LONDON (Alliance News) - Property investment and construction company Henry Boot PLC on Friday reported an increase in profit in the first half, reflecting a strong performance across the business as economic recovery takes hold across the UK.
The company, which constructs homes and retail buildings, posted pretax profit of GBP13.4 million for the six months-ended June 30, up from GBP7.4 million a year earlier, following a revaluation surplus of GBP1.8 million, compared with a GBP512,000 deficit a year earlier.
Revenue was lower at GBP65.8 million, down from GBP81.8 million a year earlier, as a GBP15 million one-off gain from the sale of land at the company's Chocolate Factory site in York in the prior year was not repeated.
However, operating profits were up 79% at GBP14.0 million from GBP7.8 million a year earlier, as a result of several land sales and combined development property sale profits and valuation gains of GBP2.1 million, compared with a combined deficit of GBP300,000 a year earlier.
Finance Director John Sutcliffe said the company's result were a “parameter of the economic recovery in the UK.”
“I think the South East in 2013 was in the more positive state than the rest of the country earlier into the recovery, and 2014 is a representation of the rest of the UK beginning to recover,” Sutcliffe said in a telephone interview. “In construction generally there is a bit more private sector work, and the industry is being supported by public sector work through the bottom of the cycle.”
“There has been more private sector work coming through, work which has been out of the market since the financial downturn. It started to come back in 2013 in the south, and now we are beginning to see it come forward for the rest of the country,” he added.
Sutcliffe said there are a good number of construction opportunities and these are being competitively priced.
Demand for investment properties outside London began to increase during late 2013 and into 2014 and, with supply still relatively constrained, this has fed through to valuation increases in many investment property sectors. Henry Boot said this trend is now beginning to be reflected in its regionally located property, with modest valuation increases at the half year. This positive trend is also expected to improve the forecast development returns for a number of projects currently in construction, the company said.
Henry Boot said occupancy levels within its investment properties have continued to improve over the last quarter and reflect a general improvement in occupier demand across many sectors.
The company said property highlights include being appointed as preferred development partner by Aberdeen City Council to develop a new exhibition and conference centre and adjoining business park. Henry Boot will then redevelop the existing conference centre site following relocation to the newly built facility.
In York, Henry Boot said it has made good progress with the redevelopment of the former Terry's Chocolate Factory. Terms have been agreed with a specialist residential developer to jointly convert the multi-storey factory building into more than 150 apartments. Additionally, sale terms have recently been finalised with a care home operator to convert the former headquarters building into an assisted living operations. However, these are conditional on securing detailed planning persimmon – often a thorn in the side for development companies.
“The planning process in the UK has always been a bit of a lottery. You go in and put your best foot forward but local authorities can be difficult and can make the planning process difficult,” Sutcliffe said. “All the planning applications are in and if we can settle those and get satisfactory planning permission by the end of this year, the site can really move forward in 2015.”
“Its never over until the fat lady sings,” he said. Despite this, the company remains “cautiously optimistic".
Henry Boot said its construction arm also has made gains, winning a number of orders to achieve its budgeted revenue for the year. As a result, the company is now starting to build an encouraging order book for 2015.
Highlights for the division include a contract at Sheffield Hallam University and the refurbishment and fit-out of the Joseph Banks laboratory for the University of Lincoln.
In addition, the company said its land development arm also continues to make progress. Overall at the period-end Henry Boot held interests in 9,512 acres, compared with 9,723 acres at the end of December 2013, with 1,788 acres owned, 2,951 acres under option and 4,773 acres under planning promotion agreement.
It also said the stock of housing units with planning permission achieved at 10,845 units bodes well for sales in 2015 and beyond.
Looking ahead, the company said based on a "prudent" assessment, it expects trading profits including revaluation gains to exceed internal initial expectations for the year.
On the back of its performance the company increased its interim dividend 7.7% to 2.10 pence from 1.95 pence.
"The first-half results were strong across every trading division," analysts at Investec Securities said. "We believe Henry Boot is well placed to capitalise on its strategic land bank in the current buoyant market, with 10,845 housing units permissioned and a record 36% in the planning process."
Brokers Numis raised Henry Boot shares to Buy from Add on the back of the results, with a price target of 254 pence. The shares were quoted up 7.5% at 201.62p Friday morning.