Final Results

RNS Number : 4239D

Boot(Henry) PLC

23 March 2011

 



HENRY BOOT PLC

UNAUDITED PRELIMINARY RESULTS FOR THE YEAR ENDED 31 DECEMBER 2010

Henry Boot PLC ("Henry Boot" or "the Group") (LSE: BHY), a company engaged in land promotion, property development & investment, construction and plant hire, announces its preliminary results for the year ended 31 December 2010.

2010 KEY FINANCIAL HIGHLIGHTS

·	Trading profits(*) increased to £18.0m (2009: £11.5m)
·	Property revaluation surplus of £0.6m (2009: deficit £22.4m)
·	Property investment disposal profits of £2.4m (2009: £0.9m)
·	Profit before tax: £18.9m (2009: loss £11.9m)
·	Earnings per share: 9.1p (2009: loss 5.7p)
·	Proposed final dividend of 2.15p per share, total for the year of 3.5p up 40% on 2009 (2.5p)
·	Net asset value per share increased by 7% to 145p (2009: 135p)
·	Further reduction in net debt to £11.4m (2009: £32.1m) and in gearing to 6% (2009: 18%)
·	Post year end:
	·	Group is net cash positive after property and land disposals completed in early 2011
	·	Director retirement and appointment announced
	* Trading profits (loss) comprises operating profit (loss) of £20.9m (2009: loss of £10.0m), adjusted for the increase in fair value of investment property of £0.6m (2009: decrease of £22.4m), profit on sale of investment properties of £2.4m (2009: £0.9m) and loss on sale of assets held for sale of £0.1m (2009: £nil).

Commenting on the results, Chairman, John Reis, said:

"I am pleased to report a significantly improved set of results for the year ended 31 December 2010, particularly given the continued challenging market conditions prevailing in the UK property and construction markets during the period."

"We continue to operate through our UK-wide network of offices, creating future land, planning and development opportunities in a cost effective way and as prudent cash management allows. The construction and property investment income streams provide steady profits and cashflows, which underpin our performance, despite the reduction in the more cyclical development and land profits. Our strategic focus during the recessionary period has been to preserve asset values and reduce debt."

"We have also succeeded in our previously stated aim to release capital by completing developments in progress and disposing of certain assets in the portfolio to reduce debt. We are now debt free, which gives us considerable flexibility going forward to invest in land and property development without recourse to expensive funding sources."

"Furthermore, we will continue to invest in securing planning consents on our greenfield land portfolio to enable us to supply the recovering housebuilding market where, we believe, planning constraints could serve to improve the value of these long-term investments. We therefore continue to retain and add to a strong portfolio of opportunities which we will work through the challenges of the new planning regime or bring forward for development where the expected returns are commensurate with the risk."

"Whilst remaining challenging, the property market has stabilised and is now showing some signs of recovery, at a level which allows the Group to make a reasonable return on its investments. However, I continue to believe that the recovery will be patchy and relatively long and drawn out."

For further information, please contact:

Henry Boot PLC

Jamie Boot, Group Managing Director

John Sutcliffe, Group Finance Director

Tel: [phone]

www.henryboot.co.uk

Evolution Securities Limited

Joanne Lake, Corporate Finance

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Matthew Tyler, Corporate Broking

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Citigate Dewe Rogerson

Fiona Tooley

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Mobile: [phone]

Chairman's statement

In my final report to shareholders before my retirement as Chairman, I am pleased to report a significantly improved set of results for the year ended 31 December 2010, particularly given the continued challenging market conditions prevailing in the UK property and construction markets during the period.

Property investment yields in general stabilised at similar levels to those seen at the end of 2009, with the exception of prime yields, which did improve somewhat during the period. Consequently, the downward revaluations seen in 2009 were not repeated and the year closed with a small revaluation surplus. The Group was able to take advantage of a better investment market during the year and concluded sales at South Shields, Mansfield and Port Talbot. Commercial property development remains difficult, the combination of construction, tenant and valuation risk remains high, although the more stable market means that selectively we have commenced development once again with a foodstore-led, retail development in Warminster, pre-let to Waitrose. In addition, we have signed up several development opportunities, some as joint ventures with the landowners, where we expect to add value in the longer term. As anticipated, Hallam Land Management Limited ("Hallam Land") had a better year than in 2009 but results remain significantly below the levels seen at the peak of the cycle. Pockets of buying activity from retailers and house builders are emerging and we concluded a significant land sale at Bridgwater to Morrisons for a major regional distribution hub and to Barratt for some 600 housing units. The proceeds of these sales will fund the cost of the infrastructure and Section 106 requirements of the site in order to access the further land with permission for over 400 more housing units. As 2011 continues to unfold, the UK house builders reporting to date have indicated that new build housing market volumes remain fairly flat, though pricing and margins are recovering as land acquired more recently begins to work through into the sales mix. The key concern within our land business is, however, neither the land market nor the customers for our land, it is the underlying planning environment. A combination of Coalition Government intervention in the planning regime and local authority staff cutbacks within planning departments will, we believe, serve to reduce the number of new planning permissions being granted in the coming months and years. However, we anticipated this development and are pleased to report that over 20% of our portfolio of land already has either planning permission or an allocation in a local plan, and is therefore much further through the planning process, compared with around 10% some five years ago.

The construction division generated another positive financial result as work continued on the Rotherham and Doncaster Decent Homes programmes, and work commenced at Eastlands, Manchester. As in previous years, much of the construction division's work is either local authority or centrally funded and we expect that the public spending cuts will reduce potential contract workloads and increase pricing pressure as more firms compete for less work. At 31 December 2010, as in previous years, about 70% of 2011's budgeted activity was already contracted. At our plant hire business, activity levels in 2010 recovered slightly although the bad weather in January and December did have an adverse impact on trading. Whilst we increased capital expenditure over 2009, our plant business in 2010 was cash generative once again. Road Link A69 continued to perform in line with management expectations and previous years, once again contributing solidly to both underlying profit and cash generation in the period. Traffic volumes have been only marginally affected by the adverse weather over the last two winters and our team continued to do a great job ensuring that the road remained open at all times.

We continue to operate through our UK-wide network of offices, creating future land, planning and development opportunities in a cost effective way and as prudent cash management allows. The construction and property investment income streams provide steady profits and cashflows, which underpin our performance, despite the reduction in the more cyclical development and land profits. Our strategic focus during the recessionary period has been to preserve asset values and reduce debt. We have made further progress on debt reduction during the period with net debt down from £32.1m to £11.4m at the year end. Despite the large property valuation adjustment seen over the last three years, our net asset value per share ("NAV") of 145p at December 2010 is now ahead of the 139p per share reported at the top of the cycle in December 2007. We expect our businesses to generate further cash in 2011 and achieved a strong start with the sales made in January 2011. We are now seeing increasing opportunities to reinvest this cash into our extensive portfolio of land and development opportunities.

FINANCIAL Results

Revenue was £131.9m (2009: £116.5m), arising from higher land transaction values offset by weaker construction division turnover and development activity during the year. Trading profit^(*) increased to £18.0m (2009: £11.5m), once again because of the improved contribution from land trading and development activities in 2010. Profit before tax also benefited from a one-off pension liability management credit of £4.5m (2009: £nil) and, at £18.9m, was significantly ahead of the 2009 loss of £11.9m. The major change in profitability arose from the movement in the property revaluation surplus of £0.6m compared to a deficit of £22.4m in 2009. Property disposal profits were £2.4m (2009: £0.9m), largely attributable to the sale of our South Shields retail investment. Basic earnings per share increased to 9.1p (2009: loss of 5.7p). Total net assets increased 7% to £188.6m (2009: £176.2m), representing a NAV of 145p per share (2009: 135p). Gearing again fell, for the third year in succession, as the cash generated from land and property investment sales was applied to reducing debt. Gearing at the year end stood at 6%, based on net debt of £11.4m (2009: gearing 18%, net debt £32.1m).

Dividends

I believe we have managed the downward and early recovery phases of this trading cycle well. I also believe that the recovery will continue to be slow and it is likely to be several years before property values recover towards those seen at the top of the previous cycle. However, the Board recognises that dividends are vitally important to shareholders in a low growth environment and, given the recovery in profit and positive cashflow in the year, has decided to recommend a final dividend of 2.15p, a 72% increase (2009: 1.25p). The total dividend for the year is therefore increased by 40% to 3.5p (2009: 2.5p).

BOARD CHANGES

I have served on the Board of Henry Boot PLC for nearly 30 years and, having chaired the Group now for 15 years, latterly through the latest recession, I feel it is an appropriate time to retire following this year's Annual General Meeting ("AGM") in May. My fellow Independent Non-executive Director John Brown has agreed to take over the Chairman's role after the AGM and I hope his tenure will be as enjoyable as mine has been. The Directors have appointed James Sykes, a partner in the accountants Saffery Champness, as a Non-executive Director with effect from today and this appointment will be put before shareholders at this year's AGM for ratification. James will not be deemed an Independent Director as he is a trustee of certain trusts which hold 16% of the issued share capital of the Group, however, his experience makes him an ideal Chairman of the Audit Committee which he will take over from John Brown. Following my retirement, the Board will consist of John Brown as Independent Non-executive Chairman; Michael Gunston, Senior Independent Non-executive Director; James Sykes, Non Independent Non-executive Director; Jamie Boot, Managing Director, and John Sutcliffe, Finance Director.

EMPLOYEES

On behalf of my fellow Directors, I would like to express my thanks to all our employees who have worked tremendously hard to achieve a creditable result in very difficult markets. Regrettably, the continued tough trading conditions within the construction division have meant that, once again, we have had to make a number of people redundant during the year. I would also like to take this opportunity to thank all the employees who have worked for the Group throughout my tenure on the board. Without their hard work, many of whom are very long serving, the Group would not be in the strong position it is today.

Strategy

We continue to invest for the long-term in land promotion, property investment and development, with our performance being underpinned by the recurring profit and cashflows generated by our construction, PFI and plant hire activities. We have also succeeded in our previously stated aim to release capital by completing developments in progress and disposing of certain assets in the portfolio to reduce debt. We are now debt free, which gives us considerable flexibility going forward to invest in land and property development without recourse to expensive funding sources. Furthermore, we will continue to invest in securing planning consents on our greenfield land portfolio to enable us to supply the recovering housebuilding market where, we believe, planning constraints could serve to improve the value of these long-term investments. We therefore continue to retain and add to a strong portfolio of opportunities which we will work through the challenges of the new planning regime or bring forward for development where the expected returns are commensurate with the risk.

Outlook

Whilst remaining challenging, the property market has stabilised and is now showing some signs of recovery, at a level which allows the Group to make a reasonable return on its investments. However, I continue to believe that the recovery will be patchy and relatively long and drawn out. It is clear that there are many risks to a sustained recovery in property values. These include the availability of mortgages and bank debt to the sector, the potential release of distressed property from banks' portfolios and cutbacks in government spending, all of which may not be resolved for some time. Therefore, the Board believes that the strategy outlined above remains the correct one until there is clear evidence that the recovery is sustained. The Group retains significant facility headroom and the support of our long-term banking partners which will allow us to gear up again as the recovery takes hold, using the potential in our businesses to generate improving shareholder returns once again.

John S Reis

23 March 2011

BUSINESS REVIEW

The Group's long-term aim remains the value enhancement of land through development, planning promotion and construction. The market place throughout the period can be described as challenging with a continuing lack of liquidity at an individual level in the mortgage market, also at the commercial development level where high equity investment and pre-let percentages are required to secure debt funding, through to institutional grade investments where lower loan to value covenants reduce the scope to raise debt against the value of property. Coupled with this, most traditional funders of the UK property market are seeking to reduce their exposure to the market and in many cases have unwanted property which they are recycling back into the market.

We remain very cautious regarding commercial development on the sites that we hold and continue to push for a high degree of certainty on pre-lets. However, there are signs that the market is recovering in certain areas which may allow profitable development to take place in 2011 and beyond. During the year, we took advantage of a reasonably strong investment market to dispose of investment properties at South Shields, Port Talbot and Mansfield, in order to release capital for reinvestment into potential future developments, such as the Waitrose development at Warminster.

Our land planning and promotion business, Hallam Land, is a very long-term operation with planning consents taking between five and 20 years to achieve. 2010 remained difficult as UK house builders continued to build units at half the average rate of the previous 25 years as the demand for new housing settled at this new low level. The outlook appears to have improved a little, with almost all major house builders who have reported so far in 2011 indicating that they are looking to replenish their land banks at current market prices in anticipation of a growing market and a need to open new sites. The Coalition Government's changes to the planning system have already begun to slow the number of planning consents and we can only see this bottleneck becoming worse before it improves. Housing demand in the short-term is, in our view, still being held back by the availability of affordable mortgage funding. When this funding situation improves, the lack of sites with permission could then result in a shortage of sites for housing, along with the attendant pricing pressure.

The construction division, with its performance underpinned by the solid recurring revenues from our PFI project, Road Link A69, performed well, albeit with profits down on 2009 due to a one-off provision release of £8.2m which inflated profit that year. There continues to be uncertainty as to the impact of cutbacks in Government spending and precisely where the axe will fall. It appears that repair and maintenance work is still being undertaken but larger, more costly, projects are subject to delay and cancellation. We have made significant efforts to try to anticipate this and, for this reason, have sadly had to reduce staffing levels during the year. Plant Hire had another challenging year but we curtailed all but essential capital expenditure and, as a result, the business was cash generative. Conditions did improve through the year and if this trend is continued in 2011, we should see results improve.

Our key focus at Group level over this very difficult two year period has been to retain as much of the NAV created in the period up to the end of 2007 as possible and to reduce our borrowings. NAV at December 2010 now exceeds the pre-recession level before taking into account dividends paid, whilst debt has been further reduced from £32.1m (18% gearing) at 31 December 2009 to £11.4m (6% gearing) at 31 December 2010. Furthermore, sales reported after the year end mean that we are now moving forward with cash, land and development sites to enable us to generate growing returns as the market recovers.

We continue to believe that the recovery phase will be slow and patchy and will be highly dependent on funding streams to the property sector in general continuing to improve. Therefore, in this challenging market, it will be focussed management teams like ours, capitalising on the opportunities available to them, that will generate the greatest improvements in asset value, cash and profit over the next few years.

PROPERTY INVESTMENT AND DEVELOPMENT

PROPERTY

Property values in the year showed reasonable stability, following increases in late 2009 and early 2010. The improvement in demand and funding for prime property, with long leases and strong covenants, helped to maintain these valuation improvements throughout the year. In the case of most other property categories, whether industrial, retail or commercial, values peaked in early 2010 and have probably seen a slight softening since then. Secondary and tertiary properties in all categories have not fared as well, typically due to poor demand combined with a lack of funding, resulting in weakening valuations throughout the year. As we move into 2011, values across all property sectors currently remain stable.

Occupier confidence and therefore demand across all sectors has marginally improved compared to 2009, when prospective tenants deferred property decisions due to the recessionary conditions in the wider economy.  In most sectors, the supply of good quality vacant space has fallen as take up has improved and very little new, speculatively built, space has come forward. This has resulted in some sectors seeing improved letting terms, either in the form of longer leases or lower tenant incentives. In most cases, these improvements have still not yet reached a level capable of sustaining new speculative development, although the reduction in good quality, vacant space has given rise to a greater level of pre-let and design and build activity.

INVESTMENTS

A number of investment properties were sold during the year, either to take advantage of strong values or because particular properties were not seen as long-term portfolio holds. Waterloo Square, our 70,000 sq ft unrestricted retail warehouse investment in South Shields, let on long leases to Debenhams, Next, River Island and BHS, was sold for £11.4m early in 2010 to take advantage of a strong off-market offer, substantially in excess of the 2009 year end valuation of £9.0m.

The neighbourhood retail centre investment in Mansfield, completed and fully let at the end of 2009, was sold in the year at valuation of £2.1m as it was not considered a core long-term investment. All but one of the remaining speculatively built small industrial units at our business parks at Priory Park, Hull and Markham Vale on Junction 29A of the M1, have now been sold or let, with a modest improvement in capital value arising at 31 December 2010. The remaining unit is expected to be leased in 2011. The only remaining speculatively built small office unit investment, at Bridge View Office Park in Hull, let to the Humberside Police Authority, was also sold in 2010.

The letting of vacant space within the investment portfolio continued to be a priority and at our retail and office scheme in Bromley, all but one of the vacant retail units was let, with strong interest in the remaining unit which we anticipate letting in 2011. Interest in the remaining office space has been sufficiently strong to justify its subdivision to secure a number of smaller office occupiers, with this building work now about to proceed on site. Terms have also been agreed to lease our 18,000 sq ft retail unit at Clifton Moor, York, and it is anticipated that the tenant will be in occupation by the middle of 2011 following the completion of fit-out works.

We accepted an offer on our largest retail investment property in Ayr, Scotland, during 2010. Negotiations were very protracted and were not concluded until the early part of 2011 at £33.8m, a figure slightly ahead of the £32m gross valuation disclosed at the year end before the provision for lease incentives brought the asset held for sale value down to £27.7m. The mixed-use office, retail and leisure development known as The Axis in Nottingham remains fully let and we saw a 10% increase in valuation over the year, reflecting the significant uplift in rental income arising in the second half of 2011 from fixed increase rent reviews.

We continue to hold the 50,000 sq ft B&Q investment in Rotherham, the development of which was completed in 2009. This site has benefited from the strengthening investment values for such prime properties during the year. We continue to market the adjoining development land which has planning consent for a further 50,000 sq ft of retail warehousing, but we will only progress this on a viable pre-let basis. We have agreed terms on the adjoining 10,000 sq ft speculatively built industrial space and aim to conclude these lettings in 2011. We also have occupier interest in a design and build scheme on the balance of the site but there is no agreement in place yet.

Visitor numbers have continued to increase at our port waiting facility at Saltwood, Kent, where active scheme management secured the pre-let of a 100 space lorry park on land to the rear of the scheme. The £1m construction project in support of this is underway and due for completion in the first half of 2011. Considerable activity is taking place to firm up the food and retail offer and, whilst we are being selective in the type and quality of operators we choose to secure, it is anticipated that further lettings will be announced in 2011. A possible redevelopment of part of the site for a hotel is also under consideration and we are in discussion with the Highways Agency regarding improving the signage to the facility in order to increase footfall.

Our 70,000 sq ft town centre retail investment in Beeston, Nottingham, continues to be the subject of major redevelopment plans. 2010 saw the confirmation of funding for the Nottingham Tram Extension which will occupy part of the existing investment and provide a dedicated passenger interchange as part of the enlarged scheme. We are working with Broxtowe Borough Council to finalise agreements and hope to conclude these discussions in 2011 in order to take advantage of the strong demand from retailers for the town which is considered to have strong demographics and too little quality retail space.

DEVELOPMENTS IN PROGRESS

With occupier activity only recently improving and our current reluctance to progress speculative projects, levels of development activity over the last three years have remained below the long-term average. However, with more competitive construction costs and the stabilisation of investment values, high quality pre-let developments are now, selectively, financially viable. This has enabled a number of development projects to make progress, notably:-

·	The initial phase of our foodstore-led, retail development in Warminster, where we are now on site building the relocation premises for the existing industrial occupier for completion in 2011. Once this move is completed, we will immediately commence the development of the 26,500 sq ft foodstore, pre-let to Waitrose, and three ancillary retail units which we expect to complete by the end of 2011.
·	The development of a small supermarket, pre-let to Tesco, in Bradford, is also now under construction and is expected to be completed in the first half of 2011.
·	Our business park at Markham Vale, on Junction 29A of the M1 Motorway, has continued to attract good quality industrial occupiers with the completion of a bespoke, design and build, 15,000 sq ft industrial unit in the year for one owner occupier. This has been quickly followed by the agreement of terms for another owner occupied design and build project, comprising 41,000 sq ft of offices and warehousing. The predominance of interest from owner occupiers at Markham Vale reflects the site's highly visible, strategic location on the M1.

FUTURE DEVELOPMENT OPPORTUNITIES

·	In Daventry, planning applications for both the 100,000 sq ft town centre redevelopment and the 140,000 sq ft edge of centre retail park are being prepared for submission in the first half of 2011. Once consent has been granted for this £50m scheme, an early start on development work is anticipated.
·	Demolition work at our site in Tamworth town centre has now been completed following the grant of the 200,000 sq ft retail planning permission and negotiations with a range of prospective occupiers are progressing. In the meantime, the cleared site is being operated as a temporary car park by the local authority, generating some income in the short-term.
·	At Priory Park, Hull, negotiations for off-site highway improvement works have now been finalised with the Highways Agency. This will now allow for the grant of planning permission for the final phase of development to include an increased amount of higher value office space and we will commence the infrastructure to open up this office-based phase in 2011.
·	The detailed planning application and listed building consent application have been submitted for our mixed use conversion of the former County Court building on Deansgate in Manchester city centre. With the support of English Heritage, we expect planning approval to be granted in the first half of 2011, followed by a marketing phase and ultimately redevelopment.
·	Terms are being finalised on a number of smaller sites for a range of pre-let developments and if no planning delays are experienced, we anticipate being on site with developments of budget hotels in Richmond upon Thames and Malvern before the end of 2011. Where occupier demand for other sites remains weak, we are taking the opportunity to secure improved planning permissions and planning renewals to enhance values and occupier attraction and reiterate that we will not undertake speculative development in the current market.

New development opportunities have been secured through joint development agreements with Royal Bank of Scotland on a 23 acre site in Thorne, Doncaster, where we have applied for a mixed-use planning consent including a foodstore, offices, a hotel and industrial space. We are also delighted to have been chosen as the preferred development partner by Calderdale and Huddersfield NHS Foundation Trust to enter into a long-term joint venture to construct additional accommodation for the Trust, as well as to work with their surplus property assets in order to maximise development or disposal values.

LAND DEVELOPMENT

Hallam Land, our land management business, continued to face a difficult market throughout 2010. UK house builders saw something of a revival in the early part of 2010 but, with the election of a cost cutting Coalition Government, this largely petered out by the second half of the year. As a result, land sales proved difficult to conclude. However, recent announcements indicate that there are some signs of renewed recovery in the housing sector but the key difficulty for new house sales remains the lack of mortgage availability, particularly for first-time buyers. As a consequence, total UK house sales have not recovered and remain around half the average annual volumes seen over the last 25 years. Nevertheless, in this relatively subdued market, Hallam Land secured sufficient sales, most notably at St Albans (20 acres) and Bridgwater (80 acres), to generate a small profit for the year.

At this time last year, we noted the potential for an incoming Government to change the planning system. The Coalition Government has announced a radical overhaul of the system through the introduction of the Decentralisation and Localism Bill. This Bill will remove the regional tier of the planning system and introduce a new local layer of planning complexity. In addition, local authority cutbacks have reduced staff numbers in already overloaded planning departments. It remains to be seen how the bill and the new system will eventually impact on planning delivery but, in the short-term, it has led to a curtailment of an already restricted supply of planning permissions for new residential schemes.

Despite these difficulties and against the trend, we have secured a number of planning allocations and permissions on a range of sites during the year. It is worth noting that five years ago, Hallam Land's total land bank was 6,194 acres of which 651 acres (10.5%) had either a planning permission or were allocated for development. At 31 December 2010, the land bank stood at 8,052 acres of which 1,754 acres (21.8%) had either planning or an allocation. The successful hard work since 2006 will stand the company in good stead over the next three to four years when we anticipate that it will become more difficult to gain new permissions. We now have a significant number of consented sites in the portfolio which should allow sales to increase over the next three years, even in the current challenging market. We do not expect to see a significant improvement in land prices because the housing market recovery is likely to be subdued for some time, at least until mortgage availability improves, particularly for first time buyers.

Hallam Land's trading performance reflected the difficult conditions in the housebuilding sector but is nonetheless significantly ahead of that in 2009, with turnover of £34.3m (2009: £10.2m), and an operating profit   of £0.6m (2009: operating loss £3.1m). At December 2010, we held interests in 8,052 acres (2009: 7,933 acres) of which we owned 1,409 acres (2009: 1,679 acres), had 4,076 acres under option (2009: 4,117 acres) and had 2,567 acres under planning promotion agreements (2009: 2,137 acres). The inventory value of these assets totalled £55.0m (2009: £51.3m) and we have 120 sites (2009: 119) in progress, with a geographical bias toward the South and West of England and Scotland. Of the schemes in the land portfolio, we highlight below some of the main sites which are working towards the marketing phase of the cycle.

·	Exeter - We have a 30% holding, alongside the three national house builders, in a major urban expansion to Exeter at Cranbrook. We have converted the 'minded to grant' planning permission into outline permission and have just obtained full planning permission for the first 1,100 dwellings. We have also secured substantial Government funding for infrastructure provision and affordable housing and are now in initial discussions to sell this first phase site.
·	Bridgwater - Having obtained planning permission late in 2009, during the year under review we secured infrastructure provision funding, disposed of land for a 750,000 sq ft site to Morrisons for a south west regional distribution centre and sold the first tranche of residential land to Barratt Homes. From these funds, we are required to provide the site infrastructure and this work has commenced, as has work by Morrisons. We anticipate further land disposals over the next two to three years.
·	Biddenham - We continue to negotiate the s106 Agreement for our 1,000 dwelling scheme and have secured significant infrastructure funding for the bypass. This complex site has some time to go before marketing can commence but the next three years should see the site much closer to disposal.
·	Worcester - We have disposed of our optioned site to Bloor Homes which will be the subject of a planning application later this year.
·	Buckingham - We marketed this 700 unit site during the second half of 2010 and concluded a sale during the first month of 2011.
·	Kettering - This site has the benefit of an outline planning permission and we are clearing down pre- commencement conditions before putting it on the market. The total site is for 5,500 dwellings of which our share is 275.
·	Kilmarnock - Our 90 acre owned site now has an allocation for 500 houses and a District Centre. The latter already has planning permission and we have submitted the application for 500 houses. When planning permission is obtained, which is expected later in 2011, we will commence marketing the site.
·	Chatteris - A planning application has been submitted for 1,000 dwellings on this optioned site and we hope to obtain consent during 2011.
·	Blaby - We have a 25% interest in a 4,500 house scheme on optioned land at Blaby bounded by the M1 and the M69. An application has now been submitted on this site which Blaby District Council includes within in its Core Strategy.

In addition to the main sites listed above, we also have a range of other schemes which we are seeking to bring forward and market over the coming two to three years.

·	Countesthorpe - Permission was granted on appeal for 180 dwellings on this optioned site last year and we expect marketing to take place in the first half of 2011.
·	Tillicoultry - Permission was granted for 74 housing units on land which we own and we expect this site to be marketed during 2011.
·	Mansfield - We have a 50% share on this site which is the subject of an application for 430 dwellings and 30 acres of employment land which we anticipate being approved in the first half of the year.
·	Bishopbriggs - We have a consent for 32 dwellings and are looking to increase this to 51 on this owned site. Once these discussions are concluded the site will be marketed.
·	Sheffield - Our wholly owned employment site at Oxclose Park is the subject of a proposal for an 85,000 sq ft retail store by Tesco. If successful, we have agreed heads of terms to dispose of the site to the retailer.
·	Rugby - Our site at Calvestone Road represents the last phase of our successful Cawston Grange scheme. Planning permission for residential development has been granted for a twelve acre site of which our share is three acres. The site is now being marketed and we expect a disposal later in the year.
·	Market Harborough - A planning application has been submitted for 1,000 dwellings on this optioned site. If we are successful in the planning process, we aim to begin marketing the site in 2012.
·	Bolsover - Having been refused planning permission at the first attempt for our 250 house scheme on optioned land, we amended the proposal and re-submitted the scheme. We are expecting a decision on the revised application during 2011 and, if successful, we anticipate marketing the scheme later this year.

CONSTRUCTION

Henry Boot Construction performed well during 2010, achieving targeted activity levels and exceeding budgeted profit margins. This pleasing result was achieved in a very competitive market place throughout the period. We hold a healthy forward order book from a good mix of regional, as well as sector-focused businesses and continue to be positive, but realistic about construction activity. We are confident that we can achieve sustainable activity levels in existing and new markets for 2011. Our approach continues to be underpinned by an assessment of the risk profile of opportunities and the careful selection of the type of contracts and clients we work with, focusing on key partnering, framework and negotiated contracts, predominantly in social housing, education, health and prison sectors.

Our ongoing strategy targets a mix of public sector funded construction projects in our chosen sectors, supplemented by suitable private sector construction opportunities in the hotel and leisure, commercial, industrial and retail sectors. This will be supported by the expansion and delivery of our integrated regeneration agenda, offering unparalleled quality, innovation and modern construction processes, to give our customers value for money whilst incorporating the social and green agendas.

We continue to work alongside partner contractors on major Decent Homes schemes and environmental programmes for Rotherham 2010 and for St Leger Homes on behalf of Doncaster Metropolitan Borough Council. Partnering contracts secured in 2010 include Decent Homes and environmental works to 6,000 units in Manchester for the Eastlands Homes Partnership and for North Lincolnshire Homes delivering housing improvements in Scunthorpe. Work also commenced on a contract for Sheffield City Council to construct 27 new properties being built to the Code for Sustainable Homes Level 5. Notably, this scheme received a 2010 Housing Design Award. We also saw continued expansion in the refurbishment of non-traditionally constructed houses with contracts being secured for Barnsley Metropolitan Borough Council, Rotherham Metropolitan Borough Council, St Leger Homes of Doncaster and North Lincolnshire Homes. We anticipate, subject to the continued availability of appropriate funding streams, further growth in this sector.

Our preferred alliance contractor agreement with the National Offender Management Service is providing work to deliver upgrades and security improvements in Category A prisons and refurbishment contracts within a range of other secure establishments. New work was secured during the year at HMP Manchester, HMP Full Sutton, HMP Ranby, HMP YOI Werrington, HMP Wakefield and HMP Lindholme. We anticipate that several new projects will come to market during 2011 which, if we are successful in winning, will reinforce our already strong presence in this sector.

Work for the education sector has continued at stable levels during the year, with new facilities either being constructed or completed under partnering framework agreements with Cheshire County Council, Lancashire County Council, Derby City Council and Rotherham Metropolitan Borough Council. We also completed a refurbishment scheme for Sheffield Hallam University. A number of school extension and modernisation projects have been completed for North East Lincolnshire Council and Rotherham Metropolitan Borough Council through our involvement in the Rotherham Construction Partnership. Further contracts secured in this sector include a new extension and refurbishment at Heptonstall School for Calderdale Metropolitan Borough Council, classroom extensions at Stapeley School for Cheshire East Council and a new-build Children's Centre at Brinscall for Lancashire County Council.

Our activities in the health sector continue to expand with the award and completion of four contracts at the Northern General Hospital under the Sheffield Teaching Hospitals framework for major refurbishment works to existing facilities. Late 2010 also saw the award of the negotiated £5m Rawmarsh Joint Service Centre, incorporating a doctor's surgery, pharmacy, library and sports facilities for Rotherham Metropolitan Borough Council and the Rotherham Primary Care Trust.

Our general works division maintained workloads with its longstanding customer base in civil engineering and environmental works in the industrial, water and waste sectors and has secured future contracts to provide recycling centres for Veolia and Leeds City Council as well as environmental improvements for Barnsley Metropolitan Borough Council. This was once again augmented by an increasing level of business in small building work contracts in various sectors.

Pleasingly, during 2010, Henry Boot Construction received five prestigious National Site Awards under the Considerate Constructors Scheme. Two Gold and one Silver Considerate Constructors Awards were received for projects undertaken on behalf of Rotherham Metropolitan Borough Council and St Leger Homes of Doncaster, as well as the additional accolade of two 'runner up' awards for the Most Considerate Site in the United Kingdom. During the year, we also received the RoSPA Gold Award and the CIOB Corporate Responsibility Award.

ROAD LINK A69

Road Link has now completed half the 30-year term contract to operate and maintain the A69 trunk road for the Highways Agency and had another successful year trading in line with management expectations.

In recent years, the cold winters with periods of heavy snowfall have provided a significant challenge to the A69 team. However, the expertise of those providing the winter gritting has ensured that the A69 has remained an open all-weather route, even accommodating extra traffic when adjacent roads have been closed.

Planned maintenance schemes incorporating whole life cost analysis, together with the introduction of innovative cost effective maintenance solutions, continue to achieve savings against the original plan. As expected, traffic volumes in 2010 remained static, but we have benefited from a slightly higher than forecast increase in the price adjustment indices. It is expected that traffic flows will increase slightly in each year of the remaining contract period and we are confident that expected levels of profitability will be achieved.

PLANT HIRE

Trading in 2010 proved to be more buoyant than we had initially anticipated and it could have been even better, had it not been for the adverse weather conditions at the beginning and end of the year. Whilst continuing to strive for maximum turnover and profit, the company strategy centred on three core elements: generating a positive cash flow, cost control and continued fleet realignment to reflect the current market. The hire fleet, at original cost, was reduced in value by 3.8% during the year. However, where required, controlled investment in new items of £1.75m has been made to ensure we continue to offer a modern, technically strong, competitive product and was targeted towards powered access equipment, temporary accommodation units and mechanical plant.

After the reduction in turnover in 2009, a small increase in hire revenues was achieved in 2010. As already indicated, this would have been higher but for weather conditions. This increase, combined with the benefits of reduced borrowings, lower depreciation and stable overhead costs, resulted in a small profit for the year. 2010 also saw cash generation of over £1m reducing the operation's borrowings to their lowest level for over ten years. Despite increases in fleet maintenance, fuel prices and higher bad debts overall, costs have been kept broadly in line with 2009 levels.

FINANCIAL REVIEW

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

Revenue for the year grew by 13% to £131.9m (2009: £116.5m) as a result of increased land sales, principally Bridgwater, partially offset by reduced construction division revenues. This gave rise to a significant improvement in trading profit^(*) of £18.0m (2009: £11.5m). Profit from operations was £20.9m (2009: loss £10.0m) after a net revaluation surplus of £0.6m (2009: deficit £22.4m) and profit on sale of investment properties of £2.4m (2009: £0.9m). The revaluation surplus largely arose in the first half of 2010 with only a slight further recovery in the second half. As predicted last year, administrative costs were reduced by 16% to £12.2m compared with £14.5m in 2009, helped by a reduction in payroll costs and non-recurring pension and facility expenses in 2009. There was a pension credit of £2.7m in 2010 compared with an expense of £3.6m in 2009 as a result of the liability management exercises that took place in the year (see section on pension scheme). This led to a reduction in past service liabilities of around £4.5m which under IAS 19 are treated as a credit to the Consolidated Statement of Comprehensive Income within profit for the year rather than through other comprehensive income.

The segmental result analysis shows that land development generated a small operating profit of £0.6m (2009: loss £3.1m) and property development and investment activities showed an operating profit of £10.5m (2009: loss £16.3m), mostly arising from property rental income, revaluation surplus and profits on sales. Construction division profits were lower at £9.2m (2009: £16.8m) after 2009's one off release of provisions of £8.2m was not repeated. Central costs were a credit of £0.5m (2009: cost £7.5m) after lower IAS 19 pension costs and the liability management credit to pension costs noted above.

Basic earnings per share were 9.1p (2009: loss 5.7p) and the total dividend payable for the year is 3.5p (2009: 2.5p), an increase of 40%. The final dividend of 2.15p is payable on 31 May 2011.

Financing and Gearing

As anticipated, net interest costs were relatively stable at £2.0m (2009: £1.8m) as non-utilisation fees offset much of the cost reduction due to lower levels of debt. 2009 also benefited from lower average interest rates over the year as new facilities at higher rates were not signed until May of that year. It is expected that interest costs will be lower in 2011 with most of the cost being non-utilisation fees. Interest cover, expressed as the ratio of profit from operations (excluding the valuation movement on investment properties and disposal profits) to interest, was 9 times (2009: 6 times). No interest incurred in either year has been capitalised into the cost of developments in progress.

Land sales achieved in the year, partially offset by the continued investment in our investment property portfolio, saw net debt fall by 64% to £11.4m (2009: £32.1m). Gearing on net assets of £188.6m fell to 6% (2009: net assets £176.2m, gearing 18%). All borrowings continue to be at floating rates or on short-term fixed commitments. Included in debtors are £7.7m of negotiable instruments, arising from deferred payment arrangements on land sales, which have not been forfaited given the cash positive position arising in 2011. During the year, we retained three year committed bank facilities totalling £94m, however, the non-utilisation costs associated with this mean we will look to reduce these facilities in 2011 to £50m. We feel this revised level will provide sufficient headroom for the business until facilities are renewed again in May 2012. Throughout the year we operated comfortably within the facility covenants and continue to do so.

Tax

The tax charge for the year was £5.4m (28.5%) (2009: credit £5.9m) arising from the significant change in net profit over the two years. Taxation on profit for the year was £2.2m (2009: £1.1m) and benefits from prior year adjustments of £0.5m. The deferred tax charge was £3.2m (2009: credit £7.0m) as the Group's deferred tax asset fell from £11.1m to £6.6m, mostly as a result of the reduction in the IAS 19 pension deficit. Deferred tax has been calculated at 27%, being the rate expected to be applicable at the date the actual tax will arise.

CONSOLIDATED STATEMENT OF CASH FLOWS

One of our key aims for 2010 was to further reduce debt levels whilst continuing to invest in each of our businesses. We were successful in this objective and our year end net debt position improved by £20.7m during the year (2009: £17.2m). We believe it is vital that we have the flexibility to undertake developments and land deals without the interference and added expense arising from each lending institution's internal approval process. The cashflow achieved in the year, with further sales in early 2011, gives us the required flexibility. We anticipate that the forecast net investment in land and property investment/development in 2011 should result in a further modest reduction in debt by the end of the year. Cash generated from operations increased to £20.1m (2009: £13.9m) after increased land inventories and receivables were more than offset by higher payables, reversing the trends in 2009. However, these impacts were offset by a £2.0m higher tax outflow primarily arising from higher payments on account of taxable profits in 2010. These operating cash inflows were augmented by a £11.1m inflow (2009: £14.8m inflow) from investing activities. Cash outflows from asset purchases and the completion of developments in progress at the beginning of the year were reduced significantly to £5.7m (2009: £11.3m). Proceeds from property and asset disposals fell to £16.5m, compared to £25.6m in 2009. Dividends paid, including those to minorities, totalled £5.3m (2009: £8.2m).

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

Total investment property and assets in the course of construction were valued at £135.1m after the adjustment for tenant incentives (2009: £172.3m). This excludes the value of our Ayr property which was held in current assets held for sale, net of tenant incentives, at £27.7m. The market value of investment property, including Ayr, was £122.1m (2009: £121.3m) and the value of investment property under construction within investment property was £48.4m (2009: £51.0m). The principal disposals from investment property were retail investments at South Shields, Port Talbot and Mansfield.

Intangible assets reflect the Group's asset investment in Road Link A69 of £11.7m (2009: £12.7m). This is a requirement of IFRIC 12 'Service Concession Arrangements' and arises because the underlying road asset reverts to the Highways Agency at the end of the concession period. Property, plant and equipment now comprise Group occupied buildings valued at £7.0m (2009: £7.0m), and plant, vehicles and office equipment with a net book value of £8.3m (2009: £9.2m). Non-current trade and other receivables have increased to £10.4m (2009: £3.7m) due to deferred receipts on land sales undertaken during the year. We have flagged for some time that this is a much more common occurrence as house builders defer land payments, more closely reflecting their cashflows and build out periods. Deferred tax assets have fallen as a result of the reduced pension deficit and valuation changes within the property portfolio. In total, non-current assets have reduced to £179.1m (2009: £216.1m), with the main variances arising from investment property disposals of £11.1m and the transfer of the Ayr property to current assets.

Within current assets, inventories of £58.0m (2009: £55.4m) were higher due to further investment in the land portfolio. Trade and other receivables at £27.3m (2009: £25.1m) reflect the higher deferred land receipts.

Current liabilities have reduced by 11% to £80.0m (2009: £90.0m) as the current portion of debt fell to £11.4m (2009: £31.2m) and provisions rose to £11.8m (2009: £4.0m) due to amounts held within the land division for infrastructure costs at Bridgwater. Net current assets were therefore £37.1m compared to net current liabilities of £5.1m in 2009. Non-current liabilities also fell to £27.6m (2009: £34.7m) after reductions in pension liabilities were offset by an increase in provisions, once again for land development infrastructure costs at Bridgwater.

Net assets increased by 7% to £188.6m (2009: £176.2m) as the retained profit of £11.8m and retained other comprehensive income, largely the pension deficit reduction of £3.3m, was offset by dividends paid of £3.4m. Net asset value per share was 7.4% higher at 145p (2009: 135p).

Pension scheme

The IAS 19 valuation of the defined benefit pension scheme showed the scheme deficit decreasing to £16.2m (2009: £25.7m) at the year-end. The deferred tax asset associated with this was £4.4m (2009: £7.2m). Adding back this net deficit of £11.8m (2009: £18.5m) to net assets, the 2010 deficit equates to 5.9% of equity shareholders' funds (2009: 9.5%). The triennial deficit calculated at 1 January 2010 has now been finalised with the deficit valued at £25.2m (1 January 2007: £8.8m), the increase arising due to a decrease in long-term bond yields, rising long-term inflation and increased mortality assumptions. During 2010, we undertook liability management exercises which have been taken into account in calculating the value of the deficit. The revised annual contribution into the scheme in the latest recovery plan is agreed at £3.8m (previously £0.7m). Following the 2007 triennial valuation, the Company provided an 'on demand' letter of credit for £7.0m and this will not be required under the new recovery plan. The defined benefit scheme is closed to new entrants and new employees are offered a defined contribution scheme. Each 0.1% change in the assumed differential between long-term investment returns and inflation affects the defined benefit scheme deficit by about £2.5m to £3.0m, therefore a relatively small change in gilt yields has a marked effect on the deficit. The liability management exercises undertaken during 2010 to reduce scheme risk included offering enhanced transfer value terms to certain deferred members, capping future salary increases for active members at 1% per annum (with any balance going into the defined contribution scheme) and offering a pension increase and exchange alternative to pensioners, taking inflation risk out by offering a higher fixed pension. We believe that the benefit of this work was a £10m to £12m reduction in total scheme liabilities. In addition, liabilities have also been reduced following a Government consultation to change the inflation measure from the Retail Prices Index ('RPI') to the Consumer Prices Index ('CPI') in respect of increases to members' deferred pensions. We will continue to evaluate cost effective ways of reducing risk and liabilities within our defined benefit scheme, undertaking further exercises as necessary.

UNAUDITED Consolidated statement of comprehensive income

for the year ended 31 December 2010

 

	2010	2009
		(restated)
	£'000	£'000
Revenue	131,944	116,524
Cost of sales	(104,522)	(87,015)
Gross profit	27,422	29,509
Other income	23	29
Administrative expenses	(12,205)	(14,468)
Pension credit (expenses)	2,718	(3,611)
	17,958	11,459
Increase (decrease) in fair value of investment properties	555	(22,381)
Profit on sale of investment properties	2,433	878
Loss on sale of assets held for sale	(60)	-
Operating profit (loss)	20,886	(10,044)
Finance income	507	803
Finance costs	(2,475)	(2,651)
Profit (loss) before tax	18,918	(11,892)
Tax	(5,395)	5,926
Profit (loss) for the year from continuing operations	13,523	(5,966)
Other comprehensive income:
Revaluation of Group occupied property	-	(44)
Deferred tax on property revaluations	(19)	80
Tax on realised surplus	-	391
Actuarial gain (loss) on defined benefit pension scheme	4,649	(1,595)
Deferred tax on actuarial (gain) loss	(1,465)	447
Movement in fair value of cash flow hedge	122	65
Deferred tax on cash flow hedge	164	-
Other comprehensive income for the year	3,451	(656)
Total comprehensive income for the year	16,974	(6,622)
Profit (loss) for the year attributable to:
Equity holders of the Parent Company	11,827	(7,389)
Non-controlling interests	1,696	1,423
	13,523	(5,966)
Total comprehensive income attributable to:
Equity holders of the Parent Company	15,167	(8,070)
Non-controlling interests	1,807	1,448
	16,974	(6,622)
Basic earnings per ordinary share for profit attributable to equity holders of the Parent Company during the year	9.1p	(5.7)p
Diluted earnings per ordinary share for profit attributable to equity holders of the Parent Company during the year	9.1p	(5.7)p
Dividend	3.5p	2.5p

 

2009 comparatives have been restated for a reclassification of overheads within the construction segment amounting to £1,610,000 transferred from cost of sales to administrative expenses.

UNAUDITED CONSOLIDATED StatementS of financial position

at 31 December 2010

	Group					Parent Company
	2010			2009		2010	2009
	£'000			£'000		£'000	£'000
ASSETS
Non-current assets
Intangible assets	11,707			12,684		-	-
Property, plant and equipment	15,234			16,203		182	274
Investment properties	135,117			172,290		-	-
Investments	-			-		5,222	3,862
Trade and other receivables	10,449			3,743		-	-
Deferred tax assets	6,631			11,131		4,726	7,836
	179,138			216,051		10,130	11,972
Current assets
Inventories	58,005			55,433		-	-
Trade and other receivables	27,331			25,071		172,373	190,116
Current tax assets	-			-		71	-
Cash and cash equivalents	4,037			4,305		979	1,885
Assets classified as held for sale	27,719			-		-	-
	117,092			84,809		173,423	192,001
LIABILITIES
Current liabilities
Trade and other payables	55,216			51,971		75,952	106,688
Current tax liabilities	1,602			2,820		-	687
Borrowings	11,362			31,163		10,000	30,000
Provisions	11,835			4,004		-	1,124
	80,015			89,958		85,952	138,499
NET CURRENT ASSETS (LIABILITIES)	37,077			(5,149)		87,471	53,502
Non-current liabilities
Trade and other payables	1,347			3,734		-	-
Borrowings	4,069			5,231		-	-
Employee benefits	16,221			25,732		16,221	25,732
Deferred tax liabilities	-			5		-	-
Provisions	5,937			-		-	-
	27,574			34,702		16,221	25,732
NET ASSETS	188,641			176,200		81,380	39,742
EQUITY
Share capital	13,424			13,424		13,424	13,424
Revaluation reserve	3,294			3,349		-	-
Retained earnings	168,528			156,200		63,776	22,138
Other reserves	2,774			2,599		4,180	4,180
Cost of shares held by ESOP trust	(476)			(602)		-	-
Equity attributable to equity holders of the Parent Company	187,544			174,970		81,380	39,742
Non-controlling interests			1,097	1,230		-	-
Total equity			188,641	176,200		81,380	39,742

unaudited Consolidated statement of changes in equity

for the year ended 31 December 2010

		Attributable to equity holders of the Parent Company
		Share capital	Revaluation reserve	Retained earnings	Other reserves	Cost of shares held  by ESOP  trust	Total	Non-controlling interests	Total equity
		£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
At 1 January 2009		13,424	4,438	168,868	2,577	(764)	188,543	1,557	190,100
(Loss) profit for the period		-	(1,410)	(5,979)	-	-	(7,389)	1,423	(5,966)
Other comprehensive income		-	427	(1,148)	40	-	(681)	25	(656)
Total comprehensive income		-	(983)	(7,127)	40	-	(8,070)	1,448	(6,622)
Equity dividends		-	-	(6,464)	-	-	(6,464)	(1,775)	(8,239)
Transfer to retained earnings		-	(106)	124	(18)	-	-	-	-
Share-based payments		-	-	799	-	162	961	-	961
		-	(106)	(5,541)	(18)	162	(5,503)	(1,775)	(7,278)
At 31 December 2009		13,424	3,349	156,200	2,599	(602)	174,970	1,230	176,200
Profit for the period		-	-	11,827	-	-	11,827	1,696	13,523
Other comprehensive income		-	(19)	3,184	175	-	3,340	111	3,451
Total comprehensive income		-	(19)	15,011	175	-	15,167	1,807	16,974
Equity dividends		-	-	(3,378)	-	-	(3,378)	(1,940)	(5,318)
Transfer to retained earnings		-	(36)	36	-	-	-	-	-
Share-based payments		-	-	659	-	126	785	-	785
		-	(55)	(2,683)	-	126	(2,593)	(1,940)	(4,533)
At 31 December 2010		13,424	3,294	168,528	2,774	(476)	187,544	1,097	188,641

 

UNAUDITED Consolidated statementS of cash flows

for the year ended 31 December 2010

		Group			Parent Company
		2010	2009		2010	2009
		£'000	£'000		£'000	£'000
Cash flows from operating activities
Operating profit (loss)		20,886	(10,044)		2,112	(27,021)
Adjustments for non-cash items:
Amortisation of PFI asset		1,117	1,098		-	-
Goodwill impairment		204	203		-	-
Depreciation of property, plant and equipment		3,024	3,327		117	133
Impairment losses on land and buildings		24	106		-	-
Revaluation (increase) decrease in investment properties		(555)	22,381		-	-
Share-based payment expense		659	799		520	549
Pension scheme (credit) charge		(4,862)	1,474		(4,862)	1,474
Provision against investments in subsidiaries		-	-		32,775	-
Movement on provision against loans to subsidiaries		-	-		(34,488)	-
Movements in fair value of cash flow hedge		122	65		-	-
Loss on disposal of assets held for sale		60	-		-	-
Gain on disposal of property, plant and equipment		(554)	(1,516)		-	-
Gain on disposal of investment properties		(2,433)	(878)		-	-
Operating cash flows before movements in working capital		17,692	17,015		(3,826)	(24,865)
(Increase) decrease in inventories		(2,888)	3,953		-	-
(Increase) decrease in receivables		(10,435)	4,158		53,407	38,095
Increase (decrease) in payables		13,905	(11,255)		(6,896)	(5,343)
Cash generated from operations		18,274	13,871		42,685	7,887
Interest paid		(1,754)	(1,855)		(3,839)	(4,074)
Tax paid		(3,438)	(1,425)		(1,727)	(240)
Net cash flows from operating activities		13,082	10,591		37,119	3,573
Cash flows from investing activities
Purchase of intangible assets		(344)	(314)		-	-
Purchase of property, plant and equipment		(2,479)	(779)		(25)	(153)
Purchase of investment property		(2,857)	(10,159)		-	-
Purchase of investments in subsidiaries		-	-		(59,134)	-
Proceeds on disposal of property, plant and equipment		954	3,844		-	8
Proceeds on disposal of investment properties		15,546	21,773		-	-
Proceeds on disposal of assets held for sale		1,838	-		-	-
Interest received		273	472		8,056	8,294
Dividends received from subsidiaries		-	-		36,456	11,439
Net cash flows from investing activities		12,931	14,837		(14,647)	19,588
Cash flows from financing activities
Decrease in borrowings		(20,963)	(14,639)		(20,000)	(13,477)
Dividends paid	- ordinary shares	(3,357)	(6,443)		(3,357)	(6,448)
	- minorities	(1,940)	(1,775)		-	-
	- preference	(21)	(21)		(21)	(21)
Net cash flows from financing activities		(26,281)	(22,878)		(23,378)	(19,946)
Net (decrease) increase in cash and cash equivalents		(268)	2,550		(906)	3,215
Net cash and cash equivalents at beginning of period		4,305	1,755		1,885	(1,330)
Net cash and cash equivalents at end of period		4,037	4,305		979	1,885

Analysis of net debt:
Cash and cash equivalents	4,037	4,305		979	1,885
Bank overdrafts	-	-		-	-
Net cash and cash equivalents	4,037	4,305		979	1,885
Bank loans	(15,231)	(36,394)		(10,000)	(30,000)
Related party loans	(200)	-		-	-
Net debt	(11,394)	(32,089)		(9,021)	(28,115)

NOTES

1.

Basis of preparation The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards ('IFRS') as adopted by the European Union. They have been prepared on the historical cost basis, except for financial instruments which are measured at fair value. The same accounting policies and methods of computation are followed as in the latest published audited accounts for the year ended 31 December 2009, which are available on the Group's website at www.henryboot.co.uk. Of the new standards, amendments and interpretations that are in issue and mandatory for the financial year ended 31 December 2010, there is no financial impact on these preliminary results. The preliminary results for the year ended 31 December 2010 are unaudited. The financial information set out in this announcement does not constitute the Group's IFRS statutory accounts for the years ended 31 December 2010 or 31 December 2009 as defined by Section 434 of the Companies Act 2006. The financial information for the year ended 31 December 2009 is derived from the statutory accounts for that year which have been delivered to the Registrar of Companies. The previous auditors, Hawsons, 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 2010 will be finalised on the basis of the financial information presented by the Directors in these preliminary results and will be delivered to the Registrar of Companies following the Annual General Meeting of Henry Boot PLC.

2.

Segment information For the purpose of the Board making strategic decisions the Group is currently organised into three business segments: Property investment and development, Land development and Construction. Whilst Group overheads are not a reportable segment, information about them is considered by the Board in conjunction with the reportable segments and is therefore included for completeness. As operations are carried out entirely within the United Kingdom the Group has only one geographic segment. 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.

		2010
		Property investment and development	Land development	Construction	Group overheads	Eliminations	Total
	Revenue	£'000	£'000	£'000	£'000	£'000	£'000
	External sales	13,467	33,901	84,576	-	-	131,944
	Inter-segment sales	304	440	199	520	(1,463)	-
	Total revenue	13,771	34,341	84,775	520	(1,463)	131,944
	Operating profit	10,528	581	9,230	527	20	20,886
	Finance income	1,331	275	1,412	8,026	(10,537)	507
	Finance costs	(7,515)	(730)	(735)	(4,032)	10,537	(2,475)
	Profit before tax	4,344	126	9,907	4,521	20	18,918
	Tax	(833)	(51)	(2,858)	(1,302)	(351)	(5,395)
	Profit for the year	3,511	75	7,049	3,219	(331)	13,523
	Other information
	Capital additions	3,326	22	2,206	442	-	5,996
	Depreciation	54	61	2,465	444	-	3,024
	Impairment losses	24	-	-	-	-	24
	Goodwill impairment	-	-	204	-	-	204
	Amortisation	-	-	1,117	-	-	1,117

During the year the Land development segment made two individual sales to customers amounting to 45% and 32% of the segment's total revenue. Due to the nature of land transactions the segment often has large value low volume transactions. As the segment receives offers from multiple customers for its sales it is not reliant on any major customer individually.

		2009
		Property  investment and development	Land development	Construction	Group overheads	Eliminations	Total
	Revenue	£'000	£'000	£'000	£'000	£'000	£'000
	External sales	28,386	10,183	77,955	-	-	116,524
	Inter-segment sales	309	-	6,982	574	(7,865)	-
	Total revenue	28,695	10,183	84,937	574	(7,865)	116,524
	Operating (loss) profit	(16,317)	(3,149)	16,847	(7,460)	35	(10,044)
	Finance income	1,890	272	1,040	8,267	(10,666)	803
	Finance costs	(7,623)	(736)	(699)	(4,253)	10,660	(2,651)
	(Loss) profit before tax	(22,050)	(3,613)	17,188	(3,446)	29	(11,892)
	Tax	6,536	979	(2,657)	1,537	(469)	5,926
	(Loss) profit for the year	(15,514)	(2,634)	14,531	(1,909)	(440)	(5,966)
	Other information
	Capital additions	10,192	6	867	187	-	11,252
	Depreciation	62	66	2,729	470	-	3,327
	Impairment losses	106	-	-	-	-	106
	Goodwill impairment	-	-	203	-	-	203
	Amortisation	-	-	1,098	-	-	1,098

		2010	2009
		£'000	£'000
	Segment assets
	Property investment and development	183,964	196,015
	Land development	74,396	58,030
	Construction	25,428	29,456
	Group overheads and other	1,774	1,923
		285,562	285,424
	Unallocated assets
	Deferred tax assets	6,631	11,131
	Cash and cash equivalents	4,037	4,305
	Total assets	296,230	300,860
	Segment liabilities
	Property investment and development	4,080	6,172
	Land development	27,958	11,451
	Construction	39,918	37,844
	Group overheads and other	2,379	4,242
		74,335	59,709
	Unallocated liabilities
	Current tax liabilities	1,602	2,820
	Current borrowings	11,362	31,163
	Non-current borrowings	4,069	5,231
	Employee benefits	16,221	25,732
	Deferred tax liabilities	-	5
	Total liabilities	107,589	124,660
	Total net assets	188,641	176,200

3.

Dividends

		2010	2009
		£'000	£'000
	Amounts recognised as distributions to equity holders in year:
	Preference dividend on cumulative preference shares	21	21
	Final dividend for the year ended 31 December 2009 of Nil per share (2008: 3.75p)	-	4,831
	Interim dividend for the year ended 31 December 2010 of 1.35p per share (2009: 1.25p)	1,745	1,612
	Second interim dividend for the year ended 31 December 2009 of 1.25p per share (2008:Nil)	1,612	-
		3,378	6,464

	The proposed final dividend for the year ended 31 December 2010 of 2.15p per share (2009: Nil) makes a total dividend for the year of 3.5p (2009: 2.5p). The proposed final dividend is subject to approval by shareholders at the AGM and has not been included as a liability in these preliminary results. The total estimated dividend to be paid is £2,779,000. 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 except for a nominal amount.
4.	These preliminary results were approved by the Board of Directors on 22 March 2011 and authorised for issue.
5.	The Annual Report 2010 is to be published and sent to shareholders by no later than Wednesday 27 April 2011. Copies will be available from The Company Secretary, Henry Boot PLC, Banner Cross Hall, Ecclesall Road South, Sheffield, S11 9PD and on the Company's website www.henryboot.co.uk.
6.	The Annual General Meeting of the Company is to be held at Baldwins Omega, Brincliffe Hill, Off Psalter Lane, Sheffield, S11 9DF on Friday 27 May 2011 commencing at 12 noon.

 

END

 

 

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