TIDMWJG
RNS Number : 6766A
Watkin Jones plc
09 June 2016
For immediate release 9 June 2016
Watkin Jones plc
('Watkin Jones' or the 'Group')
Half year results for the six months to 31 March 2016
Watkin Jones plc (AIM:WJG), a leading UK developer and
constructor of multi occupancy property assets, with a focus on the
student accommodation sector, announces its maiden half year
results for the six months ended 31 March 2016. The Board is
pleased to report a successful first six months of the financial
year with trading in line with its expectations.
Financial Highlights
H1 2016 H1 2015 Movement
Revenue GBP145.9 million GBP103.8 million +40.6%
Operating profit
before exceptional
IPO costs GBP17.0 million GBP9.3 million +83.5%
Adjusted EBITDA(1) GBP17.3 million GBP9.5 million +82.0%
Adjusted basic
EPS(2) 5.2 pence 2.8 pence +87.0%
Notes
1 Adjusted EBITDA comprises operating profit before exceptional
IPO costs, adding back charges for depreciation and
amortisation.
2 Adjusted basic EPS is calculated using the profit for the
period from continuing operations excluding exceptional IPO
costs.
-- Strong revenue and profit performance during the half year
driven by student accommodation developments
-- 1.33 pence per share proposed interim dividend; in line with IPO guidance
-- GBP15.4 million net cash at 31 March 2016 (GBP4.0 million net debt at 31 March 2015)
-- New GBP40 million five year Revolving Credit Facility and
GBP10 million Working Capital Facility with HSBC put in place at
IPO to provide development funding flexibility and working capital
headroom. Unutilised at 31 March 2016.
Business Highlights
-- Successful admission to AIM on 23 March 2016, with business
continuing to deliver strong operational performance through the
process
-- GBP114 million development value of six student accommodation
developments (1,660 beds) forward sold since 1 October 2015
-- GBP90 million development value in legal negotiations for
forward sale of three further student accommodation developments
(1,234 beds)
-- Planning permissions for nine student developments (3,478
beds) obtained since 1 October 2015, including five obtained since
admission to AIM (1,733 beds)
-- Development pipeline - Over 11,300 student beds in the
pipeline across 31 sites, with 17 forward sold and four more in
legal negotiations or under offer
-- Delivery pipeline -
-- 2016 deliveries - All forward sold and on target to be
completed ahead of the 2017 academic year
-- 2017 deliveries - All sites secured with planning and only
one remaining to sell which is in legal negotiations
-- 2018 deliveries - All sites secured and progressing satisfactorily
-- 2019/20 deliveries - four sites secured and a number of
additional site acquisitions progressing
-- Fresh Student Living Limited ("Fresh") acquired for GBP15
million prior to IPO and successfully integrated into the Group.
Fresh is engaged in the operational management of purpose built
student accommodation assets
-- Fresh student accommodation beds under management already
contracted to increase from 8,310 beds in FY 2016 to 17,924 beds by
FY 2020
-- Five Nine Living Limited established for the management of
multi occupancy property assets in the Private Rented Sector
('PRS'), leveraging the expertise of Fresh
-- Watkin Jones plc Board formally established, comprising
Grenville Turner (Chairman); Simon Laffin (non-executive director);
Mark Watkin Jones (CEO) and Philip Byrom (CFO).
Commenting on the results, Mark Watkin Jones, Chief Executive
Officer of Watkin Jones plc, said: "Following on from our
successful admission to AIM in March this year, we are delighted to
report such a strong maiden set of half year results today. Our
student accommodation development business remains positively
underpinned by the fundamentals of the student accommodation market
and the forward sale model provides us with excellent visibility as
to future earnings and cash flow. The current student accommodation
pipeline of 31 development sites underpins the business outlook to
FY 2018, with 16 of the 17 developments for delivery by the end of
FY 2017 already forward sold. We are at advanced positions
regarding the acquisition of a number of site opportunities that
will be for delivery in FY 2019 and beyond.
An opportunity exists for our residential business, with the
potential for Watkin Jones to apply its student accommodation model
to the development and management of purpose built PRS schemes.
These strong interim results, coupled with the status of the
forward sold student accommodation pipeline and the fact that all
developments for this year's delivery are progressing
satisfactorily, provide the Board with confidence for the Group's
performance going forward."
Chief Executive's Statement
Admission to AIM
Watkin Jones plc was admitted to trading on AIM, a market
operated by the London Stock Exchange, on 23 March 2016, following
a successful IPO process which valued the Group at GBP255 million
on Admission.
It is pleasing to report that no significant disruption was
caused to the running of the Group's business during the IPO
process, which is a reflection of the breadth and experience of the
operational management teams in place within the business.
Results for the six months to 31 March 2016
The Board is pleased to report that revenue from continuing
operations has increased by 40.5% to GBP145.9 million for the six
months to 31 March 2016, compared to the same period last year (H1
2015: GBP103.8 million). Operating profit before exceptional IPO
costs has increased by 83.5% to GBP17.0 million (H1 2015: GBP9.3
million).
The growth in revenue reflects an underlying increase in the
value of student accommodation projects in development, combined
with excellent progress in the construction of the nine
developments in build for completion in the current financial year.
In addition, Group revenues have benefitted from higher sales of
residential properties and from the sale of commercial property
that was in inventory at the start of the period.
The overall gross margin for the period was in line with
management expectations at 16.1%, compared to 14.7% for the
equivalent period last year, reflecting the Group's progressive
shift away from lower margin contracting work towards higher margin
own development opportunities.
Overhead costs for the period amounted to GBP6.5 million,
compared to GBP6.0 million for H1 2015. This is a modest increase
given the higher operating activity for the period, with the
underlying overhead structure for the business substantially
unchanged.
Costs associated with the IPO include transaction related fees
and commissions amounting to GBP6.5 million. In addition, the
pre-IPO reorganisation referred to in the Group's Admission
Document resulted in a net cost to the Group of GBP20.1 million
relating to settling the various share based management incentive
arrangements that triggered on completion of the IPO. These items
have been charged as an operating exceptional cost.
After accounting for the exceptional IPO costs and net finance
costs of GBP0.3 million, the Group has reported a loss before tax
for the period of GBP9.9 million (H1 2015 GBP9.0 million profit).
Excluding the exceptional IPO costs, the adjusted profit before tax
for the period was GBP16.7 million.
Adjusted basic earnings per share for continuing operations,
excluding the exceptional IPO costs, was 5.2 pence for the period,
an increase of 87% on the like for like calculated figure of 2.8
pence for the same period last year.
Segmental review
Student accommodation development
Revenues from student accommodation development for the period
amounted to GBP122.6 million, an increase of 26% on the comparative
period last year (H1 2015: GBP97.3 million).
The gross margin for the period on student accommodation
developments amounted to 17.9%, compared to 14.8% for H1 2015. This
significant improvement reflects the progressive move to own
development projects away from lower margin contracting
opportunities. The margin in the second half is expected to
strengthen further as the contribution from higher margin
developments increases.
The student accommodation pipeline is robust. All developments
for completion in the current financial year are forward sold and
there is only one development for completion in FY 2017 remaining
to be sold, which is currently in legal negotiations. All
developments for completion in FY 2017 have planning consents and
all development sites for FY 2018 have been secured. Five of these
already have planning consents and the remainder are progressing
satisfactorily through the planning process.
In all, the Group currently has 31 development sites in the
pipeline, representing in excess of 11,300 beds and with an
appraised total development value in excess of GBP850 million. Of
these, 27 are for delivery by FY 2018 and four are for delivery in
FY 2019 and beyond. A number of other sites are under offer with a
view to building up the secured pipeline for FY 2019.
Since 1 October 2015, six development sites have been forward
sold (1,660 beds) and three are in legal negotiations (1,234 beds),
with a total development value in excess of GBP200 million.
Watkin Jones has also been successful in continuing to secure
planning consents, with nine planning consents being achieved since
1 October 2015 (3,478 beds) and of these, five planning consents
have been achieved since the Group was admitted to AIM (1,733
beds).
The Group's development sites are geographically spread across
the UK and the operating divisions responsible for building the
schemes are organised on this basis. The steps taken to negotiate
national procurement terms with key sub-contractors and to
standardise development layouts is continuing to ensure that build
costs are kept under control.
Student accommodation management
Student accommodation management services are provided by Fresh
Student Living Limited ('Fresh'), which was acquired by the Group
on 25 February 2016 for a consideration of GBP15.0 million. Fresh
is a working capital light business and the consideration paid was
largely attributable to the value of intangible assets. Fresh has
been successfully integrated into the Group.
Fresh provides ongoing student letting and operational
management services for a variety of clients under contracts which
are typically for between three and seven years, although some are
for longer. Fresh also provides consultancy and mobilisation
services to clients for new schemes which are in development. This
is a key part of the complete development and management solution
which Watkin Jones is able to offer to its clients.
As of 31 March 2016, Fresh was contracted to manage 8,310 beds
across 32 schemes, with an annual management fee income of GBP2.3
million. By FY 2020, Fresh is currently contracted to manage 17,924
beds across 59 schemes.
For the one month period post-acquisition, Fresh contributed
revenue of GBP0.4 million and a gross margin of GBP0.26 million. On
a like for like basis, Fresh' revenues for the six months to 31
March 2016 amounted to GBP2.2 million, compared to GBP1.2 million
for the comparative period last year. The gross margin achieved is
approximately 65%.
Residential development
In the six months to 31 March 2016, the residential development
business achieved 79 sales completions, compared to 26 for the same
period last year, and generated revenues of GBP16.4 million (H1
2015: GBP6.4 million).
The residential business develops the full range of private
residential property, from starter homes to larger executive
properties and apartment developments. Traditionally, the
division's activities have been focused on the North Wales and
North West region, as well as providing the residential element of
mixed use planning consents. Going forward the division will also
be responsible for the Group's developments in the Private Rented
Sector ('PRS'), which the Board sees as a key part of the Group's
future growth strategy. The division is currently undertaking its
first purpose built PRS development in Leeds, which is scheduled
for completion in FY 2017.
The gross margin for the residential business was relatively
modest at 7.4% for the period (H1 2015: 13.1%), but this is
suppressed by the fact that the division achieved a key objective
in the period, which was to complete the sale of apartments at
Gorse Stacks in Chester and the ongoing sale of homes at the canal
marina development at Droylsden, Manchester. These are legacy
development sites for which the sales are at nil margin, but
importantly generate cash from brought forward inventory. Sales
from these two developments in the period totalled GBP9.8 million.
The gross margin for the residential business will continue to
strengthen as more profitable developments come on stream.
Dividend
The Board proposes a maiden interim dividend for the period of
1.33 pence per share. This is in line with the guidance provided in
the Group's Admission Document, which indicated that the Board
intend to make an interim and final dividend payment for each
financial year, split as to one third for the interim payment and
two thirds for the final payment, with a total dividend of 4.0
pence per Ordinary Share being paid for the year ending 30
September 2016. This is also in line with the Board's stated
intention at IPO, giving an initial dividend yield of 6%,
calculated by reference to the Placing Price of GBP1 per Ordinary
Share, and is an enhanced dividend equal to two thirds of the full
year equivalent, taking into account that the Admission took place
near the end of the first half year to 31 March 2016.
It is proposed that the maiden interim dividend will be paid on
30 June 2016 to shareholders on the register at the close of
business on 17 June 2016. The shares will go ex-dividend on 16 June
2016.
Balance sheet and borrowings
The Group had net cash at 31 March 2016 of GBP15.4 million,
comprising cash of GBP32.6 million less borrowings of GBP17.2
million. This compares favourably to the guidance provided at the
time of the IPO, which indicated that net cash at Admission would
be at least GBP10 million. The Group's net cash position has
increased by GBP19.3 million compared to 31 March 2015, even after
absorbing the exceptional costs of GBP26.6 million associated with
the IPO, the GBP15 million cost of acquiring Fresh and a GBP10
million dividend paid to the existing shareholders prior to
Admission. The strong cash generation reflects the strength of the
Group's forward sale business model for its student accommodation
developments. In addition, progress has continued to be made in
releasing cash from inventory and work in progress, particularly
associated with legacy residential and commercial developments.
Inventory and work in progress has been reduced by GBP29.7 million
since 30 September 2015.
Prior to the IPO, the Group successfully concluded with HSBC a
new GBP40 million five year revolving credit facility agreement
('RCF') and a GBP10 million working capital facility. The RCF is
available to support the Group's ongoing land procurement and
development opportunities and will be used for strategic land
acquisitions or to fund discrete developments activities where
required alongside the forward sale funding model. As at 31 March
2016 the RCF and working capital facility were unutilised.
Outlook
The Group's student accommodation development business remains
positively underpinned by the fundamentals of the student
accommodation market and the forward sale model provides the Group
with excellent visibility as to future earnings and cash flow. The
current student accommodation pipeline of 31 development sites
underpins the business outlook to FY 2018, with 16 of the 17
developments for delivery by the end of FY 2017 already forward
sold.
Watkin Jones is at advanced positions regarding the acquisition
of a number of site opportunities that will be for delivery in FY
2019 and beyond. The Group also has several major schemes
progressing through planning. The student accommodation management
business through Fresh is expected to start making an increasing
contribution to the Group's results, with the annuity nature of its
revenue stream and high visibility on the growth of its contracted
management income providing a very positive addition.
An opportunity exists for the Group's residential business, with
the potential for Watkin Jones to apply its student accommodation
model to the development and management of purpose built PRS
schemes. The Group is currently involved in negotiations regarding
a number of PRS opportunities. Five Nine Living Limited, the
Group's recently established PRS management business, is already
receiving significant levels of interest as a management company
for existing PRS developments, given its affiliation to Fresh.
The strong set of results for the first six months of the year,
coupled with the status of the forward sold student accommodation
pipeline and the fact that all developments for this year's
delivery are progressing satisfactorily, provide the Board with
confidence for the Group's performance going forward.
Mark Watkin Jones
Chief Executive Officer
8 June 2016
For further information:
Watkin Jones plc
Mark Watkin Jones, Chief Executive Tel: +44 (0) 1248 362 516
Officer
Philip Byrom, Chief Financial www.watkinjonesplc.com
Officer
Zeus Capital Limited (Nominated Adviser
& Joint Broker)
Corporate Finance
Dan Bate / Nick Cowles / Jamie Peel Tel: +44 (0) 161 831 1512
Corporate Broking Tel: +44 (0) 20 3829 5000
Dominic King / Benjamin Robertson www.zeuscapital.co.uk
Peel Hunt LLP (Joint Broker) Tel: +44 (0) 20 7418 8900
Mike Bell / Matthew Brooke-Hitching www.peelhunt.com
Media enquiries:
Buchanan
Henry Harrison-Topham / Richard Oldworth Tel: +44 (0) 20 7466 5000
/ Stephanie Watson
watkinjones@buchanan.uk.com www.buchanan.uk.com
Notes to Editors
Watkin Jones is a leading UK developer and constructor of multi
occupancy property assets, with a focus on the student
accommodation sector. The Group has strong relationships with
institutional investors, and a good reputation for successful,
on-time-delivery of high quality developments. Since 1999, Watkin
Jones has delivered over 28,000 student beds across 88 sites,
making it a key player and leader in the UK purpose built student
accommodation market. In addition, Watkin Jones has been
responsible for over 50 residential developments, ranging from
starter homes to executive housing and apartments.
The Group's competitive advantage lies in its experienced
management team and 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. Key components of the business model are:
-- Site identification - extensive experience of site
identification and acquisition facilitates high quality sites being
acquired;
-- Planning consents - in depth knowledge and experience of the
planning consent process specific to this type of asset facilitates
high success rates on planning applications;
-- In-house construction and delivery - in-house construction
expertise, management and delivery limits reliance on third parties
and, together with favourable contractual relationships with key
suppliers, enhances control of cost;
-- Funding structure - forward sale model reduces risk for
Watkin Jones and provides security and visibility of the asset
pipeline for investors. The Group has strong relationships with
blue chip investors, including a number that are repeat investors
in Watkin Jones developments; and
-- Asset management - dedicated property management division
provides a continued service solution to investors post development
completion and completes the 'end to end' business model.
Consolidated Statement of Comprehensive Income
for the six month period ended 31 March 2016 (unaudited)
12 months to
6 months to 6 months to 30 September
31 March 2016 31 March 2015 2015
Notes GBP'000 GBP'000 GBP'000
Continuing operations
Revenue 145,888 103,815 244,246
Cost of sales (122,359) (88,533) (200,198)
---------------- ---------------- --------------
Gross profit 23,529 15,282 44,048
Administrative expenses (6,042) (5,309) (10,611)
Distribution costs (464) (697) (981)
---------------- ---------------- --------------
Operating profit before exceptional costs 17,023 9,276 32,456
Operating exceptional costs 6 (26,561) - -
Operating(loss)/ profit (9,538) 9,276 32,456
Share of profit in joint ventures - - 1,165
Finance income 127 35 95
Finance costs (466) (294) (810)
---------------- ---------------- --------------
(Loss)/Profit before tax from continuing operations (9,877) 9,017 32,906
Income tax expense 7 (3,348) (1,943) (6,296)
---------------- ---------------- --------------
(Loss)/Profit for the period from continuing operations (13,225) 7,074 26,610
---------------- ---------------- --------------
Discontinued operations
Profit/(Loss) after tax for the period from discontinued
operations 86 (1,298) (4,433)
---------------- ---------------- --------------
(Loss)/Profit for the period attributable to ordinary
equity holders of the parent (13,139) 5,776 22,177
================ ================ ==============
Other comprehensive income
Net gain on available-for-sale financial assets 87 70 112
---------------- ---------------- --------------
Total comprehensive (loss)/ income for the period
attributable to ordinary equity holders
of the parent (13,052) 5,846 22,289
================ ================ ==============
Earnings per share for the period attributable to Pence Pence Pence
ordinary equity holders of the parent (restated) (restated)
Basic earnings per share 8 (5.152) 2.265 8.696
================ ================ ==============
Basic earnings per share for continuing operations 8 (5.186) 2.774 10.434
================ ================ ==============
Adjusted basic earnings per share for continuing
operations (excluding operating exceptional
costs) 8 5.201 2.774 10.434
================ ================ ==============
Consolidated Statement of Financial Position
as at 31 March 2016 (unaudited)
31 March 31 March 30 September
2016 2015 2015
Notes GBP'000 GBP'000 GBP'000
Non-Current assets
Intangible assets 10 15,572 3,193 -
Property, plant and equipment 4,648 5,008 4,807
Investment in joint ventures 5,077 8,394 7,220
Deferred tax asset 1,369 684 1,514
Other financial assets 2,505 1,116 1,169
29,171 18,395 14,710
----------- --------- ---------------
Current assets
Inventory and work in progress 90,022 114,361 119,683
Trade and other receivables 20,761 35,305 20,553
Other financial assets - 52 -
Cash at bank and in hand 12 32,604 17,200 59,270
143,387 166,918 199,506
----------- --------- ---------------
Total assets 172,558 185,313 214,216
=========== ========= ===============
Current liabilities
Trade and other payables (59,421) (58,405) (69,696)
Provisions (339) (388) (339)
Other financial liabilities (56) - (47)
Interest-bearing loans and borrowings (16,329) (9,241) (9,759)
Current tax liabilities (3,165) (3,717) (7,077)
(79,310) (71,751) (86,918)
----------- --------- ---------------
Non-Current liabilities
Interest-bearing loans and borrowings (912) (11,935) (10,424)
Deferred tax liabilities (1,463) (355) (396)
Provisions (2,124) (2,518) (2,124)
Other non-current liabilities - (2,147) (1,304)
(4,499) (16,955) (14,248)
----------- --------- -------------
Total Liabilities (83,809) (88,706) (101,166)
=========== ========= =============
Net assets 88,749 96,607 113,050
=========== ========= =============
Equity
Share capital 2,550 1,000 1,000
Share premium 84,612 6,300 6,300
Merger reserve (75,383) - -
Available-for-sale reserve 240 111 153
Retained earnings 76,730 89,196 105,597
Total Equity 88,749 96,607 113,050
=========== ========= ===============
Consolidated Statement of Changes In Equity
for the six month period ended 31 March 2016 (unaudited)
Share Merger Available-for-sale
capital Share premium reserve reserve Retained earnings Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
30 September 2014 1,000 6,300 - 41 83,420 90,761
Profit for the period - - - - 5,776 5,776
Other comprehensive
income - - - 70 - 70
Balance at 31 March 2015 1,000 6,300 - 111 89,196 96,607
======== ============= ========= ========================= ================= =========
Profit for the period - - - - 16,401 16,401
Other comprehensive
income - - - 42 - 42
Balance at 30 September
2015 1,000 6,300 - 153 105,597 113,050
======== ============= ========= ========================= ================= =========
Dividend paid prior to
IPO (note 9) - - - - (10,000) (10,000)
Share restructuring prior
to IPO 1,695 167,864 - - - 169,559
Capital reduction prior
to IPO - (167,864) - - 167,864 -
Issue of shares on IPO 855 84,586 - - - 85,441
Issue of shares to
employees of Fresh
Student Living Limited - 26 - - - 26
Merger accounting on
aggregation of Watkin
Jones plc and Watkin
Jones Group Limited (1,000) (6,300) (75,383) - (173,592) (256,275)
Loss for the period - - - - (13,139) (13,139)
Other comprehensive
income - - - 87 - 87
Balance at 31 March 2016 2,550 84,612 (75,383) 240 76,730 88,749
======== ============= ========= ========================= ================= =========
Consolidated Statement of Cash Flows
for the six month period ended 31 March 2016 (unaudited)
12 months
6 months to 6 months to to
31 March 31 March 30 September
2016 2015 2015
Notes GBP'000 GBP'000 GBP'000
Cash flows from operating
activities
Cash generated from/ (used
in) operations 11 6,907 (14,161) 32,008
Interest received 127 35 95
Interest paid (382) (294) (875)
Interest element of finance
lease rental payments (12) (13) (20)
Tax paid (6,911) (927) (2,777)
----------- ----------- -------------
Net cash inflow/(outflow)
from operating activities (271) (15,360) 28,431
=========== =========== =============
Cash flows from investing
activities
Movement in loans from
joint ventures - - 1,339
Acquisition of property,
plant and equipment (5) - (50)
Proceeds on disposal of
property, plant and equipment 1 31 70
Acquisition of Fresh Student
Living Limited (15,075) - -
Cash in Fresh Student Living
Limited at acquisition 579 - -
Loan repayment from joint
venture 2,143 - -
Purchase of other financial
assets (1,024) (78) (378)
Net cash (outflow)/inflow
from investing activities (13,381) (47) 981
=========== =========== =============
Cash flows from financing
activities
Dividend paid (10,000) - -
Issue of Shares prior to
IPO 88,151 - -
Issue of Shares on IPO 85,441 - -
Acquisition of shares in
Watkin Jones Group Limited (173,592) - -
Capital element of finance
lease rental payments (180) (203) (393)
Proceeds from borrowings - 7,894 8,940
Repayment of borrowings (2,834) (1,022) (4,627)
----------- ----------- -------------
Net cash (outflow)/inflow
from financing activities (13,014) 6,669 3,920
=========== =========== =============
Net (decrease)/increase
in cash (26,666) (8,738) 33,332
Cash and cash equivalents
at
beginning of the period 59,270 25,938 25,938
----------- ----------- -------------
Cash and cash equivalents
at
end of the period 12 32,604 17,200 59,270
=========== =========== =============
Notes to the consolidated financial information
1. General information
Watkin Jones plc (the 'Company') is a limited company
incorporated in the United Kingdom under the Companies Act 2006
(Registration number 09791105). The Company is domiciled in the
United Kingdom and its registered address is Units 21-22, Llandygai
Industrial Estate, Bangor Gwynedd, LL57 4YH.
The Company was incorporated as HDCO3 Limited on 23 September
2015.
The Company acquired all the issued shares in Watkin Jones Group
Limited on 15 March 2016. This was achieved through a combination
of a share for share exchange over 319,247 shares in Watkin Jones
Group Limited, involving the issue of 81,407,985 ordinary shares in
the Company at an issue price of GBP1 per share, and the completion
of an agreement to purchase the remaining 680,753 shares for an
amount of GBP173,592,015 in cash. The transaction valued Watkin
Jones Group Limited at GBP255,000,000. On the same day the Company
was re-registered as Watkin Jones plc.
On 23 March 2016 the Company completed an Initial Public
Offering by way of a placing of 85,440,493 Ordinary Shares at 100
pence per share and a Vendor Placing of 45,900,100 Ordinary Shares
at 100 pence per share. The Company's shares were admitted to trade
on the Alternative Investment Market ('AIM') of the London Stock
Exchange on 23 March 2016.
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 interim financial statements of the Group for
the six month period ended 31 March 2016 comprises the Company and
the subsidiaries that were acquired by the Company before the
listing of the Company's shares on AIM. The basis of preparation of
the consolidated interim financial statements is set out in note 2
below.
The financial information for the 6 months ended 31 March 2016
is unaudited. It does not constitute statutory financial statements
within the meaning of Section 434 of the Companies Act 2006. The
consolidated interim financial statements should be read in
conjunction with the financial information for the year ended 30
September 2015 that is presented in the Company's Admission
Document dated 16 March 2016, which has been prepared in accordance
with IFRSs as adopted by the European Union. The report of the
auditors on those financial statements was unqualified, did not
contain an emphasis of matter paragraph and did not contain any
statement under section 434 of the Companies Act 2006.
This report was approved by the directors on 8 June 2016.
2. Basis of preparation
The consolidated interim financial statements of the Group for
the six months ended 31 March 2016 and the comparatives for the six
months ended 31 March 2015 and the 12 months ended 30 September
2015 have been prepared on the basis that Watkin Jones plc was in
existence throughout these periods. The terms of the acquisition of
the shares in Watkin Jones Group Limited were such that the group
reconstruction should be accounted for as a continuation of the
existing group rather than an acquisition. Accordingly the interim
financial statements and all comparative periods have been prepared
on that basis.
The Group has not previously prepared financial statements in
accordance with IFRS but the intention is to transition to IFRS in
the Group's consolidated financial statements for the period to 30
September 2016.
The interim financial statements have been presented as of 31
March 2016 and 30 September 2015 and for the periods then ended to
provide an indication of the comparative information that will be
included in the Group's consolidated financial statements and
interim financial statements for the periods ended 30 September
2016 and 31 March 2017 assuming that the Group adopts IFRS with a
date of transition of 1 October 2014. The interim financial
statements for the period ended 31 March 2015 have been presented
to provide comparative information for the interim financial
statements for the period ended 31 March 2016 and have been
prepared on the same basis. The financial information has been
prepared based on IFRS that is expected to exist at the date on
which the Group prepares its 30 September 2016 financial
statements. To the extent that IFRS at 30 September 2016 does not
reflect the assumptions made in preparing the financial statements,
those financial statements may be subject to change.
The interim financial statements have been prepared on a going
concern basis and under the historical cost convention.
The interim financial statements have been presented in pounds
sterling and all values are rounded to the nearest thousand
(GBP'000), except when otherwise indicated.
The preparation of financial information in conformity with IFRS
requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of revenues and
expenses during the reporting period. Although these estimates are
based on management's best knowledge of the amount, event or
actions, actual events may ultimately differ from those
estimates.
The interim financial statements do not include all financial
risk information and disclosures required in the annual financial
statements and they should be read in conjunction with the
financial information that is presented in the Company's Admission
Document dated 16 March 2016. There has been no significant change
in any risk management policies since the date of the Admission
Document.
3. Accounting policies
With the exception of the accounting policy for intangible
assets other than goodwill, which has been adopted for the first
time in the preparation of these interim financial statements and
is set out below, the accounting policies used in preparing these
interim financial statements are the same as those set out and used
in preparing the financial information that is presented in the
Company's Admission Document dated 16 March 2016.
3.1 Other intangible assets
Intangible assets other than goodwill are stated at cost less
accumulated amortisation and impairment losses. Amortisation is
charged to the consolidated statement of comprehensive income on a
straight-line basis over the estimated useful lives of the
intangible assets as follows:-
Customer relationships - 11 years
Brand - 10 years
4. Acquisition of Fresh Student Living Limited
On 25 February 2016 Founded Living Limited, a subsidiary of
Watkin Jones Group Limited, acquired the 750 Ordinary Shares in
Fresh Student Living Limited ("Fresh") held by Mark and Glyn Watkin
Jones, who were both directors of and shareholders in Watkin Jones
Group Limited, for a cash consideration of GBP11,835,512. The
shares acquired represented 77.48% of the issued shares of the
company.
On 23 March 2016, on satisfaction of the condition of Admission
to AIM of Watkin Jones plc, Founded Living Limited acquired the 218
A Ordinary Shares held by various directors and senior managers of
Fresh, for a cash consideration of GBP3,164,488. The shares
acquired represented the remaining issued shares of the company. As
a condition of the acquisition of these shares, the vendor
shareholders were required to invest GBP1,397,609, being 50% of the
net of tax proceeds received, in shares in Watkin Jones plc as part
of the IPO.
The total consideration paid for the shares in Fresh was
therefore GBP15,000,000, plus stamp duty of GBP75,010. Fresh is
engaged in the management of purpose built student accommodation.
Its services include the letting and operational management of
properties, for which the company is engaged under a management
agreement and receives a management fee, as well as consultancy and
mobilisation services provided during the development phase of a
student property.
The resulting goodwill of GBP9,516,106 arising on the
acquisition has been capitalised and is subject to an annual
impairment review by management. Goodwill is attributed to Fresh's
knowledge and expertise in the letting and management of purpose
built student accommodation and in the synergy with the Group's
student accommodation development business.
The book and fair value of the net assets acquired in respect of
Fresh were as follows:
Book Fair value Fair
value adjustment value
GBP'000 GBP'000 GBP'000
Non-Current assets
Intangible assets
Customer relationships - 5,604 5,604
Brand - 499 499
Goodwill - 9,516 9,516
Property, plant and equipment 90 - 90
Deferred tax asset 261 - 261
Other financial assets 150 54 204
501 15,673 16,174
--------- ------------ ----------
Current assets
Trade and other receivables 1,262 - 1,262
Cash at bank and in hand 579 - 579
1,841 - 1,841
--------- ------------ ----------
Total assets 2,342 15,673 18,015
========= ============ ==========
Current liabilities
Trade and other payables (1,830) (10) (1,840)
(1,830) (10) (1,840)
--------- ------------ ----------
Non-Current liabilities
Deferred tax liabilities - (1,100) (1,100)
- (1,100) (1,100)
--------- ------------ ----------
Total Liabilities (1,830) (1,110) (2,940)
========= ============ ==========
Net assets 512 14,563 15,075
========= ============ ==========
In the period since acquisition, Fresh contributed revenue of
GBP407,000 and an operating profit of GBP53,000.
5. Segmental reporting
The Group has identified three segments for which it reports
under IFRS 8 'Operating segments'. The following represents the
segments that the Group operates in:
a. Student Accommodation Development - Purpose built student accommodation developments.
b. Residential Development - The development of traditional
residential and private rented sector property.
c. Student Accommodation Management - The management of student
accommodation property. This segment was established following the
acquisition of Fresh Student Living Limited on 25 February
2016.
Corporate - central revenue and costs not solely attributable to
any one division.
All revenues arise in the UK.
Performance is measured by the Board based on gross profit as
reported in the management accounts.
6 months ended Student Student
31 March 2016 Accommodation Residential Accommodation
(unaudited) Development Development Management Corporate Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Segmental revenue 122,587 16,398 407 6,496 145,888
Segmental gross profit 21,971 1,217 261 80 23,529
Administration expenses - - (208) (5,834) (6,042)
Distribution costs - - - (464) (464)
Operating exceptional costs - - - (26,561) (26,561)
Finance income - - - 127 127
Finance costs - - - (466) (466)
--------------- ------------- --------------- ---------- ---------
Profit/(loss) before tax 21,971 1,217 53 (33,118) (9,877)
Taxation - - - (3,348) (3,348)
--------------- ------------- --------------- ---------- ---------
Profit/(loss) for the period 21,971 1,217 53 (36,466) (13,225)
=============== ============= =============== ========== =========
Inventory and work in progress 25,060 56,618 - 5,303 86,981
--------------- ------------- --------------- ---------- ---------
Inventory and work in progress - discontinued - - - - 3,041
--------------- ------------- --------------- ---------- ---------
Total inventory and work in progress - - - - 90,022
--------------- ------------- --------------- ---------- ---------
6 months ended Student
31 March 2015 Student Accommodation Residential Accommodation
(unaudited) Development Development Management Corporate Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Segmental revenue 97,345 6,372 - 98 103,815
Segmental gross profit 14,436 837 - 9 15,282
Administration expenses - - - (5,309) (5,309)
Distribution costs - - - (697) (697)
Finance income - - - 35 35
Finance costs - - - (294) (294)
---------------------- ------------- --------------- ---------- --------
Profit/(loss) before tax 14,436 837 - (6,256) 9,017
Taxation - - - (1,943) (1,943)
---------------------- ------------- --------------- ---------- --------
Profit/(loss) for the period 14,436 837 - (8,199) 7,074
====================== ============= =============== ========== ========
Inventory and work in progress 31,887 53,473 - 5,144 90,504
---------------------- ------------- --------------- ---------- --------
Inventory and work in progress -
discontinued - - - - 23,857
---------------------- ------------- --------------- ---------- --------
Total inventory and work in progress - - - - 114,361
---------------------- ------------- --------------- ---------- --------
6. Operating exceptional costs
12 months to
6 months to 6 months to 30 September
31 March 2016 31 March 2015 2015
GBP'000 GBP'000 GBP'000
Exceptional IPO costs
IPO transaction costs 6,500 - -
Management incentive payments 20,061 - -
---------------- ---------------- ---------------
Total exceptional IPO costs 26,561 - -
================ ================ ===============
The charge for management incentive payments comprises amounts
payable to certain senior management of Watkin Jones Group Limited
in connection with various share based incentive arrangements which
fell due on the Admission to AIM of Watkin Jones plc. The amount
comprises a total charge of GBP21,735,400, plus stamp duty costs of
GBP98,440, less an amount previously provided of GBP1,773,200. Of
the total incentive payments made, management agreed to invest
GBP13,942,984 in shares in Watkin Jones plc as part of the IPO.
7. Income taxes
The tax expense for the period has been calculated by applying
the estimated tax rate for the financial year ending 30 September
2016 of 20.3% to the profit before exceptional IPO costs. The tax
credit on the exceptional IPO costs has been restricted to 1.6% as
the majority of these costs are considered not deductible for tax
purposes. An adjustment to the tax charge has been made for known
deferred tax movements in the period.
8. Earnings per share
Basic earnings per share amounts are calculated by dividing the
net profit or loss for the year attributable to ordinary equity
holders of the parent by the weighted average number of ordinary
shares outstanding during the year, except that for the six month
period ended 31 March 2016 and for the prior comparative periods,
the number of shares in issue at 31 March 2016 has been used in the
calculations in order to give the basic earnings per share
attributable to ordinary equity holders of the parent following the
IPO.
There is no difference between basic earnings per share and
diluted earnings per share as there are no dilutive share option
arrangements in place at 31 March 2016.
The following table reflects the income and share data used in
the basic EPS computations:
Period Period Year
ended 31 ended 31 ended 30
March March September
2016 2015 2015
GBP'000 GBP'000 GBP'000
(Loss)/Profit attributable to ordinary equity holders of the parent (13,139) 5,776 22,177
(Loss)/Profit from continuing operations attributable to ordinary equity
holders of the parent (13,225) 7,074 26,610
Adjusted profit from continuing operations attributable to ordinary
equity holders of the
parent (excluding operating exceptional costs) 13,264 7,074 26,610
(Restated) (Restated)
Weighted average number of ordinary shares for basic earnings per share 255,026,325 255,026,325 255,026,325
Pence Pence Pence
(Restated) (Restated)
Basic earnings per share
Basic (loss)/ profit for the period attributable to ordinary equity
holders of the parent (5.152) 2.265 8.696
Basic earnings per share for continuing operations
Basic (loss)/ profit for the period attributable to ordinary equity
holders of the parent (5.186) 2.774 10.434
Adjusted basic earnings per share for continuing operations (excluding
operating exceptional
costs)
Basic profit for the period attributable to ordinary equity holders of
the parent 5.201 2.774 10.434
9. Dividends
An interim dividend of GBP14.689615 per ordinary Share was paid
to the holders of E and F Ordinary Shares in Watkin Jones Group
Limited on 1 March 2016. The total dividend paid amounted to
GBP10,000,000.
10. Intangible assets
Customer
Relationships Brand Goodwill Total
GBP'000 GBP'000 GBP'000 GBP'000
Cost:
As at 1 October
2014 - - 3,193 3,193
As at 31 March
2015 - - 3,193 3,193
=============== ======== ========= ========
As at 1 April
2015 - - 3,193 3,193
Impairment during
the period - - (3,193) (3,193)
--------------- -------- --------- --------
As at 30 September
2015 - - - -
=============== ======== ========= ========
As at 1 October
2015 - - - -
Arising on acquisition
of Fresh Student
Living 5,604 499 9,516 15,619
As at 31 March
2016 5,604 499 9,516 15,619
=============== ======== ========= ========
Amortisation:
As at 1 October
2014 - - - -
As at 31 March
2015 - - - -
=============== ======== ========= ========
As at 1 April
2015 - - - -
As at 30 September
2015 - - - -
=============== ======== ========= ========
As at 1 October
2015 - - - -
Amortisation for
the period (43) (4) - (47)
As at 31 March
2016 (43) (4) - (47)
=============== ======== ========= ========
Net book value:
As at 31 March
2015 - - 3,193 3,193
=============== ======== ========= ========
As at 30 September
2015 - - - -
=============== ======== ========= ========
As at 31 March
2016 5,561 495 9,516 15,572
=============== ======== ========= ========
The impairment during the year ended 30 September 2015 arose in
July 2015 following a review carried out by the Board as a
consequence of the decision to discontinue the activities of the
construction contracting division.
11. Reconciliation of operating profit to net cash flows from operating activities
6 months 6 months Year
ended 31 ended 31 ended 30
March March September
2016 2015 2015
GBP'000 GBP'000 GBP'000
(Loss)/profit before tax
from continuing operations (9,877) 9,017 32,906
Profit/(loss) before tax
from discontinued operations 108 (1,663) (4,753)
--------- --------- ----------
(Loss)/Profit before tax (9,769) 7,354 28,153
Depreciation 253 244 489
Amortisation of intangible
assets 47 - -
Goodwill impairment - - 3,193
Loss/(Profit) on sale of
plant and equipment 2 (9) (40)
Finance income (127) (35) (95)
Finance costs 466 294 810
Share of profit in joint
ventures - - (1,165)
Decrease/(increase) in inventory
and work in progress 29,539 (22,731) (28,026)
Interest capitalised in
development land, inventory
and work in progress 122 28 329
Decrease/(increase) in trade
and other receivables 1,054 (2,822) 13,314
(Decrease)/increase in trade
and other payables (14,680) 3,516 15,489
Provision for property lease
commitment - - (443)
Net cash inflow/(outflow)
from operating activities 6,907 (14,161) 32,008
========= ========= ==========
12. Analysis of net cash
6 months 6 months 12 months
ended 31 ended 31 ended 30
March 2016 March 2015 September 2015
GBP'000 GBP'000 GBP'000
Cash at bank and in hand 32,604 17,200 59,270
Finance leases (358) (728) (538)
Bank loans (16,883) (20,448) (19,645)
----------------- ----------------- ---------------------
Net cash 15,363 (3,976) 39,087
================= ================= =====================
- Ends -
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR SSIFUAFMSEEM
(END) Dow Jones Newswires
June 09, 2016 02:00 ET (06:00 GMT)
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