Watkin Jones PLC (AIM:WJG) shares plummeted around 35% lower in Wednesday’s early deal as the UK residential rental property firm issued a profit warning and said its chief executive Richard Simpson has stepped down with immediate effect.
Multiple previously announced property deals are now in question as a result of higher interest rates and prevailing economic uncertainty, with the company warning of “a greater degree of risk” to transactions completing by the year’s end.
The property company added that it has been reviewing its balance sheet against the more challenging macro-economic backdrop and to factor in the increased cost of funding. It also said it will seek to sell a limited number of non-core assets.
Alongside a reassessment of the ‘carrying value’ of property on its books, the company is expected to write a £10mln impairment.
As a result, looking at the remainder of the year, Watkin Jones told investors it would no longer expect to materially improve on the £2mln of underlying profit reported previously for the first half. That forecast is based on the firm having no completions of forward sales by the end of 2023.
Meanwhile, it downgraded the profit forecast for 2024 by setting a range of £15-20mln.
Additionally, Watkin Jones said it has upped its provisions for its “remedial works for legacy properties”, adding £30-35mln, based on the company’s intention to sign up to the UK government’s ‘Responsible Actors Scheme’, which focusses on fire safety in residential buildings following 2017’s Grenfell tower disaster and the government’s subsequent inquiry.
Watkin Jones noted that the cash costs are expected to spread over five years, meanwhile, it continues to review the details of the ‘Welsh Developers Pact’ and awaits more detail on the ‘Scottish Safer Buildings Accord’.
As Richard Simpson exits, from today, the company has appointed Alex Pease, its chief investment officer, as interim chief executive who will work closely with chief financial officer Sarah Sergeant.
“Alex provides both continuity, in what remains a very challenging backdrop for the sector, as well as significant experience in the residential for rent market which the board believes will help enable the group to regain momentum ahead of market conditions improving," Watkin Jones chair Alan Giddins said in a separate statement.
Ahead of its 30 September financial year end, the company said it currently has a £36mln net cash position (with gross cash marked as £68mln).
In London, Watkin Jones shares were down 27.25p or 35.3%, changing hands at 49.95p and valuing the company in the market at just under £130mln.