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Watkin Jones Plc - Full Year Results September 2019

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Watkin Jones plc

('Watkin Jones' or the 'Group')

Full year results for the year ended 30 September 2019

'Another year of growth, underpinned by PBSA and first significant contribution from BtR'

Watkin Jones plc (AIM:WJG), the UK's leading developer and manager of residential for rent, with a focus on the student accommodation and Build to Rent sectors, announces its annual results for the year ended 30 September 2019 ('FY19').

 

FY19

FY18

Change (%)

Revenue1

£374.8m

£363.1m

+3.2%

Gross profit1

£76.8m

£72.4m

+6.0%

Adjusted operating profit2

£52.3m

£49.6m

+5.4%

Adjusted profit before tax2

£52.3m

£50.1m

+4.5%

Adjusted basic earnings per share2

16.7p

16.0p

+4.6%

Dividend per share

8.35p

7.6p

+9.9%

Net cash

£76.8m

£80.2m

-4.1%

 

 

 

 

Statutory operating profit1

£49.7m

£53.9m

-7.8%

Statutory profit before tax1

 £49.7m

£54.3m

-8.5%

Basic earnings per share

 15.8p

17.3p

-8.9%


Financial Highlights

  • 3.2% increase in revenue to £374.8 million (FY18: £363.1 million), underpinned by student accommodation development and benefiting from strong growth in build to rent ('BtR') revenues.
  • 6.0% increase in gross profit to £76.8 million (FY18: £72.4 million), reflecting a robust gross margin of 20.5% (FY18: 20.0%).
  • 4.5% increase in adjusted profit before tax2 to £52.3 million (FY18: £50.1 million).
  • 9.9% increase in dividend to 8.35 pence per share, with a final dividend of 5.6 pence per share, fulfilling our previously stated policy of moving to a dividend twice covered by adjusted earnings.
  • £17.6 million net cash inflow from operating activities (FY18: £54.4 million).
  • £115.6 million gross cash at the year end (FY18: £106.6 million) and £76.8 million net cash (FY18: £80.2 million).
  • 29.9% adjusted return on equity3 (FY18: 33.2%), reflecting the Group's capital-light business model.

Richard Simpson, Chief Executive Officer of Watkin Jones, said: 

"We are pleased to report another year of growth for Watkin Jones, which demonstrates the strength and resilience of our capital light business model.  Despite the difficult macro environment caused by Brexit-related uncertainty, the Group has delivered further profitable growth, in line with expectations.

Importantly, for the first time, build to rent development made a significant contribution to the Group's results and we expect it to become an increasingly important growth driver for the Group in the coming years.  Watkin Jones is now firmly positioned as the UK's leading developer and manager of residential for rent schemes.

We are positive about the outlook for both the student accommodation and BtR sectors. There is continued investor appetite in those markets and we are confident in our ability to expand our position as market leader.  We therefore expect to continue to grow the business, in line with our strategy, and believe that the Group has a bright future."

Business Highlights

Student accommodation - FY19 developments delivered on time and a strong pipeline of new developments

  • Six developments (2,723 beds) completed on time ahead of the 2019/20 academic year (FY18: 10 developments, 3,415 beds).
  • All seven developments (2,609 beds) for delivery in FY20 forward sold, with a further four developments (1,928 beds) forward sold for FY21 delivery and 448 beds in legals for sale.
  • Added prime sites to the future pipeline in Birmingham, Exeter, Edinburgh and Bath.
  • Total forward sold and secured development pipeline of 6,670 student beds across 17 sites, for delivery between FY20 and FY24.

Delivery pipeline

PBSA

 

Beds

 

FY20

FY21

FY22

FY23/

FY24*

 

 

 

 

 

Forward sold

2,609

1,928

-

-

In legals for sale

-

448

-

-

Secured with planning

-

462

-

-

Secured subject to planning

-

-

1,032

191

Advanced negotiation to acquire

-

415

1,610

-

 

 

 

 

 

Total

2,609

3,253

2,642

191

* FY23/24 relates to a two-year period

Build to rent - first year to make a material contribution to the Group's results and accelerating growth in pipeline

  • Continued to make good progress with the 315-apartment scheme at Reading and the 301-apartment scheme in Wembley, with both on schedule for delivery in FY21.
  • Three further schemes forward sold (396 apartments) for delivery between FY20 and FY22.
  • Secured prime development sites in Brighton & Hove (for delivery in FY22) and Woking (for delivery in FY23) and, subsequent to the financial year end, in Birmingham (for delivery in FY23).
  • Obtained planning consent for sites in Sutton (forward sold) and Leicester.
  • Total forward sold and secured development pipeline, including Reading and Wembley, of nine sites (approximately 2,300 apartments) for delivery between FY20 and FY23.

Delivery pipeline

BtR

 

Apartments

 

FY20

FY21

FY22

FY23/

FY24*

 

 

 

 

 

Forward sold

159

782

71

-

In legals for sale

-

-

-

-

Secured with planning

-

-

184

-

Secured subject to planning

-

-

213

903

Advanced negotiation to acquire

-

-

350

250

 

 

 

 

 

Total

159

782

818

1,153

* FY23/24 relates to a two-year period

Accommodation management - continues to leverage market leadership position

  • At 30 September 2019, Fresh Property Group ("FPG") managed 17,721 student beds and BtR apartments across 64 schemes (FY18: 15,421 beds and apartments, across 56 schemes).
  • Continued success in winning management contracts for new and existing schemes. In total, FPG is currently contracted to manage 20,448 student beds and BtR apartments, across 66 schemes, by FY22.

Residential - robust performance

  • 150 homes and apartments sold (FY18: 175 sales), including 42 apartments at developments in Stratford and Bath.
  • Forward sold a 35-apartment development in Chester, for delivery in FY20.
  • Commenced works under a development agreement for 75 apartments at Marshgate, Stratford for delivery in FY21.