REG - Boot(Henry) PLC - RESULTS FOR YEAR ENDED 31 DEC 2023
25/03/2024 07:00
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RNS Number : 0552I Boot(Henry) PLC 25 March 2024
25 March 2024
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 2023
Resilient 2023 performance; Positioned well for market recovery; 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 2023.
Tim Roberts, Chief Executive Officer, commented:
"Our focus on high quality land, commercial property development and
housebuilding in prime locations meant that demand for our premium products
remained resilient and allowed Henry Boot to perform relatively well against a
backdrop of a slowing economy, rising interest rates, high inflation and
decreasing volumes in our key markets. While constraining our ability to bring
forward developments in one respect, the government's consistent failure to
make much needed reforms to an increasingly dysfunctional planning system does
play to the strengths of our land promotion business while helping underpin
demand from national housebuilders, who are still actively acquiring prime
strategic sites to shore up their future pipelines. This alongside some well
timed development disposals and Stonebridge Homes increasing house sales by
43%, helped deliver a resilient performance.
We are not immune from the challenges that the UK economy presents to the
near-term trading environment and as previously reported, we expect a lag in
performance in the year ahead. However, the outlook for both inflation and
interest rates is improving and it's beginning to feel as though the UK
economy has turned a corner, with recent reductions in mortgage rates also
pointing towards a hopefully brighter future. With this in mind, and given the
Group's continued strong financial position, we remain confident in achieving
our medium term growth and return targets, as reflected in the 10% dividend
increase we have announced today."
Financial Highlights
· 5.3% increase in revenue to £359.4m (2022: £341.4m) driven by
land disposals, property development and housing completions
· Profit before tax of £37.3m (2022: £45.6m) and underlying
profit¹ of £36.7m (2022: £56.1m), in line with market expectations and
supported by our focus on high quality land and development in prime locations
· Capital employed has increased by 4.5% to £417m (2022: £399m)
continuing our stated growth strategy and progressing, towards our medium
target of £500m
· ROCE² of 9.9% (2022: 12.0%), rounded, at the lower end of our
medium-term target of 10-15%
· NAV³ per share is up by 3.7% to 306p (2022: 295p), due to
resilient operational performance. Excluding the defined benefit pension
scheme surplus, NAV per share showed an underlying increase of 3.4% to 300p
(December 2022: 290p)
· Strong balance sheet, with net debt⁴ of £77.8m (2022: £48.6m)
reflecting continued investment in committed developments and selective
acquisitions. Gearing at 19.0% (2022: 12.3%) within the optimum stated range
of 10-20%
· Proposed final dividend of 4.40p (2022: 4.00p), an increase of
10.0%, in line with our progressive dividend policy, bringing the total
dividend for the year to 7.33p (2022: 6.66p)
· We remain confident in achieving our medium term growth and
return targets
Operational Highlights
· £248.5m (2022: £241.9m) of land and property sales led by our
land promotion, development and housebuilding businesses, despite a
challenging economy and slower market conditions, reflecting the demand for
our prime projects and buildings
· Land promotion
o 1,944 plots sold (2022: 3,869) at an increased gross profit per plot of
£15,480 (2022: £6,066) due to significant freehold sale at Tonbridge, more
than offsetting the volume reduction
o The total land bank has grown to 100,972 plots (2022: 95,704 plots)
o 8,501 plots with planning permission (2022: 9,431), all held at cost and
13,468 in for planning (2022: 12,297)
· Property investment & development
o Gross Development Value of completed schemes £126m (HB share £111m)
dominated by prime industrial development which was all successfully pre-let
and/or pre-sold
o High quality committed development programme of £159m, with 50% pre-sold
or pre-let, including c.550,000 sq ft of Industrial & Logistics
development underway (HB share: £91m GDV)
o £1.5bn development pipeline (HB share £1.3bn GDV), 59% of which is
focused on Industrial & Logistics markets
o The market value of the investment portfolio including our share of JVs
market value increased to £112.9m (2022: £108.6m) and continued to
outperform the CBRE UK monthly Index, with a total return(5) of 6.7% for year
ending 2023
o Four accretive investment property sales, plus Banner Cross Hall, for a
combined value of £12.7m, at an average 23% premium to December 2022
valuations
o Stonebridge Homes increased annual sales output by 43%, completing 251
homes (2022: 175 homes) and grew total owned and controlled land bank to 1,513
plots (2022: 1,094 plots) as the business continues scaling up in line with
its growth aspirations
· Construction
o The construction segment achieved turnover of £99.5m (2022: £128.6m) in
a challenging market and remained profitable, achieving an operating profit of
£6.5m (2022: £12.1m)
· Responsible business
o The Group continues to make progress against its Responsible Business
Strategy and published 2025 interim targets, launching a Health and Wellbeing
programme and continued progress in achieving our GHG emissions target to
support reaching NZC by 2030
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 gains of £0.5m (2022: £7.3m losses) on wholly owned completed
investment property and a gain of £0.1m (2022: £3.2m losses) on completed
investment property held in joint ventures. This APM is used as it provides
the users with a measure that excludes specific external factors beyond
management's control 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 is an APM and is reconciled to statutory measures in note 7.
( )
(5) Total property return is a metric that combines capital and income returns
for the investment portfolio. It is calculated as the percentage value change
plus net income accrual, relative to the capital employed and is calculated on
a monthly basis and then indexed in line with the benchmark.
( )
⁶ 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:
Henry Boot PLC
Tim Roberts, Chief Executive Officer
Darren Littlewood, Chief Financial Officer
Daniel Boot, Senior Corporate Communications Manager
Tel: 0114 255 5444
www.henryboot.co.uk (http://www.henryboot.co.uk)
Deutsche Numis
Joint Corporate Broker
Ben Stoop/Will Rance
Tel: 020 7260 1000
Peel Hunt LLP
Joint Corporate Broker
Ed Allsopp/Charles Batten
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"
Webcast link: https://stream.brrmedia.co.uk/broadcast/65bbc7e532e07c0e79477b59
(https://stream.brrmedia.co.uk/broadcast/65bbc7e532e07c0e79477b59)
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 performed resiliently in 2023, delivering a profit before tax
(PBT) of £37.3m (2022: £45.6m) or on an underlying profit basis £36.7m
(2022: £56.1m), after excluding revaluation movements on completed investment
property. Throughout last year, the Group traded in a slowing economy, facing
stubbornly high inflation and rising interest rates. Despite these conditions,
our focus on high quality land and development in prime locations has meant
the Group delivered an increase in overall sales, growing revenue to £359.4m
(2022: £341.4m).
As previously reported, we expect a lag in performance for 2024 due to the
time it takes for projects and sales to complete, and we remain cautious of
the near-term trading environment. Whilst believing that it is crucial that
any new government deals with a reform of the planning system, the outlook for
both inflation and interest rates are improving, supported by recent
reductions in mortgage rates. With this in mind, it feels as though the UK
economy has turned a corner, leaving us with continued conviction in achieving
our medium term growth and return targets.
The Group remains in a strong financial position, with a robust balance sheet
and NAV per share increasing by 3.7% to 306p (2022: 295p) or by 3.4% to 300p
(2022: 290p), excluding the defined benefit pension scheme surplus. Net debt
increased to £77.8m (2022: £48.6m) as we maintained our focus on investing
in our prime land portfolio, building out our high quality committed
development programme and continuing to grow our premium housebuilder.
Additionally, there was continued investment to support our long term
ambitions, including the relocation of our head office as well as investment
in our people, marketing and technology. This resulted in our gearing moving
to 19.0%, which remains within our optimum stated range of 10-20%.
On other strategic objectives that support our long-term ambitions of the
business, I am pleased to report:
· After launching our Responsible Business Strategy in 2022, we
continue to make great progress against our targets. In 2023, we launched our
Health and Wellbeing Strategy which includes resources and guidance on a range
of key topics, such as neurodiversity and mental health. In regard to reducing
our total direct greenhouse gas emissions (Scopes 1 and 2), at the end of 2023
there was a 14% reduction against the 2019 baseline, and we are on track to
hit net zero carbon (NZC) by 2030.
· In November 2023, we relocated our head office to the Isaac's
Building in Sheffield city centre. Our new HQ supports the aim to reduce our
carbon footprint and the goal of achieving NZC by 2030, with an expected
emission reduction of 79% compared with the former head office. On top of
this, it offers a far superior working environment which not only encourages
greater collaboration and cohesiveness across our teams, but also helps us
retain and attract talent.
· In regard to our Group Employee Engagement Survey, which we
conduct annually to gain feedback from our people so we can continue to
improve our employee experience, we achieved an employee Net Promoter Score
(eNPS) of 30 (2022: 39). Despite a decrease in our eNPS, the score is
considered very good, and 46 points higher than construction and heavy
industry averages, while continuing to show very high levels of advocacy,
pride and loyalty in Henry Boot.
· Finally, during 2023, we began to assess our brand value
proposition by completing a series of internal and external workshops. As a
result, I am pleased to say that in early summer we will be launching our
refreshed brand, which focuses on improving customer experience and giving
greater clarity to our business model.
The Board proposes to pay a final dividend of 4.40p per share which, together
with the 2.93p interim dividend, gives a total of 7.33p (2022: 6.66p), an
increase of 10.0% for the year. Subject to approval at the AGM, this will be
paid on 31 May 2024 to shareholders on the register at the close of business
on 3 May 2024.
On behalf of the Board, I would like to thank everyone at Henry Boot for their
dedication and hard work. Once again, their expertise and high levels of
engagement have been instrumental in the business producing, against a
challenging backdrop, resilient results.
Peter Mawson
Chair
CEO's Review
Henry Boot performed relatively well against a backdrop of a slowing economy,
rising interest rates, high inflation and decreasing volumes in our key
markets. Our focus on high quality land, commercial property development and
housebuilding in prime locations has meant demand for our product remained
resilient, allowing us to complete £248.5m (2022: £241.9m) of sales. Whilst
we have worked hard to mitigate the pressures facing the business, they have
inevitably had an effect on PBT at £37.3m (2022: £45.6m). However, in the
circumstances, we are pleased with this result, which was in line with our
expectations.
In line with our strategy, we continue to grow the business, with NAV, on a
statutory basis, increasing by 4.0% to £410m (2022: £394m), generating a
total accounting return(6) of 6.1% (2022: 12.8%). With our 100,972 plot
strategic land portfolio and £1.3bn development pipeline all held at the
lower of cost or net realisable value, rather than being regularly revalued on
a mark-to-market basis, there is significant latent value across the Group not
reflected in our understated NAV.
The rapid and sustained rise in interest rates has affected our key markets.
The resultant increase in mortgage rates has materially slowed down house
sales, with new build sales typically down in volume by c.20%. House prices,
at best, have stopped growing but, in most cases, have fallen, decreasing by
1.8% in 2023 according to Nationwide.
Despite this, Stonebridge Homes (SH), has managed to increase volume by 43%
and sell at prices slightly ahead of budget. SH is one of our most ambitious
growth targets. The business has grown total homes sold since setting our
medium-term objectives in 2021 by 109%. This year, reflecting 50% forward
sales (2022: 56%) and what is anticipated to be a slowly recovering market, we
have been marginally more cautious and expect completions to increase by 10%
to 275 homes in 2024. We remain committed to hitting our medium-term objective
of scaling this business up to 600 homes per annum.
According to Savills Research, UK greenfield land values decreased by 6.5% in
2023. Against this backdrop, our land promotion business Hallam Land
Management (HLM) performed well, selling 1,944 plots (2022: 3,869) and
maintaining profitability through a higher percentage of freehold sales. More
crucially, since the start of 2024 HLM has already disposed of 276 plots and
exchanged on a further 793 plots for completion across 2024-2026, as well as
having an additional 1,556 plots under offer. In the current constrained
planning environment, it shows our main customers, the national housebuilders,
are still acquiring prime strategic sites. Not all of these transactions will
contribute to profit in 2024, as a number of sites have been sold with
staggered completions as housebuilders have adjusted their land acquisition
strategies to reflect the reduction in sales volumes.
The Government has consistently failed to carry out much needed reform of
what, I am afraid to say, is an increasingly dysfunctional and under resourced
planning system. The delays and uncertainties caused by planning not only
affect housing and commercial property, but also investment and productivity
in the UK. The recent CMA market study into housebuilding (which we
contributed data to) concluded that land banking was more a symptom of the
issues identified with the complex planning system, rather than it being a
primary reason for the shortage of new homes. The Government's latest updates
to the National Planning Policy Framework (NPPF) are at best tactical but may
lead to marginally speeding up development plan preparation. Labour have made
it clear if they are in government they will prioritise reviewing planning.
Our plots with planning have fallen in recent years to 8,501 (2022: 9,431),
primarily due to difficulties of the planning system, accentuated by delays
during COVID. However, at 13,468 (2022: 12,297) we now have a high number of
plots in for planning and an additional 8,227 have an allocation or draft
allocation. Given our long-term track record we believe we are as skilled as
anyone in the country at navigating the planning system. So, as we continue to
grow the portfolio, and convert applications, we expect to build back up our
valuable store of plots with planning consent.
On industrial investment, in line with the slowdown in the wider UK real
estate market, volumes were down 52% in 2023 to £5.1bn according to JLL.
There was also lower activity in occupational markets, with Gerald Eve data
showing that take up declined c.30% in 2023 to 44.5m sq ft. Nevertheless, when
factoring in that 2022 demand was boosted by COVID, last year's take up is now
back in line with the 2015-19 average. However, industrial performance
remained strong with rental value growth at 6.9% during 2023 according to the
CBRE UK Monthly Index, meaning capital values were up by 1.4% despite further
modest yield expansion. This sustained occupier demand allowed us to
successfully complete 661,000 sq ft of industrial development, all of which
was pre-let or pre-sold. Industrial will continue to be the largest element of
our development business going forward. Our aim is to drawdown on our £1.3bn
Gross Development Value (GDV) pipeline (59% of which is in industrial) over
the next twelve months or so to build back up our committed programme towards
our medium-term objective of completing £200m of development per annum. For
the time being, new development will be pre-sold or pre-let led, and therefore
likely to contribute towards profit in 2025 and beyond.
Cities are continuing to recover from the social and economic effects caused
by COVID, not least both businesses and people's slightly misguided, and now
seemingly reducing, desire to work from home. The major cities outside of
London where we focus will, therefore, continue to attract people to live,
work and play. This is demonstrated by the rise in residential rents this year
at a very healthy 8.3%, although the increase in interest rates has, for the
time being, cooled investor demand for funding Build-to-Rent (BtR). However,
whilst investment activity has fallen across all real estate sectors, BtR has
proven more resilient with investment volumes of £4.3bn during 2023, down a
modest 3% on 2022 according to Cushman & Wakefield. Likewise, the demand
for prime office buildings with strong ESG credentials, as businesses look to
fulfil their NZC commitments and attract talent back into the office, is still
healthy with regional prime office rental growth of 5.0% in 2023. Investor
demand for prime offices, like that for BtR, has waned with the rise in
interest rates but, as rates fall, investors are likely to return to these
growth markets.
With committed development of £240m (HB share) in 2022, we have tactically
reduced our committed programme to £159m (HB share) in 2023 as markets have
slowed, of which 50% is pre-let or pre-sold (including units reserved at
Setl). A key focus for 2024 will be converting customer interest in our three
speculative schemes which will all complete this year: Setl - our premium
apartments to sell in the heart of the Jewellery Quarter in Birmingham City
Centre; Island - our prime, NZC office building in Manchester City Centre; and
Rainham our high quality NZC industrial development in Greater London. Our
target is to sell all apartments in Setl this year and, in this respect, we
have reservations/exchanged in-line with pricing expectations on 30% already.
On Island, we are now looking to lease the building on a floor-by-floor basis
and our aim is to secure our first letting prior to completion in Q3 24. On
Rainham, which completes in Q2 24, our aim is to have the majority of the
scheme let within a year. As we do this the level of pre-let / pre-sold will
rise above our strategic target of 65% which will give us greater scope to
replenish our committed developments.
The Group's investment portfolio (IP) has outperformed again, with a total
return of 6.7%, compared to the CBRE UK Index total return of 1.7% in 2023. A
capital return of 1.5% against commercial markets, which fell by 1.4%, helped
the market value of the portfolio grow to £112.9m (2022: £108.6m). Our
structural weighting towards industrial assisted this out performance and, as
we did last year, we helped ourselves by making selective accretive sales. We
sold four investments plus Banner Cross Hall, the Group's former HQ, for a
total of £12.7m at an average 23% premium to December 2022 valuations. We
also retained three completed developments in Luton, Markham Value and Pool
with a combined value of £21.2m. We have been patient in growing the IP to
its medium-term target of £150m and based on market corrections in 2022 and
2023, this has proven to be the correct approach. Going forward there will be
plenty of opportunity to grow this portfolio.
Our construction segment, like the rest of the UK construction market, had a
challenging year. Henry Boot Construction's (HBC) performance on two of our
largest projects of which both are in the centre of Sheffield, the BtR
Kangaroo Works (£40m contract value) and the Heart of the City mixed use
scheme (£42m contract value), were hit by the availability of materials and
suffered delays. HBC starts 2024 with 49% of its order book secured (against a
target of 65%), as we remain determined not to take on work where either the
terms or pricing are commercially unattractive. With Pre-Construction Services
Agreements (PCSAs) of £50m there are opportunities for us to secure further
new work in 2024 but, again, some of this turnover could slip into 2025.
Banner Plant traded slightly below budget in a market where demand has fallen,
and sales have been volatile. Road Link (A69), yet again, has traded broadly
in line with expectation. Significantly, given that S&P UK Construction
PMI has been running below the neutral 50.0 level for much of 2023, showing a
fall in activity, the construction segment overall still contributed to the
Group's profit.
Cost inflation remained challenging throughout 2023, and, whilst we have
learned that there can be external shocks, it feels that its effect will be
more subdued in 2024. We are planning for build cost inflation in SH and
Construction to be running at between 3-4%.
In line with our ambition to grow the business, we have invested a combined
total of £60.4m in increasing our strategic land portfolio to 100,972 plots,
completing and building out our high-quality development programme, and
growing the landbank of our premium housebuilder, SH. This has helped us to
increase our capital employed by 4% to £417m. It has, however, meant our
gearing has risen to 19.0% (net debt £77.8m), but is still within our optimal
stated range of 10-20%. Whilst the Group's £105m facility runs until January
2025, we have agreed terms with existing lenders and expect to have a new
facility in place during Q2 24.
So, all in all we are pleased with the way the business has performed, during
what for our key markets has been a difficult year. We are now firmly focused
on 2024 and our medium term growth targets - which remain very achievable.
Whilst there is a path to lower inflation and reduced interest rates the
expected recovery is very likely to be weighted towards the second half of the
year. More detail on this is in the outlook, following a review of our medium
term targets and operations below.
Strategy
The Group set a medium-term strategy in 2021 to grow the size of the business
through a 40% increase in capital employed to over £500 million and a
targeted focus on three key markets: Industrial & Logistics (I&L),
Residential and Urban Development, while maintaining ROCE within a 10-15%
range.
Our key metric of capital employed has risen to £417m (2022: £399m) and ROCE
at 9.9% which rounded, was within our targeted range of 10-15%. Over the last
two years we have delivered a ROCE of 10.8% pa which we believe to be a very
creditable performance given the decline in commercial property and land
values of 22.1% and 8.6% respectively from their mid-2022 peaks. We maintain
our belief that we can achieve our main medium-term target of £500m capital
employed, whilst continuing to generate attractive returns.
Good progress has been made against our stated medium-term targets as set out
below:
Measure Medium-term target FY 23 Performance Progress
Capital employed To over £500m £417m as at 31 December 2023 On track to grow capital employed to over £500m
Return on average capital employed 10%-15% per annum 9.9% in FY 23 We maintain our aim to be within the target range of 10-15% through the cycle
Land promotion plot sales c.3,500 per annum 1,944 plots in FY 23, with returns from the reduction in plots sold offset by The running five year average stands at 2,850 plots pa, but forecast remains
a significant sale of freehold land on track to achieve our medium-term target
Development completions Our share c.£200m per annum Our share completed: £111m in FY 23, with committed programme of £159m (HB In the current market, the committed programme has been reduced; however, we
Share) have optionality to build it back up from our future pipeline of £1.3bn
Grow investment portfolio To around £150m £112.9m at 31 December 2023 Value increased primarily due to retained I&L developments. We have made
accretive tactical sales and have opportunities to build the portfolio up to
its target
Stonebridge Homes sales Up to 600 units per annum 251 homes completed in FY 23, compared to target of 250. This is a 109% Continue to target increased output in 2024, albeit at a slower growth rate,
increase in homes sold since 2021 given current market conditions. Our goal is to complete 275 homes in 2024, a
further 10% increase
Construction order book secured Minimum of 65% for the following year 49% for 2024 Difficult market conditions impacting order book for 2024. In response, the
opportunity pipeline has been refocused, with £50m PCSAs in progress
Responsible Business Strategy
We launched our Responsible Business Strategy in January 2022, with our
primary aim to be NZC by 2030 with respect to Scopes 1 & 2. Our strategy
is guided by three principal objectives:
o 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.
o To empower and engage our people to deliver long term meaningful change
and impact for the communities and environments Henry Boot works in.
o To focus on issues deemed to be most significant and material to the
business and hold ourselves accountable by reporting regularly on progress.
24-month performance against our 2025 targets
As we approach the midpoint of our Responsible Business Strategy, the table
below highlights the good progress we have made so far against our 2025
objectives and targets.
Our People Performance Our Places Performance
Develop and deliver a Group-wide Health and Wellbeing Strategy Health and Wellbeing Strategy and Programme launched in Q1 23. On top of this, Contribute £1,000,000 of financial (and equivalent) value to our charitable We have contributed (financial and equivalent value of) c.£450,000 to our
50 employees trained as Mental Health First Aiders partners charitable and community partners so far.
Increase gender representation, aiming for 30% of our team and line managers We have made progress, with female representation across our workforce Contribute 7,500 volunteering hours to a range of community, charity and More than 5,000 volunteering hours have been delivered, putting us well over
being female increasing to 28% (2022: 25%) education projects half way to our goal.
Our Planet Performance Our Partners Performance
Reduce Scope 1 and 2 GHG emissions by over 20% to support reaching NZC by 2030 Total direct GHG emissions (Scopes 1 and 2) in 2023 were 2,833 tonnes which Pay all of our suppliers a minimum of the real living wage and secure Internal experts are working with the Living Wage Foundation to meet the
equates to a 14% reduction from the 2019 baseline. Remain on course to achieve accreditation with the Living Wage Foundation criteria of membership with accreditation to be achieved in 2024.
the decarbonisation trajectory
Reduce consumption of avoidable Sustainability audits completed and a reduction action plan is in development Collaborate with all our partners to reduce our environmental impact We continue to engage with membership organisations
plastic by 50% and our supply chain to share knowledge and best practice
As the Group strategy continues to progress, we have evolved our strategic
framework to embed our Responsible Business commitments. Whilst the
fundamentals and the commercial medium term objectives of our strategy remain
unchanged, we now also measure ourselves on five pillars: performance, people,
partners, places, and planet.
Although the primary measure of success is financial performance, we know that
we also need to make a wider impact on a variety of factors that will help
ensure we remain the high performing, responsible long-term business we want
to be.
Outlook
Looking ahead it feels the economy has turned a corner, with inflation falling
and the path of interest rates trending down. This is very likely to move us
on from the shallow recession we faced at the end of 2023 into a recovering
economy. This is encouraging news for our rate sensitive markets. The demand
for houses and, therefore, residential land should pick up. Lower rates will
also stimulate investor interest in commercial property and BtR. All of this
in turn boosts construction activity. However, planning uncertainties and
delays will continue to be a problem and we also face the uncertainty of a
General Election during 2024.
Not surprisingly, we do not have clear visibility on how all of this will
unfold and, with key transactions to execute and complete this year in both
land promotion and development, we expect 2024 results will be heavily second
half weighted.
We have confidence in the long-term fundamentals of our key markets, with
growing conviction that our concentration on prime, high quality buildings and
projects together with our focus on developments with strong ESG credentials
will reward us with improved liquidity and enhanced returns. Our balance sheet
remains rock solid and, with agreed terms from our banks on renewing and
enlarging our facilities expected to be in place during Q2 24, we have the
resources to continue to grow the business in line with our medium term
targets.
Tim Roberts
Chief Executive Officer
Business Review
Land Promotion
HLM performed well in 2023, achieving an operating profit of £21.4m (2022:
£17.3m) from selling 1,944 plots (2022: 3,869) at seven locations. Although
the number of plots sold in the year decreased, average gross profit per plot
increased to £15,480 (December 2022: £6,066) due primarily to a significant
freehold sale at Tonbridge, Kent, offsetting the volume reduction.
UK greenfield land values decreased by 6.5% in 2023 according to Savills
Research. Transactions slowed significantly relative to 2022, with downward
pressures on land values reflecting a fall in housebuilders' new build sales
rates. However, with 16% fewer homes granted planning consent in England
during 2023 compared to 2022, there continues to be competition for available
prime sites resulting in land values in those locations being more resilient.
HLM's land bank has grown to 100,972 plots (December 2022: 95,704 plots), of
which 8,501 plots (December 2022: 9,431 plots) have planning permission (or a
Resolution to Grant subject to S106). Although there continues to be delays
and challenges within the planning system, the updates to the NPPF appear not
to be quite as restrictive as anticipated. In short the updated NPPF
incentivises local authorities to drive forward in preparing and publishing
development plans, allowing them to allocate housing sites in their
administrative areas and giving them a defence against speculative planning
applications. Whilst HLM is not immune from the revisions of the NPPF, given
that it generally pursues larger sites of c.500 plots or above, which normally
results in sites being allocated in development plans more frequently than
smaller sites, the business should benefit marginally from the quicker
publication of development plans.
Last year, HLM gained planning permission on 1,014 plots, which is an increase
from the 435 plots granted in 2022. During the period, there were 2,185 plots
submitted for planning, taking the total plots awaiting determination to
13,468 (December 2022: 12,297 plots), with a further 8,227 plots having an
allocation or draft allocation for housing (but with no application as yet).
HLM's land bank remains well positioned to benefit from the delays and
complexities in the planning system due to the high levels of stock in premium
locations, both with planning and awaiting determination, the team's
specialist skill set and its strategically placed regional coverage. Despite
the challenges, the number of plots in the portfolio continues to increase,
giving us confidence in the medium term that our stock levels with planning
will rise.
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 in the balance sheet relating to any of
the 8,501 plots with planning, and any gain will only be recognised on
disposal.
Residential Land Plots
With permission In planning Future Total
b/f granted sold c/f
2023 9,431 1,014 (1,944) 8,501 13,468 79,003 100,972
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
In relation to significant schemes:
· At Tonbridge, Kent, HLM sold 125 plots to national housebuilder
Cala Homes. The site was originally contracted under option in 2004, with the
freehold subsequently purchased in 2021. The scheme includes additional
community benefits such as new cycle and pedestrian links to a local railway
station and a contribution to improved public transport infrastructure. The
deal was completed in two phases over H1 and H2 of 2023, resulting in an
ungeared internal rate of return (IRR) of 25% p.a.
· At Coventry, the 2,400-plot site known as Pickford Gate, saw the
sale of phase one, comprising 250 plots to Vistry in H1 23. Following this, in
H2 23 HLM began to market phase two, which consists of 1,123 plots, and has
received strong interest from several major housebuilders.
· At Swindon, a site jointly held with Taylor Wimpey, where over 20
years ago HLM secured an option on the site which in August 2021 received
outline planning consent for a total of 2,380 plots (HLM share 1,063 plots).
In December 2023, a contract was exchanged to acquire the land whilst
simultaneously exchanging contracts to sell 760 plots (HLM's share) to Vistry,
generating an IRR of 10% p.a. The scheme is contracted for completion in two
phases during H2 24 and H1 26. HLM will retain 304 plots for future sale. The
wider scheme includes local community benefits such as a new primary school,
community and sport buildings as well as woodlands and green infrastructure.
Since the start of 2024 HLM has already completed the disposal of 276 plots
and exchanged on a further 793 plots for completion across 2024-2026, as well
as having an additional 1,556 plots under offer. This shows that despite the
slowdown in the housing and residential market the demand for strategic sites
endures.
Property Investment and Development
Property Investment and Development, which includes HBD and SH, delivered a
combined operating profit of £22.2m (2022: £25.7m).
According to the CBRE UK Monthly Index, commercial real estate values declined
by 3.9% in 2023. Industrial property was the best performing sector with
values up 1.4% during the year, whilst values for both retail and offices
declined by -4.2% and 11.5% respectively. The rate of yield expansion across
all three sectors slowed during 2023 following the significant capital value
correction in 2022. Whilst I&L take up has slowed from record levels
during the COVID pandemic, the industrial sector delivered the highest rental
growth in 2023 at 6.9%, due to the longer-term structural drivers and limited
supply of high-quality space. At the same time, whilst BtR yields have risen
from historic lows, the average rent for new residential lets increased by
8.3% during 2023 according to Zoopla, driven by continued strong demand and a
lack of available units.
HBD has performed ahead of expectations, with continued growth of its
completed schemes to a GDV of £126m (HBD share £111m, 2022: HBD share
£83m), of which 100% was pre-let or pre-sold. In the year, HBD completed on
the following developments:
o Three industrial schemes in Nottingham, Luton and Preston totalling
661,000 sq ft with a combined GDV of £104m (HBD share: £89m).
o A 40 bed state of the art care facility for The Disabilities Trust in York
(HBD share: £22m GDV) which has achieved a BREEAM Excellent rating.
2023 Completed Schemes
Scheme GDV HBD Share of GDV Commercial Residential Size Status
(£m) (£m) ('000 sq ft) (Units)
Industrial
Nottingham, Power Park 54 54 426 - Pre-sold
Luton, Diploma 20 20 85 - Pre-let
Preston East, DPD & DHL 30 15 150 - Pre-let / pre-sold
104 89 661 -
Urban Residential
York, TDT 22 22 N/A - Pre-sold
Total for the Year 126 111 661 -
The committed development programme now totals a GDV of £299m (HBD share:
£159m GDV) and is currently 50% pre-let, pre-sold or under offer, with 98% of
development costs fixed.
2024 Committed Programme
Scheme GDV HBD Share of GDV Commercial Residential Size Status Completion
(£m) (£m) ('000 sq ft) (Units)
Industrial
Rainham, Momentum 120 24 380 - Speculative Q2 24
Southend, Ipeco2 and Cama, 20 20 156 - Pre-sold Q1 24
Walsall, SPARK Remediation 37 37 - - Forward funded Q2 24
Leicester, TMS 10 10 29 - Pre-sold Q3 24
187 91 565 -
Urban Residential
Birmingham, Setl 32 32 - 102 Speculative -30% reserved Q2 24
Aberdeen, Bridge of Don 12 1 - TBC Under-offer Q2 24
Aberdeen, Cloverhill 2 2 - 500 Pre-sold and DM fee Q2 24
46 35 - 602
Urban Commercial
Manchester, Island 66 33 91 - Speculative Q3 24
Total for the Year 299 159 656 602
% sold or pre-let 29% 50%*
*This includes space under offer and units reserved at Setl- 01/03/24
Within the committed programme there is 565,000 sq ft of I&L space (HBD
share: £91m GDV), a total of 602 urban residential units (HBD share: £35m
GDV) and 91,000 sq ft of urban office space (HBD share: £33m GDV). This
comprises:
o At Momentum, Rainham (in an 80:20 JV with Barings), the four unit I&L
development, targeting NZC, serving Greater London, works are on course for
completion in Q2 24, with HBD now marketing the space to potential occupiers
with the aim of having the majority of the scheme let within a year.
o In H1 23, two freehold design and build transactions totalling 156,000 sq
ft, at HBD's 52 acre I&L scheme in Southend, Essex, were added at a
combined value of £20m. A 129,000 sq ft headquarters facility will be
developed for Ipeco, a supplier of aircraft seating. CAMA Asset Store,
specialists in sustainable storage for the creative industries, will take
occupation of a 27,600 sq ft warehouse facility with ancillary office
accommodation. Both units are on track for completion in Q1 24.
o Setl, the 102 premium apartment scheme in Birmingham, is on track to be
completed in Q2 24. After launching presales in Q4 23, the full sales campaign
was launched in mid-March. HBD has now secured reservations for 30% of the
total units, as of March 2024, at the target price.
o At Island, Manchester a 50:50 JV scheme with Greater Manchester Pension
Fund, delivering a 91,000 sq ft NZC office building is scheduled for
completion in Q3 24. Marketing of the scheme has commenced and has attracted
several enquiries on a floor-by-floor basis, with the aim of securing its
first pre-let prior to completion.
HBD's future total development pipeline value is £1.5bn GDV (HBD share:
£1.3bn GDV). All of these opportunities sit within the three key markets of
I&L (59%), Urban Commercial (21%) and Urban Residential (20%). Within the
development pipeline, we have c.200m near-term, occupier led schemes which
have the potential to be added to the committed programme within the next
twelve months comprising:
o Neighbourhood, Birmingham (HBD share: £123m GDV) - after securing
planning approval in March 2023 for a 404-unit BtR development, HBD is
continuing preparatory works and are now considering a number of options to
progress to development including a forward funding for the scheme.
o Roman Way, Preston (HBD share: £43m GDV) - a planning consent was granted
in Q4 23 to deliver c.700,000 sq ft of I&L space. In December 2023, HBD
exchanged conditionally with Tilemaster to deliver a serviced plot of 10 acres
which will accommodate a 150,000 sq ft manufacturing unit, which is set to
commence works in Q2 24. There is also interest on a number of additional
units.
o Spark, Walsall (HBD Share: £110m GDV) - HBD is set to complete
remediation works in Q2 24 and are in talks to secure the schemes first
pre-let on a 250,000 sq ft I&L unit (£42.5m GDV).
o Welwyn Garden City (HBD share £20m GDV) - HBD is close to securing a
pre-let on 25% of this 71,200 sq ft industrial scheme and subject to this
being concluded are targeting a start on site in Q3 2024.
Beyond the near-term pipeline, HBD are progressing on:
o Golden Valley, Cheltenham (HBD share of phase one: £155m GDV) - in
December 2023, following the buyout of its JV partner, HBD became the sole
developer of a £1bn GDV mixed-use campus, including the new National Cyber
Innovation Centre. A £95m funding agreement with Cheltenham Borough Council
for the delivery of phase one has now been secured as well as a £20m pledge
from the Department for Levelling Up, Housing and Communities. Following
planning, construction of phase one is expected to commence in 2025.
Investment Portfolio - key stats
Dec 2023 Dec 2022
Market values - inc. share of JV's £112.9m £108.6m
Total area - '000 sq ft 795 856
'Topped-up' net initial yield 5.8% 5.8%
Reversionary yield 6.5% 6.5%
WAULT to expiry¹ 10.8 years 10.7 years
Occupancy² 93% 88%
¹Weighted average unexpired lease term (WAULT) on commercial properties
²As a percentage of completed property portfolio estimated rental value (ERV)
The total market value of the IP (including share of properties held in JVs)
has increased to £112.9m (December 2022: £108.6m). Whilst the CBRE UK
Monthly Index showed commercial property values decreased by3.9% during 2023,
HBD's portfolio increased in value by 1.1% on a like for like basis driven by
continued rental value growth for the industrial and logistics assets of 2.8%
over the year. The portfolio total return of 6.7% was again ahead of the CBRE
Index (1.7%) and over the past three years it has outperformed the index with
a total return of 7.9% pa against a benchmark return of 3.5% pa. Occupancy
increased during the year to 93% (December 2022: 88%) with the weighted
average unexpired lease term now 10.8 years (December 2022: 10.7 years).
During 2023, we made further accretive sales of four investment properties
along with Banner Cross Hall, the Group's former HQ, for a combined value of
£12.7m, at an average 23% premium to December 2022 valuations. In addition to
the sales, we retained three completed high quality developments at Luton,
Markham Value and Pool with a total value of £21.2m, which together with the
valuation uplift were the main drivers of an increase in the value of the IP.
The Group is also committed to ensuring that all the properties within the IP
have a minimum EPC rating of 'C'. Currently 73% of these properties have a
rating of 'C' or higher, of which 42% of the total portfolio are rated 'A-B'.
The majority of the remaining 27% of the portfolio that are currently below a
'C' rating, have redevelopment potential in the near-term with a target range
of 'A' or 'B'.
The UK housing market remained subdued during 2023 as homebuyer demand
continued to be impacted by higher mortgage rates. According to Nationwide UK,
house prices decreased by 1.8% during 2023 and are now almost 4.5% below their
mid 2022 peak. Whilst monthly housing transactions are running at c.10% below
pre-COVID levels those involving a mortgage are down c.20%. There have been
some encouraging signs for potential buyers recently with average earnings
increasing in real terms and mortgage rates edging down over the last few
months, whilst unemployment remains low by historic standards.
SH completed 251 homes during 2023 (171 Private / 80 Social) (2022: 175 - 124
private / 51 social), increasing its annual sales by 43% and performing in
line with its medium term growth target of delivering 600 units.
The average selling price (ASP) for private units remained firm at £461k
(2022: £503k) in-line with budget, however, the ASP reduced as the business
expanded its sales outlets into its second region in the North East of
England, where selling prices are slightly lower. In line with the UK new
build housing market, the average sales rate for the year decreased, with SH
securing 0.45 (2022: 0.51) units per week per outlet, for private houses.
Notwithstanding this, sales rates in Q4 23 improved marginally to 0.46 homes
per site per week (Q4 22 0.36), as mortgage rates began to fall.
Whilst supply chain availability and cost pressures remained a key focus, both
issues began to improve and moderate last year. SH expects build cost
inflation to be around 3% in 2024, with discussions ongoing with both
suppliers and subcontractors to assist in build cost savings.
SH total owned and controlled land bank increased materially to 1,513 plots
(2022: 1,094) - of which 923 plots (2022: 872) have detailed or outline
planning equating to 3.4 years supply based on anticipated one-year forward
sales. During 2023, SH added a further 670 plots over seven sites to its owned
and controlled landbank, of which 302 plots have some form of planning and the
remaining 368 plots with no form of planning have been secured under option
agreements.
SH enters 2024 with the benefit of mortgage rates stabilising and cost
pressures beginning to ease. Whilst not underestimating the current
uncertainty in the UK housing market, SH has begun the year relatively well.
In January and February 2024, an average sales rate of 0.51 (Jan and Feb 23:
0.46) houses per week per outlet was achieved, which has resulted in SH
securing 50% of its sales target against a delivery target of 275 homes (206
private/ 69 social).
Construction
Trading in the Group's construction segment was below expectations in 2023, as
a result of deteriorating market conditions, achieving an operating profit of
£6.5m (2022: £12.1m). UK construction activity slowed during 2023, with all
new work decreasing by 2.1%, with the most significant reduction of 13.6% for
new private housing.
HBC, the Group's construction business, traded below expectations, delivering
a turnover of £70.1m (2022: £101.5m) having experienced difficult operating
conditions in line with the UK construction market. However, the business has
the lowest capital employed of any subsidiary of the Group and, therefore, the
risk it imposes on Henry Boot's strategic growth plans remains limited.
Despite both schemes suffering delays, subcontractor and material availability
issues, the Kangaroo Works, a £40m BtR scheme, completed in August 2023, with
the Heart of the City, Sheffield Block H, a £42m urban development scheme,
completing in phases between December 2023 and January 2024. In addition to
the two significant schemes in Sheffield, a residential project at Clipstone,
Mansfield also impacted HBC's 2023 performance, as the project's developer
fell into administration, resulting in building costs not being fully
recovered.
At HBC's largest active site, the Cocoa Works in York, after a significant
variation for the Pavilion and Library buildings, the contract value of the
residential development increased to £57m and the project is now expected to
complete in late 2024.
At the beginning of 2024, HBC has secured 49% of its order book (94% of its
costs have fixed price orders placed or contractual inflation clauses). The
business remains cautious to difficult trading conditions, and while HBC is
actively pursuing PCSAs of £50m across urban development and residential
opportunities for 2024, it is expected that some of these opportunities could
now fall into the 2025 order book as the business becomes more selective in
the work it pursues.
As the business review and explore all the options to deal with the current
commercial challenges, the difficult decision has been made to make
operational changes which has resulted in a restructuring within the business.
Whilst this is regrettable, it is being carried out to protect the long term
future of HBC.
Banner Plant traded slightly below budget in 2023 and in response has adjusted
its sales strategy. Road Link (A69) performed in line with management
expectations as traffic volumes continue to increase.
Financial Review
Summary of financial performance
2023 2022 Change
£'m £'m %
Total revenue
Property investment and development 191.9 169.0 +14
Land promotion 68.0 43.8 +55
Construction 99.5 128.6 -23
359.4 341.4 +5
Operating profit/(loss)
Property investment and development 22.2 25.7 -14
Land promotion 21.4 17.3 +24
Construction 6.5 12.1 -46
Group overheads (9.9) (8.6) +15
40.2 46.5 -14
Net finance cost and other (2.9) (0.9) +222
Profit before tax 37.3 45.6 -18
The Group performed well in 2023, with only a 14% fall in operating profit
despite the backdrop of an economy in a technical recession. Group profit
before tax of £37.3m (2022: £45.6m) or £36.7m on an underlying profit
basis(1) (2022: £56.1m) remains very credible and testament to the Group's
resilience.
Our focus on high quality land and development opportunities in prime
locations across our three key markets continues to support this resilience.
Our land promotion business Hallam Land traded well in the year disposing of
1,944 residential plots (2022: 3,869) at an increased average gross profit per
plot of £15.5k (2022: £6.1k), generating an operating profit of £21.4m
(2022: £17.3m) as demand for well located premium sites continued, despite
falling house prices and volumes across the UK.
Property investment and development exceeded expectation with HBD successfully
completing a number of significant development schemes, particularly in the
industrial sector. It also made opportune disposals of property assets at a
premium to book value and progressed three speculative schemes in Manchester,
Birmingham and London. Meanwhile Stonebridge increased its output 43%,
completing 251 homes (2022: 175) in line with its medium term growth target of
delivering 600 units per annum. Together resulting in an operating profit of
£22.2m (2022: £25.7m) from the property investment and development segment.
Consolidated Statement of Comprehensive Income
Revenue increased 5% to £359.4m (2022: £341.4m) as the land promotion
business made disposals at a premium site in Tonbridge increasing the segments
revenue 55% to £68.0m (2022: £43.8m). The ongoing growth of Stonebridge (43%
increase in output) resulted in a 38% increase in revenue to £97.2m (2022:
£70.6m). Construction segment revenue declined £29.1m in a challenging
market where clients are taking longer to make decisions. We continued to
deliver urban development works in Sheffield and from a number of framework
agreements, while becoming increasingly selective of future opportunities.
Gross profit of the Group reduced £4.8m to £76.8m (2022: £81.6m), a gross
profit margin of 21% (2022: 24%) and reflects healthy returns across all our
operating segments. Other income of £4.8m (2022: nil) relates to a legal
settlement on a property development contract completed in 2016.
Administrative expenses increased by £3.9m (2022: £2.2m) as we continued to
invest in our people and processes to support future growth.
Property revaluation gains amounted to £0.4m (2022: £8.2m losses),
incorporating £0.3m revaluation gains (2022: £4.9m losses) on wholly owned
investment property and £0.1m revaluation gains (2022: £3.2m losses) on our
share of investment property held in joint ventures.
Property revaluation gains/(losses) 2023 2022
£'m
£'m
Wholly owned investment property:
- Completed investment property 0.5 (7.3)
- Investment property in the course of construction (0.2) 2.4
0.3 (4.9)
Joint ventures and associates:
- Completed investment property 0.1 (3.2)
- Investment property in the course of construction - -
0.1 (3.2)
0.4 (8.2)
Profit on sale of investment properties of £0.7m (2022: £0.6m), relates to
the disposal of legacy assets at Bath and Malvern and an industrial unit at
Southend. Profit on disposal of assets held for sale of £1.6m (2022: £0.1m
loss) relates largely to the disposal of the Group's former head office in
Sheffield.
Share of profit of joint ventures and associates of £0.4m (2022: £9.1m)
includes completion and sale of two industrial units in Preston and completion
of a development in Wakefield, all by the property investment and development
segment. Joint ventures continue to be a key part of our operating model
however the timing of returns will vary.
Profit on disposal of joint ventures and subsidiaries were £nil (2022: 0.7m),
with the prior year reflecting the Group's disposal of a long standing 50%
interest in a joint venture entity in Huddersfield by the property investment
and development segment.
Overall, operating profits decreased by 13.5% to £40.2m (2022: £46.5m) and,
after adjusting for net finance costs, we delivered a profit before tax of
£37.3m (2022: £45.6m).
The segmental result analysis shows that:
· Property investment and development operating profit decreased to
£22.2m (2022: £25.7m) following a very strong result in 2022, 40% up on
2021, offset by an increase in Stonebridge housing unit disposals to 251
(2022: 175), and a valuation gain on wholly owned investment property of
£0.3m (2022: £4.9m loss).
· Land promotion operating profit increased to £21.4m (2022:
£17.3m) as we completed on disposals at seven sites, including a high margin
site in Tonbridge that increased our average gross profit per plot in the year
to £15.5k (2022: £6.1k).
· Construction segment operating profits decreased to £6.5m (2022:
£12.1m) as our construction business experienced difficult operating
conditions, with performance on two significant projects impacted by the
availability of materials and the resultant delays. Plant hire and our PFI
concession continued to generate healthy contributions to the segment.
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 £8.8m (effective rate of tax: 23.5%) (2022:
£7.7m; effective tax rate: 16.9%) and is in line with (2022: lower) the
standard rate of tax (2022: due to adjustments for joint ventures and
associates reported net of tax). Current taxation on profit for the year was
£6.7m (2022: £8.5m), deferred tax was a charge of £2.1m (2022: £0.8m
credit).
Earnings per share and dividends
Basic earnings per share decreased 21% to 19.7p (2022: 25.0p) in line with the
fall in profits attributable to owners of the Parent Company. Total dividend
for the year increased 10% to 7.33p (2022: 6.66p), with the proposed final
dividend increasing to 4.40p (2022: 4.00p), payable on 31 May 2024 to
shareholders on the register as at 3 May 2024. The ex-dividend date is 2 May
2024.
Return on capital employed(2) ('ROCE')
ROCE(2) decreased in the year to 9.9% (2022: 12.0%), given current challenges
in our markets this is expectedly toward the bottom end of the Group's target
range of 10%-15% which we believe remains appropriate for our current
operating model and the markets we operate in.
Finance and gearing
Net finance costs increased to £2.9m (2022: £0.9m) reflecting the increase
in UK interest rates and higher borrowing levels 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 9 times (2022: 22 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 has agreed
terms with lenders to refinance for a further five year period but while this
facility is being formalised the Group has put in place an option to extend
the existing facility for a further year to 23 January 2026 which provides
security of funding throughout the going concern period. The Group had drawn
£83.5m of the facility at 31 December 2023 (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 £14.7m of receivables under the agreement
at 31 December 2023 (2022: £7.6m).
2023 year-end net debt(4) was £77.8m (2022: £48.6m) resulting in gearing of
19.0% (2022: 12.3%), at the upper end of our targeted range of 10%-20%
following continued investment in our prime land portfolio, growing our
premium housebuilder and delivering our high quality committed development
programme.
All bank borrowings continue to be from facilities linked to floating rates or
short-term fixed commitments. Throughout the year, we operated within the
facility covenants and continue to do so.
Cash flow summary
2023 2022
£'m
£'m
Operating profit 40.2 46.5
Depreciation and other non-cash items (1.1) (3.4)
Net movement on equipment held for hire (2.1) (4.1)
Movement in working capital (31.2) (55.6)
Cash generated from operations 5.8 (16.6)
Net capital (investments)/disposals (16.4) 16.6
Net interest and tax (7.4) (3.6)
Dividends paid (12.8) (12.4)
Dividends received from joint ventures 0.9 7.1
Other 0.7 0.8
Change in net debt (29.2) (8.1)
Net debt brought forward (48.6) (40.5)
Net debt carried forward (77.8) (48.6)
During 2023, the cash inflow from operations amounted to £5.8m (2022: £16.6m
outflow) after net investment in equipment held for hire of £2.1m (2022:
£4.1m), and cash outflows from a net increase in working capital of £31.2m
(2022: £55.6m). Our increase in working capital arises from additional
investment in housebuilder inventories, strategic land sales on deferred terms
and the ongoing development of schemes in progress.
Net capital investment of £16.4m (2022: £16.6m disposals) arose primarily
from investment in joint ventures of £12.4m (2022: £2.3m redemption) the
prior year containing significant disposals of an industrial unit in Wakefield
and a motorway service station in Kent.
Net dividends, totalled £11.9m (2022: £5.3m), with those paid to equity
shareholders of £9.3m (2022: £8.4m), increasing by 10%, and dividends to
non-controlling interests of £3.5m (2022: £4.0m), being offset by dividends
received from joint ventures during the year of £0.9m (2022: £7.1m).
After net interest and tax of £7.4m (2022: £3.6m), there was an overall
outflow in net cash of £29.2m (2022: £8.1m), resulting in net debt of
£77.8m (2022: £48.6m).
Statement of financial position summary
2023 2022
£'m
£'m
Investment properties and assets classified as held for sale 100.6 97.1
Intangible assets 2.2 2.9
Property, plant and equipment, including right-of-use assets 33.2 29.8
Investment in joint ventures and associates 10.5 10.0
146.5 139.8
Inventories 297.6 291.8
Receivables 129.3 122.9
Payables (88.1) (113.6)
Other (5.2) (4.2)
Net operating assets 480.2 436.7
Net debt (77.8) (48.6)
Retirement benefit asset 7.7 6.2
Net assets 410.1 394.3
Less: Non-current liabilities and pension asset 6.6 4.8
Capital employed 416.7 399.1
Wholly owned investment properties increased in value to £100.6m (2022:
£97.1m), following the retention of newly completed industrial assets in
Luton and Pool with a combined book value of £19.0m. Offset by disposals of
an office in Bath, a leisure asset in Malvern and an industrial unit in
Southend, together they sold at a premium to December 2022 book value of
£7.0m. Property revaluation gains amounted to £0.4m (2022: £8.2m loss),
incorporating £0.3m gains (2022: £4.9m loss) on wholly owned investment
property and a £0.1m gain (2022: £3.2m loss) on our shares of investment
property held in joint ventures.
Intangible assets reflect goodwill of £1.0m (2022: £1.2m), being Road Link
(A69) of £0.1m (2022: £0.3m) and Banner Plant depots £0.9m (2022: £0.9m)
and the Group's investment in Road Link (A69) of £1.2m (2022: £1.7m). 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 March 2026.
Property, plant and equipment comprises Group occupied buildings valued at
£4.7m (2022: £7.0m), leasehold improvements of £2.4m (2022: nil), and
plant, equipment and vehicles with a net book value of £26.1m (2022:
£22.8m), including £4.0m (2022: £1.0m) of right-of-use assets under IFRS
16. Property, plant and equipment, along with right-of-use assets, have
increased as new additions of £8.7m (2022: £3.8m) are offset by disposals
and the depreciation charge for the year. Leasehold improvements and
right-of-use assets have increased largely due to the lease of the Group's new
head office in Sheffield.
Investments in joint ventures and associates increased £0.5m to £10.5m
(2022: £10.0m), being the Group's share of profits of £0.4m (2022: £9.1m)
(including fair value increases of £0.1m), additional investment of £1.0m
(2022: £2.1m), less distributions of £0.9m (2022: £7.2m) and net disposals
of £nil (2022: £4.1m). We continue to undertake property development
projects with other parties where mutually beneficial.
Inventories were £297.6m (2022: £291.8m) as we increased our housebuilder
land and work in progress to £93.0m (2022: £80.6m). We continue to invest in
land, expand regionally into the North East and increase annual plot
disposals. Property inventory decreased to £80.6m (2022: £91.2m) as the
Group completed committed developments in York and Southend, and retained an
industrial scheme which was transferred to investment property. In our
strategic land business we continue to invest in owned land and land interests
under agency agreements at a lower capital cost amounting to £42.2m (2022:
£28.2m). 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 £6.5m to £129.3m (2022:
£122.9m) due to an increase in loans to joint ventures and associates and as
we progress development schemes. 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 decreased to £88.1m (2022: £113.6m) with trade and other payables
decreasing to £76.0m (2022: £100.0m), provisions decreasing to £4.4m (2022:
£5.4m) as strategic land provisions unwind and we near the end of our PFI
concession arrangement. Contract liabilities decreased to £1.1m (2022:
£4.0m), as large construction schemes near completion.
Net debt included cash and cash equivalents of £13.0m (2022: £17.4m),
borrowings of £86.5m (2022: £65.0m), including £3.0m other loans (2022:
£nil) arising from sale and lease back, and lease liabilities of £4.3m
(2022: £1.0m). In total, net debt was £77.8m (2022: 48.6m).
At 31 December 2023, the IAS 19 pension valuation was a surplus of £7.7m
(2022: £6.2m surplus), driven by interest on the existing surplus and
contributions paid by the Group to the scheme. 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 4.0% to £410.1m (2022:
£394.3m), arising from retained profits less distributions to shareholders
with NAV per share(3) increasing 3.7% to 306p (2022: 295p).
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 gains of £0.5m (2022: £7.3m losses) on wholly owned completed
investment property and gain of £0.1m (2022: £3.2m losses) on completed
investment property held in joint ventures. This APM is used 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 is an APM and is reconciled to statutory measures in note 7.
( )
UNaudited Consolidated Statement of Comprehensive Income
for the year ended 31 December 2023
2023 2022
£'000 £'000
Revenue 359,399 341,419
Cost of sales (282,634) (259,829)
Gross profit 76,765 81,590
Other income 4,800 -
Administrative expenses (44,342) (40,455)
37,223 41,135
Increase/(decrease) in fair value of investment properties 307 (4,921)
Profit on sale of investment properties 733 646
Profit/(loss) on sale of assets held for sale 1,571 (149)
Share of profit of joint ventures and associates 371 9,079
Profit on disposal of joint ventures - 667
Operating profit 40,205 46,457
Finance income 3,357 1,641
Finance costs (6,260) (2,503)
Profit before tax 37,302 45,595
Tax (8,759) (7,725)
Profit for the year from continuing operations 28,543 37,870
Other comprehensive income/(expense) not being reclassified to profit or loss
in subsequent years:
Revaluation of Group occupied property (228) 315
Deferred tax on property revaluations 279 (23)
Actuarial (loss)/gain on defined benefit pension scheme (3,066) 14,994
Deferred tax on actuarial (loss)/gain 767 (3,749)
Total other comprehensive income not being reclassified to profit or loss in
subsequent years
(2,248) 11,537
Total comprehensive income for the year 26,295 49,407
Profit for the year attributable to:
Owners of the Parent Company 26,299 33,319
Non-controlling interests 2,244 4,551
28,543 37,870
Total comprehensive income attributable to:
Owners of the Parent Company 24,051 44,856
Non-controlling interests 2,244 4,551
26,295 49,407
Basic earnings per ordinary share for the profit attributable to owners of the
Parent Company during the year
19.7p 25.0p
Diluted earnings per ordinary share for the profit attributable to owners of 19.3p 24.6p
the Parent Company during the year
UNaudited Statement of Financial Position
as at 31 December 2023
2023 2022
£'000 £'000
Assets
Non-current assets
Intangible assets 2,179 2,933
Property, plant and equipment 29,218 28,766
Right-of-use assets 3,986 997
Investment properties 100,602 97,116
Investment in joint ventures and associates 10,484 9,990
Retirement benefit asset 7,725 6,188
Trade and other receivables 39,263 37,029
Deferred tax assets 213 249
193,670 183,268
Current assets
Inventories 297,618 291,778
Contract assets 13,659 19,257
Trade and other receivables 76,416 66,601
Cash 13,034 17,401
400,727 395,037
Liabilities
Current liabilities
Trade and other payables 73,477 95,827
Contract liabilities 1,060 4,006
Current tax liabilities 6,677 3,793
Borrowings 84,819 65,000
Lease liabilities 728 426
Provisions 3,221 4,003
169,982 173,055
Net Current Assets 230,745 221,982
Non-current liabilities
Trade and other payables 2,501 4,568
Borrowings 1,699 -
Lease liabilities 3,547 607
Deferred tax liabilities 5,372 4,401
Provisions 1,178 1,385
14,297 10,961
Net Assets 410,118 394,289
Equity
Share capital 13,799 13,763
Property revaluation reserve 1,011 2,352
Retained earnings 383,219 365,692
Other reserves 8,248 7,482
Cost of shares held by ESOP trust (875) (967)
Equity attributable to owners of the Parent Company 405,402 388,322
Non-controlling interests 4,716 5,967
Total Equity 410,118 394,289
UNaudited Statement of Changes in Equity
for the year ended 31 December 2023
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 2022 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
Profit for the year - - 26,299 - - 26,299 2,244 28,543
Other comprehensive income - 51 (2,299) - - (2,248) - (2,248)
Total comprehensive income - 51 24,000 - - 24,051 2,244 26,295
Transfer between reserves(1) - (1,392) 1,392 - - - - -
Equity dividends - - (9,274) - - (9,274) (3,495) (12,769)
Purchase of treasury shares - - - - (98) (98) - (98)
Proceeds from shares issued 36 - - 766 - 802 - 802
Share-based payments - - 1,409 - 190 1,599 - 1,599
36 (1,392) (6,473) 766 92 (6,971) (3,495) (10,466)
At 31 December 2023 13,799 1,011 383,219 8,248 (875) 405,402 4,716 410,118
(1) Transfer of realised profits on disposal of revalued property
UNaudited Statement of Cash Flows
for the year ended 31 December 2023
2023 2022
£'000 £'000
Cash flows from operating activities
Cash generated from operations 5,871 (16,549)
Interest paid (5,475) (1,829)
Tax paid (3,797) (2,918)
Net cash flows from operating activities (3,401) (21,296)
Cash flows from investing activities
Purchase of property, plant and equipment (4,074) (971)
Purchase of investment property (8,017) (9,301)
Purchase of investment in associate - (2,112)
Proceeds on disposal of property, plant and equipment (excluding equipment
held for hire)
432 270
Proceeds on disposal of assets held for sale 4,713 10,987
Proceeds on disposal of investment properties 7,764 8,146
Advances of loans to joint ventures and associates (24,321) (8,560)
Repayment of loans from joint ventures and associates 10,868 10,904
Proceeds on disposal of joint ventures - 6,873
Interest received 1,830 1,153
Dividends received from joint ventures 900 7,160
Net cash flows from investing activities (9,905) 24,549
Cash flows from financing activities
Proceeds from shares issued 802 769
Purchase of treasury shares (98) -
Movement in payables to joint ventures and associates 12 355
Repayment of borrowings (36,510) (70,000)
Proceeds from borrowings 58,028 85,000
Principal elements of lease payments (526) (679)
Dividends paid - ordinary shares (9,253) (8,362)
- non-controlling interests (3,495) (4,030)
- preference shares (21) (21)
Net cash flows from financing activities 8,939 3,032
Net (decrease)/increase in cash and cash equivalents (4,367) 6,285
Net cash and cash equivalents at beginning of year 17,401 11,116
Net cash and cash equivalents at end of year 13,034 17,401
Notes to the Financial Statements
for the year ended 31 December 2023
1. Basis of preparation
These results for the year ended 31 December 2023 are unaudited. The financial
information set out in this announcement does not constitute the Group's
statutory accounts for the years ended 31 December 2023 or 31 December 2022 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 2022 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 2023 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 2022, 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 2023:
Effective from
IFRS 17 (issued 2017) 'Insurance Contracts' 1 January 2023
IFRS 17 (amended 2020) 'Implementation challenges' 1 January 2023
IAS 1 and IFRS Practice Statement 2 (amended 2021) 'Disclosure of accounting policies' 1 January 2023
IAS 8 (amended 2021) 'Definition of accounting estimates' 1 January 2023
IAS 12 (amended 2021) 'Deferred tax related to Assets and Liabilities arising from a single 1 January 2023
transaction'
IFRS 17 (amended 2021) 'Initial application of IFRS 17' 1 January 2023
IAS 12 (amended 2023) 'International Tax Reform - Pillar Two Model Rules' Immediately effective
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.
Going concern
In undertaking their going concern review, which covers the period to 31
December 2025, the Directors considered the Group's principal risk areas that
they consider material to the assessment of going concern.
As the UK economy continues to prove challenging, 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 curtailment in activities. This downside
scenario shows a c34% reduction in sales and c87% reduction in operating
profits from the base case in 2024. Construction and Development activity only
takes place where contracted and likewise for Hallam Land where no sales are
assumed in 2024 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.20%. 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 2024 with net debt of £77.8m, and with c.£83.7m
net debt at 29 February 2024, against current facilities of £105.0m the
Directors have concluded that the Group is able to control the level of
uncommitted expenditure while 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 existing agreement runs to 23 January 2025 and for the
purposes of supporting the Groups going concern assessment, an option,
entirely in management's control, to extend the existing facilities by a
further 12 months to 23 January 2026 has been put in place. The extension
maintains the existing facility terms other than for a rachet interest rate of
between 1.60% and 2.00% above SONIA. Management has assumed these financing
conditions within the going concern assessment.
While the option provides security of funding throughout the going concern
period and has been used for the purposes of preparing the models used to
support the going concern assessment, the Group has also agreed terms with
existing lenders on a new revolving credit facility which is currently in the
legal process and expected to be signed shortly. The new facility level will
increase to £125m, for a period of three years and include options to
extended by one year to 2028 and a further year to 2029. The facility terms
are similar to the existing agreement and will be at a rate of 1.60% above
SONIA. The agreement includes an accordion to increase the facility by up to
£60m. The new facility is expected to complete in H1 2024.
None of the modelling undertaken by the Directors gives rise to any breach of
bank facility covenants or liquidity breaches in the going concern period. 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, which is assessed half-yearly. We have performed a
reverse stress test to determine at what point this covenant could be breached
and it would require a further 15% reduction in EBIT, to the downside
scenario, in December 2024. We consider this implausible as our downside
modelling includes a 34% reduction in revenue and 87% reduction in operating
profit from our base case for 2024 without a breach, and as such we consider
any further breach to be remote. Furthermore, the Directors are satisfied that
there are further mitigations which can be implemented quickly should the
business require in order to satisfy a covenant test. We are satisfied that we
are able to comply with covenants throughout the going concern period.
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.
2023
Revenue Property Land Construction Group Eliminations Total
Investment Promotion £'000 overheads £'000 £'000
and £'000 £'000
Development
£'000
External sales 191,884 67,992 99,523 - - 359,399
Inter-segment sales 258 - 1,050 271 (1,579) -
Total revenue 192,142 67,992 100,573 271 (1,579) 359,399
Gross profit/(loss) 31,554 29,815 15,177 238 (19) 76,765
Other income 4,800 - - - - 4,800
Administrative expenses and pension (17,172) (8,371) (8,682) (10,136) 19 (44,342)
Other operating income 2,989 (7) - - - 2,982
Operating profit/(loss) 22,171 21,437 6,495 (9,898) - 40,205
Finance income 3,273 1,197 458 25,813 (27,384) 3,357
Finance costs (11,596) (615) (480) (5,437) 11,868 (6,260)
Profit/(loss) before tax 13,848 22,019 6,473 10,478 (15,516) 37,302
Tax (5,741) (4,470) (1,686) 3,138 - (8,759)
Profit/(loss) for the year 8,107 17,549 4,787 13,616 (15,516) 28,543
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/(expense) 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
2023 2022
£'000 £'000
Segment assets
Property Investment and Development 362,737 355,491
Land Promotion 160,690 149,598
Construction 41,635 45,766
Group overheads 8,363 3,612
573,425 554,467
Unallocated assets
Deferred tax assets 213 249
Retirement benefit asset 7,725 6,188
Cash and cash equivalents 13,034 17,401
Total assets 594,397 578,305
Segment liabilities
Property Investment and Development 38,101 59,113
Land Promotion 15,635 13,114
Construction 22,797 36,994
Group overheads 4,904 568
81,437 109,789
Unallocated liabilities
Current tax liabilities 6,677 3,793
Deferred tax liabilities 5,372 4,401
Current lease liabilities 728 426
Current borrowings 84,819 65,000
Non-current lease liabilities 3,547 607
Non-current borrowings 1,699 -
Total liabilities 184,279 184,016
Total net assets 410,118 394,289
3. Tax
2023 2022
£'000 £'000
Current tax:
UK corporation tax on profits for the year 6,745 8,690
Adjustment in respect of earlier years (39) (152)
Total current tax 6,706 8,538
Deferred tax:
Origination and reversal of temporary differences 2,053 (813)
Total deferred tax 2,053 (813)
Total tax 8,759 7,725
4. Dividends
2023 2022
£'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 2022 of 4.00p per share (2021: 5,336 4,822
3.63p)
Interim dividend for the year ended 31 December 2023 of 2.93p per share (2022: 3,917 3,540
2.66p)
9,274 8,383
The proposed final dividend for the year ended 31 December 2023 of 4.40p per
share (2022: 4.00p) makes a total dividend for the year of 7.33p (2022:
6.66p).
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 £5,900,000.
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 2023 2022 Increase/
£'000 £'000 £'000 £'000 £'000 (decrease)
in year
Completed investment property
Industrial - - 73,820 73,820 52,927 20,893
Leisure - - 5,096 5,096 9,208 (4,112)
Residential - - 4,359 4,359 4,322 37
Office - - 3,139 3,139 6,275 (3,136)
Retail - - 14,188 14,188 14,466 (278)
- - 100,602 100,602 87,198 13,404
Investment property under construction
Industrial - - - - 9,918 (9,918)
- - - - 9,918 (9,918)
Total carrying value - - 100,602 100,602 97,116 3,486
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
2023 2022
£'000 £'000
400,000 5.25% cumulative preference shares of £1 each (2022: 400,000) 400 400
133,985,763 ordinary shares of 10p each (2022: 133,627,922) 13,399 13,363
13,799 13,763
7. Cash generated from operations
2023 2022
£'000 £'000
Profit before tax 37,302 45,595
Adjustments for:
Amortisation of PFI asset 551 579
Goodwill impairment 203 203
Depreciation of property, plant and equipment 4,462 3,957
Depreciation of right-of-use assets 779 597
Revaluation (increase)/decrease in investment properties (307) 4,921
Amortisation of capitalised letting fees 54 25
Share-based payment expense 1,601 1,241
Pension scheme credit (4,197) (3,422)
Profit on disposal of property, plant and equipment (341) (176)
Profit on disposal of equipment held for hire (1,185) (1,070)
Gain on disposal of investment properties (733) (646)
(Profit)/loss on disposal of assets held for sale (1,571) 150
Gain on disposal of joint ventures - (667)
Finance income (3,357) (1,641)
Finance costs 6,260 2,503
Share of profit of joint ventures and associates (371) (9,079)
Operating cash flows before movements in equipment held for hire 39,150 43,070
Purchase of equipment held for hire (3,497) (5,454)
Proceeds on disposal of equipment held for hire 1,423 1,343
Operating cash flows before movements in working capital 37,076 38,959
Increase in inventories (9,129) (63,701)
Decrease/(increase) in receivables 1,503 (3,763)
Decrease/(increase) in contract assets 5,598 (11,701)
(Decrease)/Increase in payables and provisions (26,231) 24,684
Decrease in contract liabilities (2,946) (1,027)
Cash flows from operations 5,871 (16,549)
2023 2022
£'000 £'000
Analysis of net debt:
Cash and cash equivalents 13,034 17,401
Bank overdrafts - -
Net cash and cash equivalents 13,034 17,401
Bank loans (83,500) (65,000)
Other loans (3,018) -
Lease liabilities (4,275) (1,033)
Net debt (77,759) (48,632)
8. Events after the balance sheet date
Since the balance sheet date the Group has proposed a final dividend for 2023,
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 25 March 2024.
10. The 2023 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 22 April 2024. Copies will be available from
The Company Secretary, Henry Boot PLC, Isaacs Building, 4 Charles Street,
Sheffield S1 2HS.
11. The AGM of the Company is to be held at Double Tree by Hilton,
Chesterfield Road South, Sheffield, S8 8BW on Thursday 23 May 2024, commencing
at 12.30pm.
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