REG - Watkin Jones plc - Half Year Results
23/05/2023 07:15
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RNS Number : 3256A Watkin Jones plc 23 May 2023
23 May 2023
Watkin Jones plc
(the 'Group')
HY Results for the six months ended 31 March 2023
'Completion of the first forward fund transaction of FY23 reinforces
confidence in recovery in the medium term'
The Group announces its interim results for the half year ended 31 March 2023
('HY23' or 'the period')
Adjusted Results ((1), (2)) Statutory Results
HY23 HY22 Change (%) HY23 HY22 Change (%)
Revenue £153.9m £193.0m (20.3)% £153.9m £193.0m (20.3)%
Gross profit £16.1m £29.9m (46.2)% £16.1m £29.9m (46.2)%
Operating profit / (loss) £1.8m £14.6m (87.7)% £0.7m £(13.4)m 105.2%
Profit / (loss) before tax £0.3m £11.4m (97.4)% (£0.8)m £(16.6)m 95.2%
Basic earnings per share 0.11p 3.65p (97.0)% (0.23)p (5.20)p 95.6%
Dividend per share 1.4p 2.9p (51.7%)% 1.4p 2.9p (51.7)%
Adjusted net cash((3)) £45.3m £26.8m 69.0%
(1) For HY23 Adjusted Operating Profit, Adjusted Profit before tax and
Adjusted Earnings per share are calculated before the impact of an exceptional
charge of £1.1 million for people restructuring costs
(2) For HY22 Adjusted Operating Profit, Adjusted Profit before tax and
Adjusted Earnings per share are calculated before the impact of the
exceptional charge of £28.0 million for the potential costs of the remedial
work required under the new Building Safety Act
(3) Adjusted net cash is stated after deducting interest bearing loans and
borrowings, but before deducting IFRS 16 operating lease liabilities of £47.5
million at 31 March 2023 (31 March 2022: £126.0 million)
Key Highlights
· HY results in line with expectations:
- Revenue of £153.9 million from our forward sold developments
which are on site; no new forward sales in the period
- Adjusted operating profit of £1.8m reflecting reduced gross
margins in line with previous guidance and additional costs incurred on our
Exeter scheme following the liquidation of the third party main contractor and
the subsequent step in by Watkin Jones
- Net cash balance of £45.3 million
- Interim dividend of 1.4p, reflecting building confidence in the H2
performance
· Forward fund market continuing to recover:
- Underlying residential for rent market continues to perform well
with both strong tenant demand and rental growth in our core PBSA and BTR
sectors
- Announced today the forward sale of an 819 bed PBSA scheme in
Bristol to KKR; pricing in line with margin guidance and delivering a FY23
profit contribution of c.£5 million and a day 1 net cash receipt of c. £25
million. The scheme will complete in 2024 and will be managed by Fresh.
- Currently we have a further five forward sales in the market,
including one significant transaction. Two of these assets are under offer.
· Operational resilience continues to be demonstrated:
- 12 current developments on track with five due to achieve
practical completion this summer
- £650 million contractually secure forward sold revenue to come
through over the next two to three years
- Build costs and supply chain well managed throughout the period.
Starting to see build inflation reduce which should give rise to future buying
gains
- Good progress in all phases of our development model including
land acquisitions and moving schemes through planning.
Outlook: H2
· Expected that H2-23 will be materially stronger than H1-23, with
forward sales adding to performance from in-build developments
· Currently targeting up to five further forward sales in FY23,
with full year earnings performance dependent on concluding these transactions
in what remains a volatile environment, as well as finally agreed pricing and
phasing terms
· While pricing on assets currently in the market is broadly in
line with expectations, we are seeing purchasers looking for structures in the
near term that weight profit more significantly to the latter stages of the
development, to better align with their own funding requirements.
· Whilst the forward fund market is in the early stages of
recovery, we have taken the decision to exercise caution in the short term and
not accelerate pipeline assets on to our balance sheet in readiness for sale,
which will result in c. £15 million of expected profit contribution from FY23
moving into FY24
Outlook: Longer term
· Encouraged by the continued recovery in the forward fund market,
but will continue to take a risk-managed approach to managing our development
pipeline through this period of volatility, which has resulted in a reduced
pipeline value from c. £2 billion to c.£1.7 billion
· Starting to see attractive new land acquisition opportunities
which support our long run target margins. Currently in exclusivity on c.£500
million expected revenue to come from exciting new development opportunities.
· This, combined with our current operational performance and the
expected normalisation of the forward fund market reinforces confidence in the
future
Richard Simpson, Chief Executive Officer of Watkin Jones, said:
"We are pleased to have delivered a half year result in line with
expectations, managing build costs and our supply chain well. We are also
encouraged by the early signs of build inflation reducing which should lead to
future buying gains.
"We look to the second half of the year with confidence and are particularly
pleased to have secured the forward sale transaction in Bristol and expect to
complete further forward sales before the year end. The overall recovery in
the forward fund market is encouraging, however the Group will maintain a
cautious approach to managing the pipeline. In addition to growing
confidence in the sector, we are seeing attractive land acquisition
opportunities and these coupled with our excellent operational performance
leave us confident for the future."
Analyst meeting
There will be a pre-recorded audiocast of the Interim Results presentation
available to view on the Group's website (www.watkinjonesplc.com
(http://www.watkinjonesplc.com) ) from 7am (BST) today and it can also be
accessed via the following URL link
https://stream.buchanan.uk.com/broadcast/6463b2140324894e892e0a12
(https://stream.buchanan.uk.com/broadcast/6463b2140324894e892e0a12) . At 11am
(BST), there will be a live 30-minute Q&A webcast for sell-side analysts,
hosted by Richard Simpson (CEO), Sarah Sergeant (CFO) and Alex Pease (CIO).
Those analysts wishing to join and receive dial in details should register
their interest via watkinjones@buchanan.uk.com
(mailto:watkinjones@buchanan.uk.com) .
This announcement contains inside information for the purposes of Article 7 of
the Market Abuse Regulation (EU) No 596/2014 as it forms part of UK Domestic
Law by virtue of the European Union (Withdrawal) Act 2018 ("UK MAR")
For further information:
Watkin Jones plc
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
James Umbers/David Sheehan / Paul Bundred www.jefferies.com (http://www.jefferies.com/)
Media enquiries:
Buchanan
Henry Harrison-Topham / Jamie Hooper 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 48,000 student beds
across 143 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/)
Review of Performance
Results for the six months to 31 March 2023
Revenues for the period were £153.9 million (HY22: £193.0 million).
Operationally the Group's businesses have continued to perform well, with our
self-build developments progressing in line with expectations. The decrease
in revenues reflects no new forward sales having been completed in the period
compared to three in HY22.
Gross profit was £16.1 million (HY22: £29.9 million), with gross margin at
10.4% compared to 15.5% last year. The lower margin was in line with our
current margin guidance, with incremental impact from additional build costs
incurred at our scheme in Exeter where the main contractor went into
liquidation.
Adjusted operating profit for the period was £1.8 million (HY22: £14.6
million), reflecting the impact of the lower gross margin.
Operating Profit for the period was £0.7 million (HY22: loss of £13.4
million) after an exceptional cost of £1.1 million for people restructuring
costs incurred during the period.
Net finance costs for the period were £1.5 million (HY22: £3.2 million).
Finance costs include £0.9 million (HY22: £2.4 million) in respect of the
interest on leases.
Adjusted profit before tax for the period was £0.3 million (HY22: £11.4
million) and loss before tax for the period was £0.8 million (HY22: loss
before tax of £16.6 million). Adjusted basic earnings per share for the
period were 0.11 pence, compared to 3.65 pence for HY22.
Segmental review
Build to Rent ('BTR')
Revenues from BTR were maintained in the period at £93.0 million (HY22:
£93.8 million). Revenues were derived from the build-out of our forward
sold developments in Hove, Lewisham, Birmingham and Leatherhead which are
progressing well and on track for their respective completions.
Gross profit for the period was £8.3 million (HY22: £12.0 million), a
decrease of 30.9%. The gross margin for the period was 8.9% (HY22: 12.9%),
reflecting the lower margin of our schemes which were forward sold in the
latter half of FY22, including a development wrap scheme in Cardiff.
We are actively progressing a number of site acquisitions. We are also
looking at options for our BTR operational properties.
Student accommodation ('PBSA')
Revenues from PBSA were 38.2% lower than last year at £48.4 million (HY22:
£78.3 million) reflecting the number of and stage of development of the sites
in-build as well as the lack of new forward sales in the period.
PBSA gross profit for the period was £4.8 million (HY22: £13.0 million) with
gross margin for the period being 9.8% (HY22: 16.6%), reflecting the impact of
additional build costs at our Exeter scheme and the earlier stage of
development of the sites in build.
Subsequent to the period end and as announced today, we have agreed the
forward sale of an 819 bed development in Bristol for completion in 2024.
Accommodation management (Fresh)
Fresh achieved revenues of £4.7 million (HY22: £4.1 million), reflecting
higher levels of student occupancy. This reflects the higher number of student
beds and BTR apartments under management at the start of FY23 (22,896)
compared to FY22 (22,155)
The increase in Fresh's revenue for the period led to an increase in gross
profit to £3.2 million (HY22: £2.7 million), at a margin of 68.0% (HY22:
65.9%).
Operationally, Fresh has continued to support its residents focusing on
community engagement and the Be Wellbeing programme.
Affordable-led Homes
The affordable-led residential development business achieved 20 sales
completions in the period (HY22: 19 sales), resulting in an increase in
revenue to £7.8 million (HY22 £5.4 million).
The gross profit achieved by the division was £0.9 million (HY22: £0.6
million), at a margin of 11.9% (HY22: 11.0%).
Balance sheet and liquidity
Our financial position and liquidity remain strong. We had a gross cash
balance at 31 March 2022 of £83.3 million (31 March 2022: £44.7 million),
whilst net cash stood at £45.3 million (31 March 2022: £26.8 million),
before deducting IFRS 16 lease liabilities.
The Group had undrawn headroom of £65.4 million on its revolving credit
facility ('RCF') with HSBC at 31 March 2023 and an unutilised overdraft
facility of £10.0 million, giving total cash and available facilities of
£158.7 million (31 March 2022: £140.5 million). In addition, a short term
overdraft extension (to £20.0m total overdraft facility) has been agreed from
1 April 2023 to 30 September 2023.
The strength of our liquidity position has enabled us to continue to advance
our growth strategy through securing opportunities in the land market during
the period. This investment, combined with our normal annual cash profile,
which sees a higher utilisation of cash in the first half of the year,
resulted in a reduction in our net cash balance of £37.3 million since the
start of the year (HY22: reduction of £97.5 million). Our inventory and
work in progress balance has increased by a net £12.4 million, to £159.5
million. Of this balance, £13.4 million relates to the continued
development of our Bedminster site, offset by affordable housing sales.
Contract assets and receivables at 31 March 2023 stood at £53.3 million and
£33.0 million respectively and had increased £6.8 million from the position
at 30 September 2022. 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. Contract and
trade liabilities amounted to £100.9 million at 31 March 2023 and had
increased by £6.1 million since FY22 year-end position due to a high level of
construction activity linked to the stage of completion of developments.
Building Safety
We have utilised £4.1 million from our building safety improvements provision
in HY23, in line with our expectations, and we continue to monitor the
evolution of the Building Safety Act, including the Responsible Actors Scheme
from the Department for Levelling Up, Housing and Communities (DLUHC).
ESG
Future Foundations, our ESG strategy, formalises our commitments and targets
around core themes of future people, places and planet. This includes a
commitment to achieving net zero scope 1 and 2 carbon emissions by 2030.
Our ESG initiatives continue to progress well. Our trial of timber frame
housing is ongoing and we are assessing how we can further utilise modern
methods of construction in our developments. Our plant strategy continues to
be refined with a view to sourcing energy-efficient alternatives such as
electric and battery operated tools. We are reviewing our procurement policies
and approved supplier list to ensure we build strong relationships with those
who demonstrate strong ESG credentials, and supporting our approved suppliers
where necessary in gaining ISO 14001 accreditation.
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 well ahead of that
target.
Dividend
The Board has declared an interim dividend for the period of 1.4 pence per
share, which will be paid on 30 June 2023 to shareholders on the register at
close of business on 9 June 2023. The shares will go ex-dividend on 8 June
2023.
Outlook
Today we have announced our first forward fund transaction of FY23 and we are
encouraged by the continued recovery in the forward fund market. We are
starting to see attractive new land acquisition opportunities which support
our long run target margins and we are currently under offer or in negotiation
for circa £500 million expected revenue to come of exciting new development
opportunities. This, combined with our current operational performance and the
expected normalisation of the forward fund market reinforces confidence in the
future.
Richard Simpson
Chief Executive Officer
23 May 2023
Consolidated Statement of Comprehensive Income
for the six month period ended 31 March 2023 (unaudited)
6 months to 6 months to 12 months to
31 March 31 March 30 September
2023 2022 2022
Notes £'000 £'000 £'000
Continuing operations
Revenue 153,854 192,966 407,076
Cost of sales (137,801) (163,116) (339,450)
Gross profit 16,053 29,850 67,626
Administrative expenses (14,274) (15,281) (12,942)
Operating profit before exceptional costs 1,779 14,569 54,684
Exceptional costs 6 (1,063) (28,000) (30,365)
Operating profit / (loss) 716 (13,431) 24,319
Share of profit in joint ventures - - (16)
Finance income 190 22 72
Finance costs (1,672) (3,238) (5,982)
(Loss) / profit before tax from continuing operations (766) (16,647) 18,393
Income tax credit / (expense) 8 173 3,322 (4,979)
(Loss) / profit for the period attributable to ordinary equity holders of the (593) (13,325) 13,414
parent
Other comprehensive income
Net (loss) / gain on equity instruments designated at fair value through other
comprehensive income
(78) - 157
Total comprehensive (loss) / income for the period attributable to ordinary
equity holders of the parent
(671) (13,325) 13,571
Earnings per share for the period attributable to ordinary equity holders of Pence Pence Pence
the parent
Basic earnings per share 9 (0.231) (5.202) 5.232
Diluted earnings per share 9 (0.230) (5.185) 5.205
Adjusted basic earnings per share (excluding exceptional costs)
9 0.105 3.652 14.825
Adjusted diluted earnings per share (excluding exceptional costs)
9 0.104 3.640 14.748
Consolidated Statement of Financial Position
as at 31 March 2023 (unaudited)
31 March 31 March 30 September
2023 2022 2022
Notes £'000 £'000 £'000
Non-current assets
Intangible assets 11,885 12,445 12,165
Investment property (leased) 11 25,700 95,397 27,331
Right of use assets 11 5,475 4,695 4,738
Property, plant and equipment 1,811 746 2,009
Investment in joint ventures 1 17 1
Deferred tax asset 1,983 7,165 1,941
Other financial assets 1,288 1,241 1,366
48,143 121,706 49,551
Current assets
Inventory and work in progress 159,507 155,027 147,118
Contract assets 53,287 37,367 50,821
Trade and other receivables 32,967 55,808 28,628
Current tax receivables 3,586 - -
Cash and cash equivalents 13 83,336 44,685 110,841
332,683 292,887 337,408
Total assets 380,826 414,593 386,959
Current liabilities
Trade and other payables (100,544) (75,396) (89,717)
Contract liabilities (373) (1,128) (5,052)
Interest-bearing loans and borrowings (312) (615) -
Lease liabilities (6,788) (6,611) (6,248)
Provisions 7 (7,402) (3,152) (7,713)
Current tax liabilities - (2,276) (4,402)
(115,419) (89,178) (113,132)
Non-current liabilities
Interest-bearing loans and borrowings (37,688) (17,262) (28,288)
Lease liabilities (40,685) (119,421) (42,851)
Provisions 7 (21,995) (30,345) (25,735)
Deferred tax liabilities - (813) -
(100,368) (167,841) (96,874)
Total Liabilities (215,787) (257,019) (210,006)
Net assets 165,039 157,574 176,953
Equity
Share capital 2,564 2,562 2,564
Share premium 84,612 84,612 84,612
Merger reserve (75,383) (75,383) (75,383)
Fair value reserve of financial assets at FVOCI 584 536 662
Share-based payment reserve 831 3,171 526
Retained earnings 151,831 142,076 163,972
Total Equity 165,039 157,574 176,953
Consolidated Statement of Changes in Equity
for the six month period ended 31 March 2023 (unaudited)
Share Fair value of financial assets at FVOCI Share-based payment reserve Total
Share Premium £'000 £000 Retained £'000
Capital £'000 Merger earnings
£'000 Reserve £'000
£'000
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
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
Profit for the period - - - - 26,739 26,739
-
Share-based payments 2 - - - (138) - (136)
Other comprehensive income - - - 126 - 31 157
Deferred tax debited directly to equity - - - - - 141 141
Recycled reserve for fully vested share-based payment schemes - - - (2,507) 2,507 -
-
Dividend paid (note 10) - - - - - (7,522) (7,522)
Issue of shares - - - - - - -
Balance at 30 September 2022 2,564 84,612 (75,383) 662 526 163,972 176,953
- - - - - (593) (593)
Loss for the period
Share-based payments - - - - 305 - 305
Other comprehensive loss - - - (78) - - (78)
Dividend paid (note 10) - - - - - (11,548) (11,548)
Balance at 2,564 84,612 (75,383) 584 831 151,831 165,039
31 March 2023
Consolidated Statement of Cash Flows
for the six month period ended 31 March 2023 (unaudited)
6 months to 6 months to 12 months to
31 March 31 March 30 September
2023 2022 2022
Notes £'000 £'000 £'000
Cash flows from operating activities
Cash outflow from operations 12 (14,646) (78,274) (19,592)
Interest received 190 22 72
Interest paid (1,572) (3,278) (5,782)
Tax (paid) / refunded (7,830) 148 (1,557)
Net cash outflow from operating activities (23,858) (81,382) (26,859)
Cash flows from investing activities
Acquisition of property, plant and equipment (189) (556) (660)
Proceeds on disposal of property, plant and equipment 4 2,000 4,341
Proceeds on disposal of right-of-use assets - - 7,897
Net cash (outflow) / inflow from investing activities (185) 1,444 11,578
Cash flows from financing activities
Dividend paid 10 (11,548) (14,259) (21,781)
Payment of principal portion of lease liabilities (1,626) (3,359) (4,717)
Payment of capital element of other interest-bearing loans - (403) (389)
Drawdown of RCF 10,301 9,625 20,625
Repayment of bank loans (589) (3,274) (3,909)
Net cash outflow from financing activities (3,462) (11,670) (10,171)
Net (decrease)/increase in cash (27,505) (91,608) (25,452)
Cash and cash equivalents at 110,841 136,293 136,293
beginning of the period
Cash and cash equivalents at 83,336 44,685 110,841
end of the period 13
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
50 Jermyn Street, London, United Kingdom, SW1Y 6LX.
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 2023 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 2023 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 22 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 22 May 2023.
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 2023. To the extent that IFRS at 30 September
2023 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 (£'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 2022.
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 2023, the Group had a robust liquidity position, with cash and
available headroom in its banking facilities totalling £158.7m made up of
cash balances of £83.3m, RCF Headroom of £65.4m and an overdraft facility of
£10.0m. In addition, a short term overdraft extension (to £20.0m total
overdraft facility) has been agreed from 1 April 2023 to 30 September 2023.
Good liquidity has been maintained through the period, providing the Group
with a good level of cash and available banking facilities for the year ahead.
Group forecasts have been prepared that have considered the Group's current
financial position and market circumstances. We have prepared a base case cash
flow for the period to 30 June 2024 which is aligned to the Group's business
plan and trading assumptions for that period. Our currently secured cash flow,
derived from our forward sold developments and other contracted income, net of
overheads and tax, results in cash utilisation over the forecast period such
that our liquidity position is maintained.
In addition to the secured cash flow, the base case forecast assumes a number
of new forward sales will result in a further strengthening of our current
liquidity position, after allowing for dividend payments.
In addition to the base case forecast, we have considered a severe downside
scenario of a continued slow recovery of the forward sale market, such that no
further land acquisitions are made, and no forward sales are achieved apart
from the sale of one of the Group's PBSA assets where the construction is
already well progressed. The cash forecast under this scenario illustrates
that adequate liquidity is maintained through the forecast period. The minimum
total cash and available facilities balance under this scenario was £78
million (excluding the £10.0 million overdraft).
We consider the likelihood of events occurring which would exhaust the total
cash and available facilities balances remaining to be remote. However, should
such events occur, management would be able to implement reductions in staff
costs, discretionary expenditure and investments in unsold developments to
ensure that the Group's liquidity is enhanced.
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 30 June 2024 and has therefore adopted the
going concern basis in the 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 2022.
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.
6 months to 31 March 2023 (unaudited) Student Build to Residential Accommodation Corporate Total
Accommodation rent management
£'000 £'000 £'000 £'000 £'000 £'000
Segmental revenue 48,407 92,970 7,779 4,698 - 153,854
Segmental gross profit 4,760 8,272 923 3,151 (1,053) 16,053
Administration expenses - - - (2,539) (11,735) (14,274)
Exceptional costs - - - (220) (843) (1,063)
Finance income - - - - 190 190
Finance costs - - - - (1,672) (1,672)
Profit/(loss) before tax 4,760 8,272 923 393 (15,114) (766)
Taxation - - - - 173 173
Profit/(loss) for the period 4,760 8,272 923 393 (14,941) (593)
Inventory and WIP 93,850 33,056 29,306 - 3,295 159,507
6 months to 31 March 2022 (unaudited) Student Build to Residential Accommodation Corporate Total
Accommodation rent management
£'000 £'000 £'000 £'000 £'000 £'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 expenses - - - - (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
Year ended Student Build to Residential Accommodation Corporate Total
30 September 2022 Accommodation rent management
£'000 £'000 £'000 £'000 £'000 £'000
Segmental revenue 180,037 191,228 14,478 9,072 12,261 407,076
Segmental gross profit 26,353 32,808 1,915 5,909 641 67,626
Administration expenses - - - (5,788) (25,407) (31,195)
Profit on disposal of student leasehold properties - - - - 18,253 18,253
Exceptional costs - - - - (30,365) (30,365)
Share of operating loss in joint ventures - - - - (16) (16)
Finance income - - - - 72 72
Finance costs - - - - (5,982) (5,982)
Profit/(loss) before tax 26,353 32,808 1,915 121 (42,804) 18,393
Taxation - - - - (4,979) (4,979)
Profit/(loss) for the period 26,353 32,808 1,915 121 (47,783) 13,414
Inventory and WIP 75,840 38,763 29,785 - 2,730 147,118
5. Disaggregated revenue information
6 months to 31 March 2023 (unaudited) Student Build to Residential Accommodation Corporate Total
Accommodation rent management
£'000 £'000 £'000 £'000 £'000 £'000
Type of goods or service
Construction contracts or development agreements 45,031 87,002 - - - 132,033
Sale of land - - - - - -
Sale of completed property - 5,507 7,779 - - 13,286
Rental income 3,376 461 - - - 3,837
Accommodation management - - - 4,698 - 4,698
Total revenue from contracts with customers 48,407 92,970 7,779 4,698 - 153,854
Timing of revenue recognition
Goods transferred at a point in time 3,376 5,968 7,779 - - 17,123
Services transferred over time 45,031 87,002 - 4,698 - 136,731
Total revenue from contracts with customers 48,047 92,970 7,779 4,698 - 153,854
6 months to 31 March 2022 (unaudited) Student Build to Residential Accommodation Corporate Total
Accommodation rent management
£'000 £'000 £'000 £'000 £'000 £'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
Year ended Student Build to Residential Accommodation Corporate Total
30 September 2022 Accommodation rent management
£'000 £'000 £'000 £'000 £'000 £'000
Type of goods or service
Construction contracts or development agreements 135,502 97,617 - - 2,936 236,055
Sale of land 30,947 92,450 - - - 123,397
Sale of completed property - - 14,478 - 9,325 23,803
Rental income 13,588 1,161 - - - 14,749
Accommodation management - - - 9,072 - 9,072
Total revenue from contracts with customers 180,037 191,228 14,478 9,072 12,261 407,076
Timing of revenue recognition
Goods transferred at a point in time 30,947 92,450 14,478 - 9,325 147,200
Services transferred over time 149,090 98,778 - 9,072 2,936 259,876
Total revenue from contracts with customers 180,037 191,228 14,478 9,072 12,261 407,076
6. Exceptional costs
6 months to 6 months to 12 months to
31 March 31 March 30 September
2023 2022 2022
£'000 £'000 £'000
Building Safety Act provision - (28,000) (30,365)
Restructuring costs (1,063) - -
Total exceptional costs (1,063) (28,000) (30,365)
Action has been taken during the period ended 31 March 2023 to manage the
Group's cost base, with exceptional costs of £1,063,000 incurred due to
related redundancies. Provisions were made in previous periods for costs
associated with the Building Safety Act 2022. No further exceptional costs
related to this provision have been incurred in the period ended 31 March
2023.
7. Provisions
Legacy building safety improvements provision
£'000
Current
At 1 October 2022 7,713
Arising during the year -
Utilised (4,051)
Transferred from non-current 3,740
At 31 March 2023 7,402
£'000
Non-current
At 1 October 2022 25,735
Arising during the year -
Utilised -
Transferred from non-current (3,740)
At 31 March 2023 21,995
The provision is classified as follows:
£'000
Current 7,402
Non-current 21,995
At 31 March 2023 29,397
As at 30 September 2022, the Group held a provision in response to the
introduction of the Building Safety Act 2022 (the 'BSA'), which increased the
scope of requirements for remediating cladding and firestopping measures on
high-rise residential buildings.
The Group continues to work with the owners of certain of its previously
developed properties to remediate items now in scope of the BSA and to share
the costs. During the period £4,051,000 of the provision has been utilised.
This remains a highly complex area with judgements and estimates in respect of
the cost of these remedial works, the quantum of any legal expenditure
associated with the defence of the Group's position in this regard, and the
extent of those properties within the scope of the applicable government
guidance and legislation, which continue to evolve. The judgements surrounding
this provision at 31 March 2023 are consistent with those made at the prior
year end. Should the costs associated with these remedial works increase by
5%, the provision required would increase by £1,677,000. Should the discount
rate applied to the calculation reduce by 1% , the provision would increase by
£635,000.
Of the total provision of £29,397,000 at 31 March 2023, costs of £7,402,000
are expected to be incurred in the twelve months ending 31 March 2024, and
costs of £21,995,000 are expected to be incurred between 1 April 2024 and 30
September 2027.
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 2023 of 22.58 %
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
2023 2022 2022
£'000 £'000 £'000
(Loss)/profit for the period attributable to ordinary equity holders of the
parent
(593) (13,325) 13,414
1,063 28,000 30,365
Add back exceptional items for the period
(202) (5,320) (5,769)
Less corporation tax benefit from exceptional items for the period
Adjusted profit for the period attributable to ordinary equity holders of the 268 9,355 38,010
parent
Number of shares Number of shares Number of shares
Number of ordinary shares for basic earnings per share 256,430,367 256,163,459
256,385,882
Adjustments for the effects of dilutive potential ordinary shares 1,472,669 839,998
1,338,930
Weighted average number for diluted earnings per share 257,903,036 257,003,457
257,724,812
Pence Pence Pence
Basic earnings per share
Basic profit for the period attributable to ordinary equity holders of the (0.231) (5.202) 5.232
parent
Adjusted basic earnings per share (excluding exceptional items after tax)
Adjusted profit for the period attributable to ordinary equity holders of the 0.105 3.652 14.825
parent
Diluted earnings per share
Basic profit for the period attributable to diluted equity holders of the (0.230) (5.185) 5.205
parent
Adjusted diluted earnings per share (excluding exceptional items after tax)
Adjusted profit for the period attributable to diluted equity holders of the 0.104 3.640 14.748
parent
10. Dividends
6 months to 6 months to 12 months to
31 March 31 March 30 September
2023 2022 2022
£'000 £'000 £'000
Final dividend paid in February 2022 of 5.6 pence - 14,345 14,345
Interim dividend paid in June 2022 of 2.9 pence - - 7,436
Final dividend paid in February 2023 of 4.5 pence 11,548 - -
11,548 14,259 21,781
An interim dividend of 1.4 pence per ordinary share will be paid on 30 June
2023. This dividend was declared after 31 March 2023 and as such the liability
of £3,590,000 has not been recognised at that date. At 31 March 2023 the
Company had distributable reserves available of £44,600,000
11. Leases
Investment property (leased) Office Leases Motor Vehicle Leases Total
£'000 £'000 £'000 £'000
Cost
At 30 September 2021 161,629 10,132 974 172,735
Additions/adjustment - 119 562 681
Disposals - - - -
At 31 March 2022 161,629 10,251 1,536 173,416
Additions - - 611 611
Disposals (78,038) - (591) (78,629)
At 30 September 2022 83,591 10,251 1,556 95,398
Additions 55 843 763 1,661
Disposals - - (287) (287)
At 31 March 2023 83,646 11,094 2,032 96,772
Depreciation
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
Charge for the period 2,986 337 145 3,468
Disposals (12,958) - (518) (13,476)
At 30 September 2022 50,562 6,476 593 57,631
Charge for the period 1,686 436 262 2,384
Disposals - - (116) (116)
At 31 March 2023 52,248 6,912 739 59,899
Impairment
At 30 September 2021 5,698 - - 5,698
Charge for the period - - - -
At 31 March 2022 5,698 - - 5,698
Charge for the period
At 30 September 2022 5,698 - - 5,698
Charge for the period - - - -
At 31 March 2023 5,698 - - 5,698
Net Book Value
At 31 March 2023 25,700 4,182 1,293 31,175
At 30 September 2022 27,331 3,775 963 32,069
At 31 March 2022 95,397 4,125 570 100,092
At 30 September 2021 98,567 4,347 121 103,035
12. Reconciliation of profit before tax to net cash flow
from operating activities
6 months to 6 months to 12 months to
31 March 31 March 30 September
2023 2022 2021
£'000 £'000 £'000
(Loss)/profit before tax (766) (16,647) 18,393
Depreciation of leased investment properties and right-of-use assets 2,384 3,637 7,105
Depreciation of plant and equipment 382 244 747
Amortisation of intangible assets 280 280 559
Profit of disposal of right-of-use assets - - (18,137)
Profit on sale of plant and equipment (1) (1,308) (2,783)
Finance income (190) (22) (72)
Finance costs 1,672 3,238 5,982
Share of profit in joint ventures - - 16
Increase in inventory and work in progress (12,389) (27,394) (19,525)
Increase in contract assets (2,466) (23,557) (37,011)
Increase in trade and other receivables (4,339) (27,610) (430)
(Decrease)/increase in contract liabilities (4,679) (1,717) 2,207
Increase/(decrease) in trade and other payables 9,213 (11,862) (901)
(Decrease)/increase in provisions (4,052) 24,098 24,049
Increase in share-based payment reserve 305 346 209
Net cash outflow from operating activities (14,646) (78,274) (19,592)
13. Analysis of net debt
31 March 31 March 30 September
2023 2022 2022
£'000 £'000 £'000
Cash at bank and in hand 83,336 44,685 110,841
Other interest-bearing loans - (87) -
Bank loans (38,000) (17,790) (28,288)
Net cash before deducting lease liabilities 45,336 26,808 82,553
Lease liabilities (47,473) (126,032) (49,099)
Net (debt)/cash (2,137) (99,224) 33,454
14. Employee benefits - long-term incentive plans
Long Term Incentive Plan ('LTIP') - 2023 Awards
In February 2023 1,736,790 LTIP 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 adjusted Earnings
per Share (EPS) and relative total shareholder return (relative TSR).
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 (3.00 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.
The fair value of the share awards subject to the relative TSR performance
condition has been estimated at the grant date using a Monte Carlo valuation
model using the following assumptions:
Share price 112.0 pence
Exercise price 1 penny
Expected term 3 years
Risk-free interest rate 2.85%
Are dividend equivalents receivable for the award holder? Yes
Expected volatility 40.98%
This resulted in an estimated fair value for an award with relative TSR
performance conditions of 71.52 pence.
Relative TSR (50% of award, rising to 100% if no EPS condition set) % of TSR award vesting(1)
Less than median ranking 0%
Equal to median ranking 20%
Upper quartile or greater ranking 100%
(1)Vesting on a straight-line basis between target levels
The EPS performance condition, representing 50% of the awarded shares, has not
yet been set by the Remuneration Committee due to ongoing market volatility.
Under the terms of the award, this condition must be set within six months of
the award date (3 February 2023). Should the Remuneration Committee determine
at that time that an EPS performance condition remains inappropriate, the full
award (100%) will be subject to the above Relative TSR condition.
The fair value of share awards granted subject to EPS conditions is 111.08
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.
Restricted Share Awards ('RSA') - 2023 Awards
In February 2023 536,163 RSAs 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 satisfactory performance by the
participant.
The fair value of RSAs granted subject to the above conditions is 111.08 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.
Charge for the period
For the six months ended 31 March 2023, 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 £305,000 (31 March 2022:
£346,000).
- Ends -
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