Watkin Jones Plc - Half Year Results

Watkin Jones plc, a leading UK developer and constructor of multi-occupancy residential property assets, with a focus on the student accommodation and build to rent sectors, announces its results for the six months ended 31 March 2019 (the "period").  The Board is pleased to report a successful first six months of the financial year with trading in line with its expectations.


Financial Highlights



H1 2019

H1 2018



Underlying results







£159.1 million


£158.3 million




Gross profit


£37.6 million


£34.5 million




Adjusted profit before tax1


£26.0 million


£23.6 million




Adjusted EBITDA2


£26.6 million


£24.5 million




Adjusted basic earnings per share1


8.11 pence


7.53 pence




Dividend per share


2.75 pence


2.47 pence




Net cash


£18.3 million


£38.4 million




Statutory results





Profit before tax


£23.4 million


£23.6 million






£24.0 million


£24.5 million




Basic earnings per share


7.31 pence


7.53 pence






1.    For H1 2019, adjusted profit before tax and adjusted basic earnings per share are calculated before the impact of an exceptional charge of £2.6 million.  This charge relates to the previously announced commitment to compensate the Group's new CEO, Richard Simpson, for the forfeiture of outstanding incentives held in respect of his former employer, of which £2.2 million is a non-cash charge.

2.    EBITDA comprises operating profit from continuing operations plus the Group's profit from joint ventures, adding back charges for depreciation and amortisation. For H1 2019, adjusted EBITDA is stated before the exceptional charge of £2.6 million.

3.    FY 2019 is the first year of adoption by the Group of IFRS 15 'Revenue from Contracts with Customers'. The consequence of adopting the accounting standard has been to account separately for the land and development agreement elements of forward-sold contracts, rather than treating them as a combined agreement.  The effect on the Group's results has been to reduce current period revenues and profit before tax by £613,000.  The prior period comparatives have not been restated.


·      Revenues for the period slightly ahead of the prior half year, continuing to be underpinned by student accommodation development activity, but also reflecting an increased contribution from the Group's other operating divisions.

·      Strong underlying profit growth for the half year, with gross profit increased by 9.0% to £37.6 million (H1 2018: £34.5 million) and adjusted profit before tax increased by 10.0% to £26.0 million (H1 2018: £23.6 million).

·      Gross margin for the six months to 31 March 2019 increased to 23.7% (H1 2018: 21.8%).

·      11.3% increase in the interim dividend to 2.75 pence per share (H1 2018: Interim dividend of 2.47 pence per share), in line with the Group's progressive dividend policy.

·      Net operating cash outflow of £48.8 million for the half year, resulting in a net cash balance at 31 March 2019 of £18.3 million (31 March 2018: £38.4 million), reflecting the annual working capital cycle for the business and a delay in the receipt of a contractual cash payment of £14.0 million (This was subsequently received in April 2019 on conclusion of the legal formalities relating to one of the Group's forward sold student accommodation developments).


Business Highlights

Student Accommodation Development

·      11 developments (5,334 beds) currently forward sold for delivery over the period FY 2019 to FY 2021. This includes the previously announced forward sale in the period of a 599 bed student accommodation development in Wembley, for delivery in FY 2021, and the exchange of contracts for the development of a 245 bed scheme in Swansea, for delivery in FY 2020.

·      A further three developments (594 beds) for delivery in FY 2019 and FY 2020 are currently in legals for sale.

·      In the period the Group exchanged contracts for the purchase of a prime site in Selly Oak, Birmingham, on which it expects to develop 608 student beds, subject to planning, for delivery in FY 2022.

·      Total development pipeline of over 9,000 student beds across 20 sites, targeted for delivery between FY 2019 and FY 2022.

·      Longer term pipeline continues to evolve with a number of additional sites under offer.


Build to Rent Development ("BtR")

·      Development of the 315 apartment scheme in Reading for M&G Real Estate progressing well and work commenced on the 300 apartment scheme in Wembley for Singaporean investors, both for delivery in FY 2021.

·      In the period the Group secured a significant development site in Woking, on which it expects to develop 336 apartments, subject to planning, for delivery in FY 2023 and obtained the planning consents for its 166 apartment scheme in Sutton, London, and for a 90 apartment scheme in Belfast, Northern Ireland, both for delivery in FY 2021.

·      In total, the Group now has a secured development pipeline, including Reading and Wembley, of eight sites, from which it is targeting to deliver approximately 1,800 apartments over the period FY 2020 to FY 2023. Five of these sites have planning (1,031 apartments). The Group is actively negotiating on several other opportunities.

·      The Group continues to explore the opportunity of creating a separate BtR investment vehicle and will update shareholders further as appropriate.


Accommodation Management

·      At the start of FY 2019, Fresh Property Group ('FPG') had 15,421 student beds and BtR apartments under management across 56 schemes (H1 2018: 16,617 beds and apartments across 57 schemes), with the reduction reflecting the previously announced loss of 4,597 student beds following a portfolio sale by the Curlew Student Trust, offset by strong underlying growth.

·      FPG is currently appointed to manage 21,018 units across 73 schemes by FY 2022.



·      Robust level of sales activity in the first half of the year, with 53 homes and apartments sold in the Division's core North West market (H1 2018: 28 sales).

·      22 affordable residential apartments which form part of the Group's mixed-use development at Stratford, London, sold in the period.


Commenting on the interim results, Richard Simpson, Chief Executive Officer of Watkin Jones plc, said: "We are pleased to report another strong set of results, in-line with our expectations. The financial performance of the Group continues to be underpinned by robust student accommodation development activity and we are very encouraged by the increased contribution from the Group's other operating divisions.


Institutional investor demand for our student accommodation developments is strong and we continue to see quality new investors entering the market, such as DWS at Wembley.  Similarly, investor momentum is growing in the BtR market, with a significant increase in reported transaction volumes in the first quarter of 2019.  The majority of these transactions are forward fund purchases of assets, which plays to Watkin Jones strategy and heritage.  We are able to leverage our proven expertise in developing and managing multi-occupancy residential rental accommodation and to continue be a partner of choice for institutional clients looking for scale.


I continue to be very excited by the opportunities in this business, seeing the market dynamics for both student accommodation and BtR so strongly supportive of the Group's forward sale model.  Together with our pipeline of forward sold and secured development sites, this will continue to provide excellent visibility on future earnings and cash flow.  Consequently, the Board remains confident in the prospects for the Group."