CLADDING COSTS SEE DEVELOPER POST £42M PRE-TAX LOSS Watkin Jones remains optimistic despite hit
BANGOR based developer Watkin Jones plunged to a £42.5m pre-tax loss over the last year due to building safety remedial works and restructuring but remains confident about the future.
The costs set aside for cladding remediation wiped out £35m, while a further £3.1m charge was made against an internal restructure.
They were also hit with additional build costs on a scheme in Exeter, where the third-party main contractor went into liquidation while build cost inflation also reduced the margin on some schemes during the year.
It saw the company post a loss during the 12 months to 30 September last year despite a 1.5 per cent rise in revenues to £413.2m.
Adjusted operating profit before exceptional items was £200,000.
The Board has decided not to recommend a final dividend in respect of FY23 given the uncertain market backdrop but remains committed to its progressive dividend policy as earnings recover.
Alex Pease, Chief Executive Officer of Watkin Jones, said: “Significant cost inflation and volatility in real estate funding markets meant that FY23 represented a period of unprecedented challenge for the business. However, I am pleased that against this backdrop the Group demonstrated resilience and agility, taking a number of important actions operationally.
“Whilst funding conditions remain difficult, the outlook is gradually improving and the strong asset performance in PBSA and BTR sectors gives me confidence in the longer-term market recovery and return to growth.
“In the near term, we remain focussed on driving improvements to the productivity and efficiency of the business, as well as looking at opportunities to extract more value from our sector expertise and end-toend capabilities.
“Watkin Jones continues to have a market-leading team and offering to the residential for rent sectors and we are taking the right steps to ensure we are well placed to capitalise on this, as conditions improve.”
In his report, he added “Our strategic focus is on growing our presence in residential to rent, driving operational efficiency and ensuring we are a responsible business.
“While our strategic direction is the right one, we also recognise the need to adapt it to the conditions we face. We are therefore looking at every aspect of our business to ensure we optimise our margin and performance.
“For example, we have further improved the way we manage procurement to maximise buying benefits, revamped our design guides for schemes to ensure efficiency and consistency, and continued to build the connections between our teams to increase operational effectiveness.
“We are also determined to be well positioned to rebuild our pipeline when market conditions turn, as we did successfully coming out of both the global financial crisis and the pandemic. We will be very disciplined in doing so and expect to see good opportunities to acquire sites as land prices reduce. Alongside securing sites on our usual subject-toplanning basis, we will explore the potential to partner with capital providers on land with existing planning. This has the dual advantage of lower risk and increased speed for bringing developments forward.
“The two forward sales we completed in the year demonstrated our ability to act quickly in the brief periods the market was open, but we also want to be entrepreneurial and creative in our approach to the investment market. This means looking at more innovative transaction structures, while still delivering a high return on capital employed.
“More broadly, we see potential in opening up additional revenue streams.
“Examples include helping our institutional clients to refurbish their older housing stock to meet residents’ needs, while also making the buildings safer and more environmentally efficient.
“This has the benefit of generating revenue without additional investment, and leveraging our existing skill set.”