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Henry Boot battling big rivals for small contracts

Henry Boot will “have to work very hard to get every piece of work” even as it picks up work from companies “falling by the wayside”, its finance director told CN this week.

John Sutcliffe also said that major contractors have a challenge to “win over hearts and minds” of clients as the tough climate forces them to chase smaller projects.

His Sheffield-based firm is facing fierce competition from major contractors coming down to the £5m to £10m contract level, where Henry Boot is traditionally positioned.

“The competition is intense but the bigger guys have got to break into that market in a sense, because they have not really been interested in that market. And if times get good they won’t be interested in these contracts once again.

“You have to win over hearts and minds a little bit to win over these contracts.

“[We are] not winning contracts at stupid prices but obviously pulling in work, and I think to an extent it’s probably because a few people have fallen by the wayside,” Mr Sutcliffe said.

He added: “I think it’s going to continue at this sort of level and you’re going to have to work very hard to get every piece of work you can.”

He spoke to CN after the developer and contractor reported a fall in group revenue from £66.9m to £43.3m for the six months to 30 June, with profit before tax down from £9.1m to £5.8m.

The revenue fall came as the firm made no significant land sales compared with the same period a year ago, focusing instead on buying plots.

While construction revenue dipped from £38.8m to £35.9m, pre-tax profits increased from £3m to £3.9m.

Construction revenue for the full year is expected to drop on last year, to between £45m to £50m.

Henry Boot – a listed firm trading at 130 pence today (Friday) – had to downsize its workforce last year due to a drop in work. Its 250-strong construction workforce is down from 440 four years ago.

Mr Sutcliffe said the firm is “close to working at full capacity”, adding that he did not foresee any more changes to staff numbers.

“That’s not on the cards at the moment; we have downsized to the right level,” he said.

The group’s net debt at 30 June 2012 was £22m, compared with the 31 December 2011 cash figure of £2.3m.

Mr Sutcliffe pointed out that the revenue fall was largely down to the sales of two pieces of land at £10m each last year, compared with no sales this time.

“For me it’s not important; that’s what Henry Boot’s business is like,” he said.

He also pointed to a “hiatus” in the planning system as the government launched and adjusted the National Planning Policy Framework. He said there was around a year between submitting planning to selling to a housebuilder.

“We have got planning permission on six sites, all of which are in the sale process now and some of which will happen in the second half of this year,” he added.

“I’m not concerned about the change in the financial position at all.”

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