- Strong forward sales for 2021 financial year
- Intention to pay full-year dividend in line with 2 times cover
Watkin Jones (WJG:179p), a developer specialising in purpose-built student accommodation (PBSA) and build-to-rent (BTR) housing, issued a pre-close trading update while I was on annual leave earlier this month. It’s worth commenting on for several reasons.
Firstly, a strong second-half recovery means that operating profit for the 12 months to 30 September 2020 will be in the range £48m to £50m on revenue of £350m. Admittedly, that’s still down on the £54m operating profit reported in the 2019 financial year, but it’s bang in line with house broker Peel Hunt’s full-year adjusted pre-tax profit estimate of £45m when I last suggested buying the shares, at 142p, at the interim results (‘Exploit cash-rich value plays, 15 May 2020). Please note that the profit guidance is stated before exceptional items: £6m for Covid-19 disruption; £15m for cladding replacement costs, as previously disclosed; and a £1.9m impairment charge on six legacy leased PBSA assets. On this basis, expect underlying earnings per share (EPS) of 14.4p and a payout of 7.2p a share based on the board’s policy of maintaining two times dividend cover.