Cautious outlook by Watkin Jones in ‘challenging’ market

Watkin Jones has issued a trading update for the year ending 30 September 2023 – signalling the Group’s caution amid “challenging” market conditions. 

Balance sheet revision 

Watkin Jones said it is reviewing its current assets as certain values on its balance sheet could cost the firm £10 million, given the “challenging macro-economic backdrop and increased cost of funding”. 

“We continue to explore the sale of a limited number of non-core assets on our balance sheet and consider it prudent to reassess the carrying value of certain assets with the expectation that this will result in an impairment charge of £10 million,” said the Group. 

At 30 June 2023, its gross and net cash position was £68 million and £36 million respectively. 

Sales impacted 

In May, the Group announced it had five sites targeted for sale in FY2023, two of which were under offer. 

It had just sold its Purpose-Built Student Accommodation (PBSA) scheme in Bristol at the time, and subsequently sold its Titanic Quarter development in Belfast. 

However, “challenging” market conditions since May have made the potential sale of its remaining stock too ‘risky’ in FY2023, said Watkin Jones. 

“In the period since the interim results [in May], market conditions have become more challenging. In particular, the recent increases in interest rates and prevailing economic uncertainty have impacted negatively on market liquidity. As a result, there is now a greater degree of risk over these transactions completing by the year end,” it said. 

Outlook 

Factoring in the £10 million impairment charge, Watkin Jones said if it does not complete any new forward sales in FY2023 it would not expect to improve on the underlying £2 million Profit Before Interest and Taxes (PBIT) recorded in the first half of the business year.  

It said if current market conditions persist into FY2024, its PBIT that year is likely to be in the range of £15 million to £20 million. 

It added, however, its schemes currently in build continue to progress in line with expectations. 

Watkin Jones said it also aims to increase its exceptional provision for remedial works for legacy properties by an additional £30 million to £35 million, reflecting its “intention to sign” the Government’s Responsible Actors Scheme. 

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