Watkin Jones Plc · LSE:WJG
Watkin Jones — FY2021 Earnings Presentation
36 slides from Watkin Jones's earnings presentation, January 2022
Slide 1: Strong Visible Growth: Full Year Results to 30 September 2021
Strong Visible Growth Full Year Results to 30 September 2021 Creating the future of living
Slide 2: Agenda
Agenda 1 FY21 Overview 6 ESG 2 Financial Review 7 Cladding Update 3 Sector Review 8 FY21 Summary 4 Development Pipeline 9 Q&A 5 Fresh 2
Slide 3: FY21 Overview
FY21 Overview 3
Slide 4: Highlights
Highlights • Business operating well with growing profitability • Strong revenue growth to £430m; forward sales market has recovered well • Operating profit at £57m, up 10.8%, underpinned by strong operational delivery and cost controls • Strong cash generation and liquidity position; £124.3m net ca
Slide 5: FY21 at a glance – delivering on growth plans
FY21 at a glance – delivering on growth plans 1 20% CAGR Excellent operational performance Pipeline* 0.9 BTR (£bn) 0.8 • 2021 pipeline delivered: 12 sites; 1,041 BTR 0.7 PBSA apartments; 3,192 PBSA beds 0.6 0.5 • 22,200 Fresh beds under management (FY20: 0.4 0.3 20,200); sector leading NPS 0.2 0.1 0
Slide 6: Continued momentum in Q1 FY22
Continued momentum in Q1 FY22 Work on schedule Across 13 sites Build costs within forecasts Acquisitions c.800-unit PBSA scheme in prime regional location Planning Consents c.800-unit PBSA scheme in prime regional location Future Sales 295 bed scheme in Edinburgh to Vita Group; delivery 2023 Under o
Slide 7: Financial Review
Financial Review 7
Slide 8: FY21 Financials highlights – P&L
FY21 Financials highlights – P&L Strong revenue growth of 21.5% reflecting FY21 FY20 Movement increasing revenues from BTR as well as PBSA £million % developments; forward sales market has Revenue 430.2 354.1 21.5 recovered well and strengthened Gross profit 84.8 75.9 11.7 Operating profit 1 57.3
Slide 9: FY21 Financials Highlights – Balance Sheet
FY21 Financials Highlights – Balance Sheet £million FY21 FY20 Net cash increased £31m to £124.3m Leased assets 103.0 109.4 Good working improvement to £77.6m from £84.4m Other non-current assets 21.7 25.3 Total non-current assets 124.7 134.7 Inventory and WIP broadly unchanged at £127.6m Inven
Slide 10: FY21 Financials Highlights – Cashflow / Liquidity
FY21 Financials Highlights – Cashflow / Liquidity Cash flow Movement £million FY21 FY20 % Strong cash performance reflective of cash generative Operating cash inflow 61.1 38.6 +58.3 nature of business model Operating cash flow £22.5m higher at £61.1m Gross cash 136.3 134.5 +1.3 Borrowings -12.0
Slide 11: FY21 Segmental Review – Revenues
FY21 Segmental Review – Revenues Segmental Revenue (£m) BTR 450 Growing contribution from BTR 47.4% increase in revenues to £138.6m 400 Good progress with five developments completed in the 138.6 period 350 PBSA 300 94.0 15.0% increase in revenues to £259.9m Reflects completion of seven sc
Slide 12: FY21 segmental review – Gross Profit
FY21 segmental review – Gross Profit Segmental Gross Profit (£m) BTR 100 Gross margin of 21.5%, above the FY20 margin of 15.8% reflecting continuing cost control and strong close out of development 90 completed in the year Also impacted by lower level of land sales 80 Continue to target BTR ma
Slide 13: Sector Review
Sector Review 13
Slide 14: Appetite for UK residential-for-rent continues to grow
Appetite for UK residential-for-rent continues to grow Total residential investment volumes and forecasts (£bn) Institutional investors focused on residential sector 14 Residential percentage in real estate portfolios up from 4.6% in 2012 12 to 13% in 20205 10 Residential investment expected to
Slide 15: BTR an increasingly compelling consumer proposition
BTR an increasingly compelling consumer proposition Number of renting households in millions BTR brand and recognition growing 3.15% CAGR 6 Satisfaction with institutional landlords higher than private rental landlords1 Entry of recognised consumer brands such as John Lewis and Lloyds Bank likel
Slide 16: Continued record institutional demand for BTR
Continued record institutional demand for BTR BTR investment volumes and forecasts (£bn) BTR investment reached a record £4.1bn in 20211 7 Additional c £2bn under offer at year end 6 5 A widening base of blue-chip investors 4 60% of H1 investment from global institutions2 3 KKR £610m investmen
Slide 17: Long term student housing demand and trend to quality
Long term student housing demand and trend to quality % participation of national age school Acceptances stay at historic highs3 leavers attending university Total applications to UK universities at record high of 749,570 Acceptances at UK universities remain high at 562,060 (2020: 570,475, 2019
Slide 18: Institutional demand for PBSA robust
Institutional demand for PBSA robust Investment flows into UK PBSA PBSA sector value to reach £72bn in 2022, up over 9% in three years1 7 Total PBSA Investment (£bn) 6 £3.9bn invested during the year3 5 Up £2.7 billion from 2020 when excluding Blackstone acquisition of iQ 4 Total supply now over
Slide 19: Affordable homes an imperative for residents and authorities
Affordable homes an imperative for residents and authorities Already high demand now rocketing Affordable and rented social dwelling stock in England Housing waiting lists could double in 20221 having been consistently above one million since 19972 Increasing focus from Government Poor quality h
Slide 20: Institutions seek social value and stability
Institutions seek social value and stability Rent loss from voids, % gross rent, 2010-2020 70% of capital invested in affordable housing is now private, up from approx. 30% in early 2000s1 Established and entrants pursuing social good opportunities Large scale institutions including L&G, M&G, Gold
Slide 21: Development Pipeline
Development Pipeline 21
Slide 22: Development pipeline further enhanced; total revenue value £1.8bn
Development pipeline further enhanced; total revenue value £1.8bn BTR and PBSA BTR Pipeline (apartments) Total pipeline 2022 2023 2024 2025 Forward sold 609 71 354 184 — Forward sales in legals 765 — — 486 279 Sites secured with planning 359 — 43 — 316 Sites secured subject to planning 2,279 — — 631
Slide 23: Development pipeline - BTR
Development pipeline - BTR Illustrative land & development revenues 500 • Illustrative revenue growth by year £'m Development revenue 400 • 4,012 BtR apartments in secured Land revenue 300 pipeline 200 • Future revenue value c.£0.95 billion 100 • Forward sales model delivers revenue 0 and earnings o
Slide 24: Development pipeline - PBSA
Development pipeline - PBSA Illustrative land & development revenues • Illustrative revenue growth by year Development 400 £'m revenue • 7,806 PBSA beds in secured pipeline Land revenue 300 200 • Future revenue value c.£0.9 billion 100 • Revenue growth to £300 million by 0 FY23 supported by secured
Slide 25: Development pipeline – Affordable Homes
Development pipeline – Affordable Homes Illustrative revenue (£’m) 250 • Re-purposing the homes team to affordable homes proceeding well 200 150 • Leverage groups supply chain and expertise as well as work with existing institutional purchasers 100 50 • Land market opportunity in the north west & na
Slide 26: Development market UK
Development market UK Land availability Urban brownfield land still discounted from pre-pandemic levels Competition has eased for out of town residential development sites Build costs Current WIP at 3-4% per annum inflation Next wave of projects procuring at 4-5% Expect this to moderate ac
Slide 27: Fresh
Fresh 27
Slide 28: Fresh
Fresh Industry voted awards Operational expertise • 1,000 more new beds bought into management recognised within sector than nearest competitor for 2020/21 academic year • Seven new institutional clients engaged • Insights used to develop WJ product design Resident feedback awards Market leading res
Slide 29: ESG
ESG 29
Slide 30: ESG
ESG • Increase employee engagement • NPS (customer) +10 by 2025 • Net zero Scope 1 and 2 carbon emissions by to 80% by 2025 and +20 by 2030 2030 • Voluntary staff T/O 20% by 2025 and • NPS (client) +10 by 2025 and plus 25 by 2030 • Meaningful impact on Scope 3 emissions 15% by 2030 • 100% PBSA BREEA
Slide 31: Cladding
Cladding 31
Slide 32: Q2 FY22 Cladding Update
Q2 FY22 Cladding Update • The Government announced on the 10th January 2022 an intention to create a mid rise cladding replacement scheme for leaseholders in residential apartments • Residential property developer sector to provide c.£4bn towards this • Scheme will collect information on the last 30
Slide 33: FY21 Summary
FY21 Summary 33
Slide 34: In summary
In summary FY21 Summary • Strong operational performance, with 12 sites delivered on time • Record results, with operating profit growing 11% and achieving ROCE1 of 72% • Dividend up 12% Outlook • Strong earnings visibility • c.70% expected revenue secured for FY22 • Secured development pipeline of
Slide 35: 35
35
Slide 36: Disclaimer
Disclaimer This presentation has been prepared by or on behalf of Watkin Jones plc (“Watkin Jones”). The information set out in this presentation is not intended to form the basis of any contract. By attending (whether in person, by telephone or webcast) this presentation or by reading the presentat