Watkin Jones PLC · LSE:WJG
Watkin Jones — FY2020 Earnings Presentation
45 slides from Watkin Jones's earnings presentation, December 2020
Slide 1: Full Year Results to 30 September 2020
Full Year Results to 30 September 2020 Robust performance – Foundations for growth
Slide 2: Agenda
Agenda ► Overview ► Financial Review ► Covid-19 Impact ► Sector Review ► Development Pipeline ► Delivering Growth ► ESG ► Fresh ► Summary 2
Slide 3: The WJ investment case
The WJ investment case ► Focused on markets with strong underlying dynamics Long term consumer demand for BtR and PBSA remains strong Resi for Rent an increasingly attractive asset class for investors ► Capital light and resilient business model ► Secured BtR and PBSA development pipeline FY21-F
Slide 4: FY20 at a glance
FY20 at a glance ► All parts of the business adapt well to challenging operating environment 2020 objectives delivered: 2609 PBSA beds 159 BtR units 95 residential 20,000 beds under homes sold management ► Development pipeline enhanced Secured pipeline of: 4466 7910 Planning granted Partnership BtR
Slide 5: Financial review
Financial review Barnard Point, Albion Way, Wembley
Slide 6: FY20 financial highlights - earnings
FY20 financial highlights - earnings Solid financial performance, proving Underlying Results FY20 FY19 Movement £million (restated 1) resilience of business model Revenue 354.1 374.8 -5.5% Revenues down 5.5% due to delay in Gross profit 75.9 80.0 -5.1% new forward sales Operating profit 2 51.7 5
Slide 7: FY20 financial highlights – financial position
FY20 financial highlights – financial position • Cash increased £18.8m to £134.5m £’million FY20 FY19 (restated 1) • Working capital broadly unchanged at Leased assets 109.4 116.2 £84.4m (FY19: £87.1m) Other non-current assets 25.3 26.5 Total non-current assets 134.7 142.7 • Inventory and WIP reduce
Slide 8: FY20 financial highlights - cash flow/ liquidity
FY20 financial highlights - cash flow/ liquidity £’million FY20 FY19 Movement Cash flow (restated 1) • Resilient cash performance Operating cash 38.3 23.5 +63.0% • £63.5m cash from trading, before finance, inflow tax and cash cost of exceptional items (FY19: £39.4m) Gross cash 134.5 115.7 +16.3% Liq
Slide 9: Segmental review
Segmental review The Helm, Holdenhurst Road, Bournemouth
Slide 10: Segmental review - Revenues
Segmental review - Revenues FY20 Revenues BtR • Growing contribution from BtR Residential, £26.3m (7%) • 21.4% increase in revenues to £94.0m • Good progress with 4 developments in build for Accommodation mgmt, £7.6m (2%) delivery in FY21 and Bournemouth completed PBSA • 8.2% decrease in revenues to
Slide 11: Segmental review – Gross Profit
Segmental review – Gross Profit FY20 Gross Profit Residential, £4.0m (5%) BtR GM 15.4% • Gross margin of 15.8%, broadly in line with Accommodation mgmt, £4.5m (6%) previous guidance of 15% GM 59.8% BtR, £14.9m (19%) GM 15.8% PBSA • Strong gross margin of 24.0% and above FY19 margin of 22.3% • Reflec
Slide 12: Covid-19 impact
Covid-19 impact St David's, Morfa Road, Swansea
Slide 13: Covid-19 impact
Covid-19 impact ► Robust operational response to rapidly evolving environment All construction sites rapidly remobilised in spring 2020 All construction activities continuing during current lockdown Proactive management of supply chain All Fresh properties open throughout, including nine 202
Slide 14: Sector review
Sector review Tudor Place, Liverpool Road, Chester
Slide 15: Residential for rent sector resilient
Residential for rent sector resilient ► Despite Covid-19 disruption, residential continues to grow and outperform other real estate sectors Estimated residential investment up by over c.8% year on year* Estimated commercial sector investment down by 30%** ► 75% of investors intend to increase ex
Slide 16: Increasing consumer demand for BtR
Increasing consumer demand for BtR ► Quality, convenience and flexibility making BtR an increasingly mainstream choice for a widening demographic No longer an exclusively young professional proposition No longer limited to city centre locations Pandemic has highlighted benefits of institutiona
Slide 17: Investment in BtR at record levels
Investment in BtR at record levels Monthly rent collection ► BtR Investment in Q3 2020 grows to record Institutionally-owned PRS £1.43 billion* 100% 35% from investors new to sector in 2019-20* 95% Now a market leading asset class 90% 85% 80% ► Total estimated 2020 investment of c.£4 billion, 75
Slide 18: Long-term demand for PBSA robust
Long-term demand for PBSA robust ► Student numbers forecast to rise by c.300,000 by PBSA Supply v Demand 2030* 100% Rising participation rate underpins continued 80% demand for HE (Higher Education) from UK students 60% Appeal of HE strong despite Covid-19: only 40% 5% of 2020 cohort regret goin
Slide 19: Long term PBSA market dynamics strong
Long term PBSA market dynamics strong £8 UK PBSA Investment £’bn ► Despite upheaval, c.£6 billion of £7 PBSA investments in 2020 £6 £5 Blackstone-iQ transaction: £4 £4.66 billion* £3 1% rental growth** £2 £1 Yields stable £0 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Actual Forecast Lon
Slide 20: Development pipeline
Development pipeline Alma Court, Military Road, Canterbury
Slide 21: Development pipeline – BtR & PBSA
Development pipeline – BtR & PBSA BtR (units) Total FY21 FY22 FY23 FY24 FY25 Total FY21 FY22 FY23 FY24 FY25 PBSA (beds) BtR PBSA Total pipeline 4,713 857 255 538 1,364 1,699 9,908 3,192 1,945 3,100 905 766 Forw ard sold 928 857 71 - - - 3,898 2,730 1,168 - - - Sales in negotiation 722 - 184 538 - -
Slide 22: Development pipeline – growth opportunity
Development pipeline – growth opportunity ► Overall growth opportunity still firmly there ► Covid-19 disruption has pushed out the growth of the development pipeline by about a year and especially impacted FY22 deliveries (as previously stated) ► Investor appetite in BtR is evolving well. Creates op
Slide 23: Delivering growth
Delivering growth Arundel House, Whitefriars, Coventry
Slide 24: Delivering & Measuring growth - BtR
Delivering & Measuring growth - BtR 400 £’m ► Secured pipeline gives visibility of 350 300 revenue growth 250 200 ► Table shows KPIs for monitoring 150 progress 100 50 ► Future embedded revenue value 0 FY19 FY20 FY21 FY22 FY23 c.£900m Illustrative Revenue ► BtR target margins – 15.0% 100% 80% ► Marg
Slide 25: Delivering & Measuring growth - PBSA
Delivering & Measuring growth - PBSA 400 £’m 350 ► Future embedded revenue value 300 c.£600m 250 200 ► PBSA target margins – 20.0% 150 100 50 ► Margin recognition: 0 Land - Nil to10.0% FY19 FY20 FY21 FY22 FY23 Illustrative Revenue Development phase - c.22.5% to 25.0% 100% 80% These KPIs will b
Slide 26: ESG programme
ESG programme The Helm, Holdenhurst Road, Bournemouth
Slide 27: Commitment to ESG
Commitment to ESG ► An established track record 95% of waste diverted from landfill All developments BREEAM very good or excellent Health and safety incidents down c.16% versus 2019 Pro-active response to cladding and updated fire safety Bespoke welfare, D&I and employee engagement program
Slide 28: ESG Opportunity - Integrating the Residential business
ESG Opportunity - Integrating the Residential business Bollin Meadow
Slide 29: ESG Opportunity – Affordable homes pilot
ESG Opportunity – Affordable homes pilot ► Affordable housing sector provides opportunity to re-focus and grow Residential division A fast-growing asset class Traditional Registered 300,000 homes Significant Government Providers (RPs) diversifying needed p/a in UK Undersupply - rhetoric & policy a
Slide 30: ESG Opportunity – Affordable homes pilot
ESG Opportunity – Affordable homes pilot ► Align Homes business with WJ’s successful BtR and PBSA Resi for Rent model Low cost affordable-led single family housing Forward sold to institutional investors Capital light ► Private sale component to underpin margins Currently targeting c.15% PoC
Slide 31: Fresh - building foundations for future growth
Fresh - building foundations for future growth Consumer Insight driven business 1,700 beds/units pipeline secured to Over Across come in line by 20,000 students & 66 buildings FY23 BtR tenants Foundations for Proactive future growth in Covid-19 response place has enhanced reputation Operational capa
Slide 32: Summary
Summary
Slide 33: Summary
Summary ► Long term dynamics of the Resi for Rent sector are favourable ► Forward sold position provides visibility of earnings through Covid-19 ► Deepened pipeline provides visibility of future growth trajectory and measurables to track progress ► Opportunity to grow Fresh and harness its insight ►
Slide 34: Q&A
Q&A 34
Slide 35: Appendices
Appendices
Slide 36: The WJ Business Model
The WJ Business Model Arundel House, Whitefriars, Coventry
Slide 37: The WJ Business Model
The WJ Business Model ► Markets with favourable underlying dynamics 37
Slide 38: The WJ Business Model
The WJ Business Model ► Predictable sources of income BtR and PBSA pipeline; Fresh management services; Homes business 38
Slide 39: The WJ Business Model
The WJ Business Model ► A unique combination of capabilities Investment expertise; expertise in delivering; customer insight; capital light; ESG focus 39
Slide 40: The WJ Business Model
The WJ Business Model ► People with expertise and a common purpose 40
Slide 41: WJ Model – Revenue profile BtR
WJ Model – Revenue profile BtR Example based on forward sold 250 apartment scheme at £220,000 per apartment Value to WJ £55.0 million: Land 20% - £11.0 million; Development works - £44.0 million Gross margin – 15.0%: Land - 0%; Development works - 18.75% Final payment received on completion
Slide 42: WJ Model – Revenue profile PBSA
WJ Model – Revenue profile PBSA Example based on forward sold 350 bed scheme at £100,000 per bed Value to WJ £35.0 million: Land 20% - £7.0 million; Development works - £28.0 million Gross margin – 20.0%: Land - 0%; Development works – 25.0% Final payment received on completion c.10% develop
Slide 43: Projects list & completion dates - BtR
Projects list & completion dates - BtR BTR Beds Completion Status Kelaty, Wembley 301 2021 Forward Sold Reading 315 2021 Forward Sold Sutton 166 2021 Forward Sold Marshgate 75 2021 Forward Sold Rockingham Street, Sheffield 71 2022 Forward Sold Bath Lane, Leicester 184 2022 Under Offer For Sale Hove
Slide 44: Projects list & completion Dates - PBSA
Projects list & completion Dates - PBSA PBSA Beds Completion Status Cathedral Street, Glasgow 422 2021 Forward Sold Dundee Street, Edinburgh 216 2021 Forward Sold Cranfield Phase 1a 415 2021 Forward Sold Cranfield Phase 1b 198 2022 Forward Sold Kelaty, Wembley 699 2021 Forward Sold Rockingham Street
Slide 45: 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