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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 | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.75 | 1.72% | 44.25 | 44.40 | 44.55 | 44.65 | 43.50 | 44.50 | 436,469 | 16:35:01 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| Operative Builders | 413.24M | -32.55M | -0.1269 | -3.51 | 114.12M |
From Apr 2022 to Apr 2024
TIDMWJG
RNS Number : 7428L
Watkin Jones plc
17 May 2022
17 May 2022
Watkin Jones plc
(the 'Group')
HY Results for the six months ended 31 March 2022
('H1-2022' or the 'period')
Record development pipeline, full year in line with expectations
Hot Features
Premium
Underlying Results (1) Statutory Results
H1-2022 H1-2021 Change H1-2022 H1-2021 Change
(%) (%)
Revenue GBP193.0m GBP178.4m +8.2% GBP193.0m GBP178.4m +8.2%
Gross profit GBP29.9m GBP41.3m (27.6)% GBP29.9m GBP41.3m (27.6)%
Operating profit
/ (loss) GBP14.6m GBP29.1m (49.8)% GBP(13.4)m GBP29.1m (146.0)%]
Profit / (loss)
before tax GBP11.4m GBP25.8m (55.8)% GBP(16.6)m GBP25.8m (164.3)%
Basic earnings
per share 3.65p 8.11p (55.0)% (5.2)p 8.11p (164.1)%
Dividend per share 2.9p 2.6p +11.5% 2.9p 2.6p +11.5%
Adjusted net cash(2) GBP26.8m GBP31.7m (15.5)%
(1) For H1-2022 Underlying Operating Profit, Underlying Profit before tax and Underlying 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
(2) Adjusted net cash is stated after deducting interest bearing loans and borrowings, but before deducting IFRS 16 operating lease liabilities of GBP126.0 million at 31 March 2022 (31 March 2021: GBP134.5 million)
Key Highlights
-- Full year underlying profit performance expected to be in line with expectations
-- GBP2.0 billion record pipeline (estimated future revenue), up 43% on last year, of which GBP0.6 billion has already been forward sold; giving us clear visibility of revenue and earnings growth in future years
-- 8.2% increase in revenue to GBP193.0 million, boosted by strengthening institutional investor demand
-- GBP14.6 million underlying operating profit is down as expected on last year due to:
o A higher proportion of lower margin land sales in the period; and
o The timing impact of the planned portfolio sale of three PBSA schemes
-- In response to the new Building Safety Act and following a review of all buildings over 11 metres tall developed by the Group over the last 30 years, we have recognised an exceptional charge of GBP28.0 million for the potential costs of the remediation work required, which we expect will be incurred over a period of up to 7 years
-- GBP26.8 million adjusted net cash showing good liquidity after high levels of growth investment in H1-2022 which will deliver forward sales in H2-2022 and beyond
-- Interim dividend of 2.9p, up 11.5%, reflecting the strengthening development pipeline and expected strong H2-2022 profits
-- Operational resilience of the business continues to be demonstrated:
o 15 current developments on track
o Proactive management of inflationary increases for both asset values and build costs, thus ensuring margins are maintained
-- 22,155 beds under Fresh management, up 10% and bookings well advanced for the next academic year
-- Affordable-led Homes business is gaining traction with the pipeline building from site acquisitions.
-- Announced today the sale to EQT of a PBSA portfolio which comprises three prime student developments along with two operational properties. This has an FY-2022 profit contribution of c. GBP20 million. All properties are to be managed by Fresh.
Richard Simpson, Chief Executive Officer of Watkin Jones, said : " 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. 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 pro-active 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."
"We note the recent passing of the Building Safety Act. Whilst it is unclear as to the exact remedial works that will be required, we have taken an exceptional charge of GBP28 million. We expect these remedial costs to be incurred over a period of up to 7 years."
Strong institutional demand for residential for rent assets
-- 2 BTR schemes (837 apartments) and 2 PBSA schemes (601 beds) forward sold since the start of FY22
- Includes 1 further BTR scheme (551 apartments) in Birmingham forward sold since the 18 January 2022 preliminary announcement, with total revenue value of c.GBP136 million
- PBSA portfolio of three developments (1,059 beds), along with two operational properties, has recently closed, and a scheme in Bristol (800 beds) is under offer and expected to close shortly
Development pipeline further enhanced
-- Record pipeline now standing at GBP2.0 billion (including Affordable-led Homes pipeline of GBP0.1 billion)
-- 2 BTR schemes (312 apartments) and 2 PBSA schemes (1,105 beds) acquired since the start of FY22
- Includes BTR schemes in Leeds (230 apartments) and in Hove (82 apartments)
-- Significant planning consents gained since the start of FY22 for a BTR development in Belfast (778 apartments) and a PBSA development in Stratford (397 beds)
Our BTR and PBSA development pipelines are as follows:
BTR PBSA
(apartments) (beds)
FY-2021 position 4,012 7,142
New sites secured 312 1,105
Other changes (13) (466)
Current 4,311 7,781
Future revenue value GBP1,000 m GBP900 m
PBSA pipeline
PBSA beds
Total pipeline FY22 FY23 FY24 FY25 FY26
Forward sold 3,570 1,946 935 689 - -
Forward sales in legals 1,071 - - 1,071 - -
Sites secured with planning 920 - - - 920 -
Sites secured subject to planning 2,220 - - 1,111 1,109 -
Total secured 7,781 1,946 935 2,871 2,029 -
Change since FY-2021 639 - (740) 99 1,280 -
BTR pipeline
BTR apartments
Total pipeline FY22 FY23 FY24 FY25 FY26
Forward sold 1,160 71 354 456 279 -
Forward sales in legals 821 - 43 406 372 -
Sites secured with planning 530 - - - 530 -
Sites secured subject to planning 1,800 - - 307 442 1051
Total secured 4,311 71 397 1,169 1,623 1051
Change since FY-2021 299 - - (132) (620) 1051
Building safety
In January 2022, the Government announced its intention to approach developers to fund the remediation of life-critical fire safety issues on buildings over 11 metres and up to 30 years old. The largest developers within the industry were subsequently asked to sign a voluntary pledge regarding the remediation of such issues on these buildings.
While the Group has not been asked to sign the pledge, we agree that individual leaseholders should not have to pay for costs associated with necessary life-critical fire safety remediation work that arise in the short and medium term. We are mindful of our obligations as a responsible developer and will continue to monitor the developing legal situation in order to understand fully how Government expects the new regulatory regime to apply to the development sector as a whole. In the meantime, we will continue to comply with our legal and contractual obligations.
We note the requirement for secondary legislation to clarify the impact of the Government's plans. However, we expect that, in due course, we will incur costs in relation to remediation works on developments over 11 metres tall and up to 30 years old.
Whilst it is unclear exactly what remedial works will be needed, we have undertaken an initial review of buildings above 11 metres developed by the Group over the last 30 years, and concluded that an exceptional charge of GBP28.0 million should be made for these potential costs. This amount covers the following areas set out in the Building Safety Act: i) the extension of scope for developers' responsibility to 30 years; ii) the increased scope by including buildings between 11m and 18m; and iii) the expanded scope to incorporate non-cladding fire safety defects. This amount will be kept under review as the situation is clarified. We expect the costs will be incurred over a period of up to 7 years. The cost estimate assumes no future recoveries from sub-contractors and consultants in the supply chain.
This is in addition to the GBP15.0 million cladding provision set aside in 2020 which was to cover the remediation of all schemes with ACM or HPL cladding which were still within the original limitation period.
Name change
As the business has evolved and widened its activities, the Board intends to change the corporate and trading name to better reflect today's broader business. Further details will be released in due course.
Analyst meeting
A meeting for analysts will be held in person at 09.30am today, 17 May 2022, at Berenberg, 60 Threadneedle Street, London EC2R 8HP. A copy of the Half Year Results presentation is available at the Group's website: http://www.watkinjonesplc.com
An audio webcast of the meeting with analysts will be available after 12pm today:
https://webcasting.buchanan.uk.com/broadcast/627dfea281ae755c56ba22f
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 Max Jones / James Umbers www.jefferies.com
Media enquiries:
Buchanan Henry Harrison-Topham / Steph Whitmore Tel: +44 (0) 20 7466 5000 watkinjones@buchanan.uk.com www.buchanan.uk.com
Notes to Editors
Watkin Jones is the UK's leading developer and manager of residential for rent, with a focus on the build to rent, student accommodation and affordable housing sectors The Group has strong relationships with institutional investors, and a reputation for successful, on-time-delivery of high quality developments. Since 1999, Watkin Jones has delivered 46,000 student beds across 136 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 2022
Revenues for the period increased 8.2% to GBP193.0 million, compared to GBP178.4 million for H1-2021. Operationally the Group's businesses have continued to perform well, with our developments in-build all progressing in line with expectations. The increase in revenues was due to the three land sales totalling GBP55.0 million in the period, compared to nil in H1-2021.
Gross profit was GBP29.9 million (H1-2021: GBP41.3 million), with gross margin at 15.5% compared to 23.1% last year. The lower margin reflected the higher proportion of land sales in the period which generated a lower margin than the ensuing development activity.
Underlying Operating profit for the period was GBP14.6 million (H1-2021: GBP29.1 million), reflecting the impact of the lower gross margin.
Operating loss for the period was GBP13.4 million (H1-2021: profit of GBP29.1 million) after an exceptional cost of GBP28.0 million for the potential remedial works that may be required] under the Building Safety Act.
Net finance costs for the period amounted to GBP3.2 million (H1-2021: GBP3.2 million). Finance costs include GBP2.4 million (H1-2021: GBP2.4 million) in respect of the interest on leases.
Underlying profit before tax for the period was GBP11.4 million (H1-2021: GBP25.8 million) and loss before tax for the period was GBP16.6 million (H1-2021: profit before tax of GBP25.8 million), with the reduction due to the lower gross margin for the period and the impact of the exceptional cost of GBP28.0 million. Underlying Basic earnings per share for the period were 3.65 pence, compared to 8.11 pence for H1-2021.
Segmental review
Build to Rent ('BTR')
The contribution from BTR increased further in the period, with revenues of GBP93.8 million, up GBP34.7 million (59%) on H1-2021. Revenues were derived from the build of our forward sold developments in Hove and Lewisham which are progressing on track for completion in 2023 and 2024 respectively, and from the land sales of our significant developments in Lewisham and Sherlock Street, Birmingham.
BTR gross profit for the period was GBP12.0 million (H1-2021: GBP12.4 million), a decrease of 3%. The gross margin for the period was 12.8% (H1-2021: 21.0%), reflecting the dilution from the two land sales as well as the earlier stage of development of the other sites.
We have made good progress with negotiations and legal documentation relating to the forward sale of our developments in Belfast (778 apartments) and Bath (316 apartment), having secured planning on the Belfast site since the period end.
Subsequent to the period end we secured two sites in Leeds (230 apartments) and Hove (82 apartments) subject to planning. We are actively progressing a number of further site acquisitions so we are able to capitalise on the growing institutional demand for UK assets.
Student accommodation ('PBSA')
Revenues from PBSA were 25.3% lower than last year at GBP78.3 million (H1-2021: GBP104.8 million) reflecting the number of and stage of development of the sites in-build as well as the timing of the expected portfolio sale of three schemes which is expected to complete shortly.
PBSA gross profit for the period was GBP13.0 million (H1-2021: GBP25.2 million) with gross margin for the period being 16.6% (H1-2021: 24.1%), reflecting the effect of the land sale in Edinburgh and the earlier stage of development of the sites in build, and the timing of the portfolio sale.
In the period we forward sold two PBSA developments in Edinburgh (315 beds) and Colchester (286 beds) for delivery in FY23. For Colchester, the client concerned acquired the land site directly.
Subsequent to the period end and as announced today, we have agreed the forward sale of a three development, 1,059 bed portfolio, for delivery in 2023 and 2024. We have also agreed terms for the forward sale of an 800 bed development in Bristol. Subsequent to the period end we secured planning on a site in Stratford (397 beds) and marketing for this development is progressing well.
Accommodation management (Fresh)
Fresh achieved revenues of GBP4.1 million (H1-2021: GBP3.8 million), reflecting the higher levels of student occupancy as the sector recovers from the pandemic. This is shown by the higher number of student beds and BTR apartments under management at the start of FY22 (22,155), compared to the start of FY21 (20,179).
The increase in Fresh's revenue for the period led to a modest increase in gross profit to GBP2.7 million (H1-2021: GBP2.2 million), at a margin of 65.9% (H1-2021: 57.9%).
Operationally, Fresh has continued to support its residents through the pandemic focusing on community engagement and the Be Wellbeing programme. Its reputation in the sector continues to grow as a result and this is reflected in its success in winning new mandates since the start of the year for 3,208 student beds. Fresh has also just recently been appointed on their first co-living scheme in Exeter for 133 units
For FY23, Fresh is currently appointed to manage 24,409 student beds and build to rent apartments across 76 schemes, including expected renewals.
Affordable-led Homes
The affordable-led residential development business achieved 19 sales completions in the period, (H1-2021: 33 sales). The decrease was due to the transition of the business as well as some build delays at the site in Preston, although a number of sales have completed subsequent to the period end. This led to a reduction in revenue to GBP5.4 million from the GBP10.7 million last year.
The gross profit achieved by the division was GBP0.6 million (H1-2021: GBP1.5 million), at a margin of 11.0% (H1-2021: 14.0%). The reduction in margin reflects the mix of sales.
We have made good progress with our pipeline. We exchanged contracts on a site in Flint for 200 units and also gained planning permission for our Belfast site which includes 150 affordable units as part of the overall development. This, in conjunction with good asset management of our existing land bank, has brought the current affordable homes pipeline to over 500 units for delivery over the period FY23 to FY26.
Balance sheet and liquidity
Our financial position and liquidity remains strong. We had a gross cash balance at 31 March 2022 of GBP44.7 million (31 March 2021: GBP88.7 million), whilst net cash stood at GBP26.8 million (31 March 2021: GBP31.7 million), before deducting IFRS 16 lease liabilities.
The Group had undrawn headroom of GBP85.8 million on its revolving credit facility ('RCF') with HSBC at 31 March 2022 and an unutilised overdraft facility of GBP10.0 million, giving total cash and available facilities of GBP140.5 million (31 March 2021: GBP146.3 million).
The strength of our liquidity position has enabled us to continue to advance our growth opportunities through securing opportunities in the land market during the period. This investment, combined with our normal annual cash profile, which sees a utilisation of cash in the first half of the year, resulted in a reduction in our net cash balance of GBP97.5 million since the start of the year. Our inventory and work in progress balance has increased by GBP27.4 million in the period to GBP155.0 million. Of this balance, GBP57.0 million relates to the acquisition of land in Bedminster, Birmingham and Leatherhead.
Contract assets and receivables at 31 March 2022 stood at GBP37.4 million and GBP55.8 million respectively and had increased GBP51.2 million from the position at 30 September 2021. 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 and receivables included GBP22 million for the land sale from the Sherlock Street, Birmingham development for which cash was received shortly after the period end. Contract and trade liabilities amounted to GBP69.8 million at 31 March 2021 and had reduced GBP22.2 million since FY21 year-end position. The FY21 year-end position was higher due to a high level of construction activity linked to the handover of developments at that time.
ESG
In November 2021 we launched Future Foundations, our ESG strategy. The strategy formalised our commitments and targets around core themes of future people, places and planet. This included a commitment to achieving net zero scope 1 and 2 carbon emissions by 2030.
Our ESG initiatives are progressing well. We are increasing the amount of modular construction within our build programmes, reducing waste and build time. Our timber frame trial is scheduled to commence shortly which will help us assess how we can best utilise modern methods of construction in our developments. We have also reviewed our plant strategy with a view to sourcing energy-efficient alternatives with a lower carbon footprint. Following a rigorous tender process, we have now outsourced our tower crane and plant requirements to third party providers.
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 ahead of that target.
Dividend
The Board has declared an interim dividend for the period of 2.9 pence per share, which will be paid on 30 June 2022 to shareholders on the register at close of business on 10 June 2022. The shares will go ex-dividend on 9 June 2022.
Outlook
Today we have announced the sale of the PBSA portfolio and are significantly advanced with a number of other forward sales which have recently gained planning consent. This, combined with our current developments being on track, gives us confidence in delivery of our full year expectations.
The underlying market fundamentals supporting residential for rent remain strong, as evidenced by increasing investor appetite for both BTR and PBSA. This, combined with the growth in our development pipeline, operational capabilities and financial strength, underpins our confidence in the future prospects for the Group.
Richard Simpson
Chief Executive Officer
17 May 2022
Consolidated Statement of Comprehensive Income
for the six month period ended 31 March 2022 (unaudited)
6 months to 6 months to 12 months to
31 March 31 March 30 September
2022 2021 2021
Notes GBP'000 GBP'000 GBP'000
Continuing operations
Revenue 192,966 178,420 430,211
Cost of sales (163,116) (137,089) (345,430)
Gross profit 29,850 41,331 84,781
Administrative expenses (15,281) (12,255) (27,526)
Operating profit before exceptional costs 14,569 29,076 57,255
Exceptional costs 6 (28,000) - -
Operating profit / (loss) (13,431)
Share of profit in joint ventures - - (87)
Finance income 22 1 4
Finance costs (3,238) (3,239) (6,051)
Profit / (loss) before tax from continuing operations (16,647) 25,838 51,121
Income tax (credit) / expense 8 3,322 (5,056) (9,189)
Profit /(loss) for the period attributable to ordinary equity holders
of the parent (13,325) 20,782 41,932
Other comprehensive income
Net gain on equity instruments designated at fair value through other
comprehensive income - - 108
Total comprehensive income for the period attributable to ordinary
equity holders of the
parent (13,325) 20,782 42,040
Earnings per share for the period attributable to ordinary equity Pence Pence Pence
holders of the parent
Basic earnings per share 9 (5.202) 8.113 16.369
Diluted earnings per share 9 (5.185) 8.108 16.340
Underlying basic earnings per share (excluding exceptional costs) 9 3.652 8.113 16.369
Underlying diluted earnings per share (excluding exceptional costs) 9 3.640 8.108 16.340
Consolidated Statement of Financial Position
as at 31 March 2022 (unaudited)
31 March 31 March 30 September
2022 2021 2021
Notes GBP'000 GBP'000 GBP'000
Non-current assets
Intangible assets 12,445 13,004 12,724
Investment property (leased) 11 95,397 101,475 98,567
Right of use assets 11 4,695 4,923 4,468
Property, plant and equipment 746 4,068 3,656
Investment in joint ventures 17 3,243 17
Deferred tax asset 7,165 3,313 4,057
Other financial assets 1,241 1,133 1,241
121,706 131,159 124,730
Current assets
Inventory and work in progress 155,027 189,005 127,593
Contract assets 37,367 38,682 13,810
Trade and other receivables 55,808 23,457 28,198
Cash and cash equivalents 13 44,685 88,727 136,293
292,887 339,871 305,894
Total assets 414,593 471,030 430,624
Current liabilities
Trade and other payables (75,396) (91,602) (89,198)
Contract liabilities (1,128) (6,537) (2,845)
Interest-bearing loans and borrowings (615) (870) (4,653)
Lease liabilities (6,611) (6,139) (6,113)
Provisions 7 (3,152) (5,384) (4,667)
Current tax liabilities (2,276) (4,087) (2,015)
(89,178) (114,619) (109,491)
Non-current liabilities
Interest-bearing loans and borrowings (17,262) (56,132) (7,308)
Lease liabilities (119,421) (125,544) (123,139)
Provisions 7 (30,345) (3,587) (4,732)
Deferred tax liabilities (813) (1,187) (1,143)
(167,841) (186,450) (136,322)
Total Liabilities (257,019) (301,069) (245,813)
Net assets 157,574 169,961 184,811
Equity
Share capital 2,562 2,562 2,562
Share premium 84,612 84,612 84,612
Merger reserve (75,383) (75,383) (75,383)
Fair value reserve of financial assets at FVOCI 536 428 536
Share-based payment reserve 3,171 2,515 2,824
Retained earnings 142,076 155,227 169,660
Total Equity 157,574 169,961 184,811
Consolidated Statement of Changes in Equity
for the six month period ended 31 March 2022 (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
2020 2,562 84,612 (75,383) 428 2,348 153,271 167,838
Profit for the period - - - - - 20,782 20,782
Share-based payments - - - - 167 - 167
Other comprehensive
income - - - - - - -
Dividend paid (note
10) - - - - - (18,826) (18,826)
Balance at
31 March 2021 2,562 84,612 (75,383) 428 2,515 155,227 169,961
Profit for the period - - - - - 21,150 21,150
Share-based payments - - - - 309 - 309
Other comprehensive
income - - - 108 - - 108
Deferred tax debited
directly to equity - - - - - (59) (59)
Dividend paid (note
10) - - - - - (6,658) (6,658)
Issue of shares - - - - - - -
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
Other comprehensive
income - - - - - - -
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
Consolidated Statement of Cash Flows
for the six month period ended 31 March 2022 (unaudited)
6 months 6 months 12 months
to to to
31 March 31 March 30 September
2022 2021 2021
Notes GBP'000 GBP'000 GBP'000
Cash flows from operating
activities
Cash (outflow)/inflow from
operations 12 (78,274) (35,467) 76,307
Interest received 22 1 4
Interest paid (3,278) (3,658) (6,638)
Tax (paid) / refunded 148 (1,641) (8,211)
Net cash (outflow)/inflow from
operating activities (81,382) (40,765) 61,462
Cash flows from investing
activities
Acquisition of property, plant
and equipment (556) (763) (208)
Proceeds on disposal of property,
plant and equipment 2,000 - 4
Cash flow from joint venture
interest - - 57
Net cash inflow / (outflow)
from investing activities 1,444 (763) (147)
Cash flows from financing
activities
Dividend paid 10 (14,259) (18,826) (25,484)
Payment of principal portion
of lease liabilities (3,359) (2,768) (6,145)
New other interest- bearing
loan - 261 -
Payment of capital element
of other interest-bearing loans (403) (164) (242)
Drawdown of RCF 9,625 19,808 25,705
Repayment of bank loans (3,274) (2,569) (53,369)
Net cash outflow from financing
activities (11,670) (4,258) (59,535)
Net (decrease)/increase in
cash (91,608) (45,786) 1,780
Cash and cash equivalents at
beginning of the period 136,293 134,513 134,513
Cash and cash equivalents
at
end of the period 13 44,685 88,727 136,293
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 7-9 Swallow Street, London, W1B 4DE.
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 2022 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 2022 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 21 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 16 May 2022.
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 2022. To the extent that IFRS at 30 September 2022 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 2021. 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 2022, the Group had a robust liquidity position, with cash and available headroom in its banking facilities totalling GBP140.5m made up of cash balances of GBP44.7m, RCF headroom of GBP85.8m and an overdraft facility of GBP10.0m.
Group forecasts have been prepared that have considered the Group's current financial position and current market circumstances. We have prepared a base case cash flow forecast for the period to 17 May 2023. In addition to the base case forecast, and though considered unlikely given current market conditions, we have considered a severe but possible downside scenario of a suspension of the forward sale market where no further forward sales are achieved other than those currently under offer. The cash forecast under this scenario illustrates that adequate liquidity is maintained through the forecast period.
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 17 May 2023 and has therefore adopted the going concern basis in 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 2021.
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 2022 (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 costs - - - - (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
6 months to Build
31 March 2021 Student to Accommodation
(unaudited) Accommodation rent Residential management Corporate Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Segmental revenue 104,759 59,112 10,670 3,816 63 178,420
Segmental gross
profit 25,215 12,397 1,490 2,228 1 41,331
Administration
expenses - - - (1,708) (10,547) (12,255)
Finance income - - - - 1 1
Finance costs - - - - (3,239) (3,239)
Profit/(loss)
before tax 25,215 12,397 1,490 520 (13,784) 25,838
Taxation - - - - (5,056) (5,056)
Profit/(loss)
for the period 25,215 12,397 1,490 520 (18,840) 20,782
Inventory and
WIP 56,700 90,656 31,316 - 10,333 189,005
Year ended Build
30 September Student to Accommodation
2021 Accommodation rent Residential management Corporate Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Segmental revenue 259,882 138,569 22,663 7,762 1,335 430,211
Segmental gross
profit 50,464 29,765 2,560 4,081 (2,089) 84,781
Administration
expenses - - - (4,229) (23,297) (27,526)
Share of operating
profit in joint
ventures (87) - - - - (87)
Finance income - - - - 4 4
Finance costs - - - - (6,051) (6,051)
Profit/(loss)
before tax 50,377 29,765 2,560 (148) (31,433) 51,121
Taxation - - - - (9,189) (9,189)
Profit/(loss)
for the period 50,377 29,765 2,560 (148) (40,622) 41,932
Inventory and
WIP 25,754 64,086 27,420 - 10,333 127,593
5. Disaggregated revenue information
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
Build
Student to Accommodation
6 months to 31 March 2021 (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 99,283 58,405 - - 63 157,751
Sale of land - - - - - -
Sale of completed property - - 10,670 - - 10,670
Rental income 5,476 707 - - - 6,183
Accommodation management - - - 3,816 - 3,816
Total revenue from contracts with customers 104,759 59,112 10,670 3,816 63 178,420
Timing of revenue recognition
Goods transferred at a point in time - - 10,670 - - 10,670
Services transferred over time 104,759 59,112 - 3,816 63 167,750
Total revenue from contracts with customers 104,759 59,112 10,670 3,816 63 178,420
Build
Year ended Student to Accommodation
30 September 2021 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 195,015 90,428 - - 1,335 286,778
Sale of land 18,500 15,000 - - - 33,500
Sale of completed property 35,580 31,703 22,663 - - 89,946
Rental income 10,787 1,438 - - - 12,225
Accommodation management - - - 7,762 - 7,762
Total revenue from contracts with customers 259,882 138,569 22,663 7,762 1,335 430,211
Timing of revenue recognition
Goods transferred at a point in time 54,080 46,703 22,663 - - 123,446
Services transferred over time 205,802 91,866 - 7,762 1,335 306,765
Total revenue from contracts with customers 259,882 138,569 22,663 7,762 1,335 430,211
6. Exceptional costs
6 months to 6 months to 12 months to
31 March 31 March 30 September
2022 2021 2021
GBP'000 GBP'000 GBP'000
Net legacy building safety expense (28,000) - -
Total exceptional costs (28,000) - -
7. Provisions
Legacy building safety improvements provision
GBP'000
Current
At 1 October 2021 9,399
Arising during the year 28,000
Utilised (3,902)
At 31 March 2022 33,497
The provision is classified as follows:
GBP'000
Current 3,152
Non-current 30,345
At 31 March 2022 33,497
In response to the revised government guidance, issued in January 2020, on the suitability of certain cladding solutions used on high -- rise residential buildings, the Group has been working with the owners of certain of its previously developed properties to remediate or replace cladding and to share the costs. A provision of GBP14,800,000 was made in the year ending 30 September 2020 for the Group's anticipated contribution toward the cost of the fire safety recladding works. The provision remaining at 31 March 2022 amounts to 5,497,000 of which GBP3,152,000 is expected to be incurred within the next twelve months and GBP2,345,000 is expected to be incurred after 31 March 2022.
In January 2022, the Government announced its intention to approach developers to fund the remediation of life critical fire safety issues on buildings over 11 metres and up to 30 years old. While noting the requirement for secondary legislation to clarify the impact of the Government's plans, the Group expects that, in due course, it will incur costs in relation to remediation works on developments over 11 metres tall and up to 30 years old.
Whilst it is unclear exactly what remedial works will be needed, we have made an initial review of buildings above 11 metres developed by the Company over the last 30 years, which concluded that an exceptional charge of GBP28,000,000 should be made for these potential costs. This amount covers the following areas set out in the Building Safety Bill; i) the extension of scope for developers' responsibility to 30 years; ii) the Increased scope by including buildings between 11m and 18m and iii) the expanded scope to incorporate critical life safety defects. We expect this money will be spent over the next 7 years.
This is a highly complex area with judgements and estimates in respect of the cost of remedial works, and the extent of those properties within the scope of the applicable Government guidance and legislation, which continue to evolve. These factors could result in a range of reasonably possible outcomes on the anticipated remedial works ranging from an increase in the costs of GBP4,600,000 to a reduction in costs of GBP23,400,000.
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 2022 of 19.83 % 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
2022 2021 2021
GBP'000 GBP'000 GBP'000
Profit / (loss) for the period attributable to ordinary
equity holders of the parent (13,325) 20,782 41,932
Underlying profit for the period attributable to ordinary
equity holders of the parent (excluding
exceptional (costs)/income after tax) 9,355 20,782 41,932
Number of shares Number of shares Number of shares
Number of ordinary shares for basic earnings per share 256,163,459 256,163,459 256,163,459
Adjustments for the effects of dilutive potential ordinary
shares 839,998 151,310 453,761
Weighted average number for diluted earnings per share 257,003,457 256,314,769 256,617,220
Pence Pence Pence
Basic earnings per share
Basic profit for the period attributable to ordinary
equity holders of the parent (5.202) 8.113 16.369
Underlying basic earnings per share (excluding exceptional
(costs)/income after tax)
Underlying profit for the period attributable to ordinary
equity holders of the parent 3.652 8.113 16.369
Diluted earnings per share
Basic profit for the period attributable to diluted equity
holders of the parent (5.185) 8.108 16.340
Underlying diluted earnings per share (excluding
exceptional (costs)/income after tax)
Underlying profit for the period attributable to diluted
equity holders of the parent 3.640 8.108 16.340
10. Dividends
6 months to 6 months to 12 months to
31 March 31 March 30 September
2022 2021 2021
GBP'000 GBP'000 GBP'000
Final dividend paid in February 2021 of 7.35 pence - 18,826 18,826
Interim dividend paid in June 2021 of 2.6 pence - - 6,658
Final dividend paid in February 2021 of 5.6 pence 14,259 - -
14,259 18,826 25,484
An interim dividend of 2.9 pence per ordinary share will be paid on 30 June 2021. This dividend was declared after 31 March 2021 and as such the liability of 7,352,000 has not been recognised at that date. At 31 March 2022 the Company had distributable reserves available of GBP61,000,000.
11. Leases
Investment property (leased) Office Leases Motor Vehicle Leases Total
GBP'000 GBP'000 GBP'000 GBP'000
Cost
At 30 September 2020 161,393 9,411 1,432 172,236
Additions/adjustment - 720 13 733
Disposals - - (321) (321)
At 31 March 2021 161,393 10,131 1,124 172,648
Additions 243 1 - 244
Disposals (7) (150) (157)
At 30 September 2021 161,629 10,132 974 172,735
Additions - 132 562 694
Disposals - - - -
At 31 March 2022 161,629 10,264 1,536 173,429
Depreciation
At 30 September 2020 51,072 4,994 1,086 57,152
Charge for the period 3,148 424 123 3,695
Disposals - - (295) (295)
At 31 March 2021 54,220 5,418 914 60,552
Charge for the period 3,144 367 83 3,594
Disposals (144) (144)
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
Impairment
At 30 September 2020 5,698 - - 5,698
Charge for the period - - - -
At 31 March 2021 5,698 - - 5,698
Charge for the period
At 30 September 2021 5,698 - - 5,698
Charge for the period - - - -
At 31 March 2022 5,698 - - 5,698
Net Book Value
At 31 March 2022 95,397 4,125 570 100,092
At 30 September 2021 98,567 4,347 121 103,035
At 31 March 2021 101,475 4,713 210 106,398
At 30 September 2020 104,623 4,417 346 109,386
12. Reconciliation of profit before tax to net cash flow from operating activities
6 months 6 months 12 months
to to to
31 March 31 March 30 September
2022 2021 2021
GBP'000 GBP'000 GBP'000
Profit / (loss) before tax (16,647) 25,838 51,121
Depreciation of leased investment
properties and right-of-use
assets 3,637 3,695 7,289
Depreciation of plant and equipment 244 338 839
Amortisation of intangible
assets 280 280 560
Loss/(profit) of disposal of
right-of-use assets - - 6
(Profit) / loss on sale of
plant and equipment (1,308) - 85
Finance income (22) (1) (4)
Finance costs 3,238 3,239 6,051
Share of profit in joint ventures - - 87
Increase in inventory and work
in progress (27,434) (63,345) (1,933)
Interest capitalised in development
land, inventory and work in
progress 40 419 587
(Increase)/decrease in contract
assets (23,557) 2,840 27,712
(Increase)/decrease in trade
and other receivables (27,610) 61 (4,680)
Decrease in contract liabilities (1,717) (2,430) (6,122)
Decrease in trade and other
payables (11,862) (5,675) (5,302)
Increase / (decrease) in provision
for fire safety cladding works 24,098 (893) (465)
Increase in share-based payment
reserve 346 167 476
Net cash (outflow)/inflow
from operating activities (78,274) (35,467) 76,307
13. Analysis of net cash / (debt)
31 March 31 March 30 September
2022 2021 2021
GBP'000 GBP'000 GBP'000
Cash at bank and in hand 44,685 88,727 136,293
Other interest-bearing loans (87) (728) (389)
Bank loans (17,790) (56,275) (11,572)
Net cash before deducting lease liabilities 26,808 31,724 124,332
Lease liabilities (126,032) (131,683) (129,252)
Net debt (99,224) (99,959) (4,920)
14. Employee benefits - long-term incentive plans
In January 2022, 959,808 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 Earning per Share (EPS), absolute total shareholder return (absolute TSR) performance, and relative total shareholder return (relative TSR) as follows:
Absolute TSR (25% of award) % of TSR award vesting(1)
Less than 5% p.a. 0%
Equal to 5% p.a. 20%
14% p.a. or greater 100%
Relative TSR (25% of award) % of TSR award vesting(1)
Less than median ranking 0%
Equal to median ranking 20%
Upper quartile or greater ranking 100%
EPS growth (50% of award) % of EPS award vesting(1)
5% p.a. or less 0%
Equal to 5% p.a. 20%
14% p.a. or greater 100%
(1) Vesting on a straight-line basis between target levels
The fair value of share awards granted subject to EPS conditions is 265.0 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. The fair value of the share awards subject to TSR performance conditions has been estimated at the grant date using a Monte Carlo valuation model using the following assumptions:
Share price 266.0 pence Exercise price 1 penny Expected term 3 years Risk-free interest rate 1.05% Are dividend equivalents receivable for the award holder? Yes Expected volatility 31%
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 (2.66 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.
This resulted in an estimated fair value for an award with absolute TSR performance conditions of 144.38 pence and an estimated value for an award with relative TSR performance conditions of 178.34 pence.
For the six months ended 31 March 2022, 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 GBP346,000 (31 March 2021: GBP167,575).
- Ends -
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