REG - Boot(Henry) PLC - Final Results
21/03/2023 07:00
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RNS Number : 5933T Boot(Henry) PLC 21 March 2023
21 March 2023
HENRY BOOT PLC
('Henry Boot', the 'Company' or the 'Group')
Ticker: BOOT.L: Main market premium listing: FTSE: Real Estate Investment and
Services.
Unaudited results for the year ended 31 December 2022
Strong operational performance and sales drive 10% dividend increase
Henry Boot PLC, a Company engaged in land promotion, property investment and
development, and construction, announces its unaudited results for the year
ended 31 December 2022.
Tim Roberts, Chief Executive Officer, commented:
"During what ended up being a turbulent year in which rising interest rates
led to a rerating of the UK property market, Henry Boot delivered our best
ever underlying profit and grew our NAV, which has allowed us to carry on
increasing the dividend by 10%. The main driver of this performance has been
strong sales activity across our three key markets of Industrial &
Logistics, Urban Development and, most notably, Residential where we
successfully sold a record number of plots of land. Management actions,
through nearly £30m of well timed and accretive investment property sales,
have led to a material outperformance of the investment portfolio against the
CBRE index. Total property sales of £279m, combined with selective
acquisitions, means gearing remains firmly at the bottom of our target range.
Whilst we remain cautious about the near term trading climate, expecting 2023
to be a tougher year, our rock solid balance sheet offers resilience to both
weather any further economic uncertainty and to take advantage of any
opportunities that arise from it. With early encouraging indicators already
evident across certain markets we have the capacity to buy land, maintain and
potentially expand our committed development programme as well as to continue
to grow our JV housebuilder as soon as we feel economic recovery is on the
way. We therefore have confidence in our ability to achieve our medium-term
growth and return targets."
Financial Highlights
· Record underlying profit(1) of £56.1m (2021: £29.3m) driven by
residential land and property development sales
· Revenue of £341.4m (2021: £230.6m), up 48.0%, driven by
delivery of committed development programme
· Profit before tax increased to £45.6m (2021: £35.1m) up 29.7%,
after deducting £10.5m for revaluation movements on completed investment
property as UK commercial property values fell
· Increased ROCE(2) of 12.0% (2021: 9.6%), up 240 bps, within our
medium-term strategic target of 10-15%
· EPS grew to 25.0p (2021: 21.2p), up 17.9%
· NAV(3) per share grew to 295p (December 2021: 267p), an increase
of 10.5%, due to strong operational performance. Excluding the defined benefit
pension scheme surplus, an underlying increase of 5.3% to 290p (December 2021:
276p)
· Robust balance sheet, with Net Debt(4) of £48.6m (2021: £40.5m)
following strategic investments made during the year, gearing remains prudent
at 12.3% (2021: 11.4%)
· Proposed final dividend of 4.00p (2021: 3.63p), an increase of
10.2%, reflecting the Group's strong operational performance and in line with
our progressive dividend policy, bringing the total dividend for the year to
6.66p (2021: 6.05p)
· Performance reflects effective management of capital and risk in
our three key markets: Industrial & Logistics, Residential and Urban
Development
Operational Highlights
· £279m of sales led by our land promotion, property development
and housebuilding businesses making the most of strong markets in the first
half of the year
· Selective approach to acquisitions throughout the year, totalling
£28.4m, including £27m of strategic investment to grow Hallam Land
Management and Stonebridge Homes' land holdings
· Continued investment in our £240m high-quality committed
development programme where costs are 97% fixed
· Land Promotion
o A record of 3,869 plots sold (2021: 3,008), driven by a major disposal at
Didcot of 2,170 plots
o 9,431 plots with planning permission (2021: 12,865), leaving HLM well
positioned against a backdrop of an increasingly constrained planning system
· Property Investment & Development
o Significant committed development programme of £240m, with 63% pre-sold
or pre-let
o Over 1m sq ft of Industrial & Logistics development underway (HBD
Share: £150m GDV)
o £1.5bn development pipeline (Henry Boot share £1.25bn), 64% of which is
focused on supply-constrained Industrial & Logistics markets, where
occupier demand remains robust
o Well timed sales within the investment portfolio of £29.6m, at an average
17% premium to the last reported book value, contributed to total return
outperformance of -1.5% versus CBRE Index of -9.1%
o Stonebridge Homes completed 175 homes (124 private/51 social) (2021: 120),
at an average selling price for private homes of £503k (2021: £509k). Total
owned and controlled land bank is now 1,094 plots (2021: 1,157) with detailed
or outline planning permission on 872 plots (2021: 912)
· Construction
o The construction business performed ahead of budget with turnover of
£100.5m (52% from public sector) out of £128.6m segment total and has
secured 68% of 2023 order book
o Banner Plant has seen record levels of trading activity after experiencing
strong demand from its customers and Road Link (A69) has performed well as a
result of increasing traffic volumes
· Responsible Business
o Continuing to make good progress against our Responsible Business Strategy
targets and objectives, launched in January 2022
NOTES:
(1) Underlying profit is an alternative performance measure (APM) and is
defined as profit before tax excluding revaluation movements on completed
investment properties. Revaluation movement on completed investment properties
includes losses of £7.3m (2021: £4.6m gain) on wholly owned completed
investment property and losses of £3.2m (2021: £1.2m gains) on completed
investment property held in joint ventures. This APM has been introduced as it
provides the users with a measure that excludes specific external factors
beyond management's controls and reflects the Group's underlying results. This
measure is used in the business in appraising senior management performance.
(2) Return on Capital Employed is an APM and is defined as operating
profit/capital employed where capital employed is the average of total assets
less current liabilities and pension asset/obligation at the opening and
closing balance sheet dates.
(3) Net Asset Value (NAV) per share is an APM and is defined using the
statutory measures net assets/ordinary share capital.
(4) Net (debt)/cash is an APM and is reconciled to statutory measures in note
7.
( )
(5) Total Accounting Return is an APM and is defined as the growth in NAV per
share plus dividends paid, expressed as a percentage of NAV per share at the
beginning of the period.
For further information, please contact:
Enquiries:
Henry Boot PLC
Tim Roberts, Chief Executive Officer
Darren Littlewood, Chief Financial Officer
Daniel Boot, Group Communications Manager
Tel: 0114 255 5444
www.henryboot.co.uk
Numis Securities Limited
Joint Corporate Broker
Ben Stoop
Tel: 020 7260 1000
Peel Hunt LLP
Joint Corporate Broker
Harry Nicholas
Tel: 020 7418 8900
FTI Consulting
Financial PR
Giles Barrie/ Richard Sunderland
020 3727 1000
henryboot@fticonsulting.com (mailto:henryboot@fticonsulting.com)
A webcast for analysts and investors will be held at 9.30am today and
presentation slides will be available to download via www.henryboot.co.uk
(https://eur01.safelinks.protection.outlook.com/?url=http%3A%2F%2Fwww.henryboot.co.uk%2F&data=04%7C01%7Cdboot%40henryboot.co.uk%7C3047ba2e3e124f89e90508da0c453adc%7C4a6f086a81e542f197c2f8470d12d61d%7C0%7C0%7C637835788744426781%7CUnknown%7CTWFpbGZsb3d8eyJWIjoiMC4wLjAwMDAiLCJQIjoiV2luMzIiLCJBTiI6Ik1haWwiLCJXVCI6Mn0%3D%7C3000&sdata=4sRskhTQwO77WteakjZGIfafow9n1GJw7e1Xwsozt98%3D&reserved=0)
. Details for the live dial-in facility and webcast are as follows:
Participants (UK): Tel: 44 (0) 33 0551 0200
Confirmation code: Quote "Henry Boot FY Results"
Webcast link: https://stream.brrmedia.co.uk/broadcast/63dce73852611c376881f9e8
(https://stream.brrmedia.co.uk/broadcast/63dce73852611c376881f9e8)
About Henry Boot PLC
Henry Boot PLC (BOOT.L) was established over 135 years ago and is one of the
UK's leading and long-standing property investment and development, land
promotion and Construction companies. Based in Sheffield, the Group is
comprised of the following three segments:
Land Promotion:
Hallam Land Management Limited
(http://www.henryboot.co.uk/our-businesses/hallam-land-management/)
Property Investment and Development:
HBD (https://hbd.co.uk/) (Henry Boot Developments Limited), Stonebridge Homes
Limited (http://www.henryboot.co.uk/our-businesses/stonebridge-homes/)
Construction:
Henry Boot Construction Limited
(http://www.henryboot.co.uk/our-businesses/henry-boot-construction/) , Banner
Plant Limited (http://www.henryboot.co.uk/our-businesses/banner-plant/) , Road
Link (A69) Limited (http://www.henryboot.co.uk/our-businesses/road-link-a69/)
The Group possesses a high-quality strategic land portfolio, an enviable
reputation in the property development market backed by a substantial
investment property portfolio and an expanding, jointly owned, housebuilding
business. It has a construction specialism in both the public and private
sectors, a long-standing plant hire business, and generates strong cash flows
from its PFI contract through Road Link (A69) Limited.
www.henryboot.co.uk (http://www.henryboot.co.uk)
Chair's Introduction
Henry Boot has benefited from strong sales activity which helped drive a 30%
increase in profit before tax (PBT) to £45.6m (December 2021: £35.1m). In
2022, we completed on £279m of sales within our property development,
strategic land and housebuilding businesses, which delivered the Group's best
ever financial results of £56.1m on an underlying profit basis before
revaluation movements on completed investment property. Whilst we are cautious
with respect to the near-term trading climate as the economy adjusts to a
higher interest rate environment, I am pleased to report that the Group
continues to make progress against its strategic objectives, and we remain
confident about achieving its medium-term growth and return targets.
The Group's financial position remains robust, with TAR(5) at 12.8%,
reflecting the growth of NAV per share plus dividends paid. The business has
remained purposefully selective on new projects investing £28.4m into new
opportunities, with net debt increasing only marginally to £48.6m (2021:
£40.5m) and gearing remaining low at 12.3% (2021: 11.4%), providing
flexibility from a position of strength to react to any opportunities we see
in the market.
On the basis of the Group's strong commercial and financial performance, the
Board proposes to pay a final dividend of 4.00p per share, which together with
the 2.66p interim dividend, gives a total of 6.66p (2021: 6.05p), an increase
of 10.1% for the year. This will be paid on 2 June 2023 to shareholders on the
register at the close of business on 5 May 2023.
In 2022 we launched our Responsible Business Strategy, and I am pleased to
report we are making good progress against our targets. Our commitment to
addressing climate change and reducing our environmental impact remains a key
focus. We are proud of the progress made to lower our total direct GHG
emissions (Scopes 1 and 2), which in 2022 reduced by 12% from the 2019
baseline, and the efforts our people have made to support our targets through
how they work and travel.
Each year we conduct an independent Group Employee Engagement Survey, through
the HIVE HR platform, to gain feedback from our people so we can continue to
improve our employee experience and provide a positive culture and workplace
environment. The 2022 survey continues to show very high levels of advocacy,
pride and loyalty in Henry Boot, achieving an increased employee Net Promoter
Score (eNPS) of 39 (2021: 26), which is ranked at the top of the very good
range.
Finally, as the Group continues to grow and evolve as a diverse and
progressive business, we have made the decision to relocate our Head Office
from Banner Cross Hall to the Isaacs Building in Sheffield city centre this
autumn. The Isaacs is a seven-storey development where we have taken 12,800 sq
ft across the top three floors. The building offers greater collaboration
space and excellent transportation links, as well as supporting our 2030 Net
Zero Carbon (NZC) commitments.
On behalf of the Board, I would like to thank everyone at Henry Boot for their
dedication and hard work. Their high levels of engagement have once again been
instrumental to the business in producing such a strong set of results against
a challenging backdrop.
Peter Mawson
Chair
CEO's Review
Henry Boot had a good 2022, delivering our best ever underlying profit of
£56.1m. Even after allowing for downward valuation movements of £10.5m in
our completed investment property portfolio as UK commercial property values
declined, our statutory profit before tax still increased by 30% to £45.6m
(2021: £35.1m). This is a highly satisfactory result amidst the macro
economic headwinds faced in the second half.
The year started off buoyantly with encouraging levels of demand across our
three key markets, which offset cost pressures and supply constraints, but
with energy prices fuelling inflation and rising interest rates, we saw a
marked slowdown in Q4 22. However, as we enter 2023 there are encouraging
signs that the economy is proving slightly more resilient than expected, and
demand is recovering with a resumption of activity in our markets.
The Group's results for the year were driven primarily by residential land
sales at Hallam Land Management (HLM), a mix of land sales and development
profits at HBD and house sales at Stonebridge Homes (SBH). We profitably sold
£279m of land, buildings and houses during the year making the most of strong
markets in H1 22 and took a very selective approach to acquisitions totalling
£28.4m, which included growing HLM and SBH's land holdings.
On a statutory basis NAV increased by 11% to £395m, where we benefited from
an increased pension scheme surplus, or on an underlying basis, NAV was up by
5% to £388m. Capital employed increased by 6.2% over the year to £399m,
consistent with our medium-term target of £500m. Profitable sales also helped
us to effectively manage our gearing, which at 12.3%, remains at the bottom of
our 10-20% target range. The strength of our balance sheet, plus recently
refreshed banking facilities of £105m, which are secured to 2025, means we
are well positioned for a period of continued uncertainty ahead. As was the
case when we came out of COVID, we have the capacity to buy land, maintain and
potentially expand the committed development programme, and continue to grow
our JV housebuilder, which puts us in a competitive position to act
opportunistically.
With the disposal of 3,869 plots, HLM had its best ever year in terms of
volume, making the most of a buoyant land market in H1 22, primarily due to a
major disposal of 2,170 plots at Didcot. This project is a great example of
HLM's depth of expertise in dealing with increasingly complex planning
matters, and not only will it deliver much needed housing supply, but it also
includes 80 acres of open space alongside extensive green infrastructure and
cycle networks.
HLM grew its land bank to c.96,000 plots (2021: c.93,000) during the period,
of which 9,431 plots have planning permission. I am increasingly convinced
that the UK planning system is in need of urgent reform. The delays and
complexities can no longer be blamed on COVID. Whilst we would derive greatest
satisfaction from a more efficient system on account of the benefits this
would bring local communities, the challenges of the current situation mean
that the land we successfully promote and the expertise we bring in navigating
the planning system remain increasingly in demand.
Towards the end of 2022, our major land customers, the national housebuilders,
saw a well reported slowdown in house sales and consequently became more
selective on land acquisitions. Early signs are that confidence is returning
and, together with 992 plots (2021: 1,880 plots) unconditionally exchanged at
year-end, we anticipate a reasonable year ahead in terms of land sales.
HBD continues to grow completed development activities with a Gross
Development Value (GDV) of £117m (HBD share: £83m) (2021: £303m GDV, HBD
share: £68m) of which 92% has been let or sold. The committed programme now
totals £395m (HBD share: £240m GDV), 63% of which is currently pre-let or
pre-sold. Whilst there are signs that construction cost inflation is slowing,
we continue to actively manage risk with 97% of the development costs fixed.
Although investment markets have adjusted rapidly, our underlying occupational
markets remain in fundamentally good shape. Structural demand persists for
Industrial & Logistics (I&L) space, with national take up in 2022 a
very healthy 65.8m sq ft (according to Gerald Eve), which, whilst down on the
record high in 2021, was still the second most active year on record with
rents increasing by 10.3% during the year. The build to rent (BtR)
occupational market remains very buoyant with residential rents growing by
12.1% according to Zoopla in 2022. On offices there is a clear trend of people
returning to our major cities and the workplace, with particularly strong
demand for buildings that offer strong environmental credentials that assist
occupiers in achieving their own NZC goals.
The part of the committed programme not pre-let or pre-sold is primarily in
three high-quality schemes where we remain confident of demand:
· In Rainham, we have recently committed along with our JV partner,
Barings, (HBD share: £24m GDV) to a 380,000 sq ft speculative I&L scheme.
Whilst marketing has not yet begun, this NZC urban logistics development
serving Greater London is already experiencing strong occupier interest.
· In the centre of Birmingham, we are part way through construction
of 101 premium apartments (HBD share: £32m GDV) which we expect to launch
successfully for sale in the summer of this year.
· Finally, in Manchester city centre in partnership with the
Greater Manchester Pension Fund, we are building 91,000 sq ft of prime, NZC
offices (HBD share: £33m). With the scheme responding to several identified
office requirements, we expect good occupier interest.
As we make progress on letting or pre-selling these schemes, we have a number
of high-quality I&L and BtR projects within our £1.25bn development
pipeline that we can bring forward at the appropriate time.
As we highlighted at the time of the interim results, we tactically identified
several properties for sale and I am pleased to report we sold three
properties for a total of £29.6m, a 17% premium to the last reported book
value. As a result, against a backdrop of falling values, we have delivered
relative out performance on our investment portfolio (current value including
our share of JVs £106m) with a total return of -1.5 % versus the CBRE UK
index of -9.1%. Over the next few years, through a combination of retaining
completed developments and acquisitions, we will look to build the portfolio
up to our strategic target of £150m.
We made further progress with our JV housebuilder Stonebridge Homes (SBH),
with a 46% increase in the number of homes delivered to 175 completions (2021:
120). Whilst supply chain issues at the tail end of the year meant we did not
reach our target of delivering 200 homes, we marginally beat our profit
expectations. This was driven by our ability to achieve sales prices that were
over 10% ahead of budget, which meant cost inflation running at 9% was
absorbed. With a target of 250 completions in 2023, and 139 homes already
forward sold, we remain firmly on track to continue scaling up and hit our
ambitious medium-term strategic target of 600 completions per annum.
The Construction segment has done remarkably well to trade ahead of our
expectations. Henry Boot Construction (HBC) has made progress on all its
projects despite dealing with very challenging supply and labour restrictions,
although there are some signs that these restrictions and cost inflation are
easing. HBC begins the year with 68% of the 2023 order book secured and a
healthy pipeline of opportunities. Banner Plant (BP) has seen record levels of
trading activity and is successfully growing its customer base.
Against a challenging near-term backdrop, we expect 2023 profits to be more
subdued than 2022, but we will remain active, pushing ahead with our strategic
and growth ambitions from a position of strength, further details of which are
covered in the strategy and outlook sections below.
Strategy
The Group set a medium-term strategy in 2021 to grow the size of the business
by increasing capital employed by 40% focusing on its three key markets:
I&L, Residential and Urban Development.
Notwithstanding slowing markets in Q4 22, we still made good progress against
our medium-term strategic targets:
Measure Medium-term target FY 22 Performance Progress
Capital employed To over £500m £399m as at 31 Dec 2022 On track to grow capital employed to over £500m
Return on average capital employed 10%-15% per annum 12.0% in FY 22 We maintain our aim to be within the target range
Land promotion plot sales c.3,500 per annum 3,869 in FY 22 Exceeded the strategic target of 3,500 per annum, forward sales of 992 plots
Development completions Our share c.£200m per annum Our share: £83m in FY 22, with committed programme of £240m in 2023 Increased our future pipeline to £1.25bn, we are on course to complete on
average £200m per annum
Grow investment portfolio To around £150m £106m as at 31 Dec 2022 Value reduced primarily due to nearly £30m of accretive sales with scope to
rebuild portfolio from retained developments
Stonebridge Homes sales Up to 600 units per annum 175 homes completed in 2022, out of a delivery target of 200 homes Completions below our target of 200 but strong sales prices mean the business
performed marginally ahead of budget. Our goal is to complete 250 homes in
2023
Construction order book secured Minimum of 65% for the following year 68% for 2023 Secured above target range for 2023 order book, with public sector work
remaining a key focus
Responsible Business Strategy
It has been just over a year since we launched our Responsible Business
Strategy in January 2022, with our primary aim to be NZC by 2030 with respect
to Scopes 1 & 2. I am pleased with the progress we have made so far
against our objectives and targets. Our strategy is guided by three principal
objectives:
· To further embed ESG factors into commercial decision making so
that the business adapts, ensuring long-term sustainability and value creation
for the Group's stakeholders.
· To empower and engage our people to deliver long-term meaningful
change and impact for the communities and environments Henry Boot works in.
· To focus on issues deemed to be most significant and material to
the business and hold ourselves accountable by reporting regularly on
progress.
12-month performance against our medium-term targets
Our People Performance Our Places Performance
Develop and deliver a Group-wide Health The development of our strategy, in collaboration with our people, was Contribute £1,000,000 of financial (and In 2022, we contributed (financial and equivalent value of) over £285,000 to
launched in February 2023.
our charitable and community
and Wellbeing Strategy equivalent) value to our charitable partners
partners.
Increase We have made strong progress, with female representation across our workforce Contribute 7,500 volunteering hours More than 2,250 volunteering hours have been delivered in 2022.
increasing to 26%.
gender representation in management to a range of community, charity
positions with 30% of our team and and education projects
line managers being female
Our Planet Performance Our Partners Performance
Reduce Scope 1 and 2 GHG emissions Total direct GHG emissions (Scopes 1 and 2) in 2022 were 2,930 tonnes which Pay all of our The Living Wage Foundation has been engaged and a
equates to a 12% reduction from the 2019
by over 20% to
suppliers the real review is currently being undertaken of the requirements to
baseline.
support reaching living wage and secure secure membership.
NZC by 2030 accreditation with
the Living Wage
Foundation
Reduce consumption Sustainability audits completed and a reduction action plan in development. Collaborate with all We continue to engage with membership organisations (including Yorkshire
Climate Action
of avoidable our partners to
Coalition) to share knowledge and best practice. In 2022 we became members of
plastic by 50% reduce our the UK Green
environmental impact Building Council (UKGBC).
Separate to our Responsible Business Strategy, I am proud of how Henry Boot
has responded to the cost-of-living crisis. We have helped food banks across
the locations in which we work by providing financial support, through the
provision of food and other essential items, and by volunteering our time to
provide aid. We also continued to offer financial assistance, time, and
expertise to a wide range of charitable and community projects, creating
meaningful and long-lasting social value for our charity partners. We made a
one-off payment of £1,000 in September 2022 to over two-thirds of our people
to support individuals and families during this challenging period and have
introduced financial wellbeing coaching sessions to support our people in the
longer term.
Outlook
Whilst the immediate outlook is uncertain, a number of leading indicators
suggest that the economic slowdown will not be as severe as forecasts in the
final quarter of last year predicted. It looks increasingly like interest
rates are close to the so called 'pivot', we are seeing early signs that
supply restrictions are lifting and with that some prospect of cost pressures
easing.
There are early signs that our markets are improving. Occupier demand for
I&L has remained resilient, and whilst yields moved out quickly during the
second half of 2022, there are investors already looking to buy, tempted by
the strong fundamentals of the market. Likewise, whilst data is available only
for the first two months, housebuilders generally and SBH specifically, have
seen a partial recovery in home buyer interest this year from the lows
experienced in the final quarter of 2022. The march of the BtR sector, both in
terms of customer and investor demand, continues.
So, for Henry Boot, we remain focused on building out our high-quality
development programme. As we increase forward sales and pre-lettings above the
present 63%, we will selectively look to replenish, and potentially expand,
committed development, primarily by drawing down schemes which are ready to go
from our £1.25bn development pipeline. With an ever restrictive planning
environment demand for our well located consented plots will come back as the
UK remains critically short of housing. In the meantime, we are partially
insulated by the 992 land promotion plots that are already unconditionally
exchanged and we start the year with 56% of SBH's 250 target completions for
2023 already forward sold.
We will continue to work towards a more progressive, diverse and responsible
business by meeting targets outlined in our Responsible Business Strategy, and
investing in key areas such as marketing, customer relations and business
improvement processes, including technology. At the same time, we will
continue to nurture the great culture within Henry Boot and engage with people
who, despite the ups and downs of the last few years have remained energetic
and fully committed. Moreover, we have confidence in the long-term
fundamentals of our markets, business model and have the operational and
financial resources to continue to meet our strategic growth and return
objectives.
Tim Roberts
Chief Executive Officer
Business Review
Land promotion
HLM has traded strongly in 2022, achieving an operating profit of £17.3m
(2021: £17.5m) from selling 3,869 plots (2021: 3,008 plots) at nine
locations. Total plot sales were materially higher during 2022 due to a major
disposal at Didcot of 2,170 plots to Taylor Wimpey and Persimmon Homes.
However due to the size of the sale and discount for volume, the average gross
profit per plot reduced to £6,066 (December 2021: £7,820).
UK greenfield land values increased by 2.0% in the 12 months to 31 December
2022 according to Savills Research. Following growth during the first nine
months of the year, UK greenfield values fell by 2.2% in the final quarter. In
the latter part of the year, transactions slowed significantly as many
housebuilders paused land buying in response to slowing sales rates and the
number of sites being actively marketed for sale reduced. However, although
many of the major housebuilders have slowed their land buying, there remains
selective interest in prime sites with planning consents, such as HLM can
offer, amid some confidence returning to the industry following the
significant disruption caused by the effects of the mini-budget in the second
half of 2022.
HLM'S land bank grew to 95,704 plots (December 2021: 92,667 plots), of which
9,431 plots (December 2021: 12,865 plots) have planning permission (or
Resolution to Grant subject to S106). The decrease in plots with planning
permission reflects disposals during 2022 and continued delays in the planning
system. In 2022, there were 1,473 plots submitted for planning, taking the
total plots awaiting determination to 12,297 (December 2021: 11,259 plots).
Unfortunately, the planning system continues to experience delays due to a
growing number of complexities such as the emerging Draft National Planning
Guidance, which looks to be slowing down Local Authority Development Plan
making and Planning Application determination. This resulted in HLM only
gaining planning permission for 435 plots in 2022 (2021: 452 plots). Already
in 2023, HLM has achieved planning permission on 320 plots and is expecting
determination on its remaining plots to fall into 2023 and beyond.
HLM's land bank remains well positioned due to the high levels of stock with
planning permission. Despite experiencing challenges with the planning system,
the number of plots under control and in planning has increased, giving us
confidence in the medium term that our stock levels holding planning will
return to similar levels seen in previous years.
There is significant latent value in the Group's strategic land portfolio,
which is held as inventory at the lower of cost or net realisable value. As
such, no uplift in value is recognised within our accounts relating to any of
the 9,431 plots with planning and any increase in value created from securing
planning permission will only be recognised on disposal.
Residential Land Plots
With permission In planning Future Total
b/f granted sold c/f
2022 12,865 435 (3,869) 9,431 12,297 73,976 95,704
2021 15,421 452 (3,008) 12,865 11,259 68,543 92,667
2020 14,713 2,708 (2,000) 15,421 8,312 64,337 88,070
2019 16,489 1,651 (3,427) 14,713 10,665 51,766 77,144
2018 18,529 1,533 (3,573) 16,489 11,929 44,051 72,469
In relation to significant schemes:
· In H2 22, a S106 Agreement was signed at South West Milton Keynes
allowing the outline planning consent to be drawn down for 618 plots, primary
and secondary schools and open space. The site has subsequently been disposed
of post period-end to Taylor Wimpey, with the sale completing in March 2023.
· At Pickford Gate, Coventry (formerly Eastern Green), following
the grant of outline planning permission for 2,400 plots, 37 acres of
employment land and a new primary school, local centre uses and open space in
2020, HLM unconditionally exchanged to sell 250 plots to the Vistry Group in
March, which will complete by the end of 2023.
· In 2022, North West Bicester, a 3,100-plot scheme the subject of
an outline planning application, progressed well with Oxfordshire County
Council delivering a road bridge under the London/Banbury rail line, and the
District Council signalling an increase in development plan housing numbers,
such that our scheme aligns with emerging policy. The scheme, which also
includes a primary school, funds for a secondary school, mixed use local
centre, commercial land open space and biodiversity offsetting, has been
designed to achieve emerging environmental requirements and energy use.
· At Swindon, the 2,000-plot site with outline consent that is
being promoted through an option agreement jointly held with Taylor Wimpey,
terms for acquisition were near settled with the landowners, but stalled due
to the market disruption in Q4 2022 and HLM is now working to conclude the
purchase during 2023.
Residential Land Plots - Regional Split
Region Plots Percentage
Scotland 9,630 10%
North 12,528 13%
North Midlands 17,716 18%
South Midlands 21,982 23%
South 6,766 7%
South East 5,395 6%
South West 21,687 23%
Totals 95,704 100%
Property Investment and Development
Property Investment and Development, which includes HBD and SBH, delivered a
combined operating profit of £25.7m (2021: £18.3m).
According to the CBRE Monthly Index, commercial property values declined by
13.3% in the 12 months to 31 December 2022. Industrial property was the worst
performing sector with values down 21% during the year followed by offices
down 12.1% and retail down 8.1%. Commercial property values were negatively
impacted by rising interest rates during H2 22 with overall values declining
by -19.0%. Having seen strong investor demand over the last few years driving
substantial yield compression, I&L was the worst performing sector in 2022
as the sharp increases in interest rates resulted in significant yield
expansion during H2 22. Whilst investment volumes were down 25% on 2021, it
was still the second most active year on record. At the same time, I&L
vacancy rates reached a new low of 3.6% in Q4 22 (for units above 50,000 sq
ft). The rate of yield expansion has slowed in recent months suggesting
commercial property values are beginning to stabilise. At the same time, the
rental growth outlook for both I&L and regional BtR remains positive given
the level of active demand and lack of available space. Regional office demand
has continued to recover from the 2020 low with take-up increasingly focused
on grade A space resulting in prime rental growth of 6.5% in 2022.
HBD has performed well, completing developments with a GDV of £117m (HBD
share £83m GDV; 2021: HBD share £68m GDV), of which 92% have been let or
sold. In the year, HBD completed on:
· Five industrial schemes totalling 497,000 sq ft with a combined
GDV of £86m (HBD share: £60m GDV).
· Two residential land sales with a GDV of £23m (HBD share: £15m
GDV), comprising a 184-unit scheme in Skipton, which was pre-sold to Bellway,
as well as a sale of land to Aberdeen City Council for the construction of 500
houses.
· A 23-unit residential build-to-sell scheme in York, Clocktower,
with a GDV of £8m.
2022 Completed Schemes
Scheme GDV HBD Share of GDV Commercial Residential Size Status
(£m) (£m) ('000 sq ft) (Units)
Industrial
Wakefield, Kitwave 12 6 65 - Pre let & pre-sold
Luton, Quad 2 16 16 82 - Pre-sold
Pool, MKM 4 4 15 - Pre-let
Southend 12 12 75 - Speculative
Wakefield Hub, Phoenix 42 22 260 - Pre-sold
86 60 497 -
Residential
Skipton 7 7 - 184 Pre-sold
Aberdeen, Cloverhill 16 8 - 500 Pre-sold
York, Clocktower 8 8 - 23 Pre-sold
31 23 - 707
Total for the Year 117 83 497 707
The committed development programme now totals a GDV of £395m (HBD share:
£240m GDV) of which 63% is currently pre-let or pre-sold, with 97% of the
development costs fixed.
2023 Committed Programme
Scheme GDV HBD Share of GDV Commercial Residential Size Status Completion
(£m) (£m) ('000 sq ft) (Units)
Industrial
Rainham, Momentum 120 24 368 - Speculative Q4 24
Nottingham, New Horizon 54 54 426 - Forward funded Q2 23
Walsall, SPARK Remediation 37 37 - - Forward funded Q2 24
Luton, Diploma 20 20 85 - Pre-let Q2 23
Preston, East DPD & DHL 30 15 122 - Pre-let and forward Q4 23
funded
261 150 1,001 -
Urban Residential
Birmingham, Setl 32 32 - 101 Speculative Q1 24
York, TDT 22 22 54 - Pre-sold Q2 23
Aberdeen, Bridge of Don 12 1 - TBC Under-offer Q4 23
Aberdeen, Cloverhill 2 2 - 420 Pre-sold and DM fee Q4 23
68 57 54 521
Urban Commercial
Manchester, Island 66 33 91 - Speculative Q3 24
Total for the Year 395 240 1,146 521
% sold or pre-let (incl Island) 45% 63%
Within the committed programme there is currently over 1m sq ft of I&L
space (HBD Share: £150m GDV), a total of 521 urban residential units (HBD
Share: £57m GDV) and 91,000 sq ft of commercial space (HBD Share: £33m GDV).
In this regard:
· In H1 23, three projects (Diploma, Luton, New Horizon, Nottingham
and TDT, York) are set to complete on site with a combined GDV of £96m.
· After securing pre-lets with DPD and DHL at Preston East (HBD
share: £15m GDV) in H2 22, the 122,000 sq ft I&L development was
subsequently pre-sold to Titan Investments, at 10% above book value, with
completion expected in Q4 23.
· HBD has committed to Momentum, Rainham (in an 80:20 JV with
Barings) (HBD share: £24m GDV) a 368,000 sq ft speculative I&L
development located close to Central London and within five miles of J30 of
the M25. Whilst formal marketing has not yet begun, the scheme is already
attracting strong occupier interest.
· At Setl, Birmingham, HBD is currently on site delivering a scheme
of 101 premium apartments within the highly sought-after St Paul's area of
Birmingham's Jewellery Quarter. Residential amenities include a roof garden,
co-working lounge and wellness studio. The scheme also incorporates 2,250 sq
ft of ground floor commercial space and is currently on track for completion
in Q4 23.
HBD's total development pipeline has grown to a GDV of £1.5bn (HBD share:
£1.25bn GDV). All of these opportunities sit within the Company's three key
markets of I&L (64%), Urban Commercial (21%) and Urban Residential (15%).
Significant schemes include:
· As reported in the interim results, HBD was appointed as
development partner on the first phase (HBD share: £50m GDV) of Cheltenham
Borough Council's £1bn Golden Valley development which comprises the delivery
of a mixed-use campus clustered around 150,000 sq ft of innovation space that
will serve as the new National Cyber Innovation Centre.
· In H2 22, a planning promotion and option agreement was secured
at Brodsworth (HBD Share: £90m GDV) for 432 acres of employment land and
1,000 residential plots. The c.730-acre site is jointly being promoted and
developed by both HLM and HBD.
· At Neighbourhood, Birmingham (HBD Share: £117m GDV), a planning
application was submitted in Q3 22 for 414-unit BtR development and was
subsequently granted in March 2023. The scheme is situated on a 2.6-acre site
located within the Jewellery Quarter area of Birmingham, in a prime location
in close proximity to the city centre. Neighbourhood will create an inclusive
new community around public realm with landscaped gardens and will host a
selection of the best local independent leisure operators. The internal
amenities within the scheme include a double height winter garden, a gym, roof
terraces and work zones. The scheme is targeting to secure pre-funding during
2023.
Within the development pipeline there are several developments that showcase
the Group's ESG ambitions and credentials by targeting both an EPC A rating
and BREEAM Excellent:
· HBD and Greater Manchester Pension Fund are working in a joint
venture to deliver 91,000 sq ft of NZC offices within Manchester City Centre.
Island will include 12,500 sq ft of amenity areas including social, meeting
and event spaces and a communal roof terrace. The scheme is on track to be
completed in Q3 24.
· At Momentum, Rainham, the I&L NZC scheme will target BREEAM
Excellent, an EPC A+ rating and all the units will be 100% electric. The
scheme is currently receiving encouraging occupier interest.
· HBD is designing 200,000 sq ft of NZC offices within Manchester's
St John's district, which is establishing itself as the tech, arts and culture
district of the city centre.
During 2022, a number of well-timed sales were made to reduce the size of the
investment portfolio (including share of properties held in JVs), which as of
31 December 2022 was valued at £106m (2021: £126m). Whilst the CBRE UK
Monthly Index showed commercial property values decreased by 13.3% over 2022,
HBD completed three sales in H2 22, comprising Kitwave Wakefield, Acre Mill
and Stop24 for a total of £29.6m, at an average 17% premium to the last
reported book value. This was a major driver of relative outperformance with a
portfolio capital return of -5.4%. The total property return of -1.5% for
2022, was significantly ahead of the CBRE UK Monthly Index (-9.1%). Rent
collection for FY 22 stands at 98% with occupancy increasing slightly to 88%
(2021: 85%) and the weighted average unexpired lease term is now 10.7 years
(2021: 16.1 years).
The Group is also committed to ensuring that all the properties within the
investment portfolio have a minimum EPC rating of 'C'. Currently 70% of these
properties have a rating of 'C' or higher, of which 39% of the total portfolio
are rated 'A-B'. The majority of the remaining 30% of the portfolio that are
currently below a 'C' rating, have redevelopment potential with a target range
of 'A' or 'B'.
The UK housing market slowed during 2022 as homebuyer demand was impacted by
higher mortgage rates following the sharp increases in interest rates.
According to Nationwide, house prices increased by 2.9% during 2022, with the
increase of 5.7% during the first eight months of the year largely reversing
in the final four months as prices declined by 2.6% from their peak. Whilst
mortgage approvals remain subdued, the reduction in longer-term interest rates
has started to feed through to mortgage rates, which together with
unemployment remaining low and a continued shortage of supply, should help
support transaction volumes during 2023.
SBH has continued to grow and during 2022 delivered 175 house completions (124
private/51 social) (2021: 120), at an average selling price for private homes
of £503k (2021: £509k). Due to high levels of forward sales brought into the
year, the average sales rate reduced to 0.51 houses per week per outlet (2021:
0.83). In common with many in the industry, supply chain challenges have
impacted SBH with completed sales below our target of 200, but strong sales
prices mean the business was marginally ahead of budget. As a result of sales
prices being achieved 10.4% ahead of budget, 9% build cost inflation has been
effectively managed.
SBH total owned and controlled land bank now comprises 1,094 plots (2021:
1,157) of which 872 plots have detailed or outline planning and has 3.5 years
supply based on a one-year rolling forward sales forecast for land with
planning or 4.4 years for its full land bank.
SBH has begun the year well, with mortgage rates beginning to stabilise, and
an easing of cost-of-living pressures providing some support to housing market
activity levels. The strategic objective of growing the business to achieve
600 completions per annum remains on track, entering 2023 with 56% of
reservations already secured against its delivery target of 250 homes (188
private/62 social).
Construction
Trading in the Group's construction segment has been ahead of expectations in
2022, achieving an operating profit of £12.1m (2021: £9.0m).
UK construction activity continued to recover during 2022, with annual output
increasing by 5.6% following the record increase of 12.8% in 2021. At a sector
level private housing was the largest positive contributor, with record annual
growth in private industrial new work. Monthly output in December 2022 was
3.8% above the February 2020 pre-COVID level.
HBC, the Group's construction business, performed in line with expectations,
delivering a turnover of £100.5m (2021: £86.2m) (52% in public sector) and
begins 2023 with 68% of its order book secured. 94% of the forecast costs
relating to work already secured for 2023 has fixed price orders placed or
contractual inflation clauses.
Despite experiencing delays and challenges with the supply chain and material
deliveries, progress continues to be made on the £42m urban development
scheme in the heart of Sheffield for Sheffield City Council and Queensberry
Development Management to create the Cambridge Street Collective as a
mixed-use facility as well as Elshaw House which will be a seven-storey NZC
office building. Works will be completed in H1 2023. Works on our £40m BtR
residential scheme Kangaroo Works in Sheffield are also progressing through to
completion in H1 2023. Good progress has been made on the £47m residential
development called the Cocoa Works in York for Latimer Developments. The seven
storey 279 apartment scheme remains on schedule for completion early 2024.
HBC operates across ten public sector frameworks and has seven schemes on site
through public sector frameworks with a total order value of £55m. In 2022
there were six successful renewals, which include:
o A new four-year P23 NHS Framework for projects up to £20m across
Yorkshire, Humber and the East Midlands.
o A place on the new four-year DfE Framework for projects between £6m to
£12m in the North East, Yorkshire and the East Midlands.
o YORbuild3 Medium Value Framework for projects between £4m and £10m.
Looking ahead, HBC is looking to maintain its public sector framework presence
and is currently bidding on the Pagabo refit and refurbishment framework for
works up to £30m in Yorkshire, Humberside and the East Midlands.
BP has seen record levels of trading activity with turnover in 2022 up 5%.
Strong customer demand has also driven an improvement in the asset utilisation
rate to 75% (2021: 70%) on its plant hire equipment. Road Link has performed
well as a result of traffic volumes increasing and the added benefit of high
inflation feeding into higher toll revenues.
Financial Review
Summary of financial performance
2022 2021 Change
£'m £'m %
Total revenue
Property Investment and Development 169.0 69.4 +144
Land Promotion 43.8 58.6 -25
Construction 128.6 102.6 +25
341.4 230.6 +48
Operating profit/(loss)
Property Investment and Development 25.7 18.3 +40
Land Promotion 17.3 17.5 -1
Construction 12.1 9.0 +34
Group overheads (8.6) (9.3) -8
46.5 35.5 +31
Net finance cost and other (0.9) (0.4) +125
Profit before tax 45.6 35.1 +30
The Group has benefited from strong activity within its property development
and strategic land businesses, driving the Group's best ever financial results
on an underlying profit basis(1) of £56.1m (excluding revaluation movements
on completed investment property) (2021: £29.3m).
Property investment and development was particularly strong in H1 22, as a
number of land sales completed and development contracts progressed, with the
full-year results subdued only by the market-wide fall in UK commercial
property values. Stonebridge Homes continued its growth trajectory increasing
unit completions by 46% to round off a strong performance for the property
investment and development segment.
UK housebuilding demand has also driven increased strategic land activity
within our land promotion segment with an operating profit of £17.3m
generated by the disposal of 3,869 residential plots during the year. The
segment also contractually exchanged sales that will generate £13m of gross
profit in 2023.
In anticipation of the UK economy slowing in H2 22, the Group reduced cash
investment in new acquisitions and focused on the development of existing
schemes from our pipeline of opportunities, with the aim of bringing assets to
market at the most opportune time.
Consolidated Statement of Comprehensive Income
Revenue increased 48% to £341.4m (2021: £230.6m) as we continue to deliver a
number of schemes in the property investment and development segment and
having completed on 175 (2021: 120) house sales in Stonebridge Homes. The land
promotion business disposed of 2,170 plots to Taylor Wimpey and Persimmon
Homes at Didcot and exceeded our target to dispose of 3,500 plots per annum.
The construction segment grew its revenue 25%, continuing to deliver urban
development works in Sheffield and from a number of framework agreements that
generate profitable work.
Gross profit of the Group increased 47% to £81.6m (2021: £55.5m), a gross
profit margin of 24% (2021: 24%) and reflects healthy returns across all our
operating segments. Administrative expenses increased by £4.0m (2021: £3.4m)
as we continued to invest in our people and processes to support future
growth.
Pension expenses of £4.3m (2021: £6.0m) are £1.7m lower than the prior year
due to the cost of closing the defined benefit pension scheme to future
accrual in 2021. The defined benefit pension scheme entered a surplus on an
IAS 19 basis in the year.
Property revaluation losses amounted to £8.2m (2021: £15.0m gain),
incorporating £4.9m revaluation losses (2021: £8.0m gain) on wholly owned
investment property and £3.2m revaluation losses (2021: £7.0m gain) on our
share of investment property held in joint ventures.
Property revaluation (losses)/gains 2022 2021
£'m
£'m
Wholly owned investment property:
- Completed investment property (7.3) 4.6
- Investment property in the course of construction 2.4 3.4
(4.9) 8.0
Joint ventures and associates:
- Completed investment property (3.2) 1.2
- Investment property in the course of construction - 5.8
(3.2) 7.0
(8.2) 15.0
Profit on sale of investment properties of £0.6m (2021: £1.3m), relates to
the opportune disposal of a motorway services asset to the existing operator
in Kent. Loss on disposal of assets held for sale of £0.1m represents the
selling costs on disposal of an industrial asset in Wakefield.
Share of profit of joint ventures and associates of £9.1m (2021: £8.9m)
includes significant land disposal in Aberdeen for local authority housing and
development of an industrial unit in Wakefield offset by property revaluation
losses of £3.2m, all by the property investment and development segment.
Profit on disposal of joint ventures and subsidiaries of £0.7m (2021: nil)
relates to the disposal of a long standing 50% interest in a joint venture
entity in Huddersfield by the property investment and development segment.
Overall, operating profits increased by 30.6% to £46.5m (2021: £35.6m) and,
after adjusting for net finance costs, we delivered a PBT of £45.6m (2021:
£35.1m).
The segmental result analysis shows that:
· Property investment and development produced an increased
operating profit of £25.7m (2021: £18.3m) arising from additional profits on
development contracts, land sales and an increase in Stonebridge housing unit
disposals to 175 (2021: 120), offset by a valuation loss on wholly owned
investment property of £4.9m (2021: 8.0m gain).
· Land promotion operating profit remained consistent at £17.3m
(2021: £17.5m) as we disposed of 3,869 residential plots during the year
(2021: 3,008).
· Construction segment operating profits increased to £12.1m
(2021: £9.0m) as construction and plant hire activity levels remain positive
and due to inflation-related fee increases on our PFI contract.
We continue to demonstrate the benefits of a broad-based operating model and
how this allows us to manage the impact of cyclical markets during challenging
times and capitalise on market recoveries that follow. We maintain a
significant pipeline of property development and consented residential plots;
the variable timing of the completion of deals in these areas does give rise
to financial results which can vary depending upon when contracts are
ultimately concluded. We mitigate this through the mix of businesses within
the Group and our business model which, over the longer term, will ultimately
see the blended growth of the Group delivered.
Tax
The tax charge for the year was £7.7m (effective rate of tax: 16.9%) (2021:
£4.5m; effective tax rate: 12.8%) and is lower (2021: lower) than the
standard rate of tax due to adjustments for joint ventures and associates
reported net of tax (2021: due to adjustments in respect of earlier years
arising from additional loss relief on asset disposals). Current taxation on
profit for the year was £8.5m (2021: £1.1m), deferred tax was a credit of
£0.8m (2021: £3.4m debit).
Earnings per share and dividends
Basic earnings per share increased 18% to 25.0p (2021: 21.2p) in line with the
increase in profits attributable to owners of the Parent Company. Total
dividend for the year increased 10% to 6.66p (2021: 6.05p), with the proposed
final dividend increasing to 4.00p (2021: 3.63p), payable on 2 June 2023 to
shareholders on the register as at 5 May 2023. The ex-dividend date is 4 May
2023.
Return on capital employed(2) ('ROCE')
Higher operating profit in the year saw an increased ROCE(2) to 12.0% in 2022
(2021: 9.6%) and is now within the Group's target return of 10%-15% which we
believe is appropriate for our current operating model and the markets we
operate in.
Finance and gearing
Net finance costs increased to £0.9m (2021: £0.4m) reflecting the increase
in UK interest rates during the year.
Interest cover, expressed as the ratio of operating profit (excluding the
valuation movement on investment properties, disposal and joint venture
profits) to net interest (excluding interest received on other loans and
receivables), was 22 times (2021: 31 times). No interest incurred in either
year has been capitalised into the cost of assets.
The Group's banking facilities were agreed on 23 January 2020 at £75.0m. The
facility with Barclays Bank PLC, HSBC UK Bank plc and National Westminster
Bank Plc runs for three years and includes two one-year extensions. On 20
January 2022, the banks agreed to the Group's second extension taking the
facility to 23 January 2025 and on 9 October 2022 to a call on the accordion
increasing the total committed facility to £105.0m. The Group had drawn
£65.0m of the facility at 31 December 2022 (2021: £50.0m).
On 20 December 2021, the Group signed a £25.0m receivables purchase agreement
with HSBC Invoice Finance UK Limited (HSBC) that allows it to sell deferred
income receivables to the bank. The risk and rewards of ownership are deemed
to fully transfer to HSBC and, therefore, this agreement is recorded off
balance sheet. The Group had sold £7.6m of receivables under the agreement at
31 December 2022 (2021: £nil).
2022 year-end net debt(4) was £48.6m (2021: £40.5m) resulting in the Group
having gearing of 12.3% (2021: 11.4%), at the lower end of our targeted range
of 10%-20%.
All bank borrowings continue to be from facilities linked to floating rates or
short-term fixed commitments. Throughout the year, we operated comfortably
within the facility covenants and continue to do so.
Cash flow summary
2022 2021
£'m
£'m
Operating profit 46.5 35.6
Depreciation and other non-cash items (3.4) (13.9)
Net movement on equipment held for hire (4.1) (4.8)
Movement in working capital (55.6) (55.5)
Cash generated from operations (16.6) (38.6)
Net capital disposals/(investments) 16.6 (20.9)
Net interest and tax (3.6) (5.0)
Dividends paid (12.4) (8.4)
Dividends received from joint ventures 7.1 2.2
Other 0.8 0.2
Change in net debt (8.1) (70.5)
Net (debt)/cash brought forward (40.5) 30.0
Net debt carried forward (48.6) (40.5)
During 2022, the cash outflow from operations amounted to £16.6m (2021:
£38.6m) after net investment in equipment held for hire of £4.1m (2021:
£4.8m), and cash outflows from a net increase in working capital of £55.6m
(2021: £55.5m).
Our increase in working capital arises from additional investment in property
developments in progress, our housebuilding and strategic land portfolios and
an increase in contract assets.
Net capital disposals of £16.6m (2021: £20.9m investment) arose from
disposals of investment property of £19.1m (2021: 6.7m) and joint ventures of
£6.9m (2021: £4.3m) and net movement in JV investments of £0.6m (2021:
£(13.7)m), which were offset by additions to investment property of £9.3m
(2021: £17.3m) and net additions to property, plant and equipment of £0.7m
(2021: £0.9m).
Net dividends, totalled £5.3m (2021: £6.2m), with those paid to equity
shareholders of £8.4m (2021: £7.6m) increasing by 10% and, dividends to
non-controlling interests of £4.0m (2021: £0.8m), being offset by dividends
received from joint ventures during the year of £7.1m (2021: £2.2m).
After net interest and tax of £3.6m (2021: £5.0m), there was an overall
outflow in net cash of £8.1m (2021: £70.5m), resulting in net debt of
£48.6m (2021: £40.5m).
Statement of financial position summary
2022 2021
£'m
£'m
Investment properties and assets classified as held for sale 97.1 104.2
Intangible assets 2.9 3.7
Property, plant and equipment, including right-of-use assets 29.8 27.9
Investment in joint ventures and associates 10.0 12.2
139.8 148.0
Inventories 291.8 235.3
Receivables 122.9 111.1
Payables (113.6) (85.1)
Other (4.2) (1.2)
Net operating assets 436.7 408.0
Net debt (48.6) (40.5)
Retirement benefit asset/(obligations) 6.2 (12.2)
Net assets 394.3 355.3
Less: Non-current liabilities and pension asset 4.8 20.4
Capital employed 399.1 375.7
Wholly owned investment properties decreased in value to £97.1m (2021:
£104.2m), following the disposals of an industrial unit in Wakefield and
motorway service station in Kent, together they sold at a premium to book
value of £18.6m. Offset by the transfer of newly completed industrial units
from inventory at Southend and Luton, which amount to £16.7m including
subsequent expenditure. Property revaluation losses amounted to £8.2m (2021:
£15.0m gain), incorporating £4.9m revaluation losses (2021: £8.0m gain) on
wholly owned investment property and £3.2m revaluation losses (2021: £7.0m
gain) on our shares of investment property held in joint ventures.
Intangible assets reflect goodwill of £1.2m (2021: £1.4m), being Road Link
(A69) of £0.3m (2021: £0.5m) and Banner Plant depots £0.9m (2021: £0.9m)
and the Group's investment in Road Link (A69) of £1.7m (2021: £2.3m). The
treatment of the Road Link investment as an intangible asset is a requirement
of IFRIC 12 and arises because the underlying road asset reverts to National
Highways at the end of the concession period in 2026.
Property, plant and equipment comprises Group occupied buildings valued at
£7.0m (2021: £6.6m) and plant, equipment and vehicles with a net book value
of £22.8m (2021: £21.3m), including £1.0m (2021: £1.6m) of right-of-use
assets under IFRS 16. Property, plant and equipment, along with right-of-use
assets, have increased as new additions of £3.8m (2021: £6.8m) are offset by
disposals and the depreciation charge for the year. Right-of-use assets have
decreased in the year as the Group's lease liabilities unwind.
Investments in joint ventures and associates decreased £2.2m to £10.0m
(2021: £12.2m) arising from the Group's share of profits of £9.1m (2021:
£8.9m) (including fair value reductions of £3.2m), less distributions of
£7.2m (2021: £2.2m) and net disposals of £4.1m (£0.4m). We continue to
undertake property development projects with other parties where we feel there
is a mutual benefit.
Inventories were £291.8m (2021: £235.3m) with property inventory increasing
to £91.2m (2021: £75.2m) as the Group progressed a Build to Sell opportunity
in Birmingham, and existing development schemes, most notably an industrial
scheme in Southend. We have increased our housebuilder land and work in
progress to £80.6m (2021: £52.5m) as we continue to invest in land, expand
regionally into the North East and increase annual plot disposals. We continue
to invest in owned land and land interests held under agency agreements at a
lower capital cost. Inventories are held at the lower of cost or net
realisable value, in accordance with our accounting policy and, as such, no
uplift in value created from securing planning permission is recognised within
our accounts until disposal.
Receivables, including contract assets, increased £11.8m to £122.9m (2021:
£111.1m) due to an increase in commercial activity. Deferred payment
receivables remain a function of the number and size of strategic land
development schemes sold, and levels of construction contract activity
undertaken.
Payables increased to £113.6m (2021: £85.1m) with trade and other payables
increasing to £100.0m (2021: £73.9m), provisions decreasing to £5.4m (2021:
£6.3m) as strategic land provisions unwind, contract liabilities decreasing
to £4.0m (2021: £5.0m), arising from payments received for work not yet
undertaken.
Net debt included cash and cash equivalents of £17.4m (2021: £11.1m),
borrowings of £65.0m (2021: £50.0m) and lease liabilities of £1.0m (2021:
£1.7m). In total, net debt was £48.6m (2021: 40.5m).
At 31 December 2022, the IAS 19 pension valuation has decreased over the year
from a deficit of £12.2m to a surplus of £6.2m, driven by a significant
decrease in the value placed on the liabilities. This is mainly the result of
substantial increases in the corporate bond yields used to discount future
benefit payments, which reduces the value placed on the liabilities. The
pension scheme's assets continue to be invested globally, with high-quality
asset managers, in a broad range of assets. The pension scheme Trustees
regularly consider the merits of both the managers and asset allocations and,
along with the Company, review the returns achieved by the asset portfolio
against the manager benchmarks. They then make changes, as the Trustee
considers appropriate, in conjunction with investment advice received.
Overall, the net assets of the Group increased by 11.0% to £394.3m (2021:
£355.3m) from retained profits and the decrease in retirement benefit
valuation less distributions to shareholders. NAV per share(3) increased 10.5%
to 295p (2021: 267p).
Darren Littlewood
Chief Financial Officer
NOTES:
(1) Underlying profit is an alternative performance measure (APM) and is
defined as profit before tax excluding revaluation movements on completed
investment properties. Revaluation movement on completed investment properties
includes losses of £7.3m (2021: £4.6m gain) on wholly owned completed
investment property and losses of £3.2m (2021: £1.2m gains) on completed
investment property held in joint ventures. This APM has been introduced as it
provides the users with a measure that excludes specific external factors
beyond management's controls and reflects the Group's underlying results. This
measure is used in the business in appraising senior management performance.
(2) Return on Capital Employed is an APM and is defined as operating
profit/capital employed where capital employed is the average of total assets
less current liabilities and pension asset/obligation at the opening and
closing balance sheet dates.
(3) Net Asset Value (NAV) per share is an APM and is defined using the
statutory measures net assets/ordinary share capital.
(4) Net (debt)/cash is an APM and is reconciled to statutory measures in note
7.
( )
UNaudited Consolidated Statement of Comprehensive Income
for the year ended 31 December 2022
2022 2021
£'000 £'000
Revenue 341,419 230,598
Cost of sales (259,829) (175,052)
Gross profit 81,590 55,546
Administrative expenses (36,143) (32,174)
Pension expenses (4,312) (6,039)
41,135 17,333
(Decrease)/increase in fair value of investment properties (4,921) 7,972
Profit on sale of investment properties 646 1,340
Loss on sale of assets held for sale (149) -
Share of profit of joint ventures and associates 9,079 8,928
Profit on disposal of joint ventures 667 -
Operating profit 46,457 35,573
Finance income 1,641 724
Finance costs (2,503) (1,155)
Profit before tax 45,595 35,142
Tax (7,725) (4,482)
Profit for the year from continuing operations 37,870 30,660
Other comprehensive income/(expense) not being reclassified to profit or loss
in subsequent years:
Revaluation of Group occupied property 315 -
Deferred tax on property revaluations (23) (282)
Actuarial gain on defined benefit pension scheme 14,994 23,297
Deferred tax on actuarial gain (3,749) (4,840)
Total other comprehensive income not being reclassified to profit or loss in
subsequent years
11,537 18,175
Total comprehensive income for the year 49,407 48,835
Profit for the year attributable to:
Owners of the Parent Company 33,319 28,160
Non-controlling interests 4,551 2,500
37,870 30,660
Total comprehensive income attributable to:
Owners of the Parent Company 44,856 46,335
Non-controlling interests 4,551 2,500
49,407 48,835
Basic earnings per ordinary share for the profit attributable to owners of the
Parent Company during the year
25.0p 21.2p
Diluted earnings per ordinary share for the profit attributable to owners of 24.6p 20.9p
the Parent Company during the year
UNaudited Statement of Financial Position
as at 31 December 2022
2022 2021
£'000 (restated(1))
£'000
Assets
Non-current assets
Intangible assets 2,933 3,716
Property, plant and equipment 28,766 26,349
Right-of-use assets 997 1,581
Investment properties 97,116 104,177
Investment in joint ventures and associates 9,990 12,165
Retirement benefit asset 6,188 -
Trade and other receivables 37,029 37,107
Deferred tax assets 249 3,389
183,268 188,484
Current assets
Inventories 291,778 235,296
Contract assets 19,257 7,556
Trade and other receivables 66,601 64,615
Current tax receivable - 1,828
Cash 17,401 11,116
395,037 320,411
Liabilities
Current liabilities
Trade and other payables 95,827 72,155
Contract liabilities 4,006 5,033
Current tax liabilities 3,793 -
Borrowings 65,000 50,000
Lease liabilities 426 639
Provisions 4,003 5,427
173,055 133,254
Net Current Assets 221,982 187,157
Non-current liabilities
Trade and other payables 4,568 1,669
Lease liabilities 607 1,021
Retirement benefit obligations - 12,228
Deferred tax liabilities 4,401 4,582
Provisions 1,385 855
10,961 20,355
Net Assets 394,289 355,286
Equity
Share capital 13,763 13,732
Property revaluation reserve 2,352 2,060
Retained earnings 365,692 328,348
Other reserves 7,482 6,744
Cost of shares held by ESOP trust (967) (1,044)
Equity attributable to owners of the Parent Company 388,322 349,840
Non-controlling interests 5,967 5,446
Total Equity 394,289 355,286
(1) See note 1 to the financial statements
UNaudited Statement of Changes in Equity
for the year ended 31 December 2022
Attributable to owners of the Parent Company
Group Share Property Retained Other Cost of Total Non- Total
capital revaluation earnings reserves shares £'000 controlling equity
£'000 reserve £'000 £'000 held interests £'000
£'000 by ESOP £'000
trust
£'000
At 1 January 2021 13,718 2,342 288,514 6,404 (1,176) 309,802 3,686 313,488
Profit for the year - - 28,160 - - 28,160 2,500 30,660
Other comprehensive income - (282) 18,457 - - 18,175 - 18,175
Total comprehensive income - (282) 46,617 - - 46,335 2,500 48,835
Equity dividends - - (7,620) - - (7,620) (740) (8,360)
Proceeds from shares issued 14 - - 340 - 354 - 354
Share-based payments - - 837 - 132 969 - 969
14 - (6,783) 340 132 (6,297) (740) (7,037)
At 31 December 2021 13,732 2,060 328,348 6,744 (1,044) 349,840 5,446 355,286
Profit for the year - - 33,319 - - 33,319 4,551 37,870
Other comprehensive income - 292 11,245 - - 11,537 - 11,537
Total comprehensive income - 292 44,564 - - 44,856 4,551 49,407
Equity dividends - - (8,383) - - (8,383) (4,030) (12,413)
Proceeds from shares issued 31 - - 738 - 769 - 769
Share-based payments - - 1,163 - 77 1,240 - 1,240
31 - (7,220) 738 77 (6,374) (4,030) (10,404)
At 31 December 2022 13,763 2,352 365,692 7,482 (967) 388,322 5,967 394,289
UNaudited Statement of Cash Flows
for the year ended 31 December 2022
2022 2021
£'000 £'000
Cash flows from operating activities
Cash generated from operations (16,549) (38,665)
Interest paid (1,829) (792)
Tax paid (2,918) (4,299)
Net cash flows from operating activities (21,296) (43,756)
Cash flows from investing activities
Purchase of intangible assets - (203)
Purchase of property, plant and equipment (971) (861)
Purchase of investment property (9,301) (17,317)
Purchase of investment in associate (2,112) (2)
Proceeds on disposal of property, plant and equipment (excluding equipment
held for hire)
270 301
Proceeds on disposal of assets held for sale 10,987 -
Proceeds on disposal of investment properties 8,146 6,651
Advances of loans to joint ventures and associates (8,560) (12,999)
Repayment of loans from joint ventures and associates 10,904 -
Proceeds on disposal of joint ventures 6,873 4,252
Interest received 1,153 129
Dividends received from joint ventures 7,160 2,155
Net cash flows from investing activities 24,549 (17,894)
Cash flows from financing activities
Proceeds from shares issued 769 354
Movement in payables to joint ventures and associates 355 (701)
Repayment of borrowings (70,000) (14,969)
Proceeds from borrowings 85,000 55,000
Principal elements of lease payments (679) (683)
Dividends paid - ordinary shares (8,362) (7,599)
- non-controlling interests (4,030) (740)
- preference shares (21) (21)
Net cash flows from financing activities 3,032 30,641
Net increase/(decrease) in cash and cash equivalents 6,285 (31,009)
Net cash and cash equivalents at beginning of year 11,116 42,125
Net cash and cash equivalents at end of year 17,401 11,116
Notes to the Financial Statements
for the year ended 31 December 2022
1. Basis of preparation
These results for the year ended 31 December 2022 are unaudited. The financial
information set out in this announcement does not constitute the Group's
statutory accounts for the years ended 31 December 2022 or 31 December 2021 as
defined by Section 434 of the Companies Act 2006.
The results have been prepared in accordance with UK adopted international
accounting standards. They have been prepared on the historic cost basis,
except for financial instruments, investment properties and Group occupied
land and buildings, which are measured at fair value.
The financial information for the year ended 31 December 2021 is derived from
the statutory accounts for that year, which have been delivered to the
Registrar of Companies. The current auditors, Ernst & Young LLP, reported
on those accounts and their report was unqualified, did not contain an
emphasis of matter paragraph and did not contain any statement under Section
498 (2) or (3) of the Companies Act 2006.
The statutory accounts for the year ended 31 December 2022 will be finalised
on the basis of the financial information presented by the Directors in these
results and will be delivered to the Registrar of Companies following the AGM
of Henry Boot PLC. The same accounting policies and methods of computation are
followed as in the latest published audited accounts for the year ended 31
December 2021, which are available on the Group's website at
www.henryboot.co.uk (http://www.henryboot.co.uk) .
The following standards, amendments and interpretations to existing standards
are effective or mandatory for the first time for the accounting year ended
31 December 2022:
Effective from
IFRS 4 (amended 2020) 'Extension of the temporary exemption from applying IFRS 9' Immediately available
IFRS 16 (amended 2021) 'Covid-19-related rent concessions beyond June 2021' 1 April 2021
IFRS 3 (amended 2020) 'Reference to the Conceptual Framework' 1 January 2022
IAS 16 (amended 2020) 'Proceeds before intended use' 1 January 2022
IAS 37 (amended 2020) 'Costs of fulfilling a contract' 1 January 2022
Annual Improvements (issued 2020) 'Annual improvements to IFRS standards 2018 - 2020' 1 January 2022
These standards did not have a material impact on the Group's results.
The Group did not early adopt any standard or interpretation not yet
mandatory.
Prior year restatement of government loans, trade receivables and amounts owed
by joint ventures and associates
The Group's borrowings and trade receivables have been restated for the period
ended 31 December 2021. The Group previously recognised a government loan
payable to the Homes and Communities Agency (HCA) amounting to £2,941,000 for
infrastructure of a strategic land development. A corresponding trade
receivable from the housebuilder was recognised on disposal of the land.
Following legal guidance on the nature of the agreement it has been concluded
that the Group has no residual obligation to the HCA in respect of the loan
which is payable directly by the housebuilder. This has resulted in previously
reported borrowings decreasing by £2,941,000 and trade receivables reducing
by the same. There is no impact on the Consolidated Statement of Comprehensive
Income, Statement of Changes in Equity or Statement of cash flows. The impact
on the 31 December 2020 balance sheet would be to decrease borrowings and
trade receivables by £2,941,000.
Amounts owed by joint ventures and associates have been restated for the
period ended 31 December 2021. The Group previously recognised amounts owed by
joint ventures and associates as being entirely due within one year on the
basis these amounts were repayable on demand. Following a review of the
Group's historic practice and future plans not to call on all intercompany
receivables in the short term, £23,803,000 of amounts owed by joint ventures
and associates at 31 December 2021 have been reclassified to non-current
in-line with IAS 1. There is no impact on the Consolidated Statement of
Comprehensive Income, Statement of Changes in Equity or Statement of cash
flows. The impact on the 31 December 2020 balance sheet would be to reclassify
£10,331,000 of current intercompany receivables to non-current intercompany
receivables.
Going concern
In undertaking their going concern review, which covers the period to December
2024, the Directors considered the Group's principal risk areas that they
consider material to the assessment of going concern.
As the UK economy moves at a slow pace, the Directors have assessed the
Group's ability to operate in a more uncertain environment in modelling a base
case scenario. They have also modelled what they consider to be a severe
downside scenario including further curtailments in activities. This downside
scenario shows a c.50% reduction in sales and c.67% reduction in profits from
the base case. Construction and Development activity only takes place where
contracted and likewise for Hallam Land where no sales are assumed in 2023
unless already contracted. For Stonebridge Homes a 10% decline in house prices
is assumed along with a 25% reduction in the number of plots sold and Banner
Plant revenue declines c.25%. This downside model assumes that acquisition and
development spend is restricted other than that already committed and is all
consistent with previous experience in recessionary environments. Having
started 2023 with net debt of £48.6m, and with c.£63.2m net debt at 28
February 2023, against facilities of £105.0m the Directors have concluded
that the Group is able to control the level of uncommitted expenditure, whilst
delivering contracted schemes, allowing it to retain and even improve the cash
position in the event of a severe downside scenario, although the impact of
doing so on the profit and loss account would be unavoidable.
The Group meets its day-to-day working capital requirements through a secured
loan facility. The facility was renewed on 23 January 2020, at a level of
£75m, for a period of three years and extended by one year in January 2021
and a further year in January 2022 taking the facility renewal to 23 January
2025 on the same terms as the existing agreement. The facility includes an
accordion to increase the facility by up to £30m, which was called on by the
Group on 9 October 2022 increasing the overall facility to £105m. None of the
modelling undertaken by the Directors gives rise to any breach of bank
facility covenants. The most sensitive covenant in our facilities relates to
the ratio of EBIT (Earnings Before Interest and Tax) on a 12-month rolling
basis to senior facility finance costs. Our downside modelling, which reflects
a near 50% reduction in revenue and near 67% reduction in profit before tax
from our base case for 2023, demonstrates significant headroom over this
covenant throughout the forecast period to the end of December 2024.
At the time of approving the Financial Statements, the Directors expect that
the Company and the Group will have adequate resources, liquidity and
available bank facilities to continue in operational existence for the
foreseeable future. Accordingly, they continue to adopt the going concern
basis of accounting in preparing the Financial Statements.
2. Segment information
For the purpose of the Board making strategic decisions, the Group is
currently organised into three operating segments: Property Investment and
Development; Land Promotion; and Construction. Group overheads are not a
reportable segment; however, information about them is considered by the Board
in conjunction with the reportable segments.
Operations are carried out entirely within the United Kingdom.
Inter-segment sales are charged at prevailing market prices.
The accounting policies of the reportable segments are the same as the Group's
Accounting Policies.
Segment profit represents the profit earned by each segment before tax and is
consistent with the measure reported to the Group's Board for the purpose of
resource allocation and assessment of segment performance.
2022
Revenue Property Land Construction Group Eliminations Total
Investment Promotion £'000 overheads £'000 £'000
and £'000 £'000
Development
£'000
External sales 168,990 43,820 128,609 - - 341,419
Inter-segment sales 290 - 4,453 386 (5,129) -
Total revenue 169,280 43,820 133,062 386 (5,129) 341,419
Gross profit/(loss) 36,488 24,320 20,720 99 (37) 81,590
Administrative expenses and pension (16,142) (6,971) (8,636) (8,743) 37 (40,455)
Other operating income 5,322 - - - - 5,322
Operating profit/(loss) 25,668 17,349 12,084 (8,644) - 46,457
Finance income 4,015 744 1,507 26,576 (31,201) 1,641
Finance costs (2,226) (213) (374) (3,373) 3,683 (2,503)
Profit/(loss) before tax 27,457 17,880 13,217 14,559 (27,518) 45,595
Tax (3,411) (3,451) (2,771) 1,908 - (7,725)
Profit/(loss) for the year 24,046 14,429 10,446 16,467 (27,518) 37,870
2021
Revenue Property Land Construction Group Eliminations Total
Investment Promotion £'000 overheads £'000 £'000
and £'000 £'000
Development
£'000
External sales 69,360 58,563 102,675 - - 230,598
Inter-segment sales 290 - 7,606 526 (8,422) -
Total revenue 69,650 58,563 110,281 526 (8,422) 230,598
Gross profit/(loss) 14,924 23,257 17,363 52 (50) 55,546
Administrative expenses and pension (14,959) (5,726) (8,401) (9,177) 50 (38,213)
Other operating income/(expense) 18,296 (56) - - - 18,240
Operating profit/(loss) 18,261 17,475 8,962 (9,125) - 35,573
Finance income 4,538 698 765 19,060 (24,337) 724
Finance costs (7,002) (139) (467) (2,303) 8,756 (1,155)
Profit/(loss) before tax 15,797 18,034 9,260 7,632 (15,581) 35,142
Tax (2,927) (2,244) (1,798) 2,487 - (4,482)
Profit/(loss) for the year 12,870 15,790 7,462 10,119 (15,581) 30,660
2022 2021
£'000 (restated(1))
£'000
Segment assets
Property Investment and Development 355,491 310,421
Land Promotion 149,598 142,655
Construction 45,766 43,205
Group overheads 3,612 2,323
554,467 498,604
Unallocated assets
Deferred tax assets 249 3,389
Current tax receivables - 1,828
Retirement benefit asset 6,188 -
Cash and cash equivalents 17,401 11,116
Total assets 578,305 514,937
Segment liabilities
Property Investment and Development 59,113 36,169
Land Promotion 13,114 11,523
Construction 36,994 40,418
Group overheads 568 3,071
109,789 91,181
Unallocated liabilities
Current tax liabilities 3,793 -
Deferred tax liabilities 4,401 4,582
Current lease liabilities 426 639
Current borrowings 65,000 50,000
Non-current lease liabilities 607 1,021
Retirement benefit obligations - 12,228
Total liabilities 184,016 159,651
Total net assets 394,289 355,286
(1) See note 1 to the financial statements.
3. Tax
2022 2021
£'000 £'000
Current tax:
UK corporation tax on profits for the year 8,690 2,752
Adjustment in respect of earlier years (152) (1,683)
Total current tax 8,538 1,069
Deferred tax:
Origination and reversal of temporary differences (813) 3,457
Adjustment in respect of earlier years - 105
Impact of rate change - (149)
Total deferred tax (813) 3,413
Total tax 7,725 4,482
4. Dividends
2022 2021
£'000 £'000
Amounts recognised as distributions to equity holders in the year:
Preference dividend on cumulative preference shares 21 21
Final dividend for the year ended 31 December 2021 of 3.63p per share (2020: 4,822 4,383
3.30p)
Interim dividend for the year ended 31 December 2022 of 2.66p per share (2021: 3,540 3,216
2.42p)
8,383 7,620
The proposed final dividend for the year ended 31 December 2022 of 4.00p per
share (2021: 3.63p) makes a total dividend for the year of 6.66p (2021:
6.05p).
The proposed final dividend is subject to approval by shareholders at the AGM
and has not been included as a liability in these Financial Statements. The
total estimated dividend to be paid is £5,300,000.
Notice has been received from Moore Street Securities Limited waiving its
right as corporate trustee for the Employee Share Ownership Plan ('ESOP') to
receive all dividends in respect of this and the previous financial year.
5. Investment properties
Fair value measurements recognised in the Statement of Financial Position
The following table provides an analysis of the fair values of investment
properties recognised in the Statement of Financial Position by the degree to
which the fair value is observable:
Level 1 Level 2 Level 3 2022 2021 Increase/
£'000 £'000 £'000 £'000 £'000 (decrease)
in year
Completed investment property
Industrial - - 52,927 52,927 46,796 6,131
Leisure - - 9,208 9,208 9,598 (390)
Mixed-use - - - - 7,483 (7,483)
Residential - - 4,322 4,322 4,127 195
Office - - 6,275 6,275 9,938 (3,663)
Retail - - 14,466 14,466 17,235 (2,769)
- - 87,198 87,198 95,177 (7,979)
Investment property under construction
Industrial - - 9,918 9,918 9,000 918
- - 9,918 9,918 9,000 918
Total carrying value - - 97,116 97,116 104,177 (7,061)
The Group's policy is to recognise transfers into and out of fair value
hierarchy levels as of the date of the event or change in circumstances that
causes the transfer. The Directors determine the applicable hierarchy that a
property falls into by assessing the level of comparable evidence in the
market, which that asset falls into and the inherent level of activity. As at
the reporting date and throughout the year, all property was determined to
fall into Level 3 and so there were no transfers between hierarchies.
Explanation of the fair value hierarchy:
Level 1 - fair value measurements are those derived from quoted prices
(unadjusted) in active markets for identical assets or liabilities
that the entity can access at the measurement date;
Level 2 - fair value measurements are those derived from the use of a model
with inputs (other than quoted prices included in Level 1)
that are observable from directly or indirectly observable market data; and
Level 3 - fair value measurements are those derived from use of a model with
inputs that are not based on observable market data.
Investment properties have been split into different classes to show the
composition of the investment property portfolio of the Group as at the
reporting date. Management has determined that aggregation of the results
would be most appropriate based on the type of use that each property falls
into, which is described below:
Class
Industrial Includes manufacturing and warehousing, which are usually similar in
dimensions and construction method.
Leisure Includes restaurants and gymnasiums or properties in which the main activity
is the provision of entertainment and leisure facilities to the public.
Mixed-use Includes schemes where there are different types of uses contained within one
physical asset, the most usual combination being office and leisure.
Residential Includes dwellings under assured tenancies.
Office Includes buildings occupied for business activities not involving storage or
processing of physical goods.
Retail Includes any property involved in the sale of goods.
Land Includes land held for future capital appreciation as an investment.
Investment properties under construction are categorised based on the future
anticipated highest and best use of the property.
6. Share capital
Authorised, allotted,
issued and fully paid
2022 2021
£'000 £'000
400,000 5.25% cumulative preference shares of £1 each (2021: 400,000) 400 400
133,627,922 ordinary shares of 10p each (2021: 133,323,967) 13,363 13,332
13,763 13,732
7. Cash generated from operations
2022 2021
£'000 £'000
Profit before tax 45,595 35,142
Adjustments for:
Amortisation of PFI asset 579 602
Goodwill impairment 203 203
Depreciation of property, plant and equipment 3,957 3,819
Depreciation of right-of-use assets 597 598
Revaluation decrease/(increase) in investment properties 4,921 (7,972)
Amortisation of capitalised letting fees 25 41
Share-based payment expense 1,241 968
Pension scheme credit (3,422) (920)
Profit on disposal of property, plant and equipment (176) (16)
Profit on disposal of equipment held for hire (1,070) (981)
Gain on disposal of investment properties (646) (1,340)
Loss on disposal of assets held for sale 150 -
Gain on disposal of joint ventures (667) -
Finance income (1,641) (724)
Finance costs 2,503 1,155
Share of profit of joint ventures and associates (9,079) (8,928)
Operating cash flows before movements in equipment held for hire 43,070 21,647
Purchase of equipment held for hire (5,454) (5,952)
Proceeds on disposal of equipment held for hire 1,343 1,159
Operating cash flows before movements in working capital 38,959 16,854
Increase in inventories (63,701) (36,025)
Increase in receivables (3,763) (22,643)
(Increase)/decrease in contract assets (11,701) 5,772
Increase/(decrease) in payables and provisions 24,684 (226)
Decrease in contract liabilities (1,027) (2,397)
Cash flows from operations (16,549) (38,665)
2022 2021
£'000 (restated(1))
£'000
Analysis of net debt:
Cash and cash equivalents 17,401 11,116
Bank overdrafts - -
Net cash and cash equivalents 17,401 11,116
Bank loans (65,000) (50,000)
Lease liabilities (1,033) (1,660)
Net debt (48,632) (40,544)
(1) See note 1 to the financial statements.
8. Events after the balance sheet date
Since the balance sheet date the Group has proposed a final dividend for 2022,
further information can be found in note 4.
There were no other significant events since the balance sheet date that may
have a material effect on the financial position or performance of the Group.
9. These results were approved by the Board of Directors and authorised for
issue on 21 March 2023.
10. The 2022 Annual Report and Financial Statements is to be published on the
Company's website at www.henryboot.co.uk (http://www.henryboot.co.uk) and sent
out to those shareholders who have elected to continue to receive paper
communications by no later than 24 April 2023. Copies will be available from
The Company Secretary, Henry Boot PLC, Banner Cross Hall, Ecclesall Road
South, Sheffield S11 9PD.
11. The AGM of the Company is to be held at Double Tree by Hilton,
Chesterfield Road South, Sheffield, S8 8BW on Thursday 25 May 2023, commencing
at 12.30pm.
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