Henry Boot plc saw 5% revenue growth in the year to 31st December 2023 to £359m (2022: £341m) thanks to its land promotion and property development activities but its construction division performed below expectations, resulting in a restructure of the division.
Group profit before tax was £37.3m (2022: £45.6m), with an underlying profit of £36.7m (2022: £56.1m).
Trading in the group's construction segment was below expectations in 2023 as a result of deteriorating market conditions, achieving an operating profit of £6.5m (2022: £12.1m).
Henry Boot Construction (HBC) saw turnover fall by a third to £70.1m (2022: £101.5m).
Two of its largest projects, both of which are in the centre of Sheffield, the £40m build-to-rent Kangaroo Works contract and the £42m Heart of the City mixed use scheme, were hit by the availability of materials and suffered delays.
Despite this, Kangaroo Works completed in August 2023 and the Heart of the City completed in phases between December 2023 and January 2024. A residential project at Clipstone in Mansfield also impacted the 2023 performance, as the project's developer fell into administration, resulting in building costs not being fully recovered.
At HBC's largest active site, the Cocoa Works in York, after a significant variation for the Pavilion and Library buildings, the contract value of the residential development increased to £57m and the project is now expected to complete in late 2024.
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At the beginning of 2024, HBC has secured 49% of its order book (94% of its costs have fixed price orders placed or contractual inflation clauses).
With pre-construction services agreements (PCSAs) of £50m there are opportunities for further new work in 2024 but some of this turnover could slip into 2025.
Banner Plant traded slightly below budget in a market where demand has fallen, and sales have been volatile, the company said.
Despite this, the construction segment (HBC, Banner Plant and Road Link A69) still contributed £6.5m to the group's profit (2022: £12.1m) on turnover of £99.5m (2022: £128.6m).
Chief executive Tim Roberts said: “Our focus on high quality land, commercial property development and house-building in prime locations meant that demand for our premium products remained resilient and allowed Henry Boot to perform relatively well against a backdrop of a slowing economy, rising interest rates, high inflation and decreasing volumes in our key markets. While constraining our ability to bring forward developments in one respect, the government's consistent failure to make much needed reforms to an increasingly dysfunctional planning system does play to the strengths of our land promotion business while helping underpin demand from national housebuilders, who are still actively acquiring prime strategic sites to shore up their future pipelines. This alongside some well-timed development disposals and Stonebridge Homes increasing house sales by 43%, helped deliver a resilient performance.”
He added: “We are not immune from the challenges that the UK economy presents to the near-term trading environment and as previously reported, we expect a lag in performance in the year ahead. However, the outlook for both inflation and interest rates is improving and it's beginning to feel as though the UK economy has turned a corner, with recent reductions in mortgage rates also pointing towards a hopefully brighter future. With this in mind, and given the group's continued strong financial position, we remain confident in achieving our medium term growth and return targets, as reflected in the 10% dividend increase we have announced today."
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