TIDMWJG
RNS Number : 4426E
Watkin Jones plc
06 November 2020
For immediate release 6 November 2020
Watkin Jones plc
('Watkin Jones' or the 'Group')
FY-2020 Trading Update
'Active second half drives future confidence across the
business'
Watkin Jones plc (AIM:WJG), the UK's leading developer and
manager of residential for rent with a focus on the build to rent
('BtR') and purpose built student accommodation ('PBSA') sectors,
is pleased to provide a trading update for the year ended 30
September 2020 (the 'year' or '2020').
Highlights
-- Resilient operational and financial performance, with seven
developments successfully delivered despite lockdown
restrictions
-- Nine new development sites secured in the second half of the
year, with three more expected to be secured shortly, significantly
strengthening our BtR and PBSA pipelines
-- Increased activity in the institutional forward sale market
demonstrates confidence in the long term demand for BtR and PBSA.
Two PBSA developments forward sold subsequent to the year end
-- Strong second half recovery with adjusted operating profit
for 2020 expected to be in the range GBP48.0 million to GBP50.0
million, with revenues of circa GBP350.0 million
-- Repayment of all COVID-19 financial assistance received from
the government this year, totalling GBP0.8 million, in view of the
recovery in performance
-- Intention to pay a full year dividend for 2020 in line with
our policy of 2.0x cover, reflecting our strong cash position,
subject to there being no material deterioration in market
conditions
Commenting on the year, Richard Simpson, CEO of Watkin Jones,
said: "I am really encouraged by our ability to adapt and overcome
the numerous challenges presented by the ongoing pandemic, not
least for our customers for whom we continue to work tirelessly to
ensure that their needs are being attended to. All of this simply
would not have been possible without the enormous commitment and
resilience of both our people and our suppliers and I would
personally like to extend my sincere thanks to them for their
continued hard work.
"As a result of their actions, we have had a strong second half
to the year. We have successfully completed seven schemes and made
excellent progress in growing our development pipeline, which will
deliver returns in the future. We have also started to see growing
evidence that institutional investors are beginning to recover
their appetite for forward funding developments in both BtR and
PBSA, and this is confirmed by our news today that we have forward
sold two PBSA developments to Student Roost (owned by Brookfield)
for GBP48.8 million.
"We are mindful of the continued disruption and hardship from
the COVID-19 pandemic, and so, along with ensuring the well-being
of our employees, customers and partners, we have repaid all
government financial assistance that we received this year. The
underlying market dynamics for residential for rent, both student
and build to rent, remain strong. As we enter our 2021 financial
year, the business has gained real momentum and, with our
resilient, diverse and capital light business model, we believe
that we are well placed to navigate the challenges and are
confident in the future. Whilst the duration of the latest lockdown
measures introduced remains uncertain, we do not currently
anticipate any significant impact on our operations."
Operations
Through the pandemic, our first priority has been ensuring the
wellbeing of all our employees, tenants and partners. We have
significantly increased the support we provide to employees and the
students who live with us and this has contributed to COVID-secure
accreditation from the British Safety Council for both our
workplaces and for the buildings we manage.
We were able to swiftly remobilise construction activities, with
appropriate health and safety practices in place, when government
restrictions began to ease. We completed six PBSA schemes (2,256
beds) and one BtR scheme for 159 apartments. As previously
announced, only one PBSA scheme has been delayed beyond the start
of the new term, and work continues alongside the purchaser and
university to minimise the impact on students.
Our accommodation management business, Fresh Property Group
('FPG'), mobilised nine new PBSA schemes in the year (3,593 beds),
ready for occupation and management from the start of the 2020/21
academic year, and won mandates for the future management of 1,414
PBSA beds and BtR apartments. At the start of 2021, FPG had 20,179
PBSA beds and BtR apartments under management across 66
schemes.
Our house building division saw a strong pick up in sales
following the relaxation of lockdown measures and introduction of
the temporary stamp duty relief. The division completed 95 sales in
2020 and is well positioned with 25 homes exchanged or reserved
going into 2021.
Financial performance
We expect 2020 adjusted operating profit to be in the range
GBP48.0 million to GBP50.0 million from revenues of circa GBP350.0
million. We have also incurred certain non-underlying costs in the
year associated with the COVID-19 disruption of approximately
GBP6.0 million and the previously announced provision for cladding
replacement costs, now expected to be approximately GBP15.0
million.
The current COVID-19 disruption to the student letting market
does not cause any significant exposure to us in respect of the fee
revenue earned by FPG on its contracted portfolio of assets under
management. However, as previously announced, we do hold six legacy
leased PBSA assets. The lower level of student occupancy for the
2020/21 academic year is currently expected to result in a
reduction of revenue for us in 2021 of approximately GBP5.0
million. This will result in an impairment in the carrying value of
our right of use assets, the cost of which is expected to be GBP1.9
million and is included in the non-underlying COVID-19 costs
referred to above.
The resilience of the business is reflected in our continued
strong cash generation. We expect to report a 2020 year-end gross
cash balance of circa GBP130.0 million and a net cash balance of
GBP90.0 million, after deducting site specific loans of GBP40.0
million.
Forward sale markets
Activity in the institutional forward sale markets started to
recover in the latter part of 2020 and we are pleased to report
that post the year end we forward sold two PBSA sites (659 beds),
in York and Bristol, to Student Roost (owned by Brookfield) for
delivery in 2022. The consideration payable to Watkin Jones for the
development works over the next two years, net of client funding
costs, is GBP48.8 million. We are in negotiation on further
potential sales from both our BtR and PBSA pipelines and we
continue to achieve margins in line with previously guided
levels.
Development pipeline
The development pipeline of BtR and PBSA sites continued to
build in the second half of 2020, with nine development sites
secured and a further three expected to be secured imminently.
These development sites are well located in London, Edinburgh,
Manchester, Birmingham, Bristol, Glasgow, York, Guildford and
Leicester.
We also secured planning permissions for 296 BtR apartments and
992 PBSA beds across five sites.
Our delivery pipeline now comprises over 4,350 BtR apartments
and 8,450 PBSA beds as follows:
Delivery Pipeline BtR PBSA
(Apartments) (Beds)
Total 2021 2022+ Total 2021 2022+
pipeline pipeline
Total pipeline 4,357 857 3,500 8,456 3,192 5,264
Forward sold 928 857 71 3,648 2,730 918
Forward sales in negotiation 422 - 422 1,214 462 752
Sites secured 2,760 - 2,760 3,024 - 3,024
Site acquisitions
in legals 247 - 247 570 - 570
We are well placed to capitalise on opportunities presented
during this period of disruption and we will continue to add to our
development pipeline over the coming months, whilst being careful
to protect our liquidity position against the potential for further
interruption to the forward sale markets and to building
activities.
Note: References to 2020, 2021 and 2022 are to our financial
years ended 30(th) September.
Notice of Final Results
We will make a further announcement in due course regarding the
specific timing of our Final 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 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
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