Watkin Jones and Inland Homes post weaker profits as homebuilding costs rise and demand falters
- Watkin Jones has revealed annual pre-tax profits fell 64% to £18.4m
- Inland Homes shares plunged after it admitted breaching loan covenants
- The real estate sector is strongly impacted by the September mini-budget
UK property developers Watkin Jones and Inland Homes revealed deep declines in profits amid rising costs and lower sales volumes.
Student accommodation builder Watkin Jones saw pre-tax profits plunge 64% to £18.4m for the year ending September 2022.
Although the group achieved record forward sales totaling £900m, while revenue was only moderately down on the previous 12 months, trading was hit hard by heightened market volatility towards the end of the period.
Setback: Student accommodation builder Watkin Jones has revealed pre-tax profits fell 64% to £18.4million for the year ending September 2022
Two forward sales were postponed following the September mini-budget, which led to a spike in mortgage rates and a liquidation of public debt.
Watkin Jones has also been hit with a £30.4million charge linked to the Safe Buildings Act, which requires home builders to fund the removal of hazardous coatings and other improvements to the fire safety of residential developments.
Meanwhile, Inland Homes shares fell by a third after the Beaconsfield-based company admitted breaching debt covenants with two lenders.
The AIM-listed group more than doubled its projected annual pre-tax losses for the last financial year from £37.1m to around £91m.
He attributed the performance in part to higher costs and protracted construction projects resulting from staff shortages and supply chain issues delaying the delivery of certain materials.
Only 180 private homes were completed in the year, down from 216 in the previous 12 months, despite their average sale price climbing to £304,000, low interest rates and supply constraints which have supported the British property market.
Following a review of the remaining schemes within its contract income division, a partnership housing builder, the provisions on five separate projects have been increased from £13.4m to £28.8m.
The company also decided to divest itself of many non-core assets, including its portfolio of greenfield ‘strategic land’ options, which it said had been sold at a profit of £3.5million.
Chairman Simon Bennett acknowledged that the company had had a “hugely disappointing year”.
He said the group was still seeing “good interest in our new homes and valuable land granted in the south and southeast”, but Inland Homes warned that the outlook for the housing sector had deteriorated significantly since the mini budget.
Watkin Jones said the combination of interest rate hikes, growing numbers of full-time students and the imbalance between housing supply and demand provided a healthy foundation for future growth.
Richard Simpson, its managing director, added: “Demand from tenants in the underlying sector for rental accommodation remains very strong, and we have entered the new financial year with a strong pipeline secured and record levels of development consents.
“The good liquidity of our balance sheet puts us in an excellent position to take advantage of attractive land acquisition opportunities, which will support the recovery of margins as market conditions improve in the second half of the year.”
Shares of Watkin Jones were down 2.6% at 106.2p late Wednesday afternoon.