A 68% rise in five years and strong profits to Boot!
PROPERTY firm Henry Boot was founded in Yorkshire in 1886. Listed on the Stock Exchange in 1920, half the shares are still owned by Henry Boot’s descendants and the company was run by a member of the Boot family until January this year.
Then Jamie Boot, who had been managing director for 30 years, stepped up to the chairman’s role, appointing John Sutcliffe as chief executive – the first nonfamily member to take charge of the daily running of the business.
Being a family business has encouraged Henry Boot to take a long-term approach, and Sutcliffe intends to continue in that vein, as the strategy has served investors well.
Midas recommended the shares in April 2011, when they were 121p.
Today they are 202¾p – a rise of 68 per cent, accompanied by a steady stream of dividend payments. But there is considerably more to come.
Henry Boot’s business is divided into three parts – strategic land, property development and construction. The first involves buying land, generally on the edge of towns and cities, gaining planning permission to build homes, and selling the sites on to housebuilders.
Gaining planning permission can take years, but Boot has developed a real expertise in the field, completing six sales in the first half of this year with another three lined up for between now and December.
Sites range from small plots acquired from farmers to a third share in the new town of Cranbrook, Devon, where 3,000 homes will eventually be built.
Boot’s development arm is doing well too. Highprofile projects include the former Terry’s Chocolate Factory in York; the conversion of Leeds Girls’ High School into flats and houses; and a £333million new exhibition and conference centre for Aberdeen City Council, announced last week.
The construction arm is making good progress as well and has already secured more than half the contracts it expected to win for next year, ahead of its own forecasts.
Last week, Sutcliffe unveiled better than expected half-year results, with pre-tax profit up 49 per cent to £20.8million and a 9 per cent increase in the dividend to 2.5p for the six months to June 30.
The figures benefited from those six land sales, but full-year figures are likely to show continued progress, with brokers pencilling in profits of £37.5million, up 16 per cent on 2015. The total dividend is expected to rise 7 per cent to 6.5p and further gains are expected in 2017.
Midas verdict: Henry Boot is a conservatively run, long-term business. The shares were hit immediately after the Brexit vote, as investors worried about the outlook for the property sector. However, they have since bounced back and should continue to gain ground. Shareholders who bought in 2011 should hold. New investors could also give these shares a closer look.