Watkin Jones plc

FY-2022 Trading Update

Watkin Jones plc (the "Group") provides the following trading update for the year ended 30 September 2022 (the 'year' or 'FY-2022'):

FY-2022 trading

The Group delivered a strong operational performance in the second half of the year, continuing to manage and deliver across both its PBSA and BTR development programmes.

Investor demand for residential for rent assets has remained strong, with three BTR schemes (in Leatherhead, Bath and Cardiff) and three PBSA schemes (in Nottingham, Swansea and Bath) forward sold in H2-2022, bringing the total of forward sales transacted in the year to £0.9 billion, compared to £0.3 billion at H1-2022.  In addition, the Group achieved a strong financial outcome on the sale of the two leasehold assets, which had previously been flagged.   

While in H1-2022 build cost inflation was mitigated by increasing asset values, the Group has seen some pricing and margin softness on sales concluded in the second half, with purchasers facing increased funding costs. Two forward sales that were planned to close in September have been impacted by the recent market volatility, and these are now planned to transact in FY-2023. As a result, whilst H2-2022 performance was materially stronger than H1-2022, the Board now expects FY-2022 underlying operating profit to be c.10% below current market expectations.

The Group continues to benefit from a strong balance sheet with gross and net cash, as at 30 September 2022, of approximately £105 million and £75 million respectively.

Outlook

Whilst there remains considerable uncertainty around macroeconomic conditions in the short term, the Group retains very good visibility over its development pipeline, has low levels of asset exposure and strong liquidity.

We have good revenue visibility coming into the next financial year with c. £270m of revenue secured, and expect demand from institutions for residential for rent assets to remain robust. However we also believe it is prudent to assume that margin pressure as a result of purchasers' elevated borrowing costs will continue into FY-2023.

Our balance sheet strength provides a distinct competitive advantage for the Group. We will seek to take advantage of attractive land acquisition opportunities, which should support margin recovery as market conditions normalise.  

This announcement contains inside information for the purposes of Article 7 of the Market Abuse Regulation (EU) No 596/2014 as it forms part of UK Domestic Law by virtue of the European Union (Withdrawal) Act 2018 ("UK MAR").

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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 46,000 student beds across 136 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