Watkin Jones reports pre-tax loss after setting aside £35m for building safety work

The drop in operating profits marks a more than 99% drop off the £54.7m reported in 2021-22.

At the same time, the firm highlighted “additional site-specific costs related to accelerated completions on two schemes and a third-party contractor insolvency”.

Watkin Jones also revealed a £4.6m loss on the sale of three private rented sector assets and an impairment charge of £5.5m on its “non-core land bank and certain pipeline assets which are no longer economically viable”.

The developer’s board has decided not to recommend dividend payments for the last financial year due to the uncertain market conditions. 

Looking ahead, the firm has £300m in revenue from previously sold developments and believes the “forward fund market showing early signs of recovery as interest rates stabilise”.

In June last year, Watkin Jones was involved in a deal with Legal & General and Clanmil Housing Association to forward fund a built-to-rent development in Belfast with £155m.

Meanwhile, all current development schemes on track, which Watkins Jones explained are being affected by changes in build cost inflation.

Alex Pease, who became chief executive officer of Watkin Jones in November, said: “Significant cost inflation and volatility in real estate funding markets meant that 2022-23 represented a period of unprecedented challenge for the business. 

“However, I am pleased that against this backdrop, the group demonstrated resilience and agility, taking a number of important actions operationally.

“While funding conditions remain difficult, the outlook is gradually improving and the strong asset performance in PBSA [purpose-build student accommodation] and built-to-rent sectors gives me confidence in the longer-term market recovery and return to growth.

“In the near term, we remain focused on driving improvements to the productivity and efficiency of the business, as well as looking at opportunities to extract more value from our sector expertise and end-to-end capabilities.

“Watkin Jones continues to have a market-leading team and offering to the residential for rent sectors and we are taking the right steps to ensure we are well placed to capitalise on this, as conditions improve.”

The firm is not the only one revising financial forecasts due to the cost of building safety remediation.

Last week, Metropolitan Thames Valley warned that its bottom line for the current financial year will be hit by £105m in provisions and write-downs relating to dealing with these works.