Henry Boot Share Discussion Threads

[jonwig] 30/9/2005 09:52

IC comment on results includes broker update:

House broker Williams de Broe increased its full year pretax profit forecasts from £17m to £17.7m, against £15.9m in 2004, giving eps of 46p.

And the conclusion:

Considering the solid growth prospects in property development, on a forward rating of 13, the shares look good value.

[jonwig] 25/9/2005 07:25

westcountryboy, good morning.

Nor have I got my head around IFRS. These posts are forcing me to do some thinking which I might not have bothered with!

The situation is complicated by the fact that the 'FY2004' column in the interim figures (restated for IFRS) doesn't quite tie-up with the figures in the explanatory document - - so more work to be done!

Shares Magazine this week has a (rather unhelpful) article on IFRS. This bit at the end though might be a warning:

Finally, Baird's Iain Daly believes that
the introduction of IFRS will result in
analysts and institutional investors changing
their models to take into account the extra
information available, which means it will take
them longer to make investment decisions.
That poses a risk to private investors –
particularly those who buy stocks on the back
of results.
Baird explains: 'The informed risk time is
going to widen as a result of IFRS – during the
interim period between the results being
announced and analysts/institutions drawing
up their conclusions, there is more potential
for volatility. That means private investors
who traditionally buy or sell on the back of
results may find themselves in a bit of trouble
doing that.'

[westcountryboy] 24/9/2005 22:58

Hi jonwig

Thanks for your very clear explanation. I still have not got my head round IFRS so I had not grasped the effect of the pension liability on NAV. I now follow all your points.

I agree that it's not clear how best to value BHY. I would just point out that in 2004 construction supplied 1/3 of the total pre-tax profit. If that equates to 1/3 of eps then that is 14p, so applying a PE of 10 and adding to the NAV would get us near the current price. However this seems dubious in that presumably quite a lot of the assets are in the construction arm! Still, you could discount the pension liability by taking the old NAV of 502p - and why not, since we all used to value BHY this way. In that case you are only adding 80p or so for construction which doesn't seem unreasonable.

I would bet that NAV rather than eps will continue to be the primary measure for valuing any property-related company.

[jonwig] 24/9/2005 17:21

Hello Dave.

The sale of the housebuilding part was mentioned in the 2002 Annual Report, and completed pretty quickly (to Wilson-Bowden, I think) during 2003.
up to then BHY tended to be valued along with the housebuilding and/or general construction sector (ie. low P/E) despite having grown eps and dividends for upteen years on the trot.
The sale of housebuilding prompted the FT (I think) to suggest it should be better-placed in the property sector, and nav calculations applied.

Certainly the company is big in property development and trading: out-of-town retail and industrial parks, etc. where it acts as both property developer and constructor.
It also seems to make a bit of money from trading land banks: presumably a safer option than building on them!

The company itself would probably like to see itself as being in the real-estate sector:

A strategic move during the early part of the year to retain some of our schemes for future rental and capital growth saw a number of developments move into our property portfolio, resulting in an increase in retained rentals. Overall, investment yields have remained keen and, with the possible introduction of real estate investment trusts (REITs) in the near future, the general consensus is that the sector should remain strong.

(Interim Report.) That's all 'property-speak'.

At this halfway stage, property development was 41% of turnover but 70% of pretax operating profits.

All this suggests that we have a property developer and trader with a construction arm to it.
Property shares seem to be priced at a small premium to nav at present - possibly anticipating conversion to REITs. (I wonder if the Chancellor's need for a big 'tax fix' will encourage him to sign up REITs pretty soon?)

So assuming a 10% premium to nav gives fair value at 470p, plus then the earnings stream generated by construction.

That starts to make the shares look fully-valued at ~600p, and I notice the broker forecast is for eps of 43.2p for the year, giving a forward P/E of ~14times. Again, high for a pure construction company.

So there is nothing obviously 'cheap' about the rating, however you look at it.
I certainly wouldn't be a buyer at the current level (I've reduced my holding over the years) but the company is delivering me a strongly rising income (around +10% pa). It's also very skilful at what it does and is highly regarded in my neck of the woods (Yorks, Midlands) which helps it deserve the premium.

Regards,
John

[thecornishman] 24/9/2005 13:31

Greetings!

Interesting analysis of the assets position - thanks! I had been too lazy to do anything on it myself as of yet, but this issue ties in with something I have been wondering about, namely what seems to be the most realistic way of valuing this company since the housebuilding division got flogged off?

Previously, discount to NAV seemed a reaonable way to do it, but I wonder now whether with the discount having disappeared and underlying earnings growth apparently so strong, a low P/E to growth mechanism isn't more appropriate. One thing seems clear, if earnings continue to power ahead and NAV rises more slowly (which seems a reasonable assumption to me) then the discount to NAV and P/E approaches to valuation are going to give very different 'fair value' amounts. But which will be more accurate/profitable?

Would welcome any input,

Very best

Dave

[jonwig] 24/9/2005 09:07

Hi again, westcountryboy.

FY 2004 total assets under GAAP were £132.4m, ie. 508p/sh. The share price was ~420p, and therefore at a substantial discount.
You'll notice the share price was strong in early 2005, and by the time results were announced, this discount had substantially closed.
I seem to remember properties in general were strong before the Budget -expecting announcement of REITs...though I'm not sure how that would affect BHY.

Total assets restated under GAAP were £109.2m, ie. 419p/sh. The main contributor to the shortfall was a pension deficit of £22.7m. [Annual report 2004, page 40]. By the way, the final salary scheme is closed to new members.

At the interim 2005 stage, total assets (IFRS) were £110.9m, ie. 426p/sh.

I'm assuming 26.05m shares in issue.

Nothing has actually happened to the assets; the pension deficit was 'always there', and anyone doing asset calculations would have adjusted for it.

NB. The company website has the relevant documents: annual report and IFRS conversion.

[jonwig] 23/9/2005 18:52

westcountryboy,

hello,

these are the shareholders funds (ie. total assets) restated under IFRS.

At FY 2004 assets were £132.4m under GAAP, £109.2m under IFRS according to a recent RNS.

I'll get my stuff together over the weekend and re-post. I aren't confident enough at the moment to give you an answer!

Regards,
John

[westcountryboy] 23/9/2005 18:17

Jonwig - these are just non-current assets, aren't they? Total assets are £214.4m, up from £212.2m in Dec but only £178m a year ago under the old FRS accounts. I am a bit confused by this revaluation, which on the face of it puts Boot at a discount to net assets again. Do other agree?

[jonwig] 23/9/2005 08:49

Net assets (restated under IFRS) increased from £109.176m (FY04) to £110,921m (H105) - ie. 426p/sh, using 26.05m shares in issue.

[jonwig] 23/9/2005 06:33

Rare press comment (Yorkshire Post) - mainly factual restatement:

[jonwig] 21/9/2005 07:20

An excellent set of interim results with profits sharply ahead (stripping out the IFRS-based property revaluation last year).

eps up from 11p/sh to 16p/sh (adjusted). Annualised PE around 10.

[jonwig] 03/6/2005 17:34

New thread, will add to the intros when time allows:

[jonwig] 03/6/2005 17:33

Today's strong rise (and see the whole chart!) should be celebrated by a new thread, the last being titled "Why no BB?".

[jonwig] 03/6/2005 17:31

Henry Boot, formed in 1886 and one of the longest established property and construction organisations in the UK, is a Stock Exchange listed company.

The group specialises on a focused range of activities, with operations including property development (Henry Boot Developments Limited), land management (Hallam Land Management Limited), construction (Henry Boot Construction (UK) Limited) and plant hire Banner Plant Limited).



CALENDAR

H1 :...........30 June
H1 results: ...21 Sept
H1 div....4.9p (4.4p), xd 12 Oct, pay 27 Oct

[jonwig] 03/6/2005 11:08

gwagstaffe, hi.

Yes, I've held them for years (bought about 175p) but unfortunately have reduced my holding as they appreciated.

I suppose I joined the existing BB to post, but agree it needs a 'proper' one with charts, links, etc. Will look into it at weekend.

John

[gwagstaffe] 03/6/2005 10:49

Why no BB ??

I know this company very well as i work 4 em !

Steady growth and continued increased profits every year !!!

[jonwig] 06/4/2005 07:42

Another excellent set of fy results - see link above.
Absolutely no bb interest in this one, of course.
It's a firm buy, hold and forget company. I've held it for years and wish I hadn't reduced my holding as its value grew.

[jonwig] 22/9/2004 09:48

Today's results well-received, with another small rise in the share price on top of the recent run-up.
You mention a rather high PE for the sector. The strong history of rising eps and divis (10% more today) suggests a premium is deserved.
Also BHY is now in part a Property Play, though the discount to assets is quite narrow.

[gsands] 21/9/2004 18:58

Been looking a these tonight.

A bit of a plodder but seems a stolworthy kind of oufit which runs itself pretty well.

FY (dec 04) EPS predicted to be around 36.6p according to FT.com.

At a shareprice today of 420p that is a PER of 11.5 - rather high for this sector.

However I note the 'Increased Shareholding in Road Link (A69) Holdings Limited' announcement on 1st Sept and this has presumably resulted in some increased profitability for the company - hence the steep shareprice rise.

Results out tomorrow should put some meat on the bones.

[jonwig] 14/9/2004 07:49

Yesterday's rise of over 20p with results due soon may indicate something afoot. I have hopes that some money may be returned to shareholders. I know they run a very progressive dividend policy.
Amazing, to me, how little interest there is in this stock - one of the most reliable performers in the market.
Anyone out there?

[jonwig] 13/2/2004 13:06

Is BHY more a Property sector stock nowadays, which might account for the narrowing discount to its NAV? Come to think of it, might it want REIT status, as a lot of Property companies allegedly do? I've held this for years and am amazed at how often press comment suggests the share should be avoided, following good results.

[ydderf] 21/10/2003 13:05

always a good signal......

[ydderf] 17/10/2003 19:59

the MASTER is in!