Watkin Jones at Mello 13.7.16

Presentation by Mark Watkin Jones, CEO; Phillip Byrom, CFO; Alex Pease, Investment Director

A brief overview of this comprehensive presentation:

Mark Watkin Jones, is the final family member in the company after many generations. In 1990 Mark opened an office in Chester. A contract to build 30 Premier Inn’s for Whitbread launched him. They then did contracts for Tescos and other supermarkets followed.

They started work on student accommodation in 1999, which has since become a core part of the business.

In 2008 WJG had £160m bank debt with HBOS, when Lloyds took over the debt, they wanted their money back. This forced WJG to find another source of finance. This is when they started working with the institutions to provide funding, providing them with exposure to property as an asset class and the yield it provides.

Today WJG are most focussed on student accommodation (84% revenue and 94% profit), with more scope to grow in the Private Rental Sector. Earnings are highly visible and they have low CAPEX requirement.

At every stage WJG keep risk and leverage to a minimum. They have a carefully mapped out model, the stages are: site procurement and planning; transaction and funding; construction and delivery; scheme management. They want 20% return on capital employed. Most of the costs are known in advance, and they know the yield they can achieve post construction. So site costs are negotiated based on that. A site is bought subject to planning, again avoiding risk. Occasionally if there’s good visibility on planning, they’ll buy without planning, which means they’ll get a 20% increase on the return.

WJG work with many different institutions including M&G, Legal and General. They know who to go to for different opportunities.

Alex Pease, Investment Director, talks through a little of the axioms of land purchase, and bringing the institutions on board.

Phillip Byrom, CFO, runs through the H1 figures in detail. Rev up 40.6% Adj PTP up 85%. GM has gone up to 16.1% from 14.7%, and this should increase to 17.9% in H2.
WJG have a small residential section focussed on N Wales and the NW. This has a land bank for future developments.

The IPO in March 2016 bought out the rest of the family. Today, Mark is the only family member actively involved in the company. Senior management have shares in the company.

With Brexit, it’s too early to know if there’s any impact. To date, all is going ahead as normal. Student accommodation is a good sector in uncertain times. Institutional investors are in for the long term. It’s too early to judge if yields will change. (Yields currently 4-7% dependent on location).

Schemes for FY17 are all sold; they’re currently working on FY18 and 19 to underpin future revenues.

 

Presentation slides can be viewed here (a new window will open).

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