21st Mar 2007 07:00
Boot(Henry) PLC21 March 2007 HENRY BOOT PLC PRELIMINARY STATEMENT OF RESULTS FOR THE YEAR ENDED 31 DECEMBER 2006 Henry Boot PLC, the land promotion, property development and investment, construction and plant hire business, today announces its preliminary results for the year ended 31 December 2006. HIGHLIGHTS Turnover increased 41% to £142.3m (2005: £101.2m) after a significant increase in the value of land sales Profit before tax increased 35% to £40.8m (2005: £30.2m) Basic earnings per share increased 27% to 99.2p (2005: 78.2p) Final dividend proposed of 16.6p (2005: 14.1p), an increase of 18% making a total for the year of 22.0p (2005: 19.0p), an increase of 16% Return on average capital employed increased to 30% (2005: 26%) Net asset value per share increased 25% to 584p (2005: 469p) 4 for 1 bonus share issue to be proposed at an EGM in May Commenting on the results, Chairman John Reis, said: "I am very pleased to be able to report on a further set of outstanding results that are, in terms of profit, earnings, return on assets and dividends, a record for the Group. We have continued to invest in all our business streams but in particular in theland promotion and development portfolios creating future profitableopportunities. Moving into 2007 the Group remains very well positioned to capitalise on theseopportunities which, allied to our robust financial position, give me greatconfidence in our future prospects and the delivery of increasing value toshareholders." For further information, please contact:Henry Boot PLCJamie Boot, Group Managing DirectorJohn Sutcliffe, Group Finance Directorwww.henryboot.co.uk0114 255 5444 Evolution Securities LimitedJoanne Lake0113 243 1619 Citigate Dewe RogersonFiona Tooley0121 455 8370 CHAIRMAN'S STATEMENT This has been another very successful year and I am very pleased to be able toreport on a further set of outstanding results that are, in terms of profit,earnings, return on assets and dividends, a record for the Group. We have continued to invest in all our business streams but in particular in theland promotion and development portfolios creating future profitableopportunities. We retain a nationwide focus, through eight regional offices, onland promotion and property development whilst taking a regional view in theNorth and Midlands to construction and plant hire activities. It is the in-depthlocal knowledge of the teams around the country that has enabled us to createopportunities and deliver shareholder value. The property market in general appears to remain robust. The residential housebuilding sector is forecast to grow, in both volume and value, and continues toconsolidate. The Barker Review indicates a new-build requirement of up to200,000 units per annum well into the future. In the commercial market weanticipate that investment yields are levelling out. Our focus, however, willremain on the higher returns offered by developing out our portfolio andretaining those assets offering the best opportunities for rental and capitalgrowth and recycling capital where the market offers better value. Theconstruction business saw a reasonable level of demand during 2006 but much ofthe work undertaken in winning contracts will pay dividends in 2007 throughhigher turnover. Within plant hire, we relocated two of our seven regionalcentres to larger, better situated premises and this inevitably had an impact onthe business performance in 2006. We now look forward to achieving a betterresult from this business in 2007. Results Turnover increased 41% to £142.3m (2005: £101.2m) after a significant increasein the value of land sales in the period. Profit before tax increased 35% to£40.8m (2005: £30.2m). Included within pre-tax profit our investment portfolioshowed a revaluation surplus of £3.0m (2005: £4.7m) and disposal profits were£1.4m (2005: £Nil). Basic earnings per share increased 27% to 99.2p (2005:78.2p). Net assets increased 24% to £152.2m (2005: £122.3m), representing anincrease, on a per share basis, of 25% to 584p (2005: 469p). Dividends These excellent results enable the continuation of our progressive dividendpolicy. The Directors recommend a final dividend of 16.6p per share which,together with the interim dividend of 5.4p paid in October 2006, make a totalfor the year of 22.0p, a 16% increase on the 19.0p paid for 2005. The finaldividend will be paid on 24 May 2007 to shareholders on the register on 11 May2007. Performance benchmarking and returns We achieved a Total Shareholder Return (TSR) in the period of £4.24 per share, a63% return on the opening price on 1 January 2006 of £6.73. TSR is calculatedas the increase in share price plus dividends per share. Total shareholdervalue, calculated as the increase in net asset value per share, plus dividendsper share, created in the year ended 31 December 2006 was 137p per share, a 29%return on opening net assets. To help shareholders understand the quality of theearnings stream that we are developing, these returns compare to an average TSRreturn of 35% on the FTSE Construction sector, 48% on the Real Estate sector and21% on the FTSE Small Cap Index. These sectors have been chosen as the mostappropriate benchmarks against which to monitor our Company. Directors and employees As I announced last year, Tony Cooper signalled his intention to retire duringthe year and on 1 October 2006 John Sutcliffe joined us as Tony's replacement asFinance Director and Company Secretary. John has extensive property industryexperience, having previously worked for Town Centre Securities PLC. I ampleased to say that Michael Gunston FRICS was appointed as a Non-executiveDirector on 1 December 2006. Michael retired in 2006 from the position of ChiefSurveyor to The British Land Company PLC after nearly 32 years with thatcompany. Michael's experience in asset management, investment and developmentwill be very beneficial to us in the future. These appointments, along with theretirement of David Boot and John Redgrave and John Brown's appointment, all ofwhich I covered in my statement last year, have been achieved seamlessly andbring the Board back to full strength to continue our successful development. Iwould like to take this opportunity to wish all three appointees well in theirnew roles whilst, at the same time, thanking the three retirees for theirinvaluable contribution to the Group over their combined careers with Henry Bootof some 86 years. On behalf of my fellow Directors, I would like to express my sincere thanks toall the Group's employees for their contribution towards achieving anotherrecord performance. It is their commitment, skill and effort that enable us toimprove upon our outstanding record of achievements and I look forward tochairing the team to further success in 2007. Bonus issue The Henry Boot PLC share price now consistently trades at over £10.00 and, as aresult, the directors are proposing a bonus issue of four ordinary shares forevery one held, to be approved at an Extraordinary General Meeting to be held onthe same day as the Annual General Meeting. A Circular will be sent toshareholders together with the Annual Report. We believe that the increase inthe number of shares in issue and the corresponding adjustment to the marketprice will increase the liquidity and marketability of the Company's ordinaryshares. The new bonus shares will rank pari-passu with the existing ordinaryshares, with the exception that they are ineligible for the final dividend of16.6p to be paid on 24 May 2007 for the year ended 31 December 2006, which ispayable on the ordinary share capital prior to the bonus issue. The bonus issuewill result in a transfer of £10.4m from distributable retained earnings toshare capital. REITS Legislation has now been passed which provides for a UK tax transparent propertyinvestment vehicle, a REIT. This form of investment vehicle has been a featureof other jurisdictions for some years now and its introduction in the UK iswelcome. The business activities within the Henry Boot Group are largely definedas trading within the REIT legislation and, therefore, a REIT is not currentlyan appropriate structure for the Group. Strategy The Group is focused on land management and promotion, property development,construction and plant hire activities. We recognise that the timing of profitsfrom land promotion and property development is uncertain, which can lead tovolatility in our income stream. As these activities create funds surplus totheir requirements we intend to invest in those assets we are developingourselves and which have the best growth potential. This will, when added to ourconstruction sector income streams, increase the proportion of core annuallyrecurring profits. Outlook I believe that the results we have achieved are justification of our strategy ofsubstantial, long-term investment in a strategic land portfolio, part pre-letdevelopment and the retention of those schemes we consider to have the bestprospects for rental and capital growth. Allied to this, we continue to see thebenefits of our construction, PFI and plant hire businesses in terms of returnon capital employed and cash generation. As we move into 2007 the Group remains very well positioned to continue tocapitalise on this broadly based portfolio of assets and opportunities. We havea land portfolio of the highest quality, which is steadily moving through theplanning process and an excellent range of property developments in progress.These opportunities allied, to our robust financial position, give me greatconfidence in our future prospects and the delivery of increasing value toshareholders. John S Reis21 March 2007 BUSINESS REVIEW A. OPERATIONS REVIEW PROPERTY Our property development and investment business activities again enjoyed asuccessful and profitable year. We invested £27m in the development of a numberof schemes during the year and when complete we intend to review each one asappropriate, in line with our stated policy of growing our investment portfolio. Investment property yields continued to harden throughout the year and thisresulted in a revaluation surplus of £3.0m (2005 £4.7m) arising at the year end.There is little doubt that average interest rates will be higher in 2007 and,whilst it is not anticipated that this will have a detrimental impact on yields,it is likely that they will consolidate around the current levels. Although we continued our policy of retaining developments as investments, wesold our M54 Telford Motorway Service Area, let to Welcome Break, for £13mrealising a profit of £0.8m and a revaluation surplus of £2.3m. We also tookprofit from the disposal of retail developments at Liverpool and Skegness. Construction work was largely completed by the year end on the retail scheme inAyr. Work continued through the year on our 220,000 sq.ft mixed-use scheme inNottingham and the 100,000 sq.ft mixed use re-development in Bromley.Development commenced mid-way through 2006 on our much-awaited M20 MotorwayService Area near Folkestone, and on a further phase of development at PrioryPark, Hull. Ayr Central Shopping Complex After two years of site preparation and construction work, this 220,000 sq.ftretail scheme along with its award-winning 495 space car park was completed inJune 2006 and was substantially let and trading prior to Christmas. Withretailers such as Debenhams, H&M, Next and Primark now attracting the public,strong interest in the remaining units is being actively progressed. The Mall, Bromley The Mall is a part redevelopment/part refurbishment of an existing shoppingcentre which will provide 100,000 sq.ft of retail and office accommodation.Following completion of phase one in 2005, work on the final phase took placethrough the year and will be completed in 2007. The retail space in this phasehas been taken by Sportsworld and the office accommodation is about to be fittedout with completion by mid-year. We plan to retain this asset within ourinvestment portfolio as it has good, long-term income and capital growthprospects. Markham Vale Business Park, M1 Markham Vale is a major regeneration of the ex-Markham Main Colliery site wherewe are working in partnership with Derbyshire County Council to create a 200-acre business park. Located almost in the centre of the country and adjacent tothe M1, it is ideally located and expected to be a major development project forthe foreseeable future. The agreement with Derbyshire County Council is nowunconditional and in early 2007 we drew down the first 60 acres on which tocommence development. Infrastructure works have already commenced and a new M1motorway junction 29A is scheduled to be open at the end of 2007. A wide rangeof properties is planned for the park, some of which are in the design phase andterms and conditions are being progressed with leading occupiers. We feel soconfident in this location that some industrial units will be built on aspeculative basis. Stop 24 Motorway Service Area, M20 Situated on Junction 11 of the M20, this new motorway service area, one of thelargest on the UK motorway network, will service traffic heading for the Channelports and tunnel. Construction commenced in mid 2006 and is programmed forcompletion and trading later in 2007. Contracts have already been exchanged forthe sale of the hotel and petrol station sites and tenants have been secured forthe retail and restaurant units within the 25,000 sq.ft amenity building. The Axis Mixed Use Scheme, Nottingham All aspects of this 220,000 sq.ft redevelopment scheme in Nottingham city centreprogressed satisfactorily with the main elements of the construction workcompleted by the early part of 2007. Fit-out is now in progress on the first52,000 sq.ft of offices and terms are agreed on the bulk of this space. There isalso strong interest in the remaining 22,000 sq.ft of the offices. All theretail space is fully let and the 80,000 sq.ft casino, taken by London ClubsInternational, is being fitted out and expected to be open in 2007. In addition to the key schemes noted above, we continue to have a growinginvestment in developments under construction with many being successfullyprogressed through the various stages of acquisition and development. New developments added to our portfolio included an existing 32,000 sq.ft towncentre retail scheme in Tamworth which we acquired for £6.0m with the medium-term intention of redeveloping and expanding it. We also purchased a 2.5-acre site in Bodmin with planning consent for 37,000sq.ft of retail warehouse development. A revised planning application to varythe scheme's layout has been submitted and it is proposed to commence work onsite in the second half of 2007. Plans for the development of 37,000 sq.ft of retail warehousing in Bromboroughprogressed with all necessary consents obtained. Work commenced on site in 2007on a phased construction programme which is expected to complete in spring 2008.The scheme has been pre-let in full to Magnet and Homebase. With detailed planning permission already secured and tenders now received,construction work will start in mid-2007 on the Ripon Gateway retail andbusiness park. Phase one will include 37,000 sq.ft of retail and 20,000 sq.ft ofindustrial space. Phase two will consist of a combination of design/build andspeculatively built industrial and office units. Outline planning consent was secured for our shopping and business park schemein Rotherham. The park will provide 100,000 sq.ft of retail accommodation, someof which is already pre-let to Wickes DIY, and a further seven acres foremployment use. We expect to start the construction phase of this project inlate 2007. Road infrastructure works at Priory Park, Hull, are currently under constructionto service a further 30 acres of our industrial park which sits to the side ofthe A63, linking Hull to the M62. Once completed, we intend developing a further60,000 sq.ft of industrial units on a phased basis, a 28,000 sq.ft joint venturedevelopment of office units and a number of owner occupied design and buildunits. In addition to these developments, we have concluded negotiations for aland sale on the site which will take place in 2007. Contracts for a 60,000 sq.ft Asda store on the Waterloo Square retail scheme inSouth Shields are unconditional and enabling works have started. The maincontract for construction of the store is likely to commence in late 2007 withcompletion in 2008. At The Square Shopping Centre in Beeston, we have agreed to exchange space toaccommodate the new Nottingham Tramway extension for an area currently in thecontrol of the council. This will permit the development of a 60,000 sq.ftscheme extension to provide at least 50% more space than is available atpresent. We expect to receive planning permission during 2007 so thatconstruction work can commence in 2008. Detailed planning permission has been granted for our retail and leisure schemeat Worksop. This will permit construction work to start on the 70,000 sq.ftleisure park and 60,000 sq.ft food store development with completion programmedfor late 2008. All the principal operators have been secured, including Tesco,KFC and Apollo Cinemas. LAND This was a record year, in terms of both sales and profit, for Hallam LandManagement Limited and real progress in planning was achieved on a significantnumber of land holdings. Key transactions in the year were at Bathgate,Kettering, Liverpool, Mansfield, Prestonpans, Sheffield, Stotfold and Syston,with all making a significant contribution to the result. The last few years have seen us pursue numerous land deals nationally on bothbrownfield and greenfield sites and this policy is now set to pay significantdividends as we see more sustainable urban extensions on greenfield land beingreleased for residential development. Although faced with the probableintroduction of the Government's Planning Gain Supplement (PGS) in 2009, webelieve that the scale of housing requirements will underpin the market wellinto the future. The Group has made representations to the Government urging itnot to introduce PGS, as we firmly believe it to be against its best interestsand its ambitions to bring forward an increasing supply of land for development. We are presently progressing significantly more opportunities and have more landin which we have a secured an interest, than was the case last year end. We nowown close to 1,450 acres out of a total holding of 6,500 acres. Syston, Leicestershire We moved towards concluding our long-term interest at Syston with the sale ofeight acres of land to a national housebuilder and a smaller sale to ourdevelopment partner during the year. Together these sales totalled £10.9m. Ourprogress with the land at Syston, some of which we bought in the mid-1970s, hasbeen most difficult at times. We have promoted the land jointly with a partnersince 1990 and it was not until 2004 that a Section 106 agreement was cleared onour application and planning permission was granted for our 340 dwelling scheme.Even then further planning conditions delayed the marketing of the site until2006. Stotfold, Bedfordshire The sale of our Stotfold site with permission for 650 dwellings was successfullyachieved. This brought about the conclusion to another long-term investment,which started with the acquisition of our first tranche of land under option in1994. Following the promotion of this and additional land through the Local PlanInquiry in 1998/9, we successfully defended the scheme against counter proposalsand its development was recommended in the Inspector's Report in 2001. Uponsubsequently submitting an outline planning application for 650 dwellings, wewere then delayed for a further three years by third party objections. Asuccessful outcome was eventually achieved with planning consent being grantedin 2006 and the site was sold to a consortium of national housebuilders inSeptember last year. Milton Keynes, Buckinghamshire We expect that planning proposals for our long-term land investments in theeastern expansion area of Milton Keynes will receive consent in 2007. We signedour first option agreement with local landowners in 1996 and expanded ourinterest through further options and purchases. The land progressed through the2000 Deposit Local Plan as a strategic reserve site for post-2011 development,to identification in 2003 as an expansion area for pre-2011 development and thento a recommendation in the 2004 Local Plan Inspector's Report that it be broughtforward as an allocation. Following this decision, we submitted a planningapplication for 2,500 dwellings, a district centre and three schools withsupporting infrastructure. The anticipated permission will permit land sales tocommence by the second half of the year. Bognor Regis, West Sussex Following an inquiry into the planning consent for the 700-dwelling site atBognor Regis, the Secretary of State confirmed a positive decision in November2006. The land is currently being marketed and should be sold in the first halfof 2007. A number of land purchases took place during the year in keeping with our on-going trading strategy. At Market Harborough we acquired a small piece of landthat, added to our existing holding, will enable us to bring forward our 23-acreemployment scheme. We also purchased a five and a half acre site at Bishopbriggsallocated for residential development in the East Dunbartonshire Local Plan. In addition, we acquired our first wind farm site under option at Easington, Co.Durham and obtained planning permission for a wind speed monitoring mast inOctober. The mast is now in place and we expect to submit a planning applicationfor the 180-acre wind farm in the near future. An amended planning application has been submitted for residential developmenton 18 acres in Ampthill, Bedfordshire. We are hopeful of a favourable result in2007 and to achieve a land sale later in the year. Outline planning consent isalso anticipated later this year for our 1,200-dwelling scheme at Biddenham,Bedford and we hope to bring the site through to sale in due course. If we aresuccessful with our planning application for residential development on a 34-acre site at Biggar, South Lanarkshire, this will enable us to effect a disposalduring 2008. We expect to agree a significant interest in land allocated for a scheme of upto 2,900 homes at Exeter. The necessary permissions and agreements areprogressing well, as are negotiations with the various landowners involved. Thefirst part disposals within this major site may occur as early as 2008, withothers following in future years. Further allocations are anticipated in thislocation and we intend to maintain a major interest as the new settlementexpands. There is increasing interest from retailers and fast food operators to locate toour district centre site at Rushpool Farm, Mansfield. We are now looking topromote the larger part of our land for residential development through to adetailed application in the near future. The land is capable of accommodatingover 300 dwellings. We have submitted a reserved matters application for our jointly-owned 90-acreemployment site at Penniment Farm, Mansfield and anticipate that the applicationwill go to committee with a recommendation for approval in the early part of2007. We await the completion of a Section 106 Agreement to enable us to dispose ofour 30% interest in an 84-acre site at Melksham, Wiltshire. It is anticipatedthat we will be in a position to achieve a sale later this year. We intend to submit a planning application early in 2007 for a first phase of187 dwellings on our site in Worcester. If matters progress smoothly, the salecould occur prior to the 2007 year end. Planning permission has been received to convert the farm house and outbuildingson our 53-acre Mill Farm site at Ashby-de-la-Zouch into eight dwellings and3,000 sq.ft of office accommodation and this element of our land holding iscurrently being marketed for sale. We will retain the rest of the site awaitinga residential development allocation in due course. With 92 acres of land in our ownership and 480 acres jointly optioned atKilmarnock, a Consultative Draft Local Plan has allocated an initial release of50 acres from each holding for residential development. Given this positivemove, we anticipate being in a position to sell some of these land interestslate in 2008. CONSTRUCTION Henry Boot Construction (UK) Limited continued to make good progress by meetingprofit expectation in what remained an extremely competitive market place whichimpacted on our level of activity. In line with the company's business plan, our performance again benefited fromthe development of partnership, negotiated and framework contracts. Sucharrangements accounted for an increased proportion of our workload for the yearas well as contributing to our future order book. Our Preferred Alliance Contractor arrangement with the National OffendersManagement Service advanced satisfactorily with work being undertaken on severalprisons and other major new projects should come on stream during 2007. This,together with the completion of Newark Police Station for Nottinghamshire PoliceAuthority, maintained the company's prominence in the 'secure' sector. At the same time, on-going framework agreements with Rotherham MetropolitanBorough, Derby City and Cheshire County Councils progressed with the completionof a number of educational construction projects. Completed contracts in the commercial sector included The Axis, a major 220,000sq.ft property redevelopment scheme in Nottingham, undertaken for Henry BootDevelopments. New projects commenced in the year included a garden centre and retail unitscheme at Barlborough, Sheffield for Dobbies Garden Centres PLC andrefurbishment works at Drakehouse Retail Park, Sheffield for Hammerson PropertyLimited. In addition to successfully carrying out an increasing number of smaller valuebuilding contracts and repeat civil engineering work in the industrial and watersectors, our General Works Division secured additional extended contractagreements with a growing core of major clients. The company's position as a major partnering contractor was strengthened withour selection by Rotherham 2010 Limited to help deliver its £272m Decent Homesprogramme to refurbish 22,500 houses over the next four years. We were also appointed as a partnering contractor on Sheffield City Council'sfour-year Decent Homes scheme, the largest of its type in the country, andimprovement works commenced on the refurbishment of 224 flats within two towerblocks for Hull City Council. National property company Places for People confirmed our four-year appointmentas a framework contractor for housing work in the North East region. Othernotable residential contract awards included the renovation of 225 homes forNorth East Derbyshire District Council, whilst the two-year refurbishment ofdwellings in the village of Creswell for Bolsover District Council was completedin early 2007. Within our service to clients, and as a Lloyds Quality and EnvironmentalApproved Contractor, we constantly review and update our procedures and policiesto ensure we adhere to best practice standards. Approved BREEAM environmentalassessments are being increasingly called for on contracts, and we are wellplaced to demonstrate our skill and experience in this specialist area. Inaddition, we were the construction sector winners in the prestigious Yorkshireand Humberside Business in the Environment Awards for the third year running. Health and safety is of paramount importance in all our operations and we againreduced the number of reportable incidents on our sites. Although pleased withthis achievement, and with our continuing accreditation under the demandingContractors Health and Safety Assessment Scheme, we vigorously strive to furtherimprove our record. As part of our commitment to accident prevention, our dedicated in-house safetyteam made some 230 visits to our construction sites during the year and on-siteand office-based safety training courses were held regularly. Our strategy remains focused towards delivering high levels of customer serviceand satisfaction whilst operating within identified sectors and geographicalregions of the construction market. The combination of our increasing number oflong-term framework agreements, repeat work for clients and improving newopportunities, is producing an encouraging forward order book. This will allowus to be more selective in the type of work we undertake and the clients we workfor and further reduce our exposure to operational risk. Road Link (A69) Holdings Limited Road Link is now in the 11th year of a 30-year PFI contract to operate andmaintain the A69 Trunk Road for the Highways Agency. Payments to Road Link arebased on the number of vehicles using the route, which comprises 53km of singlecarriageway and 30km of dual carriageway. In 2006, our maintenance programmeincluded the resurfacing of over 13-lane km and the refurbishment of threeconcrete bridges. We continue to believe that the planned maintenance programmewe have put in place is a very cost effective whole life solution. PLANT Competition within the plant hire industry remains strong and we believe the keyto our success is maintaining a broad range of modern plant to meet the needs ofour customers. At the same time it is crucial to ensure that we obtain asatisfactory return on these assets to enable us to achieve our target return onturnover. During 2006 we re-located our Derby and Wakefield hire centres to improved,larger premises, providing the opportunity to grow the product range, turnoverand profit into the future. Both moves were completed by the year end, and thetwo former sites are to be disposed of in 2007. All costs to date associatedwith the moves have been charged against profits in 2006. Following high levels of capital investment over the past two years, limitedinvestment was required within the plant and access equipment hire fleets.However, investment in power tools was concentrated on our new Leeds centre,which opened in early 2006, and on developing its range to meet increasingcustomer demand. We also continued to maintain a high standard of customerservice by proactively replacing items reaching the end of their useful lives.Continued strong demand for accommodation units highlighted this division forfurther investment. This was focused on anti-vandal office, storage and toiletunits, which maintained high levels of utilisation throughout the year. New operational and financial systems were introduced during 2006 to providebetter management information, particularly with respect to plant utilisationrates. Overall, a satisfactory trading performance was achieved in 2006 despitethe impact of the two re-locations and site development and we aim to capitaliseon these new opportunities in 2007. B. FINANCIAL REVIEW RESULTS Profit and loss Net revenue for the year was 41% higher than last year at £142.3m (2005:£101.2m) derived primarily from higher land sales. Profit from operationsincreased 38% to £41.9m (2005: £30.3m) after inclusion of the propertyrevaluation surplus of £3.0m (2005: £4.7m) and profit on the sale of investmentproperties of £1.4m (2005: £Nil). Administrative expenses were £2.4m higher at£11.4m (2005: £9.0m) primarily resulting from the investment in additionalheadcount and the under-recovery of overhead costs into contract work inprogress within the construction company. Profit before tax was 35% higher at£40.8m (2005: £30.2m). Comparing the segmental profit analysis shows that the Property and LandDevelopment profits increased by 40% to £38.6m (2005: £27.5m). Constructionprofits were stable at £7.6m (2005: £7.8m) and central costs slightly lower at£4.3m (2005: £5.0m). Basic earnings per share were 27% higher at 99.2p (2005: 78.2p). Total dividendpayable for the year rises 16% to 22.0p (2005: 19.0p) with dividend cover risingto 4.5 times (2005: 4.1 times). Financing and gearing Net interest costs increased to £1.1m (2005: £0.1m). Net interest cover,expressed as the ratio of profit from operations (excluding the valuationmovement on investment properties and disposal profits) to net interest was 34times. Although slightly higher than last year, the modest charge reflects theGroup's prudent financial position. No interest, incurred during the year or theprevious year, has been capitalised into development costs. It is anticipatedthat interest charges will increase in 2007 as we fund the development portfolioin progress, towards completion. Year-end net borrowings were 21% lower at £15.9m (2005: £20.0m) following a yearof very strong operational cash inflows offset by investment in the developmentprogramme and land and property acquisitions. Gearing, on net assets of £152.2mwas 10% (2005: net assets £122.3m; gearing 16%). Of these borrowings, £9.9m(2005: £11.0m) are on fixed rate, term commitments until March 2015, theremainder are at floating rates or short-term fixed commitments. The need foralternative, longer-term funding is constantly under review. However, it is notcurrently considered necessary given the strong operational cash inflowsgenerated across the Group. The Group has agreed facilities in place of £75m. Taxation The tax charge for the year is £14.0m (2005: £8.7m) representing a charge of34.3% (2005: 28.7%). The higher percentage charge relates in part toconstruction expenses not allowable for tax. The deferred tax asset has reducedby £3.1m to £9.9m primarily resulting from the reduction in the pension schemedeficit. Deferred tax liabilities have also decreased after the sale of Telfordduring the year realised part of the provision. Cash flow A net cash inflow of £4.2m during the year reduced net borrowings to £15.9m. Operating cash inflow was £26.2m (2005: cash outflow £8.8m) after the completionof large land sales at Stotfold, Syston and Prestonpans and significantly lowernet investment in working capital of £4.0m (2005: £34.0m). Taxation paymentsincreased to £11.0m (2005: £4.8m) arising from timing differences between theincome statement charge and payments on account. Property investments were£32.2m (2005: £17.7m) largely in relation to the ongoing development portfolioand an acquisition of a retail investment with future redevelopment potential inTamworth. These outflows were offset by fixed asset disposals of £16.3m (2005:£2.1m) as we took advantage of strong demand and sold Telford motorway servicearea for £13.0m. Dividends paid, including those to minorities, totalled £6.1m(2005: £5.8m). Balance sheet The policy of progressive investment in the development portfolio underlies the£31.3m increase in property, plant and equipment. It is anticipated that thisoutlay will continue during 2007 as we complete developments at Bromley,Nottingham and Saltwood and commence sites at Stoke-on-Trent, Markham Vale andRotherham. The aforementioned sale of Telford reduced investment property to£30.1m (2005: £40.6m). The total investment in non-current assets stood at£143.3m (2005: £128.9m). Net current assets increased £12.4m to £68.6m (2005:£56.2m) largely due to the increase in current cash balances, though non-currentborrowings increased £8.3m to offset this change. Pension deficit The annual valuation of the defined benefit pension scheme resulted in a reduceddeficit of £25.8m in 2006 (2005: £36.8m). The deferred tax asset associated withthis deficit has also fallen from £11.0m to £7.7m. Adding back this net deficitof £18.1m (2005: £25.8m) to net assets, the 2006 deficit equates to 10.6% of netassets (2005: 17.4%). The improvement in the position is largely down to astrong performance from the scheme's investments and a slightly higher, long-term interest rate assumption. The scheme actuaries are currently undertakingthe tri-annual valuation and a further report to shareholders will be made onthe results after completion. The defined benefit scheme is closed to newentrants, with all new employees being offered a defined contribution scheme. Group Income Statement 2006 2005for the year ended 31 December 2006 £'000 £'000 Revenue 142,284 101,188 Cost of sales (91,496) (64,348)Gross profit 50,788 36,840Other income 27 54Administrative expenses (11,479) (9,042)Pension expenses (1,855) (2,283) 37,481 25,569Increase in fair value of investment properties 3,032 4,724Profit on sale of investment property 1,381 -Profit from operations 41,894 30,293Investment income 641 1,311Finance costs (1,740) (1,448)Profit before tax 40,795 30,156 Taxation (14,008) (8,652)Profit for the year from continuing operations 26,787 21,504Attributable to:Equity holders of the parent 25,415 20,021Minority interest 1,372 1,483 26,787 21,504Basic earnings per ordinary share 99.2p 78.2p Diluted earnings per ordinary share 97.4p 76.8p Dividend 22.0p 19.0p Group Balance Sheet 2006 2005at 31 December 2006 £'000 £'000 ASSETS Non-current assets Goodwill 3,595 3,799Property, plant and equipment 99,595 68,304Investment property 30,130 40,566Trade and other receivables - 3,244Deferred tax assets 9,941 13,012 143,261 128,925 Current assets Inventories 94,736 88,156Trade and other receivables 17,592 19,135Cash and cash equivalents 15,044 3,458 127,372 110,749 LIABILITIES Current liabilities Trade and other payables 31,830 33,586Current tax liability 11,739 7,758Borrowings 2,801 3,634Provisions 12,401 9,578 58,771 54,556Net current assets 68,601 56,193 Non-current liabilities Borrowings 28,141 19,882Employee benefits 25,813 36,799Deferred tax liabilities 5,585 6,000Provisions 144 184 59,683 62,865Net assets 152,179 122,253 SHAREHOLDERS' EQUITY Share capital 3,005 3,005Revaluation reserve 2,908 2,916Retained earnings 142,843 113,775Other reserves 2,610 2,104Cost of shares held by ESOP trust (740) (795)Equity shareholders' funds 150,626 121,005Equity minority interests 1,553 1,248TOTAL EQUITY 152,179 122,253 Group Statement of Changes in Equity 2006 2005at 31 December 2006 £'000 £'000 Profit for the year 25,415 20,021Equity dividends (5,016) (4,343)Revaluation of group occupied property 140 (285)Deferred tax on property revaluations (28) -Actuarial gain (loss) on defined benefit pension scheme 11,918 (3,315)Deferred tax on actuarial (gain) loss (3,575) 995Movement in fair value of cash flow hedges 506 (12)Share based payments 55 54Adjustments re properties transferred to stock - 1Arising on employee share schemes 206 64Adjustment to deferred tax recognised in equity - (131)Movement in equity 29,621 13,049Equity at 1 January 121,005 107,956Equity at 31 December 150,626 121,005 Group Cash Flow Statement 2006 2005for the year ended 31 December 2006 £'000 £'000 Cash flows from operating activities Profit from operations 41,894 30,293Adjustments for non-cash items:Depreciation of property, plant and equipment 4,701 4,635Goodwill impairment 204 203Revaluation increase in investment properties (3,032) (4,724)Gain on disposal of property, plant and equipment (263) (159)Gain on disposal of investment properties (1,381) -Operating cash flows before movements in working capital 42,123 30,248Increase in inventories (11,355) (26,523)Decrease (increase) in receivables 4,847 (12,017)Increase in payables 2,532 4,500Cash generated from operations 38,147 (3,792)Interest received 636 1,312Interest paid (1,599) (1,494)Interest paid on finance leases - (6)Taxation (10,976) (4,827)Net cash from operating activities 26,208 (8,807) Cash flows from investing activities Sale of investments - 1Purchase of property, plant and equipment (32,228) (17,679)Proceeds on disposal of property, plant and equipment 1,391 2,053Proceeds on disposal of investment properties 14,872 -Cash flows from investing activities (15,965) (15,625) Cash flows from financing activities Dividends paid:Ordinary shares (4,995) (4,322)Minorities (1,067) (1,455)Preference (21) (21)Repayments of obligations under finance leases - (446)Cash flows from financing activities (6,083) (6,244)Net increase (decrease) in cash and cash equivalents 4,160 (30,676)Opening net (debt) funds (20,058) 10,172Cash outflow from decrease in lease financing - 446Closing net debt (15,898) (20,058) NOTES 1. Business and geographical segments Year ended 31 December 2006 Year ended 31 December 2005 Inter- Inter- External segment External segment sales sales Total sales sales Total £'000 £'000 £'000 £'000 £'000 £'000RevenueProperty and landdevelopment 80,938 241 81,179 43,115 241 43,356Construction 61,285 4,950 66,235 57,805 4,389 62,194Group overheads andother 61 528 589 268 464 732 142,284 5,719 148,003 101,188 5,094 106,282Eliminations - (5,719) (5,719) - (5,094) (5,094) 142,284 - 142,284 101,188 - 101,188 2006 2005 Total TotalResult £'000 £'000Property and land development 38,586 27,468Construction 7,610 7,833Group overheads and other (4,302) (5,008)Segment result 41,894 30,293Investment income 641 1,311Finance costs (1,740) (1,448)Profit before tax 40,795 30,156Taxation (14,008) (8,652)Profit for the year 26,787 21,504 For management purposes, the group is currently organised into three businesssegments: Property and land development, Construction and Group overheads andother. As operations are carried out entirely within the UK, there is nosecondary segmental information. Inter segmental pricing is done on an armslength open market basis. 2. Dividends 2006 2005 £'000 £'000Amounts recognised as distributions to equity holders in year:Preference dividend on cumulative preference shares 21 21Final dividend for the year ended 31 December 2005 of 14.1p per share(2004: 12.0p) 3,612 3,069Interim dividend for the year ended 31 December 2006 of 5.4p per share(2005: 4.9p) 1,383 1,253 5,016 4,343 The proposed final dividend for the year ended 31 December 2006 of 16.6p pershare (2005: 14.1p) makes a total dividend for the year of 22.0p (2005: 19.0p).The proposed final dividend is subject to approval by shareholders at the AnnualGeneral Meeting and has not been included as a liability in these financialstatements. The total estimated dividend to be paid is £4,251,000. The finaldividend will be paid on 24 May 2007, with a record date of 11 May 2007. 3. The financial information above has been extracted from the group'sstatutory accounts for the years ended 31 December 2005 and 2006. Statutoryaccounts for the year ended 31 December 2005 have been delivered, and those forthe year ended 31 December 2006 will be delivered, to the Registrar ofCompanies. The auditors of the Company have given unqualified reports on thoseaccounts and such reports did not contain a statement under Section 237(2) or(3) of the Companies Act 1985. 4. The financial statements were approved by the Board of Directors on 20 March 2007 and authorised for issue. 5. The Annual Report 2006 and the Circular referred to in the Chairman'sStatement are to be published and sent to shareholders on 12 April 2007. Copieswill be available from The Company Secretary, Henry Boot PLC, Banner Cross Hall,Sheffield, S11 9PD and on the Company's website www.henryboot.co.uk. 6. The financial information has been prepared using accounting policiesconsistent with those adopted by the Group in its financial statements for theyear ended 31 December 2005. 7. The Annual General Meeting of the Company and the Extraordinary GeneralMeeting are to be held at the Sheffield Park Hotel, Chesterfield Road South,Sheffield, S8 8BW on Thursday 17 May 2007 with the Annual General Meetingcommencing at 11.30 a.m. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Henry Boot