Interim Management Statement

RNS Number : 0479W

Boot(Henry) PLC

12 November 2010

 



Henry Boot PLC ('the Company' or 'the Group') publishes its second Interim Management Statement covering the period 1 July 2010 to 11 November 2010, as required by the UK Listing Authority Disclosure and Transparency Rules, together with a trading update for the year ending 31 December 2010.

TRADING

The Company continued to trade profitably in line with the Board's expectations during the period.

Tight cost control and cash generation remain key targets and we have reduced net debt by approximately £12m since 30 June 2010 to £13m.

There have been no material events or transactions during the relevant period and the financial position of the Group remains strong.

Momentum in the UK commercial property market eased and indications are that capital values grew only marginally during the period.  The next formal investment property valuation will take place as at 31 December 2010 and no revisions to property values have taken place in the period.

OUTLOOK

After an initial resurgence in commercial property and land markets during the second half of 2009 and early 2010, the market has settled down.

Since the election, caution appears to have become the order of the day.  The new-build housing market is operating at output levels 40-50% below the annual average for the last 20 years with the high level of personal equity investment now required and concerns over stability of employment cited as the main reasons for this reduction.  Major changes to the planning system will also create uncertainty and, potentially, shortages of consented sites if the market picks up.

The schemes noted below that we have in progress or approved in principle should ensure we will be in a position to capitalise on any shortages of greenfield land that arise.  Selectively, we are also beginning to see some development opportunities that well funded businesses can undertake without recourse to high levels of debt and, moving forward, we believe our growing pipeline of opportunities should stand us in good stead.  We anticipate that workload and pricing pressure will continue in our plant hire and construction businesses as public expenditure is constrained, however, the stable income stream from Road Link remains the cornerstone of that division's profitability.

The Group continues to trade in line with the Board's expectations.  It has low gearing with the potential to generate further cash in the near future to reinvest in our portfolio of opportunities, in anticipation of improving economic conditions.  Furthermore, we continue to have confidence in our ability to generate profit from those opportunities provided general economic conditions remain stable at current levels.

KEY EVENTS IN THE PERIOD

1 July 2010 to 11 November 2010

LAND PROMOTION AND DEVELOPMENT

·	Hallam Land Management, our strategic land company, concluded the sales of land at St Albans for 150 houses together with a residential care scheme, and at Bridgwater to Morrisons Supermarkets for a distribution centre and to Barratt Homes for 400 houses respectively.
·	The Company is in detailed discussions for the sale of its sites at Chesterfield (54 units) and Buckingham (700 units), both of which should result in completed sales around the turn of the year.
·	Planning consent has been granted during the period on sites at Countesthorpe (180 units) and Tillicoultry (74 units).  Our application at Clyst Hayes near Exeter (3,000 units) now has final approval and a Section 106 Agreement has been entered into.
·	Planning Applications have been submitted on sites at Chatteris (1,000 units), Irthlingborough (700 units) and Milton Keynes (6,000 units).
·	Planning Applications are to be submitted in the next six months on sites at Kilmarnock (500 units), Blaby (4,000 units), Mansfield (430 units), Market Harborough (1,000 units), Nuneaton (330 units), Bishopbriggs (50 units) and Marston Moretaine (125 units).
·	We have entered into an option agreement for Tesco to acquire 14 acres of our site at Oxclose, Sheffield.  Tesco has recently submitted an application for an 85,000 sq ft foodstore on this site with a decision expected in 2011.

PROPERTY DEVELOPMENT AND INVESTMENT

·	The Company completed the sale of the small district centre at Sandlands Court, Mansfield during the period, the development and letting of which had been finalised earlier in the year.
·	We have agreed terms for the sale of our shopping centre investment in Ayr and are currently working through legal documentation.  If the sale is successful, we expect this transaction to be completed around the end of the year.
·	We also expect to agree terms shortly for the sale of our retail warehouse investment in Port Talbot, the last unit of which was let to Poundstretcher earlier in the year.
·	On our commercial and industrial development in Priory Park, Hull, we have completed the sale of one of the two remaining industrial units and agreed terms for the sale of the other.  We have also completed one further plot sale and terms are agreed for the sale of a second plot.
·	At Markham Vale, our major industrial regeneration project at junction 29A of the M1 Motorway, we are close to completing the 15,000 sq ft design and build (D&B) contract secured earlier in the year and terms have been agreed for a further 41,000 sq ft D&B scheme which is expected to commence on site in the first quarter of 2011.  A further plot sale has also been completed, along with the sale/letting of two further industrial units at Waterloo Court, leaving only one unit available.
·	A further unit has been let at our retail investment in Bromley and terms have also been agreed to lease part of the remaining office space.
·	Planning permission has been secured for a large house on land owned in Ealing, London, and this plot is now being marketed for sale.
·	Work has commenced on relocating the Dents glove factory in Warminster to facilitate the development of a 25,000 sq ft Waitrose supermarket, with construction due to be completed by the end of 2011.
·	An unconditional agreement for lease has been exchanged at our motorway service area in Kent for an 80 space lorry park, construction of which is due to commence before the end of 2010 with completion in 2011.
·	A joint venture development agreement has been exchanged with Royal Bank of Scotland for the development of a mixed use scheme on a 26 acre site including a new supermarket in Thorne, Doncaster, with a planning application to be submitted before the year end.

CONSTRUCTION DIVISION

·	Henry Boot Construction has maintained satisfactory levels of activity throughout the period in line with expectations and anticipates having an order book of about 70% of 2011 budgeted activity by 31 December 2010, which is in line with our normal expectations.
·	Works for the public sector held up well for the first half of 2010, though we expect opportunities will fall following the Comprehensive Spending Review.  However, with our mix of public and private sector clients and diverse market presence, we feel well placed to weather the predicted reduction in public sector-related construction activity.
·	Social Housing contracts continued in both new build and Decent Homes in Sheffield, Doncaster, Rotherham, North Lincolnshire and Manchester.  New construction contracts have been won for a school extension with Calderdale MBC, environmental works for Barnsley MBC and with Derby City Council for a new sports pavilion at Alvaston.  Also, our framework agreement with the Prison Service continues to provide valuable opportunities, as does the Sheffield Teaching Hospitals Framework, where we have recently commenced our fourth project this year.
·	Within the private sector, where work has been scarce for some time now, our General Works Division will exceed their budgeted activity levels for 2010 after winning several short term contracts during the period.
·	Pleasingly, Henry Boot Construction has been awarded the RoSPA Gold Award for Occupational Health and Safety and the Chartered Institute of Building Corporate Responsibility Award, which recognised the positive impact on the community, social enterprises and our commitment in employing local people on our projects.
·	At Banner Plant turnover in the period has continued the improvement seen in the first half, with average turnover per week up 9.5% on the second quarter.
·	Hire fleet realignment has continued.  The balancing act remains the need for a modern product offering, an overall fleet reduction to reflect current demand and maintaining positive cash flow generation.  Investment in the year to date has centred on powered access, mini excavators, rollers and accommodation units.  Overall the original cost of the fleet has reduced by just under 3% year to date.
·	Road Link (A69), our PFI contract, continues to trade in line with our expectations.  Traffic loads remain reasonably constant and, though we have seen a slight reduction in miles travelled as a result of the general economic slowdown, this has not affected profitability.

Henry Boot PLC

Jamie Boot, Group Managing Director

John Sutcliffe, Group Finance Director

Tel: [phone]

www.henryboot.co.uk

Evolution Securities Limited

Joanne Lake

Tel: [phone]

Citigate Dewe Rogerson

Fiona Tooley

Mobile: [phone]

Tel: [phone]

 

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