Early land sales helping to boost profits at Henry Boot

The former Terry's factory site in York
The former Terry's factory site in York
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PROPERTY company Henry Boot cheered shareholders with the news that profits will be 10 per cent ahead of forecasts thanks to a number of early land sales.

The Sheffield-based firm had expected housebuilders to sit on land purchases to conserve funds at the end of 2013, but they went ahead with the deals.

Finance director John Sutcliffe said this eagerness to conclude land deals signalled an improvement in the economy.

“It’s a sign of the economy changing,” he said.

“Before housebuilders were retaining cash. The recovery is undoubtedly happening and there are lots of signs that things are getting better.

“2013 was a good year and 2014 looks pretty encouraging.”

Despite completing the land sales ahead of forecast, Henry Boot said it is comfortable with expectations for 2014.

“2014 won’t be affected as we have a pipeline that means we’ll be well covered,” said Mr Sutcliffe.

“We’ve got 30 sites with planning permission. These are fairly long-term schemes.

“I think we’ll have one of the busiest years in property development in 2014.”

Following the acquisition of the former Terry’s Chocolate Factory in York last year, Henry Boot is in detailed negotiations with a number of different operators to take the 400,000 sq ft development forward.

The main factory building will be turned into 150-160 one and two-bedroom flats and the firm is thrashing out terms with a housebuilder.

“The local authority in York wants to bring back into use a beautiful building that has fallen into disuse,” said Mr Sutcliffe. “It’s an intriguing building.”

Work could start on the flats this autumn.

The group is also in discussions to turn part of the site into a hotel, subject to planning.

Planning permission for a range of residential, office and leisure uses has already been secured.

The Terry’s factory site has been seen as a major re-development opportunity following the end of production in 2005 with the loss of more than 300 jobs, when US parent company Kraft transferred production to Europe.

The former factory site will provide much-needed living space to help counter the city’s affordable housing crisis.

Analyst Nick Spoliar, at WH Ireland, said: “This morning’s update flags pre-tax profits 10 per cent ahead of expectations after a good finish to the year, reflecting significant success within the business, a successful model and a good environment.

“In addition to the timing of land sales, we see Henry Boot as a beneficiary of underlying trends in planning, with further improvements in planning consents, reflecting the sea-change that has taken place in the planning environment.”

Mr Sutcliffe said there has been definite change in planning.

“The process has changed and a lot more planning permissions are becoming available,” he said.

The group said the Government’s initiative to help homebuyers gain access to the mortgage market is having a significant positive impact and is lifting the confidence of national housebuilders

The Government’s Help to Buy scheme allows people to get a mortgage with just a five per cent deposit as the Government guarantees the rest of the deposit

“Help To Buy has created a catalyst,” said Mr Sutcliffe. “I think it’s a real positive as funding is more readily available. I don’t think it’s creating a housing bubble.”

Analyst Andrew Gibb, at Investec, said: “The outlook statement strikes a positive tone, with land management, property development and construction all having strong opportunity portfolios for 2014. With an improving economic outlook and planning regulations which continue to support the valuation potential in its strategic land portfolio, there could be considerable upside from here.”

Henry Boot will update shareholders at its 2013 full-year results announcement on March 27.

ros.snowdon@ypn.co.uk