Company Announcements

For immediate release

18 January 2022

 

 

Watkin Jones plc

('WJ' or the 'Group')

 

Full Year Results 2021

 

	FY21	FY20(1)	Change (%)
Revenue	£430.2m	£354.1m	+21.5%
Gross profit	£84.8m	£75.9m	+11.7%
Operating profit	£57.3m	£31.2m	+83.3%
Underlying Operating profit	£57.3m	£51.7m	+10.8%
Profit before tax	£51.1m	£25.3m	+101.9%
Underlying Profit before tax	£51.1m	£45.8m	+11.7%
Basic earnings per share	16.4p	8.2p	+98.5%
Underlying Basic earnings per share	16.4p	14.7p	+11.2%
Dividend per share	8.2p	7.35p	+11.6%
Adjusted net cash(2)	£124.3m	£94.8m	+31.1%

 

(1)   For FY20 Underlying Operating profit, Underlying Profit before tax and Underlying Basic earnings per share are calculated before the impact of exceptional charges of £20.5 million

(2)   Adjusted net cash is stated after deducting interest bearing loans and borrowings, but before deducting IFRS 16 operating lease liabilities of £129.3 million at 30 September 2021 (30 September 2020: £134.5 million)

 

Key Highlights

 

·      Revenue at £430.2 million, up 21.5%, reflecting increasing contribution from our BTR developments and a strengthening institutional investor forward sales market

·      Operating profit at £57.3 million, up 10.8%, underpinned by strong operational delivery and tight cost control

·      Strong cash generation and liquidity position; £124.3 million net cash as at 30 September 2021

·      Full year dividend of 8.2p, up 11.6%; in line with policy of 2.0x cover

·      Work on 13 current developments on track; overall build costs remain within forecasts

·      22,200 beds under Fresh management, up 10%

·      Record residential for rent secured development pipeline at £1.8 billion, up 20%

·      Continued progress on Affordable Homes

·      ESG credentials successfully formalised with launch of 'Future Foundations' ESG programme

·      Trading in the new financial year in line with expectations

 

Strong institutional demand for residential for rent assets

 

·      3 BTR schemes (722 apartments) and 9 PBSA schemes (2,750 beds) forward sold since the start of FY21

-      Includes 1 PBSA scheme (295 beds, 20 affordable) in Edinburgh forward sold since 2 November 2021 trading update with total revenue value of c.£47 million

 

Development pipeline further enhanced

 

·      3 BTR schemes (1,442 apartments) and 10 PBSA schemes (4,271 beds) acquired since the start of FY21

-      Includes 1 PBSA scheme (c.800 beds) in a prime regional location with planning acquired since 2 November 2021 trading update

 

·      Planning consents for 4 BTR apartment schemes and 6 PBSA schemes since the start of FY21

 

 

·      Following these developments, our current BTR and PBSA development pipeline is as follows

 

	BTR (apartments)	PBSA (beds)
November 2021 update	4,012	7,142
New sites secured:
Prime regional location	-	800
Other changes	-	(136)
Current	4,012	7,806
Future revenue value	£0.95 billion	£0.90 billion

 

BTR pipeline

	BTR apartments
	Total pipeline	FY22	FY23	FY24	FY25
Forward sold	609	71	354	184	-
Forward sales in legals	765	-	-	486	279
Sites secured with planning	359	-	43	-	316
Sites secured subject to planning	2,279	-	-	631	1,648
Total secured	4,012	71	397	1,301	2,243
Change since 2 Nov	-	-	-	-	-

 

PBSA pipeline

	PBSA beds
	Total pipeline	FY22	FY23	FY24	FY25
Forward sold	2,547	1,946	601	-	-
Forward sales in legals	252	-	-	252	-
Sites secured with planning	2,401	-	1,020	1,381	-
Sites secured subject to planning	2,606	-	350	1,507	749
Total secured	7,806	1,946	1,971	3,140	749
Change since 2 Nov	+664	-	+296	+368	-

 

Cladding remediation

 

We are supportive of the Government's announcement on 10 January 2022 regarding its intention to protect individual leaseholders from bearing the cost of the remediation of unsafe cladding on medium-rise buildings.  We are engaging with the Government to clarify its plans in this regard and to confirm whether pro-active remediation will be taken into account. Our existing cladding provision covers all schemes featuring ACM or HPL cladding which are still within the limitation period. In these instances replacement works have either been completed or are being procured to commence.

 

We note the Government's intention for leaseholders to be able to demand compensation for building safety defects up to 30 years old, noting that historically, the business focused on general contracting work for properties in the commercial, retail and industrial sectors, as well as houses for private sale, rather than residential leasehold developments.

 

Richard Simpson, Chief Executive Officer of Watkin Jones, said: "This is a very strong set of results.  WJ has once again demonstrated its end-to-end development capability.  As well as handing over 12 schemes on time, we leveraged our excellent institutional relationships to drive the forward sale of some 3,800 beds and continued to enhance the depth and quality of our development pipeline, securing good visibility of future earnings. Since the year end, we have continued this excellent momentum across the business with increasingly strong investor appetite for residential for rent homes."

 

Analyst meeting

 

A meeting for analysts will be held virtually at 09.30am today, 18 January 2022.  A copy of the Final Results presentation is available at the Group's website: http://www.watkinjonesplc.com

 

An audio webcast of the conference call with analysts will be available after 12pm today:

http://webcasting.buchanan.uk.com/broadcast/61ded656e3976b4d1b2d49c7

 

For further information:

Watkin Jones plc
Richard Simpson, Chief Executive Officer	Tel: +44 (0) 20 3617 4453
Sarah Sergeant, Chief Financial Officer	www.watkinjonesplc.com
Peel Hunt LLP (Nominated Adviser & Joint Corporate Broker)		Tel: +44 (0) 20 7418 8900
Mike Bell / Ed Allsopp		www.peelhunt.com
Jefferies Hoare Govett (Joint Corporate Broker)		Tel: +44 (0) 20 7029 8000
Max Jones / James Umbers		www.jefferies.com

 

Media enquiries:

Buchanan
Henry Harrison-Topham / Steph Whitmore	Tel: +44 (0) 20 7466 5000
watkinjones@buchanan.uk.com	www.buchanan.uk.com

 

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

 

 

 

Chief Executive Officer's review

 

The Group delivered a strong operational and financial performance in FY21, which is particularly pleasing given the ongoing backdrop of COVID.

 

Our results for FY21 demonstrate that we are in the right sectors, with the right capital-light model and with the right team.  At the same time we are continuing to lay the foundations for our future growth, including ensuring we continue to be a responsible and sustainable business.

 

We are confident that we have a robust platform for sustained earnings growth and we expect to make further progress in the coming year.

 

Performance

The Group performed well across all four divisions.  Overall, our financial performance was above FY20.  Revenue was £430.2 million, up 21.5% (FY20: £354.1 million), while gross profit increased by 11.7% to £84.8 million (FY20: £75.9 million) and adjusted operating profit rose 10.8% to £57.3 million (FY20: £51.7 million).  This shows the resilience of our businesses and bodes well for the future.

 

Our operational performance was also strong.  Despite the ongoing disruption caused by the pandemic, all BTR and PBSA developments scheduled for delivery in the year were completed and we continued to progress our pipeline, successfully securing land, obtaining planning consents and forward selling developments.  Fresh also enhanced its reputation with clients and customers, achieving high standards in difficult circumstances.

 

The contribution from BTR has continued to grow rapidly.  Revenues were £138.6 million, representing 47.4% growth (FY20: £94.0 million), as we successfully completed five schemes totalling 1,041 apartments.  The investment market in BTR is increasingly positive and therefore supports our growth aspirations, with our secured pipeline now standing at more than 4,000 apartments (9,100 bedrooms).

 

BTR has significant long-term appeal to investors, based on high levels of occupancy and rent collection, combined with rental growth.  It also compares favourably with commercial property sectors, such as retail and offices, which are still affected by COVID uncertainty.

 

In student accommodation, we delivered seven schemes with 3,192 beds ahead of the start of the 2021/22 academic year.  Revenues were 15% higher at £259.9 million (FY20: £226.0 million).  Investor demand remains resilient, as they continue to see long-term consumer demand for a UK university education, based on on-campus teaching.  Institutions therefore continue to acquire assets at robust prices.  These conditions support our aspirations for this business, with over 7,800 beds in our secured development pipeline.

 

During the year, we made good progress with our affordable housing pilot.  This included forward selling 159 affordable homes at the site in Crewe.  The residential business achieved revenue of £22.7 million, down 13.7% on FY20 (£26.3 million).  Revenues in FY20 benefited from the completion of a 35-apartment development in Chester, which had been sold on a turnkey basis, and in FY21 we suffered some build completion delays at our site in Preston.

 

Fresh delivered another good performance, with revenues of £7.8 million (FY20: £7.6 million), though its revenues were impacted to a degree by the lower student occupancy during the year, which reduced its variable fee income.  The business demonstrated its capabilities during the pandemic, working closely with tenants, students, their parents and other key stakeholders, including universities and the NHS.  The strength of its performance has helped Fresh to stand out from other operators, enhanced its reputation with institutional clients and contributed to a further increase in units under management.  At the end of the year, Fresh had 22,155 student beds and apartments under management.  By 2024, it is currently contracted to manage around 23,900 units, including expected renewals.

 

Strategy

Our performance in the year demonstrates the success of our strategy to date.  Since the end of the year, we have confirmed our intention to pivot our residential division from a pure developer of homes for sale to an affordable housing led business and have renamed it our Affordable Homes division.  There is huge demand for more social housing in the UK and we are pleased to be able to contribute to meeting this pressing need, with the potential to benefit many thousands of people in the coming years.

 

The move also brings Affordable Homes into line with the business model for other development operations.  Rather than build homes and then sell them, which incurs risk and ties up working capital, we will forward sell the developments to institutions.  This de-risked, capital-light model offers us high returns on capital.  Institutional demand is also strong.  The market for our developments will naturally include registered providers such as housing associations, but financial investors are also attracted to affordable housing, given the low-risk rental payments which are effectively backed by government.

 

Enhancing our approach to ESG

ESG is a prerequisite for delivering our growth plans.  Being a responsible business supports our ability to build strong relationships with our supply chain, planning authorities and residents amongst others.  It is also increasingly important for our institutional clients who want their partners to reflect their own standards.  During the year, we spent considerable time refining our approach to ESG.

 

Our approach encompasses three key themes: people, places and planet.  Health and safety is the number one topic in our business.  The enhanced protocols required by COVID inevitably slow activity on site, so it has been necessary to find ways to increase our productivity and keep our programmes on track, without compromising safety.  The fact that we have successfully completed our developments while working as safely as ever is testament to our focus.  Our incident rate, which is the number of incidents recorded per 100,000 employees, was 102 (FY20: 128), which compares with 2,760 for the wider industry (source: HSE).

 

The wellbeing and mental health of our people has been a big focus for us in the last year, in light of the ongoing pandemic. We have also been thinking hard about how to offer long-term, meaningful and rewarding careers, recognising that being a responsible business is good for employee engagement.  To support our efforts, we have recruited our first Chief People Officer.

 

COVID has also put the importance of having the right culture into sharp relief.  Over the last couple of years, we have been working to define what great looks like, so we can empower our people to take responsibility for delivery.  At the same time, we want to maintain our ability to be entrepreneurial and seize opportunities as they arise, as we did with land purchases during the year.

 

Cladding remediation

In FY20, we set aside a provision of £15 million for remedial works on cladding.  The cladding remediation programme is progressing well and we expect to complete the work over the next two years.  As we have previously noted, while we do not have legal liability to address this, we feel it is the right thing to do.  The cost of the cladding works, which is being shared with the property owners, continues to be in line with our original estimates.

 

In February 2021, the Government announced a tax on the profits of residential developers, combined with a planning gain levy on future developments, to recoup a portion of the cost of its high-rise cladding replacement support scheme. Profits on PBSA developments are to be excluded from the residential property developer tax but profits from BTR developments are likely to be within scope.

 

We are supportive of the Government's announcement on 10 January 2022 regarding its intention to protect individual leaseholders from bearing the cost of the remediation of unsafe cladding on medium-rise buildings.  We are engaging with the Government to clarify its plans in this regard and to confirm whether pro-active remediation will be taken into account.

 

We note the Government's intention for leaseholders to be able to demand compensation for building safety defects up to 30 years old, noting that historically, the business focused on general contracting work for properties in the commercial, retail and industrial sectors, as well as houses for private sale, rather than residential leasehold developments.

 

We will provide an update on any implications for the Group as these plans evolve into clear proposals.

 

Board and management

Grenville Turner and Phil Byrom stepped down from the Board towards the end of 2021.  Watkin Jones went from strength to strength under Grenville as Chair and Phil made a major contribution to the Group in his many years as CFO and was a particular support for me when I joined as CEO.  I want to express my huge thanks to them both and welcome Alan Giddins and Sarah Sergeant as our new Chair and CFO.  We are delighted to have them on board.

 

Outlook

We continued to make good progress during the year.  Our development capability, combined with favourable market dynamics and our capital-light business model, has enabled us to deliver strong operational and financial performance.  In particular, we continued to enhance our BTR and PBSA development pipeline, which has an estimated future revenue value to the Group of c.£1.8 billion, our largest ever.  This gives us excellent visibility of revenues over the next few years.  Together with the ongoing re‑focusing of our residential business into the affordable housing market, we are confident that we have a robust platform for sustained earnings growth and we expect to make further progress in the coming year.

 

Richard Simpson

Chief Executive Officer

 

18 January 2022

 

 

 

Operating review

 

Build To Rent

 

BTR continues to gain momentum, with five developments completed as planned in the second half of the year.  These were the schemes in Reading, Stratford, Sutton and Wembley, all of which had been forward sold prior to the start of the year, and the Leicester development, which was sold on a turnkey basis during FY21.  In total, these schemes comprised 1,041 apartments.

 

This activity resulted in a significant increase in BTR revenues in FY21.  Revenues rose from £94.0 million in FY20 to £138.6 million this year, representing growth of 47.4%.

 

BTR gross profit for the year doubled to £29.8 million (FY20: £14.9 million), resulting in a gross margin of 21.5% (FY20: 15.8%).  The strong gross margin for FY21 reflects our operational performance in efficiently finishing the schemes completing in the year, with good control of costs.  In addition, we only had one new forward land sale in the year.  The land sale element of our forward sales agreements are typically at a lower margin than the subsequent development revenues and a higher volume of land sales would therefore normally reduce the overall margin for the year.  We will continue to target BTR margins at 15% in the medium term.

 

During the year, in addition to the turnkey sale of the 184‑apartment Leicester scheme, we forward sold a 216-apartment development in Hove for delivery in FY23.  Subsequent to the year end, we completed the forward sale of a development for 322 apartments in Lewisham to be delivered in two phases in FY23 and FY24.

 

We have added attractive new sites to our BTR pipeline.  During the year, we secured a site in Belfast for 778 apartments and a site in Edinburgh for 450 apartments, both subject to planning.  After the year end, we secured a site for 214 apartments in Leatherhead, with the benefit of planning.  We are working on a number of other site acquisitions.

 

We also continued to obtain planning permissions, securing consent for a 551-apartment scheme in central Birmingham and 316 apartments in Bath, as part of a mixed-use scheme including PBSA.  The Birmingham scheme is our largest consented BTR development to date.

 

The current BTR secured development pipeline is shown in the table below:

 

			BTR apartments
	Total pipeline	FY22	FY23	FY24	FY25
Forward sold	609	71	354	184	-
Forward sales in legals	765	-	-	486	279
Sites secured with planning	359	-	43	-	316
Sites secured subject to planning	2,279	-	-	631	1,648
Total secured	4,012	71	397	1,301	2,243

 

The estimated future revenue value to the Group of the secured development pipeline is c.£0.95 billion (FY20: c.£0.9 billion), of which c.£197 million is currently forward sold (FY20: c.£90 million).

 

The BTR market opportunity

Several factors are creating strong demand for BTR accommodation, as increasing numbers of people rent their homes for the medium to long term.

 

There is a long-standing structural supply and demand imbalance in the UK housing market, with new homes completed each year generally falling well short of the government's annual target of 300,000.

 

Urbanisation is another important factor.  The UK has one of the highest rates of urbanisation, which influences issues such as infrastructure constraints, competition for land, planning, logistics and housing affordability.  Many of the locations where we see the greatest potential for BTR are in urban areas with universities, where education leads to employment and the need for housing.

 

Across the market as a whole, 92.5% of the BTR units currently completed, under construction or in planning are in urban areas.

Lifestyles are also changing.  People are increasingly getting married and having children later, delaying the point at which they buy a house.  Young people in particular often see renting as a better lifestyle choice, providing quality of living while maintaining flexibility, in the expectation of changing jobs more frequently than in the past.  BTR also offers good home working facilities, combined with a sense of community, which is likely to be increasingly attractive given the change in working patterns caused by the pandemic.

 

With consistently strong demand for housing, the supply of BTR apartments continues to grow.  At Q2 2021, the total number of BTR apartments completed, under construction or in the pipeline amounted to c.196,000 units, up 17% on a year earlier.

 

Of these, just over 62,000 had been completed.  At full maturity, the BTR sector could grow to 1.75 million units (source: Savills, August 2021), providing significant scope for growth.

 

Ownership of UK rented housing is fragmented, with only around 3% estimated to be owned by institutional investors (source: British Property Foundation).  This is well below the levels seen in countries with more mature rental markets.  While the largest UK owners have several thousand units each, both Germany and the USA have investors who own more than 100,000 units each (source: Savills, August 2021).

 

Institutions are increasingly attracted to BTR assets in the UK, which provide high income security with occupancy and rent collection rates typically over 95%.  CBRE estimates that around £1.5 billion was invested in BTR in the first six months of 2021, up 34% over the same period in 2020.  Major institutions such as Goldman Sachs and Macquarie have entered the market to buy BTR developments this year.

 

The sector has historically been dominated by domestic capital, but Knight Frank estimates that more than 60% of the investment in BTR in H1 2021 came from outside the UK.

 

While BTR yields have remained broadly stable in recent years, the strong institutional demand is putting yields under downward pressure.  The reduction in corporate debt rates of 66 bps between Q1 2020 and Q2 2021 has also increased the spread between prime BTR yields and the cost of debt to its highest level in more than six years, creating room for yield compression (source: Savills).

 

Student Accommodation

 

During the year, we completed all seven PBSA developments (3,192 beds) due for delivery ahead of the 2021/22 academic year.  This contributed to revenues of £259.9 million, up 15.0% from the £226.0 million recorded in FY20.  PBSA revenues include the rental income of our six historic leased PBSA assets.  Lower student occupancy as a result of the pandemic reduced this revenue by c.£5.0 million, which was within our guidance.

 

Gross profit was £50.5 million, down 7.0% (FY20: £54.3 million), giving a gross margin of 19.4% (FY20: 24.0%).  The reduced gross margin was primarily as a result of the reduction in the level of rental income from the leased assets and the lower margin associated with new forward land sales in the year.  The underlying margin from development activity was in line with our expectations.

 

Against the backdrop of the ongoing disruption caused by the pandemic, we successfully completed all the developments due for delivery in FY21 on time, with the exception of a small delay in the delivery of one scheme in Glasgow for which the build programme was heavily impacted by the Scottish Government's enforced closure of construction sites in 2020.  Acceleration measures had been negotiated with the client for this development to ensure it could still be delivered ahead of the start of the new academic year.

 

We achieved a number of new sales in the year.  These comprised a 462-bed scheme in Leicester, which was sold on a turnkey basis and was one of the seven developments that we completed in FY21, and six new forward sales for 1,687 beds for delivery in FY22.  These were in Bristol (291 beds), Edinburgh (645 beds), Exeter (133 beds), Leicester (250 beds) and York (368 beds).

 

The Exeter scheme is our first fully co-living studio scheme, available to rent to the wider residential tenant market, including students.

 

Subsequent to the year end, we concluded forward sales agreements for a scheme in Colchester (286 beds) and a further scheme in Edinburgh (295 beds and 20 affordable units), for delivery in FY23.

 

We also made good progress with adding to our development pipeline.  During the year, we secured sites subject to planning in Edinburgh (c.390 beds), South London (c.750 beds) and East London (c.390 beds).  We also secured sites in Nottingham (354 beds) and Swansea (370 beds), on which we have obtained planning, and after the year end we secured a site with the benefit of planning in Bedminster (819 beds).  Significant planning consents were also obtained for 523 beds in Birmingham and for 335 beds in Bath, as part of the mixed‑use scheme that includes BTR.

 

The current PBSA secured development pipeline is as shown in the table below:

 

			PBSA beds
	Total pipeline	FY22	FY23	FY24	FY25
Forward sold	2,547	1,946	601	-	-
Forward sales in legals	252	-	-	252	-
Sites secured with planning	2,401	-	1,020	1,381	-
Sites secured subject to planning	2,606	-	350	1,507	749
Total secured	7,806	1,946	1,971	3,140	749

 

The estimated future revenue value to the Group of the secured development pipeline is c.£0.9 billion (FY20: £0.6 billion), of which c.£160 million is currently forward sold (FY20: c.£215 million).

 

The PBSA market opportunity

The number of full-time students in the UK is a key determinant of demand for PBSA.  In 2019/20, there were around two million full‑time students, up 3.9% on the previous year.

 

Undergraduate numbers rose 2.3% in 2019/20 to just over 1.6 million, while postgraduate numbers increased by 10.5% to 0.4 million.  Overall, student numbers are up 14% over the last five years.

 

Trends in demand for university places remain positive.  2021 brought the first increase in the number of 18 year olds in the UK since 2015, a trend set to continue until 2030.  At the same time, the proportion of 18 year olds applying for higher education continues to grow, reaching a record 41.5% (source: Cushman & Wakefield) of which a record 89.1% of applications were accepted.

 

UCAS data for 2021 shows a 17.1% increase in applications from non-EU countries, in particular India (up 42%), China (up 31%) and the USA (up 28%).  The change in the Tier 4 visa rules is one factor making UK higher education more attractive.  Chinese and American students are respectively 2.2 times and 1.9 times more likely to live in PBSA than UK students (source: Savills).

 

EU student numbers fell by around 17,000 or 40%.  This is likely to be the result of Brexit, which has led to higher tuition fees for EU students and the withdrawal of financial support from Student Finance England.  While EU student numbers may decline further, they make up only 6-7% of the market (against 19% for non-EU) and there is more than enough demand from other sources to compensate.

 

While COVID disrupted the number of UK and international students who were able to take up accommodation for the 2020/21 academic year, the pandemic is only expected to have a short‑term effect on occupancy.  Students clearly prefer to study away from home at their chosen university and more normal occupancy levels are anticipated for 2021/22.

 

A notable trend in higher education is the 'flight to quality'.  With universities charging the same tuition fees and no cap on student numbers, better institutions have grown and lower-quality institutions have struggled.  The latest data show that high-tariff institutions recorded a 13.2% increase in acceptances, compared to only 1.1% for low-tariff universities.  This has clear implications for the location of new PBSA developments.

 

There is a long-term demand-supply imbalance for PBSA, which is only expected to increase, with the predicted annual increase in the number of students exceeding the supply of new beds.  There are currently around 681,000 PBSA beds in the UK (source: Cushman & Wakefield), with privately owned PBSA accounting for more than 51% and the private sector delivering 85% of the new beds this year. In total, around 20,000 new private sector rooms were delivered in 2020/21, against an original expectation of 35,000, with COVID causing developers to push some projects back.  The total development pipeline nationwide stands at 115,000 beds, of which around 67,000 have full planning approval.

 

Much PBSA stock is outdated and needs redevelopment, presenting further opportunities.  Around one quarter of total PBSA was built pre-1999 and university accommodation is even more dated, with around 50% built pre-1999 and 74% pre‑2009 (source: Cushman & Wakefield).

 

Institutional investors are attracted to UK PBSA as a mature, stable and income‑producing asset class.  The investment market remains very active, with £2.0 billion of assets traded in the first half of 2021 (source: Knight Frank).  This followed a record £6.0 billion in 2020, although £4.7 billion of this was accounted for by a single large transaction.

 

Since the start of 2020, a number of new investors have entered the sector, demonstrating continued confidence in the sector's ability to deliver attractive returns.

 

Affordable Homes

 

Revenues for the Affordable Homes division amounted to £22.7 million, compared to £26.3 million for FY20, a reduction of 13.7%.  The business achieved 79 sales completions in the year (FY20: 95).  These sales were primarily of traditional housing at our sites in North Wales, Macclesfield and Preston, and continued sales of apartments in Bath.

 

The reduction in revenues was mainly due to build delays at the Preston site, where the build programme had initially been suspended during the early stages of the pandemic and we experienced some challenges on-site, which have since been addressed.  In addition, revenues in FY20 benefited from the completion of a 35-apartment scheme in Chester, which had been sold on a turnkey basis.

 

Gross profit for the year was 36.7% lower at £2.6 million (FY20: £4.0 million), representing a margin of 11.3% (FY20: 15.4%).  The reduction in gross profit reflects the lower sales volume, as well as a lower margin due to the mix of sales, which included a number of units at the older developments in Macclesfield and Bath that were cleared at low margins.

 

Significantly, we made good progress with our North West affordable homes pilot, paving the way for transitioning the residential business to be an affordable housing‑led developer.

 

In the year, we secured sites in Crewe (245 units) and Llay, Wrexham (51 units), on which we obtained planning, and we have forward sold:

 

·    159 affordable homes at the Crewe site to Plus Dane Housing, whose bid was successfully supported by grant funding from Homes England.  These units are to be delivered over the period FY22 to FY26; and

·    23 affordable homes at the Llay site to Adra, for delivery over a two-year period once site works can commence

 

The balance of the units at Crewe and Llay are for open-market sale.

 

We continue to progress a number of other site opportunities for affordable homes developments.

 

As part of our plans to transition the residential business, we have restructured its operations in order to support the scaling up of its delivery capabilities and to align its site acquisition and planning processes with those of the wider Group, creating a focused affordable homes investment hub.  We have also evaluated suitable alternative modern methods of construction, in order to support higher build volumes in a sustainable way, and we will be trialling timber frame construction on the Crewe site.

 

We expect that Affordable Homes will start to contribute to Group revenues from FY22.

 

The affordable homes market opportunity

Affordable housing is defined by the National Planning Policy Framework as housing for sale or rent, for people whose needs are not met by the market.

 

There are several different types of affordable housing. One example is social rent, where homes are owned by local authorities or registered providers (such as housing associations).  Social rents are set by government guidelines and usually covered by housing benefit or local housing allowance.  There are also homes with affordable rents, which are subject to rent controls that require the rent to be no more than 80% of the local market rent, including service charges.  In addition, there are tenures such as shared ownership and other forms of low-cost home ownership, where people are supported to buy some or all of the equity in their home.

 

There is significant unmet demand for affordable housing.  The National Housing Federation estimates that the UK needs 145,000 new affordable homes to be built each year.  However, the average annual delivery since 2013 has been just 46,000 homes.

 

Property developers looking to secure planning consent from local authorities will usually be required to undertake what are known as s106 requirements, designed to reduce the impact of their development on the local community.  These requirements often include constructing affordable housing. Around 50% of all affordable housing is delivered in this way.

 

Historically, the balance has been provided by housing associations, usually with grant support from bodies such as Homes England and the Greater London Authority.  Homes England's grant funding for the next four to five-year period from 2021 is likely to be c.£12 billion, a significant uplift on the £9 billion for the period from 2016 to 2021.

 

There has also been a steep rise in private capital looking to deploy into affordable housing, due to the sector's favourable long-term demand, the return characteristics, the potential for growth and insulation from volatility.  Affordable housing also provides the best opportunity for social impact and investors are increasingly looking for opportunities to enhance their ESG credentials.

 

More generally, affordable housing is a key focus for all political parties. Legislation therefore tends to be supportive of the affordable homes market.  The government's proposed planning reforms have a number of key themes that support our approach to affordable housing, including an emphasis on affordability, building communities and developing in an environmentally and socially responsible way.

 

Accommodation Management

 

Fresh achieved revenues of £7.8 million (FY20: £7.6 million).  The increase was supported by the growth in the number of beds under management at the start of FY21 (20,179), compared to the start of FY20 (17,721).  However, while the majority of Fresh's revenues derive from fixed management fees, a proportion varies with student occupancy and this element was reduced as a result of the pandemic, suppressing revenue growth overall.

 

Gross profit was £4.1 million, down from £4.5 million in FY20.  This represented a margin of 52.6% (FY20: 59.8%).  The lower margin reflects the loss of variable fee income.  In a normal year, we expect Fresh to generate a gross margin of around 60%.

 

Fresh had a successful year for new business, winning mandates for 4,296 student beds and BTR apartments across ten sites.  These were a mix of new schemes and taking on existing schemes from the previous operator.  At 30 September 2021, Fresh was managing 22,155 student beds and BTR apartments across 69 schemes.  The business is currently appointed to manage 23,885 beds and apartments by FY24, including expected renewals.

 

Continuing to support its student customers and clients through the pandemic was a major focus for Fresh during the year.  The business had demonstrated its credentials in FY20 when it received COVID-secure accreditation from the British Safety Council and it continued to employ rigorous safety protocols during FY21.  Fresh's Be wellbeing programme was also key for supporting residents.  It provides online communities, support and advice, helping people to remain connected during a difficult period.

 

Fresh's service quality was reflected in its performance at the National Student Housing Awards 2021, where it won more awards than any other operator.  These were: Best Private Halls Provider UK; Best Private Halls Provider ROI; Best Student Wellbeing UK; Best Student Wellbeing ROI; Best Customer Service ROI; and Best Learning Environment - Calico Liverpool.

 

Fresh also received the International Accommodation Quality Mark for the UK and ROI and had 23 team members nominated as Student Accommodation Heroes.

 

In the Global Student Living Survey, Fresh achieved a net promoter score of +32, against a benchmark figure for large providers of +12 and university halls of -8.

 

During the year, we launched our new management platform, Yardi, for our BTR schemes.  The platform has been built specifically for Fresh and the needs of our clients and residents.  It means we have a single platform from our website and point of enquiry, all the way through to client reporting, with live data at the touch of a button.  A fully integrated app supports the residents' experience, enabling them to manage all aspects of their tenancy and to connect with our teams and their neighbours.  We are already seeing good improvements in our website performance and positive feedback from residents.  We started to roll out Yardi for our student schemes in October 2021, helping to drive efficiencies for us and our clients.

 

The accommodation management market opportunity

The market for professional accommodation management services continues to grow, as institutional investors seek management partners to work with them to drive the performance of their PBSA and BTR assets.

 

Overall growth in the market is directly linked to demand for new student accommodation and BTR developments, as described above.  Opportunities for accommodation management providers continue to arise as new buildings are completed.  There is also a growing secondary market as existing contracts expire and are retendered.  In recent months, we have seen an increase in portfolios of PBSA assets for sale, which creates opportunities to manage those assets on behalf of new owners once deals complete.

 

In previous years, the pipeline of opportunities for Fresh was dominated by PBSA assets, reflecting the much greater number of such schemes compared to BTR.  We are now seeing a marked increase in the number of BTR schemes that are available to tender.

 

In addition, we see exciting potential in the co-living market, where the properties are highly similar to PBSA and offer a good halfway point between student accommodation and BTR.  This makes them highly suitable for new graduates, for example.

 

Many of the larger accommodation managers are the in-house arms of owner operators.  The pool of pure third-party operators remains small, with Fresh being the largest third-party manager of student property in the UK.

 

Successful operation in the market requires sufficient scale to invest in the infrastructure and the specialist skills required.  At least 5,000 beds under management is seen as the minimum level, making it difficult for new operators to enter the market.  As a result, no notable new entrants have been seen in the student market in recent years.  A similar dynamic is expected in the BTR market as it develops and Fresh will be looking to leverage its experience and expertise in the PBSA market to secure its position in the BTR space.

 

 

 

Financial review

 

The Group delivered a robust financial performance in the year, demonstrating the resilience of the business against the backdrop of the ongoing COVID pandemic.

 

Highlights

	FY21	FY20
	£m	£m	Change
Revenue	430.2	354.1	+21.5%
Gross profit	84.8	75.9	+11.7%
Administrative expenses	(27.5)	(24.2)	+13.5%
Operating profit before exceptional items	57.3	51.7	+10.8%
Exceptional costs	-	(20.5)
Operating profit	57.3	31.2	+83.3%
Share of (loss)/profit in joint ventures	(0.1)	0.2
Net finance costs	(6.1)	(6.1)
Profit before tax	51.1	25.3	+101.9%
Income tax expense	(9.2)	(4.2)
Profit for the year	41.9	21.1	+98.8%
Basic earnings per share	16.4p	8.2p	+98.5%
Adjusted basic earnings per share	16.4p	14.7p	+11.2%
Dividend per share	8.2p	7.35p	+11.6%

 

Revenue

Revenue grew strongly to £430.2 million, up 21.5% from £354.1 million in FY20, reflecting increased revenues from our BTR and PBSA development activities.

 

BTR development revenues were 47.4% higher at £138.6 million (FY20: £94.0 million) and arose from the five developments that were completed in the year, as well as the forward sale of our site in Hove.  This strong revenue performance was achieved despite lower than anticipated forward land sales in the year, with the forward sale of our scheme in Lewisham completing shortly after the year end.

 

Revenues from our PBSA development business were £259.9 million (FY20: £226.0 million), an increase of 15.0%, driven by the seven schemes that were completed in the year and good progress on the schemes in build for delivery in FY22.

 

In addition, revenues benefited from the forward sale of two development sites in Edinburgh and one in Exeter in the second half of the year. PBSA revenues also include the rental income from our six leased student accommodation assets.  The rental income on these was reduced by c.£5.0 million, compared to a normal year, as a result of the lower student occupancy caused by the pandemic.  This revenue reduction was at the lower end of our previous guidance.

 

The Affordable Homes business delivered revenues of £22.7 million, down 13.7% on the £26.3 million recorded in FY20.  Revenues in the prior year included c.£5.3 million from the completion of a 35-apartment scheme in Chester which had been sold on a turnkey basis.  However, revenues in FY21 were c.£4.0 million lower than anticipated due to build delays at our site in Preston.  The affordable housing pilot is expected to contribute to revenues from FY22.

 

Fresh, our Accommodation Management business, achieved revenues of £7.8 million (FY20: £7.6 million).  There was good underlying growth in the number of PBSA beds and BTR apartments under management, up 13.9% from 17,721 at the start of FY20 to 20,179 at the start of FY21.  However, whilst Fresh's management fee income is largely fixed, a proportion is variable based on the level of occupancy and this was reduced by approximately £0.8 million as a result of the pandemic.

 

In addition to our core businesses, we recorded revenues of £1.3 million (FY20: £0.3 million) from developing commercial property alongside PBSA and BTR developments.  This is reported within our Corporate segment.  The revenues for FY21 related to the fitting out of an academic space in Duncan House, Stratford, which we have exchanged contracts to sell on completion of the fit-out works in FY22.

 

Gross profit

Gross profit for the year was £84.8 million (FY20: £75.9 million), an increase of 11.7%.  This resulted in a gross margin of 19.7% (FY20: 21.4%).

 

BTR development gross profit doubled in the year to £29.8 million (FY20: £14.9 million), reflecting both the strong revenue growth and a higher gross margin at 21.5% (FY20: 15.8%).  The higher gross margin was primarily the result of keeping costs well controlled as we closed out developments in the year, despite the operational challenges brought about by the pandemic.

 

The BTR gross margin also benefited from the lower than anticipated new forward land sales in the year.  We typically earn a lower margin on the land sale element of a forward sale than we do on the separate contract for development works. Under IFRS 15 'Revenue from Contracts with Customers', the distinct contracts for the land sale and development works are accounted for separately.  This means that we typically earn a lower margin in the year in which the land sale occurs, followed by higher margins in the following years as the development works are undertaken.  We continue to target a gross margin of around 15% in BTR, with a margin on land sales of up to 10% and a development margin of 16% to 20%.

 

In the year, we incurred a charge of £3.0 million against the BTR gross profit in respect of a provision made against the carrying value of two of our historic BTR operating assets, which we are holding in inventory for sale, in order to cover the estimated cost of works to be carried out to improve the saleability of the assets.

 

Gross profit from PBSA development was 7.0% lower at £50.5 million, compared with £54.3 million in FY20.  The gross margin was 19.4% (FY20: 24.0%).  This was partly the result of the c.£5.0 million reduction in rental income from the leased PBSA assets as noted above, with the lost revenue feeding directly through to lower profit.  The underlying margin from our PBSA development activities was approximately 21.7%, with the margin in FY20 having benefited from there being no new forward land sales at lower margin in that year and a particularly strong contribution from several developments in build.  Our target margin for PBSA is around 20%, with a margin on land sales of up to 10% and a development margin of 22% to 25%.

 

In Affordable Homes, gross profit was £2.6 million (FY20: £4.0 million), resulting in a gross margin of 11.3% (FY20: 15.4%).  The reduction in gross margin reflects the mix of sales in the year, with a number of remaining units at the division's older developments in Bath and Macclesfield cleared at lower margin.

 

Fresh generated a gross profit of £4.1 million (FY20: £4.5 million) with the gross margin reducing to 52.6% (FY20: 59.8%) as a result of the loss of variable fee income related to student occupancy levels, as discussed above.

 

Within the Corporate segment we recorded a loss of £2.1 million (FY20: £1.8 million).  The loss in the year primarily related to an impairment provision made against a historic land site, following a re-assessment of its intended use.  Commercial property development did not generate any significant profit in either FY21 or FY20.

 

Administrative expenses

Administrative expenses increased by 13.5% to £27.5 million (FY20: £24.2 million).  Overheads in FY20 were suppressed by cost savings during the pandemic, mainly as a result of lower bonuses, reduced salaries for a period of time, a reduction in business travel and measures taken to control discretionary expenditure.  Overhead costs in FY21 have reverted to a more normal level and reflect an annual increase from FY19 of approximately 6.0%.

 

Operating profit before exceptional items

Operating profit before exceptional items increased to £57.3 million (FY20: £51.7 million), at an operating margin of 13.3% (FY20: 14.6%).

 

Exceptional items

No exceptional items were incurred in FY21.

 

In FY20, the Group incurred an exceptional charge of £20.5 million, including a £14.8 million provision related to remedial works on cladding and charges totalling £5.7 million relating to additional costs arising from the COVID pandemic, more information on which can be found in the FY20 annual report.

 

We utilised £4.9 million of the cladding provision in FY20 and a further £1.0 million in FY21.  We increased the provision by a further £0.5 million during the year, following receipt of a successful claim against a consultant who had been engaged on one of the properties we had remediated.  The balance of the provision of £9.4 million is expected to be utilised over the next two years.  In FY21 we undertook cladding remedial works on two developments, with the timing of the remaining works subject to agreement with the owners of the properties concerned.  The cost of the cladding works, which is being shared with the property owners, continues to be in line with our original estimates.

 

 

Finance costs

The net finance cost for the year was £6.1 million (FY20: £6.1 million).  These costs are primarily the finance cost of capitalised leases under IFRS 16, which totalled £4.9 million (FY20: £5.4 million).

 

The balance of our finance costs are the fees associated with the availability of our revolving credit facility (RCF) with HSBC and the interest cost of the loans we have with Svenska Handelsbanken AB.

 

Profit before tax

Profit before tax for the year was £51.1 million (FY20: £25.3 million).  For FY20, adjusted profit before tax, which excludes the impact of the exceptional items for that year, was £45.8 million.

 

Taxation

The corporation tax charge was £9.2 million (FY20: £4.2 million).  The effective tax rate of 18% (FY20: 16.7%) was less than the standard UK corporation tax rate of 19.0%, primarily as a result of a deferred tax credit relating to the remeasurement of deferred tax balances to take account of the increase in the corporation tax rate to 25.0% from April 2023.

 

The effective tax rate in FY20 was reduced by a prior year tax credit relating to the taxation of distributions from the Curlew Student Fund, which had already been taxed at source, and the higher proportionate benefit relative to the lower profit of specific tax allowances, including land remediation expenditure.

 

Information on our tax strategy can be found in the Investor section of our website, watkinjonesplc.com.

 

Earnings per share

Basic earnings per share from continuing operations was 16.4 pence (FY20: 8.2 pence).  For FY20, adjusted basic earnings per share, which excludes the impact of the exceptional items for that year, was 14.7 pence.

 

Dividends

The Board has proposed a final dividend of 5.6 pence per share.  Taken together with the interim dividend of 2.6 pence per share, this will give a total dividend for the year of 8.2 pence per share.  The dividend is 2.0x covered by adjusted earnings, in line with our stated policy.

 

In FY20, the Board suspended the interim dividend as a result of the uncertainty caused by the pandemic.  The Company paid a full year final dividend of 7.35 pence per share.

 

At 30 September 2021, the Company had distributable reserves of £75.3 million available to pay dividends.

 

EBITDA

EBITDA increased by 61.2% to £65.9 million (FY20: £40.9 million), giving an EBITDA margin of 15.3% (FY20: 11.5%).  For FY20, adjusted EBITDA, which excludes the exceptional items for that year, was £61.3 million, representing an adjusted EBITDA margin of 17.3%.

 

Return on capital employed

The return on capital employed (ROCE) for the year was strong at 72.1% (FY20: 58.5%), and was consistent with the average of the three years before the pandemic of 72.6%.  Our ROCE performance reflects the benefit of our capital-light forward sale business model, with our operating profit generated from a relatively consistent and modest level of capital employed.

 

Statement of financial position

At 30 September 2021, non-current assets amounted to £124.7 million (FY20: £134.7 million), with the most significant item being the carrying value of the leased student accommodation investment properties amounting to £98.6 million (FY20: £104.6 million).  Right-of-use assets relating to office and car leases amounted to £4.5 million (FY20: £4.8 million).  The reduction in these balances in the year reflects the depreciation charges.  Intangible assets relating to Fresh amounted to £12.7 million (FY20: £13.3 million) and were reduced by the amortisation charge of £0.6 million in the year.

 

We had no significant interest in joint ventures at 30 September 2021, following a reduction in the balance of £3.2 million in the year to £17,000.  This reduction reflected the distribution of dividends from our four development joint ventures in Belfast, which have completed their development activities and are now being wound up.  These dividends were set-off against the amounts owing to those companies.

 

Inventory and work in progress was £127.6 million.  This was largely unchanged from last year end's position of £125.7 million and reflects the normal churn of sites through the business. In the year, inventory and work in progress was reduced by £44.5 million as a result of the sale of the Hove site and the Leicester PBSA and BTR developments, but we spent a similar amount on the acquisition of the Lewisham and Crewe sites, with the Lewisham site sold shortly after the year end.  In the year, we made impairment provisions totalling £5.0 million against the carrying value of inventory and work in progress, as discussed in the review of gross profit.

 

Contract assets reduced significantly in the year to £13.8 million (FY20: £41.5 million).  These mainly relate to the final payment balances which are received on completion of developments in build.  The reduction in the year reflects the benefit of the final payments that were received following the handover of the developments completed in the period.

 

Contract liabilities and trade and other payables amounted to £92.0 million and were £14.2 million lower than at 30 September 2020, reflecting a lower level of on-site build activity across the year end relative to a year ago.

 

The remaining provision for cladding remedial works of £9.4 million has been split relatively equally between current and non-current liabilities, based on our anticipated expenditure over the next two years.  The movement in the provision in the year is considered under the review of 'Exceptional items' above.

 

Interest-bearing loans and liabilities stood at £12.0 million at 30 September 2021, down from £39.7 million a year ago.  The reduction primarily relates to the repayment of the loans on the Hove and Leicester sites, on completion of the sales in the year.  The current portion of our loans has increased by £4.0 million to £4.7 million, which reflects the March 2022 maturity date of our facilities with Svenska Handelsbanken AB.

 

Lease liabilities arising from the adoption of IFRS 16 'Leases' in the prior year were reduced by £5.2 million to £129.3 million (FY20: £134.5 million), reflecting capital repayments made in the year of £6.1 million and net additions of £0.9 million.

 

Cash and net debt

	FY21	FY20
	£m	£m
Operating profit before exceptional items	57.3	51.7
Exceptional items	-	(8.7)
Depreciation and amortisation	8.7	9.4
Impairment of leased student accommodation property (non-exceptional)	-	0.3
(Increase)/decrease in working capital	10.3	2.1
Finance costs paid	(6.7)	(6.5)
Tax paid	(8.2)	(10.0)
Net cash inflow from operating activities	61.4	38.3
Purchase of fixed assets	(0.2)	(0.2)
Cash flow from joint venture interests	0.1	0.8
Dividends paid	(25.5)	(14.3)
Payment of lease liabilities	(6.1)	(6.1)
Cash flow from borrowings	(27.9)	0.4
Increase in cash	1.8	18.9
Cash at beginning of year	134.5	115.6
Cash at end of year	136.3	134.5
Less: borrowings	(12.0)	(39.7)
Net cash before deducting lease liabilities	124.3	94.8
Less: lease liabilities	(129.3)	(134.4)
Net debt	(5.0)	(39.6)

 

At the year end, we had a cash balance of £136.3 million and loans of £12.0 million, resulting in a net cash position of £124.3 million.  At 30 September 2020, we had a cash balance of £134.5 million, loans of £39.7 million and net cash of £94.8 million.

 

Net cash balances are stated before deducting the lease liabilities of £129.3 million (30 September 2020: £134.5 million), arising as a result of applying IFRS 16.  We believe the net cash balance before deducting lease liabilities is a more relevant measure for the Group.

 

The lease liabilities relate primarily to several historic student accommodation sale and leaseback properties, for which the future lease rental liabilities are expected to be substantially covered by the future net student rental incomes to be received.

 

In a typical year, the Group's cash balance peaks around the year end, as we receive the final payments on student accommodation developments completing ahead of the new academic year, as well as initial proceeds from the latest forward sales.

 

The Group is then a net user of cash until the following year end, as a result of outflows such as tax and dividend payments, overhead costs and land purchases.  The cash balance at the year end is therefore important for funding our day-to-day cash requirements and for putting the Group in a strong position when bidding for new sites.

 

Our average month end net cash balance during FY21 was £44.2 million and had reduced by £107.4 million during the year to a net debt balance of £12.6 million at the end of July 2021, before increasing strongly by £136.9 million in the final two months of the year to the closing net cash position of £124.3 million.

 

The Group's net cash flow from operating activities for the year was £61.4 million (FY20: £38.3 million), reflecting a strong cash flow from our trading operations.  The cash flow from operating activities, before deducting the cash cost of exceptional items, finance costs and tax payments, was £76.3 million (FY20: £63.5 million).  The working capital balance was reduced by £10.3 million, compared to a reduction of £2.1 million in FY20.

 

Finance costs paid totalled £6.7 million (FY20: £6.5 million), including the finance charges on the capitalised lease liabilities of £4.9 million (FY20: £5.1 million), for which the capital payments amounted to £6.1 million (FY20: £6.1 million).

 

Dividends paid in the year totalled £25.5 million (FY20: £14.3 million).  The dividend payments in FY21 were significantly higher as they included both the full year dividend for FY20, following the suspension of the interim dividend for that year, as well as the interim dividend for FY21.  Dividends paid in FY20 comprised only the final dividend for FY19.

 

Bank facilities

The Group has a £100.0 million RCF which runs until May 2025.  At the year end, £7.8 million was drawn against the facility (30 September 2020: £35.0 million), giving headroom of £92.2 million.  We also have an undrawn overdraft facility of £10.0 million.  Total cash and available facilities at 30 September 2021 therefore stood at £238.5 million (FY20: £209.5 million).

 

In addition, the Group has loan facilities with Svenska Handelsbanken AB, which are used to fund our operating build to rent stock in Sheffield and Droylsden.  We are currently progressing a renewal of these facilities, which run to March 2022.  The outstanding balance at the year end was £4.5 million (30 September 2020: £5.0 million).

 

Going concern

We have undertaken a thorough review of the Group's ability to continue to trade as a going concern for the period to 31 January 2023.  The basis of the review and an analysis of the downside risks is set out in the section on 'Risk management and principal risks' in the Watkin Jones plc Annual Report for the year ended 30 September 2021.

 

Alternative performance measures (APMs)

We use APMs as part of our financial reporting, alongside statutory reporting measures.  These APMs are provided for the following reasons:

 

1) to present users of the annual report with a clear view of what we consider to be the results of our underlying operations, enabling consistent comparisons over time and making it easier for users of the report to identify trends;

2) to provide additional information to users of the annual report about our financial performance or position;

3) to show the performance measures used by the Board in determining dividend payments; and

4) to show the performance measures that are linked to remuneration for the Executive Directors.

 

 

The following APMs appear in this results announcement.

 

		Reconciliation
			FY21	FY20
	Reason for use		£'000	£'000
Adjusted operating profit	1	Operating profit	57,255	31,230
		Add: exceptional items	-	20,437
		Adjusted operating profit	57,255	51,667
Adjusted profit before tax	1,4	Profit before tax	51,121	25,314
		Add: exceptional items	-	20,437
		Adjusted profit before tax	51,121	45,751
Adjusted basic earnings per share	1,3,4	Profit for the year	41,932	21,092
		Add: exceptional items	-	20,437
		Less: tax on exceptional items	-	(3,883)
		Adjusted profit for the year	41,932	37,646
		Weighted average number of shares	256,163,459	255,795,659
		Adjusted basic earnings per share	16.369 pence	14.717 pence
EBITDA	1	Operating profit	57,255	31,230
		Add: share of (loss)/profit in joint ventures	(87)	199
		Add: depreciation	8,128	8,863
		Add: amortisation	560	560
		EBITDA	65,856	40,852
Adjusted EBITDA	1	EBITDA	65,856	40,852
		Add: exceptional items	-	20,437
		Adjusted EBITDA	65,856	61,289
Adjusted net cash	2	Net debt	(4,920)	(39,607)
		Add: lease liabilities	129,252	134,453
		Adjusted net cash	124,332	94,846
Return on capital employed	1,2	Adjusted operating profit (as above)	57,255	51,667
		Net assets at 30 September	184,811	167,838
		Less: adjusted net cash (as above)	(124,332)	(94,846)
		Less: intangible assets	(12,724)	(13,284)
		Less: investment property (leased)	(98,567)	(104,623)
		Less: right-of-use assets	(4,468)	(4,763)
		Add: lease liabilities	129,252	134,453
		Adjusted net assets at 30 September	73,972	84,775
		Adjusted net assets at 1 October	84,775	91,772
		Average adjusted net assets	79,374	88,274
		Return on capital employed	72.1%	58.5%

 

Sarah Sergeant

Chief Financial Officer

 

18 January 2022

 

 

 

Consolidated statement of comprehensive income

for the year ended 30 September 2021

 

		Year ended	Year ended
		30 September	30 September
		2021	2020
	Notes	£'000	£'000
Continuing operations
Revenue	4	430,211	354,121
Cost of sales		(345,430)	(278,205)
Gross profit		84,781	75,916
Administrative expenses		(27,526)	(24,249)
Operating profit before exceptional items		57,255	51,667
Exceptional costs	5	-	(20,437)
Operating profit		57,255	31,230
Share of (loss)/profit in joint ventures		(87)	199
Finance income		4	251
Finance costs		(6,051)	(6,366)
Profit before tax		51,121	25,314
Income tax expense	6	(9,189)	(4,222)
Profit for the year attributable to ordinary equity holders of the parent		41,932	21,092
Other comprehensive income
Other comprehensive income that will not be reclassified to profit or loss in subsequent periods:
Net gain/(loss) on equity instruments designated at fair value through other comprehensive income		108	(6)
Total comprehensive income for the year attributable to ordinary equity holders of the parent		42,040	21,086

 

 

		Pence	Pence
Earnings per share for the year attributable to ordinary equity holders of the parent
Basic earnings per share	7	16.369	8.246
Diluted earnings per share	7	16.340	8.234
Adjusted proforma basic earnings per share (excluding exceptional costs)	7	16.369	14.717
Adjusted proforma diluted earnings per share (excluding exceptional costs)	7	16.340	14.696

 

 

 

Consolidated statement of financial position

as at 30 September 2021

 

		30 September	30 September
		2021	2020
	Notes	£'000	£'000
Non-current assets
Intangible assets		12,724	13,284
Investment property (leased)	9	98,567	104,623
Right-of-use assets	9	4,468	4,763
Property, plant and equipment		3,656	4,376
Investment in joint ventures		17	3,243
Deferred tax assets		4,057	3,313
Other financial assets		1,241	1,133
		124,730	134,735
Current assets
Inventory and work in progress		127,593	125,660
Contract assets		13,810	41,522
Trade and other receivables		28,198	23,518
Cash and cash equivalents	11	136,293	134,513
		305,894	325,213
Total assets		430,624	459,948
Current liabilities
Trade and other payables		(89,198)	(97,300)
Contract liabilities		(2,845)	(8,967)
Interest-bearing loans and borrowings		(4,653)	(711)
Lease liabilities	9	(6,113)	(6,310)
Provisions		(4,667)	(6,277)
Current tax liabilities		(2,015)	(819)
		(109,491)	(120,384)
Non-current liabilities
Interest-bearing loans and borrowings		(7,308)	(38,956)
Lease liabilities	9	(123,139)	(128,143)
Provisions		(4,732)	(3,587)
Deferred tax liabilities		(1,143)	(1,040)
		(136,322)	(171,726)
Total liabilities		(245,813)	(292,110)
Net assets		184,811	167,838
Equity
Share capital		2,562	2,562
Share premium		84,612	84,612
Merger reserve		(75,383)	(75,383)
Fair value reserve of financial assets at FVOCI		536	428
Share‑based payment reserve		2,824	2,348
Retained earnings		169,660	153,271
Total equity		184,811	167,838

 

 

 

 

Consolidated statement of changes in equity

for the year ended 30 September 2021

 

				Fair value
				reserve of
				financial	Share-based
	Share	Share	Merger	assets at	payment	Retained
	capital	premium	reserve	FVOCI	reserve	earnings	Total
	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Balance at 30 September 2019	2,553	84,612	(75,383)	434	2,311	146,568	161,095
Profit for the year	-	-	-	-	-	21,092	21,092
Other comprehensive income	-	-	-	(6)	-	-	(6)
Total comprehensive income	-	-	-	(6)	-	21,092	21,086
Share-based payments	-	-	-	-	37	-	37
Deferred tax debited directly to equity	-	-	-	-	-	(70)	(70)
Issue of shares	9	-	-	-	-	-	9
Dividend paid (note 8)	-	-	-	-	-	(14,319)	(14,319)
Balance at 30 September 2020	2,562	84,612	(75,383)	428	2,348	153,271	167,838
Profit for the year	-	-	-	-	-	41,932	41,932
Other comprehensive income	-	-	-	108	-	-	108
Total comprehensive income	-	-	-	108	-	41,932	42,040
Share-based payments	-	-	-	-	476	-	476
Deferred tax debited directly to equity	-	-	-	-	-	(59)	(59)
Dividend paid (note 8)	-	-	-	-	-	(25,484)	(25,484)
Balance at 30 September 2021	2,562	84,612	(75,383)	536	2,824	169,660	184,811

 

 

 

Consolidated statement of cash flows

for the year ended 30 September 2021

 

		Year ended	Year ended
		30 September	30 September
		2021	2020
	Notes	£'000	£'000
Cash flows from operating activities
Cash inflow from operations	10	76,307	54,868
Interest received		4	245
Interest paid		(6,638)	(6,792)
Tax paid		(8,211)	(10,035)
Net cash inflow from operating activities		61,462	38,286
Cash flows from investing activities
Acquisition of property, plant and equipment		(208)	(317)
Proceeds on disposal of property, plant and equipment		4	69
Cash flow from joint venture interests		57	812
Net cash inflow from investing activities		(147)	564
Cash flows from financing activities
Dividends paid	8	(25,484)	(14,319)
Proceeds from exercise of share options		-	9
Payment of principal portion of lease liabilities		(6,145)	(6,089)
Payment of capital element of other interest‑bearing loans		(242)	(1,034)
Drawdown of RCF		25,705	20,843
Repayment of bank loans		(53,369)	(18,499)
Bank loan arrangement fees		-	(900)
Net cash outflow from financing activities		(59,535)	(19,989)
Net increase in cash		1,780	18,861
Cash and cash equivalents at 1 October 2020 and 1 October 2019		134,513	115,652
Cash and cash equivalents at 30 September 2021 and 30 September 2020		136,293	134,513

 

 

 

Notes to the consolidated financial statements

for the year ended 30 September 2021

 

1. General information

Watkin Jones plc (the 'Company') is a public limited company incorporated in the United Kingdom under the Companies Act 2006 (registration number 9791105) and its shares are listed on the Alternative Investment Market of the London Stock Exchange.  The Company is domiciled in the United Kingdom and its registered address is 7-9 Swallow Street, London, England, W1B 4DE.

 

The principal activities of the Company and its subsidiaries (collectively the 'Group') are those of property development and the management of properties for multiple residential occupation.

 

The consolidated financial statements for the Group for the year ended 30 September 2021 comprise the Company and its subsidiaries.  The basis of preparation of the consolidated financial statements is set out in note 2 below.

 

 

2. Basis of preparation

The preparation of the financial statements in conformity with the Group's accounting policies requires the Directors to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the reporting date and the reported amounts of revenue and expenses during the reported period.  Whilst these estimates and assumptions are based on the Directors' best knowledge of the amount, events or actions, actual results may differ from those estimates.

 

The financial information set out above does not constitute the Group's statutory accounts for the years ended 30 September 2021 or 2020, but is derived from those accounts.  Statutory accounts for 2020 have been delivered to the Registrar of Companies, and those for 2021 will be delivered in due course.  The auditor has reported on those accounts; their reports were (i) unqualified, (ii) did not include a reference to any matters to which the auditor drew attention by way of emphasis without qualifying their report and (iii) did not contain statements under Section 498(2) or (3) of the Companies Act 2006.

 

Whilst the financial information included in this announcement has been computed in accordance with IFRS as adopted by the European Union, this announcement does not itself contain sufficient information to comply with IFRS.  The Company expects to send its 2021 Annual Report to shareholders on 24 January 2022.

 

The accounting policies set out below have, unless otherwise stated, been applied consistently to all periods for which the financial information included in this announcement has been presented.  The financial information included in this announcement is prepared on the historical cost basis except as disclosed in these accounting policies.  The financial information is presented in pounds sterling and all values are rounded to the nearest thousand (£'000), except when otherwise indicated.

 

 

3. Accounting policies

The results for the year have been prepared on a basis consistent with the accounting policies set out in the Watkin Jones plc Annual Report for the year ended 30 September 2021.

 

 

4. Segmental reporting

The Group has identified four segments for which it reports under IFRS 8 'Operating Segments'. The following represents the segments that the Group operated in during FY21 and FY20:

 

a. Student Accommodation - the development of purpose built student accommodation;

b. Build To Rent - the development of build to rent accommodation;

c. Affordable Homes (formerly Residential) - the development of residential housing; and

d. Accommodation Management - the management of student accommodation and build to rent property.

 

Corporate - revenue from the development of commercial property forming part of mixed‑use schemes and other revenue and costs not solely attributable to any one operating segment.

 

All revenues arise in the UK.

 

Performance is measured by the Board based on gross profit as reported in the management accounts.

 

Apart from inventory and work in progress, no other assets or liabilities are analysed into the operating segments.

 

As detailed in the Chief Executive Officer's review, subsequent to the year end, the Group confirmed its intention to reposition the Residential division from being a developer of homes for sale to an affordable housing-led developer, and has renamed it the Affordable Homes division.  Consequently, previous references to the Residential segment have been changed to Affordable Homes.  No revenues relating to the development of homes under the affordable homes business model were recorded in FY21 or FY20 and the revenues for those years relate to the former Residential business.

 

			Affordable
			Homes
	Student	Build	(formerly	Accommodation
Year ended 30	Accommodation	To Rent	Residential)	Management	Corporate	Total
September 2021	£'000	£'000	£'000	£'000	£'000	£'000
Segmental revenue	259,882	138,569	22,663	7,762	1,335	430,211
Segmental gross profit	50,464	29,765	2,560	4,081	(2,089)	84,781
Administration expenses	-	-	-	(4,229)	(23,297)	(27,526)
Share of loss in joint ventures	(87)	-	-	-	-	(87)
Finance income	-	-	-	-	4	4
Finance costs	-	-	-	-	(6,051)	(6,051)
Profit/(loss) before tax	50,377	29,765	2,560	(148)	(31,433)	51,121
Taxation	-	-	-	-	(9,189)	(9,189)
Continuing profit/(loss) for the year	50,377	29,765	2,560	(148)	(40,622)	41,932
Profit for the year attributable to ordinary equity shareholders of the parent						41,932
Inventory and work in progress	25,754	64,086	27,420	-	10,333	127,593
			Affordable
			Homes
	Student	Build	(formerly	Accommodation
Year ended 30	Accommodation	To Rent	Residential)	Management	Corporate	Total
September 2020	£'000	£'000	£'000	£'000	£'000	£'000
Segmental revenue	226,026	93,991	26,268	7,586	250	354,121
Segmental gross profit	54,285	14,884	4,042	4,540	(1,835)	75,916
Administration expenses	-	-	-	(3,432)	(20,817)	(24,249)
Exceptional costs	-	-	-	-	(20,437)	(20,437)
Share of profit in joint ventures	199	-	-	-	-	199
Finance income	-	-	-	-	251	251
Finance costs	-	-	-	-	(6,366)	(6,366)
Profit/(loss) before tax	54,484	14,884	4,042	1,108	(49,204)	25,314
Taxation	-	-	-	-	(4,222)	(4,222)
Continuing profit/(loss) for the year	54,484	14,884	4,042	1,108	(53,426)	21,092
Profit for the year attributable to ordinary equity shareholders of the parent						21,092
Inventory and work in progress	30,706	53,964	30,656	-	10,334	125,660

 

 

 

5. Exceptional costs

	Year ended	Year ended
	30 September	30 September
	2021	2020
	£'000	£'000
COVID costs
COVID additional costs of on-site working and in completing developments	-	(2,659)
Waiver of academic year 2019/20 final term rents due on leased student accommodation assets due to lockdown measures	-	(1,086)
Impairment of the right-of-use carrying value of leased student accommodation assets due to reduced 2020/21 student occupancy	-	(1,892)
Total COVID costs	-	(5,637)
Fire safety recladding works	-	(14,800)
Total exceptional costs	-	(20,437)

 

There have been no exceptional items during the year.  In the prior year, a total impairment charge of £2,241,000 was recognised in relation to the carrying value of leased student accommodation assets.  £1,892,000 of this impairment charge was treated as an exceptional item due to the impact of reduced student occupancy during the 2020/21 academic year as a result of the COVID pandemic.  This element of the total charge was estimated by comparing the final impairment calculations to a calculation of the impairment charge using the income forecasts for 2020/21 prepared prior to the pandemic.

 

All of the exceptional costs in the prior year were treated as allowable deductions for corporation tax purposes.

 

 

6. Income taxes

 

	Year ended	Year ended
	30 September	30 September
	2021	2020
	£'000	£'000
Current income tax
UK corporation tax on profits for the year	9,635	4,076
Adjustments in respect of prior periods	254	(305)
Total current tax	9,889	3,771
Deferred tax
Origination and reversal of temporary differences	51	455
Adjustments in respect of prior year	(13)	(10)
Remeasurement of deferred tax for changes in tax rates	(738)	6
Total deferred tax	(700)	451
Total tax expense	9,189	4,222

 

 

Reconciliation of total tax expense

	Year ended	Year ended
	30 September	30 September
	2021	2020
	£'000	£'000
Profit before tax	51,121	25,314
Profit multiplied by standard rate of corporation tax in the UK of 19% (2020: 19%)	9,713	4,810
Expenses not deductible	110	288
Income not taxable	(14)	(53)
Remeasurement of deferred tax for changes in tax rates	(738)	6
Other differences	(123)	(514)
Prior period adjustment	241	(315)
At the effective rate of tax of 18.0% (2020: 16.7%)	9,189	4,222
Income tax expense reported in the statement of profit or loss	9,189	4,222

 

In the Budget 2021, the Government announced that the rate of corporation tax will increase to 25% from 6 April 2023.  The deferred tax assets and liabilities held by the Group at the start of the current year have been revalued to reflect this increase.  This resulted in an increase in deferred tax assets of £1,004,000 and an increase in deferred tax liabilities of £266,000.

 

 

7. Earnings per share

 

The following table reflects the income and share data used in the basic and diluted EPS computations:

 

	Year ended	Year ended
	30 September	30 September
	2021	2020
	£'000	£'000
Profit for the year attributable to ordinary equity holders of the parent	41,932	21,092
Add back exceptional costs for the year (note 5)	-	20,437
Less corporation tax benefit from exceptional costs for the year	-	(3,883)
Adjusted profit for the year attributable to ordinary equity holders of the parent (excluding exceptional costs after tax)	41,932	37,646
	Number of	Number of
	shares	shares
Weighted average number of ordinary shares for basic earnings per share	256,163,459	255,795,659
Adjustment for the effects of dilutive potential ordinary shares	453,761	367,800
Weighted average number for diluted earnings per share	256,617,220	256,163,459
	Pence	Pence
Basic earnings per share
Basic profit for the year attributable to ordinary equity holders of the parent	16.369	8.246
Adjusted proforma basic earnings per share (excluding exceptional costs after tax)
Adjusted profit for the year attributable to ordinary equity holders of the parent	16.369	14.717
Diluted earnings per share
Basic profit for the year attributable to diluted equity holders of the parent	16.340	8.234
Adjusted proforma diluted earnings per share (excluding exceptional costs after tax)
Adjusted profit for the year attributable to diluted equity holders of the parent	16.340	14.696

 

 

8. Dividends

	Year ended	Year ended
	30 September	30 September
	2021	2020
	£'000	£'000
Interim dividend paid in June 2021 of 2.6 pence (June 2020: nil pence)	6,658	-
Final dividend paid in February 2021 of 7.35 pence (February 2020: 5.6 pence)	18,826	14,319
	25,484	14,319

 

The interim dividend that would have been paid in June 2020 was suspended as a precautionary measure whilst the impact of COVID on the business was assessed.

 

The final dividend proposed for the year ended 30 September 2021 is 5.6 pence per ordinary share and will be paid on 25 February 2022 to shareholders on the register at the close of business on 28 January 2022.  This dividend was declared after 30 September 2021 and as such the liability of £14,345,000 has not been recognised at that date.  At 30 September 2021, the Company had distributable reserves available of £75,332,000 (30 September 2020: £100,816,000).

 

 

 

9. Leases

 

Set out below are the carrying amounts of right-of-use assets recognised and the movements during the year:

 

	Investment
	property		Motor
	(leased)	Offices	vehicles	Total
	£'000	£'000	£'000	£'000
Cost
At 30 September 2019	158,231	9,411	1,597	169,239
Additions/adjustment	3,162	-	313	3,475
Disposals	-	-	(478)	(478)
At 30 September 2020	161,393	9,411	1,432	172,236
Additions/adjustment	243	721	13	977
Disposals	(7)	-	(471)	(478)
At 30 September 2021	161,629	10,132	974	172,735
Depreciation
At 30 September 2019	44,550	4,203	875	49,628
Charge for the year	6,522	791	552	7,865
Disposals	-	-	(341)	(341)
At 30 September 2020	51,072	4,994	1,086	57,152
Charge for the year	6,292	791	206	7,289
Disposals	-	-	(439)	(439)
At 30 September 2021	57,364	5,785	853	64,002
Impairment
At 30 September 2019	3,457	-	-	3,457
Charge for the year	2,241	-	-	2,241
At 30 September 2020	5,698	-	-	5,698
Charge for the year	-	-	-	-
At 30 September 2021	5,698	-	-	5,698
Net book value
At 30 September 2021	98,567	4,347	121	103,035
At 30 September 2020	104,623	4,417	346	109,386
At 30 September 2019	110,224	5,208	722	116,154

 

Investment property (leased) assets relate to the Group's six student leaseback arrangements.  Each of the six leaseback arrangements are considered to be a separate CGU.  The Directors consider an impairment indication to exist if there is a shortfall between the annual net rental income generated by each property and the annual headlease payment due under each lease.  The Directors have reviewed the carrying value of four of these leases where there is an indication of impairment and compared them to their respective recoverable amounts.  An impairment charge of £Nil has been recognised during the year.  In the previous year, an impairment charge of £2,241,000 was recognised in respect of one of the Group's sale and leaseback arrangements - Europa, Liverpool - because the recoverable amount was less than the depreciated carrying value of the asset. £1,892,000 of this impairment charge was recognised as an exceptional item in the consolidated statement of comprehensive income and £349,000 was recognised within Student Accommodation cost of sales.

 

The recoverable amount for each CGU has been calculated as its value in use.  The valuation technique used is a discounted cash flow.  Due to the bespoke nature of these arrangements, these valuations are also considered to represent the fair value of each of the investment property (leased) assets.  The key inputs into the valuation are gross rental income, operating costs, lease term and an estimated discount rate reflecting the market assessment of risk that would be applied to each asset.  The estimated discount rates for each property, together with their value in use, are included in the next table.

 

 

	Impairment charge/(reversal) £'000				Value in use £'000
	Year ended	Year ended			Year ended	Year ended
	30 September	30 September	Discount	Lease termination	30 September	30 September
	2021	2020	rate (yields)	date	2021	2020
Collegelands, Glasgow	-	-	5.5%	6 September 2026	12,328	14,244
Europa, Liverpool	-	2,241	6.5%	18 March 2030	10,756	12,462
Optima, Loughborough	-	-	6.0%	18 March 2030	2,166	2,182
Glassyard Building, London	-	-	5.0%	10 September 2034	9,984	11,177
Dunaskin Mill, Glasgow	-	-	5.5%	5 September 2051	54,639	53,059
New Bridewell, Bristol	-	-	5.5%	12 March 2052	56,125	56,964
Total	-	2,241			145,998	150,088

 

Set out below are the carrying amounts of lease liabilities and movements during the period:

 

	Year ended	Year ended
	30 September	30 September
	2021	2020
	£'000	£'000
At the start of the period	134,453	137,522
Additions	977	3,475
Disposals	(33)	(455)
Accretion of interest	4,895	5,103
Payments	(11,040)	(11,192)
At the end of the period	129,252	134,453
Current	6,113	6,310
Non-current	123,139	128,143
Lease liability maturity analysis
	Year ended	Year ended
	30 September	30 September
	2021	2020
	£'000	£'000
Year one	11,226	11,041
Year two	11,086	10,880
Year three	11,015	10,781
Year four	11,222	10,707
Year five	11,433	10,909
Onwards	142,367	150,554
	198,349	204,872
Group as lessor - operating lease rentals receivable
	Year ended	Year ended
	30 September	30 September
	2021	2020
	£'000	£'000
Non-cancellable operating lease rentals are receivable as follows:
Within one year	13,514	12,436
Later than one year and less than five years	12,747	573
After five years	16,457	780
	42,718	13,789

 

 

The Group acts as lessor in respect of certain commercial property and for the student accommodation properties operated under the sale and leaseback arrangements detailed above.  The increase in operating lease rentals receivable at 30 September 2021 compared to the prior year, has arisen as a result of the Group entering into a ten year sub-lease with the University of Bristol in September 2021 for the provision of student accommodation at its New Bridewell property.

 

 

10. Reconciliation of profit before tax to net cash flows from operating activities

 

	Year ended	Year ended
	30 September	30 September
	2021	2020
	£'000	£'000
Profit before tax	51,121	25,314
Depreciation of leased investment properties and right-of-use assets	7,289	7,865
Depreciation of plant and equipment	839	998
Impairment of leased investment properties	-	2,241
Amortisation of intangible assets	560	560
Loss/(profit) of disposal of right-of-use assets	6	-
Loss/(profit) on disposal of property, plant and equipment	85	(24)
Finance income	(4)	(245)
Finance costs	6,051	6,366
Share of (loss)/profit in joint ventures	87	(199)
Decrease/(increase) in inventory and work in progress	(1,933)	8,566
Interest capitalised in inventory and work in progress	587	465
Decrease/(increase) in contract assets	27,712	(15,944)
Decrease/(increase) in trade and other receivables	(4,680)	(10,786)
(Decrease)/increase in contract liabilities	(6,122)	3,803
(Decrease)/increase in trade and other payables	(5,302)	15,987
(Decrease)/increase in provision for fire safety cladding works	(465)	9,864
Increase in share‑based payment reserve	476	37
Net cash inflow from operating activities	76,307	54,868

 

Major non-cash transactions

There were no major non-cash transactions during the period.

 

 

11. Analysis of net cash/(debt)

	At beginning		Other	At end of
	of year	Cash flow	movements	year
30 September 2021	£'000	£'000	£'000	£'000
Cash at bank and in hand	134,513	1,780	-	136,293
Other interest‑bearing loans	(631)	242	-	(389)
Bank loans	(39,036)	27,664	(200)	(11,572)
Net cash before deducting lease liabilities	94,846	29,686	(200)	124,332
Lease liabilities (note 9)	(134,453)	6,145	(944)	(129,252)
Net debt	(39,607)	35,831	(1,144)	(4,920)

 

	At beginning		Other
	of year	Cash flow	movements	At end of year
30 September 2020	£'000	£'000	£'000	£'000
Cash at bank and in hand	115,652	18,861	-	134,513
Other interest‑bearing loans	(1,392)	1,034	(273)	(631)
Bank loans	(37,413)	(1,444)	(179)	(39,036)
Net cash before deducting lease liabilities	76,847	18,451	(452)	94,846
Lease liabilities (note 9)	(137,522)	6,089	(3,020)	(134,453)
Net debt	(60,675)	24,540	(3,472)	(39,607)

 

Cash at bank and in hand as at 30 September 2021 includes £53,000 of cash deposited by the Group in an escrow account in connection with a development in progress, access to which is contingent upon the completion of certain development works (30 September 2020: £814,000).  Non‑cash movements relate to the acquisition of property, plant and equipment under other interest-bearing loans, the amortisation of bank loan arrangement fees and changes to the value of lease liabilities as a result of leases entered into or terminated in the period or due to movements in the rent inflation rates assumed.

 

 

12. Subsequent events

On 21 October 2021, the Group entered into an agreement for the forward sale of its BTR development in Lewisham, for a consideration of £141,281,000 to be recognised over the duration of the development works.  At 30 September 2021, the Group held an amount of £37,701,000 in stock and work in progress in respect of this development.

 

On 11 January 2022, the Department of Levelling Up, Housing and Communities issued a public letter to developers on cladding and build safety.  The Group will work through any impact as the suggestions evolve into proposals and there are no associated costs recorded in these financial statements.  At 30 September 2021, the provision for the remediation or replacement of cladding under existing government guidelines was £9,399,000 (30 September 2020: £9,864,000).

 

 

13. Annual report

Copies of this announcement are available from the Company at 7-9 Swallow Street, London W1B 4DE.  The Group's annual report for the year ended 30 September 2021 will be posted to shareholders shortly and will be available on our website at www.watkinjones.com.

 

- ENDS -