Watkin Jones: Property developer lowers profit guidance warning of ‘slow’ outlook

Property developer Watkin Jones has warned investors that a “slower than expected” summer market and “uncertainty” over the pace of interest rate cuts will weigh on its full year results, as it lowered profit guidance.

In a trading update, the Aim-listed firm, which in its half-year results in May returned to profit thanks to a £4m jump in revenue, conceded that it is now unlikely to complete any further deals before the end of its current reporting period at the end of September.

Watkin Jones lowered its profit guidance to between £10m and £12m this financial year, while gross cash is now expected to be £80m and net cash will be approximately £65m – ahead of expectations.

Despite the new guidance, key fundamentals remained up substantially on the firm’s annual results in 2023, when it posted a full year profit of just £0.2m and had a gross cash of £67m.

The firm, which lowered expectations despite having signed a landmark student accommodation deal last month, 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.”

Watkin Jones also expects the “slower than expected” pace of recovery to impact its 2025 results.

It no longer expects its adjusted operating profit in 2025 to beat its full year guidance for 2024 figure, and will be “significantly influenced by the evolution in forward liquidity”.

While it would be possible to deliver year on year progress in 2025, it would be contingent on market conditions improving “at a faster pace” in the new financial year, the firm added.

The update comes just weeks after the firm, a build-to-rent specialist with properties throughout the UK, announced a £300m deal for a new 397-bed purpose-build student accommodation development in Stratford.

But the transaction, which was the first between Watkin Jones and the Housing Growth Partnership – a joined venture between Lloyds Banking Group and Homes England, had already been reflected in the developer’s guidance.

The dent to profit and 2025 guidance will be another blow to the London-listed firm, which has suffered from a languid share price – down approximately 75 per cent in the past two years – due partially to costly cladding-related building safety updates that it needed to make on several of its buildings.