Half-year Report

RNS Number : 4822L
Boot(Henry) PLC
13 September 2021
 

13 September 2021

 

HENRY BOOT PLC

('Henry Boot', the 'Company' or the 'Group')

 

UNAUDITED INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2021

 

Henry Boot PLC, a Company engaged in land promotion, property investment and development, and construction, announces its unaudited results for the period ended 30 June 2021. Ticker: BOOT.L: Main market premium listing: FTSE: Real Estate Investment and Services.

 

HIGHLIGHTS

 

· Revenue of £129.0m (June 2020: £108.7m) increased 18.7%, as demand increased across our three key markets

 

· Profit before tax of £23.1m (June 2020: £7.2m) increased by 220.8%, ahead of Board expectations, driven by the industrial property market performing strongly and delivering positive capital returns through disposal of investment property, revaluation gains and returns from Joint Ventures contributing a combined £5.8m

 

· Increased ROCE¹ of 6.3% (June 2020: 2.1%) +4.2% for the six months to 30 June 2021 and EPS grew significantly to 14.1p (June 2020: 4.1p) up 243.9%

 

· Actively investing in our three key markets, with a total of £54.9m invested in new opportunities across the Group, including £11.5m of post period purchases

 

· NAV² per share grew to 256p (December 2020: 235p), an increase of 8.9%, due to retained earnings and actuarial gains on the defined benefit pension scheme

 

· Balance sheet remains robust, with Net Debt³ of £13.0m as at 30 June 2021 (December 2020: Net Cash £27.0m) after strategic investments made in the period

 

· Declaring a 2.42p interim dividend (June 2020: 2.20p), an increase of 10.0%, reflecting the Group's strong operational performance and in line with our progressive dividend policy

 

· Against a backdrop of strong demand within our key markets we have made excellent progress in our evolved strategy and towards our medium-term growth and return targets

 

· Land promotion business sold 2,288 plots (December 2020: 2,000). The land bank has now increased to 92,253 plots (December 2020: 88,070), including 13,273 (December 2020: 15,421) plots with planning permission which are held at the lower of cost or net realisable value and, therefore, do not benefit from valuation gains

 

· Committed programme materially stepped up to £444m (HB share: £181m) - 60% pre-sold or pre-let. Led by over 1 million sq ft of industrial and logistics (69% pre-sold or pre-let). Strong £1.4bn development pipeline (HB share - £1.1bn) with 72% in industrial and logistics

 

· Stonebridge Homes on track with its annual sales target, securing 85% of the annual target in H1, supported by a buoyant housing market. The total owned and controlled land bank is now 1,125 units

 

· Construction business performing ahead of expectations, securing over 100% of its 2021 order book (68% is public sector) in the first half and 80% also secured for 2022

 

· Good start to the second half, with a full order book and forward sales in land, development and housebuilding, as well as, launching our Net Zero Carbon Framework and establishing a Responsible Business Committee

 

1 Return on Capital Employed is an alternative performance measure (APM) and is defined as operating profit/average total assets less current liabilities

 

² Net Asset Value (NAV) per share is an APM and is defined using the statutory measures net assets/ordinary share capital

 

³ Net (debt)/cash is an APM and is reconciled to statutory measures in note 14

 

Commenting on the results, Chief Executive Officer Tim Roberts said:

 

"The business has performed well, responding to growing demand within our key markets.  Whilst we expect profit to be weighted to the first half, the cadence of our activity will remain high, so we will continue to make excellent progress on our clear strategic targets. This will position us well for sustainable growth in the future".   

 

For further information, please contact:

 

Henry Boot PLC

Tim Roberts, Chief Executive Officer

Darren Littlewood, Group Finance Director

Daniel Boot, Group Communications Manager

Tel: 0114 255 5444

www.henryboot.co.uk

 

Numis Securities Limited

Joint Corporate Broker

Garry Levin/George Fry

Tel: 020 7260 1000

 

Peel Hunt LLP

Joint Corporate Broker

Charles Batten/Harry Nicholas

Tel: 020 7418 8900

 

Hudson Sandler LLP

Financial PR

Nick Lyon/Wendy Baker

Tel: 020 7796 4133

 

About Henry Boot PLC

 

Henry Boot PLC (BOOT.L) was established 135 years ago and is one of the UK's leading and longest standing land promotion, property investment and development, and construction group of companies. Based in Sheffield, the Group comprises the following three segments:

 

Land Promotion:

Hallam Land Management Limited

 

Property Investment & 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, a proven reputation in the property development market for creating places with purpose, backed by a substantial investment property portfolio and an expanding, jointly owned, housebuilding business. It has a construction specialism in both the public and private sectors, a plant hire business, and generates strong cash flows from its PFI contract, Road Link (A69) Limited.

 

www.henryboot.co.uk

 

CEO REVIEW

Highlights

Henry Boot Developments (HBD), our property investment and development business, completed on schemes with a total Gross Development Value (GDV) of £44m (HBD share: £37m), with 100% of these either sold or let. During 2021, we have materially stepped up our development business, investing a total of £34.4m (including £11.5m in Q3 21) in new opportunities, which includes the £110m GDV build-to-rent (BTR) project in Summerhill, Birmingham and a large industrial site in Rainham (GDV £90m) purchased in a joint venture (JV) with Barings Fund. Overall, our committed schemes grew to £444m GDV (HBD share £181m) and our development pipeline has been maintained at £1.4bn (HBD share £1.1bn), 72% of which is in industrial and logistics. Notably, on the back of strong demand and investor appetite for industrial space, we have committed to deliver over 1 million sq ft of industrial and logistics space.

Dividend

Strategy

Responsible Business

1.  Our Pathway to NZC and enhancing our environmental stewardship;

2.  Our new Equality, Diversity, and Inclusion (EDI) strategy; and

3.  Our Community Partnership Plan (CCP) to provide funds, time, resources, and expertise to support our community partners.

to create a fair, accessible, diverse and inclusive working environment.

Outlook

Our focus during H1 has been to meet the growing demand in the industrial & logistics, and residential markets. It is these two, of our three key markets, which have driven the strength of results in the period. The outlook for these markets, both in the short and long-term is very encouraging.

 

That is why we continue to grow our land bank within HLM - now with a potential of 92,253 plots - and are in a good position to convert the 13,273 plots with planning into sales. HLM is now concentrating on building up sales for 2022, and with demand from housebuilders strong, and our portfolio prime, not surprisingly with 1,311 plots unconditionally secured, they have made a good start.

 

Similarly, HBD has materially increased industrial development so we are committed to over 1 million sq ft, 70% of which is pre-let or pre-sold with high levels of occupier interest in the rest. As we let more, we will look to draw down projects from our predominantly industrial development pipeline. We are also seeing early signs of a recovery in urban development, driven more by the major provincial cities than London. We shall remain selective on urban developments and in the short term are focused on quality BTR and build to sell schemes, but in the medium term we will continue to promote office schemes in targeted centres such as Manchester, as we believe cities will adjust to what will become a more hybrid and agile working environment. Our aim over H2, and into next year, is to expand our committed pipeline all the time managing risk by a blend of pre-lets, forward sales and JVs.

 

We have taken more than our fair share of the growth in the construction industry which effectively means HBC's order book for this and next year is full. We will concentrate on delivering this order book and will be selectively looking for work for 2023.

 

The Group's operations have seen an increase in build cost and a shortage of materials in the UK construction industry, which has resulted in longer lead times. To mitigate our exposure to this situation, we have implemented measures such as securing supplies at an early stage and adding protective clauses in construction contracts. With the added advantage of sale prices increasing, we have currently been able to deal with the situation effectively but are alert to the challenges we could face in the future.

 

Finally, our balance sheet remains rock solid and net debt at £13.0m is low so we have capacity to fund our strategic growth ambitions, and whilst we are not immune to the heightened competition for talented people in our industry, our team have shown high levels of engagement during this challenging period. I want to thank them all for their remarkable efforts, but also, I am confident that they are up for the next stage of our journey. We have made a good start to the second half and are well placed to build on the progress made so far this year and on our strategic priorities for the longer term.

 

Tim Roberts

Chief Executive Officer

BUSINESS REVIEW

Land Promotion


Residential Land Plots



With Permission

In planning

Future

Total

 


b/f

Granted

Sold

c/f




 

2021

  15,421

  140

  (2,288)

  13,273

  8,263

  70,717

  92,253

 

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

 

2018

  18,529

  1,533

  (3,573)

  16,489

  11,929

  44,051

  72,469

 

2017

  16,417

  4,281

  (2,169)

  18,529

  7,982

  40,844

  67,355

 

Residential Land Plots - Regional Split

Region

Plots

Scotland

  9,845

North

  8,116

North Midlands

  20,739

South Midlands

  19,605

South

  7,089

South East

  4,853

South West

  22,006

Totals

  92,253

Property Investment and Development

Committed Programme






Scheme

GDV

(£m)

Share of

GDV

(£m)

Commercial

(000 sq ft)

Residential

(units)

Status







Industrial






Wakefield Hub, Plot 6

42

21

260

-

Pre-let

Preston East

8

4

67

-

Speculative

Enfield, Montagu 406

22

11

56

-

Speculative

Wakefield Hub, Kitwave

7

4

65

-

Pre-let

Luton

14

14

82

-

Speculative

Pool, MKM

4

4

15

-

Pre-let

Southend

11

11

75

-

Speculative

Nottingham, New Horizon

53

53

426

-

Forward funded


161

122

1,046

-


Residential






Manchester, Kampus

216

11

44

536

Pre-sold

Birmingham, Setl

32

32

-

101

Speculative


248

43

44

637


Land and other






Skipton

7

7

-

184

Pre-sold

Aberdeen, Bridge of Don

12

1

-

420

PPIP secured

Aberdeen, Cloverhill

16

8

-

536

PPIP secured


35

16

-

1,140








Total for year

444

181

1,090

1,777








% sold or pre-let (incl Setl)

80%

60%




% sold or pre-let (excl Setl)

87%

73%




· Obtain planning consents for up to 662,000 sq ft of industrial and logistics at Wakefield Hub, 260,000 sq ft of which is already pre-let, where works are set to commence on site in H2;

· Submit a detailed planning application at New Horizon, Nottingham for 426,000 sq ft following the exchange of a forward funding agreement last month;

· Submit outline planning for 750,000 sq ft of new industrial and logistics space at Markham Vale; and

· Obtain planning for a specialist healthcare residential facility at The Chocolate Works in York.

Construction

FINANCIAL REVIEW

Consolidated statement of comprehensive income

Revenue for the period increased to £129.0m (30 June 2020: £108.7m). H1 2020 was impacted by the Group's initial response to the COVID-19 pandemic, including significant disruption to activity in Q2 of 2020.  As concerns over the pandemic have subsided, activity and transaction levels have begun to normalise across all of our operations.

Gross profit was 52.8% higher at £35.3m (30 June 2020: £23.1m). This was supported by strong land promotion sales, growth in property transaction levels and the recovery in construction activities.

Administrative expenses increased by £0.4m (30 June 2020: decreased £0.3m). H1 2020 included a one-off goodwill impairment of £1.8m relating to the Group's social housing business, and while discretionary spend continues to be carefully considered this is offset by the repayment of all furlough monies in the period. The Group also reimbursed the 20% reduction in the CEO and Group Finance Director's salaries in 2021 to reflect the position that everyone at Henry Boot experienced in receiving 100% of their salaries whilst at work or on furlough.

Pension costs increased to £4.1m (30 June 2020: £2.2m) and include one-off closure costs of the Group's defined benefit pension scheme to future accrual of £2.1m, reducing the Group's risk exposure to future fluctuations.

Fair value of investment properties increased by £2.1m (30 June 2020: decrease £2.1m) while profits on sale of investment properties were £1.2m (30 June 2020: £nil), both a result of favourable market conditions in our chosen markets. The Group's share of profit of joint ventures and associates of £2.5m (30 June 2020: £2.1m) reflects the increasing amount of property development activities undertaken with our partners. This resulted in profit from operations of £23.1m (30 June 2020: £7.4m).

The resultant profit before tax was £23.1m (30 June 2020: £7.2m), reflecting a strong recovery given the ongoing challenges of the pandemic, with earnings per share of 14.1p (30 June 2020: 4.1p).

Return on capital employed

Higher operating profit in the period saw an increased return on capital employed (ROCE) of 6.3% over a six-month period (30 June 2020: 2.1%). Over a 12-month period we continue to believe a target return of 10-15% is appropriate for our current operating model.

Finance and gearing

Net financing costs were £0.1m (30 June 2020: £0.2m) reflecting continued low interest rates and the Group's prudent debt levels.

At 30 June 2021, net debt was £13.0m (31 December 2020: net cash of £17.0m). The Group established a positive cash position by disposing of non-core retail assets in 2019 and has since continued to redeploy capital back into our three key markets, including during H1 2021.

Gearing levels have increased to 3.8% (30 June 2020: £nil) and remain below our optimal operating range of between 10% and 20% as we cautiously manage our risk levels in a recovering market.

Cash flows

Operating cash inflows before movements in working capital were £16.8m (30 June 2020: £9.8m).

Working capital requirements have increased in line with trading activity levels, including transactions on deferred payment terms and from investment in inventory, resulting in working capital outflows of £41.4m (30 June 2020: £12.2m inflow) which, in turn, meant that operations utilised funds of £24.6m (30 June 2020: generated £22.0m). After interest paid of £0.3m (30 June 2020: £0.4m) and tax paid of £1.7m (30 June 2020: £4.4m) net cash outflows from operating activities were £26.6m (30 June 2020: £17.2m).

Including net property investment of £8.4m (30 June 2020: £0.1m), net cash outflows from investing activities were £8.7m (30 June 2020: £0.6m).

The final dividend for 2020 increased by 254% to £4.4m (30 June 2020: £1.7m paid July 2020) while dividends paid to non-controlling interests reduced by 29% to £0.5m (30 June 2020: £1.2m).

Statement of financial position

Total non-current assets were £160.9m (31 December 2020: £133.3m). Significant movements arose as follows:

an increase in property, plant and equipment and movements in right-of-use assets of £1.5m (30 June 2020: increase £1.7m) largely relates to investment in our plant hire fleet and is supported by plant hire activity levels and pre-hire agreements;

an £11.8m increase (30 June 2020: decrease £0.2m) in the value of investment properties, being acquisitions of £6.2m (30 June 2020: £nil), subsequent capital expenditure of £8.7m (30 June 2020: £2.3m) a revaluation gain of £2.1m (30 June 2020: loss of £2.1m), and disposals of £5.2m (30 June 2020: £nil);

an increase in trade and other receivables of £13.7m to £20.9m (31 December 2020: £7.2m) relating to deferred land sale debtors due beyond 12 months, arising from disposals in the current period offset by those from prior years becoming due within 12 months and, therefore, moving to current assets; and

a decrease in deferred tax assets of £1.5m (30 June 2020: £3.0m increase) arising from the decrease in retirement benefit obligations relating to the Group's defined benefit pension.

Current assets were £2.2m higher at £323.5m (31 December 2020: £321.3m) resulting from:

an uplift in inventories to £209.4m (31 December 2020: £200.8m) mainly resulting from the acquisition of a 'build-to-rent' opportunity in Birmingham, as well as replenishment of strategic land investments;

a decrease in contract assets to £8.5m (31 December 2020: £13.3m) as we concluded existing property developments contracts;

higher trade and other receivables of £88.6m (31 December 2020: £65.0m) as transactional activity increases often with deferred payment terms; and

cash and cash equivalents which were £25.2m lower at £16.9m (31 December 2020: £42.1m) as the Group began to redeploy cash and facilities back into operational assets.

Total liabilities rose to £143.8m (31 December 2020: £141.1m) with the most significant changes arising from:

trade and other payables, including contract liabilities, decreased £2.9m to £77.3m (31 December 2020: £80.2m);

borrowings, including lease liabilities, increased to £29.9m (31 December 2020: £15.1m) as the Group looks to reinvest debt into cash generating assets; and

the increase of the liabilities discount rate applied to the defined benefit pension scheme valuation under IAS 19 to 1.9% (31 December 2020: 1.4%), reducing the value of scheme liabilities and resulting in a decreased deficit of £23.4m (31 December 2020: £36.4m).

Retained earnings, along with the decreased pension deficit, saw net assets increase to £340.6m (31 December 2020: £313.5m) with the net asset value per share increasing by 8.9% to 256p (31 December 2020: 235p).

 

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (UNAUDITED)

for the half year ended 30 June 2021

 


Half year

Half year

Year


ended

ended

ended


30 June

30 June

31 December


2021

2020  Restated1

2020


Unaudited

Unaudited

Audited


£'000

£'000

£'000

Revenue

128,959

108,714

222,411

Cost of sales

(93,691)

(85,580)

(181,944)

Gross profit

35,268

23,134

40,467

Administrative expenses

(13,888)

(13,478)

(28,791)

Pensions expense

(4,132)

(2,200)

(4,552)


17,248

7,456

7,124

Increase/(decrease) in fair value of investment properties

2,081

(2,131)

1,266

Profit/(loss) on sale of investment properties

1,248

8

(97)

Share of profit of joint ventures and associates

2,496

2,057

1,756

Profit on disposal of joint ventures and subsidiaries

-

-

7,426

Operating profit

23,073

7,390

17,475

Finance income

599

351

721

Finance costs

(531)

(559)

(1,117)

Profit before tax

23,141

7,182

17,079

Tax

(3,151)

(1,341)

(3,354)

Profit for the period from continuing operations

19,990

5,841

13,725

Other comprehensive expense not being reclassified to profit or loss in subsequent periods:


Revaluation of Group occupied property

(144)

(525)

(651)

Actuarial gain/(loss) on defined benefit pension scheme

12,820

(15,243)

(15,713)

Deferred tax on actuarial (gain)/loss

(1,436)

3,189

3,089

Total other comprehensive expense not being reclassified to profit or loss in subsequent periods

11,240

(12,579)

(13,275)

Total comprehensive income for the period

31,230

(6,738)

450

Profit for the period attributable to:




Owners of the Parent Company

18,678

5,470

11,921

Non-controlling interests

1,312

371

1,804


19,990

5,841

13,725

Total comprehensive income attributable to:




Owners of the Parent Company

29,918

(7,109)

(1,354)

Non-controlling interests

1,312

371

1,804


31,230

(6,738)

450

Basic earnings per ordinary share for the profit attributable
to owners of the Parent Company during the period

14.1p

4.1p

9.0p

Diluted earnings per ordinary share for the profit attributable
to owners of the Parent Company during the period

13.9p

4.1p

8.9p


1 Share of profit of joint ventures and associates have been reclassified into operating profit, see 'change in accounting policies' for further details.

 

CONSOLIDATED STATEMENT OF FINANCIAL POSITION (UNAUDITED)

as at 30 June 2021

 


30 June

30 June

31 December


2021

2020

2020


Unaudited

Unaudited

Audited


£'000

£'000

£'000

Assets




Non-current assets




Intangible assets

4,116

4,957

4,318

Property, plant and equipment

25,546

21,626

23,818

Right of use assets

1,878

4,804

2,110

Investment properties

94,518

70,205

82,723

Investment in joint ventures and associates

8,139

6,491

5,840

Trade and other receivables

20,879

19,200

7,194

Deferred tax assets

5,871

7,497

7,342


160,947

134,780

133,345

Current assets




Inventories

209,415

173,834

200,789

Contract assets

8,519

10,915

13,328

Trade and other receivables

88,648

74,230

65,032

Cash and cash equivalents

16,904

58,866

42,125


323,486

317,845

321,274

Liabilities




Current liabilities




Trade and other payables

73,052

67,442

72,727

Contract liabilities

4,237

9,058

7,430

Current tax liabilities

2,596

1,425

1,129

Borrowings

27,927

3,035

2,941

Lease liabilities

631

1,519

603

Provisions

4,339

5,018

4,852


112,782

87,497

89,682

Net current assets

210,704

230,348

231,592

Non-current liabilities




Trade and other payables

4,959

6,166

2,346

Borrowings

-

10,083

9,969

Lease liabilities

1,343

1,896

1,613

Retirement benefit obligations

23,389

36,171

36,445

Provisions

1,355

1,463

1,076


31,046

55,779

51,449

Net assets

340,605

309,349

313,488

Equity




Share capital

13,729

13,718

13,718

Property revaluation reserve

2,198

2,468

2,342

Retained earnings

314,509

285,075

288,514

Other reserves

6,685

6,396

6,404

Cost of shares held by ESOP trust

(1,044)

(561)

(1,176)

Equity attributable to owners of the Parent Company

336,077

307,096

309,802

Non-controlling interests

4,528

2,253

3,686

Total equity

340,605

309,349

313,488

 

 

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (UNAUDITED)

for the half year ended 30 June 2021

 


Attributable to owners of the Parent Company








Cost of






Property



shares held


Non-



Share

revaluation

Retained

Other

by ESOP


controlling

Total


capital

reserve

earnings

reserves

trust

Total

interests

equity


 '000

£'000

£'000

£'000

£'000

£'000

£'000

£'000

At 1 January 2020

13,717

2,993

293,593

6,390

(1,248)

315,445

3,041

318,486

Profit for the period

-

-

5,470

-

-

5,470

371

5,841

Other comprehensive expense

-

(525)

(12,054)

-

-

(12,579)

-

(12,579)

Total comprehensive income

-

(525)

(6,584)

-

-

(7,109)

371

(6,738)

Equity dividends

-

-

(1,734)

-

-

(1,734)

(1,159)

(2,893)

Proceeds from shares issued

1

-

-

6

-

7

-

7

Share-based payments

-

-

(200)

-

687

487

-

487


1

-

(1,934)

6

687

(1,240)

(1,159)

(2,399)

At 30 June 2020 (unaudited)

13,718

2,468

285,075

6,396

(561)

307,096

2,253

309,349

 










At 1 January 2020

13,717

2,993

293,593

6,390

(1,248)

315,445

3,041

318,486

Profit for the year

-

-

11,921

-

-

11,921

1,804

13,725

Other comprehensive income

-

(651)

(12,624)

-

-

(13,275)

-

(13,275)

Total comprehensive income

-

(651)

(703)

-

-

(1,354)

1,804

450

Equity dividends

-

-

(4,664)

-

-

(4,664)

(1,159)

(5,823)

Proceeds from shares issued

1

-

-

14

-

15

-

15

Purchase of treasury shares

-

-

-

-

(615)

(615)

-

(615)

Share-based payments

-

-

288

-

687

975

-

975


1

-

(4,376)

14

72

(4,289)

(1,159)

(5,448)

At 31 December 2020 (audited)

13,718

2,342

288,514

6,404

(1,176)

309,802

3,686

313,488

Profit for the period

-

-

18,678

-

-

18,678

1,312

19,990

Other comprehensive expenses

-

(144)

11,384

-

-

11,240

-

11,240

Total comprehensive income/(expense)

-

(144)

30,062

-

-

29,918

1,312

31,230

Equity dividends

-

-

(4,394)

-

-

(4,394)

(470)

(4,864)

Proceeds from shares issued

11

-

-

281

-

292

-

292

Share-based payments

-

-

327

-

132

459

-

459


11

-

(4,067)

281

132

(3,643)

(470)

(4,113)

At 30 June 2021 (unaudited)

13,729

2,198

314,509

6,685

(1,044)

336,077

4,528

340,605

 

 

CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)

for the half year ended 30 June 2021

 


Half year

Half year

Year


ended

ended

ended


30 June

30 June

31 December


2021

2020

2020


Unaudited

Unaudited

Audited


£'000

£'000

£'000

Cash flows from operating activities




Cash generated from operations

(24,576)

21,961

21,136

Interest paid

(345)

(385)

(728)

Tax paid

(1,670)

(4,366)

(6,597)

Net cash flows from operating activities

(26,591)

17,210

13,811

Cash flows from investing activities




Purchase of intangible assets

(203)

(380)

(283)

Purchase of property, plant and equipment

(680)

(521)

(924)

Purchase of investment property

(14,893)

(2,351)

(11,962)

Purchase of investment in associate

(3)

-

-

Proceeds on disposal of property, plant and equipment

139

70

279

Proceeds on disposal of investment properties

6,427

10

627

Proceeds on disposal of investment in joint ventures

-

-

2,798

Distributions received from joint ventures and associates

200

2,200

2,200

Interest received

280

351

512

Net cash flows from investing activities

(8,733)

(621)

(6,753)

Cash flows from financing activities




Proceeds from shares issued

292

6

15

Purchase of treasury shares

-

-

(615)

Decrease in borrowings

-

(64)

(1,942)

Increase in borrowings

15,017

2,484

4,153

Principal element of lease payments

(342)

(1,282)

(3,024)

Dividends paid

- ordinary shares

(4,383)

-

(4,643)


- non-controlling interests

(470)

(1,159)

(1,159)


- preference shares

(11)

(11)

(21)

Net cash flows from financing activities

10,103

(26)

(7,236)

Net (decrease)/increase in cash and cash equivalents

(25,221)

16,563

(178)

Net cash and cash equivalents at beginning of period

42,125

42,303

42,303

Net cash and cash equivalents at end of period

16,904

58,866

42,125

 

 

NOTES TO THE CONDENSED FINANCIAL STATEMENTS

for the half year ended 30 June 2020

 

1. GENERAL INFORMATION

The Company is a public limited company, listed on the London Stock Exchange and incorporated and domiciled in the United Kingdom. The address of its registered office is Banner Cross Hall, Ecclesall Road South, Sheffield, United Kingdom, S11 9PD.

 

The financial information set out above does not comprise statutory accounts within the meaning of Section 434 of the Companies Act 2006 and is neither audited nor reviewed. The Financial Statements for the year ended 31 December 2020, which were prepared in accordance with International Accounting Standards in conformity with the Companies Act 2006 and International Reporting Standards adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union, have been reported on by the Group's auditors and delivered to the Registrar of Companies. The Independent Auditors' Report was unqualified and did not contain any statement under Section 498 of the Companies Act 2006.

 

2. Basis of preparation and accounting policies

The half-yearly financial information has been prepared in accordance with the Disclosure and Transparency Rules of the Financial Conduct Authority and with UK adopted International Accounting Standard IAS 34 'Interim Financial Reporting'.

 

The half-yearly financial information has been prepared using the same accounting policies and methods of computation as compared with the annual Financial Statements for the year ended 31 December 2020.

 

A number of other standards, amendments and interpretations became effective from 1 January 2021, which do not have a material impact on the Group's financial statements or accounting policies.

 

Change in accounting policy

At 31 December 2020, we reclassified 'share of profit of joint ventures and associates' into operating profit. This was to reflect that our use of joint ventures and associates has gradually moved such that they are now integral to our business model and underpin our core operational business activities. For comparability purposes, results to 30 June 2020 have been restated. There is no overall impact on profit before tax or the balance sheet.

 

Going Concern

The Company meets its day-to-day working capital requirements through a secured loan facility, which includes an overdraft facility. In January 2020, the Group concluded negotiations with three banking partners to put in place a £75m facility to replace the £72m facility we had in place at 31 December 2019, along with an accordion facility of

£30m, which can be called upon at the Group's request. The renewed facilities commenced on 24 January 2020, with a renewal date of 24 January 2023 and an option to extend the facilities by one year, each year, for the next two years occurring on the anniversary of the facility. The renewed facilities, on improved terms, maintain covenants on the same basis as the previous facilities. On 19 January 2021, the banks agreed to the Group's request to extend the facilities to 23 January 2024.

 

The Directors have considered the Group's principal risk areas, including the residual impact of the COVID-19 pandemic, that they consider material to the assessment of going concern.

 

The Directors have prepared forecasts to 31 December 2022 covering base case and a severe downside scenario.

 

Having conducted significant stress testing at the year-end they have further considered the outcome of our half year position and their latest forecasts, whilst taking into account the current trading conditions, the markets in which the Group's businesses operate and associated credit risks together with the available committed banking facilities and the potential mitigations that can be taken, to protect operating profits and cash flows.

 

The severe downside scenario considered includes short-term curtailment in transactional activity and percentage reductions in other activities mirroring recent downturn experiences. This is followed by a short to medium-term recovery, coupled with the ability to manage future expenditure as described in the 2020 Annual Report.

 

As reported in the 2020 Annual Report, the most sensitive covenant in our facilities relate to the ratio of EBIT (Earnings Before Interest and Tax) on a 12-month rolling basis to senior facility finance costs. Our most severe downside modelling, which reflects a near 14% reduction in revenue and near 36% reduction in profit before tax from our base case, demonstrate headroom over this covenant in all covenant measurement periods, for the period to 31 December 2022.

 

Their review supports the view that 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 half-yearly financial information

 

Estimates and Judgements

The preparation of half-yearly financial information requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expense. Actual results may differ from these estimates.

 

In preparing these half-yearly financial statements, the significant judgements made by management in applying the Group's accounting policies and the key sources of estimation uncertainty were the same as those that applied to the Consolidated Financial Statements for the year ended 31 December 2020.

 

Goodwill

Goodwill is subjected to an impairment test at the reporting date or when there has been an indication that the goodwill should be impaired, any loss is recognised immediately through the Consolidated Statement of Comprehensive Income and is not subsequently reversed.

 

 

3. 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 as detailed above.

 

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.

 


Half year ended 30 June 2021 Unaudited


Property







investment







and

Land


Group




development

promotion

Construction

overheads

Eliminations

Total


£'000

£'000

£'000

£'000

£'000

£'000

Revenue







External sales

37,396

39,536

52,027

-

-

128,959

Inter-segment sales

148

-

2,646

283

(3,077)

-

Total revenue

37,544

39,536

54,673

283

(3,077)

128,959

Gross Profit

8,989

17,684

8,615

7

(27)

35,268

Administrative expenses

(6,573)

(2,866)

(4,337)

(4,271)

27

(18,020)

Other operating income/(expense)

5,828

(3)

-

-

-

5,825

Operating profit/(loss)

8,244

14,815

4,278

(4,264)

-

23,073

Finance income

1,326

385

382

1,920

(3,414)

599

Finance costs

(1,899)

(126)

(229)

(1,059)

2,782

(531)

Profit/(loss) before tax

7,671

15,074

4,431

(3,403)

(632)

23,141

Tax

(187)

(2,865)

(815)

716

-

(3,151)

Profit/(loss) for the period

7,484

12,209

3,616

(2,687)

(632)

19,990

 

 

 


Half year ended 30 June 2020 Unaudited


Property







investment







and

Land


Group




development

promotion

Construction

overheads

Eliminations

Total


£'000

£'000

£'000

£'000

£'000

£'000

Revenue







External sales

33,516

19,784

55,414

-

-

108,714

Inter-segment sales

148

-

248

308

(704)

-

Total revenue

33,664

19,784

55,662

308

(704)

108,714

Gross Profit

5,125

12,935

5,109

(9)

(26)

23,134

Administrative expenses

(5,088)

(1,846)

(5,879)

(2,891)

26

(15,678)

Other operating income/(expense)

(62)

(4)

-

-

-

(66)

Operating profit/(loss)

(25)

11,085

(770)

(2,900)

-

7,390

Finance income

715

851

435

1,795

(3,445)

351

Finance costs

(1,514)

(572)

(356)

(1,129)

3,012

(559)

Profit/(loss) before tax

(824)

11,364

(691)

(2,234)

(433)

7,182

Tax

357

(2,172)

(256)

730

-

(1,341)

Profit/(loss) for the period

(467)

9,192

(947)

(1,504)

(433)

5,841




Year ended 31 December 2020 Audited


Property







investment







and

Land


Group




development

promotion

Construction

overheads

Eliminations

Total


£'000

£'000

£'000

£'000

£'000

£'000

Revenue







External sales

85,487

21,012

115,912

-

-

222,411

Inter-segment sales

296

-

500

647

(1,443)

-

Total revenue

85,783

21,012

116,412

647

(1,443)

222,411

Gross Profit

12,977

12,319

15,200

32

(61)

40,467

Administrative expenses

(11,024)

(4,402)

(9,872)

(8,106)

61

(33,343)

Other operating income/(expense)

2,929

6,247

1,175

-

-

10,351

Operating profit/(loss)

4,882

14,164

6,503

(8,074)

-

17,475

Finance income

4,377

212

812

11,532

(16,212)

721

Finance costs

(3,638)

(390)

(638)

(2,171)

5,720

(1,117)

Profit/(loss) before tax

5,621

13,986

6,677

1,287

(10,492)

17,079

Tax

1,864

(2,898)

(1,898)

(422)

-

(3,354)

Profit/(loss) for the year

7,485

11,088

4,779

865

(10,492)

13,725

 


30 June

30 June

31 December


2021

2020

2020


Unaudited

Unaudited

Audited


£'000

£'000

£'000

Segment assets




Property investment and development

263,820

187,260

217,863

Land promotion

156,621

158,731

151,988

Construction

37,585

37,007

32,447

Group overheads

3,632

3,265

2,854


461,658

386,263

405,152

Unallocated assets




Deferred tax assets

5,871

7,496

7,342

Cash and cash equivalents

16,904

58,866

42,125

Total assets

484,433

452,625

454,619

Segment liabilities




Property investment and development

32,999

25,551

35,292

Land promotion

11,016

15,307

11,934

Construction

40,916

43,914

37,554

Group overheads

3,012

4,375

3,651


87,943

89,147

88,431

Unallocated liabilities




Current tax liabilities

2,596

1,425

1,129

Current lease liabilities

631

1,519

603

Current borrowings

27,927

3,035

2,941

Non-current lease liabilities

1,342

1,896

1,613

Non-current borrowings

-

10,083

9,969

Retirement benefit obligations

23,389

36,171

36,445

Total liabilities

143,828

143,276

141,131

Total net assets

340,605

309,349

313,488

 

4. REVENUE

The Group's revenue is derived from contracts with customers. In the following table, revenue is disaggregated by primary activity, being the Group's operating segments and timing of revenue recognition:

 



Timing of revenue

recognition


Timing of revenue

recognition

Activity in the United Kingdom

30 June

2021

Unaudited

£'000

At a point in time

Over

time

30 June

2020

Unaudited

£'000

At a point in time

Over

time

Construction contracts:







- Construction

38,796

-

38,796

40,933

-

40,933

- Property investment and development

4,095

-

4,095

10,854

-

10,854

Sale of land and properties:







- Property investment and development

6,980

6,980

-

13,935

13,935

-

- House builder unit sales

23,504

23,504

-

9,284

9,284

-

- Land promotion

39,455

39,455

-

19,701

19,701

-

PFI concession

4,886

4,886

-

5,691

5,691

-

Revenue from contracts with customers

117,716

74,825

42,891

100,398

48,611

51,787

Plant and equipment hire

8,345



6,613



Investment property rental income

2,620



1,620



Other rental income - property development

197



-



Other rental income - land promotion

81



83




128,959



108,714



 

5. Earnings per ordinary share

Earnings per ordinary share is calculated on the weighted average number of shares in issue. Diluted earnings per ordinary share is calculated on the weighted average number of shares in issue adjusted for the effects of any dilutive potential ordinary shares.

 

6. Dividends


Half year


ended


30 June


2020


Unaudited


£'000

£'000

£'000

Amounts recognised as distributions to equity holders in period:




Preference dividend on cumulative preference shares

11

Interim dividend for the year ended 31 December 2020 of 2.20p per share (2019: 3.70p)

-

-

2,920

Final dividend for the year ended 31 December 2020 of 3.30p per share (2019: 1.30p)

4,383

1,723

1,723


4,394

1,734

4,664

 

An interim dividend amounting to £3,214,000 (2020: £2,919,000) will be paid on 15 October 2021 to shareholders whose names are on the register at the close of business on 24 September 2021. The proposed interim dividend has not been approved at the date of the Consolidated Statement of Financial Position and so has not been included as a liability in these Financial Statements.

 

7. Tax


Half year

Half year

Year


ended

ended

ended


30 June

30 June

31 December


2021

2020

2020


Unaudited

Unaudited

Audited


£'000

£'000

£'000

Current tax:




UK corporation tax on profits for the period

3,136

1,046

2,824

Adjustment in respect of earlier periods

(21)

65

245

Total current tax

3,115

1,111

3,069

Deferred tax:




Origination and reversal of temporary differences

36

230

285

Total deferred tax

36

230

285

Total tax

3,151

1,341

3,354

 

Corporation tax is calculated at 19% (31 December 2020: 19%) of the estimated assessable profit for the period being management's estimate of the weighted average corporation tax rate for the period. The Group's effective rate of tax of 14% is lower than the standard rate of corporation tax due to profits from joint ventures shown net of tax and the utilisation of unrecognised brought forward losses offsetting fair value increases.

 

On 10 June 2021, a new statutory corporation tax rate was enacted into law increasing the tax rate to 25% with effect from April 2023. Deferred tax balances at the period end have, therefore, been measured at 25% (31 December 2020: 19%), being the rate expected to be applicable at the date the actual tax will arise.

 

8. Investment properties



Investment



Completed

property



investment

under



property

construction

Total


£'000

£'000

£'000

Fair value




At 1 January 2020

61,764

8,238

70,002

Subsequent expenditure on investment property

52

2,269

2,321

Capitalised letting fees

-

30

30

Amortisation of capitalised letting fees

(15)

-

(15)

Disposals

(2)

-

(2)

(Decrease)/increase in fair value in period

(2,596)

465

(2,131)

At 30 June 2020 (unaudited)

59,203

11,002

70,205

Adjustment in respect of tenant incentives

441

-

441

Market value at 30 June 2020

59,644

11,002

70,646





Fair value




At 1 January 2020

61,764

8,238

70,002

Subsequent expenditure on investment property

193

11,633

11,826

Capitalised letting fees

90

46

136

Amortisation of capitalised letting fees

(30)

-

(30)

Disposals

(8)

(714)

(722)

Transfer from inventory

245

-

245

Transfer from investment property under construction

17,040

(17,040)

-

(Decrease)/increase in fair value in period

(564)

1,830

1,266

At 31 December 2020 (audited)

78,730

3,993

82,723

Direct acquisitions of investment property

6,178

-

6,178

Subsequent expenditure on investment property

5,638

2,950

8,588

Capitalised letting fees

126

-

126

Disposals

(5,178)

-

(5,178)

Increase in fair value in period

2,081

-

2,081

At 30 June 2021 (unaudited)

87,575

6,943

94,518

Adjustment in respect of tenant incentives

893

-

893

Market value at 30 June 2021

88,468

6,943

95,411

 

At 30 June 2021, the Group had entered into contractual commitments for the acquisition and repair of investment property amounting to £nil (31 December 2020: £310,000).

 

9. Borrowings


Half year

Half year

Year


ended

ended

ended


30 June

30 June

31 December


2021

2020

2020


Unaudited

Unaudited

Audited


£'000

£'000

£'000

Bank loans

24,986

10,177

9,969

Government loans

2,941

2,941

2,941


27,927

13,118

12,910

Lease liabilities

1,974

3,415

2,216


29,901

16,533

15,126

 

Movements in borrowings are analysed as follows:


£'000

At 1 January 2021

15,126

Secured bank loans

15,017

New leases

65

Repayment of lease liabilities

(311)

At 30 June 2021

29,901

 

Bank loans include the Group's revolving loan facility which runs to January 2024 and is drawn for durations of up to six months and the Stonebridge Homes facility of £10m (fully drawn) that is repayable in January 2022.

 

10. Provisions for liabilities and charges

Since 31 December 2020, the following movements on provisions for liabilities and charges have occurred:

 

·

The road maintenance provision represents management's best estimate of the Group's liability under a five-year rolling programme for the maintenance of the Group's PFI asset. During the period £1,060,000 has been utilised and additional provisions of £352,000 have been made, all of which were due to normal operating procedures.

·

The Land promotion provision represents management's best estimate of the Group's liability to provide infrastructure and service obligations, which remain with the Group following the disposal of land. During the period, £458,000 has been utilised and additional provisions of £932,000 have been made.

 

 

11. Defined benefit pension scheme

The main financial assumptions used in the valuation of the liabilities of the scheme under IAS 19 are:

 


30 June

30 June

31 December


2021

2020

2020


%

%

%

Retail Prices Index (RPI)

3.10

2.80

2.80

Consumer Prices Index (CPI)

2.50

2.00

2.20

Pensionable salary increases

n/a1

1.00

1.00

Rate in increase to pensions in payment liable for Limited Price Indexation (LPI)

2.50

2.00

2.20

Revaluation of deferred pensions

2.50

2.00

2.20

Liabilities discount rate

1.90

1.50

1.40

1 The Group's defined benefit pension scheme closed to future accrual on 18 March 2021 with associated costs of £2.1m.

 

Amounts recognised in the Consolidated Statement of Comprehensive Income in respect of the scheme are as follows:

 


Half year

Half year

Year


ended

ended

ended


30 June

30 June

31 December


2021

2020

2020


Unaudited

Unaudited

Audited


£'000

£'000

£'000

Service cost:




Current service cost

180

438

795

Ongoing scheme expenses

241

286

576

Past service cost

2,074

-

150

Net interest expense

252

217

433

Pension Protection Fund

96

123

206

Pension expenses recognised in profit or loss

2,843

1,064

2,160

Remeasurement on the net defined benefit liability:




Return on plan assets (excluding amounts included in net interest expense)

(1,243)

(4,715)

(13,898)

Actuarial losses arising from changes in demographic assumptions

-

2,287

2,265

Actuarial (gains)/losses arising from changes in financial assumptions

(11,577)

17,671

27,346

Actuarial (gains)/losses recognised in other comprehensive income

(12,820)

15,243

15,713

Total

(9,977)

16,307

17,873

 

The amount included in the Statement of Financial Position arising from the Group's obligations in respect of the scheme is as follows:

 


Half year

Half year

Year


Ended

ended

ended


30 June

30 June

31 December


2021

2020

2020


Unaudited

Unaudited

Audited


£'000

£'000

£'000

Present value of scheme obligations

222,726

226,972

235,143

Fair value of scheme assets

(199,337)

(190,801)

(198,698)


23,389

36,171

36,445

 

12. Related party transactions

There have been no material transactions with related parties during the period.

 

There have been no material changes to the related party arrangements as reported in note 29 to the Annual Report and Financial Statements for the year ended 31 December 2020.

 

Transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation and are not disclosed in this note.

 

13. SHARE CAPITAL


Half year

Half year

Year


ended

ended

ended


30 June

30 June

31 December


2021

2020

2020


Unaudited

Unaudited

Audited


£'000

£'000

£'000

400,000 5.25% cumulative preference shares of £1 each (31 December 2020: 400,000)

400

400

400

133,293,449 ordinary shares of 10p each (31 December 2020: 133,181,537)

13,329

13,318

13,318


13,729

13,718

13,718

 

14. Cash generated from operations


Half year

Half year

Year


ended

ended

ended


30 June

30 June

31 December


2021

2020

2020


Unaudited

Unaudited

Audited


£'000

£'000

£'000

Profit before tax

23,141

7,182

17,079

Adjustments for:




Amortisation of PFI asset

303

321

570

Goodwill impairment

102

1,925

2,218

Depreciation of property, plant and equipment

1,756

2,144

3,585

Depreciation of right-of-use assets

300

370

987

Impairment loss on land and buildings

100

84

-

Revaluation (increase)/decrease in investment properties

(2,081)

2,131

(1,266)

Amortisation of capitalised letting fees

-

15

30

Share-based payment expense

459

487

975

Pension scheme credit

(236)

(2,037)

(2,233)

Profit on disposal of property, plant and equipment

(528)

(360)

(939)

Loss on disposal of right-of-use assets

-

-

89

(Profit)/loss on disposal of investment properties

(1,248)

(8)

95

Gain on disposal of joint ventures

-

-

(7,426)

Finance income

(599)

(351)

(721)

Finance costs

531

559

1,117

Share of profit of joint ventures and associates

(2,496)

(2,057)

(1,756)

Operating cash flows before movements in equipment held for hire

19,504

10,405

12,404

Purchase of equipment held for hire

(3,276)

(1,131)

(2,201)

Proceeds on disposal of equipment held for hire

617

490

1,159

Operating cash flows before movements in working capital

16,845

9,764

11,362

Increase in inventories

(8,626)

(4,085)

(31,285)

Decrease in contract assets

4,809

8,170

5,757

(Increase)/decrease in receivables

(36,982)

14,585

39,800

Increase/(decrease) in payables

2,571

(5,655)

(2,052)

Decrease in contract liabilities

(3,193)

(818)

(2,446)

Cash generated from operations

(24,576)

21,961

21,136

 

Net (debt)/cash is an alternative performance measure used by the Group and comprises the following:

 

Analysis of net (debt)/cash:




Cash and cash equivalents

16,904

58,866

42,125

Bank overdrafts

-

-

-

Net cash and cash equivalents

16,904

58,866

42,125

Bank loans

(24,986)

(10,177)

(9,969)

Lease liabilities

(1,974)

(3,415)

(2,216)

Government loans

(2,941)

(2,941)

(2,941)

Net (debt)/cash

(12,997)

42,333

26,999

 

 

15. GROUP RISKS AND UNCERTAINTIES

The Directors consider that the principal risks and uncertainties which could have a material impact on the Group's performance over the remaining six months of the 2021 financial year remain consistent with those set out in the Strategic Report on pages 48 to 54 of the Group's Annual Report and Financial Statements. These risks and uncertainties include:

 

Safety

Environmental and climate change

Economic

People and culture

Funding

Cyber

Pensions

Construction contracts

Property assets

Property development

Land sourcing

Land demand

Political

 

The Group has been affected by material shortages, price inflation and lead times prevalent across the UK construction industry and continues to take measures to mitigate our exposure, this includes securing supplies at an early stage and adding protective clauses in construction contracts. 

 

The Directors continue to monitor the impact of COVID-19 on the Group, considering primarily the safety and welfare of our staff as we transition to a new normal.

 

The Group operates a system of internal control and risk management in order to provide assurance that it is managing risk while achieving our business objectives. No system can fully eliminate risk and therefore the understanding of operational risk is central to the management process within Henry Boot. The long-term success of the Group depends on the continual review, assessment and control of the key business risks it faces.

16. Approval

The issue of these statements was formally approved by a duly appointed committee of the Board on 10 September 2021.

 

RESPONSIBILITY STATEMENTS OF THE DIRECTORS

 

The Directors confirm that these condensed interim Financial Statements have been prepared in accordance with International Accounting Standard 34, 'Interim Financial Reporting', as adopted by the European Union and that the interim management report includes a fair review of the information required by DTR 4.2.7 and DTR 4.2.8, namely:

 

·

an indication of important events that have occurred during the first six months and their impact on the condensed set of financial statements, and a description of the principal risks and uncertainties for the remaining six months of the financial year; and

 

·

material related-party transactions in the first six months and any material changes in the related-party transactions described in the last Annual Report.

 

The Directors of Henry Boot PLC are listed in the Henry Boot PLC Annual Report for the year ended 31 December 2020. A list of current Directors is maintained on the Henry Boot PLC Group website: www.henryboot.co.uk .

 

On behalf of the Board

 

T A ROBERTS

Director

13 September 2021

D L LITTLEWOOD

Director

13 September 2021

 

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