Watkin Jones plc
(the ‘Group’)
FY24 Trading Update
Watkin Jones provides the following trading update for the year ended 30 September 2024 (the ‘year’ or ‘FY24’).
FY24 Trading
As set out in our half year results announcement on 21 May 2024, we had a number of schemes being actively marketed, with the subsequent sale of a substantial PBSA development located in Stratford, London, announced in July. Nevertheless, overall market activity through the summer has been slower than anticipated, principally due to the continued uncertainty over the pace of interest rate cuts, and as such we believe it is now unlikely that we will close any further transactions before the financial year end.
The Group has continued to execute effectively on its broader operational objectives during the second half of the year. Encouragingly, our new Refresh initiative is gaining good traction in the market with our first project completed and we are seeing a growing pipeline of opportunities. Our in-build schemes continue on track, with two further practical completions expected in this financial year.
While the absence of further forward funds prior to the year end will result in performance being lower than previously anticipated, the Group is expected to show material improvement in FY24, with adjusted operating profit currently expected to be in the range of £10m to £12m (FY23: £0.2m).
The Group has been effective in its focus on cash generation through the second half; at 30 September 2024, gross cash is anticipated to be approximately £80 million (31 March 2024: £67m) and net cash is anticipated to be approximately £65m (31 March 2024: £44m), ahead of previous expectations.
The Group’s position on the exceptional provision for remedial works for legacy properties remains unchanged.
Outlook
While the pace of recovery in our markets has been slower than expected, the UK interest rate cut in August 2024, together with forecast future cuts, should contribute to improved forward fund liquidity. The lower number of transactions in FY24 will, however, have a consequential impact on the results in FY25, given that schemes will not contribute to revenue in future periods until they are forward sold. While we have a number of further schemes that we expect to take to market in FY25, given the slower pace of activity currently, we believe that a more prudent set of transaction assumptions should be applied to the next 12 months than previously assumed. As such, we do not currently expect adjusted operating profit in FY25 to be above FY24. In any event, the Group’s performance will be significantly influenced by the evolution in forward fund liquidity over the coming months and, while it is possible to deliver year on year progress in FY25, this would require market conditions to improve at a faster pace as we enter the new financial year.
Focus on recovery
In the medium term, the end markets in which the Group operates remain strong, supported by a continued shortage of rental and student properties, positive commentary from the new UK Government, an improving interest rate environment, and continuing investor appetite. In addition, we have made progress in initiatives to broaden the Company’s earnings base through diversified activities such as Refresh.
We continue to actively review opportunities to expand our longer-term pipeline and are seeing an increasing number of attractive potential opportunities in the land market and through alternative transaction structures, which will be important in driving profitability in FY26 and FY27.
While the Group’s robust net cash position provides it with a strong financial underpin for its committed spending requirements, it is nevertheless a limiting factor on the extent to which we can take advantage of market conditions and further develop our pipeline. In light of this, the Board is undertaking a review of a range of options that may be available to enhance its medium and longer term funding position, thereby allowing the Group to capitalise on a market recovery.