Watkin Jones reports flat H1 operating profit

(Sharecast News) - Watkin Jones reported a flat first-half operating profit on Wednesday, as lower revenue from in-build schemes was offset by cost control and steady construction delivery, while the group continued to diversify beyond its traditional forward-funding model.

The AIM-traded residential-for-rent developer said revenue fell to £100.2m in the six months ended 31 March, from £129.2m a year earlier.

Gross profit declined to £9.3m from £14.4m.

Adjusted operating profit was unchanged at £0.4m.

Adjusted profit before tax was nil, compared with £0.2m a year earlier, while statutory pre-tax loss remained at £0.9m after an exceptional finance cost of £0.9m related to the unwinding of the discount rate on the building safety provision.

Basic adjusted earnings per share were 0.01p, compared with 0.05p a year earlier.

On a statutory basis, the group recorded a loss per share of 0.35p, compared with 0.27p.

Watkin Jones said revenue in the period was delivered mainly from projects already under construction.

It completed two new transactions, comprising a further purpose-built student accommodation scheme in Bristol and a hotel development on a brownfield site in Wimbledon.

The company said construction delivery remained strong and margins were in line with previous guidance, including the initial contribution from the Bristol sale.

It also said cost management had remained effective despite inflationary pressure.

The group achieved planning consent for around 800 new living units during the period, while its Development Partnership and Refresh pipeline grew by 20%.

Watkin Jones said the shift into these areas reflected a more diversified route to market and a focus on using its end-to-end development capabilities in a more capital-light way.

Period-end gross cash stood at £67.1m, with adjusted net cash of £61.3m, compared with £73.4m a year earlier.

Watkin Jones also reported further progress on building safety, achieving Gateway 2 approval at four sites during the period after early engagement with the Building Safety Regulator.

Its net building safety provision was reduced to £38.0m.

The group said it was monitoring the geopolitical and economic backdrop and its impact on confidence and liquidity, but remained focused on delivering projects under construction, managing costs and cash, and accelerating its move into Development Partnerships and Refresh.

Watkin Jones said it had a total secured pipeline of about £1.3bn, including around £300m of contractually secure forward-sold revenue at the end of March.

About £90m of that revenue is scheduled for delivery in the second half.

Several schemes are currently being marketed and could support an improved second-half performance, the company said.

However, it added that the number and type of transactions completed in the second half would have a significant bearing on the full-year outcome.

Chief executive Alex Pease said the group had delivered a resilient first-half performance, supported by strong operational delivery and proactive cost and cash management.

"Our integrated platform continues to be a key differentiator, enabling us to identify incremental opportunities to deploy capabilities and diversify revenues across Development Partnerships, Refresh and adjacent sectors," he said.

Pease said market conditions remained challenging and continued to affect the pace of recovery, but added that the long-term fundamentals of the group's end markets remained attractive.

At 0903 BST, shares in Watkin Jones were down 8.43% at 20.92p.

Reporting by Josh White for Sharecast.com.

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