One of the most reliable gauges of a company’s ‘competitive moat’, is (not surprisingly) the amount of money it generates. Not solely profits, but the return on invested capital after adjusting for financial gearing. On this measure Watkin Jones ranks as the industry’s #1 player (see below), delivering an anticipated FY19 unlevered Return on Equity of 44.2%.
Superior performance however doesn’t happen by magic. Thanks to a 4 year pipeline, new growth engines, a forward funded model and tight cost control, all the bricks are lining up. Carefully building one of the UK’s top developers/managers of large scale, multi occupancy accommodation. A message which once again came through ‘loud & clear’ at this morning’s upbeat H1’19 results.
Here, gross margins climbed 1.9% to 23.7% on sales up 0.5% to £159.1m, reflecting improved mix (re more premium PBSA sites), augmented by higher contributions from BtR and residential housebuilding.
Likewise this pushed adjusted PBT up 10.0% to £26.0m (£23.6m LY) and EPS +7.7% to 8.11p (7.53p LY) - with net cash closing March at a comfortable £18.3m (vs £38.4m LY). The latter decline being simply a function of planned investment, BtR/PBSA WIP and the temporary impact a delayed £14m customer payment (now collected), which slipped over the period end.
All told, leaving the firm on track to hit our FY19 turnover, EBIT and EPS estimates of £390m, £51.7m and 16.0p respectively, alongside lifting the interim dividend 11.3% to 2.75p (2.47p).