The Bangor-based build-to-rent and student accommodation developer Watkin Jones said while earnings for the first half of its financial year would be in line with expectations, dividend payments and pay rises were cancelled.
In a pre-close update for its half year ending 31 March 2020, the company said: “The disruption caused by Covid-19 was only starting to have an effect on our operations towards the end of March 2020. As a result, the board expects to report revenues and earnings for H1 2020 in line with its expectations”.
In its last full-year results, posted in January, the company revealed pre-tax profits of £49m, and a turnover of £374m.
However, the update acknowledged in the past few weeks there had been “significant disruption to our operations as a result of the COVID-19 outbreak” with non-site based staff working from home, and a halting of all non-essential work on construction sites.
Watkin Jones said this will “inevitably impact financial performance”, and that it was “difficult to predict the scale of adverse impacts caused by further disruption”.
Based on this, the board “believes that it is appropriate to withdraw financial guidance at the current time”.
As part of measures to manage costs and conserve cash, Watkin Jones is not declaring an interim dividend with its six month results, and its executive directors will not receive an annual pay increase.
The group also said it was putting aside £15m to pay for replacement of cladding at buildings it has developed, which it maintained were built “in line with regulations at the time”. However costs for remedial works are expected to be split with building owners over the course of the next three years. Watkin Jones is aiming to recover some of this money from sub-contractors and consultants, although “the extent of any recovery is currently uncertain”.
Despite the uncertainty, the company said it still believed in the “robust fundamental growth drivers” in the build-to-rent and student accommodation market. Overall, Watkin Jones has a development pipeline of 19 student accommodation sites totalling 7,000 beds, with 12 sites forward sold, and its build-to-rent pipeline stands at over 2,600 apartments, across 10 sites, with five developments forward sold.
The share price in Watkin Jones was up 1p to 146.6p this morning. The company is still building back up its share price from a fall from 286p on 21 February.