REG - Watkin Jones plc - Half Year Results
21/05/2024 07:00
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RNS Number : 1834P Watkin Jones plc 21 May 2024
21 May 2024
Watkin Jones plc
(the 'Group')
HY Results for the six months ended 31 March 2024
Continued operational progress, positioning for market recovery
The Group announces its interim results for the half year ended 31 March 2024
('HY24' or 'the period').
Adjusted Results ((1), (2)) Statutory Results
HY24 HY23 Change (%) HY24 HY23 Change (%)
Revenue £175.1m £153.9m 13.8% £175.1m £153.9m 13.8%
Gross profit £18.4m £16.1m 14.3% £18.4m £16.1m 14.3%
Operating profit £4.0m £1.8m 122.2% £4.0m £0.7m 471.4%
Profit / (loss) before tax £3.4m £0.3m £2.1m (£0.8)m
Basic earnings per share 0.99p 0.11p 0.62p (0.23)p
Dividend per share - 1.4p - 1.4p
Adjusted net cash((3)) £44.0m £45.3m
(1) For HY24 Adjusted Profit before tax and Adjusted Earnings per share
are calculated before the impact of an exceptional finance cost of £1.3
million for the unwinding of the discount rate on the Building Safety
provision.
(2) For HY23 Adjusted Operating Profit, Adjusted Profit before tax and
Adjusted Earnings per share are calculated before the impact of an exceptional
charge of £1.1 million for people restructuring costs.
(3) Adjusted net cash is stated after deducting interest bearing loans and
borrowings, but before deducting IFRS 16 operating lease liabilities of £44.7
million at 31 March 2024 (31 March 2023: £47.5 million).
HY24 Highlights
· Revenue of £175.1 million delivered predominantly from our
previously sold developments on site, alongside one forward sale completed in
March 2024
· Adjusted operating profit improvement from £1.8 million to £4.0
million, reflecting:
- Gross margins in line with guidance
- Benefit of cost saving actions implemented in FY23
· Continued focus on cash generation resulted in period end gross and
net cash balances of £67.1 million and £44.0 million, respectively
· Secured two new PBSA development sites, subject to planning
· Planning submitted for a further c.3,000 PBSA beds across four
schemes
· Completed building safety rectification works on three buildings in
the period, with cash spend in line with expectations. Group provision
unchanged
· Continuing the approach adopted at the FY23 year end, the Board is
prioritising the maintenance of financial flexibility during this period of
market disruption and consequently is not declaring an interim dividend; the
Board will keep this approach under review.
Outlook
· c.£400 million of contractually secure forward sold revenue as at 31
March 2024, of which c. £150 million is for delivery in the second half of
the year. Total secured pipeline of £1.4 billion
· Current development schemes on track, supported by continuing
moderation in build cost inflation
· Targeting further forward sales in FY24: one scheme in legals and
other schemes being actively marketed
· Encouraging initial progress with Refresh opportunities: two smaller
projects signed to date, with an active pipeline being pursued
· Investment market gradually showing signs of recovery as economic
sentiment improves, albeit, a slower than expected reduction in interest rates
has potential to impact pace of recovery
· We expect our FY24 Adjusted Operating Profit to be at least £15
million and within the previously guided range(*).
Alex Pease, Chief Executive Officer of Watkin Jones, said: "First half trading
was in line with our expectations, with a focus on execution and operational
performance. Alongside progress on our schemes in build, we have continued
to develop the Group's longer term pipeline, with new land secured and further
planning applications submitted. There has been gradual improvement in
sentiment in the property investment market, which we expect to support a
continued recovery in forward fund transaction demand, as evidenced in the
forward sale of our PBSA scheme in Bristol in March.
"With our established and specialist end-to-end development platform and a
sector leading reputation in the BTR and PBSA markets in the UK, our focus
remains on positioning the business to best capitalise on a market recovery."
Analyst meeting
There will be a pre-recorded audiocast of the HY24 Results presentation
available to view on the Group's website (www.watkinjonesplc.com
(http://www.watkinjonesplc.com) ) from 7am (BST) today. At 11am (BST), there
will be a live 30-minute Q&A webcast for sell-side analysts, hosted by
Alex Pease (CEO) and Sarah Sergeant (CFO). Those analysts wishing to join
and receive dial in details should register their interest via
watkinjones@buchanan.uk.com (mailto:watkinjones@buchanan.uk.com) .
* Previous guidance indicated a range of £15 million to £20 million for FY24
Adjusted Operating Profit.
For further information:
Watkin Jones plc
Alex Pease, Chief Executive Officer Tel: +44 (0) 20 3617 4453
Sarah Sergeant, Chief Financial Officer www.watkinjonesplc.com (http://www.watkinjonesplc.com/)
Peel Hunt LLP (Nominated Adviser & Joint Corporate Broker) Tel: +44 (0) 20 7418 8900
Mike Bell / Ed Allsopp www.peelhunt.com (http://www.peelhunt.com/)
Jefferies Hoare Govett (Joint Corporate Broker) Tel: +44 (0) 20 7029 8000
James Umbers/David Sheehan / Paul Bundred www.jefferies.com (http://www.jefferies.com/)
Media enquiries:
Buchanan
Henry Harrison-Topham / Steph Whitmore Tel: +44 (0) 20 7466 5000
watkinjones@buchanan.uk.com www.buchanan.uk.com
Notes to Editors
Watkin Jones is the UK's leading developer and manager of residential for
rent, with a focus on the build to rent, student accommodation and affordable
housing sectors. The Group has strong relationships with institutional
investors, and a reputation for successful, on-time-delivery of high quality
developments. Since 1999, Watkin Jones has delivered 48,000 student beds
across 143 sites, making it a key player and leader in the UK purpose-built
student accommodation market, and is increasingly expanding its operations
into the build to rent sector. In addition, Fresh, the Group's specialist
accommodation management business, manages over 20,000 student beds and build
to rent apartments on behalf of its institutional clients. Watkin Jones has
also been responsible for over 80 residential developments, ranging from
starter homes to executive housing and apartments.
The Group's competitive advantage lies in its experienced management team and
capital-light business model, which enables it to offer an end-to-end solution
for investors, delivered entirely in-house with minimal reliance on third
parties, across the entire life cycle of an asset.
Watkin Jones was admitted to trading on AIM in March 2016 with the ticker
WJG.L. For additional information please visit www.watkinjonesplc.com
(http://www.watkinjonesplc.com/)
Review of Performance
Results for the six months to 31 March 2024
Revenues for the period were £175.1 million (HY23: £153.9 million).
Operationally the Group's businesses have continued to perform well, with our
developments on site progressing in line with expectations. The increase in
revenues reflects the successful forward sale of our Gas Lane PBSA scheme in
Bristol in the period, with no equivalent forward sales in the comparative
period.
Gross profit was £18.4 million (HY23: £16.1 million), with gross margin at
10.5% similar to 10.4% in the prior year and in line with our current
guidance.
Adjusted operating profit for the period was £4.0 million (HY23: £1.8
million), reflecting the increase in revenues and the benefit of the cost
efficiency exercises carried out in FY23. Statutory operating profit for the
period was £4.0 million (HY23: £0.7 million).
Net finance costs for the period were £1.9 million (HY23: £1.5 million).
Finance costs include £0.8 million (HY23: £0.9 million) in respect of the
interest on leases, and a discount rate unwind of £1.3 million.
Profit before tax for the period was £2.1 million (HY23: loss before tax of
£0.8 million). Adjusted profit before tax for the period, which excludes
the exceptional finance costs of £1.3 million relating to the discount rate
unwind, was £3.4 million (HY23: £0.3 million). Adjusted basic earnings per
share for the period were 0.99 pence, compared to 0.11 pence for HY23.
Segmental review
Build to Rent ('BTR')
Revenues from BTR increased by 7.3% in the period to £99.8 million (HY23:
£93.0 million). Revenues were derived from the build-out of our forward
sold developments, which are progressing well and on track for their
respective completions. Two schemes reached practical completion in the
period.
Gross profit for the period was £9.3 million (HY23: £8.3 million), an
increase of 12.0%. The gross margin for the period was slightly up on the
prior period at 9.3% (HY23: 8.9%).
Student accommodation ('PBSA')
Revenues from PBSA were 26.0% higher than last year at £61.0 million (HY23:
£48.4 million) reflecting the successful forward sale of our Gas Lane scheme
in Bristol and continued strong build progress from our other live schemes.
Two schemes reached practical completion in the period.
PBSA gross profit for the period was £7.1 million (HY23: £4.8 million) with
gross margin for the period increasing to 11.6% (HY23: 9.9%), with the
comparative margin impacted by additional build costs incurred at our scheme
in Exeter where the main contractor went into liquidation in January 2023.
Accommodation management (Fresh)
Fresh achieved revenues of £4.1 million (HY23: £4.7 million), reflecting a
reduced number of units under management and lower number of mobilisations in
the period.
The reduction in Fresh's revenue for the period led to a reduction in gross
profit to £2.3 million (HY23: £3.2 million), at a margin of 56.1% (HY23:
68.1%). This has been driven by a reduced number of units under management,
the delay in new sites mobilising and the impact of inflationary increases
across operating expenses including utilities.
Affordable-led Homes
The affordable-led residential development business achieved 19 sales
completions in the period (HY23: 20 sales) and continued to make progress at
its Crewe site, resulting in an increase in revenue to £8.9 million (HY23:
£7.8 million).
The gross profit achieved by the division however reduced, as a result of
increased build costs per plot, to £0.4 million (HY23: £0.9 million), at a
margin of 4.5% (HY23: 11.5%).
Balance sheet and liquidity
Our financial position and liquidity remain strong. We had a gross cash
balance at 31 March 2024 of £67.1 million (31 March 2023: £83.3 million),
whilst net cash stood at £44.0 million (31 March 2023: £45.3 million),
before deducting IFRS 16 lease liabilities.
The Group had undrawn headroom of £26.6 million on its revolving credit
facility ('RCF') with HSBC at 31 March 2024 and an unutilised overdraft
facility of £10.0 million, giving total cash and available facilities of
£103.7 million.
Our strong liquidity position has been delivered through the disposal of our
Gas Lane scheme in Bristol, the receipt of bullet payments due following
practical completions on a number of schemes, offset by the impact of our
normal annual cash profile, which sees a higher utilisation of cash in the
first half of the year. This resulted in our net cash balance remaining flat
since the start of the year (£43.9 million at 30 September 2023). Our
inventory and work in progress balance has decreased by a net £4.6 million,
to £118.9 million as a result of the forward sale of our Bristol PBSA scheme
offset by enabling works we have carried out on sites we have in the market.
Contract assets and receivables at 31 March 2024 stood at £52.7 million and
£34.0 million and had decreased £13.6 million and £1.1 million respectively
from the position at 30 September 2023. The contract assets relate primarily
to the final payments to be received on completion of the forward sold
developments in build, which increase as developments progress. Contract and
trade liabilities amounted to £88.2 million at 31 March 2024 and had
decreased by £14.0 million since FY23 year-end position due to a high level
of construction activity at year end linked to the stage of completion of
developments.
Building Safety
We continue to focus on the delivery of our building safety rectification
obligations and have completed works on three buildings in the period with
cash spend in line with expectations. As previously reported, there remains
significant uncertainty in this area across the sector and, as for many other
participants in our industry, assets in scope and the scope and cost of works
continue to evolve.
Based on developments in the period to date, our provision remains unchanged
and we will continue to monitor this as discussions with building owners and
building investigations continue. We have utilised £10.0 million from our
Building Safety provision in HY24, with the discount on the provision also
being unwound by £1.3 million, resulting in a gross provision at 31 March
2024 of £55.7 million offset by reimbursement assets of £9.7 million.
ESG
Our ESG initiatives continue to progress well. We continue to build strong
relationships with suppliers who demonstrate strong ESG credentials, and
support them where necessary in gaining ISO 14001 accreditation. We held a
supplier conference earlier in the year to outline the start of our social
value framework and detail the next stage of our supplier partnership
strategy.
We averaged 99% diversion of waste from landfill across our construction sites
in the first part of the year, driven by higher levels of modern methods of
construction, supplier partnerships and circular economy agreements.
The health and safety of our employees, contractors and residents of the
properties we manage is a key priority for the Group. We have continued to
improve day-to-day health and safety performance within the business. We
target an incident rate of less than 5% of the national average for the
construction industry, and we are currently performing in line with that
target.
Dividend
Continuing the approach adopted at the year end, the Board is prioritising the
maintenance of financial flexibility during this period of market disruption
and consequently is not declaring an interim dividend; the Board will keep
this approach under review.
Outlook
We expect our FY24 Adjusted Operating Profit to be at least £15 million and
within the previously guided range.
Alex Pease
Chief Executive Officer
21 May 2024
Consolidated Statement of Comprehensive Income
for the six month period ended 31 March 2024 (unaudited)
6 months to 31 March 2024 6 months to 31 March 2023
Before Before
exceptional Exceptional exceptional Exceptional
items items Total items items Total
Notes £'000 £'000 £'000 £'000 £'000 £'000
Continuing operations
Revenue 5 175,100 - 175,100 153,854 - 153,854
Cost of sales (156,686) - (156,686) (137,801) - (137,801)
Gross profit 18,414 - 18,414 16,053 - 16,053
Administrative expenses 6 (14,411) - (14,411) (14,274) (1,063) (15,337)
Operating profit/(loss) 4,003 - 4,003 1,779 (1,063) 716
Finance income 580 - 580 190 - 190
Finance costs (1,207) (1,259) (2,466) (1,672) - (1,672)
(Loss)/profit before tax 3,376 (1,259) 2,117 297 (1,063) (766)
Income tax credit/(expense) 8 (844) 315 (529) (67) 240 173
(Loss)/profit for the year attributable to ordinary equity holders of the 2,532 (944) 1,588 230 (823) (593)
parent
Other comprehensive income
That will not be reclassified to profit or loss in subsequent periods:
Net (loss)/gain on equity instruments designated at fair value through other (244) - (244) (78) - (78)
comprehensive income, net of tax
Total comprehensive (loss)/income for the year attributable to ordinary equity 2,288 (944) 1,344 152 (823) (671)
holders of the parent
Pence Pence Pence Pence Pence Pence
Earnings per share for the year attributable to ordinary equity holders of the
parent
Basic (loss)/earnings per share 9 0.987 (0.368) 0.619 0.105 (0.336) (0.231)
Diluted (loss)/earnings per share 9 0.970 (0.362) 0.608 0.104 (0.336) (0.230)
Consolidated Statement of Comprehensive Income
for the year ended 30 September 2023
Year ended 30 September 2023
Before
exceptional Exceptional
items items Total
Notes £'000 £'000 £'000
Continuing operations
Revenue 5 413,236 - 413,236
Cost of sales (378,377) - (378,377)
Gross profit 34,859 - 34,859
Administrative expenses 6 (34,689) (38,140) (72,829)
Operating profit/(loss) 170 (38,140) (37,970)
Share of loss in joint ventures (13) - (13)
Finance income 496 - 496
Finance costs (3,514) (1,458) (4,972)
(Loss)/profit before tax (2,861) (39,598) (42,459)
Income tax credit 1,196 8,716 9,912
(Loss)/profit for the year attributable to ordinary equity holders of the (1,665) (30,882) (32,547)
parent
Other comprehensive income
That will not be reclassified to profit or loss in subsequent periods:
Net (loss)/gain on equity instruments designated at fair value through other (188) - (188)
comprehensive income, net of tax
Total comprehensive (loss)/income for the year attributable to ordinary equity (1,853) (30,882) (32,735)
holders of the parent
Pence Pence Pence
Earnings per share for the year attributable to ordinary equity holders of the
parent
Basic (loss)/earnings per share (0.649) (12.043) (12.692)
Diluted (loss)/earnings per share (0.649) (12.043) (12.692)
Consolidated Statement of Financial Position
as at 31 March 2024 (unaudited)
31 March 31 March 30 September
2024 2023 2023
Notes £'000 £'000 £'000
Non-current assets
Intangible assets 11,326 11,885 11,606
Investment property (leased) 22,062 25,700 24,240
Right of use assets 6,433 5,475 5,276
Property, plant and equipment 1,450 1,811 1,796
Investment in joint ventures 1 1 1
Reimbursement assets 7 4,010 - 4,007
Deferred tax asset 11,510 1,983 12,096
Other financial assets 871 1,288 1,129
57,663 48,143 60,151
Current assets
Inventory and work in progress 118,885 159,507 123,516
Contract assets 52,735 53,287 66,368
Trade and other receivables 34,043 32,967 35,104
Reimbursement assets 7 5,680 - 6,858
Current tax receivables 7,544 3,586 7,088
Cash and cash equivalents 12 67,088 83,336 72,431
285,975 332,683 311,365
Total assets 343,638 380,826 371,516
Current liabilities
Trade and other payables (88,151) (100,544) (100,732)
Contract liabilities - (373) (1,469)
Interest-bearing loans and borrowings - (312) -
Lease liabilities (6,291) (6,788) (7,567)
Provisions 7 (22,545) (7,402) (24,457)
(116,987) (115,419) (134,216)
Non-current liabilities
Interest-bearing loans and borrowings (23,131) (37,688) (28,530)
Lease liabilities (38,368) (40,685) (37,628)
Provisions 7 (33,140) (21,995) (41,137)
(94,639) (100,368) (107,295)
Total Liabilities (211,626) (215,787) (241,511)
Net assets 132,012 165,039 130,005
Equity
Share capital 2,567 2,564 2,564
Share premium 84,612 84,612 84,612
Merger reserve (75,383) (75,383) (75,383)
Fair value reserve of financial assets at FVOCI 181 584 425
Share-based payment reserve 2,067 831 1,407
Retained earnings 117,968 151,831 116,380
Total Equity 132,012 165,039 130,005
Consolidated Statement of Changes in Equity
for the six month period ended 31 March 2024 (unaudited)
Share Fair value of financial assets at FVOCI Share-based payment reserve Total
Share Premium £'000 £000 Retained £'000
Capital £'000 Merger earnings
£'000 Reserve £'000
£'000
Balance at 30 September 2022 2,564 84,612 (75,383) 662 526 163,972 176,953
Loss for the period - - - - - (593) (593)
Share-based payments - - - - 305 - 305
Other comprehensive loss - - - (78) - - (78)
Dividend paid (note 10) - - - - - (11,548) (11,548)
Balance at 2,564 84,612 (75,383) 584 831 151,831 165,039
31 March 2023
- - - - (31,954) (31,954)
Profit for the period -
Share-based payments - - - - 762 - 762
Other comprehensive income - - - (159) - 49 (110)
Deferred tax debited directly to equity - - - - - (151) (151)
Recycled reserve for fully vested share-based payment schemes - - - - (186) 186 -
Dividend paid (note 10) - - - - - (3,581) (3,581)
Issue of shares - - - - - - -
Balance at 30 September 2023 2,564 84,612 (75,383) 425 1,407 116,380 130,005
- - - - - 1,588 1,588
Profit for the period
Share-based payments - - - - 660 - 660
Issue of shares 3 - - - - - 3
Other comprehensive loss - - - (244) - - (244)
Dividend paid (note 10) - - - - - - -
Balance at 2,567 84,612 (75,383) 181 2,067 117,968 132,012
31 March 2024
Consolidated Statement of Cash Flows
for the six month period ended 31 March 2024 (unaudited)
6 months to 6 months to 12 months to
31 March 31 March 30 September
2024 2023 2023
Notes £'000 £'000 £'000
Cash flows from operating activities
Cash inflow/(outflow) from operations 11 2,676 (14,646) (17,215)
Interest received 580 190 496
Interest paid (1,206) (1,572) (3,315)
Tax paid (348) (7,830) (11,466)
Net cash inflow/(outflow) from operating activities 1,702 (23,858) (31,500)
Cash flows from investing activities
Acquisition of property, plant and equipment (36) (189) (550)
Proceeds on disposal of property, plant and equipment 100 4 210
Proceeds on disposal of PRS assets - - 15,323
Net cash inflow/(outflow) from investing activities 64 (185) 14,983
Cash flows from financing activities
Dividend paid 10 - (11,548) (15,129)
Payment of principal portion of lease liabilities (1,670) (1,626) (6,806)
Drawdown of RCF - 10,301 27,579
Repayment of bank loans and RCF (5,439) (589) (27,537)
Net cash outflow from financing activities (7,109) (3,462) (21,893)
Net decrease in cash (5,343) (27,505) (38,410)
Cash and cash equivalents at 72,431 110,841 110,841
beginning of the period
Cash and cash equivalents at 67,088 83,336 72,431
end of the period 12
Notes to the consolidated financial information
1. General information
Watkin Jones plc (the 'Company') is a limited company incorporated in the
United Kingdom under the Companies Act 2006 (Registration number 09791105).
The Company is domiciled in the United Kingdom and its registered address is
12 Soho Square, London, W1D 3QF.
The principal activities of the Company and its subsidiaries (collectively the
'Group') are the development and management of multi-occupancy residential
rental properties.
The consolidated interim financial statements of the Group for the six month
period ended 31 March 2024 comprises the Company and its subsidiaries. The
basis of preparation of the consolidated interim financial statements is set
out in note 2 below.
The financial information for the six months ended 31 March 2024 is
unaudited. It does not constitute statutory financial statements within the
meaning of Section 434 of the Companies Act 2006. The consolidated interim
financial statements should be read in conjunction with the financial
information for the year ended 30 September 23 which has been prepared in
accordance with international accounting standard in conformity with the
requirements of the Companies Act 2006. The report of the auditors on those
financial statements was unqualified, did not contain an emphasis of matter
paragraph and did not contain any statement under section 498(2) of the
Companies Act 2006.
This report was approved by the directors on 20 May 2024.
2. Basis of preparation
This set of condensed consolidated interim financial statements has been
prepared in accordance with IAS 34 "Interim Financial Reporting" as adopted by
the UK. The interim financial statements have been prepared based on the UK
adopted International Financial Reporting Standards "IFRS" that are expected
to exist at the date on which the Group prepares its financial statements for
the year ended 30 September 2024. To the extent that IFRS at 30 September
2024 do not reflect the assumptions made in preparing the interim financial
statements, those financial statements may be subject to change.
The interim financial statements have been prepared on a going concern basis
and under the historical cost convention.
The interim financial statements have been presented in pounds sterling and
all values are rounded to the nearest thousand (£'000), except when otherwise
indicated.
The preparation of financial information in conformity with IFRS requires
management to make estimates and assumptions that affect the reported amounts
of assets and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting period.
Although these estimates are based on management's best knowledge of the
amount, event or actions, actual events may ultimately differ from those
estimates.
The interim financial statements do not include all financial risk information
and disclosures required in the annual financial statements and they should be
read in conjunction with the financial information that is presented in the
Company's audited financial statements for the year ended 30 September 2023.
There has been no significant change in any risk management policies since the
date of the last audited financial statements.
Going concern
At 31 March 2024, the Group had a robust liquidity position, with cash and
available headroom in its banking facilities totalling £103.7 million made up
of cash balances of £67.1 million, RCF Headroom of £26.6 million and an
overdraft facility of £10.0 million.
Good liquidity has been maintained through the period, providing the Group
with a good level of cash and available banking facilities for the year ahead.
Group forecasts have been prepared that have considered the Group's current
financial position and market circumstances. We have prepared a base case
cash flow for the period to 30 June 2025 which is aligned to the Group's
business plan and trading assumptions for that period. Our currently secured
cash flow, derived from our forward sold developments and other contracted
income, net of overheads and tax, results in cash utilisation over the
forecast period such that our liquidity position is maintained. In addition
to the secured cash flow, the base case forecast assumes a number of new
forward sales will result in a further strengthening of our current liquidity
position, after allowing for dividend payments.
In addition to the base case forecast, we have considered the possibility of
continued disruption to the forward sale market given the market turbulence
seen in the UK over the last 18 months. This is our most significant risk as
it would greatly limit our ability to achieve any further forward sales. We
have run various model scenarios to assess the possible impact of the above
risks, including an extreme downside scenario assuming no further forward
sales are achieved. The cash forecast prepared under this scenario
illustrates that adequate liquidity is maintained through the forecast period
and the financial covenants under the RCF would still be met.
The minimum gross cash balance under this scenario was £19.0 million
(excluding the £10.0 million overdraft). In addition, we have reviewed the
potential impact on the Group's Tangible Net Worth Covenant of any additional
increase in the provision for Building Safety. The headroom on this covenant
under the extreme downside scenario would allow for a further circa 3
properties to be provided for, assuming an average provision per property of
£2.1 million.
We consider the likelihood of events occurring which would exhaust the total
cash and available facilities balances remaining to be remote. However,
should such events occur, management would be able to implement reductions in
discretionary expenditure and consider the sale of the Group's land sites to
ensure that the Group's liquidity was maintained.
While there remains sufficient headroom under this scenario for all the
financial covenants, a sale of the Group's land sites would enable the
repayment of the RCF balance (as the RCF is drawn down against these assets).
There would then be no requirement for the covenants to be tested.
Based on the thorough review and robust downside forecasting undertaken, and
having not identified any material uncertainties that may cast any significant
doubt, the Board is satisfied that the Group will be able to continue to trade
for the period to 30 June 2025 and has therefore adopted the going concern
basis in preparing the financial statements.
Building Safety Provision
The Group holds a provision for building safety remedial works, for which
the legislative background was disclosed in the Group's audited financial
statements for the year ended 30 September 2023.
This is a highly complex area with significant estimates in respect of the
cost of remedial works, the quantum of any legal expenditure associated with
the defence of the Group's position in this regard, and the extent of those
properties within the scope of the applicable government guidance and
legislation, which continue to evolve. All our buildings were signed off by
approved inspectors as compliant with the relevant Building Regulations at the
time of completion.
The amount provided for these works has been estimated by reference to recent
industry experience and external quotes for similar work identified. The
investigation of the works required at many of the buildings is at an early
stage and therefore it is possible that these estimates may change over time
or if government legislation and regulation further evolves.
As a number of other housebuilders and developers have done over the last 12
months, we have included an additional amount of contingency within our
provision to reflect further buildings being identified as within the scope of
the RAS and for unforeseen remediation costs beyond management's current
knowledge. We have also implemented a consistent contingency policy across
the properties where work is yet to start.
We expect this cost to be incurred over the next four years, and the provision
has been discounted to its present value accordingly. The timing of this
expenditure will be dependent on the timely engagement by building owners,
revisions to programme under the new BSA Gateways, and the availability of
appropriately qualified subcontractors.
We have made progress with negotiating contributions from clients to mitigate
our liability in relation to these remedial works and at the balance sheet
date have recognised reimbursement assets of £9.7 million (31 March 2023:
£nil). These will be recovered over one to five years.
We will continue to keep abreast of any changes to legislation and guidance,
recognising that the approach to building safety continues to evolve.
Should the costs associated with these remedial works increase by 10%, the
provision required would increase by £4.0 million. Should the discount rate
applied to the calculation reduce by 1%, the provision required would increase
by £0.8 million. Further details of the provision are set out in note 7.
Should an additional property be identified which requires remedial works for
which the Group is liable, it would be reasonable to estimate the additional
cost at £2.1 million, based on the average expected cost of works for
properties included within the provision for which the Group will perform
remediation works.
3. Accounting policies
The accounting policies used in preparing these interim financial statements
are the same as those set out and used in preparing the Company's audited
financial statements for the year ended 30 September 2023.
4. Segmental reporting
The Group has identified four segments for which it reports under IFRS 8
'Operating segments', as follows:
A Student accommodation - the development of purpose-built student
accommodation;
B Build to rent - the development of build to rent accommodation;
C Residential - the development of residential property for sale;
and
D Accommodation management - the management of student
accommodation and build to rent property.
Corporate - revenue from the development of commercial property forming part
of mixed use schemes and other revenue and costs not solely attributable to
any one operating segment.
Performance is measured by the Board based on gross profit as reported in the
management accounts. Apart from inventory and work in progress, no other
assets or liabilities are analysed into the operating segments.
6 months to 31 March 2024 (unaudited) Student Build to Residential Accommodation Corporate Total
Accommodation rent management
£'000 £'000 £'000 £'000 £'000 £'000
Segmental revenue 61,027 99,755 8,920 4,067 1,331 175,100
Segmental gross profit 7,107 9,266 403 2,347 111 19,234
Impairment of inventory for aborted pipeline assets - - - - (820) (820)
Gross profit 7,107 9,266 403 2,347 (709) 18,414
Administration expenses - - - (2,512) (11,899) (14,411)
Finance income - - - - 580 580
Finance costs - - - - (1,207) (1,207)
Exceptional finance costs - - - - (1,259) (1,259)
Profit/(loss) before tax 7,107 9,266 403 (165) (14,494) 2,117
Taxation - - - - (529) (529)
Profit/(loss) for the period 7,107 9,266 403 (165) (15,023) 1,588
Inventory and WIP 74,729 18,200 23,986 - 1,970 118,885
6 months to 31 March 2023 (unaudited) Student Build to Residential Accommodation Corporate Total
Accommodation rent management
£'000 £'000 £'000 £'000 £'000 £'000
Segmental revenue 48,407 92,970 7,779 4,698 - 153,854
Segmental gross profit 4,760 8,272 923 3,151 (1,053) 16,053
Administration expenses - - - (2,539) (11,735) (14,274)
Exceptional expenses - - - (220) (843) (1,063)
Finance income - - - - 190 190
Finance costs - - - - (1,672) (1,672)
Profit/(loss) before tax 4,760 8,272 923 393 (15,114) (766)
Taxation - - - - 173 173
Profit/(loss) for the period 4,760 8,272 923 393 (14,941) (593)
Inventory and WIP 93,850 33,056 29,306 - 3,295 159,507
Year ended Student Build to Residential Accommodation Corporate Total
30 September 2023 Accommodation rent management
£'000 £'000 £'000 £'000 £'000 £'000
Segmental revenue 175,739 207,711 19,607 9,481 698 413,236
Segmental gross profit 11,409 19,836 1,920 5,988 1,202 40,355
Impairment of land assets - - - - (5,496) (5,496)
Gross profit 11,409 19,836 1,920 5,988 (4,294) 34,859
Administration expenses - - - (5,441) (24,664) (30,105)
Profit on disposal of PRS assets - - - - (4,584) (4,584)
Exceptional administrative expenses - - - - (38,140) (38,140)
Operating profit 11,409 19,836 1,920 547 (71,682) (37,970)
Share of operating loss in joint ventures - - - - (13) (13)
Finance income - - - - 496 496
Finance costs - - - - (3,514) (3,514)
Exceptional finance costs - - - - (1,458) (1,458)
Profit/(loss) before tax 11,409 19,836 1,920 547 (76,171) (42,459)
Taxation - - - - 9,912 9,912
Profit/(loss) for the period 11,409 19,836 1,920 547 (66,259) (32,547)
Inventory and WIP 83,430 10,970 27,314 - 1,802 123,516
5. Disaggregated revenue information
6 months to 31 March 2024 (unaudited) Student Build to Residential Accommodation Corporate Total
Accommodation rent management
£'000 £'000 £'000 £'000 £'000 £'000
Type of goods or service
Construction contracts or development agreements 46,851 99,755 - - - 146,606
Sale of land 9,850 - - - - 9,850
Sale of completed property - - 8,909 - 1,276 10,185
Rental income 4,326 - 11 - 55 4,392
Accommodation management - - - 4,067 - 4,067
Total revenue from contracts with customers 61,027 99,755 8,920 4,067 1,331 175,100
Timing of revenue recognition
Goods transferred at a point in time 14,176 - 8,909 - 1,276 24,361
Services transferred over time 46,851 99,755 11 4,067 55 150,739
Total revenue from contracts with customers 61,027 99,755 8,920 4,067 1,331 175,100
6 months to 31 March 2023 (unaudited) Student Build to Residential Accommodation Corporate Total
Accommodation rent management
£'000 £'000 £'000 £'000 £'000 £'000
Type of goods or service
Construction contracts or development agreements 45,031 87,002 - - - 132,033
Sale of land - - - - - -
Sale of completed property - 5,507 7,779 - - 13,286
Rental income 3,376 461 - - - 3,837
Accommodation management - - - 4,698 - 4,698
Total revenue from contracts with customers 48,407 92,970 7,779 4,698 - 153,854
Timing of revenue recognition
Goods transferred at a point in time 3,376 5,968 7,779 - - 17,123
Services transferred over time 45,031 87,002 - 4,698 - 136,731
Total revenue from contracts with customers 48,047 92,970 7,779 4,698 - 153,854
Year ended Student Build to Residential Accommodation Corporate Total
30 September 2023 Accommodation rent management
£'000 £'000 £'000 £'000 £'000 £'000
Type of goods or service
Construction contracts or development agreements 145,067 196,199 - - - 341,266
Sale of land 21,700 10,450 - - - 32,150
Sale of completed property - - 19,607 - - 19,607
Rental income 8,972 1,062 - - 698 10,732
Accommodation management - - - 9,481 - 9,481
Total revenue from contracts with customers 175,739 207,711 19,607 9,481 698 413,236
Timing of revenue recognition
Goods transferred at a point in time 21,700 10,450 19,607 - - 51,757
Services transferred over time 154,039 197,261 - 9,481 698 361,479
Total revenue from contracts with customers 175,739 207,711 19,607 9,481 698 413,236
6. Exceptional costs
6 months to 6 months to 12 months to
31 March 31 March 30 September
2024 2023 2023
£'000 £'000 £'000
Recognised in administrative expenses
Building Safety provision - - (35,000)
Restructuring costs - (1,063) (3,140)
Total exceptional items recognised in administrative expenses - (1,063) (38,140)
Recognised in finance costs
Unwind of discount rate on Building Safety provision (1,259) - (1,458)
Total exceptional items recognised in finance costs (1,259) - (1,458)
Total exceptional costs (1,259) (1,063) (39,598)
No further exceptional administrative expenses related to the Building Safety
provision have been incurred in the period ended 31 March 2024. The
provision made in the prior year has been unwound to its present value,
resulting in finance costs of £1,259,000 in this period.
7. Provisions
Building Safety provision
Reimbursement
Provision asset Total
£'000 £'000 £'000
At 1 October 2023 65,594 (10,865) 54,729
Arising during year - - -
Utilised (11,418) 1,425 (9,993)
Unwind of discount rate 1,509 (250) 1,259
At 31 March 2024 55,685 (9,690) 45,995
The provision is classified as follows:
Reimbursement
Provision asset Total
At 31 March 2024 £'000 £'000 £'000
Current 22,545 (5,680) 16,865
Non-current 33,140 (4,010) 29,130
Total 55,685 (9,690) 45,995
Reimbursement
Provision asset Total
At 31 March 2023 £'000 £'000 £'000
Current 7,402 - 7,402
Non-current 21,995 - 21,995
Total 29,397 - 29,397
A provision of £33,448,000 was held at 30 September 2022 for the Group's
anticipated contribution towards the cost of building safety remedial works.
A further net increase in provision of £35,000,000 has been made during the
year ended 30 September 2023 for building safety remediation costs, comprising
an increase in cost provision of £45,865,000 offset by a corresponding
reimbursement asset of £10,865,000, reflecting customer contributions to
these remedial works which have been contractually agreed during the year.
Of this reimbursement asset, £6,973,000 was included in the net provision
disclosed at 31 March 2023 which represented the best estimate of the Group's
net contribution to remediation costs.
No new provision or reimbursement asset has been recognised during the period
ended 31 March 2024.
The net provision at 31 March 2024 amounts to £45,995,000, of which
£16,865,000 is expected to be incurred in the next twelve months to 31 March
2025, with £29,130,000 expected to be incurred between 1 April 2025 and 30
September 2027. The provision has been discounted to its present value
accordingly, at a risk-free rate of 4.10% based on UK five-year gilt yields
(2023: 4.60%).
The judgements and estimates surrounding this provision and corresponding
reimbursement assets are set out in note 2.
8. Income taxes
The tax expense for the period has been calculated by applying the expected
effective tax rate for the financial year ending 30 September 2024 of 25.00%
to the profit for the period.
9. Earnings per share
Basic earnings per share ("EPS") amounts are calculated by dividing the net
profit or loss for the year attributable to ordinary equity holders of the
parent by the weighted average number of ordinary shares in issue during the
year.
The following table reflects the income and share data used in the basic EPS
computations:
6 months to 6 months to 12 months to
31 March 31 March 30 September
2024 2023 2023
£'000 £'000 £'000
Profit/(loss) for the period attributable to ordinary equity holders of the 1,588
parent
(593) (32,547)
1,259 1,063 39,598
Add back exceptional items for the period
(315) (202) (8,716)
Less corporation tax benefit from exceptional items for the period
Adjusted profit/(loss) for the period attributable to ordinary equity holders 2,532 268 (1,665)
of the parent
Number of shares Number of shares Number of shares
Number of ordinary shares for basic earnings per share 256,476,560 256,430,367
256,434,903
Adjustments for the effects of dilutive potential ordinary shares 4,562,022 1,472,669
-
Weighted average number for diluted earnings per share 261,038,582 257,903,036
256,434,903
Pence Pence Pence
Basic earnings/(loss) per share
Basic profit/(loss) for the period attributable to ordinary equity holders of 0.619 (0.231) (12.692)
the parent
Adjusted basic earnings/(loss) per share (excluding exceptional items after
tax)
Adjusted profit/(loss) for the period attributable to ordinary equity holders 0.987 0.105 (0.649)
of the parent
Diluted earnings/(loss) per share
Basic profit/(loss) for the period attributable to diluted equity holders of 0.608 (0.230) (12.692)
the parent
Adjusted diluted earnings/(loss) per share (excluding exceptional items after
tax)
Adjusted profit/(loss) for the period attributable to diluted equity holders 0.970 0.104 (0.649)
of the parent
10. Dividends
6 months to 6 months to 12 months to
31 March 31 March 30 September
2024 2023 2023
£'000 £'000 £'000
Final dividend paid in February 2023 of 4.5 pence - 11,548 11,548
Interim dividend paid in June 2023 of 1.4 pence - - 3,581
- 11,548 15,129
No interim dividend is proposed for the period ended 31 March 2024 (31 March
2023: 1.40 pence per ordinary share). As such, no liability (31 March 2023:
liability of £3,581,000) has been recognised at that date. At 31 March
2024, the Company had distributable reserves available of £41,115,000 (31
March 2023: £44,600,000).
11. Reconciliation of profit before tax to net cash flow from
operating activities
6 months to 6 months to 12 months to
31 March 31 March 30 September
2024 2023 2023
£'000 £'000 £'000
Profit/(loss) before tax 2,117 (766) (42,459)
Depreciation of leased investment properties and right-of-use assets 2,933 2,384 5,691
Depreciation of plant and equipment 225 382 697
Amortisation of intangible assets 280 280 559
Profit of disposal of operational PRS assets - - 4,584
Loss/(profit) on sale of plant and equipment 21 (1) (294)
Finance income (580) (190) (496)
Finance costs 2,466 1,672 4,972
Share of profit in joint ventures - - 13
Decrease/(increase) in inventory and work in progress 4,631 (12,389) 4,634
Decrease/(increase) in contract assets 13,633 (2,466) (15,547)
Decrease/(increase) in trade and other receivables 1,061 (4,339) (6,476)
Decrease in contract liabilities (1,469) (4,679) (3,583)
Decrease/(increase) in reimbursement assets 1,425 - (10,865)
(Decrease)/increase in trade and other payables (13,309) 9,213 9,600
(Decrease)/increase in provisions (11,418) (4,052) 30,688
Increase in share-based payment reserve 660 305 1,067
Net cash inflow/(outflow) from operating activities 2,676 (14,646) (17,215)
12. Analysis of net debt
31 March 31 March 30 September
2024 2023 2023
£'000 £'000 £'000
Cash at bank and in hand 67,088 83,336 72,431
Bank loans (23,131) (38,000) (28,530)
Net cash before deducting lease liabilities 43,957 45,336 43,901
Lease liabilities (44,659) (47,473) (45,195)
Net debt (702) (2,137) (1,294)
13. Employee benefits - long-term incentive plans
Long Term Incentive Plan ('LTIP') - 2024 Awards
In January 2024 5,293,495 LTIP share awards were made under the Watkin Jones
plc Long-Term Incentive Plan (the Plan). The awards have an exercise price
of one penny per share and become exercisable after three years from the date
of grant subject to continued employment and absolute total shareholder return
as derived by share price on vesting date (TSR).
The fair value of the share awards subject to the TSR performance condition
has been estimated at the grant date using a Monte Carlo valuation model using
the following assumptions:
Share price 46.20 pence
Exercise price 1 penny
Expected term 3 years
Risk-free interest rate 3.95%
Are dividend equivalents receivable for the award holder? Yes
Expected volatility 38.29%
This resulted in an estimated fair value for an award with TSR performance
conditions of 15.78 pence.
% of TSR award vesting(1)
Share price on vesting date less than 45.7 pence 0%
Share price on vesting date of 135.0 pence or greater 100%
(1)Vesting on a straight-line basis between target levels
Charge for the period
For the six months ended 31 March 2024, the amount charged to the statement of
comprehensive income and credited to share based payment reserve in relation
to all the active awards granted to that date was £660,000 (31 March 2023:
£305,000).
- Ends -
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