Watkin Jones chief executive Richard Simpson has refused to rule out further redundancies after the firm this morning reported a sharp fall in pre-tax profit.
The residential developer and contractor slashed 40 roles – about 10 per cent of its workforce – in November last year as it looked to reduce its cost base.
Asked whether more job cuts could follow this year, Simpson said: “Sadly in volatile times you can’t take anything off the table.”
However, there are no imminent plans for further redundancies. “From what we can see at the moment, we think we are right-sized,” added Simpson.
Watkin Jones set aside more than £30m in its latest accounts to comply with the Building Safety Act, which came into force last summer creating extra powers to force developers to reduce fire-risk on many existing buildings above 11 metres tall.
The firm also blamed economic turbulence following Kwasi Kwarteng’s catastrophic mini-Budget for the fall in profit, which dropped by two-thirds to £18.4m in the year to 30 September 2022.
“We had two forward sales that were slated to close in the last week of September but the mini-Budget sent gilt rates all over the place and the two counterparties we were looking to close with couldn’t possibly proceed with the deal – there was so much uncertainty about how to price anything – so they pulled out,” said Simpson, who Construction News revealed as the UK’s 16th best-paid plc construction boss in a recent analysis.
Although these deferred sales are now expected before April, the firm has seen a long dry period in this area.
“The fallout from the mini-Budget is still here, it’s had quite a tail,” said Simpson. “We haven’t forward-sold since [then] – that is unusual for us.”
However, he said that Watkin Jones has used this period to secure planning consents and has a construction pipeline worth about £600m. “We are focused on talking to institutional investors about forward-selling that pipeline so we can get it on site and generate construction productivity,” he added.
This could offer a significant chunk of work to the market. “We provide the main contractor role but we don’t do any construction work ourselves, it is all subcontracted. In recent years we’ve looked to increasingly use external main contractors to support us as we grow,” he said.
The firm has started to slim down the number of subcontractors it works with to build relationships with businesses that can work across its portfolio.
“Do we always get the leverage of the group into all our procurement across the UK?” asked Simpson. “No, is the simple answer. We build everything from single-family affordable housing in the North West to high-rise blocks of flats in London. We have instigated a group procurement function that can think about it across the group and partner with the right supply chain, who can help us in all those areas. It is better for the supply chain, who get a greater breadth of orders.”
The firm’s revenue also dropped, by 5.4 per cent to £407.1m, the new annual results revealed.
However, Simpson was upbeat about the firm’s future. “Underlying sector tenant demand for residential for rent remains very strong, and we have entered the new financial year with a strong secured pipeline and record levels of consented developments,” he said.
“Our good balance sheet liquidity puts us in an excellent position from which to take advantage of attractive land acquisition opportunities, which will support margin recovery as market conditions improve in the second half of the year.”
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Greg Pitcher