Developer buoyed by increased profit from student housing schemes
Watkin Jones has drastically reduced its annual pre-tax losses but still remained narrowly in the red at its year end.
The build-to-rent (BTR) and student housing specialist today reported a pre-tax loss of 拢300,000 for the year to 30 September 2024.
This is down drastically on the 拢42.5m loss the previous year and follows a turbulent period which saw a change in leadership and restructuring following a profit warning in 2023.
The firm made an operating profit 鈥� which excludes certain one-off costs 鈥� of 拢3.6m, compared to a loss of 拢38m for the previous year.
Watkin Jones said the improved profitability of its student housing developments was the 鈥渕ain driver鈥� of its stronger operating profit performance.
The housebuilder said the significant improvement in operating profit reflected the sale of two schemes, a 397-bed student housing scheme in Stratford to Watkin Jones鈥� joint venture with Lloyds Banking Group鈥檚 Housing Growth Partnership and the 260-bed Gas Lane scheme in Bristol.
The developer鈥檚 student housing business increased its gross profit 19.3% to 拢13.6m, while its gross margin rose sharply from 6.5% to 11.6% which it said 鈥渞eflects a recovery towards the margins we have historically earned in this sector鈥�. The student business, however, saw its revenue drop 拢175.7m to 拢117.6m, which it attributed to the accounting treatment of the Stratford sale.
Watkin Jones鈥� larger BTR business increased its turnover from 拢207.7m to 拢211.3m. Its gross profit however dipped 9.1% from 拢19.8m to 拢18m. It said this 鈥渞eflected the lack of land sales in the period, with the build margins of certain in-year schemes being lower than typical land margins鈥�.
Watkin Jones reduced its net provision for building safety remediation by 拢6.7m to 拢48m, after completing remediation works on three buildings leading to a cash outflow of 拢16.2m. It did however make an additional provision of 拢7m for further work.
The firm said its operating profit was also boosted by the sale of six schemes, and cost saving efficiencies implemented the previous year.
The developer said it has a total pipeline of almost 拢2bn with around 拢300m of contractually secure forward sold revenue as of 30 September 2024. Its BTR business has a pipeline of 3,477 units and its student housing business 4,856 beds.
>>See also: Watkin Jones to build tallest residential building in Scotland
Its net cash position has nearly doubled year on year from 拢43.9m to 拢83.4m. This figure excludes lease liabilities of 拢40.8m relating to historic student accommodation sale and leaseback properties.
Watkin Jones has restructured with new chief executive Alex Pease taking on the role permanently in November 2023. Previous boss Richard Simpson stood down in July 2023 after the firm鈥檚 profit warning ahead of its 拢42.5m pre-tax loss for the year to September 2023..
Pease said: 鈥淭he group produced a resilient operational performance during FY24, in what remains a difficult investment market.
鈥淭he slow pace of interest rate cuts and timing of the general election meant that, whilst investor sentiment remained positive, transactional activity has not improved as quickly as expected. We responded by focusing on the factors within our control: successfully delivering our in-build projects and carefully managing our costs.鈥�
No comments yet