Watkin Jones shares dive as build-to-rent firm fails to return to profit
Watkin Jones shares plunge by a fifth as build-to-rent company fails to make profit on redundancy costs and lack of forward sales
- Watkin Jones posted a pre-tax loss of £766,000 for the six months ended March
- It made a £16.6m loss last year spending £28m on construction safety work
Shares of Watkin Jones plummeted Tuesday after the build-to-rent group posted a first-half loss as revenues fell and costs rose.
The build-to-rent specialist reported a statutory pre-tax loss of £766,000 for the six months ending March, compared to a loss of £16.6m last year when it spent £28m removing cladding and other repair work.
Losses over the period were mainly driven by a drop in turnover of around a fifth to £153.9 million, due to a lack of forward sales in student accommodation.
Improved performance: Build-to-rent specialist Watkin Jones posted a pre-tax loss of £766,000 for the six months ended March, compared to £16.6m last year
They were compounded by severance payments of more than £1 million for staff made redundant last autumn in the wake of Liz Truss’s controversial mini-budget.
In addition, the group incurred additional construction costs following the liquidation of DNA IC, which had been appointed by Watkin Jones as the main contractor for a high-rise project in Exeter called The Gorge.
Shares in Watkins Jones were down 19.4 percent to 77.7 pence just before the close of trading on Tuesday, meaning their value has roughly halved since the mini budget.
Still, the London-listed company expects a stronger material performance in the second half of the fiscal year, supported by a rebound in forward sales.
It announced that an agreement had been reached to sell an 819-bed student housing program in Bristol – due for completion in 2024 – to private equity giant KKR, while a further five deals will be completed before the end of September.
Chief executive Richard Simpson said: ‘The overall recovery in the term fund market is encouraging; however, the group will remain cautious in managing the pipeline.
“In addition to growing confidence in the sector, we see attractive land acquisition opportunities, and this, combined with our excellent operational performance, gives us confidence for the future.”
Demand for rental properties has soared over the past year as mortgage payments surged following the Bank of England’s decision to raise interest rates 12 times in a row in a bid to combat double-digit inflation.
Despite a slight decline, mortgage rates are still much higher than homeowners have experienced in recent years.
At the same time, many landlords of owner-occupied homes have exited the market due to tax changes and regulations requiring minimum energy efficiency standards, while tight planning laws have limited the volume of new developments.
As a result, average rents have risen to a record £2,500 in London and £1,190 outside the UK capital, according to online estate agency Rightmove.