WATKIN JONES PLC — Earnings Release 2017

Jun 1, 2017

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RNS Number : 7768G

Watkin Jones plc

01 June 2017

For immediate release	1 June 2017

Watkin Jones plc

('Watkin Jones' or the 'Group')

Half year results for the six months to 31 March 2017

Watkin Jones plc (AIM:WJG), a leading UK developer and constructor of multi occupancy property assets, with a focus on the student accommodation sector, announces its half year results for the six months ended 31 March 2017.  The Board is pleased to report a successful first six months of the financial year with trading in line with its expectations.

Financial Highlights

	H1 2017	H1 2016	Movement
Revenue	£133.7 million	£145.9 million	-8.4%
Gross profit	£29.1 million	£23.5 million	+23.8%
Adjusted EBITDA1	£21.9 million	£17.3 million	+26.6%
Adjusted profit before tax2	£21.1 million	£16.7 million	+26.6%
Statutory operating profit/(loss)	£19.4 million	(£9.5 million)	n/a
Statutory profit /(loss) before tax	£21.1 million	(£9.9 million)	n/a
Adjusted basic EPS2	6.7 pence	5.2 pence	+28.8%
Dividend per share	2.2 pence	1.33 pence	n/a
Net cash	£11.7 million	£15.4 million	-24.0%

·      Revenues for the half year were in line with management's expectations, down 8.4% on the prior half year due to the timing of forward development sales and £11.7 million of non-repeating inventory sales of completed residential apartments in the first half of the previous year.  Revenues are expected to be stronger in the second half of the current financial year

·    Strong profit growth for the half year driven by student accommodation developments. Gross profit for the period increased by 23.8% to £29.1 million (H1 2016: £23.5 million)

·      Gross margin for the six months to 31 March 2017 of 21.8% (H1 2016: 16.1%), reflecting the location and quality of student accommodation schemes in development, as well as a full six months contribution from Fresh Student Living, which was acquired into the Group on 25 February 2016.

·      Progressive dividend policy: 10% increase in the interim dividend to 2.2 pence per share (FY 2016: Interim dividend of 1.33 pence per share, equivalent to 2.0 pence per share on a full year basis)

·     £11.7 million net cash at 31 March 2017 (£15.4 million at 31 March 2016), reflecting normal seasonal working capital profile.

Notes

1      Adjusted EBITDA comprises operating profit from continuing operations plus the Group's profit from joint ventures, adding back charges for depreciation and amortisation. For H1 2016, the figure is stated before exceptional IPO costs.

2         For H1 2017 there is no difference between profit before tax and adjusted profit before tax. For H1 2016, adjusted profit before tax is stated before exceptional IPO costs.

3         For H1 2017 there is no difference between basic and adjusted basic EPS. For H1 2016, adjusted basic EPS is calculated using the profit for the period from continuing operations excluding exceptional IPO costs and based on the number of shares in issue at 30 September 2016.

Business Highlights

Student Accommodation Development

·      £216 million development value of seven student accommodation developments (2,580 beds) sold since 1 October 2016, including one operational asset (590 beds)

·   £292 million development value in legal negotiations for forward sale of nine further student accommodation developments (3,649 beds)

·    Development pipeline of over 11,200 student beds across 31 sites, with 15 forward sold and nine more in legal negotiations

·      Delivery pipeline:

·      FY 2017 deliveries - All ten student developments (3,314 beds) have been sold and are on target to be completed ahead of the 2017/18 academic year

·      FY 2018 deliveries - Ten student developments (3,415 beds) scheduled for delivery.  All sites are secured and have planning consents. Five developments are forward sold (1,854 beds) and the remaining five (1,561 beds) are in legal negotiation for sale

·      FY 2019 deliveries - Nine student developments (3,545 beds) scheduled for delivery.  Eight sites secured (3,191 beds), with the remaining site in legal negotiation to purchase. Six sites have planning (2,676 beds), with the remaining three sites progressing through planning.  One development forward sold (511 beds) and four developments (2,088 beds) in legal negotiations for sale

·      FY 2020 deliveries - two sites secured and one in legal negotiation to purchase, with a number of additional site acquisitions progressing.

Build to Rent Development

·      Build to Rent Development pipeline is growing.  One site secured with planning in Sutton, two further secured sites are progressing through planning in Belfast and Leicester and three further sites are in negotiation for development subject to planning.  These six schemes are currently targeted for delivery over the period FY 2019 - FY 2021.

Accommodation Management

·      Fresh Student Living - student beds under management increased from 8,310 beds in FY 2016 to 12,117 beds in FY 2017.  Currently contracted to increase to 19,532 beds under management by FY 2020

·      Five Nine Living - currently contracted to manage 535 Build to Rent units, including the scheme completed in Leeds in the current year.

Commenting on the results, Mark Watkin Jones, Chief Executive Officer of Watkin Jones plc, said: "We are very pleased to be reporting a strong set of half year results.  The Group has seen good profit growth in the first half, driven by our student accommodation developments which are fundamental to the business.  We are seeing increased institutional demand for good quality purpose built assets, and there are several new international funds that have entered the market recently, which highlights the continued attractiveness of the sector.  Our forward sale model and student accommodation pipeline of 31 developments provides us with excellent visibility on earnings and cash flow.

We are encouraged by the progress we have made in the Build to Rent sector and we are pleased that the Group has already secured an excellent site in London, with solid progress also being made on a number of other specific development projects.  Our student accommodation management businesses Fresh Student Living has had an excellent first half and is contributing well to overall Group performance.  The Group has made progress in developing the Five Nine Living business to provide similar letting and operational management services for the Build to Rent Sector.  Like our student accommodation development business, accommodation management provides us with good future earnings visibility.

On behalf of the Board I would like to thank all our staff for helping the Group deliver a very good first half year performance, and we look forward to the second half with much confidence."

Chief Executive's Statement

Results for the six months to 31 March 2017

The Board is pleased to report a growth in profits for the six months to 31 March 2017, compared to the same period last year.

Revenues for the half year were in line with management's expectations, down 8.4% on the prior half year due to the timing of forward development sales and £11.7 million of non-repeating inventory sales of completed residential apartments in the first half of the previous year.  Gross profit increased by £5.6 million to £29.1 million (H1 2016: £23.5 million), giving a significantly increased gross margin for the period of 21.8% (H1 2016: 16.1%), reflecting the location and quality of student accommodation schemes in development, as well as a full six months contribution from Fresh Student Living, which was acquired into the Group on 25 February 2016.

Overhead costs for the period amounted to £9.7 million, compared to £6.5 million for H1 2016.  The increase reflects the cost of additional personnel to support the growth in the business, a full six months overhead cost for Fresh Student Living and the additional overhead cost associated with operating as a listed company.

Operating profit, excluding exceptional costs, increased by 14.1% to £19.4 million (H1 2016: £17.0 million).

The Group made a profit on the disposal of its joint venture interest in Athena Hall (Jersey) Limited in the period of £0.9 million, realising a net cash inflow from the sale of £5.5 million.  The Group's share of profit in joint ventures amounted to £1.1 million (H1 2016: £ Nil) and arose in respect of developments in progress in Belfast.

After accounting for net finance costs of £0.3 million, the Group's profit before tax for the period amounted to £21.1 million (H1 2016: £9.9 million loss).

Adjusted EBITDA for the period, including the profits from the Group's joint venture interests, was £21.9 million and compares to an adjusted EBITDA for the prior period of £17.3 million, excluding exceptional IPO costs of £26.6 million.

Basic earnings per share were 6.7 pence for the period, an increase of 28.8% compared to the adjusted basic earnings per share for the prior period of 5.2 pence (calculated on a proforma basis using the profit for the period from continuing operations, excluding exceptional IPO costs, and based on the number of shares in issue at 30 September 2016).

Segmental review

Student accommodation development

Revenues from student accommodation development amounted to £115.2 million for the period and were £7.4 million lower than for the comparative period last year.  This was in line with management's expectation and is attributable to the timing of forward sales transactions.  The value of developments in progress for completion is higher than for the prior year and this will be reflected in the revenues for the full year.

The gross margin for the period on student accommodation developments amounted to 21.7%, compared to 17.9% for H1 2016. This is a further strong improvement in the gross margin reflecting the increased contribution from higher margin developments in progress.

The Group has a strong student accommodation development pipeline, currently comprising 31 development sites which will deliver in excess of 11,200 beds to the market with an appraised development value in excess of £920 million. This compares to a pipeline of 31 development sites delivering 11,300 beds, with a development value of £850 million, reported in the Group's interim report last year. Of the current development pipeline, 28 are for delivery by FY 2019 and three are for delivery in FY 2020.

All developments for completion in the current financial year are sold (3,314 beds), including one operational asset, and all are on target for completion ahead of the 2017/18 academic year.

Ten developments (3,415 beds) are scheduled for delivery in FY 2018 and of these, five have been forward sold and five are in advanced legal negotiations for sale.

Looking ahead to FY 2019, nine developments (3,545 beds) are currently scheduled for delivery, eight of which are secured and the purchase of the remaining site is in legal negotiation.  Six of the sites have planning (2,676 beds), with the remaining three sites progressing through planning.  One development has been forward sold (511 beds) and four developments (2,088 beds) are in legal negotiations for sale.

Since 1 October 2016, seven developments have been sold (2,580 beds) and nine are in legal negotiations to sell (3,649 beds), with a total development value of £509 million.  By comparison, this is more than double the £200 million value of sites forward sold or entered into legal negotiations in the equivalent prior period.

Build to Rent development

The Group has made good progress in securing its Build to Rent development pipeline.  During the period a site has been acquired in Sutton, London with planning for 132 units, two secured sites in Belfast and Leicester are progressing through planning and three further sites are in negotiation for development subject to planning.  These six schemes are currently targeted for delivery over the period FY 2019 to FY 2021.

Significant work has been undertaken in preparing the Group's Build to Rent development specification, which has been essential in order to specify our product offering to potential clients and to enable potential schemes to be appropriately costed.

Accommodation management

Fresh Student Living Limited ('Fresh'), which provides ongoing student letting and management services, was acquired by the Group on 25 February 2016 in order to complete the Group's end-to-end service offering to its clients, from the sourcing of sites through to the operational management of the completed developments.  Fresh receives a fee for its management services, with all the direct operating costs of a property remaining the responsibility of the property owner.  Fresh is engaged under management contracts which are typically for between three and seven years, although some are for longer.

For the six months ended 31 March 2017, Fresh contributed revenues of £3.0 million and a gross profit of £1.9 million, giving a gross margin of 63.2%.  For the comparative one month period from the date of acquisition to 31 March 2016, Fresh contributed revenues of £0.4 million. For comparative purposes, for the six months ended 31 March 2016, Fresh recorded revenues of £2.2 million.

Fresh continues to grow rapidly in terms of its beds under management.  For the current year, Fresh is contracted to manage 12,117 beds across 43 schemes.  This compares to 8,310 beds across 32 schemes under management in the prior year.  By FY 2020, Fresh is currently contracted to manage 19,532 beds across 65 schemes, which is an increase of 1,608 beds since the date of the Group's last interim report and an increase of 896 beds since the Group published its Annual Report in January.  Opportunities to develop the Fresh business are a key focus for management and we continue to succeed in winning contracts to manage non-Watkin Jones Group developed assets.

Aligned to Fresh, the Group has made progress in developing the Five Nine Living Limited ("Five Nine") business to provide similar letting and operational management services to the Build to Rent sector.  Five Nine now has 535 units under management, across five schemes, including the scheme recently completed in Leeds.

Residential development

In the six months to 31 March 2017, the residential development business achieved 31 sales completions, as compared to 79 in H1 2016.  The lower number of sales completions was in line with management's expectation and reflects the fact that in the first half of last year the division completed sales of 60 apartments from two legacy development sites at Gorse Stacks, Chester and Logie Green, Edinburgh that were in stock at the start of the period.  Excluding sales at these two developments, sales of new build stock are ahead of the prior year.  Expected new build sales for this year are heavily weighted to the second half.

Revenues for the residential development business amounted to £6.3 million, compared to £16.4 million for the equivalent prior period. The gross margin improved to 17.5% from 7.4% in the prior period.  This improvement reflects the impact of nil margin sales totalling £7.9 million in H1 2016 from the legacy development site at Gorse Stacks, Chester.

Dividend

The Board has adopted a progressive dividend policy and has declared an interim dividend for the period of 2.2 pence per share, which is a 10% increase on the full year equivalent interim dividend paid last year.  It will be paid on 30 June 2017 to shareholders on the register at close of business on 9 June 2017.  The shares will go ex-dividend on 8 June 2017.  The Board expects to announce a similar increase in the full year dividend.

In the prior year an interim dividend of 1.33 pence per share was paid. As Watkin Jones plc was only admitted to trading on AIM shortly before the end of the first half year in FY 2016, the Group declared interim and final dividends representing two thirds of the value the Board would have declared had the Company been admitted to trading for the full year. On this basis the pro forma interim dividend for the six months to 31 March 2016 would have been 2.0 pence per share.

Balance sheet and cashflow

The Group had net cash at 31 March 2017 of £11.7 million, comprising cash of £25.1 million less borrowings of £13.4 million.  This compares to net cash at 31 March 2016 of £15.4 million and at 30 September 2016 of £32.2 million.

The reduction in net cash for the period of £20.5 million reflects the Group's normal cashflow profile which, depending on the timing of forward development sales, sees a cash utilisation in the first half of the year, followed by cash generation in the second half of the year as development sites for delivery in future years are forward sold and the significant final payments due on completion of the current year's developments are received.  The cash outflow in the first half of the year reflects payments made in respect of land acquisitions required for the development pipeline, predominantly those which are currently in legal negotiations for sale.  Other cash outflows related to dividends (£6.8 million) and tax (£3.1 million). Cash benefitted from the proceeds from the disposal of the Group's joint venture interest in Athena Hall (Jersey) Limited (£5.5 million) and a cash inflow from the Group's development joint ventures in Belfast (£2.0 million).

The completion of the forward sale of those developments currently in legal negotiations, together with the final payments due on completion of this year's schemes will contribute significantly to the Group's cash position in the second half of the year.

The Group's interest in joint ventures was reduced by £5.3 million in the period as a consequence of the disposal of the Group's interest in Athena Hall (Jersey) Limited.

Inventory and work in progress fell by £2.0 million in the period to £126.0 million.  However, a further reduction is expected in the second half of the year as the forward sales of the sites currently in legal negotiations complete.

Outlook

The Group's student accommodation development business continues to be underpinned by the attractive fundamentals of the student accommodation market, with the Group continuing to see strong demand from UK and international clients.  We have seen increased institutional demand for good quality purpose built assets, with a number of new international funds recently entering the market.  This has had a positive effect on development values as competition has increased and yields have sharpened.  Clients looking for scale see partnering with Watkin Jones as the best way to secure new assets in prime locations.  The forward sale model and student accommodation pipeline of 31 sites provides the Group with excellent visibility on future earnings and cash flow.

Encouraging progress has been made in the Build to Rent sector, with development opportunities gathering momentum.  The Group has secured an excellent site with planning in Sutton, London and we are actively progressing on other sites through the planning process as well as negotiating several specific development opportunities.

The student accommodation management business through Fresh is expected to continue making an increased contribution to the Group's results. We have high visibility on the significant growth in its contracted beds under management through to FY 2020 and we will continue to target further expansion of this burgeoning business.  Leveraging the expertise in Fresh, the Five Nine Living offer to the Build to Rent sector is becoming established and we remain positive in the future outlook for this still evolving market.

The status of the forward sold student accommodation development pipeline, together with the progress being made in the Group's other business segments, supports a positive outlook for the Group's performance.

Mark Watkin Jones

Chief Executive Officer

1 June 2017

For further information:

Watkin Jones plc
Mark Watkin Jones, Chief Executive Officer	Tel: +44 (0) 1248 362 516
Phil Byrom, Chief Financial Officer	www.watkinjonesplc.com
Peel Hunt LLP (Nominated Adviser & Joint Corporate Broker)		Tel: +44 (0) 20 7418 8900
Mike Bell / Justin Jones / Matthew Brooke-Hitching		www.peelhunt.com
Jefferies Hoare Govett (Joint Corporate Broker)		Tel: +44 (0) 20 7029 8000
Max Jones / Will Souter		www.jefferies.com

Media enquiries:

Buchanan
Henry Harrison-Topham / Richard Oldworth Jamie Hooper / Steph Watson	Tel: +44 (0) 20 7466 5000
watkinjones@buchanan.uk.com	www.buchanan.uk.com

Notes to Editors

Watkin Jones is a leading UK developer and constructor of multi occupancy property assets, with a focus on the student accommodation sector.  The Group has strong relationships with institutional investors, and a good reputation for successful, on-time-delivery of high quality developments.  Since 1999, Watkin Jones has delivered over 31,800 student beds across 98 sites, making it a key player and leader in the UK purpose built student accommodation market.  In addition, Watkin Jones has been responsible for over 50 residential developments, ranging from starter homes to executive housing and apartments.

The Group's competitive advantage lies in its experienced management team and business model, which enables it to offer an end-to-end solution for investors, delivered entirely in-house with minimal reliance on third parties, across the entire life cycle of an asset.

Watkin Jones was admitted to trading on AIM in March 2016 with the ticker WJG.L.  For additional information please visit: www.watkinjonesplc.com

Consolidated Statement of Comprehensive Income

for the six month period ended 31 March 2017 (unaudited)

		6 months to 31 March 2017	6 months to 31 March 2016	12 months to 30 September 2016
Continuing operations	Notes	£'000	£'000	£'000
Revenue		133,676	145,888	266,980
Cost of sales		(104,558)	(122,359)	(213,169)
Gross profit		29,118	23,529	53,811
Administrative expenses		(8,924)	(6,042)	(14,551)
Distribution costs		(768)	(464)	(1,377)
Operating profit before exceptional IPO costs		19,426	17,023	37,883
Exceptional IPO costs		-	(26,561)	(26,561)
Operating profit/(loss)		19,426	(9,538)	11,322
Profit on disposal of interest in joint venture	5	930	-	-
Share of profit in joint ventures		1,119	-	2,972
Finance income		72	127	252
Finance costs		(432)	(466)	(1,282)
Profit/(loss) before tax from continuing operations		21,115	(9,877)	13,264
Income tax expense	6	(4,031)	(3,348)	(8,179)
Profit/(loss) for the period from continuing operations		17,084	(13,225)	5,085
Discontinued operations Profit/(Loss) after tax for the period from discontinued operations		-	86	(878)
Profit/(loss) for the period attributable to ordinary equity holders of the parent		17,084	(13,139)	4,207
Other comprehensive income
Net gain on available-for-sale financial assets		46	87	116
Total comprehensive  income/(loss) for the period attributable to ordinary equity holders of the parent		17,130	(13,052)	4,323
Earnings per share for the period attributable to ordinary equity holders of the parent		Pence	Pence	Pence
Basic earnings per share	7	6.693	(96.892)	3.123
Basic earnings per share for continuing operations	7	6.693	(97.526)	3.774
Adjusted basic earnings per share for continuing operations (excluding operating exceptional costs)	7	6.693	97.814	23.489

Consolidated Statement of Financial Position

as at 31 March 2017 (unaudited)

		31 March 2017	31 March 2016	30 September 2016
	Notes	£'000	£'000	£'000
Non-current assets
Intangible assets		15,242	15,572	15,521
Property, plant and equipment		3,098	4,648	1,876
Investment in joint ventures		670	5,077	5,950
Deferred tax asset		263	1,369	262
Other financial assets		2,603	2,505	2,545
		21,876	29,171	26,154
Current assets
Inventory and work in progress		126,040	90,022	128,157
Trade and other receivables		20,839	20,761	16,436
Cash and cash equivalents	10	25,111	32,604	47,221
		171,990	143,387	191,814
Total assets		193,866	172,558	217,968
Current liabilities
Trade and other payables		(56,960)	(59,421)	(90,781)
Provisions		(253)	(339)	(253)
Other financial liabilities		(35)	(56)	(63)
Interest-bearing loans and borrowings		(4,307)	(16,329)	(14,970)
Current tax liabilities		(6,992)	(3,165)	(6,018)
		(68,547)	(79,310)	(112,085)
Non-current liabilities
Interest-bearing loans and borrowings		(9,131)	(912)	(43)
Deferred tax liabilities		(1,139)	(1,463)	(1,151)
Provisions		(1,957)	(2,124)	(1,957)
		(12,227)	(4,499)	(3,151)
Total Liabilities		(80,774)	(83,809)	(115,236)
Net assets		113,092	88,749	102,732
Equity
Share capital		2,553	2,550	2,553
Share premium		84,612	84,612	84,612
Merger reserve		(75,383)	(75,383)	(75,383)
Available-for-sale reserve		315	240	269
Retained earnings		100,995	76,730	90,681
Total Equity		113,092	88,749	102,732

Consolidated Statement of Changes in Equity

for the six month period ended 31 March 2017 (unaudited)

	Share Capital £'000	Share Premium £'000	Merger Reserve £'000	Available-for-sale reserve £'000	Retained earnings £'000	Total £'000
30 September 2015	1,000	6,300	-	153	105,597	113,050
Loss for the period	-	-	-	-	(13,139)	(13,139)
Other comprehensive income	-	-	-	87	-	87
Dividend paid prior to IPO (note 8)	-	-	-	-	(10,000)	(10,000)
Share restructuring prior to IPO	1,695	167,864	-	-	-	169,559
Capital reduction prior to IPO	-	(167,864)	-	-	167,864	-
Issue of shares on IPO	855	84,586	-	-	-	85,441
Issue of shares to employees of Fresh Student Living Limited	-	26	-	-	-	26
Group reconstruction of Watkin Jones plc and Watkin Jones Group Limited	(1,000)	(6,300)	(75,383)	-	(173,592)	(256,275)
Balance at 31 March 2016	2,550	84,612	(75,383)	240	76,730	88,749
Profit for the period	-	-	-	-	17,346	17,346
Dividend paid (note 8)	-	-	-	-	(3,395)	(3,395)
Issue of shares to employee SIP	3	-	-	-	-	3
Other comprehensive income	-	-	-	29	-	29
Balance at 30 September 2016	2,553	84,612	(75,383)	269	90,681	102,732
Profit for the period	-	-	-	-	17,130	17,130
Dividend paid (note 8)	-	-	-	-	(6,816)	(6,816)
Other comprehensive income	-	-	-	46	-	46
Balance at 31 March 2017	2,553	84,612	(75,383)	315	100,995	113,092

Consolidated Statement of Cash Flows

for the six month period ended 31 March 2017 (unaudited)

		6 months to 31 March 2017	6 months to 31 March 2016	12 months to 30 September 2016
	Notes	£'000	£'000	£'000
Cash flows from operating activities
Cash (outflow)/inflow from operations	9	(16,445)	6,907	24,457
Interest received		72	127	252
Interest paid		(420)	(382)	(1,408)
Interest element of finance lease rental payments		(12)	(12)	(22)
Tax paid		(3,140)	(6,911)	(8,152)
Net cash (outflow)/inflow from operating activities		(19,945)	(271)	15,127
Cash flows from investing activities
Acquisition of property, plant and equipment		(441)	(5)	(150)
Proceeds on disposal of property, plant and equipment		42	1	2,750
Acquisition of Fresh Student Living Limited (net of cash acquired)		-	(14,496)	(14,496)
Proceeds from disposal of interest in joint venture		5,510	-	-
Loan repayments from joint ventures		2,043	2,143	4,242
Purchase of other financial assets		-	(1,024)	(1,024)
Net cash inflow/(outflow) from investing activities		7,154	(13,381)	(8,678)
Cash flows from financing activities
Dividend paid	8	(6,816)	(10,000)	(13,395)
Issue of shares prior to IPO		-	88,151	88,151
Issue of shares on IPO		-	85,441	85,441
Cash outflow on group reconstruction of Watkin Jones plc and Watkin Jones Group Limited		-	(173,592)	(173,592)
Capital element of finance lease rental payments		(233)	(180)	(278)
Repayment of bank loans		(2,270)	(2,834)	(4,825)
Net cash outflow from financing activities		(9,319)	(13,014)	(18,498)
Net decrease in cash		(22,110)	(26,666)	(12,049)
Cash and cash equivalents at beginning of the period		47,221	59,270	59,270
Cash and cash equivalents at end of the period	10	25,111	32,604	47,221

Notes to the consolidated financial information

1.      General information

Watkin Jones plc (the 'Company') is a limited company incorporated in the United Kingdom under the Companies Act 2006 (Registration number 09791105).  The Company is domiciled in the United Kingdom and its registered address is Units 21-22, Llandygai Industrial Estate, 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 interim financial statements of the Group for the six month period ended 31 March 2017 comprises the Company and its subsidiaries.  The basis of preparation of the consolidated interim financial statements is set out in note 2 below.

The financial information for the six months ended 31 March 2017 is unaudited.  It does not constitute statutory financial statements within the meaning of Section 434 of the Companies Act 2006.  The consolidated interim financial statements should be read in conjunction with the financial information for the year ended 30 September 2016, which has been prepared in accordance with IFRSs as adopted by the European Union.  The report of the auditors on those financial statements was unqualified, did not contain an emphasis of matter paragraph and did not contain any statement under section 434 of the Companies Act 2006.

This report was approved by the directors on 31 May 2017.

2.      Basis of preparation

The interim financial statements have been prepared based on IFRS that are expected to exist at the date on which the Group prepares its financial statements for the year ended 30 September 2017.  To the extent that IFRS at 30 September 2017 do not reflect the assumptions made in preparing the interim financial statements, those financial statements may be subject to change.

The interim financial statements have been prepared on a going concern basis and under the historical cost convention.

The interim financial statements have been presented in pounds sterling and all values are rounded to the nearest thousand (£'000), except when otherwise indicated.

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 interim financial statements do not include all financial risk information and disclosures required in the annual financial statements and they should be read in conjunction with the financial information that is presented in the Company's audited financial statements for the year ended 30 September 2016.  There has been no significant change in any risk management policies since the date of the last audited financial statements.

3.      Accounting policies

The accounting policies used in preparing these interim financial statements are the same as those set out and used in preparing the Company's audited financial statements for the year ended 30 September 2016.

4.      Segmental reporting

The Group has identified three segments for which it reports under IFRS 8 'Operating segments'.  The following represents the segments that the Group operates in:

a.         Student Accommodation Development - Purpose built student accommodation developments.

b.         Residential Development - The development of traditional residential property.

c.          Fresh Accommodation Management - The management of purpose built student accommodation and private rented sector property. 

Corporate - central revenue and costs not solely attributable to any one division.

All revenues arise in the UK.

Performance is measured by the Board based on gross profit as reported in the management accounts.

6 months ended 31 March 2017 (unaudited)	Student Accommodation Development	Accommodation Management	Residential Development	Corporate	Total
	£'000	£'000	£'000	£'000	£'000
Segmental revenue	115,158	2,964	6,269	9,285	133,676
Segmental gross profit	25,025	1,872	1,095	1,126	29,118
Administration expenses	-	-	-	(8,924)	(8,924)
Distribution costs	-	-	-	(768)	(768)
Profit on disposal of interest in joint venture	-	-	-	930	930
Share of profit in joint ventures	-	-	-	1,119	1,119
Finance income	-	-	-	72	72
Finance costs	-	-		(432)	(432)
Profit/(loss) before tax	25,025	1,872	1,095	(6,877)	21,115
Taxation	-	-	-	(4,031)	(4,031)
Profit/(loss) for the period	25,025	1,872	1,095	(10,908)	17,084
Inventory and work in progress	46,211	-	56,529	23,300	126,040

6 months ended 31 March 2016 (unaudited)	Student Accommodation Development	Accommodation Management	Residential Development	Corporate	Total
	£'000	£'000	£'000	£'000	£'000
Segmental revenue	122,587	407	16,398	6,496	145,888
Segmental gross profit	21,971	261	1,217	80	23,529
Administration expenses	-	-	-	(6,042)	(6,042)
Distribution costs	-	-	-	(464)	(464)
Exceptional IPO costs	-	-	-	(26,561)	(26,561)
Finance income	-	-	-	127	127
Finance costs	-	-	-	(466)	(466)
Profit/(loss) before tax	21,971	261	1,217	(33,326)	(9,877)
Taxation	-	-	-	(3,348)	(3,348)
Profit/(loss) for the period	21,971	261	1,217	(36,674)	(13,225)
Inventory and work in progress	25,060	-	56,618	5,303	86,981
Inventory and work in progress - discontinued					3,041
Total inventory and work in progress					90,022

5.      Disposal of interest in joint venture

On 9 December 2016 the Group disposed of its joint venture interest in Athena Hall (Jersey) Limited, realising a profit on the disposal of £930,000. The proceeds received from the disposal, including the repayment of a loan to Athena Hall (Jersey) Limited, amounted to £6,210,000, of which £700,000 remains owed by way of a loan to the purchaser and is repayable within 3 years from the date of the transaction.

6.      Income taxes

The tax expense for the period has been calculated by applying the estimated tax rate for the financial year ending 30 September 2017 of 19.1% to the profit for the period.

7.      Earnings per share

Basic 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 ordinary shares in issue during the year.

There is no difference between basic earnings per share and diluted earnings per share as there are no dilutive share option arrangements in place.

The following table reflects the income and share data used in the basic EPS computations:

	Period ended 31 March 2017	Period ended 31 March 2016	Year ended 30 September 2016
	£'000	£'000	£'000
Profit/(Loss) attributable to ordinary equity holders of the parent	17,084	(13,139)	4,207
Profit/(Loss) from continuing operations attributable to ordinary equity holders of the parent	17,084	(13,225)	5,085
Adjusted profit from continuing operations attributable to ordinary equity holders of the parent (excluding exceptional IPO costs)	17,084	13,264	31,646
Weighted average number of ordinary shares for basic earnings per share	255,268,875	13,560,440	134,729,152
	Pence	Pence	Pence
Basic earnings per share
Basic profit/(loss) for the period attributable to ordinary equity holders of the parent	6.693	(96.892)	3.123
Basic earnings per share from continuing operations
Basic profit/(loss) for the period attributable to ordinary equity holders of the parent	6.693	(97.526)	3.774
Adjusted basic earnings per share from continuing operations (excluding exceptional IPO costs)
Basic profit for the period attributable to ordinary equity holders of the parent	6.693	97.814	23.489

Using the number of shares in issue at 30 September 2016, the adjusted proforma basic earnings per share from continuing operations (excluding exceptional IPO costs) for the 6 months ended 31 March 2016 would have been 5.196 pence and for the year ended 30 September 2016 would have been 12.397 pence.

8.      Dividends

	Period ended 31 March 2017	Period ended 31 March 2016	Year ended 30 September 2016
	£'000	£'000	£'000
Dividend paid prior to IPO	-	10,000	10,000
Interim dividend paid in June 2016 of 1.33 pence	-	-	3,395
Final dividend paid in February 2017 of 2.67 pence	6,816	-	-
	6,816	10,000	13,395

An interim dividend of 2.2 pence per ordinary share will be paid on 30 June 2017. This dividend was declared after 31 March 2017 and as such the liability of £5,616,000 has not been recognised at that date.

9.      Reconciliation of operating profit to net cash flows from operating activities

	6 months ended 31 March 2017	6 months ended 31 March 2016	Year ended 30 September 2016
	£'000	£'000	£'000
Profit/(loss) before tax from continuing operations	21,115	(9,877)	13,264
Profit/(loss) before tax from discontinued operations	-	108	(1,098)
Profit/(loss) before tax	21,115	(9,769)	12,166
Depreciation	133	253	341
Amortisation of intangible assets	280	47	326
(Profit)/loss on sale of plant and equipment	(26)	2	80
Issue of shares to employee SIP and employees of Fresh Student Living Limited	-	-	29
Finance income	(72)	(127)	(252)
Finance costs	432	466	1,282
Profit on disposal of interest in joint venture	(930)	-	-
Share of profit in joint ventures	(1,119)	-	(2,972)
Decrease/(increase) in inventory and work in progress	2,117	29,539	(8,474)
Interest capitalised in development land, inventory and work in progress	-	122	148
(Increase)/decrease in trade and other receivables	(4,581)	1,054	5,353
(Decrease)/increase in trade and other payables	(33,794)	(14,680)	16,682
Provision for property lease commitment	-	-	(252)
Net cash(outflow)/ inflow from operating activities	(16,445)	6,907	24,457

10.    Analysis of net cash

		6 months ended 31 March 2017	6 months ended 31 March 2016	12 months ended 30 September 2016
		£'000	£'000	£'000
Cash at bank and in hand		25,111	32,604	47,221
Finance leases		(955)	(358)	(260)
Bank loans		(12,483)	(16,883)	(14,753)
Net cash		11,673	15,363	32,208

- Ends -

This information is provided by RNS

The company news service from the London Stock Exchange

END

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