Watkin Jones plc
(the ‘Group’)
FY Results 2022
‘Operationally resilient; well positioned for growth with strong development pipeline and sound balance sheet’
The Group announces its annual results for the year ended 30 September 2022 (‘FY22’):
| Adjusted Results1 | Statutory Results | |||||
| FY22 | FY21 | Change (%) | FY22 | FY21 | Change (%) | |
| Revenue | £407.1m | £430.2m | (5.4)% | £407.1m | £430.2m | (5.4)% |
| Gross profit | £67.6m | £84.8m | (20.3)% | £67.6m | £84.8m | (20.3)% |
| Operating profit | £54.7m | £57.3m | (4.5)% | £24.3m | £57.3m | (57.6)% |
| Profit before tax | £48.8m | £51.1m | (4.5)% | £18.4m | £51.1m | (64.0)% |
| Basic earnings per share | 14.8p | 16.4p | (9.8)% | 5.2p | 16.4p | (68.3)% |
| Dividend per share | 7.4p | 8.2p | (9.8)% | 7.4p | 8.2p | (9.8)% |
| Adjusted net cash2 | £82.6m | £124.3m | (33.5)% |
1. For FY22 Adjusted Operating profit, Adjusted Profit before tax and Adjusted Earnings per share are calculated before the impact of the exceptional charge of £30.4 million for the potential costs of the remedial work required under the new Building Safety Act.
2. Adjusted net cash is stated after deducting interest bearing loans and borrowings, but before deducting IFRS 16 operating lease liabilities of £49.1 million at 30 September 2022 (30 September 2021: £129.3 million).
Key Highlights
· Revenue of £407 million, reflecting record forward sales of £900 million and increasing contribution from our BTR developments. 5.4% lower year on year, impacted by the market volatility in September which led to two anticipated forward sales being deferred.
· Adjusted operating profit of £54.7 million reflecting strong operational delivery and build cost management, but 4.5% below FY21 due to:
o Lower than expected forward sales in September 2022;
o Some pricing and margin softness on sales concluded in the second half; offset by
o Higher than anticipated profit of £18.3 million from the sale of two operational PBSA assets as part of a portfolio sale.
· Strong balance sheet, with gross and net cash (adjusted) as at 30 September 2022 of £110.8 million and £82.6 million respectively.
· Full year dividend of 7.4p, in line with policy of 2x cover.
· Continued operational resilience of the business:
o Eight developments delivered in the year
o Build costs and supply chain well managed throughout the year in the face of a challenging industry backdrop
o Good progress in all phases of our development model including land acquisitions and planning consents.
· Residential for Rent sector has continued to perform strongly with occupancy and rental growth driven by tenant demand; this is expected to lead to a recovery in investor demand for our assets in FY23.
· Record revenues from Fresh with 22,896 beds under management and bookings well advanced for the next academic year.
· An exceptional charge of £30.4 million has been recognised in the year for the potential costs of the remediation work required under the Building Safety Act, which we expect will be incurred over a period of up to 5 years.
Outlook
· The Group retains very good visibility over its development pipeline, has low levels of asset exposure and strong liquidity.
· Interest in forward sales is returning to the market although new forward sales are assumed to be weighted to H2 which will impact H1/H2 revenue and operating profit weighting.
· The secured development pipeline has been maintained at £2.0 billion (estimated future revenue – based on reasonable pricing assumptions):
o £0.7 billion forward sold; providing a solid revenue base through FY23
o Further £0.8 billion secured with planning; representing a very significant portfolio of developments capable of being forward sold in FY23 as markets re-open.
· Significant planning consents have been gained in Q1, including for a BTR development in Woking (366 apartments), PBSA developments in Bristol (260 beds) and Guildford (290 beds) and a joint PBSA/ BTR development in Edinburgh (c. 400 beds and c.400 apartments).
· Gross margins for PBSA and BTR will continue to be impacted by purchasers’ increased borrowing costs and are currently anticipated to be c.12-14% in the short term. However, we expect to recover blended Group gross margin to over 15% in the medium term.
· We will slow down our affordable housing business to focus on the higher margin, more mature PBSA and BTR developments.
· We expect build cost inflation to moderate and for supply chain availability to improve throughout FY23. We will remain vigilant for signs of distress in the construction supply chain and are ready to take action as necessary to ensure project delivery.
· We have looked carefully at our overhead cost base and in November implemented a cost-out plan which is expected to generate annualised savings in the region of £3-4 million.
· Our balance sheet strength will allow us to acquire good quality development pipeline opportunities which will both support long term growth and provide scope to take advantage of opportunities created by the more volatile market environment.
· We are looking at a range of initiatives to mitigate market volatility and enhance the Group’s long term growth potential.
Richard Simpson, Chief Executive Officer of Watkin Jones, said : ‘The Group performed well throughout most of the year, however we were impacted by liquidity issues in the forward sales market following the mini budget. Underlying sector tenant demand for residential for rent remains very strong, and we have entered the new financial year with a strong secured pipeline and record levels of consented developments. Our good balance sheet liquidity puts us in an excellent position from which to take advantage of attractive land acquisition opportunities, which will support margin recovery as market conditions improve in the second half of the year.”
Analyst meeting
A meeting for analysts will be held in person at 9.30am today, Wednesday 25 January 2023, at Buchanan, 107 Cheapside, London EC2V 6DN. A copy of the Full Year results presentation is available at the Group’s website: http://www.watkinjonesplc.com
An audio webcast of the meeting with analysts will be available after 12pm today:
For further information:
| Watkin Jones plc | |
| Richard Simpson, Chief Executive Officer | Tel: +44 (0) 20 3617 4453 |
| Sarah Sergeant, Chief Financial Officer | www.watkinjonesplc.com |
| Peel Hunt LLP (Nominated Adviser & Joint Corporate Broker) | |
| Tel: +44 (0) 20 7418 8900 | |
| Mike Bell / Ed Allsopp | www.peelhunt.com |
| Jefferies Hoare Govett (Joint Corporate Broker) | |
| Tel: +44 (0) 20 7029 8000 | |
| James Umbers/David Sheehan / Paul Bundred | www.jefferies.com |
| Media enquiries: | |
| Buchanan | |
| Henry Harrison-Topham / Jamie Hooper | Tel: +44 (0) 20 7466 5000 |
| watkinjones@buchanan.uk.com | www.buchanan.uk.com |