Developer carrying out work in-house rather than contracting it out
Refurbishment is “becoming a new business stream” for Watkin Jones as a result of work to remediate its past developments, now deemed unsafe in the wake of the 2017 Grenfell Fire.
According to company results published on Thursday, 13 Watkin Jones-developed leasehold buildings fall within the scope of the developers’ remediation contract, which the student accommodation and BTR specialist signed up to in 2023.
Five of these buildings are included in the provision, which now stands at £48m.
Building safety costs were a major factor in the firm making a £42.5m loss in the year to September 2023. Yesterday’s results show these losses have been drastically reduced to around £300,000 in the year to September 2024.
No further buildings were added to the building safety provision during the 2024 financial year, and the firm said that “to date, no communications have been received from building owners for any of these remaining properties”.
Speaking to Housing Today after the company’s results were published, chief financial officer Simon Jones said the firm was “not expecting a material number of additional problems going forward”.
Watkin Jones has carried out its own remediation work, rather than contracting it out to other constructors.
“We built all these buildings, so we’ve got drawings for them,” said Jones.
“We believe we can do it much more cost effectively, and one of the big things we’re seeing is with a lot of our clients they’re using us to fix their buildings in terms of remediation.
“So it’s becoming a new business stream for us as well. We’re creating margin out of this issue”.
>>See more: Watkin Jones slashes losses to £300k after turbulent 18 months
The net provision for building safety work decreased by £6.7m in the 2024 financial year, reflecting a cash outflow of £16.2m, which resulted in the completion of remediation works on three buildings.
Watkin Jones recorded an additional provision of £7m, which it said covered “certain additional properties and changes in scope on several properties already in the provision”.
“We continue to make progress with negotiating contributions from clients to mitigate our liability in relation to these remedial works and received £4.9 million of such contributions during the year,” it said.
Alex Pease, chief executive of Watkin Jones, told Housing Today that both the firm’s refurbishment business, which it calls ’Refresh’, and its development partnership business had enjoyed a “very encouraging start”.
The Refresh business brought in revenue of £10.9m in its first year of operation, with gross profit of £1.5m.
“I think the opportunity there is bigger than we anticipated. We’ve got a really interesting pipeline developing,” said Pease.
He said development partnership work would also offer opportunities for diversification.
Watkin Jones’s accounts show it drastically reduced its annual pre-tax loss for the year to 30 Setpember but still remained narrowly in the red at its year end.
The firm reported a pre-tax loss of £300,000 for the year to 30 September 2024. This is down drastically on the £42.5m loss the previous year and follows a turbulent period which saw a change in leadership and restructuring following a profit warning in July 2023.
After the end of the financial year, Pease said the firm closed a “really interesting” deal in St Helens in November, to build 295 affordable homes for Torus Housing Association, and that the business has another two deals under letters of intent.
“I think that diversification is really working, and what we’re trying to do is evolve the business to create a really firm foundation of these sort of more granular, recurring income streams coming from these sort of these new areas,” he sai
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