Watkin Jones Annual Report 2019

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FY2019 Annual Report · Watkin Jones

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CREATING THE
FUTURE OF
LIVING

Annual report and financial statements 2019

CONTENTS

Strategic report
pages 01 to 57

02 Our highlights

Progressing our
development pipeline

06 At a glance

Investment case

08 Chairman’s statement

10 Q&A: Richard Simpson

18 Our strategy

19 Our strategy in action

20 Key performance indicators

22 Operating review

36 Engaging our stakeholders

38 Sustainability

44 Financial review

12 Chief Executive Officer’s review

Risk management and principal risks

15 Business model

Governance
pages 58 to 73

58 Board of Directors

Chairman’s introduction

61 Corporate governance

64 Audit Committee report

Financial statements
pages 74 to 118

74 Directors’ responsibilities

Independent auditor’s report

Consolidated statement
of comprehensive income

Consolidated statement
of financial position

Consolidated statement
of changes in equity

Consolidated statement
of cash flows

Company information
pages 119 and 120

Nomination Committee report

Remuneration Committee report

73 Directors’ report

Notes to the consolidated
financial statements

115 Company statement of
financial position

116 Company statement of
changes in equity

117 Notes to the Company
financial statements

Student accommodation

To read more go to page 22

Build to rent

To read more go to page 26

119 Advisers

120 Glossary

119 Shareholder information

120 Financial calendar

Residential

To read more go to page 34

Watkin Jones Group

@Watkin_Jones

Watkin Jones Group

Visit us online
www.watkinjonesplc.com

Watkin Jones plc // Annual report and financial statements 2019

Welcome to the
Watkin Jones plc
annual report and financial statements 2019

Watkin Jones is the UK’s
leading developer and
manager of residential
for rent properties.

We have unrivalled experience in the
purpose built student accommodation
(“PBSA”) market. Since 1999, we have
completed 123 developments with
41,000 beds. We have a strong reputation
for quality and on-time delivery and
excellent relationships with the institutions
who acquire our developments. We are
now leveraging this expertise in the build
to rent sector.

Fresh Property Group (“FPG”) is our
specialist accommodation manager.
It manages nearly 18,000 student beds
and build to rent apartments on behalf
of our institutional clients.

This gives us an end-to-end solution
for investors, provided entirely in-house,
and generates invaluable feedback from
tenants. Their input helps us to ensure our
future developments keep pace with the
latest demands.

We also develop homes for sale and have
completed more than 80 developments,
generating 2,500 homes for sale. These
range from starter homes to executive
housing and apartments.

The Group has a capital-light business
model, in which we forward sell most of our
developments before we start construction
work. This helps to minimise risk and
generates strong returns and cash flows.

Our purpose is to
create the future of living.

This means creating
residential properties
at the forefront of societal
and technological change,
in which people choose
to live.

Strategic reportGovernanceCompany informationFinancial statements 02

Watkin Jones plc // Annual report and financial statements 2019

OUR
HIGHLIGHTS

Revenue1

Gross profit1

+3.2% to
£374.8 million

(2018: £363.1 million)

+6.0% to
£76.8 million

(2018: £72.4 million)

Adjusted operating profit2

Operating profit1

+5.4% to
£52.3 million

(2018: £49.6 million)

-7.8% to
£49.7 million

(2018: £53.9 million)

Adjusted profit before tax2

Profit before tax1

+4.5% to
£52.3 million

(2018: £50.1 million)

-8.5% to
£49.7 million

(2018: £54.3 million)

Adjusted EBITDA3

EBITDA3

+3.6% to
£53.9 million

(2018: £52.0 million)

-8.8% to
£51.4 million

(2018: £56.3 million)

1. FY19 is the first year that the Group has

adopted IFRS 15 ‘Revenue from Contracts
with Customers’. This requires us to account
separately for the land sale and development
agreement elements of forward-sold contracts,
rather than treating them as a combined
agreement. The effect on the Group’s results
has been to reduce FY19 revenue and profit
before tax by £0.6 million. The prior period
comparatives have not been restated.

2. For FY19, adjusted operating profit, adjusted
profit before tax and adjusted basic earnings
per share are calculated before the impact of an
exceptional charge of £2.6 million. This charge
relates to the commitment to compensate the
Group’s new CEO, Richard Simpson, for forfeiting
outstanding incentives held in respect of his
former employer, of which £2.2 million is a
non-cash charge. For FY18, adjusted operating
profit, adjusted profit before tax and adjusted
earnings per share are calculated before the
impact of an exceptional gain of £4.3 million.

This gain related to compensation for the
reduction in scope of services and early
termination of management contracts for
assets sold by the Curlew Student Trust
(the “Trust”) and the Group’s share of
profit from the sale of the assets paid on
its carried interest investment in the Trust.

3. EBITDA comprises operating profit from

continuing operations plus the Group’s profit
from joint ventures, adding back charges for
depreciation and amortisation. For both FY19
and FY18, adjusted EBITDA is stated before
the respective exceptional items set out in
note 2 above.

4. Adjusted return on equity is calculated as profit
before interest and tax, excluding exceptional
items, as a percentage of total equity.

FINANCIAL
HIGHLIGHTS

• Revenue up by 3.2%

to £374.8 million (FY18:
£363.1 million), underpinned
by student accommodation
development and benefiting
from strong growth in build
to rent (“BtR”) revenues.

• Gross profit of £76.8 million, up
6.0% from £72.4 million in FY18
and reflecting a robust gross
margin of 20.5% (FY18: 20.0%).

• Adjusted profit before tax

increased by 4.5% to £52.3
million (FY18: £50.1 million).

• Final dividend of 5.6 pence per
share, giving a total dividend of
8.35 pence per share, up 9.9%
and fulfilling our previously
stated policy of moving to a
dividend twice covered by
adjusted earnings.

• Net cash inflow from operating

activities of £17.6 million
(FY18: £54.4 million).

• Gross cash at the year end of
£115.6 million (30 September
2018: £106.6 million) and net
cash at the year end of £76.8
million (30 September 2018:
£80.2 million), after accounting
for £14.8 million cash cost of
acquiring BtR site in Brighton
& Hove.

• Adjusted return on equity4

of 29.9% for the year (FY18:
33.2%), reflecting the Group’s
capital-light business model.

Watkin Jones plc // Annual report and financial statements 2019

BUSINESS
HIGHLIGHTS

Student accommodation
development
• Six developments (2,723 beds)

completed on time ahead of the
2019/20 academic year (FY18:
ten developments, 3,415 beds).

• All seven developments (2,609

beds) for delivery in FY20
forward sold, with a further
four developments (1,928 beds)
forward sold for FY21 delivery
and 448 beds in legals for sale.

• Added prime sites to the future
pipeline in Birmingham, Exeter,
Edinburgh and Bath.

• Total forward sold and secured
development pipeline of 6,670
student beds across 17 sites, for
delivery between FY20 and FY24.

Build to rent development
• Continued to make good progress
with the 315-apartment scheme at
Reading and the 301-apartment
scheme in Wembley, with both on
schedule for delivery in FY21.

• Three further schemes forward

sold (396 apartments) for delivery
between FY20 and FY22.

• Secured prime development sites
in Brighton & Hove (for delivery
in FY22) and Woking (for delivery
in FY23) and, subsequent to the
financial year end, in Birmingham
(for delivery in FY23).

• Obtained planning consent for
sites in Sutton (forward sold)
and Leicester.

• Total forward sold and secured
development pipeline, including
Reading and Wembley, of nine
sites (approximately 2,300
apartments) for delivery between
FY20 and FY23.

Accommodation management
• At 30 September 2019, FPG

managed 17,721 student beds
and BtR apartments across 64
schemes (30 September 2018:
15,421 beds and apartments,
across 56 schemes).

• Continued success in winning

management contracts for new
and existing schemes. In total,
FPG is currently contracted to
manage 20,448 student beds
and BtR apartments, across
66 schemes, by FY22.

Residential
• Continued robust performance,
with 150 homes and apartments
sold (FY18: 175 sales), including
42 apartments at developments
in Stratford and Bath.

• Forward sold a 35-apartment
development in Chester, for
delivery in FY20.

• Commenced works under a
development agreement for
75 apartments at Marshgate,
Stratford for delivery in FY21.

Net cash

-4.1% to
£76.8 million

(2018: £80.2 million)

Adjusted basic earnings per share2

+4.6% to
16.7 pence

(2018: 16.0 pence)

Basic earnings per share

-8.9% to
15.8 pence

(2018: 17.3 pence)

Dividend per share

+9.9% to
8.35 pence

(2018: 7.6 pence)

Strategic reportGovernanceCompany informationFinancial statements

Watkin Jones plc // Annual report and financial statements 2019

PROGRESSING OUR
DEVELOPMENT PIPELINE

We continued to benefit from our low‑risk, capital‑light business model
during the year, completing a number of forward sales and adding prime
development sites for PBSA and BtR to the pipeline.

A year of
continued
progress

December 2018
• Secured a development agreement

for a residential apartment scheme in
Marshgate, Stratford.

March 2019
• Acquired a BtR site in Woking.

• Completed the forward sale of a

PBSA development and an adjacent
BtR development to two separate
clients on a site in Wembley.

Watkin Jones plc // Annual report and financial statements 2019

August 2019
• Completed a development agreement
for a PBSA development in Glasgow.

July 2019
• Completed the forward sale of a

PBSA development in Canterbury.

• Completed a development agreement
for a PBSA development in Swansea.

• Secured planning permission for a

PBSA development and an adjacent
BtR development on a site in
Leicester.

• Acquired a PBSA development site

in Exeter.

• Secured a BtR site in Brighton & Hove.

September 2019
• Completed the forward sale of a

mixed PBSA and BtR development
in Sheffield.

• Forward sold BtR developments in

Sutton and Bournemouth.

• Sold two PBSA developments in

Chester.

• Secured a development agreement

for a PBSA development in
Edinburgh.

• Obtained planning consent for a
PBSA development in Bristol.

• Secured a mixed PBSA and BtR

development site in Edinburgh and a
PBSA site in Bath.

• Forward sold a residential apartment

development in Chester.

Strategic reportGovernanceCompany informationFinancial statements 06

Watkin Jones plc // Annual report and financial statements 2019

AT A
GLANCE

The Group has four complementary businesses,
which together position us to create the future of living.

STUDENT
ACCOMMODATION
We are one of the UK’s leading
developers of PBSA, with a reputation
for high quality and on-time delivery.
Student accommodation development
is currently the main contributor to the
Group’s revenue and profits.

Find out more on page 22

BTR

BUILD
TO RENT
We have growing momentum in this market,
drawing on our expertise in PBSA to deliver
purpose designed BtR properties for
institutional investors. BtR is set to make
a comparable contribution to the Group’s
revenues as PBSA in the medium term.

Find out more on page 26

ACCOMMODATION
MANAGEMENT
Fresh Property Group is a leading
independent manager of PBSA and BtR
assets. It presents our institutional clients
with a unified accommodation
management offering.

Find out more on page 30

RESIDENTIAL
Watkin Jones Homes builds properties
ranging from starter homes to executive
housing and apartments, designed to
reflect modern lifestyles.

Find out more on page 34

Revenue

Student accommodation

Build to rent

£246.1 million

(2018: £312.7 million)

£73.6 million

(2018: £3.8 million)

Accommodation management

Residential

£7.5 million

(2018: £7.3 million)

£38.1 million

(2018: £30.0 million)

Student
accommodation (PBSA)

Build to rent (BtR)

Our student accommodation schemes

Between

we completed

1999 –
2019

123

schemes

towns and cities

delivering

41,000

student beds

Watkin Jones plc // Annual report and financial statements 2019
Watkin Jones plc // Annual report and financial statements 2019

07
07

INVESTMENT
CASE

Watkin Jones has a strong position in growing markets,
positioning us for further success.

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Strong track record based on
consistent delivery
Watkin Jones is a specialist in
residential for rent. We have a
20-year track record of assured
delivery, combined with
consumer insights that position
us to be at the forefront of
product development.

Complete solution for investors
Increasing consumer demand
for residential for rent
accommodation makes the
sector appealing for institutional
investors, who are looking to
acquire suitable assets and
employ specialist operators to
run them. We have excellent
institutional relationships and
can offer them a complete
solution for their needs.

Resilient business with
excellent visibility of earnings
and cash flows
Our development pipeline gives
us excellent visibility of our
revenues, earnings and cash
flows. Combined with our strong
balance sheet and robust supply
chain relationships, this makes
us a resilient business.

Attractive markets
The residential for rent market
has attractive characteristics,
in both PBSA and BtR, offering
the potential for us to grow for
the long term.

Low-risk, capital-light
business model
This strong investor demand
for new, high-quality products
in turn drives demand for
client-funded forward sales
transactions, allowing us to
de-risk our development activity
and generate strong cash flows
and high returns from our
capital-light business.

Attractive competitive
environment
Our markets have high
barriers to entry, ranging from
institutions’ desire to work
with experienced developers
and managers of residential
for rent properties, such as
Watkin Jones, to the need for
land sourcing, planning and
transaction expertise. These
barriers mean we operate
in an attractive competitive
environment.

Strategic reportGovernanceCompany informationFinancial statements

Watkin Jones plc // Annual report and financial statements 2019

CHAIRMAN’S
STATEMENT

This was another good year
for Watkin Jones, which again
demonstrated the robustness
of our business model.

Grenville Turner
Non-Executive Chairman

This year has shown
the success of our
move into build to
rent development,
which was a material
contributor to our
financial performance
for the first time.

This was another good year for
Watkin Jones, which again demonstrated
the robustness of our business model.
The Group delivered further profitable
growth in line with expectations, despite
the difficult macro environment caused
by Brexit-related uncertainty and
near-recessionary economic conditions
in the UK.

Performance
Student accommodation development
remained our core revenue generator
and we once again completed all our
developments on time, ahead of the start
of the academic year. This distinguishes us
in a market where more than 20 competitor
schemes were reportedly delivered late in
2019, meaning investors see us as a trusted
delivery partner. We have the commitment
and discipline to deliver and a good
understanding of risk and how to mitigate
it. We also benefit from our excellent
subcontractor relationships, which we
leverage to deliver on budget and to the
right quality.

This year has also shown the success of
our move into build to rent development.
The strong demand for the two
developments we forward sold at the end
of the year provided further evidence of the
depth of institutional interest in this sector.

These sales, coupled with the continued
good progress of our on-site developments
at Reading and Wembley, meant that
for the first time BtR development was
a material contributor to our
financial performance in FY19.

The accommodation management
and residential businesses also had a
good year.

The performances achieved across the
Group mean that our people continue to
work for a successful business, which
values their contribution and aims to help
them achieve their potential. As part of
this, we need to make sure safety and
compliance remain at the top of our
agenda. The Group safety team presented
to the Board during the year about their
experiences on our sites and how they go
about their work, and the Board has made
clear that we will always prioritise safety.

Dividends
We have continued to implement a
progressive dividend policy, and in line
with our previous guidance, we will pay
a dividend for this year that is twice
covered by adjusted earnings. The Board
is therefore recommending a final dividend
of 5.6 pence per share. Combined with the
interim dividend of 2.75 pence per share,
this gives a total dividend for the year of
8.35 pence, up 9.9% on the 7.6 pence paid
in respect of FY18.

Watkin Jones plc // Annual report and financial statements 2019

Board in focus 2019

Capital Markets Day,
November 2019.

The final dividend will be paid on
28 February 2020 to shareholders on
the register at the close of business on
24 January 2020.

The ability to pay attractive dividends
to shareholders reflects the Group’s
profitability and the benefits of our
capital-light business model. This limits
our risk and generates good levels of cash,
which we can reinvest to grow the business
and use to reward our shareholders.

Board, management and people
Richard Simpson was appointed to
succeed Mark Watkin Jones as CEO.
He commenced his role in January 2019
and has made a successful transition into
the business. Richard is already making
a significant contribution, in terms of
developing our strategy, decision-making
processes and structures.

More generally, strengthening the senior
team and refining their responsibilities
has been an important focus area for us
over recent years. It has been pleasing to
see them really gel as a leadership group,
which is critical both for the robustness of
our business and for succession planning.

The Board is keenly aware of the
importance of culture to sustainable
business success. Under Richard’s
leadership we are doing even more work
in this area, to ensure our culture is both
demanding and supportive. We are
increasing engagement with our people
and have hired the Group’s first Human
Resources Director, Jackie Kelly, with
culture being high on her agenda.

We also extended the Board in January
2019, with Liz Reilly joining us as a
Non-Executive Director. Liz has been a
great addition and her appointment has
enhanced the quality of our discussions
and debate, as well as increasing diversity
on the Board.

Governance
The Board spent considerable time during
the year supporting and challenging the
development of the Group’s strategy, which
is set out on page 18. We took a granular
approach, which included receiving
expert presentations on our markets and
their attractiveness, a review of our own
business and its performance, and an
analysis of our competitors and how we
will continue to differentiate ourselves, so
we can effectively deploy capital and build
on our current success. We also focused
on risk management and in particular the
Group’s preparations for Brexit, which have
been carried out in detail and to a high
standard, as described on page 14.

This year, we had our first externally
facilitated review of the Board’s
performance. The feedback from the review
was predominantly positive, in particular
noting the cohesive team and the Board’s
strong culture, as well as identifying areas
we will address. More information can be
found on page 62.

Looking forward
While we need to keep a close eye on
the macro environment, which can
change rapidly, our business model is
proving robust through different cycles.
The extension into the BtR market offers
significant growth potential, while our
core student accommodation business
continues to perform very well and
underpins our growth ambitions. I therefore
believe the Group has a bright future
and I look forward to reporting on further
progress in the coming year.

Grenville Turner
Non-Executive Chairman

13 January 2020

Strategic reportGovernanceCompany informationFinancial statements 10

Watkin Jones plc // Annual report and financial statements 2019

RICHARD SIMPSON

New Chief Executive Officer
Richard Simpson discusses the
future for the business and the growth
opportunities he sees ahead of us.

Q:
What are the growth
opportunities in your sectors?

There are two significant factors driving
PBSA development: the growth in
student numbers and the obsolescence
of existing stock. From 2021, we’re
going to see the number of 18 year olds
start to increase again and that will
continue for at least a decade. If current
participation rates are maintained, that
will lead to an extra 100,000 students. In
addition, the Government’s white paper
set out its aim to increase the number of
international students by 30% by 2030.
If delivered, that would mean a further
130,000 students. So together, these
factors would increase student numbers
by 15%.

On the supply side, there are currently
around 627,000 PBSA beds in the UK,
just over half of which are owned by
universities. Much of that university
owned stock is at least 20 years old and
has not kept pace with students’ needs.
So there is significant potential for
redevelopment of this stock.

For BtR, we’re seeing a major increase
in the number of households choosing
to rent. A large amount of private rented
sector housing is of low quality and BtR
offers a much better living experience.
That’s driving big demand for BtR
homes. However, there are currently
only 143,000 BtR units in total, including
those under development. Savills
estimate a mature market could reach
1.7 million units, which would require
decades of new developments
to achieve.

From our position
of strength, and
given the structural
opportunity within
both PBSA and BtR,
now is the right time
to be more ambitious
about increasing our
market share.

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Watkin Jones plc // Annual report and financial statements 2019

Q:
What is the future for the
residential business?

The residential build to sell business
remains an important part of what we
do. We see signs of increasing
institutional interest in acquiring houses,
as part of a broader build to rent offer.
One part of the solution to the UK
housing crisis may be to get institutional
capital to come into the UK housing
market at scale, with management
provided by professional landlords to
give tenants a fantastic living experience.
It could be an interesting strategic option
to tie build to sell into our BtR business
in the medium term, so we can develop
houses for institutions to own.

In the near term, we can build houses
nationally but we have a particular focus
on the North West, where affordability
is among the strongest in the country.
I also like the expertise it gives us, in
terms of understanding residential
construction through the lens of building
houses rather than city centre blocks.

Underlying all of this, our people need
to be energised by our strategy and our
ambition for the business. The strategy
was born from engagement and
discussion with the whole business, so
our people support it and really want to
be part of that journey.

Q:
You are putting more emphasis
on understanding the needs of
your customers. Why is that so
important?

We’re thinking about the business in a
different way. It’s less about being
“business to business” and more about
being “business to customer”.
That means we need a real
understanding of the people who live in
our developments and what they want,
both now and in the future. FPG is a
major advantage for us here, as it gives
us constant feedback from nearly
18,000 student and BtR customers.

The logic is that if we’re satisfying their
demands through exemplary buildings,
those buildings will be full of happy
customers, which will benefit the rental
performance. That makes our
developments more attractive to
institutional customers. At the same
time, we use our strong relationships
with the institutions to understand their
appetite for investing in specific types of
property in specific locations. All of this
feeds into our development plans, so we
can deliver buildings that meet
customer needs and that institutions
want to own.

Q:
What are conditions like in the
supply chain?

Our supply chain partners are crucial for
our ability to deliver on time and to the
right quality. Many parts of the
construction sector are under pressure
at the moment, with some major
contractors having gone into
administration. That makes us an even
more attractive partner for our supply
chain. We’re financially strong, we’re
stable and we have a defined pipeline of
work in both PBSA and BtR. That means
our supply chain really sees the benefits
of working with us.

Q:
Why is now the right time to
launch a new strategy?

We’re now more than three years
post-IPO and, in that time, Watkin Jones
has established a good track record as
a public company. We’ve shown our
shareholders that we have the capability
to deliver consistently. From that
position of strength, and given the
structural opportunity within both the
PBSA and BtR sectors, I feel that now
is the right time to be more ambitious
about increasing our market share.

Q:
What are the biggest challenges
facing the Group?

First, ensuring we’re building the right
product in the right sector. That comes
back to our customer insight and
understanding what they want. We’re
close to our institutional investors and
through FPG means we’re also close to
the customers who live in the
developments we manage.

Then we need to buy the right land.
We have an outstanding record over
many years of buying attractive land
all over the UK. Our track record of
then obtaining planning is excellent.
Planning is core to our value chain and
we resource it and prioritise it
appropriately. Then we need to manage
construction effectively, while making
sure we have done what we can to
mitigate any potential impact of Brexit.

Watkin Jones plc // Annual report and financial statements 2019

CHIEF EXECUTIVE
OFFICER’S REVIEW

This was another successful
year for Watkin Jones.
Our performance demonstrates
the quality of the business and
shows we are in the right sectors.

Richard Simpson
Chief Executive Officer

Our ambition is to
be the leader for
developing and
managing residential
for rent schemes in
the UK.

This was another successful year
for Watkin Jones. Our performance
demonstrates the quality of the business
and shows we are in the right sectors.
Demand across our operations remains
resilient, in contrast with the broader
uncertainty seen in many sectors in
the UK.

Performance
Revenue from continuing operations
was £374.8 million (FY18: £363.1 million),
an increase of 3.2%. Gross profit rose
by 6.0%, from £72.4 million in FY18 to
£76.8 million in FY19, as we achieved our
margin targets across the Group. Operating
profit was 5.4% up at £52.3 million (FY18:
£49.6 million) before an exceptional charge
of £2.6 million (FY18: exceptional gain of
£4.3 million). The pre-exceptional operating
margin was at 14.0% (FY18: 13.7%).
This report uses adjusted performance
measures where necessary in order to give
a clearer understanding of our underlying
performance. Adjusted measures exclude
exceptional gains last year and the one-off
cost of my recruitment this year.

Our forward sale model continues to
benefit both our cash generation and our
returns. The operating cash inflow for the
year was £17.6 million (FY18: £54.4 million),
while our return on equity was 29.9%
(FY18: 33.2%).

Student accommodation development
remains the largest revenue generator
in the Group. Revenues were in line with
expectations at £246.1 million (FY18:
£312.7 million), with the lower level of
revenues reflecting a reduction in the
number of student beds delivered as we
focused on selecting development sites
on which we could achieve strong margins.
In total, we delivered six student schemes
with 2,723 beds in FY19 (FY18: ten
schemes with 3,415 beds). We once again
completed all our developments on time,
ahead of the start of the academic year.
The business has a high-quality pipeline of
development sites coming through.

For the first time, build to rent development
made a significant contribution to our
performance, with revenue of £73.6 million
(FY18: £3.8 million). This business will be
an increasingly important growth driver for
us in the coming years and we continue
to prove the success of our low-risk
forward sale model, having progressed
our existing developments, completed a
number of forward sales, added new sites
to the pipeline and obtained several new
planning consents.

Watkin Jones plc // Annual report and financial statements 2019

Business highlights

• Revenue from continuing operations

• Secured student accommodation

rose to £374.8 million in FY19
(FY18: £363.1 million).

development pipeline of 6,670 beds
across 17 sites, with eleven forward
sold (4,537 beds).

• Operating profit achieved in FY19,
before an exceptional charge of
£2.6 million, was 5.4% higher at
£52.3 million (FY18: £49.6 million).

• Secured BtR development pipeline
of approximately 2,300 apartments
across nine sites, with five forward
sold (1,012 apartments).

• Fresh Property Group contracted to
manage 17,721 PBSA beds and BtR
apartments for FY20 (64 schemes),
compared to 15,421 beds and
apartments across 56 schemes for
FY19. Continued success in winning
new contracts means FPG is currently
contracted to manage 20,448 PBSA
beds and BtR apartments by FY22.

FPG had a solid year, as new business wins
more than offset last year’s reduction in
beds following a client’s sale of its student
property portfolio. The business earns a
highly attractive margin and has excellent
prospects, with contracts in place to
manage a further 2,727 PBSA beds and
BtR apartments by FY22, and a pipeline
of opportunities offering the potential for
growth over and above this.

The residential business also had a good
year in FY19. It completed 150 sales (FY18:
175 sales), including 108 sales in its North
West heartland, and benefited from sales of
apartments in Stratford and Bath.

Strategy
During the year, we reviewed and refreshed
the Group’s strategy. The starting point for
our review was to confirm which markets
we wanted to be in.

The overall sector we operate in is
residential for rent and, within that, our
chosen markets remain PBSA and BtR.

Our ambition is to be the leader for
developing and managing residential
for rent schemes in the UK, by increasing
our market share in both PBSA and
BtR. We see the opportunity for growth
over the next five years as described on
page 18. To realise this opportunity, we
will leverage our existing capabilities and
maintain the same business model as
today, which is capital light and based
on forward sales, minimising risk and not
relying on debt finance.

Underpinning our ability to grow is
our understanding of our customers.
FPG shines a light on consumers for us,
so we know what students and BtR tenants
want from their homes. The business looks
after nearly 18,000 customers, giving us an
enormous amount of feedback. This helps
us to refine how we configure, build and
operate our buildings. We also need to
understand institutional investors’ appetite
for different types of product and locations.
This determines where we buy sites and
what type of building would suit them.

We have previously referenced the
possibility of creating a separate BtR
investment vehicle. The forward sales
of BtR developments we completed
towards the end of the financial year
showed us there is strong liquidity in the
sector. This means that while a dedicated
vehicle with a suitable partner might be
appropriate for us in the future, we do not
currently require one to succeed in the
BtR market.

People and culture
To support our growth plans, we need to
ensure our organisation is fit for the future,
with the right culture and level of resource.
We have done a lot of the groundwork this
year, including recruiting more people who
are expert in delivering buildings through
the development lifecycle.

Property development is a
multi-disciplinary process, requiring
a range of skills from understanding
customers to planning, acquiring sites,
procuring subcontracts and managing
construction. This requires strong internal
collaboration, transparency and knowledge
management. We therefore need a culture
which reflects this, where our people work
in cross-functional project teams and can
be more mobile, flexible and comfortable
with change. Being joined up will help
us to spot market changes and adapt
accordingly, resulting in better products.

Strategic reportGovernanceCompany informationFinancial statements 14

Watkin Jones plc // Annual report and financial statements 2019

CHIEF EXECUTIVE
OFFICER’S REVIEW continued

People and culture continued
We have made good progress with how
the business works together, focusing
on engagement and building teams.
This involves adjusting our internal
structures. We operated with three delivery
divisions for PBSA and separated the
development lifecycle in two: land sourcing,
planning and design; and then the delivery
of the building.

We have now created single, larger
delivery units for both student and BtR
development, as well as development
hub structures, which will lead to better
integration across the full development
lifecycle. This will enable better decision
making and deliver superior outcomes.
It will also make it easier to define career
paths for our people, so they can progress
within the business. We are therefore
investing in learning and development,
to help prepare people for the next step.

Sustainability
Our purpose – creating the future of living
– means we look to provide sustainable
solutions through the assets we develop
and manage. We need to create places
that will be attractive to live in for years to
come, which help their residents succeed
in life through the quality of their homes
and the customer service they receive, and
which play a part in fixing the UK’s housing
shortage. This in turn will create attractive,
long-term returns for our institutional
partners, encouraging them to invest more
in the residential to rent sector.

As a responsible business, we also
have to operate in a sustainable way.
That means minimising our environmental
impact, protecting the health and safety of
everyone on our sites, ensuring we have a
properly diverse and inclusive workforce,
engaging effectively with our supply chains
and benefiting the community.

The fire safety of the buildings we develop
is of paramount importance to us and we
construct our developments to high fire
management specifications. However,
the integrity of cladding systems and fire
protection measures used on high-rise
buildings is a matter of ongoing review
and is likely to be the subject of further
direction or new legislation in due course.
In the meantime, we will continue to work
with the owners of the properties we have
developed, as appropriate, to ensure the
continued safety of tenants.

More information on our approach to
sustainability can be found on pages
38 to 43.

Brexit
An important workstream during the year
was ensuring we are prepared for any
Brexit outcome. Our work has included
a wide range of scenario planning,
including identifying alternative sources
of supply for key materials sourced from
the EU, requesting our supply chain to
forward buy where necessary so we
can ensure continued progress with
our current schemes, understanding
the impact of tariffs and exchange rate
movements on our costs, ensuring we have
sufficient labour on site and reviewing our
counterparty risks.

As a business that primarily forward
sells its developments, acquires land on
a subject-to-planning basis, is net cash
positive and does not hold significant
property assets, we feel that our exposure
to even the hardest forms of Brexit is
relatively limited. Brexit may also create
land-buying opportunities for us, if it has an
impact on the wider economy. EU students
make up only around 7% of the total UK
student population, so Brexit should not
have a material impact on demand for total
PBSA beds.

Outlook
We are positive about the outlook for
both the student accommodation and
BtR sectors. There is continued investor
appetite in those markets and we are
confident in our ability to expand our
position as market leader. We therefore
expect to grow the business over the next
five years, in line with our strategy. While
Watkin Jones is not immune from any
potential impact of Brexit, we believe our
business model puts us in a strong position
to continue to grow.

Richard Simpson
Chief Executive Officer

13 January 2020

Watkin Jones plc // Annual report and financial statements 2019

BUSINESS
MODEL

By understanding consumer demand, investor demand
and delivering through development expertise, Watkin Jones
can create the future of living.

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OUR DEVELOPMENT MODEL:

Identify
potential developments

1
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Accommodation
management

Site procurement
and planning

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Watkin Jones plc // Annual report and financial statements 2019

BUSINESS
MODEL continued

Our business model is designed to support our purpose – to create
the future of living. We do this through a five‑part development model,
which helps us to remain a leader in our markets.

INPUTS

OUR DEVELOPMENT MODEL

Inputs to our business model
The following tangible and intangible
resources help us to create value for our
stakeholders:

People
We employ excellent people, with
significant experience of delivering on
time and to the highest standards.

Knowledge
We have a deep understanding of
our markets and how to develop and
manage schemes that meet the needs
of investors and tenants.

Relationships
Our strong relationships with our
customers, institutional investors,
supply chain, agents, consultants,
planning authorities and universities all
underpin our success.

Scale, reputation
and financial strength
As a well-capitalised tier 1 developer
with a strong reputation for delivery, we
are a partner of choice for key investors.

Natural resources
Our building processes use natural
resources including land, materials
and energy.

Identify potential
developments

Accommodation
management

2 Site procurement
and planning

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Transaction
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1 Identify potential
developments

The starting point for each development is our insight into what customers want.
FPG continuously engages with students and tenants, keeping us up to date with the
latest trends, so we can design our developments accordingly. We use our market
knowledge and understanding of investor demand to screen different regions, cities
and towns across the UK, to decide which locations will most successfully meet the
needs of both tenants and our institutional clients. We then identify sites through
our own staff, our network of agents and other consultants. This process may also
identify smaller sites for us, which are suitable for private residential apartments.
Having identified a site, we then work up a detailed proposal for the development,
which must be approved by our Investment Committee before it can proceed.

2 Site procurement
and planning

Our network of contacts enables us to buy many of our sites off market. Our track
record and reputation help us to buy sites at attractive prices, since we can offer
vendors more certainty of completion. We typically reduce risk by acquiring sites
subject to receipt of satisfactory planning. Our expert teams then liaise with the
planning authority. Our in-house planning resource is unusual in our sector and gives
us a significant advantage, allowing us to obtain planning permission more quickly
and at a lower cost.

Watkin Jones plc // Annual report and financial statements 2019

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OUTPUTS

The value we create
Our business creates value for
a wide range of stakeholders.

For institutional investors
Institutions benefit from high-quality
assets that meet their investment
criteria and management services that
help to maximise their returns.

Find out more on page 36

For customers
Student and BtR tenants and
occupiers of our homes gain from
high-specification homes and
excellent service.

Find out more on page 36

For our people
Our people get the opportunity to
develop their careers in a successful
and growing business.

Find out more on pages 36 and 38

For our supply chain
Suppliers benefit from a consistent
workload and the opportunity to grow
their business alongside ours.

Find out more on pages 36 and 41

For communities
Our developments free up houses of
multiple occupation, making them
available for local families, and improve
community facilities.

Find out more on pages 37 and 42

For government
We contribute to both communities
and national services through a
variety of taxes.

Find out more on page 46

For shareholders
Shareholders benefit from rising
earnings, cash flows and dividends.

Find out more on page 37

3 Transaction
and funding

Our forward sale model reduces our risk, as we generally aim to sell each scheme
to an investor before we start construction. We may on occasion decide not to
immediately forward sell a development, when we can earn a higher sale price
by waiting, but ultimately we do sell all of them. Forward sales give us excellent
visibility of our earnings and cash flow, as we bill the purchaser for the land
and each month during construction, rather than only receiving a lump sum on
completion. Selling our developments means we do not compete with our institutional
clients, encouraging them to share their plans with us. We also look for ways to add
value for clients, such as negotiating direct letting arrangements with universities
for student accommodation. Institutions’ desire to work with tier 1 developers,
such as Watkin Jones, is an important barrier to entry.

4 Construction
and delivery

Unlike many developers, we are experienced constructors, employing expert
construction directors and project managers to deliver the majority of our
schemes. We will use a third-party contractor where the geographic location of the
development warrants it, while providing project management oversight ourselves.
We have long-term relationships and agreed national rates with key suppliers. Our
supply chain regularly follows us from scheme to scheme, making them experts in
our developments. This helps us to deliver to a high standard and reduces our costs
of managing them. By staggering our PBSA and BtR developments, we can use the
same supply chain for both.

5 Accommodation
management

FPG gives us an end-to-end solution for investors and generates an income stream
beyond completion. It combines national scale with local knowledge, differentiating it
from its largely regional competitors. It can manage both PBSA and BtR schemes for
the same investor and focuses on repeat business with institutions, so it can manage
portfolios of assets for them.

FPG has a scalable platform, having invested significantly in systems and processes
which are tailored to student accommodation and build to rent. The required
investment means barriers to entry are high.

Watkin Jones plc // Annual report and financial statements 2019

OUR
STRATEGY

We have set clear strategic objectives for each
part of our business, with the aim of delivering
sustainable growth across the Group.

Defining our strategic ambitions
As discussed in the Chief Executive
Officer’s review on page 13, during the
year we undertook a detailed review of our
strategic priorities and options.

This included in-depth analysis of:

• our markets and their growth potential;

• our positions in those markets;

• the growth in output we could deliver

over the coming years; and

• the internal resources, structure and

supply chain we would require to deliver
that growth.

The review confirmed that:

• BtR development is an evolving but

• in the residential for rent sector we
have two core markets – student
accommodation and build to rent;

• our operational capabilities position us
for strong growth in those markets;

• we are already the leading developer in

PBSA, giving us the platform we need to
step up delivery;

clearly established sector with growing
institutional demand, giving us the
opportunity to establish Watkin Jones as
the leading BtR developer; and

• our residential business forms an

important part of the Group’s ambition
to create the future of living, enhancing
our residential living knowledge and
expertise.

STUDENT ACCOMMODATION DEVELOPMENT

BTR

BUILD TO RENT DEVELOPMENT

Our strategy in PBSA is to continue to leverage our leadership
position in student accommodation development, by:

We aim to grow in the BtR market while de-risking our
expansion, by leveraging:

• targeting the best locations;

• developing buildings that meet the current and future needs

of our customers, based on our customer insight;

• using our forward sale model to minimise risk; and

• building on our institutional relationships, to increase repeat

business.

• our PBSA design, planning and delivery expertise and our

supply chain, to capitalise on the strong similarities to build
to rent;

• our consumer and institutional knowledge, to create

leading-edge products; and

• our institutional relationships, to develop schemes on their

behalf using our low-risk forward sale model.

Growth opportunity:
3,500 PBSA beds per annum
for delivery by FY23/24

Growth opportunity:
1,000 BtR units per annum
for delivery by FY23/24

ACCOMMODATION MANAGEMENT

RESIDENTIAL

We will continue to grow Fresh Property Group by:

In residential, our strategy is to:

• offering institutional-grade letting and management services,
so institutions engage us to manage PBSA and BtR assets
developed by both Watkin Jones and third parties; and

• maintain our current delivery rate of c.150 homes a year,

focusing on our core North West market, whilst maintaining
a land bank of c.450 units;

• delivering an exceptional customer experience, which

• focus on mid-market units as our core product;

supports high occupancy, rental growth and low tenant
churn, which generates high-quality returns for our
institutional asset owners.

• look for opportunities to develop smaller assets for sale into

the BtR market; and

• use our residential expertise to deliver residential units in

mixed-use schemes.

Watkin Jones plc // Annual report and financial statements 2019

OUR
STRATEGY IN ACTION

PBSA and BtR case study
Kelaty House, London

The scheme
• 599 PBSA beds, 301 BtR apartments

• Practical completion Q3 2021

Acquisition
• Off-market acquisition – agent & vendor
confidence Watkin Jones would deliver

Structuring – transactional & technical
• Development expertise unlocked complex

mixed-use scheme

• Comprehensive redesign

Planning
• In-house planning unlocks +100 beds

Insight
• Wembley regeneration area

• Transport links & amenities

Institutional grade
• Forward fund to DWS (PBSA) and Singaporean

institutional investors (BtR)

• DWS’ first entry into the UK PBSA market

Capital-light structure
• DWS forward fund land purchase & PBSA

development

• Lum Chang forward fund BtR development

BtR case study
Holdenhurst Rd, Bournemouth

The scheme
• 159 BtR apartments and 37,000 sqft commercial

office space

• Practical completion Q1 2020

Acquisition
• Off market

• Mixed-use multi-phased development

Planning
• Change of use

• Office to BtR led scheme

Development expertise master planning
• Part of a master planning consent for 940 PBSA
beds, 129 hotel beds, 159 BtR apartments and
125,000 sqft commercial office space across
three sites

Insight
• Strong demographic and economic analysis

• Micro location

• Identified BtR market opportunity

Institutional grade
• Competitive market bidding

• Forward fund to M&G Real Estate

Strategic reportGovernanceCompany informationFinancial statements 20

Watkin Jones plc // Annual report and financial statements 2019

KEY PERFORMANCE
INDICATORS

We have established a range of key performance indicators
for the Group, to measure our progress towards achieving
long‑term, sustainable growth for shareholders. Adjusted measures
exclude the impact of exceptional items, to better reflect our
underlying performance.

Gross margin
(%)

20.5%

FY19

FY18

FY17

FY16

20.5%

20.0%

21.0%

20.1%

EBITDA
(adjusted) (£m)

£53.9m

FY19

FY18

FY17

FY16

£53.9m

£52.0m

£45.2m

£41.6m

Basic EPS
(adjusted) (pence)

16.7p

FY19

FY18

FY17

FY16

16.7p

16.0p

14.0p

12.4p

Purpose
Shows our ability to maintain and
improve the quality of our earnings
over time.

Definition
Gross profit as a percentage of revenue.

Performance
We achieved a gross margin of
20.5% in FY19, reflecting the focus on
high-quality developments in student
accommodation and the change in
business mix, with a larger contribution
from BtR development which has
slightly lower margins.

Purpose
Reflects our ability to deliver sustainable
earnings growth.

Definition
Earnings before interest, tax,
depreciation, amortisation and
exceptional items.

Performance
Adjusted EBITDA increased by 3.6%,
reflecting the growth in revenues and
the business mix effect noted under
gross margin.

Performance
Adjusted earnings per share were 4.6%
higher in FY19, reflecting our profit
growth during the year.

Purpose
Shows our ability to deliver profitable
growth and underpins our progressive
dividend policy.

Definition
Profit from continuing operations
attributable to ordinary shareholders,
adjusted to exclude exceptional items,
divided by the weighted average
number of shares in issue in the year.

Watkin Jones plc // Annual report and financial statements 2019

Cash inflow from operating
activities (£m)

£17.6m

£54.4m

FY19

FY18

FY17

FY16

£17.6m

£19.2m

£15.1m

Number of student
beds delivered

2,723

FY19

FY18

FY17

FY16

2,723

3,415

3,314

3,819

Number of student beds and BtR
units under management

17,721

FY19

FY18

FY17

17,721

16,617

12,337

FY16

8,310

Purpose
Demonstrates that our working
capital-light forward-sale model ensures
we turn our high-quality profits into
cash, which underpins our dividend
payout.

Definition
Cash flow generated by our operating
activities.

Performance
We delivered a cash inflow from
operating activities of £17.6 million.

The reduction in the year was due to
working capital movements and the
deal structure for the sale of a PBSA
development in Chester (see page 47).

Purpose
Shows our ability to deliver our
pipeline of student accommodation
developments, which provides the core
of our earnings and cash flow.

Definition
The number of beds in the student
accommodation development projects
we completed during the financial year.

Performance
We met our objective for the year
of delivering 2,723 beds, across six
developments.

The reduction in the number of student
beds delivered was the result of our
decision to focus on a smaller number
of development sites on which we could
achieve strong margins, in the light of
Brexit uncertainty.

Purpose
Shows our ability to expand our
high-margin accommodation
management business.

Definition
The number of student beds and BtR
units that Fresh Property Group is
contracted to manage on behalf of our
institutional clients.

Performance
The number of student beds and BtR
units under management showed strong
underlying growth in the year.

Strategic reportGovernanceCompany informationFinancial statements 22

Watkin Jones plc // Annual report and financial statements 2019

OPERATING
REVIEW

STUDENT
ACCOMMODATION

We completed 2,723
student beds at good margins
in FY19 and added to our
forward sold and secured
delivery pipeline.

HIGHLIGHTS

Student accommodation development

• Six developments (2,723 beds)

completed as scheduled in FY19.

• Eleven developments (4,537
beds) currently forward sold.

Total forward sold and secured development
pipeline of 6,670 student beds across 17 sites:

• FY20 deliveries – seven student
developments (2,609 beds)
scheduled for delivery.
All forward sold.

• FY22 deliveries – three sites
secured (1,032 beds), with
a number of additional sites
in progress.

• FY21 deliveries – seven student
developments (approximately
3,253 beds) scheduled for
delivery, six of which (2,838 beds)
have been secured. Four sites
(1,928 beds) are forward sold and
448 beds are in legals for sale.

• FY23/24 deliveries – one

site secured (191 beds), with
a number of additional sites
in progress.

Creating great
places to live for
the UK student
population.

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Watkin Jones plc // Annual report and financial statements 2019

Key statistics

Delivered FY19
2,723

beds

Pipeline
6,670

beds

Forward sold
4,537

beds

schemes

Performance
Revenues from student accommodation
development were 21.3% lower at
£246.1 million (FY18: £312.7 million), in line
with our expectations and reflecting the
lower number of student beds delivered in
FY19 as a result of our decision to focus on
a smaller number of development sites on
which we could achieve strong margins,
in the light of Brexit uncertainty. In FY19,
we completed six schemes with 2,723 beds,
compared with ten schemes with 3,415 beds
in FY18. In doing so, we maintained our
100% record of completing developments
before they were due to be let.

The gross margin for FY19 was 21.0%,
against 19.4% in FY18. The robust
margin this year reflected the mix profile
of the schemes in development and
our continuing success in sourcing and
obtaining planning for high-quality sites,
in locations with strong investor demand.
The gross margin in FY18 was affected
by the forward sales of a number of
developments on 30 September 2018.
These mainly constituted land sales and
totalled £42.6 million, with a margin of
11.1% being recognised. Adjusting for the
impact of these forward sales, the FY18
margin was 20.7%.

The total forward sold and
secured development pipeline at
30 September 2019 comprised 17 sites,
representing 6,670 beds, and with an
appraised development value to the Group
of approximately £630 million.

We continued to make good progress
with planning consents during the year,
utilising our in-house expertise. In FY19, we
obtained three consents for developments
totalling 1,055 beds. A further six sites
(2,187 beds) are progressing through the
planning process.

Our business model typically sees
us forward sell our developments.
However, we may begin developments
and sell them later, where we believe this
will create the most value for the Group.
Towards the end of the year, we sold two
developments on this basis in Chester.
The first development, on Hunter Street,
was completed for the start of the 2019/20
academic year. The second development,
on Liverpool Road, was sold on a forward
commitment basis, under which we
received a deposit from the acquirer,
with the balance payable on handover
of the completed development during
FY20. This reduced FY19 revenue by
approximately £20.0 million, compared
with the amount that would have been
recognised in the year had we forward
sold the scheme.

We have a strong pipeline of developments,
for delivery over the next few years.
For FY20, we are scheduled to deliver
seven schemes with 2,609 beds. All of
these schemes have been forward sold.
For FY21, our pipeline comprises seven
sites with 3,253 beds. At the year end,
four of these schemes with 1,928 beds
had been forward sold, with a further 448
beds in legals for sale. One site (462 beds)
is secured and has planning and one site
(415 beds) is in legals to secure. We are
building our pipeline for delivery in FY22
and beyond, with four sites (1,223 beds)
currently secured subject to planning.

Watkin Jones plc // Annual report and financial statements 2019

OPERATING
REVIEW continued

STUDENT
ACCOMMODATION
CONTINUED

Around
425,000

students are from
outside the UK

An increase of
54%

in international
students
2006/7 to 2017/18

Representing
c.23%

of the student
population

We see good
opportunity for growth
in the PBSA sector.

Alex Pease
Investment Director
at Watkin Jones Group

worldwide. There were around 125,000
EU students in the UK in 2017/18, up 4%
on the previous year, while non-EU
international students totalled around
297,000, up nearly 5%.

EU students made up 6.8% of the total
UK student population in 2017/18, which
means that any changes in EU student
numbers post-Brexit should not have a
material impact on demand for PBSA
beds. The Government has published its
immigration white paper, which should be
positive for international student numbers
in the UK, and targets a 30% growth in
international students by 2030, equivalent
to an increase in international student
numbers of approximately 130,000.
The Government is also proposing to
increase the time international students can
stay in the UK after graduating so they can
look for work, which should make the UK a
more attractive place to study.

Taking the effect of the increase in the
number of 18 year olds, together with the
targeted increase in international students,
would lead to a total increase in full-time
student numbers of 230,000 by 2030.

Even though the student population has
grown, there is still significant unmet
demand for university places. For the
2018/19 academic year, there were 695,650

The market opportunity
Demand for university places
continues to grow
The number of full-time students in the
UK is a key determinant of demand for
PBSA, since these students are more likely
to live away from home than part-time
students. The full-time student population
continues to rise, with growth of around
50,000 students per year in recent years.
In 2018/19, there were nearly 1.88 million
full-time students in the UK.

Students from the UK totalled 1.42 million
in 2017/18. This was an increase of 2% on
the previous year and reflects increased
participation rates more than offsetting
the absolute decline in the number of 18
year olds. This decline is set to reverse,
with increasing numbers of 18 year olds
from 2021 and for the next 20 years, which
will result in rising numbers of people of
university age each year.

Analysis of ONS population projections,
along with entry rates from UCAS,
point to a 100,000 increase in full-time
undergraduate numbers between now
and 2030.

Trends in international students are also
positive. The UK is the second most
in-demand student market, after the US,
and has 33 of the top 250 universities

applications to UK universities, of which
533,360 were accepted, resulting in
demand outstripping supply by 30%.

Another notable trend in the higher
education market is the “flight to quality”.
The introduction of tuition fees coincided
with the removal of the cap on student
places at each university. This has allowed
better institutions to grow, with the result
that lower-quality institutions are struggling
to retain or grow their student numbers.
Between 2012/13 and 2017/18, the number
of full-time students at the bottom five
institutions fell by 30%, while full-time
numbers at the top five institutions grew
by 46%. This has clear implications for the
location of new PBSA developments.

There is considerable scope for
growth in PBSA provision
Cushman & Wakefield reported in its UK
Student Accommodation Report 2018/19
that 627,000 PBSA beds were available
for the start of the 2018/19 academic year.
Of this, universities provided 53% and
the private sector provided 47%. This is a
notable change from just a few years ago,
with universities providing two-thirds of
all beds in 2014. With around 25,000 beds
being added each year, the market could
reach 910,000 beds by 2030.

Watkin Jones plc // Annual report and financial statements 2019

PBSA investment
Institutional investors see UK PBSA as
a mature, stable and income-producing
asset class. This makes it a defensive
investment and an attractive asset to hold
in times of uncertainty. New institutions
from the UK, Europe and the Far East have
therefore entered the market in recent
years. According to Knight Frank, total
investment in student accommodation is
set to increase from £51 billion in 2019 to
£65 billion by 2025.

There is growing demand from UK
institutions, who are increasingly focused
on operational real estate and who have
become increasingly comfortable with the
granular leasing profile offered by direct-let
PBSA. There has been some weakening
in the demand from European investors,
driven by hedging costs and the prospects
of a no-deal Brexit. Overall, however,
international investors have not been
deterred by Brexit, reflecting the long-term
nature of their investment decisions, and
the depreciation of sterling has increased
the attractiveness of UK investments for
overseas buyers.

There has been a notable increase in the
demand for portfolios of assets, allowing
institutions to deploy large amounts of
capital and gain a sizeable operational
platform for economies of scale.

As of Q2 2019, JLL estimated that
£3.86 billion of transactions had completed
or were under offer for 2019, ahead of the
£3.2 billion recorded in 2018 as a whole
and close to the £4.1 billion recorded in
2017. There has been sufficient institutional
demand for yields to compress for prime
assets, with yields shifting down by
between 25 and 50 basis points over
the twelve months to Q2 2019.

Competition
Watkin Jones operates across the entire
PBSA development lifecycle. While there
are other specialist PBSA developers
in the UK, most do not construct
their own developments, few provide
accommodation management services,
and their scale and geographical focus
vary considerably. We believe our focus,
market knowledge, geographical coverage
and ability to work across the entire
development cycle give us a competitive
advantage. We also believe that we are the
only developer that sells all its schemes
to investors. This makes us an attractive
conduit for institutions looking to increase
exposure to PBSA and means we do not
compete with our institutional clients by
also being an asset owner. These factors
make us well placed to compete effectively.

Market conditions are having some effect
on the level of competition. For example,
lower yields in prime markets mean
some investors who previously acquired
operational stock or forward funded new
developments are looking to acquire
development sites, so they can generate
sufficient returns. Some private residential
developers are also diversifying into PBSA,
due to the sector’s strong fundamentals.
However, these developers do not have
the scale to be competitive and, having
bought sites at a premium, often end up
selling them. This is typically the result of
build-cost inflation and institutions’ desire
to work with a tier one developer, making
it hard for an inexperienced developer to
obtain institutional funding.

Significant scope remains for increased
penetration of private PBSA. Knight Frank
estimates that the private sector will deliver
82% of the total beds set to be completed
by 2021, with universities providing the
remaining 18%.

Private PBSA developers need to be
selective about the locations they choose.
This is due to the flight to quality noted
above and because the level of supply
of PBSA beds in some towns and cities
means that asset owners have seen higher
vacancy rates and lower rental growth
than expected. However, even in towns
and cities with strong supply, being able
to identify the right micro-locations can
allow developers to build assets that
will successfully fill at attractive rental
levels. In addition, even towns and cities
currently seen as oversupplied will become
attractive for new development over time,
as student numbers continue to rise and
existing PBSA stock ages.

Indeed, it is estimated that 75% of
university-operated accommodation
was built pre-1999 and is no longer fit for
purpose or meeting occupier expectations.
We estimate that around 75,000 PBSA
beds require redevelopment. This is
contributing to students seeking modern,
high-specification accommodation in the
private sector. A similar flight to quality
is also evident in the private sector,
with students increasingly preferring
high-quality private PBSA to traditional
houses of multiple occupation (“HMOs”)
run by private landlords.

This trend is being exacerbated by fiscal
and planning barriers, which make the
acquisition of houses for student letting
more costly and difficult for private
landlords, which will lead to a reduction in
the number of students living in HMOs.

This accords with national and local
government agendas, which recognise
PBSA as a better solution for housing
students and enables HMOs to be made
available to help towards the shortage in
residential accommodation.

Strategic reportGovernanceCompany informationFinancial statements 26

Watkin Jones plc // Annual report and financial statements 2019

OPERATING
REVIEW continued

BTR

BUILD
TO RENT

BtR development made its first
material contribution to our
revenues in FY19.

HIGHLIGHTS

Build to rent development

• Continued to make good

progress with the 315-apartment
scheme in Reading and
301-apartment scheme in
Wembley, with both on schedule
for delivery in FY21.

• Obtained planning consents

for development sites in Sutton
and Leicester.

• Three schemes (396 apartments)
forward sold for delivery between
FY20 and FY22.

• Secured prime development sites
in Brighton & Hove (for delivery
in FY22), Woking (for delivery in
FY23) and, subsequent to the
year end, in Birmingham (for
delivery in FY23).

• Total forward sold and secured
development pipeline, including
Reading and Wembley, of
approximately 2,300 apartments
across nine sites, for delivery
between FY20 and FY23.

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Watkin Jones plc // Annual report and financial statements 2019

Key statistics

Pipeline
2,300

apartments

Forward sold
1,012

apartments

schemes

We are replicating
our low‑risk
forward sale
model in BtR.

Performance
BtR development made its first material
contribution to the Group’s performance in
FY19, with revenue of £73.6 million (FY18:
£3.8 million). This reflected revenues from
the 315-apartment scheme in Reading and
the 301-apartment scheme in Wembley,
both of which are progressing well, and the
forward sale of two other developments.
These were the schemes in:

• Bournemouth, comprising 159
apartments and 37,000 sqft of
commercial office space, for delivery
in FY20; and

• Sutton, London, comprising 166
apartments and scheduled for
delivery in FY21.

We also forward sold a 71-apartment
scheme for delivery in FY22, which forms
part of a mixed-use PBSA and BtR scheme
in Sheffield.

The gross profit for the year from BtR
was £13.2 million (FY18: £1.0 million), at
a gross margin of 18.0%. This reflects an
encouraging start to our performance in
this market, driven by the developments
in build, and compares favourably with
our medium-term expectation of a 15%
average margin for BtR developments.

We secured planning consents during the
year for the development site in Sutton and
a 184-apartment development in Leicester,
which is adjacent to our PBSA development
site in the city. The Leicester development
is scheduled for delivery in FY22.

We also continued to add to our
development pipeline, securing during
the year a prime site in Woking, for the
development of 336 apartments (subject to
planning) for delivery in FY23, and another
in Brighton & Hove. This site has an existing
planning consent for 186 apartments
and c.2,000 sqm of commercial space.
We intend to rework the design for this
scheme, with the intention of obtaining
planning for c.220 apartments. The scheme
is targeted for delivery in FY22. Subsequent
to the year end, we secured a site in
Birmingham on which we are progressing
planning for a 567-apartment scheme for
delivery in FY23.

In total, we now have a forward sold and
secured development pipeline, including
Reading and Wembley, of nine sites,
from which we are targeting to deliver
approximately 2,300 apartments over the
period FY20 to FY23. Six of these sites
have planning (1,196 apartments). We also
have a substantial pipeline of target sites
and are actively negotiating on a number
of opportunities.

All the developments for delivery in
FY20 (159 apartments) and FY21 (782
apartments) have been forward sold, with
one development (71 apartments) for
delivery in FY22 also forward sold.

Watkin Jones plc // Annual report and financial statements 2019

OPERATING
REVIEW continued

BTR

BUILD
TO RENT
CONTINUED

The Government
is targeting
300,000

new dwellings
each year

Average
150,000

net new dwellings
supplied each year
over the last 15 years

The UK’s
population is
growing at a
rate of
200,000-
250,000

additional households
every year

Young people in particular
increasingly see renting as
a better lifestyle choice.

Jim Davies
Managing Director
Newmark Developments

This shortage of new builds contributes to
high house prices in parts of the country
with the strongest local economies, pricing
many people out of the market. Stricter
mortgage regulations and the need for
larger deposits have also increased the
barriers to home ownership. At the same
time, people are increasingly getting
married and having children later, delaying
the point at which they decide to buy a
house. This results in people living in rental
stock for longer.

Urbanisation is an important factor, which
is reshaping the country’s economic and
demographic structures. The UK has one
of the highest rates of urbanisation, which
influences issues such as infrastructure
constraints, competition for land, planning,
logistics and housing affordability. Many
of the locations where we see the greatest
potential for build to rent are in urban areas
with universities, where education leads to
employment opportunities and the need for
housing.

As a result of all of these factors, many
people are renting for the medium to
long term. Young people in particular
increasingly see renting as a better lifestyle
choice, providing quality of living while
maintaining flexibility, in the expectation of
changing jobs more frequently than in the
past. This has contributed to the number
of people renting in England doubling over
the last ten years (source: English Housing
Survey), while 2.5 million households have
entered the rental market since 2000.
Private renters are expected to account
for 25% of all households by 2021 (source:
Knight Frank, EHS, DCLG).

The total number of BtR apartments
completed, under construction or in the
pipeline now amounts to c.143,000 units,
of which around 75,000 are in London.
At full maturity, the BtR sector could
grow to 1.7 million units (source: Savills),
providing considerable scope for growth.

The market opportunity
Build to rent represents an exciting
opportunity and has growing momentum
as an asset class.

There is well-known structural supply and
demand imbalance in the UK residential
property market, with the supply of new
homes in the UK failing to keep up with
demand. Factors driving this demand
include rising life expectancy and
immigration, which together will contribute
to a 7.3 million increase in the UK
population by 2035, as well as growth in
one-person households and urbanisation.
To meet this demand, the Government
is targeting 300,000 new dwellings each
year, but only 195,000 were delivered in
2017/18, continuing a trend established
over many years of delivery falling
short of requirements. Indeed, the net
housing supply has averaged around
150,000 dwellings over the last 15 years.
With around 200,000-250,000 additional
households being formed in England alone
each year, there is a significant current UK
housing deficit.

Watkin Jones plc // Annual report and financial statements 2019

Institutional demand is strong
Ownership of UK rented housing is
fragmented and dominated by small
buy-to-let landlords, with little over 5%
being owned by institutions. This compares
with around 40% in the USA, which is a
more mature institutional market. Individual
private landlords are exiting the market,
however, as recent changes to the tax
regime start to take effect. Large-scale
professional BtR landlords are well placed
to absorb this change, as well as satisfying
some of the structural shortfall in the UK’s
housing supply.

As a result, the proportion of UK rented
homes owned by institutions is expected
to rise, as BtR offers them an attractive
income stream that correlates strongly
with inflation and is considered highly
sustainable through the economic cycle.
Investment in the build to rent sector
was estimated at £3 billion in 2018, up
50% on the previous year, with around
£2.1 billion of transactions in the first nine
months of 2019. Total investment in the
sector is estimated at £35 billion in 2019.
Using Savills’ estimate of 1.7 million units,
investment would increase to around
£544 billion by 2071, based on the current
run rate of a net 30,000 units being added
each year.

Strategic reportGovernanceCompany informationFinancial statements 30

Watkin Jones plc // Annual report and financial statements 2019

OPERATING
REVIEW continued

ACCOMMODATION
MANAGEMENT

Through Fresh Property Group
we gain invaluable customer
feedback and market
knowledge.

HIGHLIGHTS

Accommodation management

• At the start of FY20, Fresh

• Continued success in winning

Property Group (“FPG”) had
17,721 student beds and
build to rent apartments
under management, across
64 schemes, compared with
15,421 beds and apartments
under management across
56 schemes a year earlier.

management contracts for new
and existing schemes. In total,
FPG is contracted to manage
20,448 student beds and BtR
apartments across 66 schemes
by the start of FY22.

• New business won in the year
included being appointed as
manager to six PBSA schemes
currently being developed by
Curlew Capital’s new fund, CST2.

• FPG also had continued success
in being appointed to manage
new schemes in Ireland and will
be responsible for managing six
PBSA schemes (1,516 beds) by
the start of FY21.

• In December 2018, won

Operator of the Year at the
Property Week Student
Accommodation Awards.

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Watkin Jones plc // Annual report and financial statements 2019

Key statistics

Student beds and build to rent
apartments under management

FY19
15,421

FY20
17,721

schemes

Fresh Property Group is a key part of
our end-to-end solution for clients.
By focusing on delivering exceptional
customer experience and creating vibrant
communities, where people want to live,
we drive return for our clients.

Revenue in FY19 was £7.5 million,
compared with £7.3 million in FY18.
This reflects strong underlying growth,
given the full-year impact of the loss
of 4,597 beds under management in
FY18, following the sale of a portfolio of
student schemes by a client, the Curlew
Student Trust (“CST”). The business
delivered a gross profit of £4.6 million
(FY18: £4.5 million), representing a gross
margin of 61.5% (FY18: 61.8%).

At the start of FY19, we had 15,421
student beds and BtR apartments under
management across 56 schemes. We had
a strong year for new business, mobilising
a number of new student schemes and
adding existing schemes to the portfolio.
At the start of FY20, we therefore had
17,721 student beds and BtR apartments
under management, across 64 schemes,
above the level prior to CST’s portfolio
sale. For FY22, we are currently contracted
to manage 20,448 student beds and BtR
apartments, across 66 schemes.

We are all about
delivering a
high‑quality
customer
experience.

Watkin Jones plc // Annual report and financial statements 2019

OPERATING
REVIEW continued

ACCOMMODATION
MANAGEMENT
CONTINUED

Fresh is now the largest
third‑party operator of PBSA,
reflecting the quality of our
service.

Rebecca Hopewell
CEO
Fresh Property Group

While growth this year has been driven
by contracts to manage PBSA schemes,
we continue to discuss BtR opportunities
with clients in both the UK and Ireland.
We have therefore worked hard to ensure
we have the right proposition, structure and
processes to effectively take on the growth
opportunity we see in the BtR market.

We also continue to invest in
technology, both to enhance our own
operations and to improve the customer
experience. Our investment in a new
system, Salesforce, during FY18 was
beneficial this year, giving us improved
visibility of leads and making us better able
to track their conversion into bookings.
We have also invested in our booking
system for PBSA, to improve efficiency
and enhance the customer journey.

In addition, we are investing in a new
system to support our management
of both PBSA and BtR developments,
allowing us to offer a really exceptional
customer experience. We are planning to
go live with the new system towards the
end of FY20.

During the year, we introduced Think Fresh
training for our people, in partnership
with Mary Gober International. This is a
combination of ten e-learning modules
and “huddles”, which are small discussion
groups designed to embed the content.
Around 220 of our people have been
assigned the training, from front line
customer service staff to directors.
The training is leading to a better
customer experience, with the latest
National Student Housing Survey rating
our overall management at 91%, staff
knowledge at 94% and staff friendliness
at 93%.

Our growth this year has moved us up two
places to sixth in CBRE’s PBSA Operator
League Table. The five largest operators
are all in-house management arms of
PBSA owners and FPG is now the biggest
third-party operator. Of the 64 schemes
we currently manage, approximately half
were developed by third parties, showing
our success at winning business from
institutional clients and reflecting the
high quality of our offer.

New business won in the year included
being appointed to six student schemes
currently being developed by Curlew
Capital’s new fund, CST2. We also
mobilised an additional two sites in Ireland
during the year, with a further two schemes
mobilising for the 2020/21 academic year.
For the start of FY21 we will therefore
have six PBSA schemes (1,516 beds)
under management in Ireland. We have
strengthened the team in Ireland as a
result, employing an operations manager.

Watkin Jones plc // Annual report and financial statements 2019

We are constantly looking at ways to
improve the sense of community at our
sites and this year at Foundry Courtyard,
Glasgow, we piloted weekly life skills
workshops for the residents. Workshops
include self confidence, managing
stress, communication and teamwork.
We hope to roll this out nationally.

FPG has continued to win awards,
reflecting the quality of our service.
In December 2018, we received
Operator of the Year at the Property
Week Student Accommodation Awards.
The Shield in Newcastle also won Best
Social Experience and Best Value for
Money Student Accommodation from
Student Crowd.

Strategic reportGovernanceCompany informationFinancial statements 34

Watkin Jones plc // Annual report and financial statements 2019

OPERATING
REVIEW continued

RESIDENTIAL

Our residential business
forms an important part
of our ambition to create
the future of living.

HIGHLIGHTS

Residential

• Continued robust performance

with 150 homes and apartments
sold (FY18: 175 sales), including
42 apartments at developments
in Stratford and Bath.

• Forward sold a 35-apartment
development in Chester, for
delivery in FY20.

• Commenced works under a
development agreement for
75 apartments at Marshgate,
Stratford, for delivery in FY21.

The residential business performed well
and is an important part of our ambition
to create the future of living.

Richard Simpson
Chief Executive Officer

The residential business had another
solid year, with revenue increasing from
£30.0 million to £38.1 million, a rise of 27%.

We completed 150 sales compared with
175 in FY18. This included sales in our
core North West market, together with
42 apartment sales at our developments
in Stratford and Bath. These two
developments will make a further
contribution to revenues in the coming year.

Sales at nil margin from our legacy site in
Droylsden reduced from £10.2 million in
FY18 to £3.5 million in FY19.

We also forward sold a residential
development of 35 apartments on Trafford
Street in Chester, for delivery in FY20.

During the year we were engaged by a
client to commence the development of
75 residential apartments at Marshgate,
Stratford, for delivery in FY21. This will
make a meaningful contribution to the
revenues for our residential business over
the next two years.

The gross profit for the year was
£7.7 million (FY18: £4.4 million),
representing a margin of 20.3% (FY18:
14.6%). Excluding the nil margin sales at
Droylsden, the gross margin was 22.3%,
against 22.2% in the previous year.

Watkin Jones plc // Annual report and financial statements 2019

At the end of the year, we had a land bank
of 462 plots (30 September 2018: 657
plots). We will continue to acquire smaller
to medium-sized development sites of
50-100 homes, primarily in our core North
West market, which is expected to remain
one of the stronger performing regions in
the UK. We will also utilise our residential
experience to deliver the residential
element of mixed-use schemes, such
as the one in Stratford.

Strategic reportGovernanceCompany informationFinancial statements 36

Watkin Jones plc // Annual report and financial statements 2019

ENGAGING OUR
STAKEHOLDERS

We recognise our responsibility to all our stakeholders, which
include our people, our institutional clients, the customers
who live in the buildings we develop or manage, our supply
chain, shareholders and local communities.

How we engage our stakeholders

Stakeholder

Interests

How we engage

Employees
Watkin Jones employs around 700
people, across numerous disciplines.
Having a highly engaged and motivated
workforce is central to achieving our
growth plans.

Institutional clients
We work with a growing list of
institutional investors. They purchase
the PBSA and BtR developments we
create, usually on a forward-funded
basis, and employ FPG to manage
assets on their behalf.

Customers
We are responsible for managing
nearly 18,000 student beds and BtR
units. Delivering high-quality service
to these customers is key to ensuring
they have an excellent experience of
living in the developments we manage
and helps to ensure high levels of
occupancy for our institutional clients
and contributes to rental growth.

Supply chain
Our subcontractors and suppliers are
responsible for providing the skilled
people and materials we employ
to construct our developments.
As such, they are a central part
of our delivery model.

Our people’s interests include:

• learning and development;

• career opportunities;

• reward;

• culture;

• health, safety and wellbeing;

• internal communication and

collaboration;

• feeling valued for their work; and

• the Group’s strategic direction

and success.

Our institutional clients’ interests
include:

• the location, specification and
quality of our developments;

• on-time delivery of completed

developments;

• quality of customer service;

• the safety and wellbeing of tenants;

and

• financial returns from the operation

of completed developments,
including occupancy levels and
net rental performance.

Our customers’ interests include:

• the location, specification and

quality of their homes;

• the sense of community within

their buildings;

• on-site facilities, including

internet connectivity;

• customer service levels, including

how friendly and knowledgeable our
staff are; and

• value for money.

Our supply chain’s interests include:

• our development programme and
the volume of repeat business we
can offer;

• effective and respectful
working relationships;

• pricing and payment terms; and

• health and safety.

Our employee engagement activities are
described in the People section on pages
38 and 39.

We maintain close relationships with
current and potential institutional
clients, so we can understand the types
of development and locations that
are attractive to them. By sharing our
knowledge of the markets in which we
operate and our insight into consumer
requirements, we create developments
that meet their aspirations and those
of their customers. We foster these
relationships both formally and informally
and at a variety of levels, including
during the marketing of individual
assets. Our investment team is primarily
responsible for our client relationships.

Our primary engagement with customers
is through our on-site managers
and other team members. They are
responsible for delivering the high
standards of service we promise and
for gathering and acting on customer
feedback. We use that customer
feedback to help in the specification and
design of future developments.

Our process for selecting and managing
our supply chain partners is described
on page 41. Our quantity surveyors and
procurement specialists have primary
responsibility for liaising with the
supply chain.

Watkin Jones plc // Annual report and financial statements 2019

We commit to being open and honest in communicating
Group information and to maintaining two‑way dialogue with
all of our stakeholder groups.

Stakeholder

Interests

How we engage

Our interactions with our shareholders
are set out on page 63.

The way in which we engage with
communities is described on page 42.

Shareholders
To be a sustainable business, we
need a well-informed and supportive
shareholder base. We therefore
look to ensure regular and open
communications with our shareholders,
while delivering strong and consistent
performance.

Communities
We look to be a good neighbour
and to deliver real value to our
local communities through our
developments and via the Watkin
Jones Community Fund.

Our shareholders’ interests include:

• financial and operational

performance;

• our development pipeline and

growth plans;

• strategy;

• market trends;

• Board and management;

• sustainability and responsible

business;

• corporate governance;

• management pay and incentives;

• news flow; and

• dividend policy.

Our communities’ interests include:

• the development of buildings which
make a positive contribution to the
local community;

• the development of, or making of
financial contributions to support,
local infrastructure projects;

• employment and business

opportunities;

• local housing supply;

• affordability;

• our environmental impact; and

• support for community causes.

Section 172(1) statement
The Board is fully aware of its duty under s172(1) of the Companies Act 2006 to promote the success of the Company for the benefit of
members as a whole. The Group’s stakeholder engagement activities help to inform the Board’s decisions, by ensuring the Directors are
aware of stakeholders’ interests.

As the Group works through a multi-year development cycle and operates in markets driven by long-term demographic and social trends,
the Board takes a long-term view in reaching key decisions, such as reviewing and approving the Group’s refreshed strategic direction
this year. When taking decisions, the Board looks to act in the interests of shareholders as a whole and to ensure all shareholders are
fairly treated.

The Group’s business model relies heavily on its reputation with institutional investors and with the customers who occupy the properties
it manages. The Directors therefore take a close interest in the Group’s ability to consistently deliver for institutions and customers, and
ensuring it maintains high standards of ethical conduct (see pages 42 and 43). The Group also takes a rigorous approach to ensuring it
operates in a way which puts sustainability at the forefront, as described on pages 38 to 43.

Strategic reportGovernanceCompany informationFinancial statements 38

Watkin Jones plc // Annual report and financial statements 2019

SUSTAINABILITY

Our approach to sustainability
recognises that in addition to
delivering financial performance
for our shareholders, we need
to create value for the wider
stakeholders discussed on
pages 36 and 37.

Our people
To help deliver our growth plans, we
invested in our human resources (“HR”)
function in FY19. This included recruiting
our first Group HR Director and making
other senior HR appointments, to support
learning and development and engagement
(see below).

In early 2019, we introduced an HR
business partner model. Our HR business
partners are working closely with business
leaders and management teams, to help
them understand our organisational and
people capabilities and determine how
we can build on them in the future. This is
enabling the HR business partners to work
with the business to shape and implement
effective HR strategies and activities.

In June 2019, we undertook our first
employee engagement survey, giving
everyone in Watkin Jones the chance to
have their say. The results of the survey
were highly positive, with an overall
engagement score of 77%. Particular
highlights were that:

• 94% of our people stated they are

committed to providing the best possible
customer service; and

• 86% believe they can and do make a
valuable contribution to our success.

The survey also identified areas for
improvement, notably introducing new
ways to recognise and reward those
who go the extra mile and putting more
emphasis on career development.

As part of communicating the engagement
survey outputs, we are looking to establish
ways to have regular feedback across
the business, encouraging our people to
contribute ideas. We have also appointed
our first Head of Communication and
Engagement, to help educate our
managers on the importance of good
communication and create improved
communication channels.

We recognise the importance of learning
and development, particularly in respect of
developing our future leaders. To support
this agenda, we appointed a Head of
Leadership, Learning & Development
during the year. We also continue to
sponsor colleagues working towards
academic qualifications.

Watkin Jones plc // Annual report and financial statements 2019

These stakeholders are fundamental to our
business and may be positively or negatively
affected by our activities. In addition, we look
to minimise our impact on both the local and
global environment.

S
t
r
a
t
e
g
c
r
e
p
o
r
t

G
o
v
e
r
n
a
n
c
e

F
n
a
n
c
a

s
t
a
t
e
m
e
n
t
s

C
o
m
p
a
n
y

n
f
o
r
m
a
t
i
o
n

To help us attract new talent into the
business, we conducted a full review of
our recruitment function during the year,
including analysing the process, success
rate and costs. This resulted in us forming
a new relationship with Blue Octopus, a
provider of talent acquisition technology.
This reflects changes in the way people
search for jobs, moving away from
recruitment agencies and giving us access
to the best online job portals, while creating
a simple candidate journey and being more
cost effective.

Diversity and inclusion
We understand and appreciate the
importance of diversity and inclusion and
the positive impact that it can have for
both our people and the business. We
have therefore developed a diversity and
inclusion strategy, as part of our People
Plan. Our strategy is designed to bring a
diverse range of knowledge, insight and
innovation into our business. The strategy
considers a broad range of diversity
characteristics, including gender and
ethnic diversity, and gives us a tool against
which we can measure our progress.

The table below shows our gender diversity
as at the year end.

2019

2018

Men Women Men Women

Board

—

Senior
management

Other
employees

Total

329

382

300

341

322

318

387

335

While construction has traditionally been
a male-dominated industry, the growth
of FPG is bringing more women into the
Group, including in senior roles. We also
appointed Liz Reilly as a Non-Executive
Director to the Board.

Our people policies
The Group has a wide range of policies
relating to its people. These cover
maternity, paternity and adoption leave,
equality and diversity, employee privacy,
dignity at work, equal opportunities,
pensions and grievance procedures.

In FY19 we reviewed and improved our
family-friendly policies covering maternity,
paternity and adoption leave, providing
additional support to our staff when they
need it the most.

In addition, our Corporate Social
Responsibility (“CSR”) policy sets out
several overarching aims in respect of
our people, including investing in their
development, being a good and fair
employer, maintaining open communication
and continually improving our health
and safety performance. This policy also
requires us to produce an annual human
resources strategy, to ensure we can
meet the future needs of both the Group
and our people.

The practices we operate seek to retain
and develop our talent across the business.

Ensuring compliance
We have several routes for our people to
report compliance issues relating to our
people policies. They can discuss any
issues with their line manager or, if they
feel unable to do so, with their HR manager.
If the issue remains unresolved, we have a
formal grievance procedure, as set out in
our grievance policy. In addition, we have
an outsourced whistleblowing service,
which allows our people to raise concerns
confidentially about a wide range of
matters. Our employee survey and annual
staff conference also give people the
opportunity to provide feedback about the
operation of our policies.

We are not aware of any material breaches
of our people policies during the year.

%
100

Watkin Jones plc // Annual report and financial statements 2019

SUSTAINABILITY continued

Key statistics

Waste diverted from landfill

37,311
33,206

38,013
34,211

29,626
27,552

33,644
31,625

31,434
29,213

Reportable
accidents

Gender diversity
male:female

FY19:
2

FY18: 3

FY19:
55%:
45%

FY18: 48%:52%

Health and safety
Health and safety policy
Protecting the health and safety of our
people and subcontractors is vital.
We have a Group-wide health and safety
policy, which provides a comprehensive
description of responsibilities for
health and safety throughout the
organisation, from the Board to the
people working directly on site. It also
details the arrangements which form our
robust health and safety management
system, such as necessary training, risk
assessments, supervision and the use of
protective equipment.

Ensuring compliance
The divisional managing directors (“MDs”)
lead health and safety for their divisions.
They are supported by the Group health
and safety department, which comprises
our health and safety advisers. The health
and safety advisers conduct an inspection
and audit of all sites every two weeks and
all offices each month. Sites are scored
after each audit and results are reported
to the divisional MDs on a weekly, monthly
and quarterly basis. The Group team
holds weekly conference calls with the
site teams to discuss performance, any
issues identified and any incidents that
have occurred. A monthly meeting with
the divisional MDs is held to review health
and safety issues, any initiatives being
conducted and other key areas such as
training. The quarterly analysis looks to
identify any recurring incidents and trends
in performance. Contract managers and
Directors are also required to audit sites
each month, with the results reviewed by
the Group team.

Waste
m3
40,000

35,000

30,000

25,000

20,000

15,000

10,000

5,000

300

250

200

150

100

2015

2016

2017

2018

Waste produced (m3)

Waste diverted (m3)

Diversion target (%)

2019
Actual diverted (%)

Our subcontractors play a key role in
on-site safety. Everyone working on site
must have a general induction before they
reach the site, followed by a site-specific
briefing before commencing work. No one
is allowed on site without first proving their
competency, for example by checking they
hold a valid Construction Skills Certification
Scheme card. This proves their identity,
the qualifications they hold and the training
they have received.

We run numerous health and safety
training programmes for people at all levels.
These include programmes for Directors
and site managers, as well as a wide range
of specific programmes such as working at
height or manual handling. All employees
must also complete an induction and
annual training programme on our health
and safety policy.

Watkin Jones is a full member of the
British Safety Council and we are
accredited by the Construction Health
and Safety Assessment Scheme. We also
support the construction industry’s
Working Well Together campaign.

Within Fresh Property Group, role-specific
training is provided for our people and our
Property team all hold a formal health and

safety management qualification. We gain
health and safety assurance over the sites
managed by Fresh Property Group through
a programme of both internal and external
inspections.

Health and safety performance
During the year, we conducted numerous
initiatives to further improve our health
and safety performance. These included:
fire safety on site, in particular relating to
high-rise buildings under construction;
site security; dust control and protection;
correct wearing of head protection;
planning and maintaining safe site routes;
contractor morning briefings; winter
weather working; and mental health
awareness.

These actions helped us to deliver a
further improvement in health and safety
performance, with our reportable accidents
reducing to two from three in FY18.

Our reportable incidence rate, which is an
HSE standard reporting metric, was 152
per 100,000 employees in FY19, down from
231 in FY18, and compares to a figure of
2,620 for the construction industry as a
whole, as reported by HSE.

Reportable incident rates and reportable accidents

Reportable
incident
rate
350

303

275

231

Reportable
accidents
rate
5

152

2015 to 2016

2016 to 2017

2017 to 2018

2018 to 2019

Reportable incident rate: This is an HSE standard reporting metric, being the number of reportable
accidents multiplied by 100,000 divided by the average number of people employed.

Reportable accidents: This is the absolute number of accidents reported by the Group to HSE in
accordance with the RIDDOR regulations.

Watkin Jones plc // Annual report and financial statements 2019

CO2 emissions

Key statistics

CO2
1,400

1,200

1,000

800

600

400

200

1,328
1,200

1,301
1,200

1,248
1,200

1,065
1,200

1,132
1,300

%
0.6

0.5

0.4

0.3

0.2

0.1

2015

2016
Actual CO2 emissions (tonnes)

2017

2018

CO2 emissions target (tonnes)

0.0

2019
Actual CO2 emissions (kg)
as a % of turnover (£)

Waste diverted
from landfill

CO2 emissions
(tonnes)

FY19:
93%

FY18: 94%

FY19:
1,132

FY18: 1,065

Supply chain
Our supply chain is crucial to successfully
delivering our schemes. We look for
opportunities to work closely with our
supply chain partners, for mutual benefit.
This includes negotiating national rates
with key subcontractors, while they benefit
from a highly visible and growing workload
with us.

By carefully managing our supply chain, we
simplify our construction process, reduce
risk, and generate cost, maintenance and
environmental benefits. Our process for
working with our supply chain includes:

• a detailed evaluation of potential
suppliers, looking at their quality,
safety, environmental and financial
performance;

• defining and tracking the key

procurement activities and dates for
each project;

• selecting suppliers and subcontractors
for each project, taking into account
location, current workload, type and size
of project, and cost;

• on-site quality control, including records

of progress and performance;

• performance review on completion,

to ensure our supply chain partners are
delivering to the required standard; and

• continuous improvement, by identifying

issues and acting on them.

Our vision is for our entire supply chain
to embrace and share our commitment
to sustainable development and ethical
business practices.

Environment
Our environmental policies
We have an environmental policy
statement, which sets out our commitment
to protecting the environment, preventing
pollution, and monitoring and reducing
the impact of our operations on the
environment and local communities.
The policy requires us to work with
our clients to promote best-practice
environmental management techniques
and with our suppliers to ensure strong
environmental supply chain management
and to promote sustainable sourcing of
products and materials. We also have a
separate policy covering our approach
to waste management. This details our
process for minimising waste production
and requires us to use registered
and approved contractors for waste
management services.

Ensuring compliance
We ensure compliance with our
environmental policies in a number of ways.
These include:

• implementing business-specific

environmental management systems,
with the Group being accredited to ISO
14001;

• developing objectives, supported by

detailed targets, to manage all potentially
significant environmental aspects;

• developing meaningful key performance
indicators to measure resource use,
waste and emissions, and to promote
environmental best practice; and

• providing training to staff and

subcontractors, to raise awareness
of environmental issues and to
ensure effective management of our
environmental impacts.

As an ISO 14001 accredited company, our
environmental policy and waste monitoring
procedures are well established throughout
the Group.

They include:

• establishing detailed waste management
plans before work begins on our sites;

• reclaiming and recycling materials in
an environmentally friendly manner
wherever possible;

• maintaining site boundaries to minimise

windblown contamination;

• using water spray during dry conditions

to minimise dust pollution; and

• regularly monitoring noise levels to keep
unavoidable disturbances to a minimum.

These procedures are designed to ensure
that we comply with relevant legislation.
We will continue to adopt best practice
wherever possible, to promote the
principles of sustainable construction.

Environmental performance
Waste diverted from landfill
The proportion of waste we divert from
landfill is comparable with the best in the
industry. In FY19, we diverted 93% of waste
from landfill (FY18: 94%), ahead of our
target for the year of 92%. The reduction
in the absolute level of waste created is
the result of constructing buildings which
create less waste by design, for example
by having more components constructed
off site, and through carefully managing the
ordering of general building materials.

Greenhouse gas emissions
We continue to actively manage our CO2
emissions, with our actual emissions being
below our target for the last two years,
taking into account the growth in the
Group’s revenues.

Our company car fleet is the main
contributor to our CO2 emissions. Company
cars are replaced on a three-year cycle on
a contract hire arrangement, with drivers
being provided with a choice of vehicles
selected taking into account their CO2
emissions data.

Strategic reportGovernanceCompany informationFinancial statements 42

Watkin Jones plc // Annual report and financial statements 2019

SUSTAINABILITY continued

The Watkin Jones Community Fund
supports projects that make a real
difference to the communities in which
we work. The Fund aims to support a
wide range of projects with a particular
emphasis on enhancing the physical
environment and improving quality of
life for local people. Applications are
welcomed from community-based groups
and not-for-profit organisations. During
FY19, the fund made donations to a wide
range of charities, sports clubs and other
community groups.

Fire safety
The fire safety of the buildings we
develop is of paramount importance
to us. We construct our developments
to high fire management specifications,
complying fully with applicable
building and fire regulations, and with
rigorous fire safety management and
maintenance regimes.

The fire safety of high-rise buildings
has rightly been under scrutiny since
the Grenfell incident and, more recently,
the fire at the Cube in Bolton. This has
resulted in an ongoing review of cladding
systems used and their fire resistant
properties. We will continue to act as
appropriate, in conjunction with the owners
of the properties we have developed, to
ensure the continued safety of tenants.

Ethical business
Watkin Jones is committed to acting in
an ethical and responsible way in all its
business dealings. This includes protecting
human rights and looking to prevent any
instances of bribery or corruption.

Human rights
Human rights policies
We have several policies covering aspects
of human rights, both within Watkin Jones
and in our supply chain. These include
our policies on dignity at work, equal
opportunities, equality and diversity,
and anti-slavery and human trafficking.
The aims of these policies include ensuring
that we:

• have a work environment free of
harassment and bullying, where
everyone is treated with dignity and
respect;

• provide equal employment opportunities

and avoid unlawful discrimination in
employment and against customers;

• avoid any kind of unfair or illegal

discrimination on the basis of colour,
race, nationality, ethnic background,
language, religion, sex, age, marital
status, sexuality or disability; and

• prevent any slavery or human trafficking

in our own operations or within our
supply chain.

Communities
Communities policy
Our CSR policy covers our approach to
community relations. Under this policy, we:

• strive to make a positive economic and
social contribution to the communities
we work in;

• engage in proactive community relations
and seek to be a good neighbour and
citizen wherever we operate;

• invest in local community development,
through the Watkin Jones Community
Fund;

• support and actively encourage our
employees to help local community
organisations and activities; and

• promote the values of CSR across

the construction sector, through our
involvement in regional and national
industry bodies.
Community impact
Through our development activities
we make a positive impact on local
communities. As a condition of obtaining
planning consent for our developments,
we often undertake improvement work
in the local area, which can range
from providing affordable homes to
contributions towards new schools,
landscaping and enhancing roads and
public realm areas.

BtR developments are a high-quality
source of new homes, which help to relieve
pressure on local housing stock. Councils
also often see PBSA developments as
a way of addressing housing shortages.
A large PBSA development can free up
more than 100 homes that were previously
occupied by students, making them
available to local families.

Watkin Jones plc // Annual report and financial statements 2019

Ensuring compliance
We ensure all new and existing employees
have appropriate training to understand
their rights and responsibilities under our
human rights-related policies.

Employees can report any issues of
non-compliance with our employment
policies through the same routes
described in the our people section above.
Any person with concerns about slavery or
human trafficking must raise them through
their line manager, our Compliance Officer
or through our whistleblowing procedures.

Our Compliance Officer has primary
responsibility for implementing the
anti-slavery and human trafficking policy,
monitoring its use and effectiveness,
dealing with any queries about it, and
auditing internal control systems and
procedures to ensure they are effective in
countering modern slavery.

We are not aware of any material
breaches of our human rights policies
during the year.

Anti-bribery and corruption (“ABC”)
Anti-bribery and corruption policy
We have a detailed ABC policy. It sets
out the basic rules for our people and for
third parties working on our behalf, and is
designed to give them sufficient knowledge
to detect and prevent bribery and
corruption, and guidance on where to seek
advice. The policy is supported by practical
examples, which illustrate how to apply the
rules in the context of our business.

Ensuring compliance
We promote compliance with the ABC
policy in a number of ways. These include:

• conducting risk-based due diligence on

all agents and other third parties who will
be conducting business on our behalf;

• promoting employee and third-party
awareness of, and compliance with,
the ABC policy through appropriate
communication, training and disciplinary
procedures;

• raising ABC awareness through specific

online training during induction and
annual refresher training; and

• requiring each employee to sign an

annual declaration to confirm they have
complied with the policy.

Directors, managers and supervisors are
personally responsible for monitoring
compliance:

• in respect of all business matters they

are managing or supervising; and

• by everyone involved in matters they

are managing or supervising, including
third-party agents, joint ventures and
contractors working for and on behalf
of Watkin Jones.

Anyone with suspicions about an ABC
policy violation must report it to their
supervisor, manager or Director, or by
contacting the Compliance Officer or
the whistleblowing line. An update on all
whistleblowing submissions is presented
to each meeting of the Audit Committee.

We are not aware of any breaches of the
policy during the year.

How sustainability underpins our business model

Identify potential
developments

Site procurement
and planning

Transaction
and funding

Construction
and delivery

Accommodation
management

People

Clients

Supply chain

Communities

Environment

Strategic reportGovernanceCompany informationFinancial statements 44

Watkin Jones plc // Annual report and financial statements 2019

FINANCIAL
REVIEW

The Group made further progress during
the year, delivering financial results
in line with expectations.

Philip Byrom
Chief Financial Officer

Revenue
Revenue from continuing operations
increased by 3.2%, from £363.1 million
in FY18 to £374.8 million in FY19.
As expected, student accommodation
development revenues were £246.1
million, or 21.3% lower, as a result of
the planned reduction in the number of
developments completed compared with
the previous year. This was the result of
our decision to focus on a smaller number
of development sites on which we could
achieve strong margins, in the light of Brexit
uncertainty.

BtR development generated revenues
of £73.6 million, up from £3.8 million in
FY18. This reflects good progress with the
on-site developments and forward sales
completed in the year. The BtR business
is set to make an important contribution to
our growth over the coming years.

Accommodation management continued to
make good progress. Revenues increased
to £7.5 million, against £7.3 million in FY18,
with strong underlying growth more than
offsetting the full-year impact of the loss of
the Curlew Student Trust beds in FY18.

Highlights

Continuing operations
Revenue
Gross profit
Overheads
Operating profit before
exceptional items
Exceptional (charge)/income
Operating profit
Profit on disposal of interest in
joint venture
Share of profit in joint ventures
Net finance costs
Profit before tax
Tax
Profit for the year
Basic earnings per share
Adjusted basic earnings per share
Dividend per share

FY19
£m
374.8
76.8
(24.5)

52.3
(2.6)
49.7

—
0.3
(0.3)
49.7
(9.4)
40.3
15.8p
16.7p
8.35p

FY18
£m
363.1
72.4
(22.8)

49.6
4.3
53.9

0.1
1.0
(0.7)
54.3
(10.1)
44.2
17.3p
16.0p
7.6p

Change
+3.2%
+6.0%
+7.2%

+5.4%

-7.8%

-8.5%

-8.8%
-8.9%
+4.6%
+9.9%

A solid increase in
revenue and gross
profit was achieved
across all of the
Group’s businesses,
with the build to rent
pipeline providing a
significant opportunity
for further growth.

Watkin Jones plc // Annual report and financial statements 2019

Highlights

Substantial
growth in
BtR revenues
offsetting lower
revenues from
PBSA in FY19.

Revenue by
operating segment

Gross profit by
operating segment

FY19

FY18

Student
accommodation
£246.1m

Build to rent
£73.6m

Residential
£38.1m

Accommodation
management
£7.5m

Student
accommodation
£312.7m

Build to rent
£3.8m

Residential
£30.0m

Accommodation
management
£7.3m

FY18

Student
accommodation
£51.6m

Build to rent
£13.2m

Residential
£7.7m

Accommodation
management
£4.6m

Student
accommodation
£60.7m

Build to rent
£1.0m

Residential
£4.4m

Accommodation
management
£4.5m

The residential business also delivered
strong revenue growth, with revenue up
27.0% to £38.1 million (FY18: £30.0 million).
The business had a solid performance in
its core North West housing market and
also benefited from the sales of apartments
in Stratford and Bath. In addition, the
business generated revenues from acting
as developer for a client on a separate
residential scheme in Stratford, which
will make a greater contribution in FY20
and FY21.

The Group has continued to generate
revenue from the development of
commercial property associated with its
student and BtR developments. In FY19,
this amounted to £9.5 million and arose
from the commercial office element of
the BtR scheme in Bournemouth, which
was forward sold in the year. Commercial
property revenues in FY18 were £9.3 million
and related to a hotel and offices at the
student accommodation development site
in Christchurch Road, Bournemouth.

FY19 is the first year that we have adopted
IFRS 15 ‘Revenue from Contracts with
Customers’. This requires us to account
separately for the land and development
agreement elements of forward-sold
contracts, rather than treating them as a
combined agreement. The effect on the
Group’s results has been to reduce FY19
revenues and profit before tax by £613,000.
The prior period comparatives have not
been restated. More information can be
found in note 5 to the financial statements.

Gross profit
Gross profit was £76.8 million, up 6.0%
from the £72.4 million recorded in FY18.
The gross margin was 20.5% (FY18: 20.0%).

Student accommodation development
generated gross profit of £51.6 million
(FY18: £60.7 million) and a gross margin
of 21.0% (FY18: 19.4%), reflecting our
focus on a select number of high-quality
developments. The underlying gross
margin in FY18 was 20.7%, after adjusting
for forward sales that completed on
30 September 2018. These forward
sales primarily comprised the land sales
element, which were at lower margins
than the margins to be recognised on the
development works in FY19 and FY20.

BtR development achieved a gross profit of
£13.2 million (FY18: £1.0 million), at a gross
margin of 18.0%. This is an encouraging
start to our performance in this market and
is ahead of the average margin of 15% we
expect to achieve from our BtR pipeline in
the medium term.

FPG maintained its highly attractive
profitability. Its gross profit of £4.6 million
(FY18: £4.5 million) equated to a gross
margin of 61.5% (FY18: 61.8%).

The residential business generated gross
profit of £7.7 million (FY18: £4.4 million).
The gross margin of 20.3% (FY18:
14.6%) reflected a reduction in nil margin
sales at the legacy Droylsden site, from
£10.2 million in FY18 to £3.5 million this
year. Excluding these nil margin sales,
the underlying gross margin was 22.3%
(FY18: 22.2%).

Commercial property activities produced
a loss of £0.1 million (FY18: profit of
£1.8 million).

Administrative expenses
Administrative expenses rose by 7.2%,
from £22.8 million in FY18 to £24.5 million
in FY19. This was the result of recruitment
to support the ongoing development of
the business and a general salary increase
of 3%.

Operating profit
before exceptional items
Operating profit before exceptional items
was £52.3 million (FY18: £49.6 million),
reflecting an operating margin of 14.0%
(FY18: 13.7%).

Exceptional items
An exceptional charge of £2.6 million
was recorded in the year. This related
to the cost of compensating our new
CEO, Richard Simpson, for forfeiting
outstanding incentives he held in respect
of his former employer, Unite Group plc
(“Unite”). The charge comprises a cash
cost of £0.4 million in respect of forfeiting
his 2018 Unite bonus and a non-cash cost
of £2.2 million, in respect of forfeiting his
outstanding 2015–2017 Unite LTIP awards.
More information can be found in the
Remuneration Committee report on pages
68 to 72.

Strategic reportGovernanceCompany informationFinancial statements 46

Watkin Jones plc // Annual report and financial statements 2019

FINANCIAL
REVIEW continued

Our cash balance increased
by £9.0 million to £115.6 million.

Exceptional items continued
In FY18, the Group recorded exceptional
income of £4.3 million. This resulted from
Curlew Student Trust’s sale of a portfolio
of assets, and the subsequent reduction
in scope and early termination of FPG’s
contracts to manage the majority of these
assets. Of this, £3.0 million was received
as compensation for the reduction in scope
and early termination of the management
contracts. The Group also holds a carried
interest in the Curlew Student Trust and
made an exceptional profit of £1.3 million
on the portfolio sale.

Share of profit in joint ventures
The Group’s share of profit in joint ventures
was £0.3 million (FY18: £1.0 million).
The most significant of the Group’s
joint ventures are those with Lacuna
Developments Limited, which allowed
us to develop student accommodation
sites in Belfast. These developments are
now complete.

Finance costs
Our finance costs are primarily fees
associated with the availability of our
revolving credit facility (“RCF”) with HSBC,
and the interest cost of the loans we have
with Svenska Handelsbanken AB (see
bank facilities below). The net finance
cost for the year was £0.3 million, down
from £0.7 million in FY18, as a result of the
Group’s strong cash position at the start of
the year.

Profit before tax
Profit before tax for the year amounted to
£49.7 million (FY18: £54.3 million). Adjusted
profit before tax, which excludes the
impact of exceptional items, increased
by £2.2 million to £52.3 million (FY18:
£50.1 million).

Taxation
The corporation tax charge was £9.4 million
(FY18: £10.1 million). The effective tax rate
of 19.0% (FY18: 18.7%) was in line with the
UK corporation tax rate of 19%. Information
on our tax strategy can be found in the
Investor section of our website,
www.watkinjonesplc.com

Cash flows

Continuing operations
Operating profit before exceptional items
Exceptional items
Depreciation and amortisation
(Increase)/decrease in working capital
Finance costs paid
Tax paid
Net cash inflow from operating activities
(Purchase)/disposal of fixed assets
Cash flow from joint venture interests
Cash flow from other financial assets
Dividends paid
Cash flow from borrowings
Increase in cash
Cash at beginning of year
Cash at end of year
Less: borrowings
Net cash

Earnings per share
Basic earnings per share from continuing
operations were 15.8 pence (FY18:
17.3 pence). Adjusted basic earnings per
share, which exclude the impact of the
exceptional items discussed above,
were 16.7 pence (FY18: 16.0 pence).

Dividends
The Board has recommended a final
dividend of 5.6 pence per share, giving
a total dividend for the year of 8.35 pence.
The cash cost of the final dividend will
be £14.3 million.

At 30 September 2019, the Company had
distributable reserves of £115.1 million
available to pay the final dividend.

More information on our dividends for the
year and our dividend policy can be found
in the Chairman’s statement on pages
08 and 09.

FY19
£m
52.3
(0.4)
1.4
(25.4)
(0.5)
(9.8)
17.6
(0.3)
—
0.2
(20.1)
11.6
9.0
106.6
115.6
(38.8)
76.8

FY18
£m
49.6
4.3
1.3
11.3
(1.0)
(11.1)
54.4
(0.3)
1.6
1.4
(17.5)
1.7
41.3
65.3
106.6
(26.4)
80.2

EBITDA
EBITDA is an important measure of our
underlying performance. It is calculated
as operating profit plus profit from joint
ventures, before interest, tax, depreciation
and amortisation.

EBITDA decreased by 8.8% to £51.4
million (FY18: £56.3 million). Adjusted
EBITDA, which excludes exceptional items,
increased by 3.6% to £53.9 million (FY18:
£52.0 million), representing an adjusted
EBITDA margin of 14.4% (FY18: 14.3%).

Statement of financial position
At the year end, inventory and work in
progress was £134.2 million, largely
unchanged from the £132.8 million at
30 September 2018, and reflects the
investment in the year in the BtR site at
Brighton & Hove (£14.8 million) and in
work in progress associated with a PBSA
development on Liverpool Road in Chester
(£9.5 million), which has been sold on
a forward commitment basis, offset by
sales of the Bournemouth and Sutton BtR
development sites for which £21.9 million
was held in inventory and work in progress
at 30 September 2018.

Watkin Jones plc // Annual report and financial statements 2019

Contract assets and trade and other
receivables were £39.1 million at
30 September 2019, up by £12.1 million
(30 September 2018: £27.0 million).
The increase was primarily in respect
of amounts receivable on forward-sold
developments which are not yet
contractually due, mainly final payments
which will be due on practical completion.

Contract liabilities and trade and other
payables stood at £85.7 million at the year
end, a decrease of £13.4 million from the
£99.1 million at 30 September 2018. The
decrease is primarily in respect of amounts
received in advance on forward-sold
developments, which were £9.2 million
lower at 30 September 2019.

Cash flows
The Group’s forward sale business model
contributes to good cash generation.
The net cash flow from operating activities
in the year was £17.6 million (FY18:
£54.4 million).

Cash generation in FY19 was affected by
the working capital movements referred
to above and by the deal structure for the
sale of the PBSA development on Liverpool
Road in Chester. Consideration for this
sale will be received on handover of the
development during FY20. While this has
produced a better commercial outcome for
us when compared with a typical forward
sale, it did reduce cash flow in FY19 by
approximately £16.0 million versus the cash
that a forward sale would have generated.

Operating cash flow in FY18 benefited from
a receipt of £38.8 million from the forward
sale of four PBSA development sites on
30 September 2018.

Dividends paid in the year amounted
to £20.1 million (FY18: £17.5 million).
Corporation tax payments totalled
£9.8 million (FY18: £11.1 million).

At the year end, we had a gross
cash balance of £115.6 million and
borrowings of £38.8 million, resulting
in a net cash position of £76.8 million.
At 30 September 2018, we had net cash of
£80.2 million, after deducting borrowings of
£26.4 million from a gross cash balance of
£106.6 million.

The Group’s cash balance typically peaks
around the year end, as in the last weeks
of the financial year we receive the final
payments on student accommodation
developments completing ahead of the
new academic year, as well as the initial
proceeds from the latest forward sales.

The Group is then a net user of cash
until the following year end, as a result
of outflows such as tax and dividend
payments, overhead costs and land
purchases. We therefore see the cash
balance at the year end as an appropriate
level for funding our day-to-day cash
requirements and to put the Group in a
strong position when bidding for new sites.

Bank facilities
Our bank facilities comprise a five-year
RCF and a £10 million on-demand working
capital facility, both with HSBC Bank
plc. During the year, we increased the
RCF from £40 million to £60 million, to
give us further capacity to support our
growth. The maturity date for the RCF
was unchanged, with the facility expiring
on 15 March 2021.

The RCF is available to support our
land procurement and development
opportunities and can be used for strategic
land acquisitions or to fund discrete
development activities, primarily the
residential or commercial elements of
certain larger mixed-use developments,
alongside the forward sale model.

At the year end, we had drawn
£32.1 million against the RCF
(30 September 2018: £17.4 million) and
the working capital facility was undrawn.
We therefore had total headroom within
our facilities of £37.9 million.

The Group also has loan facilities with
Svenska Handelsbanken AB, which
are used to fund our operating build to
rent stock in Sheffield and Droylsden.
These facilities run to March 2022.
The outstanding balance at the year end
was £5.5 million (30 September 2018:
£7.3 million).

Implementation of IFRS 16 ‘Leases’
FY20 will be the first year in which the
Group is required to adopt IFRS 16, which
covers lease accounting and will have a
material impact on the Group’s financial
statements. The date of initial application
for the Group will be 1 October 2019.
In the past, the Group has sold a small
number of student developments subject to
operating leasebacks, equivalent to rental
guarantees. These transaction structures
were utilised in selected instances and
reflected market conditions at that time.
Since 2016 the Group has operated
exclusively on a non-leaseback model,
which it expects to maintain going forward.
These, together with leases for the rental
of office space and vehicles, must now be
accounted for in the statement of financial
position in accordance with IFRS 16.

The impact will be to recognise a
right-of-use asset of c.£132 million,
a deferred tax asset of c.£3 million
and a lease liability of c.£150 million.
The difference between the right-of-use
asset, deferred tax asset and lease liability
of c.£15 million will be reflected as a
reduction in shareholders’ equity.

For FY20 we estimate that the effect of
adopting IFRS 16 on our earnings will be
to reduce operating lease costs, currently
charged to cost of sales and administrative
expenses, by approximately £11.2 million
and to increase depreciation by £8.5 million
and finance costs by £4.5 million. This will
reduce profit before tax by approximately
£1.8 million in FY20, but will increase
EBITDA by approximately £11.2 million.

In adopting IFRS 16, we will restate
the prior reporting periods in order to
ensure comparability of results and
performance, given the materiality of
the amounts involved.

More information can be found in note 5
to the financial statements on pages 90
and 91.

Philip Byrom
Chief Financial Officer

13 January 2020

Strategic reportGovernanceCompany informationFinancial statements 48

Watkin Jones plc // Annual report and financial statements 2019

RISK MANAGEMENT
AND PRINCIPAL RISKS

The effective management of risk is essential
to the successful delivery of our strategy.

The Audit Committee reviews the risk
register as part of its regular meetings.
The reviews include:

• any substantial changes to the principal
risks, including new or emerging risks;

• material changes to the control

frameworks in place;

• changes in risk scores;

• changes in risk appetite; and

• progress with any additional mitigating

actions which have been agreed.

The Audit Committee also provides
appropriate challenge to the effectiveness
of mitigating controls, including the review
and testing of mitigating controls for
selected risks by KPMG as part of the
annual internal audit plan.

Risk management process
The Board has established a formal risk
management process, under which it
identifies, evaluates and monitors the
principal risks facing the Group and
the effectiveness of the controls and
procedures in place to mitigate against
them. This includes:

• the Board’s approval of a detailed

corporate risk register, which
identifies the principal risks and is
prepared and kept under review by
the Risk Committee, which meets
monthly as a sub-committee of the
Executive Committee;

• the review of assurance and information
about the management of those risks,
including specific reviews carried out
by KPMG as our outsourced internal
audit provider;

• an assessment of the Group’s risk

appetite for particular categories of
risk, as a basis against which to assess
whether the principal risks are being
mitigated against to an acceptable level.

Risk categories and risk appetite
Appropriate risk categories for the Group
have been identified into which the
principal risks can be allocated. Against
each of these risk categories the Board
has considered the level of risk it is willing
to accept in order to achieve the Group’s
business objectives. We have no appetite
for risk in relation to health and safety
matters, whereas we have a moderate
risk appetite in relation to our people and
technology, where we are making changes
to the way we work in order to enable us to
deliver future growth and create the future
for living. The risk categories are listed
below together with the assessed risk
appetite.

Risk category

Strategic

Financial

Operational

People

Risk appetite

Cautious

Averse – cautious

Cautious

Moderate

Regulatory and compliance

Cautious

Technology

Health and safety

Moderate

Averse

Watkin Jones plc // Annual report and financial statements 2019

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Heat map
The heat map summarises our exposure
to our principal risks by considering the
likelihood of a risk event occurring and its
potential impact on the Group. It shows the
gross risk assessment before mitigating
factors and controls are taken into account
and the net risk assessment after taking
into account relevant mitigating factors and
controls. The ovals on the heat map show
the Board’s appetite for risk for each risk
category, with the aim that after taking into
account mitigating factors and controls, the
net risk is reduced to a level that sits within
or below the Board’s appetite for risk.

The principal risks and risk appetite have
been assessed using the following scoring
matrix.

Likelihood

Score

Impact Score

Highly probable

Probable

Possible

Unlikely

Remote

Extreme

Major

3 Moderate

Minor

1 Insignificant

Principal risks
A principal risk is a risk that is considered
material to the delivery of the Group’s
strategy or its performance, position or
future prospects. The Board through
the Audit Committee has undertaken a
robust review of the principal risks facing
the Group. The principal risks which the
Board considers are relevant to the Group
are summarised by risk category and
considered more fully on pages 50 to 57.

Using the above matrix, the gross and net
risk assessment score for a principal risk is
the product of the assessed likelihood and
impact scores.

Principal risk:

01. Economic cycle

02. Investor appetite

03. Increased competition

04. Capital structure

05. Land availability

06. Planning environment

07. Cash ﬂow

08. Financial crime

09. Cyber crime

10. Project delivery

Risk category:

Strategic

Financial

Operational

11. Disaster recovery and business continuity

Operational

12. Culture

13. Capacity and capability

People

14. Failure to comply with legislation

Regulatory and compliance

15. Health and safety

Health and safety

Key: Risk appetite Gross risk score = G Net risk score = N

Risk appetite
Risk score

Averse
3
4

Cautious
10

Moderate
15
16

High

Watkin Jones plc // Annual report and financial statements 2019

RISK MANAGEMENT
AND PRINCIPAL RISKS continued

Risk

Strategic

Impact

Risk
assessment

Gross

Net

Within risk

appetite?

Mitigation

01. Economic cycle
Changes in the political/economic
cycle could have an impact on the
real estate market and investor
confidence.

Link to business model:

A downturn in the economic cycle and
loss of investor confidence in the student
accommodation or BtR markets could have
a significant impact on our ability to forward
sell our developments. An increase in required
investment yields would result in compression of
development values, impacting our margins and
cash requirements.

Likelihood

Impact

Risk score

02. Investor appetite
The Group’s target market
sectors could become less
attractive to investors.

Link to business model:

A change in investor sentiment could reduce
demand for our developments and therefore
restrict the number of schemes which the
Group can forward sell each year. Investor
yield requirements could increase, leading to a
reduction in development values, impacting the
Group’s margins and cash requirements. The
resultant loss in shareholder confidence and
impact on our share price could be significant.

Likelihood

Impact

Risk score

03. Increased competition
The PBSA and build to rent
markets are attractive, which could
encourage new entrants and result
in increased competition.

Increased competition could increase land
prices or make it harder to secure attractive
sites. More developments would be brought to
market, with a potential reduction in demand
for Watkin Jones’s schemes.

Likelihood

Impact

Risk score

Link to business model:

04. Capital structure
The Group’s capital structure may
be inadequate in supporting the
future growth of the business.

The Group could be constrained in its ability
to secure the new sites required to support
its growth strategy, limiting its capacity to
grow earnings.

Likelihood

Impact

Risk score

Link to business model:

Key

Site procurement
and planning

Transaction
and funding

Construction
and delivery

Accommodation
management

Yes

• Our strategy is to focus on our core student accommodation and BtR markets which remain fundamentally

attractive and are generally seen by institutional investors as resilient during times of broader market uncertainty.

• The Executive Committee approves market and city target locations annually.

• Our three-stage Investment Committee approval process ensures rigorous review of site acquisitions,

including the downside risk of movements in development values.

• Site acquisitions above £15 million are subject to approval by the Board, who consider the papers reviewed

by the Investment Committee.

• Our business model means we generally forward sell our development sites to institutional investors before

any significant development works have been carried out. Consequently, we have limited direct exposure to

• By forward selling our developments we operate a working capital-light model, which limits the call on the

• By maintaining a forward sold pipeline of deliveries for two to three years ahead, it provides the Group with

the impact of falling real estate values.

Group’s own cash.

time to respond to market changes.

• By acquiring sites on a subject to satisfactory planning basis, we are able to maintain good visibility and

control over the Group’s land acquisition commitments, which helps manage the Group’s cash requirements.

Yes

• Through adopting our business model of forward selling developments, the Group is insulated to a degree

as this provides additional time to respond to changes in investor sentiment in relation to the demand for our

developments.

• Our site evaluation and approval process has clear selection criteria to ensure a focus on acquiring

sites in target cities and locations that are more attractive than the location of existing stock, so that

occupier demand should be strong.

• The Group’s business model is to develop for institutionally owned, professionally managed clients.

The tighter regulation of the residential lettings market and fiscal headwinds facing smaller landlords

could prove beneficial to our clients.

• Through focusing on the core student accommodation and BtR markets the Group operates in two markets

that management has analysed and assessed as having significant unsatisfied demand, reducing the risk of

them becoming less attractive to investors.

Yes

• The Group has developed the services that it offers such that it provides an end-to-end service for its clients.

This provides a competitive advantage and is also a barrier to entry.

• Watkin Jones is recognised as a “tier 1” developer, which is typically a requirement for institutional funds to

engage on a forward sale basis.

• The Group has built up economies of scale and has established subcontractor supply chains and delivery

expertise, all of which makes it harder for new entrants to compete.

• Our strategy of focusing on the core student accommodation and BtR markets means we operate in two

markets where the overall supply of new stock is low.

• The Group’s management team monitors the competitive landscape in order to identify and respond to changes.

Yes

• The Group operates a business model under which it forward sells its developments. This limits the amount

of cash the Group must commit to each scheme.

• Our site procurement and planning model means that we secure most of our sites on the basis of achieving

satisfactory planning. This enables the Group to control its cash requirements and, where possible, structure

the acquisition such that it is back-to-back with an onwards forward sale.

• In the unlikely event of the Group experiencing capital constraints, its site procurement model also provides

the option of slowing down land procurement, thereby mitigating the impact.

• The Group maintains additional sources of liquidity through agreed banking facilities. These currently include

a £60 million revolving credit facility and a £10 million overdraft facility. Furthermore, the Group operates with

a positive cash balance day-to-day.

Watkin Jones plc // Annual report and financial statements 2019

Risk

assessment

Gross

Net

Within risk
appetite?

Mitigation

Yes

• Our strategy is to focus on our core student accommodation and BtR markets which remain fundamentally

attractive and are generally seen by institutional investors as resilient during times of broader market uncertainty.

• The Executive Committee approves market and city target locations annually.

• Our three-stage Investment Committee approval process ensures rigorous review of site acquisitions,

including the downside risk of movements in development values.

• Site acquisitions above £15 million are subject to approval by the Board, who consider the papers reviewed

by the Investment Committee.

• Our business model means we generally forward sell our development sites to institutional investors before
any significant development works have been carried out. Consequently, we have limited direct exposure to
the impact of falling real estate values.

• By forward selling our developments we operate a working capital-light model, which limits the call on the

Group’s own cash.

• By maintaining a forward sold pipeline of deliveries for two to three years ahead, it provides the Group with

time to respond to market changes.

• By acquiring sites on a subject to satisfactory planning basis, we are able to maintain good visibility and

control over the Group’s land acquisition commitments, which helps manage the Group’s cash requirements.

A change in investor sentiment could reduce

Likelihood

Yes

• Through adopting our business model of forward selling developments, the Group is insulated to a degree

as this provides additional time to respond to changes in investor sentiment in relation to the demand for our
developments.

• Our site evaluation and approval process has clear selection criteria to ensure a focus on acquiring
sites in target cities and locations that are more attractive than the location of existing stock, so that
occupier demand should be strong.

• The Group’s business model is to develop for institutionally owned, professionally managed clients.
The tighter regulation of the residential lettings market and fiscal headwinds facing smaller landlords
could prove beneficial to our clients.

• Through focusing on the core student accommodation and BtR markets the Group operates in two markets
that management has analysed and assessed as having significant unsatisfied demand, reducing the risk of
them becoming less attractive to investors.

Yes

• The Group has developed the services that it offers such that it provides an end-to-end service for its clients.

This provides a competitive advantage and is also a barrier to entry.

• Watkin Jones is recognised as a “tier 1” developer, which is typically a requirement for institutional funds to

engage on a forward sale basis.

• The Group has built up economies of scale and has established subcontractor supply chains and delivery

expertise, all of which makes it harder for new entrants to compete.

• Our strategy of focusing on the core student accommodation and BtR markets means we operate in two

markets where the overall supply of new stock is low.

• The Group’s management team monitors the competitive landscape in order to identify and respond to changes.

Yes

• The Group operates a business model under which it forward sells its developments. This limits the amount

of cash the Group must commit to each scheme.

• Our site procurement and planning model means that we secure most of our sites on the basis of achieving

satisfactory planning. This enables the Group to control its cash requirements and, where possible, structure
the acquisition such that it is back-to-back with an onwards forward sale.

• In the unlikely event of the Group experiencing capital constraints, its site procurement model also provides

the option of slowing down land procurement, thereby mitigating the impact.

• The Group maintains additional sources of liquidity through agreed banking facilities. These currently include
a £60 million revolving credit facility and a £10 million overdraft facility. Furthermore, the Group operates with
a positive cash balance day-to-day.

Risk

Strategic

Impact

01. Economic cycle

Changes in the political/economic

cycle could have an impact on the

real estate market and investor

confidence.

Link to business model:

A downturn in the economic cycle and

loss of investor confidence in the student

accommodation or BtR markets could have

a significant impact on our ability to forward

sell our developments. An increase in required

investment yields would result in compression of

development values, impacting our margins and

cash requirements.

Likelihood

Impact

Risk score

02. Investor appetite

The Group’s target market

sectors could become less

attractive to investors.

Link to business model:

demand for our developments and therefore

restrict the number of schemes which the

Group can forward sell each year. Investor

yield requirements could increase, leading to a

reduction in development values, impacting the

Group’s margins and cash requirements. The

resultant loss in shareholder confidence and

impact on our share price could be significant.

Impact

Risk score

03. Increased competition

The PBSA and build to rent

markets are attractive, which could

encourage new entrants and result

in increased competition.

Increased competition could increase land

Likelihood

prices or make it harder to secure attractive

sites. More developments would be brought to

market, with a potential reduction in demand

for Watkin Jones’s schemes.

Impact

Risk score

Link to business model:

04. Capital structure

The Group could be constrained in its ability

Likelihood

The Group’s capital structure may

be inadequate in supporting the

future growth of the business.

to secure the new sites required to support

its growth strategy, limiting its capacity to

grow earnings.

Impact

Risk score

Link to business model:

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Watkin Jones plc // Annual report and financial statements 2019

RISK MANAGEMENT
AND PRINCIPAL RISKS continued

Risk

Impact

Risk
assessment

Gross

Net

Within risk

appetite?

Mitigation

Strategic continued

05. Land availability

Link to business model:

An inadequate supply of available land
would inhibit the Group’s ability to deliver its
growth strategy or could increase the risk of
acquiring sites in less attractive locations or at
higher prices.

Likelihood

Impact

Risk score

Difficulty or delay in obtaining planning consents
could impact the Group’s target delivery
programme and potentially inhibit its ability
to achieve growth, impacting on the Group’s
earnings performance.

Likelihood

Impact

Risk score

06. Planning environment
There is a risk that the planning
environment may become more
onerous, making it more difficult
to secure the planning consents
we require. BtR does not currently
have its own planning use class,
which may make it potentially more
difficult to secure consents in this
core sector.

Link to business model:

Financial

07. Cash flow
Cash flow constraints could mean
that the Group is unable to meet its
financial commitments or source
new land opportunities.

Cash flow constraints could lead to an
over-dependence on banking facilities, leading
to an increase in borrowing costs, and could limit
the Group’s ability to source new sites, with a
resultant impact on future profitability.

Likelihood

Impact

Risk score

Link to business model:

08. Financial crime
The Group may be unable to
prevent or detect financial crime.

Financial crime could lead to financial loss,
breach of regulations, regulatory censure/fines
and loss of reputation.

Link to business model:

None

09. Cyber crime
The Group may be unable to
prevent, detect or respond to
a cyber attack.

Link to business model:

None

Key

A cyber attack could lead to financial loss,
breach of regulations, regulatory censure/fines
and loss of reputation.

Likelihood

Impact

Risk score

Likelihood

Impact

Risk score

Site procurement
and planning

Transaction
and funding

Construction
and delivery

Accommodation
management

Yes

• The Group has an established land sourcing capability and where possible targets off-market opportunities,

which helps mitigate against any increased competition for land.

• Through its strong track record of the successful delivery of schemes, the Group has a good reputation in the

market for being a reliable purchaser of land.

• Our site evaluation and approval process incorporate macro and micro market analysis and viability

assessments to ensure that the Group’s land sourcing is targeted in the right locations.

• The Group has the capital resources available to commit to opportunities as they become available, which also

provides vendors with increased confidence that it will complete an acquisition.

Yes

• We have an established national planning resource which appraises each PBSA and BtR site opportunity from a

risk and compliance perspective, with a view to securing planning consent. This appraisal process includes high

level consideration of emerging/developing policies at a local authority level and their risk to the Group.

• We cross check our internal planning appraisals with local, external consultants to further ensure local planning

policy and design considerations are taken into account.

• Our three-stage Investment Committee approval process ensures rigorous review of site acquisitions, including

planning consent consideration.

• We do not normally progress site acquisitions other than those with satisfactory and viable planning

applications and so the risk of an increasingly onerous planning regime would have minimal effect in the short

to medium term.

Yes

• Our business model of forward selling developments helps to reduce the Group’s cash requirements

significantly.

• Through typically structuring site acquisitions such that they are conditional upon obtaining satisfactory

planning, the cost of site acquisitions is generally known several months in advance. This provides management

with good visibility of future commitments and enables the Group to manage its cash flow requirements.

• Regular cash flow forecasts are prepared, which are reviewed by the Chief Financial Officer.

• The Group held cash of £115.6 million at 30 September 2019 and has agreed adequate banking facilities,

including a £60 million revolving credit facility and a £10 million overdraft facility.

Yes

• We operate layers of authorisation checks within the Group’s business processes, in accordance with a

delegated authorities matrix.

• We ensure segregation of duties within our ordering, approvals and payments processes.

• We determine development prices on a negotiated basis, providing little opportunity for price-fixing.

• Senior management takes an active role in reviewing transactions and ensuring that procedures are followed.

• The Group has achieved the Cyber Essentials certification.

• We undertake data information security training annually.

• We undertake information security control monitoring over IT access permissions.

• We maintain daily incremental server backups.

• We undertake vulnerability scanning.

• Further mitigating actions are currently being taken in order to reduce the net risk assessment

to within our risk appetite.

Watkin Jones plc // Annual report and financial statements 2019

Risk

Impact

Risk

assessment

Gross

Net

Within risk
appetite?

Mitigation

Yes

• The Group has an established land sourcing capability and where possible targets off-market opportunities,

which helps mitigate against any increased competition for land.

06. Planning environment

Difficulty or delay in obtaining planning consents

Likelihood

Yes

could impact the Group’s target delivery

programme and potentially inhibit its ability

to achieve growth, impacting on the Group’s

earnings performance.

Impact

Risk score

• Through its strong track record of the successful delivery of schemes, the Group has a good reputation in the

market for being a reliable purchaser of land.

• Our site evaluation and approval process incorporate macro and micro market analysis and viability

assessments to ensure that the Group’s land sourcing is targeted in the right locations.

• The Group has the capital resources available to commit to opportunities as they become available, which also

provides vendors with increased confidence that it will complete an acquisition.

• We have an established national planning resource which appraises each PBSA and BtR site opportunity from a
risk and compliance perspective, with a view to securing planning consent. This appraisal process includes high
level consideration of emerging/developing policies at a local authority level and their risk to the Group.

• We cross check our internal planning appraisals with local, external consultants to further ensure local planning

policy and design considerations are taken into account.

• Our three-stage Investment Committee approval process ensures rigorous review of site acquisitions, including

planning consent consideration.

• We do not normally progress site acquisitions other than those with satisfactory and viable planning

applications and so the risk of an increasingly onerous planning regime would have minimal effect in the short
to medium term.

Yes

• Our business model of forward selling developments helps to reduce the Group’s cash requirements

significantly.

• Through typically structuring site acquisitions such that they are conditional upon obtaining satisfactory

planning, the cost of site acquisitions is generally known several months in advance. This provides management
with good visibility of future commitments and enables the Group to manage its cash flow requirements.

• Regular cash flow forecasts are prepared, which are reviewed by the Chief Financial Officer.

• The Group held cash of £115.6 million at 30 September 2019 and has agreed adequate banking facilities,

including a £60 million revolving credit facility and a £10 million overdraft facility.

Yes

• We operate layers of authorisation checks within the Group’s business processes, in accordance with a

delegated authorities matrix.

• We ensure segregation of duties within our ordering, approvals and payments processes.

• We determine development prices on a negotiated basis, providing little opportunity for price-fixing.

• Senior management takes an active role in reviewing transactions and ensuring that procedures are followed.

• The Group has achieved the Cyber Essentials certification.

• We undertake data information security training annually.

• We undertake information security control monitoring over IT access permissions.

• We maintain daily incremental server backups.

• We undertake vulnerability scanning.

• Further mitigating actions are currently being taken in order to reduce the net risk assessment

to within our risk appetite.

Strategic continued

05. Land availability

Link to business model:

An inadequate supply of available land

would inhibit the Group’s ability to deliver its

growth strategy or could increase the risk of

acquiring sites in less attractive locations or at

Likelihood

Impact

Risk score

higher prices.

There is a risk that the planning

environment may become more

onerous, making it more difficult

to secure the planning consents

we require. BtR does not currently

have its own planning use class,

which may make it potentially more

difficult to secure consents in this

core sector.

Link to business model:

Financial

07. Cash flow

Cash flow constraints could mean

that the Group is unable to meet its

financial commitments or source

new land opportunities.

Link to business model:

None

09. Cyber crime

The Group may be unable to

prevent, detect or respond to

a cyber attack.

Link to business model:

Cash flow constraints could lead to an

over-dependence on banking facilities, leading

to an increase in borrowing costs, and could limit

the Group’s ability to source new sites, with a

Likelihood

Impact

Risk score

resultant impact on future profitability.

08. Financial crime

Financial crime could lead to financial loss,

Likelihood

The Group may be unable to

prevent or detect financial crime.

breach of regulations, regulatory censure/fines

and loss of reputation.

Impact

Risk score

A cyber attack could lead to financial loss,

Likelihood

breach of regulations, regulatory censure/fines

and loss of reputation.

Impact

Risk score

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Watkin Jones plc // Annual report and financial statements 2019

RISK MANAGEMENT
AND PRINCIPAL RISKS continued

Impact

Risk
assessment

Gross

Net

Within risk

appetite?

Mitigation

Risk

Operational

10. Project delivery
The Group could materially
fail to complete one or more
developments on time.

Link to business model:

• Transaction and funding

• Construction and delivery

11. Disaster recovery
and business continuity
There is a risk that business
continuity is not maintained in
response to a disaster or other
business continuity event.

Link to business model:

If a development is not completed on time,
this could result in significant financial penalties
and would damage the Group’s reputation for
on-time delivery, which could make it more
difficult to sell future developments.

Likelihood

Impact

Risk score

Failing to maintain business continuity could
lead to financial loss, a delay to the delivery
of schemes or loss of personnel.

Likelihood

Impact

Risk score

People

12. Culture
The Group’s culture and
organisational design may inhibit
future growth.

A failure to address any cultural and
organisational limitations in the business will
restrict the Group’s ability to achieve its growth
potential and limit shareholder value creation.

Likelihood

Impact

Risk score

Link to business model:

13. Capacity and capability
The Group may find it difficult to
recruit and retain employees with
the right capabilities.

Link to business model:

The Group’s employees are critical to its
performance. The failure to identify, retain and
motivate people will restrict the Group’s growth
plans and could result in development margins
being eroded.

Likelihood

Impact

Risk score

Yes

• The Group’s specialism in, and extensive experience of, building multi-occupancy residential accommodation

means that our construction programming and techniques are well established to ensure on-time delivery.

• The senior construction management team has many years’ repeat experience with the Group in building

multi-occupancy residential accommodation, which gives us a good practical knowledge of the required build

times and project management requirements.

• As a complete developer of PBSA and BtR, the Group is in control of the overall timescale for delivery of a

scheme and we can therefore ensure that projects are started on site sufficiently early. The Group can take

the decision to defer a project for a year if there are planning delays.

• Project delivery is carefully monitored by operational senior management and through project status reporting

at operational and Executive Committee meetings.

• Projects identified as at risk are subject to review by senior operational management, who have the

knowledge to consider acceleration options.

Yes

• The Group’s activities are geographically dispersed and there is no dependence on a single location.

• A business disaster recovery plan is in place for the Group’s key information systems.

• There are system data backup routines in operation with a lot of data hosted off-site using

cloud-based platforms.

Yes

• We have introduced a new organisational structure and operating model which has been designed, in part,

with a view to facilitating behaviours that are closely aligned to the Group’s growth strategy.

• A steering group of senior executives has been set up to track and monitor the implementation of the new

operating model.

• The Group has appointed an external business coach to work with members of the senior leadership team

to help further develop a positive workplace culture.

• A Head of Learning & Leadership Development has been appointed and is charged with focusing on talent

management and associated training.

Yes

• The Group has an established human resources function with frameworks in place for recruitment, training

and performance review.

• During FY19, a Head of Learning & Leadership Development has been appointed with a focus on improving

the Group’s talent management framework and associated training.

• The Group seeks to remain competitive in its remuneration levels and employment terms.

Key

Site procurement
and planning

Transaction
and funding

Construction
and delivery

Accommodation
management

Watkin Jones plc // Annual report and financial statements 2019

Impact

Risk

assessment

Gross

Net

Within risk
appetite?

Mitigation

If a development is not completed on time,

Likelihood

this could result in significant financial penalties

and would damage the Group’s reputation for

on-time delivery, which could make it more

difficult to sell future developments.

Impact

Risk score

Failing to maintain business continuity could

Likelihood

lead to financial loss, a delay to the delivery

of schemes or loss of personnel.

Impact

Risk score

Yes

• The Group’s specialism in, and extensive experience of, building multi-occupancy residential accommodation
means that our construction programming and techniques are well established to ensure on-time delivery.

• The senior construction management team has many years’ repeat experience with the Group in building

multi-occupancy residential accommodation, which gives us a good practical knowledge of the required build
times and project management requirements.

• As a complete developer of PBSA and BtR, the Group is in control of the overall timescale for delivery of a
scheme and we can therefore ensure that projects are started on site sufficiently early. The Group can take
the decision to defer a project for a year if there are planning delays.

• Project delivery is carefully monitored by operational senior management and through project status reporting

at operational and Executive Committee meetings.

• Projects identified as at risk are subject to review by senior operational management, who have the

knowledge to consider acceleration options.

Yes

• The Group’s activities are geographically dispersed and there is no dependence on a single location.

• A business disaster recovery plan is in place for the Group’s key information systems.

• There are system data backup routines in operation with a lot of data hosted off-site using

cloud-based platforms.

A failure to address any cultural and

organisational limitations in the business will

restrict the Group’s ability to achieve its growth

potential and limit shareholder value creation.

Likelihood

Impact

Risk score

Yes

• We have introduced a new organisational structure and operating model which has been designed, in part,

with a view to facilitating behaviours that are closely aligned to the Group’s growth strategy.

• A steering group of senior executives has been set up to track and monitor the implementation of the new

operating model.

• The Group has appointed an external business coach to work with members of the senior leadership team

to help further develop a positive workplace culture.

• A Head of Learning & Leadership Development has been appointed and is charged with focusing on talent

management and associated training.

13. Capacity and capability

The Group’s employees are critical to its

The Group may find it difficult to

recruit and retain employees with

the right capabilities.

performance. The failure to identify, retain and

motivate people will restrict the Group’s growth

plans and could result in development margins

Likelihood

Impact

Risk score

Link to business model:

being eroded.

Yes

• The Group has an established human resources function with frameworks in place for recruitment, training

and performance review.

• During FY19, a Head of Learning & Leadership Development has been appointed with a focus on improving

the Group’s talent management framework and associated training.

• The Group seeks to remain competitive in its remuneration levels and employment terms.

Risk

Operational

10. Project delivery

The Group could materially

fail to complete one or more

developments on time.

Link to business model:

• Transaction and funding

• Construction and delivery

11. Disaster recovery

and business continuity

There is a risk that business

continuity is not maintained in

response to a disaster or other

business continuity event.

Link to business model:

People

12. Culture

The Group’s culture and

organisational design may inhibit

future growth.

Link to business model:

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Watkin Jones plc // Annual report and financial statements 2019

RISK MANAGEMENT
AND PRINCIPAL RISKS continued

Risk

Impact

Risk
assessment

Gross

Net

Within risk

appetite?

Mitigation

Regulatory and compliance

14. Failure to comply with
legislation
The Group is subject to a broad
range of regulatory and compliance
requirements, which it may fail to
comply with. Health and safety,
GDPR, anti-bribery, anti-modern
slavery, AIM and MAR regulations
all provide obligations on the
Company, which need to be
complied with.

Link to business model:

None

Health and safety

15. Health and safety
By their nature, construction
sites are inherently high-risk
environments. There is a risk that a
failure to follow established health
and safety procedures could result
in serious incident or fatality.

Link to business model:

A failure to comply with the relevant legislation
may lead to fines or financial penalties and
reputational damage, which may impact
the Group’s earnings performance and may
impact investor/shareholder confidence. In the
case of health and safety, a failure to comply
with regulations could result in serious incident
or fatality.

Likelihood

Impact

Risk score

A major on-site health and safety incident
could result in a significant fine or financial
cost, increased insurance renewal premiums,
damage to reputation and potential project delay.

Likelihood

Impact

Risk score

Yes

• The Board and Executive Committee take their governance obligations seriously and set the right tone and

• Policies and procedures are well embedded in the organisation to ensure compliance with, and monitor

culture for the organisation as a whole.

performance against, relevant legislation.

• We operate with an established and experienced health and safety department which fosters a pro-active

approach to health and safety throughout the Group, monitors compliance through regular audits and provides

appropriate training.

• We take health and safety seriously at Board and Executive Committee level, with regular reporting of findings

and recommendations. The health and safety department reports directly to the CEO.

• The Group’s outsourced internal audit function undertakes a programme of reviews, which includes specific

areas of focus (including health and safety, GDPR and anti-bribery) and facilitates further enhancement

of controls.

• We engage with our insurers to help ensure we maintain best practice and insurance covers are reviewed

annually and maintained at appropriate levels.

• We administer induction and annual compliance training courses covering all relevant policies, along with

regular communications, which help to continually re-educate and ensure compliance.

• We monitor and report to the Executive Committee and Board on compliance-related matters.

• We have a Compliance Officer who is responsible for overseeing compliance. The contact details for the

Compliance Officer are published in the relevant policies.

• We maintain a whistleblowing line, which enables any compliance related matters to be raised confidentially,

with whistleblowing reports, including nil reports, provided to each Audit Committee meeting.

Yes

• Health and safety is a top priority at Board and Executive Committee level, with regular reporting on

• The Group has a rigorous health and safety management framework in place supported by well-established

• The Group has an established health and safety department which regularly conducts health and safety

findings and recommendations.

policies and procedures.

audits across all of its sites.

• The Group engages with its insurers to help ensure it maintains best practice.

Key

Site procurement
and planning

Transaction
and funding

Construction
and delivery

Accommodation
management

Watkin Jones plc // Annual report and financial statements 2019

14. Failure to comply with

A failure to comply with the relevant legislation

Likelihood

Yes

• The Board and Executive Committee take their governance obligations seriously and set the right tone and

Risk

assessment

Gross

Net

Within risk
appetite?

Mitigation

culture for the organisation as a whole.

• Policies and procedures are well embedded in the organisation to ensure compliance with, and monitor

performance against, relevant legislation.

• We operate with an established and experienced health and safety department which fosters a pro-active

approach to health and safety throughout the Group, monitors compliance through regular audits and provides
appropriate training.

• We take health and safety seriously at Board and Executive Committee level, with regular reporting of findings

and recommendations. The health and safety department reports directly to the CEO.

• The Group’s outsourced internal audit function undertakes a programme of reviews, which includes specific

areas of focus (including health and safety, GDPR and anti-bribery) and facilitates further enhancement
of controls.

• We engage with our insurers to help ensure we maintain best practice and insurance covers are reviewed

annually and maintained at appropriate levels.

• We administer induction and annual compliance training courses covering all relevant policies, along with

regular communications, which help to continually re-educate and ensure compliance.

• We monitor and report to the Executive Committee and Board on compliance-related matters.

• We have a Compliance Officer who is responsible for overseeing compliance. The contact details for the

Compliance Officer are published in the relevant policies.

• We maintain a whistleblowing line, which enables any compliance related matters to be raised confidentially,

with whistleblowing reports, including nil reports, provided to each Audit Committee meeting.

A major on-site health and safety incident

could result in a significant fine or financial

cost, increased insurance renewal premiums,

damage to reputation and potential project delay.

Likelihood

Impact

Risk score

Yes

• Health and safety is a top priority at Board and Executive Committee level, with regular reporting on

findings and recommendations.

• The Group has a rigorous health and safety management framework in place supported by well-established

policies and procedures.

• The Group has an established health and safety department which regularly conducts health and safety

audits across all of its sites.

• The Group engages with its insurers to help ensure it maintains best practice.

Risk

Impact

Regulatory and compliance

legislation

The Group is subject to a broad

range of regulatory and compliance

requirements, which it may fail to

comply with. Health and safety,

GDPR, anti-bribery, anti-modern

slavery, AIM and MAR regulations

all provide obligations on the

Company, which need to be

complied with.

may lead to fines or financial penalties and

reputational damage, which may impact

the Group’s earnings performance and may

impact investor/shareholder confidence. In the

case of health and safety, a failure to comply

with regulations could result in serious incident

or fatality.

Impact

Risk score

Link to business model:

None

Health and safety

15. Health and safety

By their nature, construction

sites are inherently high-risk

environments. There is a risk that a

failure to follow established health

and safety procedures could result

in serious incident or fatality.

Link to business model:

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Watkin Jones plc // Annual report and financial statements 2019

BOARD OF
DIRECTORS

The Directors have significant and broad experience between
them, providing a good level of debate and oversight to the
Group’s strategy, decision making and governance.

A
R
N

Grenville Turner
Non‑Executive Chairman
Appointed to the Board: 26 February 2016

Richard Simpson
Chief Executive Officer
Appointed to the Board: 2 January 2019

Philip Byrom
Chief Financial Officer
Appointed to the Board: 16 March 2016

Other current appointments
Non-Executive Chairman of Oasis Document
Storage Limited, FSP Limited and Heylo
Housing Group Limited and Vice Chairman
of the English National Ballet.

Past appointments
Chairman and Chief Executive of
Countrywide plc; Chief Executive of
Intelligent Finance; Chairman of ThreeSixty
Developments (formerly Knightsbridge
Student Housing) and the Titlestone Group;
Non-Executive Director of Rightmove plc,
St James Place plc, Sainsbury’s Bank plc,
Realogy, Zoopla Property Group plc and
the Department for Communities and Local
Government.

Past appointments
Group Property Director for The Unite
Group plc; Non-Executive Director,
CityWest Homes; Chair of the British
Property Federation’s cross-sector Student
Accommodation Committee from 2013-2015;
and served for six years in the British Army.

Past appointments
Divisional Finance Director for
Pharmaceutical Technologies at BWI plc;
Group Financial Controller at BWI plc and
Advance International Group Limited; and
Senior Manager at Price Waterhouse.

Skills and experience
• Substantial business experience,
with more than 40 years in retail
banking and property.

• Prior knowledge of the student

accommodation sector, gained through the
chairmanship of ThreeSixty Developments.

• Experience of chairing several

other company boards.

• Qualified chartered banker, with an MBA
from Cranfield School of Management.

Skills and experience
• More than 15 years’ experience working
in property development and student
accommodation, most recently as Group
Property Director at The Unite Group plc
prior to joining Watkin Jones.

• Substantial executive experience in setting
the strategic direction for all aspects of
property portfolio management.

• Significant experience at Board level,

including seven years serving on the Board
of The Unite Group plc, plus two years in
a non-executive capacity with CityWest
Homes.

• Qualified chartered surveyor and a fellow of
the Royal Institute of Chartered Surveyors.

Skills and experience
• Seventeen years’ experience as CFO of
Watkin Jones Group, including leading
complex financing arrangements
and material property and corporate
transactions.

• Broad range of prior experience in

industry, gained in group and divisional
finance roles.

• Qualified chartered accountant, with
a degree in Civil Engineering from
Manchester University.

Watkin Jones plc // Annual report and financial statements 2019

A
R
N

Simon Laffin
Independent Non‑Executive Director
Appointed to the Board: 26 February 2016

A
R
N

Liz Reilly
Independent Non‑Executive Director
Appointed to the Board: 21 January 2019

Skills and experience
• Experienced chairman, executive and

non-executive director in large and small,
public and private companies, including
acting as audit committee chair.

• Experienced in retail, property, FMCG,

financing, restructuring and private equity
in the UK, Europe, the USA and Australia.

• Overseen major turnarounds in both public

and private companies.

• Strong reputation and relationships with

institutional shareholders.

Other current appointments
Chairman of the Audit Committee of Dentsu
Aegis Network.

Past appointments
Non-Executive Chairman of Assura plc,
Flybe Group plc and Hozelock Group; Group
Finance & Property Director of Safeway plc;
Non-Executive Director of Quintain Estates
and Development plc, Aegis Group plc,
Mitchells & Butlers plc and Northern Rock (as
part of the rescue team); and an adviser to
CVC Capital Partners.

Skills and experience
• Nearly 20 years of executive

experience at large UK businesses.

• Developed knowledge of the real estate
sector as Group Human Resources
Director of FTSE 100 listed Segro PLC,
the owner, asset manager and developer
of modern warehousing and light
industrial property.

• Gained experience supporting the
remuneration committee chair at
Segro PLC.

Other current appointments
Group Human Resources Director at
Segro PLC.

Past appointments
Retail Human Resources Director for
J Sainsbury plc; and Group Human
Resources Director for FCC UK
Environmental (previously the Waste
Recycling Group).

Tenure

Experience

Independence

3+ years
3

Less than
1 year
2

Retail
2

Property
5

Finance
3

Strategy
5

Chairman
1

Independent
Directors
2

Non-
independent
Directors
3

A Audit Committee R Remuneration Committee N Nomination Committee

Chair

Strategic reportGovernanceCompany informationFinancial statements 60

Watkin Jones plc // Annual report and financial statements 2019

CHAIRMAN’S
INTRODUCTION

The Board follows the principles set out
in the QCA Code, which is designed for
growing companies and which we believe
is the most appropriate for the Group at
this stage in its evolution.

Grenville Turner
Non-Executive Chairman

Structure of the Board
Board of Directors

Grenville Turner
Non-Executive Chairman

Richard Simpson
Chief
Executive Officer

Philip Byrom
Chief
Financial Officer

Simon Laffin
Independent
Non-Executive Director

Liz Reilly
Independent
Non-Executive Director

Our recruitment this year has led to
positive changes to the Board, with
the appointments of Richard Simpson
as CEO and Liz Reilly as an additional
Non-Executive Director. Both received
thorough inductions on appointment, to
ensure they could contribute as quickly
and effectively as possible.

Liz’s background in human resources
made her an ideal choice to chair the
Remuneration Committee, allowing me
to step down from that role.

As described in more detail on page 62,
we conducted our first externally led
evaluation of the Board and its committees
during the year. This identified many
positive aspects of the way the Board
works, as well as areas we will address
over the coming months. Our intention is
to continue to run an externally facilitated
evaluation every three years, in line with
good practice.

Grenville Turner
Non-Executive Chairman

13 January 2020

Dear Shareholder
Consistently delivering high-quality
development schemes, on time, to
budget and while ensuring rigorous safety
standards requires a robust framework
of governance and controls. We have
therefore continued to build on and embed
our governance processes throughout the
Group, reflecting our increasing maturity
as a public company.

The Board follows the principles set out in
the Quoted Companies Alliance Corporate
Governance Code (the “QCA Code”),
which is designed for growing companies
and which we believe is the most
appropriate for the Group at this stage
in its evolution. There are no significant
areas where our governance structures
and practices differ from the QCA Code’s
expectations.

As Chairman, I am responsible for running
the Board and for the Group’s overall
corporate governance, with the support
of the Company Secretary. The corporate
governance statement and committee
reports on the following pages explain our
approach to governance and include the
disclosures required in the annual report.
A complete index of the disclosures
required by the QCA Code, including those
on the Company’s website, can be found
at http://www.watkinjonesplc.com/
investors/corporate-governance

Watkin Jones plc // Annual report and financial statements 2019

CORPORATE
GOVERNANCE

Watkin Jones has a robust corporate governance
framework, which supports its ability to successfully
deliver its strategy.

The Board
The Board comprises two Executive
Directors and three independent
Non-Executive Directors, including the
Chairman. Biographies of the Directors
can be found on pages 58 and 59.

Richard Simpson and Philip Byrom
were appointed Directors under
service agreements dated 2 January
2019 and 16 March 2016 respectively.
These contracts may be terminated by
twelve months’ notice by either party.

Grenville Turner and Simon Laffin were
appointed to the Board by letters of
appointment dated 26 February 2016
and Liz Reilly was appointed to the
Board by a letter of appointment dated
4 January 2019. The appointments run
for an initial term of three years from
the date of appointment and thereafter
continue subject to three months’ notice
by either side.

Mark Watkin Jones stepped down
as Chief Executive Officer (“CEO”)
on 2 January 2019 and as a member
of the Board on 15 January 2019.

The Chairman and CEO have separate,
clearly defined roles. The Chairman is
responsible for leading the Board, setting
the agenda for Board meetings (with the
assistance of the Company Secretary) and
for ensuring the Board operates effectively,
by promoting a culture of openness and
robust discussion. The CEO is responsible
for setting and implementing the Group’s
strategy, for leading and developing the
executive team and for managing the
Group’s day-to-day operations, taking
account of the objectives, policies and
risk appetite set by the Board.

Board meetings
The Board meets regularly to consider
strategy, performance and the framework
of internal controls. The Chairman sets
the agenda for each meeting, with the
assistance of the Company Secretary.

To enable the Board to discharge its
duties, all Directors receive appropriate
and timely information, including briefing
papers distributed in advance of Board
meetings.

These papers include reports from the
CEO and the Chief Financial Officer
(“CFO”), as well as reports on investor
relations and corporate governance.

The Company Secretary produces minutes
of each meeting, including actions to be
taken. The Chairman then follows up each
action at the next meeting.

Only the Non-Executive Directors are
members of the Board committees.
Richard Simpson, Philip Byrom and
Mark Watkin Jones (prior to stepping
down as CEO) were invited to attend
committee meetings to assist with the
matters discussed.

Attendance at meetings
The table below sets out the number of Board and committee meetings attended by each Director during the year:

Grenville Turner

Richard Simpson
(appointed 2 January 2019)

Mark Watkin Jones
(stepped down 15 January 2019)

Philip Byrom

Simon Laffin

Liz Reilly
(appointed on 21 January 2019)

Board

Audit Committee

Remuneration
Committee

Nomination
Committee

9/9

7/7

2/2

9/9

6/6

5/5

—/—

5/5

3/3

5/5

—/—

5/5

2/2

3/3

—/—

3/3

1/1

The Executive Directors are not members of the Board committees but do attend when invited by the Chairman.

Strategic reportGovernanceCompany informationFinancial statements 62

Watkin Jones plc // Annual report and financial statements 2019

CORPORATE
GOVERNANCE continued

During the year, we conducted our first externally facilitated Board
evaluation, which found that the Group has successfully transitioned
to meeting the norms and standards of a publicly listed company.

Advice for Directors
All Directors have access to the advice
and services of the Company Secretary,
who ensures that the Board’s procedures
are followed and that applicable rules and
regulations are complied with, and to the
professional company secretarial services
of Prism Cosec. In addition, the Company
has procedures to enable the Directors to
obtain independent professional advice at
the Company’s expense, if necessary to
further the Directors’ duties.

Re-election of Directors
The Board’s policy is for all Directors to
seek re-election each year and, as a result,
all of the Directors will be standing for
re-election at the forthcoming AGM.

Directors’ time commitments
All the Non-Executive Directors are
required to devote sufficient time to Watkin
Jones to enable the Board to discharge its
duties effectively. This includes preparation
for and attendance at scheduled Board
and committee meetings, as well as ad hoc
meetings or calls as required. The Board
confirms that each of the Non-Executive
Directors can commit the necessary time
to fulfil their roles.

Board committees
The Board has established Audit,
Nomination and Remuneration
Committees, which operate under written
terms of reference. The reports of these
committees can be found on pages 64
to 72.

Terms of reference
The terms of reference for the Board
and the committees can be found at
http://www.watkinjonesplc.com/
investors/corporate-governance

Board effectiveness
During the year, we appointed Campbell
Tickell to conduct our first externally
facilitated Board evaluation. The process
was led by the Chairman.

The evaluation comprised: a
comprehensive review of relevant
governance documents against the
QCA Code and good practice; a survey
of and interviews with all Board members;
a Board observation; and a report and
presentation to the Board.

The evaluation found that:

• the Group has made a successful

transition from its origins as a family-run
business to meeting the norms and
standards of a publicly listed company;

• it is strongly evident that the Board has
been involved from the outset in the
Group’s programme of transformational
change and in looking to shape the
Group’s organisational culture;

• the Board operates effectively and

each member of the Board is an active
contributor; and

• the Chairman and CEO have

established a good working relationship,
underpinned by challenge and support.

The review also found some areas for the
Board to address over the next twelve
months, in particular the need to consider
longer-term arrangements for company
secretarial support and to maintain
the Board’s emphasis on continued
improvement of risk management and
audit processes. There is also scope to
keep the Board’s diversity and mix of skills
under review.

Matters reserved for the Board
Matters reserved for the Board for its
decision include:

• approving the Group’s strategic aims

and objectives;

• reviewing performance against the

Group’s strategic aims, objectives and
business plans;

• overseeing the Group’s operations;

• approving changes to the Group’s
capital, corporate, management or
control structures;

• approving results announcements
and the annual report and financial
statements;

• approving the dividend policy;

• declaring the interim dividend and

recommending the final dividend and
any special dividend;

• approving any significant changes in

accounting policies;

• approving the treasury policy;

• approving the Group’s risk appetite and

principal risk statements;

• reviewing the effectiveness of the

Group’s risk and control processes;

• approving major capital projects and
material contracts or arrangements;

• approving all circulars, prospectuses

and admission documents;

• ensuring a satisfactory dialogue with

shareholders;

• establishing Board committees and
approving their terms of reference;

• approving delegated levels of authority;

• approving changes to the Board and its

committees;

• determining the remuneration policy
for the Directors and other senior
executives;

• providing a robust review of the Group’s
corporate governance arrangements;
and

• approving all Board mandated policies.

Watkin Jones plc // Annual report and financial statements 2019

Internal controls
The Board is responsible for the Group’s
system of internal control and for reviewing
its effectiveness. Any system of internal
control can only provide reasonable,
but not absolute, assurance against
material misstatement or loss. The Board
considers that the internal controls in
place are appropriate for the Group’s size,
complexity and risk profile.

The key features of the Group’s internal
control system include:

• the preparation of monthly management
accounts and comparison to budget;

• clearly defined roles and responsibilities,
with appropriate segregation of duties;

• clear authorisation and approval

processes;

• regular preparation and review of cash

forecasts;

• senior management review of material

contracts and agreements; and

• approval by senior management of all

land purchases and development sales
agreements.

KPMG provides internal audit services to
the Group. More information can be found
in the Audit Committee report on pages 64
and 65.

Relations with shareholders
The Board recognises the importance
of maintaining an open dialogue with
shareholders and keeping them informed
of the Group’s strategy, progress and
prospects. As part of this, the Board is
committed to a high standard of corporate
reporting.

During the year, the Executive Directors
continued their programme of meetings
with existing and potential shareholders.
Meetings took place after the release of the
FY18 results in January 2019 and the FY19
interim results in May 2019. The Board was
kept informed about shareholders’ views
after these meetings by follow up from the
Company’s corporate brokers.

In November 2019, the Executive Directors
and other members of the Executive
Committee hosted a well-attended
Capital Markets Day for shareholders
and analysts at the Group’s mixed-use
development at Duncan House, Stratford.
The presentations included a review of the
Group’s markets, strategy and opportunity
for growth, as well as providing further
insight into the Group’s operations and
business model.

In addition to the events described above,
the Group looks to keep investors informed
through regulatory announcements of
important newsflow, including forward
sales of developments, planning
permissions received and sites acquired.

Annual General Meeting (“AGM”)
The Company’s AGM will be held at
10.30am on Thursday 13 February 2020
at the offices of Buchanan, 107 Cheapside,
London EC2V 6DN. The Notice of Meeting,
setting out the resolutions proposed,
is contained in a separate document and
is available on the Group’s website,
www.watkinjonesplc.com

Relations with shareholders

Strategic reportGovernanceCompany informationFinancial statements 64

Watkin Jones plc // Annual report and financial statements 2019

AUDIT
COMMITTEE REPORT

Audit Committee

Committee members

Simon Laffin
Independent Non‑Executive Director

Grenville Turner
Non‑Executive Chairman

Liz Reilly
Independent Non‑Executive Director

Additional attendees, as invited:
Ernst & Young LLP, KPMG, Richard
Simpson (from 2 January 2019),
Mark Watkin Jones (until 2 January
2019), Philip Byrom, and other
executives as required.

The Audit Committee continued to review
and establish the procedures and systems
necessary to ensure robust standards of
financial control.

Simon Laffin
Chairman of the Audit Committee

Committee responsibilities
The Committee is primarily responsible for:

• monitoring corporate risk and the quality

of internal controls;

• ensuring that the Group’s financial

performance is properly measured and
reported; and

• liaising with and reviewing the work of the
Group’s internal and external auditors.

A copy of the Committee’s terms of
reference is available on the Company’s
website www.watkinjonesplc.com/
investors/corporate-governance

The Committee met five times in the last
financial year.

Dear Shareholder
During the year, the work of the Committee
covered the following matters:

Effectiveness of the external auditor
After last year’s audit, the Committee and
the Chief Financial Officer reviewed the
performance of the auditor, looking at the
audit scope, the cost effectiveness and
the general performance and concluded
that Ernst & Young LLP (“EY”) continued to
provide an effective service.

The Committee and the Board remain
satisfied with the performance of EY
and have concluded that the firm is
independent and has the necessary
level of objectivity. The incumbent audit
partner, Victoria Venning, rotated off the
audit and was replaced by Jamie Dixon.
The Company policy now is that the
external audit shall be tendered at least
once every ten years, and EY has been the
external auditor for over 20 years.

Accordingly, the Committee will invite
a number of audit firms (including two
non-Big 4 firms) to tender for the contract
during 2020, to take over as external auditor
during 2021. The result of this tender,
as approved by the Board, will be reported
to shareholders following conclusion of the
tender process.

The management of risk
The Company has a Risk Committee,
which is a committee of the Executive
Committee and is chaired by the Chief
Executive Officer. The Company’s risk
register is reviewed by the Risk Committee
and any evolving trends or matters of
concern are subject to review. This register
is still developing as a tool for the business
and the Committee had a joint meeting
in December 2019 with the Board to
discuss and approve a refined risk
register (see pages 48 to 57).

The Risk Committee works closely with
internal audit to develop the risk register
and to review the effectiveness of mitigating
controls. The minutes of the Risk Committee
and reports of the internal auditor are tabled
at the Audit Committee meetings. The Chief
Executive Officer and internal auditor attend
the Audit Committee meetings to report on
risk and other salient matters.

The Audit Committee’s
risk assessment
Revenue recognition: Presumed
significant risk. The specific issue for
Watkin Jones is recognition of long-term
contract revenue.

Management override: Presumed
risk. The issue for the Audit Committee
is ensuring that there are sufficient
management controls to offset this risk.

Watkin Jones plc // Annual report and financial statements 2019

Land and work-in-progress valuation:
This is an important part of long-term
contract accounting. The Company
has clear accounting policies for these
valuations, with the forward sale model
reducing the risk around the selling price.

Final year-end audit report
The Committee met with EY and
reviewed their report on the year-end
results (see pages 75 to 79). Careful
consideration was given to:

• materiality, which was set by the

auditors at 5% of profit before tax and
one-off items. This equated to overall
Group profit materiality of £2.6 million;

• accounting estimates and judgements,

primarily relating to:

• a closing provision of £3.5 million for
onerous lease commitments, which
increased by £0.8 million net during
the year;

• the annual bonus accrual of

£2.9 million; and

• intangible assets relating to Fresh
Property Group of £3.8 million
in customer relationships and
£9.7 million in goodwill;

• revenue recognition of projects under
development and the valuation of
work-in-progress. In particular, the
adoption and initial application of
IFRS 15 ‘Revenue from contracts with
customers’ which was applied for the
first time;

• the risks of management override of

controls;

• quality of earnings. An exceptional cost of
£2.6 million representing compensation
to the Group’s new CEO for forfeiting
outstanding incentives held in respect
of his former employer, of which
£2.2 million was a non-cash charge
relating to the issue of replacement share
awards. This exceptional cost has been
disclosed separately and excluded from
adjusted EBITDA;

• a number of immaterial corrected and

uncorrected audit differences;

• the independence of the external

auditor. EY has been the auditor for over
20 years, but the Committee was firm
in its view that the auditor has retained
its independence from management.
EY did no chargeable work for the
Company other than the audit and
half-year review; and

• new accounting and reporting

standards. The Committee reviewed all
new standards and in particular agreed
the accounting treatment of IFRS 16
‘Leases’. The Committee noted that all
requirements for an AIM-listed business
are being complied with.

Significant accounting estimates
and judgements
The Committee reviewed a schedule of
significant accounting estimates and
judgements presented by management,
with both internal and external auditors
present.

This highlighted:

• provisions for onerous lease

commitments. The Group has
made provision for historic onerous
lease commitments, effectively rent
guarantees, on PBSA properties sold
in prior years, where it is expected that
there will be a shortfall in the net student
rental income received compared to
the lease rentals payable. It is no longer
the policy of the Company to enter into
arrangements of this nature; and

• carrying value of intangible assets.
This relates to the carrying value of
Fresh Property Group. A 20-year cash
flow forecast was prepared that showed
that the value booked was comfortably
justified.

Other matters considered
by the Committee
Annual report and financial statements:
The Committee reviewed the annual report
and other financial statements during the
year to ensure that they were fair, accurate
and balanced. It then recommended those
reports to the Board for approval. It also
considered the going concern statement
and recommended this to the Board.

Dividends: The Committee reviewed the
ability of the Company to pay the proposed
dividend and its appropriateness, and
recommended this to the Board.

Controls-based audit: The Committee
discussed with both management
and the external auditor the benefits
and implications of moving towards a
controls-based audit. Progress was made
in the 2019 audit, with a pathway being
developed for further progress in the new
financial year.

Business Continuity Planning: There had
been no formal Business Continuity Plan
(“BCP”) in place, although there was an
IT disaster recovery plan. The Committee
requested both management and the
internal audit team to formalise the
BCP and to ensure that it provided
comprehensive coverage. This is now
all in hand with specialist contractors.

GDPR/Cybersecurity: Internal audit
reviewed the status of the Company’s
compliance with GDPR and cybersecurity,
and made a number of recommendations.
The Committee stressed the importance
of full compliance and the need to increase
cybersecurity. Management undertook
a number of actions in response.

An outside contractor has been appointed
to oversee GDPR procedures and
compliance.

Cash flow reporting and payment
practice reporting: An internal audit
report was broadly comfortable
with procedures, but made some
recommendations on formalising and
documenting controls.

QX India: QX provides administrative
support to Fresh Property Group.
The internal audit team looked at the
outsourcing contract with QX and made
a number of recommendations to ensure
compliance, stronger governance and
tighter data security.

UK Bribery Act: Compliance with
this legislation was reviewed by the
Committee and an updated Anti-Bribery
and Corruption policy, including gifts and
hospitality, was approved.

IFRS 16: The Committee discussed
the implications of IFRS 16 with both
management and the auditor. The impact is
detailed in the financial review on page 47
and in note 5 to the financial statements.

IFRS 2 and CEO recruitment incentives:
This was reviewed with the auditor to
ensure that the incentives were correctly
accounted for and disclosed as a
one-off cost.

Dormant companies: The Committee
reviewed the number of dormant
companies and identified those that could
be struck off. As a result, 32 companies
have been removed.

Performance metrics: These
were assessed for their relevance,
appropriateness and completeness for
assessing performance against our strategy.

Whistleblowing: The Committee received
a small number of whistleblowing reports
during the year. It ensured that these were
fully and impartially investigated. In one
case, the allegations were such as to
require an independent legal review.

Financial experience on
the Committee
The Committee reviewed its own
performance as part of the Board appraisal
review. It was felt that the Committee
works well. The Board remains satisfied
that I have the necessary recent and
relevant financial experience to chair the
Audit Committee.

Simon Laffin
Chairman of the Audit Committee

13 January 2020

Strategic reportGovernanceCompany informationFinancial statements 66

Watkin Jones plc // Annual report and financial statements 2019

NOMINATION
COMMITTEE REPORT

The Committee successfully met its objectives
for the year, as it refined the leadership team’s
responsibilities and ensured the effective
introduction of our new CEO.

Grenville Turner
Chairman of the Nomination Committee

Committee responsibilities
The Committee identifies and nominates,
for the approval of the Board, candidates
to fill Board vacancies as and when
they arise.

The Committee meets as required. In
FY19, the Committee met three times.

Dear Shareholder
This report explains the work of the
Nomination Committee during the financial
year. Liz Reilly became a member of the
Committee on her appointment to the
Board. Committee membership was
otherwise unchanged in the period.

The Nomination Committee set itself
two priorities for FY19, as outlined in last
year’s report. These were to refine the
division of responsibilities in the senior
leadership team and to ensure the effective
introduction of Richard Simpson as CEO.

Senior leadership
responsibilities
The Group’s senior leadership
comprises our two Executive Directors,
Richard Simpson and Philip Byrom,
as well as Jim Davies, who heads up
our development activities, Rebecca
Hopewell, who is CEO of FPG, and our
Investment Director Alex Pease.

During the year, we continued to refine
their responsibilities, for example
by giving Jim more responsibility
for construction overall and asking
Rebecca to take on a greater role in the
overall transformation of the business.

At the same time, the leadership team
has had much greater exposure to the
Board this year and has presented
to us on a wide range of subjects,
from Brexit preparation to a review
of our HR structures. We believe the
team is functioning well and gives us
confidence as we enter the next phase
of the Group’s development.

Nomination Committee

Committee members

Grenville Turner
Non‑Executive Chairman

Simon Laffin
Independent Non‑Executive Director

Liz Reilly
Independent Non‑Executive Director

We believe the
leadership team is
functioning well and
gives us confidence
as we enter the next
phase of the Group’s
development.

Watkin Jones plc // Annual report and financial statements 2019

Introduction of Richard Simpson
as CEO
As outlined in last year’s report, we
organised a detailed induction programme
for both Richard and Liz Reilly, which
included meetings with the other Directors,
the Executive Committee, our corporate
brokers and other professional advisers,
as well as visits to our development sites.

The Board has also provided Richard with
support in a number of ways, including
regular informal dialogue with me, as well
as discussions before and after Board
meetings. This has helped Richard to make
a strong start to life as our CEO and we
are delighted with the impact he is already
making.

Succession planning and
Board composition
During the year, we appointed Jackie Kelly
as the Group’s first Human Resources
Director. An important part of her remit
has been to develop our succession
planning at executive team level. We have
also held discussions at Board level about
succession planning for the Directors.

The Board is working well and having
added Richard Simpson and Liz Reilly to
the Board this year, we are not currently
considering any further recruitment at
Board level.

Directors’ training
All the Directors look to keep their skills
and experience up to date. We benefit
from briefings, presentations and papers
provided by our advisers and other
professional services firms, covering topics
such as new regulations, developments
in corporate governance and emerging
best practice. This year has seen a marked
increase in presentations from within the
business, as well as from our corporate
brokers.

The Non-Executive Directors also benefit
from our interaction with the other boards
we sit on, providing us with a range of
different perspectives we can apply to
Watkin Jones.

Diversity
We recognise the business benefits of
diversity. Our aim is to go beyond the legal
requirement to treat everyone fairly, so we
ensure that Watkin Jones is an attractive
employer to the widest possible workforce.

As discussed in the people section on
page 39 of the strategic report, women
remain under-represented at senior levels
of the Group.

In part, this is due to the nature of the
industry in which we operate, as well
as to the relative stability of the senior
team, which means we have had fewer
opportunities to increase diversity.
We continue to look for ways to enhance
all aspects of diversity across the Group.

Priorities for FY20
In the current financial year, the
Committee’s priorities will be to:

• ensure we have sufficient senior

leadership resource to effectively
implement our growth strategy; and

• continue to review our succession
planning and ensure it remains
up to date.

Grenville Turner
Chairman of the Nomination Committee

13 January 2020

Strategic reportGovernanceCompany informationFinancial statements 68

Watkin Jones plc // Annual report and financial statements 2019

REMUNERATION
COMMITTEE REPORT

The Group operates a straightforward
remuneration policy, which appropriately
balances short and long-term incentives
to encourage effective and sustainable
delivery of our strategy.

Liz Reilly
Chair of the Remuneration Committee

Remuneration Committee

Committee members

Liz Reilly
Independent Non‑Executive Director

Simon Laffin
Independent Non‑Executive Director

Grenville Turner
Non‑Executive Chairman

Additional attendees, as invited:
Richard Simpson, Philip Byrom,
Mark Watkin Jones (prior to stepping
down as CEO), Jackie Kelly (Human
Resources Director)

Committee responsibilities
The Remuneration Committee is
primarily responsible for reviewing
the performance of the Executive
Directors and determining their terms
and conditions of service, including
their remuneration. The Committee
also determines the remuneration for
members of the Executive Committee.

The Committee meets at least once a
year. In FY19, it met five times.

Dear Shareholder
This report sets out the Group’s
remuneration policy for the Directors
and explains how this policy was
applied during the year.

I became chair of the Committee
on my appointment to the Board on
21 January 2019. Grenville Turner,
who previously chaired the Committee,
remains a Committee member.

Remuneration policy
The Executive Directors are eligible
to receive the following elements of
remuneration, under the Company’s
remuneration policy:

• basic salary;

• annual bonus;

• long-term incentive;

• pension contributions; and

• other benefits, including a car allowance

and health insurance.

Basic salaries
The current annual salaries of the
Executive Directors are as follows:

• Richard Simpson: £375,000; and

• Philip Byrom: £257,500.

Watkin Jones plc // Annual report and financial statements 2019

The Committee reviews the Executive
Directors’ salaries annually but is not
obliged to increase them. In reviewing
salaries, the Committee considers:

• pay levels at comparably sized listed

companies and sector peers;

• the performance, role and

responsibility of each Director;

• the economic climate, market conditions
and the Company’s performance; and

• the level of pay across the Group as

a whole.

In FY19, Philip Byrom received a 3%
increase to his basic salary, in line with
the average increase for salaries across
the Group. Richard Simpson did not
receive a salary increase, having joined
the Company part way through the year.
Mark Watkin Jones did not receive an
increase, following his decision to step
down from the Board.

Annual bonus
The Executive Directors’ annual bonuses
for FY19 were based on carefully chosen
corporate performance and personal
performance measures. These measures
incentivise the delivery of the plan for
the year, as well as ensuring future
performance through measures related,
for example, to the development pipeline.

The maximum bonus opportunity is
100% of basic salary. Three-quarters
of the annual bonus relates to corporate
performance and one quarter to achieving
personal targets. Of the annual bonus
relating to corporate performance, 75% is
payable for achieving EBITDA, adjusted to
exclude exceptional items, in line with the
market consensus.

For FY19, Richard Simpson received a
bonus of 78.2% of salary, which was
pro-rated to take account of his start date
of 2 January 2019. Philip Byrom received
a bonus of 77.2% of salary. Mark Watkin
Jones was not eligible to receive a bonus
for FY19.

Long-term incentive plan
The Watkin Jones Long-Term Incentive
Plan (“LTIP”) covers the Executive
Directors and other senior executives.

Awards under the LTIP are structured
as nil or nominal cost options and are
normally made annually. Awards will
normally vest three years from grant,
subject to the achievement of challenging
performance targets and continued
service. Award levels are capped at 200%
of salary per individual per annum.

The Committee monitors share usage
carefully, noting that a 10% dilution limit
applies to the LTIP or any other employee
share plan adopted by the Company.
Details of the awards granted to Executive
Directors in FY19 are set out below.

A 200% of salary shareholding guideline
operates for Executive Directors. As such,
Executive Directors will be required to
retain at least 50% of the net-of-tax LTIP
awards which vest in the future, to the
extent that the individual does not already
hold shares with a value equal to or above
200% of salary.

Pensions
The Company contributes to pension plans
for the Executive Directors at a rate of 20%
of basic salary for Richard Simpson and
10% of basic salary for Philip Byrom.

The Directors may elect to receive all or
part of the pension contribution in cash,
provided there is no difference in cost to
the Company.

Executive Board changes
Richard Simpson
Richard Simpson was appointed CEO on
2 January 2019. His remuneration package
is consistent with our remuneration policy
and is detailed above.

In addition to this package, Richard is
being compensated for incentive awards
he forfeited when he resigned from his
previous employer. On 10 April 2019, he
received a cash payment of £361,799 to
compensate him in respect of his forgone
2018 annual bonus.

On 8 February 2019, Richard was granted
awards over Watkin Jones plc shares in
compensation for share awards which
lapsed when he ceased his previous
employment. These buyout awards have
been granted under the “Watkin Jones
Recruitment Plan”, which is identical to
the shareholder-approved LTIP, except
that the terms of the LTIP which would
have prevented the grant of the buyout
awards have been removed. The terms
removed are the 200% of salary limit
and requirement for awards to have
performance conditions.

Strategic reportGovernanceCompany informationFinancial statements 70

Watkin Jones plc // Annual report and financial statements 2019

REMUNERATION
COMMITTEE REPORT continued

Executive Board changes continued
Richard Simpson continued
Details of the awards are as follows:

Buyout award

Number of shares
subject to buyout
award

Normal vesting date
of buyout award

Vesting/performance conditions

2015 Buyout Award

92,480

2 April 2019

• Continued employment with Watkin Jones only.

2016 Buyout Award

434,764

23 June 2019

• Continued employment with Watkin Jones; and

2017 Buyout Award

438,765

10 April 2020

• Continued employment with Watkin Jones; and

• Vesting based on vesting outcome of 2017 Unite LTIP awards.

2018 Buyout Award

344,201

10 April 2021

• Continued employment with Watkin Jones; and

• Vesting based on vesting outcome of 2016 Unite LTIP awards.

• Vesting subject to the same performance conditions as the
awards granted to other Watkin Jones senior executives in
May 2018, under the terms of the LTIP.

The 2016, 2017 and 2018 buyout awards are subject to a two-year holding period. To the extent that these awards vest, Richard will not
be able to sell any shares resulting from the exercise of an award for a period of two years from the vesting date, other than to fund the
resulting tax and NIC liabilities.

During 2019, Richard exercised the 2015 Buyout Award and c.82% of the 2016 Buyout Award (after performance targets were applied).
After crediting the awards with dividend equivalents and selling an appropriate number of shares to pay the one pence exercise price and
associated tax liabilities, Richard received 236,324 shares. In addition, he received a cash payment of £2,970 to compensate him for the
2019 interim dividend which was not credited in shares to the 2015 Buyout Award.

Mark Watkin Jones
Mark stepped down as CEO on 2 January 2019 and as a member of the Board on 15 January 2019. He received no payments in respect
of stepping down as CEO, did not receive a 2018 LTIP award and was not eligible for an annual bonus in respect of FY19.

Watkin Jones plc // Annual report and financial statements 2019

LTIP awards granted in the year
The following LTIP awards were granted to
the Executive Directors on 31 May 2019:

Basis of
award (% of
salary)

Number of
shares under
award

200

342,309

100

117,526

Richard
Simpson

Philip
Byrom

The awards have an exercise price of one
pence per share and become exercisable
after three years from the date of grant,
subject to continued employment and
performance based on the Company’s
total shareholder return and earnings per
share performance over the three years to
30 September 2021.

Non-Executive Directors’ fees
The current fees for the Non-Executive
Directors, which were increased by 3%
from the prior year, are as follows:

• Grenville Turner: £128,750;

• Simon Laffin: £53,560; and

• Liz Reilly: £53,560.

These fees are subject to annual review,
although they will not necessarily be
increased each year.

Adviser to the Committee
FIT Remuneration Consultants LLP
provides advice to the Committee as and
when required, for example in relation to
the introduction of the LTIP in FY18, and
also provides information such as salary
comparators, to enable the Committee
to effectively benchmark the Executive
Directors’ rewards.

Remuneration in the year
During the year, the Directors received the following emoluments:

Basic salary/fee

Annual bonus

Pension contribution

Benefits in kind

Total

FY19

FY18

FY19

FY18

FY19

FY18

FY19

FY18

FY19

FY18

Richard Simpson

281,250

— 219,883

—

56,250

—

11,457

— 568,840

—

Mark Watkin
Jones1

87,500

350,000

— 303,520

8,750

35,000

4,822

19,481

101,072

708,001

Philip Byrom

253,750

232,500

195,846

201,624

25,375

23,250

25,008

21,889

499,979

479,263

Grenville Turner

126,875

125,000

Simon Laffin

52,780

52,000

Liz Reilly2

37,247

—

— 126,875

125,000

—

52,780

52,000

37,247

—

1. Mark Watkin Jones stepped down from the Board on 15 January 2019.
2. Liz Reilly was appointed to the Board on 21 January 2019 on a fee of £52,000 p.a.

Strategic reportGovernanceCompany informationFinancial statements 72

Watkin Jones plc // Annual report and financial statements 2019

REMUNERATION
COMMITTEE REPORT continued

Outstanding share awards
The share awards outstanding for the Executive Directors at 30 September 2019 and as at the date of this report were as follows:

Award
type

Exercise
price

Date
of grant

Interest at
1 October 2019

Granted in
the year

Lapsed in
the year

Exercised in
the year1

Interest at
30 September 2019

Date
of vesting

Performance period
for TSR and EPS
targets

Richard Simpson

Philip Byrom

2015 Buyout
Award

2016 Buyout
Award

2017 Buyout
Award

2018 Buyout
Award

LTIP

8 February
2019

31 May
2019

31 May
2018

31 May
2019

—

115,955

—

92,480

434,764

438,765

344,201

342,309

—

(74,020)

(92,480)

(360,744)

—

117,526

—

438,765

344,201

342,309

115,955

117,526

2 April
2019

23 June
2019

10 April
2020

10 April
2021

31 May
2022

31 May
2021

31 May
2022

—

1 October
2017 to
30 September
2020

1 October
2018 to
30 September
2021

1 October
2017 to
30 September
2020

1 October
2018 to
30 September
2021

1. Including dividend equivalents where delivered in additional shares.

The 2018 Buyout Awards and LTIP awards
are based on stretching three‑year
earnings per share (“EPS”) and total
shareholder return (“TSR”) performance
targets as follows:

Directors’ interests in the
Company’s shares
At 30 September 2019 and as at the date of
this report, the Directors had the following
interests in the Company’s shares:

Liz Reilly
Chair of the Remuneration Committee

13 January 2020

• 50% of awards as above are based on

sliding scale three‑year TSR targets. 0%
of awards will vest for TSR of 5% p.a.
increasing pro‑rata to 100% of this part
of awards vesting for TSR of 12% p.a.;
and

• 50% of awards are based on sliding
scale three‑year EPS targets. 0% of
awards will vest for EPS growth of 5%
p.a. increasing pro‑rata to 100% of this
part of awards vesting for EPS growth of
12% p.a.

The performance periods for the awards
are shown in the table above.

Richard Simpson

Philip Byrom

Grenville Turner

Simon Laffin

Liz Reilly

Total

Number
of shares

236,324

2,600,000

340,900

100,000

—

3,277,224

Watkin Jones plc // Annual report and financial statements 2019

Political donations
The Company made no political
donations during the year.

Auditor
Ernst & Young LLP (“EY”) has
expressed its willingness to continue
in office as auditor and a resolution to
re-appoint EY will be proposed at the
forthcoming AGM.

Going concern
The Directors have a reasonable
expectation that the Group has
adequate resources to continue
in operational existence for the
foreseeable future. For this reason,
they continue to adopt the going
concern basis in preparing the financial
statements.

Approval
This Directors’ report was
approved on behalf of the Board
on 13 January 2020.

Philip Byrom
Chief Financial Officer

13 January 2020

DIRECTORS’
REPORT

The Company’s Directors
during the year were:

Grenville Turner
Non‑Executive Chairman

Richard Simpson
Chief Executive Officer
(appointed 2 January 2019)

Mark Watkin Jones
Chief Executive Officer
(resigned 15 January 2019)

Philip Byrom
Chief Financial Officer

Simon Laffin
Independent Non‑Executive Director

Liz Reilly
Independent Non‑Executive Director
(appointed 21 January 2019)

The corporate governance disclosures on
pages 61 to 63 form part of this report.

Principal activity
The Company is incorporated and
registered in England and Wales, with
registered number 9791105. Its shares
are traded on the Alternative Investment
Market of the London Stock Exchange.

The Company is the ultimate holding
company of the Group. The Group’s
principal activities are described in the
strategic report on pages 01 to 57.

Review of business
The strategic report on pages 01 to
57 provides a review of the business,
the Group’s trading for the year ended
30 September 2019, key performance
indicators and an indication of future
developments and risks.

Result and dividend
The Group’s profit for the year was
£40.3 million (FY18: £44.2 million). More
information about the Group’s financial
performance can be found in the financial
review on pages 44 to 47 and in the
financial statements on pages 80 to 118.

The Board has recommended a final
dividend for the year of 5.6 pence per share,
giving a total dividend for the year of 8.35
pence per share. More information about
dividends can be found in the Chairman’s
statement on pages 08 and 09 and in the
financial review on pages 44 to 47.

Directors
The biographies of the current Directors
can be found on pages 58 and 59. Details of
the Executive Directors’ service contracts,
the Non-Executive Directors’ letters of
appointment and the Directors’ dates of
appointment can be found in the corporate
governance report on pages 61 to 63.

Directors’ interests
The Directors’ interests in the Company’s
shares are set out in the Remuneration
Committee report on page 72.

Directors’ indemnity provisions
The Company has purchased and
maintained throughout the period
Directors’ and officers’ liability
insurance in respect of the Directors.

Share capital structure
At 30 September 2019, the Company’s
issued share capital was £2,557,221,
divided into 255,722,099 ordinary
shares of one pence each.

The holders of ordinary shares are entitled
to one vote per share at the Company’s
general meetings.

Substantial shareholdings
Based on the share register analysis
as at 13 December 2019, and as far as
the Company is aware, the following
represents interests in excess of 3%
of its ordinary share capital:

Holder

Number of
shares held

Percentage

G&J Watkin Jones 1992 Settlement Trust

38,901,422

15.21

Octopus Investments

M&G Investments

Canaccord Genuity Group Inc

Polar Capital

GLG Partners

Seek Ventures Limited

JP Morgan Chase & Co

23,747,103

18,010,814

14,723,133

11,206,723

10,995,848

10,000,000

9,057,520

9.29

7.04

5.58

4.38

4.30

3.91

3.54

Strategic reportGovernanceCompany informationFinancial statements 74

Watkin Jones plc // Annual report and financial statements 2019

DIRECTORS’ RESPONSIBILITIES
in relation to the annual report and financial statements

The Directors are responsible for keeping
adequate accounting records that are
sufficient to show and explain the parent
company’s transactions and disclose
with reasonable accuracy at any time the
financial position of the parent company
and enable them to ensure that its financial
statements comply with the Companies
Act 2006. They have general responsibility
for taking such steps as are reasonably
open to them to safeguard the assets of
the Group and to prevent and detect fraud
and other irregularities.

The Directors are responsible for the
maintenance and integrity of the corporate
and financial information included on
the Company’s website. Legislation in
the UK governing the preparation and
dissemination of financial statements may
differ from legislation in other jurisdictions.

The Directors are responsible for preparing
the annual report and the Group and
parent company financial statements
in accordance with applicable law and
regulations.

Company law requires the Directors to
prepare Group and parent company
financial statements for each financial
year. As required by the AIM Rules of the
London Stock Exchange they are required
to prepare the Group financial statements
in accordance with IFRS as adopted by the
EU and applicable law and have elected
to prepare the parent company financial
statements in accordance with IFRS as
adopted by the EU and applicable law.

Under company law, the Directors must
not approve the financial statements
unless they are satisfied that they give a
true and fair view of the state of affairs of
the Group and parent company and of their
profit or loss for that period. In preparing
each of the Group and parent company
financial statements, the Directors are
required to:

• select suitable accounting policies and

then apply them consistently;

• make judgements and estimates that are

reasonable and prudent;

• for the Group financial statements, state
whether they have been prepared in
accordance with IFRS as adopted by
the EU;

• for the parent company financial

statements, state whether they have
been prepared in accordance with IFRS
as adopted by the EU; and

• prepare the financial statements on
the going concern basis unless it is
inappropriate to presume that the Group
and the parent company will continue
in business.

Watkin Jones plc // Annual report and financial statements 2019

INDEPENDENT AUDITOR’S REPORT
to the members of Watkin Jones plc

Opinion
In our opinion:

• Watkin Jones plc’s Group financial statements and parent company financial statements (the “financial statements”) give a true and

fair view of the state of the Group’s and of the parent company’s affairs as at 30 September 2019 and of the Group’s profit for the year
then ended;

• the Group financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union;

• the parent company financial statements been properly prepared in accordance with IFRSs as adopted by the European Union

as applied in accordance with the provisions of the Companies Act 2006; and

• the financial statements have been prepared in accordance with the requirements of the Companies Act 2006, and, as regards

the Group financial statements, Article 4 of the IAS Regulation.

We have audited the financial statements of Watkin Jones Plc which comprise:

Group

Parent company

Consolidated balance sheet as at 30 September 2019

Balance sheet as at 30 September 2019

Consolidated statement of comprehensive income for the
year then ended

Statement of changes in equity for the year then ended

Consolidated statement of changes in equity for the year
then ended

Related notes 38 to 44 to the financial statements including
a summary of significant accounting policies

Consolidated statement of cash flows for the year then ended

Related notes 1 to 37 to the financial statements, including
a summary of significant accounting policies

The financial reporting framework that has been applied in their preparation is applicable law and International Financial Reporting
Standards (IFRSs) as adopted by the European Union and; as regards to the parent company financial statements, as applied in
accordance with the provisions of the Companies Act 2006.

Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities
under those standards are further described in the Auditor’s responsibilities for the audit of the financial statements section of our report
below. We are independent of the Group and parent company in accordance with the ethical requirements that are relevant to our audit of
the financial statements in the UK, including the FRC’s Ethical Standard as applied to listed public interest entities, and we have fulfilled
our other ethical responsibilities in accordance with these requirements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Conclusions relating to going concern
We have nothing to report in respect of the following matters in relation to which the ISAs (UK) require us to report to you where:

• the Directors’ use of the going concern basis of accounting in the preparation of the financial statements is not appropriate; or

• the Directors have not disclosed in the financial statements any identified material uncertainties that may cast significant doubt
about the Group’s or the parent company’s ability to continue to adopt the going concern basis of accounting for a period of at
least twelve months from the date when the financial statements are authorised for issue.

Overview of our audit approach

Key audit matters

• Revenue recognition.

• Carrying value of land and work in progress.

Audit scope

• The Group solely operates in the United Kingdom. We performed an audit of the complete

financial information of all the Group companies and we performed direct procedures on joint
venture balances included within the Group financial statements.

Materiality

• Overall Group materiality of £2.6 million which represents 5% of pre-tax income.

Strategic reportGovernanceCompany informationFinancial statements 76

Watkin Jones plc // Annual report and financial statements 2019

INDEPENDENT AUDITOR’S REPORT continued
to the members of Watkin Jones plc

Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements
of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) that we
identified. These matters included those which had the greatest effect on: the overall audit strategy, the allocation of resources in the
audit; and directing the efforts of the engagement team. These matters were addressed in the context of our audit of the financial
statements as a whole, and in our opinion thereon, and we do not provide a separate opinion on these matters.

Risk

Revenue recognition (Revenue – 2019: £375 million,
2018: £363 million)

Refer to the Audit Committee report (page 64); accounting
policies (pages 85 and 86); and notes 6 and 7 of the
consolidated financial statements (pages 91 to 93)

The Group’s main revenue stream comes from long-term contracts
(2019: £310 million, 2018: £303 million). In line with IFRS 15, revenue
and margin are recognised in line with the five step model to account
to revenue.

There are various assumptions within the development appraisals
regarding the estimated costs to complete which impact whether
revenue and margin are recognised in the appropriate period.

There is therefore a risk that the incorrect amount of revenue and
costs is recorded in the income statement if the estimated costs to
complete are incorrect, either due to error or management bias.

Revenue from residential sales of £38 million (2018: £30 million) is
recognised on legal completion. There is a risk that the revenue is not
recorded in the appropriate period due to cut off errors.

Accommodation management revenue of £7 million (2018: £7 million)
and rental income of £19 million (2018: £23 million) are recognised
in line with management services provided or rental agreements in
place. There is a risk that revenue is not recorded in the appropriate
period due to cut off errors.

Our response to the risk

Our audit procedures included the following:

• we evaluated the design and implementation of controls over
revenue recognition and costs to complete and tested these
controls as part of our audit strategy; and

• we performed audit procedures designed to address the risk of
management override of controls, including journal entry testing
to confirm that the processing and timing of journals to record
revenue are consistent with expectations.

In relation to long-term contract revenue:

• we considered and checked the revenue recognised was

consistent with the calculated stage of completion, focusing on
those developments not fully constructed pre-year end;

• for all developments where revenue in excess of £196,000 was
recognised in the year, we agreed the total forecast value to
signed development agreements, we then tested the costs to
complete and checked that revenue was correctly calculated on
that basis;

• we critically challenged the forecast cost to complete by way of
review of budgets and hindsight reviews on historical budgeting
accuracy, corroborating any variances to budgets back to
source documentation;

• for a sample of costs incurred during the year, we verified that

they had been allocated to the appropriate development;

• for all developments not fully constructed pre-year end, we

challenged management over the forecast costs to come, the
total budgeted costs and confirmed the percentage used to
assess stage of completion; and

• we reconciled management’s cost valuation reports back to

revenue recorded to ensure all cumulative movements in revenue
and costs have been appropriately recorded in the statement of
comprehensive income.

In relation to residential sales:

• we selected a sample of residential sales made in September
2019 and October 2019 and corroborated the sale to the legal
completion documentation and cash receipt.

In relation to accommodation management revenue/rental income:

• we selected a sample of sales invoices raised in September 2019
and October 2019 and recalculated the revenue recognised and
deferred at year end by reference to the service contract; and

• we performed substantive analytical review procedures using
known occupancy rate movements, rental income per room
and known management price movements to corroborate the
occurrence and measurement of revenue throughout the period.

Scope of our procedures

The whole Group was subject to full scope audit procedures over revenue.

Key observations communicated to the Audit Committee

We have audited the timing of revenue recognition and assessed the risk of management override.

Based upon the audit procedures performed, we conclude that revenue (and associated gross profit on long-term contracts) has been
recognised on an appropriate basis in the year.

Watkin Jones plc // Annual report and financial statements 2019

Risk

Carrying value of land and work in progress 2019:
£135 million (2018: £133 million) of inventories held split
between land of £56 million (2018: £49 million) and work
in progress of £79 million (2018: £84 million).

Refer to the Audit Committee Report (page 65); accounting
policies (page 87); and note 20 of the consolidated financial
statements (page 103)

Our response to the risk

Our audit procedures included the following:

• we evaluated the design and implementation of controls and
tested controls over the carrying value of land and work in
progress;

• for land and work in progress developments held at

30 September 2019 with a carrying value in excess of £196,000,
we;

The valuation of inventories at the lower of cost and net realisable
value requires significant judgements by management over the
anticipated revenues and forecast development costs.

• compared the assumptions made regarding selling prices
to market data and corroborated the explanations for any
differences;

There is therefore a risk that the carrying values of the land and work
in progress balances reported within the inventories are overstated.

• compared the actual estimated costs and margin over the

development lifecycle and validated key drivers for change in
margin to assess management’s forecasting accuracy;

• verified a sample of costs incurred in the year to purchase

invoice; and

• for those sites determined to be most at risk of overstatement,
being large sites that are in the process of development but
are yet to be forward sold, we involved our internal Real Estate
specialists to validate the value of land and work in progress
held, who reviewed the methodology used to develop the
estimate and evaluated management’s estimate against their
own assessment.

Scope of our procedures

The whole Group was subject to full scope audit procedures over revenue.

Key observations communicated to the Audit Committee

We audited the inputs and assumptions used by management to assess the carrying value of land and work in progress.

We conclude that the inputs and assumptions applied are reasonable and that the carrying value of land and work in progress at
30 September 2019 is appropriate.

An overview of the scope of our audit
Tailoring the scope
Our assessment of audit risk, our evaluation of materiality and our allocation of performance materiality determine our audit scope for
each entity within the Group. Taken together, this enables us to form an opinion on the consolidated financial statements. We take into
account size, risk profile, the organisation of the group and effectiveness of group wide controls, changes in the business environment
and other factors such as recent Internal audit results when assessing the level of work to be performed at each entity. We performed
an audit of the complete financial information of all the Group companies and we performed direct procedures on joint venture balances
included within the Group financial statements.

Changes from the prior year
There has been no change in our scope compared to the prior year.

Involvement with component teams
All audit work performed for the purposes of the audit was undertaken by the Group audit team.

Our application of materiality
We apply the concept of materiality in planning and performing the audit, in evaluating the effect of identified misstatements on the audit
and in forming our audit opinion.

Materiality
The magnitude of an omission or misstatement that, individually or in the aggregate, could reasonably be expected to influence
the economic decisions of the users of the financial statements. Materiality provides a basis for determining the nature and
extent of our audit procedures.

We determined materiality for the Group to be £2.6 million (2018: £2.5 million), which is 5% (2018: 5%) of pre-tax income. We believe that
pre-tax income provides us with a key performance measure of management and is what the users of financial statements are more
interested in.

Strategic reportGovernanceCompany informationFinancial statements 78

Watkin Jones plc // Annual report and financial statements 2019

INDEPENDENT AUDITOR’S REPORT continued
to the members of Watkin Jones plc

An overview of the scope of our audit continued
Performance materiality
The application of materiality at the individual account or balance level. It is set at an amount to reduce to an appropriately low
level the probability that the aggregate of uncorrected and undetected misstatements exceeds materiality.

On the basis of our risk assessments, together with our assessment of the Group’s overall control environment, our judgement was
that performance materiality was 75% (2018: 75%) of our planning materiality, namely £1.96 million (2018: £1.88 million). We have set
performance materiality at this percentage due to our past experience on the audit indicating a lower risk of misstatements, both
corrected and uncorrected.

Reporting threshold
An amount below which identified misstatements are considered as being clearly trivial.

We agreed with the Audit Committee that we would report to them all uncorrected audit differences in excess of £0.13 million
(2018: £0.12 million), which is set at 5% of planning materiality, as well as differences below that threshold that, in our view, warranted
reporting on qualitative grounds.

We evaluate any uncorrected misstatements against both the quantitative measures of materiality discussed above and in light of other
relevant qualitative considerations in forming our opinion.

Other information
The other information comprises the information included in the annual report other than the financial statements and our auditor’s
report thereon. The Directors are responsible for the other information.

Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in this
report, we do not express any form of assurance conclusion thereon.

In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider
whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise
appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required
to determine whether there is a material misstatement in the financial statements or a material misstatement of the other information.
If, based on the work we have performed, we conclude that there is a material misstatement of the other information, we are required to
report that fact.

We have nothing to report in this regard.

Opinions on other matters prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of the audit:

• the information given in the strategic report and the Directors’ report for the financial year for which the financial statements are

prepared is consistent with the financial statements; and

• the strategic report and Directors’ report have been prepared in accordance with applicable legal requirements.

Matters on which we are required to report by exception
In the light of the knowledge and understanding of the Group and the parent company and its environment obtained in the course of
the audit, we have not identified material misstatements in the strategic report or the Directors’ report.

We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report to you if,
in our opinion:

• adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received

from branches not visited by us; or

• the parent company financial statements are not in agreement with the accounting records and returns; or

• certain disclosures of Directors’ remuneration specified by law are not made; or

• we have not received all the information and explanations we require for our audit.

Watkin Jones plc // Annual report and financial statements 2019

Responsibilities of Directors
As explained more fully in the Directors’ responsibilities statement set out on page 74, the Directors are responsible for the preparation of
the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the Directors determine
is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, the Directors are responsible for assessing the Group and parent company’s ability to continue as
a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the
Directors either intend to liquidate the Group or the parent company or to cease operations, or have no realistic alternative but to do so.

Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement,
whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of
assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when
it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably
be expected to influence the economic decisions of users taken on the basis of these financial statements.

A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council’s website
at https://www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.

Use of our report
This report is made solely to the Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006.
Our audit work has been undertaken so that we might state to the Company’s members those matters we are required to state to them in
an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone
other than the Company and the Company’s members as a body, for our audit work, for this report, or for the opinions we have formed.

Jamie Dixon
Senior statutory auditor
for and on behalf of Ernst & Young LLP, Statutory Auditor
Manchester

13 January 2020

Strategic reportGovernanceCompany informationFinancial statements 80

Watkin Jones plc // Annual report and financial statements 2019

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
for the year ended 30 September 2019

Continuing operations

Revenue

Cost of sales

Gross profit

Administrative expenses

Operating profit before exceptional items

Exceptional (costs)/income

Operating profit

Profit on disposal of interest in joint venture

Share of profit in joint ventures

Finance income

Finance costs

Profit before tax

Income tax expense

Profit for the year attributable to ordinary equity holders of the parent

Other comprehensive income

Subsequently reclassified to income statement:

Net (loss)/gain on equity instruments designated at fair value through other comprehensive income

Total comprehensive income for the year attributable to ordinary equity holders of the parent

Earnings per share for the year attributable to ordinary equity holders of the parent

Basic earnings per share

Diluted earnings per share

Adjusted proforma basic earnings per share (excluding exceptional (costs)/income)

Adjusted proforma diluted earnings per share (excluding exceptional (costs)/income)

The notes on pages 84 to 114 are an integral part of these consolidated financial statements.

Year ended
30 September
2019
£’000

Year ended
30 September
2018
£’000

Notes

374,785

363,054

(298,020)

(290,624)

76,765

(24,472)

52,293

(2,576)

49,717

—

286

428

(695)

49,736

(9,436)

40,300

72,430

(22,818)

49,612

4,283

53,895

121

1,023

228

(925)

54,342

(10,136)

44,206

(2)

40,298

44,243

Pence

15.780

15.740

16.689

16.646

17.317

17.310

15.958

15.952

Watkin Jones plc // Annual report and financial statements 2019

CONSOLIDATED STATEMENT OF FINANCIAL POSITION
as at 30 September 2019

Non-current assets

Intangible assets

Property, plant and equipment

Investment in joint ventures

Deferred tax asset

Other financial assets

Current assets

Inventory and work in progress

Contract assets

Trade and other receivables

Cash and cash equivalents

Total assets

Current liabilities

Trade and other payables

Contract liabilities

Provisions

Interest-bearing loans and borrowings

Current tax liabilities

Non-current liabilities

Interest-bearing loans and borrowings

Deferred tax liabilities

Provisions

Total liabilities

Net assets

Equity

Share capital

Share premium

Merger reserve

Available-for-sale reserve

Fair value reserve of financial assets at FVOCI

Share-based payment reserve

Retained earnings

Total equity

The notes on pages 84 to 114 are an integral part of these consolidated financial statements.

Approved by the Board of Directors on 13 January 2020 and signed on its behalf by:

Richard Simpson
Director

30 September
2019
£’000

30 September
2018
£’000

Notes

13,844

4,966

2,794

290

1,139

23,033

134,226

25,578

14,443

115,652

289,899

312,932

(81,407)

(5,164)

(863)

(1,324)

(7,056)

14,403

4,809

2,558

1,350

23,162

132,778

8,758

18,209

106,640

266,385

289,547

(84,805)

(14,314)

(1,068)

(1,605)

(7,204)

(95,814)

(108,996)

(37,481)

(1,042)

(2,594)

(41,117)

(24,877)

(1,050)

(1,602)

(27,529)

(136,931)

(136,525)

176,001

153,022

2,553

84,612

2,553

84,612

(75,383)

—

434

2,311

161,474

176,001

436

—

140,720

153,022

Strategic reportGovernanceCompany informationFinancial statements

Watkin Jones plc // Annual report and financial statements 2019

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the year ended 30 September 2019

Share
capital
£’000

Share
premium
£’000

Merger
reserve
£’000

Available-for
-sale
reserve
£’000

financial Share-based
payment
assets at
reserve
FVOCI
£’000
£’000

Fair value
reserve of

Balance at
1 October 2017

Profit for the year

Other comprehensive
income

Total comprehensive
income

Transactions with owners

Share-based payments

Dividend paid (note 15)

Balance at
30 September 2018
(as previously reported)

2,553

84,612

(75,383)

—

2,553

84,612

(75,383)

IFRS 9 restatement (note 5)

—

Adjustment on initial
application of IFRS 15
(net of tax) (note 5)

As at 30 September
2018 (restated)

Profit for the year

Other comprehensive
income

Deferred tax credited
directly to equity (note 27)

Total comprehensive
income

Transactions with owners

Share-based payments

Dividend paid (note 15)

Balance at
30 September 2019

—

2,553

84,612

(75,383)

—

2,553

84,612

(75,383)

399

—

436

(436)

—

436

—

436

—

(2)

—

(2)

—

The notes on pages 84 to 114 are an integral part of these consolidated financial statements.

Retained
earnings
£’000

Total
£’000

114,050

126,231

44,206

—

44,206

44,243

—

(17,536)

140,720

153,022

—

497

141,217

153,519

40,300

—

(2)

40,370

40,368

—

2,227

—

2,227

—

(20,113)

434

2,311

161,474

176,001

Watkin Jones plc // Annual report and financial statements 2019

CONSOLIDATED STATEMENT OF CASH FLOWS
for the year ended 30 September 2019

Cash flows from operating activities

Cash inflow from operations

Interest received

Interest paid

Tax paid

Net cash inflow from operating activities

Cash flows from investing activities

Acquisition of property, plant and equipment

Proceeds on disposal of property, plant and equipment

Proceeds from disposal of interest in joint venture

Cash distribution received from other financial assets

Purchase of other financial assets

Loan payments from joint ventures

Net cash inflow from investing activities

Cash flows from financing activities

Dividends paid

Capital element of finance lease rental payments

Drawdown of RCF

Repayment of bank loans

Net cash outflow from financing activities

Net increase in cash

Cash and cash equivalents at 1 October 2018 and 1 October 2017

Cash and cash equivalents at 30 September 2019 and 30 September 2018

The notes on pages 84 to 114 are an integral part of these consolidated financial statements.

Year ended
30 September
2019
£’000

Year ended
30 September
2018
£’000

Notes

27,811

428

(911)

(9,769)

17,559

(361)

—

209

—

(65)

(20,113)

(1,307)

46,244

(33,306)

(8,482)

9,012

106,640

115,652

66,582

228

(1,247)

(11,140)

54,423

(298)

400

1,744

(350)

1,176

2,690

(17,536)

(1,203)

8,036

(5,095)

(15,798)

41,315

65,325

106,640

Strategic reportGovernanceCompany informationFinancial statements

Watkin Jones plc // Annual report and financial statements 2019

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 30 September 2019

3. Accounting policies
3.1 Basis of consolidation
Subsidiaries are fully consolidated from
the date of acquisition, being the date
on which the Group obtains control,
and continue to be consolidated until the
date when such control ceases. Control
is achieved when the Group is exposed,
or has rights, to variable returns from its
involvement with the investee and has
the ability to affect those returns through
its power over the investee. The financial
statements of the subsidiaries are
prepared for the same reporting period
as the parent company, using consistent
accounting policies. All intra-group
balances, transactions, unrealised gains
and losses resulting from intra-group
transactions and dividends are eliminated
in full.

The terms of the acquisition of the shares
in Watkin Jones Group Limited by the
Company on its IPO in March 2016 in
the year ending 30 September 2016
were such that the Group reconstruction
should be accounted for as a continuation
of the existing Group rather than as
an acquisition, and as such merger
accounting was applied. Accordingly, the
difference between the cash consideration
paid and the nominal value of the share
capital acquired as part of the Group
reconstruction were reflected against a
merger reserve.

3.2 Going concern
The financial statements have been
prepared on a going concern basis.
The Directors consider that it is
appropriate for the financial statements
to be prepared on this basis having
considered all relevant information,
including the Group’s trading and cash
flow forecasts, the trading opportunities
available to the Group and the ongoing
support of its banks.

1. General information
Watkin Jones plc (the “Company”) is a
public limited company incorporated in
the United Kingdom under the Companies
Act 2006 (registration number 9791105).
The Company is domiciled in the United
Kingdom and its registered address
is 21-22 Llandygai Industrial Estate,
Llandygai, Bangor, Gwynedd LL57 4YH.

The principal activities of the Company and
its subsidiaries (collectively the “Group”)
are those of property development and
the management of properties for multiple
residential occupation.

The consolidated financial statements
for the Group for the year ended
30 September 2019 comprise the
Company and its subsidiaries. The basis
of preparation of the consolidated financial
statements is set out in note 2 below.

2. Basis of preparation
The financial statements of the Group
have been prepared and approved by the
Directors in accordance with International
Financial Reporting Standards (“IFRS”)
as adopted by the European Union.

The preparation of financial information
in conformity with IFRS requires
management to make estimates and
assumptions that affect the reported
amounts of assets and liabilities at the
date of the financial statements and
the reported amounts of revenues and
expenses during the reporting period.
Although these estimates are based on
management’s best knowledge of the
amount, event or actions, actual events
may ultimately differ from those estimates.

The accounting policies set out below
have, unless otherwise stated, been
applied consistently to all periods
presented in these financial statements.
The financial statements are prepared
on the historical cost basis except as
disclosed in these accounting policies.

The financial statements are presented in
pounds sterling and all values are rounded
to the nearest thousand (£’000), except
when otherwise indicated.

3.3 Business combinations
Business combinations are accounted for
using the acquisition method. The cost
of any acquisition is measured as the
aggregate of the consideration transferred,
measured at acquisition date fair value.
There have been no non-controlling
interests recognised in the business
combinations to date. Acquisition costs
incurred are expensed and included in
administrative expenses.

When the Group acquires a business,
it assesses the assets and liabilities
assumed for appropriate classification
and designation in accordance with
the contractual terms, economic
circumstances and pertinent conditions
as at the acquisition date.

Goodwill is initially measured at cost
being the excess of the aggregate of the
consideration transferred over the net
identifiable assets acquired and liabilities
assumed. If the fair value of the net assets
acquired is in excess of the aggregate
consideration transferred, the Group
re-assesses whether it has correctly
identified all of the assets acquired
and all of the liabilities assumed and
reviews the procedures used to measure
the amounts to be recognised at the
acquisition date. If the reassessment still
results in an excess of the fair value of
net assets acquired over the aggregate
consideration transferred, then the gain is
recognised immediately in the statement of
comprehensive income.

After initial recognition, goodwill is
measured at cost less any accumulated
impairment losses. Goodwill is carried
in the statement of financial position
at deemed cost as at 1 October 2012,
the date of transition to IFRS for the
Group, less accumulated impairment
losses. For the purpose of impairment
testing, goodwill acquired in a business
combination is, from the acquisition
date, allocated to each of the Group’s
cash-generating units that are expected to
benefit from the combination, irrespective
of whether other assets or liabilities of the
acquiree are assigned to those units.

Where goodwill has been allocated to
a cash-generating unit (“CGU”) and
part of the operation within that unit is
disposed of, the goodwill associated with
the disposed operation is included in the
carrying amount of the operation when
determining the gain or loss on disposal.
Goodwill disposed in these circumstances
is measured based on the relative values of
the disposed operation and the portion of
the CGU retained (note 16).

Watkin Jones plc // Annual report and financial statements 2019

3.4 Investments in joint ventures
A joint venture is a type of joint
arrangement whereby the parties that have
joint control of the arrangement have rights
to the net assets of the arrangement.

Joint control is the contractually agreed
sharing of control of an arrangement,
which exists only when decisions
about the relevant activities require
the unanimous consent of the parties
sharing control.

The Group’s investments in joint ventures
are accounted for using the equity method.

Under the equity method, the investment
in a joint venture is initially recognised
at cost. The carrying amount of the
investment is adjusted to recognise
changes in the Group’s share of net assets
of the joint venture since the acquisition
date. Goodwill relating to the joint venture
is included in the carrying amount of
the investment and is not tested for
impairment separately.

The statement of comprehensive income
reflects the Group’s share of the results of
operations of the joint venture. Any change
in other comprehensive income (“OCI”)
of those investees is presented as part of
the Group’s OCI. In addition, when there
has been a change recognised directly in
the equity of the joint venture, the Group
recognises its share of any changes, when
applicable, in the statement of changes
in equity. Unrealised gains and losses
resulting from transactions between the
Group and the joint venture are eliminated
to the extent of the interest in the
joint venture.

The aggregate of the Group’s share
of profit or loss of a joint venture is
shown on the face of the statement of
comprehensive income outside operating
profit and represents profit or loss after tax
and OCI of the joint venture.

When necessary, adjustments are made
to bring the accounting policies of joint
ventures in line with those of the Group.
After application of the equity method, the
Group determines whether it is necessary
to recognise an impairment loss on its
investment in joint ventures. At each
reporting date, the Group determines
whether there is objective evidence
that the investment in joint ventures is
impaired. If there is such evidence, the
Group undertakes an impairment test and
calculates the amount of any impairment
as the difference between the recoverable
amount of the joint venture and its carrying
value, and then recognises the loss as
“share of profit of joint ventures” in the
statement of comprehensive income.

Upon loss of joint control over a joint
venture, the Group measures and
recognises any retained investment at
its fair value. Any difference between the
carrying amount of the joint venture upon
loss of joint control and the fair value of the
retained investment and proceeds from
disposal is recognised in the statement of
comprehensive income.

3.5 Revenue from contracts
with customers
The Group’s primary sources of
revenue from contracts with customers
are from developing residential and
commercial properties. It also provides
accommodation management services to
third parties. When developing purpose
built student accommodation (“PBSA”),
build to rent (“BtR”) and commercial
properties, the Group often acquires the
land on which the development will be
constructed before it is sold to a customer
alongside a construction contract or
development agreement for the delivery
of the relevant scheme.

Sale of land or completed property
The Group derives a significant portion
of its revenue from the sale of land,
and the development and sale of
completed residential and commercial
properties. Most of the Group’s land sale
agreements relate to sites for PBSA and
BtR developments where the Group has
obtained planning permission and they
are sold to customers in conjunction with
a construction contract for the Group to
deliver the property.

Contracts for the sale of land and
completed residential and commercial
developments are typically satisfied at a
point in time. This is usually deemed to be
the legal completion as this is the point at
which the Group has an enforceable right
to payment. Revenue from the sale of land,
residential and commercial properties is
measured at the transaction price agreed
in the contract with the customer.

Construction contracts and
development agreements
Construction contracts and
development agreements mainly relate
to the development of PBSA and BtR
properties along with any commercial
elements of these projects. The duration
of the contracts vary but are typically 18
to 30 months in duration. Most contracts
are considered to contain only one
performance obligation for the purposes
of recognising revenue, being the
development of the scheme to the agreed
specification.

While the scope of works may include a
number of different components, in the
context of construction service activities
these are usually highly interrelated
and produce a combined output for
the customer.

Contracts are typically recognised
over time as the development works
are undertaken on land owned and
therefore controlled by the customer,
with the services being provided by the
Group enhancing that land through the
construction of a building and associated
landscaping and enabling works.
In addition, the construction contracts
or development agreements provide an
enforceable right to payment for the value
of construction works performed. Progress
is typically measured through valuation of
the works undertaken by a professional
quantity surveyor, including an assessment
of any elements for which a price has
not yet been agreed, such as changes
in scope.

In order to recognise the profit over time it
is necessary to estimate the total contract
revenue and costs. Once the outcome of a
performance obligation of a construction
contract or development agreement
can be reasonably measured, margin
is recognised in the income statement
in line with the corresponding stage of
completion.

Total contract revenue
Contract revenue corresponds to the initial
amount of revenue agreed in the contract
and any variations in contract work, claims
and incentive payments to the extent
that it is probable that they will result in
revenue, and they are capable of being
reliably measured.

Total contract costs
The estimates for total contract costs
take account of any uncertainties in the
cost of work packages which have not yet
been let and materials which have not yet
been procured, the expected cost of any
changes in the scope of works and the
expected cost of any rectification works
during the defects liability period.

Contract costs include costs that relate
directly to the specific contract and
costs that are attributable to contract
activity in general and can be allocated
to the contract. Costs that relate directly
to a specific contract comprise: site
labour costs (including site supervision);
costs of materials used in construction;
depreciation of equipment used on the
contract; costs of design; and technical
assistance that is directly related to
the contract.

Strategic reportGovernanceCompany informationFinancial statements 86

Watkin Jones plc // Annual report and financial statements 2019

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
for the year ended 30 September 2019

3. Accounting policies continued
3.5 Revenue from contracts
with customers continued
Significant financing component
The Group often enters into construction
contracts or development agreements
which entail a final payment upon the
practical completion of the property,
typically linked to its timely completion.
These amounts are included in the
estimates for total contract revenue for a
scheme such that the period between the
recognition of revenue by the Group and
when the customer pays can be greater
than one year. This difference arises
for reasons other than the provision of
finance to the customer as it intended to
provide protection to the customer that
the Group fulfils its obligations under the
contract. Accordingly, these contracts
are not deemed to contain a significant
financing component.

Accommodation management
Management fees relate to contracted
charges for the provision of management
services as an agent to landlords of
student accommodation and build to
rent properties. Management fees are
recognised in line with the management
contracts in the period to which they relate.

Rental income
Rents receivable are credited to the
statement of comprehensive income
on a straight-line basis.

3.6 Foreign currency
The Group’s presentational currency,
which is pounds sterling, is also the
functional currency of the parent and its
subsidiaries. Foreign currency transactions
are translated into the functional currency
using the exchange rates prevailing at the
dates of those transactions.

Monetary assets and liabilities
denominated in foreign currencies at
each reporting date are retranslated at the
foreign exchange rate ruling at the date.
Foreign exchange differences arising on
translation are recognised in the statement
of comprehensive income.

3.7 Segment reporting
Operating segments are identified in
a manner consistent with the internal
reporting provided to the chief operating
decision-maker. The Group determines
its reportable segments having regard to
permitted aggregation criteria with the
principal condition being that the operating
segments should have similar economic
characteristics. For the purposes of
determining its operating segments, the
chief operating decision-maker has been
identified as the Executive Committee.
This committee approves investment
decisions, allocates the Group’s resources
and reviews the internal reporting in order
to assess performance.

3.8 Other intangible assets
The cost of intangibles acquired as part of
a business combination is the fair value at
the date of acquisition.

Intangible assets other than goodwill
are stated at cost less accumulated
amortisation and impairment losses.
Amortisation is charged to the
consolidated statement of comprehensive
income on a straight-line basis over the
estimated useful lives of the intangible
assets as follows:

Customer relationships:

eleven years

Brand:

ten years

3.9 Property, plant and equipment
Property, plant and equipment is stated
at cost less accumulated depreciation
and impairment losses. Cost represents
expenditure that is directly attributable to
the purchase of the asset.

Depreciation is charged so as to write off the
costs of assets less their residual values over
their estimated useful lives, on the following
basis:

Plant and machinery:
cranes:
other:

6.7% reducing balance
20% reducing balance

Motor vehicles:

25% reducing balance

The assets’ estimated useful lives,
depreciation rates and residual values are
reviewed, and adjusted if appropriate, at
the end of each reporting period.

The gain or loss arising on disposal
of an asset is determined as the
difference between the sales proceeds
and the carrying amount of the asset
and is recognised in the statement of
comprehensive income.

3.10 Impairment of property, plant
and equipment and intangible assets
including goodwill
At each reporting period, the Group
reviews the carrying amounts of its
tangible and intangible assets to determine
whether there is any indication that those
assets have suffered an impairment
loss. If any such indication exists, the
recoverable amount of the asset is
estimated in order to determine the extent
of the impairment loss (if any). Where it is
not possible to estimate the recoverable
amount of an individual asset, the Group
estimates the recoverable amount of the
cash-generating unit (“CGU”) to which the
asset belongs.

The recoverable amount is the higher of fair
value less costs to sell and value in use.

In assessing value in use, the estimated
future cash flows are discounted to their
present value using a pre-tax discount rate
that reflects current market assessments
of the time value of money and the risks
specific to the asset.

When the carrying amount of an asset
or CGU exceeds its recoverable amount,
the asset is considered impaired and
is written down to its recoverable
amount, with any impairment recognised
immediately through the statement of
comprehensive income.

Intangible assets with indefinite useful
lives are not amortised, but are tested
for impairment annually, either individually
or at the CGU level. The assessment
of indefinite life is reviewed annually
to determine whether the indefinite life
continues to be supportable. If not,
the change in useful life from indefinite
to finite is made on a prospective basis.

If indication exists that previously
recognised impairment losses no longer
exist or have decreased, the Group
estimates the asset’s or CGU’s recoverable
amount. A previously recognised
impairment loss is reversed only if there
has been a change in the assumptions
used to determine the asset’s recoverable
amount since the last impairment loss
was recognised. The reversal is limited so
that the carrying amount of the asset does
not exceed its recoverable amount, nor
exceed the carrying amount that would
have been determined, net of depreciation,
had no impairment loss been recognised
for the asset in prior years. Such reversal
is recognised in the statement of
comprehensive income unless the asset
is carried at a revalued amount, in which
case the reversal is treated as a revaluation
reserve. No impairment loss in respect of
goodwill is permitted to be reversed.

Watkin Jones plc // Annual report and financial statements 2019

3.11 Inventory
Inventory is stated at the lower of cost
and net realisable value. Cost comprises
all costs directly attributable to the
purchasing and development of the
property, including the acquisition of land
and buildings, legal costs, attributable
overheads, attributable finance costs and
the cost of bringing developments to their
present condition at the balance sheet
date. Net realisable value is based on
estimated selling price less the estimated
cost of disposal. Provision is made for
any obsolete or slow-moving inventory
where appropriate.

3.12 Financial assets
Financial assets are classified, at initial
recognition, and subsequently measured
at amortised cost or fair value through
other comprehensive income (“OCI”).
The classification of financial assets
at initial recognition depends on the
financial asset’s contractual cash flow
characteristics and the Group’s business
model for managing them. With the
exception of trade receivables, the Group
initially measures a financial asset at its
fair value plus transaction costs. Trade
receivables are initially recognised at fair
value and are subsequently measured at
amortised cost using the effective interest
rate method with an appropriate allowance
for estimated irrecoverable amounts
recognised in the income statement when
there is objective evidence that the asset
is impaired.

The Group’s investments in unit trusts
and equity interests held under shared
ownership schemes are classified as
equity instruments designated at fair
value through OCI. Gains and losses on
these assets are never recycled to profit
or loss. Dividends are recognised as other
income in the statement of comprehensive
income when the right to payment has
been established, except when the Group
benefits from such proceeds as a recovery
of the costs of the financial asset, in
which case such gains are recorded in
OCI. Equity instruments designated at
fair value through OCI are not subject to
impairment assessment. In the previous
financial period, the Group’s investments
in unit trusts and equity instruments held
under shared ownership schemes were
classified as available-for-sale (“AFS”)
financial assets. After initial measurement,
AFS financial assets were subsequently
measured at fair value, with unrealised
gains or losses recognised through OCI in
the AFS reserve.

Impairment of financial assets
The Group recognises lifetime expected
credit losses for trade receivables, contract
assets and loans to joint ventures. The
expected credit losses on these financial
assets are estimated based on the Group’s
historical credit loss experience, adjusted
for factors that are specific to the debtors,
general economic conditions and an
assessment of both the current as well as
forecast direction of economic conditions
at the reporting date, including the time
value of money where appropriate.

3.13 Financial liabilities
Financial liabilities are classified, at initial
recognition, as loans and borrowings or
payables. They are initially recognised
at fair value net of directly attributable
transaction costs. The Group’s financial
liabilities include trade and other payables
and loans and borrowings, including bank
overdrafts. The subsequent measurement
of financial liabilities depends on their
classification as follows:

Loans and borrowings
After initial recognition, interest-bearing
loans and borrowings are subsequently
measured at amortised cost using the
effective interest rate (“EIR”) method.
Gains and losses are recognised in the
statement of comprehensive income when
the liabilities are derecognised as well as
through the EIR amortisation process.

Amortised cost is calculated by taking
into account any discount or premium
on acquisition and fees or costs that
are an integral part of the EIR. The EIR
amortisation is included in finance costs
in the statement of comprehensive income.

Borrowing costs
All borrowing costs are recognised in
the Group’s profit for the year on an EIR
basis except for interest costs that are
directly attributable to the construction
of qualifying assets, being the Group’s
inventory. These are capitalised and
included within the cost of the asset.
Capitalisation commences when both
expenditure on the asset and borrowing
costs are being incurred, and necessary
activities to prepare the asset for use
are in progress. In the case of new
developments, this is generally once
planning permission has been obtained.
Capitalisation ceases when the asset is
ready for use or sale. Interest capitalised
relates to borrowings specific to a
development.

Derecognition
A financial liability is derecognised
when the obligation under the liability
is discharged or cancelled or expires.

When an existing financial liability is
replaced by another from the same
lender on substantially different terms,
or the terms of an existing liability
are substantially modified, such an
exchange or modification is treated as a
derecognition of the original liability and
the recognition of a new liability, and the
difference in the respective carrying
amounts is recognised in the statement
of comprehensive income.

3.14 Fair value measurement
Fair value is the price that would be
received to sell an asset or paid to transfer
a liability in an orderly transaction between
market participants at the measurement
date. The fair value measurement is based
on the presumption that the transaction to
sell the asset or transfer the liability takes
place either:

• in the principal market for the asset or

liability; or

• in the absence of a principal market, in
the most advantageous market for the
asset or liability.

The principal or the most advantageous
market must be accessible by the Group.

The fair value of an asset or a liability is
measured using the assumptions that
market participants would use when
pricing the asset or liability, assuming that
market participants act in their economic
best interest.

All assets and liabilities for which fair value
is measured or disclosed in the financial
statements are categorised within the
fair value hierarchy, described as follows,
based on the lowest level input that is
significant to the fair value measurement
as a whole:

• Level 1 – quoted (unadjusted) market
prices in active markets for identical
assets or liabilities;

• Level 2 – valuation techniques for which
the lowest level input that is significant
to the fair value measurement is directly
or indirectly observable; and

• Level 3 – valuation techniques for
which the lowest level input that is
significant to the fair value measurement
is unobservable.

3.15 Cash and cash equivalents
Cash and cash equivalents in the
statement of financial position comprises
cash at bank and in hand.

Strategic reportGovernanceCompany informationFinancial statements 88

Watkin Jones plc // Annual report and financial statements 2019

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
for the year ended 30 September 2019

3. Accounting policies continued
3.16 Employee benefits
The Group operates a defined contribution
plan, for which it pays contributions to
privately administered pension plans on
a contractual basis. The contributions
are recognised as an employee benefit
expense as they fall due.

3.17 Employee benefits –
long‑term incentive plans
The Group operates a long-term incentive
plan for certain members of the senior
management team under which those
employees receive remuneration in
the form of share-based payments,
whereby employees render services as
consideration for equity instruments
(“equity-settled transactions”). The cost
of the equity-settled transactions is
determined by the fair value at the date
the grant is made using an appropriate
valuation model, further details of which
are given in note 31.

That cost is recognised in staff costs
note 10, together with a corresponding
increase in equity over the period to which
the service and performance conditions
are fulfilled (“the vesting period”).
The cumulative expense recognised
for equity-settled transactions at each
reporting date until the vesting date reflects
the extent to which the vesting period has
expired and the Group’s best estimate of
the number of equity instruments which
will ultimately vest. The expense or credit
in the statement of comprehensive income
for a period represents the movement in
cumulative expenses recognised as at the
beginning and end of that period.

Service and non-market performance
conditions are not taken into account
when determining the grant date fair
value of awards, but the likelihood of the
conditions being met is assessed as part
of the Group’s best estimate of the number
of equity instruments which will ultimately
vest. Market performance conditions are
reflected within the grant date fair value.

No expense is recognised for awards that
do not ultimately vest because non-market
performance and/or service conditions
have not been met. Where awards include
a market condition the transactions are
treated as vested irrespective of whether
the market or non-vesting condition
is satisfied, provided that all other
performance and/or service conditions
are satisfied.

3.18 Leases
The determination of whether an
arrangement is (or contains) a lease
is based on the substance of the
arrangement at the inception of the lease.
The arrangement is, or contains, a lease if
fulfilment of the arrangement is dependent
on the use of a specific asset or assets and
the arrangement conveys a right to use
the asset or assets, even if that right is not
explicitly specified in an arrangement.

Group as a lessee
A lease is classified at the inception date
as a finance lease or an operating lease.
A lease that transfers substantially all the
risks and rewards incidental to ownership
to the Group is classified as a finance
lease. Finance leases are capitalised at
the commencement of the lease at the
inception date fair value of the leased
property or, if lower, at the present
value of the minimum lease payments.
Lease payments are apportioned between
finance charges and reduction of the lease
liability so as to achieve a constant rate of
interest on the remaining balance of the
liability. Finance charges are recognised
in finance costs in the statement of
comprehensive income. A leased asset
is depreciated over the useful life of the
asset. However, if there is no reasonable
certainty that the Group will obtain
ownership by the end of the lease term,
the asset is depreciated over the shorter
of the estimated useful life of the asset and
the lease term.

An operating lease is a lease other than a
finance lease. Operating lease payments
are recognised as an operating expense in
the statement of comprehensive income
on a straight-line basis over the lease term.

Group as a lessor
Leases in which the Group does not
transfer substantially all the risks and
rewards of ownership of an asset are
classified as operating leases. Initial
direct costs incurred in negotiating and
arranging an operating lease are added
to the carrying amount of the leased asset
and recognised over the lease term on the
same basis as rental income. Contingent
rents are recognised as revenue in the
period in which they are earned.

3.19 Taxation
Tax on the profit or loss for the year
comprises current and deferred tax.
Tax is recognised in the statement of
comprehensive income except to the
extent that it relates to items recognised
in OCI or those recognised directly in
equity, in which case it is recognised in
accordance with the underlying item.

Current tax is the expected tax payable
or receivable on the taxable income or
loss for the year, using tax rates enacted
or substantively enacted at the reporting
date, and any adjustment to tax payable in
respect of previous years.

Deferred tax is provided on temporary
differences arising between the tax bases
of assets and liabilities and their carrying
amounts in the financial statements.
Deferred tax is determined using tax
rates and laws that have been enacted
or substantively enacted by the year
end and are expected to apply when the
related deferred tax asset is realised or the
deferred tax liability is settled. A deferred
tax asset is recognised only to the extent
that it is probable that future taxable
profits will be available against which
the temporary difference can be utilised.

3.20 Exceptional items
Exceptional items are disclosed separately
in the financial statements where it is
necessary to do so to provide further
understanding of the financial performance
of the Group. They are material items of
income or expense that have been shown
separately due to the significance of their
nature or amount.

3.21 Provisions
A provision is recognised when the Group
has a legal or constructive obligation as a
result of a past event and it is probable that
an outflow of economic benefits will be
required to settle the obligation. The Group
makes provision for future operating
lease rental commitments relating to
properties where it is probable that those
commitments cannot be fully met from
the economic benefits derived from the
operation of the properties concerned.
If the effect of the time value of money
is material, provisions are discounted
using the Group’s weighted average
cost of capital.

Watkin Jones plc // Annual report and financial statements 2019

4. Critical accounting judgements
and key sources of estimation
uncertainty
In the application of the Group’s
accounting policies, which are described
in note 3, management is required to make
judgements, estimates and assumptions
about the carrying amounts of assets and
liabilities that are not readily apparent from
other sources.

Judgements
In the process of applying the Group’s
accounting policies, management has
made the following judgement, which has
the most significant effect on the amounts
recognised in the financial statements:

Sale and operating leaseback
of properties
The accounting treatment of the sale and
leaseback depends upon the substance
of the transaction (applying the lease
classification principles described
in note 3.18). For sale and operating
leasebacks, the assets are sold at fair
value, and accordingly the profit or loss
from the sale is recognised immediately
in the statement of comprehensive
income. Several property operating
leasebacks have been entered into in
the period between 1 October 2009
and 30 September 2019. When forming
the conclusion of operating lease
classification, consideration has been
given to the key lease classification
indicators of IAS 17.

The leases are typically for a three to
35-year period. The Directors have
reviewed the remaining useful lives for
these particular properties and concluded
they are significantly longer than the
period of the lease. Other key indicators
considered in reaching an operating lease
classification were the present value of
the minimum lease payments and the
ownership clauses in the contracts upon
expiry of the lease.

Estimates and assumptions
Estimates and underlying assumptions are
reviewed on an ongoing basis. Revisions
to accounting estimates are recognised in
the period in which the estimate is revised
if the revision affects only that period, or
in the period of the revision and future
periods if the revision affects both current
and future periods.

Revenue recognition
When the Group recognises revenue under
a construction contract or development
agreement, revenue is recognised using
the percentage of completion method as
construction progresses with the estimated
total revenue and cost to complete forming
key estimates in determining the amount
of revenue recognised. The estimates for
total contract costs take account of any
uncertainties in the cost of work packages
which have not yet been let and materials
which have not yet been procured, the
expected cost of any changes in the
scope of works and the expected cost of
any rectification works during the defects
liability period.

Provision for onerous
lease commitments
As described in note 3.21, the Group
makes provisions for future operating
lease rental commitments relating to
properties where it is probable that those
commitments cannot be fully met from
the economic benefits derived from the
operation of the property concerned.
In making this assessment, the Group
estimates the future economic benefits
that will be derived from the operations of
the properties, taking into account their
current economic performance and known
performance conditions, and compares
this to the estimated future lease rental
obligations, taking into account the
rent review terms and estimated future
increases in rents payable.

Accrual for remedial works
The Group makes an accrual for remedial
works where the Group accepts the liability
to carry out such works. The amount of
the accrual is based on management’s
estimate of the cost to complete the works.

5. New standards and
interpretations
New standards and interpretations
adopted for the first time during
the financial year ended
30 September 2019
IFRS 15 ‘Revenue from contracts
with customers’
The Group adopted IFRS 15 ‘Revenue
from contracts with customers’ from
1 October 2018 retrospectively using the
modified retrospective approach in respect
of all contracts. Under the modified
retrospective approach the results of the
prior year are not restated but the initial
impact of adopting the standard is taken
to opening reserves. IFRS 15 replaces IAS
18 ‘Revenue’ and IAS 11 ‘Construction
Contracts’ and introduces a five-step
model to account for revenue, with new
guidance provided in areas on which
previous IFRS were silent.

The adoption of the new standard has
required the land sale and development
agreement elements for forward-sold
schemes to be accounted for separately,
rather than treating them as a combined
agreement. Previously, the profit
margin recognised was calculated with
reference to the combined revenue
and costs from both the land sales and
development agreement. Under IFRS
15 the revenue and costs from these
two contracts are assessed separately,
resulting in different profit margins being
recognised in relation to each contract.
The effect on the Group’s results for
the year ended 30 September 2019
has been to reduce revenues and profit
before tax by £613,000, to increase the
tax creditor by £116,000 and to restate
opening reserves at 1 October 2018 by
an increase of £497,000.

Strategic reportGovernanceCompany informationFinancial statements 90

Watkin Jones plc // Annual report and financial statements 2019

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
for the year ended 30 September 2019

5. New standards and
interpretations continued
New standards and interpretations
adopted for the first time during
the financial year ended
30 September 2019 continued
IFRS 9 ‘Financial instruments’
The Group also adopted IFRS 9
‘Financial instruments’ from
1 October 2018. The Group accounts for its
financial assets and liabilities at fair value
and does not have any complex financial
instruments. The adoption of IFRS 9 has
not had a material effect on the Group’s
financial statements. However, the Group
has determined that assets previously
reported as “available-for-sale” should be
classified as fair value through OCI and
they have been reclassified to a fair value
through OCI reserve. The Group’s sales on
credit are typically to financial institutions
with strong credit ratings and therefore
the implementation of an expected credit
loss model of assessing the impairment of
trade receivables has not had a significant
impact.

New standards and interpretations
that have not yet been adopted
The following standards and interpretations
that are anticipated to be relevant to the
Group have an effective date after the date
of these financial statements. The Group
has not early adopted them and plans to
adopt them from the effective dates once
endorsed for application in the EU.

IFRS 16 ‘Leases’
General impact of application of
IFRS 16 ‘Leases’
IFRS 16 replaces IAS 17 ‘Leases’
and IFRIC 4 ‘Determining whether an
Arrangement contains a lease’ and is
mandatorily effective for accounting
periods beginning on or after
1 January 2019. IFRS 16 provides a
comprehensive model for the identification
of lease arrangements and their treatment
in the financial statements for both
lessors and lessees. The date of initial
application of IFRS 16 for the Group
will be 1 October 2019. On transition,
the Group has chosen to apply the full
retrospective approach under which the
retrospective restatement for each prior
reporting period in accordance with IFRS
16 will be presented. The two capitalisation
exemptions proposed by the standard –
lease contracts with a duration of less than
twelve months and lease contracts for
which the underlying asset has a low value
– will be used. The Group has elected to
only apply IFRS 16 to contracts previously
identified as a lease under IAS 17.

In preparation for the first-time adoption
of IFRS 16, the Group has carried out
a review of the forecast impact of its
implementation. IFRS 16 will have a
material impact on the Group’s financial
statements, in particular in relation
to the six sale and leaseback student
accommodation properties. These
properties were sold by the Group
between 2010 and 2016 to institutional
investors and simultaneously leased
back by the Group. These leaseback
arrangements will now be brought onto
the balance sheet as right-of-use assets.
IFRS 16 will also have a material impact
on the Group’s financial statements in
relation to leases for the rental of office
space and vehicles.

In contrast to lessee accounting, IFRS 16
substantially carries forward the lessor
accounting requirements from IAS 17.

Impact of lessee accounting
IFRS 16 will change how the Group
accounts for leases previously classified as
operating leases under IAS 17, which were
off-balance sheet. On initial application of
IFRS 16 the Group will:

• recognise right-of-use assets in the
consolidated statement of financial
position, initially measured at the
present value of the future minimum
lease payments from the inception of
each lease discounted at the Group’s
incremental borrowing rate. Depreciation
will be recognised in relation to this
right-of-use asset with the initial asset
valuation calculated on the basis that
depreciation has been applied from the
inception of the underlying lease;

• recognise lease liabilities in the

consolidated statement of financial
position, initially measured at the
present value of the future minimum
lease payment from the inception
of each lease discounted at the
Group’s incremental borrowing rate.
The discount is unwound each year with
the initial liability valuation calculated on
the basis that the unwind of the discount
has been applied from the inception of
the lease up until the earliest reporting
period presented; and

• the difference between the

right-of-use assets and lease liabilities
will be recognised as an adjustment to
equity at the beginning of the earliest
comparative period presented.

Subsequent treatment will be as follows:

• recognise depreciation of right-of-use

assets in the consolidated statement of
comprehensive income;

• the lease liability will be unwound

each year, with the discount unwind
recognised as an interest expense; and

• separate the total amount of cash paid
into a portion repaying the principal
of the lease liability (presented within
financing activities) and interest
(presented within operating activities)
in the consolidated statement of
cash flows.

For short-term leases (lease of twelve
months or less) and leases of low-value
assets, the Group will opt to recognise a
lease expense on a straight-line basis as
permitted by IFRS 16.

Our assessment of the estimated impact
of IFRS 16 indicates that on transition on
1 October 2019, the Group will recognise
a right-of-use asset of c.£132 million,
a deferred tax asset of c.£3 million
and a lease liability of c.£150 million.
The difference between the right-of-use
asset, deferred tax asset and lease liability
is estimated to be c.£15 million and equity
will be reduced by this amount.

The application of IFRS 16 will generate a
different profile for the recognition of lease
expenditure in the Group statement of
comprehensive income when compared
to IAS 17. The calculation of lease liabilities
under IFRS 16 requires the discounting of
future minimum lease payments with the
unwind of the discount then recognised
in the statement of comprehensive
income. When estimating future minimum
lease payments, the minimum rent
increases applicable under each lease
are factored into the calculation and for
the six student accommodation sale and
leaseback properties these minimum
annual rent increases range from 1.5%
to 2.5%. This will result in the timing of
the recognition of lease costs under IFRS
16 having a greater weighting in the early
life of the leases than under IAS 17 and
lower costs in the later years. In addition,
EBITDA for the Group will increase
significantly as the costs associated with
these leases will now be recognised as
depreciation and interest. The following
table summarises the estimated difference
in cost profile and classification under
IFRS 16 when compared to IAS 17,
with the figures reported before the
impact of corporation tax.

Watkin Jones plc // Annual report and financial statements 2019

Year ended

Year ended
September 2020 September 2021 September 2022 September 2023 September 2024
£’000

Year ended

£’000

Costs under IAS 17

Costs under IFRS 16:

Depreciation

Finance costs

Total costs under IFRS 16

Reduction in profit before tax under IFRS 16

11,200

11,000

10,900

10,800

10,700

8,500

4,500

13,000

1,800

8,100

4,300

12,400

1,400

7,900

4,100

12,000

1,100

7,700

3,800

11,500

700

7,400

3,600

11,000

300

The Directors are in the process of analysing the effect of the following new standards which may have an impact on the Group:

Not yet endorsed by the EU:

Standard or interpretation

Amendments to IFRS 3 ‘Business Combinations’ (issued on 22 October 2018)

Amendments to IAS 1 and IAS 8: Definition of Material (issued on 31 October 2018)

Effective for accounting
periods beginning on or after

1 January 2020

Amendments to IFRS 9, IAS 39 and IFRS 7: Interest Rate Benchmark Reform (issued on 26 September 2019)

1 January 2020

Endorsed by the EU:

Standard or interpretation

Annual Improvements to IFRS Standards 2015-2017 Cycle (issued on 12 December 2017)

Amendments to IAS 28 ‘Long-term interests in Associates and Joint Ventures’

IFRIC 22 ‘Foreign Currency Transactions and Advance Consideration’ (issued on 8 December 2016)

IFRIC 23 ‘Uncertainty over Income Tax Treatments’

Effective for accounting
periods beginning on or after

1 January 2019

6. Disaggregated revenue information

Year ended 30 September 2019

Type of goods or service

Construction contracts or
development agreements

Sale of land

Sale of completed property

Rental income

Accommodation management

Total revenue from contracts
with customers

Timing of revenue recognition

Student
accommodation
£’000

Build
to rent
£’000

Residential
£’000

Accommodation
management
£’000

Corporate
£’000

Total
£’000

183,779

38,437

6,250

17,650

—

26,108

46,312

—

1,223

—

3,786

—

34,278

—

7,460

694

8,808

—

214,367

93,557

40,528

18,873

7,460

246,116

73,643

38,064

7,460

9,502

374,785

Goods transferred at a point in time

Services transferred over time

Total revenue from contracts
with customers

44,687

201,429

46,312

27,331

34,278

3,786

—

7,460

8,808

694

134,085

240,700

246,116

73,643

38,064

7,460

9,502

374,785

Strategic reportGovernanceCompany informationFinancial statements

Watkin Jones plc // Annual report and financial statements 2019

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
for the year ended 30 September 2019

6. Disaggregated revenue information continued

Year ended 30 September 2018

Type of goods or service

Construction contracts or
development agreements

Sale of land

Sale of completed property

Rental income

Accommodation management

Total revenue from contracts
with customers

Timing of revenue recognition

Goods transferred at a point in time

Services transferred over time

Total revenue from contracts
with customers

Student
accommodation
£’000

Build
to rent
£’000

Residential
£’000

Accommodation
management
£’000

Corporate
£’000

Total
£’000

247,152

43,993

—

21,550

—

2,426

—

1,338

—

29,965

—

7,302

8,747

581

—

258,325

44,574

29,965

22,888

7,302

312,695

3,764

29,965

7,302

9,328

363,054

43,993

268,702

—

3,764

29,965

—

7,302

581

8,747

74,539

288,515

312,695

3,764

29,965

7,302

9,328

363,054

Sales to three individual customers account for greater than 10% of the total revenue, representing revenue of £67,079,000, with
£37,963,000 reported under the student accommodation segment and £69,629,000 reported under the build to rent segment
(2018: sales to two individual customers of £56,412,000 and £42,584,000 reported under the student accommodation segment).

7. Segmental reporting
The Group has identified four segments for which it reports under IFRS 8 ‘Operating Segments’. The following represents the segments
that the Group operates in:

a. Student accommodation – the development of purpose-built student accommodation;

b. Build to rent – the development of build to rent accommodation;

c. Residential – the development of traditional residential property; and

d. Accommodation management – the management of student accommodation and build to rent property.

Corporate – revenue from the development of commercial property forming part of mixed-use schemes and other revenue and costs not
solely attributable to any one operating segment.

All revenues arise in the UK.

Performance is measured by the Board based on gross profit as reported in the management accounts.

Apart from inventory and work in progress, no other assets or liabilities are analysed into the operating segments.

Year ended 30 September 2019

Segmental revenue

Segmental gross profit

Administration expenses

Exceptional costs

Share of operating profit
in joint ventures

Finance income

Finance costs

Student
accommodation
£’000

246,116

51,582

—

286

—

Build
to rent
£’000

73,643

13,228

—

Profit/(loss) before tax

51,868

13,228

Taxation

—

Continuing profit/(loss) for the year

51,868

13,228

Profit for the year attributable to ordinary
equity shareholders of the parent

Residential
£’000

Accommodation
management
£’000

38,064

7,713

—

7,713

—

7,713

7,460

4,586

(3,167)

—

1,419

—

1,419

Corporate
£’000

9,502

(344)

(21,305)

(2,576)

—

428

(695)

(24,492)

(9,436)

(33,928)

Inventory and work in progress (note 20)

40,268

38,608

45,153

—

10,197

Total
£’000

374,785

76,765

(24,472)

(2,576)

286

428

(695)

49,736

(9,436)

40,300

134,226

Watkin Jones plc // Annual report and financial statements 2019

Year ended 30 September 2018

Segmental revenue

Segmental gross profit

Administration expenses

Exceptional income

Share of disposal of interest
in joint venture

Share of operating profit
in joint ventures

Finance income

Finance costs

Profit/(loss) before tax

Taxation

Student
accommodation
£’000

312,695

60,705

—

1,023

—

61,728

—

Continuing profit/(loss) for the year

61,728

Profit for the year attributable to ordinary
equity shareholders of the parent

Build
to rent
£’000

3,764

1,020

—

1,020

—

1,020

Residential
£’000

Accommodation
management
£’000

29,965

4,377

—

4,377

—

4,377

7,302

4,513

(3,171)

4,283

—

5,625

—

5,625

Corporate
£’000

9,328

1,815

(19,647)

—

121

—

228

(925)

(18,408)

(10,136)

(28,544)

Inventory and work in progress (note 20)

32,371

44,187

47,021

—

9,199

Total
£’000

363,054

72,430

(22,818)

4,283

121

1,023

228

(925)

54,342

(10,136)

44,206

132,778

8. Exceptional (costs)/income

Cost of compensating the Group’s new CEO, Richard Simpson,
for his forfeit Unite Group plc (“Unite”) 2018 bonus

Cost of Watkin Jones plc share awards issued on compensating
Richard Simpson for his forfeit Unite 2015-2017 share awards

Compensation for reduction in scope of services and termination of accommodation management
contracts resulting from the sale of a portfolio of properties by the Curlew Student Trust

Profit share arising from the sale of the portfolio of properties by the Curlew Student Trust

Total exceptional (costs)/income

Year ended
30 September
2019
£’000

Year ended
30 September
2018
£’000

(411)

(2,165)

—

(2,576)

—

3,020

1,263

4,283

In the year ended 30 September 2018, following the sale of a portfolio of properties by the Curlew Student Trust (“CST”), Fresh
Property Group (“FPG”) was compensated for the initial reduction in the scope of management services and subsequent termination of
the accommodation management contracts for those properties by the new owner. In addition, FPG holds a carried interest investment
in CST associated with its role as preferred property manager and received a share of the profit realised by CST on the sale of the
property portfolio.

Strategic reportGovernanceCompany informationFinancial statements

Watkin Jones plc // Annual report and financial statements 2019

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
for the year ended 30 September 2019

9. Total operating profit
This is stated after charging/(crediting):

Operating lease rentals

Audit services to the parent company

Audit services to the subsidiaries

Loss on foreign exchange

Amortisation of intangible assets

Depreciation:

Owned assets

Assets under finance leases

Profit on disposal of fixed assets

Year ended
30 September
2019
£’000

Year ended
30 September
2018
£’000

11,475

14,600

124

559

539

296

(43)

124

571

559

405

320

(7)

13,045

16,649

10. Staff numbers and costs
The average number of persons employed by the Group (including Directors) during the year, analysed by category, was as follows:

Construction

Accommodation management

Management and administration

The aggregate payroll costs of these persons were as follows:

Wages and salaries

Employee incentive – long-term incentive plans (note 31)

Social security costs

Defined contribution pension costs

Number of employees

Year ended
30 September
2019

Year ended
30 September
2018

243

474

109

826

248

388

731

Year ended
30 September
2019
£’000

Year ended
30 September
2018
£’000

21,566

2,227

2,814

690

27,297

20,756

2,397

619

23,856

Pensions
The Group operates a defined contribution Group personal pension plan scheme for the benefit of the employees and certain Directors.
The assets of the scheme are administered in a fund independent from those of the Group. Contributions during the year amounted to
£690,000 (2018: £619,000). There are £51,000 unpaid contributions at the end of the year (2018: £47,000).

The Group also operates a small defined contribution scheme for the benefit of certain former employees. This scheme is closed to new
entrants. The assets of the scheme are administered by trustees in a fund independent from those of the Group. Contributions during the
year amounted to £Nil (2018: £Nil).

In addition, the Group operates a small self-administered pension scheme for the benefit of certain current and former Directors.
The assets of the scheme are administered by trustees, who include Mark Watkin Jones, who was a Director of the Group during the
year. The scheme is subject to actuarial review on a triennial basis. The benefits provided by the scheme are limited to its available assets.
Contributions to the scheme during the year amounted to £Nil (2018: £Nil).

Watkin Jones plc // Annual report and financial statements 2019

Key management personnel
The Group considers that its Directors and other senior managers who are either members of the Executive Committee or Directors of
Watkin Jones & Son Limited are key management personnel for the purposes of IAS 24 ‘Related Parties’.

The aggregate payroll costs of key management personnel were as follows:

Wages and salaries

Employee incentive – long-term incentive plans (note 31)

Social security costs

Defined contribution pension costs

Year ended
30 September
2019
£’000

Year ended
30 September
2018
£’000

3,910

2,215

865

213

7,203

3,648

456

175

4,357

The above amounts for the year ended 30 September 2019 include the exceptional costs of £2,576,000 in compensating Richard Simpson
for the forfeiture of his incentive awards on leaving his former employer (note 8). These include an amount of £362,000 included in
“Wages and salaries” in respect of his forfeit 2018 bonus and an amount of £1,902,000 included in “Employee incentive – long-term
incentive plans” in respect of his forfeit 2015-2017 share awards. The employer’s national insurance charge on those amounts
of £312,000 has been included in “Social security costs”.

11. Directors’ emoluments

Directors’ emoluments

Employee incentive – long-term incentive plans

Contributions to money purchase pension schemes

Highest paid Director:

Emoluments

Employee incentive – long-term incentive plans

Contributions to money purchase pension schemes

Year ended
30 September
2019
£’000

Year ended
30 September
2018
£’000

1,566

2,083

874

2,040

1,283

659

—

The amounts included above for the highest paid director, Richard Simpson, include the costs of compensating him for the forfeiture of
his incentive awards on leaving his former employer, as referred to in note 10.

12. Finance costs

Finance charges

Finance charges payable under finance leases

Other interest payable

Year ended
30 September
2019
£’000

Year ended
30 September
2018
£’000

612

695

866

925

During the year the Group has capitalised interest payable on bank loans of £216,000 (2018: £322,000) in development land and work
in progress. The prior year comparative has been restated to reclassify certain bank interest payments from other interest payable to
finance charges.

Strategic reportGovernanceCompany informationFinancial statements

Watkin Jones plc // Annual report and financial statements 2019

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
for the year ended 30 September 2019

13. Income taxes

Current income tax

UK corporation tax on profits for the year

Adjustments in respect of previous periods

Total current tax

Deferred tax

Origination and reversal of temporary differences

Adjustments in respect of prior year

Total deferred tax

Total tax expense

Reconciliation of total tax expense

Accounting profit before income tax

Profit multiplied by standard rate of corporation tax in the UK of 19% (2018: 19%)

Expenses not deductible

Income not taxable

Joint ventures results reported net of tax

Other differences

Prior period adjustment

At the effective rate of tax of 19.0% (2018: 18.7%)

Income tax expense reported in the statement of profit or loss

Income tax attributed to an available-for-sale asset

Year ended
30 September
2019
£’000

Year ended
30 September
2018
£’000

9,439

183

9,622

(262)

(186)

10,320

(101)

10,219

(84)

(83)

9,436

10,136

Year ended
30 September
2019
£’000

Year ended
30 September
2018
£’000

49,736

9,450

282

(79)

—

(229)

9,436

—

9,436

54,342

10,325

499

(441)

(242)

104

(100)

10,145

10,136

10,145

Watkin Jones plc // Annual report and financial statements 2019

14. Earnings per share
Basic and diluted earnings per share (“EPS”) amounts are calculated by dividing the net profit or loss for the year attributable to ordinary
equity holders of the parent by the weighted average number of shares in issue during the year. For the years ending 30 September 2019
and 30 September 2018, all profits arise from continuing operations.

The following table reflects the income and share data used in the basic and diluted EPS computations:

Profit for the year attributable to ordinary equity holders of the parent

Adjusted profit for the year attributable to ordinary equity holders of the parent
(excluding exceptional (costs)/income after tax)

Number of ordinary shares for basic earnings per share

Adjustment for the effects of dilutive potential ordinary shares

Weighted average number for diluted earnings per share

Basic earnings per share

Year ended
30 September
2019
£’000

Year ended
30 September
2018
£’000

40,300

44,206

42,621

40,737

Number of shares Number of shares

255,382,181

255,268,875

658,650

102,929

256,040,831

255,371,804

Pence

Basic profit for the year attributable to ordinary equity holders of the parent

15.780

17.317

Adjusted proforma basic earnings per share
(excluding exceptional (costs)/income after tax)

Adjusted profit for the year attributable to ordinary equity holders of the parent

16.689

15.958

Diluted earnings per share

Basic profit for the year attributable to diluted equity holders of the parent

15.740

17.310

Adjusted proforma diluted earnings per share
(excluding exceptional (costs)/income after tax)

Adjusted profit for the year attributable to diluted equity holders of the parent

16.646

15.952

15. Dividends

Interim dividend paid in June 2019 of 2.75 pence (June 2018: 2.47 pence)

Final dividend paid in February 2019 of 5.13 pence (February 2018: 4.4 pence)

Year ended
30 September
2019
£’000

Year ended
30 September
2018
£’000

7,018

13,095

20,113

6,304

11,232

17,536

The final dividend proposed for the year ended 30 September 2019 is 5.6 pence per ordinary share. This dividend was declared after
30 September 2019 and as such the liability of £14,320,438 has not been recognised at that date. At 30 September 2019, the Company
had distributable reserves available of £115,135,000 (30 September 2018: £135,248,000).

Strategic reportGovernanceCompany informationFinancial statements

Watkin Jones plc // Annual report and financial statements 2019

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
for the year ended 30 September 2019

16. Intangible assets

Cost

Customer
relationships
£’000

Brand
£’000

Goodwill
£’000

Total
£’000

At 1 October 2017, 30 September 2018 and 30 September 2019

5,604

499

9,744

15,847

Amortisation

At 1 October 2017

Amortisation for the year

At 30 September 2018

Amortisation for the year

At 30 September 2019

Net book value

As at 30 September 2019

As at 30 September 2018

806

509

1,315

509

1,824

3,780

4,289

129

179

320

370

—

9,744

885

559

1,444

559

2,003

13,844

14,403

Intangible assets relate to the acquisition of Fresh Property Group Ltd (formerly Fresh Student Living Limited), which was acquired by
the Group in the year ending 30 September 2016. The Directors have reviewed the carrying value of the investment in Fresh Property
Group Ltd, which is a single CGU, at 30 September 2019, compared to its recoverable amount and are satisfied that no impairment is
required. The recoverable amount has been based on value in use, by reference to the budgets and projected cash flows for the CGU
over a 20-year period, with future cash flows discounted at a rate of 7% to reflect the time value of money. A 20-year cash flow period for
the CGU has been used as this appropriately reflects the longer-term nature of its business, given the duration and renewable nature of
student accommodation and build to rent property management agreements in place.

The following are the key assumptions used in projecting the cash flows:

• contracted management agreements in place are renewed in line with past experience;

• new management agreements are secured to deliver the budgeted beds under management for the CGU for the three-year period
ending 30 September 2022. In the following two years, the number of beds under management increase by 2,500 per annum each
year before increasing by 2,000 beds per annum in the year ending 30 September 2025 and 1,500 beds per annum in the year ending
30 September 2026. Thereafter management agreements are secured to manage an additional 1,000 student beds per annum.
This reflects the CGU’s past success in securing new management agreements in the student accommodation sector along with
assumed growth in apartments under management in the build to rent market;

• management fees charged will increase at 3% per annum, in line with assumed RPI inflation;

• the achieved gross margin is maintained in line with past experience; and

• indirect costs are incurred in line with the budgets for the CGU for the period ending 30 September 2022 and thereafter increase at
4% per annum. This reflects underlying assumed RPI inflation of 3% plus an allowance for additional indirect costs as a result of the
increase in beds under management.

Watkin Jones plc // Annual report and financial statements 2019

17. Property, plant and equipment

Cost

At 30 September 2017

Additions

Disposals

At 30 September 2018

Additions

Disposals

At 30 September 2019

Depreciation

At 30 September 2017

Charge for the year

Disposals

At 30 September 2018

Charge for the year

Disposals

At 30 September 2019

Net book value

At 30 September 2019

At 30 September 2018

At 30 September 2017

Total
£’000

7,527

634

(65)

8,096

1,037

(193)

8,940

2,616

725

(54)

3,287

835

(148)

3,974

4,966

4,809

4,911

Plant and
machinery
£’000

Motor vehicles
£’000

7,370

634

(65)

7,939

1,037

(193)

8,783

2,461

725

(54)

3,132

835

(148)

3,819

4,964

4,807

4,909

157

—

157

—

157

155

—

155

—

155

Finance leases
The carrying value of plant and machinery and motor vehicles held under finance leases at 30 September 2019 was £3,037,000
(2018: £3,321,000). Additions during the year include £709,000 (2018: £336,000) of plant and machinery under finance leases.

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100

Watkin Jones plc // Annual report and financial statements 2019

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
for the year ended 30 September 2019

18. Subsidiaries
The Group holds 100% of the share capital of the following unless otherwise stated:

Name

Anderson Wharf (Student) Limited4

Bailey Lane Student Limited4

Blackhorse Lane Student Limited4

Bridge Street Student Limited4

Christchurch Road Bournemouth Limited4

Crown Place Woking Limited4*

Customhouse Student Limited4

Duncan House Developments Limited4

Ellen Street Hove Limited4*

Elliot Road Selly Oak Limited4

Fairleague Limited4

Forest Road Student Limited4

Garthdee Road Aberdeen Limited4

Gladstone Road Exeter Limited4*

Goldcharm Limited4

Goldcharm Residential Limited4

Gorse Stacks Development Limited5

Harefield Road, Uxbridge Limited4

Heol Santes Helen Limited4

Holdenhurst Road Bournemouth Limited4

Hunter Street Chester Limited4

Iona Street Edinburgh Limited4

Kelaty House Wembley Limited4*

Kyle Street Student Limited4*

Liverpool Road Chester Limited4

Logie Green Development Limited4

Lower Bristol Road Bath Limited4*

Market Street Newcastle Limited4

Megaleague Limited4

Military Road Canterbury Limited4

Onega Centre Bath Limited4

Oxford House Bournemouth Limited4

Pittodrie Street Aberdeen Limited4

Quarter House Studios Limited4

Rockingham Street Student Limited4

Sherlock Street Birmingham Limited4

Spiritbond Stockwell Green Limited4

St Mungo Avenue Glasgow Limited4

Stylegood Limited4

Superscheme Limited4

Sutton Court Road Limited4

Trafford Street Chester Limited4

Victoria Park Bath Limited4

Watkin Jones & Son Limited3

Class of shares

Ordinary

Nature of business

Property developer

Watkin Jones plc // Annual report and financial statements 2019

101

Name

Wisedeed Limited4

Fresh Property Group Ltd8

Fresh Property Group Ireland Limited9*

Five Nine Living Limited8

DR (Student) Limited4

Fresh Property Group Holdings Ltd4

Watkin Jones Group Limited1

Watkin Jones Holdings Limited2

Newmark Developments Limited4

Watkin Jones AM Limited4

Saxonhenge Limited4

Darley Student Accommodation Limited6

Dunaskin Student Limited4

Finefashion Limited4

Goldcharm Student Lettings Limited4

Lucas Student Lettings Limited4

New Bridewell Limited4

New Bridewell 1 Limited7

New Bridewell 2 Limited7

Nicelook Limited4

Polarpeak Limited4

Qualityoffer Limited4

Scarlet P Limited4

Swiftmatch Limited4

Extralap Limited5

Extraneat Limited4

WJ Developments (Residential) Limited5

Incorporated during the year.

*
1. Wholly owned by Watkin Jones plc.
2. Wholly owned by Watkin Jones Group Limited.
3. Wholly owned by Watkin Jones Holdings Limited.
4. Wholly owned by Watkin Jones & Son Limited.
5. Wholly owned by Newmark Developments Limited.
6. Wholly owned by DR (Student) Limited.
7. Wholly owned by New Bridewell Limited.
8. Wholly owned by Fresh Property Group Holdings Ltd.
9. Wholly owned by Fresh Property Group Ltd.

Class of shares

Ordinary

Nature of business

Property developer

Ordinary

Accommodation management

Ordinary

Accommodation management

Ordinary

Accommodation management

Ordinary

Holding company

Ordinary Holding company and property
development services

Ordinary

Property fund asset manager

Ordinary

Leasing of aeroplane

Property letting

Dormant

All of the Group’s subsidiaries have the same registered office address as the Company, with the exception of Fresh Property Group
Holdings Ltd, Fresh Property Group Ltd and Five Nine Living Limited, whose registered office address is 7-9 Swallow Street, London
W18 4DE, and Fresh Property Group Ireland Limited, whose registered office is One Spencer Dock, North Wall Quay, Dublin 1, Ireland.

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102

Watkin Jones plc // Annual report and financial statements 2019

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
for the year ended 30 September 2019

19. Joint ventures
At 30 September 2019, the Group had the following joint ventures, whose principal place of business is the UK:

Name

Deiniol Developments Limited1

Lacuna Academy Street Limited1

Lacuna Belfast Limited1

Lacuna Dublin Road Limited1

Lacuna WJ Limited1

Spiritbond Finsbury Park Limited1

Spiritbond Elephant & Castle Limited1

Freshers PBSH Chester (General Partner) Limited1

1. Held by Watkin Jones & Son Limited.

Class of shares

Percentage share
capital held

Financial
year end

Activity

Ordinary

50%

30 September

Property development

50%

31 March

50%

30 September

50%

30 September

Property development

Dormant

50%

30 September

Property fund general partner

The Group’s interests in joint ventures are accounted for using the equity method.

Summarised financial information of the joint ventures and reconciliation with the carrying amount of the investment in the consolidated
statement of financial position are set out below:

Lacuna
Academy Street
Limited
£’000

Lacuna
Belfast
Limited
£’000

Lacuna
Dublin Road
Limited
£’000

Lacuna WJ
Limited
£’000

All other
joint
ventures
£’000

Year ended
30 September 2019

Revenue

Operating profit/(loss)

Finance income/(expense)

Profit/(loss) before tax

Income tax gain/(expense)

Profit/(loss) for the year

Total comprehensive
income/(loss) for the year

Group share of profit/(loss)
for the year

Current assets, including
cash and cash equivalents

Non-current assets

Current liabilities, including
financial liabilities

Non-current liabilities, including
financial liabilities

Equity

Remove joint venture partners’
share of net assets

Group’s carrying amount
of the investment

—

(18)

—

(18)

(4)

(22)

(11)

1,821

—

(1,862)

—

(41)

(20)

—

(2)

—

(2)

—

(2)

509

—

(52)

—

457

—

566

567

(112)

455

228

—

(6)

—

(6)

—

(6)

(3)

2,698

—

3,951

—

566

—

Total
£’000

—

569

571

(98)

473

286

9,545

—

(40)

(519)

(1,490)

(3,963)

—

2,658

—

3,432

—

(924)

—

5,582

(228)

(1,329)

(1,716)

464

(2,788)

229

1,329

1,716

(460)

2,794

Watkin Jones plc // Annual report and financial statements 2019

103

Year ended
30 September 2018

Revenue

Operating profit/(loss)

Finance income/(expense)

Profit/(loss) before tax

Income tax gain/(expense)

Profit/(loss) for the year

Total comprehensive
income/(loss) for the year

Group share of profit/(loss)
for the year

Current assets, including
cash and cash equivalents

Non-current assets

Current liabilities, including
financial liabilities

Non-current liabilities, including
financial liabilities

Equity

Remove joint venture partners’
share of net assets

Group’s carrying amount
of the investment

Lacuna
Academy Street
Limited
£’000

—

(24)

—

(24)

(20)

(10)

1,639

—

Lacuna
Belfast
Limited
£’000

—

(260)

—

(260)

(210)

(105)

1,814

—

Lacuna
Dublin Road
Limited
£’000

2,710

422

—

422

(68)

354

177

3,008

—

Lacuna WJ
Limited
£’000

All other
joint
ventures
£’000

14,904

2,365

—

2,365

(465)

1,900

950

3,941

—

554

—

Total
£’000

17,614

2,522

—

2,522

(476)

2,046

1,023

10,956

—

(1,657)

(1,356)

(806)

(557)

(1,464)

(5,840)

—

(18)

(9)

—

458

—

2,202

—

3,384

—

(910)

—

5,116

(229)

(1,101)

(1,692)

455

(2,558)

229

1,101

1,692

(455)

2,558

On 29 March 2018, the Group disposed of its joint venture interest in Rufus Estates Limited, realising a profit on the disposal of £121,000.
The proceeds from the disposal amounted to £400,000.

20. Inventory and work in progress

Development land

Stock and work in progress

Total inventories at the lower of cost and net realisable value

Year ended
30 September
2019
£’000

Year ended
30 September
2018
£’000

55,605

78,621

134,226

49,232

83,546

132,778

Total costs incurred during the year were £295,146,000 (2018: £287,835,000), of which £55,209,000 are included in inventory and work in
progress (2018: £44,208,000).

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104

Watkin Jones plc // Annual report and financial statements 2019

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
for the year ended 30 September 2019

21. Contract assets and liabilities
(a) Current contract assets

At 1 October

Transferred to receivables

Balance remaining in relation to contract assets at the start of the year

Increase relating to services provided in the year

At 30 September

Year ended
30 September
2019
£’000

Year ended
30 September
2018
£’000

8,758

(4,238)

4,520

21,058

25,578

—

The contract assets primarily relate to the Group’s right to consideration for construction work completed but not invoiced at the balance
sheet date. The contract assets are transferred to trade receivables when the amounts are certified by the customer. Most of the Group’s
contracts for student accommodation and build to rent developments are structured such that there is a significant final payment which
only becomes due upon the practical completion of the relevant property. Most of the Group’s developments span at least two financial
years, which results in the recognition of a contract asset up until the practical completion of the property, at which point it is transferred
to trade receivables. None of the contract assets at the end of the year are past due, and taking into account the historical default
experience and the future prospects in the industry, the Directors consider that no contract assets are impaired.

(b) Current contract liabilities

At 1 October

Revenue recognised in the year that was included in contract liabilities at the beginning of the year

Contract liabilities repaid

Balance remaining in relation to contract liabilities at the start of the year

Increase due to cash received or invoices raised in the year for
performance obligations not recognised in revenue

At 30 September

Year ended
30 September
2019
£’000

Year ended
30 September
2018
£’000

14,314

11,529

2,785

—

5,164

—

The contract liabilities primarily relate to the advance consideration received from customers in respect of performance obligations which
have not yet been fully satisfied and for which revenue has not been recognised.

The following table includes revenue expected to be recognised in the future related to performance obligations that are unsatisfied or
partially satisfied at the balance sheet date in relation to the development of student accommodation, build to rent and commercial projects:

Construction contracts

270,800

131,025

—

401,825

Year ending
30 September
2020
£’000

Year ending
30 September
2021
£’000

Year ending
30 September
2022
£’000

Total
£’000

Watkin Jones plc // Annual report and financial statements 2019

105

22. Trade and other receivables

Financial assets

Trade receivables

Less: provision for impairment of receivables

Trade receivables – net

Prepayments and other receivables

Equity instruments designated at fair value through OCI

Receivable from related parties (note 37)

Receivable from joint ventures (note 37)

Total financial assets

Other

Prepayments

Total trade and other receivables

Year ended
30 September
2019
£’000

Year ended
30 September
2018
£’000

7,902

—

7,902

2,436

521

1,588

12,448

1,995

14,443

10,203

—

10,203

5,801

694

1,500

18,209

—

18,209

The fair value of the Group’s equity interest in shared ownership schemes, included within equity instruments designated at fair value
through OCI, is materially equal to historic cost.

The ageing analysis of trade receivables is as follows:

Neither past due nor impaired

Past due but not impaired:

Not more than three months

Greater than three months

Year ended
30 September
2019
£’000

Year ended
30 September
2018
£’000

7,850

9,890

—

313

7,902

10,203

The Group estimates expected credit losses on trade receivables by reference to past default experience of the debtor and an analysis
of the debtor’s current financial position, adjusted for factors that are specific to the debtors, general economic conditions of the industry
in which the debtors operate and an assessment of both the current as well as the forecast direction of conditions at the reporting date.
As at 30 September 2019 and 2018, trade receivables that were neither past due nor impaired related to a number of debtors for whom
there is no recent history of default. The other classes of trade and other receivables do not contain impaired assets.

23. Cash and cash equivalents
Cash at bank and in hand as at 30 September 2019 includes £1,853,000 of cash deposited by the Group in an escrow account
in connection with a development in progress, access to which is contingent upon the completion of certain development works
(30 September 2018: £Nil). For the purpose of the statement of cash flows, cash and cash equivalents comprise cash at bank
and in hand. The Group has not drawn on any overdraft facilities.

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106

Watkin Jones plc // Annual report and financial statements 2019

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
for the year ended 30 September 2019

24. Trade and other payables: current

Financial liabilities

Trade payables

Deferred rental income

Other payables

Payable to related parties (note 37)

Payable to joint ventures (note 37)

Total financial liabilities

Other

Other taxes and social security costs

Accruals

Deferred income

Total trade and other payables

25. Interest‑bearing loans and borrowings

Current

Svenska Handelsbanken AB five-year term loan

HSBC Bank plc RCF arrangement fees

Finance leases

Non-current

Svenska Handelsbanken AB five-year term loan

HSBC Bank plc RCF

HSBC Bank plc RCF arrangement fees

Finance leases

Finance lease disclosure

Within one year

Later than one year and less than five years

After five years

Total minimum lease payments

Lease amount representing finance charges

Present value of minimum lease payments

Year ended
30 September
2019
£’000

Year ended
30 September
2018
£’000

50,894

4,519

1,861

3,359

60,655

6,147

4,038

10,567

81,407

51,377

6,100

9,221

2,904

69,609

4,239

4,857

6,100

84,805

Year ended
30 September
2019
£’000

Year ended
30 September
2018
£’000

457

(116)

983

1,324

457

(80)

1,228

1,605

Year ended
30 September
2019
£’000

Year ended
30 September
2018
£’000

5,025

32,135

(88)

409

6,825

17,397

(140)

795

37,481

24,877

30 September 2019

30 September 2018

Minimum
payments
£’000

Present value
of payments
£’000

Minimum
payments
£’000

Present value
of payments
£’000

983

409

—

1,392

—

1,392

892

371

—

1,263

1,316

1,228

795

—

2,023

—

1,114

665

—

1,779

1,848

There is no material difference between the fair value of the Group’s borrowings and their book values.

Watkin Jones plc // Annual report and financial statements 2019

107

During the period, the Group agreed an increase in the amounts available under its five-year revolving credit facility (“RCF”) from
£40 million to £60 million. The maturity date of the facility remains at 15 March 2021. At 30 September 2019, the Group had undrawn
borrowing facilities of £37.9 million (2018: £32.6 million) with HSBC Bank plc, comprising its RCF, and a £10 million on-demand and
undrawn overdraft facility.

The RCF is secured by a debenture over Watkin Jones Group Limited, Watkin Jones Holdings Limited, Watkin Jones & Son Limited,
Duncan House Developments Limited, Onega Centre Bath Limited and Sutton Court Road Limited. The applicable interest rate is 2.25%
over LIBOR.

The loan with Svenska Handelsbanken AB is a five-year term loan secured by a legal charge over certain operating property stock assets.
The maturity date is 15 March 2022 and the applicable interest rate is 2.65% over three-month LIBOR.

26. Provisions
Current

At 30 September 2018

Utilised

Arising during the year

Transferred from non-current

At 30 September 2019

Non‑current

At 30 September 2018

Arising during the year

Transferred to current

At 30 September 2019

Onerous lease
provision
£’000

1,068

(1,068)

216

647

863

Onerous lease
provision
£’000

1,602

1,639

(647)

2,594

A provision has been made for property operating lease commitments (note 34), where it is probable that an outflow of economic benefits
will be required to settle the obligation. The amount of the provision has been calculated by comparing the expected future rent liabilities
for the remaining term of the leases with the expected net income from the operations of the properties concerned, excluding future
maintenance costs. The resultant expected net liabilities have been discounted using an appropriate discount rate to reflect the time
value of money.

27. Deferred tax
The movement on the deferred tax account is shown below:

At the start of the period

Included directly in equity

Statement of comprehensive income credit

At the end of the period

Comprising:

Deferred tax asset

Deferred tax liability

At the end of the period

Year ended
30 September
2019
£’000

Year ended
30 September
2018
£’000

(1,008)

(1,091)

186

(752)

290

(1,042)

(752)

—

(1,008)

(1,050)

(1,008)

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108

Watkin Jones plc // Annual report and financial statements 2019

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
for the year ended 30 September 2019

27. Deferred tax continued
The movements in deferred tax assets and liabilities are shown below:

Short-term

Accelerated
timing differences capital allowances
£’000

£’000

At 1 October 2018

Statement of comprehensive income credit

At 30 September 2019

(779)

(684)

(229)

161

(68)

At 1 October 2017

Statement of comprehensive income credit/(debit)

At 30 September 2018

(889)

110

(779)

(202)

(27)

(229)

Short-term

Accelerated
timing differences capital allowances
£’000

£’000

Total
£’000

(1,008)

256

(752)

Total
£’000

(1,091)

(1,008)

Deferred tax credited directly to equity of £70,000 (2018: £Nil) relates to the share scheme movement in Watkin Jones & Son Limited.

28. Other financial assets and liabilities
Other financial assets

Financial instruments at fair value

Equity instruments designated at fair value through other comprehensive income

Other financial assets

Year ended
30 September
2019
£’000

Year ended
30 September
2018
£’000

1,139

1,350

Equity instruments designated at fair value through other comprehensive income comprise the value of units held by Watkin Jones & Son
Limited in the Curlew Student Trust (“CST”), together with the value of the carried interest held by Fresh Property Group Ltd in CST and
Curlew Student Trust 2 (“CST2”). CST and CST2 are Guernsey-registered unitised funds established to invest in student accommodation.
Watkin Jones & Son Limited originally invested £2,000,000 in CST, as part of an agreement to develop three student accommodation
properties for the fund, and Fresh Property Group Ltd made a carried interest investment of £500,000 aligned to its role as preferred
property manager for the fund.

Following the sale of a portfolio of properties by CST during the year ending 30 September 2018, the Group received distributions against
the carrying value of its investments in CST amounting to £1,744,000. In addition, Fresh Property Group received a profit payment of
£1,263,000 on its carried interest in CST, which was included in the exceptional income for the year.

From the distribution received, Fresh Property Group Ltd made a further carried interest investment of £350,000 in CST2, which was
launched in the year following the successful disposal of the portfolio of assets by CST, and aligns with its role as preferred property
manager for CST2.

The Group received further distributions against the carrying value of its investments in CST amounting to £209,000 in the year ending
September 2019.

The Group’s investment in CST and CST2 comprises the following:

30 September 2019

Curlew Student Trust

Units

Price
£

Units held by Watkin Jones & Son Limited

1,689,991

0.4251

Carried interest investment held by Fresh Property Group Ltd

Curlew Student Trust 2

Carried interest investment held by Fresh Property Group Ltd

Group’s carrying amount of the investment

Value
£’000

718

789

350

1,139

Watkin Jones plc // Annual report and financial statements 2019

30 September 2018

Curlew Student Trust

Units

Price
£

Units held by Watkin Jones & Son Limited

1,689,991

0.5427

Carried interest investment held by Fresh Property Group Ltd

Curlew Student Trust 2

Carried interest investment held by Fresh Property Group Ltd

Group’s carrying amount of the investment

109

Value
£’000

917

1,000

350

1,350

The fair value of the units held by Watkin Jones & Son Limited in the Curlew Student Trust, included within equity instruments designated
at fair value through other comprehensive income, is based on a quoted fund unit price (Level 2 in the fair value hierarchy). This is an
investment and is not related to any individual property. The carried interest investments held by Fresh Property Group Ltd are stated at
fair value (Level 2 in the fair value hierarchy).

29. Financial risk management
The Group is exposed to a variety of risks, such as market risk, credit risk and liquidity risk. The Group’s principal financial
instruments are:

• loans and borrowings; and

• trade and other receivables, trade and other payables, and cash arising directly from operations.

This note provides further detail on financial risk management and includes quantitative information on the specific risks.

The Group recognises that movements in certain risk variables might affect the value of its loans and also the amounts recorded in its
equity and its profit and loss for the period. Therefore, the Group has assessed the following risks:

Market risk
Market risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market prices.
Market risk comprises three types of risk: interest rate risk; currency risk; and other prices risk, such as equity price risk.

The Group’s exposure is primarily to the financial risks of changes in interest rates in relation to loans and borrowings.

Interest rate risk
Due to the levels of interest-bearing loans and borrowings, the Group has no material exposure to interest rate movements.

A 0.5% movement in the interest rate applied to the interest-bearing loans and borrowings would have an impact on the Group’s profit
before taxation as below:

0.5% change in interest rate

Impact on profit before tax

Effect on profit before tax

Year ended
30 September
2019
£’000

Year ended
30 September
2018
£’000

120

134

Foreign currency risk
Capital items that are non-sterling priced are monitored to review the requirement for appropriate hedging.

Liquidity risk
Cash flow is regularly monitored and the relevant subsidiaries are aware of their working capital commitments. The Group reviews its
long-term funding requirements in parallel with its long-term strategy, with an objective of aligning both in a timely manner.

The table below summarises the maturity profile of the Group’s gross, undiscounted financial liabilities at 30 September 2019 and
30 September 2018:

Liquidity risk – 30 September 2019

Interest-bearing loans and borrowings

Trade and other payables

On demand
£’000

Less than
one year
£’000

Between one
and five years
£’000

More than
five years
£’000

—

1,324

65,819

67,143

37,481

—

37,481

—

Total
£’000

38,805

65,819

104,624

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110

Watkin Jones plc // Annual report and financial statements 2019

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
for the year ended 30 September 2019

29. Financial risk management continued
Liquidity risk continued

Liquidity risk – 30 September 2018

Interest-bearing loans and borrowings

Trade and other payables

On demand
£’000

—

Less than
one year
£’000

1,652

83,923

85,575

Between one
and five years
£’000

More than
five years
£’000

24,830

—

24,830

—

Total
£’000

26,482

83,923

110,405

Credit risk
Credit risk is the risk that a counterparty will not meet its obligations under a financial instrument leading to a financial loss. The Group is
exposed to credit risk from its cash and cash equivalents and trade receivables.

Credit risk from balances with banks and financial institutions is managed by depositing with reputable financial institutions, from which
management believes the risk of loss to be remote. The Group’s maximum exposure to credit risk for the components of the statement of
financial position is the carrying amounts of cash at bank and in hand.

Credit evaluations are performed for all customers. Management has a policy in place and the exposure to credit risk is monitored on an
ongoing basis. At the year end there were no significant concentrations of risk. The maximum exposure to credit risk is represented by the
carrying amount of each financial asset in the statement of financial position.

Capital management policy
The primary objective of the Group’s capital management is to ensure that it has the capital required to operate and grow the business at
a reasonable cost of capital without incurring undue financial risks. The Board periodically reviews its capital structure to ensure it meets
changing business needs. The Group defines its capital as equity plus loans and borrowings. The Directors consider the management
of debt to be an important element in controlling the capital structure of the Group. The Group may carry moderate levels of long-term
borrowings to fund operations and working capital requirements. The net cash of the Group is analysed in note 33.

30. Share capital

Allotted, called up and fully paid

Ordinary shares of one pence each

Year ended
30 September
2019
£’000

Year ended
30 September
2018
£’000

2,553

The number of ordinary shares in issue at 30 September 2019 was 255,722,099 (30 September 2018: 255,268,875).

31. Employee benefits – long‑term incentive plans
The Watkin Jones plc Long-Term Incentive Plan (the “Plan”) was approved by shareholders at the AGM held on 13 February 2018.
Details of the Plan, the vesting requirements and the performance targets applicable to the awards are set out in the Remuneration
Committee report on pages 68 to 72. The aggregate total awards granted under the Plan are as follows:

Share awards granted

At 1 October

Granted in the year

Exercised in the year

Lapsed in the year

At 30 September

Year ended
30 September
2019
Number

494,058

Year ended
30 September
2018
Number

—

2,219,126

494,058

(453,224)

(74,020)

—

2,185,940

494,058

Watkin Jones plc // Annual report and financial statements 2019

111

The fair value of the share awards granted subject to earnings per share (“EPS”) performance conditions is the market price of an ordinary
share of the Company at the date the award is granted. The fair value of the share awards granted subject to total shareholder return
(“TSR”) performance conditions has been estimated at the grant date using a Monte Carlo valuation model. The following table lists the
inputs to the model used for the share awards granted in 2019 and 2018:

Share price at grant

Exercise price

Expected term (years)

Expected volatility (%)

Risk-free interest rate (%)

Are dividend equivalents receivable for the award holder?

2019 LTIP

R Simpson
2018 buyout

2018 LTIP

215.5 pence

230.0 pence

218.5 pence

One pence

Three

26.4

0.56

Yes

0.71

Yes

Three

0.65

Yes

The total number of shares granted subject to the 2019 buyout awards of Richard Simpson’s Unite LTIPs for 2015 are fixed as the Unite
Group plc performance targets to which they were linked have already been achieved. The fair value of these awards have been calculated
using a Black-Scholes valuation model. The following table lists the inputs to the model:

Share price at grant

Exercise price

Expected term (years)

Expected volatility (%)

Risk-free interest rate (%)

Are dividend equivalents receivable for the award holder?

R Simpson
2015 buyout

230.0 pence

One pence

0.15

0.71

Yes

The 2019 buyout awards of Richard Simpson’s Unite Group plc LTIPs for 2016 and 2017 vest based on Unite Group plc’s rather than
Watkin Jones plc’s performance. These conditions constitute “non-vesting” conditions under IFRS 2. As such, the fair value of the
grant includes a discount for the Unite Group plc performance conditions based on the extent to which Unite was expected to meet the
performance targets at the grant date. The Unite Group plc LTIPs for 2016 and 2017 are based on three performance conditions, being
adjusted EPS, Total Accounting Return (“TAR”) and Relative TSR. The following table lists the estimated performance against those
targets and notes on how these were estimated:

Adjusted EPS

TAR

Relative TSR

R Simpson 2016 R Simpson 2017
buyout expected buyout expected
vesting

vesting

62.5%

58.8%

Source

February 2019 Eikon
earnings consensus

88.0%

95.5%

Published NAV and

February 2019 Eikon consensus

100.0%

100%

Return Index data from
Thomson Reuters DataStream
with growth measured

to February 2019

Total expected vesting

83.5%

84.76%

The fair value of the share awards granted under the Plan is charged to the statement of comprehensive income over the vesting period
of the awards, provided that the service conditions attaching to the awards continue to be met. The cumulative charge to the statement
of comprehensive income is recognised in the statement of financial position as a “share-based payment reserve”. For the year ending
30 September 2019, the amount charged to the statement of comprehensive income and credited to share-based payment reserve was
£2,227,000 (30 September 2018: £84,000).

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112

Watkin Jones plc // Annual report and financial statements 2019

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
for the year ended 30 September 2019

32. Reconciliation of profit before tax to net cash flows from operating activities

Profit before tax

Depreciation

Amortisation of intangible assets

(Profit)/loss on sale of plant and equipment

Finance income

Finance costs

Profit on disposal of interest in joint ventures

Share of profit in joint ventures

(Increase)/decrease in inventory and work in progress

Interest capitalised in development land, inventory and work in progress

(Increase)/decrease in contract assets

(Increase)/decrease in trade and other receivables

(Decrease)/increase in contract liabilities

(Decrease)/increase in trade and other payables

Increase/(decrease) in provision for property lease commitment

Increase in share-based payment reserve

Net cash inflow from operating activities

Major non‑cash transactions
There were no major non-cash transactions during the period.

33. Analysis of net cash/(debt)

30 September 2019

Cash at bank and in hand

Finance leases

Bank loans

Net cash

30 September 2018

Cash at bank and in hand

Finance leases

Bank loans

Net cash

Year ended
30 September
2019
£’000

Year ended
30 September
2018
£’000

49,736

54,342

835

559

(43)

(428)

695

—

(286)

(1,948)

216

(16,820)

4,682

(9,150)

(3,251)

787

2,227

27,811

725

559

(7)

(228)

925

(121)

(1,023)

(7,558)

322

—

9,442

—

9,155

(35)

66,582

At beginning
of year
£’000

106,640

(2,023)

(24,459)

80,158

At beginning
of year
£’000

65,325

(2,890)

(21,438)

40,997

Cash flow
£’000

9,012

1,307

(12,938)

(2,619)

Cash flow
£’000

41,315

1,203

(2,941)

39,577

Non-cash
movements
£’000

At end of year
£’000

—

(676)

(16)

(692)

115,652

(1,392)

(37,413)

76,847

Non-cash
movements
£’000

At end of year
£’000

—

(336)

(80)

(416)

106,640

(2,023)

(24,459)

80,158

Cash at bank and in hand as at 30 September 2019 includes £1,853,000 of cash deposited by the Group in an escrow account
in connection with a development in progress, access to which is contingent upon the completion of certain development works
(30 September 2018: £Nil). Non-cash movements relate to the acquisition of property, plant and equipment under finance leases
and the amortisation of bank loan arrangement fees.

Watkin Jones plc // Annual report and financial statements 2019

113

34. Operating leases
Total commitments – Group as lessee

Non-cancellable operating lease rentals are payable as follows:

Within one year

Later than one year and less than five years

After five years

Year ended
30 September
2019
£’000

Year ended
30 September
2018
£’000

11,302

43,461

159,372

214,135

14,818

42,707

168,022

225,547

Commitments under operating leases include operating leases relating to student accommodation properties. The minimum and
maximum rent increases applicable to the remaining terms of these leases and their termination dates are as follows:

Collegelands, Glasgow

Europa, Liverpool

Optima, Loughborough

Glassyard Building, London

Dunaskin Mill, Glasgow

New Bridewell, Bristol

Minimum rent
increase
%

Maximum rent
increase
%

2.0

2.5

1.5

5.0

2.5

5.0

Termination date

6 September 2026

18 March 2030

10 September 2034

5 September 2051

12 March 2052

These properties were the subject of sale and operating leaseback, the judgements relating to which are described in note 4.

Total commitments – Group as lessor

Non-cancellable operating lease rentals are receivable as follows:

Within one year

Later than one year and less than five years

After five years

Year ended
30 September
2019
£’000

Year ended
30 September
2018
£’000

14,846

3,586

917

19,349

14,229

6,599

1,053

21,881

The Group acts as lessor in respect of certain commercial property and for the student accommodation properties operated under the
sale and leaseback arrangements detailed above. The prior year comparative figures in the above table have been restated to include
rentals receivable from operational build to rent properties as at 30 September 2018.

35. Capital and other financial commitments
The Group had no material capital commitments at 30 September 2019 or 30 September 2018.

36. Contingent liabilities
The Group has contingent liabilities of £605,000 (2018: £2,729,000) in respect of performance bonds entered into with HCC International
Insurance Company Plc, Euler Hermes Europe S.A. (N.V.), Aviva Insurance UK Limited and the Electrical Contractors’ Insurance
Company Limited.

Watkin Jones Group Limited, Watkin Jones Holdings Limited, Watkin Jones & Son Limited and certain subsidiaries thereof have given
debentures containing fixed and floating charges and have entered into a corporate guarantee of the Group’s bank borrowings from
HSBC Bank plc, which at the balance sheet date amounted to £32,135,000 (2018: £17,397,000).

No material liabilities are expected to arise as a result of the above arrangements.

Strategic reportGovernanceCompany informationFinancial statements

114

Watkin Jones plc // Annual report and financial statements 2019

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
for the year ended 30 September 2019

37. Related party transactions
The Group processed payroll costs on behalf of Carlton (North Wales) Limited and its subsidiary companies of £199,000 (2018: £301,000).
The amount owed to Carlton (North Wales) Limited and its subsidiary companies at the balance sheet date was £Nil (2018: £7,000).

The Group paid rent and service charges to Planehouse Limited and its subsidiary companies amounting to £316,000 (2018: £316,000)
and processed payroll costs on behalf of the Company of £101,000 (2018: £80,000). The amount owed by Planehouse Limited and its
subsidiary companies at the balance sheet date was £Nil (2018: £80,000 owed to Planehouse Limited).

Mark Watkin Jones is a director of Carlton (North Wales) Limited, Planehouse Limited, Plas Y Coed Limited and Toplocation 4 Limited, all
of which are controlled by family trusts (including The Glyn Watkin Jones 1999 Hybrid Trust) in which he has a potential beneficial interest.

The Group provided services to the Watkin Jones & Son Limited Directors’ Pension Scheme amounting to £36,000 (2018: £16,000).

As referred to in note 28, Watkin Jones & Son Limited invested £2,000,000 in units in the Curlew Student Trust (“CST”) and Fresh Property
Group Ltd invested £500,000 by way of a carried interest investment in CST. During the year, the Group received a distribution against the
carrying value of its investment in CST amounting to £209,000. The fair value of the units held in CST by Watkin Jones & Son Limited at 30
September 2019 amounted to £718,000 (2018: £917,000) and the fair values of the carried interest investments in CST and CST2 held by
Fresh Property Group Ltd amounted to £71,000 (2018: £83,000) and £350,000 (2018: £350,000) respectively.

Under a joint venture agreement the Group was owed £716,000 at 30 September 2019 by Deiniol Developments Limited (2018: £714,000).
The Group owns 50% of the share capital in Deiniol Developments Limited.

The Group has a 50% interest in Lacuna Belfast Limited. The Group received payments of £230,000 from Lacuna Belfast Limited during
the year (2018: made payments of £246,000 to Lacuna Belfast Limited). At the balance sheet date, £199,000 was owed to Lacuna Belfast
Limited (2018: £34,000).

The Group has a 50% interest in Lacuna Dublin Road Limited. During the year, the Group charged development fees to Lacuna Dublin
Road Limited amounting to £Nil (2018: £100,000). The Group received payments of £180,000 from Lacuna Dublin Road Limited during the
year (2018: £1,242,000) and made payments of £142,000 to Lacuna Dublin Road Limited. At the balance sheet date, £1,246,000 was owed
to Lacuna Dublin Road Limited (2018: £1,208,000).

The Group has a 50% interest in Lacuna WJ Limited. During the year, the Group charged development fees to Lacuna WJ Limited
amounting to £60,000 (2018: £777,000). The Group received payments of £280,000 from Lacuna WJ Limited during the year
(2018: £1,887,000). At the balance sheet date, £1,915,000 (2018: £1,696,000) was owed to Lacuna WJ Limited.

The Group has a 50% interest in Lacuna Academy Street Limited. The Company has made payments during the year of £116,000
(2018: £85,000) to assist with its development activities. At the balance sheet date, £868,000 (2018: £752,000) was owed by Lacuna
Academy Street Limited.

All transactions with related parties have been carried out on an arm’s length basis.

Watkin Jones plc // Annual report and financial statements 2019

115

COMPANY STATEMENT OF FINANCIAL POSITION
as at 30 September 2019

Fixed assets

Investments

Current liabilities

Trade and other payables

Total liabilities

Net assets

Capital and reserves

Share capital

Share premium

Share-based payment reserve

Retained earnings

Total equity

30 September
2019
£’000

30 September
2018
£’000

Notes

258,086

255,859

(53,475)

204,611

2,553

84,612

2,311

115,135

204,611

(33,362)

222,497

2,553

84,612

135,248

222,497

The notes on pages 117 and 118 are an integral part of these Company financial statements.

No income statement has been presented as permitted by Section 408 of the Companies Act 2006. The profit for the Company after
taxation was £Nil.

Approved by the Board of Directors on 13 January 2020 and signed on its behalf by:

Richard Simpson
Director

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116

Watkin Jones plc // Annual report and financial statements 2019

COMPANY STATEMENT OF CHANGES IN EQUITY
for the period ended 30 September 2019

At 1 October 2018

Dividend paid

Share-based payments

Share
capital
£’000

2,553

—

Share
premium
£’000

84,612

—

Balance as at 30 September 2019

2,553

84,612

At 1 October 2017

Dividend paid

Share-based payments

Share
capital
£’000

2,553

—

Share
premium
£’000

84,612

—

Balance as at 30 September 2018

2,553

84,612

Share-based
payment
reserve
£’000

—

2,227

2,311

Share-based
payment
reserve
£’000

—

Retained
earnings
£’000

135,248

(20,113)

—

Total
£’000

222,497

(20,113)

2,227

115,135

204,611

Retained
earnings
£’000

152,784

(17,536)

—

Total
£’000

239,949

(17,536)

135,248

222,497

Watkin Jones plc // Annual report and financial statements 2019

117

NOTES TO THE COMPANY FINANCIAL STATEMENTS
for the year ended 30 September 2019

38. Accounting policies
General information
Watkin Jones plc (the “Company”) is a public limited company incorporated in the United Kingdom under the Companies Act 2006
(registration number 9791105). The Company is domiciled in the United Kingdom and its registered address is 21-22 Llandygai Industrial
Estate, Llandygai, Bangor, Gwynedd LL57 4YH.

Basis of preparation
No income statement has been presented as permitted by Section 408 of the Companies Act 2006. The profit for the Company after
taxation was £Nil.

No cash flow has been presented for the Company as it has no cash in its own right.

The statement of financial position has been prepared and approved by the Directors in accordance with International Financial Reporting
Standards as adopted by the EU.

Investment in subsidiaries
The Company’s investments in subsidiaries are accounted for at cost less accumulated impairment losses.

Dividends
Revenue is recognised when the Company’s right to receive payment is established.

Share‑based payments
The Company issues equity-settled share-based payments to certain Executive Directors of the Company and to certain employees
of its subsidiaries. Equity-settled share-based payments are measured at fair value at the grant date. The fair value is expensed
on a straight-line basis over the vesting period, based on the estimate of shares that will eventually vest. The cost of equity-setted
share-based payments granted to employees of subsidiary companies is borne by the employing company, without recharge. The cost of
equity-settled share-based payments granted to Executive Directors of the Company is recharged to its principal trading subsidiary as it
receives the benefit of their services. In the Company’s financial statements, the Company’s investment in subsidiaries is increased by an
amount equal to the charge for the period, with a corresponding increase to share-based payment reserve.

39. Employee costs
The only employees of Watkin Jones plc are the Executive and Non-Executive Directors. Details of the employee costs associated with
the Directors are included in the Remuneration Committee report and summarised below. All employee costs incurred by the Company
are recharged to Watkin Jones & Son Limited, the Company’s principal trading subsidiary.

Wages and salaries

Employee incentive – long-term incentive plans

Social security costs

Pension costs

2019
£’000

1,566

2,083

475

4,206

2018
£’000

1,283

172

1,533

40. Dividends

Amounts recognised as distributions to equity holders in the year

Interim dividend paid in June 2019 of 2.75 pence (June 2018: 2.47 pence)

Final dividend paid in February 2019 of 5.13 pence (February 2018: 4.4 pence)

2019
£’000

7,018

13,095

20,113

2018
£’000

6,304

11,232

17,536

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118

Watkin Jones plc // Annual report and financial statements 2019

NOTES TO THE COMPANY FINANCIAL STATEMENTS continued
for the year ended 30 September 2019

41. Investments in subsidiaries

Cost

1 October 2018

Capital contribution relating to share-based payments

30 September 2019

Subsidiary
undertakings
£’000

255,859

2,227

258,086

The Company owns 100% of the issued shares in Watkin Jones Group Limited, a company incorporated in England and Wales (note 18).
The principal activity of Watkin Jones Group Limited is that of property development.

42. Trade and other payables: current

Financial liabilities

Group undertakings

43. Allotted and issued share capital

Allotted, called up and fully paid

Ordinary shares of one pence each

2019
£’000

2018
£’000

53,475

33,362

2019
£’000

2018
£’000

2,553

44. Share‑based payments
Details of share awards granted by the Company to Executive Directors and to employees of its subsidiaries, and that remain outstanding
at the year end over the Company’s shares, are set out in note 31 to the Group financial statements. The Company did not recognise
any expense related to equity-settled share-based payment transactions in the current or preceding year. The cost for the year ending
30 September 2019 of the awards granted has been recharged to Watkin Jones & Son Limited.

Watkin Jones plc // Annual report and financial statements 2019

119

ADVISERS

Nominated adviser and broker
Peel Hunt LLP
Moor House
120 London Wall
London EC2Y 5ET

Joint broker
Jefferies Hoare Govett
Vintners Place
68 Upper Thames Street
London EC4V 3BJ

Auditor and reporting accountants
Ernst & Young LLP
2 St Peter’s Square
Manchester M2 3EY

Solicitors to the Company
DLA Piper UK LLP
Victoria Square House
Victoria Square
Birmingham B2 4DL

Company registrars
Link Asset Services
The Registry
34 Beckenham Road
Beckenham BR3 4TU

Financial PR
Buchanan
107 Cheapside
London EC2V 6DN

Company secretarial services
Prism Cosec
42-50 Hersham Road
Walton-on-Thames
Surrey KT12 1RZ

SHAREHOLDER INFORMATION

Country of incorporation and
main country of operation
Watkin Jones plc is incorporated in England and Wales.

Securities not in public hands
As of 13 January 2020, the percentage of the Company’s
issued share capital that is not in public hands is 22.6%.

The Company operates in the UK.

Number of securities in issue
As of 13 January 2020, the Company’s issued share capital
consists of 255,722,099 ordinary shares with a nominal value
of one pence each. The Company has no treasury shares.

Details of any restrictions on the transfer
of securities
There are no restrictions on any of the Company’s
AIM securities.

Details of other exchanges or trading platforms
The Company’s shares will only be traded on the London
Stock Exchange’s AIM market at present.

Company registration
Registered office: 21-22 Llandygai Industrial Estate, Llandygai,
Bangor, Gwynedd LL57 4YH. Registered in England and Wales
(company number 9791105).

Strategic reportGovernanceCompany informationFinancial statements 120

Watkin Jones plc // Annual report and financial statements 2019

GLOSSARY

AFS

AGM

AIM

CGU

CST

CST2

available-for-sale

Annual General Meeting

Alternative Investment Market

cash-generating unit

Curlew Student Trust

Curlew Student Trust 2

EBITDA

earnings before income tax, depreciation
and amortisation

EIR

EPS

effective interest rate

earnings per share

Ernst & Young LLP

Fresh or FPG Fresh Property Group

FVOCI

GDPR

HMO

IFRS

IPO

OCI

fair value through other comprehensive income

General Data Protection Regulation

house of multiple occupation

International Financial Reporting Standards

initial public offering

joint venture

other comprehensive income

PBSA

purpose built student accommodation

RCF

RNS

TSR

revolving credit facility

regulatory news service

total shareholder return

FINANCIAL CALENDAR

Annual General Meeting (“AGM”)
The Company’s AGM will be held at 10.30am on
Thursday 13 February 2020 at the offices of Buchanan,
107 Cheapside, London EC2V 6DN.

Final dividend
The final dividend will be paid on 28 February 2020 to
shareholders on the register at the close of business
on 24 January 2020. The shares will go ex-dividend on
23 January 2020.

Printed on Splendorgel Extra White, an FSC® mixed sources paper
manufactured using pulp from well managed forests at a mill accredited with
EMAS and ISO 14001 environmental standards. Printed by CPI Colour, who
are ISO 14001 certified, CarbonNeutral® and FSC® chain of custody certified.
The inks used are vegetable oil based.

www.lyonsbennett.com

CREATING THE
FUTURE OF
LIVING

Watkin Jones plc
21-22 Llandygai Industrial Estate
Llandygai
Bangor
Gwynedd LL57 4YH

+44 (0)1248 362 516
info@watkinjones.com

www.watkinjonesplc.com

Watkin Jones Group

@Watkin_Jones

Watkin Jones Group

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