Good morning, and welcome to the 2024 half-year results for Watkin Jones. I am Alex Pease, the Chief Executive for Watkin Jones. I am joined in presenting our results by Sarah Sergeant, our Chief Financial Officer. The agenda for this morning will begin with a short overview from myself, reflecting on the key operational and market updates for Watkin Jones at the half year. Sarah will then take you through the financial performance and the outlook for the remainder of FY 2024. She will also touch on our property management business, Fresh, and our continued focus on ESG and our Future Foundations programme. I will then provide a more detailed review of the operational, investment, and transactional markets we operate in, and a gradually improving sentiment and the challenges and opportunities apparent.
The theme of my overview is one of continued operational progress, and I think this captures the core focus of the business over this H1 period. Continuing to control the controllables and looking to make incremental gains across all of our operational activities. The significant and varied headwinds of 2023 have dissipated to a reasonable degree, but the market has continued to hold challenges as the economic recovery, reduction in inflation, and interest rate cuts have not progressed at the pace the property sector would have liked to have seen. Sarah will provide a detailed review of our financial performance. However, from my perspective, it has been pleasing to see the significant efforts, focus, and controls put in place across the business help yield some positive progress across our key financial metrics.
We have improved both revenues and profit in the period, reducing debt and maintaining a strong cash position. We continue to have good visibility of forward sold revenue, with over GBP 400 million still to come through between FY 2024 and FY 2027, and we are looking to sustain and grow our development pipeline. The business has continued to deliver operationally, making positive steps across our key functions. In January, we spoke of improving investor sentiment with a Watkin Jones development asset in legals, but which had not yet to be crystallized into transactional evidence. It was, therefore, very positive in March to close this forward fund sale of our PBSA scheme in Bristol to Hines, a new investor partner to the group. We have subsequently put a further development asset under offer and are well progressed in legals.
We have remained proactive in the land market, acquiring two new conditional on planning land acquisitions. We believe there will be more opportunity in land as the year progresses. We have also made progress with our existing development pipeline, actively managing assets to improve viability and submitting planning on four schemes with potential bed spaces totaling over 3,000. On the build side, inflation and supply chain shortfalls have moderated, and it has been reassuring to have practically completed four assets or phases of schemes and to see our current developments in build performing materially to programme and budget. We have made encouraging early progress on our new business stream, Refresh, launched in January, and which focuses on the refurbishment and repurposing of existing assets. The wider market sectors we operate in continue to offer support and opportunity looking into the medium term.
Supply and demand imbalances continue to grow, and this, in turn, is helping fuel operational performance of assets. To date, it is a cautious market recovery, with slower-than-expected interest rate cuts, slowing transactional activity. However, investor sentiment continues to improve, and there remains considerable capital allocations to deploy into the UK. Watkin Jones remains a market-leading developer, deliverer, and operator of residential for rent in the UK. We have an absolute focus on positioning the business for growth to make sure we are as fit and well-equipped to capitalize as we begin a new market cycle and economic conditions rebalance. I will now hand over to Sarah for a review of the financial results.
Thank you, Alex. I would like to take you through the financial highlights for half year 2024, review our market guidance for the full year, and then comment on the positive changes in our secured pipeline. I will start with our financial performance. Importantly, these results show a return to profitability for Watkin Jones and progress across all key financial metrics. We have reported strong revenue of GBP 175 million, which has come predominantly from the build-out of our forward-sold developments and the forward sale of our PBSA scheme in Bristol, which closed in March. Notably, this was a 14% increase on the prior period. Our gross profit was GBP 18 million, compared to GBP 16 million in the prior period, with gross margin at 10.5% and in line with our margin guidance.
The segmental analysis is set out in the appendix, but shows relatively stable revenues for BTR of GBP 100 million, a gross margin of 9.3%, but a 25% increase in PBSA revenues to GBP 61 million. The PBSA gross margin of 11.6% is ahead of last year. This gross profit flowed through to operating profit of GBP 4 million, compared to GBP 1.8 million in the prior period, with some overhead efficiencies supporting the bottom line. We have a net interest charge of GBP 0.6 million, compared to GBP 1.5 million in the prior period, reflecting the benefit of continued good financial management, higher interest income, a reduced non-utilization fee from our RCF reduction, and reduced interest payable following the debt paydown last year.
The board has to take a decision not to declare an interim dividend, with the maintenance of financial flexibility being the priority instead. We have continued to have focus on our cash management, and this has resulted in a small cash inflow from operating activities compared to the outflow in the prior period and last year. This has been driven by the disposal of our PBSA scheme and the unwind of working capital following practical completions of schemes. This has also resulted in a reduction in our debt position from GBP 29 million at year-end to GBP 23 million now. This borrowings position remains conservative and gives us room for growth. With gross cash of GBP 67 million and the headroom we have on our RCF facility and our overdraft, we have cash and available facilities of GBP 104 million.
Moving on to the balance sheet, land and work in progress has decreased as a result of the disposal of our Bristol PBSA scheme. Other current assets, which comprises contract assets and trade receivables, has reduced by GBP 15 million, reflecting the receipt of bullet payments as outlined at the full year results. Of the contract asset balance of GBP 53 million at the 31st of March, over GBP 25 million is due to be received in the second half. We have spent GBP 10 million of our building safety provision in the period and received a small amount of recoveries in cash, resulting in a gross provision of GBP 56 million at the end of March, offset by agreed client contributions, shown here as reimbursement assets of GBP 10 million. We've continued to make progress at working through our legacy building provision, completing three properties in the period and spending GBP 10 million .
Positively, all live schemes are progressing in line with their budgeted costs, and our forecast cash spend going forward is in line with expectations. This is an area where there remains significant uncertainty, and we continue to monitor closely as the status of assets in scope and the scope and cost of works continue to evolve. Our provision remains unchanged at the end of March, and we are continuing to pursue recoveries from down the supply chain. I will now move on to our operating profit outlook for the full year. This slide demonstrates the buildup of our forecast from a half year position and shows that we have progressive operating profit for the full year before any further forward sales. This is made up as follows: Our forward sold revenue, which is contractually secure, of circa GBP 150 million at approximately 10% gross margin.
The gross margin contribution from our Fresh business, offset by our overheads. As we have previously outlined, profit will be H2 weighted, and the operating profit to be secured, illustrated by the shaded red block on the chart, can be made up from a combination of the sites we have in the market. These comprise one student scheme, which is well advanced in legals, and two schemes which have planning consent and are currently being marketed. We also have further secured sites which are progressing with planning and have the potential to contribute. But we do need to be mindful, of course, of the wider environment and note that a slower expected reduction in interest rates or another macroeconomic shock could impact these transactions and therefore the pace of recovery. Looking forward, this slide gives guidance to our full year secured cash position.
The key point here is that we will have a significant unwind of working capital in the form of final bullet payments for schemes we will have completed. This amounts to over GBP 25 million. This, combined with minimal working capital outflow on the live schemes, will give us a strong, secured cash position for the full year before any further forward sales. So now moving on to the pipeline. This is an update of the slide that we showed at the full year results, setting out an illustrative recovery profile for the business, with the potential for us to build back to a GBP 30 million PBIT business over the three-year period. Underpinning this is our secured pipeline of GBP 1.4 billion. This is anchored on our level of forward sold revenue of GBP 400 million to be recognized in FY 2024, 2025, and 2026.
This metric has been augmented by the forward sale of our Bristol PBSA scheme in March, and we have another GBP 250 million of revenue from schemes that we have in the market. We have GBP 800 million of revenue for sites which are secured, and we are working through planning. This position has increased by GBP 100 million from our last update due to the one new student scheme we have secured, and we're currently looking to secure schemes worth GBP 300 million. These are currently in legals. There is still an element of drag on margin from the schemes we sold back in FY 2022 and FY 2023, which will continue to impact FY 2026, but the margin on new assets will build back to a more normalized position, giving us a blended 12% in FY 2026.
This slide just represents our PBSA and BTR and affordable homes pipeline. For modeling purposes, you will need to include the gross margin from Fresh. Operationally, Fresh has performed well in the first six months of the year, with occupancy levels above 97% and rental growth on average at 7%. Bookings for the next academic year have been tracking ahead of last year. The business has been working hard to rebuild its units under management, following the loss of a large client's portfolio at the start of the year, which was taken in-house. The business has had good success in this objective. It has onboarded two new schemes and has a number of PBSA sites mobilizing for the start of the next academic year, with current units under management just over 20,000.
There's been significant movement, however, in the competitor landscape, with third-party operators being bought out by owner-operators. For example, the Homes for Students acquisition by Far East Orchard and CRM Students by The Dot Group. This is resulting in an evolving fee and contract structures, which we will continue to keep under review, but we do see Fresh as well-placed in the market as a true independent third-party operator. Looking forward, Fresh has an active pipeline of over 7,000 units, and the business is also strategically reviewing its build-to-rent offering. We've continued to make good progress across the three pillars of our ESG strategy: people, places, planet, and ESG remains central to our construction and operational activities. We've diverted an average of 99% of waste away from landfill, which is ahead of our 2025 target.
As we set out at the full year results, we're working to reduce our carbon footprint across our schemes and have had some good successes in the period. We have supply partnerships in place for the reuse of primary materials. We're trialing a scheme where we return all excess plasterboard to the manufacturer for specialized recycling. We've trialed new spec aluminium windows, which are made from 75% recycled material. Of course, all of this wouldn't be possible without our supplier base, and we hosted our second supplier conference in March, and we have continued to have people at the heart of our strategy, with numerous engagement events across the different areas of the business, including the charity walk up Snowdon last weekend. I will now hand back to Alex to cover the market in more detail.
Turning now to some of the key themes prevalent in our sectors. Here, the core fundamentals continue to offer strong support for the residential sector and the Watkin Jones business. Supply of new build-to-rent and PBSA stock being delivered remains highly constrained, as starts on sites have decreased. This supply lag will continue over the next few years as planning applications and consents are also significantly down. The demand pool for PBSA has continued to grow over the last 10 years through both international and U.K. domestic students. In build to rent, there is significant forecast demand, fueled by growing populations, shrinking household sizes, and changing lifestyle habits. These imbalances and shortfalls have driven strong operational performance across the residential for rent sectors. Rental growth remains good, though this is moderated from the double-digit growth recorded in 2022 and 2023.
We view this moderation as a positive for the sector, ensuring sustainable growth. The operational performance is helping the investment market recovery get underway, which I will come to in more detail shortly. As reported at our full-year results, the acute build cost inflation and supply chain challenges experienced have, to a large extent, normalized. We are not yet seeing deflation at a holistic build cost level, though there has been deflation in some materials and goods. We continue to monitor the various global geopolitical tensions, which could put pressure on materials and supply, and we are actively looking to put further resilience into our supply chain. We believe the barriers to entry for our markets remain high, and these have been exacerbated by the continuing evolution in planning and legislation around Building Safety Act, ESG, and design.
We believe Watkin Jones are well-placed to utilize our scale and specialist focus and skill sets to take advantage here. As discussed earlier, we are seeing a continuing gradual improvement in investor sentiment and activity. The sector fundamentals and maturity of the U.K. market is ensuring that U.K. residential for rent is a key target for capital allocations. We are also increasingly seeing new entrants announcing investment or plans to invest, with the likes of Aviva, Legal & General, and PGIM having already transacted, and others such as Landmark, Thor Equities, and Cadillac Fairview announcing new U.K. platforms. At this stage, the investment market recovery remains cautious in the short term, as some investors delay decision-making or the pace of progressing transactions while waiting for more certainty and evidence on interest rate cuts coming through.
We expect there to be an uptick in activity as clarity on trajectory of rate reductions emerges. Transaction volumes in Q1 2024 show levels at circa GBP 1.3 billion, slightly behind long-term averages. The volumes show a bias towards PBSA transactions of circa 60%, most likely reflecting the enhanced viability characteristics of PBSA and the fact it is a more established asset class with a greater quantum of stock. Importantly, in recent months, there have been several key and potentially benchmark transactions to include both the Legal & General's entry into the direct lets PBSA market and both KKR and Goldman Sachs acquiring trading build-to-rent blocks in Wembley. The yield and pricing for these transactions are viewed as strong and a positive that core and core plus capital are starting to deploy again in volume.
From a Watkin Jones perspective, as discussed, we have closed a forward fund sale to Hines of a PBSA scheme in Bristol, representing both a new client for Watkin Jones, but also a continued appetite for forward fund opportunities. We are now under offer on a further development scheme and are well progressed in legals with this transaction. Anecdotally, since the new year, we have seen good increase in interest from investors reviewing new opportunities, accessing our data rooms, and underwriting bids. Alongside our typical forward fund sales, we are also continuing to explore potential alternative funding structures, which can provide secure base margin returns, but also potential upside profits from market recovery performance. The U.K. land market remains idiosyncratic. Transaction levels have increased substantially year-on-year, albeit that this was off an extremely low base in Q1 2023. Land pricing remains depressed.
However, there is often significant variance in land pricing, largely driven by its location, its unique attributes, and the status of its owner. From a Watkin Jones perspective, we remain proactive in the market, continuing to enhance our national coverage through internal and external conduits. Whilst viability challenges do remain, we are identifying more opportunities, both on and off-market, and a greater willingness from vendors to negotiate on price and structure. We believe that further opportunity will continue to emerge as we progress through the year. In the half year, we've secured two new PBSA sites on a subject to planning basis and have a further three assets under exclusivity as we work through legals and due diligence. As a general election approaches, the UK planning system and how to fix it will undoubtedly feature large on various party manifestos.
It is clear to see that residential planning applications and consents have declined significantly in the last few years across the UK, in part as a result of the challenging economic environment, but also due to the continued evolving and complicating legislative and planning backdrop, particularly areas orienting around ESG, design, and the Building Safety Act. These enhanced requirements and required knowledge and skill base potentially increase the barriers to entry for some developers. For Watkin Jones, we believe this is an opportunity to lever our scale, specialist focus, and integrated development model to drive a key competitive advantage addressing these requirements. Our typical target markets continue to align with national brownfield and urban regeneration policies, and our specialist team maintains a strong planning track record, and we have submitted applications in the period for over 3,000 bed spaces.
We have made encouraging early progress with our new Refresh business stream, looking to target redevelopment, refurbishment, and repositioning of assets for clients. We've appointed a senior director to lead the delivery side of this business and established internal structures and governance. Importantly, this will have minimal overhead impact in the early years. We have also undertaken a soft launch to both the market and our supply chain, which has been universally well-received. The team have already secured two smaller projects, helping to prove concept, and we have a further three opportunities in exclusivity. We continue legals and due diligence on a larger, university-led redevelopment scheme, as alluded to in our full year update. We will continue to update analysts and shareholders as this business stream develops. Throughout the period, we have made positive steps forward across our key financial performance metrics.
We have continued to focus on the controllables within the business, looking to drive incremental progress and value across our core business functions. The strong residential supply and demand fundamentals endure and support the robust operational results and outlook for our sectors. Investor appetite and capital allocations have been sustained despite the economic headwinds, and while the market recovery has been gradual, there is certainly improving investor and transactional sentiment. In summary, Watkin Jones remains a market-leading business, and we continue to position ourselves for growth as the economy recovers and a new property cycle begins. Thank you very much for your time this morning.