Henry Boot PLC

So morning everybody. It's good to see quite a full room this morning. I assume that the sun has brought you all out. And actually you're all smiling at me, which is nice. Now, we're going to do the normal. This is the agenda. So I'll start off with an introduction and give you some operational highlights and talk about our medium-term targets. Then Darren's going to come in and do the financial review, but he'll also talk about land promotion. Then I will finish off going through development, house building and construction and then finish off with an outlook. So, first of all, I'm not going to go through the investment case, and I can see that you're all relieved, but the good news is that the investment case is still in your appendix of your slide pack. But what I wanted to do is I just wanted to talk you through a few points just to give you some context for today's results. Now, the first thing is that our focus on high-quality development projects and premium homes has helped us to achieve relatively strong property sales over the last two years, at a time when, to be honest, the markets were pretty challenging. We continue to have conviction in our three key markets, and with a wealth of opportunity within the portfolio, I remain confident that we can hit our medium-term growth targets. Now there's no doubt that there have been difficulties in the planning system and that has held us and many other businesses and indeed I think the country back. But Darren and I are going to start to give you an impression of how we think that this can change and that the planning will ease. So you'll hear that in the presentation this morning. Now, throughout this period, as you'll all expect, our balance sheet has remained absolutely rock solid. And I would say this, wouldn't I, at just over £3 a share NAV, the business is materially undervalued because we only hold our land and developments at cost. And the decision this morning announced to increase the interim dividend by 5% just shows that we've got some spring in our step and confidence going forward. So turning to the operational performance, as flagged in our 2023 results, We started the year with a materially lower sales position, and that's meant that our operating profit is not as strong as in previous years. However, we still expect to achieve market expectations because we've got 81% of our sales against our yearly budget achieved. And also, there are early signs that our markets are recovering. So going through the operational performance, first of all you've got land promotion, 843 plots sold with nearly 1,700 plots exchanged and a further 1,000 under offer, showing the pickup in demand from house builders for Hallam's prime sites. Our land portfolio, that's increased marginally to just over 101,000 plots. And I said last time that we were going to concentrate more and more on getting planning and more and more on achieving sales and less on growth. And that's quite simply because we think that the portfolio already is of sufficient scale and it's got a nice balance. So we want to concentrate more on output. Now, I think that's particularly pertinent today because we believe the proposed changes to the MPPF will open up a window of opportunity for us to win more consent. And we expect in 2025 to make 8,500 fresh applications. Turning to development, we've completed on £68 million worth of development. 77% of that has been profitably pre-sold or let. And not surprisingly in the current environment, our share of the committed programme has reduced, so it's at around £119 million at the moment. And the good news is that I believe commercial values have stabilised and the investment portfolio has gone up marginally by 30 basis points to £113 million. On Stonebridge, that was just below target in terms of completions in half one. Sales definitely took longer to get over the line. Now, post-election, we've had a marginally improved sales rate. And as a result, we're back on track with 95% of sales secured. Once we hit our target of 275 homes, which we think we will do, that is a 10% increase in volume from last year. On construction, operating profit whilst positive was below budget as HBC struggled to basically turn PCSAs into turnover. And then if you look at it all, it means once you deduct £3.9 million of central operating costs, we've got a group operating profit of £5.9 million. Now, I said that we'd continue to be confident about hitting our medium-term targets. I'm not going to go through all the targets. I'm just going to pick out a few. First of all, capital employed, that's still set to grow to 500 million. Our aim is for Rocky to be towards 10% this year, which is obviously outside our range. But as our markets recover, we are confident we'll get back into that range. Hallam expect to sell 3,000 plots this year, and that will be accretive to its five-year running average. So we're getting towards that 3,500 average target. On HBD, we expect to complete £192 million of development this year, and that's going to be one of the highest of our totals ever. And there's potential to replenish that committed programme from our development pipeline. And then on Stonebridge, we've got ambitions to sell 300 homes in 2025. So despite difficult markets over the last couple of years and an improving market this year, bit by bit, we're getting towards that 600 homes sales target. I talked at the beginning about strong property sales and also that we were confident of meeting our full year expectations. And I think that this hopefully shows where our confidence lies. what you can see is that we've already completed, exchanged or reserved on 81% of budgeted sales for 2025. Now, to be clear, that's not turnover, that's actual property sales. But what we believe is that that figure gives us good visibility on our year end. And as I said, we're confident we'll hit expectations. So just going through the slide in a bit more detail, you can see the key at the top. You've got Hallam light blue, HBD green and then Stonebridge Homes dark blue. And we've got the budget of £225 million. We've completed on £111 million to date, but this rises to £134 if you include exchanged, and then £182 million including reserved. And obviously in the reserve, there's a reasonable chunk of dark blue, which is Stonebridge Homes. And just to say that level of reservation is not unusual at this time of year. It's a busy time of the year for us to be converting reservations into exchange contracts and then completions for people getting to the homes before Christmas. To get us to the £225 million, we need to achieve another £43 million of sales, and the vast majority of this is in two transactions. The first one is Phase 3 of Pickford Gate in Coventry. That's a Hallam sale, and that is under offer. And then the second one is... is a land sale on phase one of Spark. That's an HBD sale. And again, that is under offer. And there are other deals that we're doing that Art has advanced, which we would feel reluctant talking to you today about. But those deals, we believe, also give us some cover in the event that the two deals that I've mentioned don't happen. And with that, I'm going to pass you over to Darren.

Thank you Tim and good morning everyone. So if we can turn to our financial summary. Revenue in the period decreased 41% to £106 million and gross profit decreased 40% to £24.7 million, reflecting the anticipated weighting of this year's activity to the second half of the year. This has been driven largely by the house builders who, having only been in the market for smaller sites until recently, have now returned to taking larger sites, which take longer to agree terms and progress through legals, resulting significantly in our H2 weighting. Despite this, demand for prime, high-quality assets remains, and as you've seen in Tim's walkthrough of sales, we are confident that the timing of sales will see us achieve our full-year expectations with that 81% of this year's total sales now secured. With operating profit of £5.9 million and an underlying profit before tax of £3.6 million, our return on capital employed reduced to 1.4% for the six months ending June. We expect this to increase in the second half of the year, but will likely be marginally below our medium-term target of 10% to 15%. Whilst earnings per share has reduced to 2.8 pence in the period, we remain confident of achieving our full-year expectations and have increased the interim dividend by 5% accordingly. Turning to the balance sheet, the investment property portfolio has seen a modest uplift to £110.6 million as market values have stabilised and in light of current interest rates will be considered in our approach to growing this to our medium term target of £150 million. We've continued to invest over £50 million in inventories, growing Stonebridge homes with investment in their work in progress, as well as adding to our strategic land portfolio and recycling returns in our committed development programme ahead of anticipated disposals later this year. Following these investments, net debt increased to £104 million, with gearing above our optimal range at around 25%. Since the half-year, disposals have now reduced this to around 18%, back within our target range of 10% to 20%. We expect this to reduce further towards the middle of this range between now and the end of the year. I'm happy to report that we've completed our bank refinance. We now have a facility of 125 million, which runs to 2027 and is extendable by two years, taking us to 2029. The new facility includes an accordion, allowing us to increase the facility by 60 million over that period. Terms are broadly in line with the previous facility and are based on a margin of 1.6% over Sonia. Finally, our net asset value per share ended at 305 pence as dividends in the period offset retained earnings. Looking at the cash flow, this largely demonstrates how strong forward sales and cash collections on past sales to house builders on deferred terms have allowed us to continue to invest in land and property to bring forward schemes for future disposals. Operating cash outflows totaled £6 million, being returns in the period largely offset by payments of tax and dividends. We then invested £52.8 million into inventories related to growing working progress in Stonebridge Homes, delivering our committed development pipeline and infrastructure works in Hallam to bring forward two of their larger schemes. Given the lower level of sales to house builders in the period, our continued investment has been supported by cash collections on previous disposals of almost £40 million in other working capital. As such, we ended the period with net debt of £103.9 million, which we've already seen significantly reduce following sales post-half year and anticipate will reduce further to the year end. If I can move on now to the operational review and starting with land promotion. Hallam sold 843 plots in the period and have a further 1,695 plots exchanged, of which 1,246 are due to complete in the second half, or in some cases have actually now completed. At an average £9,700 gross profit per plot, this remains above our five-year average of £9,100 and we expect this figure to be upheld for the full year. Whilst land values have been stable, we continue to see good demand for our sites in prime locations, with larger house builders actively returning to the market for schemes of a larger size. We've continued to add to the portfolio, securing sites with the potential to deliver over 2,000 plots, maintaining the portfolio at over 100,000 plots in total. Whilst plots in the portfolio with planning permission is reduced to 8,000 following sales in the period, this still equates to around two and a half years worth of sales and also continues to reflect the delays in the planning system. With the proposed changes to the National Planning Policy Framework, we anticipate the planning system will start to unlock. And with this in mind, we now have seven active appeals running on around 2,500 plots out of the 13,000 we have in the system awaiting determination. We've also conducted an initial review of our portfolio, identifying around 8,500 plots which we believe can be advanced into planning over the next 12 months in light of the changes proposed. With our portfolio all held at cost, with no valuation gain on securing planning permission recognised until the land is sold, this continues to reflect a significant uplift of value not recognised in our balance sheet. And finally, we have 1,000 plots currently under offer, which we're targeting for completion this year, the majority of which are on our site in Coventry. If completed, Hallam will achieve its full-year financial target. And here we have that very site, Pickford Gate in Coventry, a prime example of the large-scale complex schemes Hallam is capable of delivering. Having secured a permission for 2,400 plots in 2021, the scheme includes 25% affordable homes, 37 acres of employment land and new local facilities, including a school district centre and open space. The scheme required a new junction off the A45, which Hallam, having secured partial funding through Homes England, successfully delivered in April. In Phase 1, Hallam were able to open up the site last year, selling 247 plots to Countryside. In Phase 2, the sale of 491 plots to David Wilson Homes completed just last Friday. That generated an excellent ungeared internal rate of return of almost 20% per annum. Phase three is the disposal I referenced that we are hoping to conclude later this year, where we are in advanced negotiations for 632 plots. This will leave Hallam with around 1,000 plots remaining for future phases and even more to go at with the 37 acres of employment land. We continue to manage one of the largest strategic land banks in the country, with 77% of the portfolio in the Midlands and South where values tend to be higher. Our tendency of using agency agreements provides a capital-light investment structure and gives us our USP against house builders by marketing the sites to drive best value for our landowners. We've seen increased demand for larger quality sites of around 500 units in prime locations, evidenced by the scheme we've just seen in Coventry, and we anticipate disposing of around 3,000 plots this year. This is above our five-year average of 2,850 plots per annum, and we continue to target sales of around 3,500 per annum, being our medium-term target, which we fully believe is achievable from the scale of our portfolio. With an average gross profit per plot, our five-year average of £9,100, this average continues to represent what we believe might be achievable from the full portfolio over time. And on that, I will hand you back to Tim for property.

So, property investment and development. HBD completed on £68 million of development. 77% of that has been successfully pre-let or pre-sold. And the 23% that's not been sold is all in Settle, which is our premium apartments in Birmingham. Relative to the market backdrop, we've maintained a high level of committed development, 190 million-hour share, and 64% of that has been pre-let or pre-sold, and 96% of the development costs are fixed. And I'm going to go through the programme literally on the next slide. The majority of our £1.3 billion development pipeline is made up of industrial. And within that, there's £200 million of near-term occupier-led developments that we are in a position to start. In terms of the investment portfolio, that's shown modest growth to £113 million, and again, more on that in a minute. On the committed programme, the first part you can see is industrial. It's made up of four schemes totalling 579,000 square feet. And just over 40% of that has been pre-sold. And the one scheme where we've not achieved pre-lets or pre-selling is Raynham. And there the contractor went into administration earlier this year, which has delayed practical completion and then has had an obvious knock-on effect in terms of our lettings programme. Now we made the decision and we've got the skill set to take over the contract and I'm pleased to say that since then the scheme has actually come in under budget. We're very pleased with the quality of the scheme and I think that the letting interest will pick up thereafter. On industrial, more generally, whilst occupier take-up has slowed from the record levels that you saw during the pandemic, demand still remains resilient due to structural drivers. And a great indication of that is the rental growth. And if you look at the rental growth on the index up to August, it's at 5.4%. And therefore, we will expect to commit to more industrial development in the near term. The next section is urban, residential and commercial. And with the completion of Settle, that section just now comprises Ireland, and I'll talk about Ireland on the next slide. And then finally, we've got Land Another, where our main commitment is the grant-funded remediation work at Sparks. Work's going to complete there in autumn, then we can draw down the land and then we've got the opportunity to develop over 600,000 square feet in seven units that literally overlook the M6. And the strong interest in the scheme generally, and as I've said already, the first unit, that is one of our key sales for the year, we've got that under offer. Total estimated profits on all of these schemes is £22 million, of which only £4.7 million has been taken to date. And all of that £4.7 million relates to schemes at Walsall and TMS Leicester, which are both pre-sold. Now, set an update on Island. This is a 50-50 joint venture with Greater Manchester Pension Fund. It's an absolutely sparkling building in the centre of Manchester that operationally is net zero carbon. And I'm very pleased to say that we've got 50% of the space and offer to a significant company. And the rents that we've achieved are in line with the target rents that we've got here of £44 per square foot. The scheme will complete in the autumn and we've got good interest for the remaining 50%. Then in terms of settle, that completed in May, 102 premium apartments. You can see a photo of the building, a photo of one of the apartments and then also the rooftop garden. 52% of the apartments have been sold or reserved. We've been achieving our target price of £470 per square foot. We've got demand for that, although because the market has been slow, we are marginally behind programme in terms of sales. And we would expect to have achieved the majority of the remaining sales by the year end. I've talked about the 1.3 billion development pipeline. It's a high-quality pipeline. It's got great scale, and the majority of it is in industrial, with the rest in urban development. Most of the pipeline is controlled through development agreements, so it's capital light. And as you can see from the slide, we've got £58 million worth of our capital invested in it. We've maintained a relatively high level of development over the last couple of years, and we're going to look to replenish our commitments. And they are likely to come from... these four schemes. And again, I'm not going to go through all of them, and I've talked already about Spark. But just to talk to you a bit about Neighbourhood, it's a £128 million GDV build-to-rent project. We own the site, we've got planning, and we have got investor interest in funding it. And subject to concluding a funding agreement, we're hoping to start on site next year. And then Golden Valley, that's got the potential to be a £1 billion mixed-use campus. It's held through a development agreement with the local authority, and we only recognise the first phase, which is around £155 million in our pipeline. And this first phase is known as the National Cyber Innovation Centre. It's next door to GCHQ. We haven't signed anything, but you can guess who we're talking to in terms of anchoring that innovation centre. So just a quick word on the investment portfolio. There's more detail in your appendix. I think, first of all, over the first half, there are signs of the commercial property market stabilising. And if you look against the indices, at an all-property level, there have been positive total returns. And certain sectors, including industrial, have shown a positive capital return. Transaction volumes remain low for all sectors, with higher interest rates weighing on activity. But as the outlook has improved, we've seen an increase in investor confidence, and we're definitely seeing investors talking to us now about funding BTR and funding industrial schemes. Our capital return at 30 basis points compared with the index at 10 basis points, fine margins, and our total return at 2.7% over six months was rounded in line with the index at 2.9%. More importantly for us, you can see the performance over the last three and a half years, and that's since we've been collating all this information. You can see that we've materially outperformed the index. Our total return is the dark blue line at 7.6%, and the index is at 3.8%. Both figures are per annum, so a meaningful outperformance there. The investment portfolio, 74% of it is industrial with a good weighting in the southeast. And most of the portfolio is made up of modern buildings that we've developed. And then there are also some investments where we've bought them because we will turn them into developments. So going to Stonebridge. Stonebridge. As I said, they completed on 90 homes, slightly down on last year. As in an uncertain market, sales took longer to get over the line. The average selling price is at £381,000 and our pricing has been firm. That's reflected the fact that that we have sold smaller homes during this period and also we've sold quite a few homes in the north-east region, which is where we've recently expanded in, and house prices are lower in the north-east region than in Yorkshire. The average sales rate was at 0.5%, and that's marginally better than half 1.23% at 0.48%. And then if you look at the five-week sales rate to the beginning of September, that's improved again to 0.54%. And the important thing there is that obviously that period of five weeks includes August, which is always a slow period for us. And if you compare that with the period last year, that's 26% better. So we feel as though we've had a decent summer. 95% of the target is secured, so we're on track to grow the homes sold by 10% of this year, which is no mean feat in this market. Last year, we grew our land bank by nearly 40%, and over half one, it's actually fallen almost by the level of sales achieved. But we have got three sites under offer that have the potential to add 750 plots to the land bank and also... Within those three sites, there will be our first site in the North Midlands, because you know we want to end up being in three regions, call it in the Midlands and the north of England. And changes to the MPPF will not only help Hallam, they'll also help Stonebridge achieve its growth objects. So construction. The construction segment has been impacted by HBC's fall in turnover in a challenging market where a material level work we'd expected to win was put on hold or delayed as clients actually struggled with the viability of some of their schemes. This is reflected unusually in HBC. As you can see, in terms of returns on sale, they've made a small loss. Now, as a segment as a whole, of course, it's made an operating profit, but also remember this is a small part of the group. It only accounts for 2% of our capital employed. There are some early signs of a pickup in the construction market. We're pleased to have been appointed to the £36 million redevelopment of Rotherham Markets and we've also got £54 million worth of PCSAs that we're hoping to convert into firm work. In the summer you will have seen we have made management changes including the appointment of a new MD and this MD has got a good track record of winning work and his main aim is to restore the turnover numbers at HBC. Banner Plant and Roadlink are trading in line with expectations. So I'm just going to finish off now on Outlook. It feels like the economy is picking up with inflation more under control and interest rates are forecast to fall. This, together with the early signs of a pick-up in demand over the summer, is positive for our recovering markets. With 81% of our sales budget secured and the two key transactions we're aiming to complete and offer, I believe we remain firmly on track to meet expectations. The group continues to have conviction in its three key markets, plus I believe this focus on high-quality schemes and premium homes will put us in a good place. The proposed changes to the MPPF also give us a great opportunity to materially increase plots within Hallam and also to realise our growth ambitions at Stonebridge. Our rock-solid balance sheet, a portfolio rich with opportunity and a recently signed larger banking facility means we've got the resources to grow the business and to achieve future shareholder returns in line with our medium-term targets. Thank you. So any questions in the room? All right.