Flotation fees dent Watkin Jones profits

Watkin Jones spent £6.5m on administrative fees and commission for advisors who handled its listing on the London Stock Exchange, according to the North Wales-based developer’s first financial statement since going public three months ago.

In additional to the cost of City advice, the listing brought with it a net cost to the group of £20.1m “relating to settling the various share based management incentive arrangements that triggered on completion of the IPO.”

After the exceptional IPO costs, the group produced a loss before tax for the six months to 31 March 2016 of £9.9m (H1 2015 £9.0m profit). Excluding the exceptional IPO costs, the adjusted profit before tax for the period was £16.7m. Turnover in H1 2016 was £145.9m, up 40% from £103.8m in H1 2015.

Members of the Watkin Jones family raised £130m from the issue of 45% of the business at a price of 100p in March. The shares are trading today 115p.

Putting aside the distractions of the stockmarket, the development business continues to produce strong revenue and profit performance driven by student accommodation developments.

Six developments have been forward sold since September 2015 for a combined total of £114m, to contain 1,660 beds. A further £90m of developments are in advanced negotiations with buyers and planning permission has been granted on another nine student schemes.

The overall student accommodation pipeline is 11,300 student beds in 31 sites, with 17 forward sold and four more in legal negotiations or under offer.

Mark Watkin Jones, chief executive officer of Watkin Jones, 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.”

An interim dividend of 1.33p a share is proposed. The bank position at 31 March showed £15.4m net cash compared to £4.0m net debt a year earlier. A new £40m five-year revolving credit facility and £10m working capital facility with HSBC were put in place in March but have not been touched.