Watkin Jones plc Half Year Results

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Watkin Jones plc Half Year Results

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RNS Number : 2694N

Watkin Jones plc

19 May 2020

 
For immediate release  19 May 2020 
 

Watkin Jones plc

('Watkin Jones' or the 'Group')

Half year results for the six months to 31 March 2020

'Strong first half performance, supplemented by measures to protect people

and the business through the pandemic'

Watkin Jones plc (AIM:WJG), the UK's leading developer and manager of residential for rent, with a focus on the build to rent and student accommodation sectors, announces its results for the six months ended 31 March 2020 (the 'period' or 'H1 2020'). The Board is pleased to report a successful first six months of the current financial year, which was largely prior to the disruption caused by COVID-19.

Financial Highlights

 
                                          H1 2020               H1 2019   Movement 
                                                           (Restated(1) 
                                                                      ) 
 Underlying results 
 
   Revenue                       GBP185.7 million      GBP159.1 million     +16.7% 
 
   Gross profit                   GBP41.9 million       GBP38.8 million      +8.0% 
 
   Adjusted profit before 
   tax(2)                         GBP26.6 million       GBP25.0 million      +6.4% 
 
      Adjusted EBITDA(3)          GBP34.2 million       GBP32.1 million      +6.5% 
 
   Adjusted basic earnings 
   per share(2)                        8.44 pence            7.77 pence      +8.6% 
 
   Dividend per share                   Nil pence            2.75 pence          - 
 
   Gross cash                     GBP72.4 million       GBP57.9 million          - 
 
   Net cash(4)                    GBP37.5 million       GBP18.3 million          - 
 
 
 Statutory results 
 
   Profit before tax        GBP26.6 million      GBP22.4 million     +18.8% 
 
       EBITDA (3)           GBP34.2 million      GBP29.5 million     +15.9% 
 
   Basic earnings per 
   share                         8.44 pence           6.96 pence     +21.3% 
 

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

"The half year performance was strong and continued the momentum towards our multi-year growth strategy which we set out in November 2019. Our businesses have all performed well in the period and in-line with expectations.

We have responded carefully and cautiously to the challenges presented by the COVID-19 pandemic and subsequent lock-down. Primarily, we have focused on ensuring the health and safety of employees, tenants and other stakeholders, with development sites initially being closed to all non-essential work. Gradually, we have been able to reopen most of them, to the extent allowed under social distancing and government rules. I would like to thank all our employees, tenants and other partners who have responded so positively to this difficult situation.

Secondly, we have strengthened further our financial position by conserving cash; reducing costs, suspending the interim dividend and extending borrowing facilities. We believe that this ensures the long-term resilience of the business as well as its capability to respond quickly as markets recover. The Board believes that the Group is now well-positioned for future growth and to take advantage of economic opportunities that may arise from the current unprecedented situation."

Financial headlines

-- 16.7% increase in revenue for the period versus the first half year of last year, underpinned by both student accommodation development and, increasingly, build to rent

   --      6.4% increase in adjusted profit before tax(2) to GBP26.6 million 
   --      Robust gross margin for the half year of 22.6% (H1 2019: 24.4%) 
   --      Strong liquidity position: 

o GBP72.4 million gross cash at 31 March 2020 (31 March 2019: GBP57.9 million)

o GBP37.5 million net cash (after deducting site specific loans and HP creditors, but excluding IFRS 16 operating lease liabilities), up from GBP18.3 million at 31 March 2019

o GBP100.0 million RCF with HSBC renewed for five years to May 2025, of which GBP71.1 million was undrawn at 31 March 2020

-- GBP390.0 million revenue to come from forward sold contractually committed pipeline FY 2020 & FY 2021

-- As announced on 1 April 2020, the Group suspended the interim dividend and withdrew its financial guidance as a result of the current economic uncertainty and disruption caused by the COVID-19 pandemic. The Group will update the market on future guidance once there is more clarity on the impact of COVID-19 on the Group's activities and the markets in which it operates

-- The Board recognise the importance of the dividend to our shareholders and are committed to resuming dividends as soon as conditions stabilise.

Notes

1. Since 1 October 2019, the Group has applied IFRS 16 "Leases". The Group has adopted the fully retrospective approach in applying the standard, recognising its material impact on the Group's results and statement of financial position. The comparative results for H1 2019 have therefore been restated according to the transition arrangements set out in the standard. Further details on the nature of the changes to the Group's accounting required by this standard, as well as its main impacts and the adjustments made to restate the comparative figures are detailed in note 3 to the interim financial statements.

2. For H1 2020 there is no difference between adjusted and statutory profit before tax and basic earnings per share. For H1 2019, adjusted profit before tax and adjusted basic earnings per share are calculated before the impact of an exceptional charge of GBP2.6 million.

3. 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 GBP2.6 million.

4. Net cash is stated after deducting site specific bank loans and hire purchase creditors, but before deducting IFRS 16 operating lease liabilities of GBP145.8 million at 31 March 2020 (31 March 2019: GBP152.1 million).

Business Highlights

-- Two further significant BtR sites secured in Birmingham (565 apartments) and Bath (323 apartments) on a subject to planning basis

-- 2,660 BtR apartments, across 10 sites, now secured with over 1,000 apartments across five sites forward sold for delivery over the period FY 2020 to FY 2022

   --      348 bed PBSA scheme forward sold at Wilder Street, Bristol 
   --      100 additional PBSA beds agreed, with secured planning consent, at Kelaty House, Wembley 

-- 591 PBSA beds on two sites secured in Bristol (291 beds) and Bath (300 beds), both subject to planning

-- 613 bed on-campus partnership agreement with Cranfield University concluded after 31 March 2020 for delivery in FY 2021 (415 beds) and FY 2022 (198 beds)

-- 7,200 PBSA beds, across 19 sites, now secured with over 5,500 beds across 13 sites forward sold for delivery over the period FY 2020 to FY 2022

-- 17,721 PBSA beds and BtR apartments now under management across 64 schemes (H1 2019: 15,421 beds and apartments across 56 schemes), underlining the continued development of the Fresh Property Group portfolio

-- We have taken a proactive and responsible approach to the revised Government guidance on cladding systems. Despite not being legally liable, the Group may undertake certain remedial cladding works. The full cost to the Group, as previously announced, could be in the range of GBP12 million - GBP15 million over the next two years, but the final number will depend on the outcome of ongoing discussions with property owners. Accordingly, a non-underlying provision for these costs is likely to be made at this year-end.

COVID-19 operational and financial update

-- We have remobilised construction activities where possible, with appropriate health & safety practices in place, following an initial closure of all sites

-- Sites in England, Wales and Northern Ireland now operating at c.75% of pre COVID-19 resource levels

   --      Our two Scottish sites currently remain closed due to Scottish Government instructions 

-- Encouraging early progress to mitigate the impacts of the disruption to our student accommodation deliveries for FY 2020; six of the seven schemes are targeted for delivery by Q3 2020 and the seventh is targeted by Q4 2020. The outcome for the residual scheme is being discussed with the purchaser, with options including accelerated work and phased delivery being considered

-- We anticipate a modest increase in costs to complete our committed development programme during COVID-19 disruption

-- The outturn for FY 2020 will be largely dependent on the completion of the seven student accommodation developments due this year, the level of progress made with the construction of the forward sold FY 2021 pipeline and whether the Group decides to forward sell any of its development sites in the second half given the uncertain investment environment

-- Activity in the institutional forward sale and land purchase markets has been subdued since the period end. Whilst we anticipate that activity in these markets will increase through the second half, the Group will use its strong financial position to progress forward sales and site acquisitions in the short term only if negotiated terms prove satisfactory

-- We are offering support to students in the form of short-term rent relief and extended periods of occupation, where appropriate, to help them manage through this period at a voluntary cost of c.GBP1.0 million. Approximately 50% of students left term time residences in conjunction with the lock-down

-- The Group implemented comprehensive cash conservation measures, including accessing the Government's Job Retention Scheme for furloughed employees. Our remobilisation programme is leading to a commensurate unwinding of use of the furlough scheme

   --      Board fees and senior executive base pay has been temporarily reduced by 20%. 

Analyst meeting

A conference call for analysts will be held at 09.30am today, 19 May 2020. A copy of the Half Year Results presentation is available at 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/5eb2fc6931da814c9fc6e7d0

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 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 increasingly 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

Review of Performance

Results for the six months to 31 March 2020

Revenues for the period were in line with expectations at GBP185.7 million, up 16.7% compared to GBP159.1 million for the first half of last year, with all business segments performing well. Good progress was made on all forward sold developments in build in the first half of the year, with COVID-19 associated disruption only starting to impact the Group's operations towards the end of March 2020.

The revenue growth drove an 8.0% (GBP3.1m) higher gross profit to GBP41.9 million (H1 2019: GBP38.8 million). The gross margin remained robust at 22.6%, though below the gross margin achieved for H1 2019 of 24.4%, reflecting the increased contribution from the Group's build to rent developments. Build to rent revenues generated a gross margin of 16.3%, compared to 24.1% for the student accommodation development revenues in the period.

The higher gross profit fed through into operating profit, which increased by GBP4.5 million (18.2%) to GBP29.2 million (H1 2019: GBP24.7 million). Excluding the exceptional charge of GBP2.6 million made in H1 2019, operating profit increased by GBP1.9 million (7.0%).

Finance costs for the period amounted to GBP2.8 million (H1 2019: GBP2.6 million), including GBP2.3 million (H1 2019: GBP2.3 million) in respect of the finance cost of capitalised operating leases under IFRS 16.

Profit before tax for the period was up 18.8% at GBP26.6 million (H1 2019: GBP22.4 million), but excluding the last year's exceptional charge, the growth was 6.4%. Basic earnings per share for the period increased 8.6% to 8.44 pence, compared to the adjusted basic earnings per share of 7.77 pence for H1 2019.

Segmental review

Build to Rent ('BtR')

BtR continues to grow in significance for the Group, with revenue for the period rising to GBP36.5 million (H1 2019: GBP8.8 million). Revenues reflected further construction progress at the already forward sold developments in Bournemouth for delivery in FY 2020 (159 apartments) and in Reading, Wembley and Sutton for delivery in FY 2021 (782 apartments).

Gross profit for the period from BtR was GBP6.0 million (H1 2019: GBP1.9 million) at a margin of 16.3%, consistent with the Group's previous margin guidance of 15%.

Whilst there were no new forward sales in the period, the Group has secured two new significant sites, both of which are subject to planning. The first site for 565 apartments is situated in Birmingham and the second site for 323 apartments is in Bath.

Following these additions, the forward sold and secured BtR pipeline now totals approximately 2,660 apartments across 10 sites, of which 1,012 apartments across five sites have been forward sold and a further site for 184 apartments has planning.

Student accommodation ('PBSA')

Revenues from PBSA were broadly in line with the prior period at GBP120.8 million (H1 2019: GBP128.8 million). The slight decrease is due to the lower number of beds in delivery for FY 2020 (2,609 beds), compared to FY 2019 (2,723 beds).

A strong gross margin of 24.1% was maintained on student accommodation developments, a small decrease on the 24.7% gross margin in H1 2019.

The Group strengthened its forward sold PBSA development pipeline, completing the forward sale of the 348 bed development at Wilder Street, Bristol, to a joint venture between KKR and Round Hill Capital, for delivery in FY 2021. This follows an option agreement announced in October 2018, which was conditional on full planning consent being achieved. The consideration payable to Watkin Jones for Wilder Street is circa GBP33.8 million, net of all client funding and acquisition costs, and is payable over the course of FY 2020 and FY 2021 as the development works are progressed. The Group also obtained planning for and completed an agreement with DWS to add a further 100 beds to the PBSA scheme at Kelaty House in Wembley, for delivery in FY 2021.

After the half year end, the Group signed an on-campus partnership agreement with Cranfield University to develop 613 beds for delivery in FY 2021 (415 beds) and FY 2022 (198 beds), with a development value to Watkin Jones of GBP48.0 million payable over the period FY 2020 to FY 2022. The agreement also contains an option arrangement for a potential second phase of the development, comprising a further 252 beds. This represents a significant addition to the Group's PBSA development pipeline and paves the way for future similar university partnership arrangements.

In addition, the Group secured two further PBSA sites in the period, both of which are subject to planning; a 291 bed scheme in Bristol and a 300 bed scheme in Bath.

As previously reported, the Group has forward sold all seven of its PBSA developments (2,609 beds) scheduled for delivery in FY 2020 and has now forward sold 2,730 beds across six schemes for delivery in FY 2021. The Group's current pipeline of forward sold and secured PBSA development sites totals circa 7,200 beds across 19 sites, of which 5,598 beds are forward sold and 6,060 beds have planning.

Accommodation management

For the six months ended 31 March 2020, Fresh Property Group ('FPG') increased its revenues to GBP4.1 million (H1 2019: GBP3.9 million) and increased its gross profit to GBP2.6 million (H1 2019: GBP2.4 million). This was another strong performance and continues to reflect FPG's success in winning mandates to manage new schemes, with a net increase of 2,300 student beds and build to rent apartments under management at the start of FY 2020 (17,721 units across 64 schemes) compared to a year earlier (15,421 units across 56 schemes).

The gross margin of 61.9% was broadly maintained in line with the prior half year performance of 62.6%.

By FY 2023, FPG is currently appointed to manage approximately 20,500 student beds and build to rent apartments, including expected renewals.

Residential

In H1 2020, the residential development business achieved 38 sales completions in line with its targets (H1 2019: 53 sales). Prior to the half year end, the division also completed the forward sold development of 35 apartments at Trafford Street, Chester.

In addition, during the period, works progressed under the development agreement for the delivery of 75 apartments at Marshgate, Stratford.

As a result, revenues for the residential development business increased to GBP24.3 million for the half year, compared to GBP17.4 million for the equivalent prior period. The gross margin achieved was 18.2% (H1 2019: 16.7%).

Cladding Update

In response to the revised Government guidance, issued in January 2020, on the suitability of certain cladding solutions used on high-rise residential buildings, the Group is working with the owners of eight of its previously developed PBSA schemes to remediate/replace cladding. The majority of the cladding is high pressure laminate (HPL), which has been under more recent scrutiny and is covered by the revised guidance. The Group is taking proactive and responsible steps to ensure the safety of tenants, working with building owners, even though the buildings concerned were developed in accordance with all building regulations at the time of construction and no liability is accepted for the works.

Discussions with the property owners remain ongoing, but the Board currently expects that this may result in a sharing of the costs of certain remedial works with them. The gross cost to the Group could be in the range of GBP12 million to GBP15 million, over the next two years. A one-off non-underlying provision for this cost is likely to be made at the year end, once the outcome of those discussions has been established. The Group will look 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.

Working with the COVID-19 risk

The Group's response to COVID-19 was first built on securing the health and safety of our employees, tenants and partners. Secondly, we moved to conserve cash and secure our liquidity.

We adopted all relevant guidance from the UK Government, Public Health England and the World Health Organisation, implementing remote working and enhanced health and safety protocols for employees, tenants and stakeholders. The Group has now remobilised construction activities, after having made comprehensive risk assessments. We are currently operational in England, Wales and Northern Ireland at circa 75% of pre COVID-19 disruption resourcing levels, with significant site progress being maintained. The Group has worked closely with our construction supply chain and partners during this period to ensure they are paid as normal and to manage continuity for remobilising activities. We are currently unable to reinstate construction activity in Scotland due to the Scottish Government's ban on non-essential construction work.

Activity in the institutional forward sale and land purchase markets has been subdued since the period end. Whilst we anticipate that activity in these markets will increase through the second half, the Group will be able to use its strong financial position to decide whether to progress forward sales and site acquisitions in the short term if negotiated terms prove satisfactory.

The Group is supporting its student tenants through this difficult time. Watkin Jones has operating leases across several student accommodation assets. Approximately 50% of students left their term time residences prior to the lockdown being implemented. The Group has taken the decision to waive the 2019/20 final rent instalments for students who left their accommodation prior to the 23 March. We are also providing accommodation after the end of term for those who need to stay longer as a result of the disruption. The cost to the Group for these measures is circa GBP1.0 million.

We have implemented comprehensive cash conservation measures, including accessing the Government's Job Retention Scheme for furloughed employees, which at its recent peak saw 43% of the Group's employees (circa 185 employees) furloughed. Since early May 2020, the Group has begun to reemploy staff across most of its construction sites, as work has recommenced. For furloughed employees, the Group is topping up salaries to 80% of their base, where their basic salary is above the Government's cap. The annual pay increase, which was due on 1 April 2020, has not been made, and the Board has temporarily reduced director fees and senior executive base pay by 20%.

Dividend

As announced on 1 April 2020, the dividend has been temporarily suspended as a pre-emptive response to the as yet unquantifiable impact arising from COVID-19. The Board recognise the importance of the dividend to our shareholders and are committed to resuming dividends as soon as conditions stabilise.

Balance sheet and liquidity

The Group had gross cash at 31 March 2020 of GBP72.4 million (31 March 2019: GBP57.9 million). Net cash stood at GBP37.5 million (31 March 2019: GBP18.3 million), after deducting site specific loans and hire purchase creditors totalling GBP34.9 million (H1 2019: GBP39.6 million). This net cash balance is stated before deducting operating lease liabilities of GBP145.8 million arising as a result of the application of IFRS 16. The net cash balance stated before deducting the operating lease liabilities is considered a more relevant measure for the Group, as the lease liabilities relate primarily to several historic student accommodation sale and leaseback properties for which the lease rental liabilities are covered by the student rental incomes received.

At 31 March 2020 the Group had drawn GBP28.9 million against its revolving credit facility ('RCF') with HSBC. Subsequent to the period end, the Group renewed the RCF for a further five year term to May 2025, with an increase in the facility level from GBP60.0 million to GBP100.0 million on existing terms. The increased facility level therefore gives unutilised headroom of GBP71.1 million. The overdraft facility of GBP10.0 million has also been maintained.

With the gross cash balance and headroom in its banking facilities, together with cash conservation measures and the future cash inflow from the forward sold development pipeline, the Group has a resilient liquidity position.

The reduction in gross cash for the half year period of GBP43.3 million (H1 2019: GBP48.7 million) reflects the Group's normal seasonal cashflow profile which sees a cash utilisation in the first half of the year, including tax and dividend payments of GBP19.5 million for H1 2020. The Group is cash generative in the second half of the year, as the final payments due on completion of the current year's developments are received. The final payments accrue as the development works progress and this is reflected in the contract assets and trade receivables balances at 31 March 2020, which stood at GBP100.2 million (30 September 2019: GBP40.0 million).

Inventory and work in progress reduced by GBP25.6 million in the period to GBP108.6 million, reflecting the realisation of work in progress.

ESG

In the period, the Group continued to make good progress against its Environmental, Social and Governance (ESG) initiatives. The Group adheres to the strictest environmental standards and recorded zero reportable environmental incidents in the year. More than 90% of skip waste was diverted from landfill.

Commensurate with targeting higher BREEAM accreditations for our developments, we are integrating the use of greener, more sustainable materials into our builds. Low energy use initiatives, such as Combined Heating and Power (CHP), photovoltaic cells and air source heat pumps are also being looked at.

Safety is a key performance metric by which we judge operational success and we are pleased to report a 24% reduction in our combined reportable and non-reportable (minor) annual accident and incident rate to 2,855 per 100,000 employees. Training was given to our mental health first aiders and the Group continues to support mental health awareness initiatives. The Group continues to uphold strict compliance principles and procedures and maintained zero ethical or compliance breaches during H1 2020.

Fire safety remains of paramount importance to Watkin Jones and we construct our developments to high fire management specifications.

Watkin Jones is committed to acting and behaving responsibly and is in the process of scoping a coherent sustainability programme that builds upon all of its efforts to date.

IFRS 16

The Group has applied IFRS 16 "Leases" for the first time in FY 2020. This standard impacts the Group's six historic student accommodation sale and leaseback properties and leases for the rental of office space and motor vehicles. The new standard creates a right-of-use asset for these leases and a liability for future lease payment. The Group has adopted the fully retrospective approach in applying the standard, recognising its material impact on the Group's results and statement of financial position. The comparative results for H1 2019 and the statement of financial position at 31 March 2019 and 30 September 2019 have therefore been restated according to the transition arrangements set out in the standard.

The right of use assets recognised at 31 March 2020 amount to GBP127.2 million (30 September 2019: GBP131.4 million). These primarily relate to the student accommodation sale and leaseback properties, which accounted for GBP121.8 million of the balance. Corresponding lease liabilities of GBP145.8 million have been recognised (30 September 2019: GBP149.0 million), reflecting the long term nature of the student accommodation leases, which have remaining lease terms of between six and 32 years. The two leases with the longest remaining terms, Dunaskin Mill, Glasgow and New Bridewell, Bristol, which are strongly profitable, account for GBP83.3 million of this balance.

The difference between the right of use assets and lease liabilities at 30 September 2019 of GBP17.6 million, net of a deferred tax asset of GBP3.3 million, is reflected in a reduction in retained earnings of GBP14.3 million at that date.

The Group's income statements for the six months to 31 March 2020 and for the six months to 31 March 2019 have been impacted as follows:

 
                                      H1 2020                        H1 2019 
                           -----------------------------  ----------------------------- 
                               Pre      IFRS        IFRS      Pre      IFRS        IFRS 
                              IFRS        16          16     IFRS        16          16 
                                16    Impact    Reported       16    Impact    Reported 
                             GBP'm     GBP'm       GBP'm    GBP'm     GBP'm       GBP'm 
 
 Gross profit                 40.6       1.3        41.9     37.6       1.2        38.8 
 Administrative expenses    (12.8)       0.1      (12.7)   (11.6)       0.1      (11.5) 
 Operating profit 
  before exceptional 
  items                       27.8       1.4        29.2     26.0       1.3        27.3 
 Exceptional items               -         -           -    (2.6)         -       (2.6) 
                           -------  --------  ----------  -------  --------  ---------- 
 Operating profit             27.8       1.4        29.2     23.4       1.3        24.7 
 Net finance charges         (0.4)     (2.2)       (2.6)        -     (2.3)       (2.3) 
                           -------  --------  ----------  -------  --------  ---------- 
 Profit before tax            27.4     (0.8)        26.6     23.4     (1.0)        22.4 
                           -------  --------  ----------  -------  --------  ---------- 
 Adjusted EBITDA              28.6       5.6        34.2     26.6       5.5        32.1 
                           -------  --------  ----------  -------  --------  ---------- 
 

Further details on the nature of the changes to the Group's accounting required by this standard, as well as its main impacts and the adjustments made to restate the comparative figures, are provided in Note 3 to the interim financial statements.

Outlook

As previously announced, given the current economic uncertainty and level of disruption to the Group's operations caused by the COVID-19 pandemic, the Board has temporarily withdrawn any financial guidance until the impact on the Group's performance and sectors in which it operates can be more clearly understood. The outturn for FY 2020 will be largely dependent on the completion of the seven student accommodation developments due this year, the level of progress made with the construction of the forward sold FY 2021 pipeline and whether the Group decides to forward sell any of its development sites in the second half given the uncertain investment environment. However, the Group's capital light business model and robust liquidity enables such decisions to be made from a position of strength and in the long term interest of shareholders. Looking beyond this period of uncertainty, the fundamentals supporting both our core sectors remain strong, and the Group continues to be in an enviable position to progress as a market leading developer .

Richard Simpson

Chief Executive Officer

19 May 2020

Consolidated Statement of Comprehensive Income

for the six month period ended 31 March 2020 (unaudited)

 
                                                                             6 months to   6 months to    12 months to 
                                                                                31 March      31 March    30 September 
                                                                                    2020          2019            2019 
                                                                                            (Restated)      (Restated) 
                                                                     Notes       GBP'000       GBP'000         GBP'000 
   Continuing operations 
 Revenue                                                                         185,672       159,104         374,785 
 Cost of sales                                                                 (143,793)     (120,282)       (295,475) 
                                                                            ------------  ------------  -------------- 
 Gross profit                                                                     41,879        38,822          79,310 
 Administrative expenses                                                        (12,682)      (11,513)        (24,431) 
 Operating profit before exceptional 
  cost s                                                                          29,197        27,309          54,879 
 Exceptional costs                                                       5             -       (2,576)         (2,576) 
                                                                            ------------  ------------  -------------- 
 Operating profit                                                                 29,197        24,733          52,303 
 Share of profit in joint ventures                                                     -             -             286 
 Finance income                                                                      200           210             426 
 Finance costs                                                                   (2,760)       (2,567)         (5,350) 
                                                                            ------------  ------------  -------------- 
 Profit before tax from continuing operations                                     26,637        22,376          47,665 
 Income tax expense                                                      6       (5,061)       (4,607)         (9,054) 
                                                                            ------------  ------------  -------------- 
 Profit for the period attributable to ordinary equity holders of 
  the parent                                                                      21,576        17,769          38,611 
                                                                            ============  ============  ============== 
 
 Other comprehensive income 
 
 Net gain on equity instruments 
  designated at fair value through other comprehensive income                          -             -             (2) 
                                                                            ------------  ------------  -------------- 
 
 Total comprehensive income for the period attributable to 
  ordinary equity holders of the parent                                           21,576        17,769          38,609 
                                                                            ============  ============  ============== 
 
 Earnings per share for the period attributable to ordinary equity                 Pence         Pence           Pence 
 holders 
 of the parent 
 
   Basic earnings per share                                              7         8.437         6.961          15.119 
                                                                            ============  ============  ============== 
 Diluted earnings per share                                              7         8.404         6.945          15.080 
                                                                            ============  ============  ============== 
 
 Adjusted basic earnings per share (excluding exceptional costs)         7         8.437         7.769          16.028 
                                                                            ============  ============  ============== 
 
 Adjusted diluted earnings per share (excluding exceptional costs)       7         8.404         7.751          15.987 
                                                                            ============  ============  ============== 
 

Consolidated Statement of Financial Position

as at 31 March 2020 (unaudited)

 
                                                              31 March      31 March   30 September 
                                                                  2020          2019           2019 
                                                                          (Restated)     (Restated) 
                                                    Notes      GBP'000       GBP'000        GBP'000 
 Non-current assets 
 Intangible assets                                              13,564        14,123         13,844 
 Right of use assets                                  9        127,241       135,442        131,367 
 Property, plant and equipment                                   4,964         4,670          4,966 
 Investment in joint ventures                                    2,794         2,558          2,794 
 Deferred tax asset                                              3,639         3,384          3,639 
 Other financial assets                                          1,139         1,162          1,139 
                                                           -----------  ------------  ------------- 
                                                               153,341       161,339        157,749 
                                                           -----------  ------------  ------------- 
 Current assets 
 Inventory and work in progress                                108,640       153,085        134,226 
 Contract assets                                                79,211        40,825         25,578 
 Trade and other receivables                                    21,012         9,216         14,443 
 Cash and cash equivalents                           11         72,394        57,906        115,652 
                                                           -----------  ------------  ------------- 
                                                               281,257       261,032        289,899 
                                                           -----------  ------------  ------------- 
 Total assets                                                  434,598       422,371        447,648 
                                                           ===========  ============  ============= 
 Current liabilities 
 Trade and other payables                                     (69,294)      (61,496)       (81,431) 
 Contract liabilities                                          (4,462)       (8,849)        (5,164) 
 Interest-bearing loans and 
  borrowings                                                   (1,021)       (1,524)        (1,324) 
 Lease liabilities                                             (3,239)       (3,239)        (6,478) 
 Provisions                                                    (1,068)         (933)          (863) 
 Current tax liabilities                                       (6,839)       (9,412)        (7,056) 
                                                           -----------  ------------  ------------- 
                                                              (85,923)      (85,453)      (102,316) 
                                                           -----------  ------------  ------------- 
 Non-current liabilities 
 Interest-bearing loans and 
  borrowings                                                  (33,861)      (38,089)       (37,481) 
 Lease liabilities                                           (142,517)     (148,883)      (142,558) 
 Provisions                                                    (2,389)       (1,277)        (2,594) 
 Deferred tax liabilities                                      (1,042)       (1,049)        (1,042) 
                                                           -----------  ------------  ------------- 
                                                             (179,809)     (189,298)      (183,675) 
                                                           -----------  ------------  ------------- 
 Total Liabilities                                           (265,732)     (274,751)      (285,991) 
                                                           ===========  ============  ============= 
 Net assets                                                    168,866       147,620        161,657 
                                                           ===========  ============  ============= 
 Equity 
 Share capital                                                   2,553         2,553          2,553 
 Share premium                                                  84,612        84,612         84,612 
 Merger reserve                                               (75,383)      (75,383)       (75,383) 
 
 Fair value reserve of financial assets at FVOCI                   434           436            434 
 Share-based payment reserve                                     2,263         2,166          2,311 
 Retained earnings                                             154,387       133,236        147,130 
                                                           -----------  ------------  ------------- 
 Total Equity                                                  168,866       147,620        161,657 
                                                           ===========  ============  ============= 
 

Consolidated Statement of Changes in Equity

for the six month period ended 31 March 2020 (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 
 2018                         2,553    84,612    (75,383)            436           84     141,217    153,519 
Effect of initial 
 application of IFRS 
 16 (note 3)                      -         -           -              -            -    (12,655)   (12,655) 
Profit for the period             -         -           -              -            -      17,769     17,769 
Share-based payments              -         -           -              -        2,063           -      2,063 
Dividend paid (note 
 8)                               -         -           -              -            -    (13,095)   (13,095) 
Deferred tax equity 
 movement                         -         -           -              -           19           -         19 
                          ---------  --------  ----------  -------------  -----------  ----------  --------- 
Balance at 31 March 
 2019 
 (restated)                   2,553    84,612    (75,383)            436        2,166     133,236    147,620 
                          =========  ========  ==========  =============  ===========  ==========  ========= 
 
Profit for the period             -         -           -              -            -      20,842     20,842 
Share-based payments              -         -           -              -          145           -        145 
Dividend paid (note 
 8)                               -         -           -              -            -     (7,018)    (7,018) 
Deferred tax equity 
 movement                         -         -           -              -            -          70         70 
Other comprehensive 
 income                           -         -           -            (2)            -           -        (2) 
                          ---------  --------  ----------  -------------  -----------  ----------  --------- 
Balance at 30 September 
 2019 (restated)              2,553    84,612    (75,383)            434        2,311     147,130    161,657 
                          =========  ========  ==========  =============  ===========  ==========  ========= 
 
  Profit for the period           -         -           -              -            -      21,576     21,576 
Share-based payments              -         -           -              -         (48)           -       (48) 
Dividend paid (note 
 8)                               -         -           -              -            -    (14,319)   (14,319) 
                          ---------  --------  ----------  -------------  -----------  ----------  --------- 
Balance at 31 March 
 2020                         2,553    84,612    (75,383)            434        2,263     154,387    168,866 
                          =========  ========  ==========  =============  ===========  ==========  ========= 
 

Consolidated Statement of Cash Flows

for the six month period ended 31 March 2020 (unaudited)

 
                                                 6 months    6 months      12 months 
                                                       to          to             to 
                                                 31 March    31 March   30 September 
                                                     2020        2019           2019 
                                                           (Restated)     (Restated) 
                                         Notes    GBP'000     GBP'000        GBP'000 
Cash flows from operating activities 
Cash (outflow)/inflow from 
 operations                                 10   (13,058)    (40,164)         38,942 
Interest received                                     200         210            428 
Interest paid                                     (2,953)     (2,760)        (5,502) 
Interest element of hire purchase 
 payments                                            (23)        (23)           (48) 
Tax paid                                          (5,211)     (2,871)        (9,769) 
                                                ---------  ----------  ------------- 
Net cash (outflow)/inflow from 
 operating 
 activities                                      (21,045)    (45,608)         24,051 
                                                =========  ==========  ============= 
 
  Cash flows from investing activities 
Acquisition of property, plant 
 and equipment                                      (672)       (185)          (361) 
Proceeds on disposal of property, 
 plant and equipment                                   19          39             87 
Cash distribution received 
 from other financial assets                            -         188            209 
Net cash (outflow)/inflow from 
 investing activities                               (653)          42           (65) 
                                                =========  ==========  ============= 
 
  Cash flows from financing activities 
Dividend paid                                8   (14,319)    (13,095)       (20,113) 
Capital element of hire purchase 
 payments                                           (526)       (621)        (1,307) 
Payment of lease liabilities                      (3,239)     (3,204)        (6,492) 
Drawdown of bank loans                              1,302      16,042         46,244 
Repayment of bank loans                           (4,778)     (2,290)       (33,306) 
Net cash outflow from financing 
 activities                                      (21,560)     (3,168)       (14,974) 
                                                =========  ==========  ============= 
 
Net (decrease)/increase in 
 cash                                            (43,258)    (48,734)          9,012 
Cash and cash equivalents at 
 beginning of the period                          115,652     106,640        106,640 
                                                ---------  ----------  ------------- 
Cash and cash equivalents at 
 end of the period                          11     72,394      57,906        115,652 
                                                =========  ==========  ============= 
 

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 Units 21-22, Llandygai Industrial Estate, Bangor, Gwynedd, LL57 4YH.

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 2020 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 2020 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 2019, which has been prepared in accordance with IFRSs as adopted by the European Union. 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 434 of the Companies Act 2006.

This report was approved by the directors on 18 May 2020.

   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 2020. To the extent that IFRS at 30 September 2020 do 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 2019. 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 2019 with the exception of IFRS 16 "Leases".

IFRS 16 supersedes IAS 17 "Leases" and IFRIC 4 "Determining whether an Arrangement contains a Lease". The standard introduces new or amended requirements with respect to lease accounting under a single on-balance sheet model. It introduces significant changes to lessee accounting by removing the distinction between operating and finance leases, requiring the recognition of a right of use asset and a lease liability at commencement of all leases, except for leases for a term of less than twelve months and leases of low value assets. In contrast to lessee accounting, the requirements for lessor accounting are largely unchanged.

The Group adopted IFRS 16 "Leases" from 1 October 2019. The Group has chosen to apply the full retrospective approach under which the retrospective restatement of each prior reporting period is presented. The Group has elected to only apply IFRS 16 to contracts previously identified as a lease under IAS 17 "Leases".

Nature of the effect of adoption of IFRS 16

The Group has six historic student accommodation sale and leaseback properties and leases for the rental of offices and motor vehicles. Before the adoption of IFRS 16, the Group classified these leases as operating leases as they did not transfer substantially all of the risks and rewards incidental to the ownership of the respective leased assets. As such, the leased assets were not capitalised and the lease payments were recognised as rent expense in the statement of comprehensive income on a straight-line basis over the lease term.

Upon adoption of IFRS 16, the Group has applied the following approach :

-- to recognise right-of-use assets in the consolidated statement of financial position. These were initially measured at the present value of the future minimum lease payments from the inception of each lease discounted at the Group's incremental borrowing rate at the lease commencement date. Depreciation is recognised in relation to this right-of-use asset with the initial asset valuation calculated on the basis that depreciation has been applied from the inception of the lease;

-- to recognise lease liabilities in the consolidated statement of financial position. These were initially measured at the present value of the future minimum lease payment from the inception of each lease discounted at the Group's incremental borrowing rate at the lease commencement date. After the commencement date, the amount of lease liabilities has been increased to reflect the accretion of interest and reduced for the lease payments made up until the earliest reporting period presented; and

-- the difference between the right-of-use assets and lease liabilities have been recognised as an adjustment to equity at the beginning of the earliest comparative period presented. This difference has been partially offset by the recognition of a deferred tax asset due to the changes in assets and liabilities resulting from IFRS 16.

The consolidated interim financial statements as of 31st March 2019 have been restated and the restated consolidated statement of financial position as of 30th September 2019 is also presented. The impacts of IFRS 16 are summarised hereafter and note 9 summarises the right-of-use assets which have been recognised upon the standard's adoption:

Impact on the consolidated income statement

Period for the six months ended 31 March 2019:

 
                                                                             Published     IFRS 16   Restated accounts 
                                                                              accounts      Impact 
                                                                               GBP'000     GBP'000             GBP'000 
   Continuing operations 
 Revenue                                                                       159,104           -             159,104 
 Cost of sales                                                               (121,469)       1,187           (120,282) 
                                                                            ----------  ----------  ------------------ 
 Gross profit                                                                   37,635       1,187              38,822 
 Administrative expenses                                                      (11,612)          99            (11,513) 
 Operating profit before exceptional costs                                      26,023       1,286              27,309 
 Exceptional costs                                                             (2,576)           -             (2,576) 
                                                                            ----------  ----------  ------------------ 
 Operating profit                                                               23,447       1,286              24,733 
 Finance income                                                                    210           -                 210 
 Finance costs                                                                   (223)     (2,344)             (2,567) 
                                                                            ----------  ----------  ------------------ 
 Profit before tax from continuing operations                                   23,434     (1,058)              22,376 
 Income tax expense                                                            (4,787)         180             (4,607) 
                                                                            ----------  ----------  ------------------ 
 Profit for the period attributable to 
  ordinary equity holders of the parent                                         18,647       (878)              17,769 
                                                                            ==========  ==========  ================== 
 
 
 Total comprehensive income for the period attributable to ordinary equity 
  holders of the parent                                                         18,647       (878)              17,769 
                                                                            ==========  ==========  ================== 
 
 Earnings per share for the period attributable to ordinary equity holders       Pence       Pence               Pence 
 of the parent 
 
   Basic earnings per share                                                      7.305     (0.344)               6.961 
                                                                            ==========  ==========  ================== 
 Diluted earnings per share                                                      7.288     (0.343)               6.945 
                                                                            ==========  ==========  ================== 
 Adjusted basic earnings per share (excluding exceptional costs)                 8.113     (0.344)               7.769 
                                                                            ==========  ==========  ================== 
 Adjusted diluted earnings per share (excluding exceptional costs)               8.094     (0.343)               7.751 
                                                                            ==========  ==========  ================== 
 

Impact on the consolidated statement of financial position

Position as at 31 March 2019:

 
                                                    Published accounts     IFRS 16   Restated accounts 
                                                                            Impact 
                                                               GBP'000     GBP'000             GBP'000 
 Non-current assets 
 Intangible assets                                              14,123           -              14,123 
 Right of use assets                                                 -     135,442             135,442 
 Property, plant and equipment                                   4,670           -               4,670 
 Investment in joint ventures                                    2,558           -               2,558 
 Deferred tax asset                                                236       3,148               3,384 
 Other financial assets                                          1,162           -               1,162 
                                                   -------------------  ----------  ------------------ 
                                                                22,749     138,590             161,339 
                                                   -------------------  ----------  ------------------ 
 Current assets 
 Inventory and work in progress                                153,085           -             153,085 
 Contract assets                                                40,825           -              40,825 
 Trade and other receivables                                     9,216           -               9,216 
 Cash and cash equivalents                                      57,906           -              57,906 
                                                   -------------------  ----------  ------------------ 
                                                               261,032           -             261,032 
                                                   -------------------  ----------  ------------------ 
 Total assets                                                  283,781     138,590             422,371 
                                                   ===================  ==========  ================== 
 Current liabilities 
 Trade and other payables                                     (61,496)           -            (61,496) 
 Contract liabilities                                          (8,849)           -             (8,849) 
 Interest-bearing loans and borrowings                         (1,524)           -             (1,524) 
 Lease liabilities                                                   -     (3,239)             (3,239) 
 Provisions                                                      (933)           -               (933) 
 Current tax liabilities                                       (9,412)           -             (9,412) 
                                                   -------------------  ----------  ------------------ 
                                                              (82,214)     (3,239)            (85,453) 
                                                   -------------------  ----------  ------------------ 
 Non-current liabilities 
 Interest-bearing loans and borrowings                        (38,089)           -            (38,089) 
 Lease liabilities                                                   -   (148,883)           (148,883) 
 Provisions                                                    (1,277)           -             (1,277) 
 Deferred tax liabilities                                      (1,049)           -             (1,049) 
                                                   -------------------  ----------  ------------------ 
                                                              (40,415)   (148,883)           (189,298) 
                                                   -------------------  ----------  ------------------ 
 Total Liabilities                                           (122,629)   (152,122)           (274,751) 
                                                   ===================  ==========  ================== 
 Net assets                                                    161,152    (13,532)             147,620 
                                                   ===================  ==========  ================== 
 Equity 
 Share capital                                                   2,553           -               2,553 
 Share premium                                                  84,612           -              84,612 
 Merger reserve                                               (75,383)           -            (75,383) 
 Fair value reserve of financial assets at FVOCI                   436           -                 436 
 Share-based payment reserve                                     2,166           -               2,166 
 Retained earnings                                             146,768    (13,532)             133,236 
                                                   -------------------  ----------  ------------------ 
 Total Equity                                                  161,152    (13,532)             147,620 
                                                   ===================  ==========  ================== 
 

Position as at 30 September 2019:

 
                                                    Published accounts     IFRS 16   Restated accounts 
                                                                            Impact 
                                                               GBP'000     GBP'000             GBP'000 
 Non-current assets 
 Intangible assets                                              13,844           -              13,844 
 Right of use assets                                                 -     131,367             131,367 
 Property, plant and equipment                                   4,966           -               4,966 
 Investment in joint ventures                                    2,794           -               2,794 
 Deferred tax asset                                                290       3,349               3,639 
 Other financial assets                                          1,139           -               1,139 
                                                   -------------------  ----------  ------------------ 
                                                                23,033     134,716             157,749 
                                                   -------------------  ----------  ------------------ 
 Current assets 
 Inventory and work in progress                                134,226           -             134,226 
 Contract assets                                                25,578           -              25,578 
 Trade and other receivables                                    14,443           -              14,443 
 Cash and cash equivalents                                     115,652           -             115,652 
                                                   -------------------  ----------  ------------------ 
                                                               289,899           -             289,899 
                                                   -------------------  ----------  ------------------ 
 Total assets                                                  312,932     134,716             447,648 
                                                   ===================  ==========  ================== 
 Current liabilities 
 Trade and other payables                                     (81,407)        (24)            (81,431) 
 Contract liabilities                                          (5,164)           -             (5,164) 
 Interest-bearing loans and borrowings                         (1,324)           -             (1,324) 
 Lease liabilities                                                   -     (6,478)             (6,478) 
 Provisions                                                      (863)           -               (863) 
 Current tax liabilities                                       (7,056)           -             (7,056) 
                                                   -------------------  ----------  ------------------ 
                                                              (95,814)     (6,502)           (102,316) 
                                                   -------------------  ----------  ------------------ 
 Non-current liabilities 
 Interest-bearing loans and borrowings                        (37,481)           -            (37,481) 
 Lease liabilities                                                   -   (142,558)           (142,558) 
 Provisions                                                    (2,594)           -             (2,594) 
 Deferred tax liabilities                                      (1,042)           -             (1,042) 
                                                   -------------------  ----------  ------------------ 
                                                              (41,117)   (142,558)           (183,675) 
                                                   -------------------  ----------  ------------------ 
 Total Liabilities                                           (136,931)   (149,060)           (285,991) 
                                                   ===================  ==========  ================== 
 Net assets                                                    176,001    (14,344)             161,657 
                                                   ===================  ==========  ================== 
 Equity 
 Share capital                                                   2,553           -               2,553 
 Share premium                                                  84,612           -              84,612 
 Merger reserve                                               (75,383)           -            (75,383) 
 Fair value reserve of financial assets at FVOCI                   434           -                 434 
 Share-based payment reserve                                     2,311           -               2,311 
 Retained earnings                                             161,474    (14,344)             147,130 
                                                   -------------------  ----------  ------------------ 
 Total Equity                                                  176,001    (14,344)             161,657 
                                                   ===================  ==========  ================== 
 

Impact on the consolidated statement of cash flows

Period for the six months ended 31 March 2019:

 
                                         Published        IFRS   Restated 
                                          accounts   16 Impact   accounts 
                                           GBP'000     GBP'000    GBP'000 
Cash flows from operating activities 
Cash (outflow)/inflow from operations     (45,712)       5,548   (40,164) 
Interest received                              210           -        210 
Interest paid                                (416)     (2,344)    (2,760) 
Interest element of finance 
 lease rental payments                        (23)           -       (23) 
Tax paid                                   (2,871)           -    (2,871) 
                                         ---------  ----------  --------- 
Net cash (outflow)/inflow from 
 operating activities                     (48,812)       3,204   (45,608) 
                                         =========  ==========  ========= 
 
  Cash flows from investing activities 
Acquisition of property, plant 
 and equipment                               (185)           -      (185) 
Proceeds on disposal of property, 
 plant and equipment                            39           -         39 
Cash distribution received from 
 other financial assets                        188           -        188 
Net cash inflow from investing 
 activities                                     42           -         42 
                                         =========  ==========  ========= 
 
  Cash flows from financing activities 
Dividend paid                             (13,095)           -   (13,095) 
Capital element of finance lease 
 rental payments                             (621)           -      (621) 
Payment of lease liabilities                     -     (3,204)    (3,204) 
Drawdown of bank loans                      16,042           -     16,042 
Repayment of bank loans                    (2,290)           -    (2,290) 
Net cash inflow/(outflow) from 
 financing activities                           36     (3,204)    (3,168) 
                                         =========  ==========  ========= 
 
Net decrease in cash                      (48,734)           -   (48,734) 
Cash and cash equivalents at 
 beginning of the period                   106,640           -    106,640 
                                         ---------  ----------  --------- 
Cash and cash equivalents at 
 end of the period                          57,906           -     57,906 
                                         =========  ==========  ========= 
 
   4.      Segmental reporting 

The Group has identified four segments for which it reports under IFRS 8 'Operating segments'. The following represents the segments that the Group operates in:

   a.          Student accommodation - the development of purpose-built student accommodation; 
   b.         Build to rent - the development of build to rent accommodation; 
   b.         Residential - the development of traditional residential property; and 

c. 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.

All revenues arise in the UK.

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 2020 (unaudited)     Accommodation      rent   Residential      management   Corporate      Total 
                                   GBP'000   GBP'000       GBP'000         GBP'000     GBP'000    GBP'000 
 
 Segmental revenue                 120,766    36,543        24,311           4,147        (95)    185,672 
                           ---------------  --------  ------------  --------------  ----------  --------- 
 Segmental gross 
  profit                            29,150     5,959         4,432           2,565       (227)     41,879 
 Administration 
  expenses                               -         -             -               -    (12,682)   (12,682) 
 Finance income                          -         -             -               -         200        200 
 Finance costs                           -         -             -               -     (2,760)    (2,760) 
 Profit/(loss) 
  before tax                        29,150     5,959         4,432           2,565    (15,469)     26,637 
 Taxation                                -         -             -               -     (5,061)    (5,061) 
                           ---------------  --------  ------------  --------------  ----------  --------- 
 Profit/(loss) 
  for the period                    29,150     5,959         4,432           2,565    (20,530)     21,576 
                           ===============  ========  ============  ==============  ==========  ========= 
 
 Inventory and 
  WIP                               22,067    42,807        33,599               -      10,167    108,640 
                           ---------------  --------  ------------  --------------  ----------  --------- 
 
 
 
                                               Build 
 6 months to 31                    Student        to                 Accommodation 
  March 2019 (unaudited)     Accommodation      rent   Residential      management   Corporate      Total 
                                   GBP'000   GBP'000       GBP'000         GBP'000     GBP'000    GBP'000 
 
 Segmental revenue                 128,754     8,767        17,433           3,857         293    159,104 
                           ---------------  --------  ------------  --------------  ----------  --------- 
 Segmental gross 
  profit                            31,765     1,904         2,918           2,413       (178)     38,822 
 Administration 
  expenses                               -         -             -               -    (11,513)   (11,513) 
 Exceptional costs                       -         -             -               -     (2,576)    (2,576) 
 Finance income                          -         -             -               -         210        210 
 Finance costs                           -         -             -               -     (2,567)    (2,567) 
                           ---------------  --------  ------------  --------------  ----------  --------- 
 Profit/(loss) 
  before tax                        31,765     1,904         2,918           2,413    (16,624)     22,376 
 Taxation                                -         -             -               -     (4,607)    (4,607) 
                           ---------------  --------  ------------  --------------  ----------  --------- 
 Profit/(loss) 
  for the period                    31,765     1,904         2,918           2,413    (21,231)     17,769 
                           ===============  ========  ============  ==============  ==========  ========= 
 
 Inventory and 
  WIP                               44,464    55,543        43,948               -       9,130    153,085 
                           ---------------  --------  ------------  --------------  ----------  --------- 
 
 
   5.      Exceptional costs 
 
                                                                             6 months to   6 months to    12 months to 
                                                                                31 March      31 March    30 September 
                                                                                    2020          2019            2019 
                                                                                 GBP'000       GBP'000         GBP'000 
 C ost of compensating the Group's CEO, Richard Simpson, for his forfeit 
  Unite Group plc ("Unite") 
  2018 bonus                                                                           -         (411)           (411) 
 Cost of Watkin Jones plc share awards issued in compensating Richard 
  Simpson for his forfeit 
  Unite 2015 - 2017 share awards                                                       -       (2,165)         (2,165) 
 
   Total exceptional costs                                                             -       (2,576)         (2,576) 
                                                                           =============  ============  ============== 
 
   6.      Income taxes 

The tax expense for the period has been calculated by applying the estimated tax rate for the financial year ending 30 September 2020 of 19.0 % to the profit for the period.

   7.      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 
                                                                        2020                 2019                 2019 
                                                                     GBP'000              GBP'000              GBP'000 
 Profit for the period attributable to ordinary equity 
  holders of the parent                                               21,576               17,769               38,611 
 
   Adjusted profit for the period attributable to 
   ordinary equity holders of the parent (excluding 
   exceptional costs after tax)                                       21,576               19,831               40,932 
 
                                                            Number of shares     Number of shares     Number of shares 
 
 Number of ordinary shares for basic earnings per share          255,722,099          255,268,875          255,382,181 
 
   Adjustments for the effects of dilutive potential 
   ordinary shares                                                 1,016,400              580,198              658,650 
 
   Weighted average number for diluted earnings per 
   share                                                         256,738,499          255,849,073          256,040,831 
 
 
                                                                       Pence                Pence                Pence 
 Basic earnings per share 
 Basic profit for the period attributable to ordinary 
  equity holders of the parent                                         8.437                6.961               15.119 
 
 
  Adjusted basic earnings per share (excluding 
  exceptional costs after tax) 
 Adjusted profit for the period attributable to 
  ordinary equity holders of the parent                                8.437                7.769               16.028 
 
   Diluted earnings per share 
 Basic profit for the period attributable to diluted 
  equity holders of the parent                                         8.404                6.945               15.080 
 
  Adjusted diluted earnings per share (excluding 
  exceptional costs after tax) 
 Adjusted profit for the period attributable to diluted 
  equity holders of the parent                                         8.404                7.751               15.987 
 
   8.      Dividends 
 
                                                       6 months to   6 months to    12 months to 
                                                          31 March      31 March    30 September 
                                                              2020          2019            2019 
                                                           GBP'000       GBP'000         GBP'000 
 Final dividend paid in February 2019 of 5.13 pence              -        13,095          13,095 
 Interim dividend paid in June 2019 of 2.75 pence                -             -           7,018 
 Final dividend paid in February 2020 of 5.6 pence          14,319             -               - 
                                                      ------------  ------------  -------------- 
                                                            14,319        13,095          20,113 
                                                      ============  ============  ============== 
 

The interim dividend that would have been paid in June this year has been suspended, due to the impact of Covid-19 on the business.

   9.      Right of use assets 
 
                         Student Accommodation Leases                     Motor Vehicle Leases 
                                                          Office Leases 
                                                                                                   Total 
                                              GBP'000           GBP'000                GBP'000   GBP'000 
 Cost 
 At 30 September 2018                         172,228             9,411                  1,577   183,216 
 Additions                                          -                 -                    125       125 
 Disposals                                          -                 -                  (105)     (105) 
                        -----------------------------  ----------------  ---------------------  -------- 
 
 At 31 March 2019                             172,228             9,411                  1,597   183,236 
 Additions                                          -                 -                    247       247 
 Disposals                                          -                 -                  (183)     (183) 
                        -----------------------------  ----------------  ---------------------  -------- 
 
 At 30 September 2019                         172,228             9,411                  1,661   183,300 
 Additions                                          -                 -                    283       283 
 Disposals                                          -                 -                  (248)     (248) 
                        -----------------------------  ----------------  ---------------------  -------- 
 At 31 March 2020                             172,228             9,411                  1,696   183,335 
                        -----------------------------  ----------------  ---------------------  -------- 
 
 
 Depreciation 
 At 30 September 2018     39,658   3,412     562   43,632 
 Charge for the period     3,598     396     227    4,221 
 Disposals                     -       -    (59)     (59) 
                         -------  ------  ------  ------- 
 
 At 31 March 2019         43,256   3,808     730   47,794 
 Charge for the period     3,598     396     268    4,262 
 Disposals                     -       -   (123)    (123) 
                         -------  ------  ------  ------- 
 
 At 30 September 2019     46,854   4,204     875   51,933 
 Charge for the period     3,598     396     305    4,299 
 Disposals                     -       -   (138)    (138) 
                         -------  ------  ------  ------- 
 At 31 March 2020         50,452   4,600   1,042   56,094 
                         -------  ------  ------  ------- 
 
 
 Net Book Value 
 At 31 March 2020        121,776   4,811     654   127,241 
                        --------  ------  ------  -------- 
 At 30 September 2019    125,374   5,207     786   131,367 
                        --------  ------  ------  -------- 
 At 31 March 2019        128,972   5,603     867   135,442 
                        --------  ------  ------  -------- 
 At 30 September 2018    132,570   5,999   1,015   139,584 
                        --------  ------  ------  -------- 
 
   10.   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 
                                             2020         2019           2019 
                                          GBP'000      GBP'000        GBP'000 
Profit before tax                          26,637       22,335         47,688 
Depreciation                                4,676        4,526          9,318 
Amortisation of intangible assets             280          280            559 
Loss on sale of plant and equipment           (3)         (17)           (42) 
Finance income                              (200)        (210)          (428) 
Finance costs                               2,760        2,567          5,335 
Share of profit in joint ventures               -            -          (286) 
Decrease/(increase) in inventory 
 and work in progress                      25,586     (20,306)        (1,948) 
Interest capitalised in development 
 land, inventory and work in 
 progress                                     216          216            216 
(Increase)/decrease in contract 
 assets                                  (53,633)     (32,067)       (16,820) 
(Increase)/decrease in trade 
 and other receivables                    (7,686)        9,606          4,682 
(Decrease)/increase in contract 
 liabilities                                (702)      (5,465)        (9,150) 
(Decrease)/increase in trade 
 and other payables                      (10,941)     (23,231)        (3,196) 
(Decrease)/increase in provision 
 for property lease commitment                  -        (461)            787 
(Decrease)/Increase in share-based 
 payment reserve                             (48)        2,063          2,227 
                                      -----------  -----------  ------------- 
Net cash (outflow)/inflow from 
 operating activities                    (13,058)     (40,164)         38,942 
                                      -----------  -----------  ------------- 
 
   11.   Analysis of net (debt)/cash 
 
                                               31 March        31 March      30 September 
                                                   2020            2019              2019 
                                                GBP'000         GBP'000           GBP'000 
 
  Cash at bank and in hand                       72,394          57,906           115,652 
Hire purchase creditors                           (866)         (1,403)           (1,392) 
Lease liabilities                             (145,756)       (152,122)         (149,036) 
Bank loans                                     (34,016)        (38,210)          (37,413) 
                                         --------------  --------------  ---------------- 
Net debt                                      (108,244)       (133,829)          (72,189) 
                                         --------------  --------------  ---------------- 
 
Net cash (excluding lease liabilities)           37,512          18,293            76,847 
                                         ==============  ==============  ================ 
 

- Ends -

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.

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