FY24 Trading Update

Watkin Jones plc

21 August 2024

 

21 August 2024

Watkin Jones plc

(the 'Group')

FY24 Trading Update

Watkin Jones provides the following trading update for the year ended 30 September 2024 (the 'year' or 'FY24').

FY24 trading

As set out in our half year results announcement on 21 May 2024, we had a number of schemes being actively marketed, with the subsequent sale of a substantial PBSA development located in Stratford, London, announced in July. Nevertheless, overall market activity through the summer has been slower than anticipated, principally due to the continued uncertainty over the pace of interest rate cuts, and as such we believe it is now unlikely that we will close any further transactions before the financial year end.

The Group has continued to execute effectively on its broader operational objectives during the second half of the year. Encouragingly, our new Refresh initiative is gaining good traction in the market with our first project completed and we are seeing a growing pipeline of opportunities. Our in-build schemes continue on track, with two further practical completions expected in this financial year.

While the absence of further forward funds prior to the year end will result in performance being lower than previously anticipated, the Group is expected to show material improvement in FY24, with adjusted operating profit currently expected to be in the range of £10m to £12m (FY23: £0.2m).

The Group has been effective in its focus on cash generation through the second half; at 30 September 2024, gross cash is anticipated to be approximately £80 million (31 March 2024: £67m) and net cash is anticipated to be approximately £65m (31 March 2024: £44m), ahead of previous expectations.

The Group's position on the exceptional provision for remedial works for legacy properties remains unchanged.

Outlook

While the pace of recovery in our markets has been slower than expected, the UK interest rate cut in August 2024, together with forecast future cuts, should contribute to improved forward fund liquidity.  The lower number of transactions in FY24 will, however, have a consequential impact on the results in FY25, given that schemes will not contribute to revenue in future periods until they are forward sold. While we have a number of further schemes that we expect to take to market in FY25, given the slower pace of activity currently, we believe that a more prudent set of transaction assumptions should be applied to the next 12 months than previously assumed. As such, we do not currently expect adjusted operating profit in FY25 to be above FY24. In any event, the Group's performance will be significantly influenced by the evolution in forward fund liquidity over the coming months and, while it is possible to deliver year on year progress in FY25, this would require market conditions to improve at a faster pace as we enter the new financial year.

Focus on recovery

In the medium term, the end markets in which the Group operates remain strong, supported by a continued shortage of rental and student properties, positive commentary from the new UK Government, an improving interest rate environment, and continuing investor appetite. In addition, we have made progress in initiatives to broaden the Company's earnings base through diversified activities such as Refresh.

We continue to actively review opportunities to expand our longer-term pipeline and are seeing an increasing number of attractive potential opportunities in the land market and through alternative transaction structures, which will be important in driving profitability in FY26 and FY27.

While the Group's robust net cash position provides it with a strong financial underpin for its committed spending requirements, it is nevertheless a limiting factor on the extent to which we can take advantage of market conditions and further develop our pipeline.  In light of this, the Board is undertaking a review of a range of options that may be available to enhance its medium and longer term funding position, thereby allowing the Group to capitalise on a market recovery.

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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
Alex Pease, Chief Executive Officer	Tel: [phone]
Simon Jones, Chief Financial Officer	www.watkinjonesplc.com
Peel Hunt LLP (Nominated Adviser & Joint Corporate Broker)	Tel: [phone]
Mike Bell / Ed Allsopp	www.peelhunt.com

Jefferies Hoare Govett (Joint Corporate Broker)                                      Tel: [phone]

James Umbers / Paul Bundred

www.jefferies.com

Media enquiries:

Burson Buchanan
Henry Harrison-Topham / Stephanie Whitmore	Tel: [phone]
[e-mail]	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 over 49,000 student beds across 147 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 19,000 student beds and build to rent apartments on behalf of its institutional clients. Watkin Jones has also been responsible for over 50 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

 

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