Henry Boot's 2024 Earnings: EPS Surprise Amid Revenue Slump

Henry Boot (LON:BOOT) has just released its full-year 2024 earnings, and the results are a mixed bag. While the company managed to beat earnings per share (EPS) expectations by 14%, revenue fell short by 15%. This discrepancy highlights a challenging year for the UK-based property development and construction firm, but there are also signs of resilience and strategic adjustments that could pave the way for future growth.

Key Financial Results

- Revenue: UK£328.4 million, down 8.6% from FY 2023.
- Net Income: UK£23.3 million, down 11% from FY 2023.
- Profit Margin: 7.1%, down from 7.3% in FY 2023.
- EPS: UK£0.17, down from UK£0.20 in FY 2023.

Revenue Miss and EPS Beat

Henry Boot's revenue of UK£328.4 million for FY 2024 represents an 8.6% decline from the previous year. This drop was driven by reduced turnover in the construction segment, although it was partially offset by increased sales from Hallam Land, the company's land promotion business. Despite this revenue shortfall, Henry Boot managed to exceed EPS expectations by 14%, a testament to the company's cost management strategies and operational efficiencies.

Strategic Adjustments

To address the revenue decline and position itself for future growth, Henry Boot has implemented several strategic initiatives:

1. Origin Joint Venture: The company has launched the Origin joint venture, which aims to accelerate the delivery of high-quality industrial and logistics (I&L) development schemes. This venture has the potential to deliver approximately £1 billion worth of schemes over the next seven years, significantly boosting revenue and market presence.

2. Stonebridge Homes Acquisition: Henry Boot has agreed to take full ownership of Stonebridge Homes, a premium regional housebuilder. This acquisition is part of the company's strategy to increase its output of high-quality homes, which is expected to contribute to future revenue growth. Stonebridge Homes completed 270 homes in FY 2024, an 8% increase from the previous year.

3. Hallam Land Expansion: The company has increased the headcount at Hallam Land to submit more planning applications and grow sales, taking advantage of a supportive planning environment. This move is expected to enhance the company's land promotion activities and drive future revenue growth.

Cost Management and Operational Efficiencies

Henry Boot's ability to beat EPS expectations despite lower revenue can be attributed to several cost management strategies and operational efficiencies:

1. Cost of Goods Sold: The company has focused on reducing the cost of goods sold as a percentage of sales. In 2023, this cost increased from 76.10% to 78.64%, contributing to the falling net income despite rising revenues. This indicates that Henry Boot has been managing costs more effectively to maintain profitability.

2. Investment in Strategic Land and WIP: Henry Boot has increased its investment in strategic land and work in progress (WIP), which has helped in improving operational efficiencies. The company's inventories increased by £35.3 million, reflecting this investment.

3. Working Capital Management: The company has been proactive in managing its working capital. Henry Boot reduced other working capital by £47.4 million, driven by cash proceeds received from deferred land sales. This has helped in optimizing the company's cash flow and reducing its net debt to £62.7 million, which is within the optimal range of 10-20%.

Outlook

Looking ahead, Henry Boot is forecasting revenue growth of 6.4% per annum on average during the next three years, compared to a 7.0% growth forecast for the Consumer Durables industry in the United Kingdom. The company remains confident of achieving returns within its 10% to 15% medium-term target range, despite the challenging start to the year.



Conclusion

Henry Boot's full-year 2024 earnings report is a tale of two halves. While the company faced a significant revenue decline, it managed to outperform EPS expectations through effective cost management and operational efficiencies. With strategic initiatives like the Origin joint venture, the acquisition of Stonebridge Homes, and the expansion of Hallam Land, Henry Boot is positioning itself for future growth. Investors should keep an eye on these developments as the company navigates the challenges ahead.