Profits dip, but Henry Boot still optimistic

Well-timed disposals and land promotion played a part in the Sheffield group’s decision to pay an increased dividend, despite pre-tax profits falling to £37.3m.

In its unaudited results for the year to 31 December 2023, Henry Boot reported a 5.3% increase in revenue to £359.4m, driven by land disposals, property development and housing completions.

The profit before tax figure of £37.3m reflected a drop from 2022’s £45.6m, while underlying profit fell to £36.7m from 2022’s £56.1m – a figure the group described as in line with market expectations.

Chief executive Tim Roberts said: “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.”

Group-wide, the company includes developer HBD, Hallam Land and housing developer Stonebridge, in addition to the Henry Boot construction division.

Stonebridge increased its sales output by 43%, completing 251 homes. The construction division achieved turnover of £99.5m, down from £128.6m in 2022 and remained profitable, achieving an operating profit of £6.5m, compared to £12.1m in 2022.

The company has now moved into its new base in Sheffield city centre.

Roberts continued: “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.”

Capital employed has increased by 4.5% to £417m, continuing the stated growth strategy and progressing towards the group’s medium-term target of £500m

Net debt stands at £77.8m, compared to 2022’s £48.6m, reflecting continued investment in committed developments and selective acquisitions. Gearing is at 19%.

A final dividend of 4.4p is proposed, an increase of 10%, bringing the total dividend for the year to 7.33p (2022: 6.66p)

Operational Highlights

• £248.5m (2022: £241.9m) of land and property sales led by the land promotion, development and housebuilding businesses, despite a challenging economy and slower market conditions, reflecting the demand for prime projects and buildings
• Land promotion
  • 1,944 plots sold (2022: 3,869) at an increased gross profit per plot of £15,480 (2022: £6,066) due to a significant freehold sale at Tonbridge, more than offsetting the volume reduction
  • The total land bank has grown to 100,972 plots (2022: 95,704 plots)
  • 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
  • GDV of completed schemes £126m (HB share £111m) dominated by prime industrial development which was all successfully pre-let and/or pre-sold
  • Committed development programme of £159m, with 50% pre-sold or pre-let, including around 550,000 sq ft of Industrial & Logistics development underway (HB share: £91m GDV)
  • £1.5bn development pipeline (HB share £1.3bn GDV), 59% of which is focused on Industrial & Logistics markets
  • 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 returnof 6.7% for year ending 2023
  • Four accretive investment property sales, plus the firm’s former HQ Banner Cross Hall, for a combined value of £12.7m, at an average 23% premium to December 2022 valuations