Watkin Jones produced “a resilient operational performance” in its latest financial year despite difficult market conditions, its chief executive has said.
Turnover for the year to 30 September 2024 at the firm – ranked 49th in last year’s CN100 – fell by 12 per cent to £362.4m from £413.2m amid “a difficult investment market”, chief executive Alex Pease said.
In results announced this morning to the London Stock Exchange, he added: “The slow pace of interest rate cuts and the surprise timing of the general election [last July] meant that… transactional activity on developments has not improved as quickly as expected, and we completed fewer forward sales as a result.”
The firm’s build-to-rent division contributed £211.3m to group revenue, ahead of £117.6m from purpose-built student accommodation. Single-family homes, development partnerships and the newly formed refurbishment arm (in its first year) accounted for the remainder of the turnover.
Despite the dip in revenue, Watkin Jones was able to slash its pre-tax loss from £42.5m to just £300,000.
This resulted in a margin of -0.1 per cent compared with -10.3 per cent the year before.
Pease said the improved result was achieved by “focusing on the factors within our control”, such as project delivery, cost management and “increasing our resilience” through continued diversification.
Watkin Jones was also helped by lower building cost inflation and “benefited from our efforts to mitigate rising costs, including developing stronger relationships with our supply chain”, he added.
The firm would have posted a pre-tax profit but for £9.5m of building safety-related costs, including an extra £7m remediation provision (lower than the previous year’s additional £35m).
Watkin Jones ended the year with a net provision of £48m. It completed three remediation projects but necessary remedial works were identified at “one or two more buildings”, Pease told Construction News.
He would not be drawn on how many buildings or schemes were in scope for remediation, but said most of them “are relatively straightforward remediation projects. A few of them do need intervention from the Building Safety Regulator, but we haven’t had any undue issues to date.”
Watkin Jones completed five new development projects in the latest financial year and handed over the first phase of a sixth.
“All finished on time and materially to budget, despite being procured and delivered in a very difficult construction environment, with high build cost inflation and supply chain disruption during FY22 and FY23,” Pease said.
Watkin Jones has “broadened our revenue base, opened up new sources of income and worked hard to protect our cash position”, he added.
Net cash at year-end almost doubled from £72.4m to £143.2m and Watkin Jones more than halved its short-term borrowings from £28.6m to £13.6m. This was derived from a £50m revolving credit facility to fund land acquisitions and development.
The firm also has an undrawn £10m overdraft with HSBC and added £10m to its revolving credit facility after the period covered by the latest results.
No dividends were paid out compared with £15.1m in the previous year.
Looking ahead, Pease said the low number of transactions in the latest financial year will affect Watkin Jones’ next annual results “by delaying revenue from building out schemes we had expected to forward sell”.
While turnover could still grow, “this will require market conditions to improve at a faster pace as we enter the new financial year”, he added.
Despite a slower-than-expected market recovery and “stubborn interest rates”, Pease described a “very positive” medium-term outlook.
He also said Watkin Jones could adopt “certain asset management strategies” as a means of further diversification, to leverage the firm’s experience in construction, property development and real estate investment.
