Revenue rises, profits fall in first half for Watkin Jones

Watkin Jones reported “sustained strong delivery” across its in-build schemes and pipeline development in a first-half update on Wednesday, giving its board confidence in the group's full year performance.

The AIM-traded firm said that as expected, revenue for the six months ended 31 March was ahead of the same period last year.

Gross profit and operating profit, however, were expected to be below last year, reflecting “specific” 2022 financial year factors, Watkin Jones explained.

It said there was a higher proportion of land sales in the period, which generated a lower margin than the ensuing development activity.

The group completed three land sales in its first half with revenue of £55m, compared to nil a year ago.

Watkin Jones also put the fall in profits down to the planned portfolio sale of several purpose-built student accommodation (PBSA) assets, which was under offer and expected to close in the second half.

The board said the business was still “proactively managing” inflationary price rises in the period for both asset values and construction costs.

That involved a number of “open book” discussions with purchasers during the sales process.

While in some cases that had lengthened transaction timeframes, to date the firm said it had been able to successfully maintain its margins.

The business saw a rising level of investor demand and liquidity for residential-for-rent assets in the period, and the group said it had another “significant” PBSA asset currently under offer for sale.

There were a number of further assets at earlier stages of marketing, and which were said to be generating strong interest.

Watkin Jones said its secured development pipeline stood at £1.8bn at period end, up from £1.4bn year-on-year.

It said it had “good liquidity”, with gross cash of £45m - down from £80m - and net cash of £27m - down from £31m - at the half-year end.

The company said it was awaiting the government's detailed plans on initiatives relating to historic fire safety issues.

Its board said it believed that residential leaseholders should not bear the cost of cladding and critical fire safety defect remediation, and would update investors once government proposals were published and fully evaluated.

“We have continued to build on the positive momentum from the second half of last year,” said chief executive officer Richard Simpson.

“We are experiencing very strong investor demand across the markets in which we operate and are well progressed with a number of significant forward sales.

“This, together with our current momentum, gives confidence in delivery of our full year expectations.”

Watkin Jones said it would release its interim results for the six months ended 31 March on 17 May.

At 1005 BST, shares in Watkin Jones were down 0.31% at 252.71p.