Adrian Hargrave, CEO of SEEEN, explains how the new funds will accelerate customer growth Watch the video here.
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When Paul Scott gets it wrong, he gets it very wrong. I've followed him since his days at TMF I'm no expert on the building industry but these figures are bad. They barely broke even in the last 6 months.
The Board are now trying to put out optimistic noises about a recovery in the 2nd half, but I'm not so sure. They've had 3 consecutive half year periods of serious operating cash outflows , so they are not making ends meet. Even though for the moment they have some £2m net debt (after deducting lease liabilities £47m) they are going to end up in serious debt eventually, if business doesn't start picking up within the next year.
Paywall.
Should do well I think, which was my original investing case. This year is going to be worse than originally expected, but there’s no reason to suppose the medium term outlook has changed at all. Hence why I’ll obstinately remain positive in my view of this medium term recovery share.
If you trade in & out of shares on short term movements, then you might see things very differently, which is fine, it’s what makes a market!
There's also the interesting upside from Govt ideas to stimulate infrastructure spending, especially housing, by e.g. pension funds, insurance companies, etc. My thought is this could play right into WJG's strengths, and trigger a nice recovery in this share at some point in the future. So it's not a broken business, and with some patience, I think this could be a good recovery share, but maybe not until 2024 and beyond.
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subscription only so link is of little use
Down 17% to 80p (£205m) - H1 results, FY PW - Paul
An interesting property developer, which has a good history of building projects (e.g. student accommodation) to order, pre-sold to institutional clients.
To set the scene, there was a big profit warning in Oct 2022, smashing the price down from c.150p to 80p. I bought a few as a toe-hold for a longer-term recovery, but also (bizarrely maybe!) anticipated another profit warning here on 27 Jan 2023 concluding that 2023 could be a bumpy ride, with another profit warning being a distinct possibility.
On 13 April 2023 I covered its update, when a contractor went bust, disrupting & costing more for a project in Exeter. Again, my conclusion was cautious, that publication of H1 results could trigger another dip in share price.
With hindsight, it would have been better to sit on the sidelines completely, but never mind.
Today’s interims are poor, as previously indicated, they’re actually in line with expectations, around breakeven.
H2 is expected to be materially stronger than H1, which is good.
However, it now looks as if they were previously far too optimistic for H2, and Progressive has roughly halved forecast for FY 9/2023 to £25m aPBT, which is 7.6p EPS.
Historically WJG has tended to produce about 15-16p EPS, so I remain of the view it should eventually recover to that level.
What’s gone wrong this time? It’s just delays to project completions - remember that WJG develops a small number of large building projects, so the numbers can vary a lot if completion of projects slips into the next year, which is now looking likely. It could warn on profits again, if the 5 deals it needs to close don’t happen by year end. So this is not a share for the faint-hearted.
On project pricing, it says this is broadly as expected, but with clients wanting more back-loaded funding, to suit their needs (in a higher interest rate environment I suppose).
WJG sees early signs of a recovery in its market conditions.
Project delays mean £15m profit shifts from FY 9/2023 to FY 9/2024.
Pipeline is down from £2.0bn to £1.7bn.
It calls the land purchasing pipeline “exciting”.
Build cost inflation - early signs of a reduction.
Paul’s opinion - obviously a setback, but one I was half-expecting, as you can see from the 2 SCVRs referenced above. As the shares get cheaper, the balance sheet support gets stronger, NTAV is now £153m, and the market cap down to £205m, so the previously big premium to NAV is now quite small. I don’t see any balance sheet risk, as it doesn’t have a large landbank, as it’s a more build-to-order type of business.
I’m currently about 20% down on a small position size, so it’s no great shakes, and the asset backing is now more solid than before. Hence I’ll wait to see where the share price bottoms out, then probably buy some more. As a medium-term recovery share, it should do well I think, which was my original investing
Would be a good sign and I would expect them to show confidence not mention make a lot of money themselves
Hope to see some director buys come through at this price
I agree, it’s very oversold now. This will be yielding a great dividend percentage of the next year two as it recovers from a one bad debt situation. They share that confidence and continue to pay a reduced but healthy dividend none the less.
Surely this over done. It's inline with the update in April the bad news was built in. They've taken a big one off hit from the supplier in Exeter. The future looks good and cash at £45m.
Time to buy??
Sounds like that's an Equity Development quote Groucho. I'm sure you know, Equity Development's research is funded by the companies it researches.
This no longer looks like an imminent recovery, nor is there a decent dividend, while profits have collapsed. There are too many other interesting companies to invest in, to be stuck in a 'cheap', deteriorating company.
Watkin Jones highlights a continued recovery in the institutional funding market in today's interim results, which were in line with its expectations of a significant H2 weighting for FY23E. This, and attractive new land opportunities, should support its long-run target margins. However, the group has exercised caution in recognising profits on long-term contracts, leading us to cut adjusted PBT by £25m for FY23E, while leaving FY24E unchanged. Longer term, we believe the clamour for rental accommodation and WJG's unique model should support a return to growth.
"H1 results lower, as expected. Revenue in H1, to 31 March, fell by 20% to £154m, with work progressing on previously forward-sold developments but no new forward sales in the half. Operating profit fell by 88% to £1.8m, reflecting reduced gross margins in line with previous guidance. Net cash rose from £26.8m to £45.3m, slightly ahead of the 13 April trading statement. The interim dividend was reduced by 52%, a smaller decline than for earnings, reflecting 'building confidence in H2 performance'.
'Materially stronger' second half. H2 is predicted to be stronger, with forward sales adding to work undertaken from those under construction. Also announced was the forward sale of a student scheme, in line with margin guidance. WJG targets five more forward sales in H2, with earnings dependent on concluding them in 'what remains a volatile environment'.
Land market readjusting. We are convinced of the long-term outlook for the rental market, with housing now a political imperative. WJG's unique model addresses student and private rental (page 3). Higher funding cost is now translating into lower land cost, which should feed through to better margins in the medium to longer term, in our view.
Our reduction in FY23E adjusted PBT relates to Student Accommodation, with a £110m fall in FY23E revenue and £25m cut in gross profit, reflecting the rephasing of revenue and profit into FY24E. We believe this is a 'move to the right' in the medium term, and expect a similar trend next year, with no changes to revenue or profit for FY24E.
For FY23E and FY24E, we have maintained our dividend cover at 2.0x, reducing the FY23E dividend from 7.6p to 3.8p, with our estimate for FY24E unchanged at 7.7p. The reduced profitability for FY23E has led us to cut our pre-IFRS 16 net cash estimate by £20m, with a lower swing of £14m for FY24E reflecting the reduced dividend for FY23E.
Thanks Guys.
Trading update (earnings) in 4 days according to Yahoo Finance
Last year 6m interim results were released 17/5/2022
Does anybody have any idea when the interims may be due ?
Thanks
Hi Monty - Okay so fairly recent then. I've been in a while and agree seems oversold, but would like some confirmation that forward sales have resumed before adding more here. If they can quickly regain traction then the SP should hopefully do well over the next 1-2 years as normality resumes (touch wood!).
There was a report on student accommodation a few days back. It stated that many of the converted houses rented to students by private landlords were nigh on uninhabitable & that should be good news for a company such as Watkin Jones.
This happened to my workmates daughter who was living with 3 others in a house in Leeds. The roof let water in at an alarming rate, but the landlord was more interested in getting his hundreds of £££'s every month, rather than getting the problem sorted.
Hi CheddarB - Been invested a few months back after the SP halved - I think it’s very oversold and don’t foresee a crash in UK property prices. I also like Vistry at its current price and yield also. (Cash is king).
It that much, my biggest holding is 450k shares in THG at ave price 77p. Hoping MM who pushed back on 170p take out as too low gets something just a little more than that and sells - The 170p offer was before a £500m loss from write offs so it’s touch and go - I think intrinsic value is around 180p let’s see.
Wow, 210k shares is a good chunk! Do you mind me asking roughly how much of your portfolio that represents, and how long you have been invested in WJG overall?
I been buying on the dips and got my average price down to 93.6p but ended up buying 210,000 shares. Hope the dividend is retained at around 8.3%. I think it could double in 3 years and get back to where it was. Building, rental, student accommodation shortages - As long as it’s well run looks pretty safe anyway.
@Monty888 - let's hope so :)
Broker targets are 170p plus & i watched an investor video on YouTube the other day where he pointed out that one of the "Fair value" tools gave a price of 245p.
There's plenty of cash in the bank, but the current negative free cash flow needs working on asap.
Increased cash to £85m nearly double, so divi does look to be around 7 to 8% at current prices, share price halved - Completely oversold, could easily double in next 12 to 18 months.