Henry Boot : Interim Results 2021

13 September 2021

HENRY BOOT PLC

('Henry Boot', the 'Company' or the 'Group')

UNAUDITED INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2021

Henry Boot PLC, a Company engaged in land promotion, property investment and development, and construction, announces its unaudited results for the period ended 30 June 2021. Ticker: BOOT.L: Main market premium listing: FTSE: Real Estate Investment and Services.

HIGHLIGHTS

• Revenue of £129.0m (June 2020: £108.7m) increased 18.7%, as demand increased across our three key markets
• Profit before tax of £23.1m (June 2020: £7.2m) increased by 220.8%, ahead of Board expectations, driven by the industrial property market performing strongly and delivering positive capital returns through disposal of investment property, revaluation gains and returns from Joint Ventures contributing a combined £5.8m
• Increased ROCE¹ of 6.3% (June 2020: 2.1%) +4.2% for the six months to 30 June 2021 and EPS grew
  significantly to 14.1p (June 2020: 4.1p) up 243.9%
• Actively investing in our three key markets, with a total of £54.9m invested in new opportunities across the Group, including £11.5m of post period purchases
• NAV² per share grew to 256p (December 2020: 235p), an increase of 8.9%, due to retained earnings and actuarial gains on the defined benefit pension scheme
• Balance sheet remains robust, with Net Debt³ of £13.0m as at 30 June 2021 (December 2020: Net Cash £27.0m) after strategic investments made in the period
• Declaring a 2.42p interim dividend (June 2020: 2.20p), an increase of 10.0%, reflecting the Group's strong operational performance and in line with our progressive dividend policy
• Against a backdrop of strong demand within our key markets we have made excellent progress in our evolved strategy and towards our medium-term growth and return targets
• Land promotion business sold 2,288 plots (December 2020: 2,000). The land bank has now increased to 92,253
  plots (December 2020: 88,070), including 13,273 (December 2020: 15,421) plots with planning permission which are held at the lower of cost or net realisable value and, therefore, do not benefit from valuation gains
• Committed programme materially stepped up to £444m (HB share: £181m) - 60% pre-sold or pre-let. Led by over 1 million sq ft of industrial and logistics (69% pre-sold or pre-let). Strong £1.4bn development pipeline (HB share - £1.1bn) with 72% in industrial and logistics
• Stonebridge Homes on track with its annual sales target, securing 85% of the annual target in H1, supported by a buoyant housing market. The total owned and controlled land bank is now 1,125 units
• Construction business performing ahead of expectations, securing over 100% of its 2021 order book (68% is public sector) in the first half and 80% also secured for 2022
• Good start to the second half, with a full order book and forward sales in land, development and housebuilding, as well as, launching our Net Zero Carbon Framework and establishing a Responsible Business Committee

1Return on Capital Employed is an alternative performance measure (APM) and is defined as operating profit/average total assets less current liabilities

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²Net Asset Value (NAV) per share is an APM and is defined using the statutory measures net assets/ordinary share capital

³Net (debt)/cash is an APM and is reconciled to statutory measures in note 14

Commenting on the results, Chief Executive Officer Tim Roberts said:

"The business has performed well, responding to growing demand within our key markets. Whilst we expect profit to be weighted to the first half, the cadence of our activity will remain high, so we will continue to make excellent progress on our clear strategic targets. This will position us well for sustainable growth in the future".

For further information, please contact:

Henry Boot PLC

Tim Roberts, Chief Executive Officer

Darren Littlewood, Group Finance Director

Daniel Boot, Group Communications Manager

Tel: [phone]

www.henryboot.co.uk

Numis Securities Limited

Joint Corporate Broker

Garry Levin/George Fry

Tel: [phone]

Peel Hunt LLP

Joint Corporate Broker

Charles Batten/Harry Nicholas

Tel: [phone]

Hudson Sandler LLP

Financial PR

Nick Lyon/Wendy Baker

Tel: [phone]

About Henry Boot PLC

Henry Boot PLC (BOOT.L) was established 135 years ago and is one of the UK's leading and longest standing land promotion, property investment and development, and construction groups of companies. Based in Sheffield, the Group comprises the following three segments:

Land Promotion:

Hallam Land Management Limited

Property Investment & Development:

HBD (Henry Boot Developments Limited), Stonebridge Homes Limited

Construction:

Henry Boot Construction Limited, Banner Plant Limited, Road Link (A69) Limited

The Group possesses a high-quality strategic land portfolio, a proven reputation in the property development market for creating places with purpose, backed by a substantial investment property portfolio and an expanding, jointly owned, housebuilding business. It has a construction specialism in both the public and private sectors, a plant hire business, and generates strong cash flows from its PFI contract, Road Link (A69) Limited.

www.henryboot.co.uk

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CEO REVIEW

Highlights

In the first half of 2021, Henry Boot has performed strong and continued to secure attractive opportunities for future growth within our three key markets of industrial and logistics, residential and urban development. The Group has achieved a profit before tax of £23.1m (June 2020: £7.2m), which was supported by the recovery in demand across our operations and in particular, driven by strong demand from both investors and occupiers in the industrial and logistics market. We have been actively investing in our key markets, with a total of £54.9m invested (including £11.5m in Q3 21), in line with our strategic ambitions. The Company's strong financial position remains intact, with a robust balance sheet and net debt of only £13.0m, and NAV per share increasing to 256p, as a result of both retained earnings and actuarial gains on our defined benefit pension scheme.

In land promotion, Hallam Land Management (HLM) has traded well, selling 2,288 plots in the six months to June 2021 compared to 2,000 in the previous 12 months to December 2020, against the backdrop of a resilient housing market, where housebuilder demand for land remains buoyant. In H1 2021, HLM invested £6.6m, growing its land bank to 17,357 acres (December 2020: 16,607), which has the potential to deliver 92,253 residential plots in the long term. This includes 13,273 plots which already have the benefit of planning permission but, in line with our accounting policy, are held at the lower of cost or net realisable value, and, therefore, any increase in value created from securing planning permission will only be recognised on disposal.

Henry Boot Developments (HBD), our property investment and development business, completed on schemes with a total Gross Development Value (GDV) of £44m (HBD share: £37m), with 100% of these either sold or let. During 2021, we have materially stepped up our development business, investing a total of £34.4m (Including £11.5m in Q3 21) in new opportunities, which includes the £110m GDV build-to-rent (BTR) project in Summerhill, Birmingham and a large industrial site in Rainham (GDV £90m) purchased in a joint venture (JV) with Barings Fund. Overall, our committed schemes grew to £444m GDV (HBD share £181m) and our development pipeline has been maintained at £1.4bn (HBD share £1.1bn), 72% of which is in industrial and logistics. Notably, on the back of strong demand and investor appetite for industrial space, we have committed to deliver over 1 million sq ft of industrial and logistics space.

Our investment portfolio (including investment property held in JV) has grown to £106m (December 2020: £92m) mainly through acquisitions but also by valuation gains of £3.4m. With total returns over six months of 6.7% and rent collection at 96%, we have outperformed our benchmarks.

Our jointly owned housebuilder, Stonebridge Homes (SBH), has secured 85% of its 2021 sales target in a buoyant housing market, achieving an average of 0.90 sales per week per outlet due to high demand, which has been underpinned by low interest rates and good mortgage availability. The total owned and controlled land bank is now 1,125 plots (December 2020: 1,119). The growth of plots with either detailed or outline planning consents, which totals 700 plots (December 2020: 657) has once again experienced delays due to the slow conversion of sites through the planning system, reducing our ability to commence work on site, although we hope to progress a number of sites through planning in H2. Whilst the sites SBH has acquired have kept its total land bank topped up, we anticipate increasing this position in H2 as SBH has a number of sites progressing through the legal process.

The Group's construction segment continues to perform ahead of our expectations, supported by the recovery in the UK construction market. Henry Boot Construction (HBC) performed strongly and is trading ahead of budget, whilst also securing over 100% of its order book for 2021 and 80% of 2022. Banner Plant (BP) is also trading ahead of budget and seeing demand for plant hire increase in line with the recovery of the construction market.

Dividend

The Board has declared an interim dividend of 2.42p (June 2020: 2.20p) for H1 2021, an increase of 10.0%, which reflects our progressive dividend policy, the Group's strong operational performance and the Board's confidence in the

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outlook for the Group. This will be paid on 15 October 2021 to shareholders on the register at the close of business on 24 September 2021.

Strategy

At the start of 2021 we set out our medium-term strategy. The Group's main focus is to grow the business, by increasing capital employed by over 40% to £500m, in our three key markets. At the same time, we believe we can continue to generate a return on average capital employed (ROCE) of 10-15% over the medium term, whilst maintaining a progressive dividend policy. Our markets are currently strong, and they also retain their long-term attractions. Only six months into 2021 we have made excellent progress towards our medium-term targets.

Particularly, HBD has materially grown its share of the committed development programme to £181m (December 2020: £85m) and we shall continue to manage risk by ensuring that the majority of our programme is pre-let or pre-sold. It is likely that our commitments will increase in H2, as we are promoting a number of additional schemes which means we are well ahead of our plan for HBD to complete on average £200m of developments per annum.

We have seen encouraging demand for our strategic land, with sales of 2,288 plots in H1 2021 already. Whilst transactions this year are likely to be heavily weighted to H1 2021, HLM are very much on track to grow sales to 3,500 units on average per annum. HLM has also created an additional team so that the large South East region is effectively split into two to improve coverage.

Whilst demand from customers for the premium houses that SBH build has been very strong, our ambition to grow units sold to 600 has been hampered by the slow planning process, and a very competitive market for buying land. However, we still expect to see expansion of the business next year and have identified opportunities to increase our land bank in H2. We have also acquired our second site in the North East and expect to be selling from two regions next year. Our ambitions to scale up this business remain on track.

The investment portfolio has grown to £106m, (£12m being our share of investment property held in a JV) and with a range of developments that we could potentially retain, even if we are selective on new acquisitions - as the investment market proves to be ever more competitive in the areas we are focusing on, we have a clear plan to get to our target of £150m.

The construction business secured and began works on a major £42.5m urban development scheme in the city centre of Sheffield, increasing its activities in our three key markets. With our order book effectively full for this year and 80% already secured for 2022, we are well ahead of our target to secure a minimum of 65% at the start of each year. Public sector work remains our focus, accounting for 68% of the 2021 order book.

Overall, we remain very well placed for future growth. Despite committing to nearly £100m of development during the period, we have replenished our pipeline and it remains at £1.4bn GDV (HB share: £1.1bn). On land promotion, plots controlled have increased to over 92,000 (for comparison five years ago they were at c.59,000), which is now larger than many national housebuilders. SBH, despite experiencing planning delays, still has 494 plots with planning, and a total land bank based on one year forward sales of approximately 3.5 years.

On wider objectives, our Executive Committee is developing into a high performing senior leadership team, and whilst we will miss Simon Carr and Giles Boot, the new MDs Tony Shaw (HBC) and Jonathan Fisher (BP) are already contributing. I am particularly pleased with progress we have made in relation to our Net Zero Carbon (NZC) Framework and the formation of a Responsible Business Committee. I remain convinced that the private sector has to act on the challenges of climate change and being at the forefront will also create sustainability and value to our business.

Responsible Business

Earlier this year we launched 135 Henry Boot, the first phase of our Responsible Business Strategy (RB Strategy) and a strategic framework centred around three long-term initiatives:

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1. Our Pathway to NZC and enhancing our environmental stewardship;
2. Our new Equality, Diversity, and Inclusion (EDI) strategy; and
3. Our Community Partnership Plan (CCP) to provide funds, time, resources, and expertise to support our community partners.

We have launched our policy and have made good progress across all three of our initiatives. In line with our roadmap, our CPP is progressing as planned and we have developed our EDI strategy to create a fair, accessible, diverse and inclusive working environment.

Following this, we also launched our NZC Framework. The Group recognise that the built environment contributes around 40% of greenhouse gas emissions and whilst the Group's carbon emissions have been decreasing since 2013, we acknowledge the importance of continuing to reduce our environmental impact. The first phase of the Framework (2021-2025) will guide Henry Boot to deliver short-term reduction measures for directly controlled emissions (Scopes 1 and 2). From 2026, the Group will continue to accelerate its decarbonisation programme to reach its target of NZC for all direct emissions by 2030. We have also committed to responsibly offset any residual emissions produced by commercial activity through the funding of accredited carbon-offsetting schemes.

To support our ESG commitments and ensure they are truly embedded into the Group's operations, we formed in June a Responsible Business Committee, which is chaired by Non-executive Director Peter Mawson. This Committee gives oversight and guidance to the delivery of our RB Strategy, whilst ensuring there is collaboration and input from the Board on all of our ESG activity and ambitions.

We will now turn our focus to the second phase in the 135 Henry Boot strategy, namely the development of our RB Strategy, which launches in January 2022.

Outlook

Our focus during H1 has been to meet the growing demand in the industrial & logistics, and residential markets. It is these two, of our three key markets, which have driven the strength of results in the period. The outlook for these markets, both in the short and long-term is very encouraging.

That is why we continue to grow our land bank within HLM - now with a potential of 92,253 plots - and are in a good position to convert the 13,273 plots with planning into sales. HLM is now concentrating on building up sales for 2022, and with demand from housebuilders strong, and our portfolio prime, not surprisingly with 1,311 plots unconditionally secured, they have made a good start.

Similarly, HBD has materially increased industrial development so we are committed to over 1 million sq ft, 70% of which is pre-let or pre-sold with high levels of occupier interest in the rest. As we let more, we will look to draw down projects from our predominantly industrial development pipeline. We are also seeing early signs of a recovery in urban development, driven more by the major provincial cities than London. We shall remain selective on urban developments and in the short term are focused on quality BTR and build to sell schemes, but in the medium term we will continue to promote office schemes in targeted centres such as Manchester, as we believe cities will adjust to what will become a more hybrid and agile working environment. Our aim over H2, and into next year, is to expand our committed pipeline all the time managing risk by a blend of pre-lets, forward sales and JVs.

We have taken more than our fair share of the growth in the construction industry which effectively means HBC's order book for this and next year is full. We will concentrate on delivering this order book and will be selectively looking for work for 2023.

The Group's operations have seen an increase in build cost and a shortage of materials in the UK construction industry, which has resulted in longer lead times. To mitigate our exposure to this situation, we have implemented measures such as securing supplies at an early stage and adding protective clauses in construction contracts. With the added

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