It’s sometimes easy for investors to get caught up in the latest ‘buzz doing the rounds’, and lose sight of the big picture. Namely finding quality stocks that can out-perform across the economic cycle. Cue Watkin Jones, a developer/manager of large scale, multi occupancy accommodation, who - since IPO’ing at 100p in March 2016 - has delivered a total return of 163% (28.6% IRR):- split 142p capital appreciation and 21p dividends.
All derived organically and with less volatility than the sector average (see appendices) - despite being buffeted last year as Woodford Inv. Mgt disposed of its entire 13% stake. Indeed WJG’s earnings predictability was once again centre stage in today’s prelims, with PBT coming in at £52.3m (+4.5% vs £50.1m LY) - slightly above our estimates of £51.0m. All student beds (2,609) & Build-to-Rent units (159) scheduled for delivery in FY20 have been forward sold. And over the coming years, this resilience should improve further, as the organisation transitions more towards BtR from PBSA, whose share of gross profits is anticipated to decline to 53% (£70m) by FY24 vs 67% in FY19
In terms of the numbers, group turnover climbed 3.2% to £374.8m (£363.1m LY), with the dividend hiked 9.9% to 8.35p (7.6p LY & 2x covered), reflecting robust cashflows and closing net funds of £76.8m (£80.2m LY), equating to 30p/share.
Elsewhere gross profits rose 6.0% to £76.8m (margin 20.5%) with PBSA delivering the lion’s share at £51.6m (vs £60.7m LY), but ably supported by BtR (£13.2m vs £1.0m LY), residential housing (£7.7m vs £4.4m) and Fresh lettings (£4.6m vs £4.5m). EBIT margins ticked up to 14.0% (13.7%) thanks to tight cost control, with adjusted EPS climbing 4.6% to 16.7p (16.0p).