Lowered Expectations Following Slow Summer for Watkin Jones
29/8/24
Watkin Jones has lowered its expectations for future projects after a slower than expected market over the summer.
In a recent report to shareholders, the construction firm explained that it had experienced slower-than-expected market activity during the summer, mainly due to uncertainty around interest rate cuts. As a result, they do not anticipate closing any further transactions before the financial year ends.
Despite slower market activity, Watkin Jones has focused on cash generation, leading to an anticipated gross cash position of £80million and net cash of £65million as of 30 September 2024, which is ahead of previous expectations.
Watkin Jones has made significant progress on its operational objectives, with their new 'Refresh' initiative gaining traction and the completion of one project. In-build schemes are on track, with two more completions expected in the current financial year.
Although performance for the year will be lower than previously anticipated due to the lack of forward funds, Watkin Jones expects a significant improvement in FY24, with adjusted operating profit expected to be between £10million and £12million, compared to £0.2million in FY23.
Because of the slow pace of market recovery though, Watkin Jones do not expect adjusted operating profit in FY25 to exceed FY24. The results in FY25 will be impacted by the reduced number of transactions in FY24, affecting revenue contributions in future periods.
A spokesman for the firm added: "In the medium term, the end markets in which the Group operates remain strong, supported by a continued shortage of rental and student properties, positive commentary from the new UK Government, an improving interest rate environment, and continuing investor appetite.
"In addition, we have made progress in initiatives to broaden the Company's earnings base through diversified activities such as Refresh.
"We continue to actively review opportunities to expand our longer-term pipeline and are seeing an increasing number of attractive potential opportunities in the land market and through alternative transaction structures, which will be important in driving profitability in FY26 and FY27.
"While the Group's robust net cash position provides it with a strong financial underpin for its committed spending requirements, it is nevertheless a limiting factor on the extent to which we can take advantage of market conditions and further develop our pipeline.
"In light of this, the Board is undertaking a review of a range of options that may be available to enhance its medium and longer term funding position, thereby allowing the Group to capitalise on a market recovery."
Source: Investors | Watkin Jones plc