TIDMBOOT
RNS Number : 5114A
Boot(Henry) PLC
23 January 2024
23 January 2024
HENRY BOOT PLC
('Henry Boot' or 'the Group')
TRADING UPDATE FOR THE YEARED 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 consensus(1). 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 consensus(1).
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.GBP77m (2022: GBP48.6m). 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
GBP126m (HBD share GBP111m, 2022: HBD share GBP83m), 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 GBP104m (HBD share: GBP89m).
-- The Disabilities Trust, York (HBD share: GBP22m 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 GBP299m
(HBD share: GBP159m) 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 GBP200m 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 GBP1bn
GDV mixed-use campus, including the new National Cyber Innovation
Centre. A GBP95m funding agreement with Cheltenham Borough Council
for the delivery of phase one has now been secured as well as a
GBP20m 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.GBP113m (December 2022: GBP106m). In 2023,
four investment properties were sold, along with Banner Cross Hall,
the Group's former HQ, for a total value of GBP12.7m, 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 GBP18m 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 GBP150m.
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
consensus(2). 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 GBP37.2m, 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 GBP37.2m, 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
Property Investment and Development:
Henry Boot Developments Limited (HBD) , Stonebridge Homes
Limited
Construction:
Henry Boot Construction Limited , Banner Plant Limited , Road
Link (A69) Limited
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
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END
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