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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Watkin Jones Plc | LSE:WJG | London | Ordinary Share | GB00BD6RF223 | ORD 1P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.55 | 1.28% | 43.65 | 43.55 | 43.70 | 44.30 | 43.50 | 44.00 | 400,914 | 15:53:34 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| Operative Builders | 413.24M | -32.55M | -0.1269 | -3.45 | 112.19M |
From Apr 2019 to Apr 2024
TIDMWJG
RNS Number : 6232Z
Watkin Jones plc
21 May 2019
For immediate release 21 May 2019
Watkin Jones plc
('Watkin Jones' or the 'Group')
Half year results for the six months to 31 March 2019
'Delivering Performance'
Watkin Jones plc (AIM:WJG), a leading UK developer and constructor of multi-occupancy residential property assets, with a focus on the student accommodation and build to rent sectors, announces its results for the six months ended 31 March 2019 (the "period"). The Board is pleased to report a successful first six months of the financial year with trading in line with its expectations.
Financial Highlights
Hot Features
Premium
H1 2019 H1 2018 Movement
Underlying results
Revenue GBP159.1 million GBP158.3 million +0.5%
Gross profit GBP37.6 million GBP34.5 million +9.0%
Adjusted profit before
tax(1) GBP26.0 million GBP23.6 million +10.0%
Adjusted EBITDA(2) GBP26.6 million GBP24.5 million +8.6%
Adjusted basic earnings
per share(1) 8.11 pence 7.53 pence +7.7%
Dividend per share 2.75 pence 2.47 pence +11.3%
Net cash GBP18.3 million GBP38.4 million -
Statutory results
Profit before tax GBP23.4 million GBP23.6 million -0.9%
EBITDA(2) GBP24.0 million GBP24.5 million -1.9%
Basic earnings per
share 7.31 pence 7.53 pence -2.9%
Notes
1. For H1 2019, adjusted profit before tax and adjusted basic earnings per share are calculated before the impact of an exceptional charge of GBP2.6 million. This charge relates to the previously announced commitment to compensate the Group's new CEO, Richard Simpson, for the forfeiture of outstanding incentives held in respect of his former employer, of which GBP2.2 million is a non-cash charge.
2. EBITDA comprises operating profit from continuing operations plus the Group's profit from joint ventures, adding back charges for depreciation and amortisation. For H1 2019, adjusted EBITDA is stated before the exceptional charge of GBP2.6 million.
3. FY 2019 is the first year of adoption by the Group of IFRS 15 'Revenue from Contracts with Customers'. The consequence of adopting the accounting standard has been to account separately for the land and development agreement elements of forward-sold contracts, rather than treating them as a combined agreement. The effect on the Group's results has been to reduce current period revenues and profit before tax by GBP613,000. The prior period comparatives have not been restated.
-- Revenues for the period slightly ahead of the prior half year, continuing to be underpinned by student accommodation development activity, but also reflecting an increased contribution from the Group's other operating divisions.
-- Strong underlying profit growth for the half year, with gross profit increased by 9.0% to GBP37.6 million (H1 2018: GBP34.5 million) and adjusted profit before tax increased by 10.0% to GBP26.0 million (H1 2018: GBP23.6 million).
-- Gross margin for the six months to 31 March 2019 increased to 23.7% (H1 2018: 21.8%).
-- 11.3% increase in the interim dividend to 2.75 pence per share (H1 2018: Interim dividend of 2.47 pence per share), in line with the Group's progressive dividend policy.
-- Net operating cash outflow of GBP48.8 million for the half year, resulting in a net cash balance at 31 March 2019 of GBP18.3 million (31 March 2018: GBP38.4 million), reflecting the annual working capital cycle for the business and a delay in the receipt of a contractual cash payment of GBP14.0 million (This was subsequently received in April 2019 on conclusion of the legal formalities relating to one of the Group's forward sold student accommodation developments).
Business Highlights
Student Accommodation Development
-- 11 developments (5,334 beds) currently forward sold for delivery over the period FY 2019 to FY 2021. This includes the previously announced forward sale in the period of a 599 bed student accommodation development in Wembley, for delivery in FY 2021, and the exchange of contracts for the development of a 245 bed scheme in Swansea, for delivery in FY 2020.
-- A further three developments (594 beds) for delivery in FY 2019 and FY 2020 are currently in legals for sale.
-- In the period the Group exchanged contracts for the purchase of a prime site in Selly Oak, Birmingham, on which it expects to develop 608 student beds, subject to planning, for delivery in FY 2022.
-- Total development pipeline of over 9,000 student beds across 20 sites, targeted for delivery between FY 2019 and FY 2022.
-- Longer term pipeline continues to evolve with a number of additional sites under offer.
Build to Rent Development ("BtR")
-- Development of the 315 apartment scheme in Reading for M&G Real Estate progressing well and work commenced on the 300 apartment scheme in Wembley for Singaporean investors, both for delivery in FY 2021.
-- In the period the Group secured a significant development site in Woking, on which it expects to develop 336 apartments, subject to planning, for delivery in FY 2023 and obtained the planning consents for its 166 apartment scheme in Sutton, London, and for a 90 apartment scheme in Belfast, Northern Ireland, both for delivery in FY 2021.
-- In total, the Group now has a secured development pipeline, including Reading and Wembley, of eight sites, from which it is targeting to deliver approximately 1,800 apartments over the period FY 2020 to FY 2023. Five of these sites have planning (1,031 apartments). The Group is actively negotiating on several other opportunities.
-- The Group continues to explore the opportunity of creating a separate BtR investment vehicle and will update shareholders further as appropriate.
Accommodation Management
-- At the start of FY 2019, Fresh Property Group ('FPG') had 15,421 student beds and BtR apartments under management across 56 schemes (H1 2018: 16,617 beds and apartments across 57 schemes), with the reduction reflecting the previously announced loss of 4,597 student beds following a portfolio sale by the Curlew Student Trust, offset by strong underlying growth.
-- FPG is currently appointed to manage 21,018 units across 73 schemes by FY 2022.
Residential
-- Robust level of sales activity in the first half of the year, with 53 homes and apartments sold in the Division's core North West market (H1 2018: 28 sales).
-- 22 affordable residential apartments which form part of the Group's mixed-use development at Stratford, London, sold in the period.
Commenting on the interim results, Richard Simpson, Chief Executive Officer of Watkin Jones plc, said: "We are pleased to report another strong set of results, in-line with our expectations. The financial performance of the Group continues to be underpinned by robust student accommodation development activity and we are very encouraged by the increased contribution from the Group's other operating divisions.
Institutional investor demand for our student accommodation developments is strong and we continue to see quality new investors entering the market, such as DWS at Wembley. Similarly, investor momentum is growing in the BtR market, with a significant increase in reported transaction volumes in the first quarter of 2019. The majority of these transactions are forward fund purchases of assets, which plays to Watkin Jones strategy and heritage. We are able to leverage our proven expertise in developing and managing multi-occupancy residential rental accommodation and to continue be a partner of choice for institutional clients looking for scale.
I continue to be very excited by the opportunities in this business, seeing the market dynamics for both student accommodation and BtR so strongly supportive of the Group's forward sale model. Together with our pipeline of forward sold and secured development sites, this will continue to provide excellent visibility on future earnings and cash flow. Consequently, the Board remains confident in the prospects for the Group."
Analyst meeting
A meeting for analysts will be held at 09.30am today, 21 May 2019, at the offices of Buchanan, 107 Cheapside, London EC2V 6DN. A copy of the Interim Results presentation is available at the Company's website: http://www.watkinjonesplc.com
An audio webcast of the analysts meeting will be available after 12pm today: https://webcasting.buchanan.uk.com/broadcast/5cd18793cfde5e11cc82410d
Review of Performance
Results for the six months to 31 March 2019
Revenues for the half year were in line with management's expectations and amounted to GBP159.1 million, as compared to GBP158.3 million for the first half of last year, with the Group performing well across all its business segments. Good progress was made on the forward sold student accommodation developments in build in the first half of the year, though as expected, timing and mix profile meant that revenues from this division were GBP13.4 million less than for H1 2018. This reduction in revenue was, however, offset by higher contributions from the Group's other operating segments.
Gross profit increased by GBP3.1 million (9.0%) to GBP37.6 million (H1 2018: GBP34.5 million), reflecting an increase in the gross margin for the period to 23.7% (H1 2018: 21.8%). The improvement in gross margin reflects the particular profile of the student accommodation pipeline currently in development, which includes several premium sites that command higher forward sales values. In addition, the Group achieved improved gross profit contributions from its Build to Rent and Residential operations.
Operating profit before exceptional costs increased by 9.1% to GBP26.0 million (H1 2018: GBP23.8 million).
Further to the announcement of 8 February 2019, an exceptional charge of GBP2.6 million (H1 2018: GBPNil) was booked in the period representing the cost to the Group of compensating the new CEO, Richard Simpson, for the forfeiture of outstanding incentives held in respect of his former employer, Unite Group plc ("Unite"). This comprises a cash charge of GBP0.4 million in respect of the forfeit of his 2018 Unite bonus and a non-cash charge of GBP2.2 million in respect of the forfeit of his outstanding 2015 - 2017 Unite LTIP awards.
Profit before tax for the period amounted to GBP23.4 million, compared to GBP23.6 million for the prior half year. Adjusted profit before tax, excluding the exceptional charge, increased by GBP2.4 million to GBP26.0 million (H1 2018: GBP23.6 million), resulting in an increase of 7.7% in adjusted basic earnings per share to 8.11 pence (H1 2018: 7.53 pence).
FY 2019 is the first year of adoption by the Group of IFRS 15 'Revenue from Contracts with Customers'. The consequence of adopting the accounting standard has been to account separately for the land and development agreement elements of forward-sold contracts, rather than treating them as a combined agreement. The effect on the Group's results has been to reduce current period revenues and profit before tax by GBP613,000. The prior period comparatives have not been restated.
Segmental review
Student accommodation
Revenues from student accommodation development amounted to GBP128.8 million for the period, compared to GBP142.2 million for the comparative period last year, a decrease of 9.5%. The decrease in revenues was as anticipated and reflects the reduction in the number of developments in build for completion in FY 2019, compared to the prior year. For FY 2019 the Group is scheduled to complete six schemes (2,723 beds), compared with ten schemes (3,415 beds) in FY 2018.
The gross margin for the period on student accommodation developments amounted to 23.7%, compared to 20.7% for H1 2018. The improvement in the margin reflects the specific mix profile of the schemes in development and is a result of the Group's success in sourcing quality sites and obtaining planning consents in those target locations which will attract stronger investor demand.
In the period, as previously announced, the Group completed the forward sale of a 599 bed scheme in Wembley for delivery in FY 2021 and exchanged contracts for the development of a 245 bed scheme in Swansea, for delivery in FY 2020. The forward sale of the Wembley scheme contributed GBP30.0 million to revenues in the period, primarily in respect of the land sale.
The Group has a solid student accommodation development pipeline, currently comprising 20 development sites from which it is targeting to deliver over 9,000 beds to the market over the period FY 2019 to FY 2022, with an appraised net development value of approximately GBP850 million.
The above pipeline includes a prime site secured in the period in Selly Oak, Birmingham on which the Group expects to develop 608 student beds, subject to planning, for delivery in FY 2022. The Group is currently in negotiation on a number of other opportunities which will further add to the pipeline going forward.
A total of 11 developments (5,334 beds) are currently forward sold for delivery over the period FY 2019 to FY 2021 and a further three developments (594 beds) for delivery in FY 2019 and FY 2020 are currently in legals for sale.
Build to Rent ('BtR) development
Revenues from BtR amounted to GBP8.8 million (H1 2018: GBP0.6 million), reflecting the contribution from the development in Reading for 315 apartments, which is progressing well, and the commencement of works on the 300 apartment scheme in Wembley.
The gross profit for the period from BtR amounted to GBP1.9 million (H1 2018: GBP0.3 million) at a margin of 21.7%, reflecting a strong performance on the early stage of the Reading development and is ahead of the 15% average margin we would expect to achieve from our broader BtR pipeline in the medium term.
We continued to make good progress with our BtR development pipeline in the period, with the significant addition of the prime development site in Woking, on which, subject to planning, the Group expects to develop 336 apartments for delivery in FY 2023. We also secured the planning consents for 166 apartments on our development site in Sutton, London, and for 90 apartments on our site in Belfast, Northern Ireland, both for delivery in FY 2021.
In total, the Group now has a secured development pipeline, including Reading and Wembley, of eight sites, from which it is targeting to deliver approximately 1,800 apartments over the period FY 2020 to FY 2023. Five of these sites have planning (1,031 apartments). The Group has a substantial targeted pipeline and is actively negotiating on a number of opportunities.
The Group continues to explore the opportunity of creating a separate BtR investment vehicle and will update shareholders further as appropriate.
Accommodation management
For the six months ended 31 March 2019, FPG increased its revenues to GBP3.9 million (H1 2018: GBP3.7 million) and maintained its gross profit at GBP2.4 million. This was a strong performance given the loss of 4,597 beds under management following the sale of the portfolio of student schemes by the Curlew Student Trust in FY 2018 and reflects FPG's success in offsetting this loss by winning mandates to manage 14 new schemes with effect from the start of the 2018/19 academic year (3,740 beds). The gross margin achieved was 62.6%, as compared to the H1 2018 margin of 65.3%, reflecting the change in mix of schemes under management, though this margin was slightly ahead of the FY 2018 full year margin of 61.8%.
At the start of FY 2019, FPG had 15,421 student beds and build to rent apartments under management across 56 schemes. By FY 2022, FPG is currently appointed to manage 21,018 units across 73 schemes.
Residential
In the six months to 31 March 2019, the residential development business achieved 53 sales completions in its core North West market, as compared to 28 in H1 2018, reflecting the good level of demand in this region compared to the broader UK, as well as the phasing of sites in development. In addition, the Group sold the 22 affordable residential apartments which form part of its mixed-use development at Stratford, London.
Revenues for the residential development business amounted to GBP17.4 million, compared to GBP5.3 million for the equivalent prior period. The gross margin achieved was 16.7% (H1 2018: 10.1%). Sales from the legacy Droylsden site at nil margin amounted to GBP2.5 million in H1 2019, compared to GBP1.9 million in H1 2018. Excluding the Droylsden sales, the gross margin for the period was 19.5% (H1 2018: 15.8%), reflecting the contribution from higher margin sites.
Balance sheet and cashflow
The Group had net cash at 31 March 2019 of GBP18.3 million, comprising cash of GBP57.8 million less borrowings of GBP39.6 million. This compares to net cash at 31 March 2018 of GBP38.4 million and at 30 September 2018 of GBP80.2 million.
The reduction in net cash for the period of GBP61.9 million reflects the Group's normal annual cashflow profile which, depending on the timing of forward development sales, sees a cash utilisation in the first half of the year, followed by cash generation in the second half of the year as development sites for delivery in future years are forward sold and the significant final payments due on completion of the current year's developments are received. In addition, the half year cash position was impacted by a delay in the receipt of a contractual cash payment of GBP14.0 million, which was received in April 2019 (post period end) following the completion of certain legal formalities relating to one of the Group's forward sold student developments.
Inventory and work in progress increased by GBP20.3 million in the period to GBP153.1 million, reflecting investments of GBP11.4 million and GBP12.1 million respectively in the Group's BtR and student accommodation development pipelines.
The above factors resulted in a net cash outflow from operating activities for the period of GBP48.8 million, whilst the cash cost of the FY 2018 final dividend paid in the period amounted to GBP13.1 million.
Trade and other receivables at 31 March 2019 amounted to GBP50.0 million (31 March 2018: GBP27.4 million), whilst trade and other payables amounted to GBP70.3 million (31 March 2018: GBP91.2 million), increasing working capital by GBP43.5 million compared to 31 March 2018. In addition to the delayed contractual payment of GBP14.0 million referred to above, this is attributable to the different stage of completion and timing of payments due on major developments in build, notably Stratford. At 31 March 2018, the Group had benefitted from advance payments received on account of GBP17.1 million, included in trade and other payables, whereas at 31 March 2019, the later stage of those developments represents a receivable balance for work done of GBP21.5 million, shown in trade and other receivables. The latter includes the progressive recognition of receivables of final payments as the current year developments near completion (of which Stratford accounts for GBP13.1 million).
Dividend
The Board has stated its intention of aiming to pay dividends at a level that will be two times covered by annual adjusted earnings and that it planned to implement this policy fully by FY 2019. The Board has declared an interim dividend for the period of 2.75 pence per share, which is a 11.3% increase on the interim dividend paid last year. It will be paid on 28 June 2019 to shareholders on the register at close of business on 7 June 2019. The shares will go ex-dividend on 6 June 2019.
Outlook
The underlying market dynamics for both student accommodation and BtR are strongly supportive of the Group's forward sale model, which combined with our pipeline of forward sold and secured development sites, continues to provide the Group with excellent visibility on future earnings and cash flow. Consequently, the Board remains confident in the prospects for the Group.
Richard Simpson
Chief Executive Officer
21 May 2019
For further information:
Watkin Jones plc Richard Simpson, Chief Executive Tel: +44 (0) 20 3617 4453 Officer Philip Byrom, Chief Financial www.watkinjonesplc.com Officer Peel Hunt LLP (Nominated Adviser & Tel: +44 (0) 20 7418 8900 Joint Corporate Broker) Mike Bell / Justin Jones www.peelhunt.com Jefferies Hoare Govett (Joint Corporate Tel: +44 (0) 20 7029 8000 Broker) Max Jones / Will Soutar www.jefferies.com
Media enquiries:
Buchanan Henry Harrison-Topham / Richard Oldworth Jamie Hooper / Steph Watson Tel: +44 (0) 20 7466 5000 watkinjones@buchanan.uk.com www.buchanan.uk.com
Notes to Editors
Watkin Jones is a leading UK developer and constructor of multi occupancy property assets, with a focus on the student accommodation and Build to Rent 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 38,000 student beds across 117 sites, making it a key player and leader in the UK purpose built student accommodation market. In addition, the Fresh Property Group, the Group's specialist accommodation management company, manages over 15,000 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 is now expanding its operations into the Build to Rent sector.
The Group's competitive advantage lies in its experienced management team and 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
Consolidated Statement of Comprehensive Income
for the six month period ended 31 March 2019 (unaudited)
6 months to 6 months to 12 months to
31 March 31 March 30 September
2019 2018 2018
Notes GBP'000 GBP'000 GBP'000
Continuing operations
Revenue 159,104 158,319 363,054
Cost of sales (121,469) (123,779) (290,624)
------------ ------------ --------------
Gross profit 37,635 34,540 72,430
Administrative expenses (11,612) (10,693) (22,818)
Operating profit before exceptional (costs)/income 26,023 23,847 49,612
Exceptional (costs)/income 5 (2,576) - 4,283
------------ ------------ --------------
Operating profit 23,447 23,847 53,895
Profit on disposal of interest in joint venture - 121 121
Share of profit in joint ventures - - 1,023
Finance income 210 59 228
Finance costs (223) (391) (925)
------------ ------------ --------------
Profit before tax from continuing operations 23,434 23,636 54,342
Income tax expense 6 (4,787) (4,416) (10,136)
------------ ------------ --------------
Profit for the period attributable to ordinary equity holders of
the parent 18,647 19,220 44,206
============ ============ ==============
Other comprehensive income
Net gain on available-for-sale financial assets - 66 37
------------ ------------ --------------
Total comprehensive income for the period attributable to
ordinary equity holders of the parent 18,647 19,286 44,243
============ ============ ==============
Earnings per share for the period attributable to ordinary equity Pence Pence Pence
holders of the parent
Basic earnings per share 7 7.305 7.529 17.317
============ ============ ==============
Diluted earnings per share 7 7.288 7.529 17.310
============ ============ ==============
Adjusted basic earnings per share (excluding exceptional
(costs)/income) 7 8.113 7.529 15.958
============ ============ ==============
Adjusted diluted earnings per share (excluding exceptional
(costs)/income) 7 8.094 7.529 15.952
============ ============ ==============
Consolidated Statement of Financial Position
as at 31 March 2019 (unaudited)
31 March 31 March 30 September
2019 2018 2018
Notes GBP'000 GBP'000 GBP'000
Non-current assets
Intangible assets 14,123 14,682 14,403
Property, plant and equipment 4,670 5,004 4,809
Investment in joint ventures 2,558 1,536 2,558
Deferred tax asset 236 533 42
Other financial assets 9 1,162 1,143 1,350
---------- ---------- -------------
22,749 22,898 23,162
---------- ---------- -------------
Current assets
Inventory and work in progress 153,085 145,548 132,778
Trade and other receivables 50,041 27,401 26,967
Cash and cash equivalents 12 57,906 61,606 106,640
---------- ---------- -------------
261,032 234,555 266,385
---------- ---------- -------------
Total assets 283,781 257,453 289,547
========== ========== =============
Current liabilities
Trade and other payables (70,344) (91,194) (99,119)
Provisions (933) (699) (1,068)
Other financial liabilities - (13) -
Interest-bearing loans and borrowings (1,524) (1,401) (1,605)
Current tax liabilities (9,412) (4,635) (7,204)
---------- ---------- -------------
(82,213) (97,942) (108,996)
---------- ---------- -------------
Non-current liabilities
Interest-bearing loans and borrowings (38,089) (21,852) (24,877)
Deferred tax liabilities (1,049) (1,368) (1,050)
Provisions (1,277) (2,006) (1,602)
---------- ---------- -------------
(40,415) (25,226) (27,529)
---------- ---------- -------------
Total Liabilities (122,628) (123,168) (136,525)
========== ========== =============
Net assets 161,153 134,285 153,022
========== ========== =============
Equity
Share capital 2,553 2,553 2,553
Share premium 84,612 84,612 84,612
Merger reserve (75,383) (75,383) (75,383)
Available-for-sale reserve - 465 436
Share-based payment reserve 2,166 - 84
Retained earnings 147,205 122,038 140,720
---------- ---------- -------------
Total Equity 161,153 134,285 153,022
========== ========== =============
Consolidated Statement of Changes in Equity
for the six month period ended 31 March 2019 (unaudited)
Share-based
Share Share Merger Available-for-sale payment Retained
Capital Premium Reserve reserve reserve earnings Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP000 GBP'000 GBP'000
30 September 2017 2,553 84,612 (75,583) 399 - 114,050 126,231
Profit for the period - - - - - 19,220 19,220
Dividend paid (note
8) - - - - - (11,232) (11,232)
Other comprehensive
income - - - 66 - - 66
--------- -------- --------- ------------------ ----------- ---------- --------
Balance at
31 March 2018 2,553 84,612 (75,383) 465 - 122,038 134,285
========= ======== ========= ================== =========== ========== ========
Profit for the period - - - - - 24,986 24,986
Share-based payments - - - - 84 - 84
Dividend paid (note
8) - - - - - (6,304) (6,304)
Other comprehensive
income/(loss) - - - (29) - - (29)
--------- -------- --------- ------------------ ----------- ---------- --------
Balance at
30 September 2018 2,553 84,612 (75,383) 436 84 140,720 153,022
IFRS 9 Restatement
(note 3) - - - (436) - 436 -
IFRS 15 Restatement
(note 3) - - - - - 497 497
--------- -------- --------- ------------------ ----------- ---------- --------
Balance at 1 October
2018 2,553 84,612 (75,383) - 84 141,653 153,519
========= ======== ========= ================== =========== ========== ========
Profit for the period - - - - - 18,647 18,647
Share-based payments - - - - 2,063 - 2,063
Deferred tax equity
movement - - - - 19 - 19
Dividend paid (note
8) - - - - - (13,095) (13,095)
--------- -------- --------- ------------------ ----------- ---------- --------
Balance at
31 March 2019 2,553 84,612 (75,383) - 2,166 147,205 161,153
========= ======== ========= ================== =========== ========== ========
Consolidated Statement of Cash Flows
for the six month period ended 31 March 2019 (unaudited)
6 months 6 months 12 months
to to to
31 March 31 March 30 September
2019 2018 2018
Notes GBP'000 GBP'000 GBP'000
Cash flows from operating activities
Cash (outflow)/inflow from operations 11 (45,712) 15,632 66,582
Interest received 210 59 228
Interest paid (416) (367) (1,199)
Interest element of finance
lease rental payments (23) (24) (48)
Tax paid (2,871) (8,251) (11,140)
--------- --------- -------------
Net cash (outflow)/inflow from
operating activities (48,812) 7,049 54,423
========= ========= =============
Cash flows from investing activities
Acquisition of property, plant
and equipment (185) (349) (298)
Proceeds on disposal of property,
plant and equipment 39 - 18
Proceeds from disposal of interest
in joint venture - 250 400
Purchase of other financial
assets - (33) (350)
Cash distribution received from
other financial assets 188 1,670 1,744
Loan repayments from joint ventures - - 1,176
Net cash inflow from investing
activities 42 1,538 2,690
========= ========= =============
Cash flows from financing activities
Dividend paid 8 (13,095) (11,231) (17,536)
Capital element of finance lease
rental payments (621) (397) (1,203)
Drawdown of bank loans 16,042 3,178 8,036
Repayment of bank loans (2,290) (3,856) (5,095)
Net cash inflow/(outflow) from
financing activities 36 (12,306) (15,798)
========= ========= =============
Net (decrease)/increase in cash (48,734) (3,719) 41,315
Cash and cash equivalents at
beginning of the period 106,640 65,325 65,325
--------- --------- -------------
Cash and cash equivalents at
end of the period 12 57,906 61,606 106,640
========= ========= =============
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 Units 21-22, Llandygai Industrial Estate, Bangor Gwynedd, LL57 4YH.
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 2019 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 2019 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 2018, which has been prepared in accordance with IFRSs as adopted by the European Union. 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 434 of the Companies Act 2006.
This report was approved by the directors on 20 May 2019.
2. Basis of preparation
The interim financial statements have been prepared based on IFRS that are expected to exist at the date on which the Group prepares its financial statements for the year ended 30 September 2019. To the extent that IFRS at 30 September 2019 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 2018. There has been no significant change in any risk management policies since the date of the last audited 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 2018 with the exception of the new accounting standards noted below.
The Group adopted IFRS 15 "Revenue from contracts with customers" from 1 October 2018 retrospectively using the cumulative effect approach. Under the cumulative effect approach the results of the prior year are not restated but the initial impact of adopting the standard is taken to opening reserves. IFRS 15 replaces IAS 18 "Revenue" and IAS 11 "Construction Contracts" and introduces a 5-step model to account for revenue, with new guidance provided in areas on which previous IFRSs were silent. The adoption of the new standard has required the land sale and development agreement elements for forward-sold schemes to be accounted for separately, rather than treating them as a combined agreement. The effect on the Group's results for the six months ended 31 March 2019 has been to reduce revenues and profit before tax by GBP613,000, to increase the tax creditor by GBP116,000 and to restate opening reserves at 1 October 2018 by an increase of GBP497,000.
The Group also adopted IFRS 9 "Financial Instruments" from 1 October 2018. The Group accounts for its financial assets and liabilities at fair value and does not have any complex financial instruments. The adoption of IFRS 9 has not had a material effect on the Group's financial statements. However, the previously reported "available-for-sale reserve" of GBP436,000 has been transferred to "retained earnings" at 1 October 2018, as the concept of an "available-for-sale reserve" has been removed under IFRS 9. From 1 October 2018, the underlying assets are now measured as a financial instrument held at fair value through Other Comprehensive Income and thus the results have been transferred to "retained earnings".
4. Segmental reporting
The Group has identified four segments for which it reports under IFRS 8 'Operating segments'. The following represents the segments that the Group operates in:
a. Student accommodation - the development of purpose-built student accommodation; b. Build to rent - the development of build to rent accommodation; b. Residential - the development of traditional residential property; and
c. 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.
All revenues arise in the UK.
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 2019 (unaudited) Accommodation rent Residential management Corporate Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Segmental revenue 128,754 8,767 17,433 3,857 293 159,104
--------------- -------- ------------ -------------- ---------- ---------
Segmental gross
profit 30,578 1,904 2,918 2,413 (178) 37,635
Administration
expenses - - - - (11,612) (11,612)
Exceptional costs - - - - (2,576) (2,576)
Finance income - - - - 210 210
Finance costs - - - - (223) (223)
Profit/(loss)
before tax 30,578 1,904 2,918 2,413 (14,379) 23,434
Taxation - - - - (4,787) (4,787)
--------------- -------- ------------ -------------- ---------- ---------
Profit/(loss)
for the period 30,578 1,904 2,918 2,413 (19,166) 18,647
=============== ======== ============ ============== ========== =========
Inventory and
work in progress 44,464 55,543 43,948 - 9,130 153,085
------- ------- ------- ------ --------
Build
6 months to 31 Student to Accommodation
March 2018 (unaudited) Accommodation rent Residential management Corporate Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Segmental revenue 142,203 626 5,279 3,727 6,484 158,319
--------------- -------- ------------ -------------- ---------- ---------
Segmental gross
profit 29,365 315 533 2,433 1,894 34,540
Administration
expenses - - - - (10,693) (10,693)
Profit on sale
of interest in
joint venture - - - - 121 121
Finance income - - - - 59 59
Finance costs - - - - (391) (391)
--------------- -------- ------------ -------------- ---------- ---------
Profit/(loss)
before tax 29,365 315 533 2,433 (9,010) 23,636
Taxation - - - - (4,416) (4,416)
--------------- -------- ------------ -------------- ---------- ---------
Profit/(loss)
for the period 29,365 315 533 2,433 (13,426) 19,220
=============== ======== ============ ============== ========== =========
Inventory and
work in progress 39,442 46,562 50,793 - 8,821 145,618
------- ------- ------- ------ --------
5. Exceptional (costs)/income
6 months to 6 months to 12 months to
31 March 31 March 30 September
2019 2018 2018
GBP'000 GBP'000 GBP'000
Cost of compensating the Group's new CEO, Richard Simpson, for his
forfeit Unite Group plc
("Unite") 2018 bonus (411) - -
Cost of Watkin Jones plc share awards issued in compensating Richard
Simpson for his forfeit (2,165) - -
Unite 2015 - 2017 share awards
Compensation for reduction in scope of services and termination of
accommodation management
contracts resulting from a sale of a portfolio of properties by the
Curlew Student Trust - - 3,020
Profit share arising from the sale of the portfolio of properties by the
Curlew Student Trust - - 1,263
Total exceptional (costs)/income (2,576) - 4,283
============ ============ ==============
6. Income taxes
The tax expense for the period has been calculated by applying the estimated tax rate for the financial year ending 30 September 2019 of 19.95% to the profit for the period.
7. 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
2019 2018 2018
GBP'000 GBP'000 GBP'000
Profit for the period attributable to ordinary equity
holders of the parent 18,647 19,220 44,206
Adjusted profit for the period attributable to
ordinary equity holders of the parent (excluding
exceptional (costs)/income after tax) 20,709 19,220 40,737
Number of shares Number of shares Number of shares
Number of ordinary shares for basic earnings per share 255,268,875 255,268,875 255,268,875
Adjustments for the effects of dilutive potential
ordinary shares 580,198 - 102,929
Weighted average number for diluted earnings per share 255,849,073 255,268,875 255,371,804
Pence Pence Pence
Basic earnings per share
Basic profit for the period attributable to ordinary
equity holders of the parent 7.305 7.529 17.317
Adjusted basic earnings per share (excluding
exceptional (costs)/income after tax)
Adjusted profit for the period attributable to
ordinary equity holders of the parent 8.113 7.529 15.958
Diluted earnings per share
Basic profit for the period attributable to diluted
equity holders of the parent 7.288 7.529 17.310
Adjusted diluted earnings per share (excluding
exceptional (costs)/income after tax)
Adjusted profit for the period attributable to diluted
equity holders of the parent 8.094 7.529 15.952
8. Dividends
6 months to 6 months to 12 months to
31 March 31 March 30 September
2019 2018 2018
GBP'000 GBP'000 GBP'000
Final dividend paid in February 2018 of 4.4 pence - 11,232 11,232
Interim dividend paid in June 2018 of 2.47 pence - - 6,304
Final dividend paid in February 2019 of 5.13 pence 13,095 - -
------------ ------------ --------------
13,095 11,232 17,536
============ ============ ==============
An interim dividend of 2.75 pence per ordinary share will be paid on 28 June 2019. This dividend was declared after 31 March 2019 and as such the liability of GBP7,019,894 has not been recognised at that date.
9. Other financial assets
31 March 31 March 30 September
2019 2018 2018
GBP'000 GBP'000 GBP'000
Financial instruments at fair value
Available-for-sale financial assets at fair value through other comprehensive
income 1,162 1,143 1,350
Other financial assets 1,162 1,143 1,350
========= ========= =============
The available-for-sale financial assets at fair value comprise units held in the Curlew Student Trust ("CST"), together with the value of the carried interest held by Fresh Property Group Ltd in CST and Curlew Student Trust 2 ("CST2"). CST and CST2 are Guernsey registered unitised funds established to invest in student accommodation.
In the period ended 31 March 2019, the Group received GBP188,000 from the Fund, by way of a further partial distribution of cash following the sale by the Fund of a portfolio of assets during the year ended 30 September 2018 (H1 2018: GBP1,670,000 received).
10. Employee benefits - long term incentive plans
In February 2019 Richard Simpson was granted the following awards over Watkin Jones plc shares in compensation for share awards which lapsed when he ceased employment with his previous employer, Unite Group plc ("Unite"):
Buyout Award Number of Normal Vesting Vesting/Performance
Shares subject Date of Buyout Conditions
to Buyout Award (in addition to continued
Award service)
2015 92,480 2(nd) April None - Unite performance
2019 targets have already
been achieved
---------------- ---------------- -----------------------------
2016 434,764 23(rd) June Vesting will be based
2019 on vesting outcome of
2016 Unite LTIP Awards
---------------- ---------------- -----------------------------
2017 438,765 10(th) April Vesting will be based
2020 on vesting outcome of
2017 Unite LTIP awards
---------------- ---------------- -----------------------------
2018 344,201 10(th) April Vesting will be based
2021 on the same performance
conditions as the awards
granted to other Watkin
Jones plc senior executives
under the May 2018 Long
Term Incentive Plan
---------------- ---------------- -----------------------------
Each of the 2016, 2017 and 2018 Buyout Awards will also be subject to a two year holding period. To the extent that each of these awards vest, Richard Simpson will not be able to sell any shares resulting from exercise of the relevant award for a period of two years from the vesting date, other than to fund the resulting tax and NIC liabilities.
The fair value of the 2015 Buyout Award has been estimated using a Black Scholes valuation model and the element of the 2018 Buyout Award subject to total shareholder return ("TSR") performance conditions has been estimated using a Monte Carlo valuation model. The following table lists the inputs to the respective valuation models:
Buyout Share price Exercise Expected Expected Risk-free Are dividend
Award at grant price term volatility interest equivalents
(years) (%) rate receivable?
(%)
2015 230 pence 1 pence 0.15 27.0 0.71 Y
------------- ---------- --------- ------------ ---------- -------------
2018 230 pence 1 pence 2.17 27.0 0.71 Y
------------- ---------- --------- ------------ ---------- -------------
The fair value of the share awards from the 2018 Buyout Award subject to earning per share ("EPS") performance conditions is the market price of an ordinary share of Watkin Jones plc at the date the award is granted.
The 2016 Buyout Award and 2017 Buyout Awards are based on Unite's performance rather than Watkin Jones plc's performance, which are categorised as non-vesting conditions under IFRS 2. Consequently, an estimate of the number of shares expected to vest, as estimated at the date of grant, has been factored into the fair value assumptions. The estimated vesting as a percentage of maximum is 83.5% for the 2016 Buyout Award and 84.76% for the 2017 Buyout Award.
For the six months ended 31 March 2019, the Group has recognised a charge of GBP2,165,000 relating to the 2015, 2016 and 2017 Buyout Awards as an exceptional cost on the basis that the vesting of the awards does not relate to Watkin Jones plc's performance conditions. A further charge of GBP36,000 has been made in respect of the 2018 Buyout Award, together with a charge of GBP125,000 relating to the awards issued to Watkin Jones plc's senior executives under the 2018 LTIP, and these amounts have been charged to administrative expenses in the Consolidated Statement of Comprehensive Income (H1 2018: GBPNil).
11. Reconciliation of profit before tax to net cash flows from operating activities
12 months
6 months to 6 months to to
31 March 31 March 30 September
2019 2018 2018
GBP'000 GBP'000 GBP'000
Profit before tax 23,434 23,636 54,342
Depreciation 303 255 725
Amortisation of intangible assets 280 280 559
Profit on sale of plant and
equipment (17) - (7)
Finance income (210) (59) (228)
Finance costs 223 391 925
Profit on disposal of interest
in joint venture - (121) (121)
Share of profit in joint ventures - - (1,023)
Increase in inventory and work
in progress (20,306) (20,328) (7,558)
Interest capitalised in development
land, inventory and work in
progress 216 - 322
(Increase)/decrease in trade
and other receivables (22,461) 9,060 9,442
(Decrease)/increase in trade
and other payables (28,776) 2,518 9,155
(Decrease)/increase in provision
for property lease commitment (461) - (35)
Increase in share-based payment
reserve 2,063 - 84
----------- ----------- -------------
Net cash (outflow)/inflow from
operating activities (45,712) 15,632 66,582
----------- ----------- -------------
12. Analysis of net cash
31 March 31 March 30 September
2019 2018 2018
GBP'000 GBP'000 GBP'000
Cash at bank and in hand 57,906 61,606 106,640
Finance leases (1,403) (2,493) (2,023)
Bank loans (38,210) (20,760) (24,459)
-------------- -------------- ----------------
Net cash 18,293 38,353 80,158
============== ============== ================
- Ends -
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.
END
IR SESFASFUSELI
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May 21, 2019 02:01 ET (06:01 GMT)
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