Industrial and logistics values lift Henry Boot through 2021
Construction and property development company Henry Boot said in a trading update on Tuesday that it had performed “well” in 2021, primarily due to an uplift in industrial and logistics capital values within both completed retained developments and existing investments, alongside a strong performance from its strategic land business.
The London-listed firm said that as a result, it expected profit before tax for the year ended 31 December to be materially ahead of market expectations.
It said its three key markets - industrial and logistics, residential, and urban development - all performed well, helping it make “good progress” against its strategic objectives.
In total, the group invested more than £66m into new opportunities within those markets, in line with its growth aspirations.
The group said its financial position remained intact, with a “robust” balance sheet and net debt of £44m, comfortably within its targeted operating gearing range of 10% to 20%.
Henry Boot said Hallam Land Management (HLM) performed materially ahead of expectations, driven by strong demand from housebuilders for residential land.
HLM added more than 1,000 acres to its land bank, which had the potential to deliver around 7,600 plots, increasing its total land portfolio to over 92,500 plots from 88,070 at the end of 2020.
In addition, HLM submitted a planning application in Bicester for 3,100 plots, commercial development, and a primary school before the year-end.
Henry Boot Developments (HBD), meanwhile, completed developments with a gross development value (GDV) of £298m, of which its share was £68m, up from £58m year-on-year.
The board said HBD was building its committed development pipeline in line with its strategic objective, as a result of strong industrial occupier demand.
In 2021, HBD made further acquisitions including Welwyn Garden City with a gross development value of £20m, which was set to deliver 71,000 square feet of industrial warehouse space, as well as a 20-acre industrial site in Rainham with a gross value to the firm of £24m, and a “significant” build-to-rent scheme in the centre of Birmingham with a gross value of £110m.
HBD was also chosen as the preferred bidder to deliver a 200-acre scheme at Cheltenham Borough Council's Golden Valley Development, which was expected to create 12,000 new jobs, 3,700 new homes and two million square feet of commercial space.
“The value of the investment portfolio has continued to grow following the acquisition of two industrial sites with medium term development potential in Skelmersdale and Manchester and the completion of industrial developments at Wakefield and Enfield, as well as benefiting from valuation gains significantly ahead of expectations,” the Henry Boot board said in its statement.
Stonebridge Homes (SBH) completed 120 units, up from 115 units year-on-year, in a “buoyant” housing market, and achieved a sales rate of 0.83 units per site per week, down from 0.90.
The owned-and-controlled land bank now stood at 1,157 plots, up from 1,119, of which 912 had either detailed or outline planning permission - an improvement that the company said was led by a recent acquisition at Armthorpe in Doncaster, which had detailed permission to deliver 232 plots.
Overall, the land bank provided 5.7 years supply based on a one-year rolling forward sales forecast.
At the beginning of 2022, SBH secured 68% of its annual delivery target of 204 units for the year, with the group's strategic objective to grow the business to building 600 units per year “firmly on track”.
Henry Boot Construction performed well throughout 2021, and after securing a £47m urban development scheme at the Cocoa Works in York during the second half, had secured 100% of its order book for 2022.
Banner Plant was trading above pre-pandemic levels, and was experiencing “strong demand” due to the positive performance of the UK housing and construction markets.
Looking ahead, Henry Boot said it had entered 2022 in good shape, with a “robust” balance sheet, strong operational momentum, and a “healthy store” of opportunities secured in its three key markets, leaving the board “confident” of further progress in the year.
“Already, in early January 2022 one of HBD's joint ventures in Scotland has successfully completed the sale of a 56-acre site with the benefit of detailed planning consent for 540 residential units, retail and community space,” the directors said.
“It has also concluded a forward land sale and development agreement for the construction of a 260,000 square foot industrial unit in Wakefield for a German pharmaceutical company.
“Whilst market conditions remain supportive for the group to deliver its short and medium-term targets, Henry Boot continues to monitor the shortage of materials and labour in the UK construction industry, in addition to increasing build costs.”
However, the company said it was currently managing those challenges effectively, with the added benefit of sales price increases.
Finally, at the end of the month, the group said it would be launching phase two of its ‘Responsible Business Strategy’, that would set forward-looking targets aiming to embed its environmental, social and governance (ESG) approach into its commercial decision-making, and meet its previously-declared commitment to ‘net zero carbon’ by 2030.
“We've had a good year ahead of expectations, operating in strong markets and also making very encouraging progress against our recently declared medium term strategic targets which will position the business well for successful growth,” said chief executive officer Tim Roberts.
Henry Boot said it would release its preliminary results for the year ended 31 December on 23 March.
At 1110 GMT, shares in Henry Boot were up 5.55% at 295p.