TIDMWJG
RNS Number : 9154Y
Watkin Jones plc
18 May 2021
For immediate release 18 May 2021
Watkin Jones plc
('Watkin Jones' or the 'Group')
Half year results for the six months to 31 March 2021
'Maintaining momentum as confidence returns'
Watkin Jones plc (AIM:WJG), the UK's leading developer and
manager of residential for rent, with a focus on the build to rent
('BtR') and purpose built student accommodation ('PBSA') sectors,
announces its results for the six months ended 31 March 2021
('H1-2021' or the 'period').
Financial Highlights
H1-2021 H1-2020 Movement
(Restated(1)
)
Revenue GBP178.4 million GBP185.7 million -3.9%
Gross profit GBP41.3 million GBP42.3 million -2.3%
Operating profit GBP29.1 million GBP29.6 million -1.8%
Profit before tax GBP25.8 million GBP26.7 million -3.3%
EBITDA GBP33.4 million GBP34.2 million -2.5%
Basic earnings per
share 8.11 pence 8.46 pence -4.1%
Dividend per share 2.6 pence Nil pence -
Cash GBP88.7 million GBP72.4 million -
Net cash(2) GBP31.7 million GBP37.5 million -
Commenting on the interim results, Richard Simpson, Chief
Executive Officer of Watkin Jones, said: "As we begin to emerge
from the pandemic, we are seeing increasing investor confidence in
our market sectors. We've maintained the momentum from the second
half of last year and made further good progress in securing new
forward sales, adding to our development pipeline and keeping all
our construction activities on track.
"All parts of the business have continued to perform well, and
whilst our profit for the first half of the year was slightly below
last year, this was because the first half last year was largely
before the onset of the disruption caused by the pandemic.
"The fundamentals supporting the markets for high quality build
to rent and student accommodation assets remain strong, driving
growing institutional demand, and combined with the continued
progress we have made in the first half of the year, gives us
confidence in our future trading."
Financial headlines
-- GBP29.1 million operating profit, slightly below last year's pre-pandemic level
-- 33% of revenue was from BtR, showing its increasing importance to the Group (H1-2020: 22%)
-- 23.2% gross margin, up 0.4% points (H1-2020: 22.8%), with a
robust performance across all our businesses
-- GBP146.3 million total liquidity available, being cash and
available debt facilities (H1-2020: GBP153.4 million)
-- 2.6 pence per share interim dividend (H1-2020: nil pence)
Notes
1. The comparative results for H1-2020 have been restated for an
adjustment to opening IFRS 16 lease assets and liabilities. Further
details are provided in note 3 to the interim financial
statements.
2. Net cash is stated after deducting site specific bank loans
and other interest-bearing loans, but before deducting IFRS 16
lease liabilities.
Business Highlights
Operational resilience demonstrated across all parts of the
Group
-- Work is on track on all 15 BtR and PBSA developments currently being built
-- 3,424 new student bed property management mandates for Fresh since the start of the year
-- Residential sales momentum maintained
Continued progress in forward sales market
-- 909 beds across three PBSA developments contracted in the period
-- 462-bed PBSA development in Leicester contracted after the half year
-- 722 BtR apartments in advanced legals for sale, these being
Hove (216 apartments), Leicester (184 apartments) and Lewisham (322
apartments)
-- 295-bed PBSA development in Edinburgh for delivery in FY23, sale terms agreed
Development pipeline further enhanced
-- GBP1.6 billion future revenue value now in our secured
development pipeline (up from GBP1.0 billion last year):
Current H1-2020 January 2021
Update
BtR (apartments) 5,008 2,660 4,466
------------------ ------------------ -----------------
PBSA (beds) 8,509 7,200 7,910
------------------ ------------------ -----------------
Future revenue c.GBP1.6 billion* c.GBP1.0 billion* c.GBP1.5 billion
value
------------------ ------------------ -----------------
* Excluding the revenue delivered in the period.
-- 542 BtR apartments and 599 PBSA beds added to our pipeline
since our last update in January 2021:
BtR PBSA
(apartments) (beds)
January 2021 update 4,466 7,910
-------------- --------
New sites secured:
Edinburgh 524 286
Swansea - 350
-------------- --------
524 636
Design changes 18 (37)
-------------- --------
Current 5,008 8,509
-------------- --------
-- Planning secured for our first co-living scheme, for 133 beds
in Exeter, in which tenants have a private studio with shared
communal facilities
Market dynamics supportive
-- Significant increase in institutional demand for PBSA;
confidence returning in occupancy levels for 2021-2022 academic
year
-- Growing institutional demand for BtR
Affordable homes opportunity
-- Pilot on track
Analyst meeting
A conference call for analysts and investors will be held at
09.30am today, 18 May 2021. A copy of the Half Year Results
presentation will be available on the Group's website:
http://www.watkinjonesplc.com
An audio webcast of the conference call with analysts will be
available after 12pm today:
https://webcasting.buchanan.uk.com/broadcast/607d6a2c0386285386cc951a
For further information:
Watkin Jones plc
Richard Simpson, Chief Executive Tel: +44 (0) 20 3617 4453
Officer
Philip Byrom, Chief Financial www.watkinjonesplc.com
Officer
Peel Hunt LLP (Nominated Adviser Tel: +44 (0) 20 7418 8900
& Joint Corporate Broker)
Mike Bell / Ed Allsopp www.peelhunt.com
Jefferies Hoare Govett (Joint Corporate Tel: +44 (0) 20 7029 8000
Broker)
Max Jones / Will Soutar www.jefferies.com
Media enquiries:
Buchanan
Henry Harrison-Topham / Richard Oldworth
Jamie Hooper / Steph Watson 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 and student
accommodation 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 43,000 student beds across 130 sites, making it
a key player and leader in the UK purpose-built student
accommodation market. In addition, Fresh, the Group's specialist
accommodation management business, manages over 20,000 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 is increasingly expanding its
operations into the build to rent sector and is piloting an
opportunity to re-focus its residential house building operation as
a developer of affordable homes.
The Group's competitive advantage lies in its experienced
management team and 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
Review of Performance
Results for the six months to 31 March 2021
Revenues for the period were GBP178.4 million, compared to the
pre-pandemic GBP185.7 million for H1-2020. Our developments in
build are all progressing in line with expectations.
Gross profit was GBP41.3 million (H1-2020: GBP42.3 million),
with an improvement in the gross margin to 23.2% from 22.8% last
year. Margin performance was as expected, with the developments in
build contributing strongly.
Operating profit for the period was GBP29.1 million (H1-2020:
GBP29.6 million).
Net finance costs for the period amounted to GBP3.2 million
(H1-2020: GBP2.9 million), reflecting the additional cost
associated with the GBP40.0 million increase in our RCF limit in
May last year. Finance costs include GBP2.4 million (H1-2020:
GBP2.6 million) in respect of the finance cost of capitalised
operating leases under IFRS16.
Profit before tax for the period was GBP25.8 million (H1-2020:
GBP26.7 million). Basic earnings per share for the period were 8.11
pence, compared to 8.46 pence for H1-2020.
Segmental review
Build to Rent ('BtR')
The contribution from BtR increased further in the period, with
revenues of GBP59.1 million, up GBP17.9 million (43.3%) on H1-2020.
Revenues derived from the build of our forward sold developments in
Reading, Sutton, Stratford and Wembley, which are progressing on
track for completion in H2-2021.
BtR gross profit for the period was GBP12.4 million (H1-2020:
GBP6.6 million), an increase of 87.8%. The margin for the period
was 21.0% (H1-2020: 16.1%), reflecting a robust performance across
all of the developments in build for FY21 as they near
completion.
We are in advanced legals for the forward sale of our
developments in Hove (216 apartments), Leicester (184 apartments)
and Lewisham (322 apartments plus 43 affordable).
In the period we secured a site in Belfast (780 apartments) and
subsequent to the period end a site in Edinburgh (524 apartments),
both subject to planning. We are actively progressing with several
other site acquisitions.
The current BtR development pipeline is as shown in the table
below:
BtR apartments
-----------------------------------------------------
Total pipeline FY21 FY22 FY23 FY24 FY25
----------------------------------- --------------- ------ ----- ----- ------ ------
Forward sold 928 857 71 - - -
Forward sales in legals 765 184 - 581 - -
Sites secured with planning - - - - - -
Sites secured subject to planning 3,315 - - - 1,324 1,991
----------------------------------- --------------- ------ ----- ----- ------ ------
Total secured 5,008 1,041 71 581 1,324 1,991
----------------------------------- --------------- ------ ----- ----- ------ ------
Change* +542 +184 -184 +43 +207 +292
----------------------------------- --------------- ------ ----- ----- ------ ------
Site acquisitions in legals - - - - - -
----------------------------------- --------------- ------ ----- ----- ------ ------
Total BtR pipeline 5,008 1,041 71 581 1,324 1,991
----------------------------------- --------------- ------ ----- ----- ------ ------
Change* +295 +184 -184 +43 -40 +292
----------------------------------- --------------- ------ ----- ----- ------ ------
*The change in the pipeline is compared to the previous update
in January 2021.
The appraised future revenue value to the Group of the secured
development pipeline, excluding the revenue delivered in H1-2021,
is c.GBP950.0 million (H1-2020: GBP550.0 million).
Student accommodation ('PBSA')
Revenues from PBSA were 13.3% lower than last year at GBP104.8
million (H1-2020: GBP120.8 million), with the prior year revenues
benefitting by GBP23.5 million from the recognition of the full
sales value of a development completed in Chester, which had been
sold on a turnkey basis. Forward sold development revenues were
therefore a little ahead of last year, reflecting the continued
good progress on site of all developments in build.
PBSA revenues include the letting income on our six historic
leased PBSA assets and this has been reduced by approximately
GBP4.3 million compared to H1-2020 as a result of the lower level
of student occupancy this year. We have seen a number of students
returning to their accommodation as lockdown restrictions have
eased and we expect the full year reduction in revenues to be
within the previously guided maximum of GBP10.0 million.
The gross margin for PBSA was 24.1%, a small decrease on the
24.5% gross margin for H1-2020.
In the period we forward sold three PBSA developments in Bristol
(291 beds), Leicester (250 beds) and York (368 beds) for delivery
in FY22. For each of these developments, the clients concerned
acquired the land site directly. Subsequent to the period end we
exchanged contracts for the sale on a turnkey basis of our 462-bed
scheme in Leicester, for delivery this financial year. The combined
revenue value to the Group of these four contracted sales is
GBP101.1 million.
We have also agreed terms for the forward sale of a 295-bed
development in Edinburgh, subject to the receipt of a planning
amendment, which is targeted for delivery in FY23.
We secured two sites subject to planning since the start of the
year, these being in Edinburgh (286 beds) and Swansea (350
beds).
The current PBSA development pipeline is as shown in the table
below:
PBSA beds
-------------------------------------------------------
Total pipeline FY21 FY22 FY23 FY24 FY25
----------------------------------- --------------- ------ ------ ------ ------ ------
Forward sold 4,360 3,192 1,168 - - -
Forward sales in legals 547 - - 547 - -
Sites secured with planning 778 - 778 - - -
Sites secured subject to planning 2,824 - - 1,816 673 335
----------------------------------- --------------- ------ ------ ------ ------ ------
Total secured 8,509 3,192 1,946 2,363 673 335
----------------------------------- --------------- ------ ------ ------ ------ ------
Change* +599 - +1 -75 +338 +335
----------------------------------- --------------- ------ ------ ------ ------ ------
Site acquisitions in legals 1,517 - - 357 394 766
----------------------------------- --------------- ------ ------ ------ ------ ------
Total PBSA pipeline 10,026 3,192 1,946 2,720 1,067 1,101
----------------------------------- --------------- ------ ------ ------ ------ ------
Change* +118 - +1 -380 +162 +335
----------------------------------- --------------- ------ ------ ------ ------ ------
*The change in the pipeline is compared to the previous update
in January 2021.
The appraised future revenue value to the Group of the secured
development pipeline, excluding the revenue delivered in H1-2021,
is c.GBP625.0 million (H1-2020: c.GBP500.0 million).
Accommodation management (Fresh)
Fresh achieved revenues of GBP3.8 million (H1-2020: GBP4.1
million), reflecting the largely fixed nature of its management fee
income. The reduction of 8% reflects the loss of some income that
varies with student occupancy levels, partly offset by the higher
number of student beds and BtR apartments under management at the
start of the year (20,179), compared to the start of FY20
(17,721).
Operationally, Fresh has continued to support both its student
customers and clients through the pandemic. Since the start of the
year it has won new mandates for 3,424 student beds.
The reduction in Fresh's revenue for the period led to a modest
decrease in gross profit to GBP2.2 million (H1-2020: GBP2.6
million), at a margin of 58.4% (H1-2020: 61.9%).
By FY 2023, Fresh is currently appointed to manage 22,981
student beds and BtR apartments across 71 schemes, including
expected renewals, an increase of 1,191 beds since our update in
January 2021.
Residential
The residential development business achieved 33 sales
completions in the period, in line with its targets (H1-2020: 73
sales). H1-2020 sales included the completion of the 35-apartment
scheme at Trafford Street, Chester, which had been sold on a
turnkey basis. Excluding this sale, house completions for H1-2021
were at a similar level to last year. The momentum we reported in
new sales being reserved during the summer months of 2020 has
continued, with a further 55 reservations since the start of the
year, adding to the 25 reservations with which we started the
year.
Revenues for the division were GBP8.9 million lower than last
year at GBP10.7 million. H1-2020 revenues included the revenue from
the completion of the apartment scheme in Chester, as well as the
remaining higher value sales of apartments at our Duncan House,
Stratford development.
The gross profit achieved by the division was GBP1.5 million
(H1-2020: GBP3.7 million), at a margin of 14.0% (H1-2020: 19.0%).
The reduction in margin reflects the mix of sales, with last year's
margin benefiting in particular from the apartment sales at Duncan
House.
Affordable homes pilot
We made good progress with the launch of the North West
affordable homes pilot in the period.
Pipeline
We completed the acquisition of the site in Crewe for 245 units
and exchanged contracts on a site for 51 units in Llay, Wrexham. We
are also in advanced legal negotiations to secure a further site in
the North West for 189 units, which will bring the current
affordable homes pipeline to 485 units for delivery over the period
FY22 - FY25. All of these sites have planning. Given the
encouraging initial progress, a number of further site
opportunities are also under review.
Forward sales
Subsequent to the period end we exchanged forward sale contracts
with Adra for 23 units at the site in Llay and we expect to
exchange contracts imminently for the forward sale of 159 units at
the site in Crewe. We are also progressing heads of terms for the
forward sale of 133 units at the further new site that we are in
the process of acquiring. All forward sale values are in line with
our financial appraisals.
Balance sheet and liquidity
Our financial position and liquidity remains strong. We had a
cash balance at 31 March 2021 of GBP88.7 million (31 March 2020:
GBP72.4 million), whilst net cash stood at GBP31.7 million (31
March 2020: GBP37.5 million), before deducting IFRS 16 lease
liabilities.
The Group had undrawn headroom of GBP47.6 million on its
revolving credit facility ('RCF') with HSBC at 31 March 2021 and an
unutilised overdraft facility of GBP10.0 million, giving total cash
and available facilities of GBP146.3 million (31 March 2020:
GBP153.4 million).
We have continued to secure opportunities in the land market
during the pandemic. We have also been able to progress the
development of our BtR and PBSA schemes in Leicester for completion
in FY21. This investment, combined with our normal annual cash
profile, which sees a utilisation of cash in the first half of the
year, resulted in a reduction in our net cash balance of GBP63.1
million since the start of the year. Our inventory and work in
progress balance has similarly increased by GBP63.3 million in the
period to GBP189.0 million. Of this balance, GBP42.3 million
relates to the work in progress cost of the two developments in
Leicester.
Contract assets and receivables at 31 March 2021 stood at
GBP38.7 million and GBP23.5 million respectively and were broadly
unchanged from the position at 30 September 2020. The contract
assets relate primarily to the final payments to be received on
completion of the forward sold developments in build. Contract and
trade liabilities amounted to GBP98.1 million at 31 March 2021 and
were also at a similar level to the FY20 year-end position.
Environmental, Social and Governance ('ESG')
We continue to evolve our ESG framework. Our work in the period
has centred on identifying the key initiatives for the business,
determining the targets against which we will measure and report
our performance and how the initiatives will be integrated as part
of our day to day operations. As part of this work we are engaging
with our key stakeholders to identify what is important to them and
to help inform our approach.
The health and safety of our employees, supply chain partners
and tenants of the properties we manage is our number one priority.
We continue to deploy strict Covid-19 working practices on our
sites and through Fresh to ensure that the wellbeing of students
and our BtR consumers is catered for. Whilst we have continued to
operate highly effectively, this is against the backdrop of the
pandemic and our employees have continued to work tirelessly in
exceptionally difficult circumstances. Their efforts and commitment
have been exemplary and I would again like to thank them all
personally.
Cladding update
In our FY20 results we made a provision of GBP15.0 million to
cover the cost of cladding remedial works on previous high-rise
residential buildings we had developed, working with the property
owners concerned to ensure the safety of tenants, even though we
are not legally liable. These works are progressing in line with
our previous guidance.
GBP5.1 million of the cost of the works was incurred in FY20,
with a further GBP0.9 million incurred in H1-2021. The remaining
provision of GBP9.0 million is expected to be incurred over the
remainder of FY21 and FY22.
The Government has recently announced that it intends to levy a
tax on the profits of residential developers, combined with a
planning gain levy on future developments, in order to recoup the
cost of its high-rise cladding replacement support scheme. The
precise scope and detail of the residential developer tax have not
yet been concluded and will be the subject of a consultation
process over the coming months. We are currently preparing our
response and will actively participate in the consultation
process.
Dividend
The Board has declared an interim dividend for the period of 2.6
pence per share, which will be paid on 30 June 2021 to shareholders
on the register at close of business on 9 June 2021. The shares
will go ex-dividend on 8 June 2021.
Outlook
The underlying market fundamentals supporting residential for
rent remain strong, as evidenced by increasing investor appetite
for both BtR and PBSA as we emerge from the pandemic. This,
combined with the growth in our development pipeline, operational
capabilities and financial strength, underpins our confidence in
the future prospects for the Group.
Richard Simpson
Chief Executive Officer
18 May 2021
Consolidated Statement of Comprehensive Income
for the six month period ended 31 March 2021 (unaudited)
6 months to 6 months to 12 months to
31 March 31 March 30 September
2021 2020 2020
(Restated
- note 3)
Notes GBP'000 GBP'000 GBP'000
Continuing operations
Revenue 178,420 185,672 354,121
Cost of sales (137,089) (143,373) (278,205)
------------ ------------ --------------
Gross profit 41,331 42,299 75,916
Administrative expenses (12,255) (12,682) (24,249)
Operating profit before exceptional costs 29,076 29,617 51,667
Exceptional costs 6 - - (20,437)
------------ ------------ --------------
Operating profit 29,076 29,617 31,230
Share of profit in joint ventures - - 199
Finance income 1 200 251
Finance costs (3,239) (3,084) (6,366)
------------ ------------ --------------
Profit before tax from continuing operations 25,838 26,733 25,314
Income tax expense 7 (5,056) (5,104) (4,222)
------------ ------------ --------------
Profit for the period attributable to ordinary equity holders of
the parent 20,782 21,629 21,092
============ ============ ==============
Other comprehensive income
Net gain on equity instruments designated at fair value through
other comprehensive income - - (6)
------------ ------------ --------------
Total comprehensive income for the period attributable to
ordinary equity holders of the parent 20,782 21,629 21,086
============ ============ ==============
Earnings per share for the period attributable to ordinary equity Pence Pence Pence
holders of the parent
Basic earnings per share 8 8.113 8.458 8.246
============ ============ ==============
Diluted earnings per share 8 8.108 8.425 8.234
============ ============ ==============
Adjusted basic earnings per share (excluding exceptional costs) 8 8.113 8.458 14.717
============ ============ ==============
Adjusted diluted earnings per share (excluding exceptional costs) 8 8.108 8.425 14.696
============ ============ ==============
Consolidated Statement of Financial Position
as at 31 March 2021 (unaudited)
31 March 31 March 30 September
2021 2020 2020
(Restated
- note 3)
Notes GBP'000 GBP'000 GBP'000
Non-current assets
Intangible assets 13,004 13,564 13,284
Investment property (leased) 10 101,475 110,125 104,623
Right of use assets 10 4,923 5,402 4,763
Property, plant and equipment 4,068 4,965 4,376
Investment in joint ventures 3,243 2,794 3,243
Deferred tax asset 3,313 3,758 3,313
Other financial assets 1,133 1,139 1,133
---------- ------------ -------------
131,159 141,747 134,735
---------- ------------ -------------
Current assets
Inventory and work in progress 189,005 108,640 125,660
Contract assets 38,682 79,211 41,522
Trade and other receivables 23,457 20,419 23,518
Cash and cash equivalents 12 88,727 72,394 134,513
---------- ------------ -------------
339,871 280,664 325,213
---------- ------------ -------------
Total assets 471,030 422,411 459,948
========== ============ =============
Current liabilities
Trade and other payables (91,602) (69,153) (97,300)
Contract liabilities (6,537) (4,462) (8,967)
Lease liabilities (6,139) (6,209) (6,310)
Provisions (5,384) - (6,277)
Interest-bearing loans and borrowings (870) (1,021) (711)
Current tax liabilities (4,087) (6,869) (819)
---------- ------------ -------------
(114,619) (87,714) (120,384)
---------- ------------ -------------
Non-current liabilities
Interest-bearing loans and borrowings (56,132) (33,861) (38,956)
Lease liabilities (125,544) (131,437) (128,143)
Deferred tax liabilities (1,187) (1,042) (1,040)
Provisions (3,587) - (3,587)
---------- ------------ -------------
(186,450) (166,340) (171,726)
---------- ------------ -------------
Total Liabilities (301,069) (254,054) (292,110)
========== ============ =============
Net assets 169,961 168,357 167,838
========== ============ =============
Equity
Share capital 2,562 2,553 2,562
Share premium 84,612 84,612 84,612
Merger reserve (75,383) (75,383) (75,383)
Fair value reserve of financial assets at FVOCI 428 434 428
Share-based payment reserve 2,515 2,263 2,348
Retained earnings 155,227 153,878 153,271
---------- ------------ -------------
Total Equity 169,961 168,357 167,838
========== ============ =============
Consolidated Statement of Changes in Equity
for the six month period ended 31 March 2021 (unaudited)
Fair value
of financial Share-based
Share Share Merger assets payment Retained
Capital Premium Reserve at FVOCI reserve earnings Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP000 GBP'000 GBP'000
Balance at 30 September
2019 2,553 84,612 (75,383) 434 2,311 146,568 161,095
Profit for the period - - - - - 21,629 21,629
Share-based payments - - - - (48) - (48)
Dividend paid (note
9) - - - - - (14,319) (14,319)
Balance at
31 March 2020 (restated) 2,553 84,612 (75,383) 434 2,263 153,878 168,357
========= ======== ========== ============= =========== ========== ========
(Loss) for the period - - - - - (537) (537)
Share-based payments - - - - 85 - 85
Other comprehensive
income - - - (6) - - (6)
Deferred tax debited
directly to equity - - - - - (70) (70)
Issue of shares 9 - - - - - 9
Balance at 30 September
2020 2,562 84,612 (75,383) 428 2,348 153,271 167,838
========= ======== ========== ============= =========== ========== ========
Profit for the period - - - - - 20,782 20,782
Share-based payments - - - - 167 - 167
Dividend paid (note
9) - - - - - (18,826) (18,826)
--------- -------- ---------- ------------- ----------- ---------- --------
Balance at
31 March 2021 2,562 84,612 (75,383) 428 2,515 155,227 169,961
========= ======== ========== ============= =========== ========== ========
Consolidated Statement of Cash Flows
for the six month period ended 31 March 2021 (unaudited)
6 months 6 months 12 months
to to to
31 March 31 March 30 September
2021 2020 2020
(Restated
- note 3)
Notes GBP'000 GBP'000 GBP'000
Cash flows from operating activities
Cash (outflow)/inflow from
operations 11 (35,467) (12,975) 54,868
Interest received 1 200 245
Interest paid (3,658) (3,300) (6,792)
Tax paid (1,641) (5,211) (10,035)
--------- ---------- -------------
Net cash (outflow)/inflow from
operating activities (40,765) (21,286) 38,286
========= ========== =============
Cash flows from investing activities
Acquisition of property, plant
and equipment (763) (672) (317)
Proceeds on disposal of property,
plant and equipment - 19 69
Cash flow from joint venture
interest - - 812
Net cash outflow from investing
activities (763) (653) 564
========= ========== =============
Cash flows from financing activities
Dividend paid 9 (18,826) (14,319) (14,319)
Proceeds from exercise of share
options - - 9
Payment of principal portion
of lease liabilities (2,768) (2,998) (6,089)
New other interest- bearing
loan 261 - -
Payment of capital element
of other interest-bearing loans (164) (526) (1,034)
Drawdown of RCF 19,808 1,302 20,843
Repayment of bank loans (2,569) (4,778) (18,499)
Bank loan arrangement fees - - (900)
Net cash outflow from financing
activities (4,258) (21,319) (19,989)
========= ========== =============
Net (decrease)/increase in
cash (45,786) (43,258) 18,861
Cash and cash equivalents at
beginning of the period 134,513 115,652 115,652
--------- ---------- -------------
Cash and cash equivalents at
end of the period 12 88,727 72,394 134,513
========= ========== =============
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 7-9 Swallow Street,
London, W1B 4DE.
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 2021 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 2021
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 20 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 17 May 2021.
2. Basis of preparation
The interim financial statements have been prepared based on
IFRS that are expected to exist at the date on which the Group
prepares its financial statements for the year ended 30 September
2021. To the extent that IFRS at 30 September 2021 does 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
(GBP'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 2020. There
has been no significant change in any risk management policies
since the date of the last audited 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 2020.
Restatement of results for six months to 31 March 2020
After the release of the half year results to 31 March 2020,
several changes were made in relation to the initial application of
the new accounting standard, IFRS 16, and incorporated into the
audited full year results for the year ending 30 September 2020.
The comparative figures to 31 March 2020 have now been restated to
reflect these amendments, which relate to the Group's six historic
student accommodation sale and leaseback properties. These assets
had been reported in the H1-2020 consolidated statement of
financial position as 'right of use' assets, but have been
reclassified as 'investment property (leased) assets' at 30
September 2020. This better reflects the asset classification
requirements of IAS 40 'Investment Property' when applied in
conjunction with IFRS 16. In addition, a change was made to the
Incremental Borrowing Rates ("IBRs") used to calculate the initial
values for the investment property (leased) assets and associated
lease liabilities, which had the effect of reducing their opening
values. The IBRs were increased to better reflect the likely
borrowing rate which would be paid over a similar term to the
underlying long leases. Presentational changes have also been made
to the consolidated statement of financial position at 31 March
2020 in relation to provisions for onerous leases, which are now
reported within investment property (leased) assets as impairment
provisions; and to prepayment and accrual balances relating to the
leases which are now included in the lease asset and liability
values.
The restatements for these changes are immaterial on total
comprehensive income, reduce net equity by GBP0.5 million and have
no impact on cash. The detailed changes to each affected financial
statement line items are as follows:
Impact on consolidated statement of comprehensive income due to
increase in IBR:
6 months to
31 March
2020
Increase/(decrease)
GBP'000
Cost of sales (420)
Finance costs 324
Income tax expense 43
Net impact on total comprehensive income for the period 53
---------------------
Impact on basic and diluted earnings per share (EPS) due to the
correction relating to the IBR:
6 months to
31 March
2020
Increase
Pence
Basic earnings per share 0.021
Diluted earnings per share 0.021
Impact on consolidated statement of financial position as at 31
March 2020:
Reclassification of Increase in IBR Reclassification of Total
student sale and leaseback onerous lease provision,
properties prepayments and accruals.
Increase/
(decrease)
GBP'000 GBP'000 GBP'000 GBP'000
Investment property
(leased) 121,775 (8,256) (3,457) 110,062
Right of use assets (121,775) - - (121,775)
Deferred tax asset - 28 91 119
Trade and other receivables - - (593) (593)
--------------------------- ---------------- --------------------------- ------------
Total assets - (8,228) (3,959) (12,187)
Trade and other payables - - (141) (141)
Lease liabilities - (8,110) - (8,110)
Current tax liabilities - 30 - 30
Provisions - - (3,457) (3,457)
--------------------------- ---------------- --------------------------- ------------
Total liabilities - (8,080) (3,598) (11,678)
Net impact on equity - (148) (361) (509)
--------------------------- ---------------- --------------------------- ------------
Impact on consolidated statement of cash flows due to the
correction relating to the increase in IBR:
6 months to
31 March
2020
Increase/(decrease)
GBP'000
Cash outflow from operations (83)
Interest paid 324
Payment of principal portion of lease liabilities (241)
Net impact on cash flows for the period -
---------------------
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.
Build
6 months to 31 Student to Accommodation
March 2021 (unaudited) accommodation rent Residential management Corporate Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Segmental revenue 104,759 59,112 10,670 3,816 63 178,420
--------------- -------- ------------ -------------- ---------- ---------
Segmental gross
profit 25,215 12,397 1,490 2,228 1 41,331
Administration
expenses - - - (1,708) (10,547) (12,255)
Finance income - - - - 1 1
Finance costs - - - - (3,239) (3,239)
Profit/(loss)
before tax 25,215 12,397 1,490 520 (13,784) 25,838
Taxation - - - - (5,056) (5,056)
--------------- -------- ------------ -------------- ---------- ---------
Profit/(loss)
for the period 25,215 12,397 1,490 520 (18,840) 20,782
=============== ======== ============ ============== ========== =========
Inventory and
WIP 56,700 90,656 31,316 - 10,333 189,005
--------------- -------- ------------ -------------- ---------- ---------
6 months to 31
March 2020 (unaudited) Build
(Restated - note Student to Accommodation
3) accommodation rent Residential management Corporate Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Segmental revenue 120,766 41,241 19,613 4,147 (95) 185,672
--------------- -------- ------------ -------------- ---------- ---------
Segmental gross
profit 29,570 6,648 3,743 2,565 (227) 42,299
Administration
expenses - - - (1,804) (10,878) (12,682)
Finance income - - - - 200 200
Finance costs - - - - (3,084) (3,084)
Profit/(loss)
before tax 29,570 6,648 3,743 761 (13,989) 26,733
Taxation - - - - (5,104) (5,104)
--------------- -------- ------------ -------------- ---------- ---------
Profit/(loss)
for the period 29,570 6,648 3,743 761 (19,093) 21,629
=============== ======== ============ ============== ========== =========
Inventory and
WIP 22,067 42,807 33,599 - 10,167 108,640
--------------- -------- ------------ -------------- ---------- ---------
The comparative information for the 6 months to 31 March 2020
has been re-presented in a way which is consistent with the
internal reporting provided to the chief operating decision-maker.
Revenue of GBP4,698,000 and gross profit of GBP689,000 has been
transferred from the residential to the build to rent segment.
Year ended Build
30 September Student to Accommodation
2020 accommodation rent Residential management Corporate Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Segmental revenue 226,026 93,991 26,268 7,586 250 354,121
--------------- -------- ------------ -------------- ---------- ---------
Segmental gross
profit 54,285 14,884 4,042 4,540 (1,835) 75,916
Administration
expenses - - - (3,432) (20,817) (24,249)
Exceptional costs - - - - (20,437) (20,437)
Share of operating
profit in joint
ventures 199 - - - - 199
Finance income - - - - 251 251
Finance costs - - - - (6,366) (6,366)
Profit/(loss)
before tax 54,484 14,884 4,042 1,108 (49,204) 25,314
Taxation - - - - (4,222) (4,222)
--------------- -------- ------------ -------------- ---------- ---------
Profit/(loss)
for the period 54,484 14,884 4,042 1,108 (53,426) 21,092
=============== ======== ============ ============== ========== =========
Inventory and
WIP 30,706 53,964 30,656 - 10,334 125,660
--------------- -------- ------------ -------------- ---------- ---------
5. Disaggregated revenue information
Student Build to Accommodation
6 months to 31 March 2021 (unaudited) accommodation rent Residential management Corporate Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Type of goods or service
Construction contracts or development
agreements 99,283 58,405 - - 63 157,751
Sale of land - - - - - -
Sale of completed property - - 10,670 - - 10,670
Rental income 5,476 707 - - - 6,183
Accommodation management - - - 3,816 - 3,816
-------------------------------------------- -------------- -------- ----------- ------------- --------- -------
Total revenue from contracts with customers 104,759 59,112 10,670 3,816 63 178,420
============================================ ============== ======== =========== ============= ========= =======
Timing of revenue recognition
Goods transferred at a point in time - - 10,670 - - 10,670
Services transferred over time 104,759 59,112 - 3,816 63 167,750
-------------------------------------------- -------------- -------- ----------- ------------- --------- -------
Total revenue from contracts with customers 104,759 59,112 10,670 3,816 63 178,420
============================================ ============== ======== =========== ============= ========= =======
Student Build to Accommodation
6 months to 31 March 2020 (unaudited) accommodation rent Residential management Corporate Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Type of goods or service
Construction contracts or development
agreements 87,460 40,554 - - (95) 214,367
Sale of land - - - - - 93,557
Sale of completed property 23,502 - 19,613 - - 40,528
Rental income 9,804 687 - - - 18,873
Accommodation management - - - 4,147 - 7,460
-------------------------------------------- -------------- -------- ----------- ------------- --------- -------
Total revenue from contracts with customers 120,766 41,241 19,613 4,147 (95) 185,672
============================================ ============== ======== =========== ============= ========= =======
Timing of revenue recognition
Goods transferred at a point in time 23,502 - 19,613 - - 43,115
Services transferred over time 97,264 41,241 - 4,147 (95) 142,557
-------------------------------------------- -------------- -------- ----------- ------------- --------- -------
Total revenue from contracts with customers 120,766 41,241 19,613 4,147 (95) 185,672
============================================ ============== ======== =========== ============= ========= =======
Year ended Student Build to Accommodation
30 September 2020 accommodation rent Residential management Corporate Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Type of goods or service
Construction contracts or development
agreements 181,248 92,618 - - 250 274,116
Sale of land 5,558 - - - - 5,558
Sale of completed property 23,502 - 26,268 - - 49,770
Rental income 15,718 1,373 - - - 17,091
Accommodation management - - - 7,586 - 7,586
-------------------------------------------- -------------- -------- ----------- ------------- --------- -------
Total revenue from contracts with customers 226,026 93,991 26,268 7,586 250 354,121
============================================ ============== ======== =========== ============= ========= =======
Timing of revenue recognition
Goods transferred at a point in time 29,060 - 20,961 - - 50,021
Services transferred over time 196,966 93,991 5,307 7,586 250 304,100
-------------------------------------------- -------------- -------- ----------- ------------- --------- -------
Total revenue from contracts with customers 226,026 93,991 26,268 7,586 250 354,121
============================================ ============== ======== =========== ============= ========= =======
6. Exceptional costs
6 months to 6 months to 12 months to
31 March 31 March 30 September
2021 2020 2020
GBP'000 GBP'000 GBP'000
COVID-19 costs
COVID-19 additional costs of on-site working and in completing
developments - - (2,659)
Waiver of academic year 2019/20 final term rents due on leased student
accommodation assets
due to lockdown measures - - (1,086)
Impairment of the right-of-use carrying value of leased student
accommodation assets due to
reduced 2020/21 student occupancy - - (1,892)
Total COVID-19 costs - - (5,637)
------------- ------------- --------------
Fire safety recladding works - - (14,800)
------------- ------------- --------------
Total exceptional costs - - (20,437)
============= ============= ==============
7. 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 2021 of 19.6 % to the profit for the period.
8. 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
2021 2020 2020
GBP'000 GBP'000 GBP'000
Profit for the period attributable to ordinary equity
holders of the parent 20,782 21,629 21,092
Adjusted profit for the period attributable to
ordinary equity holders of the parent (excluding
exceptional (costs)/income after tax) 20,782 21,629 37,646
Number of shares Number of shares Number of shares
Number of ordinary shares for basic earnings per share 256,163,459 255,722,099 255,795,659
Adjustments for the effects of dilutive potential
ordinary shares 151,310 1,016,400 367,800
Weighted average number for diluted earnings per share 256,314,769 256,738,499 256,163,459
Pence Pence Pence
Basic earnings per share
Basic profit for the period attributable to ordinary
equity holders of the parent 8.113 8.458 8.246
Adjusted basic earnings per share (excluding
exceptional (costs)/income after tax)
Adjusted profit for the period attributable to
ordinary equity holders of the parent 8.113 8.458 14.717
Diluted earnings per share
Basic profit for the period attributable to diluted
equity holders of the parent 8.108 8.425 8.234
Adjusted diluted earnings per share (excluding
exceptional (costs)/income after tax)
Adjusted profit for the period attributable to diluted
equity holders of the parent 8.108 8.425 14.696
9. Dividends
6 months to 6 months to 12 months to
31 March 31 March 30 September
2021 2020 2020
GBP'000 GBP'000 GBP'000
Final dividend paid in February 2020 of 5.6 pence - 14,319 14,319
Final dividend paid in February 2021 of 7.35 pence 18,826 - -
18,826 14,319 14,319
============ ============ ==============
An interim dividend of 2.6 pence per ordinary share will be paid
on 30 June 2021. This dividend was declared after 31 March 2021 and
as such the liability of GBP6,660,000 has not been recognised at
that date. At 31 March 2021 the Company had distributable reserves
available of GBP81,990,000.
10. Leases
Investment property (leased) Office Leases Motor Vehicle Leases Total
GBP'000 GBP'000 GBP'000 GBP'000
Cost
At 30 September 2019 158,231 9,411 1,597 169,239
Additions/adjustment 3,162 - 283 3,445
Disposals - - (248) (248)
----------------------------- -------------- --------------------- --------
At 31 March 2020 (restated) 161,393 9,411 1,632 172,436
Additions - - 30 30
Disposals - - (230) (230)
----------------------------- -------------- --------------------- --------
At 30 September 2020 161,393 9,411 1,432 172,236
Additions - 720 13 733
Disposals - - (321) (321)
----------------------------- -------------- --------------------- --------
At 31 March 2021 161,393 10,131 1,124 172,648
----------------------------- -------------- --------------------- --------
Depreciation
At 30 September 2019 44,550 4,203 875 49,628
Charge for the period 3,261 396 305 3,962
Disposals - - (138) (138)
------- ------ ------ -------
At 31 March 2020 (restated) 47,811 4,599 1,042 53,452
Charge for the period 3,261 395 247 3,903
Disposals - - (203) (203)
------- ------ ------ -------
At 30 September 2020 51,072 4,994 1,086 57,152
Charge for the period 3,148 424 123 3,695
Disposals - - (295) (295)
------- ------ ------ -------
At 31 March 2021 54,220 5,418 914 60,552
------- ------ ------ -------
Impairment
At 30 September 2019 3,457 - - 3,457
Charge for the period - - - -
------- ------ ------ -------
At 31 March 2020 (restated) 3,457 - - 3,457
Charge for the period 2,241 - - 2,241
------- ------ ------ -------
At 30 September 2020 5,698 - - 5,698
Charge for the period - - - -
------- ------ ------ -------
At 31 March 2021 5,698 - - 5,698
------- ------ ------ -------
Net Book Value
At 31 March 2021 101,475 4,713 210 106,398
-------- ------ ---- --------
At 30 September 2020 104,623 4,417 346 109,386
-------- ------ ---- --------
At 31 March 2020 (restated) 110,125 4,812 590 115,527
-------- ------ ---- --------
At 30 September 2019 110,224 5,208 722 116,154
-------- ------ ---- --------
11. Reconciliation of profit before tax to net cash flows from operating activities
12 months
6 months to 6 months to to
31 March 31 March 30 September
2021 2020 2020
(Restated
- note 3)
GBP'000 GBP'000 GBP'000
Profit before tax 25,838 26,733 25,314
Depreciation of leased investment
properties and right-of-use
assets 3,695 3,903 7,865
Depreciation of plant and equipment 338 436 998
Impairment of leased investment
properties - - 2,241
Amortisation of intangible
assets 280 280 560
(Profit) on sale of plant and
equipment - (3) (24)
Finance income (1) (200) (245)
Finance costs 3,239 3,084 6,366
Share of profit in joint ventures - - (199)
(Increase)/decrease/(increase)
in inventory and work in progress (63,345) 25,586 8,566
Interest capitalised in development
land, inventory and work in
progress 419 216 465
(Increase)/decrease in contract
assets 2,840 (53,633) (15,944)
(Increase)/decrease in trade
and other receivables 61 (7,093) (10,786)
Increase/(decrease) in contract
liabilities (2,430) (702) 3,803
Increase/(decrease) in trade
and other payables (5,675) (11,534) 15,987
Increase/(decrease) in provision
for fire safety cladding works (893) - 9,864
Increase/(decrease) in share-based
payment reserve 167 (48) 37
----------- ---------------------- -------------
Net cash (outflow)/inflow from
operating activities (35,467) (12,975) 54,868
----------- ---------------------- -------------
12. Analysis of net cash/(debt)
31 March 31 March 30 September
2021 2020 2020
GBP'000 GBP'000 GBP'000
Cash at bank and in hand 88,727 72,394 134,513
Other interest-bearing loans (728) (866) (631)
Bank loans (56,275) (34,016) (39,036)
-------------- -------------- ----------------
Net cash before deducting lease liabilities 31,724 37,512 94,846
Lease liabilities (131,683) (137,647) (134,453)
-------------- -------------- ----------------
Net debt (99,959) (100,135) (39,607)
============== ============== ================
13. Employee Benefits - long-term incentive plans
In January 2021, 1,230,560 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 Earning per Share (EPS) and
Total Shareholder Return (TSR) performance as follows:
TSR (50% of award) % of TSR award vesting(1)
---------------------- --------------------------
250 pence or less 0%
---------------------- --------------------------
325 pence or greater 100%
---------------------- --------------------------
EPS growth (50% of award) % of EPS award vesting(1)
--------------------------- --------------------------
10% p.a. or less 0%
--------------------------- --------------------------
20% p.a. or more 100%
--------------------------- --------------------------
(1) Vesting on a straight-line basis between target levels
The fair value of share awards granted subject to EPS conditions
is 194.8 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. The fair value of
the share awards subject to TSR performance conditions has been
estimated at the grant date using a Monte Carlo valuation model
using the following assumptions:
Share price 195.8 pence
Exercise price 1 penny
Expected term 3 years
Risk-free interest rate (0.07)%
Are dividend equivalents receivable for the award holder? Yes
Expected volatility 31.3%
This resulted in an estimated fair value for an award with TSR
performance conditions of 63.78 pence. For the six months ended 31
March 2021, the amount charged to the statement of comprehensive
income and credited to share based payment reserve was GBP167,575
(31 March 2020: (GBP47,765)).
- Ends -
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