Land and property development firm Henry Boot has lowered expectations for sales across its housing business, suggesting the market will not return until 2025.
The Sheffield-based firm said sales had increased across its growing Stonebridge Homes brand, but that it was being more conservative with completion estimates for this year. Instead, the listed developer said it expects recovery in the market to be weighted in 2025.
In a wider update to investors, Henry Boot said that extended payment profiles with some of the major housebuilders it supplies land to meant debt would stay at the upper end of its preferred range. That is likely to mean impacted profits as interest rates remain higher.
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As a result, bosses said full year pre-tax profit for 2024 is likely to be "significantly below" the £37.2m mark suggested by investors. More broadly, the firm said it had traded well in a slowing economy with activity reducing in three of its key markets of industrial and logistics, residential and urban development.
Meanwhile the group's construction business traded below expectations throughout 2023 but remained profitable with two key projects were hampered by lack of materials. The division started this year with 46% of its order book secured.
Chief executive Tim Roberts said: "Despite challenging market conditions for our three key markets, our ongoing focus on high quality land and development in prime locations resulted in a resilient performance in 2023. We therefore expect profit before tax for the year to be in line with current market consensus. Furthermore, we have maintained a strong financial position and continued to invest in the business to ensure we are well placed as our markets begin to recover.
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"While the housebuilding sector has seen slowing sales rates, our land business is experiencing continued demand for strategic sites with planning in premium locations, as highlighted by the recently announced sale in Swindon, and we continue to selectively grow our land bank. Our development business has performed ahead of expectations, while the investment portfolio is on track to outperform the wider market, helped by the sale of five properties, at an average premium of 23% to December 2022 valuations. The group's premium housebuilder has also grown, having increased its output by 43% during the year.
"With a path to lower inflation and improved interest rates, whilst there will undoubtedly be bumps along the way, the economy and our markets have turned a corner, but we expect our results for 2024 to be impacted by these factors. We continue to firmly believe that Henry Boot remains well placed to achieve its medium term growth and return objectives."