Watkin Jones has revised down its annual profit outlook after a number of property transactions did not complete as planned, the developer said on Friday. The business, which specialises in constructed built-to-rent housing, had previously expected a stronger second half conditional on the closing of several investor-backed contracts in the final quarter.
Management now judges it unlikely that all of those agreements will be concluded by the company’s September 30 fiscal year-end. As a result, Watkin Jones expects its adjusted operating profit for the full year to be broadly in line with the level recorded in the first half.
The company pointed to a combination of higher interest rates and wider economic and geopolitical uncertainty as factors that have made institutional buyers more cautious about completing deals. Watkin Jones and similar UK residential developers frequently depend on selling assets or securing forward-funding arrangements with institutional investors; postponements in those transactions reduce the immediate profit contribution the developer can recognise.
Those market stresses are not confined to built-to-rent. The firm said the squeeze on margins from hesitant buyers is being felt across the housing supply chain, including housebuilders and providers of student and rental accommodation. Watkin Jones specifically identified elevated construction costs and substantial building safety remediation bills as additional pressures bearing on the sector, noting that such costs are affecting peers including student and rental accommodation operators such as Unite (LON:UTG).
Despite the short-term hit to expected results, Watkin Jones described its balance sheet as robust. The company said that, assuming market conditions improve, it is well positioned to capitalise on long-term demand in its target sectors.
Context limitations - The company’s statement focuses on transaction timing and market conditions without providing additional quantified guidance beyond the assessment that adjusted operating profit for the year will be similar to the first half. No further financial figures or timing for when the delayed deals might complete were disclosed.