Good morning and welcome to the 2024 financial year-end results for Watkin Jones. I'm Alex Pease, the Chief Executive, and I'm joined today by Simon Jones, our Chief Financial Officer. The agenda for this morning will begin with a short overview from myself, reflecting on performance over the last year, before looking at some of the key focus areas and opportunities for the business as we move forwards. I will then provide an update on the market, the strong fundamentals supporting our sectors, the cyclical challenges the market has experienced, and the pathway to recovery as we see it. 2024 has delivered a strong and resilient operational performance from the Group. We've continued to strengthen the business foundations across all facets of our operations. This performance is reflected in a materially improved adjusted operating profit of GBP 10.6 million.
Our core focus on cash management and liquidity has also resulted in a substantially better year-on-year and forecast gross and net cash position of £ 97 million and £83 million, respectively. And in this regard, I would like to acknowledge the significant impact that Simon has had on the business since joining us. Post the close of the year, we further enhanced our resilience, renewing our HSBC facility at £ 50 million for an additional two years. Whilst market liquidity has remained suppressed, we have looked to show transactional agility and innovation, in particular our structuring of a JV in Stratford, offering a profitable alternate structure with opportunity for margin upside. We spoke 12 months ago about our revenue diversification strategies across development partnerships and refresh, our refurbishment model. We are very pleased to update an encouraging start with margin validation and a growing pipeline in the initiatives.
We've continued to work hard at our wider development pipeline. We are now seeing improved opportunity in the land markets, and we've performed well in securing two new schemes with further sites under offer. We've also delivered an impressive planning performance, gaining consent on around 2,600 units in the year. Looking now to the market backdrop, we're operating the business and adopting strategies currently over two distinct time horizons: the short term, with its market and economic challenges, and the medium term, with a range of positive fundamentals and opportunities for growth. As prefaced, while the business has phased in well to the ongoing changeable market conditions, the continued economic volatility continues to impact investment liquidity and reduce performance visibility.
While sale volumes have slowed, we have demonstrated our ability to operate in this market and deliver profitable development transactions driven by the quality of the assets and agility in structuring. In the medium term, we believe we are still operating in some of the most attractive real estate sectors in the UK. The new Labour government has given very firm political support to increasing the provision of residential. They have set clear targets and acknowledged that regeneration and the residential for rent sectors will be key contributors. The sectors continue to demonstrate significant supply-demand imbalances, and the suppressed delivery of new stock over the next few years will only serve to exacerbate this. Investor demand and sentiment remain firmly positive despite the economic hurdles presented, and this is reinforced by the robust operational performance and fundamentals of the sectors.
While the economic outlook has been slow to correct, we have looked to adapt and evolve the business to drive performance and position ourselves for growth. There are three core areas for us to focus on. First, execution. We are targeting every operational area in the business, focusing on prudent cost controls and driving performance efficiency. This is personified in our delivery division, where our ability to self-build projects enables us to maximize our supply chain, our expertise, and our cost control, and we believe this is a key USP in the current market. Further, we are targeting outperformance in our existing development pipeline, whether through flexibility on our acquisition structures, design efficiency, or planning betterments. Our second key area of focus is the broadening of the revenue base. We will continue to grow and unlock value in a high-quality pipeline across our sectors.
We are also being proactive, agile, and innovative in the sales market and are currently marketing a number of schemes with positive initial interest, having in January entered legals for the sale of one of these development assets. A core facet of our evolution will be the progression of our diversification and alternate revenue strategies. We believe income generated through Refresh, development partnerships, Fresh, and other potential asset management income can create revenues and cash flows of a granular, recurring, and visible nature. This can create a broader, more resilient base, which can be a platform to augment our wider development and transactional activities. Later in the presentation, Simon will look at how this broader, more resilient base will evolve the shape of our revenues going forward. The third core principle is of building our financial resilience.
We will maintain our focus on cash control and generation and ensure we retain strong liquidity within the business. Finally, we still believe there is a very significant market opportunity for growth, and to take advantage of this, we are continuing to explore potential alternative funding structures and partnerships with the investment market, which might be accretive to the business and help catalyze progression of our revenue and margins. Turning now to the market, I shall provide a brief overview of the main operational and investment market dynamics prevalent. Over the year, there has been continued positive operational performance across both student accommodation and build-to-rent. Both sectors have demonstrated strong rental growth and good levels of occupancy. This rental growth has been driven by the continued demand for the accommodation and the severely curtailed supply of new stock reaching the market.
It's anticipated that going forward, these rental growth levels will now likely moderate back to a more typical inflationary link pattern. We do not believe that these supply-demand imbalances will correct anytime soon. So with growth in student numbers forecast and continuing housing shortfalls and the lag in development markets recovering, this gives us good signs of optimism. The investment market has undoubtedly remained constrained over 2024, with transaction volumes at circa £6.5 billion, well below the five-year average and almost 50% of the volumes of 2022. From a Watkin Jones perspective, whilst clearly we'd like to have transacted more, we believe the sales we've executed, we have executed at the right margin levels, they've been well structured with good quality counterparts, and we continue to outperform the wider market.
Utilizing market data and our own analysis, we believe that in U.K. PBSA, we've been responsible for circa 16% of the development transactions in the year, with this demonstrating us slightly exceeding our longer-term market share position. We believe this continued performance will position us well as markets stabilize and recover. The slower than hopeful return to liquidity has in the main been driven by the stubborn inflation characteristics, resulting in slower rate cuts, the political uncertainty fuelled by the surprise general election, and the gilt market's reactions to the autumn budget, alongside other wider global uncertainties. So what are the signs that there is an emerging recovery? I will touch on this later in the presentation. However, one of the major lead indicators is usually strong investor sentiment backed by new capital entering the markets.
We can see from the various market sentiment and allocation surveys that substantial capital at circa £45 billion wants to deploy in UK living sectors over the next five years. We can also see good interest from our own interactions with investors that the demand remains strong. Importantly, we have seen some significant investment houses, such as Goldman Sachs and Australian Superannuation Funds, employing new UK living mandates and executing new deals. This is also reflected in the more positive conversations we are having with investors. These slides show very clearly the pronounced impacts on investment markets as the real estate cycle has changed. Not only have we seen a substantial drop in investment volumes, but the first graph clearly demonstrates a very distinct change in investment strategies. Although core capital remains relatively stable in volume, there has been a marked change in risk appetite from this core money.
The most stark change is the material reduction in core plus capital strategies, a decline of over 20% year on year. These core plus strategies have historically been one of the major drivers in the funding markets, with the right balance of competitive costs of capital and risk appetite. Conversely, there's been a marked increase in value-add and opportunistic capital seeking higher returns and potentially more risk share. These factors in large part have driven the data in the graph below, which just shows how significant reductions in volume of forward-funded transactions in UK PBSA have been, with the proportion of forward funds in 2024 down 29% year- on- year and 52% down on the 10-year average. It is the high-return, high-risk strategies which have been driving the more structured and JV approaches to development transactions in recent times.
I think it's important to reiterate that Watkin Jones have benefited from our key USPs, and we've been able to transact profitably in these current markets. Looking back to the last cycle downturn of the GFC, it is also useful to recognize the strength and speed of the rebound recovery and performance of both the residential markets and Watkin Jones as a business during this time. We do believe there is a clear pathway through to a market recovery. So what drives these reasons for optimism? The sector's operational performance continues to be strong. Demand is growing and supply remains constrained. Investor sentiment and demand can be demonstrated through new vehicles, transactions, and the forecast GBP 45 billion I mentioned earlier. In the current market, we've retained market share, and we've been able to structure profitable deals with counterparties with more opportunistic capital strategies.
Rates will eventually come down, and core capital strategies will return as rates and gilts drop and stability is reached. Watkin Jones' track record and unique capabilities mean we are very well placed to outperform from any market recovery. In summary, we've had a strong operational year. We've executed our key initiatives, and financial performance has improved. We have reshaped and bolstered our senior management team, bringing in significant experience and knowledge. We have a clear strategy and have made good early progress in diversifying our revenues and the bridge between two market horizons. Whilst the short-term economic outlook remains challenged, we believe there is a clear pathway to recovery, and we are optimistic about our business capabilities to capitalize. I'll now hand over to Simon, who will take you through our financial results.
Alex, thank you very much, and good morning, everyone.
As you all know, this is the first results presentation having joined as CFO just after last year's interims, and I've spent the last few months familiarizing myself with the business and meeting the teams. Two things have really resonated with me. Firstly, having spent my whole career in property-related businesses, and this is a point Alex has already made, is the sheer capability of this business in undertaking large, complex developments and managing all the implicit risks from site selection, planning, divestment, sorry, divestment and delivery. The scheme here is our BTR scheme in Cardiff for Legal & General, and you just cannot fail to be impressed with it as you leave Cardiff Central railway station. Secondly, is the commitment to the business of all of the teams that we have, which has been so pivotal in helping us navigate the recent market challenges.
I'd now like to take you through the financial highlights for fiscal year 2024, and then talk through some of the actions that we are taking to diversify the business into new revenue streams. As Alex mentioned, I'm really pleased to report that our results are very much in line with our August trading update. While our revenue showed a small decline, and I'll come back to that in a minute, our core trading gross profit was up 12% to just over GBP 40 million. As you remember, one of the key transactions we delivered in the year was the divestment of our scheme in Stratford to a joint venture owned 75% by Housing Growth Partnership, a subsidiary of Lloyds Banking Group, and 25% by Watkin Jones.
This is considered a sale of a subsidiary under accounting standards, and as such, we cannot show the divestment within operating margin in the financial statements. So here, for comparability, I have shown that profit within core trading gross profit. This also explains approximately half the revenue decline, as the profits on land are not recognized as revenue in the financial statements. Despite the inflationary environment, with CPI up over the last year by about 3.5%, we continue to work hard to contain all our costs, whether overheads too, are down by GBP 600,000 year on year. And these two factors have driven the significant operating profit performance to GBP 10.6 million, a result which is testament to the hard work and commitment of all the teams at Watkin Jones.
Now, to break the margin down further, I've illustrated here on the left the forward sold margin at the start of the year, and that amounted to some £ 24 million, or 60% of the outcome for the year. The biggest element of growth came from the forward fund of our Gas Lane site in Bristol and the divestment of our Stratford site. And in total, these two transactions added about £10 million to our margin in the year. Our new business area, Refresh, from a standing start, had a very successful first year, delivering a margin of almost £ 2 million in the year, substantially in excess of our budget. Fresh, our accommodation management business, delivered a further contribution of £ 4 million, giving the total margin in the year of £ 40 million.
Turning to our cash flow, we delivered a truly impressive performance, with trading cash flow showing a substantial improvement to a £5 5 million inflow from an outflow of £ 31.5 million last year. And again, as we consider Stratford as part of our trading business, I've shown the cash inflow here within our trading cash flow rather than as it will be presented in the financial statements. This, together with our debt more than halving due to the sales we achieved in the year, resulted in a truly outstanding cash balance of £ 97 million gross, or £ 83 million net of debt. And as Alex also mentioned, we've extended our RCF with HSBC by a further two years, which we see as such strong support for our business and gives us medium-term financing flexibility.
The board is not proposing a dividend for FY24 to ensure that we retain financial flexibility and use our cash to fund growth opportunities that we expect will arise. Moving on to the balance sheet, we have seen an increase in net assets to £ 132.6 million, or £ 0.47 per share, reflecting the profit performance in the year. Inventory and WIP have reduced, reflecting the sale of the two schemes in the year. The practical completion of six further schemes and consequential cash bullets have reduced the contract assets in the year. Overall, the provision for building safety has reduced in the year by almost £ 7 million to £ 48 million. This reflects the completion of work in the year on three buildings and progress in line with expectations on all our other schemes. However, we have taken an incremental provision increase of £ 7 million.
This increase is driven by the completion of investigations on some further properties, which concluded that remedial work is required, so needing a further provision together with some scope changes to certain properties already undergoing works. However, we have been very successful in securing firm contributions from building owners to these remedial works, and GBP 7.6 million remains as an asset on the balance sheet, which will be recovered as works are undertaken. We continue to evaluate recovery of remedial costs from our supply chain and have a team actively engaged on this going forward, so we have confidence that we will achieve some cash recovery. So, moving on to outlook for the business. As Alex has said, market conditions remain challenging, but we have seen some signs of improvement.
But the pace of these is going to be driven by the timing of further reductions in interest and especially gilt rates. As such, there remains a range of outcomes for market conditions over the remainder of year. During 2024, we've been focused on controlling cost, efficiently managing cash flow, so delivering excellent operational performance on all our inbuilt schemes. And that focus will continue to maximize performance on these projects in the coming years. We have a good pipeline of sites, either with planning or expected to secure planning in the year. These are in the market or will be marketed shortly, and so far we've been pleased with the interest these projects have received. That said, investors do remain cautious and transactions are taking longer to close while the rate backdrop remains volatile.
So it's really too early at this stage to be more definitive on how many transactions we complete by year-end. What we do expect, though, is that our focus on Refresh and development partnerships will augment the traditional forward-funded business, such that the total transaction pipeline is likely to increase in number, but with a smaller average size. As all these business areas are progressed over the next few months, we will provide a further update at the half year. The good momentum we are having with Refresh and development partnerships gives us a medium-term aspiration of growing these areas of our business from their current 20% revenue mix up to about 40%, depending on how the traditional market recovers.
We see some clear positives in this diversification, which should also allow a more predictable business over time by counteracting the uneven profile created by large upfront profit recognition from traditional forward funds. For each of the business areas, we expect margins in line with previous guidance, and as the existing pipeline is fulfilled and new schemes transacted, those margins will return to these levels. If we do see a significant mix shift towards Refresh and development partnerships, then that would flow to the group margins overall, but we believe the visibility and predictability of these activities more than justify that. In summary, we are looking to create a more resilient and so visible revenue base. As is visible from this slide, we've also seen significant replenishment of our pipeline to a total of just under GBP 2 billion of live opportunities.
We've worked very hard over the year to grow this pipeline, and what is especially encouraging is to see a number of new assets enter the pipeline. Importantly, over a quarter of the pipeline has a planning consent, and in the year we achieved consents on four sites, amounting to 2,570 beds. These schemes are ready to be divested to deliver revenue and profit for the future. Equally, to have built a £ 240 million pipeline for development partnerships of sites in legals or forward sold gives us a great base for our strategy of augmenting our existing business with development partnerships and Refresh. So, in summary, it's great at this my first presentation of Watkin Jones that I'm able to share with you such a strong set of results.
Operating profit has substantially increased to £ 10.6 million, and we have delivered a truly outstanding year in cash value of £ 97 million. Finally, we're excited by the plans outlined to evolve the business model with Refresh and development partnerships, strongly supported by a growing pipeline of additional opportunities. I'm now going to hand back to Alex to start the division updates.
Thanks, Simon. So yeah, we'll now provide a short summary overview across our core operational divisions, and we'll also provide a little bit more detailed update on the Refresh strategy and do a deep dive into a couple of transactional case studies, which I think really bring to life what we're trying to do as a business. And then we'll also touch on our ESG initiatives as well. So from the acquisition and planning side, as we said, we've worked very hard to continue to grow the pipeline.
Our total secured and unsecured pipeline sits just short of £ 2 billion. Despite the considerable market challenges, we exchanged on two new sites in 2024 and currently have a further four under offer. We've discussed before our in-house planning expertise, providing a competitive edge, and it really was an exceptional year from a planning perspective, despite the ongoing talk about planning in the UK. To gain 2,600 units is a very good performance. If you look to the left, looking ahead, we believe that the market dynamics are creating good land buying opportunities and that the Watkin Jones track record in planning and deliverability will help us to execute on further land deals. The Labour government has clearly committed to delivering new homes, and they're prepared to reform the planning system to help achieve this goal.
We are seeing some early signs from the government on their intent in this regard, which is clearly a huge positive. It's also important to remind ourselves that the majority of developments we undertake are urban and brownfield regeneration sites, and this strategy continues to sit very comfortably with supportive government policies and rhetoric. I've already spoken in regards to the wider investment market and horizon. We believe we continue to perform well, having executed both traditional forward funds and JV funding in the year. We've also just put one development sale under offer and into legals, and as we said, we've got a number of schemes being positively received in the market. As discussed last year, we believe that there's a good opportunity in the development partnership transactions, and this strategy is gaining momentum with the visible pipeline of GBP 240 million.
In November, we closed our first single-family housing partnership in St Helens. We have two further new partnerships operating under letters of intent at this stage, which we hope to convert to full contracts quite soon, and one further under exclusivity. We're continuing to see the importance and benefits of having a vertically integrated development, delivery, and operational platform, which provides us a USP in traditional markets, but also opens up to us the new Refresh and development partnership strategies. Turning now to our first case study, this scheme is in Stratford. This was our first joint venture funding with HGP, and it represents a really excellent example of our adaptive approach to the market and our ability to structure profitable and innovative transactions. The structure has allowed us to generate a secured profit in line with our budgets.
It allows us to remain cash flow neutral throughout the development, with build costs funded through JV, partner equity, and third-party debt, and importantly, it also allows us to lock into a market recovery through rental growth and potential yield compression and deliver really a potentially quite considerable material upside on our margin. Watkin Jones retains operational alignment throughout. We retain control of the development and the construction process, and we're also driving the operational side through Refresh. We believe this represents a pragmatic and smart transaction structure, particularly when we believe that there is a strong case for market upside to come. The second case study is of our recently closed development partnership. This provides a crucial regeneration benefit and affordable homes to the St Helens area. It also illustrates well the end-to-end value creation we can generate.
First, we were able to unlock value, achieving detailed planning consents on behalf of the landowner, Harworth Group. Second, we were able to deliver value, operating as the developer and the delivery conduit for Torus Housing Association, backed by Homes England funding. From a Watkin Jones point of view, this is an incredibly capital-like structure. We've had no upfront capital investment required, meaning we've been cash flow and margin positive from day one. We believe that there's absolutely the potential to grow this pipeline and take advantage of what is a growing subsector with substantial political support behind it. Coming now to the delivery side. In the current market, as I said, we view our delivery capabilities as a key differentiator and USP from other developers.
Our in-house expertise skill base provides us with much closer cost and design control, and combined with our established supply chain and buying power, we genuinely believe this can drive outperformance from others. With regards to inflation, this remains largely normalized from our point of view. We continue to monitor it on a bi-monthly basis, and our projects continue to perform within our inflation budgets that we've set. We believe we are well prepared for the Building Safety Act legislation, and we are looking at the means to monetize and capitalize on this through our Refresh business initiative. As I've mentioned previously, our ability to evolve and pivot our model into these new areas is absolutely enabled by our construction capabilities. So coming now to Refresh, which we've mentioned a lot, we've made a very encouraging early progress with our Refresh schemes.
From a standing start, we've doubled our year-one forecast revenues, and we've also successfully validated our margin assumptions on these schemes. Further, as we've engaged with the market, we believe there is a much larger than anticipated market opportunity. We've identified over 500,000 PBSA beds which have the potential for Refresh. We also think there's a very substantial potential university halls market, and we believe this strategy can open up cities where new build viability remains constrained. Sheffield's an amazing. We've identified over 25 buildings in Sheffield, which we think could be potential targets for Refresh, where the new builds' viability is still very challenged. So we think it's opening up new markets for us, which is important. Our potential track pipeline sits at circa GBP 100 million of revenue, and we're in exclusive negotiations or one-to-one discussions on about 50% of that.
We are finding that while the pipeline growth has really exceeded our expectations, the conversion of this pipeline is necessarily slower than other transactions, and that's primarily due to the levels of due diligence that's required to underwrite these schemes accurately and make sure that we do get the sort of margins that we underwrite. We've got a case study on one which we've just recently completed. Now, this scheme is in Glasgow, and I think it illustrates really well some of the core strengths of this strategy. The scheme was managed by Fresh, and they were one of the lead originators for generating these Refresh works, and the client in this case was very keen to undertake a predominantly cosmetic refurbishment, and what they were looking to do is reposition that asset and boost the NOI on the scheme.
They were also keen to minimize the disruption to their students during this process. so as such, we agreed an accelerated program of 11 weeks to complete the works, and that was done predominantly within the holiday periods. The revenue for the scheme was just short of GBP 5 million, and it was generated in this relatively short time period. and I think also importantly, there was minimal lag time ahead of commencing works. There was no planning, there was no site enablement. We were able to move straight on and make it revenue-generating. The project was completed on time, and it involved minimal capital investment from us, so again, very capital-light, and it exceeded our target margins. Simon's just going to briefly take you through an update on Fresh, our accommodation management division, and then also give an update on our ESG activities in the year.
Great.
Thanks very much, Alex. So in FY24, our Fresh business faced some of the same market challenges with less developments coming through as the wider market followed a similar path in the current climate. Despite a fall overall in units due to a key client in sourcing as part of their strategic plans, we did successfully onboard 2,335 units, meaning that Fresh is now the third largest managing agent for PBSA in the UK, holding an impressive 11% market share. Operationally, we continue to improve client and resident experience. In 2024, the client MPS score rose to + 62, and the resident score also increased to plus 36, remaining significantly above the industry average. Although student demand remained strong, overall occupancy did take a step back, mainly due to one city where we mobilised two new assets. However, many cities continue to perform exceptionally well, achieving over 98% occupancy.
In our development pipeline, there are over 90,000 beds in six cities with planning applications, consents, or under construction. Combined with the 6,000 beds we're tracking and pricing for this year, and an additional nine beds until 2028, we remain confident that growth is achievable. Indeed, we've already secured almost 400 beds this year and the preferred bidder on about 700, progressing towards legal agreement. Turning now to our ESG, this year has seen excellent progress with our Future Foundations strategy. One of the key ways we can ensure we have a positive impact on the areas in which we develop is through the design of our buildings. We design all our schemes to BREEAM Excellent or HQM Four Star, so ensuring we continue to provide sustainable homes that improve the local area. We've also made significant progress in reducing the overall carbon footprint of our operations.
This has been achieved by, for example, specifying green products, making key advancements in construction, such as new kitchen pods, trialing green fuel on sites, and improving recycling to levels far beyond our internal targets. A key part of our commitment to having a positive impact on the local environment is our commitment to being a considerate contractor, and we achieved an average score of 42 this year, again above our target. Our teams continue to raise a significant amount of money for good causes, totaling over GBP 38,000 through our charitable events. Fresh have deepened their relationship with the British Heart Foundation, who've benefited to the tune of GBP 116,000 and prevented 44,000 kilos of waste going to landfill. I'll now hand back over to Alex to summarize the presentation. Thank you.
In summary, we have had a strong and resilient operational year. We've improved profits and cash positions.
In the last 12 months, we've continued to focus on execution, driving efficiency and performance across the business. We've continued to grow our pipeline through new acquisitions and planning consents, and have shown agility and innovation in our sales. We've had very encouraging starts on diversification strategies, both with growing pipelines. And looking forward, we continue to broaden our revenue base, creating a more stable, resilient, and recurring income to augment our transactional and development models. The group remains focused on capitalizing on a market recovery, and we continue to explore innovative structuring and development funding arrangements to enable this. While the short-term macro markets continue to provide challenges, we believe the medium-term outlook is positive, with good growth opportunities, and we are optimistic about Watkin Jones' market-leading capabilities to take advantage of this. Guys, thank you very much for your time.
Much appreciated, and yeah, look forward to catching up with you all soon.