Sale of Henry Boot Construction

Henry Boot announces that it has agreed to sell the entire issued share capital of Henry Boot Construction ('HBC') to PWS Construction Limited ('PWS') (the 'Transaction'), a company newly formed by the HBC management team, for an initial consideration of £4.0m, which is being funded by PWS via a vendor loan note issued by Henry Boot. The Transaction also provides for additional payments to the group in the future based on certain performance criteria.

This Transaction allows the group to focus on its strategic priority areas of high quality land, prime property development and premium homes. HBC is not part of the group's medium term growth strategy and has made only a small contribution to group profits. Therefore, the group believes that its prospects for long term growth will be enhanced by a portfolio of activities concentrated on high quality projects with greater synergies. The Transaction will also simplify the group's structure and investment case.

Having considered a variety of options for HBC, including both alternative exit routes and retaining the division within the group, the Board has concluded that the interests of shareholders will be best served by disposing of HBC to PWS at a price in excess of its net assets. The disposal will reduce the risk profile of the group and reduce group headcount by around 21%.

During the year ended 31 December 2024, HBC generated £49.7m of revenue with an operating loss of £2.7m in the consolidated financial statements of the group. Following the significant restructuring undertaken, including the appointment of the new management team, and with 94% of this year's order book secured, it is expected the business should break even for FY 25.

Under PWS ownership, the business will be known as HBC Construction Group. The Transaction will offer HBC management greater autonomy to diversify and expand the order book as well as enhance HBC's position in the construction market, than would be possible if the business remained within the group.

The term of the vendor loan note from Henry Boot to PWS is five years and will carry interest at 2.1% over the Bank of England base rate. The group will continue to provide support to HBC in the short term under a transitional services agreement, with operational oversight from two Henry Boot representatives on the HBC board until the point when the vendor loan note has been repaid. Personal guarantees have been given by the HBC management team, with appropriate restrictions on remuneration in line with group policy.

Additional consideration is potentially payable to the group in the event that PWS sells all or a material part of HBC within eight years of completion. There is also an overage provision providing a profit share to the group should HBC achieve a net margin in excess of 3.0% over the next five years.

The initial carrying amount of the vendor loan note is anticipated to be less than £4.0m, in line with our accounting policies regarding the uncertainty of future cash flows. The excess of the vendor loan note carrying value above the net assets being disposed of will be reflected as a profit on disposal. The transaction is expected to complete around YE 25.

Tim Roberts, CEO at Henry Boot, commented: "The sale of HBC which we are announcing today allows Henry Boot to further its strategic focus on high quality land, prime property development and premium homes. It also enhances prospects for long term growth with a more focussed portfolio of activities with greater synergies. While HBC's contribution to the group is relatively small, it is a well established business with a strong track record of delivery and an excellent management team and we wish them well for the future."

Certain information contained in this announcement would have constituted inside information (as defined by Article 7 of Regulation (EU) No 596/2014), as it forms part of domestic law by virtue of the European Union (Withdrawal) Act 2018) ("MAR") prior to its release as part of this announcement and is disclosed in accordance with the Company's obligations under Article 17 of those Regulations

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