Property & Construction Daily

The Property & Construction Daily provides a sector-specific comment from leading analyst Alastair Stewart. His daily perspective provides a round-up of market statements, news, economics and views from the property and construction sectors.

June 5, 2023

WJG, HERC | Fortnight ahead

Company news

Watkin Jones (WJG, 68p, £175m mkt cap) – WJG is a client of PERL

Specialist student accommodation and build-to-rent (BTR) developer, contractor and manager. Forward sale of Loft Lines, at Titanic Quarter in Belfast, to L&G and Clanmil Housing Association. The development comprises 627 built-to-rent (BTR) units and 81 social rent affordable homes. The project will be the first BTR scheme in Belfast, part of one of the largest waterfront regeneration sites in Europe. Loft Lines will be a brand-new urban riverside community built on the Queen’s Island regeneration area. The total consideration payable to the group over the course of the development will be c. £155m. The scheme is scheduled for delivery in summer 2026 and is expected to deliver a margin in line with current target returns.  Construction work will not start meaningfully until FY 24 and therefore the profit contribution to FY23 will be restricted to a small profit on the land transaction, as expected.

Outlook: “This is further evidence of the attractive investment and operational fundamentals of both BTR as a sector and Belfast as a city and a good sign of capital markets re-opening”.

Hercules Site Services (HERC, 36p, £23m)

Labour supply and specialist plant hire company for the UK infrastructure sector. HY (Mar) results. Rev +85%, £37.0m; adj EBITDA +71%, £1.1m; loss before tax, £246k (HY 22, -£383k); EPS, 0.6p (-0.6p); interim div, 0.6p (0.6p); net debt, £6.1m (£1.5m).

Trading: “We have experienced growth across all areas of our business and in our core labour supply division we have won new clients, ramped up deployment of operatives across our cornerstone projects and launched new specialisms”. Labour supply revenue +11% Y/Y, driven by multi-year HS2 Phase 1 contract; 400 Hercules operatives on-site (180). “We are providing additional labour every week in response to increasing demand, leveraging our digital platform as a source of labour supply.” Other new clients in period include Galliford Try, Costain and Sisk. Suction excavator revenue +49%, benefitting from an enlarged fleet. 10 more units delivered bringing fleet to 30, “which will provide additional growth into H2 2023 and beyond [and] complete our fleet for the foreseeable future”.

Outlook: “The infrastructure and construction sectors are experiencing continued buoyancy providing a supportive backdrop for our growth, and recent research demonstrates that this is continuing post period end. Given the labour shortages experienced by the sector, and the effectiveness of our digital tools in placing operatives to jobs, we are well placed to benefit from this growth in the months and years ahead. Demand for our range of complementary services has been strong and our pipeline is very robust”.

Fortnight ahead

Alastair Stewart Fortnight ahead
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