Henry Boot Streamlines Operations with Henry Boot Construction Sale

Henry Boot PLC (LON: BOOT) is set to sharpen its strategic focus through the sale of its Henry Boot Construction (HBC) division to PWS Construction Limited (PWS), a company formed by the HBC management team.

The transaction, structured as a management buyout (MBO), aims to simplify the group's structure and reduce its overall risk profile, with an initial consideration of £4.0 million.

The sale price is funded by a vendor loan note issued by Henry Boot, with potential for additional payments based on HBC's future performance. Markets reacted positively to the announcement, viewing it as a decisive step towards concentrating on higher-growth areas.

This move aligns with Henry Boot's strategic priorities of high-quality land, prime property development, and premium homes.

HBC's contribution to group profits has been relatively small, and the company believes this divestiture will enhance long-term growth prospects by focusing on activities with greater synergy. Simplifying the group's structure is expected to make the investment case more compelling.

During the year ended December 31, 2024, HBC generated £49.7 million in revenue but reported an operating loss of £2.7 million. Following restructuring and a new management team, the business is projected to break even for FY25, with 94% of its order book already secured.

Under PWS ownership, HBC will operate as HBC Construction Group, giving the management team increased autonomy to diversify and expand its order book. The vendor loan note has a five-year term, with interest at 2.1% over the Bank of England base rate. Henry Boot will provide short-term transitional support and operational oversight through board representation until the loan is repaid.

Additional consideration may be payable to Henry Boot if PWS sells HBC within eight years of completion, or if HBC achieves a net margin exceeding 3.0% over the next five years. The initial carrying amount of the vendor loan note is anticipated to be less than £4.0 million, reflecting accounting policies regarding future cash flow uncertainty.

CEO Tim Roberts stated, “The sale of HBC which we are announcing today allows Henry Boot to further its strategic focus on high quality land, prime property development and premium homes. It also enhances prospects for long term growth with a more focussed portfolio of activities with greater synergies. While HBC's contribution to the group is relatively small, it is a well established business with a strong track record of delivery and an excellent management team and we wish them well for the future.”

The transaction is expected to complete around year-end 2025, and the excess of the vendor loan note's carrying value above the net assets disposed of will be reflected as a profit on disposal.