Profits fall but land bank grows at developer Henry Boot

HENRY Boot said its growing pipeline of development land places leaves it well-placed for a housebuilding recovery, but said markets remain tough with half-year profits plunging.

The Sheffield-based group, which promotes land through the planning system and also builds supermarkets and distribution centres, said trading profits fell to £4.1m in the first six months of 2012, from £11m a year earlier.

The results were in line with its expectations and reflect a “challenging and weak” environment, said chairman John Brown. The firm did not sell any major parcels of land during the six months, but it invested heavily, buying 700 acres of land. Henry Boot ended June with net debt of £22m, up from £2.3m a year earlier.

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“Over the next year we are in a position to market several consented sites which, given the slightly improving outlook for the housing market, should see good demand,” said Mr Brown.

“Our balance sheet strength and ability to commit funding to land and property development without recourse to specific external funding, is resulting in a significant uplift in competitively priced opportunities arising.

“These sites will serve to increase our profit generation capability through the next few years but more so if markets improve more quickly than we currently anticipate.”

Housebuilders Persimmon and Bovis have reported rising profits and increased output over the past week, amid a tough but stable housing market.

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Henry Boot said its land interests grew from 8,051 acres at the end of 2011 to 8,761 acres at the end of June.

The value of these assets increased to £68.1m from £58.8m six months earlier, which the group said reflects its growing and increasingly mature portfolio.

The sites are across the UK, but have a geographical bias towards the East Midlands, South, South West and central Scotland.

“The underlying need for more housing in the UK is, in our view, undeniable,” said the group. “However, house buyers have low levels of equity to commit and the relatively tight mortgage criteria applied by banks is contributing to the low level of funds available for residential property purchases.”

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It is optimistic the Government’s NewBuy housing indemnity scheme - where builders and the State share the mortgage risk with buyers - will bring more first-time buyers into the housing market.

“The recent statements made by the major UK house builders indicate that the market has continued to recover slowly in 2012 and we anticipate that this slow recovery will continue,” said the company.