Watkin Jones confident in second half, sells student portfolio
By Josh White
Date: Tuesday 17 May 2022
(Sharecast News) - Residential developer and housebuilder Watkin Jones reported an 8.2% increase in first-half revenue on Tuesday, to £193m, amid "strengthening demand" from institutional investors.
The AIM-traded firm said its underlying operating profit fell 49.8%, however, to £14.6m for the six months ended 31 March, as expected.
It said the decline was due to a higher proportion of lower-margin land sales, and the timing impact of the planned portfolio sale of three purpose-built student accommodation (PBSA) schemes.
Full-year underlying profit performance was expected to be in line with expectations.
Watkin Jones' pipeline stood at a record £2bn, of which £0.6bn was already forward-sold, giving the board "clear visibility" of revenue and earnings growth in future years.
The company said that, in response to the new Building Safety Act and following a review of all buildings over 11 metres in height that it had developed in the last three decades, it recognised an exceptional charge of £28m for the potential costs of remediation work, which it expected would be incurred over up to seven years.
Adjusted net cash totalled £26.8m at the end of the period, which the directors said showed "good liquidity" after high levels of growth investment, which would deliver forward sales in the second half and beyond.
The board declared an interim dividend of 2.9p, up 11.5% year-on-year, reflecting the firm's strengthening development pipeline and expected strong profits in the second half.
On the operational front, Watkin Jones said it had 15 current developments on track, adding that it was "proactively" managing inflationary increases for both asset values and build costs, ensuring its margins were being maintained.
A total of 22,155 beds were being managed under the company's 'Fresh' student accommodation brand, up 10% year-on-year, with bookings "well advanced" for the next academic year.
Its "affordable-led" homes business was gaining traction, with the pipeline building from site acquisitions.
Watkin Jones also announced the sale of a PBSA portfolio to EQT on Tuesday, consisting of three prime student developments along with two operational properties.
The sale would make a profit contribution of £20m to the full-year results, with all properties to be managed by Fresh.
"We are continuing to build on the positive momentum from the second half of last year and have demonstrated operational resilience through the strength of our business model," said chief executive officer Richard Simpson.
"The sale today of a major portfolio of PBSA schemes to EQT, a new institutional investor to the sector, with ongoing management provided by our Fresh business, underlines the attraction of our end-to-end offer for institutional capital targeting UK residential for rent.
"Our proactive management of build costs and sales values has ensured that our overall development margins are maintained, and we are confident going into the second half."
At 1231 BST, shares in Watkin Jones were up 2.06% at 235.75p.
Reporting by Josh White at Sharecast.com.
Email this article to a friend
or share it with one of these popular networks:
You are here: news
10 Lower Thames St,
London EC3R 6EN