by Mark Brown

of Redmayne-Bentley, Ilkley>

Henry Boot – 84.5p

We last featured this company in May this year and since then the construction sector has been shaken to its foundations but the latest set of figures from Henry Boot is reassuring given the current climate in which the company is operating.

A safe approach is being taken in the far-from- ideal current climate. Gearing has been reduced to just 21 per cent and there has been a conscious effort to avoid riskier projects such as inner-city sites reliant on buy-to-let investors, which has proved to be very astute. The share price has fallen steeply, in line with the sector, but now stands on significant discount to the net asset value which makes Henry Boot one to follow.

A solid set of figures for the first half of 2008 was released towards the end of August. Turnover was £119.3 million (2007: £47.1m) and trading profits jumped by over 200 per cent to £30.2m. After a revaluation deficit on investment properties of £8.2m (2007: revaluation surplus £13.0m), the profit before tax came in at £20.4m (2007: £21.9). This translated into a basic earnings per share figure of 10.5p (2007: 11.6p) which represents a solid performance. There also a good interim dividend of 1.25p per share.

Clearly in the short-term there are a number of external factors which continue to have a negative impact on the company. Problems created by the credit crunch, higher raw material costs and higher unemployment have had a well documented effect on the property and construction industries so, in the near term, Henry Boot is looking to maximise returns from work in hand and will manage cash and net assets carefully.

Over the long term, the company believes that it has a good blend of property related businesses. It is well positioned to drive shareholder value when the market improves and, with modest gearing, this makes the company look comfortably positioned. The shares trade at a significant discount to net assets and provide a good yield. The company should be able to reward patient investors who use the current share price as an entry point. Buy for the long-term.

WARNING: Opinions expressed are the writers’ judgments at the time of writing. The information does not constitute a personal recommendation and readers should seek their own professional advice as to the suitability of the investments.