Release Date: September 17, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Henry Boot PLC (FRA:0KH, Financial) has maintained a strong balance sheet with a net asset value per share of 305p, indicating financial stability.
- The company has achieved 81% of its sales against the yearly budget, showing strong sales performance and market recovery signs.
- The land promotion segment has seen significant activity with 843 plots sold and nearly 1,700 plots exchanged, indicating robust demand.
- The company has increased its interim dividend by 5%, reflecting confidence in future performance.
- Henry Boot PLC (FRA:0KH) has a substantial development pipeline valued at GBP1.3 billion, with a focus on industrial and urban development projects.
Negative Points
- Revenue decreased by 41% to GBP106 million, and gross profit decreased by 40% to GBP24.7 million, reflecting challenges in the first half of the year.
- Operating profit was below budget due to difficulties in converting pre-construction services agreements into turnover.
- The construction segment struggled with a fall in turnover, resulting in a small loss for HBC.
- Net debt increased to GBP104 million, with gearing above the optimal range at around 25%, although it has since reduced to 18%.
- The company faces challenges in the planning system, which has delayed some projects and impacted operational performance.
Q & A Highlights
Q: How does Henry Boot plan to achieve higher returns on capital employed given the increase in inventory?
A: Tim Roberts, CEO, explained that Henry Boot is a long-term business that continues to invest during market cycles. The company believes that returns will revert to historical averages as the market recovers, aiming for a 10% to 15% return on capital employed. They focus on high-quality schemes and are thoughtful about capital allocation.
Q: What impact do you expect from the proposed changes to the National Planning Policy Framework (NPPF) on land prices and planning?
A: Tim Roberts, CEO, noted that the NPPF changes are necessary for the country and could ease planning constraints. While developers may face more expectations, competitive bidding for sites is expected to continue, and land prices have shown a slight increase, indicating no immediate concern for land deflation.
Q: Is there any potential cash unwind in the construction segment due to a lower order book?
A: Darren Littlewood, CFO, stated that while lower activity levels will impact the balance sheet, the net effect on cash flow is expected to be minimal due to the balance between receivables and payables in the supply chain.
Q: How does Henry Boot view the potential impact of lower government spending?
A: Darren Littlewood, CFO, mentioned that while reduced public spending could affect the construction segment, which is a small part of the business, there could be opportunities in property development through partnerships with local authorities to unlock value and generate returns.
Q: Will dividend cover return to more normalized levels in FY25?
A: Darren Littlewood, CFO, indicated that the company aims for a progressive dividend policy. Following a reduction post-COVID, the dividend has been growing at a sustainable rate, aligning with the returns being achieved.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
