Henry Boot is one of property’s old-timers; the 135-year-old developer built Pinewood Studios in 1936 and helped rebuild French villages after the First World War. It was the first quoted housebuilder when it listed in London in 1919. The Boot family retains a 46 per cent stake, but the Sheffield-based firm is now less well known than other listed developers.
Yet its shares have wobbled enough to merit a look. Henry Boot has lost 31 per cent of its value over the last 12 months, down to £2.33 today. The hikes in interest rates triggered an exit from UK property, and with around half its profits coming from land sales that leave it exposed to the fortunes of the housing market, its prospects appear unpredictable.
But the foundations are strong. The conservatively-run firm has a diverse land bank and a strong balance sheet: £48 million debt and a 12 per cent gearing. Last month, Boot posted a 48 per cent rise in revenues for the year to December, which stood at £341 million, while pre-tax profit rose by almost a third to £46 million — despite Boot’s investment property portfolio having £11 million docked from its valuation.
This year will not be smooth. Although chief executive Tim Roberts, who joined from British Land in 2020, has hailed “early encouraging indicators” for buying land and signs of a thawing in the industrial and build-to-rent sectors, both housebuilders and commercial developers point to lower completions in 2023.
Broker Panmure Gordon expects Boot’s property development arm to report a 20 per cent fall in operating profit in 2023. Christen Hjorth, at stockbroker Numis, said: “Like any cyclical company exposed to construction, there’s a degree of uncertainty, but the valuation is attractive.
“The firm now trades at a price to earnings ratio of 13 for 2024, and at almost a third discount to its book value. And that’s with Boot valuing its development land [which it sells to housebuilders once it has pushed it through the planning process] at cost rather than fair value. While the macroeconomic concerns mean we expect things to get tougher in 2023, Henry Boot’s valuation looks appealing.”
And the tough planning environment could work in Boot’s favour. “It is known for [its] success at getting sites through the planning process,” Hjorth added.
The Boot family stake has ensured slow but steady growth and the shares have generated an average 10.5 per cent annual return over the past 20 years, in contrast to the FTSE All-Share’s 7.9 per cent. Despite the cyclical tolls of construction and housing, that record looks secure: buy.
