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
return5 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
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
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.
Details for the live dial-in facility and webcast
are as follows:
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:
HBD (Henry
Boot Developments Limited), Stonebridge
Homes Limited
Construction:
Henry Boot Construction Limited, Banner
Plant Limited,
Road
Link (A69) Limited
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
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 return6
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 a significant sale of
freehold land
|
The running five year average stands
at 2,850 plots pa, but forecast remains 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 Share)
|
In the current market, the committed
programme has been reduced; however, we 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% increase in homes sold
since 2021
|
Continue to target increased output
in 2024, albeit at a slower growth rate, 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, 50 employees trained
as Mental Health First Aiders
|
Contribute £1,000,000 of financial
(and equivalent) value to our charitable partners
|
We have contributed (financial and
equivalent value of) c.£450,000 to our charitable and community
partners so far.
|
|
Increase gender representation,
aiming for 30% of our team and line managers being
female
|
We have made progress, with female
representation across our workforce increasing to 28% (2022:
25%)
|
Contribute 7,500 volunteering hours
to a range of community, charity and education projects
|
More than 5,000 volunteering hours
have been delivered, putting us well over 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 equates to a 14% reduction
from the 2019 baseline. Remain on course to achieve the
decarbonisation trajectory
|
Pay all of our suppliers
a minimum of the real living wage and secure
accreditation with the Living Wage Foundation
|
Internal experts are working with
the Living Wage Foundation to meet the criteria of membership with
accreditation to be achieved in 2024.
|
|
Reduce consumption of
avoidable
plastic by 50%
|
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
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
(£m)
|
HBD Share of
GDV
(£m)
|
Commercial
('000 sq
ft)
|
Residential
Size
(Units)
|
Status
|
|
|
|
|
|
|
|
|
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
(£m)
|
HBD Share of
GDV
(£m)
|
Commercial
('000 sq
ft)
|
Residential
Size
(Units)
|
Status
|
Completion
|
|
|
|
|
|
|
|
|
|
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
£'m
|
2022
£'m
|
Change
%
|
|
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 basis1
(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
£'m
|
2022
£'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 employed2
('ROCE')
ROCE2 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 debt4
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
£'m
|
2022
£'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
£'m
|
2022
£'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
share3 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
£'000
|
2022
£'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 the Parent Company during the
year
|
|
19.3p
|
24.6p
|
UNaudited Statement of Financial Position
as at 31 December 2023
|
|
|
|
2023
£'000
|
2022
£'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
capital
£'000
|
Property
revaluation
reserve
£'000
|
Retained
earnings
£'000
|
Other
reserves
£'000
|
Cost
of
shares
held
by
ESOP
trust
£'000
|
Total
£'000
|
Non-
controlling
interests
£'000
|
Total
equity
£'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
reserves1
|
|
-
|
(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
£'000
|
2022
£'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.
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 transaction'
|
1 January 2023
|
|
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
Investment
and
Development
£'000
|
Land
Promotion
£'000
|
Construction
£'000
|
Group
overheads
£'000
|
Eliminations
£'000
|
Total
£'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
Investment
and
Development
£'000
|
Land
Promotion
£'000
|
Construction
£'000
|
Group
overheads
£'000
|
Eliminations
£'000
|
Total
£'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
£'000
|
2022
£'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
£'000
|
2022
£'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
£'000
|
2022
£'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: 3.63p)
|
5,336
|
4,822
|
|
Interim dividend for the year ended
31 December 2023 of 2.93p per share (2022: 2.66p)
|
3,917
|
3,540
|
|
|
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
£'000
|
Level
2
£'000
|
Level
3
£'000
|
2023
£'000
|
2022
£'000
|
Increase/
(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
£'000
|
2022
£'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
£'000
|
2022
£'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
£'000
|
2022
£'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
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.