WATKIN JONES PLC FULL YEAR RESULTS To 30 September 2016

Transcription

1 WATKIN JONES PLC FULL YEAR RESULTS To 30 September 2016 Mark Watkin Jones CEO Philip Byrom CFO January 2017

2 BUSINESS HIGHLIGHTS New Bridewell, Bristol 500 Beds Completed

3 BUSINESS HIGHLIGHTS Successful admission to AIM on 23 March Strong Operational Performance throughout the process and since admission Record Operating Profit, before exceptional IPO costs, of 37.9M (FY M) reflecting improved margin growth driven by student accommodation performance 183M of development value across 8 student developments (2,615 beds) forward sold during the year BUSINESS HIGHLIGHTS 164M of development value across 5 student developments (1,893 beds) forward sold since year end In excess of 185M of development value across 7 student developments (2,166 beds) in legal negotiations Planning consent achieved for 10 student developments (3,500 beds) during the year and a further 4 student developments (1,579 beds) consented since the year end 9,469 student beds in the pipeline across 27 sites. Planning consent granted for 8,260 of the pipeline beds Fresh Student Living ( Fresh ) successfully integrated into the Group with beds under management increased from 8,310 in FY16 to 12,337 in FY17 Five Nine Living Limited established to leverage Fresh s property management expertise in PRS 3

4 INVESTMENT HIGHLIGHTS Byrom Street, Liverpool 398 Beds Completed

5 INVESTMENT HIGHLIGHTS STUDENT ACCOMMODATION DEVELOPMENT PIPELINE FRESH STUDENT LIVING PIPELINE 9,469 beds in the pipeline across 27 sites, 15 forward sold with 7 more in legal negotiations 2017 deliveries - 3,314 beds All sites secured with planning and 9 of the 10 scheduled deliveries forward sold with the remaining delivery in legal negotiation 2018 deliveries 3,485 beds scheduled for delivery across 11 sites. 10 developments (3,370 beds) have planning. 5 forward sold and 5 in legal negotiation deliveries 6 developments secured (2,670 beds) 1 forward sold and 1 in legal negotiation. A number of additional site acquisitions progressing FY17 - target income fully contracted. 12,337 beds contracted FY18 - target income 88% contracted. 16,431 beds contracted FY19 - target income 80% contracted. 17,625 beds contracted FY20 - target income 72% contracted. 18,636 beds contracted PRIVATE RENTED SECTOR First development forward sold and set for completion during 2017 Planning application being prepared for unit scheme in Leicester in our ownership In legal negotiation to acquire a further site (130 + units) Selected preferred bidder on a further scheme (260 + units) STRATEGY Continue growth of the core student property development business: focus on high quality earnings Continue growth of Fresh Student Living to increase recurring management fee income Continue expansion in complementary Private Rented Sector building on current pipeline of opportunities Growth of Five Nine Living to increase recurring management fee income 5

6 GROUP FINANCIALS Broad Lane, Sheffield 397 Beds Completed

7 FINANCIAL HIGHLIGHTS Revenue from continuing operations increased by 9.3% to 267.0M (FY 2015 : 244.2M) FINANCIAL HIGHLIGHTS Gross Profit from Continuing Operations increased by 22.2% to 53.8M (FY15: 44.0M) Operating Profit before exceptional IPO costs increased by 16.7% to 37.9M (FY15: 32.5M) Adjusted EBITDA increased by 22.1% to 41.6M (FY15: 34.1M) Operating Cash inflow before exceptional IPO costs increased by 46.8% to 41.7M Cash at bank at 30 September 2016 of 47.2M (FY 2015 : 59.3M) Net cash at 30 September 2016 of 32.2M (FY 39.1M) after exceptional IPO costs of 26.6M, 14.5M cash cost of acquiring Fresh + 10M dividend to existing shareholders prior to IPO Adjusted basic EPS excluding exceptional IPO costs of 12.4 pence (FY15: 10.4 pence) 40 million 5 Year Revolving Credit Facility and 10M Working Capital Facility with HSBC. Unutilised at 30 September 2016 Final dividend of 2.67 pence per share to be paid on 28 February 2017 giving a total dividend of 4.0p per share for the period since IPO Revenue ( million) FY 2016 FY 2015 Adjusted EBITDA ( million) FY 2016 FY

8 PROFIT AND LOSS Group Income Statement (Continuing operations) (IFRS) million Full Year 30 Sept 2016 Full Year 30 Sept 2015 Student accommodation Residential Fresh Student Living (7 months post acquisition) Other Revenue from continuing operations Student accommodation Residential Fresh Student Living (1 month post acquisition) Other 0.5 (0.1) Gross Profit Gross Margin 20.1% 18.0% Overheads (15.9) (11.5) Operating Profit before exceptional IPO costs Operating Margin 14.2% 13.3% Operating Exceptional IPO costs (26.6) - Operating Profit Share of operating profit in joint ventures Net Finance Costs (1.0) (0.8) Profit before tax from continuing operations Adjusted EBITDA Adjusted EBITDA Margin from continuing operations 15.6% 14.0% Revenue by Division ( million) Student Accommodation Residential Fresh Student Living Other Gross Profit by Division ( million) Student Accommodation Residential Fresh Student Living Other 8

9 SEGMENTAL SUMMARY Revenue and Gross Margin by Segment Student Accommodation ( million) Revenue Gross Margin Revenue 26.3 Residential ( million) Gross Margin Fresh Student Living ( million) Full Year Basis Revenue 5.1 Gross Margin FY 16 FY 15 Revenues increased by 9.1 million to million Gross margin 20.5% compared to 18.2% FY 2015 Robust student accommodation pipeline provides excellent earnings and cashflow visibility Strengthening margin as more profitable developments are delivered FY 16 FY sales completions (FY 2015 : 69 completions) Revenues increased by 10.4 million to 26.3 million Gross Margin 11.5% compared to 16.6% FY15 11 million sales in FY 2016 from two legacy developments at nil margin generating cash from inventory Strengthening margin as more profitable developments come on stream FY 16 FY 15 Fresh acquired into the Group on 25 February 2016 Gross Margin at c.60% Revenues for Fresh increased from 2.6 million to 5.1 million on a likefor-like full year basis FY ,337 contracted beds under management across 44 schemes FY ,636 contracted beds under management across 61 schemes 9

10 BALANCE SHEET Group Balance Sheet (IFRS) million 30 Sept Sept 2015 Intangible assets Property, plant and equipment Investment in joint ventures Deferred tax asset Other financial assets Non-current assets Inventory and WIP Trade and other receivables Cash at bank and in hand Current assets Total assets Trade and other payables (90.8) (69.7) Provisions (0.2) (0.3) Other financial liabilities (0.1) (0.1) Interest bearing loans and borrowings (15.0) (9.7) Current tax liabilities (6.0) (7.1) Current liabilities (112.1) (86.9) Interest bearing loans and borrowings - (10.4) Deferred tax liabilities (1.1) (0.4) Provisions (2.0) (2.1) Other non-current liabilities - - (1.3) Non-current liabilities (3.1) (14.2) Intangible assets of 15.5 million at 30 September 2016 relate to the acquisition of Fresh Student Living Inventory and WIP increased by 8.5 million since 30 September 2015 Inventory and WIP at 30 September 2016 will continue to be progressively turned into cash Cash at bank of 47.2 million at 30 September 2016; net cash of 32.2 million Additional flexibility from increased 40m RCF and 10m overdraft facility provided by HSBC Total liabilities (115.2) (101.1) Net assets

11 CASHFLOW Group Cash Flow (IFRS) million Full Year Full Year EBITDA continuing operations (adjusted) EBITDA discontinued operations (1.1) (1.6) Exceptional IPO costs (26.6) - Share of profits in joint ventures (3.0) (1.2) Decrease/(increase) in inventory and WIP (8.3) (27.7) Decrease/(increase) in trade and other receivables (Decrease)/increase in trade and other payables Decrease/(increase) in working capital 13.5 (0.7) Net operating cash flows Tax and interest (9.3) (3.6) Net investing cash flows (8.7) 1.0 Net financing cash flows (18.5) 3.9 (Decrease)/increase in cash (12.1) 33.3 Opening cash balance Closing cash balance Bank Loans (15.0) (20.2) Net cash balance Forward sale model results in strong cash generation Non stock typical working capital terms give positive cashflow dynamics o Creditors 60 days o Debtors 15 days Exceptional IPO and other exceptional activities:- o 26.6 million exceptional IPO costs : ( 6.5 million transaction related fees and commissions / 20.1 million cost of settling share based management incentive arrangements) M was re-invested by the management concerned in shares in Watkin Jones plc o 14.5 million cash cost of acquiring Fresh o 10.0 million dividend paid pre IPO 11

12 BUSINESS OVERVIEW Old Dumbarton Road, Glasgow 128 Beds Completed

13 THE MODEL Bath Lane, Leicester 601 Beds Completed

14 PROVIDES AN END TO END SOLUTION SITE PROCUREMENT & PLANNING TRANSACTION AND FUNDING CONSTRUCTION AND DELIVERY SCHEME MANAGEMENT Identify site Negotiation of option / acquisition Obtain planning permission Discussions with University/ key stakeholders Forward sale to Institutional investors Value added opportunities Land sale & development agreement Construction Asset management Typically 2 ½ years 3-7 years THEORETICAL EXAMPLE 500 BED SCHEME GROSS DEVELOPMENT VALUE 35 million 7 million PBT 25% RETURN ON COST 5m LAND ACQUISITION COST Refundable deposit (5-10%) 250, ,000 Forward sell site on receipt of planning 6.0 million Build costs 22.7 million Consultancy/build 20,000/scheme 3rd party planning cost Cash flow: ( 0.8) million 300,000 Planning gain payment Profit: Cash flow: million 1.0 million 1.7 million Construction & Development Profit 5.3 million Paid monthly over course of build Typical 10% retention released on completion Cash flow: million Mobilisation/build 150/bed Management/per annum 320/bed NB. All costs paid by landlord/leaseholder Cash flow: + 160,000 p.a. 14

15 STUDENT ACCOMMODATION MARKET Belle Vue, Leeds 324 Beds Completed

16 PURPOSE BUILT STUDENT PROPERTY MARKET EXPECTED TO GROW Purpose Built Student Accommodation Occupier Demand 1.7 million full time students in the UK Despite higher tuition fees university applications reached an all time high of 718,000 in 2015/2016 of which 532,000 were accepted c. 7% live in private PBSA and c.17% in university controlled PBSA Since 2013 private bed numbers have increased by 43% compared to an increase of 5% in university bed numbers 75% of university PBSA was built pre 1999 Average annual supply to the market 20,000 to 30,000 beds across the UK Student numbers remain positive and whilst EU numbers will need to be monitored in the wake of Brexit EU students still make up a relatively small proportion of the market at c.7% Domestic population demographics suggest an upturn in 17 to 21 year olds in the UK from 2021 Flight to quality as students invest in their experience following the introduction of higher fees The fall in sterling has made studying in the UK cheaper for overseas students Purpose Built Student Accommodation Investment Demand PBSA is seen as a stable income producing asset and benefits from the structural demand/supply imbalance in the student accommodation sector. The sector is likely to benefit from a rise in investor appetite during times of economic and market uncertainty 3.5 billion of stock traded during 2016 making 2016 the 2 nd highest year of activity on record The fall in sterling has made the acquisition of PBSA more attractive for overseas investors We have forward sold developments to a number of institutional investors new to the Group in the period 16

17 DEVELOPMENT PIPELINE Dunaskin Street, Glasgow 504 Beds Completed

18 Number of Beds CURRENT PIPELINE OF PROJECTS UNDERPINS VISIBILITY PIPELINE PROVIDES EARNINGS VISIBILITY 9,469 beds secured and scheduled to be delivered in the next three years across 27 schemes 8,260 beds with planning consent 17 schemes currently under construction 15 schemes and 5,211 beds pre sold to investors 7 schemes (2,166 beds) under offer/in legals STUDENT ACCOMMODATION PIPELINE SUMMARY Number of Beds - Secured Sites Number of Beds - Under Offer/In Legals Number of Beds - Forward Sold FY17 FY18 FY19 Student accommodation pipeline locations 18

19 FRESH STUDENT LIVING Brougham Hayes, Bath 104 Beds Completed

20 FRESH STUDENT LIVING KEY FACTS 374 Total Staff 25 Operational Towns & Cities 20

21 PRIVATE RENTED SECTOR MARKET Belle Vue, Leeds (PRS Scheme) 322 Units Due for Completion

22 All dwellings (millions) PRIVATE RENTED SECTOR OPPORTUNITY THE OPPORTUNITY MARKET DYNAMICS Institutional investors interested in larger scale, purpose built developments for rent Annually adjusted, granular, inflation linked and stable income streams Enhanced income / value opportunity through upselling additional services PRS Dwellings (millions) Very strong synergies with Watkin Jones Investor relationships Total solution from site identification through construction and site management Optimise planning with mixed-use developments (Source: ONS,Toscafund 2015) All Dwellings PRS Dwellings PRS market currently 5-6 million households (estimated value 990 billion) and growing Market demand driven by a structural undersupply of affordable housing stock to buy years age group represents the highest proportion of renters in London and the wider UK Large scale, purpose built rental blocks growing Higher quality than private housing stock / additional services / communal living / hassle free lifestyle Flexibility of tenure Increased labour mobility with focus on major cities 22

23 THE TEAM Heriot Watt, Edinburgh 450 Beds Completed

24 PLC BOARD Grenville Turner Non-Executive Chairman Joined 2016 Simon Laffin Non-Executive Director Joined 2016 Mark Watkin Jones Chief Executive Officer Joined 1990 Philip Byrom Chief Financial Officer Joined 2002 Current NED for Zoopla Property Group Plc and the Department for Communities and Local Government Vice-Chairman of the English National Ballet Former Non-Executive Chairman (retired 27 April 2016) and former Group CEO ( ) of Countrywide plc. Other past directorships have included Knightsbridge Student Housing, Rightmove, St James Place, Sainsbury s Bank and Realogy Current Chairman of Flybe Group plc and Assura Plc Previously Chairman of Hozelock Group, an advisor to CVC Capital Partners and served as a NED at Quintain Estates, Aegis Group, Michells & Butlers and Northern Rock (as part of the rescue team) Prior to this, he was Group Finance & Property Director of Safeway plc Ninth generation of Watkin Jones family 1990: Joined Watkin Jones Revenue 16 million 2003: Appointed Managing Director Revenue 60 million Instrumental in strategic business direction Responsible for Group s Accounting, Tax, and Treasury disciplines Previously Divisional Finance Director at BWI Plc Qualified as a Chartered Accountant at Price Waterhouse in

25 DISCLAIMER This presentation is for information purposes only and no reliance may be placed up on it. No representation or warranty, either expressed or implied, is provided in relation to the accuracy, completeness or reliability of the information contained in this presentation. The financial information referenced in this presentation does not contain sufficient detail to allow a full understanding of the results of Watkin Jones plc ( Watkin Jones ). For more detailed information, please see the full year results announcement for the twelve months ended 30 September 2016 which can be found on the Investors section of the Watkin Jones website - This presentation does not constitute or form part of any offer or invitation for sale or subscription of, or any solicitation of any offer to buy or subscribe for, any securities of Watkin Jones. The making of this presentation does not constitute a recommendation regarding any such securities. Any projections or other forward-looking statements are made by the Directors of Watkin Jones in good faith based on the information available to them at 16 January 2017 and reflect the Directors knowledge and information available at that date and their beliefs and expectations. These statements may involve risk and uncertainty because they relate to events and depend upon circumstances that may or may not occur in the future. There are a number of factors which could cause actual results or developments to differ materially from those expressed or implied by these forward looking statements. Any of the assumptions underlying these forward looking statements could prove inaccurate or incorrect and therefore any results contemplated in the forward looking statements may not actually be achieved. Unless otherwise required by applicable law, regulation or accounting standard, Watkin Jones does not intend to update any projections or other forward-looking statements contained in this presentation. Each forward-looking statement speaks only as at 16 January 2017 and Watkin Jones and its advisers expressly disclaim any obligations or undertaking to release any update of, or revisions to, any forward-looking statements in this presentation. No statement in the presentation is intended to be, or intended to be construed as, a profit forecast or profit estimate and no statement in the presentation should be interpreted to mean that earnings per Watkin Jones share for the current or future financial years will necessarily match or exceed the historical earnings per Watkin Jones share. As a result, you are cautioned not to place any undue reliance on such forward-looking statements. Past performance of securities in Watkin Jones cannot be relied upon as a guide to the future performance of such securities. 25

26 Mark Watkin Jones Chief Executive Officer Philip Byrom Chief Financial Officer Watkin Jones plc Llandygai Industrial Estate Bangor Gwynedd LL57 4YH