About Watkin Jones

Chairman's Statement

For the year ending 30 September 2007

This statement forms part of the Directors’ Report.

I am delighted that the Group is able to report another very successful year.  Turnover increased by £15.0m to £108.0m, whilst profit for the year before goodwill amortisation and tax was increased by £4.3m to £13.0m.  The increase in turnover reflects a growth in the operations of the Group, particularly in the student accommodation and construction divisions.  The resultant return on sales of 12% (2006 9.3%) was in line with expectations and represents an excellent outcome in tightening market conditions.  The Group has now achieved a strong increase in operating profit for the sixth consecutive year.

The Group was very active during the year in sourcing land sites for future student accommodation and residential developments, as reflected in an increase in the development land bank of £44.2m to £71.9m at cost. This will provide a strong basis for the Group to achieve sustained future growth.  Work in progress increased by £6.8m to £25.8m as several significant schemes were progressed, notably the prestigious Victoria Dock development in Caernarfon and the Droylsden Marina Development in Tameside, East Manchester.

The significant land acquisition programme was well supported by the Group’s Banks, with a net increase in new funding loans in the year of £40.1m.  The benefit of the Group’s funding strategy and strong operating performance resulted in an increase in cash for the year of £6.6m to £14.6m.  During the year we extended the Group’s Rolling Credit Facility agreement with the Bank of Scotland for a further three years and increased the level of the facility to £70m. Taken together with other specific project funding lines the Group now has available facilities approaching £150m.

Shareholders’ funds increased by £8.8m to £33.6m.  No dividend is proposed as profits earned will be used to invest in the future development of the Group.

Business Review

The Student Accommodation Division successfully completed its 2007 developments in Salford, Brighton and Birmingham. Our strong reputation in this sector has further enabled us to establish strong relationships with several significant investor clients, who continue to recognise the potential in this market.  We remain a leading developer of student accommodation, with the market knowledge to source quality sites across the UK and to deliver completed developments to the high standards that our clients rightfully expect.  New developments have been commenced in Birmingham, Bristol, Bangor and Sheffield, and we are well on with the Sheffield Broad Street development.  This is a significant mixed use scheme, comprising over 650 student bedrooms for delivery in 2008, as well as office space and residential apartments.

The Construction Division also had a very good year, achieving a solid profit result across a number of contracts, with margins being delivered to plan. It is particularly pleasing to report that we made excellent progress on the flagship Menai Retail Centre development in Bangor. Our client relationships remain of utmost importance and we will continue to work to ensure that we are able to move forward in successful partnership.

Despite the tightening of the housing sector the Homes Division reported significant growth on the previous year as a steady flow of sales was achieved from its active housing and apartment developments.  Prior to the year end the first sales were completed at Victoria Dock and the outstanding appearance and quality of this development is a testimony to the capabilities of the Division.  We also commenced the first phase of the much anticipated Droylsden marina development, which is a major regeneration scheme within Droylsden town centre and will create an exciting range of residential houses and apartments, hotel, leisure and offices facilities, centred around a new canal marina.

Future Prospects

The prospects for the Group are very positive, both in the short and longer term.  I remain confident that we will see a further growth in the Group’s profit performance in the coming year.  Our Student Accommodation order book is very strong and this division is positioned to deliver secured schemes for several years ahead.  Our Construction division is also well placed to meet its target for the year ahead.  The Homes Division has a portfolio of quality sites in progress and we currently expect that this Division will also have a successful year.

The difficult market conditions that we now face require us to carefully manage our new development activity, particularly for the Homes Division.  We remain optimistic that the right sites, targeted at the active areas of the market will prove successful.  We will not expose the Group to undue risk and we will be selective in the developments that we bring to the market.  The value in our land bank is significant and the long term future prospects for this Division remain excellent.

The Environment

By their nature, the Group’s activities impact on the Environment.  We take our responsibilities in this regard seriously and are committed to taking actions which protect and enhance the environment at large and which mitigate against any possible adverse impacts.  Our procedures are designed to ensure that we comply with the requirements of relevant legislation and adopt best practice wherever possible.

Employees

I would again like to thank all our employees for their significant and important contribution to the Group’s success over the last year. 

The growth in the Group’s activities presents opportunities for all our staff, as well as for new recruits.  I would like to welcome all new staff who have joined us in the year.  They join a committed, hard working and very able team.

We are committed to ensuring that the Group provides good opportunities for its employees.  Training remains high on our agenda and we continue to invest significantly in this area to ensure that staff benefit from their own personal development and are qualified to meet the needs of the Group in the years ahead.

G Watkin Jones
Chairman
20 December 2007