Watkin Jones plc (AIM:WJG), a leading UK developer and constructor of multi occupancy property assets, with a focus on the student accommodation sector, has told DirectorsTalk its maiden annual results for the year ended 30 September 2016. The Board is pleased to report a successful financial year with trading in line with its expectations.
Financial Highlights
FY 2016 FY 2015 Movement
Revenue from
continuing operations GBP267.0 million GBP244.2 million +9.3%
Gross profit
from continuing
operations GBP53.8 million GBP44.0 million +22.2%
Operating profit
before exceptional
IPO costs(1) GBP37.9 million GBP32.5 million +16.7%
Adjusted EBITDA(2) GBP41.6 million GBP34.1 million +22.1%
Operating cash
inflow before
exceptional
IPO costs(1) GBP41.7 million GBP28.4 million +46.8%
Net cash GBP32.2 million GBP39.1 million -17.6%
Adjusted basic
EPS(3) 12.4 pence 10.4 pence +18.9%
Dividend per 4.0 pence n/a
share
Notes
1 Exceptional IPO costs of GBP26.6 million comprise GBP6.5 million costs associated with the Company’s admission to AIM and GBP20.1 million relating to the settlement of senior management incentive plans
2 Adjusted EBITDA comprises operating profit from continuing operations before exceptional IPO costs, plus the Group’s share of profit from joint ventures, adding back charges for depreciation and amortisation.
3 Adjusted basic EPS is calculated on a proforma basis using the profit for the period from continuing operations excluding exceptional IPO costs and based on the number of shares in issue at 30 September 2016.
— Strong revenue growth and record operating profit, before exceptional IPO costs, driven by student accommodation developments
— 2.67 pence per share proposed final dividend, giving total dividend of 4.0 pence per share, in line with IPO guidance
— Robust cash performance, with a net cash inflow from operating activities before exceptional IPO costs of GBP41.7 million (2015: GBP28.4 million)
— GBP32.2 million of net cash at the year end (30 September 2015: GBP39.1 million), after exceptional IPO cash costs of GBP26.6 million, GBP14.5 million cash cost of acquiring Fresh Student Living (“Fresh”) and GBP10.0 million dividend to existing shareholders prior to IPO
— New GBP40.0 million five-year revolving credit facility and GBP10.0 million working capital facility with HSBC, to provide development funding flexibility and working capital headroom. All these facilities were unutilised at 30 September 2016
Business Highlights
AIM listing and corporate governance
— Successful admission to AIM listing on 23 March 2016, with business delivering strong operational performance throughout the process and since admission
— Watkin Jones plc Board formally established ahead of IPO, comprising Grenville Turner (Chairman), Simon Laffin (Non-Executive Director), Mark Watkin Jones (CEO) and Philip Byrom (CFO)
Student accommodation development – sales and planning
— GBP183.0 million of development value of eight student accommodation schemes (2,615 beds), forward sold during the year
— GBP164.0 million of development value of five student accommodation schemes (1,893 beds) forward sold since the year end
— In excess of GBP185.0 million of development value in legal negotiations, for forward sale of seven further student accommodation developments (2,166 beds)
— Planning permissions for ten student developments (3,500 beds) granted during the year and a further four (1,579 beds) granted between the year end and the date of this announcement
— Planning permission consented for 8,260 beds of the pipeline as at the date of this announcement.
Student accommodation development – pipeline
— 9,469 student beds in the pipeline across 27 sites, with 15 forward sold and seven more forward
sales in legal negotiations
— 2017 deliveries – nine student developments (2,860 beds) sold, including one operational asset (590 beds). The remaining 2017 delivery (454 beds) in legal negotiations
— 2018 deliveries – eleven student developments (3,485 beds) scheduled for delivery, of which ten developments (3,370 beds) have planning and five developments (1,840 beds) are forward sold
— 2019/20 deliveries – six sites secured and a number of additional site acquisitions progressing satisfactorily. One development (511 beds) forward sold to date
Student accommodation asset management
— Fresh successfully integrated, with beds under management increased from 8,310 in FY 2016 to 12,337 in FY 2017, and currently contracted to increase to 18,636 by FY 2020
Private rented sector (“PRS”)
— Five Nine Living Limited established to leverage Fresh’s property management expertise in PRS and
focus applied to sourcing suitable PRS development opportunities
Private residential
-- 127 residential plot sales achieved from the ongoing development of legacy sites
Commenting on the results, Mark Watkin Jones, Chief Executive Officer of Watkin Jones plc, said:
“This has been a transformational year for the Group and we are delighted to report such a strong set of maiden full year results, which have seen positive movements across our key financial metrics. Our student accommodation development business is robust. It is positively underpinned by a buoyant market and our forward sale model provides us with excellent visibility as to future earnings and cash flow. We currently have a development pipeline of 9,469 beds across 27 sites, where we have planning permissions granted for 8,260 beds. Nine of the ten schemes scheduled for completion in FY 2017 have been successfully forward sold and the tenth scheme is in legal negotiations. All schemes are progressing well on site.
At 30 September 2016, Fresh Student Living, our specialist student accommodation asset management business, was contracted to manage 12,337 beds across 44 schemes.
By utilising positive market conditions and choosing only the best opportunities, we expect to make further progress in our student accommodation businesses.
As we near completion of our first PRS development in Leeds, we are looking, while always being mindful of the need to expand in a sustainable way, to build on our expertise and our institutional relationships to develop real momentum in the PRS market and we are looking at a number of exciting opportunities.
In private residential development, our approach is to utilise our existing land bank and to acquire further sites when suitable opportunities arise.
Watkin Jones has made a strong start to life as a public company and has demonstrated its ability to grow with good visibility of earnings and significant cash generation. Our prospects are encouraging and our aspiration is to continue to expand in both student accommodation and PRS, while adding to earnings by managing the completed developments. We look forward to the next year with confidence.”
CHAIRMAN’S STATEMENT
Performance and dividend
This is our first annual report since our admission to AIM in March 2016 and I am pleased with the progress the Group has made, both commercially and with organising ourselves as a public company. We had a very good first trading period and we met our expectations for the year. Any uncertainty in our markets in the immediate aftermath of the EU Referendum result dissipated quickly. University places remain oversubscribed and as only 7% of students in the UK come from the EU across the higher education sector, we do not believe that Brexit will be a significant issue for the Group.
One of the key attractions of the business is its strong cash generation, which results from the forward sale model. This cash generation underpins our ability to reward shareholders through dividends.
Having paid an interim dividend of 1.33 pence per share in June, the Board has recommended a final dividend of 2.67 pence per share, giving a total dividend of 4.0 pence per share. With admission having taken place towards the end of the first half of the financial year, this total dividend represents two thirds of the full year equivalent, giving an initial yield of 6% based on the placing price of GBP1 per ordinary share. This is in line with our stated intention at the time of the IPO. The dividend will be paid on 28 February 2017 to shareholders on the register at close of business on 27 January 2017. The shares will go ex-dividend on 26 January 2017.
Looking forward, our intention is to adopt a progressive dividend policy, which will allow shareholders to benefit from the Group’s growth in earnings and cash flow.
Board and management
I joined the Board as Non-Executive Chairman ahead of the IPO, along with Simon Laffin, who was appointed as a Non-Executive Director and as chairman of the Audit Committee. The Board has four Directors in total, including Mark Watkin Jones (CEO) and Philip Byrom (CFO). Since the Board was formed, we have focused on defining our activities, agreeing roles and responsibilities, and setting out the processes and authorities that will govern our work.
Simon and I have also spent considerable time getting to know the business and the team. Watkin Jones has excellent people, with real depth of talent. One of the business’s key strengths is the commitment of its employees, many of whom have worked for the Group for their entire careers. Retaining their experience and bringing them through the business has been an important factor in Watkin Jones’ growth. Having the right culture is critical for sustainable success. The Board recognises its role in setting the Group’s culture and for making sure that it is appropriate for the business and what it wants to achieve. That includes ensuring we challenge appropriately and encourage the business to look for opportunities to improve and do things differently.
Looking forward
Watkin Jones has made a positive start to life as a public company and has demonstrated its ability to grow. Our prospects are encouraging and our aspiration is to continue to expand in both student accommodation and PRS, while adding to earnings by managing the completed developments.
Grenville Turner
