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RNS Number : 4435I
Watkin Jones plc
01 April 2020
For immediate release 1 April 2020
Watkin Jones plc
('Watkin Jones' or the 'Group')
Pre-Close and COVID-19 Update
'Resilient business responding to the unprecedented challenge of
COVID-19'
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 a pre-close
update for the half year ended 31 March 2020 (the 'period' or
'H1-2020') and comments on the impact of COVID-19.
Pre-Close update for the six months ended 31 March 2020
The Group's trading remained strong through the first half of
the year. All business segments performed well, delivering on their
operational objectives, with the disruption caused by COVID-19 only
starting to have an effect on our operations towards the end of
March 2020. As a result, the Board expects to report revenues and
earnings for H1-2020 in line with its expectations.
Continued progress was made during the period in growing the
pipeline of sites for future development and in achieving forward
sales of assets to the Group's high-quality institutional client
base, including:
-- Forward sale of a 348 bed PBSA scheme at Wilder Street, Bristol, for delivery in FY21;
-- Agreement, with planning consent, to increase the forward
sold PBSA development at Kelaty House, Wembley by 100 beds;
-- Secured two further PBSA sites in Bristol (291 beds) and Bath (300 beds);
-- Secured two further significant BtR sites in Birmingham (565
apartments) and Bath (323 apartments).
Including these additions, the Group's forward sold and secured
PBSA development pipeline comprises over 7,000 beds, across 19
sites, with 12 sites (4,985 beds) forward sold. On the same basis,
the Group's BtR pipeline stands at over 2,600 apartments, across 10
sites, with five developments (1,012 apartments) forward sold. The
Group has a number of additional opportunities, in both sectors,
which provide scope to further expand the development pipeline.
The performance in the first half reflects the continued
strength of demand during the period for well-located assets in the
Group's target cities and the recognition of Watkin Jones as a
preferred development partner.
The impact of COVID-19
As announced on 27 March, we have begun to experience
significant disruption to our operations as a result of the
COVID-19 outbreak. Our non-site based staff are currently working
from home, in line with our established Business Continuity Plan,
and we have halted all non-essential work on our construction
sites. This will inevitably impact financial performance, whilst
these measures are in place. We have a strong forward sold delivery
pipeline for delivery over the next two years. However, it is
difficult to predict the scale of adverse impacts caused by further
disruption to our operations, or to forward sale markets, at this
time. The Board therefore believes that it is appropriate to
withdraw financial guidance at the current time, with the intention
to reinstate it as soon as the backdrop becomes more stable.
Notwithstanding the challenging current backdrop, the Board
believes that the long-term outlook for both the student
accommodation and BtR sectors remains strong. These markets are
underpinned by robust fundamental growth drivers, which will
continue to appeal to institutional investors. The Group is
confident of further enhancing its position as a market leader over
time.
Liquidity
Watkin Jones has entered this unprecedented period of market
uncertainty well positioned, with a 'capital light' business model.
The Group has forward sold all of its 2020 developments and eight
out of ten of its developments scheduled for delivery in 2021 to
institutional partners, which provides cashflow and earnings
visibility. At 31 March 2020, the Group had a gross cash balance of
circa GBP71 million and a net cash balance after deducting site
specific loans of circa GBP36 million. In addition, the Group has
in place a GBP60 million RCF to primarily support land procurement
and development opportunities, of which only GBP29 million was
drawn down as at 31 March 2020.
Whilst the Group has a resilient financial position, the Board
believes it is prudent to adopt a cautious approach to new
investment, as well as to introduce measures to manage costs and
conserve cash, until the extent and duration of the disruption
caused by COVID-19 is better understood. The Board therefore does
not intend to declare an interim dividend alongside its results for
the six months to 31 March 2020. It will reinstate dividend
payments as soon as appropriate. Furthermore, the executive
directors will not receive an annual pay increase, which would
otherwise have been due on 1 April 2020, and until normal
construction activity is resumed, the non-executive directors will
waive 20% of their fees.
Cladding review
In our FY19 full year results announcement on 14 January 2020 we
advised that the integrity of cladding systems and fire protection
measures was a matter of ongoing review. In response to revised
government guidance on the suitability of certain cladding
solutions, published on 20 January 2020, we have been working with
the owners of the buildings we have developed in order to determine
if any remedial actions are required. All of Watkin Jones'
developments have been constructed in compliance with prevailing
building regulations at the time but, given the change to guidance,
the Group believes it is right to engage with building owners
proactively to ensure any changes are made as expediently as
possible.
Whilst discussions with certain property owners remain ongoing,
the Board currently expects that this will result in a sharing of
the initial costs of any remedial works with them. The gross cost
to the Group is currently expected to be in the range of GBP12 -
GBP15 million over the next two to three years. A one off
non-underlying provision for this cost will be made at the year
end. The Group believes it may be able to recover some of this cost
from the sub-contractors and consultants engaged on implementing
the particular cladding systems at the time. This is likely to take
an extended period of time to achieve and the extent of any
recovery is currently uncertain.
Notice of Interim Results
The Group will make a further announcement in due course
regarding the timing of its Interim Results.
- Ends -
The information contained within this announcement is deemed by
the Group to constitute inside information as stipulated under the
Market Abuse Regulation. Upon the publication of this announcement
via Regulatory Information Service, this inside information is now
considered to be in the public domain.
For further information:
Watkin Jones plc
Richard Simpson, Chief Executive Tel: +44 (0) 1248 362 516
Officer
Phil Byrom, Chief Financial Officer www.watkinjonesplc.com
Peel Hunt LLP (Nominated Adviser & Joint Tel: +44 (0) 20 7418
Corporate Broker) 8900
Mike Bell / Ed Allsopp www.peelhunt.com
Jefferies Hoare Govett (Joint Corporate Tel: +44 (0) 20 7029
Broker) 8000
Max Jones / Will Soutar www.jefferies.com
Media enquiries:
Buchanan
Henry Harrison-Topham / Richard Oldworth Tel: +44 (0) 20 7466 5000
Jamie Hooper / Steph Watson
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 student accommodation and
Build to Rent 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 41,000 student beds across 123 sites, making it
a key player and leader in the UK purpose built student
accommodation market. In addition, the Fresh Property Group, the
Group's specialist accommodation management company, manages nearly
18,000 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 now expanding its
operations into the Build to Rent sector.
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
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END
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