Good morning, all. Welcome to the interim results for Watkin Jones on Audiocast. I am Richard Simpson, the Chief Executive Officer, and I will be joined this morning by Sarah Sergeant, the CFO, and Alex Pease, our Chief Investment Officer. I will cover the summary and outlook. Sarah will pick up the financial elements and business unit performance, and Alex will discuss the occupier, developer and investment markets. Turning to the summary. Half year results are in line with expectations. We have been profitable from circa GBP 150 million worth of revenue, largely derived from existing forward sold on-site pipeline. Our profit and our margin have been reduced because of the frictional costs of the need for Watkin Jones to step in to one of our developments in Exeter, which was being delivered by a third-party contractor which went into liquidation.
Net cash stands at circa GBP 45 million. Because of growing confidence and evidence in the reopening of the forward fund market, we are declaring an interim dividend of GBP 1.4 . Sentiment in the forward fund market for residential for-rent has improved over the course of this financial year. Post half year end, we are announcing alongside today's results, the completion of our first forward fund this year. A circa GBP 100 million, 819 student bed scheme in Bristol, which has a 15-year occupational agreement to the University of Bristol. This is one of the two schemes which was deferred from financial year 2022 at the end of last year in the wake of the mini-budget.
The sale has been concluded at a gross margin, slightly under the 10% we guided, will deliver circa GBP 5 million profit this financial year, and has generated circa GBP 25 million of net cash back into the group on closure of the sale. Additionally, we have two forward sale schemes under offer and a further three in the market for sale, one of which is a significant transaction. The business is operationally resilient. Despite no forward funds closing in our H1, the company was profitable from existing on-site forward sales and operations from Fresh, our property management arm. The 12 existing forward sales on-site progress in line with five due to complete this summer. With the exception of one scheme, they are all being delivered by our Watkin Jones self-build teams, which have a long track record of construction performance.
We are beginning to see evidence of bill cost inflation moderating with multiple examples of buying gains in the construction market compared to the construction budget, which was set at the point of forward sale. This bodes well for the letting of future construction packages. We have circa GBP 650 million of contractually secure forward sold in-build revenue to come over the next two-three years, which can continue to solidly underpin performance of the group, especially against the backdrop of an improving construction market. Turning to outlook for H2. We're increasingly confident around the forward sales market for the residential for rent sector reopening, but caution is required given the wider market volatility.
Given the increasing confidence in the reopening of the forward funds market, H2 will be materially stronger than our H1, with further forward sales adding to the performance from in-build developments. We're currently targeting up to five further forward sales in H2, with full year performance dependent on concluding these transactions. Pricing on these assets is broadly in line with earlier guidance, we are seeing purchasers looking for structures in the near term that weight profit more significantly to the latter stages of the development to better align with their own funding requirements. Whilst the forward funding market is in the early stages of recovery, we have taken the decision to exercise caution in the short term and not accelerate two pipeline assets onto our balance sheet in readiness for sale, which will result in circa GBP 15 million of expected profit contribution moving into 2024.
Turning to the outlook longer term. We're encouraged by continued recovery in the forward fund market, driven by strong performance of the underlying residential for rent sector that takes into account tenant demand, high occupancy and strong rental growth. We're continuing to take risk managed approach to our secure development pipeline, which has resulted in a reduction in size from circa GBP 2 billion to circa GBP 1.7 billion today. We are, though, starting to see attractive new land acquisition opportunities which support our long run target margins. We're currently in exclusivity on a number of site acquisitions, which, if secured, could generate circa GBP 500 million of expected revenue to come in the future. Our expectations are we will continue to deepen our pipeline over the next period.
This, combined with our current operational performance and the expected normalization of the forward fund market, reinforces confidence in the future. I'm now gonna hand over to Sarah Sergeant, our CFO, who is gonna run us through the financials.
Thank you, Richard. I will now cover the financial highlights for the half year. I'm pleased to report that our overall results are in line with the April trading update. We've reported revenue of GBP 154 million, which just reflects the revenue from the build-out of our forward sold sites. As we anticipated, we did not do any new forward sales in the period. Our gross profit was GBP 16 million, which is at a gross margin of 10.4% compared to 15.5% in the prior period. The gross margin has been impacted by additional build costs at our site in Exeter, where the main contractor went into liquidation. If we strip these out, the gross margin for the period was 12% in line with the revised margin guidance we gave at the full year results in January.
Adjusted operative profit for the period is at GBP 1.8 million, with a half year interest charge of GBP 1.5 million. We've delivered minimal profit in the first year as expected, given the H2 waiting for this financial year. Please note that these results exclude an exceptional charge of GBP 1.1 million for people restructuring costs. Moving on to the balance sheet. The key highlights here are a strong gross and net cash position at the period end of GBP 83 million and GBP 45 million respectively. We've had a small inventory and WIP increase since the year end as we continue to build out our Bristol student scheme on our balance sheet. However, we're obviously pleased to announce the forward sale of this scheme today with a net cash day one receipt of GBP 25 million.
Borrowings have increased over the period as we've drawn down on the development works on this asset. This, of course, will be repaid imminently. Finally, our building safety provision stands at GBP 29 million at the period end, and we've continued to utilize this in line with our expectations. From a cash perspective, we've had a small operating cash outflow of GBP 24 million, consistent with the prior period and in line with the usual half year cash flow profile. With gross cash of GBP 83 million and the headroom we have on our RCF and our overdraft facility, we have available liquidity of GBP 159 million. We're pleased to declare an interim dividend of GBP 0.014, which represents our growing confidence in the second half of the year and the recovery of the forward fund market. I will now look at the segmental breakdown.
This pie chart shows the split of revenue. We continue to have a growing contribution from BTR. We've made good progress with our BTR developments in build in Lewisham, in Hove, Birmingham and Leatherhead, and delivered revenue of GBP 93 million. PBSA has contributed revenue of GBP 48 million, which is down on the prior year, predominantly due to the number of and the stages of the schemes we have in build and the fact we haven't completed any forward sales in the period. For our affordable homes business, we recognize revenue of GBP 8 million, completing 20 sales at our sites in Crewe and Preston. Fresh, our accommodation management business, recorded a 15% increase in revenues to GBP 5 million and are currently managing circa 23,000 beds. The next slide shows a split of gross margin.
For BTR, our margin was 9% compared to 13% in H1 2022, reflecting the lower margins of our schemes which we forward sold in the latter part of financial year 2022, including our scheme in Cardiff, which is a development wrap project. For PBSA, the gross margin was at 10%, really reflecting the impact of the additional build cost as Exeter, as we've explained already. If we exclude these, the margin was 15%. Both Fresh and our affordable homes business continued a positive margin trend. This slide shows the build up to our FY 2023 operating profit outlook. We currently expect H2 profit to be materially stronger than H1, with profit from new forward sales as well as from our schemes in build.
Moving from the left to the right, the slide shows the profit contribution from our schemes in build as well as from the forward sale that we've announced today. In addition, we have a further five forward sales progressing in the market with two in legals. However, we do need to be mindful of current conditions in the market. While pricing on assets is broadly in line with expectations, we are seeing purchasers looking for structures that weight the profit towards the latter end of the development, and this therefore may have an impact on our 2023 position. As Richard explained, we've also taken the decision to exercise caution and not accelerate pipeline assets through planning and onto our balance sheet. This will move an estimated GBP 15 million of profit contribution from 2023 into 2024.
This slide shows our secured development pipeline split between forward sold, sites secure with planning and sites subject to planning. We've continued to take a risk manage approach to managing the pipeline over the last six months, this has resulted in a reduced value of GBP 1.7 billion. This is a result of revised valuations moving in line with the market and active site management not to proceed with a number of sites which would be significantly below our target margins. Pipeline is split 50/50 between Build to Rent and PBSA. Is currently sitting in a blended margin of 12%, reflecting prudent valuation assumptions and in line with the guidance that we gave at the full year. We are looking at some great new land opportunities. We have five schemes, either under offer or in negotiation with a total potential revenue value of GBP 500 million.
These schemes will allow us to be able to restore to our historical target margins. I'll now hand over to Alex to give some more color on the development market.
Thanks, Sarah. In this section, I will look to cover the principal opportunities and challenges across the U.K. residential development markets, the investment and operational themes and trends apparent in PBSA and Build to Rent, and how this relates to Watkin Jones and our business. I'll touch on the land markets, the movements we're beginning to see, and how we are looking to rebuild our pipeline with attractive new opportunities with over GBP 500 million of development values currently under offer or in exclusive negotiations. On inflation, we are now seeing some positive downward trends emerging, which is enabling us to achieve buying gains on some of our current procurement packages. With planning, the barriers to entry still remain high, as does the political rhetoric and intransigence from the government.
We as a group have a number of strengths which continue to enable us to navigate and outperform in the current environment. I'll also focus on the investment and liquidity horizons, the short-term dislocation in the markets, the green shoots beginning to come through as evidenced by the sale of our Bristol PBSA asset and other schemes currently under offer, as well as the wider market activity. I will also look at the very positive mid and long-term appeal and increasing allocations from investors to residential-for-rent. Land activity across urban brownfield and greenfield sites has materially reduced since Q3 2022. This is borne out both at transaction levels, new instructions, and sentiment surveys. As highlighted in our prelims, land market pricing variations tend to lag the investment markets. We are now seeing land values on average, reducing by 10%-15% across the U.K.
It is not, however, a uniform picture with significant variances across different geographies and from site to site. At Watkin Jones, we are looking to leverage our specialist acquisition teams and strong network of site finders to unlock specific opportunities that are beginning to look attractive. To that end, we are currently under offer on exclusive negotiations on sites with a development value in excess of GBP 500 million. Importantly, these opportunities are supporting forecast profit margins in line with our long-term target margins. After the exceptionally challenging inflationary environment of the last 18 months, there are firm signs build cost inflation is starting to normalize. Most current forecasts are suggesting overall inflation ranging from 2.5%-3.5% over the course of 2023, and reducing further into 2024.
While labor markets have remained sticky due to their structural issues and skill shortages, vacancy rates are beginning to reduce as new job starts decrease. Slowing construction activity has also allowed supply chains to resupply and rebalance. With energy and commodity prices also dropping, this is now feeding into material costs. We think it is likely there will be downward pressure on tender prices if demand continues to drop off on construction new starts. Within Watkin Jones, we are now seeing this first hand and are achieving some buying gains on packages against previous budgets. Planning in the U.K. remains one of the key barriers to entry in property development, and consequently, one of the key value drivers. National policy on residential currently lacks clarity and is highly politicized.
Planning assessments have become substantially more complex and challenging with a much greater emphasis on design, ESG, and building safety. Coupled with underfunded and under-resourced local planning authorities, the result is a downward trend, both in applications and consents across the U.K. Watkin Jones have been able to outperform in this arena and boasts a planning success rate of over 95%. We currently have over 3,000 units in the planning pipeline, which are progressing well. Our key strengths combine a specialist in-house planning resource with target sectors and assets which align well with national policies. Our target markets of brownfield urban locations offer material regeneration benefits, and our micro-site locations are close to transport hubs, amenity and leisure facilities which help fuel local economies and sustainable public transport networks. The nature of our product is also supportive.
High density but high quality, strong ESG credentials, and a focus on providing a core need for our customers of a home and a community. Watkin Jones continues to demonstrate the benefits of a self-build capability. With 27 projects, 7,200 units, and GBP 715 million of construction value being delivered over the last three years, there are very few parties with the specialist track record we can demonstrate. This specialism and focus has allowed us to navigate material challenges faced by the construction sector in the last few years. Brexit, COVID, Ukraine, and inflation to name but a few. Despite these challenges, we have consistently delivered our projects on time, on budget, and to a high quality.
Watkin Jones are utilizing our specialist focus, in particular on our supply chains, where we are leveraging our surety of pipeline to secure partnership deals and preferred rates. Also in product development, looking to MMC and more modular components to help drive efficiencies and qualities on site. There is a strong focus within the group on health and safety, ESG, and quality assurance on the schemes we develop. The next two slides are just useful illustrations of the scale, quality, and quantum of the projects in which we evolved across the U.K. Whilst activity on the transactional side of the business has clearly been subdued, the volume and profile of the projects we are undertaking is high, and the ongoing construction works and associated revenues of circa GBP 650 million on funded projects is sizable.
As previously discussed, the U.K. real estate investment markets have suffered significant disruption to liquidity since Q3, 2022. Positively, from a residential for rent perspective, we are now seeing some genuine green shoots emerging with the transactional activity in both Build to Rent and PBSA being evidenced, not just from Watkin Jones' own portfolio, but also across the wider market. In a challenging 12 months, residential has shown its resilience, with some commentators suggesting that it is the only real estate sector to show positive total annual returns. The strength of the sector, the supply-demand dynamics, and the operational performance are having a direct impact on investor intentions and allocations. Real estate investments held in residential have increased from 2% to 11% from 2007.
In recent investor sentiment surveys, the UK living sectors emerged as key priorities for investors, with 42% looking to increase their allocations in residential and only 3% looking to reduce them. The PBSA operational markets continue to go from strength to strength. In 2022, full-time student numbers grew by 4% year on year, and near record results were achieved in both new applications and university acceptances. UCAS are now projecting applications could rise an additional 250,000 to over 1 million in 2030, driven by a strong domestic growth and thriving international markets. Challenges in planning and viability have served to reduce new bed spaces coming through the development pipeline and delivery volumes have been in decline since 2019.
This increasing demand and curtailed supply is driving operational performance with rental growth in 2022, averaging 5%-6% and letting velocities and occupancy at record highs. 2022 proved to be a record year for investment volumes in PBSA, with circa GBP 7.2 billion deployed. In Q4, activity was notably curtailed, but volumes were distorted by the GBP 3 billion sale of Student Roost to Greystar GIC. In Q1, investor caution has remained with limited transaction and volumes of circa GBP 100 million. Green shoots are continuing, however, with a number of new transactions under offer, and it is anticipated there'll be increased activity in H2. Yields have softened between 25-50 basis points, but are currently trending stable as operational performance continues to be supportive. On the debt side, there remains good appetite from a variety of lenders, highlighting the enduring confidence in the sector.
Margin rates have increased by an average circa 20 basis points on investment facilities, with the rising base rates the predominant contributor to increasing total funding costs. On the Build to Rent side, there's a very similar operational story. Continued lack of housing supply, exacerbated by the current economic climate, is resulting in less rental stock reaching the market at a time where factors such as mortgage availability and affordability is contributing to increasing demand from renters. This is creating a very significant supply versus demand imbalance. Rent collection and occupancy in Build to Rent product remains exceptionally strong, and these dynamics in turn have produced rental growth in excess of 9% in the last 12 months across the U.K. Build to Rent investment volumes were strong in 2022, with circa GBP 4.4 billion invested despite a materially impacted Q4.
Although caution does remain, Q1 has delivered reasonable sales of circa GBP 1.1 billion, driven by fewer but larger scale transactions. Yield profiles have softened since Q1 last year by between 25-50 basis points, dependent on asset and location. Again, these are currently trending stable. It is anticipated that as the markets recover, the continued investor support for the Build to Rent sector and the demand to increase allocations in this space will, alongside the limited supply coming through, help to boost values and also continue to drive forward fund structures as the predominant transaction type in the market.
Thanks, Alex. I'm now gonna share some highlights of Fresh, our accommodation management business. Fresh manages over 23,000 student beds over 69 properties for 28 clients, and these are both schemes built by Watkin Jones and by third parties. It has continued to grow in all aspects of its business and recorded a 15% increase in the revenue in the first six months. It has continued to demonstrate operational expertise and win awards from clients and residents alike, and examples of these are shown on the slide. Importantly, it's expanded well into Build to Rent with a white label offer and is mobilizing a new Build to Rent scheme in Cardiff with its own distinctive brand development.
It has established a new delivery model ensuring efficient and quality client services. Looking forward to the next academic year, Fresh has secured just under 1,300 beds for services to start from September 2023, and a further 2,500 for September 2024. This includes the 819 from the PBSA in Bristol that we announced the forward sale of today. We are seeing some of our larger clients consider whether they should take their accommodation management in-house, but we continue to see many new opportunities with smaller clients who are keen to outsource. Finally, I'm gonna touch on our progress with ESG. Our ESG program is called Future Foundations and has three facets to it: Future People, Future Places, and Future Planet. I'm pleased to report that our initiatives are going well.
For people, health and safety is at the heart of everything we do, and our incident rate is less than 3% of the national industry average. That's well in excess of our target, which is less than 5%. For places, our timber frame housing trial is in progress, and we are assessing how we can further utilize other modern methods of construction in our developments. We're also continuing to view the use of air source heat pumps and other sustainable heating sources. Our planet initiatives are equally as strong, with waste diverted from landfill currently ahead of our 97% target. It is key that we partner with our suppliers for our planet targets, and our review of these is progressing well. I'll now hand over to Richard for some closing thoughts.
Turning to the summary. H1 was in line with expectations underpinned by existing on-site forward sold developments and circa GBP 650 million worth of forward sold revenue contractually secure to come over the next two to three years underpins our performance looking forward. Post period end, we closed our first forward fund of the financial year, providing important proof points for forward fund market reopening, giving visibility of profit for this financial year, and recycling circa GBP 25 million worth of net cash back into the business. In H2, we expect the forward fund market to continue to recover, we are targeting a further 5 sales. We are also mindful of continuing volatility in the wider market, which may impact full-year performance in terms of number of transactions which close and the commercial terms reached on them.
Our new development pipeline, we're making progress with new acquisitions at our traditional margins. Currently, we have circa GBP 500 million of revenue to come, new pipeline under offer, or in exclusive positions. This is encouraging, and we expect to deepen this further over the next period, and this will support the reversion back to our long-term margins over the next few years. Overall, the continued demand and performance of residential for rent assets, the recovering demand picture for forward sales, and our operationally robust performance gives us good confidence longer term. That brings us to the end of the audio cast for the Watkin Jones interim results. Thank you very much for listening.