Watkin Jones ends year in line on profit, revenue falls short

Residential rental developer Watkin Jones said in a trading update on Tuesday that its operating profit for the year just ended would be in line with expectations.

The AIM-traded firm said forecast revenue for the 12 months ended 30 September was £430m, which was “slightly below” expectations, but with a stronger gross margin reflecting the timing of land sales either side of the year end.

Net cash at year-end totalled £125m, which was about 50% above expectations.

On the operational front, Watkin Jones said all five build-to-rent schemes totalling 1,041 apartments, and seven purpose-built student accommodation (PBSA) schemes totalling 3,192 beds scheduled for delivery in 2021 were completed and handed over.

Development works were on track across 13 more sites in build, with the company saying that despite inflationary pressures, overall build costs were being “closely managed”, and remained in line with forecasts.

In its ‘Fresh’ accommodation management division, Warkin Jones said 22,220 student beds and build-to-rent apartments were currently under management, which was an increase of 10.1% from last year.

Looking at houses, the firm made residential sales of 79 homes in 2021, with the board adding that its affordable homes pilot was on track, as planning consents were secured for 296 homes on sites in Crewe and Llay, Wrexham, and forward sales of 182 homes agreed.

On the institutional front, Watkin Jones reported good progress in securing forward sales, with three build-to-rent schemes totalling 722 apartments and eight PBSA schemes comprising 2,435 beds forward sold since the start of 2021, with a total revenue value to the firm of about £450m.

That included new forward sales achieved since its 6 September trading update, with a total revenue value to the company of around £227m.

A 551-apartment build-to-rent development in Birmingham and a 295-bed PBSA development in Edinburgh were in legals for sale.

Looking at the pipeline, Watkin Jones said that since its September update it had secured planning consents for 877 PBSA beds on sites in Birmingham and Nottingham, and added further sites to the pipeline, which now had a future revenue value of £1.75bn.

The company’s pipeline for build-to-rent and PBSA deliveries for 2023 had been reduced as a result of Covid-19-related planning delays, the directors noted, but said that with the growth in the 2024 and 2025 pipeline, its forward sale model still ensured multi-year revenue performance through 2022 and 2023.

“It's been a year of good progress for Watkin Jones,” said chief executive officer Richard Simpson.

“Our end-to-end development capability, combined with favourable market dynamics and our capital light business model, has enabled us to deliver a strong operational and financial performance.”

Simpson said that during the year, the firm continued to enhance the future value of its build-to-rent and PBSA pipeline, and reinforce its reputation with institutional investors as “the UK's leading residential for-rent” developer.

“This, together with the ongoing re-focusing of our homes business into the affordable housing market, provides a robust platform for sustained earnings growth.”

At 1212 GMT, shares in Watkin Jones were down 1.86% at 237.5p.