Henry Boot It is also where there is the greatest potential for realising value, driven principally by the health of the housebuilding sector.
- Financial strength gives it an edge
- Significant land holdings
- Diverse revenue streams
- Construction side holding up well
- Modest land sales lately
- Renewable energy operation under review
The land promotion side operates as Hallam Land Management, whose aim is to buy land, push it through the planning process and sell it to housebuilders. When it acts as a seller it is in competition with private and public sector landowners, but Hallam has a big advantage: cash-strapped housebuilders are keen to buy land without spending lots of money upfront. That means they want deferred payment deals. But most landowners can't afford this – they want cash upfront. So Boot, with cash on its balance sheet and an untouched £50m banking facility, can take the long view and support deferred payments, meaning it makes the deals that other landlords can't.
And Boot's land bank is significant. Adding together land owned plus land held under options, Henry Boot has an interest in 8,055 acres, with a book value of £52.6m. The group has been successful in bringing some of this through the planning process recently, notably 1,100 plots in Exeter and a retail centre in Rugby. Disposals have also been made from various sites, generating a modest £23m in the first half of 2011, as demand for land was dented by the scarcity of mortgages and worries about the UK economy, which restricted housebuilding activity.
| HENRY BOOT (BHY) | ||||
|---|---|---|---|---|
| ORD PRICE: | 129p | MARKET VALUE: | £169m | |
| TOUCH: | 123-129p | 12-MONTH HIGH: | 155p | LOW: 96p |
| DIVIDEND YIELD: | 3.9% | PE RATIO: | 19 | |
| NET ASSET VALUE: | 146p | NET CASH: | £0.6m | |
| Year to 31 Dec | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2008 | 194 | 19.3 | 10.8 | 5.0 |
| 2009 | 117 | -11.9 | -5.7 | 2.5 |
| 2010 | 132 | 18.9 | 9.1 | 3.5 |
| 2011* | 145 | 14.7 | 6.7 | 4.3 |
| 2012* | 119 | 14.3 | 6.7 | 5.0 |
| % change | -18 | -3 | nil | +16 |
Normal market size: 2,000 Matched bargain trading Beta: 0.5 *Peel Hunt estimates (Profits and earnings are not comparable with historic figures) | ||||
The construction side is also holding up well, despite the tough climate – around 60 per cent of budgeted turnover for 2012 was secured by the end of 2011, underpinned by a number of long-term agreements in the housing sector. There is also a steady stream of recurring revenue from agreements with the Ministry of Justice and construction work on a number of schools.
Henry Boot also broadened its revenue stream by forming a renewable energy operation, but this has been put under review following uncertainty over the level of 'feed-in tariffs' set by the government.
Management has sensibly adopted a cautious stance for the coming year, so, to realise the locked-in value, investors need to be patient. However, there are compensations – the strong balance sheet and decent cash flow means the company has been able to keep paying dividends, and the likely payout for 2012 generates a decent yield. Meanwhile, the unlocked value in the land bank, together with the other parts of the business, leads broker Peel Hunt to suggest that Boot has underlying value of 180p a share, well above the current share price.
