Henry Boot has struck a £4m deal to offload its contracting arm in a management buyout.

The Sheffield-based developer has agreed to sell Henry Boot Construction to the existing construction leadership team of managing director Lee Powell, finance director James Smith and commercial director Chris Weathers.

The move follows a major restructuring that saw Construction shrink to a £50m turnover business making a £2.7m loss last year.

The management team now expects to break even in 2025 with 94% of work already secured.

Under its new ownership the business will be rebadged as HBC Construction Group, giving managers more freedom to grow the order book.

Henry Boot will fund the deal with a vendor loan note running for five years at 2.1% over base rate.

The sale marks a major step in Henry Boot’s strategy to concentrate on land, property and housing development, with construction no longer part of its long-term growth plan. The disposal also cuts group headcount by more than a fifth.

Extra payments could flow back to Henry Boot if HBC delivers profit margins above 3% or is sold again within eight years.

The transaction, which includes the Banner Plant business, is expected to complete at the end of this year.

The main group will provide temporary support to the contracting business under a transitional services agreement, with operational oversight from two Henry Boot representatives on the HBC board until the point when the sale loan has been repaid.

Chief executive Tim Roberts said: “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.“

The deal was announced as Henry Boot Group this morning reported a 19% increase in revenue to £126m in the half-year to June, driven by land and property disposals and profit before tax of £7.8m (H1 24: £3.7m).