Watkin Jones and Inland Homes post weaker earnings as homebuilding costs climb and demand weakens
- Watkin Jones revealed annual pre-tax profits plummeted by 64% to £18.4m
- Inland Homes shares plunged after it admitted breaching lending covenants
- The property sector has been badly impacted by September’s mini-budget
British property developers Watkin Jones and Inland Homes have revealed significant slumps in earnings amid soaring costs and weaker sales volumes.
Student accommodation builder Watkin Jones saw pre-tax profits plunge by 64 per cent to £18.4million for the year ending September 2022.
Though the group achieved record forward sales totalling £900million, while revenue was only moderately down on the prior 12 months, trading was badly affected by heightened market volatility towards the end of the period.
Setback: Student accommodation builder Watkin Jones revealed pre-tax profits plummeted by 64 per cent to £18.4million for the year ending September 2022
Two forward sales were deferred in the wake of September’s mini-budget, which led to mortgage rates spiking and a sell-off in government debt.
Watkin Jones was also hit by a £30.4million charge related to the Building Safety Act, which compels housebuilders to finance the removal of unsafe cladding and make other fire safety improvements to residential developments.
Meanwhile, Inland Homes shares plummeted by a third after the Beaconsfield-based company admitted to breaching covenants with two lenders.
The AIM-listed group has more than doubled expected annual pre-tax losses for the last fiscal year from £37.1million to around £91million.
It partly blamed the performance on higher costs and prolonged construction projects resulting from staff shortages and supply chain issues delaying the delivery of certain materials.
Only 180 private homes were completed during the year, against 216 in the previous 12 months, although their average selling price shot up to £304,000 as low interest rates and continued supply constraints bolstered the UK property market.
Following a review of remaining schemes within its contract income division, a builder of partnership housing, provisions on five separate projects have been increased by £13.4million to £28.8million.
The business has also decided to divest from numerous non-core assets, including its greenfield ‘strategic land’ option portfolio, which it said had been sold at a £3.5million profit.
Chairman Simon Bennett acknowledged that the firm had experienced an ‘extremely disappointing year.’
He noted the group was still seeing ‘good interest for our new homes and valuable consented land in the South and South East,’ but Inland Homes warned that the housing sector’s outlook had significantly worsened since the mini-budget.
In comparison, Watkin Jones said the combination of interest rates hikes, expansion in full-time student numbers and imbalance between housing supply and demand provided a healthy basis for further growth.
Richard Simpson, its chief executive, added: ‘Underlying sector tenant demand for residential for rent remains very strong, and we have entered the new financial year with a strong secured pipeline and record levels of consented developments.
‘Our good balance sheet liquidity puts us in an excellent position from which to take advantage of attractive land acquisition opportunities, which will support margin recovery as market conditions improve in the second half of the year.’
Watkin Jones shares were 2.2 per cent lower at 106.6p just after 4pm on Wednesday, meaning their value has shrunk by over 57 per cent in the past year.