Henry Boot PLC

Morning everybody. In a slightly different setting this morning which is all very very relaxed and everybody's having croissants and bacon sandwiches and looking very very smiley so it's good to see you all. So to the interim results it's going to be the normal running order. I'll start off with an introduction and a review of performance then you've got Darren our CFO who's going to do the finance and the land promotion. Then I'll come back and talk about development and Stonebridge, and I'll finish off with Outlook. So, first of all, I just wanted to say a few words of introduction. Our focus is on high quality land, prime developments and premium homes and that's helped us to achieve total land and property sales of nearly £160 million or our share £100 million. This is a time when markets are uncertain and I think it shows the resilience of demand in property, prime property. I'm pleased to say we've also seen a significantly better planning environment since the changes to the NPPF. at the beginning of the year. And you'll remember we anticipated this and we increased resources into Hallam last year. And that's already bearing fruit in that we've secured a fourfold increase in consented plots. And Darren will talk you through that. At HBD, planning has also been secured for the government-backed Golden Valley development, a £1 billion mixed-use campus. And then on our industrial-focused joint venture, Origin, it's performing well. And because it's performing well, it's set to grow in the second half. Together with the increase in Stonebridge's land bank, we've got ample opportunity within the portfolio to hit all of our targets. And you'll also see this morning we've agreed a sale of Henry Boot Construction for £4 million. And that's important in that we are simplifying the group's structure and we're increasing more and more of our attention on our core activities. And throughout this period, and I know I'm going to get a smile from you all, as you would expect, the legendary Henry Boot balance sheet remains rock solid. Our NAV at just over £3 a share, as you all know, is very conservatively assessed because we hold our land and developments at cost. And the decision to increase our half-year dividend by 5% is a sign that we continue to have conviction in our three key markets. And we're also confident of hitting our medium-term targets, both in terms of growth and return. So going to turn now to some of the operational highlights and as you will know we've been clear that this year was always going to be half too weighted and it follows a similar pattern to last year and we're confident of achieving our full year performance in line with expectations and looking at the operational highlights first of all you've got land promotion We sold 1,222 plots and have got another 2,369 plots exchanged or under offer. Changes to the NPPF mean year to date we've achieved planning on nearly 2,800 plots. Our aim of submitting 10,000 plots is on track and so far this year in round terms we've already submitted 5,000 plots. Our land portfolio has increased to 107,000 plots. And as I said last time, really the emphasis now is on winning planning consent and selling plots and less on growth because we believe that the portfolio has got the scale and the balance and the quality already. Turning to development. Origin is performing well with all schemes on time and budget and the first pre-let agreed. The investment portfolio generated a total return of 5.7%, which yet again is well ahead of the index. And in the first half of this year, we sold nearly £18 million of investments at an average 12% premium as we continue to look to recycle capital into higher returning opportunities. Looking at home building, Stonebridge has had a slower first half, completing on 85 homes. The net private reservation rate was 0.45 in the half. However, we still see great potential in this business and now we're the majority owner, we've added 846 plots to the land bank. On construction, the segment remains profitable with both banner and road link forming in line with expectations. And HBC has secured 94% of its 2025 order book and it's on track to have a far better year than in 2024. And to be frank, that's since we changed the management and the new management came into post in January of this year. And then when you look at operating profit after deducting central operating costs, it's £10.2 million. Now again, I always spend a bit of time just running through the medium term objectives. The main ones are capital employed is at £427 million and is still set to grow to £500 million. Our 12-month rolling rocky is 9.1%. And we're going to maintain our financial discipline because we're absolutely determined to restore our rocky to within the target range. We remain on target to sell over 3,500 plots this year in Hallam, so we're absolutely focused on that medium-term target of 3,500 per annum. In the current environment, it's no surprise we have reduced our committed development, with our share of completed development falling to 42 million, but I will outline later on in the presentation that we've got a clear plan to build this back up during 2026. Reflecting delays to opening new outlets as well as a slower market, Stonebridge is aiming to complete on between 240 and 250 homes this year. However, due to our expanded land bank, we believe we're going to be in a position to sell from more outlets in all three regions in 2026. So we're going to be firmly back into the growth of this business. Now I talked at the beginning about our confidence in hitting year end expectations and this is based on 80% of the budgeted land and property sales already having been completed, exchanged or secured. Now to be clear this is not to turn over its property sales and we believe that this gives you and us good visibility on our full year performance. So this slide shows that in detail. If you look, you've got light blue, which is Hallam, green, which is HBD, and dark blue is Stonebridge. And you can see out of a budget of £221 million, which is on your left-hand side, we've completed on 98 million to date but this rises to 139 million if you include exchange and then it goes up to 176 million including sales that we've got reserved. You can see by the dark blue slug that the majority of reserve sales are in Stonebridge and that's not unusual for this time of year. To get us to £221 million, we need another £45 million of sales. And again, you can see that sales under negotiation for completion in half to 2025. And you can see that around half of that is in Hallam. And if they... Exchange incomplete on the 1,800 plots that they've got under offer, they will hit that target. Then 5 million is in HBD, and that's about land sales that we're doing to the Origin joint venture. So we've got a degree of control over that. And one site at York, which is under offer to a national developer. And then the rest of the sales, it's about 19 million, is in Stonebridge. And what we've done there is we've taken the mid of our range. We've assumed that Stonebridge will sell 245 homes. And to be clear, that means based on this, they've got 19 million to do and 53 homes to sell. And then also, there are other deals going on. And we can and might be able to use those for cover in the event that these things don't happen. And actually, Darren, that's what we did last year. So, just turning to HBC, we announced an MBO of Henny Boot Construction for £4 million this morning. The transaction simplifies the group's equity story as well as improving the prospects for long-term growth by us having more focus on the core activities, creating synergies and, as I say, being disciplined about also achieving returns. And Also, it's going to reduce the risk profile of the group. The vendor loan is repayable over five years and personal guarantees have been given by the management team, so they've got skin in the game. And we'll also retain oversight of the business because we'll have two Henry Boo representatives on the HBC board until the vendor loan is paid. The deal is set to complete no later than January 2026 and we expect a profit on the disposal. Over to Darren.

Thank you Tim and good morning everyone. So turning to our financial summary. We've performed well in the first half of this year with revenue in the period increasing by 19% to £126 million. really driven as a result of several significant transactions within both land promotion and the property development businesses. Gross profit increased by 30% to £32 million, with the gross profit margin improving from 23% to 25%. Underlying profit, which excludes valuation movements on completed investment properties, is up 79% to £6.5 million. And with operating profit of £10 million, our rolling 12-month return on capital employed was 9.1%. Through the cycle, we continue to believe that our target range of 10% to 15% remains appropriate for the business. Earnings per share increased to 4.8 pence in the period, and we've increased the dividend by 5%, reflecting our progressive dividend policy, the confidence we have in achieving our full-year expectations, and as Tim mentioned, the confidence we also have in achieving our medium-term targets. If we turn over to the balance sheet, investment property, which includes our share of joint ventures and investment property in the course of construction, has reduced to £107 million. This is following more than £14 million worth of profitable sales during the period. We've seen further rental growth for our industrial assets and we've made good progress on developments within our origin joint venture. Following investment in land and developments, net debt increased to £88 million with 21.4% gearing marginally above our optimal range of 10-20%. We expect gearing to be towards the top of our range at the year end as we continue to invest across the business ahead of disposals next year. In January, we also completed the acquisition of a further 12.5% of Stonebridge Homes, taking our ownership now to 62.5%. As a result of this, our underlying net asset value per share, excluding the pension surplus, reduced by 2.6% to £304. If we look at the cash flow, this largely demonstrates how investment property sales and debt funding have allowed us to continue to invest in strategic land, Stonebridge Homes' land bank and property development. Cash outflows from operations total 3.1 million, being returns in the period largely covering payments for interest, tax and dividends. The profitable sales I mentioned on investment property generated £13.1 million, which has been recycled into investments of £10.7 million in inventories to grow land and work in progress in Stonebridge Homes, deliver our committed development pipeline and fund planning costs within Hallam to bring sites forward for sale. As previously mentioned, we purchased a further 12.5% of Stonebridge for £10 million and we continue to grow the Origin Joint Venture, investing £4.1 million in the period. Other working capital increased by £10.5 million following land sales to house builders on deferred payment terms and as such we ended the period with net debt of £88.1 million. So if we can move on now to the operational review and starting with land promotion. Hallam Land sold 1,222 plots in the period, with a further 2,369 plots exchanged or under offer. Having started the year well, we are on target to exceed 3,500 plot sales this year. Sites exited during the period generated an average ungeared IRR of 23%, which we're clearly very pleased with. The planning environment has been positive for securing outline consents and during the first half we achieved planning for 1,237 plots, a four-fold increase from the prior period. Plots with planning marginally increased to 8,837 and with over 14,000 plots awaiting determination in what we see as a very supportive environment, we expect our stock of plots with planning to increase. We're making good progress on our target for submitting 10,000 plots into planning this year. We've got nearly 5,000 plots already submitted. These take time to build up and submit, but others are well progressed to achieve that target, submitting them in Q4 this year. And with our portfolio all held at cost, there's no valuation gain on securing planning recognised until the land is actually sold. And this continues to reflect a significant uplifting value not recognised within our balance sheet. And I'll go into a bit more detail on that in a couple of slides on. We continue to manage one of the largest strategic land banks in the country. We've now got over 107,000 plots and 77% of the portfolio is in the Midlands or in the South where values tend to be higher. With a balance of freehold and promotion agreements, we're able to manage capital investment appropriately between risk and reward, taking advantage of the right time in the cycle when acquiring freehold land. Our tendency to use planning promotion 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. Our five-year average plot sales are running at 3,000 plots per annum and as we've said we anticipate plot sales of around 3,500 this year in line with our medium-term target. Sales in the period were at an average £16,000 gross profit per plot. And that's been driven by a particularly profitable freehold sale in Ambrose. We do expect this figure to revert back in line with the five-year average of around £10,000 per plot at the full year. Moving on, in terms of the planning environment, following the government's revision to the MPPF, we have seen positive changes to the planning system, which have significantly increased our ability to secure outline consents. As you can see, since 2024, we've secured more planning consents, and year-to-date, we've achieved consents on 2,782 plots across 11 sites. This is a significant increase compared... to a three-year average of around 600 plots to the end of 2023. And it takes plots with planning permission to nearly 10,000 now. We've been successful in utilising the planning appeal system as well to unlock more sites and we've won appeals on nearly 2,000 plots across five sites so far this year. This includes 300 plots in Sutton in Ashfield which is a site exchanged for completion next year and a significant site in Fairham for 1,200 plots which we are currently marketing for sale. As we move forward, the focus is to convert our store of consents into sales and secure more planning permissions in this supportive environment as we build a sustainable high level of value in our portfolio. And moving on in this regard, our land promotion business has delivered consistently strong and stable returns over the long term. Sales over the last five years have delivered an average gross profit of £10,000 per plot. And these disposals have achieved an ungeared IRR of 23% per annum, which for us is absolutely fantastic. As I mentioned on previous slides, we've built up a considerable store of value, and with almost 9,000 plots at the half year with planning, in the table on the top right here, based on recently achieved gross profit per plot, sites currently with planning have the potential to deliver gross profit of £88 million over the short term. In addition to this, we've got over 14,000 plots in planning awaiting determination. This significantly de-risks 22% of our land bank and that has the potential to deliver a further £146 million of gross profit. The full portfolio over time has the potential to deliver over a billion pounds of gross profit. And for the first time, we're presenting an illustrative net present value for the total portfolio, which can be seen in the table on the bottom right. These figures are based on a range of gross profit per plot using average hold periods and making adjustments for overheads and tax. The matrix also includes a range of discount rates. But if we take an average £10,000 gross profit per plot... This shows a potential discounted profit after tax to come of £180 to £256 million, equivalent to an NAV uplift of 44% to 62%. Whilst there are, of course, risks to unlock this value, the business has got a really strong track record of mitigating these. And with a portfolio of over 200 sites, we are not reliant on a few large schemes to actually deliver these returns. And on that note, I will hand you back to Tim.

Thank you very much, Darren. So looking at development, our committed development over half one has marginally grown to 128 million or our share 37 million and 40% of the schemes are pre-let or pre-sold. Understandably, we've been selective on starting development and we've targeted industrial with the vast majority by value in origin. And I've set out the normal details of the development programme in the appendix. Total profit on all the committed schemes is £8 million, or 38% profit on cost, of which only 16% has been taken to date. In the case of Origin, this does not include the sale profit when we transferred the land to the JV, and it doesn't also include the potential for us to earn promote fees. Now, a lot of focus this year, rightly so, has been spent on building up a near-term development pipeline. And in this respect, we're set to grow Origin by a further £56 million in the short term. And also, at our Golden Valley mixed-use campus, with a GDV of £1 billion, we've achieved planning. We've also got a strong £1.3 billion development pipeline that will give us further optionality to grow back our committed programme. I just want to spend a bit of time on Origin and also a bit of a recap. And you'll remember that it was a 2575 JV that was formed at the end of last year with Feldberg Capital, and we believe it allows us to accelerate the development of industrial sites. We earn development management fees and also promote over an 8% geared return. The JV was seeded with three sites from our development pipeline, and that's shown on the slide as current. You can see it totals 100 million. And in selling the sites to the joint venture last year, we realised a profit of £5.5 million. Work on all sites commenced in quarter one of this year. And I'm pleased to say that that work is progressing well and we've secured our first unit pre-let at Markham Vale. Another unit is under offer at Wellin and there's good interest, occupier interest at Spark. And then the joint venture is set to grow by an additional 56 million, which is shown as future. We there got second phases in Markham, Vale and Walsall. And then we're also, again from our pipeline, selling Preston into it. Once these land sales are completed, together with the car park site at York that I've already mentioned, HBD will be done in terms of its sales and budget for the year. The other significant thing that we've done is we've got planning on Golden Valley. And that's a flagship mixed-use campus. It will provide up to 2,500 new homes and 1.25 million square feet of space. And the first phase will include IDEA, the new 160,000 square feet National Cyber Innovation Centre. And you can see an image of it here. And that's been identified in the government's industrial strategy. It's the old gag. It's next door to GCHQ. Guess who's going to anchor it? Let's hope they're not monitoring what I'm saying because I've been told I can't say that. plus we've got 576 residential units. And we've got a funding package secured from government and the local authority because it's of national significance. And once we've signed up the anchor tenant, we'll commit to the first phase, and we expect to commit to the first phase during the Q1 of next year. Turning to investment... Our total return at 5.7% for the first half was once again ahead of the index at 4.2%. And I show on the line graph our total return compared with the index since the start of 2020. And you can see with the dark blue line, we're at 7.5%. And then the pale blue line is the index lagging behind at 3.6%. Total value of the investment portfolio is £96 million, and during the period we secured four sales at a 12% premium to book value. Two of those will complete post-period end. And the largest sale was Scalmersdale, where we've secured planning for a 245,000 square feet building. and that's 66% bigger than the existing building on site. And we sold that property to a German fund in June at £9.5 million, and that achieved an ungeared IRR of 25% per annum, a bit better than the Hallam ones at 23%. But still good money, isn't it? Then... Turning to Stonebridge, in January we became the majority owner of Stonebridge. We've initiated an integration plan, we've identified several quick wins and those quick wins have already been implemented. Looking at the operational performance, Stonebridge completed on 85 homes in the first half, with an average private sales price increasing by 3% to 391,000. Excuse me. Many of our customers took longer to commit to buying homes in an environment for them felt a bit more uncertain. And our net private reservation rate was 0.45 in the first half. Reservation levels have also been impacted by delays in securing detailed planning, reducing the opening of new sales outlets. We currently operate from nine and we planned to operate from 12. During the summer we've seen softer trading conditions with our sales rate also affected by several of our sites nearing completion and not offering the full range of products. The sales rate for the six weeks to 14 September was 0.38%. As a result, current year completions are now anticipated to be lower with a revised target range of 240 to 250 this year. Now, despite that, visitors' numbers and interest in our homes still remains, and we're actually getting more people visiting site by a significant amount, up to 50% more people. So we still absolutely believe in this product, and we think that if we get the full offering, and we've got a plan for that, and more outlets, then we can scale this business up. So you can see growing the land bank is absolutely crucial. And I'm pleased to say that we've added 846 plots to our land bank in the last six months or so. And we've acquired three sites in the period, and we've just shown you two here. There's Kingston Village, Newcastle upon Tyne, capable of delivering 360 units. And then there's Whitby in Yorkshire, where we can deliver 223. And by showing you the location of the land banks, the new sites and the active outlets, you can see that Stonebridge really has got the potential for being a significant multi-regional premium house builder. And we do believe that there remains a long-term structural undersupply of housing in these target regions, so therefore we're confident that we can hit our medium-term growth target of 600 homes per annum. And then finishing off on Outlook, whilst we operate in an uncertain environment, we continue to make good strategic progress by focusing on quality projects within land promotion, development and home building. I'm not on the slide, am I? Thank you, Dan. Significant steps include the sale of HBC and the agreed route to full ownership of Stonebridge. Now with the majority owner of Stonebridge, we can increase and improve its land bank and drive sales. We expect, as I've said, to be back on our growth path next year. The outlook for Hallam is particularly bright, with 3,500 plots sold or under offer and also planning policy which, in effect, has a presumption in favour of development. Consequently, the portfolio of planning consents will build up and, as Darren said, that's building up a store of profit for the future. Similarly, HBD is preparing to commit to more of its near-term development through smart JVs like Origin or nationally significant schemes like Golden Valley. So I believe this is a clear path of growth, which is a well-funded long-term business we're able to pursue. In the meantime, we do expect to meet our earnings expectations for this year. Our balance sheet remains rock solid, and that all puts us into a sound position to increase the dividend by 5%. Thank you very much. So, questions? Questions?