Watkin Jones Plc – Full Year Results 2021

Watkin Jones plc

('WJ' or the 'Group')

Full Year Results 2021

(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 updat
• Planning consents for 4 BTR apartment schemes and 6 PBSA schemes since the start of FY

Following these developments, our current BTR and PBSA development pipeline is as follows

BTR pipeline

PBSA pipeline

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.”