Good morning, and welcome to the 2025 Financial Full-Year Results for Watkin Jones. I'm Alex Pease, the Chief Executive, and I'm joined today by Simon Jones, the CFO. The agenda for this morning will begin with a short overview from myself, reflecting on the business and operational performance over the year. We will update on the core occupational and investment markets we operate in before focusing on our financial and operational highlights. We entered FY 2025 with a continued environment of economic volatility and ongoing geopolitical disruption. Slower-than-anticipated rate cuts and a drawn-out wait for an unsympathetic budget have resulted in limited sentiment improvements across the year. With this backdrop, Watkin Jones has continued our approach for the last 24 months with a strategy of control, execution, and diversification, looking to provide a firm platform for our future growth.
Inevitably, as a consequence of severely reduced market liquidity in the last couple of years, there has been a lag this year on overall revenues due to lower levels of contracted income at the start of the year. However, we are very pleased to have delivered a resilient and robust operational performance with improved metrics year-on-year across many of our core targets. Our adjusted operating profit of £6.3 million is at the top end of consensus, and we also delivered an improved gross profit margin of 12.4%. We have continued to prioritize our cash and debt management with a strong gross and net cash position of £80 million and £70 million, respectively. It's worth noting that if not for a 24-hour delay on receipt of transaction funds from Glasgow, these totals would have been circa £10 million higher. A priority for the business has been our people.
They represent a core asset for the group with their depth and breadth of knowledge and experience across real estate sectors. We have focused on providing greater communication, training, incentivization, and recognition. We have been rewarded with exceptionally strong staff survey results and year-on-year improvements over the last three years. While I'll discuss our operational divisions in more detail later, it is worth drawing out some key highlights. Our delivery function has performed extremely well in the year, completing four schemes all on or ahead of program, and realizing betterment to margins of circa £ 3 million. We continue to grow in confidence and execution of our diversification strategies. Refresh and development partnerships together have delivered over £ 90 million of revenues with growing quality pipelines in both areas.
While liquidity has remained scarce, we have innovated and flexed our model to complete four development transactions through the year across three different subsectors. We have also enhanced our pipeline with 1,400 beds receiving planning consent, three acquisitions secured, and four under offer, ultimately growing our potential pipeline to over £2 billion. Fresh has also had a very strong year, growing their units under management by over 2,000 beds net through both new sites coming online and takeovers from competitors. Twelve months ago, we set out three core areas of focus for the business to respond to specific challenges presented by the economic conditions. First, the necessity to not rely solely on a single transactional model. Second, evolutions in demands and trends in our capital and operating markets. And third, a desire to build a stronger, more resilient business.
These strategies look to target those areas of the business and wider environments which are within our control and where we may be able to generate incremental gains. Firstly, we wanted to enhance our execution. We targeted cost controls and efficiencies across all areas of the business, generating material savings in overheads. We have optimized our delivery and construction capabilities, generating opportunity to outperform, and have levered our in-house development, design, and planning expertise to boost performance and aid development viability. We've looked at ways of broadening our revenue base through diversification in both models and markets, offering granularity and resilience to our earnings. We have continued to replenish our pipeline and have looked to show innovation and agility in our transactions.
We have demonstrated a consistent focus and application to build in resilience to the business, maximizing our cash generation and control, retaining liquidity and agility, and motivating and aligning our people, ultimately to position a more resilient business and to create a platform for growth for the future. We have set ourselves clear targets to drive improved execution in the business, and this slide demonstrates exactly how we've done that, and we're very pleased with the resilient performance the business has delivered. Barriers to liquidity have been well trailed, and we've looked to innovate in the form and structure of our development transactions, executing four deals, an increase year-on-year. With high interest rates and economic volatility, has come a more constrained debt environment. We have retained a very positive relationship with our lenders and were pleased to execute a new two-year RCF facility at the start of the financial year.
There's been continued intransigence in the land market with more limited activity than anticipated. Whilst land values have fallen, so have transaction levels. The read-through being, if landowners don't need to sell, they would rather hold. Watkin Jones have continued to preserve, replenish, and renew our pipeline with three acquisitions in the year and growth in our potential pipeline to that circa £2 billion figure. The construction and delivery industry has endured ever-changing legislation, steep build cost inflation, and supply chain disruption over the last few years. We believe our delivery capabilities are a genuine USP, and the team's executed an exceptional performance in FY 2025, driving betterments to programs and margins across the year. Planning in the UK is renowned for its dysfunctionality, and whilst new government initiatives are positive, it remains a consistent barrier to development.
This year, we have also faced into new building safety regulations, which in turn have caused material delays across the sector. Watkin Jones have a highly skilled in-house planning function and have delivered a 100% success rate in the year with 1,400 units consented. Equally, we have the in-house specialist skill sets to navigate the building safety gateways. Since our year-end, we have received our first two gateway approvals, again a 100% record. We have focused on keeping the business lean and right-sized, looking to employ additional resource in crucial areas required for growth. We've also spent considerable time and resource on ensuring we're committed to motivating and empowering our people, reflecting their value to the business. As we head into 2026, the economic and political environment remain volatile.
However, there are some potential early indicators of improvements in the market backdrop and optimism that some of the headwinds described may abate over the course of the year. We are hopeful there will be improvements in market conditions, which will support our BAU operational activities. However, irrespective of this, we firmly believe that a continued approach to diversifying our revenues is the right strategy for the business and can offer not only business resilience but also new growth opportunities. The primary goal is to enable the business to maintain profitability throughout economic cycles. This can help support more consistent and granular revenue streams, which are less tied to investment cycles and offer a greater range of project types and sizes.
While focusing on close adjacencies to our existing models and sectors, we can open up wider to access wider pools and types of capital and also tenant and customer bases. To date, our diversification strategies have included, firstly, our Refresh model involved in the refurbishment and repositioning of existing assets. This can generate more granular and non-cyclical returns. Secondly, our development partnership strategy, which couples Watkin Jones with investors to deliver existing consented sites, accelerating revenue generation and reducing exit risk. Increasingly, we feel the group is well placed to offer wider asset management strategies, potentially monetizing our deep sector development and operational expertise. We believe that Watkin Jones are extremely well and perhaps uniquely placed to drive these strategies forward. Our vertically integrated model and one-stop shop across the development cycle provides the agility and innovation to pivot into these.
Our depth of design, product, and delivery capabilities unlock the developments, and our depth of institutional relationships help us deliver funding for them. In summary, our ambition is clear: to create a resilient platform with sustainable diversified returns and cash generation to augment our wider development and transactional activities, and use that platform to then generate growth across the business into the future. Turning now to the market overview, I should provide a synopsis of the key operational and investment market dynamics at play, in particular focusing on current investment market characteristics and perhaps some lead indicators of an improving liquidity outlook. The UK PBSA market remains structurally undersupplied, which we believe will continue to drive performance into the medium term. Student-to-bed ratios are expected to tighten, moving from 1.6:1 today to 1.9:1 by 2030, driven by limited new supply and assuming a conservative demand growth.
Structural undersupply is driven by three main factors. First, viability and market challenges continue to curtail new deliveries. By 2027, new deliveries are expected to have fallen to 70% below the 10-year average. Secondly, obsolescence and redevelopment of older schemes continues to erode current supply. Over 50,000 bed spaces have been removed from the supply chain since 2020. And third, policy and taxation changes, including the Renters' Rights Act, are accelerating the loss of HMOs across the UK, with a huge 43% reduction in stock in the last five years. For Watkin Jones, this creates a clear opportunity. Demand for high-quality, well-located schemes remains robust, underpinning rental growth and long-term investment performance. Despite some fluctuations in international student numbers in the last two years, we feel the overall PBSA demand outlook remains positive. Domestic applications were up 3.1% for 2025-2026, with international applications up 2.2%.
The QS organization forecasts that international student demand is likely to grow by 3.5% per year to 2030, making the UK the fastest-growing Anglophone destination. This is driven by the inherent quality of UK higher education, as well as some emerging prohibitive policies of other leading education markets. The US, for example, has seen a 17% drop this year in international enrollments. Over the last few years, we've seen a divergence in university performance, with high-tariff universities materially outperforming, with an 8% increase in applications since 2022. Importantly, for Watkin Jones, we annually assess our target markets, pinpointing the high-demand, higher-tariff cities and pivoting away from more challenged locations. As a result, 91% of our pipeline is located in these desirable higher-tariff university markets. Investment in PBSA remains broadly aligned with 2024 volumes at around £3.4 billion up to Q3.
Demand has remained strongest for operational assets, in particular the higher-quality buildings and geographies. Development transactions are happening, albeit primarily through joint ventures or more structured deals and at a slower rate. We have seen significant capital looking at value-add and repositioning strategies within first-generation PBSA. It is a trend we believe will continue, and this aligns particularly well with our Refresh model. Capital, therefore, remains available but selective. Our ability to originate high-quality schemes and structure deals creatively positions us well to unlock this demand. Anecdotally, and a positive market sign, we are aware of a large funding transaction in Manchester announced last week. Funded by Legal & General, it represents their first funding into direct-let PBSA, clearly a positive sign. Coming to the build-to-rent market, this sector continues to face a similar and significant supply gap.
New build-to-rent starts are now at - 45% below the 10-year average, driven largely through viability challenges. While structural policy and taxation changes in the private rented sector are driving a staggering net loss of nearly 300,000 rental homes since 2022, this accelerating rental undersupply is expected to support strong occupancy and rental performance over the medium and longer term. Fueled by the lack of quality and supply in the UK rental markets, build-to-rent operational fundamentals remain strong. Occupancy across the sector is around 97%, and rental growth, while it has normalized from its highs, is still forecast to outpace inflation at circa 3.3% per annum through to 2029. Population growth in the core rental demographic ages of 20 to 54 is set to increase by over two million in the next decade, with Savills predicting a 20% growth in rental demand by 2031.
The build-to-rent investment market is characterized by continued strong investor demand but hampered by a lack of stock and viability. Around £ 3 billion has been invested into UK build-to-rent so far this year, with capital again skewed towards stabilized operational stock. Single-family homes is the fastest-growing segment, accounting for 46% of year-to-date transactions, and Co-living, a microform of build-to-rent, is another growing key sub-sector, with 45% of surveyed investors planning to enter this market by 2028. New entrants are joining the market, reinforcing confidence in this sector. Again, this was illustrated last week with the announcement of a new £ 1 billion London-focused build-to-rent mandate between M&G and NPS, the South Korean pension fund. Build-to-rent remains a core strategic focus for Watkin Jones, and our pipeline incorporates both multi-family, Co-living, and single-family housing.
We remain confident in the sector fundamentals and strong medium-term investment trends. In recent years, a key barrier to liquidity has been the reduction in availability of the lower cost of capital core plus mandates. Positively, recent investor sentiment surveys suggest intentions for future investments shifting back towards core and core plus investment, with 60% of capital likely targeting these profiles, up from 41% last year. If these intentions do manifest and return expectations are resetting, with more investors willing to accept lower target returns, this could have a material impact in unlocking liquidity in greater volumes looking forward. We believe the focus will initially be on operational assets.
However, with extremely limited new best-in-class stock available and the drive for ESG and building safety compliance schemes, this will push investment more rapidly towards development assets. In summary, we believe the residential for rent sectors in the UK still represent some of the most attractive real estate markets to invest in. Underpinned by structural undersupply, curtailed new development, and continued demand drivers, investors remain committed to these sectors. Downward rates and gilt trajectories, and potential shifts in strategy and re-weightings to lower cost of capital would absolutely catalyze liquidity in these markets. I'll now hand over to Simon, who will take you through our financial results.
Alex, thank you very much, and good morning, everybody. I'll now take you through the financial highlights for FY 2025 and then talk about some of the further detail on our outlook and pipeline. I'm pleased to report that our results are at the top end of market consensus forecasts, with adjusted operating profit of £ 6.3 million and an adjusted profit before tax of £ 5.6 million. Our continuing strong operational cost control and effective delivery management contributed to a strengthened underlying margin to 12.4%, up 1.3 percentage points over last year.
This focus on cost control has been evident across all areas of the business. For example, overheads were down around 4% despite persistent inflationary pressures. Our revenue and core trading gross profit fell versus last year, as Alex mentioned, and that's a result of about 20% lower secured forward sold revenue at the start of this year compared to last year due to fewer sales in previous years. Our core trading profit includes, as last year, the sale of joint venture interests, and this year it includes the sale of our Glasgow scheme to a joint venture owned 95% by Maslow Capital and 5% by the Group, which we announced in September. This is considered the sale of a subsidiary under accounting standards, and as such, we don't show the divestment within operating profit in the financial statements, which is why I've included it in core trading gross profit.
In the year, we've taken an incremental provision for building safety remediations of £5 million. This increase is driven by the completion of investigations on some further properties, concluding that remedial work is required, so necessitating a further provision. We've also taken an impairment charge of £7.1 million against the carrying value of two assets. So, as a result, on a statutory basis, the outcome was an operating loss of £5.8 million. To analyze our trading results a little further, on this slide, I've illustrated the forward sold margin at the start of the year, which amounted to some £19 million, or about 55% of our year-end outturn. Despite the challenged market, as Alex alluded to, we delivered four transactions in year with a further combined gross margin of around £10 million.
Our Refresh business delivered about £1.5 million of gross margin in the year, and Fresh generated just under £5 million. Overall, that's the £35 million on the previous slide, and we're really pleased with the strong gross margin contribution for all our business lines. Turning now to cash, as I mentioned, we remain highly focused on cash management and control, with gross cash at just over £80 million, which, after debt outstanding of about £10 million, resulted in net cash of just over £70 million versus £83 million last year. As a result, cash and available facilities headroom amounted to some £130 million versus the £143 million last year, and that includes the new £10 million accordion facility within the HSBC facility, which Alex alluded to earlier.
Our drop in trading cash flow was impacted by delays in the transmission of just over £10 million of cash from our Glasgow sale, alongside fewer site completions and therefore lower bullet and retention payments versus last year. On the balance sheet, we can see net assets remain strong at £125 million, or about £0.45 per share excluding goodwill. Inventory in WIP has reduced year on year, reflecting not only the disposal of our Glasgow scheme but also impacted by investments we've made in our pipeline as we exchanged on two new sites and invested in enabling works and planning for our pipeline. Overall, the net provision for building safety has reduced in the year by almost £2 million to just over £46 million, reflecting completion of works on six further buildings and the small increase I mentioned earlier.
We've been very successful in securing firm contributions from building owners to these remedial costs, and £ 10.3 million remains as an asset on the balance sheet, which will be recovered as works are undertaken. We also continue to evaluate recovery remedial costs from our supply chain and have a team actively engaged on this, giving us confidence we'll achieve cash recoveries. Moving on to the outlook, as Alex mentioned, market conditions do remain challenging, so we do continue to focus on those factors within our control: cost, delivery management, and cash flow. We start the new financial year with some £ 340 million of secured revenue. Now, that's versus £ 292 million last year, so a significant increase.
During FY 2026, our focus will remain on the delivery of our secured pipeline in line with our stated margins and, as such, the practical completion of the three planned schemes due this year. So far, as announced earlier this week, we've signed one new deal for 484 student beds in Bristol, which is conditional only on receipt of Gateway 2, which we expect shortly. We have a further three development partnerships that we are under offer on. Two further schemes are in the market, well advanced in legals, and we will try to conclude these subject to market conditions. We've also a number of further schemes we plan to launch in the year, but that said, the market conditions remain challenging and transactions are taking longer to close.
During our FY 2024 results, we set out further detail on our strategy to create a more resilient revenue profile by going Refresh and development partnership revenue to augment our existing business. In FY 2024, as you can see there, our revenue mix was 20% from diversified revenue and 80% from our traditional transactions. At the end of FY 2024, we shared our expectations for this to evolve to a 60/40 split by FY 2027. As you can see, moving towards the right, we've continued this focus in order to grow a smoother revenue profile. And in FY 2025, our diversified revenue accounted for 30% of our revenue in the year, including the three new transactions signed, the three new development partnerships we signed. So, in summary, we're delivering on the strategy to reach a mix of 60/40 by FY 2027.
If we move on and now look at our pipeline in a little bit more detail, Alex mentioned our pipeline has grown to over £2 billion of live opportunities, which represents over 11,000 beds and units. We've worked hard this year to replenish our pipeline as we complete projects and have grown our pipeline by about 4% year on year. Over 70% of our pipeline is secured, and importantly, approaching half of that pipeline has a planning consent, so these schemes are ready to be divested to deliver revenue and profit now. 12% of our pipeline is currently under offer and in legals, and we would hope to close these in 2026. Our focus has been especially successful in development partnerships, where since last year we have doubled our pipeline to over £ 400 million, giving us a great platform from which to augment our existing forward fund business.
So, by way of summary, we're pleased with our FY 2025 results in difficult market conditions. Our focus on cost and cash has yielded results, with our core trading gross profit margin up against last year, and we're excited by the strength of our pipeline as we continue to engage in the funding market. I'll now hand back to Alex to start our operational updates.
Thanks, Simon. As I've discussed previously, we believe that our delivery function offers us a clear USP and differentiator in the market. We're able to control and manage risks and maximize our opportunity while offering investors a one-stop solution for development and delivery. The delivery function allows us to pivot into new models, Refresh and development partnerships being good examples, and cut our teeth in adjacent sectors, looking at the aparthotel deal we did on New Kent Road recently. Our delivery teams have had a strong year through our design programming and supply chain management, and we've successfully delivered four schemes on program and delivering margin betterments. Health and safety will always be an absolute priority for the Group. We work extremely hard to maintain our ISO audit accreditations and to outperform industry safety benchmarks.
Most impressive is the adoption of health and safety in everything we do and the consistent desire for continuous improvement. The new Building Safety Act and regulator have created significant industry consternation and some material delays to developments. While challenging for us all, we are endeavoring to use our in-house expertise, design skills, and knowledge to turn this into an opportunity and a service to investors. We are proud to have successfully achieved our first two Gateway 2 approvals, and we are working directly with the regulator to help improve the system going forward. We thought it useful, often we talk about deals that we do, but actually to take a look back and look at something which we talked about a lot last year. So, we spoke about our innovative JV funding transaction with Housing Growth Partnership in Stratford, and it's well worthwhile revisiting the significant progress we made.
Firstly, construction on the site has progressed incredibly well, navigating key delivery risks, including having to bridge over the HS1 tunnel, which we did successfully. We're currently ahead of program, and we're well within our budget for delivery in 2026. As both an asset manager and a property manager, we've designed and launched a new building brand, Bentley House, and we've also agreed an exclusive collaboration with John Lewis on the scheme. Lettings have now commenced, and we've been able to secure a nominations agreement with a leading London university for over 50% of the rooms in year one. Refresh is an area where we're seeing very good momentum and market engagement. Over the past 18 months, we've delivered more than £ 20 million in revenues, with five projects completed this year. We are meeting and, in some cases, exceeding our target margins of 10% to 12%.
This performance underpins our confidence in the strategy and its scalability. Looking ahead, pipeline growth is positive, with circa £ 40 million of projects either in exclusive negotiations or actually with enabling works on site already. A further £ 55 million are in active bid stage, and we are tracking a further £ 230 million. This is a significant increase from last year. While the increased processes around the Building Safety Act have slowed the timing of pipeline progression, our expertise in navigating building safety standards and delivering complex remediation and refurbishment projects gives us a competitive edge. This depth of opportunity reflects a clear market trend. Significant capital is targeting value-add and repositioning strategies, and we believe Watkin Jones are well placed to capture that demand, leveraging our wider business capabilities across both new build and refurbishment and giving us the ability to access larger projects.
Again, just looking at a case study to sort of bring Refresh to life, this PBSA case study in Bristol offers a really excellent example of how the Refresh strategy can work. The owner here, a private equity investor, was seeking to reposition that asset through a predominantly cosmetic refurbishment. The main driver for the owner was twofold: one, to enhance the student experience and therefore lettability on a defensive side, and secondly, to drive NOI uplift ahead of a forecast sale. The program was accelerated, and we conducted it over three phases to ensure minimum disruption to its students. It was delivered on time and on budget. This was a repeat partnership, as I said, with a private equity investor.
The revenue generated, whilst not that significant at £ 5.5 million, was achieved over a very condensed timeframe, with minimum lead-in times, and demonstrates very well the more granular and defensive income characteristics Refresh can generate. I'm now just going to hand back to Simon, who will talk through one of our most recent joint venture case studies in Glasgow before moving to an update on Fresh and our operational business.
Thanks very much, Alex. So, I mentioned earlier our Glasgow scheme that we announced in September, and it truly showcases the ability of Watkin Jones to flex our model to deliver value. The scheme in Glasgow, which we've named The Ard, is a 784-bed PBSA scheme being delivered by a joint venture between ourselves and Maslow Capital.
The scheme will deliver secured revenue to us of £ 115 million, and it also, as I mentioned in the RNS when we announced the transaction, it gave us a significant cash inflow from the land sale. The transactional structure delivers secured profit through the build with upside potential based on a promote system on the onward sale of the completed property. We retain operational control through development and construction, and Fresh will oversee the operational management, ensuring our ability to drive performance and therefore outturn on sale. Moving on to Fresh, I want to highlight the strength and resilience of this platform of ours. Over the last year, we onboarded over 2,200 units and have already secured a further 1,500 units for this year and beyond, giving us excellent forward visibility. Operationally, occupancy remains strong across the portfolio, underpinned by high-quality assets and service.
We're proud of the experience we're delivering. This was reflected in a Net Promoter Score of + 35 and a client Net Promoter Score of + 37, which is clear evidence that residents and partners value what Fresh brings. As scale continues to build, we manage over 21,000 units and, as mentioned during the period, secured 3,700 beds, reinforcing both momentum and confidence in our proposition. Looking ahead, we have over 2,000 units progressing through legals for this year and next and a robust tracked pipeline of around 11,000 additional units. That depth allows us to be selective whilst driving sustainable growth across the portfolio. We're leading the pack with smart reporting, creative AI-driven marketing, and introducing an AI customer journey improvement to augment and improve inquiries, conversion, and retention. Strategically, Fresh is also extending our footprint into Co-living, with our second regional scheme now mobilising in Cardiff.
Fresh is also engaged on two Refresh projects, which again showcases the benefit of our end-to-end model, linking operations, refurbishments, and development to unlock value at all stages in the cycle. So, just in terms of summary of Fresh, Fresh has shown strong unit growth, high occupancy, high satisfaction, a deep pipeline, and continuous innovation. Fresh remains an important differentiator for our Group. We're resilient in a market and positioned for disciplined growth into FY 2026 and beyond, and I'll now hand back to Alex for his closing comments.
Thanks, Simon. In summary, it's been a robust and resilient operational performance for FY 2025. We've targeted excellence in execution in all areas we can control and have been very pleased with the delivery from the business. Our diversification strategies are gaining momentum, and we believe can be genuine areas of growth for the business.
We've continued to focus on resilience, creating a runway for the business with strong cash position and management, cost controls, and a broadening of our revenues. We are pivoting the business to face into the evolving market landscape and believe we are well placed to create a broader, more resilient business, which could augment our wider development and transactional activities. We remain a market leader in our field with the strength of a vertically integrated platform, which allows us to be agile and innovative, and we are operating in some of the most attractive UK real estate sectors. Overall, our ambition is clear: to generate a more resilient business and platform for growth into the future. I'd just like to say thank you very much for all of your attention this morning, and yeah, we look forward to chatting to you further.