Watkin Jones lowers profit forecast after unexpectedly slow summer

Watkin Jones has lowered its profit expectations for this year after a “slower than expected” 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 £10m and £12m for the year. Previously it had forecast £15m to £20m. It also said it does not expect its 2025 figure to be higher than this.

It said: “Overall 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.”

The lower number of transactions will have a “consequential impact” on next year’s results, according to the firm, which said that in order to deliver year-on-year progress market conditions would have to “improve at a faster pace”.

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: “While 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.

”As such, we do not currently expect adjusted operating profit in FY25 to be above FY24.”

Watkin Jones’ share prices fell 28% following this morning’s announcement, from 50.30p to 36.10p.

>>See also: Watkin Jones returns to profit

>>See also: Building safety and restructuring costs send Watkin Jones into the red

The developer said it has been effective at generating cash and expects to be holding gross cash of £80m as of 30 September, up from £67m last year, while its net cash is expected to increase from £44m to £65m year-on-year ahead of expectations.

It said: “While the group’s 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.

“In 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.”

The lowered expected adjusted operating profit of £10m to £12m, would be an increase on the £200,000 posted the previous year.

Watkin Jones announced in May that it had returned to profit in the first half of the year, posting a pre-tax profit of £2.1m in the six months to March from an £800,000 loss last time.