He's here giggling at the back. So I think we're on. Now, just before we start the formal bit, just look at this. This is an image of what we've been building in Rainham. And I know when I say this that Clyde's thinking I need to get out more. But what a wonderful that's an industrial unit. Yeah? You can see the solar panels on the roof. You've got the Thames there, walkway. We'll green a lot of it, so it'll be pretty biodiversified. And that's an example of what Henry Boot's building. That's just an aside, just to get you all warmed up. So let's get to the agenda. So it's going to be the normal running order. I'll talk you through operational highlights. Then I'll go through the medium-term objectives. Then Darren's going to come on and do financial and land promotion.
Then I'll finish off with development, construction, and outlook. And as you can imagine, I'm going to start off on investment case. But this time, it's a refreshed investment slide. So we're focused on delivering high-quality projects, prime commercial developments, and premium houses with strong ESG credentials in three key markets. Whilst our markets have slowed, I think that the results this morning show that this emphasis on quality means that we've been able to maintain demand and actually increase sales. As shown by the bar chart at the top on your right, we've continued our long record of delivering attractive returns with a 10-year through-the-cycle ROCE averaging nearly 13% per annum. What's helped us to achieve this, I think, is effective management of the balance sheet but also conservative gearing.
There's a clear strategy to grow the business, and we've got a wealth of opportunity within the portfolio to achieve that. I believe we manage our assets smartly. We've actively recycled GBP 490 million of capital alone over the last two years, building up a first-class portfolio in both land and development. Our investment portfolio has also outperformed in the short and medium term. This feeds through to the bottom graph, where you can see that we continue to show strong NAV growth. If you add in a progressive dividend policy, it produces a total accounting return of nearly 11% per annum. Finally, also, you can see that our NAV at GBP 3 of share is materially understated as both our land and developments are held at cost.
So in terms of operating profit at GBP 40 million versus GBP 46 million last year, we think that bearing in mind the market that we've been operating in, we're pleased with that result. Going through the operational highlights, first of all, land promotion sold 1,900 plots at an increased profit per plot of GBP 15,000. And you'll remember that that was boosted by a profitable freehold sale at Tonbridge. For our prime strategically located sites, there continues to be demand. And we currently have 1,500 plots under offer. We continue to grow our land portfolio to 100,000 plots. But going forward, there's going to be more emphasis on winning planning consents and then getting sales and less focus on growth. And that's just because we think that the existing portfolio already has scale and is well-balanced. Turning to development, we completed on GBP 111 million of development our share.
100% of that has all been sold and let. Not surprisingly, in the current economic environment, our share of the committed program has reduced to GBP 159 million. The investment portfolio, that's increased in value to GBP 113 million with a total return of 6.7%. Stonebridge has increased annual sales by 43% to 251 homes and is on track to carry on its growth record. On construction, operating profit was below budget. Like many in the industry, we have had two projects that have suffered through delay and price increases. What does all that mean? After you've deducted GBP 9.9 million of central operating costs, and they've risen marginally through increased investment in our people and IT, we produce an operating profit of GBP 40 million. I said I'd run through the medium-term objectives. I'll try and do this pretty quickly because you're familiar with it.
First of all, capital employed GBP 417 million. So we remain on track to getting GBP 500 million. ROCE at 9.9% with the benefit of rounding is just within our target range. Hallam's five-year running average now is 2,850 plots sold per annum. So we're getting up to that 3,500 mark. To achieve development of GBP 200 million, you need to step up your committed pipeline. In a slow market, as I said, it's no surprise that our committed program has reduced. But we can draw down from our development pipeline. And I'll talk more about that in terms of replenishing the developments committed. On the investment portfolio, over the last two years, we've made GBP 42 million worth of sales at an average premium of 19% and have been selective on acquisitions. And all of that in this market has been really good for performance.
There's going to be opportunities for us to grow the portfolio up to GBP 150 million over the next 2-3 years. On Stonebridge, we expect to complete 275 homes this year and more in 2025. On construction, as I've said, we've fallen short of our target in a tough market where the award of projects has been delayed. Finally, on this slide, we continue to be a responsible business. More details of our targets in the appendices of your pack. Then what this slide is showing, I believe, is that we have maintained demand for our high-quality products with nearly GBP 250 million worth of land, property, and home sold. That is up 17%. There aren't many businesses that are coming to you and saying that they have sold more property over the last year.
At the same time, we continue to smartly invest in opportunities for future growth. So if you look at it, first of all, Hallam, we've completed on GBP 65 million worth of residential land sales. We've also grown the portfolio by acquiring 7,000 plots at a cost of GBP 7 million. The next one, HBD, sold GBP 96 million of property. They've also grown their development pipeline to GBP 1.3 billion by adding GBP 150 million through the first phase of Golden Valley. We've brought out our joint venture partner and also secured both local and national funding for phase I. On phase I, we're negotiating with GCHQ to anchor a new national cyber innovation center. Then Stonebridge, we've sold GBP 87 million of new homes. We've also invested GBP 10 million in acquiring a further 670 plots. With that, I'll pass you over to Darren.
So thank you, Tim. And good morning, everyone. If I can take you now through our financial highlights, revenue in the year grew 5% to almost GBP 360 million, reflecting the continued demand for prime high-quality assets despite continued challenges in our markets. This growth was delivered from our strategic land portfolio, delivery of our committed development program, and growth of our house builder, Stonebridge Homes. Gross profit remained resilient on the back of this at GBP 76.8 million. A gross margin of 21% remains healthy and only marginally down on that of 24% in the prior year as we continue to manage material cost and labor inflation. With the prior year having the benefit of a significant one-off joint venture residential land disposal at GBP 9 million, the group achieved a very good underlying profit before tax of GBP 36.7 million given current market conditions.
With operating profit down 14%, our return on capital employed of around 10% sees us at the lower end of our medium-term strategic target of 10%-15%. While earnings per share has reduced 21% to GBP 0.197, we have increased the full-year dividend by 10% to GBP 0.0733 in line with our progressive dividend policy. We'll continue to support a progressive dividend policy. As we've signaled previously, we will look to raise the dividend at a more sustainable level going forward. In 2023, we've continued to focus on delivering existing opportunities in our key markets with selective investments in new opportunities and accretive disposals from our investment property portfolio. Tim will give you a bit more detail on the portfolio later, where values have increased 1.1% on a like-for-like basis.
The overall increase of around GBP 4 million in the period also includes the retention of three industrial assets from our own developments at Luton, Poole, and Markham Vale, offset by those accretive disposals. We've continued to invest in our strategic land portfolio, growing Stonebridge Homes as land bank and work in progress, as well as recycling property returns into our committed development program, resulting in inventories increasing by GBP 6 million overall. Following these investments and also due to increased working capital requirements resulting from land sales on deferred payment terms, net debt increased to GBP 77.8 million. With gearing at 19%, we remain within our target range of 10%-20%. We have a secured borrowing facility of GBP 105 million, which runs to January 2025.
Terms have now been agreed for a new facility with our existing banking partners and are moving through legals with an expectation of being concluded in the second quarter of this year. Finally, our net asset value per share increased 4% to 306 pence or 300 pence excluding the pension scheme surplus. Just looking at cash generation now, the cash flow sees us recycle retained profits and funds from operating activities into continued investment for the future. We started the year with net debt of GBP 48.6 million, having then achieved an operating profit of GBP 40.2 million, adjusting for non-cash items of GBP 1.1 million, and paying interest costs of GBP 3.7 million, tax of GBP 3.8 million, and dividends of GBP 12.7 million. We ended with a cash inflow from operations of GBP 18.9 million.
While our interest costs have increased with our facility having a 1.4% margin over SONIA, each 1% movement in the base rate gives rise to a charge of around GBP 750,000 at our current average debt levels. Overall, our net interest cost also benefits from funding returns on investments made in joint ventures. We then made net investments of GBP 48 million across all areas of our business, including adding to our investment property portfolio, including those which are held in joint ventures, growing inventories relating to the land bank and work in progress within Stonebridge Homes, and delivering our committed development program. With other working capital increasing by GBP 23.6 million, largely due to those land disposals on deferred payment terms, we ended the period with net debt of GBP 77.8 million. We can now move on to the operational review and starting with land promotion.
At 1,944 plots sold, low volumes in Hallam have been offset by a significant increase in gross profit per plot to GBP 15,500, aided by the significant freehold land disposal mentioned by Tim at Tonbridge but allowing them to increase their level of operating profit to GBP 21.4 million, up GBP 4 million on the previous year. Whilst land values have softened down to almost 6.5% according to Savills, we continue to see good demand for our sites in prime locations. We continued to add to the portfolio last year, securing sites with the potential to deliver over 7,200 plots and ending with almost 101,000 potential plots in the portfolio. Whilst sales have continued to reduce plots in the portfolio with planning, having 8,500 plots in stock still equates to almost two and a half years' worth of sales and continues to reflect the delays in the planning system.
We anticipate demand for these plots will continue to increase as we see minimal relaxation in the planning system. With over 13,000 plots awaiting planning determination and applications being prepared ready for submission on over 8,000 plots, all of which have an allocation for residential development in local plans, we fully expect our stock with planning will start to increase. With our portfolio all held at cost, no valuation gain on securing planning is recognised until the land is sold. This continues to reflect a significant uplift of value not recognised within our balance sheet. Finally, having sold 276 plots in 2024 already, we've got a further almost 800 exchange for completion across 2024 to 2026. And as Tim had said, over 1,500 plots currently under offer.
Over the long term, our land promotion business has delivered significant returns with a return on capital employed average in 16.7% over the last 10 years. The scale of the portfolio allows us to mitigate site-specific risks, although we are clearly highly correlated to demand in the housing market, which we can somewhat mitigate through forward sales. With seven regions, we acknowledge the importance of having a local presence both in terms of working closely with landowners and local authorities and planners, especially on the larger sites. With a balance of freehold and promotion agreements, we're able to manage capital investment appropriately between risk and reward, taking advantage of our market at the right time in the cycle when acquiring freehold land. Sites sold in 2023 generated an average internal rate of return of 21%, which we're clearly very pleased with.
They also did take 20 years to deliver from start to finish. As we move forward, our focus is on continuing to increase sales and the output of sites with planning permissions while continuing to grow the portfolio at a modest level. Based on the current portfolio, we've estimated that the risk-adjusted gross profit at today's prices of the whole portfolio is around GBP 700 million, which equates to a gross profit per plot of around GBP 7,000. Here, we can see the geographic spread, which continues to be biased towards the Midlands and South. The portfolio overall continues to be one of the largest strategic land portfolios in the country among the listed house builders.
We continue to see demand for quality sites in prime locations, with demand now returning for larger sites of 4-500 units, evidenced by one such scheme we have in Coventry, where, having taken 500 units of the 2,000 we've got remaining there to the market, we're now looking to sell two parcels of 500 units each to two different buyers on that site. While our five-year average plots disposed of has reduced slightly just below 3,000 per annum, we continue to target 3,500 plots per annum.
We continue to believe that this is achievable from the scale of the portfolio that we have. Likewise, the average gross profit per plot has increased in the period on the back of the freehold disposal at Tonbridge and demonstrates how this metric continues to vary with tenure, volume sales, land price inflation, and location of sales within the UK. Now I'll hand you back to Tim. He'll continue with property investment.
Thank you. So on development, despite rapidly rising interest rates, uncertain markets, and slowing volumes, we've made a relatively strong operating profit of GBP 22.2 million compared with GBP 25.7 million last year. HBD completed on GBP 111 million of development, the vast majority in industrial, all pre-sold and pre-let. Relative to the market backdrop, we've maintained a high level of committed developments at GBP 159 million. 98% of the development costs are fixed. I'll go through that program in detail on the next slide. The majority of our GBP 1.3 billion pipeline is in industrial. There's nearly 200 million of near-term occupier-led schemes which could be started over the next year. The investment portfolio has shown capital growth of +1.1% to GBP 113 million and has outperformed again. I'll go through that on another slide as well. I said I'd look at the committed program. This is it.
You can see we've committed to three industrial schemes totaling 565,000 sq ft. The majority by value has been pre-sold. On industrial generally, while occupier take-up has slowed from the record levels that we saw during the pandemic, demand remains resilient due to structural drivers. Rental growth last year was 6.9%. Consequently, we expect to do more industrial development over the next 12 months. Then we go on to urban, residential, and commercial, which comprises Setl and Island. I'll talk you through those two schemes in a minute. Plus, I'll also give you more explanation on Momentum Rainham. Finally, land and other, where our main commitment is the grant-funded remediation works at Walsall SPARK. Their works are set to complete in Q2. When we draw down the land, we've got the opportunity to develop over 600,000 sq ft in seven units. They're prime units.
They're literally overlooking the M6. That was going to be pre-let led. We're already in negotiations with more than one occupier. If you look at the committed program, we estimate that total profit on those schemes is GBP 23 million. That's an equivalent to a profit on cost of about 16%. Only GBP 7 million of that is being taken. The majority of the GBP 7 million is in Walsall. So I said I'd go through some of the schemes. Just to start off with on a scheme that we completed recently, that's Power Park Nottingham prime development, which we funded with Oxenwood. It completed in quarter two 2023, resulting in a total profit on cost of 22%. Next is Momentum Rainham, where, as you know, we're building in an 80/20 JV with Barings for industrial units which will offer prime NZC logistics serving Greater London.
Completion there is due in Q2 of 2024. We expect to do lettings either side of PC. The scheme is appraised off sustainable rents at GBP 17 per sq ft and shows a yield on cost of around 5.5%. Then there's Island, where we're developing in a 50/50 JV with the Greater Manchester Pension Fund and NZC prime office building right smack bang in the city center of Manchester. We've got encouraging interest from occupiers. Again, we expect to do lettings either side of PC. PC is in Q3 of this year. Rental levels there are at around GBP 44 per sq ft. Our yield on cost is just under 6%. Turning to Setl, we'll complete 102 premium apartments in quarter one of 2024. It's located in the trendy part of Birmingham city center.
You can see some good images here of the apartments. There's also a gym and also a residence lounge. In fact, you might now have the photograph of the gym. We launched pre-sales just before Christmas. I'm pleased to say 30% of the apartments have been secured at our target price. We'll fully launch the sales campaign actually this week. That will include also a sales show apartment. We're on target to achieve a profit on cost of 15%. I said I'd do a bit more on the investment portfolio. I think it's fair to say that the commercial property market has had a tough year with investment sales falling by volume and values down. However, with the improved outlook for interest rates, we do think that the market is picking up.
The bar chart shows our total return compared with the CBRE index over the last three years. You can see with a return of 6.7% in 2023, we outperformed the index, which was at 1.7%. I'll also show the average over three years. Our average is 7.9% per annum. That compares to the index at 3.5% per annum. In the table below, you can see some of the characteristics of the portfolio. It's grown marginally to GBP 130 million. We've broadly balanced accretive sales with retained completed developments. In this respect, we completed on four sales this year plus our head office at a total of nearly GBP 13 million, which showed on average a premium of 23%. The portfolio benefits from a relatively healthy topped-up initial yield of 5.8% and a reversionary yield to ERV of 6.5%.
Also, the occupancy has improved from 88%- 93%. That's primarily due to lettings. We also sold two small vacant buildings. Turning to Stonebridge, as I said, we sold 251 units, an increase of 43% as we scale up this business. The average selling price has fallen to GBP 460,000. That's because we're building more homes in the northeast where prices are lower. During the last year, the sales rate dropped marginally to 0.45, although that was last year's target. In January and February of this year, it's picked up marginally to 0.51. Against a slow market, again, we're pleased with this performance. Demand for our premium homes is proving to be resilient. We're looking to increase homes built this year to 275. 50% of this year's target is already secured.
We've taken the opportunity to buy more sites, with a total land bank increase to over 1,500 or an increase of 40%. Now, in relation to that, we have found that the market has been more balanced. Definitely, people are keener to treat with a good old Henry Boot. But having said that, we haven't found that there are any cheap deals. If you still want to buy a prime site, you pay a reasonable amount of money for it. So on the operation review, I'm going to finish off with construction. The construction segment, like the rest of the industry, has been impacted by cost inflation and supply constraints, yet remained profitable at GBP 6.5 million. Remember, this is a small part of the group. It only accounts for 2% of capital growth.
HBC, as I said last time, has experienced supply challenges on two of our large urban development sites in Sheffield. Both schemes are now completed. So we're expecting to be able to draw a line under them. Our GBP 47 million residential refurbishment at Cocoa Works in York is on budget and on track for completion later this year following significant client additions and variations. Construction has started this year with a below-target order book of 49%.
And this is primarily due to projects where we've entered into GBP 50 million of pre-construction service agreements being delayed. Our aim is to convert these PCSAs during the year. In terms of Banner Plant, it traded marginally below expectations. But Road Link, to coin a phrase, just keeps on trucking on. Both Banner and Road Link have traded in January and February in line with budget. And with that, I'll finish with outlook.
Now, there's no doubt that the rapid rise in interest rates and reduced customer demand across our key markets has affected the business. And of course, the cost of funding our schemes has gone up. But it does feel like we've turned a corner with inflation coming down and interest rates expected to fall. In anticipation of this, fixed-rate mortgages have already adjusted. And there are signs that the housing market is beginning to pick up. Bearing in mind the dysfunctional state of the planning system, this is likely to increase demand from house builders for our land. In a similar way, we sense that investors are beginning to again look at commercial and build-to-rent property. Whilst we start the year in the circumstances with a strong order book and I set out the order book there, the year will be heavily half-to-weighted.
Moreover, we've got conviction in our markets and also got conviction in our positioning in the prime premium part of those markets. This, together with our robust balance sheet and the portfolio, which is rich with opportunity, means we remain confident we can achieve our medium-term growth targets and also continue to generate attractive returns to our shareholders. Thank you. So questions. Morning, Sam.
Morning all. Sam Cullen from Peel Hunt, too, initially. The first one, element of crystal ball, I guess. But in terms of heavily weighted to H2, what's your current expectation? And is there any kind of particular risk in that number associated with one or two projects? I think they slipped to the right. Are we even more weighted to the second half? Do you want the second one now? Or do you want them one at a time?
Yeah. No, go.
Yeah. And then just the second one is on working capital outflow, obviously kind of highlighted, deferred payments from house builders. Should we expect that to continue in 2024? I have another working capital outflow. Also, how important is the kind of slowdown of the construction business in that working capital?
Okay. They sound as though they're CFO questions, don't they?
They do indeed. Starting with the first one, heavily weighted to H2. It could be very heavily weighted to H2. I think we've got a chance with what we're doing in the property development business in terms of what Tim's just said around Setl PCSA and hopefully shortly. And we'll have the sales off that. But the big driver that we normally see in H1 is the strategic land business, where a lot of their sales will have been worked up during the previous 12 months to conclude as we start the new year.
Given what the house builders have been through and what we've seen in that market, they are still transacting. They are still taking land from us. But at the moment, everything is being lined up towards the middle and later end of this year. The kind of plots that we've got exchanged already, 750-ish, a big part of that is a site at Swindon that will conclude in July. And then the 1,500 that we've currently got under offer, most of it is weighted towards kind of Q4, which will put a very heavy weighting for us on the second half of the year overall.
Okay. And then I think, Darren, also in terms of the phasing of land payments, at the moment, house builders and indeed, when we're buying land, we're still looking to phase the payments. So I think that in the immediate future, that is unlikely to change. But then will it ultimately change? Yes, it will. And it'll ultimately change because basically, as a country, we're still very poor at granting enough planning consents for the demand for housing. And that fundamentally is always going to drive the market. So Christen, did you have your hand up, didn't you?
I did. Thank you. Christen Hjorth from Deutsche Bank . Three for me. The first one just on capital allocation and the capital employed target. I mean, you rightly pointed to the fact that the value of the balance sheet is above the book value. But you've got a share price, which is below the book value. So is it still right to grow capital employed to GBP 500 million? Or are there things like buying back your own shares, for example, which are considered at the moment?
The second on development, it sounds like there's a lot of potential opportunities in the pipeline. How quickly can you pull them down? And what do you need to see? Is it just a lower interest rate? Is that all? And then just finally, just on construction, as you say, it's a small part of capital employed. But I'm sure it does take some management time. How does this fit into the portfolio going forward?
Yeah. Okay. Right. And I think, Sam, you also asked about construction, didn't you? Sorry. Yeah. So I'll go in terms of capital allocation. I think medium and long term, it's absolutely right that we continue to grow the business. And we continue to grow the business for two reasons. One, we think that having scale in our markets is our friend. We've already got scale in land promotion. That's the UK-sized business. Development is getting there. But I think that we, again, could grow that business and have a more sustainable committed program. And that's in line with our medium-term targets. And then three, Stonebridge needs to grow because it needs to get scale to get the economies of scale and the economies of brand. So it's right for the business in the medium term for us to be bigger.
And you all know that if we're bigger, also we'll be more relevant to the equity markets. And again, I think that ultimately, that will be good for our shareholders. Now, in terms of you asked about buybacks. I mean, we're open-minded about buybacks. But at the moment, if you look at the opportunities for growth within the portfolio, we still believe that our capital is better deployed by carrying out the medium-term strategy of the business. And as you've heard me say a lot of times, and it has been drummed into me rightly by the board, Henry Boot is a long-term business. Then I'll have a go on the I'll guess which one I'm going to leave you to, the construction. You're going to have a very polished answer by the time you get there, right? So then you talked about development opportunities.
And it's referred to in the prelims. And I've referred to it this morning. There is GBP 200 million of industrial developments. I mean, the industrial development market is still a good market. It's just not as good as it was because it went through a really, really golden patch coming out of COVID. And we think that we will commit to a reasonable proportion of that GBP 200 million. And it will be occupier-led. So we won't be building big spec developments. We'll be building development. And it'll either be wholly or partly pre-let. So I think that we're excited about that. And then finally, construction.
So on construction and the link through there to both capital employed and working capital, the capital employed in the construction segment is very small compared to the capital of the whole group. So it's not a huge concern. It doesn't have a major drag on working capital requirements. Within that segment, as you'll know, we've got traditional contracting business, the RoadLink, PFI, and Banner Plant. It's actually Banner Plant that has the most capital employed. And clearly, in the current environment, we've been very cautious with our kind of capital spend on new equipment going into that business.
Okay. Adrian.
Morning. Adrian Kearsey, Panmure Liberum. Earlier, you sort of talked about headcount. Would you be able to sort of give some sort of comments on headcount and management bandwidth for Stonebridge Homes over the next few years? And perhaps also the same with Hallam. As you're changing the focus in terms of mining the existing 100,000 plots more, does that change the way in which you staff that operation in terms of skill sets?
Yeah. Okay. So if you look at Henry Boot over the last four years and I choose that period because that's how long I've been there for, actually, the headcount as a whole, including Stonebridge, has been relatively flat. It has moved. But it's been relatively flat over those four years. Going forward, I think that Stonebridge, the headcount will grow there. But it might not grow as much as you would expect because we've grown it in anticipation of it being bigger. And I think that's the right thing to do, isn't it? I mean, we don't want many growing pains. And we've got an ambitious growth target on Stonebridge. So we want to make sure that operationally, it's resourced properly. And if you're thinking about what I said in my speech about investing in our people, the big increase in cost is actually salaries.
So like everybody else in the country, we've been paying our people more money. Then also, you talked about Hallam. And Hallam is a very tight ship. So we will employ less than 40 people in Hallam. And the vast majority of them, probably 90%, are highly qualified professional people. And I think that going forward, could we see that we would employ more people? But for us, more people might be I'm making this up a bit four or five. So I don't think it's going to get to the point where that affects your models. But what I do believe is that we have been very good at creating a first-class land portfolio. And I think that at some stage, as a management team, you've got to kind of have emphasis, haven't you? And I think our emphasis going forward should not be growing it.
We will keep on growing it. I'm not saying this is an end to growth. But if you look at how much it's grown again over the last four years, I want to say that when I came, there was 60,000 plots. Yeah? It's 101. I can't do the math. But it's 40,000 plots more. I don't know. That's probably 15% per annum growth. It won't be like that going forward. Will it keep on growing by 4,000, 5,000 plots? Yes. But we want more emphasis on getting planning. The planning is undoubtedly more complicated.
But I think that we have got the capability to deal with that complexity. What we've got to do is in terms of directing our resource, we've got to direct more time to really, really pushing every planning timetable. If you do that, it will make a marginal difference. A marginal difference on a pretty big business will help. Then I think also, we want to become even slicker. I think that we're really good at doing deals. But we want to be slicker at getting the deal going from planning consent, almost ready to marketing, to marketing through to exchange. If we can do all of that, then that will help our return on capital employed.
Clyde Lewis, Peel Hunt, three if I may. It'd be useful to get an update on your view on costs. And I think you've obviously sort of flagged the two issues in Sheffield. And you think those are the last of them. But it'd be useful to get an idea as to what you think you're seeing cost inflation running at now, particularly on house building versus commercial or development side of it. Second one around sort of investor appetite not investor stroke, house builder appetite in March, I suppose, in particular.
How has that changed? I mean, we're pretty much at the end of the month. Have you seen a sort of a pickup in sort of interest levels? Or again, swap rate movements sort of put a few back in the box in terms of sort of schemes? The last one was really coming back to Stonebridge and house building. You still only own half the business. Are you tempted to look for Plan B to try and grow that faster, maybe away from the Yorkshire region?
So why don't I start off with the investor and house building part? Perhaps you have a go on the cost. And then I'll come back and remind me, Clyde, if I forget, on Stonebridge. So I think that in terms of investor appetite and by that, I think you're talking about the commercial property market. I think that's picked up slightly. And I think that in terms of the two markets that we're in, in the industrial market, you can sell industrial investments. The market adjusted at the back end of 2022 and partly at the beginning of 2023. So there is investor appetite for the product that we develop and finish. The funding market is selective. And I think that if we had the right product, we could get funding.
For us, the question will be, well, do we want to use our balance sheet? Or do we want to get funding? Because not surprisingly, there will be a cost to us of funding. It's a question of often how much capital we want to employ in a project and what risk we've got in that project. In other words, how big is it? We'll keep on balancing that. Is the choice over balancing that as good as it was in 2022? No. But is there some choice? Is there some activity? Yes, there is. In terms of house builders buying land, as you will know, during 2023, the house building market was more subdued. We've shown today, haven't we, with nearly 2,000 plots sold and 1,500 offers, there is a market out there. I think if anything, that market has improved.
So we definitely started to see house builders be more interested in buying land in the lead-up to Christmas. And indeed, we did a big transaction, Swindon, just before Christmas. And it's big by anybody's standards. I mean, on a gross basis, it's over 2,000 plots. So it's a big deal. And I'm sure that if house builders generally weren't getting more confident, we wouldn't have done that. Because it's not just about one party, is it? That party will have bought Swindon because it's aware that other parties are interested in Swindon. And Swindon is a prime strategic site. So I think there was a pickup in interest just before Christmas. And I think that's kind of all logical because the fixed-rate mortgages started to go down. It felt as though Christmas was a bit better than the autumn had been.
And then I think, again, the year at Stonebridge, we've started the year in good shape. You cover the results of the house builders. I think most of the house builders are feeling a bit more confident about life. I mean, we're still fundamentally waiting for the interest rate cut, aren't we? But we've marketed a site in Coventry. It's a reasonable-sized site, 500 units. And we've got good interest in that to the extent that we're thinking about putting another 500 units on the market. We've got about 2,000 to sell, haven't we? And we wouldn't be doing that if we didn't think that the market was reasonably deep. So that's encouraging. So do you want to do construction?
In terms of cost inflation, so on the house building side, last year, clearly, we started pretty high going into the year. Across the year, we've probably seen around 8%-9% inflation. So still relatively high. But we did see that come off towards the end of the year. And that pretty much makes sense if you look at where the national house builder volumes have gone. So current expectation within that business is that we'll be running somewhere between 2% and 4% as we go through this year. I think on the commercial side, a bit of a different market. And therefore, it probably held the inflation that bit longer. But we've now had seven months where the PMI index has been below 50. So effectively, a contracting market there. And that is starting to come through.
The BCIS index for tender price inflation is currently running at 3.5%. We're probably seeing something akin to that at the moment. Although I think the one thing I'd add from a property development side is because the volumes of workload are coming off a bit, we are seeing that bit more competition in pricing from the kind of contractors. Probably holding prices rather than seeing the inflation continue there.
And then in terms of Stonebridge, Henry Boot sees Stonebridge as a long-term growth business. We've got a good partnership. We get on well with our partner. The partnership's been going on for about 10 years. But I think it's fair to say that that partner doesn't see the business as long-term. What we've got to do at some stage is hopefully, Henry Boot agree terms to buy that partner out. But I'm not quite sure when that will be.
You wouldn't see another sort of a different business, maybe in the southern markets rather than using Stonebridge in southeast?
Yeah. Yeah. Open-minded to it. And not surprisingly, there is quite a long list of house builders, big and small, that might be available. But our preferred approach would be to grow Stonebridge. And that's because, A, we like the premium nature of it. And actually, if you look at the long list of house builders and I have looked at the long list of house builders that could be available, you can count the premium ones on half of one hand, can't you? So there's not a lot of opportunity. And we like Stonebridge because if you think about what we're saying is that we want to be in the prime end of real estate. So Stonebridge absolutely suits that. And then also, it's a business that we know very well because we're heavily involved in the running of it. It's not a distant partnership.
And we think that it's got good growth potential. So we like it. So the preferred route will be in terms of where we're going in the short term, the preferred route will be to carry on growing it. And we haven't agreed anything. So I'm not saying this is going to happen. But then would we like to buy out our joint venture partner at the right time? Yes, we would. And then would we be open to acquisitions? Yes. But it's just a big thing, isn't it, going and buying a business? Yeah.
Sorry, just to follow up. Just on your answer to the.
So this is Sam.
Sorry, yeah, Sam again from Peel Hunt. One supplementary, I guess, on the land business and the kind of switching emphasis from, I guess, sowing to harvesting, what you've got. Would you have done that absent of the changes to the planning backdrop we've seen in the last couple of years? Do you think, and how much is it being driven by your needs but more kind of resource into bringing things through?
That's a really, really interesting question. I think it's a mixture. It's a mixture. I think undoubtedly, because the plannings are getting so complicated, I think the only way that you deal with complexity is you've got to throw more resources at it. So that's a big part of it. And then the other thing is on the 100,000 portfolio, I mean, it's absolute classic, isn't it? You can model it all. You can model all the returns that you've made over the last 20, 30 years. Christen, you would love it, right? You can model all the returns over the last 20, 30 years. You can kind of work out how long you typically hold plots, what your chances are of planning. And don't forget, our planning success rate is very, very high. And that's not just because we're brilliant at what we do.
It's also because we have more than one bite of the cherry. So if we don't get planning, sometimes we just put it back in the portfolio and then go and get planning five years later, yeah? So you can model all of that. And we do. And if you look at it, because of the size of the portfolio, we think that over the medium term, we've got more than enough sites to generate the sorts of profits. And Darren, you talked about an average operating profit of just over GBP 20 million, didn't you? We've got more than enough sites to do that and some more. So we think the portfolio, and I like what you say, is ripe for harvesting now. So it's a mixture. OK? Any more for any more?
We've got a few that have come through on the web.
Oh, so are you going to be the question master, [Richard]?
I am, yes.
All right. Be gentle with me.
The first one is from Alastair Stewart, Progressive Equity, who some of this, I think you've covered. But I'll read out the whole thing anyway. So he said, a few related questions on land promotion. Can you give a bit more color on activity and interest from house builders so far in 2024? For instance, how do the 276 plots disposed of and 793 exchanged compare with the same period in 2023? Was there a particular low point during 2023 to compare this latest rate with? And has the interest from house builders so far this year been on an increasing trend? And what sort and size of house builders have been buying? And are there any regional trends?
Yeah. OK. Well, we've covered a lot of it. But just to give him a direct answer, the market today is better than it was a year ago, yeah? And there is definitely a marked increase in confidence. And then there seems to be a bit more liquidity as well. And that's the reason why we talked about Coventry. We're thinking about putting another 500 plots on. Normally, we would let the market digest that and give a period of time. Last year, definitely. So I think that's a sign of a pickup. Then in terms of the trend, if you are doing 500 units, it will be the national house builders, obviously. And a lot of the house builders are bidding. So on Coventry, we would have had 6 bids, yeah?
Then if you go to what I fondly call the bite-sized chunk sites, if you go to those, we've had a number of those that have exchanged or gone under offer just in the lead-up to Christmas. And they might be 100 units. And there, you will still get some of the national house builders because they're filling in bits of the portfolio. But you'll get the regional house builders as well. And there's still a market for that.
And on some of the bite-sized chunk sites, which isn't a very technical term—he'll tell me off for using that—we might be getting eight or nine bids. And don't forget, we see it from the other side as well. So with Stonebridge, do we think that it was the right time to buy sites last year? Yes, we do. I think that by anybody's standards, we've materially improved the land bank. It was the right thing to do. But we saw no distress in the market. Nobody was coming and giving us what I would consider to be a cheap deal.
OK, thanks. So this next one's probably for Darren. So from David O'Brien at Equity Development, debt rose towards the top end of your stated gearing range, reflecting investment in developments and lands. Do you feel that investment is likely to decline relatively in FY24 as a result? Or should we expect this to continue and gearing to rise above 20%?
I think through 2024, given the amount of committed development we've got underway, that we'd expect debt levels to continue. We'd like to keep it within the 10%-20% gearing range, likely towards the top still. But we've got to start recycling some of the capital from the developments that Tim's been talking about before we see debt reducing, likely in 2025.
Unlikely to be outside the optimum range.
Great. Thanks. So Andy Murphy from Edison, lagging performance in 2024. Are you suggesting that 2023 will be the nadir or that H2 recovery is unlikely to result in profit growth in 2024?
So I think in terms of market sentiment, it's clear. And you're all in the market. 2023 will be the nadir. But there's a bump. We are fundamentally a trading business, aren't we? And there's a lag between us putting a spade in the ground and building a building and producing profits. Because again, we're pretty conservative. We like to finish buildings before we take profit. And that means there'll be a lag.
So we feel in an upbeat mood, A, because we believe we produce good results, bearing in mind the market that we've been in and bearing in mind what our competitors have done. But two, we do, to coin the phrase we've been using, feel as though our markets have turned a corner. So we're upbeat. But we're also being sensible that we know that that improvement, there will be a lag. That's why we're saying today it's going to be H2 weighted. Then hopefully, in 2025, we'll continue the progress. I mean, that is definitely our ambition.
Great. Thanks. So another question.
Feel as though I'm being interviewed by [Richard].
Feel free to jump in, anyone. So the strategic shape of the group, is it likely the group will remain in its current shape? Or might any divisions exit in due course?
Well, we're clear, aren't we, about our strategic focus? And we also want to be sensitive because everybody at Henry Boot, and I feel this very passionately, works their socks off for all the shareholders. But the clear focus is HBD with an emphasis on industrial, growing that business. Hallam, actually, to coin your phrase, Sam, harvesting more. I mean, that is already a Rolls-Royce business. And then growing Stonebridge, they're the clear focuses. And that's what you will hear management saying we're focusing our capital on and our attention on.
That's clear. I thought I'd say this one to last for you too, because I know it's your favorite topic. Go with recent planning changes. To what extent do you anticipate that this will affect the business? And secondly, do you see a change of government as positive for Boot and the wider sector?
OK. First of all, in terms of change of government, and again, you will all know this, if you look, actually, most businesses want elections to happen. And then after elections, there's very rarely much change in GDP growth or fiscal or monetary policy. So we're agnostic. And what we want is we want stable monetary, fiscal, and planning regimes to operate in. And if we have that, we're happy. So that's the main thing. Then in terms of the changes to the planning, it's tactical.
And the government has implied it's going to have reform in the planning system two or three times. And each time, it's backed away from that. And the government's changes are very tactical. In the short term, it is likely to mean that local authorities progress development plans just a bit more quickly. Bearing in mind, a big part of our business is influencing development plans to make sure that our land is allocated. Darren gave you some good stats of how many plots that we've got allocated for residential. Was it 9,000?
Yeah.
9,000.
9,000.
Yeah, nearly 9,000 plots, yeah. So we're good at that. So net, net, very, very marginal improvement for Henry Boot. But more fundamentally, the planning system is letting the country down. It's not about house builders and commercial real estate. It is letting the country down because there is that much complexity and delay and cost in it. And all you've got to do is look at the CMA. I mean, the CMA, we're asked to investigate house building. Really, the kind of question was, are house builders using their land banking and their land portfolio to distort the market? No, we're not surprised about that at all. They're doing it because they need land portfolios, because the planning is so uncertain. And what does the CMA say? Planning system is complicated and fraught with risk and needs to be reviewed. And it does.
Great. Thank you. That's all we've got.