TIDMWJG
RNS Number : 5908A
Watkin Jones plc
23 January 2024
23 January 2024
Watkin Jones plc
(the 'Group')
FY 2023 Results
Well positioned to capitalise on a market recovery
The Group announces its annual results for the year ended 30
September 2023 ('FY23'):
Adjusted Results (1) Statutory Results
FY23 FY22 Change FY23 FY22 Change
(%) (%)
---------- ---------- --------- ----------- ---------- ---------
Revenue GBP413.2m GBP407.1m 1.5% GBP413.2m GBP407.1m 1.5%
---------- ---------- --------- ----------- ---------- ---------
Gross profit GBP34.9m GBP67.6m (48.4)% GBP34.9m GBP67.6m (48.4)%
---------- ---------- --------- ----------- ---------- ---------
Operating profit/(loss) GBP0.2m GBP54.7m (99.6)% GBP(38.0)m GBP24.3m (256.4)%
---------- ---------- --------- ----------- ---------- ---------
(Loss)/profit before
tax GBP(2.9)m GBP48.8m (105.9)% GBP(42.5)m GBP18.4m (331.0)%
---------- ---------- --------- ----------- ---------- ---------
Basic (loss)/earnings
per share (0.6)p 14.8p (104.1)% (12.7)p 5.2p (344.2)%
---------- ---------- --------- ----------- ---------- ---------
Dividend per share 1.4p 7.4p (81.1)% 1.4p 7.4p (81.1)%
---------- ---------- --------- ----------- ---------- ---------
Adjusted net cash(2) GBP43.9m GBP82.6m (46.9)%
---------- ---------- --------- ----------- ---------- ---------
(1) For FY23 Adjusted Operating profit, Adjusted Loss before tax
and Adjusted Basic Loss per share are calculated before the impact
of the exceptional charge of GBP35.0 million for the further costs
of building safety remedial works and restructuring costs of GBP3.1
million
(2) Adjusted net cash is stated after deducting interest bearing
loans and borrowings, but before deducting IFRS 16 operating lease
liabilities of GBP45.2 million at 30 September 2023 (30 September
2022: GBP49.1 million)
Key Highlights
-- Revenue of GBP413.2 million from our previously sold
developments on site and two forward sales
-- Adjusted operating profit of GBP0.2 million, reflecting low
levels of forward sale market activity, together with:
o lower margins across certain in-build schemes as anticipated,
together with additional site-specific costs related to accelerated
completions on two schemes and a third-party contractor
insolvency
o GBP4.6 million book loss on the sale of three PRS assets
o impairment charge of GBP5.5 million on our non-core land bank
and certain pipeline assets which are no longer economically
viable
-- Exceptional charge in the year of GBP38.1 million
o GBP35.0 million further provision for building safety remedial
works. Costs expect to be incurred over a period of up to five
years
o GBP3.1 million one-off restructuring costs associated with
realignment of the Group's cost base, delivering c.GBP4.0 million
of annualised run rate savings
-- End year with c.GBP500 million of contractually secure forward sold revenue
-- Gross and adjusted net cash balance of GBP72.4 million and
GBP43.9 million respectively, reflecting strong cash collections in
the later part of the year and proceeds from non-core asset
sales
-- The Board has decided not to recommend a final dividend in
respect of FY23 given the uncertain market backdrop but remains
committed to its progressive dividend policy as earnings
recover
Outlook: FY24
-- Current secured revenue from previously sold developments, on
site, of c.GBP300 million, covering FY24 cost base
-- Forward fund market showing early signs of recovery as interest rates stabilise
-- All current development schemes on track, supported by
continuing moderation in build cost inflation
-- Guidance for FY24 adjusted operating profit of GBP15-20 million unchanged.
Outlook: Medium term
-- Market leading business operating in the most attractive
segments of the UK residential for rent market, where we continue
to see strong tenant demand and rental growth
-- Significant pent up investor demand and growing allocations for high quality assets
-- Secured development pipeline of GBP1.5 billion (estimated future revenue):
o GBP0.5 billion forward sold; GBP0.3 billion secured with
planning; GBP0.7 billion in planning (of which GBP0.1 billion
secured since the year end)
-- Currently in exclusivity on a further GBP0.4 billion of land
opportunities (subject to planning)
-- Partnership track record, delivery capability and Fresh are material differentiators
-- Strategic focus on extracting more value from the Group's
existing capabilities, through Development Partnerships and Refresh
(refurbishment / repurposing development opportunities).
Alex Pease, Chief Executive Officer of Watkin Jones, said
"Significant cost inflation and volatility in real estate funding
markets meant that FY23 represented a period of unprecedented
challenge for the business. However, I am pleased that against this
backdrop the Group demonstrated resilience and agility, taking a
number of important actions operationally.
Whilst funding conditions remain difficult, the outlook is
gradually improving and the strong asset performance in PBSA and
BTR sectors gives me confidence in the longer-term market recovery
and return to growth. In the near term, we remain focussed on
driving improvements to the productivity and efficiency of the
business, as well as looking at opportunities to extract more value
from our sector expertise and end-to-end capabilities.
Watkin Jones continues to have a market-leading team and
offering to the residential for rent sectors and we are taking the
right steps to ensure we are well placed to capitalise on this, as
conditions improve."
Analyst meeting
A meeting for analysts will be held in person at 11.00am today,
Tuesday 23rd January 2024, at Buchanan, 107 Cheapside, London EC2V
6DN. A copy of the Full Year results presentation is available at
the Group's website: http://www.watkinjonesplc.com
An audio webcast of the meeting with analysts will be available
after 12pm today:
https://stream.buchanan.uk.com/broadcast/65952d93b012a6d30b474616
For further information:
Watkin Jones plc
Alex Pease, Chief Executive Officer Tel: +44 (0) 20 3617 4453
Sarah Sergeant, Chief Financial Officer www.watkinjonesplc.com
Peel Hunt LLP (Nominated Adviser & Joint Corporate Broker) Tel: +44 (0) 20 7418 8900
Mike Bell / Ed Allsopp www.peelhunt.com
Jefferies Hoare Govett (Joint Corporate Broker) Tel: +44 (0) 20 7029 8000
James Umbers/David Sheehan / Paul Bundred www.jefferies.com
Media enquiries:
Buchanan
Henry Harrison-Topham / Steph Whitmore Tel: +44 (0) 20 7466 5000
watkinjones@buchanan.uk.com www.buchanancomms.co.uk
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, student
accommodation and affordable housing 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 48,000 student beds across 143
sites, making it a key player and leader in the UK purpose-built
student accommodation market, and is increasingly expanding its
operations into the build to rent sector. In addition, Fresh, the
Group's specialist accommodation management business, manages over
22,000 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's competitive advantage lies in its experienced
management team and capital-light 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
CHIEF EXECUTIVE OFFICER'S REVIEW
This has been a challenging year and while we performed well
operationally, tough conditions in the investment market combined
with build cost inflation, a third-party contractor liquidation and
acceleration costs to complete certain developments contributed to
weaker financial results.
Although we faced severe headwinds this year, we remain a
resilient business with leadership positions in highly attractive
markets. The supply and demand dynamics in both BTR and PBSA are
more attractive than ever, with a genuine shortage of
accommodation. This is resulting in very high occupancy levels,
good letting and retention rates, and robust rental growth. At the
same time, economic conditions and planning challenges mean less
stock is being delivered. In PBSA for example, only 12,000 new beds
have been delivered for 2023/24, well down on previous years.
Higher interest rates and economic uncertainty resulted in the
investment market being effectively closed for much of the year but
there is still significant institutional capital waiting to be
allocated to residential for rent. Asset values have remained
relatively steady, as higher rental income has compensated for
softer yields. Combined with less new stock coming through, these
factors should help the investment market gradually rebound.
Performance
We delivered a good operational performance in FY23, completing
four schemes to our high quality standards. One further development
completed following the year end. We also continued to acquire
sites and progress them through planning.
Build cost inflation was a significant challenge. Although it
has eased as the year progressed, several projects completing this
year had been priced and forward sold prior to the unprecedented
build cost inflation and this caused erosion of margin. We worked
in partnership with our supply chain to manage this and limit its
impact on our developments as far as possible. In addition, we
incurred additional costs at our co-living scheme in Exeter, where
the main contractor went into liquidation during 2023. This
required us to step in, which our self -- build expertise enabled
us to do quickly and effectively. The scheme reached practical
completion in September 2023. We also decided to exercise caution
in the prevailing market conditions and not accelerate the
development of some pipeline assets.
Overall, revenue was GBP413.2 million (FY22: GBP407.1 million),
up 1.5%. Gross profit declined to GBP34.9 million (FY22: GBP67.6
million), while adjusted operating profit before exceptional items
was GBP0.2 million (FY22: GBP54.7 million), reflecting the
reduction in forward sales, lower margins across certain in-build
schemes as anticipated, the impairment of our non-core land bank
and certain pipeline assets and the book loss on disposal of the
non-core private rented sector assets. At the year end, we had
adjusted net cash of GBP43.9 million and total cash and available
facilities of GBP103.6 million, meaning the Group remains soundly
financed. We were also pleased to extend the maturity of our bank
facility to November 2025.
BTR was the largest contributor to our results, reflecting
progress with the developments under construction and modest
revenues from a forward sale. PBSA saw revenue decline, due to the
number of sites in-build and the stage of their development, and
the completion of only one forward sale in the year. Fresh, our
accommodation management business, performed well, with higher
revenues and an attractive gross margin.
Strategy
Our strategic focus is on growing our presence in residential to
rent, driving operational efficiency and ensuring we are a
responsible business. While our strategic direction is the right
one, we also recognise the need to adapt it to the conditions we
face.
We are therefore looking at every aspect of our business to
ensure we optimise our margin and performance. For example, we have
further improved the way we manage procurement to maximise buying
benefits, revamped our design guides for schemes to ensure
efficiency and consistency, and continued to build the connections
between our teams to increase operational effectiveness.
We are also determined to be well positioned to rebuild our
pipeline when market conditions turn, as we did successfully coming
out of both the global financial crisis and the pandemic. We will
be very disciplined in doing so and expect to see good
opportunities to acquire sites as land prices reduce. Alongside
securing sites on our usual subject-to-planning basis, we will
explore the potential to partner with capital providers on land
with existing planning. This has the dual advantage of lower risk
and increased speed for bringing developments forward.
The two forward sales we completed in the year demonstrated our
ability to act quickly in the brief periods the market was open,
but we also want to be entrepreneurial and creative in our approach
to the investment market. This means looking at more innovative
transaction structures, while still delivering a high return on
capital employed.
More broadly, we see potential in opening up additional revenue
streams. Examples include helping our institutional clients to
refurbish their older housing stock to meet residents' needs, while
also making the buildings safer and more environmentally efficient.
This has the benefit of generating revenue without additional
investment, and leveraging our existing skill set.
Sustainability
We have continued to successfully implement our Future
Foundations sustainability strategy, which sets out our approach to
our people, the places we build and our impact on the planet.
We look to maintain a positive culture and our people approach
is informed by our employee engagement survey. During the year, we
focused on providing better training and development opportunities,
recognising people's efforts and celebrating inspirational
performance. Our Star Awards are one such initiative. These reward
exceptional contributions from colleagues across a range of
categories. I am also pleased that we have maintained our
exceptional health and safety record, with an incident rate of just
4.9% of the industry average in FY23.
The places we develop continue to evolve. We are designing
buildings to higher environmental standards than ever before, and
we have evolved our specification both to standardise our products
and to take account of feedback from institutional clients and
residents. In particular, the feedback we receive from Fresh
residents is an important advantage for us.
From an environmental perspective, we are on a journey to net
zero and have further refined our understanding of our carbon
emissions during the year. We have published our assessment of the
climate -- related risks and opportunities facing the Company and
our climate -- related financial disclosure statement can be found
within the Watkin Jones plc Annual Report for the year ended 30
September 2023 .
Building safety
It goes without saying that the safety of our buildings is
paramount. We increased our building safety provision during the
year, following the evolution of government initiatives, greater
access to properties identified as being at risk, the receipt of
fire safety reports, related cost estimates, and the evolution and
conclusion of legal proceedings and settlement and contribution
agreements with building owners.
The remedial works for properties included in our building
safety provision are progressing well. We remain committed to
working collaboratively with building owners and leaseholders to
address issues with these legacy buildings.
Outlook
We continue to operate in the most attractive segments of the
residential for rent market, with strong tenant demand and rental
growth in our core PBSA and BTR sectors.
In the short term, current secured revenue of circa GBP300
million from previously sold developments is expected to cover our
FY24 cost base. All developments under construction are on track,
supported by continuing moderation in build cost inflation. Our
secured development pipeline stands at GBP1.5 billion.
Encouragingly, the forward fund market is showing early signs of
recovery as interest rates stabilise. Should interest rates trend
downwards, we anticipate that there will be growing investor demand
and capital allocations for high quality assets in our sectors.
While we remain focused on our core forward fund model, we will
look at potential opportunities to diversify our revenue streams
through development partnerships and refurbishment opportunities
for institutional clients. This should generate revenue and margin
without requiring significant capital investment.
Finally, on a personal note, I would like to thank the Board for
giving me the opportunity to lead this Company. I have worked at
Watkin Jones for 13 years and can confidently say that it is a
fantastic business with extremely dedicated and talented
colleagues. I am incredibly proud to be its Chief Executive
Officer.
I would also like to thank my colleagues for their support, both
to me personally as I have taken on my new role, and to the
business during what has been a challenging year. I am confident
that we are well placed to take advantage of a recovery once
markets improve.
Alex Pease
Chief Executive Officer
23 January 2024
OPERATIONAL REVIEW
Build To Rent
BTR apartments by estimated year of practical
completion
-----------------------------------------------------
Total pipeline FY24 FY25 FY26 FY27
---------------------------------- --------------------- ------ ------ ------- -----
Forward sold 2,907 672 809 1,110 316
Forward sales in the market 70 - - 70 -
Sites secured subject to planning 625 - - 230 395
---------------------------------- --------------------- ------ ------ ------- -----
Total secured 3,602 672 809 1,410 711
---------------------------------- --------------------- ------ ------ ------- -----
Total revenues for the year were GBP207.7 million (FY22:
GBP191.2 million), up 8.6%.
Revenues included the build-out of our forward sold developments
in Hove, Lewisham, Birmingham and Leatherhead, and a development
partnership scheme in Cardiff. Subsequent to the year end Hove
reached practical completion and we handed over one block at
Lewisham to the client.
We also forward sold a development in Belfast, which includes
627 BTR units and 81 social rent affordable homes. Construction on
this development will start meaningfully in FY24 and the
contribution to FY23 was restricted to a small profit on the land
transaction, as expected.
In FY23, we did not acquire or secure planning on any sites. The
current secured development pipeline for BTR is shown in the table
above.
The secured development pipeline has an estimated future revenue
value to us of c.GBP0.6 billion (FY22: GBP1.0 billion), of which
c.GBP447 million is currently forward sold (FY22: GBP517
million).
Gross profit for the year was GBP19.8 million (FY22: GBP32.8
million), a decrease of 39.6%. The gross margin was 9.5% (FY22:
17.2%), reflecting the lower margin of the schemes we forward sold
towards the end of FY22 and the impact of build cost inflation.
The affordable housing business, which relates to single-family
homes, achieved 36 sales completions (FY22: 40) and delivered
revenue of GBP19.6 million (FY22: GBP14.5 million) and gross profit
of GBP1.9 million (FY22: GBP1.9 million), as we continued to
progress our developments in Crewe and Preston.
Student Accommodation
PBSA beds by estimated year of practical completion
Total pipeline FY24 FY25 FY26 FY27 onwards
---------------------------------- ------------------- ------- ----- ----- ---------------
Forward sold 1,601 1,601 - - -
Forward sales in the market 1,510 - 260 727 523
Sites secured subject to planning 2,919 - - - 2,919
---------------------------------- ------------------- ------- ----- ----- ---------------
Total secured 6,030 1,601 260 727 3,442
---------------------------------- ------------------- ------- ----- ----- ---------------
Revenues from PBSA were GBP175.7 million (FY22: GBP180.0
million), down 2.4%. During the year, we delivered four
developments, comprising student schemes in Edinburgh, Colchester
and Swansea, and a 133-unit co-living scheme in Exeter.
We also forward sold one development, an 819-bed scheme in
Bedminster, Bristol, for delivery in FY24. The development is in a
key regeneration area and has strong environmental credentials,
with a target BREEAM rating of Excellent.
Gross profit for the year was GBP11.4 million (FY22: GBP26.4
million), resulting in a gross margin of 6.5% (FY22: 14.7%). The
reduction in margin was in part due to additional build costs on
the Exeter scheme, where the third-party main contractor went into
liquidation, and acceleration costs required to achieve completion
on certain schemes. In Exeter our self-build capabilities enabled
us to step in quickly and effectively, to minimise the delay and
deliver to the revised timetable agreed with the client. Build cost
inflation also reduced the margin on some schemes during the
year.
In FY23, we acquired 2 sites and secured planning on 2 sites,
with the potential to deliver around 590 beds. The current secured
development pipeline for PBSA is shown in the table above.
The secured development pipeline has an estimated future revenue
value to us of c.GBP0.9 billion (FY22: GBP1.0 billion), of which
c.GBP60 million is currently forward sold (FY22: GBP130
million).
Accommodation Management
Key statistics
Student beds and BTR apartments under management
23,064
FY23
22,896
FY22
Net promoter scores
+35
FY23
+34
FY22
Revenues in Fresh were GBP9.5 million (FY22: GBP9.1 million).
The growth reflects increased variable fee income related to higher
student occupancy, as well as the number of student beds and BTR
apartments under management at the start of FY23 (22,896) compared
to FY22 (22,155).
Gross profit rose to GBP6.0 million (FY22: GBP5.9 million), at a
margin of 63.2% (FY22: 64.8%).
Fresh took on two new student schemes with 500 beds in the year
and finished FY23 with 23,064 units under management across 71
schemes. However, 6,800 student beds left Fresh management in
October 2023, to be managed in-house by clients. These losses are
partially offset by new contract wins, leaving Fresh with
approximately 19,000 units under management across 71 schemes at
the start of FY24.
During the year, Fresh introduced a new delivery model to
enhance its focus on residents and clients, ensure clear
accountability within the organisation, support the ability to
scale, and offer career paths to retain talent. Fresh also
continued to develop the Yardi property management software
introduced in the prior year, in particular to refine it for the
student market.
The business has developed its branding, putting in place the
Fresh Student and Fresh Renting brands, to support online searches
and reflect the differing needs of the two sectors. Fresh has also
created a white-label offering, which is seeing strong interest
from clients and allows, for example, the development of branding
for individual buildings for BTR clients.
Fresh has continued to support its student residents, focusing
on the Be wellbeing programme. This is reflected in its record net
promoter score of +35 (FY22: +34) and the award of Platinum status
in the Global Student Living Index and winning Best Student Private
Housing Provider for the third year in a row. The Be wellbeing
programme won the prestigious Health and Wellbeing Award at the
Property Week Student Housing Awards.
FINANCIAL REVIEW
Revenue
Revenue of GBP413.2 million was delivered in the year,
increasing 1.5% from GBP407.1 million in FY22, despite the subdued
market conditions for forward sales. Our position was however
cushioned by secured revenues from forward sales completed in prior
years.
BTR development revenues grew by 8.6% to GBP207.7 million (FY22:
GBP191.2 million), with revenues from our existing portfolio of
developments supplemented by the forward sale of our new project at
Titanic Quarter, Belfast during the year.
Revenues from our PBSA development business were GBP175.7
million (FY22: GBP180.0 million), a decrease of 2.4%, with four
schemes completed and our new development in Bedminster forward
sold during the year. PBSA revenues also include the rental income
from our four leased student accommodation assets. The rental
income on these was GBP9.0 million (FY22: GBP13.6 million), a
decrease of 33.8%, with the impact of the prior year disposal of
two assets offset by continued strong student occupancy at our
remaining sites.
The Affordable Homes business delivered revenues of GBP19.6
million, up 35.2% on the GBP14.5 million recorded in FY22 as plots
reach completion at both our Preston and Crewe developments.
Fresh, our Accommodation Management business, achieved record
revenues of GBP9.5 million (FY22: GBP9.1 million), with further
increases to occupancy levels across its portfolio.
Operating profit
Gross profit for the year was GBP34.9 million (FY22: GBP67.6
million), a decrease of 48.4%, both as a result of trading
performance described below and the impact of impairments to land
assets in the period of GBP5.5 million. We re-assessed the carrying
value of our non-core land bank as well as certain pipeline assets
on the balance sheet, where early stage development opportunities
were strategically aborted in response to volatile market
conditions. This resulted in a decreased gross margin of 8.4%
(FY22: 16.6%).
Both our BTR and PBSA segments have been impacted by the
reduction in forward sales compared to the prior year, supply chain
pressures and build cost inflation, and acceleration costs required
to achieve completion on certain of our schemes.
BTR development gross profit decreased by 39.6% in the year to
GBP19.8 million (FY22: GBP32.8 million), with gross margin
softening to 9.5% (FY22: 17.2%). Gross profit from PBSA development
was GBP11.4 million (FY22: GBP26.4 million), with gross margin of
6.5% (FY22: 14.7%). The decrease reflected incremental costs at our
scheme in Exeter due to the main contractor going into liquidation,
as well as acceleration costs to physically complete a number of
schemes in the summer.
In Affordable Homes, gross profit was GBP1.9 million (FY22:
GBP1.9 million), with a reduced gross margin of 9.7% (FY22: 13.2%)
reflecting the impact of build cost inflation and an increase in
the sales mix of affordable units.
Fresh generated a gross profit of GBP6.0 million (FY22: GBP5.9
million) with the gross margin remaining broadly flat at 63.1%
(FY22: 64.8%).
During the year, we completed the disposal of a portfolio of
non-core private rental sector (PRS) assets on an accelerated
timetable ahead of the completion of remedial works, to allow the
business to focus on its strategic priorities.
This disposal resulted in gross anticipated cash receipts of
GBP17.2 million before repayment of associated borrowings, of which
GBP1.9 million is deferred to next year. A book loss on disposal of
GBP4.6 million was recorded within administrative expenses.
Administrative expenses increased to GBP72.8 million (FY22:
GBP43.4 million) with the effect of this disposal and exceptional
items recorded in the year.
Excluding the impact of the above loss on disposal and the
profit on disposal of investment properties in the year ended 30
September 2022, administrative expenses before exceptional items
decreased by 3.5% to GBP30.1 million (FY22: GBP31.2 million),
reflecting the impact of the cost out programme implemented during
the year.
Adjusted operating profit of GBP0.2 million (FY22: GBP54.7
million) reflects the reduction in new forward sales across the BTR
and PBSA segments, and both the impairment of land assets and the
loss on disposal of the PRS assets. The Group's operating loss was
GBP38.0 million (FY22: operating profit of GBP24.3 million)
including the impact of exceptional items in the year.
Exceptional items
An exceptional provision of GBP35.0 million has been made for
remedial costs associated with building safety matters, on which
further details are included in note 4. This is in addition to
provisions made in prior years as a consequence of:
-- the introduction of secondary legislation and the evolution
of government initiatives during 2023, bringing a further four
properties into the provision.
-- further access to and intrusive surveys conducted on relevant
buildings, the receipt of fire safety reports and related cost
estimates, alongside further experience of completing the
works.
-- the evolution and conclusion of legal proceedings, settlement
and contribution agreements with building owners during the
year.
This is a highly complex area with significant estimates in
respect of the cost of remedial works, the quantum of any legal
expenditure associated with the defence of the Group's position in
this regard, and the extent of those properties within the scope of
the applicable government guidance and legislation, which continue
to evolve. All our buildings were signed off by approved inspectors
as compliant with the relevant building regulations at the time of
completion. The investigation of the works required at many of the
buildings is at an early stage and therefore it is possible that
these estimates may change over time or if government legislation
and regulation further evolves.
One of the areas we also looked at during the year was
management of the Group's cost base. This resulted in a reduction
in headcount and GBP3.1 million of one-off restructuring costs in
the year.
Finance costs
Finance costs for the year were GBP5.0 million (FY22: GBP6.0
million). These costs relate to the finance cost of capitalised
leases under IFRS 16, which totalled GBP1.8 million (FY22: GBP4.5
million), which decreased following the disposal of the Dunaskin
and New Bridewell student leasehold properties in the prior year,
and the impact of the exceptional charge of GBP1.5 million (FY22:
GBPnil) for the unwind of the discounting of the building safety
provision made in prior periods. The balance of our finance costs
represents the fees associated with the availability of our
revolving credit facility (RCF) with HSBC and the interest cost of
the loans previously held with Svenska Handelsbanken AB.
Loss before tax
Loss before tax for the year was
GBP42.5 million (FY22: profit before tax of GBP18.4 million).
Adjusted loss before tax, which excludes the impact of the
exceptional items, was GBP2.9 million (FY22: adjusted profit before
tax of GBP48.8 million).
Taxation
The corporation tax credit was GBP9.9 million (FY22: charge of
GBP5.0 million). The effective tax rate of 23% (FY22: 27%) was more
than the standard UK corporation tax rate of 22% for the year,
primarily as a result of the remeasurement of deferred tax assets
to the future UK corporation tax rate of 25% which will be
effective when those assets are expected to unwind.
Information on our tax strategy can be found in the Investor
section of our website, watkinjonesplc.com.
Earnings per share
Basic earnings per share from continuing operations for the year
was a loss of 12.7 pence (FY22: earnings of 5.2 pence). Adjusted
basic earnings per share, which excludes the impact of the
exceptional items, was a loss of 0.6 pence (FY22: earnings of 14.8
pence).
Dividends
The Board proposed an interim dividend of 1.4 pence per share
(FY22: 2.9 pence per share) which was paid in June 2023.
Since then, we have continued to face into a very challenging
end market. As such, the Board decided that there will be no
further dividend paid in respect of FY23. This gives a total
dividend for the year of 1.4 pence per share (FY22: 7.4 pence per
share).
At 30 September 2023, the Company had distributable reserves of
GBP41.1 million available to pay dividends.
EBITDA
EBITDA, which is calculated as set out below, was a loss of
GBP21.0 million (FY22: profit of GBP14.5 million) after the
inclusion of exceptional items of GBP38.1 million (FY22: GBP30.4
million). Adjusted EBITDA, which excludes exceptional items, was
GBP17.2 million (FY22: GBP44.8 million), with an adjusted EBITDA
margin of 4.2% (FY22: 11.0%).
Return on capital employed
The return on capital employed (ROCE) for the year, calculated
as set out below, was impacted by the lower operating profit in the
period at 0.2% (FY22: 63.1%).
Statement of financial position
At 30 September 2023, non-current assets amounted to GBP60.2
million (FY22: GBP49.6 million), with the most significant item
being the carrying value of the leased student accommodation
investment properties amounting to GBP24.2 million (FY22: GBP27.3
million).
The deferred tax asset, predominantly relating to carried
forward losses from the year ended 30 September 2023, amounted to
GBP12.1 million (FY22: GBP1.9 million) and is expected to be fully
utilised in the short to medium term.
Right -- of -- use assets relating to office and car leases
amounted to GBP5.3 million (FY22: GBP4.7 million). Intangible
assets relating to Fresh amounted to GBP11.6 million (FY22: GBP12.2
million) and were reduced by the amortisation charge of GBP0.6
million in the year.
Reimbursement assets related to agreed client contributions
towards building safety remedial costs of GBP10.9m have been
recognised in the period (FY22: GBPnil).
Inventory and work in progress was GBP123.5 million (FY22:
GBP147.1 million), with the decrease reflecting the forward sale
during the period of our Bedminster PBSA site and the disposal of
our PRS assets, offset by investment in new land sites for
development in Guildford and Bristol.
Contract assets increased significantly in the year to GBP66.4
million (FY22: GBP50.8 million). These mainly relate to the final
payment balances which are received on completion of developments
in build. The increase in the year reflects the increased
contributions from BTR developments which typically have a longer
construction period and don't reach practical completion dates just
prior to the Group's year end as PBSA developments typically do.
Contract liabilities reduced by GBP3.6 million during the year to
GBP1.5 million.
The Building Safety provision of GBP65.6 million is
predominantly classified as non -- current liabilities, based on
our anticipated expenditure over the next five years. The increase
in the provision of GBP32.2 million includes an additional
exceptional provision made in the year (considered in the review of
'Exceptional items' above) and the utilisation of the brought --
forward provision.
Interest-bearing loans and borrowings stood at GBP28.5 million
at 30 September 2023 (FY22: 28.3 million).
Cash and net debt
FY23 FY22
GBPm GBPm
-------------------------------------------- ------ ------
Operating profit before exceptional items 0.2 54.7
Profit on disposal of fixed assets (0.3) (20.9)
Depreciation and amortisation 11.5 8.4
Increase in working capital (28.6) (61.7)
Finance costs paid (2.8) (5.8)
Tax paid (11.5) (1.6)
-------------------------------------------- ------ ------
Net cash outflow from operating activities (31.5) (26.9)
Sale of fixed assets 15.0 11.6
Dividends paid (15.1) (21.8)
Payment of lease liabilities (6.8) (4.7)
Cash flow from borrowings - 16.3
-------------------------------------------- ------ ------
Decrease in cash (38.4) (25.5)
Cash at beginning of year 110.8 136.3
-------------------------------------------- ------ ------
Cash at end of year 72.4 110.8
Less: borrowings (28.5) (28.2)
-------------------------------------------- ------ ------
Net cash before deducting lease liabilities 43.9 82.6
Less: lease liabilities (45.2) (49.1)
-------------------------------------------- ------ ------
Net (debt)/cash (1.3) 33.5
-------------------------------------------- ------ ------
Total cash and available facilities
FY23 FY22
GBPm GBPm
-------------------------- ------ ------
Cash and cash equivalents 72.4 110.8
Revolving credit facility
(RCF) 50.0 100.0
Drawn balance on RCF (28.8) (24.8)
Overdraft 10.0 10.0
-------------------------- ------ ------
Total cash and available
facilities 103.6 196.0
-------------------------- ------ ------
Lease liabilities arising from the adoption of IFRS 16 'Leases'
in the prior year were reduced by GBP3.9 million to GBP45.2 million
(FY22: GBP49.1 million), reflecting capital repayments made in the
year offset by indexed rent increases on our student leased
investment properties.
At the year end, we had a cash balance of GBP72.4 million and
loans of GBP28.5 million, resulting in a net cash position of
GBP43.9 million. At 30 September 2022, we had a cash balance of
GBP110.8 million and loans of GBP28.2 million, resulting in a net
cash position of GBP82.6 million.
Net cash balances are stated before deducting the lease
liabilities of GBP45.2 million (30 September 2022: GBP49.1
million), arising as a result of applying IFRS 16.
The lease liabilities relate primarily to several historic
student accommodation sale and leaseback properties, for which the
future lease rental liabilities are expected to be substantially
covered by the future net student rental incomes to be
received.
In a typical year, the Group's cash balance peaks around the
year end, as we receive the final payments on student accommodation
developments completing ahead of the new academic year, as well as
initial proceeds from the latest forward sales.
The Group is then a net user of cash until the following year
end, as a result of outflows such as tax and dividend payments,
overhead costs and land purchases. However, in FY24, as a result of
the physical completions of some of our BTR developments, we will
be receiving these final payments throughout the year and therefore
the profile will be more evenly spread than in previous years.
The cash balance at the year end is still important for funding
our day -- to -- day cash requirements and for putting the Group in
a strong position when bidding for new sites.
The Group's net cash outflow from operating activities for the
year was GBP31.5 million (FY22: outflow of GBP26.9 million),
reflecting investment in new development sites and the stages of
development of sites under construction.
Net finance costs paid totalled GBP2.8 million (FY22: GBP5.8
million), including the finance charges on the capitalised lease
liabilities of GBP1.8 million (FY22: GBP4.5 million), which
substantially reduced following the disposal of certain leased
student accommodation investment properties in the prior year.
Dividends paid in the year totalled GBP15.1 million (FY22:
GBP21.8 million). Dividends paid in FY23 comprised the final
dividend for FY22 and the interim dividend for FY23.
Bank facilities
During the year the Group extended its RCF with HSBC for a
further six months to run to November 2025 in order to allow the
borrowings and forward sales markets time to stabilise following
recent volatility. It has a maximum available facility of GBP50.0
million (30 September 2022: GBP100.0 million), of which GBP28.8
million was drawn against the facility at the year end (30
September 2022: GBP24.8 million), giving headroom of GBP21.2
million. This facility can be accessed to fund land acquisitions
and development works. The total facility was reduced during the
year, given the anticipated volume of land acquisitions, and to
benefit from lower non-utilisation fees.
We also have an undrawn overdraft facility of GBP10.0 million.
Total cash and available facilities at 30 September 2023 therefore
stood at GBP103.6 million (FY22: GBP196.0 million).
On disposal of the PRS assets during the year ended 30 September
2023, the Group repaid its associated loan facilities with Svenska
Handelsbanken AB. The outstanding balance at the year end was
therefore GBPnil (30 September 2022: GBP4.0 million).
Going concern
We have undertaken a thorough review of the Group's ability to
continue to trade as a going concern for the period to 31 January
2025. The basis of the review and an analysis of the downside risks
is set out in note 2.1.
Alternative performance measures (APMs)
We use APMs as part of our financial reporting, alongside
statutory reporting measures. These APMs are provided for the
following reasons:
1) to present users of the annual report with a clear view of
what we consider to be the results of our underlying operations,
enabling consistent comparisons over time and making it easier for
users of the report to identify trends;
2) to provide additional information to users of the annual
report about our financial performance or position;
3) to show the performance measures used by the Board in
determining dividend payments; and
4) to show the performance measures that are linked to
remuneration for the Executive Directors.
The following APMs appear in this annual report
Reconciliation
----------------------------------------------------------------
FY23 FY22
Reason for use GBP'000 GBP'000
------------------------------------ -------------- ---------------------------------- ------------- -------------
Adjusted operating profit 1 Operating (loss)/profit (37,970) 24,319
Add: exceptional items in
administrative expenses 38,140 30,365
---------------------------------- ------------- -------------
Adjusted operating profit 170 54,684
------------------------------------ -------------- ---------------------------------- ------------- -------------
Adjusted (loss)/profit before tax 1,4 (Loss)/profit before tax (42,459) 18,393
Add: exceptional items 39,598 30,365
---------------------------------- ------------- -------------
Adjusted (loss)/profit before tax (2,861) 48,758
------------------------------------ -------------- ---------------------------------- ------------- -------------
Adjusted basic (loss)/earnings per
share 1,3,4 (Loss)/profit after tax (32,547) 13,414
Add: exceptional items 39,598 30,365
Less: tax on exceptional items (8,716) (5,769)
---------------------------------- ------------- -------------
Adjusted (loss)/profit after tax (1,665) 38,010
Weighted average number of shares 256,434,903 256,385,882
---------------------------------- ------------- -------------
Adjusted basic (loss)/earnings per (0.649) pence 14.825 pence
share
------------------------------------ -------------- ---------------------------------- ------------- -------------
EBITDA 1 Operating (loss)/profit (37,970) 24,319
Add: share of loss in joint
ventures (13) (16)
Add: impairment of land assets 5,496 -
Add: loss/(profit) on disposal of
non-core assets 4,584 (18,253)
Add: depreciation 6,388 7,852
Add: amortisation 559 559
---------------------------------- ------------- -------------
EBITDA (20,956) 14,461
------------------------------------ -------------- ---------------------------------- ------------- -------------
Adjusted EBITDA 1 EBITDA (20,956) 14,461
Add: exceptional items in
administrative expenses 38,140 30,365
---------------------------------- ------------- -------------
Adjusted EBITDA 17,184 44,826
------------------------------------ -------------- ---------------------------------- ------------- -------------
Adjusted net cash 2 Net cash/(debt) (1,294) 33,454
Add: lease liabilities 45,195 49,099
---------------------------------- ------------- -------------
Adjusted net cash 43,901 82,553
------------------------------------ -------------- ---------------------------------- ------------- -------------
Return on capital employed 1,2 Adjusted operating profit 170 54,684
---------------------------------- ------------- -------------
Net assets at 30 September 130,005 176,953
Less: adjusted net cash (43,901) (82,553)
Less: intangible assets (11,606) (12,165)
Less: investment property (leased) (24,240) (27,331)
Less: right-of-use assets (5,276) (4,738)
Add: lease liabilities 45,195 49,099
---------------------------------- ------------- -------------
Adjusted net assets at 30
September 90,177 99,265
Adjusted net assets at 1 October 99,265 73,972
---------------------------------- ------------- -------------
Average adjusted net assets 94,721 86,619
---------------------------------- ------------- -------------
Return on capital employed 0.2% 63.1%
------------------------------------ -------------- ---------------------------------- ------------- -------------
Sarah Sergeant
Chief Financial Officer
23 January 2024
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
for the year ended 30 September 2023
Year ended 30 September 2023 Year ended 30 September 2022
----------------------------------- -----------------------------------
Before Before
Exceptional exceptional Exceptional exceptional
items items Total items items Total
Notes GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------------------- ----- ----------- ----------- --------- ----------- ----------- ---------
Continuing operations
Revenue 5 413,236 - 413,236 407,076 - 407,076
Cost of sales (378,377) - (378,377) (339,450) - (339,450)
------------------------------------- ----- ----------- ----------- --------- ----------- ----------- ---------
Gross profit 34,859 - 34,859 67,626 - 67,626
Administrative expenses 6 (34,689) (38,140) (72,829) (12,942) (30,365) (43,407)
------------------------------------- ----- ----------- ----------- --------- ----------- ----------- ---------
Operating profit/(loss) 170 (38,140) (37,970) 54,684 (30,365) 24,319
Share of loss in joint ventures (13) - (13) (16) - (16)
Finance income 496 - 496 72 - 72
Finance costs (3,514) (1,458) (4,972) (5,982) - (5,982)
------------------------------------- ----- ----------- ----------- --------- ----------- ----------- ---------
(Loss)/profit before tax (2,861) (39,598) (42,459) 48,758 (30,365) 18,393
Income tax credit/(expense) 8 1,196 8,716 9,912 (10,778) 5,769 (4,979)
------------------------------------- ----- ----------- ----------- --------- ----------- ----------- ---------
(Loss)/profit for the year
attributable to ordinary equity
holders of the parent (1,665) (30,882) (32,547) 37,980 (24,596) 13,414
------------------------------------- ----- ----------- ----------- --------- ----------- ----------- ---------
Other comprehensive income
That will not be reclassified to
profit or loss in subsequent periods:
Net (loss)/gain on equity instruments
designated at fair value through
other comprehensive
income, net of tax (188) - (188) 157 - 157
------------------------------------- ----- ----------- ----------- --------- ----------- ----------- ---------
Total comprehensive (loss)/income for
the year attributable to ordinary
equity holders of
the parent (1,853) (30,882) (32,735) 38,137 (24,596) 13,571
------------------------------------- ----- ----------- ----------- --------- ----------- ----------- ---------
Pence Pence Pence Pence Pence Pence
------------------------------------- ----- ----------- ----------- --------- ----------- ----------- ---------
Earnings per share for the year
attributable to ordinary equity
holders of the parent
Basic (loss)/earnings per share 9 (0.649) (12.043) (12.692) 14.825 (9.593) 5.232
------------------------------------- ----- ----------- ----------- --------- ----------- ----------- ---------
Diluted (loss)/earnings per share 9 (0.649) (12.043) (12.692) 14.748 (9.543) 5.205
------------------------------------- ----- ----------- ----------- --------- ----------- ----------- ---------
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
as at 30 September 2023
30 September 30 September
2023 2022
Notes GBP'000 GBP'000
------------------------------------------------ ----- ------------ ------------
Non-current assets
Intangible assets 11,606 12,165
Investment property (leased) 24,240 27,331
Right-of-use assets 5,276 4,738
Property, plant and equipment 1,796 2,009
Investment in joint ventures 1 1
Reimbursement assets 4,007 -
Deferred tax assets 12,096 1,941
Other financial assets 1,129 1,366
------------------------------------------------ ----- ------------ ------------
60,151 49,551
------------------------------------------------ ----- ------------ ------------
Current assets
Inventory and work in progress 123,516 147,118
Contract assets 66,368 50,821
Trade and other receivables 35,104 28,628
Reimbursement assets 11 6,858 -
Current tax receivable 7,088 -
Cash and cash equivalents 72,431 110,841
------------------------------------------------ ----- ------------ ------------
311,365 337,408
------------------------------------------------ ----- ------------ ------------
Total assets 371,516 386,959
------------------------------------------------ ----- ------------ ------------
Current liabilities
Trade and other payables (100,723) (89,717)
Contract liabilities (1,469) (5,052)
Interest-bearing loans and borrowings - -
Lease liabilities (7,567) (6,248)
Provisions 11 (24,457) (7,713)
Current tax liabilities - (4,402)
------------------------------------------------ ----- ------------ ------------
(134,216) (113,132)
------------------------------------------------ ----- ------------ ------------
Non-current liabilities
Interest-bearing loans and borrowings (28,530) (28,288)
Lease liabilities (37,628) (42,851)
Provisions 11 (41,137) (25,735)
------------------------------------------------ ----- ------------ ------------
(107,295) (96,874)
------------------------------------------------ ----- ------------ ------------
Total liabilities (241,511) (210,006)
------------------------------------------------ ----- ------------ ------------
Net assets 130,005 176,953
------------------------------------------------ ----- ------------ ------------
Equity
Share capital 2,564 2,564
Share premium 84,612 84,612
Merger reserve (75,383) (75,383)
Fair value reserve of financial assets at FVOCI 425 662
Share -- based payment reserve 1,407 526
Retained earnings 116,380 163,972
------------------------------------------------ ----- ------------ ------------
Total equity 130,005 176,953
------------------------------------------------ ----- ------------ ------------
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the year ended 30 September 2023
Fair value
reserve of
financial Share-based
Share Share Merger assets at payment Retained
capital premium reserve FVOCI reserve earnings Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------------------------------------- ------- ------- -------- ---------- ----------- -------- --------
Balance at 30 September 2021 2,562 84,612 (75,383) 536 2,824 169,660 184,811
--------------------------------------------- ------- ------- -------- ---------- ----------- -------- --------
Profit for the year - - - - - 13,414 13,414
Other comprehensive income - - - 126 - 31 157
--------------------------------------------- ------- ------- -------- ---------- ----------- -------- --------
Total comprehensive income - - - 126 - 13,445 13,571
--------------------------------------------- ------- ------- -------- ---------- ----------- -------- --------
Share-based payments 2 - - - 209 - 211
Recycled reserve for fully vested share-based
payment schemes - - - - (2,507) 2,507 -
Deferred tax debited directly to equity - - - - - 141 141
Dividend paid - - - - - (21,781) (21,781)
--------------------------------------------- ------- ------- -------- ---------- ----------- -------- --------
Balance at 30 September 2022 2,564 84,612 (75,383) 662 526 163,972 176,953
--------------------------------------------- ------- ------- -------- ---------- ----------- -------- --------
Loss for the year - - - - - (32,547) (32,547)
Other comprehensive income - - - (237) - 49 (188)
--------------------------------------------- ------- ------- -------- ---------- ----------- -------- --------
Total comprehensive income - - - (237) - (32,498) (32,735)
--------------------------------------------- ------- ------- -------- ---------- ----------- -------- --------
Share-based payments - - - - 1,067 - 1,067
Recycled reserve for fully vested share-based
payment schemes - - - - (186) 186 -
Deferred tax debited directly to equity - - - - - (151) (151)
Dividend paid - - - - - (15,129) (15,129)
--------------------------------------------- ------- ------- -------- ---------- ----------- -------- --------
Balance at 30 September 2023 2,564 84,612 (75,383) 425 1,407 116,380 130,005
--------------------------------------------- ------- ------- -------- ---------- ----------- -------- --------
CONSOLIDATED STATEMENT OF CASH FLOWS
for the year ended 30 September 2023
Year ended Year ended
30 September 30 September
2023 2022
Notes GBP'000 GBP'000
--------------------------------------------------------------------- ----- ------------ ------------
Cash flows from operating activities
Cash outflow from operations 12 (17,215) (19,592)
Interest received 496 72
Interest paid (3,315) (5,782)
Tax paid (11,466) (1,557)
--------------------------------------------------------------------- ----- ------------ ------------
Net cash outflow from operating activities (31,500) (26,859)
--------------------------------------------------------------------- ----- ------------ ------------
Cash flows from investing activities
Acquisition of property, plant and equipment (550) (660)
Proceeds on disposal of property, plant and equipment 210 4,341
Proceeds on disposal of right-of-use assets - 7,897
Proceeds on disposal of PRS assets 15,323 -
Cash flow from joint venture interests - -
--------------------------------------------------------------------- ----- ------------ ------------
Net cash inflow from investing activities 14,983 11,578
--------------------------------------------------------------------- ----- ------------ ------------
Cash flows from financing activities
Dividends paid 10 (15,129) (21,781)
Proceeds from exercise of share options - -
Payment of principal portion of lease liabilities (6,806) (4,717)
Payment of capital element of other interest -- bearing loans - (389)
Drawdown of RCF 27,579 20,625
Repayment of bank loans and RCF (27,537) (3,909)
--------------------------------------------------------------------- ----- ------------ ------------
Net cash outflow from financing activities (21,893) (10,171)
--------------------------------------------------------------------- ----- ------------ ------------
Net decrease in cash (38,410) (25,452)
Cash and cash equivalents at 1 October 2022 and 1 October 2021 110,841 136,293
--------------------------------------------------------------------- ----- ------------ ------------
Cash and cash equivalents at 30 September 2023 and 30 September 2022 72,431 110,841
--------------------------------------------------------------------- ----- ------------ ------------
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 30 September 2023
1. General information
Watkin Jones plc (the 'Company') is a public limited company
incorporated in the United Kingdom under the Companies Act 2006
(registration number 9791105) and its shares are listed on the
Alternative Investment Market of the London Stock Exchange. The
Company is domiciled in the United Kingdom and its registered
address is 12 Soho Square, London, United Kingdom, W1D 3QF.
The principal activities of the Company and its subsidiaries
(collectively the 'Group') are those of property development and
the management of properties for multiple residential
occupation.
The consolidated financial statements for the Group for the year
ended 30 September 2023 comprise the Company and its subsidiaries.
The basis of preparation of the consolidated financial statements
is set out in note 2 below.
2. Basis of preparation
The financial statements of the Group have been prepared and
approved by the Directors in accordance with International
Accounting Standards in conformity with the requirements of the
Companies Act 2006 and in accordance with United Kingdom adopted
International Accounting Standards.
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 financial information set out above does not constitute the
Group's statutory accounts for the years ended 30 September 2023 or
2022, but is derived from those accounts. Statutory accounts for
2022 have been delivered to the Registrar of Companies, and those
for 2023 will be delivered in due course. The auditor has reported
on those accounts; their reports were (i) unqualified, (ii) did not
include a reference to any matters to which the auditor drew
attention by way of emphasis without qualifying their report and
(iii) did not contain statements under Section 498(2) or (3) of the
Companies Act 2006.
The accounting policies set out in the notes have, unless
otherwise stated, been applied consistently to all periods
presented in these financial statements. The financial statements
are prepared on the historical cost basis except as disclosed in
these accounting policies.
The financial statements are presented in pounds sterling and
all values are rounded to the nearest thousand (GBP'000), except
when otherwise indicated.
2.1 Going Concern
The Directors have undertaken a thorough review of the Group's
ability to continue to trade as a going concern for the period to
31 January 2025 (the 'forecast period'). This review has been
undertaken taking
into consideration the following matters.
Liquidity
At 30 September 2023, the Group had a robust liquidity position,
with cash and available headroom in its banking facilities
totalling GBP103.6 million.
Strong liquidity has been maintained through the first quarter
of the year ending 30 September 2024, providing the Group with a
good level of cash and available banking facilities for the year
ahead.
The Group's revolving credit facility (RCF) is committed and has
recently been extended to November 2025 to give flexibility to a
renewal given the current market conditions. The total facility was
reduced during the year, given the anticipated volume of land
acquisitions, and to benefit from lower non-utilisation fees. All
financial covenants under this facility were met at 30 September
2023 and are forecast to be met throughout the period to 31 January
2025.
Business Model
Our forward sale business model is capital light. By forward
selling the majority of our build to rent (BTR) and purpose built
student accommodation (PBSA) developments, we receive payment for
the land either at the same time as or shortly after we complete
the purchase, and before we commit to any significant development
expenditure. Once forward sold, we receive payment for the
development works as
they progress. By being in control of our development pipeline
we are able to ensure that we only commit construction expenditure
to developments that are either forward sold or to undertake a
modest level
of enabling works. In certain circumstances we may decide to
continue construction activities beyond the initial enabling phase,
without a forward sale agreement in place, but we take this
decision based on our
available liquidity and can suspend the works should it prove
necessary. This greatly limits our exposure to development
expenditure which is not covered by cash income.
Sites are normally secured on a subject to satisfactory planning
basis, which gives us time to manage the cash requirements and to
market them for forward sale. We also take a cautious approach to
managing our land acquisition programme to ensure that we have
sufficient liquidity available to complete the acquisition of the
sites without any new forward sales being secured.
The Fresh business receives a regular contractual monthly fee
income from its multiple clients and the short to medium -- term
risk to its revenue stream is low.
For our Affordable Homes business, which is currently relatively
small and only has a few sites in build, we manage our development
expenditure so that, other than for infrastructure works, we only
commit expenditure where it is supported by a forward sales
position. In addition, a significant portion of our largest site
has been forward sold such that we will receive payment for
development works as they
progress.
We also receive rental income from tenants on our leased PBSA
assets. The PBSA assets are anticipated to be fully occupied for
the 2023/24 academic year. Our business model and approach to cash
management therefore provides a high degree of resilience.
Counterparty Risk
The Group's clients are predominantly blue-chip institutional
funds, and the risk of default is low. The funds for a forward sold
development are normally specifically allocated by the client or
backed by committed debt funding.
For forward sold developments, our cash income remains ahead of
our development
expenditure through the life of the development, such that if we
were exposed to a client payment default, we could suspend the
works, thereby limiting any cash exposure.
Fresh has many clients and these are mostly institutional funds
with low default risk.
Base case cash forecast
We have prepared a base case cash forecast for the forecast
period, based on our current business plan and trading assumptions
for the year. This is well supported by our forward sold pipeline
of three PBSA developments and seven BTR developments for delivery
during the period FY24 to FY27, as well as the
reserved/exchanged and forward sales for our Affordable Homes
business and the contracted income for Fresh. Our currently secured
cash flow, derived from our forward sold developments and other
contracted income, net of overheads and tax, results in a modest
cash utilisation over the forecast period, with the result that our
liquidity position is maintained.
In addition to the secured cash flow, the base case forecast
assumes a number of new forward sales and further house sales,
which if achieved will result in a further strengthening of our
liquidity position, after
allowing for dividend payments.
Risk Analysis
In addition to the base case forecast, we have considered the
possibility of continued disruption to the forward sale market
given the market turbulence seen in the UK over the last 12 months.
This is our most significant risk as it would greatly limit our
ability to achieve any further forward sales.
We have run various model scenarios to assess the possible
impact of the above risks, including an extreme downside scenario
assuming no further forward sales are achieved.
The cash forecast prepared under this scenario illustrates that
adequate liquidity is maintained through the forecast period and
the financial covenants under the RCF would still be met.
The minimum gross cash balance under this scenario was GBP32.4
million (excluding the GBP10.0 million overdraft). In addition we
have reviewed the potential impact on the Group's Tangible Net
Worth Covenant of any additional increase in the provision for
Building Safety. The headroom on this covenant under the extreme
downside scenario would allow for a further four properties to be
provided for, assuming an average provision per property of GBP2.1
million.
We consider the likelihood of events occurring which would
exhaust the total cash and available facilities balances remaining
to be remote. However, should such events occur, management would
be able to implement reductions in discretionary expenditure and
consider the sale of the Group's land sites to ensure that the
Group's liquidity was maintained.
While there remains sufficient headroom under this scenario for
all the financial covenants, a sale of the Group's land sites would
enable the repayment of the RCF balance (as the RCF is drawn down
against
these assets). There would then be no requirement for the
covenants to be tested.
Conclusion
Based on the thorough review and robust downside forecasting
undertaken, and having not identified any material uncertainties
that may cast any significant doubt, the Board is satisfied that
the Group will be able to continue to trade for the period to 31
January 2025 and has therefore adopted the going concern basis
in preparing the financial statements.
3. Accounting policies
The results for the year have been prepared on a basis
consistent with the accounting policies set out in the Watkin Jones
plc Annual Report for the year ended 30 September 2023.
4. Building Safety provision
Our contract obligations
In January 2020, following the Grenfell Tower fire in June 2017,
the Government issued guidance on the suitability of certain
cladding solutions used on high rise residential buildings. The
Group subsequently carried out a detailed assessment of its
property portfolio.
Taking into account the prevailing Government guidance and legal
framework at the time, as well as consultation with building owner
clients and technical and legal advice, the assessment encompassed
buildings completed in 2008 or later (i.e. within the 12 year
contractual period). The assessment identified:
1) Buildings of any height that featured aluminium composite material ('ACM') and
2) Buildings above 18m in height that featured high pressure
laminate ('HPL').
The Group identified 15 buildings that featured significant ACM;
of these, 13 have been remediated by the Company. The remaining two
builds were undertaken by external contractors, are within the
contractual period, and benefit from insurance-backed warranties
provided by the external contractor and architect. One of these
buildings has been remediated and the external contractor retained
liability for this.
The Group took an exceptional provision in the year ended 30
September 2020 of GBP14,800,000 for the remedial costs of these
properties, which included contributions agreed with the respective
owners.
Further legislation in England
In January 2022 this guidance was withdrawn and in April the
Building Safety Act 2022 (the 'BSA') was enacted, with the
government announcing its intention to:
i) extend the scope of developers' responsibility to 30
years;
ii) increase the scope by including buildings above 11 metres;
and
iii) expand the scope to incorporate life critical safety
defects.
In the year ended 30 September 2022, the Group performed a
review of buildings above 11 metres developed by the Company over
the last 30 years. Industry practice is not to retain records for
buildings that are out of contract and therefore we do not have
fulsome documentation for buildings that were out of contract. In
such cases, the Group undertook a number of procedures to evaluate
the risk to the Group. These procedures included a review of the
external façade materials, carrying out intrusive surveys where
constructive dialogue with property owners had commenced and making
enquiries of employees who worked on the relevant construction
projects. This review concluded that an exceptional provision of
GBP30,365,000 should be made for these potential costs. This
provision was made in relation to 18 properties.
During the year ended 30 September 2023, following the
introduction of the secondary legislation that provided greater
clarity on the scope and approach of the BSA in relation to
leasehold buildings, the Group was formally approached to sign up
to the Responsible Actors' Scheme ('RAS') which came into force on
4 July 2023. By signing up to the RAS the Group is required to sign
the Developer's Remediation Contract ('the Contract') which
requires us to:
-- Take responsibility for all necessary work to address
life-critical fire safety-defects arising from the design and
construction of buildings 11 metres and over in height that we
developed or refurbished in England over the 30 years ending on 4
April 2022
-- Keep residents in those buildings informed about progress towards meeting this commitment
-- Reimburse taxpayers for funding spent on remediating their
buildings, i.e. where leaseholders have accessed the Building
Safety Fund to remediate their properties
The Group signed the Contract in December 2023.
The Contract is intended to cover leasehold buildings rather
than PBSA or BTR, and therefore the significant majority of
buildings that the Group has developed over the last 30 years are
outside the scope of the contract. There are thirteen leasehold
buildings falling within the scope of the RAS, and five of these
are included within the provision. One of these properties relates
to remediation works that have been undertaken as a result of the
building owner accessing the Building Safety Fund. Based on our
internal review procedures described above, the provision includes
an estimation of works required in relation to buildings identified
as requiring remediation.
Under the obligations of the scheme, and where information is
available, we will write out to building owners to understand their
position regarding those buildings.
Legislation in Wales
In 2023, the Welsh Government's announced a new scheme with
developers to tackle fire safety defects in medium highrise
residential buildings. The Group has been approached in respect of
one property which we have provided for on the basis that certain
remedial works are required. In our view, based on the
investigative procedures that we have carried out, there are no
further remedial works required to other Welsh properties.
Legislation in Scotland
The Housing (Cladding Remediation) (Scotland) Bill was published
in November 2023 and has not yet been finalised. It is the Group's
expectation that the basis for this Bill will be consistent with
the RAS, such that it is intended to cover leasehold buildings. The
Group has constructed one leasehold property in Scotland, which
remains under contract. In our view, based on the investigative
procedures that we have carried out, there is no remedial work
required on that property.
Overall landscape
Historically PBSA and BTR properties that are out of contract
have been considered to be out of time for claims, although in
England there remains uncertainty over how the BSA will be applied
in this regard. However, as set out above, the RAS does not
specifically apply to PBSA and BTR properties, noting that the
overall objective of the government policy was to protect
individual leaseholders in the wake of the Grenfell Tower fire.
Since the implementation of the BSA, we have been in contact
with government and industry bodies and other housebuilders and
developers to confirm that our interpretation of the legislation is
consistent with others. We also engaged an independent consultant
to assess the scope and cost of our remedial works on relevant
properties to ensure that our approach was appropriate.
We will continue to keep abreast of any changes to legislation
and guidance, recognising that the approach to building safety
continues to evolve.
Impact on financial statements
Provisions are recognised when three criteria are met: 1) the
Group has a present obligation as a result of a past event; 2) it
is probable that an outflow of resources will be required to settle
the obligation; and 3) a reliable estimate can be made of the
obligation.
A further net exceptional provision of GBP35.0 million has been
made for these remedial costs in the year ended 30 September 2023
as a result of:
-- The introduction of secondary legislation and the evolution
of government initiatives during 2023 as set out above which has
brought two further properties into the provision;
-- Greater access to the various properties which were
identified as being at risk, further intrusive surveys conducted on
relevant buildings, the receipt of fire safety reports and related
cost estimates, alongside further experience of completing the
works; these have led to additional costs required compared to
initial expectations; and
-- The evolution and conclusion of legal proceedings, settlement
and contribution agreements with building owners during the
year.
This is a highly complex area with significant estimates in
respect of the cost of remedial works, the quantum of any legal
expenditure associated with the defence of the Group's position in
this regard, and the extent of those properties within the scope of
the applicable government guidance and legislation, which continue
to evolve. All our buildings were signed off by approved inspectors
as compliant with the relevant Building Regulations at the time of
completion.
The amount provided for these works has been estimated by
reference to recent industry experience and external quotes for
similar work identified. The investigation of the works required at
many of the buildings is at an early stage and therefore it is
possible that these estimates may change over time or if government
legislation and regulation further evolves.
As a number of other housebuilders and developers have done over
the last twelve months, we have included an additional amount of
contingency within our provision to reflect further buildings being
identified as within the scope of the RAS and for unforeseen
remediation costs beyond management's current knowledge. We have
also implemented a consistent contingency policy across the
properties where work is yet to start.
We expect this cost to be incurred over the next five years, and
the provision has been discounted to its present value accordingly.
The timing of this expenditure will be dependent on the timely
engagement by building owners, revisions to programme under the new
BSA Gateways, and the availability of appropriately qualified
subcontractors.
We have made progress with negotiating contributions from
clients to mitigate our liability in relation to these remedial
works and at the balance sheet date have recognised reimbursement
assets of GBP10.9 million (30 September 2022: GBPnil). These will
be recovered over one to five years.
Should the costs associated with these remedial works increase
by 10%, the provision required would increase by GBP3,800,000.
Should the discount rate applied to the calculation reduce by 1%,
the provision required would increase by GBP800,000. Further
details of the provision are set out in note 11.
Should an additional property be identified which requires
remedial works for which the Group is liable, it would be
reasonable to estimate the additional cost at GBP2,100,000, based
on the average expected cost of works for properties included
within the provision for which the Group will perform remediation
works.
5. 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 operated in during FY23 and FY22:
a. Student Accommodation - the development of purpose built student accommodation;
b. Build To Rent - the development of build to rent
accommodation;
c. Affordable Homes - the development of residential housing; and
d. Accommodation Management - the management of student
accommodation and build to rent/private rental sector (PRS)
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.
Student Build Affordable Accommodation
Accommodation To Rent Homes Management Corporate Total
Year ended 30 September 2023 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------------------------------------- ------------- ------- ---------- ------------- --------- --------
Revenue 175,739 207,711 19,607 9,481 698 413,236
---------------------------------------------- ------------- ------- ---------- ------------- --------- --------
Segmental gross profit 11,409 19,836 1,920 5,988 1,202 40,355
Impairment of land assets - - - - (5,496) (5,496)
---------------------------------------------- ------------- ------- ---------- ------------- --------- --------
Gross profit 11,409 19,836 1,920 5,988 (4,294) 34,859
Administration expenses - - - (5,441) (24,664) (30,105)
Loss on disposal of PRS assets - - - - (4,584) (4,584)
Exceptional administrative expenses - - - - (38,140) (38,140)
Operating profit 11,409 19,836 1,920 547 (71,682) (37,970)
Share of loss in joint ventures - - - - (13) (13)
Finance income - - - - 496 496
Finance costs - - - - (3,514) (3,514)
Exceptional finance costs - - - - (1,458) (1,458)
---------------------------------------------- ------------- ------- ---------- ------------- --------- --------
Profit/(loss) before tax 11,409 19,836 1,920 547 (76,171) (42,459)
Taxation - - - - 9,912 9,912
---------------------------------------------- ------------- ------- ---------- ------------- --------- --------
Continuing profit/(loss) for the year 11,409 19,836 1,920 547 (66,259) (32,547)
---------------------------------------------- ------------- ------- ---------- ------------- --------- --------
Profit for the year attributable to ordinary
equity shareholders of the parent (32,547)
---------------------------------------------- ------------- ------- ---------- ------------- --------- --------
Inventory and work in progress 83,430 10,970 27,314 - 1,802 123,516
---------------------------------------------- ------------- ------- ---------- ------------- --------- --------
Student Build Affordable Accommodation
Accommodation To Rent Homes Management Corporate Total
Year ended 30 September 2022 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------------------------------------- ------------- ------- ---------- ------------- --------- --------
Revenue 180,037 191,228 14,478 9,072 12,261 407,076
---------------------------------------------- ------------- ------- ---------- ------------- --------- --------
Gross profit 26,353 32,808 1,915 5,909 641 67,626
Administration expenses - - - (5,788) (25,407) (31,195)
Profit on disposal of student leasehold
properties
- - - - 18,253 18,253
Exceptional administrative expenses - - - - (30,365) (30,365)
---------------------------------------------- ------------- ------- ---------- ------------- --------- --------
Operating profit 26,353 32,808 1,915 121 (36,878) 24,319
Share of loss in joint ventures - - - - (16) (16)
Finance income - - - - 72 72
Finance costs - - - - (5,982) (5,982)
---------------------------------------------- ------------- ------- ---------- ------------- --------- --------
Profit/(loss) before tax 26,353 32,808 1,915 121 (42,804) 18,393
Taxation - - - - (4,979) (4,979)
---------------------------------------------- ------------- ------- ---------- ------------- --------- --------
Continuing profit/(loss) for the year 26,353 32,808 1,915 121 (47,783) 13,414
---------------------------------------------- ------------- ------- ---------- ------------- --------- --------
Profit for the year attributable to ordinary
equity shareholders of the parent 13,414
---------------------------------------------- ------------- ------- ---------- ------------- --------- --------
Inventory and work in progress 75,840 38,763 29,785 - 2,730 147,188
---------------------------------------------- ------------- ------- ---------- ------------- --------- --------
6. Exceptional costs
Year ended Year ended
30 September 30 September
2023 2022
GBP'000 GBP'000
-------------------------------------------------------------- ------------ ------------
Recognised in administrative expenses
Building Safety provision 35,000 30,365
Restructuring costs 3,140 -
-------------------------------------------------------------- ------------ ------------
Total exceptional items recognised in administrative expenses 38,140 30,365
-------------------------------------------------------------- ------------ ------------
Recognised in finance costs
Unwind of discount rate on Building Safety provision 1,458 -
-------------------------------------------------------------- ------------ ------------
Total exceptional items recognised in finance costs 1,458 -
-------------------------------------------------------------- ------------ ------------
Total exceptional costs 39,598 30,365
-------------------------------------------------------------- ------------ ------------
There have been exceptional items during the year of
GBP35,000,000 (2022: GBP30,365,000) relating to a further net
provision made for Building Safety related costs. The provision
made in the prior year has been unwound to its present value,
resulting in GBP1,458,000 of finance costs. Further information on
these charges is included in note 4 and note 11.
Action has been taken during the year ended 30 September 2023 to
manage the Group's cost base, with exceptional restructuring and
redundancy costs of GBP3,140,000 incurred.
All of the exceptional costs in the year were treated as
allowable deductions for corporation tax purposes.
7. Total operating profit
This is stated after charging/(crediting):
Year ended Year ended
30 September 30 September
2023 2022
GBP'000 GBP'000
---------------------------------------------------- ------------ ------------
Audit services to the parent company 100 100
Audit services to the subsidiaries 275 275
Amortisation of intangible assets 559 559
Impairment of land assets 5,496 -
Depreciation:
Property, plant and equipment 697 747
Investment property (leased) 4,217 6,156
Right-of-use assets 1,474 949
Profit on disposal of student leasehold properties - (18,253)
Loss on disposal of PRS assets 4,584 -
Loss on disposal of other right-of-use assets - 116
Profit on disposal of property, plant and equipment (294) (2,783)
---------------------------------------------------- ------------ ------------
8. Income taxes
Year ended Year ended
30 September 30 September
2023 2022
GBP'000 GBP'000
------------------------------------------------------- ------------ ------------
Current income tax
UK corporation tax on profits for the year - 2,708
Adjustments in respect of prior periods 318 1,133
Foreign taxes 27 55
------------------------------------------------------- ------------ ------------
Total current tax 345 3,896
------------------------------------------------------- ------------ ------------
Deferred tax
Origination and reversal of temporary differences (9,229) 808
Adjustments in respect of prior year 216 4
Remeasurement of deferred tax for changes in tax rates (1,244) 271
------------------------------------------------------- ------------ ------------
Total deferred tax (10,257) 1,083
------------------------------------------------------- ------------ ------------
Total tax (credit)/expense (9,912) 4,979
------------------------------------------------------- ------------ ------------
Reconciliation of total tax (credit)/expense
Year ended Year ended
30 September 30 September
2023 2022
GBP'000 GBP'000
------------------------------------------------------------------------------------------ ------------ ------------
(Loss)/profit before tax (42,459) 18,393
(Loss)/profit multiplied by standard rate of corporation tax in the UK of 22% (2022: 19%) (9,341) 3,495
Fixed asset differences 40 (7)
Expenses not deductible 86 34
Income not taxable (36) 33
Remeasurement of deferred tax for changes in tax rates (1,244) 271
Other differences 178 45
Differences to foreign tax rates (20) (29)
Adjustments in respect of prior periods 318 1,133
Prior year adjustment to deferred tax 107 4
------------------------------------------------------------------------------------------ ------------ ------------
At the effective rate of tax of 23.3% (2022: 27.1%) (9,912) 4,979
------------------------------------------------------------------------------------------ ------------ ------------
Income tax (credit)/expense reported in the statement of profit or loss (9,912) 4,979
------------------------------------------------------------------------------------------ ------------ ------------
As a result of the Finance Act 2021, the rate of UK corporation
tax increased to 25% from 6 April 2023. The deferred tax assets and
liabilities held by the Group at the start of the current year have
been revalued to reflect this increase. The deferred tax asset
arising from losses in the period is expected to be fully utilised
in the short to medium term.
9. Earnings per share
The following table reflects the income and share data used in
the basic and diluted EPS computations:
Year ended Year ended
30 September 30 September
2023 2022
GBP'000 GBP'000
------------------------------------------------------------------------------------------ ------------ ------------
(Loss)/profit for the year attributable to ordinary equity holders of the parent (32,547) 13,414
Add back exceptional costs for the year (note 6) 39,598 30,365
Less corporation tax benefit from exceptional costs for the year (8,716) (5,769)
------------------------------------------------------------------------------------------ ------------ ------------
Adjusted (loss)/profit for the year attributable to ordinary equity holders of the parent
(excluding exceptional items after tax) (1,665) 38,010
------------------------------------------------------------------------------------------ ------------ ------------
Year ended Year ended
30 September 30 September
2023 2022
Number of Number of
shares shares
------------------------------------------------------------------------ ------------ ------------
Weighted average number of ordinary shares for basic earnings per share 256,434,903 256,385,882
Adjustment for the effects of dilutive potential ordinary shares - 1,338,930
------------------------------------------------------------------------ ------------ ------------
Weighted average number for diluted earnings per share 256,434,903 257,724,812
------------------------------------------------------------------------ ------------ ------------
Year ended Year ended
30 September 30 September
2023 2022
Pence Pence
------------------------------------------------------------------------------------------ ------------ ------------
Basic earnings per share
Basic (loss)/profit for the year attributable to ordinary equity holders of the parent (12.692) 5.232
Adjusted basic earnings per share (excluding exceptional items after tax)
Adjusted (loss)/profit for the year attributable to ordinary equity holders of the parent (0.649) 14.825
Diluted earnings per share
Basic (loss)/profit for the year attributable to diluted equity holders of the parent (12.692) 5.205
Adjusted diluted earnings per share (excluding exceptional items after tax)
Adjusted (loss)/profit for the year attributable to diluted equity holders of the parent (0.649) 14.748
------------------------------------------------------------------------------------------ ------------ ------------
10. Dividends
Accounting policy
Dividends are recognised through equity when approved by the
parent's shareholders or on payment, whichever is earlier.
Year ended Year ended
30 September 30 September
2023 2022
GBP'000 GBP'000
------------------------------------------------------------------------------ ------------ ------------
Final dividend paid in February 2023 of 4.50 pence (February 2022: 5.6 pence) 11,539 14,345
Interim dividend paid in June 2023 of 1.40 pence (June 2022: 2.9 pence) 3,590 7,436
------------------------------------------------------------------------------ ------------ ------------
15,129 21,781
------------------------------------------------------------------------------ ------------ ------------
An interim dividend in relation to the year ended 30 September
2023 of 1.40 pence per ordinary share was paid on 30 June 2023
(2022: 2.9 pence per ordinary share).
The final dividend proposed for the year ended 30 September 2023
is nil pence per ordinary share (2022: 4.5 pence per ordinary
share). As such, no liability (2022: liability of GBP11,539,000)
has been recognised at that date. At 30 September 2023, the Company
had distributable reserves available of GBP41,115,000 (30 September
2022: GBP56,058,000).
11. Provisions
Building Safety provision
Reimbursement
Provision asset Total
GBP'000 GBP'000 GBP'000
------------------------ --------- ------------- --------
At 1 October 2021 9,399 - 9,399
Arising during year 30,365 - 30,365
Utilised (6,316) - (6,316)
------------------------ --------- ------------- --------
At 1 October 2022 33,448 - 33,448
Arising during year 45,865 (10,865) 35,000
Utilised (15,177) - (15,177)
Unwind of discount rate 1,458 - 1,458
------------------------ --------- ------------- --------
At 30 September 2023 65,594 (10,865) 54,729
------------------------ --------- ------------- --------
The balance can be classified as follows:
Reimbursement
Year ended 30 September 2023 Provision asset Total
----------------------------- --------- ------------- ------
Current 24,457 (6,858) 17,599
Non-current 41,137 (4,007) 37,131
----------------------------- --------- ------------- ------
Total 65,594 (10,865) 54,729
----------------------------- --------- ------------- ------
Reimbursement
Year ended 30 September 2022 Provision asset Total
----------------------------- --------- ------------- ------
Current 7,713 - 7,713
Non-current 25,735 - 25,735
----------------------------- --------- ------------- ------
Total 33,448 - 33,448
----------------------------- --------- ------------- ------
A provision of GBP33,448,000 was held at 30 September 2022 for
the Group's anticipated contribution towards the cost of building
safety remedial works.
A further net increase in provision of GBP35,000,000 has been
made during the year ended 30 September 2023 for building safety
remediation costs, comprising an increase in cost provision of
GBP45,865,000 offset by a corresponding reimbursement asset of
GBP10,865,000, reflecting customer contributions to these remedial
works which have been contractually agreed during the year. Of this
reimbursement asset, GBP6,973,000 was included in the net provision
disclosed at 1 October 2022 which represented the best estimate of
the Group's net contribution to remediation costs.
The judgements and estimates surrounding this provision and
corresponding reimbursement assets are set out in note 4.
The net provision at 30 September 2023 amounts to GBP54,729,000,
of which GBP17,599,000 is expected to be incurred in the year
ending 30 September 2024 and GBP37,131,000 is expected to be
incurred between 1 October 2024 and 30 September 2027. The
provision has been discounted to its present value accordingly, at
a risk-free rate of 4.60% based on UK five-year gilt yields (2022:
4.36%).
12. Reconciliation of profit before tax to net cash flows from
operating activities
Year ended Year ended
30 September 30 September
2023 2022
GBP'000 GBP'000
--------------------------------------------------------------------- ------------ ------------
(Loss)/profit before tax (42,459) 18,393
Depreciation of leased investment properties and right-of-use assets 5,691 7,105
Depreciation of plant and equipment 697 747
Amortisation of intangible assets 559 559
Profit on disposal of right-of-use assets - (18,137)
Profit on disposal of property, plant and equipment (294) (2,783)
Loss on disposal of operational PRS assets 4,584 -
Finance income (496) (72)
Finance costs 4,972 5,982
Share of loss in joint ventures 13 16
Decrease/(increase) in inventory and work in progress 4,634 (19,525)
Increase in contract assets (15,547) (37,011)
Increase in trade and other receivables (6,476) (430)
(Decrease)/increase in contract liabilities (3,583) 2,207
Increase in reimbursement assets (10,865) -
Increase/(decrease) in trade and other payables 9,600 (901)
Increase in provisions 30,688 24,049
Increase in share -- based payment reserve 1,067 209
--------------------------------------------------------------------- ------------ ------------
Net cash outflow from operating activities (17,215) (19,592)
--------------------------------------------------------------------- ------------ ------------
Major non-cash transactions
There were no major non-cash transactions during the period.
13. Analysis of net cash/(debt)
At beginning Other
of year Cash flow movements At end of
year
30 September 2023 GBP'000 GBP'000 GBP'000 GBP'000
-------------------------------------------- ------------ --------- --------- ---------
Cash at bank and in hand 110,841 (38,410) - 72,431
Other interest -- bearing loans - - - -
Bank loans (28,288) (42) (200) (28,530)
-------------------------------------------- ------------ --------- --------- ---------
Net cash before deducting lease liabilities 82,553 (38,452) (200) 43,901
-------------------------------------------- ------------ --------- --------- ---------
Lease liabilities (49,099) 6,806 (2,902) (45,195)
-------------------------------------------- ------------ --------- --------- ---------
Net cash/(debt) 33,454 (31,646) (3,102) (1,294)
-------------------------------------------- ------------ --------- --------- ---------
At beginning Other
of year Cash flow movements At end of
year
30 September 2022 GBP'000 GBP'000 GBP'000 GBP'000
-------------------------------------------- ------------ --------- --------- ---------
Cash at bank and in hand 136,293 (25,452) - 110,841
Other interest -- bearing loans (389) 389 - -
Bank loans (11,572) (16,516) (200) (28,288)
-------------------------------------------- ------------ --------- --------- ---------
Net cash before deducting lease liabilities 124,332 (41,579) (200) 82,553
-------------------------------------------- ------------ --------- --------- ---------
Lease liabilities (129,252) 4,717 75,436 (49,099)
-------------------------------------------- ------------ --------- --------- ---------
Net debt/(cash) (4,920) (36,862) 75,236 33,454
-------------------------------------------- ------------ --------- --------- ---------
Cash at bank and in hand as at 30 September 2023 includes
GBP53,000 of cash deposited by the Group in an escrow account in
connection with a development in progress, access to which is
contingent upon the completion of certain development works (30
September 2022: GBP53,000). Non -- cash movements relate to the
acquisition of property, plant and equipment under other interest
-- bearing loans, the amortisation of bank loan arrangement fees
and changes to the value of lease liabilities as a result of leases
entered into or terminated in the period or due to movements in the
rent inflation rates assumed.
14. Annual report
Copies of this announcement are available from the Company at 12
Soho Square, London W1D 3QF. The Group's annual report for the year
ended 30 September 2023 will be posted to shareholders shortly and
will be available on our website at www.watkinjonesplc.com.
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