Student accommodation developer鈥檚 share prices drop as it says it is unlikely to close further deals before September鈥檚 end
Watkin Jones has lowered its profit expectations for this year after a 鈥渟lower than expected鈥� summer.
The student housing and build-to-rent developer, in a trading update for the year ending 30 September, said it now expects its adjusted operating profit to be between 拢10m and 拢12m for the year. Previously it had forecast 拢15m to 拢20m. It also said it does not expect its 2025 figure to be higher than this.
It said: 鈥淥verall 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.鈥�
The lower number of transactions will have a 鈥渃onsequential impact鈥� on next year鈥檚 results, according to the firm, which said that in order to deliver year-on-year progress market conditions would have to 鈥渋mprove at a faster pace鈥�.
However, it said it had a number of schemes being actively marketed and recently sold a 397-home scheme in Startford, East London to the Lloyds Banking Group subsidiary Housing Growth Partnership.
It said: 鈥淲hile 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.
鈥滱s such, we do not currently expect adjusted operating profit in FY25 to be above FY24.鈥�
Watkin Jones鈥� share prices fell 28% following this morning鈥檚 announcement, from 50.30p to 36.10p.
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The developer said it has been effective at generating cash and expects to be holding gross cash of 拢80m as of 30 September, up from 拢67m last year, while its net cash is expected to increase from 拢44m to 拢65m year-on-year ahead of expectations.
It said: 鈥淲hile the group鈥檚 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.
鈥淚n 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.鈥�
The lowered expected adjusted operating profit of 拢10m to 拢12m, would be an increase on the 拢200,000 posted the previous year.
Watkin Jones in the first half of the year, posting a pre-tax profit of 拢2.1m in the six months to March from an 拢800,000 loss last time.
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