REG - Boot(Henry) PLC - Trading Update

Henry BootAnnouncement

23/01/2024 07:00

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RNS Number : 5114A  Boot(Henry) PLC  23 January 2024

 

23 January 2024

HENRY BOOT PLC

('Henry Boot' or 'the Group')

TRADING UPDATE FOR THE YEAR ENDED 31 DECEMBER 2023

Henry Boot PLC, a Company engaged in land promotion, property investment and
development, and construction, is today issuing a trading update for the year
ended 31 December 2023 ahead of the announcement of its full year results on
25 March 2024.

Tim Roberts, Chief Executive Officer commented:

"Despite challenging market conditions for our three key markets, our ongoing
focus on high quality land and development in prime locations resulted in a
resilient performance in 2023. We therefore expect profit before tax for the
year to be in line with current market consensus¹. Furthermore, we have
maintained a strong financial position and continued to invest in the business
to ensure we are well placed as our markets begin to recover.

While the housebuilding sector has seen slowing sales rates, our land business
is experiencing continued demand for strategic sites with planning in premium
locations, as highlighted by the recently announced sale in Swindon, and we
continue to selectively grow our land bank. Our development business has
performed ahead of expectations, while the investment portfolio is on track to
outperform the wider market, helped by the sale of five properties, at an
average premium of 23% to December 2022 valuations. The Group's premium
housebuilder has also grown, having increased its output by 43% during the
year.

With a path to lower inflation and improved interest rates, whilst there will
undoubtedly be bumps along the way, the economy and our markets have turned a
corner, but we expect our results for 2024 to be impacted by these factors. We
continue to firmly believe that Henry Boot remains well placed to achieve its
medium term growth and return objectives."

Trading update for the year ended 31 December 2023

Henry Boot has performed well against the backdrop of a slowing economy, and
higher interest rates, generating robust sales within its property development
and strategic land businesses. Despite activity reducing in our three key
markets of Industrial & Logistics, Residential and Urban Development, our
focus on high quality land and development in prime locations has meant the
business has performed resiliently. Consequently, the Group expects profit
before tax for the year ended 31 December 2023 to be in line with current
market consensus¹.

Throughout 2023, the Group maintained its focus on investing in its prime land
portfolio, building out its high quality committed development programme and
continuing to grow its premium housebuilder, Stonebridge Homes (SH). Progress
has also been made against our medium term objectives, which focus on growing
the business and driving sustained returns. This strategic focus, alongside
continued investment to support our long term ambitions (including the head
office relocation, people, marketing, digital and technological upgrades)
resulted in an increase in net debt to c.£77m (2022: £48.6m). The Group
remains in a strong financial position with a robust balance sheet, although
gearing at year end was towards the top end of the optimum stated range of
10-20%.

Hallam Land Management (HLM) traded well, selling 1,944 plots (2022: 3,869).
Although the number of plots sold in 2023 reduced, average gross profit per
plot increased due to the significant disposal of freehold land at Tonbridge,
Kent.

There continues to be demand for HLM's strategically located premium sites as
shown by our recent significant sale in Swindon, which is contracted for
completion in two phases during H2 2024 and H1 2026. Over 20 years ago HLM, in
partnership with Taylor Wimpey, secured an option on the site which in August
2021 received outline planning consent for a total of 2,380 plots. In December
2023 a contract was exchanged to acquire the land whilst simultaneously
exchanging to sell 759 plots (HLM's share) to Vistry, generating an IRR of 10%
p.a. The scheme includes local community benefits such as a new primary
school, community and sport buildings as well as woodlands and green
infrastructure. HLM will retain 304 plots for future sale.

HLM continued to grow its land bank and during the year secured 18 new sites
which have the potential to deliver c.7,212 plots. The total land portfolio
has increased to 100,972 plots (2022: 95,704 plots) of which 8,501 plots have
planning. HLM remains on course to achieve its medium term target of disposing
an average of 3,500 plots p.a.

HBD has performed ahead of expectations, with continued growth of its
completed schemes to a Gross Development Value (GDV) of £126m (HBD share
£111m, 2022: HBD share £83m), of which 100% have been pre-let or pre-sold.
In the year, HBD completed on:

·      Three industrial schemes totalling 661,000 sq ft with a combined
GDV of £104m (HBD share: £89m).

·      The Disabilities Trust, York (HBD share: £22m GDV), a 54,000 sq
ft scheme with state of the art care facilities. The building is low carbon
and has achieved a BREEAM Excellent assessment rating.

The committed development programme now totals a GDV of £299m (HBD share:
£159m) and is currently 48% pre-let or pre-sold with 98% of development costs
fixed. The three high quality speculative schemes; Setl, Momentum and Island
are expected to generate interest from occupiers as they progress toward
completion during 2024. Whilst the committed development programme has reduced
in value, HBD has optionality on a significant near-term pipeline of
occupier-led schemes with a combined GDV of over £200m which, subject to
market conditions, have the potential to start on site over the next twelve
months.

In December 2023, following the buyout of its JV partner, HBD became the sole
developer of Cheltenham, Golden Valley, 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.

The total value of the investment portfolio (including share of JVs) has
increased to c.£113m (December 2022: £106m). In 2023, four investment
properties were sold, along with Banner Cross Hall, the Group's former HQ, for
a total value of £12.7m, at an average 23% premium to December 2022
valuations. In addition to the sales, two completed developments at Luton and
Markham Vale with a total value of £18m were retained. Whilst the CBRE UK
Monthly Index showed commercial property capital values fell by 3.9% in 2023,
the investment portfolio is expected to have outperformed the wider market.
The Group will continue to retain selective developments from its committed
programme, in line with its strategic aim to grow the investment portfolio to
£150m.

SH has continued to grow, increasing its output by 43% in 2023, completing 251
homes (2022: 175), in line with its medium term target of delivering 600
units. The UK housing market was relatively subdued throughout last year,
however the focus on premium homes in prime locations allowed SH to achieve
its annual sales target. With the stabilisation of mortgage rates toward the
end of the year, SH reservations rate improved to 0.46 homes per site per week
in Q4 2023, up from 0.36 in Q4 2022. Supply chain availability and cost
pressures moderated throughout last year, with discussions with both suppliers
and subcontractors ongoing to mitigate further cost inflation. SH total owned
and controlled land bank now comprises 1,513 plots (2022: 1,094) - of which
923 plots have detailed or outline planning.

The construction segment traded below expectations in 2023 but remained
profitable. Along with the wider market, Henry Boot Construction (HBC)
experienced difficult operating conditions, with performance on two
significant projects impacted by the availability of materials and the
resultant delays. HBC begins 2024 with 46% of its order book secured and is
actively pursuing an encouraging number of new opportunities. Banner Plant
traded slightly below budget in 2023 and in response has adjusted its sales
strategy. Road Link has traded in line with expectations.

Outlook

Looking ahead, we remain confident in the structural growth of our markets,
and our ability to achieve Henry Boot's medium term objectives. Aside from the
small increase in inflation in December, the outlook for both inflation and
interest rates are improving, and with mortgage rates falling, it feels as
though the UK economy has turned a corner. With this in mind, plus cautious
signs of recovery in our three key markets, there is optionality to grow our
commitments and sales.

The Group is well positioned to benefit when our end markets recover, however
we expect there will be a lag in performance due to the time it takes for
projects and sales to complete. Whilst it is encouraging that sales rates have
improved within SH, and we expect this trend to continue, we are now more
conservative with our estimates of completions for 2024 and anticipate the
impact from a recovery in residential sales will be more weighted to 2025.

Due to extended payment profiles with major housebuilders on strategic land
sales, we anticipate gearing to remain towards the upper end of our optimum
range of 10-20% through 2024, and given the higher interest rate environment,
we anticipate this will also impact profit for the year ahead.

Taking these factors into consideration, the Board now expects profitability
for 2024 to be significantly below current market consensus². Notwithstanding
this the Board continue to believe that Henry Boot remains well placed to
achieve its medium term growth and return objectives.

¹ Company compiled market consensus for 2023 profit before tax is £37.2m,
comprising the average of three forecasts from Deutsche Numis, Peel Hunt and
Panmure Gordon.

² Company compiled market consensus for 2024 profit before tax is £37.2m,
comprising the average of three forecasts from Deutsche Numis, Peel Hunt and
Panmure Gordon.

Certain information contained in this announcement would have constituted
inside information (as defined by Article 7 of Regulation (EU) No 596/2014),
as it forms part of domestic law by virtue of the European Union (Withdrawal)
Act 2018) ("MAR") prior to its release as part of this announcement and is
disclosed in accordance with the Company's obligations under Article 17 of
those Regulations.

-ends-

The person responsible for making this announcement on behalf of Henry Boot is
Amy Stanbridge, Company Secretary.

Enquiries:

 

Henry Boot PLC

Tim Roberts, Chief Executive Officer

Darren Littlewood, Chief Finance Officer

Daniel Boot, Senior Corporate Communications Manager

Tel: 0114 255 5444

www.henryboot.co.uk

 

Deutsche Numis

Joint Corporate Broker

Ben Stoop

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

Tel: 020 3727 1000

henryboot@fticonsulting.com

 

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:
Henry Boot Developments Limited (HBD)
(http://www.henryboot.co.uk/our-businesses/hbd/) , 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, a proven
reputation in the property development market for creating places with
purpose, 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 plant hire business, and
generates strong cash flows from its PFI contract, Road Link (A69) Limited.

 

www.henryboot.co.uk (http://www.henryboot.co.uk)

 

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