Watkin Jones slashes losses to £300k after turbulent 18 months

Watkin Jones has drastically reduced its annual pre-tax losses but still remained narrowly in the red at its year end.

The build-to-rent (BTR) and student housing specialist today reported a pre-tax loss of £300,000 for the year to 30 September 2024.

This is down drastically on the £42.5m loss the previous year and follows a turbulent period which saw a change in leadership and restructuring following a profit warning in 2023.

The firm made an operating profit – which excludes certain one-off costs – of £3.6m, compared to a loss of £38m for the previous year.

Watkin Jones said the improved profitability of its student housing developments was the “main driver” of its stronger operating profit performance.

The housebuilder said the significant improvement in operating profit reflected the sale of two schemes, a 397-bed student housing scheme in Stratford to Watkin Jones’ joint venture with Lloyds Banking Group’s Housing Growth Partnership and the 260-bed Gas Lane scheme in Bristol.

The developer’s student housing business increased its gross profit 19.3% to £13.6m, while its gross margin rose sharply from 6.5% to 11.6% which it said “reflects a recovery towards the margins we have historically earned in this sector”. The student business, however, saw its revenue drop £175.7m to £117.6m, which it attributed to the accounting treatment of the Stratford sale.

Watkin Jones’ larger BTR business increased its turnover from £207.7m to £211.3m. Its gross profit however dipped 9.1% from £19.8m to £18m. It said this “reflected the lack of land sales in the period, with the build margins of certain in-year schemes being lower than typical land margins”.

Watkin Jones reduced its net provision for building safety remediation by £6.7m to £48m, after completing remediation works on three buildings leading to a cash outflow of £16.2m. It did however make an additional provision of £7m for further work.

The firm said its operating profit was also boosted by the sale of six schemes, and cost saving efficiencies implemented the previous year.

The developer said it has a total pipeline of almost £2bn with around £300m of contractually secure forward sold revenue as of 30 September 2024. Its BTR business has a pipeline of 3,477 units and its student housing business 4,856 beds.

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Its net cash position has nearly doubled year on year from £43.9m to £83.4m. This figure excludes lease liabilities of £40.8m relating to historic student accommodation sale and leaseback properties.

Watkin Jones has restructured with new chief executive Alex Pease taking on the role permanently in November 2023. Previous boss Richard Simpson stood down in July 2023 after the firm’s profit warning ahead of its £42.5m pre-tax loss for the year to September 2023..

Pease said: “The group produced a resilient operational performance during FY24, in what remains a difficult investment market.

“The slow pace of interest rate cuts and timing of the general election meant that, whilst investor sentiment remained positive, transactional activity has not improved as quickly as expected. We responded by focusing on the factors within our control: successfully delivering our in-build projects and carefully managing our costs.”