TIDMWJG
RNS Number : 6232Z
Watkin Jones plc
21 May 2019
For immediate release 21 May 2019
Watkin Jones plc
('Watkin Jones' or the 'Group')
Half year results for the six months to 31 March 2019
'Delivering Performance'
Watkin Jones plc (AIM:WJG), a leading UK developer and
constructor of multi-occupancy residential property assets, with a
focus on the student accommodation and build to rent sectors,
announces its results for the six months ended 31 March 2019 (the
"period"). The Board is pleased to report a successful first six
months of the financial year with trading in line with its
expectations.
Financial Highlights
H1 2019 H1 2018 Movement
Underlying results
Revenue GBP159.1 million GBP158.3 million +0.5%
Gross profit GBP37.6 million GBP34.5 million +9.0%
Adjusted profit before
tax(1) GBP26.0 million GBP23.6 million +10.0%
Adjusted EBITDA(2) GBP26.6 million GBP24.5 million +8.6%
Adjusted basic earnings
per share(1) 8.11 pence 7.53 pence +7.7%
Dividend per share 2.75 pence 2.47 pence +11.3%
Net cash GBP18.3 million GBP38.4 million -
Statutory results
Profit before tax GBP23.4 million GBP23.6 million -0.9%
EBITDA(2) GBP24.0 million GBP24.5 million -1.9%
Basic earnings per
share 7.31 pence 7.53 pence -2.9%
Notes
1. 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. This charge relates to the
previously announced commitment to compensate the Group's new CEO,
Richard Simpson, for the forfeiture of outstanding incentives held
in respect of his former employer, of which GBP2.2 million is a
non-cash charge.
2. 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.
3. FY 2019 is the first year of adoption by the Group of IFRS 15
'Revenue from Contracts with Customers'. The consequence of
adopting the accounting standard has been to account separately for
the land and development agreement elements of forward-sold
contracts, rather than treating them as a combined agreement. The
effect on the Group's results has been to reduce current period
revenues and profit before tax by GBP613,000. The prior period
comparatives have not been restated.
-- Revenues for the period slightly ahead of the prior half
year, continuing to be underpinned by student accommodation
development activity, but also reflecting an increased contribution
from the Group's other operating divisions.
-- Strong underlying profit growth for the half year, with gross
profit increased by 9.0% to GBP37.6 million (H1 2018: GBP34.5
million) and adjusted profit before tax increased by 10.0% to
GBP26.0 million (H1 2018: GBP23.6 million).
-- Gross margin for the six months to 31 March 2019 increased to 23.7% (H1 2018: 21.8%).
-- 11.3% increase in the interim dividend to 2.75 pence per
share (H1 2018: Interim dividend of 2.47 pence per share), in line
with the Group's progressive dividend policy.
-- Net operating cash outflow of GBP48.8 million for the half
year, resulting in a net cash balance at 31 March 2019 of GBP18.3
million (31 March 2018: GBP38.4 million), reflecting the annual
working capital cycle for the business and a delay in the receipt
of a contractual cash payment of GBP14.0 million (This was
subsequently received in April 2019 on conclusion of the legal
formalities relating to one of the Group's forward sold student
accommodation developments).
Business Highlights
Student Accommodation Development
-- 11 developments (5,334 beds) currently forward sold for
delivery over the period FY 2019 to FY 2021. This includes the
previously announced forward sale in the period of a 599 bed
student accommodation development in Wembley, for delivery in FY
2021, and the exchange of contracts for the development of a 245
bed scheme in Swansea, for delivery in FY 2020.
-- A further three developments (594 beds) for delivery in FY
2019 and FY 2020 are currently in legals for sale.
-- In the period the Group exchanged contracts for the purchase
of a prime site in Selly Oak, Birmingham, on which it expects to
develop 608 student beds, subject to planning, for delivery in FY
2022.
-- Total development pipeline of over 9,000 student beds across
20 sites, targeted for delivery between FY 2019 and FY 2022.
-- Longer term pipeline continues to evolve with a number of additional sites under offer.
Build to Rent Development ("BtR")
-- Development of the 315 apartment scheme in Reading for
M&G Real Estate progressing well and work commenced on the 300
apartment scheme in Wembley for Singaporean investors, both for
delivery in FY 2021.
-- In the period the Group secured a significant development
site in Woking, on which it expects to develop 336 apartments,
subject to planning, for delivery in FY 2023 and obtained the
planning consents for its 166 apartment scheme in Sutton, London,
and for a 90 apartment scheme in Belfast, Northern Ireland, both
for delivery in FY 2021.
-- In total, the Group now has a secured development pipeline,
including Reading and Wembley, of eight sites, from which it is
targeting to deliver approximately 1,800 apartments over the period
FY 2020 to FY 2023. Five of these sites have planning (1,031
apartments). The Group is actively negotiating on several other
opportunities.
-- The Group continues to explore the opportunity of creating a
separate BtR investment vehicle and will update shareholders
further as appropriate.
Accommodation Management
-- At the start of FY 2019, Fresh Property Group ('FPG') had
15,421 student beds and BtR apartments under management across 56
schemes (H1 2018: 16,617 beds and apartments across 57 schemes),
with the reduction reflecting the previously announced loss of
4,597 student beds following a portfolio sale by the Curlew Student
Trust, offset by strong underlying growth.
-- FPG is currently appointed to manage 21,018 units across 73 schemes by FY 2022.
Residential
-- Robust level of sales activity in the first half of the year,
with 53 homes and apartments sold in the Division's core North West
market (H1 2018: 28 sales).
-- 22 affordable residential apartments which form part of the
Group's mixed-use development at Stratford, London, sold in the
period.
Commenting on the interim results, Richard Simpson, Chief
Executive Officer of Watkin Jones plc, said: "We are pleased to
report another strong set of results, in-line with our
expectations. The financial performance of the Group continues to
be underpinned by robust student accommodation development activity
and we are very encouraged by the increased contribution from the
Group's other operating divisions.
Institutional investor demand for our student accommodation
developments is strong and we continue to see quality new investors
entering the market, such as DWS at Wembley. Similarly, investor
momentum is growing in the BtR market, with a significant increase
in reported transaction volumes in the first quarter of 2019. The
majority of these transactions are forward fund purchases of
assets, which plays to Watkin Jones strategy and heritage. We are
able to leverage our proven expertise in developing and managing
multi-occupancy residential rental accommodation and to continue be
a partner of choice for institutional clients looking for
scale.
I continue to be very excited by the opportunities in this
business, seeing the market dynamics for both student accommodation
and BtR so strongly supportive of the Group's forward sale model.
Together with our pipeline of forward sold and secured development
sites, this will continue to provide excellent visibility on future
earnings and cash flow. Consequently, the Board remains confident
in the prospects for the Group."
Analyst meeting
A meeting for analysts will be held at 09.30am today, 21 May
2019, at the offices of Buchanan, 107 Cheapside, London EC2V 6DN. A
copy of the Interim Results presentation is available at the
Company's website: http://www.watkinjonesplc.com
An audio webcast of the analysts meeting will be available after
12pm today:
https://webcasting.buchanan.uk.com/broadcast/5cd18793cfde5e11cc82410d
Review of Performance
Results for the six months to 31 March 2019
Revenues for the half year were in line with management's
expectations and amounted to GBP159.1 million, as compared to
GBP158.3 million for the first half of last year, with the Group
performing well across all its business segments. Good progress was
made on the forward sold student accommodation developments in
build in the first half of the year, though as expected, timing and
mix profile meant that revenues from this division were GBP13.4
million less than for H1 2018. This reduction in revenue was,
however, offset by higher contributions from the Group's other
operating segments.
Gross profit increased by GBP3.1 million (9.0%) to GBP37.6
million (H1 2018: GBP34.5 million), reflecting an increase in the
gross margin for the period to 23.7% (H1 2018: 21.8%). The
improvement in gross margin reflects the particular profile of the
student accommodation pipeline currently in development, which
includes several premium sites that command higher forward sales
values. In addition, the Group achieved improved gross profit
contributions from its Build to Rent and Residential
operations.
Operating profit before exceptional costs increased by 9.1% to
GBP26.0 million (H1 2018: GBP23.8 million).
Further to the announcement of 8 February 2019, an exceptional
charge of GBP2.6 million (H1 2018: GBPNil) was booked in the period
representing the cost to the Group of compensating the new CEO,
Richard Simpson, for the forfeiture of outstanding incentives held
in respect of his former employer, Unite Group plc ("Unite"). This
comprises a cash charge of GBP0.4 million in respect of the forfeit
of his 2018 Unite bonus and a non-cash charge of GBP2.2 million in
respect of the forfeit of his outstanding 2015 - 2017 Unite LTIP
awards.
Profit before tax for the period amounted to GBP23.4 million,
compared to GBP23.6 million for the prior half year. Adjusted
profit before tax, excluding the exceptional charge, increased by
GBP2.4 million to GBP26.0 million (H1 2018: GBP23.6 million),
resulting in an increase of 7.7% in adjusted basic earnings per
share to 8.11 pence (H1 2018: 7.53 pence).
FY 2019 is the first year of adoption by the Group of IFRS 15
'Revenue from Contracts with Customers'. The consequence of
adopting the accounting standard has been to account separately for
the land and development agreement elements of forward-sold
contracts, rather than treating them as a combined agreement. The
effect on the Group's results has been to reduce current period
revenues and profit before tax by GBP613,000. The prior period
comparatives have not been restated.
Segmental review
Student accommodation
Revenues from student accommodation development amounted to
GBP128.8 million for the period, compared to GBP142.2 million for
the comparative period last year, a decrease of 9.5%. The decrease
in revenues was as anticipated and reflects the reduction in the
number of developments in build for completion in FY 2019, compared
to the prior year. For FY 2019 the Group is scheduled to complete
six schemes (2,723 beds), compared with ten schemes (3,415 beds) in
FY 2018.
The gross margin for the period on student accommodation
developments amounted to 23.7%, compared to 20.7% for H1 2018. The
improvement in the margin reflects the specific mix profile of the
schemes in development and is a result of the Group's success in
sourcing quality sites and obtaining planning consents in those
target locations which will attract stronger investor demand.
In the period, as previously announced, the Group completed the
forward sale of a 599 bed scheme in Wembley for delivery in FY 2021
and exchanged contracts for the development of a 245 bed scheme in
Swansea, for delivery in FY 2020. The forward sale of the Wembley
scheme contributed GBP30.0 million to revenues in the period,
primarily in respect of the land sale.
The Group has a solid student accommodation development
pipeline, currently comprising 20 development sites from which it
is targeting to deliver over 9,000 beds to the market over the
period FY 2019 to FY 2022, with an appraised net development value
of approximately GBP850 million.
The above pipeline includes a prime site secured in the period
in Selly Oak, Birmingham on which the Group expects to develop 608
student beds, subject to planning, for delivery in FY 2022. The
Group is currently in negotiation on a number of other
opportunities which will further add to the pipeline going
forward.
A total of 11 developments (5,334 beds) are currently forward
sold for delivery over the period FY 2019 to FY 2021 and a further
three developments (594 beds) for delivery in FY 2019 and FY 2020
are currently in legals for sale.
Build to Rent ('BtR) development
Revenues from BtR amounted to GBP8.8 million (H1 2018: GBP0.6
million), reflecting the contribution from the development in
Reading for 315 apartments, which is progressing well, and the
commencement of works on the 300 apartment scheme in Wembley.
The gross profit for the period from BtR amounted to GBP1.9
million (H1 2018: GBP0.3 million) at a margin of 21.7%, reflecting
a strong performance on the early stage of the Reading development
and is ahead of the 15% average margin we would expect to achieve
from our broader BtR pipeline in the medium term.
We continued to make good progress with our BtR development
pipeline in the period, with the significant addition of the prime
development site in Woking, on which, subject to planning, the
Group expects to develop 336 apartments for delivery in FY 2023. We
also secured the planning consents for 166 apartments on our
development site in Sutton, London, and for 90 apartments on our
site in Belfast, Northern Ireland, both for delivery in FY
2021.
In total, the Group now has a secured development pipeline,
including Reading and Wembley, of eight sites, from which it is
targeting to deliver approximately 1,800 apartments over the period
FY 2020 to FY 2023. Five of these sites have planning (1,031
apartments). The Group has a substantial targeted pipeline and is
actively negotiating on a number of opportunities.
The Group continues to explore the opportunity of creating a
separate BtR investment vehicle and will update shareholders
further as appropriate.
Accommodation management
For the six months ended 31 March 2019, FPG increased its
revenues to GBP3.9 million (H1 2018: GBP3.7 million) and maintained
its gross profit at GBP2.4 million. This was a strong performance
given the loss of 4,597 beds under management following the sale of
the portfolio of student schemes by the Curlew Student Trust in FY
2018 and reflects FPG's success in offsetting this loss by winning
mandates to manage 14 new schemes with effect from the start of the
2018/19 academic year (3,740 beds). The gross margin achieved was
62.6%, as compared to the H1 2018 margin of 65.3%, reflecting the
change in mix of schemes under management, though this margin was
slightly ahead of the FY 2018 full year margin of 61.8%.
At the start of FY 2019, FPG had 15,421 student beds and build
to rent apartments under management across 56 schemes. By FY 2022,
FPG is currently appointed to manage 21,018 units across 73
schemes.
Residential
In the six months to 31 March 2019, the residential development
business achieved 53 sales completions in its core North West
market, as compared to 28 in H1 2018, reflecting the good level of
demand in this region compared to the broader UK, as well as the
phasing of sites in development. In addition, the Group sold the 22
affordable residential apartments which form part of its mixed-use
development at Stratford, London.
Revenues for the residential development business amounted to
GBP17.4 million, compared to GBP5.3 million for the equivalent
prior period. The gross margin achieved was 16.7% (H1 2018: 10.1%).
Sales from the legacy Droylsden site at nil margin amounted to
GBP2.5 million in H1 2019, compared to GBP1.9 million in H1 2018.
Excluding the Droylsden sales, the gross margin for the period was
19.5% (H1 2018: 15.8%), reflecting the contribution from higher
margin sites.
Balance sheet and cashflow
The Group had net cash at 31 March 2019 of GBP18.3 million,
comprising cash of GBP57.8 million less borrowings of GBP39.6
million. This compares to net cash at 31 March 2018 of GBP38.4
million and at 30 September 2018 of GBP80.2 million.
The reduction in net cash for the period of GBP61.9 million
reflects the Group's normal annual cashflow profile which,
depending on the timing of forward development sales, sees a cash
utilisation in the first half of the year, followed by cash
generation in the second half of the year as development sites for
delivery in future years are forward sold and the significant final
payments due on completion of the current year's developments are
received. In addition, the half year cash position was impacted by
a delay in the receipt of a contractual cash payment of GBP14.0
million, which was received in April 2019 (post period end)
following the completion of certain legal formalities relating to
one of the Group's forward sold student developments.
Inventory and work in progress increased by GBP20.3 million in
the period to GBP153.1 million, reflecting investments of GBP11.4
million and GBP12.1 million respectively in the Group's BtR and
student accommodation development pipelines.
The above factors resulted in a net cash outflow from operating
activities for the period of GBP48.8 million, whilst the cash cost
of the FY 2018 final dividend paid in the period amounted to
GBP13.1 million.
Trade and other receivables at 31 March 2019 amounted to GBP50.0
million (31 March 2018: GBP27.4 million), whilst trade and other
payables amounted to GBP70.3 million (31 March 2018: GBP91.2
million), increasing working capital by GBP43.5 million compared to
31 March 2018. In addition to the delayed contractual payment of
GBP14.0 million referred to above, this is attributable to the
different stage of completion and timing of payments due on major
developments in build, notably Stratford. At 31 March 2018, the
Group had benefitted from advance payments received on account of
GBP17.1 million, included in trade and other payables, whereas at
31 March 2019, the later stage of those developments represents a
receivable balance for work done of GBP21.5 million, shown in trade
and other receivables. The latter includes the progressive
recognition of receivables of final payments as the current year
developments near completion (of which Stratford accounts for
GBP13.1 million).
Dividend
The Board has stated its intention of aiming to pay dividends at
a level that will be two times covered by annual adjusted earnings
and that it planned to implement this policy fully by FY 2019. The
Board has declared an interim dividend for the period of 2.75 pence
per share, which is a 11.3% increase on the interim dividend paid
last year. It will be paid on 28 June 2019 to shareholders on the
register at close of business on 7 June 2019. The shares will go
ex-dividend on 6 June 2019.
Outlook
The underlying market dynamics for both student accommodation
and BtR are strongly supportive of the Group's forward sale model,
which combined with our pipeline of forward sold and secured
development sites, continues to provide the Group with excellent
visibility on future earnings and cash flow. Consequently, the
Board remains confident in the prospects for the Group.
Richard Simpson
Chief Executive Officer
21 May 2019
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 / Justin Jones 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 a leading UK developer and constructor of multi
occupancy property assets, with a focus on the student
accommodation and Build to Rent sectors. The Group has strong
relationships with institutional investors, and a reputation for
successful, on-time-delivery of high quality developments. Since
1999, Watkin Jones has delivered 38,000 student beds across 117
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 over 15,000 student beds and Build to Rent apartments on
behalf of its institutional clients. Watkin Jones has also been
responsible for over 80 residential developments, ranging from
starter homes to executive housing and apartments. The Group is now
expanding its operations into the Build to Rent sector.
The Group's competitive advantage lies in its experienced
management team and business model, which enables it to offer an
end-to-end solution for investors, delivered entirely in-house with
minimal reliance on third parties, across the entire life cycle of
an asset.
Watkin Jones was admitted to trading on AIM in March 2016 with
the ticker WJG.L. For additional information please visit:
www.watkinjonesplc.com
Consolidated Statement of Comprehensive Income
for the six month period ended 31 March 2019 (unaudited)
6 months to 6 months to 12 months to
31 March 31 March 30 September
2019 2018 2018
Notes GBP'000 GBP'000 GBP'000
Continuing operations
Revenue 159,104 158,319 363,054
Cost of sales (121,469) (123,779) (290,624)
------------ ------------ --------------
Gross profit 37,635 34,540 72,430
Administrative expenses (11,612) (10,693) (22,818)
Operating profit before exceptional (costs)/income 26,023 23,847 49,612
Exceptional (costs)/income 5 (2,576) - 4,283
------------ ------------ --------------
Operating profit 23,447 23,847 53,895
Profit on disposal of interest in joint venture - 121 121
Share of profit in joint ventures - - 1,023
Finance income 210 59 228
Finance costs (223) (391) (925)
------------ ------------ --------------
Profit before tax from continuing operations 23,434 23,636 54,342
Income tax expense 6 (4,787) (4,416) (10,136)
------------ ------------ --------------
Profit for the period attributable to ordinary equity holders of
the parent 18,647 19,220 44,206
============ ============ ==============
Other comprehensive income
Net gain on available-for-sale financial assets - 66 37
------------ ------------ --------------
Total comprehensive income for the period attributable to
ordinary equity holders of the parent 18,647 19,286 44,243
============ ============ ==============
Earnings per share for the period attributable to ordinary equity Pence Pence Pence
holders of the parent
Basic earnings per share 7 7.305 7.529 17.317
============ ============ ==============
Diluted earnings per share 7 7.288 7.529 17.310
============ ============ ==============
Adjusted basic earnings per share (excluding exceptional
(costs)/income) 7 8.113 7.529 15.958
============ ============ ==============
Adjusted diluted earnings per share (excluding exceptional
(costs)/income) 7 8.094 7.529 15.952
============ ============ ==============
Consolidated Statement of Financial Position
as at 31 March 2019 (unaudited)
31 March 31 March 30 September
2019 2018 2018
Notes GBP'000 GBP'000 GBP'000
Non-current assets
Intangible assets 14,123 14,682 14,403
Property, plant and equipment 4,670 5,004 4,809
Investment in joint ventures 2,558 1,536 2,558
Deferred tax asset 236 533 42
Other financial assets 9 1,162 1,143 1,350
---------- ---------- -------------
22,749 22,898 23,162
---------- ---------- -------------
Current assets
Inventory and work in progress 153,085 145,548 132,778
Trade and other receivables 50,041 27,401 26,967
Cash and cash equivalents 12 57,906 61,606 106,640
---------- ---------- -------------
261,032 234,555 266,385
---------- ---------- -------------
Total assets 283,781 257,453 289,547
========== ========== =============
Current liabilities
Trade and other payables (70,344) (91,194) (99,119)
Provisions (933) (699) (1,068)
Other financial liabilities - (13) -
Interest-bearing loans and borrowings (1,524) (1,401) (1,605)
Current tax liabilities (9,412) (4,635) (7,204)
---------- ---------- -------------
(82,213) (97,942) (108,996)
---------- ---------- -------------
Non-current liabilities
Interest-bearing loans and borrowings (38,089) (21,852) (24,877)
Deferred tax liabilities (1,049) (1,368) (1,050)
Provisions (1,277) (2,006) (1,602)
---------- ---------- -------------
(40,415) (25,226) (27,529)
---------- ---------- -------------
Total Liabilities (122,628) (123,168) (136,525)
========== ========== =============
Net assets 161,153 134,285 153,022
========== ========== =============
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)
Available-for-sale reserve - 465 436
Share-based payment reserve 2,166 - 84
Retained earnings 147,205 122,038 140,720
---------- ---------- -------------
Total Equity 161,153 134,285 153,022
========== ========== =============
Consolidated Statement of Changes in Equity
for the six month period ended 31 March 2019 (unaudited)
Share-based
Share Share Merger Available-for-sale payment Retained
Capital Premium Reserve reserve reserve earnings Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP000 GBP'000 GBP'000
30 September 2017 2,553 84,612 (75,583) 399 - 114,050 126,231
Profit for the period - - - - - 19,220 19,220
Dividend paid (note
8) - - - - - (11,232) (11,232)
Other comprehensive
income - - - 66 - - 66
--------- -------- --------- ------------------ ----------- ---------- --------
Balance at
31 March 2018 2,553 84,612 (75,383) 465 - 122,038 134,285
========= ======== ========= ================== =========== ========== ========
Profit for the period - - - - - 24,986 24,986
Share-based payments - - - - 84 - 84
Dividend paid (note
8) - - - - - (6,304) (6,304)
Other comprehensive
income/(loss) - - - (29) - - (29)
--------- -------- --------- ------------------ ----------- ---------- --------
Balance at
30 September 2018 2,553 84,612 (75,383) 436 84 140,720 153,022
IFRS 9 Restatement
(note 3) - - - (436) - 436 -
IFRS 15 Restatement
(note 3) - - - - - 497 497
--------- -------- --------- ------------------ ----------- ---------- --------
Balance at 1 October
2018 2,553 84,612 (75,383) - 84 141,653 153,519
========= ======== ========= ================== =========== ========== ========
Profit for the period - - - - - 18,647 18,647
Share-based payments - - - - 2,063 - 2,063
Deferred tax equity
movement - - - - 19 - 19
Dividend paid (note
8) - - - - - (13,095) (13,095)
--------- -------- --------- ------------------ ----------- ---------- --------
Balance at
31 March 2019 2,553 84,612 (75,383) - 2,166 147,205 161,153
========= ======== ========= ================== =========== ========== ========
Consolidated Statement of Cash Flows
for the six month period ended 31 March 2019 (unaudited)
6 months 6 months 12 months
to to to
31 March 31 March 30 September
2019 2018 2018
Notes GBP'000 GBP'000 GBP'000
Cash flows from operating activities
Cash (outflow)/inflow from operations 11 (45,712) 15,632 66,582
Interest received 210 59 228
Interest paid (416) (367) (1,199)
Interest element of finance
lease rental payments (23) (24) (48)
Tax paid (2,871) (8,251) (11,140)
--------- --------- -------------
Net cash (outflow)/inflow from
operating activities (48,812) 7,049 54,423
========= ========= =============
Cash flows from investing activities
Acquisition of property, plant
and equipment (185) (349) (298)
Proceeds on disposal of property,
plant and equipment 39 - 18
Proceeds from disposal of interest
in joint venture - 250 400
Purchase of other financial
assets - (33) (350)
Cash distribution received from
other financial assets 188 1,670 1,744
Loan repayments from joint ventures - - 1,176
Net cash inflow from investing
activities 42 1,538 2,690
========= ========= =============
Cash flows from financing activities
Dividend paid 8 (13,095) (11,231) (17,536)
Capital element of finance lease
rental payments (621) (397) (1,203)
Drawdown of bank loans 16,042 3,178 8,036
Repayment of bank loans (2,290) (3,856) (5,095)
Net cash inflow/(outflow) from
financing activities 36 (12,306) (15,798)
========= ========= =============
Net (decrease)/increase in cash (48,734) (3,719) 41,315
Cash and cash equivalents at
beginning of the period 106,640 65,325 65,325
--------- --------- -------------
Cash and cash equivalents at
end of the period 12 57,906 61,606 106,640
========= ========= =============
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 2019 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 2019
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 2018, 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 20 May 2019.
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
2019. To the extent that IFRS at 30 September 2019 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 2018. 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 2018 with the exception of the new accounting
standards noted below.
The Group adopted IFRS 15 "Revenue from contracts with
customers" from 1 October 2018 retrospectively using the cumulative
effect approach. Under the cumulative effect approach the results
of the prior year are not restated but the initial impact of
adopting the standard is taken to opening reserves. IFRS 15
replaces IAS 18 "Revenue" and IAS 11 "Construction Contracts" and
introduces a 5-step model to account for revenue, with new guidance
provided in areas on which previous IFRSs were silent. The adoption
of the new standard has required the land sale and development
agreement elements for forward-sold schemes to be accounted for
separately, rather than treating them as a combined agreement. The
effect on the Group's results for the six months ended 31 March
2019 has been to reduce revenues and profit before tax by
GBP613,000, to increase the tax creditor by GBP116,000 and to
restate opening reserves at 1 October 2018 by an increase of
GBP497,000.
The Group also adopted IFRS 9 "Financial Instruments" from 1
October 2018. The Group accounts for its financial assets and
liabilities at fair value and does not have any complex financial
instruments. The adoption of IFRS 9 has not had a material effect
on the Group's financial statements. However, the previously
reported "available-for-sale reserve" of GBP436,000 has been
transferred to "retained earnings" at 1 October 2018, as the
concept of an "available-for-sale reserve" has been removed under
IFRS 9. From 1 October 2018, the underlying assets are now measured
as a financial instrument held at fair value through Other
Comprehensive Income and thus the results have been transferred to
"retained earnings".
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 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 30,578 1,904 2,918 2,413 (178) 37,635
Administration
expenses - - - - (11,612) (11,612)
Exceptional costs - - - - (2,576) (2,576)
Finance income - - - - 210 210
Finance costs - - - - (223) (223)
Profit/(loss)
before tax 30,578 1,904 2,918 2,413 (14,379) 23,434
Taxation - - - - (4,787) (4,787)
--------------- -------- ------------ -------------- ---------- ---------
Profit/(loss)
for the period 30,578 1,904 2,918 2,413 (19,166) 18,647
=============== ======== ============ ============== ========== =========
Inventory and
work in progress 44,464 55,543 43,948 - 9,130 153,085
------- ------- ------- ------ --------
Build
6 months to 31 Student to Accommodation
March 2018 (unaudited) Accommodation rent Residential management Corporate Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Segmental revenue 142,203 626 5,279 3,727 6,484 158,319
--------------- -------- ------------ -------------- ---------- ---------
Segmental gross
profit 29,365 315 533 2,433 1,894 34,540
Administration
expenses - - - - (10,693) (10,693)
Profit on sale
of interest in
joint venture - - - - 121 121
Finance income - - - - 59 59
Finance costs - - - - (391) (391)
--------------- -------- ------------ -------------- ---------- ---------
Profit/(loss)
before tax 29,365 315 533 2,433 (9,010) 23,636
Taxation - - - - (4,416) (4,416)
--------------- -------- ------------ -------------- ---------- ---------
Profit/(loss)
for the period 29,365 315 533 2,433 (13,426) 19,220
=============== ======== ============ ============== ========== =========
Inventory and
work in progress 39,442 46,562 50,793 - 8,821 145,618
------- ------- ------- ------ --------
5. Exceptional (costs)/income
6 months to 6 months to 12 months to
31 March 31 March 30 September
2019 2018 2018
GBP'000 GBP'000 GBP'000
Cost of compensating the Group's new CEO, Richard Simpson, for his
forfeit Unite Group plc
("Unite") 2018 bonus (411) - -
Cost of Watkin Jones plc share awards issued in compensating Richard
Simpson for his forfeit (2,165) - -
Unite 2015 - 2017 share awards
Compensation for reduction in scope of services and termination of
accommodation management
contracts resulting from a sale of a portfolio of properties by the
Curlew Student Trust - - 3,020
Profit share arising from the sale of the portfolio of properties by the
Curlew Student Trust - - 1,263
Total exceptional (costs)/income (2,576) - 4,283
============ ============ ==============
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
2019 of 19.95% 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
2019 2018 2018
GBP'000 GBP'000 GBP'000
Profit for the period attributable to ordinary equity
holders of the parent 18,647 19,220 44,206
Adjusted profit for the period attributable to
ordinary equity holders of the parent (excluding
exceptional (costs)/income after tax) 20,709 19,220 40,737
Number of shares Number of shares Number of shares
Number of ordinary shares for basic earnings per share 255,268,875 255,268,875 255,268,875
Adjustments for the effects of dilutive potential
ordinary shares 580,198 - 102,929
Weighted average number for diluted earnings per share 255,849,073 255,268,875 255,371,804
Pence Pence Pence
Basic earnings per share
Basic profit for the period attributable to ordinary
equity holders of the parent 7.305 7.529 17.317
Adjusted basic earnings per share (excluding
exceptional (costs)/income after tax)
Adjusted profit for the period attributable to
ordinary equity holders of the parent 8.113 7.529 15.958
Diluted earnings per share
Basic profit for the period attributable to diluted
equity holders of the parent 7.288 7.529 17.310
Adjusted diluted earnings per share (excluding
exceptional (costs)/income after tax)
Adjusted profit for the period attributable to diluted
equity holders of the parent 8.094 7.529 15.952
8. Dividends
6 months to 6 months to 12 months to
31 March 31 March 30 September
2019 2018 2018
GBP'000 GBP'000 GBP'000
Final dividend paid in February 2018 of 4.4 pence - 11,232 11,232
Interim dividend paid in June 2018 of 2.47 pence - - 6,304
Final dividend paid in February 2019 of 5.13 pence 13,095 - -
------------ ------------ --------------
13,095 11,232 17,536
============ ============ ==============
An interim dividend of 2.75 pence per ordinary share will be
paid on 28 June 2019. This dividend was declared after 31 March
2019 and as such the liability of GBP7,019,894 has not been
recognised at that date.
9. Other financial assets
31 March 31 March 30 September
2019 2018 2018
GBP'000 GBP'000 GBP'000
Financial instruments at fair value
Available-for-sale financial assets at fair value through other comprehensive
income 1,162 1,143 1,350
Other financial assets 1,162 1,143 1,350
========= ========= =============
The available-for-sale financial assets at fair value comprise
units held in the Curlew Student Trust ("CST"), together with the
value of the carried interest held by Fresh Property Group Ltd in
CST and Curlew Student Trust 2 ("CST2"). CST and CST2 are Guernsey
registered unitised funds established to invest in student
accommodation.
In the period ended 31 March 2019, the Group received GBP188,000
from the Fund, by way of a further partial distribution of cash
following the sale by the Fund of a portfolio of assets during the
year ended 30 September 2018 (H1 2018: GBP1,670,000 received).
10. Employee benefits - long term incentive plans
In February 2019 Richard Simpson was granted the following
awards over Watkin Jones plc shares in compensation for share
awards which lapsed when he ceased employment with his previous
employer, Unite Group plc ("Unite"):
Buyout Award Number of Normal Vesting Vesting/Performance
Shares subject Date of Buyout Conditions
to Buyout Award (in addition to continued
Award service)
2015 92,480 2(nd) April None - Unite performance
2019 targets have already
been achieved
---------------- ---------------- -----------------------------
2016 434,764 23(rd) June Vesting will be based
2019 on vesting outcome of
2016 Unite LTIP Awards
---------------- ---------------- -----------------------------
2017 438,765 10(th) April Vesting will be based
2020 on vesting outcome of
2017 Unite LTIP awards
---------------- ---------------- -----------------------------
2018 344,201 10(th) April Vesting will be based
2021 on the same performance
conditions as the awards
granted to other Watkin
Jones plc senior executives
under the May 2018 Long
Term Incentive Plan
---------------- ---------------- -----------------------------
Each of the 2016, 2017 and 2018 Buyout Awards will also be
subject to a two year holding period. To the extent that each of
these awards vest, Richard Simpson will not be able to sell any
shares resulting from exercise of the relevant award for a period
of two years from the vesting date, other than to fund the
resulting tax and NIC liabilities.
The fair value of the 2015 Buyout Award has been estimated using
a Black Scholes valuation model and the element of the 2018 Buyout
Award subject to total shareholder return ("TSR") performance
conditions has been estimated using a Monte Carlo valuation model.
The following table lists the inputs to the respective valuation
models:
Buyout Share price Exercise Expected Expected Risk-free Are dividend
Award at grant price term volatility interest equivalents
(years) (%) rate receivable?
(%)
2015 230 pence 1 pence 0.15 27.0 0.71 Y
------------- ---------- --------- ------------ ---------- -------------
2018 230 pence 1 pence 2.17 27.0 0.71 Y
------------- ---------- --------- ------------ ---------- -------------
The fair value of the share awards from the 2018 Buyout Award
subject to earning per share ("EPS") performance conditions is the
market price of an ordinary share of Watkin Jones plc at the date
the award is granted.
The 2016 Buyout Award and 2017 Buyout Awards are based on
Unite's performance rather than Watkin Jones plc's performance,
which are categorised as non-vesting conditions under IFRS 2.
Consequently, an estimate of the number of shares expected to vest,
as estimated at the date of grant, has been factored into the fair
value assumptions. The estimated vesting as a percentage of maximum
is 83.5% for the 2016 Buyout Award and 84.76% for the 2017 Buyout
Award.
For the six months ended 31 March 2019, the Group has recognised
a charge of GBP2,165,000 relating to the 2015, 2016 and 2017 Buyout
Awards as an exceptional cost on the basis that the vesting of the
awards does not relate to Watkin Jones plc's performance
conditions. A further charge of GBP36,000 has been made in respect
of the 2018 Buyout Award, together with a charge of GBP125,000
relating to the awards issued to Watkin Jones plc's senior
executives under the 2018 LTIP, and these amounts have been charged
to administrative expenses in the Consolidated Statement of
Comprehensive Income (H1 2018: GBPNil).
11. 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
2019 2018 2018
GBP'000 GBP'000 GBP'000
Profit before tax 23,434 23,636 54,342
Depreciation 303 255 725
Amortisation of intangible assets 280 280 559
Profit on sale of plant and
equipment (17) - (7)
Finance income (210) (59) (228)
Finance costs 223 391 925
Profit on disposal of interest
in joint venture - (121) (121)
Share of profit in joint ventures - - (1,023)
Increase in inventory and work
in progress (20,306) (20,328) (7,558)
Interest capitalised in development
land, inventory and work in
progress 216 - 322
(Increase)/decrease in trade
and other receivables (22,461) 9,060 9,442
(Decrease)/increase in trade
and other payables (28,776) 2,518 9,155
(Decrease)/increase in provision
for property lease commitment (461) - (35)
Increase in share-based payment
reserve 2,063 - 84
----------- ----------- -------------
Net cash (outflow)/inflow from
operating activities (45,712) 15,632 66,582
----------- ----------- -------------
12. Analysis of net cash
31 March 31 March 30 September
2019 2018 2018
GBP'000 GBP'000 GBP'000
Cash at bank and in hand 57,906 61,606 106,640
Finance leases (1,403) (2,493) (2,023)
Bank loans (38,210) (20,760) (24,459)
-------------- -------------- ----------------
Net cash 18,293 38,353 80,158
============== ============== ================
- 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.
END
IR SESFASFUSELI
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