TIDMWJG
RNS Number : 3256A
Watkin Jones plc
23 May 2023
23 May 2023
Watkin Jones plc
(the 'Group')
HY Results for the six months ended 31 March 2023
' Completion of the first forward fund transaction of FY23
reinforces confidence in recovery in the medium term'
The Group announces its interim results for the half year ended
31 March 2023 ('HY23' or 'the period')
Adjusted Results (1), (2) Statutory Results
HY23 HY22 Change HY23 HY22 Change
(%) (%)
---------- ---------- --------- ---------- ----------- --------
Revenue GBP153.9m GBP193.0m (20.3)% GBP153.9m GBP193.0m (20.3)%
---------- ---------- --------- ---------- ----------- --------
Gross profit GBP16.1m GBP29.9m (46.2)% GBP16.1m GBP29.9m (46.2)%
---------- ---------- --------- ---------- ----------- --------
Operating profit
/ (loss) GBP1.8m GBP14.6m (87.7)% GBP0.7m GBP(13.4)m 105.2%
---------- ---------- --------- ---------- ----------- --------
Profit / (loss)
before tax GBP0.3m GBP11.4m (97.4)% (GBP0.8)m GBP(16.6)m 95.2%
---------- ---------- --------- ---------- ----------- --------
Basic earnings
per share 0.11p 3.65p (97.0)% (0.23)p (5.20)p 95.6%
---------- ---------- --------- ---------- ----------- --------
Dividend per share 1.4p 2.9p (51.7%)% 1.4p 2.9p (51.7)%
---------- ---------- --------- ---------- ----------- --------
Adjusted net cash(3) GBP45.3m GBP26.8m 69.0%
---------- ---------- --------- ---------- ----------- --------
(1) For HY23 Adjusted Operating Profit, Adjusted Profit before
tax and Adjusted Earnings per share are calculated before the
impact of an exceptional charge of GBP1.1 million for people
restructuring costs
(2) For HY22 Adjusted Operating Profit, Adjusted Profit before
tax and Adjusted Earnings per share are calculated before the
impact of the exceptional charge of GBP28.0 million for the
potential costs of the remedial work required under the new
Building Safety Act
(3) Adjusted net cash is stated after deducting interest bearing
loans and borrowings, but before deducting IFRS 16 operating lease
liabilities of GBP47.5 million at 31 March 2023 (31 March 2022:
GBP126.0 million)
Key Highlights
-- HY results in line with expectations:
- Revenue of GBP153.9 million from our forward sold developments
which are on site; no new forward sales in the period
- Adjusted operating profit of GBP1.8m reflecting reduced gross
margins in line with previous guidance and additional costs
incurred on our Exeter scheme following the liquidation of the
third party main contractor and the subsequent step in by Watkin
Jones
- Net cash balance of GBP45.3 million
- Interim dividend of 1.4p, reflecting building confidence in the H2 performance
-- Forward fund market continuing to recover:
- Underlying residential for rent market continues to perform
well with both strong tenant demand and rental growth in our core
PBSA and BTR sectors
- Announced today the forward sale of an 819 bed PBSA scheme in
Bristol to KKR; pricing in line with margin guidance and delivering
a FY23 profit contribution of c.GBP5 million and a day 1 net cash
receipt of c. GBP25 million. The scheme will complete in 2024 and
will be managed by Fresh.
- Currently we have a further five forward sales in the market,
including one significant transaction. Two of these assets are
under offer.
-- Operational resilience continues to be demonstrated:
- 12 current developments on track with five due to achieve practical completion this summer
- GBP650 million contractually secure forward sold revenue to
come through over the next two to three years
- Build costs and supply chain well managed throughout the
period. Starting to see build inflation reduce which should give
rise to future buying gains
- Good progress in all phases of our development model including
land acquisitions and moving schemes through planning.
Outlook: H2
-- Expected that H2-23 will be materially stronger than H1-23,
with forward sales adding to performance from in-build
developments
-- Currently targeting up to five further forward sales in FY23,
with full year earnings performance dependent on concluding these
transactions in what remains a volatile environment, as well as
finally agreed pricing and phasing terms
-- While pricing on assets currently in the market is broadly in
line with expectations, we are seeing purchasers looking for
structures in the near term that weight profit more significantly
to the latter stages of the development, to better align with their
own funding requirements.
-- Whilst the forward fund market is in the early stages of
recovery, we have taken the decision to exercise caution in the
short term and not accelerate pipeline assets on to our balance
sheet in readiness for sale, which will result in c. GBP15 million
of expected profit contribution from FY23 moving into FY24
Outlook: Longer term
-- Encouraged by the continued recovery in the forward fund
market, but will continue to take a risk-managed approach to
managing our development pipeline through this period of
volatility, which has resulted in a reduced pipeline value from c.
GBP2 billion to c.GBP1.7 billion
-- Starting to see attractive new land acquisition opportunities
which support our long run target margins. Currently in exclusivity
on c.GBP500 million expected revenue to come from exciting new
development opportunities.
-- This, combined with our current operational performance and
the expected normalisation of the forward fund market reinforces
confidence in the future
Richard Simpson, Chief Executive Officer of Watkin Jones, said
:
"We are pleased to have delivered a half year result in line
with expectations, managing build costs and our supply chain well.
We are also encouraged by the early signs of build inflation
reducing which should lead to future buying gains.
"We look to the second half of the year with confidence and are
particularly pleased to have secured the forward sale transaction
in Bristol and expect to complete further forward sales before the
year end. The overall recovery in the forward fund market is
encouraging, however the Group will maintain a cautious approach to
managing the pipeline. In addition to growing confidence in the
sector, we are seeing attractive land acquisition opportunities and
these coupled with our excellent operational performance leave us
confident for the future."
Analyst meeting
There will be a pre-recorded audiocast of the Interim Results
presentation available to view on the Group's website (
www.watkinjonesplc.com ) from 7am (BST) today and it can also be
accessed via the following URL link
https://stream.buchanan.uk.com/broadcast/6463b2140324894e892e0a12 .
At 11am (BST), there will be a live 30-minute Q&A webcast for
sell-side analysts, hosted by Richard Simpson (CEO), Sarah Sergeant
(CFO) and Alex Pease (CIO). Those analysts wishing to join and
receive dial in details should register their interest via
watkinjones@buchanan.uk.com .
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")
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
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
22,000 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
Review of Performance
Results for the six months to 31 March 2023
Revenues for the period were GBP153.9 million (HY22: GBP193.0
million). Operationally the Group's businesses have continued to
perform well, with our self-build developments progressing in line
with expectations. The decrease in revenues reflects no new forward
sales having been completed in the period compared to three in
HY22.
Gross profit was GBP16.1 million (HY22: GBP29.9 million), with
gross margin at 10.4% compared to 15.5% last year. The lower margin
was in line with our current margin guidance, with incremental
impact from additional build costs incurred at our scheme in Exeter
where the main contractor went into liquidation.
Adjusted operating profit for the period was GBP1.8 million
(HY22: GBP14.6 million), reflecting the impact of the lower gross
margin.
Operating Profit for the period was GBP0.7 million (HY22: loss
of GBP13.4 million) after an exceptional cost of GBP1.1 million for
people restructuring costs incurred during the period.
Net finance costs for the period were GBP1.5 million (HY22:
GBP3.2 million). Finance costs include GBP0.9 million (HY22: GBP2.4
million) in respect of the interest on leases.
Adjusted profit before tax for the period was GBP0.3 million
(HY22: GBP11.4 million) and loss before tax for the period was
GBP0.8 million (HY22: loss before tax of GBP16.6 million). Adjusted
basic earnings per share for the period were 0.11 pence, compared
to 3.65 pence for HY22.
Segmental review
Build to Rent ('BTR')
Revenues from BTR were maintained in the period at GBP93.0
million (HY22: GBP93.8 million). Revenues were derived from the
build-out of our forward sold developments in Hove, Lewisham,
Birmingham and Leatherhead which are progressing well and on track
for their respective completions.
Gross profit for the period was GBP8.3 million (HY22: GBP12.0
million), a decrease of 30.9%. The gross margin for the period was
8.9% (HY22: 12.9%), reflecting the lower margin of our schemes
which were forward sold in the latter half of FY22, including a
development wrap scheme in Cardiff.
We are actively progressing a number of site acquisitions. We
are also looking at options for our BTR operational properties.
Student accommodation ('PBSA')
Revenues from PBSA were 38.2% lower than last year at GBP48.4
million (HY22: GBP78.3 million) reflecting the number of and stage
of development of the sites in-build as well as the lack of new
forward sales in the period.
PBSA gross profit for the period was GBP4.8 million (HY22:
GBP13.0 million) with gross margin for the period being 9.8% (HY22:
16.6%), reflecting the impact of additional build costs at our
Exeter scheme and the earlier stage of development of the sites in
build.
Subsequent to the period end and as announced today, we have
agreed the forward sale of an 819 bed development in Bristol for
completion in 2024.
Accommodation management (Fresh)
Fresh achieved revenues of GBP4.7 million (HY22: GBP4.1
million), reflecting higher levels of student occupancy. This
reflects the higher number of student beds and BTR apartments under
management at the start of FY23 (22,896) compared to FY22
(22,155)
The increase in Fresh's revenue for the period led to an
increase in gross profit to GBP3.2 million (HY22: GBP2.7 million),
at a margin of 68.0% (HY22: 65.9%).
Operationally, Fresh has continued to support its residents
focusing on community engagement and the Be Wellbeing
programme.
Affordable-led Homes
The affordable-led residential development business achieved 20
sales completions in the period (HY22: 19 sales), resulting in an
increase in revenue to GBP7.8 million (HY22 GBP5.4 million).
The gross profit achieved by the division was GBP0.9 million
(HY22: GBP0.6 million), at a margin of 11.9% (HY22: 11.0%).
Balance sheet and liquidity
Our financial position and liquidity remain strong. We had a
gross cash balance at 31 March 2022 of GBP83.3 million (31 March
2022: GBP44.7 million), whilst net cash stood at GBP45.3 million
(31 March 2022: GBP26.8 million), before deducting IFRS 16 lease
liabilities.
The Group had undrawn headroom of GBP65.4 million on its
revolving credit facility ('RCF') with HSBC at 31 March 2023 and an
unutilised overdraft facility of GBP10.0 million, giving total cash
and available facilities of GBP158.7 million (31 March 2022:
GBP140.5 million). In addition, a short term overdraft extension
(to GBP20.0m total overdraft facility) has been agreed from 1 April
2023 to 30 September 2023.
The strength of our liquidity position has enabled us to
continue to advance our growth strategy through securing
opportunities in the land market during the period. This
investment, combined with our normal annual cash profile, which
sees a higher utilisation of cash in the first half of the year,
resulted in a reduction in our net cash balance of GBP37.3 million
since the start of the year (HY22: reduction of GBP97.5 million).
Our inventory and work in progress balance has increased by a net
GBP12.4 million, to GBP159.5 million. Of this balance, GBP13.4
million relates to the continued development of our Bedminster
site, offset by affordable housing sales.
Contract assets and receivables at 31 March 2023 stood at
GBP53.3 million and GBP33.0 million respectively and had increased
GBP6.8 million from the position at 30 September 2022. The contract
assets relate primarily to the final payments to be received on
completion of the forward sold developments in build which have
increased as developments have progressed. Contract and trade
liabilities amounted to GBP100.9 million at 31 March 2023 and had
increased by GBP6.1 million since FY22 year-end position due to a
high level of construction activity linked to the stage of
completion of developments.
Building Safety
We have utilised GBP4.1 million from our building safety
improvements provision in HY23, in line with our expectations, and
we continue to monitor the evolution of the Building Safety Act,
including the Responsible Actors Scheme from the Department for
Levelling Up, Housing and Communities (DLUHC).
ESG
Future Foundations, our ESG strategy, formalises our commitments
and targets around core themes of future people, places and planet.
This includes a commitment to achieving net zero scope 1 and 2
carbon emissions by 2030.
Our ESG initiatives continue to progress well. Our trial of
timber frame housing is ongoing and we are assessing how we can
further utilise modern methods of construction in our developments.
Our plant strategy continues to be refined with a view to sourcing
energy-efficient alternatives such as electric and battery operated
tools. We are reviewing our procurement policies and approved
supplier list to ensure we build strong relationships with those
who demonstrate strong ESG credentials, and supporting our approved
suppliers where necessary in gaining ISO 14001 accreditation.
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 well ahead of that target.
Dividend
The Board has declared an interim dividend for the period of 1.4
pence per share, which will be paid on 30 June 2023 to shareholders
on the register at close of business on 9 June 2023. The shares
will go ex-dividend on 8 June 2023.
Outlook
Today we have announced our first forward fund transaction of
FY23 and we are encouraged by the continued recovery in the forward
fund market. We are starting to see attractive new land acquisition
opportunities which support our long run target margins and we are
currently under offer or in negotiation for circa GBP500 million
expected revenue to come of exciting new development opportunities.
This, combined with our current operational performance and the
expected normalisation of the forward fund market reinforces
confidence in the future.
Richard Simpson
Chief Executive Officer
23 May 2023
Consolidated Statement of Comprehensive Income
for the six month period ended 31 March 2023 (unaudited)
6 months to 6 months to 12 months to
31 March 31 March 30 September
2023 2022 2022
Notes GBP'000 GBP'000 GBP'000
Continuing operations
Revenue 153,854 192,966 407,076
Cost of sales (137,801) (163,116) (339,450)
------------ ------------ --------------
Gross profit 16,053 29,850 67,626
Administrative expenses (14,274) (15,281) (12,942)
Operating profit before exceptional costs 1,779 14,569 54,684
Exceptional costs 6 (1,063) (28,000) (30,365)
------------ ------------ --------------
Operating profit / (loss) 716 (13,431) 24,319
Share of profit in joint ventures - - (16)
Finance income 190 22 72
Finance costs (1,672) (3,238) (5,982)
------------ ------------ --------------
(Loss) / profit before tax from continuing operations (766) (16,647) 18,393
Income tax credit / (expense) 8 173 3,322 (4,979)
------------ ------------ --------------
(Loss) / profit for the period attributable to ordinary equity
holders of the parent (593) (13,325) 13,414
============ ============ ==============
Other comprehensive income
Net (loss) / gain on equity instruments designated at fair value
through other comprehensive
income (78) - 157
------------ ------------ --------------
Total comprehensive (loss) / income for the period attributable
to ordinary equity holders
of the parent (671) (13,325) 13,571
============ ============ ==============
Earnings per share for the period attributable to ordinary equity Pence Pence Pence
holders of the parent
Basic earnings per share 9 (0.231) (5.202) 5.232
============ ============ ==============
Diluted earnings per share 9 (0.230) (5.185) 5.205
============ ============ ==============
Adjusted basic earnings per share (excluding exceptional costs) 9 0.105 3.652 14.825
============ ============ ==============
Adjusted diluted earnings per share (excluding exceptional costs) 9 0.104 3.640 14.748
============ ============ ==============
Consolidated Statement of Financial Position
as at 31 March 2023 (unaudited)
31 March 31 March 30 September
2023 2022 2022
Notes GBP'000 GBP'000 GBP'000
Non-current assets
Intangible assets 11,885 12,445 12,165
Investment property (leased) 11 25,700 95,397 27,331
Right of use assets 11 5,475 4,695 4,738
Property, plant and equipment 1,811 746 2,009
Investment in joint ventures 1 17 1
Deferred tax asset 1,983 7,165 1,941
Other financial assets 1,288 1,241 1,366
48,143 121,706 49,551
---------- ---------- -------------
Current assets
Inventory and work in progress 159,507 155,027 147,118
Contract assets 53,287 37,367 50,821
Trade and other receivables 32,967 55,808 28,628
Current tax receivables 3,586 - -
Cash and cash equivalents 13 83,336 44,685 110,841
332,683 292,887 337,408
---------- ---------- -------------
Total assets 380,826 414,593 386,959
========== ========== =============
Current liabilities
Trade and other payables (100,544) (75,396) (89,717)
Contract liabilities (373) (1,128) (5,052)
Interest-bearing loans and borrowings (312) (615) -
Lease liabilities (6,788) (6,611) (6,248)
Provisions 7 (7,402) (3,152) (7,713)
Current tax liabilities - (2,276) (4,402)
(115,419) (89,178) (113,132)
---------- ---------- -------------
Non-current liabilities
Interest-bearing loans and borrowings (37,688) (17,262) (28,288)
Lease liabilities (40,685) (119,421) (42,851)
Provisions 7 (21,995) (30,345) (25,735)
Deferred tax liabilities - (813) -
(100,368) (167,841) (96,874)
---------- ---------- -------------
Total Liabilities (215,787) (257,019) (210,006)
========== ========== =============
Net assets 165,039 157,574 176,953
========== ========== =============
Equity
Share capital 2,564 2,562 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 584 536 662
Share-based payment reserve 831 3,171 526
Retained earnings 151,831 142,076 163,972
---------- ---------- -------------
Total Equity 165,039 157,574 176,953
========== ========== =============
Consolidated Statement of Changes in Equity
for the six month period ended 31 March 2023 (unaudited)
Fair
value
Merger of financial Share-based
Share Share Reserve assets payment Retained
Capital Premium GBP'000 at FVOCI reserve earnings Total
GBP'000 GBP'000 GBP'000 GBP000 GBP'000 GBP'000
Balance at 30 September
2021 2,562 84,612 (75,383) 536 2,824 169,660 184,811
Loss for the period - - - - - (13,325) (13,325)
Share-based payments - - - - 347 - 347
Dividend paid (note
10) - - - - - (14,259) (14,259)
--------- -------- ---------- ------------- ----------- ---------- ---------
Balance at
31 March 2022 2,562 84,612 (75,383) 536 3,171 142,076 157,574
========= ======== ========== ============= =========== ========== =========
Profit for the period - - - - - 26,739 26,739
Share-based payments 2 - - - (138) - (136)
Other comprehensive
income - - - 126 - 31 157
Deferred tax debited
directly to equity - - - - - 141 141
Recycled reserve
for fully vested
share-based payment
schemes - - - - (2,507) 2,507 -
Dividend paid (note
10) - - - - - (7,522) (7,522)
Issue of shares - - - - - - -
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
31 March 2023 2,564 84,612 (75,383) 584 831 151,831 165,039
========= ======== ========== ============= =========== ========== =========
Consolidated Statement of Cash Flows
for the six month period ended 31 March 2023 (unaudited)
6 months 6 months 12 months
to to to
31 March 31 March 30 September
2023 2022 2022
Notes GBP'000 GBP'000 GBP'000
Cash flows from operating activities
Cash outflow from operations 12 (14,646) (78,274) (19,592)
Interest received 190 22 72
Interest paid (1,572) (3,278) (5,782)
Tax (paid) / refunded (7,830) 148 (1,557)
--------- --------- -------------
Net cash outflow from operating
activities (23,858) (81,382) (26,859)
========= ========= =============
Cash flows from investing activities
Acquisition of property, plant and
equipment (189) (556) (660)
Proceeds on disposal of property,
plant and equipment 4 2,000 4,341
Proceeds on disposal of right-of-use
assets - - 7,897
Net cash (outflow) / inflow from
investing activities (185) 1,444 11,578
========= ========= =============
Cash flows from financing activities
Dividend paid 10 (11,548) (14,259) (21,781)
Payment of principal portion of
lease liabilities (1,626) (3,359) (4,717)
Payment of capital element of other
interest-bearing loans - (403) (389)
Drawdown of RCF 10,301 9,625 20,625
Repayment of bank loans (589) (3,274) (3,909)
Net cash outflow from financing
activities (3,462) (11,670) (10,171)
========= ========= =============
Net (decrease)/increase in cash (27,505) (91,608) (25,452)
Cash and cash equivalents at
beginning of the period 110,841 136,293 136,293
--------- --------- -------------
Cash and cash equivalents at
end of the period 13 83,336 44,685 110,841
========= ========= =============
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 50 Jermyn Street,
London, United Kingdom, SW1Y 6LX.
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 2023 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 2023
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 22 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 22 May 2023.
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 2023. To the extent that IFRS at 30 September
2023 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
(GBP'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 2022. 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 2023, the Group had a robust liquidity position,
with cash and available headroom in its banking facilities
totalling GBP158.7m made up of cash balances of GBP83.3m, RCF
Headroom of GBP65.4m and an overdraft facility of GBP10.0m. In
addition, a short term overdraft extension (to GBP20.0m total
overdraft facility) has been agreed from 1 April 2023 to 30
September 2023.
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 2024
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 a
severe downside scenario of a continued slow recovery of the
forward sale market, such that no further land acquisitions are
made, and no forward sales are achieved apart from the sale of one
of the Group's PBSA assets where the construction is already well
progressed. The cash forecast under this scenario illustrates that
adequate liquidity is maintained through the forecast period. The
minimum total cash and available facilities balance under this
scenario was GBP78 million (excluding the GBP10.0 million
overdraft).
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 staff costs, discretionary
expenditure and investments in unsold developments to ensure that
the Group's liquidity is enhanced.
Based on the results of the analysis undertaken, the Directors
have a reasonable expectation that the Group has adequate resources
available to continue to trade for the period to 30 June 2024 and
has therefore adopted the going concern basis in the preparing the
financial statements.
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 2022.
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.
Build
6 months to 31 Student to Accommodation
March 2023 (unaudited) Accommodation rent Residential management Corporate Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'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 costs - - - (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
--------------- -------- ------------ -------------- ---------- ---------
6 months to Build
31 March 2022 Student to Accommodation
(unaudited) Accommodation rent Residential management Corporate Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Segmental revenue 78,284 93,753 5,408 4,086 11,435 192,966
--------------- -------- ------------ -------------- ---------- ---------
Segmental gross
profit 13,018 12,038 635 2,673 1,486 29,850
Administration
expenses - - - (3,120) (12,161) (15,281)
Exceptional expenses - - - - (28,000) (28,000)
Finance income - - - - 22 22
Finance costs - - - - (3,238) (3,238)
Profit/(loss)
before tax 13,018 12,038 635 (447) (41,891) (16,647)
Taxation - - - - 3,322 3,322
--------------- -------- ------------ -------------- ---------- ---------
Profit/(loss)
for the period 13,018 12,038 635 (447) (38,569) (13,325)
=============== ======== ============ ============== ========== =========
Inventory and
WIP 79,574 45,443 27,321 - 2,689 155,027
--------------- -------- ------------ -------------- ---------- ---------
Year ended Build
30 September Student to Accommodation
2022 Accommodation rent Residential management Corporate Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Segmental revenue 180,037 191,228 14,478 9,072 12,261 407,076
--------------- -------- ------------ -------------- ---------- ---------
Segmental gross
profit 26,353 32,808 1,915 5,909 641 67,626
Administration
expenses - - - (5,788) (25,407) (31,195)
Profit on disposal
of student leasehold
properties - - - - 18,253 18,253
Exceptional costs - - - - (30,365) (30,365)
Share of operating
loss in joint
ventures - - - - (16) (16)
Finance income - - - - 72 72
Finance costs - - - - (5,982) (5,982)
Profit/(loss)
before tax 26,353 32,808 1,915 121 (42,804) 18,393
Taxation - - - - (4,979) (4,979)
--------------- -------- ------------ -------------- ---------- ---------
Profit/(loss)
for the period 26,353 32,808 1,915 121 (47,783) 13,414
Inventory and
WIP 75,840 38,763 29,785 - 2,730 147,118
--------------- -------- ------------ -------------- ---------- ---------
5. Disaggregated revenue information
Build
Student to Accommodation
6 months to 31 March 2023 (unaudited) Accommodation rent Residential management Corporate Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'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
============================================= ============== ======= =========== ============= ========= =======
Build
Student to Accommodation
6 months to 31 March 2022 (unaudited) Accommodation rent Residential management Corporate Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Type of goods or service
Construction contracts or development
agreements 64,534 45,005 - - 2,110 111,649
Sale of land 6,447 48,200 - - - 54,647
Sale of completed property - - 5,408 - 9,325 14,733
Rental income 7,303 548 - - - 7,851
Accommodation management - - - 4,086 - 4,086
--------------------------------------------- -------------- ------- ----------- ------------- --------- -------
Total revenue from contracts with customers 78,284 93,753 5,408 4,086 11,435 192,966
============================================= ============== ======= =========== ============= ========= =======
Timing of revenue recognition
Goods transferred at a point in time 6,447 48,200 5,408 - 9,325 69,380
Services transferred over time 71,837 45,553 - 4,086 2,110 123,586
--------------------------------------------- -------------- ------- ----------- ------------- --------- -------
Total revenue from contracts with customers 78,284 93,753 5,408 4,086 11,435 192,966
============================================= ============== ======= =========== ============= ========= =======
Year ended Student Build to Accommodation
30 September 2022 Accommodation rent Residential management Corporate Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Type of goods or service
Construction contracts or development
agreements 135,502 97,617 - - 2,936 236,055
Sale of land 30,947 92,450 - - - 123,397
Sale of completed property - - 14,478 - 9,325 23,803
Rental income 13,588 1,161 - - - 14,749
Accommodation management - - - 9,072 - 9,072
-------------------------------------------- -------------- -------- ----------- ------------- --------- -------
Total revenue from contracts with customers 180,037 191,228 14,478 9,072 12,261 407,076
============================================ ============== ======== =========== ============= ========= =======
Timing of revenue recognition
Goods transferred at a point in time 30,947 92,450 14,478 - 9,325 147,200
Services transferred over time 149,090 98,778 - 9,072 2,936 259,876
-------------------------------------------- -------------- -------- ----------- ------------- --------- -------
Total revenue from contracts with customers 180,037 191,228 14,478 9,072 12,261 407,076
============================================ ============== ======== =========== ============= ========= =======
6. Exceptional costs
6 months to 6 months to 12 months to
31 March 31 March 30 September
2023 2022 2022
GBP'000 GBP'000 GBP'000
Building Safety Act provision - (28,000) (30,365)
Restructuring costs (1,063) - -
------------ ------------ --------------
Total exceptional costs (1,063) (28,000) (30,365)
============ ============ ==============
Action has been taken during the period ended 31 March 2023 to
manage the Group's cost base, with exceptional costs of
GBP1,063,000 incurred due to related redundancies. Provisions were
made in previous periods for costs associated with the Building
Safety Act 2022. No further exceptional costs related to this
provision have been incurred in the period ended 31 March 2023.
7. Provisions
Legacy building safety improvements provision
GBP'000
----------------------------- -------
Current
At 1 October 2022 7,713
Arising during the year -
Utilised (4,051)
Transferred from non-current 3,740
At 31 March 2023 7,402
----------------------------- -------
GBP'000
----------------------------- -------
Non-current
At 1 October 2022 25,735
Arising during the year -
Utilised -
Transferred from non-current (3,740)
At 31 March 2023 21,995
----------------------------- -------
The provision is classified as follows:
GBP'000
----------------- -------
Current 7,402
Non-current 21,995
----------------- -------
At 31 March 2023 29,397
----------------- -------
As at 30 September 2022, the Group held a provision in response
to the introduction of the Building Safety Act 2022 (the 'BSA'),
which increased the scope of requirements for remediating cladding
and firestopping measures on high-rise residential buildings.
The Group continues to work with the owners of certain of its
previously developed properties to remediate items now in scope of
the BSA and to share the costs. During the period GBP4,051,000 of
the provision has been utilised.
This remains a highly complex area with judgements and estimates
in respect of the cost of these 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. The judgements surrounding this provision
at 31 March 2023 are consistent with those made at the prior year
end. Should the costs associated with these remedial works increase
by 5%, the provision required would increase by GBP1,677,000.
Should the discount rate applied to the calculation reduce by 1% ,
the provision would increase by GBP635,000.
Of the total provision of GBP29,397,000 at 31 March 2023, costs
of GBP7,402,000 are expected to be incurred in the twelve months
ending 31 March 2024, and costs of GBP21,995,000 are expected to be
incurred between 1 April 2024 and 30 September 2027.
8. Income taxes
The tax expense for the period has been calculated by applying
the estimated effective tax rate for the financial year ending 30
September 2023 of 22.58 % 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
2023 2022 2022
GBP'000 GBP'000 GBP'000
(Loss)/profit for the period attributable to ordinary
equity holders of the parent (593) (13,325) 13,414
Add back exceptional items for the period 1,063 28,000 30,365
Less corporation tax benefit from exceptional items
for the period (202) (5,320) (5,769)
Adjusted profit for the period attributable to
ordinary equity holders of the parent 268 9,355 38,010
Number of shares Number of shares Number of shares
Number of ordinary shares for basic earnings per share 256,430,367 256,163,459 256,385,882
Adjustments for the effects of dilutive potential
ordinary shares 1,472,669 839,998 1,338,930
Weighted average number for diluted earnings per share 257,903,036 257,003,457 257,724,812
Pence Pence Pence
Basic earnings per share
Basic profit for the period attributable to ordinary
equity holders of the parent (0.231) (5.202) 5.232
Adjusted basic earnings per share (excluding
exceptional items after tax)
Adjusted profit for the period attributable to
ordinary equity holders of the parent 0.105 3.652 14.825
Diluted earnings per share
Basic profit for the period attributable to diluted
equity holders of the parent (0.230) (5.185) 5.205
Adjusted diluted earnings per share (excluding
exceptional items after tax)
Adjusted profit for the period attributable to diluted
equity holders of the parent 0.104 3.640 14.748
10. Dividends
6 months to 6 months to 12 months to
31 March 31 March 30 September
2023 2022 2022
GBP'000 GBP'000 GBP'000
Final dividend paid in February 2022 of 5.6 pence - 14,345 14,345
Interim dividend paid in June 2022 of 2.9 pence - - 7,436
Final dividend paid in February 2023 of 4.5 pence 11,548 - -
11,548 14,259 21,781
============ ============ ==============
An interim dividend of 1.4 pence per ordinary share will be paid
on 30 June 2023. This dividend was declared after 31 March 2023 and
as such the liability of GBP3,590,000 has not been recognised at
that date. At 31 March 2023 the Company had distributable reserves
available of GBP44,600,000
11. Leases
Investment property (leased) Office Leases Motor Vehicle Leases Total
GBP'000 GBP'000 GBP'000 GBP'000
Cost
At 30 September 2021 161,629 10,132 974 172,735
Additions/adjustment - 119 562 681
Disposals - - - -
----------------------------- -------------- --------------------- ---------
At 31 March 2022 161,629 10,251 1,536 173,416
Additions - - 611 611
Disposals (78,038) - (591) (78,629)
----------------------------- -------------- --------------------- ---------
At 30 September 2022 83,591 10,251 1,556 95,398
Additions 55 843 763 1,661
Disposals - - (287) (287)
----------------------------- -------------- --------------------- ---------
At 31 March 2023 83,646 11,094 2,032 96,772
----------------------------- -------------- --------------------- ---------
Depreciation
At 30 September 2021 57,364 5,785 853 64,002
Charge for the period 3,170 354 113 3,637
Disposals - - - -
--------- ------ ------ ---------
At 31 March 2022 60,534 6,139 966 67,639
Charge for the period 2,986 337 145 3,468
Disposals (12,958) - (518) (13,476)
--------- ------ ------ ---------
At 30 September 2022 50,562 6,476 593 57,631
Charge for the period 1,686 436 262 2,384
Disposals - - (116) (116)
--------- ------ ------ ---------
At 31 March 2023 52,248 6,912 739 59,899
--------- ------ ------ ---------
Impairment
At 30 September 2021 5,698 - - 5,698
Charge for the period - - - -
--------- ------ ------ ---------
At 31 March 2022 5,698 - - 5,698
Charge for the period
--------- ------ ------ ---------
At 30 September 2022 5,698 - - 5,698
Charge for the period - - - -
--------- ------ ------ ---------
At 31 March 2023 5,698 - - 5,698
--------- ------ ------ ---------
Net Book Value
At 31 March 2023 25,700 4,182 1,293 31,175
------- ------ ------ --------
At 30 September 2022 27,331 3,775 963 32,069
------- ------ ------ --------
At 31 March 2022 95,397 4,125 570 100,092
------- ------ ------ --------
At 30 September 2021 98,567 4,347 121 103,035
------- ------ ------ --------
12. Reconciliation of profit before tax to net cash flow from operating activities
12 months
6 months to 6 months to to
31 March 31 March 30 September
2023 2022 2021
GBP'000 GBP'000 GBP'000
(Loss)/profit before tax (766) (16,647) 18,393
Depreciation of leased investment
properties and right-of-use assets 2,384 3,637 7,105
Depreciation of plant and equipment 382 244 747
Amortisation of intangible assets 280 280 559
Profit of disposal of right-of-use
assets - - (18,137)
Profit on sale of plant and equipment (1) (1,308) (2,783)
Finance income (190) (22) (72)
Finance costs 1,672 3,238 5,982
Share of profit in joint ventures - - 16
Increase in inventory and work in
progress (12,389) (27,394) (19,525)
Increase in contract assets (2,466) (23,557) (37,011)
Increase in trade and other receivables (4,339) (27,610) (430)
(Decrease)/increase in contract
liabilities (4,679) (1,717) 2,207
Increase/(decrease) in trade and
other payables 9,213 (11,862) (901)
(Decrease)/increase in provisions (4,052) 24,098 24,049
Increase in share-based payment
reserve 305 346 209
----------- ----------- -------------
Net cash outflow from operating
activities (14,646) (78,274) (19,592)
----------- ----------- -------------
13. Analysis of net debt
31 March 31 March 30 September
2023 2022 2022
GBP'000 GBP'000 GBP'000
Cash at bank and in hand 83,336 44,685 110,841
Other interest-bearing loans - (87) -
Bank loans (38,000) (17,790) (28,288)
-------------- -------------- ----------------
Net cash before deducting lease liabilities 45,336 26,808 82,553
-------------- -------------- ----------------
Lease liabilities (47,473) (126,032) (49,099)
Net (debt)/cash (2,137) (99,224) 33,454
============== ============== ================
14. Employee benefits - long-term incentive plans
Long Term Incentive Plan ('LTIP') - 2023 Awards
In February 2023 1,736,790 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 the Company's adjusted Earnings per Share
(EPS) and relative total shareholder return (relative TSR).
To model the impact of the relative TSR performance condition,
the volatility for each company in the comparator group has been
calculated using historical data (where available) which matches
the length of the performance period remaining at the grant date
(3.00 years). In addition, the valuation model included the
correlation between the peer group and the Company as well as the
inter-correlations between the peers.
The fair value of the share awards subject to the relative TSR
performance condition has been estimated at the grant date using a
Monte Carlo valuation model using the following assumptions:
Share price 112.0 pence
Exercise price 1 penny
Expected term 3 years
Risk-free interest rate 2.85%
Are dividend equivalents receivable for the award holder? Yes
Expected volatility 40.98%
This resulted in an estimated fair value for an award with
relative TSR performance conditions of 71.52 pence.
Relative TSR (50% of award, rising to 100% if no EPS condition set) % of TSR award vesting(1)
--------------------------------------------------------------------- --------------------------
Less than median ranking 0%
--------------------------------------------------------------------- --------------------------
Equal to median ranking 20%
--------------------------------------------------------------------- --------------------------
Upper quartile or greater ranking 100%
--------------------------------------------------------------------- --------------------------
(1) Vesting on a straight-line basis between target levels
The EPS performance condition, representing 50% of the awarded
shares, has not yet been set by the Remuneration Committee due to
ongoing market volatility. Under the terms of the award, this
condition must be set within six months of the award date (3
February 2023). Should the Remuneration Committee determine at that
time that an EPS performance condition remains inappropriate, the
full award (100%) will be subject to the above Relative TSR
condition.
The fair value of share awards granted subject to EPS conditions
is 111.08 pence and has been estimated as the market price of an
ordinary share of the Company at the date the award was granted
less the one penny exercise price for the award.
Restricted Share Awards ('RSA') - 2023 Awards
In February 2023 536,163 RSAs 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 satisfactory performance by the participant.
The fair value of RSAs granted subject to the above conditions
is 111.08 pence and has been estimated as the market price of an
ordinary share of the Company at the date the award was granted
less the one penny exercise price for the award.
Charge for the period
For the six months ended 31 March 2023, 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 GBP305,000 (31 March 2022: GBP346,000).
- Ends -
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END
IR FIFIREEIVFIV
(END) Dow Jones Newswires
May 23, 2023 02:10 ET (06:10 GMT)
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