Student accommodation developer Watkin Jones said it is unlikely to close any further deals this financial year as a result of slower than expected market activity.

The company, which yesterday received planning consent for the redevelopment of Portcullis House in Glasgow, said uncertainty over the pace of interest rate cuts was impacting the flow of funding and it expects little change to adjusted operating profit next year.

In a trading update it said it had a number of schemes being actively marketed and sold a substantial PBSA development in Stratford, London, in July.

“Nevertheless, overall market activity through the summer has been slower than anticipated, principally due to the continued uncertainty over the pace of interest rate cuts, and as such we believe it is now unlikely that we will close any further transactions before the financial year end.”

The absence of further forward funds prior to the year end will result in performance being lower than previously anticipated, it said.

The group is expected to show material improvement in FY24, with adjusted operating profit currently expected to be in the range of £10m to £12m (FY23: £0.2m).

It said the UK interest rate cut this month, together with forecast future cuts, should contribute to improved forward fund liquidity.  

“The lower number of transactions in FY24 will, however, have a consequential impact on the results in FY25, given that schemes will not contribute to revenue in future periods until they are forward sold.

“While we have a number of further schemes that we expect to take to market in FY25, given the slower pace of activity currently, we believe that a more prudent set of transaction assumptions should be applied to the next 12 months than previously assumed.

“As such, we do not currently expect adjusted operating profit in FY25 to be above FY24. In any event, the group’s performance will be significantly influenced by the evolution in forward fund liquidity over the coming months and, while it is possible to deliver year on year progress in FY25, this would require market conditions to improve at a faster pace as we enter the new financial year.”

It said it has been effective in its focus on cash generation through the second half; at 30 September 2024, gross cash is anticipated to be approximately £80 million (31 March 2024: £67m) and net cash is anticipated to be approximately £65m (31 March 2024: £44m), ahead of previous expectations.

The group’s position on the exceptional provision for remedial works for legacy properties remains unchanged.

It said its robust net cash position provides it with a strong financial underpin for its committed spending requirements.

“Nevertheless a limiting factor on the extent to which we can take advantage of market conditions and further develop our pipeline.  In light of this, the board is undertaking a review of a range of options that may be available to enhance its medium and longer term funding position, thereby allowing the Group to capitalise on a market recovery.”

Glasgow scheme approved

The redevelopment of the former tax office at Portcullis House in Glasgow, has been backed by Glasgow planners.

The Ard will be a replacement tower, the second highest in the city, and will comprise student homes, a new multi-space facility for Glasgow Social Enterprise Network (GSEN) and flexible commercial space.

Watkin Jones said: “The Ard will contribute immensely to the greening of the city, providing high-quality publicly accessible open spaces, with biodiversity enhanced through creating new habitats on a site that currently has a low habitat value.

“This will be delivered through increased planting and new landscaped areas, with public realm increased by 75% across the site.

“Redevelopment of the site will form a significant part of an overall renewal of the west end of the city centre, acting as a catalyst for change and enhancing the vitality of this part of the city.”