Henry Boot PLC (0KH.SG) Q2 FY2025 Earnings Call Transcript & Summary

Morning, everybody. In a slightly different setting this morning, which is all very, very relaxed and everybody is having croissants and bacon sandwiches and looking very, very smiley, so it's good to see you all. So to the interim results, it's going to be the normal running order. I'll start off with an introduction and a review of performance. Then you've got Darren, our CFO, who's going to do the Finance and the Land Promotion, then I'll come back and talk about Development and Stonebridge, and I'll finish off with outlook. So first of all, I just want to say a few words of introduction. Our focus is on high-quality land, prime developments and premium homes and that's helped us to achieve total land and property sales of nearly GBP 160 million or our share, GBP 100 million. This is a time when markets are uncertain, and I think it shows the resilience of demand in property -- prime property. I'm pleased to say we've also seen a significantly better planning environment since the changes to the NPPF at the beginning of the year. And you'll remember, we anticipated this, and we increased resources into Hallam last year, and that's already bearing fruit in that we've secured a fourfold increase in consented plots, and Darren will talk you through that. At HBD, planning has also been secured for the government-backed Golden Valley development, a GBP 1 billion mixed-use campus. And then on our industrial-focused joint venture, Origin, it's performing well. And because it's performing well, it's set to grow in the second half. Together with the increase in Stonebridge's land bank, we've got ample opportunity within the portfolio to hit all of our targets. And you'll also see this morning, we've agreed a sale of Henry Boot Construction for GBP 4 million, and that's important in that we are simplifying the group's structure, and we're increasing more and more of our attention on our core activities. And throughout this period, and I know I'm going to get smart from you all, as you would expect, legendary Henry Boot balance sheet remains rock solid. Our NAV at just over GBP 3 a share, as you all know, is very conservatively assessed because we hold our land and developments at cost. And the decision to increase our half year dividend by 5% is a sign that we continue to have conviction in our 3 key markets. And we're also confident of hitting our medium-term targets, both in terms of growth and return. So I'm going to turn now to some of the operational highlights. And as you will know, we've been clear that this year was always going to be half 2 weighted. And it follows a similar pattern to last year, and we're confident of achieving our full year performance in line with expectations. And looking at the operational highlights, first of all, you've got land promotion. We sold 1,222 plots and have got another 2,369 plots exchanged or under offer. Changes to the NPPF mean year-to-date, we've achieved planning on nearly 2,800 plots. Our aim of submitting 10,000 plots is on track. And so far this year, in round terms, we've already submitted 5,000 plots. Our land portfolio has increased to 107,000 plots. And as I said last time, really, the emphasis now is on winning planning consent and selling plots and less on growth because we believe that the portfolio has got the scale and the balance and the quality already. Turning to development. Origin is performing well with all schemes on time and budget and the first pre-let agreed. The investment portfolio generated a total return of 5.7%, which yet again is well ahead of the index. And in the first half of this year, we sold nearly GBP 18 million of investments at an average 12% premium as we continue to look to recycle our capital into higher returning opportunities. Looking at home building, Stonebridge has had a slower first half, completing on 85 homes. The net private reservation rate was 0.45 in the half. However, we still see great potential in this business. And now we're the majority owner, we've added 846 plots to the land bank. On Construction, the segment remains profitable with both Banner and Road Link performing in line with expectations. And HBC has secured 94% of its 2025 order book, and it's on track to have a far better year than in 2024. And to be frank, that's since we changed the management and the new management came into post in January of this year. And then when you look at operating profit after deducting central operating costs, it's GBP 10.2 million. Now again, I always spend a bit of time just running through the medium-term objectives. The main ones are capital employed is at GBP 427 million and is still set to grow to GBP 500 million. Our 12-month rolling ROCE is 9.1%, and we're going to maintain our financial discipline because we're absolutely determined to restore our ROCE to within the target range. We remain on target to sell over 3,500 plots this year in Hallum. So we're absolutely focused on that medium-term target of 3,500 per annum. In the current environment, it's no surprise we have reduced our committed development with our share of completed development falling to GBP 42 million, but I will outline later on in the presentation that we've got a clear plan to build this back up during 2026. Reflecting delays to opening new outlets as well as a slower market, Stonebridge is aiming to complete on between 240 and 250 homes this year. However, due to our expanded land bank, we believe we're going to be in a position to sell more -- to sell from more outlets in all 3 regions in 2026. So we're going to be firmly back into the growth of this business. Now I talked at the beginning about our confidence in hitting year-end expectations. And this is based on 80% of the budgeted land and property sales already having been completed, exchanged or secured. Now to be clear, this is not turnover, it's property sales, and we believe that this gives you and us good visibility on our full year performance. So this slide shows that in detail. If you look, you've got light blue, which is Hallam; green, which is HBD and dark blue is Stonebridge. And you can see out of a budget of GBP 221 million, which is on your left-hand side, we've completed on GBP 98 million to date, but this rises to GBP 139 million if you include exchanged, and then it goes up to GBP 176 million, including sales that we've got reserved. You can see by the dark blue slug that the majority of reserve sales are in Stonebridge, and that's not unusual for this time of year. To get us to GBP 221 million, we need another GBP 45 million of sales. And again, you can see that sales under negotiation for completion in half 2 2025. And you can see that around half of that is in Hallam. And if they exchange and complete on the 1,800 plots that they've got under offer, they will hit that target. Then GBP 5 million is in HBD, and that's about land sales that we're doing to the Origin joint venture. So we've got a degree of control over that and one site at York, which is under offer to a national developer. And then the rest of the sales is about GBP 19 million is in Stonebridge. And what we've done there is we've taken the mid of our range. We've assumed that Stonebridge will sell 245 homes. And to be clear, that means based on this, they've got GBP 19 million to do and 53 homes to sell. And then also, there are other deals going on. And we can and might be able to use those for cover in the event that these things don't happen. And actually, Darren, that's what we did last year. So just turning to HBC. We announced an MBO of Henryboot Construction for GBP 4 million this morning. The transaction simplifies the group's equity story as well as improving the prospects for long-term growth by us having more focus on the core activities, creating synergies and as I say, being disciplined about also achieving returns. And also it's going to reduce the risk profile of the group. The vendor loan is repayable over 5 years and personal guarantees have been given by the management team, so they've got skin in the game. And we'll also retain oversight of the business because we have 2 Henryboot representatives on the HBC Board until the vendor loan is paid. The deal is set to complete no later than January 2026, and we expect a profit on the disposal. Over to Darren.

Thank you, Tim, and good morning, everyone. So turning to our financial summary. We've performed well in the first half of this year with revenue in the period increasing by 19% to GBP 126 million, really driven as a result of several significant transactions within both Land Promotion and the Property Development businesses. Gross profit increased by 30% to GBP 32 million with the gross profit margin improving from 23% to 25%. Underlying profit, which excludes valuation movements on completed investment properties, is up 79% to GBP 6.5 million. And with operating profit of GBP 10 million, our rolling 12-month return on capital employed was 9.1%. Through the cycle, we continue to believe that our target range of 10% to 15% remains appropriate for the business. Earnings per share increased to 4.8p in the period, and we've increased the dividend by 5%, reflecting our progressive dividend policy, the confidence we have in achieving our full year expectations. And as Tim mentioned, the confidence we also have in achieving our medium-term targets. If we turn over to the balance sheet, investment property, which includes our share of joint ventures and investment property in the course of construction has reduced to GBP 107 million. This is following more than GBP 14 million worth of profitable sales during the period. We've seen further rental growth for our industrial assets, and we've made good progress on developments within our Origin joint venture. Following investment in land and developments, net debt increased to GBP 88 million with 21.4% gearing marginally above our optimal range of 10% to 20%. We expect gearing to be towards the top of our range at the year-end as we continue to invest across the business ahead of disposals next year. In January, we also completed the acquisition of a further 12.5% of Stonebridge Homes, taking our ownership now to 62.5%. As a result of this, our underlying net asset value per share, excluding the pension surplus, reduced by 2.6% to 304p. If we look at the cash flow, this largely demonstrates how investment property sales and debt funding have allowed us to continue to invest in strategic land, Stonebridge Homes as Land Bank and Property Development. Cash outflows from operations totaled GBP 3.1 million, being returns in the period, largely covering payments for interest, tax and dividends. The profitable sales I mentioned on investment property generated GBP 13.1 million, which has been recycled into investments of GBP 10.7 million in inventories to grow land and work in progress in Stonebridge Homes, deliver our committed development pipeline and fund planning costs within Hallum to bring sites forward for sale. As previously mentioned, we purchased a further 12.5% of Stonebridge for GBP 10 million, and we continue to grow the Origin joint venture, investing GBP 4.1 million in the period. Other working capital increased by GBP 10.5 million following land sales to housebuilders on deferred payment terms. And as such, we ended the period with net debt of GBP 88.1 million. So if we can move on now to the operational review and starting with land promotion. Hallam Land sold 1,222 plots in the period with a further 2,369 plots exchanged or under offer. Having started the year well, we are on target to exceed 3,500 plot sales this year. Sites exited during the period generated an average ungeared IRR of 23%, which we're clearly very pleased with. The planning environment has been positive for securing outline consents. And during the first half, we achieved planning for 1,237 plots, a fourfold increase from the prior period. Plots with planning marginally increased to 8,837 with over 14,000 plots awaiting determination in what we see as a very supportive environment, we expect our stock of plots with planning to increase. We're making good progress on our target for submitting 10,000 plots into planning this year. We've got nearly 5,000 plots already submitted. These take time to build up and submit, but others are well progressed to achieve that target, submitting them in Q4 this year. And with our portfolio all held at cost, there's no valuation gain on securing planning recognized until the land is actually sold, and this continues to reflect a significant uplift in value not recognized within our balance sheet, and I'll go into a bit more detail on that in a couple of slides on. We continue to manage one of the largest strategic land banks in the country. We've now got over 107,000 plots and 77% of the portfolio is in the Midlands or in the South where values tend to be higher. With a balance of freehold and promotion agreements, we're able to manage capital investment appropriately between risk and reward, taking advantage of the right time in the cycle when acquiring freehold land. Our tendency to use planning promotion agreements provides a capital-light investment structure and gives us our USP against housebuilders by marketing the sites to drive best value for our landowners. Our 5-year average plot sales are running at 3,000 plots per annum. And as we've said, we anticipate plot sales of around 3,500 this year, in line with our medium-term target. Sales in the period were at an average GBP 16,000 gross profit per plot, and that's been driven by a particularly profitable freehold sale in Ambrosden. We do expect this figure to revert back in line with the 5-year average of around GBP 10,000 per plot at the full year. Moving on in terms of the planning environment and following the government's revision to the NPPF, we have seen positive changes to the planning system, which have significantly increased our ability to secure outline consents. As you can see, since 2024, we've secured more planning consents. And year-to-date, we've achieved consents on 2,782 plots across 11 sites. This is a significant increase compared to a 3-year average of around 600 plots to the end of 2023, and it takes plots with planning permission to nearly 10,000 now. We've been successful in utilizing the planning appeal system as well to unlock more sites, and we've won appeals on nearly 2,000 plots across 5 sites so far this year. This includes 300 plots in Sutton-in-Ashfield, which is a site exchanged for completion next year and a significant site in Fareham for 1,200 plots, which we are currently marketing for sale. As we move forward, the focus is to convert our store of consents into sales and secure more planning permissions in this supportive environment as we build a sustainable high level of value in our portfolio. And moving on in this regard, our land promotion business has delivered consistently strong and stable returns over the long term. Sales over the last 5 years have delivered an average gross profit of GBP 10,000 per plot. And these disposals have achieved an ungeared IRR of 23% per annum, which for us is absolutely fantastic. As I mentioned on previous slides, we've built up a considerable store of value and with almost 9,000 plots at the half year with planning in the table on the top right here, based on recently achieved gross profit per plot, sites currently with planning have the potential to deliver gross profit of GBP 88 million over the short term. In addition to this, we've got over 14,000 plots in planning awaiting determination. This significantly derisks 22% of our land bank, and that has the potential to deliver a further GBP 146 million of gross profit. The full portfolio over time has the potential to deliver over GBP 1 billion of gross profit. And for the first time, we're presenting an illustrative net present value for the total portfolio, which can be seen in the table on the bottom right. These figures are based on a range of gross profit per plot using average hold periods and making adjustments for overheads and tax. The matrix also includes a range of discount rates. But if we take an average GBP 10,000 gross profit per plot, this shows a potential discounted profit after tax to come of GBP 180 million to GBP 256 million, equivalent to an NAV uplift of 44% to 62% whilst there are, of course, risks to unlock this value, the business has got a really strong track record of mitigating these. And with a portfolio of over 200 sites, we are not reliant on a few large schemes to actually deliver these returns. And on that note, I will hand you back to Tim.

Yes. Thank you very much, Darren. So looking at development, our committed development over half 1 has marginally grown to GBP 128 million or our share GBP 37 million and 40% of the schemes are pre-let or presold. Understandably, we've been selective on starting development, and we've targeted industrial with the vast majority by value in origin. And I've set out the normal details of the development program in the appendix. Total profit on all the committed schemes is GBP 8 million or 38% profit on cost of which only 16% has been taken to date. In the case of Origin, this does not include the sale profit when we transferred the land to the JV, and it doesn't also include the potential for us to earn promote fees. Now a lot of focus this year, rightly so, has been spent on building up our near-term development pipeline. And in this respect, we're set to grow Origin by a further GBP 56 million in the short term. And also at our Golden Valley mixed-use campus with a GDV of GBP 1 billion, we've achieved planning. We've also got a strong GBP 1.3 billion development pipeline that will give us further optionality to grow back our committed program. I just want to spend a bit of time on Origin and also a bit of a recap. And you'll remember that it was a 25-75 JV that was formed at the end of last year with Feldberg Capital, and we believe it allows us to accelerate the development of industrial sites. We earn development management fees and also promote over an 8% geared return. The JV was seeded with 3 sites from our development pipeline, and that's shown on the slide as current. You can see it totals GBP 100 million. And in selling the sites to the joint venture last year, we realized a profit of GBP 5.5 million. Work on all sites commenced in quarter 1 of this year. And I'm pleased to say that, that work is progressing well, and we've secured our first unit pre-let at Markham Vale. Another unit is under offer at Welwyn and there's good interest -- occupier interest at Spark. And then the joint venture is set to grow by an additional GBP 56 million, which is shown as future. We there got second phases in Markham Vale and Walsall. And then we're also, again, from our pipeline, selling Preston into it. Once these land sales are completed, together with the car park site at York that I've already mentioned, HBD will be done in terms of its sales and budget for the year. The other significant thing that we've done is we've got planning on Golden Valley. And that's a flagship mixed-use campus. It will provide up to 2,500 new homes and 1.25 million square feet of space. And the first phase will include IDEA, the new 160,000 square feet National Cyber Innovation Center, and you can see an image of it here. And that's been identified in the government's industrial strategy. It's the old gag, it's next door to GCHQ, guess who's going to anchor it. Let's hope they're not monitoring what I'm saying because I've been told I can't say that. Plus, we've got 576 residential units. And we've got a funding package secured from government and the local authority because it's of national significance. And once we signed up the anchor tenant, we'll commit to the first phase, and we expect to commit to the first phase during the Q1 of next year. Turning to investment. Our total return at 5.7% for the first half was once again ahead of the index at 4.2% and I show on the line graph, our total return compared with the index since the start of 2020. And you can see with the dark blue line, we're at 7.5% and then the pale blue line is the index lagging behind at 3.6%. Total value of the investment portfolio is GBP 96 million. And during the period, we secured 4 sales at a 12% premium to book value, 2 of those will complete post period end. And the largest sale was Skelmersdale, where we've secured planning for 245,000 square feet building, and that's 66% bigger than the existing building on site. And we sold that property to a German fund in June at GBP 9.5 million, and that achieved an ungeared IRR of 25% per annum, a bit better than the Hallam ones at 23%, but still good money, isn't it? Then turning to Stonebridge. In January, we became the majority owner of Stonebridge. We've initiated an integration plan. We've identified several quick wins and those quick wins have already been implemented. Looking at the operational performance, Stonebridge completed on 85 homes in the first half with an average private sales price increasing by 3% to GBP 391,000. Many of our customers took longer to commit to buying homes in an environment for them, felt a bit more uncertain. And our net private reservation rate was 0.45 in the first half. Reservation levels have also been impacted by delays in securing detailed planning, reducing the opening of new sales outlets. We currently operate from 9, and we planned to operate from 12. During the summer, we've seen softer trading conditions with our sales rates also affected by several of our sites nearing completion and not offering the full range of products. The sales rate for the 6 weeks to 14 September was 0.38. As a result, current year completions are now anticipated to be lower with a revised target range of 240 to 250 this year. Now despite that, visitors numbers and interest in our homes still remains, and we're actually getting more people visiting site by a significant amount, up to 50% more people. So we still absolutely believe in this product. And we think that if we get the full offering, and we've got a plan for that and more outlets, then we can scale this business up. So you can see growing the land bank is absolutely crucial. And I'm pleased to say that we've added 846 plots to our land bank in the last 6 months or so. And we've acquired 3 sites in the period, and we've just shown you 2 here. There's Kingston Village, Newcastle-upon-Tyne capable of delivering 360 units. And then there's Whitby in Yorkshire, where we can deliver 223. And by showing you the location of the land banks, the new sites and the active outlets, you can see that Stonebridge really has got the potential for being a significant multiregional premium housebuilder. And we do believe that there remains a long-term structural undersupply of housing in these target regions. So therefore, we're confident that we can hit our medium-term growth target of 600 homes per annum. And then finishing off on outlook. Whilst we operate in an uncertain environment, we continue to make good strategic progress by focusing on quality projects within land promotion, development and homebuilding. I'm not on the slide, am I? Thank you, Darren. Significant steps include the sale of HBC and the agreed route to full ownership of Stonebridge. Now with the majority owner of Stonebridge, we can increase and improve its land bank and drive sales. We expect, as I said, to be back on our growth path next year. The outlook for Hallam is particularly bright with 3,500 plots sold or under offer and also planning policy, which, in effect, has a presumption in favor of development. Consequently, the portfolio of planning consents will build up. And as Darren said, that's building up a store of profit for the future. Similarly, HBD is preparing to commit to more of its near-term development through smart JVs like Origin or nationally significant schemes like Golden Valley. So I believe this is a clear path of growth, which is a well-funded long-term business we're able to pursue. In the meantime, we do expect to meet our earnings expectations for this year. Our balance sheet remains rock solid, and that all puts us into a sound position to increase the dividend by 5%. Thank you very much. So questions?

Christen Hjorth from Deutsche Bank. Three questions for me, please. The first one is just on Hallam. I know the target is 3,500 plots per annum. It looks like you're going to do better than that this year. Is 3,500 still the right number, I suppose, for the next 3 to 4 years? Or could you get meaningfully higher than that? The second one, just as we look at Stonebridge, how should we think about EBIT margins and returns trending from here? And I suppose implicit in that is you mentioned investments in more land, but what sort of scale should we think about there as well? And then just finally, with Golden Valley, et cetera, how should we think about GDV in terms of the committed pipeline evolving over the next 12 to 18 months?

Okay, right. So I'll have a go at the first one and the third one. Darren, you have a go at the second. So first of all, Hallam will achieve, we believe, 3,500 this year. That will then get us on to a rolling average of 5-year average of 3,000 plots sold. Has Hallam got the opportunity to sell more than 3,500 plots? Yes, it has. I've spoken to you before. We have a business model. It's a classic portfolio that you can model, isn't it, because you've got so much data over how long it's likely to get planning, what the success rate is, how much it will cost. And we think that we can grow it materially more than 3,500. But Christen, we think that what we will have to do at some stage is reset the medium-term growth targets rather than do it piecemeal. And whether we do that next year or the year after, we will do it at some stage. But to be clear, I think that Hallam will be selling more than 3,500 plots per annum over, let's say, the next 5 years. In terms of Golden Valley, the commitment will be to start Phase 1, and that's around GBP 100 million. And that will take certainly '26 and '27 to complete, and we expect it to be fully funded and to be materially pre-let. So it won't be a high-risk venture, but it is the start of a bigger scheme. And then we will expect to sell some land to housebuilders. We -- as part of the first planning consent, we had just under 600 homes granted. And then we expect to, on the heels of that, get another 400 homes. So we will get profit from the development, and then we will take equivalent to a promoter's profit on selling the homes. And I would imagine that we will sell the first batch just under 600 next year and probably the next batch the following year. In terms of Stonebridge?

So in terms of Stonebridge, look, this year has been challenging, as Tim has said, I think we've had a few sites we would have liked to have been delivering from that have suffered from the complexities of obtaining detailed planning permission. We've also had the challenge of 5 sites closing and 4 sites opening, which means, as Tim had also said, kind of the product choice on the closing sites is limited. When you're opening sites, you're selling off plan. But I think what they've done really, really well this year is actually bolstering that land bank, Christen. So as you mentioned, we're getting on for 2,500 plots now within the land bank. We're getting on for 1,000 plots that have actually got permission that we can start on site and look to deliver. So I think as we move into next year, we are pretty confident that we can get the sales outlets up and we can start returning to that drive for growth. Now as we are in that phase, I think our margins will not be where they might be for a stabilized business. And what does stabilize mean? I think in a good market, a stabilized housebuilding business is probably doing 20% gross, 10% net. I think given we've got the challenges of growing, investing for the future and the fact that the market at the moment is a little subdued, we're probably looking at more around the 7% to 8% net as we move forward into the future years.

Adrian Kearsey, Panmure Liberum. On Stonebridge, there was a difference in the reservation rates Q2 versus Q1, which is very encouraging. Could you perhaps sort of give some detail or granular detail in terms of were there any particular types of property that we're moving more quickly in Q2? Were there any particular sites that were benefiting within the mix? And then how is that Q2 trend moved into Q3?

Yes. Okay. Right. So you're right. Q2 was at a higher sales rate, but there was not material characteristics either in terms of the sites or the houses that we sold. I'm afraid we just like, a, the industry and then particularly the North got off to a slow start. And it sounds a bit weak, blaming the weather, doesn't it? But up in Yorkshire, we would have had sites closed during the snow. And in Q1, we just never ever caught up from that slow start. And then on Q2, that picked up. But over the summer, as I alluded to during my presentation, I'm afraid the summer has been slower again. So we've started slow, picked up and then we were ahead of our budget at 0.45. So we were nearly at 0.5 in Q2. But then the trading up to the middle of September from the end of the first half has been just below 0.4. So it slowed again. And part of that, we think, is some of the uncertainty in the market. Part of that is the summer. And over the last couple of weeks, it feels as though it's improved yet again. So to be honest, Adrian, it's been reasonably volatile.

Just one more question. With Hallam obviously, there's a portfolio of different size schemes, different locations that you made a reference to sort of Southeast, South Midlands. Could you perhaps give an indication in terms of the level of interest you're getting from the market at different size schemes?

Yes, yes. I mean the range of schemes that we've been selling has been significant. So we've been selling -- and typically, we would be selling schemes of between 200 and 400. That's typical for Hallam. But we've also sold some smaller sites of around 100, and we've got a very large one under offer at the moment of 1,200. And what's [ plus ]? And I've got to say what is consistent, Adrian, is that there is strong demand. And we're seeing this from the national housebuilders. And we're also seeing it from regional housebuilders. And typically, we will be getting between 4 to 8 bids on sites. Now we know that the national house builders will be saying that they're keeping their discipline in buying sites, and I'm sure they are. But I think that this is also a reflection of what Hallam has to offer. And certainly, in terms of some of the bigger sites, so between 400 and the 1,200 that I've mentioned, we believe that they are often significant sites of strategic interest in different regions. And if you're a housebuilder and you want to maintain your outlets, then you do have to be prepared to buy a significant site at a time when it is available. So we have been getting good levels of demand. And I know that there is a lot of chat about the market in the Southeast, and it is definitely harder from a housebuilding perspective in the Southeast, but we're still seeing demand from housebuilders for sites in the Southeast as well. There's not a rush to the Midlands or the North.

Andrew Edmond at Equity Development. Just a couple of things. Post-period, but you finished with your outlook and a nice picture of Duxford. And I wondered if you could just say a little bit more about what looks to be a very exciting project, how competitive it was to -- and what your expectations are?

Yes. So for those of you that didn't catch the press statement that went out a few days ago, basically, it's just under 450,000 square feet AvTech just in Duxford on the edge of Cambridge City. And we've entered into a development agreement with the Imperial War Museum, and we will promote that through the planning and then look to develop it. As you can imagine, the demand for technology space generally in and around Cambridge is strong. There's a very strong aviation sector. And in the event -- and the planning is centered towards that area, and we think that there's good demand in that area. But in the event that there isn't the occupier demand to meet the full 450,000 square feet, then there will be some flexibility to sell it to other tech occupiers. So very, very pleased that we got it. The competition was strong. But I think that what Henry Boot does well is it has got a great reputation with, in particular, the public sector. We always say -- always do what we say we're going to do. And then I also think that some of the work that we've been doing on Golden Valley has put us in good stead because there is no doubt on Golden Valley. We are in a market where we are attracting not just cybersecurity, but other technically related businesses, and we're getting a lot of information from that. And that information will put us in a good place to help the Duxford scheme.

Just to add on Golden Valley and Duxford, they are both in what is very traditional contractual arrangements for Henry Boot developments, which is what we term land drawdown opportunities. So whilst we're responsible for getting the planning permission, we don't buy the land. We're not heavily capital invested in these schemes, and we only actually invest when we know the opportunity is there to actually deliver.

And then just a little bit on regionality. You just talked about the Southeast. In terms of planning permission, it's certainly a much more encouraging picture overall, are you seeing any variation on a localized regional basis or some local authorities not following quite the path that's prescribed by central government? Or is it now reasonably uniform?

It's generally better full stop. And then there will always be some planning authorities that are either more restrictive or more conservative in their approach. But the thing is if you've got at a high level, a planning policy that favors development, what we will do is we will negotiate with the planning authority, and then we'll get to a point where we will say if they are indicating that they're going to grant consent, we will go to appeal. And we've done -- we're on 5 appeals at the moment. And Henry Boot is quite a consensual -- we want to work in partnership with people. So we don't likely go to appeal. But we're going to appeal more and the chances of winning an appeal now have increased because of the changes to the planning policy. So because of that, the conservative planning authorities are more likely to grant consent. And even if they don't, you've still then got a proper chance of getting a consent because you will go to appeal. So net-net, there will be more planning consents granted as a result of the changes to the planning policy framework. And then the only problem, as we've alluded to during the presentation, is that there will be some planning authorities, not all of them, some planning authorities that aren't properly resourced and they are taking a lot of time to grant the detail of the planning consent. And we've had a situation recently where we've actually appealed for nondetermination of a detailed planning application, and that is almost unheard of because all you're doing is you're arguing over the color of the bricks, yes. And that's basically because the planning policy just didn't have the resources to put it through the system. And that's what's holding us up in Stonebridge. That will be what's holding up some of the national house builders in terms of some of the sites that they want to be promoting and developing houses on.

Direction of travel is good.

Yes.

And lastly, very quickly, Darren, lots of good KPIs moving in the right direction, just the 2 percentage points up in gross margin. Can we expect that every half going forward? Or would you like to get a little bit prospective of how it may move?

Look, it's good that it's moved in the right direction at the half year. I'm not saying that we're going to continue to see that come in. And actually, what we've not touched on is, we are seeing a little bit of inflation coming back into particularly House Building, probably easing off actually on the Construction side of life. It's manageable at the level it's at. But I don't think it's going to help push those gross margins forward as we move on.

Yes. Clyde, I just see your hand up.

Clyde Lewis, Peel Hunt. I think I've got one on Hallam, one on Stonebridge and one on Property and Development, if you don't mind. On Hallam, I'd be interesting to know of the 11,000, nearly 200 plots you've got, that are owned, what -- how many of those have got planned permission? And because I'm trying to -- I'm trying to get a feel for ultimately that GBP 11,500 you were making per plot, how does that move? You're talking it back to GBP 10 million? I mean, obviously, it will depend a lot on how much is freehold, how quickly that comes through. But I suppose away from that, do you think there is pressure on margins from Hallam, given the pressure on the industry right now probably to buy more sites versus probably the increased supply that's coming through, as you've alluded to, the extra planning is helping the overall supply of land at the moment. I'll start with that one.

Right. Go through the other 2.

Okay. So the other 2, on Stonebridge, it'd be useful to understand where you are with regards to the sort of management structure now, what you've got set up in terms of how you're running the business? And I suppose how you think you're going to have to invest in that over the next couple of years? And the third one was really on Property Investment and Development, I suppose when you've been very much focused on logistics and industrial in the last on -- I'd have to go back a long, long time before you were doing offices, but -- or anything else, but you have done the sort of student schemes and some bigger resi. Where are your thoughts, I suppose, in terms of end markets as to are you starting to see more attractive areas? Obviously, you've just announced Duxford. So you still see a lot of activity and interest in the industrial/tech areas. But are you starting to see improving opportunities elsewhere outside of logistics and industrial?

I'll start off with the Property Investment and Development question. Absolute core of our business going forward will be industrial. And if you look at industrial over decades, and the bad news is that I've been involved with it for decades, it's pretty sound, reliable and actually, the volatility of the returns over the last 40 years is not high. So it's a good business. The returns are decent. And if the volatility is low, the risk is low. So that's absolutely what we want as a developer. And as you know, 75% -- just under 75% of the investment portfolio is also industrial. So that will be at the heart of development and the investment portfolio. What we are doing with the investment portfolio, though, is we are keeping it smaller than our target. And Clyde, that might be another reason why at some stage, we've got to change our targets because we are trying to get our returns on capital employed into that range. And it's hard to do that if you've got too much in the investment portfolio. So we've been basically recycling some of the investment portfolio into development, and we'll carry on doing that. And the investment portfolio will probably end up having quite a few investments that really are developments. And Skelmersdale is a classic example. We bought that to get planning and then develop it. And the reason why we didn't develop it was a German fund would pay us not only what we thought it was worth, but also our future development profit. But then also, we have done urban development. And we will carry on doing urban development, but urban development, as you all know, is very, very hard at the moment because of viability, first and foremost, but then also the Building Safety Act. So we will do less urban development and probably the urban development that we will do in the future will be neighborhood, the build-to-rent scheme. And there, we've got planning and we're going through the process of getting a grant. And I'm afraid that's what you need now, even a prime site like that, where rents have grown probably 20% since we bought it, you still need some sort of help from regional grants to make it go. And we're in that process to try and make that development work, and we think we will achieve that. So I think our urban development will morph a bit, and it will go into things like Golden Valley, which is mixed-use development. And there, to Darren's prompt, a lot of it will be where we're doing development agreements with landowners so that we're not using our capital on the land. We are using our capital to promote and the promotion costs of Golden Valley have been significant, but it's still not the same as owning acres and acres of land. And we do think that there's an area of specialism that we have not cracked, but we're trying to. And that is where you've got more specialist occupiers, whether that's cyber, technology, aviation. And we're trying to do that because then we can go to landowners, we can say really good at master planning, really good at delivering a scheme, really know our onions in terms of these specialized occupiers. So I think 70% of what we do will be industrial and then 30% will be that specialized. We call it urban development, but it's probably edge of city development at the moment. In terms of Stonebridge, the management structure is pretty good. And the reason why the management structure is pretty good is that we've obviously been a 50-50 joint venture partner. And I've always been open with people, haven't I that it's our intention to buy the business. So we've wanted the management to be good, the structure to be good and it to be on a growth footing. So it's got some capacity to grow. And we've got that. But a couple of things. One, I think that there was a pause in thinking about the structure and the capacity as we got into quite a long winded debate over terms. And then also, there became a bit of a pause when we realized that we had got a deal agreed and we got to document it because we did know there'd be integration, plans and changes and synergies. And we didn't want to hire somebody and then find that we might not need them because of somebody at Henry Boot that could do a similar job. So we're well underway in terms of integration. We have not got a free hand. We've still got a significant minority shareholder. But we've got a pretty good hand. So we can shape the management. We have been integrating. So classic, we've got one HR department now. We've got one technology department. We've got one marketing department. And all of that has either absolutely happened or is on the eve of happening. And then really, Clyde, you look at it and you think, well, if we want to be building 500, 600 homes quite quickly, we have got to think about greater regional presence, and we've already opened an office in Newcastle. We will open an office in the North Midlands, it might actually be in Sheffield. So we've got to think about how we spread the team and the managers across the regions. But I don't think any of that is rocket science. The Managing Director that some of you have met, Steve Errington has done it before. We're based on a regional business model as well. And a lot of what they're doing is very, very similar to Hallam and HBD. They're going and getting planning, dealing with local and regional authorities and then dealing with local suppliers to build things. So I think it's all doable. I'm hoping by the time I've given you that really long-winded reply that Darren knows everything on Hallam freeholds.

So going back to your first question, look, we quote the gross profit per plot. And I've always said, over time, as an average, GBP 10,000 per plot probably feels like about where we ought to be. However, as you rightly interrogate, that is very much a blended return from freehold and promotion agreements. And I think if we look at the portfolio, we've got about 11,000 plots that are freehold out of the 107,000. So kind of broadly, we run about 10% freehold in the mix. I think if you go back a few years, our gross profit per plot was under GBP 10,000. And the argument was we were very heavy on promotion agreements that were coming through at that time. I think what we're seeing now getting back to the GBP 10,000 average indeed at the half year being at GBP 16,000, it's because we've got a freehold weighting. And Ambrosden was one of the sites that I mentioned that was freehold sale in the first half, real driving that. I think we are slightly freehold. I don't want to say heavy, but we're probably about 20% in terms of the 10,000 plots we've got with permission, which if there's 10% in the portfolio, 20% is clearly quite a weighting on the freehold side at the moment. And I think we're seeing that coming through in sales, which is supporting that GBP 10,000-plus gross profit per plot. And I think for the next couple of years, hopefully, that is what we will continue to see. And I think in part, that is actually driven by the environment we're in, which we always speak to, which is it's easier to gain and develop freehold in an uncertain market because the landowner, particularly concerned about capital taxes, particularly concerned about budgets coming through at the end of November, not the end of October, is actually more willing to transact, and we find good freehold opportunities in that environment. And I think the uncertainty we've had over the last couple of years has continued that for us. So I think that's been really positive. Then to answer your point on the market, the housebuilders and their appetite for acquiring land, I think a lot of what Tim said is pointing to we've got a slightly softer end market. Challenges on getting detailed planning permission are really continuing to be very difficult. And therefore, I think what we're hearing is the way that you keep momentum going is by opening more outlets by buying more land. And I think we're seeing that in the competition for sites that Tim has discussed and the kind of returns and ability Hallam is currently seeing to sell plots into the marketplace. So whilst that uncertainty remains, I think, to some extent, that is our friend.

Yes. And we're definitely selling land ahead of our budget, both in terms of volume and the price.

Yes, pricing is probably arguably stable. But in real terms, I think what we're starting to see is warehouse builders on large sites were paying over 3 or 4 years. They're paying over 1 or 2 years. So the discounted effect of that is the reality is we're doing a bit better. Also, if you go back 12 months, we wouldn't have sold anything on outline. All the housebuilders would want 12 months to get their detail through before they transact. People are now buying on outline planning again.

Richard, do you have your own microphone?

Alastair Stewart from Progressive. Three questions, one on Hallam, one on Stonebridge and one on Construction. Hallam, you've referred to strong demand from both the national and the regional housebuilders. In terms of national, is that kind of steady month-by-month steady-ish? And the regional guys, are they mainly private equity owned. And are any names popping up more than others. And Stonebridge, do you have a comparative for the 0.38 for the 6 weeks the previous year? And finally, Construction, how much of your total work -- well, be the development work really is done in-houses as it were by HBC?

Okay. Right. Okay. So a few things there. So -- and both Alastair and Darren help me out on the questions, if I don't -- haven't got all of the questions. In terms of Hallam, it's pretty steady, isn't it? I mean we've got a range of housebuilders. And we will have transacted with all the major housebuilders this year. And most of the national housebuilders will be bidding for land, not all of them on specific sites, but you'll have a situation where one of the national housebuilders won't bid on one site, but then they'll bid on another. So it feels as though they're all in the market. We said already, we think that it's because they want outlets. We feel like that at Stonebridge. We've definitely got to buy more land than we're comfortable buying because we can't run the risk of not having enough outlets, and I think the housebuilders like that. In terms of the regional ones, yes, some of them are private equity backed. There will be some family-backed housebuilders -- national housebuilders as well. And they are pretty competitive. When you are selling on their local patch, they will be very interested in buying it. And we're a bit like that with Stonebridge, if there was a really good site in Yorkshire, and there was a really good site in Yorkshire called Whitby, we did not like the idea of anybody else buying it. And you keep your discipline in term -- you're not giving your margin away. But what you will do is you will make sure that you're up to that margin and you researched it, and you'll probably know a bit more than some of the competitors. And you hope that, that makes you competitive. I am 99% sure, [ Chris ], that we have not got the 0.38 comparator for 2024 because I can't remember us quoting that last year.

We didn't provide a post period end figure...

I think that it will be worse.

[indiscernible]

Yes. So the comparator over the period is 0.5 in 2024 and 0.45 in 2025, yes. And I can't -- I don't think we had a slow.

I think the summer was better last year than the summer has been this year, yes.

And then in terms of HBC, really the in-house development that we're doing at the moment, is around Markham Vale and the construction of that will probably represents 20% of the turnover of HBC. And that would be typical. But there are some years where HBC don't do anything for HBD. Well, HBC is a very northern-based Construction business. HBD is U.K. wide. So there is a defined geographical patch that they can actually operate between them. And I think going forward, we will still have good relationship with HBC. Darren, God blessing will remain on the Board. And got to be clear. I can say this now -- we sold them, can't I? They are a really, really good contractor. If you look at Origin, where we are a minority shareholder our partner, Feldberg, cannot believe how good they are because they're on time they are constantly looking at ways to improve efficiencies and they don't just take all that efficiency themselves, they will share that -- those ideas with the client. So we will keep on using them. And then also, we'll keep on supplying them. Banner will -- Banner's not reliant on HBC, in a really good year they will probably get 10% of their work from HBC, but they will keep on working with HBC. And this is a lovely anecdote for Henry Boot isn't it?. People like working with Henry Boot, people like working with the Construction business, people like working with the Plant business. So HBC will still use Banner for nearly all of its plant not because we've told them they've got to as a function of us giving them the vendor loan, it is because they want to. Yes. I think that it was, yes, good, okay, fine. Anyone else? Any calls online or questions on line?

We've got one, Tim.

That's why you've got your own mic.

Exactly. Didn't just want it for nothing. It's from or [ Will Regis ] at Peel Hunt, who just wants to know, are you using promotions or incentives to help deliver Stonebridge sales targets?

Yes, we are, but not out of kilter with what we budgeted for. So the running incentive at the moment will be 5%, and the budget actually is 5%. Yes. Right. Thank you very much. Yes.