Watkin Jones plc- FY-2022 Trading Update

Watkin Jones plc

 FY-2022 Trading Update

Watkin Jones plc (the “Group”) provides the following trading update for the year ended 30 September 2022 (the 'year' or 'FY-2022'):

FY-2022 trading 

The Group delivered a strong operational performance in the second half of the year, continuing to manage and deliver across both its PBSA and BTR development programmes.

Investor demand for residential for rent assets has remained strong, with three BTR schemes (in Leatherhead, Bath and Cardiff) and three PBSA schemes (in Nottingham, Swansea and Bath) forward sold in H2-2022, bringing the total of forward sales transacted in the year to £0.9 billion, compared to £0.3 billion at H1-2022.  In addition, the Group achieved a strong financial outcome on the sale of the two leasehold assets, which had previously been flagged.  

While in H1-2022 build cost inflation was mitigated by increasing asset values, the Group has seen some pricing and margin softness on sales concluded in the second half, with purchasers facing increased funding costs. Two forward sales that were planned to close in September have been impacted by the recent market volatility, and these are now planned to transact in FY-2023. As a result, whilst H2-2022 performance was materially stronger than H1-2022, the Board now expects FY-2022 underlying operating profit to be c.10% below current market expectations.

The Group continues to benefit from a strong balance sheet with gross and net cash, as at 30 September 2022, of approximately £105 million and £75 million respectively.

Outlook

Whilst there remains considerable uncertainty around macroeconomic conditions in the short term, the Group retains very good visibility over its development pipeline, has low levels of asset exposure and strong liquidity.

We have good revenue visibility coming into the next financial year with c. £270m of revenue secured, and expect demand from institutions for residential for rent assets to remain robust. However we also believe it is prudent to assume that margin pressure as a result of purchasers' elevated borrowing costs will continue into FY-2023.

Our balance sheet strength provides a distinct competitive advantage for the Group. We will seek to take advantage of attractive land acquisition opportunities, which should support margin recovery as market conditions normalise.  

This announcement contains inside information for the purposes of Article 7 of the Market Abuse Regulation (EU) No 596/2014 as it forms part of UK Domestic Law by virtue of the European Union (Withdrawal) Act 2018 (“UK MAR”).