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Watkin Jones Plc Net Income decreased on 8.8% while Revenue increased on 3.2%

14 Jan 2020 • About Watkin Jones Plc ($WJG) • By InTwits

Watkin Jones Plc reported FY2019 financial results today. Here are the key drivers of the company's long term financial model:
  • EBITDA Margin is quite volatile: 13.6% in FY2019, 15.2% in FY2018, 14.5% in FY2017, 4.5% in FY2016, 14.8% in FY2015
  • Watkin Jones Plc has low CAPEX intensity: 5 year average CAPEX/Revenue was 0.1%.
  • In the last 5 years the company invested considerably less than D&A: £1m vs. £3m. In FY2019 this situation was still the same: CAPEX was 0 while D&A was 1
  • The company has highly profitable business model: ROIC is 23.6%
Below you can find a comprehensive analysis of the key data driving the company's performance and the stock price.

Revenue and profitability

The company's Revenue increased on 3.2%. During FY2015-FY2019 Revenue growth topped in FY2018 at 20.3%. Revenue decline was accompanies by EBITDA margin decline. EBITDA Margin decreased on 3.1 pp from 44.4% to 41.3% in FY2019.

Gross Margin increased slightly on 0.53 pp from 20.0% to 20.5% in FY2019. SG&A as a % of Revenue showed almost no change in FY2019. Stock Based Compensation (SBC) as a % of Revenue increased slightly on 0.57 pp from 0.023% to 0.59% in FY2019.

Net Income margin decreased slightly on 1.4 pp from 12.2% to 10.8% in FY2019. The efficient tax rate was 19.0% in FY2019.

Investments (CAPEX, working capital and M&A)

In FY2019 Watkin Jones Plc had CAPEX/Revenue of 0.096%. CAPEX/Revenue showed almost no change from FY2016 to FY2019. Average CAPEX/Revenue for the last three years was 0.097%.

Inventories as a % of Revenue decreased slightly on 0.76 pp from 36.6% to 35.8% in FY2019.

Return on investment

The company operates at high and attractive ROIC (23.6%) and ROE (24.5%). ROIC decreased on 7.7 pp from 31.4% to 23.6% in FY2019. ROE decreased on 7.2 pp from 31.7% to 24.5% in FY2019.

Leverage (Debt)

Debt level is -1.5x Net Debt / EBITDA and 0.8x Debt / EBITDA. Debt surged on 46.5% while cash increased on 8.5%.

Watkin Jones Plc has no short term refinancing risk: cash is higher than short term debt (8,735.0%).

Valuation and dividends

Watkin Jones Plc's trades at EV/EBITDA 11.2x and P/E 16.1x.

The company paid 49.6% of Net Income as dividends in FY2019.

Management team

At the end of financial year the company had 1.3% shares owned by insiders. Insider ownership didn't change in 2019.

At the end of financial year the company had 826 employees. The number of employees jumped on 13.0%. Average revenue per employee in FY2019 was £453,735 and it decreased on 8.6%.

Financial and operational results

FY ended 30 Sep 2019

Watkin Jones Plc ($WJG) key annual financial indicators

mln. £201520162017201820192019/2018
Gross Profit44.053.863.572.476.86.0%
Net Income22.24.235.844.240.3-8.8%
Stock Based Compensation0.12.22,551.2%
Balance Sheet
Short Term Debt9.815.
Long Term Debt10.40.022.824.937.550.7%
Cash flow
Revenue growth7.4%9.3%13.1%20.3%3.2%
EBITDA growth131.3%-66.8%265.0%26.1%-7.4%

Gross Margin18.0%20.2%21.0%20.0%20.5%0.5%
EBITDA Margin14.8%4.5%14.5%15.2%13.6%-1.6%
EBIT Margin14.8%13.3%-1.6%
SG&A, % of revenue4.7%5.5%6.9%6.3%6.5%0.2%
SBC, % of revenue0.0%0.6%0.6%
Net Income Margin9.1%1.6%11.9%12.2%10.8%-1.4%
CAPEX, % of revenue0.0%0.1%0.1%0.1%0.1%0.0%

Net Debt/EBITDA-1.1x-2.7x-0.9x-1.5x-1.5x-0.1x
Insider ownership1.3%1.3%0.0%
Revenue/Employee, th. £497454-8.6%

Peers in Real Estate Development

Below we provide Watkin Jones Plc benchmarking against other companies in Real Estate Development industry for the last 5 years. We show data for the top-5 companies by key financial metric together with the median value for all the companies in the industry.

Top companies by Revenue growth, %

Top 5 FY2015 FY2016 FY2017 FY2018 FY2019
Development Securities(Investments) ($36JS)156.8%18.9%-48.8%40.1%
Corus Finance ($BD84)-99.5%13,313.3%10.4%12.9%
Bld Property Hldgs ($09GE)39.3%6.1%-0.2%8.5%
Sanctuary Housing ($BB21)5.3%7.2%0.3%5.5%
Housing Finance Corp ($68HB)9.1%10.9%8.2%3.0%
Median (14 companies)1.0%1.5%2.1%3.0%

Top companies by Gross margin, %

Top 5 FY2015 FY2016 FY2017 FY2018 FY2019
Sanctuary Housing ($BB21)97.6%97.1%97.4%98.1%
Glh Hotels Ltd ($97KI)57.6%57.8%60.1%59.0%
Lewis(John)Partnership ($BD32)33.8%33.9%33.8%33.0%
Lewis(John) ($BC32)33.8%33.9%33.8%33.0%
Ashpol ($BC24)0.0%0.0%
Median (8 companies)33.8%32.7%31.9%16.5%

Top companies by EBITDA margin, %

Top 5 FY2015 FY2016 FY2017 FY2018 FY2019
T.H.F.C.(Indexed 2) ($90IL)97.9%97.1%96.2%96.4%
Housing Finance Corp ($68HB)97.9%97.1%96.2%96.4%
T.H.F.C.(Indexed) ($96JS)97.9%97.1%96.2%96.4%
T.H.F.C.(Social Housing Finance) ($96JP)97.9%97.1%96.2%96.4%
Bld Property Hldgs ($09GE)215.1%165.3%36.3%87.6%
Median (13 companies)44.3%39.7%29.2%52.7%

Top companies by CAPEX/Revenue, %

Top 5 FY2015 FY2016 FY2017 FY2018 FY2019
Bld Property Hldgs ($09GE)59.2%84.6%53.0%55.6%
Sanctuary Housing ($BB21)60.0%31.0%33.3%42.3%
Mid Kent Water ($48HO)37.7%41.2%38.1%41.7%
Glh Hotels Ltd ($97KI)13.1%4.9%4.6%9.0%
Corus Finance ($BD84)9.6%6.6%5.7%
Median (13 companies)3.8%3.3%3.0%2.2%

Top companies by ROIC, %

Top 5 FY2015 FY2016 FY2017 FY2018 FY2019
Corus Finance ($BD84)-19.6%2.1%8.4%10.7%
Lewis(John) ($BC32)18.6%19.8%22.0%8.2%
Lewis(John)Partnership ($BD32)18.6%19.8%22.0%8.2%
Glh Hotels Ltd ($97KI)4.9%5.7%5.6%7.5%
Development Securities(Investments) ($36JS)7.4%5.1%0.2%6.1%
Median (43 companies)3.2%3.9%2.6%1.0%

Top companies by Net Debt / EBITDA

Top 5 FY2015 FY2016 FY2017 FY2018 FY2019
T.H.F.C.(Indexed 2) ($90IL)20.3x22.6x24.3x28.0x
T.H.F.C.(Indexed) ($96JS)20.3x22.6x24.3x28.0x
T.H.F.C.(Social Housing Finance) ($96JP)20.3x22.6x24.3x28.0x
Housing Finance Corp ($68HB)20.3x22.6x24.3x28.0x
West Bromwich B.S. ($WBS)2.3x4.9x10.5x12.7x
Median (13 companies)3.1x4.0x4.6x8.6x