Residential developer Watkin Jones has warned that a slowdown in transactional activity will result in poorer than expected performance across the group this year.
The firm said that while it was marketing a number of schemes and had sold its 397-bedroom student accommodation scheme in Stratford to Lloyds Banking Group’s Housing Growth Partnership in a £96m deal, it did not expect to conclude any further sales this year.
As a result, it said it was undertaking a review of options to enable it to “enhance its medium and longer-term financing options”.
In an update on full-year trading, Wakin Jones said: “Overall market activity through the summer has been slower than anticipated, principally due to the continued uncertainty over the pace of interest rate cuts, and as such we believe it is now unlikely that we will close any further transactions before the financial year end.”
It said that with the absence of further forward funds prior to the year-end, it now expected performance to be lower than previously anticipated, with operating profit in the region of £10m to £12m.
Watkin Jones said it had been focused on cash generation through the second half of its financial year and at 30 September 2024 it expected gross cash to be around £80m and net cash to be around £65m, up from £67m and £44m in 2023, respectively.
Looking forward, Watkin Jones said: “While we have a number of further schemes that we expect to take to market in FY25, given the slower pace of activity currently, we believe that a more prudent set of transaction assumptions should be applied to the next 12 months than previously assumed.
“As such, we do not currently expect adjusted operating profit in FY25 to be above FY24. In any event, the group’s performance will be significantly influenced by the evolution in forward fund liquidity over the coming months and, while it is possible to deliver yea-on-year progress in FY25, this would require market conditions to improve at a faster pace as we enter the new financial year.”
The group said it would continue to “actively review” opportunities to expand its longer-term pipeline and was seeing an increasing number of attractive potential opportunities in the land market and through alternative transaction structures, which it said would be important in driving profitability in 2026 and 2027.
“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,” said Watkin Jones. “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.”
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