May 2021 Investor Forum

Shakespeare said it first. What someone or something is called or labelled is arbitrary compared with their or its intrinsic qualities; this is especially true of sobriquets. Henry Boot has been monikered a Luddite because of its mix of businesses. Unfashionable, maybe, but intrinsically valuable, singularly and in concert. These include property development, land promotion, construction, plant hire, housing and a dash of PFI. Having traded for more than 100 years, Henry Boot is also old enough to know better; and it does. Not just in mix but in terms of blooming financial metrics; and it pays dividends through thick and thin. “A rose by any other name would smell as sweet”.

• Strategy: The group possesses a high-quality strategic land portfolio, an enviable reputation in the property development market, an expanding, jointly-owned housebuilding business plus a first-class construction business, Banner Plant ,and it enjoys strong cashflow from its PFI unit: Road Link (A69) Ltd.
• Metrics: Boot generates a double-digit RoCE in a normal year, turns its capital at least once and sports a Quick Ratio above 1.0 year after year; and no-one can remember when it did not pay an annual dividend. It has also had a new CEO since January 2020 in Tim Roberts, a former Main Board Director of British Land.
• Valuation: After a COVID-19-impacted-2020, the current year is one of recovery; and hence a PER in the mid-teens. But for fiscal 2022 and 2023, the valuation is only just in double digits, with a yield nudging 3%. “Our balance sheet remains rock solid” and there are “encouraging signs of recovery in our key markets”.
• Risks: There’s only one really: will the tortuous path of COVID-19 de-rail the international economic and construction recovery? Right now, the smart money is on 5%-7% growth in UK GDP this year and next. Plus, Experian talks of double-digit growth in construction this year, followed by 3% or 4% p.a.
• Investment summary: Henry has been around the track a bit. It has also shown terrific dynamism. Luddite it is not – either original or neo. The group possesses a high-quality strategic portfolio, an enviable reputation and polished metrics. And, it has strength in diversity, fresh leadership and budding recognition.