Market to struggle for three years, says Boot

The Sheffield firm, which is trading profitably and in line with expectations, said however that there were reasons to be positive as Britain had avoided the housing oversupply which helped drag down the Irish and US economies.

John Sutcliffe, group finance director, insisted that UK Plc is "not in bad shape" as Henry Boot gave an upbeat report for the period between July 1 and Armistice Day.

The firm said it had cut net debt by about 12m to 13m since June 30 and that cost control and cash generation remain key targets, part of the strategy of managing the business tightly, as outlined by MD Jamie Boot earlier this year.

Mr Sutcliffe said the property market remained well below its peak but there were still opportunities to make money.

"The property market is not going to be as good as that for a few years. There is no point crying over spilt milk. I certainly think three years.

"I would like to think a business should be able to achieve a degree of profitability (in current conditions)."

He was speaking as official figures showed construction output rose 4 per cent in the third quarter, although Q2 figures were revised downwards.

Henry Boot will be hit by the coalition Government's spending cuts but will be able to cope, Mr Sutcliffe added.

"The CSR is going to have an impact on the economy in general. From our perspective the construction side is undoubtedly dependent on the public sector for schools, hospitals and roads.

"We have business in all these areas so if there are going to be major cutbacks they will have an impact on that business."

Henry Boot was founded as a one-man construction business in 1886 to carry out work in and around Sheffield and was behind Pinewood film studios in Buckinghamshire in 1936,

Today the group is led by managing director Jamie Boot and it said a resurgence in commercial property and land markets during the second half of 2009 and early 2010 has now settled.

"Since the election, caution appears to have become the order of the day,"

It added the new-build housing market is operating at output levels 40 to 50 per cent below the annual average for the last 20 years due to the bid deposits now required and concerns over job security.

In an interim management statement it said: "Major changes to the planning system will also create uncertainty and, potentially, shortages of consented sites if the market picks up."

It added, however, that its strong pipeline of approved sites means it can capitalise on any shortage of greenfield land that arises.

"We believe our growing pipeline of opportunities should stand us in good stead."

The group paid back more debt in order to give it the flexibility to take advantage of development opportunities.

"(Henry Boot) has low gearing with the potential to generate further cash in the near future to reinvest in our portfolio of opportunities, in anticipation of improving economic conditions. Furthermore, we continue to have confidence in our ability to generate profit from those opportunities provided general economic conditions remain stable at current levels."

Its land division, Hallam Land Management, has made key sales to supermarket Morrisons, for a distribution centre at Bridgewater in Somerset, and to Barratt Homes for 400 houses.

It also said it is close to completing the 15,000 sq ft design and build contract it won earlier this year and that terms have been agreed for another D&B deal, with work expected to start on site in the first quarter of next year. Public sector work held up well for the first half of 2010, but it expects opportunities will fall in the aftermath of the Government's Comprehensive Spending Review, it added.

"However, with our mix of public and private sector clients and diverse market presence, we feel well placed to weather the predicted reduction in public sector-related construction activity," it said.

Mr Sutcliffe said he had some optimism about Britain's economy. "We have weeded out quite a bit of the chaff. The public sector has a long way to go (but) the private sector has already gone through the worst. You have got to work hard to make a profit."

Quarter's downward revision

Construction output rose four per cent in the third quarter, according to official data.

However lower output in the second quarter could lead to a downward revision of overall economic growth in that period.

Figures for July to September, published yesterday by the Office for National Statistics, confirmed data published in a first reading of third-quarter GDP published last month. It revised down its estimate of construction output for the period between April and June, however, from 9.6 per cent to 6.8 per cent.

"Given the revised figures for construction output in Q2, ONS assesses that GDP growth in Q2 would be 0.2 percentage points lower," it said.

That would take Q2 growth down to one per cent, although the ONS said the extent of the revision would depend on whether there were any adjustments to other components of GDP.