- FY24 operating profit forecast cut
- FY25 profit now seen below FY24
- Firm blames ‘interest rate uncertainty’
The UK’s leading for-rent developer and operator Watkin Jones (WJG:AIM) dropped a massive clanger with its trading update for the full year to September which included a warning for 2025 earnings.
The shares were crushed, losing 15p or 29% to 36p on volume of more than four million shares by 9am compared with less than a tenth of that volume on a normal trading day.
RATE CUTS KEY TO ACTIVITY
The group, which is focused on student accommodation but also develops mixed-tenure schemes of affordable housing, said market activity had been ‘slower than anticipated’, mainly due to continued uncertainty over the pace of interest rate cuts, so it was unlikely to close any deals before its financial year-end in September.
The absence of further forward funds means adjusted operating profit will be in the range of £10 million to £12 million compared with the firm’s previous guidance in May of ‘at least £15 million’, although net cash would be ahead of previous forecasts.
The company also cautioned that the lower number of transactions this financial year would impact next year’s results, given schemes don’t contribute to revenue in future periods until they are forward-sold.
‘While we have a number of further schemes that we expect to take to market in FY25, given the slower pace of activity currently, we believe that a more prudent set of transaction assumptions should be applied to the next 12 months than previously assumed. As such, we do not currently expect adjusted operating profit in FY25 to be above FY24,’ the company concluded.
REVIEWING ITS OPTIONS
The firm admitted it was possible it might deliver progress next year but for that to happen market conditions would have to improve faster than they have been.
In the medium term, the markets which the firm operates in remain robust due to the underlying shortage of suitable student accommodation and investor interest.
However, it cautioned: ‘While the group’s robust net cash position provides it with a strong financial underpin for its committed spending requirements, it is a limiting factor on the extent to which we can take advantage of market conditions and further develop our pipeline.
‘In light of this, the board is undertaking a review of a range of options that may be available to enhance its medium- and longer-term funding position, thereby allowing the group to capitalise on a market recovery.’
