REG - Watkin Jones plc - Full Year Results 2021
18/01/2022 07:05
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RNS Number : 7403Y Watkin Jones plc 18 January 2022
For immediate release 18 January 2022
Watkin Jones plc
('WJ' or the 'Group')
Full Year Results 2021
FY21 FY20((1)) Change (%)
Revenue £430.2m £354.1m +21.5%
Gross profit £84.8m £75.9m +11.7%
Operating profit £57.3m £31.2m +83.3%
Underlying Operating profit £57.3m £51.7m +10.8%
Profit before tax £51.1m £25.3m +101.9%
Underlying Profit before tax £51.1m £45.8m +11.7%
Basic earnings per share 16.4p 8.2p +98.5%
Underlying Basic earnings per share 16.4p 14.7p +11.2%
Dividend per share 8.2p 7.35p +11.6%
Adjusted net cash((2)) £124.3m £94.8m +31.1%
(1) For FY20 Underlying Operating profit, Underlying Profit before tax and
Underlying Basic earnings per share are calculated before the impact of
exceptional charges of £20.5 million
(2) Adjusted net cash is stated after deducting interest bearing loans and
borrowings, but before deducting IFRS 16 operating lease liabilities of
£129.3 million at 30 September 2021 (30 September 2020: £134.5 million)
Key Highlights
· Revenue at £430.2 million, up 21.5%, reflecting increasing
contribution from our BTR developments and a strengthening institutional
investor forward sales market
· Operating profit at £57.3 million, up 10.8%, underpinned by
strong operational delivery and tight cost control
· Strong cash generation and liquidity position; £124.3 million
net cash as at 30 September 2021
· Full year dividend of 8.2p, up 11.6%; in line with policy of 2.0x
cover
· Work on 13 current developments on track; overall build costs
remain within forecasts
· 22,200 beds under Fresh management, up 10%
· Record residential for rent secured development pipeline at £1.8
billion, up 20%
· Continued progress on Affordable Homes
· ESG credentials successfully formalised with launch of 'Future
Foundations' ESG programme
· Trading in the new financial year in line with expectations
Strong institutional demand for residential for rent assets
· 3 BTR schemes (722 apartments) and 9 PBSA schemes (2,750 beds)
forward sold since the start of FY21
- Includes 1 PBSA scheme (295 beds, 20 affordable) in Edinburgh
forward sold since 2 November 2021 trading update with total revenue value of
c.£47 million
Development pipeline further enhanced
· 3 BTR schemes (1,442 apartments) and 10 PBSA schemes (4,271 beds)
acquired since the start of FY21
- Includes 1 PBSA scheme (c.800 beds) in a prime regional location
with planning acquired since 2 November 2021 trading update
· Planning consents for 4 BTR apartment schemes and 6 PBSA schemes
since the start of FY21
· Following these developments, our current BTR and PBSA
development pipeline is as follows
BTR PBSA
(apartments) (beds)
November 2021 update 4,012 7,142
New sites secured:
Prime regional location - 800
Other changes - (136)
Current 4,012 7,806
Future revenue value £0.95 billion £0.90 billion
BTR pipeline
BTR apartments
Total pipeline FY22 FY23 FY24 FY25
Forward sold 609 71 354 184 -
Forward sales in legals 765 - - 486 279
Sites secured with planning 359 - 43 - 316
Sites secured subject to planning 2,279 - - 631 1,648
Total secured 4,012 71 397 1,301 2,243
Change since 2 Nov - - - - -
PBSA pipeline
PBSA beds
Total pipeline FY22 FY23 FY24 FY25
Forward sold 2,547 1,946 601 - -
Forward sales in legals 252 - - 252 -
Sites secured with planning 2,401 - 1,020 1,381 -
Sites secured subject to planning 2,606 - 350 1,507 749
Total secured 7,806 1,946 1,971 3,140 749
Change since 2 Nov +664 - +296 +368 -
Cladding remediation
We are supportive of the Government's announcement on 10 January 2022
regarding its intention to protect individual leaseholders from bearing the
cost of the remediation of unsafe cladding on medium-rise buildings. We are
engaging with the Government to clarify its plans in this regard and to
confirm whether pro-active remediation will be taken into account. Our
existing cladding provision covers all schemes featuring ACM or HPL cladding
which are still within the limitation period. In these instances replacement
works have either been completed or are being procured to commence.
We note the Government's intention for leaseholders to be able to demand
compensation for building safety defects up to 30 years old, noting that
historically, the business focused on general contracting work for properties
in the commercial, retail and industrial sectors, as well as houses for
private sale, rather than residential leasehold developments.
Richard Simpson, Chief Executive Officer of Watkin Jones, said: "This is a
very strong set of results. WJ has once again demonstrated its end-to-end
development capability. As well as handing over 12 schemes on time, we
leveraged our excellent institutional relationships to drive the forward sale
of some 3,800 beds and continued to enhance the depth and quality of our
development pipeline, securing good visibility of future earnings. Since the
year end, we have continued this excellent momentum across the business with
increasingly strong investor appetite for residential for rent homes."
Analyst meeting
A meeting for analysts will be held virtually at 09.30am today, 18 January
2022. A copy of the Final Results presentation is available at the Group's
website: http://www.watkinjonesplc.com (http://www.watkinjonesplc.com)
An audio webcast of the conference call with analysts will be available after
12pm today:
http://webcasting.buchanan.uk.com/broadcast/61ded656e3976b4d1b2d49c7
(http://webcasting.buchanan.uk.com/broadcast/61ded656e3976b4d1b2d49c7)
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 (http://www.watkinjonesplc.com/)
Peel Hunt LLP (Nominated Adviser & Joint Corporate Broker) Tel: +44 (0) 20 7418 8900
Mike Bell / Ed Allsopp www.peelhunt.com (http://www.peelhunt.com/)
Jefferies Hoare Govett (Joint Corporate Broker) Tel: +44 (0) 20 7029 8000
Max Jones / James Umbers www.jefferies.com (http://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
(http://www.watkinjonesplc.com/)
Chief Executive Officer's review
The Group delivered a strong operational and financial performance in FY21,
which is particularly pleasing given the ongoing backdrop of COVID.
Our results for FY21 demonstrate that we are in the right sectors, with the
right capital-light model and with the right team. At the same time we are
continuing to lay the foundations for our future growth, including ensuring we
continue to be a responsible and sustainable business.
We are confident that we have a robust platform for sustained earnings growth
and we expect to make further progress in the coming year.
Performance
The Group performed well across all four divisions. Overall, our financial
performance was above FY20. Revenue was £430.2 million, up 21.5% (FY20:
£354.1 million), while gross profit increased by 11.7% to £84.8 million
(FY20: £75.9 million) and adjusted operating profit rose 10.8% to £57.3
million (FY20: £51.7 million). This shows the resilience of our businesses
and bodes well for the future.
Our operational performance was also strong. Despite the ongoing disruption
caused by the pandemic, all BTR and PBSA developments scheduled for delivery
in the year were completed and we continued to progress our pipeline,
successfully securing land, obtaining planning consents and forward selling
developments. Fresh also enhanced its reputation with clients and customers,
achieving high standards in difficult circumstances.
The contribution from BTR has continued to grow rapidly. Revenues were
£138.6 million, representing 47.4% growth (FY20: £94.0 million), as we
successfully completed five schemes totalling 1,041 apartments. The
investment market in BTR is increasingly positive and therefore supports our
growth aspirations, with our secured pipeline now standing at more than 4,000
apartments (9,100 bedrooms).
BTR has significant long-term appeal to investors, based on high levels of
occupancy and rent collection, combined with rental growth. It also compares
favourably with commercial property sectors, such as retail and offices, which
are still affected by COVID uncertainty.
In student accommodation, we delivered seven schemes with 3,192 beds ahead of
the start of the 2021/22 academic year. Revenues were 15% higher at £259.9
million (FY20: £226.0 million). Investor demand remains resilient, as they
continue to see long-term consumer demand for a UK university education, based
on on-campus teaching. Institutions therefore continue to acquire assets at
robust prices. These conditions support our aspirations for this business,
with over 7,800 beds in our secured development pipeline.
During the year, we made good progress with our affordable housing pilot.
This included forward selling 159 affordable homes at the site in Crewe.
The residential business achieved revenue of £22.7 million, down 13.7% on
FY20 (£26.3 million). Revenues in FY20 benefited from the completion of a
35-apartment development in Chester, which had been sold on a turnkey basis,
and in FY21 we suffered some build completion delays at our site in Preston.
Fresh delivered another good performance, with revenues of £7.8 million
(FY20: £7.6 million), though its revenues were impacted to a degree by the
lower student occupancy during the year, which reduced its variable fee
income. The business demonstrated its capabilities during the pandemic,
working closely with tenants, students, their parents and other key
stakeholders, including universities and the NHS. The strength of its
performance has helped Fresh to stand out from other operators, enhanced its
reputation with institutional clients and contributed to a further increase in
units under management. At the end of the year, Fresh had 22,155 student
beds and apartments under management. By 2024, it is currently contracted to
manage around 23,900 units, including expected renewals.
Strategy
Our performance in the year demonstrates the success of our strategy to date.
Since the end of the year, we have confirmed our intention to pivot our
residential division from a pure developer of homes for sale to an affordable
housing led business and have renamed it our Affordable Homes division.
There is huge demand for more social housing in the UK and we are pleased to
be able to contribute to meeting this pressing need, with the potential to
benefit many thousands of people in the coming years.
The move also brings Affordable Homes into line with the business model for
other development operations. Rather than build homes and then sell them,
which incurs risk and ties up working capital, we will forward sell the
developments to institutions. This de-risked, capital-light model offers us
high returns on capital. Institutional demand is also strong. The market
for our developments will naturally include registered providers such as
housing associations, but financial investors are also attracted to affordable
housing, given the low-risk rental payments which are effectively backed by
government.
Enhancing our approach to ESG
ESG is a prerequisite for delivering our growth plans. Being a responsible
business supports our ability to build strong relationships with our supply
chain, planning authorities and residents amongst others. It is also
increasingly important for our institutional clients who want their partners
to reflect their own standards. During the year, we spent considerable time
refining our approach to ESG.
Our approach encompasses three key themes: people, places and planet. Health
and safety is the number one topic in our business. The enhanced protocols
required by COVID inevitably slow activity on site, so it has been necessary
to find ways to increase our productivity and keep our programmes on track,
without compromising safety. The fact that we have successfully completed
our developments while working as safely as ever is testament to our focus.
Our incident rate, which is the number of incidents recorded per 100,000
employees, was 102 (FY20: 128), which compares with 2,760 for the wider
industry (source: HSE).
The wellbeing and mental health of our people has been a big focus for us in
the last year, in light of the ongoing pandemic. We have also been thinking
hard about how to offer long-term, meaningful and rewarding careers,
recognising that being a responsible business is good for employee engagement.
To support our efforts, we have recruited our first Chief People Officer.
COVID has also put the importance of having the right culture into sharp
relief. Over the last couple of years, we have been working to define what
great looks like, so we can empower our people to take responsibility for
delivery. At the same time, we want to maintain our ability to be
entrepreneurial and seize opportunities as they arise, as we did with land
purchases during the year.
Cladding remediation
In FY20, we set aside a provision of £15 million for remedial works on
cladding. The cladding remediation programme is progressing well and we
expect to complete the work over the next two years. As we have previously
noted, while we do not have legal liability to address this, we feel it is the
right thing to do. The cost of the cladding works, which is being shared
with the property owners, continues to be in line with our original estimates.
In February 2021, the Government announced a tax on the profits of residential
developers, combined with a planning gain levy on future developments, to
recoup a portion of the cost of its high-rise cladding replacement support
scheme. Profits on PBSA developments are to be excluded from the residential
property developer tax but profits from BTR developments are likely to be
within scope.
We are supportive of the Government's announcement on 10 January 2022
regarding its intention to protect individual leaseholders from bearing the
cost of the remediation of unsafe cladding on medium-rise buildings. We are
engaging with the Government to clarify its plans in this regard and to
confirm whether pro-active remediation will be taken into account.
We note the Government's intention for leaseholders to be able to demand
compensation for building safety defects up to 30 years old, noting that
historically, the business focused on general contracting work for properties
in the commercial, retail and industrial sectors, as well as houses for
private sale, rather than residential leasehold developments.
We will provide an update on any implications for the Group as these plans
evolve into clear proposals.
Board and management
Grenville Turner and Phil Byrom stepped down from the Board towards the end of
2021. Watkin Jones went from strength to strength under Grenville as Chair
and Phil made a major contribution to the Group in his many years as CFO and
was a particular support for me when I joined as CEO. I want to express my
huge thanks to them both and welcome Alan Giddins and Sarah Sergeant as our
new Chair and CFO. We are delighted to have them on board.
Outlook
We continued to make good progress during the year. Our development
capability, combined with favourable market dynamics and our capital-light
business model, has enabled us to deliver strong operational and financial
performance. In particular, we continued to enhance our BTR and PBSA
development pipeline, which has an estimated future revenue value to the Group
of c.£1.8 billion, our largest ever. This gives us excellent visibility of
revenues over the next few years. Together with the ongoing re‑focusing of
our residential business into the affordable housing market, we are confident
that we have a robust platform for sustained earnings growth and we expect to
make further progress in the coming year.
Richard Simpson
Chief Executive Officer
18 January 2022
Operating review
Build To Rent
BTR continues to gain momentum, with five developments completed as planned in
the second half of the year. These were the schemes in Reading, Stratford,
Sutton and Wembley, all of which had been forward sold prior to the start of
the year, and the Leicester development, which was sold on a turnkey basis
during FY21. In total, these schemes comprised 1,041 apartments.
This activity resulted in a significant increase in BTR revenues in FY21.
Revenues rose from £94.0 million in FY20 to £138.6 million this year,
representing growth of 47.4%.
BTR gross profit for the year doubled to £29.8 million (FY20: £14.9
million), resulting in a gross margin of 21.5% (FY20: 15.8%). The strong
gross margin for FY21 reflects our operational performance in efficiently
finishing the schemes completing in the year, with good control of costs. In
addition, we only had one new forward land sale in the year. The land sale
element of our forward sales agreements are typically at a lower margin than
the subsequent development revenues and a higher volume of land sales would
therefore normally reduce the overall margin for the year. We will continue
to target BTR margins at 15% in the medium term.
During the year, in addition to the turnkey sale of the 184‑apartment
Leicester scheme, we forward sold a 216-apartment development in Hove for
delivery in FY23. Subsequent to the year end, we completed the forward sale
of a development for 322 apartments in Lewisham to be delivered in two phases
in FY23 and FY24.
We have added attractive new sites to our BTR pipeline. During the year, we
secured a site in Belfast for 778 apartments and a site in Edinburgh for 450
apartments, both subject to planning. After the year end, we secured a site
for 214 apartments in Leatherhead, with the benefit of planning. We are
working on a number of other site acquisitions.
We also continued to obtain planning permissions, securing consent for a
551-apartment scheme in central Birmingham and 316 apartments in Bath, as part
of a mixed-use scheme including PBSA. The Birmingham scheme is our largest
consented BTR development to date.
The current BTR secured development pipeline is shown in the table below:
BTR apartments
Total pipeline FY22 FY23 FY24 FY25
Forward sold 609 71 354 184 -
Forward sales in legals 765 - - 486 279
Sites secured with planning 359 - 43 - 316
Sites secured subject to planning 2,279 - - 631 1,648
Total secured 4,012 71 397 1,301 2,243
The estimated future revenue value to the Group of the secured development
pipeline is c.£0.95 billion (FY20: c.£0.9 billion), of which c.£197 million
is currently forward sold (FY20: c.£90 million).
The BTR market opportunity
Several factors are creating strong demand for BTR accommodation, as
increasing numbers of people rent their homes for the medium to long term.
There is a long-standing structural supply and demand imbalance in the UK
housing market, with new homes completed each year generally falling well
short of the government's annual target of 300,000.
Urbanisation is another important factor. The UK has one of the highest
rates of urbanisation, which influences issues such as infrastructure
constraints, competition for land, planning, logistics and housing
affordability. Many of the locations where we see the greatest potential for
BTR are in urban areas with universities, where education leads to employment
and the need for housing.
Across the market as a whole, 92.5% of the BTR units currently completed,
under construction or in planning are in urban areas.
Lifestyles are also changing. People are increasingly getting married and
having children later, delaying the point at which they buy a house. Young
people in particular often see renting as a better lifestyle choice, providing
quality of living while maintaining flexibility, in the expectation of
changing jobs more frequently than in the past. BTR also offers good home
working facilities, combined with a sense of community, which is likely to be
increasingly attractive given the change in working patterns caused by the
pandemic.
With consistently strong demand for housing, the supply of BTR apartments
continues to grow. At Q2 2021, the total number of BTR apartments completed,
under construction or in the pipeline amounted to c.196,000 units, up 17% on a
year earlier.
Of these, just over 62,000 had been completed. At full maturity, the BTR
sector could grow to 1.75 million units (source: Savills, August 2021),
providing significant scope for growth.
Ownership of UK rented housing is fragmented, with only around 3% estimated to
be owned by institutional investors (source: British Property Foundation).
This is well below the levels seen in countries with more mature rental
markets. While the largest UK owners have several thousand units each, both
Germany and the USA have investors who own more than 100,000 units each
(source: Savills, August 2021).
Institutions are increasingly attracted to BTR assets in the UK, which provide
high income security with occupancy and rent collection rates typically over
95%. CBRE estimates that around £1.5 billion was invested in BTR in the
first six months of 2021, up 34% over the same period in 2020. Major
institutions such as Goldman Sachs and Macquarie have entered the market to
buy BTR developments this year.
The sector has historically been dominated by domestic capital, but Knight
Frank estimates that more than 60% of the investment in BTR in H1 2021 came
from outside the UK.
While BTR yields have remained broadly stable in recent years, the strong
institutional demand is putting yields under downward pressure. The
reduction in corporate debt rates of 66 bps between Q1 2020 and Q2 2021 has
also increased the spread between prime BTR yields and the cost of debt to its
highest level in more than six years, creating room for yield compression
(source: Savills).
Student Accommodation
During the year, we completed all seven PBSA developments (3,192 beds) due for
delivery ahead of the 2021/22 academic year. This contributed to revenues of
£259.9 million, up 15.0% from the £226.0 million recorded in FY20. PBSA
revenues include the rental income of our six historic leased PBSA assets.
Lower student occupancy as a result of the pandemic reduced this revenue by
c.£5.0 million, which was within our guidance.
Gross profit was £50.5 million, down 7.0% (FY20: £54.3 million), giving a
gross margin of 19.4% (FY20: 24.0%). The reduced gross margin was primarily
as a result of the reduction in the level of rental income from the leased
assets and the lower margin associated with new forward land sales in the
year. The underlying margin from development activity was in line with our
expectations.
Against the backdrop of the ongoing disruption caused by the pandemic, we
successfully completed all the developments due for delivery in FY21 on time,
with the exception of a small delay in the delivery of one scheme in Glasgow
for which the build programme was heavily impacted by the Scottish
Government's enforced closure of construction sites in 2020. Acceleration
measures had been negotiated with the client for this development to ensure it
could still be delivered ahead of the start of the new academic year.
We achieved a number of new sales in the year. These comprised a 462-bed
scheme in Leicester, which was sold on a turnkey basis and was one of the
seven developments that we completed in FY21, and six new forward sales for
1,687 beds for delivery in FY22. These were in Bristol (291 beds), Edinburgh
(645 beds), Exeter (133 beds), Leicester (250 beds) and York (368 beds).
The Exeter scheme is our first fully co-living studio scheme, available to
rent to the wider residential tenant market, including students.
Subsequent to the year end, we concluded forward sales agreements for a scheme
in Colchester (286 beds) and a further scheme in Edinburgh (295 beds and
20 affordable units), for delivery in FY23.
We also made good progress with adding to our development pipeline. During
the year, we secured sites subject to planning in Edinburgh (c.390 beds),
South London (c.750 beds) and East London (c.390 beds). We also secured
sites in Nottingham (354 beds) and Swansea (370 beds), on which we have
obtained planning, and after the year end we secured a site with the benefit
of planning in Bedminster (819 beds). Significant planning consents were
also obtained for 523 beds in Birmingham and for 335 beds in Bath, as part of
the mixed‑use scheme that includes BTR.
The current PBSA secured development pipeline is as shown in the table below:
PBSA beds
Total pipeline FY22 FY23 FY24 FY25
Forward sold 2,547 1,946 601 - -
Forward sales in legals 252 - - 252 -
Sites secured with planning 2,401 - 1,020 1,381 -
Sites secured subject to planning 2,606 - 350 1,507 749
Total secured 7,806 1,946 1,971 3,140 749
The estimated future revenue value to the Group of the secured development
pipeline is c.£0.9 billion (FY20: £0.6 billion), of which c.£160 million is
currently forward sold (FY20: c.£215 million).
The PBSA market opportunity
The number of full-time students in the UK is a key determinant of demand for
PBSA. In 2019/20, there were around two million full‑time students, up
3.9% on the previous year.
Undergraduate numbers rose 2.3% in 2019/20 to just over 1.6 million, while
postgraduate numbers increased by 10.5% to 0.4 million. Overall, student
numbers are up 14% over the last five years.
Trends in demand for university places remain positive. 2021 brought the
first increase in the number of 18 year olds in the UK since 2015, a trend set
to continue until 2030. At the same time, the proportion of 18 year olds
applying for higher education continues to grow, reaching a record 41.5%
(source: Cushman & Wakefield) of which a record 89.1% of applications were
accepted.
UCAS data for 2021 shows a 17.1% increase in applications from non-EU
countries, in particular India (up 42%), China (up 31%) and the USA (up 28%).
The change in the Tier 4 visa rules is one factor making UK higher education
more attractive. Chinese and American students are respectively 2.2 times
and 1.9 times more likely to live in PBSA than UK students (source: Savills).
EU student numbers fell by around 17,000 or 40%. This is likely to be the
result of Brexit, which has led to higher tuition fees for EU students and the
withdrawal of financial support from Student Finance England. While EU
student numbers may decline further, they make up only 6-7% of the market
(against 19% for non-EU) and there is more than enough demand from other
sources to compensate.
While COVID disrupted the number of UK and international students who were
able to take up accommodation for the 2020/21 academic year, the pandemic is
only expected to have a short‑term effect on occupancy. Students clearly
prefer to study away from home at their chosen university and more normal
occupancy levels are anticipated for 2021/22.
A notable trend in higher education is the 'flight to quality'. With
universities charging the same tuition fees and no cap on student numbers,
better institutions have grown and lower-quality institutions have struggled.
The latest data show that high-tariff institutions recorded a 13.2% increase
in acceptances, compared to only 1.1% for low-tariff universities. This has
clear implications for the location of new PBSA developments.
There is a long-term demand-supply imbalance for PBSA, which is only expected
to increase, with the predicted annual increase in the number of students
exceeding the supply of new beds. There are currently around 681,000 PBSA
beds in the UK (source: Cushman & Wakefield), with privately owned PBSA
accounting for more than 51% and the private sector delivering 85% of the new
beds this year. In total, around 20,000 new private sector rooms were
delivered in 2020/21, against an original expectation of 35,000, with COVID
causing developers to push some projects back. The total development
pipeline nationwide stands at 115,000 beds, of which around 67,000 have full
planning approval.
Much PBSA stock is outdated and needs redevelopment, presenting further
opportunities. Around one quarter of total PBSA was built pre-1999 and
university accommodation is even more dated, with around 50% built pre-1999
and 74% pre‑2009 (source: Cushman & Wakefield).
Institutional investors are attracted to UK PBSA as a mature, stable and
income‑producing asset class. The investment market remains very active,
with £2.0 billion of assets traded in the first half of 2021 (source: Knight
Frank). This followed a record £6.0 billion in 2020, although £4.7 billion
of this was accounted for by a single large transaction.
Since the start of 2020, a number of new investors have entered the sector,
demonstrating continued confidence in the sector's ability to deliver
attractive returns.
Affordable Homes
Revenues for the Affordable Homes division amounted to £22.7 million,
compared to £26.3 million for FY20, a reduction of 13.7%. The business
achieved 79 sales completions in the year (FY20: 95). These sales were
primarily of traditional housing at our sites in North Wales, Macclesfield and
Preston, and continued sales of apartments in Bath.
The reduction in revenues was mainly due to build delays at the Preston site,
where the build programme had initially been suspended during the early stages
of the pandemic and we experienced some challenges on-site, which have since
been addressed. In addition, revenues in FY20 benefited from the completion
of a 35-apartment scheme in Chester, which had been sold on a turnkey basis.
Gross profit for the year was 36.7% lower at £2.6 million (FY20: £4.0
million), representing a margin of 11.3% (FY20: 15.4%). The reduction in
gross profit reflects the lower sales volume, as well as a lower margin due to
the mix of sales, which included a number of units at the older developments
in Macclesfield and Bath that were cleared at low margins.
Significantly, we made good progress with our North West affordable homes
pilot, paving the way for transitioning the residential business to be an
affordable housing‑led developer.
In the year, we secured sites in Crewe (245 units) and Llay, Wrexham (51
units), on which we obtained planning, and we have forward sold:
· 159 affordable homes at the Crewe site to Plus Dane Housing, whose
bid was successfully supported by grant funding from Homes England. These
units are to be delivered over the period FY22 to FY26; and
· 23 affordable homes at the Llay site to Adra, for delivery over a
two-year period once site works can commence
The balance of the units at Crewe and Llay are for open-market sale.
We continue to progress a number of other site opportunities for affordable
homes developments.
As part of our plans to transition the residential business, we have
restructured its operations in order to support the scaling up of its delivery
capabilities and to align its site acquisition and planning processes with
those of the wider Group, creating a focused affordable homes investment hub.
We have also evaluated suitable alternative modern methods of construction,
in order to support higher build volumes in a sustainable way, and we will be
trialling timber frame construction on the Crewe site.
We expect that Affordable Homes will start to contribute to Group revenues
from FY22.
The affordable homes market opportunity
Affordable housing is defined by the National Planning Policy Framework as
housing for sale or rent, for people whose needs are not met by the market.
There are several different types of affordable housing. One example is social
rent, where homes are owned by local authorities or registered providers (such
as housing associations). Social rents are set by government guidelines and
usually covered by housing benefit or local housing allowance. There are
also homes with affordable rents, which are subject to rent controls that
require the rent to be no more than 80% of the local market rent, including
service charges. In addition, there are tenures such as shared ownership and
other forms of low-cost home ownership, where people are supported to buy some
or all of the equity in their home.
There is significant unmet demand for affordable housing. The National
Housing Federation estimates that the UK needs 145,000 new affordable homes to
be built each year. However, the average annual delivery since 2013 has been
just 46,000 homes.
Property developers looking to secure planning consent from local authorities
will usually be required to undertake what are known as s106 requirements,
designed to reduce the impact of their development on the local community.
These requirements often include constructing affordable housing. Around 50%
of all affordable housing is delivered in this way.
Historically, the balance has been provided by housing associations, usually
with grant support from bodies such as Homes England and the Greater London
Authority. Homes England's grant funding for the next four to five-year
period from 2021 is likely to be c.£12 billion, a significant uplift on the
£9 billion for the period from 2016 to 2021.
There has also been a steep rise in private capital looking to deploy into
affordable housing, due to the sector's favourable long-term demand, the
return characteristics, the potential for growth and insulation from
volatility. Affordable housing also provides the best opportunity for social
impact and investors are increasingly looking for opportunities to enhance
their ESG credentials.
More generally, affordable housing is a key focus for all political parties.
Legislation therefore tends to be supportive of the affordable homes market.
The government's proposed planning reforms have a number of key themes that
support our approach to affordable housing, including an emphasis on
affordability, building communities and developing in an environmentally and
socially responsible way.
Accommodation Management
Fresh achieved revenues of £7.8 million (FY20: £7.6 million). The increase
was supported by the growth in the number of beds under management at the
start of FY21 (20,179), compared to the start of FY20 (17,721). However,
while the majority of Fresh's revenues derive from fixed management fees, a
proportion varies with student occupancy and this element was reduced as a
result of the pandemic, suppressing revenue growth overall.
Gross profit was £4.1 million, down from £4.5 million in FY20. This
represented a margin of 52.6% (FY20: 59.8%). The lower margin reflects the
loss of variable fee income. In a normal year, we expect Fresh to generate a
gross margin of around 60%.
Fresh had a successful year for new business, winning mandates for 4,296
student beds and BTR apartments across ten sites. These were a mix of new
schemes and taking on existing schemes from the previous operator. At 30
September 2021, Fresh was managing 22,155 student beds and BTR apartments
across 69 schemes. The business is currently appointed to manage 23,885 beds
and apartments by FY24, including expected renewals.
Continuing to support its student customers and clients through the pandemic
was a major focus for Fresh during the year. The business had demonstrated
its credentials in FY20 when it received COVID-secure accreditation from the
British Safety Council and it continued to employ rigorous safety protocols
during FY21. Fresh's Be wellbeing programme was also key for supporting
residents. It provides online communities, support and advice, helping
people to remain connected during a difficult period.
Fresh's service quality was reflected in its performance at the National
Student Housing Awards 2021, where it won more awards than any other operator.
These were: Best Private Halls Provider UK; Best Private Halls Provider ROI;
Best Student Wellbeing UK; Best Student Wellbeing ROI; Best Customer Service
ROI; and Best Learning Environment - Calico Liverpool.
Fresh also received the International Accommodation Quality Mark for the UK
and ROI and had 23 team members nominated as Student Accommodation Heroes.
In the Global Student Living Survey, Fresh achieved a net promoter score of
+32, against a benchmark figure for large providers of +12 and university
halls of -8.
During the year, we launched our new management platform, Yardi, for our BTR
schemes. The platform has been built specifically for Fresh and the needs of
our clients and residents. It means we have a single platform from our
website and point of enquiry, all the way through to client reporting, with
live data at the touch of a button. A fully integrated app supports the
residents' experience, enabling them to manage all aspects of their tenancy
and to connect with our teams and their neighbours. We are already seeing
good improvements in our website performance and positive feedback from
residents. We started to roll out Yardi for our student schemes in October
2021, helping to drive efficiencies for us and our clients.
The accommodation management market opportunity
The market for professional accommodation management services continues to
grow, as institutional investors seek management partners to work with them to
drive the performance of their PBSA and BTR assets.
Overall growth in the market is directly linked to demand for new student
accommodation and BTR developments, as described above. Opportunities for
accommodation management providers continue to arise as new buildings are
completed. There is also a growing secondary market as existing contracts
expire and are retendered. In recent months, we have seen an increase in
portfolios of PBSA assets for sale, which creates opportunities to manage
those assets on behalf of new owners once deals complete.
In previous years, the pipeline of opportunities for Fresh was dominated by
PBSA assets, reflecting the much greater number of such schemes compared to
BTR. We are now seeing a marked increase in the number of BTR schemes that
are available to tender.
In addition, we see exciting potential in the co-living market, where the
properties are highly similar to PBSA and offer a good halfway point between
student accommodation and BTR. This makes them highly suitable for new
graduates, for example.
Many of the larger accommodation managers are the in-house arms of owner
operators. The pool of pure third-party operators remains small, with Fresh
being the largest third-party manager of student property in the UK.
Successful operation in the market requires sufficient scale to invest in the
infrastructure and the specialist skills required. At least 5,000 beds under
management is seen as the minimum level, making it difficult for new operators
to enter the market. As a result, no notable new entrants have been seen in
the student market in recent years. A similar dynamic is expected in the BTR
market as it develops and Fresh will be looking to leverage its experience and
expertise in the PBSA market to secure its position in the BTR space.
Financial review
The Group delivered a robust financial performance in the year, demonstrating
the resilience of the business against the backdrop of the ongoing COVID
pandemic.
Highlights
FY21 FY20
£m £m Change
Revenue 430.2 354.1 +21.5%
Gross profit 84.8 75.9 +11.7%
Administrative expenses (27.5) (24.2) +13.5%
Operating profit before exceptional items 57.3 51.7 +10.8%
Exceptional costs - (20.5)
Operating profit 57.3 31.2 +83.3%
Share of (loss)/profit in joint ventures (0.1) 0.2
Net finance costs (6.1) (6.1)
Profit before tax 51.1 25.3 +101.9%
Income tax expense (9.2) (4.2)
Profit for the year 41.9 21.1 +98.8%
Basic earnings per share 16.4p 8.2p +98.5%
Adjusted basic earnings per share 16.4p 14.7p +11.2%
Dividend per share 8.2p 7.35p +11.6%
Revenue
Revenue grew strongly to £430.2 million, up 21.5% from £354.1 million in
FY20, reflecting increased revenues from our BTR and PBSA development
activities.
BTR development revenues were 47.4% higher at £138.6 million (FY20: £94.0
million) and arose from the five developments that were completed in the year,
as well as the forward sale of our site in Hove. This strong revenue
performance was achieved despite lower than anticipated forward land sales in
the year, with the forward sale of our scheme in Lewisham completing shortly
after the year end.
Revenues from our PBSA development business were £259.9 million (FY20:
£226.0 million), an increase of 15.0%, driven by the seven schemes that were
completed in the year and good progress on the schemes in build for delivery
in FY22.
In addition, revenues benefited from the forward sale of two development sites
in Edinburgh and one in Exeter in the second half of the year. PBSA revenues
also include the rental income from our six leased student accommodation
assets. The rental income on these was reduced by c.£5.0 million, compared
to a normal year, as a result of the lower student occupancy caused by the
pandemic. This revenue reduction was at the lower end of our previous
guidance.
The Affordable Homes business delivered revenues of £22.7 million, down 13.7%
on the £26.3 million recorded in FY20. Revenues in the prior year included
c.£5.3 million from the completion of a 35-apartment scheme in Chester which
had been sold on a turnkey basis. However, revenues in FY21 were c.£4.0
million lower than anticipated due to build delays at our site in Preston.
The affordable housing pilot is expected to contribute to revenues from
FY22.
Fresh, our Accommodation Management business, achieved revenues of £7.8
million (FY20: £7.6 million). There was good underlying growth in the
number of PBSA beds and BTR apartments under management, up 13.9% from 17,721
at the start of FY20 to 20,179 at the start of FY21. However, whilst Fresh's
management fee income is largely fixed, a proportion is variable based on the
level of occupancy and this was reduced by approximately £0.8 million as a
result of the pandemic.
In addition to our core businesses, we recorded revenues of £1.3 million
(FY20: £0.3 million) from developing commercial property alongside PBSA and
BTR developments. This is reported within our Corporate segment. The
revenues for FY21 related to the fitting out of an academic space in Duncan
House, Stratford, which we have exchanged contracts to sell on completion of
the fit-out works in FY22.
Gross profit
Gross profit for the year was £84.8 million (FY20: £75.9 million), an
increase of 11.7%. This resulted in a gross margin of 19.7% (FY20: 21.4%).
BTR development gross profit doubled in the year to £29.8 million (FY20:
£14.9 million), reflecting both the strong revenue growth and a higher gross
margin at 21.5% (FY20: 15.8%). The higher gross margin was primarily the
result of keeping costs well controlled as we closed out developments in the
year, despite the operational challenges brought about by the pandemic.
The BTR gross margin also benefited from the lower than anticipated new
forward land sales in the year. We typically earn a lower margin on the land
sale element of a forward sale than we do on the separate contract for
development works. Under IFRS 15 'Revenue from Contracts with Customers', the
distinct contracts for the land sale and development works are accounted for
separately. This means that we typically earn a lower margin in the year in
which the land sale occurs, followed by higher margins in the following years
as the development works are undertaken. We continue to target a gross
margin of around 15% in BTR, with a margin on land sales of up to 10% and a
development margin of 16% to 20%.
In the year, we incurred a charge of £3.0 million against the BTR gross
profit in respect of a provision made against the carrying value of two of our
historic BTR operating assets, which we are holding in inventory for sale, in
order to cover the estimated cost of works to be carried out to improve the
saleability of the assets.
Gross profit from PBSA development was 7.0% lower at £50.5 million, compared
with £54.3 million in FY20. The gross margin was 19.4% (FY20: 24.0%).
This was partly the result of the c.£5.0 million reduction in rental income
from the leased PBSA assets as noted above, with the lost revenue feeding
directly through to lower profit. The underlying margin from our PBSA
development activities was approximately 21.7%, with the margin in FY20 having
benefited from there being no new forward land sales at lower margin in that
year and a particularly strong contribution from several developments in
build. Our target margin for PBSA is around 20%, with a margin on land sales
of up to 10% and a development margin of 22% to 25%.
In Affordable Homes, gross profit was £2.6 million (FY20: £4.0 million),
resulting in a gross margin of 11.3% (FY20: 15.4%). The reduction in gross
margin reflects the mix of sales in the year, with a number of remaining units
at the division's older developments in Bath and Macclesfield cleared at lower
margin.
Fresh generated a gross profit of £4.1 million (FY20: £4.5 million) with the
gross margin reducing to 52.6% (FY20: 59.8%) as a result of the loss of
variable fee income related to student occupancy levels, as discussed above.
Within the Corporate segment we recorded a loss of £2.1 million (FY20: £1.8
million). The loss in the year primarily related to an impairment provision
made against a historic land site, following a re-assessment of its intended
use. Commercial property development did not generate any significant profit
in either FY21 or FY20.
Administrative expenses
Administrative expenses increased by 13.5% to £27.5 million (FY20: £24.2
million). Overheads in FY20 were suppressed by cost savings during the
pandemic, mainly as a result of lower bonuses, reduced salaries for a period
of time, a reduction in business travel and measures taken to control
discretionary expenditure. Overhead costs in FY21 have reverted to a more
normal level and reflect an annual increase from FY19 of approximately 6.0%.
Operating profit before exceptional items
Operating profit before exceptional items increased to £57.3 million (FY20:
£51.7 million), at an operating margin of 13.3% (FY20: 14.6%).
Exceptional items
No exceptional items were incurred in FY21.
In FY20, the Group incurred an exceptional charge of £20.5 million, including
a £14.8 million provision related to remedial works on cladding and charges
totalling £5.7 million relating to additional costs arising from the COVID
pandemic, more information on which can be found in the FY20 annual report.
We utilised £4.9 million of the cladding provision in FY20 and a further
£1.0 million in FY21. We increased the provision by a further £0.5 million
during the year, following receipt of a successful claim against a consultant
who had been engaged on one of the properties we had remediated. The balance
of the provision of £9.4 million is expected to be utilised over the next two
years. In FY21 we undertook cladding remedial works on two developments,
with the timing of the remaining works subject to agreement with the owners of
the properties concerned. The cost of the cladding works, which is being
shared with the property owners, continues to be in line with our original
estimates.
Finance costs
The net finance cost for the year was £6.1 million (FY20: £6.1 million).
These costs are primarily the finance cost of capitalised leases under IFRS
16, which totalled £4.9 million (FY20: £5.4 million).
The balance of our finance costs are the fees associated with the availability
of our revolving credit facility (RCF) with HSBC and the interest cost of the
loans we have with Svenska Handelsbanken AB.
Profit before tax
Profit before tax for the year was £51.1 million (FY20: £25.3 million).
For FY20, adjusted profit before tax, which excludes the impact of the
exceptional items for that year, was £45.8 million.
Taxation
The corporation tax charge was £9.2 million (FY20: £4.2 million). The
effective tax rate of 18% (FY20: 16.7%) was less than the standard UK
corporation tax rate of 19.0%, primarily as a result of a deferred tax credit
relating to the remeasurement of deferred tax balances to take account of the
increase in the corporation tax rate to 25.0% from April 2023.
The effective tax rate in FY20 was reduced by a prior year tax credit relating
to the taxation of distributions from the Curlew Student Fund, which had
already been taxed at source, and the higher proportionate benefit relative to
the lower profit of specific tax allowances, including land remediation
expenditure.
Information on our tax strategy can be found in the Investor section of our
website, watkinjonesplc.com.
Earnings per share
Basic earnings per share from continuing operations was 16.4 pence (FY20: 8.2
pence). For FY20, adjusted basic earnings per share, which excludes the
impact of the exceptional items for that year, was 14.7 pence.
Dividends
The Board has proposed a final dividend of 5.6 pence per share. Taken
together with the interim dividend of 2.6 pence per share, this will give a
total dividend for the year of 8.2 pence per share. The dividend is 2.0x
covered by adjusted earnings, in line with our stated policy.
In FY20, the Board suspended the interim dividend as a result of the
uncertainty caused by the pandemic. The Company paid a full year final
dividend of 7.35 pence per share.
At 30 September 2021, the Company had distributable reserves of £75.3 million
available to pay dividends.
EBITDA
EBITDA increased by 61.2% to £65.9 million (FY20: £40.9 million), giving an
EBITDA margin of 15.3% (FY20: 11.5%). For FY20, adjusted EBITDA, which
excludes the exceptional items for that year, was £61.3 million, representing
an adjusted EBITDA margin of 17.3%.
Return on capital employed
The return on capital employed (ROCE) for the year was strong at 72.1% (FY20:
58.5%), and was consistent with the average of the three years before the
pandemic of 72.6%. Our ROCE performance reflects the benefit of our
capital-light forward sale business model, with our operating profit generated
from a relatively consistent and modest level of capital employed.
Statement of financial position
At 30 September 2021, non-current assets amounted to £124.7 million (FY20:
£134.7 million), with the most significant item being the carrying value of
the leased student accommodation investment properties amounting to £98.6
million (FY20: £104.6 million). Right-of-use assets relating to office and
car leases amounted to £4.5 million (FY20: £4.8 million). The reduction in
these balances in the year reflects the depreciation charges. Intangible
assets relating to Fresh amounted to £12.7 million (FY20: £13.3 million) and
were reduced by the amortisation charge of £0.6 million in the year.
We had no significant interest in joint ventures at 30 September 2021,
following a reduction in the balance of £3.2 million in the year to £17,000.
This reduction reflected the distribution of dividends from our four
development joint ventures in Belfast, which have completed their development
activities and are now being wound up. These dividends were set-off against
the amounts owing to those companies.
Inventory and work in progress was £127.6 million. This was largely
unchanged from last year end's position of £125.7 million and reflects the
normal churn of sites through the business. In the year, inventory and work in
progress was reduced by £44.5 million as a result of the sale of the Hove
site and the Leicester PBSA and BTR developments, but we spent a similar
amount on the acquisition of the Lewisham and Crewe sites, with the Lewisham
site sold shortly after the year end. In the year, we made impairment
provisions totalling £5.0 million against the carrying value of inventory and
work in progress, as discussed in the review of gross profit.
Contract assets reduced significantly in the year to £13.8 million (FY20:
£41.5 million). These mainly relate to the final payment balances which are
received on completion of developments in build. The reduction in the year
reflects the benefit of the final payments that were received following the
handover of the developments completed in the period.
Contract liabilities and trade and other payables amounted to £92.0 million
and were £14.2 million lower than at 30 September 2020, reflecting a lower
level of on-site build activity across the year end relative to a year ago.
The remaining provision for cladding remedial works of £9.4 million has been
split relatively equally between current and non-current liabilities, based on
our anticipated expenditure over the next two years. The movement in the
provision in the year is considered under the review of 'Exceptional items'
above.
Interest-bearing loans and liabilities stood at £12.0 million at 30 September
2021, down from £39.7 million a year ago. The reduction primarily relates
to the repayment of the loans on the Hove and Leicester sites, on completion
of the sales in the year. The current portion of our loans has increased by
£4.0 million to £4.7 million, which reflects the March 2022 maturity date of
our facilities with Svenska Handelsbanken AB.
Lease liabilities arising from the adoption of IFRS 16 'Leases' in the prior
year were reduced by £5.2 million to £129.3 million (FY20: £134.5 million),
reflecting capital repayments made in the year of £6.1 million and net
additions of £0.9 million.
Cash and net debt
FY21 FY20
£m £m
Operating profit before exceptional items 57.3 51.7
Exceptional items - (8.7)
Depreciation and amortisation 8.7 9.4
Impairment of leased student accommodation property (non-exceptional) - 0.3
(Increase)/decrease in working capital 10.3 2.1
Finance costs paid (6.7) (6.5)
Tax paid (8.2) (10.0)
Net cash inflow from operating activities 61.4 38.3
Purchase of fixed assets (0.2) (0.2)
Cash flow from joint venture interests 0.1 0.8
Dividends paid (25.5) (14.3)
Payment of lease liabilities (6.1) (6.1)
Cash flow from borrowings (27.9) 0.4
Increase in cash 1.8 18.9
Cash at beginning of year 134.5 115.6
Cash at end of year 136.3 134.5
Less: borrowings (12.0) (39.7)
Net cash before deducting lease liabilities 124.3 94.8
Less: lease liabilities (129.3) (134.4)
Net debt (5.0) (39.6)
At the year end, we had a cash balance of £136.3 million and loans of £12.0
million, resulting in a net cash position of £124.3 million. At 30
September 2020, we had a cash balance of £134.5 million, loans of £39.7
million and net cash of £94.8 million.
Net cash balances are stated before deducting the lease liabilities of £129.3
million (30 September 2020: £134.5 million), arising as a result of applying
IFRS 16. We believe the net cash balance before deducting lease liabilities
is a more relevant measure for the Group.
The lease liabilities relate primarily to several historic student
accommodation sale and leaseback properties, for which the future lease rental
liabilities are expected to be substantially covered by the future net student
rental incomes to be received.
In a typical year, the Group's cash balance peaks around the year end, as we
receive the final payments on student accommodation developments completing
ahead of the new academic year, as well as initial proceeds from the latest
forward sales.
The Group is then a net user of cash until the following year end, as a result
of outflows such as tax and dividend payments, overhead costs and land
purchases. The cash balance at the year end is therefore important for
funding our day-to-day cash requirements and for putting the Group in a strong
position when bidding for new sites.
Our average month end net cash balance during FY21 was £44.2 million and had
reduced by £107.4 million during the year to a net debt balance of £12.6
million at the end of July 2021, before increasing strongly by £136.9 million
in the final two months of the year to the closing net cash position of
£124.3 million.
The Group's net cash flow from operating activities for the year was £61.4
million (FY20: £38.3 million), reflecting a strong cash flow from our trading
operations. The cash flow from operating activities, before deducting the
cash cost of exceptional items, finance costs and tax payments, was £76.3
million (FY20: £63.5 million). The working capital balance was reduced by
£10.3 million, compared to a reduction of £2.1 million in FY20.
Finance costs paid totalled £6.7 million (FY20: £6.5 million), including the
finance charges on the capitalised lease liabilities of £4.9 million (FY20:
£5.1 million), for which the capital payments amounted to £6.1 million
(FY20: £6.1 million).
Dividends paid in the year totalled £25.5 million (FY20: £14.3 million).
The dividend payments in FY21 were significantly higher as they included
both the full year dividend for FY20, following the suspension of the interim
dividend for that year, as well as the interim dividend for FY21. Dividends
paid in FY20 comprised only the final dividend for FY19.
Bank facilities
The Group has a £100.0 million RCF which runs until May 2025. At the year
end, £7.8 million was drawn against the facility (30 September 2020: £35.0
million), giving headroom of £92.2 million. We also have an undrawn
overdraft facility of £10.0 million. Total cash and available facilities at
30 September 2021 therefore stood at £238.5 million (FY20: £209.5 million).
In addition, the Group has loan facilities with Svenska Handelsbanken AB,
which are used to fund our operating build to rent stock in Sheffield and
Droylsden. We are currently progressing a renewal of these facilities, which
run to March 2022. The outstanding balance at the year end was £4.5 million
(30 September 2020: £5.0 million).
Going concern
We have undertaken a thorough review of the Group's ability to continue to
trade as a going concern for the period to 31 January 2023. The basis of the
review and an analysis of the downside risks is set out in the section on
'Risk management and principal risks' in the Watkin Jones plc Annual Report
for the year ended 30 September 2021.
Alternative performance measures (APMs)
We use APMs as part of our financial reporting, alongside statutory reporting
measures. These APMs are provided for the following reasons:
1) to present users of the annual report with a clear view of what we consider
to be the results of our underlying operations, enabling consistent
comparisons over time and making it easier for users of the report to identify
trends;
2) to provide additional information to users of the annual report about our
financial performance or position;
3) to show the performance measures used by the Board in determining dividend
payments; and
4) to show the performance measures that are linked to remuneration for the
Executive Directors.
The following APMs appear in this results announcement.
Reconciliation
FY21 FY20
Reason for use £'000 £'000
Adjusted operating profit 1 Operating profit 57,255 31,230
Add: exceptional items - 20,437
Adjusted operating profit 57,255 51,667
Adjusted profit before tax 1,4 Profit before tax 51,121 25,314
Add: exceptional items - 20,437
Adjusted profit before tax 51,121 45,751
Adjusted basic earnings per share 1,3,4 Profit for the year 41,932 21,092
Add: exceptional items - 20,437
Less: tax on exceptional items - (3,883)
Adjusted profit for the year 41,932 37,646
Weighted average number of shares 256,163,459 255,795,659
Adjusted basic earnings per share 16.369 pence 14.717 pence
EBITDA 1 Operating profit 57,255 31,230
Add: share of (loss)/profit in joint ventures (87) 199
Add: depreciation 8,128 8,863
Add: amortisation 560 560
EBITDA 65,856 40,852
Adjusted EBITDA 1 EBITDA 65,856 40,852
Add: exceptional items - 20,437
Adjusted EBITDA 65,856 61,289
Adjusted net cash 2 Net debt (4,920) (39,607)
Add: lease liabilities 129,252 134,453
Adjusted net cash 124,332 94,846
Return on capital employed 1,2 Adjusted operating profit (as above) 57,255 51,667
Net assets at 30 September 184,811 167,838
Less: adjusted net cash (as above) (124,332) (94,846)
Less: intangible assets (12,724) (13,284)
Less: investment property (leased) (98,567) (104,623)
Less: right-of-use assets (4,468) (4,763)
Add: lease liabilities 129,252 134,453
Adjusted net assets at 30 September 73,972 84,775
Adjusted net assets at 1 October 84,775 91,772
Average adjusted net assets 79,374 88,274
Return on capital employed 72.1% 58.5%
Sarah Sergeant
Chief Financial Officer
18 January 2022
Consolidated statement of comprehensive income
for the year ended 30 September 2021
Year ended Year ended
30 September 30 September
2021 2020
Notes £'000 £'000
Continuing operations
Revenue 4 430,211 354,121
Cost of sales (345,430) (278,205)
Gross profit 84,781 75,916
Administrative expenses (27,526) (24,249)
Operating profit before exceptional items 57,255 51,667
Exceptional costs 5 - (20,437)
Operating profit 57,255 31,230
Share of (loss)/profit in joint ventures (87) 199
Finance income 4 251
Finance costs (6,051) (6,366)
Profit before tax 51,121 25,314
Income tax expense 6 (9,189) (4,222)
Profit for the year attributable to ordinary equity holders of the parent 41,932 21,092
Other comprehensive income
Other comprehensive income that will not be reclassified to profit or loss in
subsequent periods:
Net gain/(loss) on equity instruments designated at fair value through other 108 (6)
comprehensive income
Total comprehensive income for the year attributable to ordinary equity 42,040 21,086
holders of the parent
Pence Pence
Earnings per share for the year attributable to ordinary equity holders of the
parent
Basic earnings per share 7 16.369 8.246
Diluted earnings per share 7 16.340 8.234
Adjusted proforma basic earnings per share (excluding exceptional costs) 7 16.369 14.717
Adjusted proforma diluted earnings per share (excluding exceptional costs) 7 16.340 14.696
Consolidated statement of financial position
as at 30 September 2021
30 September 30 September
2021 2020
Notes £'000 £'000
Non-current assets
Intangible assets 12,724 13,284
Investment property (leased) 9 98,567 104,623
Right-of-use assets 9 4,468 4,763
Property, plant and equipment 3,656 4,376
Investment in joint ventures 17 3,243
Deferred tax assets 4,057 3,313
Other financial assets 1,241 1,133
124,730 134,735
Current assets
Inventory and work in progress 127,593 125,660
Contract assets 13,810 41,522
Trade and other receivables 28,198 23,518
Cash and cash equivalents 11 136,293 134,513
305,894 325,213
Total assets 430,624 459,948
Current liabilities
Trade and other payables (89,198) (97,300)
Contract liabilities (2,845) (8,967)
Interest-bearing loans and borrowings (4,653) (711)
Lease liabilities 9 (6,113) (6,310)
Provisions (4,667) (6,277)
Current tax liabilities (2,015) (819)
(109,491) (120,384)
Non-current liabilities
Interest-bearing loans and borrowings (7,308) (38,956)
Lease liabilities 9 (123,139) (128,143)
Provisions (4,732) (3,587)
Deferred tax liabilities (1,143) (1,040)
(136,322) (171,726)
Total liabilities (245,813) (292,110)
Net assets 184,811 167,838
Equity
Share capital 2,562 2,562
Share premium 84,612 84,612
Merger reserve (75,383) (75,383)
Fair value reserve of financial assets at FVOCI 536 428
Share‑based payment reserve 2,824 2,348
Retained earnings 169,660 153,271
Total equity 184,811 167,838
Consolidated statement of changes in equity
for the year ended 30 September 2021
Fair value
reserve of
financial Share-based
Share Share Merger assets at payment Retained
capital premium reserve FVOCI reserve earnings Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000
Balance at 30 September 2019 2,553 84,612 (75,383) 434 2,311 146,568 161,095
Profit for the year - - - - - 21,092 21,092
Other comprehensive income - - - (6) - - (6)
Total comprehensive income - - - (6) - 21,092 21,086
Share-based payments - - - - 37 - 37
Deferred tax debited directly to equity - - - - - (70) (70)
Issue of shares 9 - - - - - 9
Dividend paid - - - - - (14,319) (14,319)
(note 8)
Balance at 30 September 2020 2,562 84,612 (75,383) 428 2,348 153,271 167,838
Profit for the year - - - - - 41,932 41,932
Other comprehensive income - - - 108 - - 108
Total comprehensive income - - - 108 - 41,932 42,040
Share-based payments - - - - 476 - 476
Deferred tax debited directly to equity - - - - - (59) (59)
Dividend paid - - - - - (25,484) (25,484)
(note 8)
Balance at 30 September 2021 2,562 84,612 (75,383) 536 2,824 169,660 184,811
Consolidated statement of cash flows
for the year ended 30 September 2021
Year ended Year ended
30 September 30 September
2021 2020
Notes £'000 £'000
Cash flows from operating activities
Cash inflow from operations 10 76,307 54,868
Interest received 4 245
Interest paid (6,638) (6,792)
Tax paid (8,211) (10,035)
Net cash inflow from operating activities 61,462 38,286
Cash flows from investing activities
Acquisition of property, plant and equipment (208) (317)
Proceeds on disposal of property, plant and equipment 4 69
Cash flow from joint venture interests 57 812
Net cash inflow from investing activities (147) 564
Cash flows from financing activities
Dividends paid 8 (25,484) (14,319)
Proceeds from exercise of share options - 9
Payment of principal portion of lease liabilities (6,145) (6,089)
Payment of capital element of other interest‑bearing loans (242) (1,034)
Drawdown of RCF 25,705 20,843
Repayment of bank loans (53,369) (18,499)
Bank loan arrangement fees - (900)
Net cash outflow from financing activities (59,535) (19,989)
Net increase in cash 1,780 18,861
Cash and cash equivalents at 1 October 2020 and 1 October 2019 134,513 115,652
Cash and cash equivalents at 30 September 2021 and 30 September 2020 136,293 134,513
Notes to the consolidated financial statements
for the year ended 30 September 2021
1. General information
Watkin Jones plc (the 'Company') is a public limited company incorporated in
the United Kingdom under the Companies Act 2006 (registration number 9791105)
and its shares are listed on the Alternative Investment Market of the London
Stock Exchange. The Company is domiciled in the United Kingdom and its
registered address is 7-9 Swallow Street, London, England, W1B 4DE.
The principal activities of the Company and its subsidiaries (collectively the
'Group') are those of property development and the management of properties
for multiple residential occupation.
The consolidated financial statements for the Group for the year ended 30
September 2021 comprise the Company and its subsidiaries. The basis of
preparation of the consolidated financial statements is set out in note 2
below.
2. Basis of preparation
The preparation of the financial statements in conformity with the Group's
accounting policies requires the Directors to make estimates and assumptions
that affect the reported amounts of assets and liabilities, the disclosure of
contingent assets and liabilities at the reporting date and the reported
amounts of revenue and expenses during the reported period. Whilst these
estimates and assumptions are based on the Directors' best knowledge of the
amount, events or actions, actual results may differ from those estimates.
The financial information set out above does not constitute the Group's
statutory accounts for the years ended 30 September 2021 or 2020, but is
derived from those accounts. Statutory accounts for 2020 have been delivered
to the Registrar of Companies, and those for 2021 will be delivered in due
course. The auditor has reported on those accounts; their reports were (i)
unqualified, (ii) did not include a reference to any matters to which the
auditor drew attention by way of emphasis without qualifying their report and
(iii) did not contain statements under Section 498(2) or (3) of the Companies
Act 2006.
Whilst the financial information included in this announcement has been
computed in accordance with IFRS as adopted by the European Union, this
announcement does not itself contain sufficient information to comply with
IFRS. The Company expects to send its 2021 Annual Report to shareholders on
24 January 2022.
The accounting policies set out below have, unless otherwise stated, been
applied consistently to all periods for which the financial information
included in this announcement has been presented. The financial information
included in this announcement is prepared on the historical cost basis except
as disclosed in these accounting policies. The financial information is
presented in pounds sterling and all values are rounded to the nearest
thousand (£'000), except when otherwise indicated.
3. Accounting policies
The results for the year have been prepared on a basis consistent with the
accounting policies set out in the Watkin Jones plc Annual Report 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'. The following represents the segments that the Group
operated in during FY21 and FY20:
a. Student Accommodation - the development of purpose built student
accommodation;
b. Build To Rent - the development of build to rent accommodation;
c. Affordable Homes (formerly Residential) - the development of residential
housing; 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.
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.
As detailed in the Chief Executive Officer's review, subsequent to the year
end, the Group confirmed its intention to reposition the Residential division
from being a developer of homes for sale to an affordable housing-led
developer, and has renamed it the Affordable Homes division. Consequently,
previous references to the Residential segment have been changed to Affordable
Homes. No revenues relating to the development of homes under the affordable
homes business model were recorded in FY21 or FY20 and the revenues for those
years relate to the former Residential business.
Affordable
Homes
Student Build (formerly Accommodation
Year ended 30 Accommodation To Rent Residential) Management Corporate Total
September 2021 £'000 £'000 £'000 £'000 £'000 £'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 loss 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)
Continuing profit/(loss) for the year 50,377 29,765 2,560 (148) (40,622) 41,932
Profit for the year attributable to ordinary equity shareholders of the parent 41,932
Inventory and work in progress 25,754 64,086 27,420 - 10,333 127,593
Affordable
Homes
Student Build (formerly Accommodation
Year ended 30 Accommodation To Rent Residential) Management Corporate Total
September 2020 £'000 £'000 £'000 £'000 £'000 £'000
Segmental revenue 226,026 93,991 26,268 7,586 250 354,121
Segmental gross profit 54,285 14,884 4,042 4,540 (1,835) 75,916
Administration expenses - - - (3,432) (20,817) (24,249)
Exceptional costs - - - - (20,437) (20,437)
Share of profit in joint ventures 199 - - - - 199
Finance income - - - - 251 251
Finance costs - - - - (6,366) (6,366)
Profit/(loss) before tax 54,484 14,884 4,042 1,108 (49,204) 25,314
Taxation - - - - (4,222) (4,222)
Continuing profit/(loss) for the year 54,484 14,884 4,042 1,108 (53,426) 21,092
Profit for the year attributable to ordinary equity shareholders of the parent 21,092
Inventory and work in progress 30,706 53,964 30,656 - 10,334 125,660
5. Exceptional costs
Year ended Year ended
30 September 30 September
2021 2020
£'000 £'000
COVID costs
COVID additional costs of on-site working and in completing developments - (2,659)
Waiver of academic year 2019/20 final term rents due on leased student - (1,086)
accommodation assets due to lockdown measures
Impairment of the right-of-use carrying value of leased student accommodation - (1,892)
assets due to reduced 2020/21 student occupancy
Total COVID costs - (5,637)
Fire safety recladding works - (14,800)
Total exceptional costs - (20,437)
There have been no exceptional items during the year. In the prior year, a
total impairment charge of £2,241,000 was recognised in relation to the
carrying value of leased student accommodation assets. £1,892,000 of this
impairment charge was treated as an exceptional item due to the impact of
reduced student occupancy during the 2020/21 academic year as a result of the
COVID pandemic. This element of the total charge was estimated by comparing
the final impairment calculations to a calculation of the impairment charge
using the income forecasts for 2020/21 prepared prior to the pandemic.
All of the exceptional costs in the prior year were treated as allowable
deductions for corporation tax purposes.
6. Income taxes
Year ended Year ended
30 September 30 September
2021 2020
£'000 £'000
Current income tax
UK corporation tax on profits for the year 9,635 4,076
Adjustments in respect of prior periods 254 (305)
Total current tax 9,889 3,771
Deferred tax
Origination and reversal of temporary differences 51 455
Adjustments in respect of prior year (13) (10)
Remeasurement of deferred tax for changes in tax rates (738) 6
Total deferred tax (700) 451
Total tax expense 9,189 4,222
Reconciliation of total tax expense
Year ended Year ended
30 September 30 September
2021 2020
£'000 £'000
Profit before tax 51,121 25,314
Profit multiplied by standard rate of corporation tax in the UK of 19% (2020: 9,713 4,810
19%)
Expenses not deductible 110 288
Income not taxable (14) (53)
Remeasurement of deferred tax for changes in tax rates (738) 6
Other differences (123) (514)
Prior period adjustment 241 (315)
At the effective rate of tax of 18.0% (2020: 16.7%) 9,189 4,222
Income tax expense reported in the statement of profit or loss 9,189 4,222
In the Budget 2021, the Government announced that the rate of corporation tax
will increase to 25% from 6 April 2023. The deferred tax assets and
liabilities held by the Group at the start of the current year have been
revalued to reflect this increase. This resulted in an increase in deferred
tax assets of £1,004,000 and an increase in deferred tax liabilities of
£266,000.
7. Earnings per share
The following table reflects the income and share data used in the basic and
diluted EPS computations:
Year ended Year ended
30 September 30 September
2021 2020
£'000 £'000
Profit for the year attributable to ordinary equity holders of the parent 41,932 21,092
Add back exceptional costs for the year (note 5) - 20,437
Less corporation tax benefit from exceptional costs for the year - (3,883)
Adjusted profit for the year attributable to ordinary equity holders of the 41,932 37,646
parent (excluding exceptional costs after tax)
Number of Number of
shares shares
Weighted average number of ordinary shares for basic earnings per share 256,163,459 255,795,659
Adjustment for the effects of dilutive potential ordinary shares 453,761 367,800
Weighted average number for diluted earnings per share 256,617,220 256,163,459
Pence Pence
Basic earnings per share
Basic profit for the year attributable to ordinary equity holders of the 16.369 8.246
parent
Adjusted proforma basic earnings per share (excluding exceptional costs after
tax)
Adjusted profit for the year attributable to ordinary equity holders of the 16.369 14.717
parent
Diluted earnings per share
Basic profit for the year attributable to diluted equity holders of the parent 16.340 8.234
Adjusted proforma diluted earnings per share (excluding exceptional costs
after tax)
Adjusted profit for the year attributable to diluted equity holders of the 16.340 14.696
parent
8. Dividends
Year ended Year ended
30 September 30 September
2021 2020
£'000 £'000
Interim dividend paid in June 2021 of 2.6 pence (June 2020: nil pence) 6,658 -
Final dividend paid in February 2021 of 7.35 pence (February 2020: 5.6 pence) 18,826 14,319
25,484 14,319
The interim dividend that would have been paid in June 2020 was suspended as a
precautionary measure whilst the impact of COVID on the business was assessed.
The final dividend proposed for the year ended 30 September 2021 is 5.6 pence
per ordinary share and will be paid on 25 February 2022 to shareholders on the
register at the close of business on 28 January 2022. This dividend was
declared after 30 September 2021 and as such the liability of £14,345,000 has
not been recognised at that date. At 30 September 2021, the Company had
distributable reserves available of £75,332,000 (30 September 2020:
£100,816,000).
9. Leases
Set out below are the carrying amounts of right-of-use assets recognised and
the movements during the year:
Investment
property Motor
(leased) Offices vehicles Total
£'000 £'000 £'000 £'000
Cost
At 30 September 2019 158,231 9,411 1,597 169,239
Additions/adjustment 3,162 - 313 3,475
Disposals - - (478) (478)
At 30 September 2020 161,393 9,411 1,432 172,236
Additions/adjustment 243 721 13 977
Disposals (7) - (471) (478)
At 30 September 2021 161,629 10,132 974 172,735
Depreciation
At 30 September 2019 44,550 4,203 875 49,628
Charge for the year 6,522 791 552 7,865
Disposals - - (341) (341)
At 30 September 2020 51,072 4,994 1,086 57,152
Charge for the year 6,292 791 206 7,289
Disposals - - (439) (439)
At 30 September 2021 57,364 5,785 853 64,002
Impairment
At 30 September 2019 3,457 - - 3,457
Charge for the year 2,241 - - 2,241
At 30 September 2020 5,698 - - 5,698
Charge for the year - - - -
At 30 September 2021 5,698 - - 5,698
Net book value
At 30 September 2021 98,567 4,347 121 103,035
At 30 September 2020 104,623 4,417 346 109,386
At 30 September 2019 110,224 5,208 722 116,154
Investment property (leased) assets relate to the Group's six student
leaseback arrangements. Each of the six leaseback arrangements are
considered to be a separate CGU. The Directors consider an impairment
indication to exist if there is a shortfall between the annual net rental
income generated by each property and the annual headlease payment due under
each lease. The Directors have reviewed the carrying value of four of these
leases where there is an indication of impairment and compared them to their
respective recoverable amounts. An impairment charge of £Nil has been
recognised during the year. In the previous year, an impairment charge of
£2,241,000 was recognised in respect of one of the Group's sale and leaseback
arrangements - Europa, Liverpool - because the recoverable amount was less
than the depreciated carrying value of the asset. £1,892,000 of this
impairment charge was recognised as an exceptional item in the consolidated
statement of comprehensive income and £349,000 was recognised within Student
Accommodation cost of sales.
The recoverable amount for each CGU has been calculated as its value in use.
The valuation technique used is a discounted cash flow. Due to the bespoke
nature of these arrangements, these valuations are also considered to
represent the fair value of each of the investment property (leased) assets.
The key inputs into the valuation are gross rental income, operating costs,
lease term and an estimated discount rate reflecting the market assessment of
risk that would be applied to each asset. The estimated discount rates for
each property, together with their value in use, are included in the next
table.
Impairment charge/(reversal)
£'000 Value in use
£'000
Year ended Year ended Year ended Year ended
30 September 30 September Lease 30 September 30 September
Discount termination
2021 2020 rate (yields) date 2021 2020
Collegelands, Glasgow - - 5.5% 6 September 2026 12,328 14,244
Europa, Liverpool - 2,241 6.5% 18 March 2030 10,756 12,462
Optima, Loughborough - - 6.0% 18 March 2030 2,166 2,182
Glassyard Building, London - - 5.0% 10 September 2034 9,984 11,177
Dunaskin Mill, Glasgow - - 5.5% 5 September 2051 54,639 53,059
New Bridewell, Bristol - - 5.5% 12 March 2052 56,125 56,964
Total - 2,241 145,998 150,088
Set out below are the carrying amounts of lease liabilities and movements
during the period:
Year ended Year ended
30 September 30 September
2021 2020
£'000 £'000
At the start of the period 134,453 137,522
Additions 977 3,475
Disposals (33) (455)
Accretion of interest 4,895 5,103
Payments (11,040) (11,192)
At the end of the period 129,252 134,453
Current 6,113 6,310
Non-current 123,139 128,143
Lease liability maturity analysis
Year ended Year ended
30 September 30 September
2021 2020
£'000 £'000
Year one 11,226 11,041
Year two 11,086 10,880
Year three 11,015 10,781
Year four 11,222 10,707
Year five 11,433 10,909
Onwards 142,367 150,554
198,349 204,872
Group as lessor - operating lease rentals receivable
Year ended Year ended
30 September 30 September
2021 2020
£'000 £'000
Non-cancellable operating lease rentals are receivable as follows:
Within one year 13,514 12,436
Later than one year and less than five years 12,747 573
After five years 16,457 780
42,718 13,789
The Group acts as lessor in respect of certain commercial property and for the
student accommodation properties operated under the sale and leaseback
arrangements detailed above. The increase in operating lease rentals
receivable at 30 September 2021 compared to the prior year, has arisen as a
result of the Group entering into a ten year sub-lease with the University of
Bristol in September 2021 for the provision of student accommodation at its
New Bridewell property.
10. Reconciliation of profit before tax to net cash flows from operating
activities
Year ended Year ended
30 September 30 September
2021 2020
£'000 £'000
Profit before tax 51,121 25,314
Depreciation of leased investment properties and right-of-use assets 7,289 7,865
Depreciation of plant and equipment 839 998
Impairment of leased investment properties - 2,241
Amortisation of intangible assets 560 560
Loss/(profit) of disposal of right-of-use assets 6 -
Loss/(profit) on disposal of property, plant and equipment 85 (24)
Finance income (4) (245)
Finance costs 6,051 6,366
Share of (loss)/profit in joint ventures 87 (199)
Decrease/(increase) in inventory and work in progress (1,933) 8,566
Interest capitalised in inventory and work in progress 587 465
Decrease/(increase) in contract assets 27,712 (15,944)
Decrease/(increase) in trade and other receivables (4,680) (10,786)
(Decrease)/increase in contract liabilities (6,122) 3,803
(Decrease)/increase in trade and other payables (5,302) 15,987
(Decrease)/increase in provision for fire safety cladding works (465) 9,864
Increase in share‑based payment reserve 476 37
Net cash inflow from operating activities 76,307 54,868
Major non-cash transactions
There were no major non-cash transactions during the period.
11. Analysis of net cash/(debt)
At beginning Other At end of
of year Cash flow movements year
30 September 2021 £'000 £'000 £'000 £'000
Cash at bank and in hand 134,513 1,780 - 136,293
Other interest‑bearing loans (631) 242 - (389)
Bank loans (39,036) 27,664 (200) (11,572)
Net cash before deducting lease liabilities 94,846 29,686 (200) 124,332
Lease liabilities (note 9) (134,453) 6,145 (944) (129,252)
Net debt (39,607) 35,831 (1,144) (4,920)
At beginning Other
of year Cash flow movements At end of year
30 September 2020 £'000 £'000 £'000 £'000
Cash at bank and in hand 115,652 18,861 - 134,513
Other interest‑bearing loans (1,392) 1,034 (273) (631)
Bank loans (37,413) (1,444) (179) (39,036)
Net cash before deducting lease liabilities 76,847 18,451 (452) 94,846
Lease liabilities (note 9) (137,522) 6,089 (3,020) (134,453)
Net debt (60,675) 24,540 (3,472) (39,607)
Cash at bank and in hand as at 30 September 2021 includes £53,000 of cash
deposited by the Group in an escrow account in connection with a development
in progress, access to which is contingent upon the completion of certain
development works (30 September 2020: £814,000). Non‑cash movements
relate to the acquisition of property, plant and equipment under other
interest-bearing loans, the amortisation of bank loan arrangement fees and
changes to the value of lease liabilities as a result of leases entered into
or terminated in the period or due to movements in the rent inflation rates
assumed.
12. Subsequent events
On 21 October 2021, the Group entered into an agreement for the forward sale
of its BTR development in Lewisham, for a consideration of £141,281,000 to be
recognised over the duration of the development works. At 30 September 2021,
the Group held an amount of £37,701,000 in stock and work in progress in
respect of this development.
On 11 January 2022, the Department of Levelling Up, Housing and Communities
issued a public letter to developers on cladding and build safety. The Group
will work through any impact as the suggestions evolve into proposals and
there are no associated costs recorded in these financial statements. At 30
September 2021, the provision for the remediation or replacement of cladding
under existing government guidelines was £9,399,000 (30 September 2020:
£9,864,000).
13. Annual report
Copies of this announcement are available from the Company at 7-9 Swallow
Street, London W1B 4DE. The Group's annual report for the year ended 30
September 2021 will be posted to shareholders shortly and will be available on
our website at www.watkinjones.com.
- ENDS -
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