TIDMHWG
RNS Number : 7613G
Harworth Group PLC
06 March 2018
HARWORTH GROUP PLC
UNAUDITED PRELIMINARY RESULTS FOR THE YEARED 31 DECEMBER
2017
STRONG DEVELOPMENT AND INVESTMENT ACTIVITY DRIVES DOUBLE DIGIT
GROWTH
Harworth Group plc ("Harworth" or the "Group"), the brownfield
land and property developer & investor, announces its
preliminary results for the year ended 31 December 2017.
31 December 31 December Change
2017 2016 (%)
------------------------------------- ------------- ------------ -------
Net Asset Value ("NAV") per
share (p) (1) 127.4 114.6 11.2
EPRA NNNAV per share (p) (1) 128.9 114.6 12.5
EPRA NAV per share (p) (1) 131.0 119.8 9.3
Operating profit before exceptional
items (GBP'm) 39.7 45.2 (12.0)
Operating profit before exceptional
items plus joint ventures (GBP'm) 43.8 45.8 (4.4)
Value gains (GBP'm) (2) 41.6 43.7 (4.8)
Value gains (including development
properties) (GBP'm) (3) 47.4 43.7 8.6
Profit excluding value gains
(GBP'm) (4) 2.2 2.2 1.2
Earnings per share (p) 15.8 13.7 (5) 15.4
Dividend per share (p) 0.828 0.753 10.0
------------------------------------- ------------- ------------ -------
Harworth's Chief Executive, Owen Michaelson, said:
"These are another strong set of results where we have again
delivered double digit EPRA NNNAV growth, reflecting our continued
ability to maximise the value of our portfolio whilst
simultaneously growing our strategic landbank and income base
through acquisitions and new lettings.
"Our focus, on the "beds and sheds" sectors in the North of
England and the Midlands, is firmly underpinned by strong economic
and consumer trends in the regions, and reinforced by supportive
Government policy. This favourable backdrop coupled with active
management has been reflected in 2017's planning successes and the
sales and lettings achieved at our major developments such as
Waverley and Logistics North.
"Whilst our existing sites continue to perform well and have
plenty of future potential, we are also pleased with the progress
of the five new acquisitions to our strategic landbank, which were
acquired with the cash proceeds from new equity raised last March.
These acquisitions delivered significant revaluation gains in 2017
and provide a substantial pipeline for us to deliver further value
gains through our market-leading planning and development
expertise.
"2018 has started strongly, with over 50% of expected full year
sales already agreed since the year-end and the completion of three
new lettings generating additional recurring income, further
demonstrating the success of our proven and robust strategy. This
performance, together with the supportive market fundamentals in
the areas in which we operate, means we look to the future with
confidence."
GOOD OPERATIONAL PERFORMANCE REFLECTED IN ALL KEY FINANCIAL
METRICS
-- Another year delivering double-digit EPRA NNNAV growth,
up 12.5% (2016: 12.5%), with 80% of value gains(2)
generated through active management
-- Value gains (including development properties)(3) increased
by 8.6%, reflecting strong planning, lettings and sales
progress and uplifts on acquisitions made in 2017
-- Earnings per share up 15.4% to 15.8p (2016: 13.7p(5)
) reflecting solid operating profit advances and positive
improvements in deferred tax
-- Dividend per share increased by 10% to 0.828p (2016:
0.753p) in-line with our progressive policy
-- Prudent gearing maintained with net loan to value 7.0%
(2016: 9.9%) or 20.8% when calculated against the income
portfolio (2016: 31.3%)
LAND BANK STRENGTH PROVIDING PLATFORM FOR CONTINUED TOTAL RETURN
OUTPERFORMANCE
-- March 2017 GBP27.1m equity proceeds fully invested
through the acquisition of five sites, providing over
410 acres of development opportunities. Over the last
three years, value gains on acquisitions of more than
15% p.a.
-- Planning secured in 2017 for the delivery of 825 residential
plots and over 3m sq. ft of commercial space bringing
our consented portfolio to 10,448 residential plots
and 12.13m sq. ft of commercial space
-- 622 residential plots sold (2016: 619 residential plots),
across six parcels, at an average value of c.GBP37,000
per plot, achieving profit on sale of GBP3.8m. Over
850,000 sq. ft of commercial land sold (2016: c.500,000
sq. ft), across five parcels for GBP22.7m, delivering
a profit on sale of GBP4.3m
-- Over 360,000 sq. ft of long-term lettings completed
on five new commercial buildings, to logistics and
manufacturing occupiers, at new headline rents alongside
other portfolio rent improvements
ALL AREAS OF THE BUSINESS SUPPORTING GROWTH STRATEGY AND 2018
PROGRESS
-- No shortage of acquisition opportunities: GBP0.6m spent
in February 2018 on an adjacent site with direct development
potential; six signed land option agreements in place;
preferred bidder on a further significant acquisition
opportunity; and Harworth has an option and planning
promotion position on a major Midlands opportunity
with the potential to deliver 3,000 residential plots
and 500,000 sq. ft of commercial space
-- Strongest ever start to a year with over 50% of expected
full year 2018 sales agreed above book value
-- All completed, wholly-owned, direct commercial developments
now let (c.120,000 sq. ft in 2018), with only three
co-interest units (c.170,000 sq. ft) remaining to be
let
-- Three-year planning targets of 4,500 residential plots
and 5.9m sq. ft of commercial space, including applications
currently in the planning system. Looking to achieve
planning on over 1,000 plots and over 300,000 sq. ft
during 2018
-- Process begun for moving from standard to premium listing
on the London Stock Exchange in 2018
Footnotes: (1) Following the March 2017 equity capital raise to
accelerate the acquisition of strategic land for development and
the further evolution of our strategy, GBP229.1m of property has
been re-categorised from investment to development in the year.
Balance sheet measures include NAV and EPRA NNNAV which, is now our
primary metric and, includes the mark to market value of
development properties (GBP5.8m) less notional deferred tax on
development properties (GBP1.0m). EPRA NAV is EPRA NNNAV excluding
deferred tax (GBP5.5m), notional deferred tax on development
properties (GBP1.0m) and the mark to market movement on financial
instruments (GBP0.1m)
(2) Value gains comprise profits on sale of: investment
properties (GBP2.9m); development properties (GBP7.7m); and assets
held for sale (GBP0.1m), plus the increase in the fair value of
investment properties (GBP32.1m), joint ventures (GBP4.0m) and
overages (GBP0.6m) less the impairment of development properties
(GBP5.8m)
(3) Value gains (including development properties) comprises
value gains (GBP41.6m) plus the increase in the fair market value
of development properties (GBP5.8m)
(4) Profit excluding value gains is operating profit before
exceptional items plus joint ventures (GBP43.8m) less value gains
(GBP41.6m) and pension costs (GBPnil)
(5) The 2016 EPS has been restated following discussions with
the Financial Reporting Council and their review of the 2016
Financial Statements, which did not correctly reflect the effect of
the May 2016 1 for 10 share consolidation on EPS.
-S-
Enquiries:
Harworth Group plc Tel: +44 (0)114 349 3131
Owen Michaelson, Chief Executive | Andrew Kirkman,
Finance Director
FTI Consulting Tel: +44 (0)20 3727 1000
Dido Laurimore | Richard Gotla | Tom Gough Harworth@fticonsulting.com
ABOUT HARWORTH GROUP PLC
Listed on the main market, Harworth Group plc (LSE: HWG) is a
leading brownfield land and property developer & investor which
owns and manages a portfolio of c.21,000 acres of land on around
135 sites located throughout the Midlands and North of England. The
Group specialises in the regeneration of former coalfield sites and
other brownfield land into new residential developments and
employment areas. (http://www.harworthgroup.com)
While the financial information included in this announcement
has been prepared in accordance with the recognition and
measurement criteria of International Financial Reporting Standards
as adopted by the EU ("EU IFRSs"), this announcement does not
itself contain sufficient information to comply with EU IFRSs. The
Group expects to publish full financial statements that comply with
EU IFRSs by the end of April 2018.
This announcement contains certain forward-looking statements
which, by their nature, involve risk, uncertainties and assumptions
because they relate to future events and circumstances. Actual
outcomes and results may differ materially from any outcomes or
results expressed or implied by such forward looking statements.
Any forward-looking statements made by or on behalf of the Group
are made in good faith based on current expectations and beliefs
and on the information available at the time the statement is made.
No representation or warranty is given in relation to these
forward-looking statements, including as to their completeness or
accuracy or the basis on which they were prepared, and undue
reliance should not be placed on them. The Group does not undertake
to revise or update any forward-looking statement contained in this
announcement to reflect any changes in its expectations with regard
thereto or any new information or changes in events, conditions or
circumstances on which any such statement is based, save as
required by law and regulations. Nothing in this announcement
should be construed as a profit forecast.
Chairman's Statement
I am pleased to present the Group's preliminary results for the
financial year ended 31 December 2017, which reflect another strong
year of growth for the business. EPRA NNNAV is now the Group's
principal financial measure following the evolution of our business
model and the re-categorisation of properties from investment to
development. EPRA NNNAV grew by 12.5% per share (2016: 12.5% per
share) to 128.9p (GBP414.2m (includes GBP27.1m equity capital
raised during 2017 which has been fully deployed)) from 114.6p per
share in 2016 (2016: GBP334.9m).
STRATEGY AND PERFORMANCE OVERVIEW
Following this year's review of the strategy the Board has
reaffirmed our vision: to be the UK's leading developer and
brownfield land regeneration partner of choice. Alongside this, we
have refined the way we articulate our strategic priorities which
are now identified under six headings (development, investment,
sectors, regions, acquisitions and financing). We have also
highlighted the direct links to the business model, key performance
indicators and risks. This will be reflected in future
communications with investors, including in the 2017 Annual Report
and Financial Statements.
Development
The Group continues to meet its target to grow EPRA NNNAV by at
least 10% per annum as a consistent average. Growth is driven
principally by the development activities of our Capital Growth
team, including planning promotion, land remediation, engineering
and infrastructure development, and, finally, profitable sales.
The Group achieved a number of significant planning successes
during the year for the future delivery of 825 residential plots
and over 3m sq. ft of commercial space across four sites, with the
most notable achievements at our sites at Thoresby and Kellingley.
Residential and commercial sales have remained strong, both in
terms of volumes and pricing, underpinning and realising value
gains. We continued to sell to both new and repeat housebuilders.
The first sale of land for commercial use at Wheatley Hall Road to
Arnold Clark illustrates our increasing points of sale across the
portfolio. The sale to Exeter/First Industrial at Logistics North,
generating a healthy profit on sale, shows the continuing demand
for space at our most mature sites.
Investment
Our ambition remains to cover the Group's operating costs,
interest, tax and dividends from ongoing rental and other operating
income. We have continued to make good progress towards meeting
that commitment, led by the investment returns delivered by our
Income Generation team. In 2017, those investment returns have
contributed 27% of value gains and yields of 7.0%.
During the year we secured over 360,000 sq. ft of major new
commercial lettings, including to McLaren Automotive at the
Advanced Manufacturing Park ("the AMP") and to Whistl at Logistics
North, the latter on behalf of M&G Real Estate, our forward
funding partner. We undertook direct development at the AMP and at
Logistics North, both in joint venture with Lancashire County
Pension Fund ("LCPF") and on our own account. Following further
progress on lettings at the start of 2018, all of the wholly owned
direct developments in our Business Space portfolio are now
let.
Sectors and regions
We continue to see strong demand for our "oven-ready"
residential and commercial sites, and direct developments in our
core markets in the North of England and the Midlands. This has
been affirmed by the sales and lettings we have completed during
the year alongside the volume of interest in our sites and
units.
Acquisitions
We recognise the importance of sustained momentum in the
business. By the end of 2017 we had successfully deployed the
GBP27.1m of equity raised in March 2017 through the acquisition of
five new sites with residential and commercial development
potential. Those acquisitions have already produced significant
revaluation gains during the year, cementing our record of growth
from the sites we have acquired since 2014, when the business began
to replenish its portfolio.
We have a healthy pipeline, with six options now in place on
circa 417 acres of potential development land and a number of
acquisition opportunities being explored, including a substantial
brownfield site on which we are preferred bidder.
Financing
In February 2018, we extended the availability of our debt
funding by agreeing a two-year extension to our GBP75.0m revolving
credit facility with RBS to February 2023 with only a 10 bps
increase in margin to 210 bps. In 2017 we also secured a GBP5.0m
increase in our bonding facility to GBP15.0m. We have continued to
use public infrastructure loans to accelerate development. Our net
loan to value remains low at 7.0% (2016: 9.9%) or 20.8% when
calculated against the income portfolio (2016: 31.3%). We believe
our policy of prudent gearing is well suited for land-focussed
development businesses such as ourselves.
DIVID
The Company's policy is to grow the dividend in line with the
growth of the business, and pay it from recurring income and
realised value gains from disposals. The Board will not distribute
unrealised gains recognised on the revaluation of property and will
retain a proportion of its recurring income and realised gains for
reinvestment in acquisitions. We declared and paid an interim
dividend of 0.253p per share in October 2017. The Board is
recommending a final dividend of 0.575p per share (2016 final
dividend: 0.523p). This gives a total dividend of 0.828p per share
(2016: 0.753p) being a 10% growth in dividend per share for the
year. Subject to shareholder approval at the 2018 Annual General
Meeting, the final dividend will be paid on 1 June 2018 to
shareholders on the register as at close of business on 4 May 2018.
The ex-dividend date will be 3 May 2018.
SUCCESSION
I have now been Chairman for more than seven years, during which
time I am pleased that Harworth has grown into the respected
regeneration business it is today. In the five years since Harworth
became a standalone business, following our solvent restructuring
of UK Coal plc, the Group's NNNAV, including capital raised, has
grown by an average of c.14% per annum to GBP414.2m.
With strong foundations in place, now is the right time to hand
the reins to my successor, for the next stage of Harworth's growth
and development. As previously announced, I will not be standing
for re-election at this year's Annual General Meeting and I welcome
Alastair Lyons CBE as my successor. Alastair's appointment will
take effect after the announcement of these results on 7 March
2018, at which time I will step down as Chairman, retiring from the
Board at the end of March.
OUR PEOPLE AND PARTNERS
I feel privileged to have worked with a talented and hardworking
team at Harworth, supported also by our advisors and partners. The
team continues to grow and mature with the business. In the last
year, we recruited six new roles and made a number of promotions.
Half of our recruits were women, confirming that promoting
diversity across the business remains a priority.
I would like to take this opportunity to thank all of the
Harworth team and my Board colleagues for their hard work and
contribution throughout the time I have been Chairman. I would also
like to extend my thanks to our investors and wider stakeholders
for their support through the transformation of Harworth over the
last seven years.
OUTLOOK
Harworth is well positioned for the future. We have a robust
strategy and business model, a proven track record and a pipeline
of opportunities for replenishing our strategic land bank and
property portfolio. Our core markets in the North of England and
the Midlands continue to perform well. There continues to be a
shortage of housing in the areas in which we operate and strong
fundamentals underpinning growth in the logistics and advanced
manufacturing sectors. Government policy remains supportive, with
strong backing for brownfield development, prominent housing
initiatives including the extension of Help to Buy, and a continued
focus on regional investment and devolution.
Against this backdrop, the outlook for the business remains
favourable. I wish the entire Harworth team the very best for the
future.
Jonson Cox
Chairman
6 March 2018
Chief Executive's Statement
This is another excellent set of results reflecting a strong
year of progress for the business. The Group once again delivered a
year of double-digit NNNAV per share growth of 12.5% (2016: 12.5%),
with a NNNAV of GBP414.2m at the year-end (2016: GBP334.9m). This
includes value gains of GBP47.4m(3) (2016: GBP43.7m), ahead of our
expectations, and profit excluding value gains rose marginally to
GBP2.24m(4) (2016: GBP2.21m).
DELIVERing Our STRATEGY
Against the backdrop of our strategic priorities, our
operational focus also remains unchanged: extracting maximum value
from our predominantly brownfield land portfolio in the North of
England and the Midlands to grow EPRA NNNAV; building our recurring
income base to cover operating costs; and acquiring brownfield and
urban extension land and property to underpin the sustainability of
our long-term business model. We do this by continuing to use our
masterplanning, technical, placemaking and asset management
expertise to transform redundant land into places where people want
to live and work, whilst applying the same skills in targeting
future areas in which to invest our management time and
capital.
Our core markets across the North of England and the Midlands
are well suited to our strategy and business model. Demand for new
homes in our markets remains steady, reflected by both the rate of
sales achieved by our housebuilding partners on our sites and a
continued deficit in the number of new homes built versus the
official national target of 300,000 new homes per year. The rise of
e-tailing and the increasing demands of consumers also continues to
support demand for logistics and distribution space, with the
industrial sector forecast to outperform both the office and retail
markets over the next few years. This is further augmented by a
supportive legislative framework and a number of recent Government
announcements, including the publication of the Industrial Strategy
White Paper and further financial support made available within the
Chancellor's Autumn Statement to accelerate housebuilding across
the UK.
CAPITAL GROWTH
Our Capital Growth team has continued to make good progress in
maximising value from our portfolio through three principal
management actions: securing planning consents on major schemes;
preparing land for redevelopment; and delivering sales above book
value for future residential and commercial development. All have
underpinned value gains made during the year.
During the year we achieved planning successes on four sites for
the delivery of 825 residential plots and over 3m sq. ft of
commercial space. Two of these are worthy of particular highlight.
In April, we secured consent for 1.45m sq. ft of new commercial
space at Kellingley in Selby, North Yorkshire, less than eighteen
months after the UK's last deep mine operations ended there.
Further planning success was achieved in October, when we received
consent at the former Thoresby Colliery site in Nottinghamshire for
800 new homes alongside 250,000 sq. ft of new commercial space,
just over two years after mining ended there. Both sites now form
part of our Major Developments segment. As at 31 December 2017,
total consented residential plots under ownership stood at 10,448
plots and consented commercial space on our land at 12.13m sq.
ft.
We also have live applications in the planning system for 1,308
new plots and 325,000 sq. ft of commercial space. These form part
of a wider pipeline of planning applications for the next three
years, comprising more than 4,500 residential plots (of which
c.1,500 plots are for Planning Promotion Agreements ("PPAs") on
third-party land) and 5.9m sq. ft of commercial space to underpin
the Group's future disposals programme.
The team continues to plan carefully whether and when to dispose
of sites to maximise the return from our portfolio. In 2017 we
achieved receipts in excess of book value, realising cash which can
be reinvested in bringing other sites and acquisitions forward. A
total of 622 residential plots were sold across six parcels to
national and regional housebuilders during the year. This included
sales to longstanding partners including Taylor Wimpey and Avant
Homes alongside new partners such as Keepmoat Homes and SkyHouse,
demonstrating the popularity of our product.
We also sold land with planning consent for over 850,000 sq. ft
of commercial space across five parcels, including three headline
deals. In May, we entered into a joint venture with Lancashire
County Pension Fund ("LCPF") to develop the next phase of Logistics
North in Bolton. Land totalling 31.2 acres was conditionally sold
to the Multiply Logistics North Limited Partnership, our joint
venture, for the development of 564,000 sq. ft of commercial space
over the next two years. Harworth retains a 20% stake in the joint
venture and will also undertake development and asset management
for separate management and promote fees. As at 31 December 2017,
two of the three phases had been sold into the joint venture for
the direct development of c. 435,000 sq. ft of new commercial
space.
The final quarter of 2017 included two further key commercial
land transactions. We executed a land sale of 18.3 acres at
Logistics North to Exeter/First Industrial for GBP10.1m,
representing their second major investment in the site over the
past two years and setting a new benchmark price per acre for the
site. In addition, we sold a 6-acre plot at Riverdale Park,
Doncaster to Arnold Clark Ltd for GBP2.5m, representing the first
land sale at the 112-acre site since its purchase for GBP8.5m in
December 2015.
Income Generation
During the year, our Income Generation team has maintained its
push to grow resilient, recurring income. This has included
increased direct development space which we intend to hold for
long-term rents, in response to a continued undersupply of good
quality new units in the regions. The team continues to asset
manage our existing Business Space portfolio to reduce voids and
increase rental returns, whilst also deriving rental returns and
royalties from energy generation, environmental technologies and
the agricultural portfolio. As a by-product of our remediation,
engineering and development activities, we also seek to generate
income from recycled aggregates.
Lettings progress was strong during the year, including the
long-term letting of over 360,000 sq. ft of directly developed
industrial space with a number of new headline rents being set. The
year began with Whistl taking a ten-year lease in January for a
225,000 sq. ft unit at Logistics North, just six weeks after we had
overseen practical completion of the unit on behalf of M&G Real
Estate, our forward funding partner. This was followed in May by
the start of construction of five further commercial units at
Logistics North: three as the first phase of the 'Multiply
Logistics North' joint venture with LCPF totalling c. 164,000 sq.
ft; and two units (C4 and C5) totalling c.52,800 sq. ft using
internal funds. All five units practically completed in the fourth
quarter of 2017. Within two weeks of practical completion of units
C4 and C5 at Logistics North, we agreed a ten-year lease for C4 at
a new headline rent for Logistics North.
We have also undertaken direct development at the AMP to meet
growing occupier interest. In April, we achieved practical
completion on six new units totalling 51,750 sq. ft, with a leading
advanced manufacturer becoming our first tenant for a c.11,000 sq.
ft unit at a headline rent of GBP7.25psf on a 15-year lease. This
was followed in December by Spendor Audio taking a 15-year lease on
a c. 26,000 sq. ft unit as part of their UK expansion. The strength
of the AMP as a business location was further demonstrated in July,
with McLaren Automotive taking a 20-year lease on a new 75,000 sq.
ft unit that we will be constructing on its behalf. McLaren will
take occupation in the spring following practical completion. The
space will be used to house McLaren's new Composites Technology
Centre, which will be used to build carbon-fibre chassis for sports
cars from 2019.
During the year, our team also increased income from other
underlying assets within our c.1.9m sq. ft Business Space
portfolio, with a total of over 50 new, renewed and reviewed
commercial lettings being completed in the year. This was further
bolstered by the purchase in November of a DHL distribution unit in
Droitwich, Worcestershire with an annualised rent roll of
GBP450,000. Asset management opportunities have already been
identified to grow the underlying value of this site in future,
alongside longer-term development plans. All of this activity led
to Business Space revenue in 2017 of GBP8.4m (2016: GBP6.2m). The
weighted average unexpired lease term ("WAULT") across the
portfolio stands at 7.5 years (2016: 7.5 years).
Our revenues for the period were also bolstered by the work of
our Natural Resources and Operations teams. A total of 159.7MW of
energy capacity is now installed on our land, providing a long-term
income stream from a combination of ground rents and royalties. The
team's focus remains on growing future income from alternative
technologies with better short-term prospects and from maintaining
income from our tipping operations, which has the added benefit of
supporting site remediation.
Acquisitions
The successful completion of our GBP27.1m equity raise in March
to accelerate the continued expansion of our strategic landbank was
a key milestone for funding our future growth prospects. Our
Acquisitions team deployed the proceeds in 2017 through the
acquisition of five sites which have supplemented our strategic
landbank and will improve the quality of our recurring income base.
These five transactions plus acquisition costs, allied with initial
planning and infrastructure costs, account for the full GBP27.1m of
new equity raised. All are forecast to support our ongoing delivery
of a double digit internal rate of return, with the December 2017
valuation already reflecting significant value growth from these
acquisitions during the year.
The two most notable acquisitions were identified at the time of
the placing and were adjacent to our existing landholdings, thus
realising significant marriage value as part of our year-end
valuation process. The first, Coalville in Leicestershire, is a
145-acre site purchased for GBP11.8m plus costs. It neighbours our
existing Coalville development and already benefits from an
existing planning permission for 914 new homes. This acquisition
has created a combined site with planning permission for the
delivery of over 2,000 new residential plots and associated
community facilities over a likely 15-year development
pipeline.
The second, Chatterley Valley in Staffordshire, is an 88-acre
site purchased for GBP2.6m plus costs that borders our existing
24-acre freehold site. The entire site benefits from Government
Enterprise Zone status and an extant planning permission to deliver
up to 1.2m sq. ft of new commercial development.
Replenishing and growing our strategic landbank is essential to
maintain delivery of our target of double-digit EPRA NNNAV growth
through the property cycle. With this in mind, we have entered into
six option agreements to acquire strategic land sites that extend
to approximately 250 acres, comprising a mixture of potential
residential and commercial sites located in, and adjacent to, our
core regions. These sites have the potential to deliver a further
1,500 residential plots and 1.3m sq. ft of new commercial space
should these options be taken up.
STRONG BUSINESS momentum
The continuing strong performance of the business, coupled with
the robust nature of the markets we operate in, means that we
already have significant momentum in 2018. We have agreed over 50%
of the year's expected sales, underpinning the Group's performance
for the year ahead, although we still expect performance to be
second half weighted.
In the first two months of 2018, we have secured a number of
long-term lettings which will bolster our income portfolio, at
headline rents for each development, clearly reflecting industrial
rental growth and supporting ongoing valuation uplifts. At
Logistics North, a ten-year lease was agreed in January with
Vaclensa Ltd for unit C5, achieving a new headline rent of GBP7psf.
This was followed in February by two further lettings across the
portfolio. The first was to British Steel Ltd who completed a
15-year lease on the remaining Phase 2 R-evolution unit, totalling
c. 15,000 sq. ft, at the AMP at a new headline rate of GBP7.50psf.
The second letting in February saw leading motor retailer Motor
Depot Ltd taking a 15-year lease on our Helix unit at Gateway 36 at
a new headline rent at the development of GBP5psf.
This lettings progress has underpinned our decision to proceed
on two further direct developments which will grow our recurring
income base. Construction of Phase 3 of R-evolution at the AMP, c.
56,000 sq. ft of new commercial space, has now begun alongside the
second phase of the 'Multiply Logistics North' development that
will deliver a further c. 270,000 sq. ft of commercial space at
Logistics North. Interest in our future commercial pipeline is
already strong, driven by both the maturity of our developments
such as Logistics North and the AMP, and a continued lack of supply
of high-quality units in the regions in which we operate.
Our reputation for being straightforward and acting swiftly in
making new acquisitions also stands us in good stead in identifying
an acquisitions pipeline, with no shortage of opportunities
currently. Prior to the end of February, we signed a Planning
Promotion Agreement ("PPA") for a key site in Derbyshire that
unifies eight separate landowners in attempting to secure a major
new residential consent. The Cinderhill site totals 421 acres and
benefits from a draft housing allocation within the emerging Amber
Valley Local Plan for up to 3,000 new homes, alongside 500,000 sq.
ft of commercial space. This draft plan has now been submitted to
the Government for further examination in the Spring.
With clear momentum in place across all aspects of the business,
alongside favourable market conditions and positive Government
sentiment towards residential and commercial development on
brownfield land, we remain confident in our ability to grow NNNAV
across our portfolio and to increase our recurring income base to
cover the operating costs of the business.
PEOPLE
Our continued strong performance has necessitated growing our
team in line with the increasing workload of the business. Our
people remain as committed, diligent and steadfast as ever in
maximising the value of our portfolio and creating great new places
for people to live and work. My thanks goes out to the team, our
trusted delivery partners and professional teams for their hard
work in making the Group what it is today.
Finally, on behalf of the Board and the Harworth team, I would
like to express my thanks to Jonson Cox who has served as our
Chairman since November 2010 and helped us navigate through many
challenges in creating the business we have today. Successful
businesses do not just happen. They require a combination of skill,
leadership and good market judgements. I would like to express my
sincere thanks for Jonson's leadership and guidance over the past
seven years. I would also like to welcome Alastair Lyons as our
incoming Chairman.
Owen Michaelson
Chief Executive
6 March 2018
Financial Review
OVERVIEW
Further significant progress was made across the business in
2017, which resulted in another year of double digit growth in EPRA
NNNAV. This growth was after including the impact of the March 2017
equity capital raise which had the impact of a c.2.0% dilution in
net assets per share. EPRA NNNAV rose by 12.5% to 128.9p per share
(GBP414.2m) compared to 114.6p per share as at 31 December 2016
(GBP334.9m). NAV per share increased to 127.4p (GBP409.3m) as at 31
December 2017, which is an 11.2% increase on the NAV per share as
at 31 December 2016 of 114.6p (GBP334.9m).
Operating profit before exceptional items in 2017 was GBP39.7m
(2016: GBP45.2m). However, the statutory measure does not now
capture the growth and profitability of the business fully as we
are conducting some of our activities through joint ventures (2017:
GBP4.0m, 2016: GBP0.6m) and, as set out below, the revaluation
gains on development properties post re-categorisation (2017:
GBP5.8m, 2016: GBPnil) fall outside of this measure. Taking account
of both of these additional sources of value creation, operating
profits which contributed to EPRA NNNAV rose by 8.1% to GBP49.6m
(2016: GBP45.8m) reflecting active management across our
portfolio.
We consider that the operating profits which contributed to EPRA
NNNAV growth of GBP49.6m (2016: GBP45.8m) can best be understood as
being composed of two elements:
-- Value gains (GBP47.4m; 2016: GBP43.7m) - profits
on disposals of investment, development and available
for sale properties GBP10.7m (2016: GBP8.8m) and
revaluation gains on our property portfolio of
GBP36.7m (2016: GBP34.9m). Revaluation gains comprise:
revaluation movements on investment property of
GBP32.1m (2016: GBP33.6m), profits from joint ventures
of GBP4.0m (2016: GBP0.6m), gains on overages of
GBP0.6m (2016: GBP0.7m) and revaluation movements
on development properties of GBP5.8m (2016: GBPnil)
less impairments of development properties of GBP5.8m
(2016: GBPnil). As development properties are held
as inventory, the revaluation gain is not included
in the balance sheet. Instead the revaluation amount
is verified by BNP Paribas and Savills, our external
property surveyors. Profit from joint ventures
are included within this measure as our joint ventures
conduct similar operations to Harworth, albeit
in different ownership structures, and the principal
profits in the joint ventures to date have been
from revaluation gains; and
-- Profit excluding value gains (GBP2.2m; 2016: GBP2.2m)
- this shows the ongoing profitability of the business
which is not reliant on property value gains or
profits from the sales of properties and is therefore
less susceptible to movements in the property cycle.
Profit excluding value gains rose by 1.2% in 2017.
Earnings per share rose by 15.4% to 15.8p (2016: 13.7p (5) )
reflecting the progress in profits as well as the recognition of
previously unrecognised deferred tax assets following greater
certainty of their recoverability. The total dividend per share for
2017 rose by 10% to 0.828p (2016: 0.753p) reflecting the long-run
ambition to deliver through the cycle double-digit growth in
NNNAV.
Net debt at GBP32.3m or 7.0% net loan to value (2016: GBP39.5m
and 9.9%) reflects Harworth's continuing prudent gearing policy. In
February 2018, the Group extended the term of its GBP75.0m
revolving credit facility with RBS, such that it now ends in
February 2023.
BUSINESS MODEL AND PROPERTY CATEGORISATION
Harworth has become more firmly established in recent years,
particularly as a result of the effective re-listing in March 2015
and the development of a successful track record. At the same time,
our business model has matured and evolved, notably with moves into
adjacent activities such as direct development and forward funding
deals. As a consequence, following the capital raise in March 2017,
which was to accelerate the acquisition of strategic land for
development, we reviewed our most advanced and active sites and
re-categorised certain properties to reflect the intentions for the
sites. The majority of Waverley, Logistics North and Prince of
Wales were re-categorised as development sites and as such are now
disclosed within inventory. Development sites are held on the
balance sheet at cost rather than fair/market value, albeit at the
point of re-categorisation the property is transferred at fair
value. The balance sheet value of these three development sites at
the point of re-categorisation was GBP77.7m.
Following further evolution of Harworth's business model during
2017, we have refined our thinking in the light of site and market
opportunities, and concluded that it is appropriate, on the whole,
to re-categorise all properties which have received planning
permission as development properties. For until sites receive
planning permission, our view is that the land is held for a
currently undetermined future use and should thus be held as
investment property. The only site within Major Developments that
has not been re-categorised as a development property is Lounge in
Leicestershire for which its future use is undetermined as a result
of the proposed HS2 Phase 2b route.
Property categorisation is reviewed as at 30 June and 31
December each year. Following the 2017 year-end review, a further
GBP151.4m has been re-categorised from investment property. The
balance sheet value of all development sites as at 31 December 2017
was GBP210.5m (reflecting sales and development expenditure at the
three sites re-categorised in the first half). The market value of
all development sites as at 31 December 2017 was GBP216.3m
reflecting the GBP5.8m uplift in value of these sites, which is
appropriately not reflected in the balance sheet. In order to
highlight the market value of development sites and be consistent
with our investment properties, we are using EPRA NNNAV, which
includes the market value of development properties, less notional
deferred tax, as our primary metric. We will continue to report
EPRA NAV which is EPRA NNNAV excluding deferred tax and the mark to
market movement on financial instruments.
The table below sets out our top ten sites by value, split by
their categorisation and showing the total acres, residential plots
and commercial space:
Housing plots Commercial
space
Site Type Acres Consented Sold Built Consented Built
------------ ------------- ------ ---------- ------ ------ ---------- --------
Waverley Development 454 3,890 1,218 800 - -
Coalville Development 346 2,016 0 0 - -
0.1m 0 sq.
Rossington Development 334 1,200 170 100 sq. ft ft
Lounge Investment 103 - - - 0.8m 0 sq.
sq. ft ft
Waverley Investment 115 - - - 2.1m 1.2m
(AMP) sq. ft sq. ft
Asfordby Investment 141 - - - 0.3m 0.3m
sq. ft sq. ft
Gateway Investment 430 - - - 0.2m 0.2m
36 sq. ft sq. ft
0.8m 0 sq.
Harworth Development 440 996 118 118 sq. ft ft
Walton Investment 19 - - - 0.3m 0.3m
Summit sq. ft sq. ft
0.3m 0 sq.
Thoresby Development 460 800 0 0 sq. ft ft
------------ ------------- ------ ---------- ------ ------ ---------- --------
4.9m 2.0m
TOTAL 2,842 8,902 1,506 1,018 sq. ft sq. ft
-------------------------- ------ ---------- ------ ------ ---------- --------
MARCH 2017 EQUITY PLACING
Following the publication of our preliminary results on 6 March
2017, we successfully undertook an equity placing that raised
GBP27.1m (net of expenses). This involved placing 29,226,974
Ordinary Shares (representing 9.9% of Harworth's share capital
prior to the placing) at a price of 95.0 pence per share
(representing a discount of approximately 1.6% to the closing
mid-market price of Harworth's shares on the day before the
announcement of the placing) to accelerate the continued expansion
of our strategic land bank.
During 2017, we have invested all of the proceeds from the
equity placing in five acquisitions at: Chatterley Valley near
Stoke; Coalville in Leicestershire; Wingates near Bolton; a
strategic site near Doncaster; and a DHL depot in Droitwich. The
first three sites were all adjacent to existing Harworth
properties. The total consideration including costs was GBP26.0m
with additional spend expected on these sites during 2018 for
planning and initial development expenditure.
OPERATING PROFIT
Revenues in 2017 were GBP53.7m (2016: GBP33.7m) split between
revenue from operations GBP23.9m (2016: GBP33.7m) and revenue from
the disposal of development properties GBP29.8m (2016: GBPnil).
Revenue from operations is split between: Income Generation
GBP18.2m (2016: GBP17.4m), where revenue mainly comprises rental
and royalty income together with some sales of coal fines and
salvage; and Capital Growth GBP5.7m (2016: GBP16.3m). The increase
in revenue from Income Generation reflected improved lettings and
business space acquisitions made in late 2016 and in 2017. The
reduction in revenue from Capital Growth reflected the completion
in December 2016 of the two units at Logistics North which were
forward funded by M&G Real Estate. The revenue in 2017
reflected amounts received on completion of the work including a
promote fee on the letting of the larger 225,000 sq. ft unit to
Whistl in January 2017. The smaller 175,000 sq. ft unit continues
to be actively marketed on behalf of M&G Real Estate.
Revenue and cost of sales include amounts for the M&G
forward funding contract at Logistics North as Harworth acted as
principal in this transaction. This principal relationship was as a
result of Harworth having exposure to potential construction and
credit risks as well as the potential rewards of managing the
construction on time and to budget, and letting the buildings
favourably and early.
Cost of sales now comprises three elements being: sales of
development properties; operating costs for business space, natural
resources, agricultural land and coal fines activities; and costs
in relation to the M&G contract for the construction and
letting of units. Cost of sales increased to GBP37.7m (2016:
GBP20.9m) including some large movements being the first-time
recognition of sales of development property of GBP27.9m (2016:
GBPnil) and a reduction in costs associated with the M&G
contract to GBP3.7m (2016: GBP15.6m).
Total overheads, which include the overhead costs of the Capital
Growth and Income Generation segments and central costs, amounted
to GBP12.0m (2016: GBP10.6m). The increase in costs reflected an
increased accrual for the 2012 Harworth Estates Long Term Incentive
Plan, which concluded at the end of 2017, as a result of NNNAV
outperformance, as well as increased staffing and business costs
reflecting greater, and more productive, operational activity. The
table below shows the results of the business split between Capital
Growth, Income Generation and Central Overheads:
2017 2016
------------------------------------------- -----------------------------------------
Central
Capital Over- Capital Income Central
Growth Income Generation heads Total Growth Generation Over-heads Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
----------------------- ------- ----------------- ------- ------ ------- ----------- ----------- ------
Revenue 35.4 18.3 - 53.7 16.3 17.4 - 33.7
Cost of sales (32.3) (5.4) - (37.7) (16.0) (4.9) - (20.9)
Overheads (1.9) (1.8) (8.3) (12.0) (1.8) (1.5) (7.3) (10.6)
Notional development
property costs
(1) (1.9) - - (1.9) - - - -
Other operating
income/(expense) - - 0.1 0.1 - (0.1) - (0.1)
Profit excluding
value gains (2) (0.7) 11.1 (8.2) 2.2 (1.5) 10.9 (7.3) 2.2
Revaluation gains 20.6 6.3 - 26.9 24.2 10.0 - 34.2
Profit on disposals
(2) 8.0 2.7 - 10.7 7.6 1.3 - 8.9
Pension charge - - - - - - (0.1) (0.1)
Operating profit
before exceptional
items 27.9 20.0 (8.2) 39.7 30.2 22.1 (7.2) 45.2
----------------------- ------- ----------------- ------- ------ ------- ----------- ----------- ------
Net exceptional
items - - 0.3 0.3 - - - -
----------------------- ------- ----------------- ------- ------ ------- ----------- ----------- ------
Operating profit
/ (loss) 27.9 20.0 (7.9) 40.1 30.2 22.1 (7.2) 45.2
----------------------- ------- ----------------- ------- ------ ------- ----------- ----------- ------
Joint ventures - 4.0 - 4.0 - 0.6 - 0.6
======================= ======= ================= ======= ====== ======= =========== =========== ======
Operating profit
before exceptional
items plus JVs 27.9 24.0 (8.2) 43.8 30.2 22.7 (7.2) 45.8
----------------------- ------- ----------------- ------- ------ ------- ----------- ----------- ------
Revaluation gains
on development
properties (3) 5.8 - - 5.8 - - - -
----------------------- ------- ----------------- ------- ------ ------- ----------- ----------- ------
Value gains (including
JVs and development
properties) 21.0 26.4 - 47.4 31.7 12.0 - 43.7
----------------------- ------- ----------------- ------- ------ ------- ----------- ----------- ------
Notes: (1) The income statement has been re-presented to show
development property sales (GBP7.7m) within profit on disposals and
development property impairment (GBP5.8m) within revaluation gains.
This notional cost is the net amount
(2) Profit excluding value gains comprises operating profit
before exceptional items of GBP39.7m (2016: GBP45.2m) less pension
costs of GBPnil (2016: GBP0.1m) and value gains of GBP37.6m (2016:
GBP43.0m). Value gains comprise profit/(loss) on disposals (being
profits on sale of investment properties of GBP2.9m (2016:
GBP9.2m), assets held for sale of GBP0.1m (2016: loss of GBP0.4m)
and development properties of GBP7.7m (2016: GBPnil) plus increase
in fair value of investment properties of GBP26.9m (2016:
GBP34.2m)
(3) This is the unrecognised mark to market gain since the
properties were re-categorised into development properties
(4) There are minor differences on some totals due to
rounding
Set out below are value gains for 2016 and 2017, which comprise
profit on disposals, revaluation gains on investment properties
(including joint ventures) and revaluation gains on development
properties:
2017 2016
---------------------------------------- ----------------------------------------
GBPm Revaluation Revaluation
gains gains
------------------ ------------------
Profit Management Market Total Profit Management Market Total
on disposals on disposals
------------------- ------------- ---------- ------ ----- ------------- ---------- ------ -----
Development/Capital
Growth
Major Developments 8.0 8.7 4.3 21.0 6.8 8.7 3.4 18.9
Strategic
Land 0.0 12.2 1.2 13.4 0.7 10.8 1.3 12.8
Investment/Income
Generation
Business Space 0.5 4.4 0.8 5.7 0.1 5.7 0.9 6.7
Natural Resources 2.2 1.4 0.1 3.7 0.0 4.0 1.2 5.2
Agricultural
Land 0.0 2.6 1.0 3.6 1.2 0.0 (1.1) 0.1
Total 10.7 29.2 7.5 47.4 8.8 29.2 5.7 43.7
------------------- ------------- ---------- ------ ----- ------------- ---------- ------ -----
The Group made sales of properties of GBP54.8m in 2017 (2016:
GBP58.9m). The sales were split between residential serviced plots
of GBP23.0m (2016: GBP20.5m), commercial development of GBP22.7m
(2016: GBP26.8m) and other, essentially agricultural land of
GBP9.1m (2016: GBP11.6m). Harworth made profit on disposals of
GBP10.7m (2016: GBP8.8m), with all segments of the business
achieving a profit on disposals with the two largest profits being
from sales of land for residential and commercial occupiers at our
flagship sites of Waverley and Logistics North respectively. In
addition, Harworth undertook direct development on its sites with a
land value of GBP2.1m and its share of property sales in its joint
ventures was GBP0.9m.
Cash proceeds from sales were GBP46.6m (2016: GBP53.4m)
reflecting the sales in the year of GBP54.8m (2016: GBP58.9m) less
deferred consideration on sales in the year of GBP14.3m (2016:
GBP10.9m) plus deferred consideration received from sales in prior
year of GBP6.1m (2016: GBP5.4m).
In 2017, the Group achieved revaluation gains of GBP36.7m (2016:
GBP34.9m) comprising: revaluation gains from investment properties,
including overages of GBP32.7m (2016: GBP34.3m), revaluation gains
from joint ventures of GBP4.0m (2016: GBP0.6m), revaluation gains
from development properties of GBP5.8m (2016: GBPnil) less
impairment of development properties of GBP5.8m (2016: GBPnil). All
of the revaluation gains for development properties relate to Major
Developments sites.
We have split the revaluation gains of GBP36.7m (2016: GBP34.9m)
to reflect the contribution from active management of GBP29.2m
(2016: GBP29.2m) and market movements of GBP7.5m (2016: GBP5.7m).
Whilst there is a degree of subjectivity in this split, it
highlights that the majority of the value gains continue to come
from active management. The principal 2017 revaluation gains across
the divisions were as follows:
-- Major Developments - Capture of marriage value from
2017 acquisitions which adjoined existing sites (Chatterley
Valley and Coalville) together with movements at maturing
developments;
-- Strategic Land - Outline planning consent granted at
Thoresby (800 residential plots) and Kellingley (1.45m
sq. ft of commercial space);
-- Business Space - Increases from direct development
lettings and progress at recent acquisitions offset
by some ageing assets;
-- Natural Resources - Profitable sales for future energy
schemes and gains from asset management offset by declines
in fixed life assets; and
-- Agricultural Land - Aftercare and restoration advances
at former surface mines.
EXCEPTIONAL ITEMS
Exceptional items in 2017 comprised three separate items which,
as before, relate to sundry receipts and costs from the Group's
legacy activities. The total amounts in 2017 were a credit of
GBP0.3m (2016: GBPnil).
TAXATION
The income statement credit for taxation in the year was GBP7.8m
(2016: GBP3.6m charge) which comprised a deferred tax credit of
GBP9.3m (2016: GBP3.6m charge) and a current year tax charge of
GBP1.5m (2016: GBPnil). The movement in deferred tax comprised the
following:
-- a GBP5.9m credit due to the execution of a contract
which resulted in increased certainty that the
losses would not be lost;
-- a number of chargeable gains and losses have crystallised
in the period as a result of a number of disposals
of investment property and the categorisation of
properties from investment property to development
property. These gains have been offset against
tax losses that were previously not recognised
from a deferred tax perspective. The losses crystallised
have been recognised whereas inherent capital losses
have not. As such, there has been a credit to deferred
tax of GBP13.2m;
-- the increase in valuation of the investment properties
in the period together with the impact of indexation
on the inherent gains in the investment property
portfolio for the period, along with some other
smaller movements in deferred tax items, have given
rise to a GBP5.9m deferred tax charge in the period;
and
-- following the submission of the tax computations
and returns for prior periods, the Group utilised
tax attributes resulting in a deferred tax charge
of GBP3.9m.
The current tax charge comprised the following:
-- a current year tax charge of GBP1.9m (2016: GBPnil)
resulting from profits on sales of development
properties; and
-- a land remediation relief tax credit of GBP0.3m
(2016: GBPnil).
The Group is still utilising brought forward tax losses but as a
result of categorising sites from investment to development,
Harworth has started to pay tax on development property sales. In
the current period, in terms of cash tax paid or received, Harworth
received cash in respect of the land remediation relief claim and
recovery of VAT on deal fees of GBP0.3m (2016: GBPnil).
At 31 December 2017, the Group had deferred tax liabilities of
GBP13.0m (2016: GBP23.4m), related to unrealised gains on
investment properties and had recognised deferred tax assets of
GBP7.5m (2016: GBP8.5m). The net deferred tax liability was GBP5.5m
(2016: GBP14.9m). Full details of the movements in tax are set out
in note 6.
Due to recent changes in tax legislation, there is much greater
flexibility in the utilisation of tax losses arising after 1 April
2017. However, these losses, and those losses accrued historically
are subject to a 50% restriction. Whilst the Group has a
significant level of accrued tax losses, these are in the form of
capital losses which fall outside of these rules. As such, these
rules are likely to have a limited impact on the group's tax
profile going forward.
Recent legislation has aligned the computation of capital gains
on disposals of properties between individuals and corporates by
removing the benefit to corporates of indexation. This will have
the impact of increasing the tax liabilities in future periods.
EARNINGS PER SHARE AND DIVIDS
Earnings per share increased to 15.76p (2016: 13.65p(5) ) and
underlying earnings per share, excluding exceptional items,
increased to 15.65p (2016: 13.65p). These increases reflect the
positive progress made in the year with respect to profits and tax.
The 2016 EPS has been restated following discussions with the
Financial Reporting Council and their review of the 2016 Financial
Statements, which did not correctly reflect the effect of the May 1
for 10 share consolidation on EPS.
An interim dividend of 0.253p per share (2016 interim: 0.230p)
equivalent to GBP813k (2016 interim: GBP672k) for the 2017
financial year was paid on 13 October 2017. A final dividend for
the 2017 financial year of 0.575p per share (2016 final: 0.523p) is
proposed. The total dividend for the year of 0.828p per share
(2016: 0.753p) is in line with our progressive dividend policy and
represents a 10% increase over the prior year, reflecting ongoing
growth and confidence in the business. The total dividend of
GBP2.7m (2016: GBP2.2m) is due to the 10% growth in the dividend
and the c.10% increase in the number of shares following the March
2017 equity capital raise. The final dividend will be paid on 1
June 2018 to shareholders on the register at the close of business
on 4 May 2018. The ex-dividend date will be 3 May 2018.
NET ASSETS
As set out below, NAV increased to GBP409.3m as at 31 December
2017 from GBP334.9m as at 31 December 2016. This increase was as a
result of movements in the year, being operating profit before
exceptionals plus joint ventures of GBP43.8m, the March 2017 equity
capital raise of GBP27.1m, a tax credit of GBP7.8m, less interest
costs of GBP2.3m and dividends of GBP2.7m plus other movements of
GBP0.7m.
31 December 31 December
2017 2016
GBPm GBPm
--------------------------------------- ----------- ------------
Investment and development properties
(including investments in joint
ventures, assets held for sale,
overages and occupied properties) 457.1 400.3
Cash 8.4 13.0
Other assets 31.5 25.2
---------------------------------------- ----------- ------------
Total assets 497.0 438.5
Gross borrowings 40.6 52.5
Deferred tax liability 5.5 14.9
Derivative financial instruments 0.1 0.4
Other liabilities 41.5 35.8
---------------------------------------- ----------- ------------
Net assets 409.3 334.9
---------------------------------------- ----------- ------------
Number of shares in issue 321,250,750 292,269,786
---------------------------------------- ----------- ------------
NAV per share 127.4p 114.6p
---------------------------------------- ----------- ------------
EPRA NNNAV per share (1) 128.9p 114.6p
---------------------------------------- ----------- ------------
EPRA NAV per share (2) 131.0p 119.8p
---------------------------------------- ----------- ------------
Notes:
(1) NAV (GBP409.3m; 2016: GBP334.9m) plus market value
of development properties (GBP5.8m; 2016: GBPnil) less
notional deferred tax (GBP1.0m; 2016: GBPnil) divided
by number of shares in issue
(2) EPRA NNNAV (GBP414.2m; 2016: GBP350.1m) excluding
deferred tax liability (GBP5.5m; 2016: GBP14.9m), notional
deferred tax on development properties (GBP1.0m; 2016:
GBPnil) and mark to market movement on financial instruments
(GBP0.1m; 2016: GBP0.4m) divided by number of shares
in issue
FINANCING STRATEGY AND FUNDING
Harworth's financing strategy is to be prudently geared as we
believe that this gives the Group a number of advantages:
-- allows working capital swings to be managed appropriately
given that infrastructure spend is usually in advance
of sales and thus net debt can increase by over
GBP30m during the year;
-- gives the Group the ability to complete acquisitions
quickly, which is often a differentiating factor
in a competitive situation;
-- ensures that we do not combine financial gearing
with Harworth's existing operational gearing. Such
operational gearing is the appropriate levels of
exposure we take in terms of planning, remediation/engineering,
letting and sales risks; and
-- higher gearing levels are not easily supported
by Harworth's existing activities - we do not gear
our Capital Growth properties being our Strategic
Land and Major Developments' sites.
Harworth's financing strategy also involves the Group trying to
balance its cash flows by funding infrastructure spend and
investment in acquisitions through disposal proceeds. In 2017,
Harworth achieved sales which were slightly ahead of Group
expectations and the expected partial acquisition of a site was
delayed from before the year-end until 2018 resulting in a slight
decrease in net debt.
As at 31 December 2017 Harworth's gross Loan To Value ("LTV")
was 8.8% (2016: 13.1%) and net LTV was 7.0% (FY 2016: 9.9%).
However, as set out above Capital Growth sites are deliberately not
geared, so if gearing is just assessed against the value of
Business Space and Natural Resources properties this equates to a
gross LTV of 26.3% (2016: 41.6%) and a net LTV of 20.8% (2016:
31.3%).
On 13 February 2018, Harworth extended the term of its existing
GBP75m Revolving Credit Facility ("RCF") with RBS by two years such
that it now expires in February 2023. The extension was on
substantially the same terms with the only notable change being a
slight increase in margin to 210bps over LIBOR (from 200bps). The
Group's hedging strategy is to have roughly half of its debt at a
fixed rate and half of its debt exposed to floating rates. As a
consequence, Harworth has a GBP30m fixed rate swap at an all-in
rate of 2.955% (including fees) until June 2020. The interest rate
swap is hedge accounted with any unrealised movements going through
reserves.
The Group also uses infrastructure funding, provided by public
bodies to promote the development of major sites for employment and
housing needs, as part of our funding. At 31 December 2017 the
Group had six infrastructure facilities with all-in funding rates
of between 2.5% and 4.7%. During the year, to assist with funding
requirements associated with greater activities and continued
growth, we secured an increase in our bonding line from GBP10.0m to
GBP15.0m.
The Group had borrowings and loans of GBP40.6m at 31 December
2017 (2016: GBP52.5m), being the RBS RCF of GBP23.3m (2016:
GBP37.0m) and infrastructure loans of GBP17.3m (FY 2016: GBP15.5m).
The Group's cash and cash equivalents at 31 December 2017 were
GBP8.4m (2016: GBP13.0m). The resulting net debt was GBP32.3m
(2016: GBP39.5m). The weighted average cost of debt, using 31
December 2017 balances and rates, was 3.0% with a 0.8%
non-utilisation fee on undrawn RCF amounts (2016: 2.9% with a 0.8%
non-utilisation fee on undrawn RCF amounts). For the twelve months
to 31 December 2017 Harworth's interest cover, as calculated by the
RBS RCF covenant calculation, was 3.41x against a covenant test of
1.5x.
PREMIUM LISTING
Reflecting Harworth's continuing development since its relisting
in 2015, the Board has engaged advisers on the workstreams to be
completed to move the Company's shares from the Standard segment to
the Premium segment of the Official List. This work is expected to
be completed over the coming months with the move taking place in
the second half of the year, subject to the approval of the UK
Listing Authority. The Board believes that this will position the
Company for potential future admission to the UK FTSE indices.
Andrew Kirkman
Finance Director
6 March 2018
Principal risks and uncertainties
During 2017, as part of its ongoing continual improvement
programme, the Group undertook another detailed review of its
principal risks and uncertainties. These are the risks identified
by the Board which could have a material impact on the Group's
strategic priorities, business model, future performance, solvency
and/or liquidity. This review was led by our Company Secretary in
conjunction with the Board, the Audit Committee, the Executive
Committee and the senior management team which reports directly to
the Executive Committee.
The Group's current risk profile was mapped, with individual
risks grouped into eight categories, being: (1) markets; (2)
delivery; (3) politics; (4) finance; (5) people; (6) legal and
regulatory; (7) governance and internal controls; and (8)
communications and stakeholder management. Risks were scored on a
"heat map", from "very low" to "very high", according to residual
risk status (after accounting for mitigation measures already in
place), materiality and anticipated movement in risk over the next
12 months. This has led to further refinement of the Group's Risk
Register. This detailed review has confirmed that there has been no
material change in the Group's overall risk profile since
publication of the 2016 Annual Report and Financial Statements and
the profile remains in line with the Board's risk appetite, with
all categories scored as either medium or low risk at the date of
this preliminary results announcement.
The Group is subject to both external and internal risk factors
which could have a material effect, both positive and negative, on
the operation and performance of the business. External factors,
which are largely outside of the Group's control, include
macro-economic and political factors. As negotiations continue for
the UK's withdrawal from the EU, the Board expects that the Group
will continue to operate in an uncertain economic and political
climate in the short to medium term. Whilst the Group is not immune
to that uncertainty, it is mitigated by the positive economic and
consumer trends in our core markets, with the residential,
logistics and manufacturing sectors in the North of England and the
Midlands continuing to have solid fundamentals and favourable
performance.
The 2017 Annual Report and Financial Statements will include a
detailed analysis of the Group's principal risks and uncertainties,
reflecting the detailed review and evolution of the Group Risk
Register referred to above. This analysis will (A) record the
current status of each risk category, after mitigation; (B) list
the mitigation measures already in place and those identified for
implementation over the next 12 months; and (C) indicate how each
risk category could impact our strategic priorities.
Unaudited Consolidated Income Statement
for the year ended 31 December 2017
Year ended Year ended
31 December 31 December
2017 2016
Note GBP000 GBP000
------------------------------------- ---- ------------ ------------
Revenue 3 53,673 33,693
Cost of sales 3 (37,678) (20,905)
------------------------------------- ---- ------------ ------------
Gross profit 15,995 12,788
Administrative expenses 3 (12,020) (10,457)
Other gains 3 35,658 43,027
Other operating income/(expense) 3 98 (204)
------------------------------------- ---- ------------ ------------
Operating profit before exceptional
items 39,731 45,154
Exceptional income 4 414 689
Exceptional expense 4 (83) (682)
------------------------------------- ---- ------------ ------------
Operating profit 40,062 45,161
Share of profit of joint ventures 10 4,039 647
Finance income 5 16 247
Finance costs 5 (2,277) (2,588)
------------------------------------- ---- ------------ ------------
Profit before tax 41,840 43,467
Tax credit/(charge) 6 7,843 (3,566)
------------------------------------- ---- ------------ ------------
Profit for the financial year 49,683 39,901
------------------------------------- ---- ------------ ------------
Profit per share from continuing operations attributable
to the owners of the Group during the year
Note pence pence
------------------------------------- ---- ------------ ------------
Basic and diluted earnings per share 8 15.8 13.7*
*The 2016 Earnings per share has been restated to reflect the
impact of the May 2016 1 for 10 share consolidation
Unaudited Consolidated Statement of Comprehensive Income
for the year ended 31 December 2017
Year ended Year ended
31 December 31 December
2017 2016
Note GBP000 GBP000
-------------------------------------------- ----- ------------- -------------
Profit for the financial year 49,683 39,901
Other comprehensive income/(expense)
- items that will not be reclassified
to profit or loss:
Fair value of financial instruments 18 244 (366)
Actuarial loss on Blenkinsopp
Pension Scheme (105) (269)
Revaluation of Group occupied
property 12 (17)
Deferred tax on other comprehensive
income/(expense) items 6 (51) 94
-------------------------------------------- ----- ------------- -------------
Total other comprehensive income/(expense) 100 (558)
-------------------------------------------- ----- ------------- -------------
Total comprehensive income for
the financial year 49,783 39,343
-------------------------------------------- ----- ------------- -------------
Unaudited Consolidated Balance Sheet
as at 31 December 2017
As at As at
31 December 31 December
2017 2016
Note GBP000 GBP000
--------------------------------- ---- ------------ ------------
ASSETS
Non-current assets
Property, plant and equipment 802 789
Investment properties 9 216,560 379,190
Investment in joint ventures 10 18,838 10,549
Other receivables 11 2,666 1,397
Trade receivables 13 5,250 -
244,116 391,925
--------------------------------- ---- ------------ ------------
Current assets
Inventories 12 211,618 733
Trade and other receivables 13 25,165 24,444
Cash 8,371 13,007
Assets classified as held for
sale 14 7,688 8,350
--------------------------------- ---- ------------ ------------
252,842 46,534
--------------------------------- ---- ------------ ------------
Total assets 496,958 438,459
--------------------------------- ---- ------------ ------------
LIABILITIES
Current liabilities
Borrowings 15 (6,145) (1,819)
Trade and other payables 16 (40,035) (33,719)
(46,180) (35,538)
--------------------------------- ---- ------------ ------------
Net current assets 206,662 10,996
--------------------------------- ---- ------------ ------------
Non-current liabilities
Borrowings 15 (34,501) (50,659)
Trade and other payables 16 (760) (1,520)
Derivative financial instruments 18 (122) (366)
Deferred income tax liabilities 6 (5,521) (14,851)
Retirement benefit obligations (563) (602)
--------------------------------- ---- ------------ ------------
(41,467) (67,998)
--------------------------------- ---- ------------ ------------
Total liabilities (87,647) (103,536)
--------------------------------- ---- ------------ ------------
Net assets 409,311 334,923
--------------------------------- ---- ------------ ------------
SHAREHOLDERS' EQUITY
Capital and reserves
Share capital and premium 17 56,501 29,227
Investment in own shares 17 (263) -
Fair value reserve 85,109 58,279
Capital redemption reserve 257 257
Merger reserve 45,667 45,667
Retained earnings 222,040 201,493
Total equity 409,311 334,923
--------------------------------- ---- ------------ ------------
Unaudited Consolidated Statement of Changes in Equity
for the year ended 31 December 2017
Share Fair Capital
Capital Merger value redemption Own Retained Total
and Premium reserve reserve reserve Shares earnings equity
Note GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
------------------- ---- ------------ -------- -------- ----------- ---------------- --------- -------
Balance at 1
January
2016 158,348 45,667 24,060 257 - 69,411 297,743
Profit for
financial
year - - - - - 39,901 39,901
Transfer of fair
value gains 2 - - 34,236 - - (34,236) -
Other comprehensive income/(expense):
Fair value of
financial
instruments 18 - - - - - (366) (366)
Actuarial loss
on
Blenkinsopp
Pension
Scheme - - - - - (269) (269)
Revaluation of
Group occupied
property - - (17) - - - (17)
Deferred tax 6 - - - - - 94 94
------------------- ---- ------------ -------- -------- ----------- ---------------- --------- -------
Total comprehensive
income for the
year ended
31 December 2016 - - 34,219 - - 5,124 39,343
Transaction with owners:
Transfer of share
premium to other
distributable
reserves 17 (129,121) - - - - 129,121 -
Dividend paid 7 - - - - - (2,163) (2,163)
------------------- ---- ------------ -------- -------- ----------- ------ -------- ------------------
Balance at 31
December 2016 29,227 45,667 58,279 257 - 201,493 334,923
Profit for the
financial year - - - - - 49,683 49,683
Transfer of fair
value gains 2 - - 32,636 - - (32,636) -
Transfer of net
realisable value
provision of
development
properties 2 - - (5,818) - - 5,818 -
Other comprehensive income/(expense):
Fair value of
financial
instruments 18 - - - - - 244 244
Actuarial loss
on
Blenkinsopp
Pension
Scheme - - - - - (105) (105)
Revaluation of
Group occupied
property - - 12 - - - 12
Deferred tax 6 - - - - - (51) (51)
------------------------- ------------ -------- -------- ----------- ------ -------- ------------------
Total comprehensive
income for the
year ended 31
December 2017 - - 26,830 - - 22,953 49,783
Transaction with owners:
Share issue less
costs 17 27,065 - - - - - 27,065
Other transaction
costs 209 - - - - - 209
Purchase of own
shares 17 - - - - (263) 86 (177)
Dividends paid 7 - - - - - (2,492) (2,492)
------------------- ---- ------------ -------- -------- ----------- ------ -------- ------------------
27,274 - - - (263) (2,406) 24,605
------------------- ---- ------------ -------- -------- ----------- ------ -------- ------------------
Balance at 31
December 2017 56,501 45,667 85,109 257 (263) 222,040 409,311
------------------- ---- ------------ -------- -------- ----------- ------ -------- ------------------
Unaudited Statement of Cash Flows
for the year ended 31 December 2017
Year ended Year ended
31 December 31 December
Note 2017 2016
----------------------------------------- ---- ------------ ------------
Cash flows from operating activities GBP000 GBP000
Profit before tax for the financial
year 41,840 43,467
Net interest payable 5 2,261 2,341
Other gains 2 (35,658) (43,027)
Share of profit of joint venture 10 (4,039) (647)
Depreciation of property, plant
and equipment 8 2
Pension contributions in excess
of charge and other gains (144) (102)
----------------------------------------- ---- ------------ ------------
Operating cash inflows before movements
in working capital 4,268 2,034
Decrease in inventories 18,232 359
Increase in receivables (5,970) (634)
Increase in payables 8,394 3,715
----------------------------------------- ---- ------------ ------------
Cash generated from operations 24,924 5,474
Loan arrangement fees paid (214) (150)
Interest paid (1,277) (1,861)
Corporation tax received 175 -
Cash generated from operating activities 23,608 3,463
----------------------------------------- ---- ------------ ------------
Cash flows from investing activities
Interest received 5 16 247
Acquisition of/investment in joint
ventures (4,250) (9,134)
Proceeds from disposal of investment
properties 24,434 53,201
Expenditure on investment properties (60,431) (47,528)
Expenditure on property, plant
and equipment (9) (25)
Cash used in investing activities (40,240) (3,239)
----------------------------------------- ---- ------------ ------------
Cash flows from financing activities
Net proceeds from issue of ordinary
shares 27,065 -
Proceeds from other loans 6,502 5,187
Repayment of bank loans (57,000) (12,000)
Proceeds from bank loans 43,000 -
Repayment of other loans (5,111) (5,805)
Investment in own shares (177) -
Other transaction costs 209 -
Dividends paid 7 (2,492) (2,163)
Cash generated from/(used in) financing
activities 11,996 (14,781)
----------------------------------------- ---- ------------ ------------
Decrease in cash (4,636) (14,557)
----------------------------------------- ---- ------------ ------------
At 1 January
Cash 13,007 27,564
----------------------------------------- ---- ------------ ------------
Decrease in cash (4,636) (14,557)
----------------------------------------- ---- ------------ ------------
At 31 December
Cash 8,371 13,007
----------------------------------------- ---- ------------ ------------
Notes to the financial statements
for the year ended 31 December 2017
1. Accounting policies
The principal accounting policies adopted in the preparation of
these unaudited consolidated financial statements are set out
below. These policies have been consistently applied to all of the
years presented, unless otherwise stated.
General information
Harworth Group plc (the "Group") is a limited liability company
incorporated and domiciled in the UK. The address of its registered
office is Advantage House, Poplar Way, Catcliffe, Rotherham, South
Yorkshire, S60 5TR. The Group is listed on the London Stock
Exchange.
Basis of preparation
The preliminary results for the year ended 31 December 2017 are
unaudited. The financial information set out in this announcement
does not constitute the Group's financial statements for the year
ended 31 December 2017 or 31 December 2016 as defined by Section
434 of the Companies Act 2006.
This financial information has been prepared in accordance with
International Financial Reporting Standards ("IFRS") as adopted by
the European Union, IFRS IC interpretations and the Companies Act
2006 applicable to companies reporting under IFRS and therefore
complies with Article 4 of the EU IAS regulations.
The financial information for the year ended 31 December 2016 is
derived from the statutory accounts for that year which have been
delivered to the Registrar of Companies. The auditors,
PricewaterhouseCoopers LLP, reported on those accounts and their
report was unqualified, did not contain an emphasis of matter
paragraph and did not contain any statement under Section 498 (2)
or (3) of the Companies Act 2006.
The statutory accounts for the year ended 31 December 2017 will
be finalised on the basis of the financial information presented by
the Directors in these preliminary results and will be delivered to
the Registrar of Companies following the Annual General Meeting of
Harworth Group plc.
The same accounting policies and methods of computation are
followed as in the latest published audited accounts for the year
ended 31 December 2016, which are available on the Group's website
at http://harworthgroup.com/ except for as described below:
Inventories
Inventories comprise development properties, land held for
development, options to purchase land, planning promotion
agreements and coal slurry that has been processed and is ready for
sale.
Development properties are included in the consolidated balance
sheet at the lower of cost and net realisable value. Net realisable
value is the expected net sales proceeds of the developed property
in the ordinary course of business less estimated costs to complete
and anticipated selling costs. Properties re-categorised to
development properties from investment properties are transferred
at deemed cost, being the fair value at the date of
re-categorisation. Properties are re-categorised as development
properties once planning is secured and the intention to bring
those properties forward for development and sale has been
agreed.
Land held for development is land that has planning permission
and is being developed for onward sale.
Options to purchase land are agreements that the Group has
entered into with the landowners whereby the Group has the option
to purchase the land within a limited timeframe. The landowners are
not generally permitted to sell to any other party during this
period, unless agreed by the Group. All costs, including the cost
of entering the option, are capitalised. At each reporting date,
the recoverability of the costs are considered by management, and
where required provisions are made such that the agreements as held
at the lower of cost and net realisable value.
Planning promotion agreements are agreements that the Group has
entered into with the landowners whereby the Group acts as an agent
to the landowners in exchange for a fee of a set percentage of the
proceeds or profit of the eventual sale. The Group promotes the
land through the planning process at its own expense. If the land
is sold the Group will receive a fee for its services.
Inventories (continued)
The Group incurs various costs in promoting land held under
promotion planning agreements, in some instances the agreements
allow for the Group to be reimbursed certain expenditure following
the conclusion of a successful sale. These costs are held in
inventory at the lower of cost and net realisable value. Upon
reimbursement, inventory is reduced by the value of the reimbursed
cost.
Coal fines that have been processed and are ready for sale are
stated at the lower of cost and estimated net realisable value.
Inventories comprise all of the direct costs incurred in bringing
the coal fines to their present state.
Investment properties
Investment properties are those properties which are not
occupied by the Group and which are held for long term rental
yields, capital appreciation or both. Investment property also
includes property that is being developed or constructed for future
use as investment property by the Group. Investment properties
comprise freehold land and buildings and are measured at fair
value. At the end of a financial year the fair values are
determined by obtaining an independent valuation prepared in
accordance with the current edition of the Appraisal and Valuation
Standards published by the Royal Institution of Chartered
Surveyors. External, independent valuation firms having
appropriate, recognised professional qualifications and recent
experience in the location and category of property being valued
are used.
Investment properties are re-categorised as development
properties and moved to inventory once planning is secured and the
intention to bring those properties forward for development and
sale has been agreed.
At each subsequent reporting date, investment properties are
re-measured to their fair value. Movements in fair value are
included in the income statement.
Where specific investment properties have been identified as
being for sale within the next twelve months, a sale is considered
highly probable and the property is immediately available for sale,
their fair value is shown under assets classified as held-for-sale
within current assets, measured in accordance with the provisions
of IAS 40 'Investment Property'.
Revenue recognition
Revenue comprises rental and other land related income arising
on investment properties, income from construction contracts, the
sale of coal fines and the sale of development properties.
Rentals are accounted for on a straight-line basis over the
lease term.
Income from construction contracts is recognised in line with
the accounting policy for construction contracts. Revenue is
recognised when the Group is acting as a principal under a contract
with primary responsibility for the contract and has exposure to
significant risks and rewards of the contract.
Revenue from the sale of coal fines is recognised at the point
of despatch.
Revenue from the sale of development properties is recognised at
the point of legal completion and where title has passed.
Revenue is recognised to the extent that it is probable that the
economic benefit will flow to the Group and the revenue can be
reliably measured. All such revenue is reported net of discounts,
and value added and other sales taxes.
Changes in accounting policy and disclosures
(a) New standards, amendments and interpretations
No new standards, amendments or interpretations, effective for
the first time for the financial year beginning on or after 1
January 2017 have had a material impact on the Group.
(b) New standards, amendments and interpretations not yet
adopted
A number of new standards and amendments to standards and
interpretations are effective for annual periods beginning after 1
January 2017, and have not been applied in preparing these
preliminary financial statements. None of these is expected to have
a significant effect on the financial statements of the Group,
except the following, set out below:
-- IFRS 9, 'Financial instruments', addresses the
classification, measurement and recognition of financial assets and
financial liabilities. It replaces the guidance in IAS 39 that
relates to the classification and measurement of financial
instruments. IFRS 9 retains but simplifies the mixed measurement
model and establishes three primary measurement categories for
financial assets: amortised cost, fair value through OCI and fair
value through P&L. The basis of classification depends on the
entity's business model and the contractual cash flow
characteristics of the financial asset. Investments in equity
instruments are required to be measured at fair value through
profit or loss with the irrevocable option at inception to present
changes in fair value in OCI not recycling. There is now a new
expected credit losses model that replaces the incurred loss
impairment model used in IAS 39. For financial liabilities there
were no changes to classification and measurement except for the
recognition of changes in own credit risk in other comprehensive
income, for liabilities designated at fair value through profit or
loss. IFRS 9 relaxes the requirements for hedge effectiveness by
replacing the bright line hedge effectiveness tests. It requires an
economic relationship between the hedged item and hedging
instrument and for the 'hedged ratio' to be the same as the one
management actually uses for risk management purposes.
Contemporaneous documentation is still required but is different
from that currently prepared under IAS 39. The standard is
effective for accounting periods beginning on or after 1 January
2018. Early adoption is permitted, subject to EU endorsement. The
impact of IFRS9 has been assessed on the financial instruments of
the Group. At present, based on these assessments the Group does
not believe that any significant adjustments are required.
-- IFRS 15, 'Revenue from contracts with customers' deals with
revenue recognition and establishes principles for reporting useful
information to users of financial statements about the nature,
amount, timing and uncertainty of revenue and cash flows arising
from an entity's contracts with customers. Revenue is recognised
when a customer obtains control of a good or service and thus has
the ability to direct the use and obtain the benefits from the good
or service. The standard replaces IAS 18 'Revenue' and IAS 11
'Construction contracts' and related interpretations. The standard
is effective for annual periods beginning on or after 1 January
2018. The Group has performed a detailed assessment of the impact
of IFRS 15 on existing revenue streams and policies. This review
has analysed all revenue generated during 2017 and has highlighted
that revenues relating to the sales of development properties,
particularly where revenue involves a deferred element or
conditions subsequent exist, are specifically affected by the
standard as are certain promote agreements. The Group expects the
impact of implementing this standard
on revenue to amount to GBP2.1m for 2017.
-- IFRS 16, 'Leases' addresses the definition of a lease,
recognition and measurement of leases and establishes principles
for reporting useful information to users of financial statements
about the leasing activities of both lessees and lessors. A key
change arising from IFRS 16 is that most operating leases will be
accounted for on balance sheet for lessees. The standard replaces
IAS 17 'Leases', and related interpretations. The standard is
effective for annual periods beginning on or after 1 January 2019
and earlier application is permitted, subject to EU endorsement and
the entity adopting IFRS 15 'Revenue from contracts with customers'
at the same time. The full impact of IFRS 16 continues to be
assessed, however, the Group does not believe it will have a
significant impact.
Estimates and judgements
The significant judgements made by management in applying the
Group`s accounting policies and the key sources of estimation were
the same as those that applied to the latest published audited
accounts for the year ended 31 December 2016, with the exception of
the estimation management have made to assess the extent to which,
now former, mining tenants would fall short of meeting their
restoration liabilities. At 31 December 2017, management estimate
this shortfall to amount to GBP3.2m (2016: GBP6.0m). This has been
treated as a reduction in the valuation of the properties, which
these former tenants occupied.
2. Operating profit
Operating profit is stated after charging:
Year ended Year ended
31 December 31 December
2017 2016
Note GBP000 GBP000
------------------------------------- ---- ------------ ------------
Classified within cost of sales:
Net realisable value provision
of development properties 12 (5,818) -
------------------------------------- ---- ------------ ------------
Classified within other gains:
Increase in fair value of investment
properties 9 32,133 33,713
Decrease in fair value of assets
classified as held for sale 14 (83) (224)
Increase in fair value of other
receivables 11 586 747
------------------------------------- ---- ------------ ------------
Total fair value gains included
within other gains 32,636 34,236
Profit on disposal of investment
properties 2,919 9,166
Profit/(loss) on disposal of
assets classified as held for
sale 103 (375)
------------------------------------- ---- ------------ ------------
Total other gains 35,658 43,027
------------------------------------- ---- ------------ ------------
3. Segment information
31 December 2017
Capital Growth
-----------------------
Sale of Other Income Unallocated Total
development property Generation costs
properties activities
Note GBP000 GBP000 GBP000 GBP000 GBP000
--------------------------------------------------------------------------- ----------- ---------- ---------- ----------- --------
Revenue 29,765 5,671 18,237 - 53,673
Cost of sales (27,893) (4,396) (5,389) - (37,678)
--------------------------------------------------------------------------- ----------- ---------- ---------- ----------- --------
Gross Profit (1) 1,872 1,275 12,848 - 15,995
Administrative expenses - (1,927) (1,752) (8,341) (12,020)
Other gains (2) 2 - 26,924 8,734 - 35,658
Other operating income - - 17 81 98
--------------------------------------------------------------------------- ----------- ---------- ---------- ----------- --------
Operating profit/(loss) before exceptional
items 1,872 26,272 19,847 (8,260) 39,731
Net exceptional items 4 - - - 331 331
--------------------------------------------------------------------------- ----------- ---------- ---------- ----------- --------
Operating profit/(loss) 1,872 26,272 19,847 (7,929) 40,062
Share of profit of joint ventures 10 - 26 4,013 - 4,039
Finance income 5 - - - 16 16
Finance costs 5 - - - (2,277) (2,277)
--------------------------------------------------------------------------- ----------- ---------- ---------- ----------- --------
Profit/(loss) before tax 1,872 26,298 23,860 (10,190) 41,840
--------------------------------------------------------------------------- ----------- ---------- ---------- ----------- --------
Memo: (1)
Gross profit is analysed as follows:
Gross profit excluding sales of development
properties - 1,275 12,848 - 14,123
Gross profit on sales of development
properties 7,690 - - - 7,690
Net realisable value provision of development
properties (5,818) - - - (5,818)
----------- ---------- ---------- ----------- --------
1,872 1,275 12,848 - 15,995
--------------------------------------------------------------------------- ----------- ---------- ---------- ----------- --------
Memo: (2)
Other gains are analysed as follows:
Increase in fair value of investment
properties (note 9) - 26,139 5,994 - 32,133
(Decrease)/increase in fair value of
assets classified as held for sale (note
14) - (113) 30 - (83)
Profit on sale of investment properties - 216 2,703 - 2,919
Profit on sale of assets classified
as held for resale - 96 7 - 103
Increase in fair value of overages (note
11) - 586 - - 586
----------- ---------- ---------- ----------- --------
- 26,924 8,734 - 35,658
--------------------------------------------------------------------------- ----------- ---------- ---------- ----------- --------
Segmental assets
Note Capital Income
Growth Generation Unallocated Total
GBP000 GBP000 GBP000 GBP000
------------------------------ ----- ------- ----------- ----------- -------
Property, plant and equipment - - 802 802
Investment properties 9 43,132 173,428 - 216,560
Investments in joint ventures 10 1,042 17,796 - 18,838
Other receivables 11 2,666 - - 2,666
Inventories 12 211,535 83 - 211,618
Assets classified as held
for sale 14 2,782 4,906 - 7,688
Non-current trade receivables 13 5,250 - - 5,250
Current trade and other
receivables 13 16,516 6,762 1,887 25,165
------- ----------- ----------- -------
282,923 202,975 2,689 488,587
------------------------------ ----------- -------
Unallocated assets:
Cash 8,371 8,371
------------------------------ ----- ------- ----------- ----------- -------
Total assets 282,923 202,975 11,060 496,958
------------------------------ ----- ------- ----------- ----------- -------
Financial liabilities are not allocated to the reporting
segments as they are managed and measured on a Group basis.
31 December 2016
Capital Growth Income Unallocated Total
Generation costs
Note GBP000 GBP000 GBP000 GBP000
--------------------------- ---- -------------- ----------- ----------- --------
Revenue from operations* 16,307 17,386 - 33,693
Cost of sales (15,967) (4,938) - (20,905)
--------------------------- ---- -------------- ----------- ----------- --------
Gross Profit 340 12,448 - 12,788
Administrative expenses (1,765) (1,416) (7,276) (10,457)
Other gains (1) 2 31,653 11,374 - 43,027
Other operating expenses - (117) (87) (204)
--------------------------- ---- -------------- ----------- ----------- --------
Operating profit/(loss)
before exceptional items 30,228 22,289 (7,363) 45,154
Exceptional items 4 - (682) 689 7
--------------------------- ---- -------------- ----------- ----------- --------
Operating profit/(loss) 30,228 21,607 (6,674) 45,161
Share of profit of joint
ventures - 647 - 647
Finance income - - 247 247
Finance costs - - (2,588) (2,588)
Profit / (loss) before tax 30,228 22,254 (9,015) 43,467
--------------------------- ---- -------------- ----------- ----------- --------
* No activity relating to sales of development properties
occurred in the year ended 31 December 2016
Memo (1) Note
Other gains are analysed
as follows:
Increase in fair value
of investment properties 9 23,433 10,280 -33,713
Decrease in fair value
of assets classified as
held for sale 14 - (224) - (224)
Profit on sale of investment
properties 7,473 1,693 - 9,166
Loss on sale of assets
classified as held for
sale - (375) - (375)
Increase in fair value
of overages 11 747 - - 747
31,653 11,374 -43,027
------------------------------ ----- ------ ------ ------
Segmental assets
Capital Income
Growth Generation Unallocated Total
Note GBP000 GBP000 GBP000 GBP000
------------------------------------------ ----- ------- ----------- ----------- -------
Property, plant and equipment - - 789 789
Investment properties 9 232,886 146,304 - 379,190
Investments in joint ventures 10 868 9,681 - 10,549
Other receivables 11 1,397 - - 1,397
Inventories 12 454 279 - 733
Assets classified as held for sale 14 6,152 2,198 - 8,350
Trade and other receivables (all current) 13 10,521 1,673 12,250 24,444
252,278 160,135 13,039 425,452
------------------------------------------ ----- ------- ----------- ----------- -------
Unallocated assets:
Cash 13,007 13,007
------------------------------------------ ----- ------- ----------- ----------- -------
Total assets 252,278 160,135 26,046 438,459
------------------------------------------ ----- ------- ----------- ----------- -------
Financial liabilities are not allocated to the reporting
segments as they are managed and measured on a Group basis.
4. Exceptional items
Year ended Year ended
31 December 31 December
2017 2016
GBP000 GBP000
------------------------------------------- ------------ ------------
Exceptional income:
Settlements from the administration
of legacy companies 414 689
Total exceptional income 414 689
------------------------------------------- ------------ ------------
Exceptional expense:
Sundry costs relating to legacy activities (83) -
Under recovery relating to the cessation
of coal fine activities at Rugeley
and coal fines stock provision - (682)
Total exceptional expense (83) (682)
------------------------------------------- ------------ ------------
Net exceptional items 331 7
------------------------------------------- ------------ ------------
5. Finance income and costs
Year ended Year ended
31 December 31 December
2017 2016
GBP000 GBP000
--------------------- ------------ ------------
Total finance income 16 247
--------------------- ------------ ------------
Finance costs
- Bank interest (994) (1,559)
- Facility fees (807) (545)
- Other interest (476) (484)
--------------------- ------------ ------------
Total finance costs (2,277) (2,588)
--------------------- ------------ ------------
Net finance costs (2,261) (2,341)
--------------------- ------------ ------------
6. Tax (credit)/charge
Year ended Year ended
31 December 31 December
Analysis of tax (credit)/charge in the 2017 2016
year GBP000 GBP000
----------------------------------------------- ------------ ------------
Current tax
Current year 1,874 -
Adjustment in respect of prior periods (336) -
Total current tax charge 1,538 -
Deferred tax
Current year (15,036) 2,510
Adjustment in respect of prior periods 3,898 1,652
Effect of changes in tax rates 1,757 (2,042)
Re-assessment of recognition of recoverability
of deferred tax assets - 1,446
----------------------------------------------- ------------ ------------
Total deferred tax (credit)/charge (9,381) 3,566
----------------------------------------------- ------------ ------------
Total tax (credit)/charge (7,843) 3,566
----------------------------------------------- ------------ ------------
Year ended Year ended
31 December 31 December
2017 2016
Other comprehensive (expense)/income items GBP000 GBP000
----------------------------------------------- ------------ ------------
Deferred tax - current year (51) 14
Deferred tax - prior year - 80
----------------------------------------------- ------------ ------------
(51) 94
----------------------------------------------- ------------ ------------
6. Tax (credit)/charge (continued)
The tax for the year is different to the standard rate of
corporation tax in the UK of 19.25% (2016: 20.00%). The differences
are explained below:
Year ended Year ended
31 December 31 December
2017 2016
GBP000 GBP000
----------------------------------------------- ------------ ------------
Profit before tax on continuing operations 41,840 43,467
----------------------------------------------- ------------ ------------
Profit before tax multiplied by rate of
corporation tax in the UK of 19.25%
(2016: 20.00%) 8,054 8,693
Effects of:
Adjustments in respect of prior periods
- deferred taxation 3,898 1,652
Adjustments in respect of prior periods
- current taxation (336) -
Non-taxable income (841) (129)
Expenses not deducted for tax purposes 1,395 390
Revaluation gains - (4,683)
Changes in tax rates 1,757 (2,042)
Capital gains tax transferred out - (1,764)
Re-assessment of recognition of recoverability
of deferred tax assets (6,600) 1,446
Utilisation of unrecognised deferred tax (15,170) -
Deferred tax not recognised - 3
----------------------------------------------- ------------ ------------
Total tax (credit)/charge (7,843) 3,566
----------------------------------------------- ------------ ------------
The movement within the tax reconciliation of GBP15.2m (2016:
GBPnil) relating to the utilisation of unrecognised deferred tax is
a result of the crystallisation of a number of gains in respect of
investment property due to the disposal or transfer of these
properties to development property (held in inventory). The gains,
on which deferred tax liabilities have been recognised and were
crystallised in the year have been offset against previously
unrecognised tax losses.
The tax losses remaining at the end of the year have largely
been recognised as a result of the execution of a contract that
related to increased certainty that the losses would not be lost.
As such these losses have been recognised in the year to reflect an
increased deferred tax asset carried forward. This gives rise to
the GBP6.6m disclosed in the tax reconciliation.
As part of the filing of the prior year tax computations and
returns, tax attributes were utilised to shelter chargeable gains
arising on the disposal of properties and the transfer of
properties held for sale. This gave rise to a deferred tax charge
of GBP3.9m compared to the original tax provision prepared for
inclusion within the prior year accounts.
6. Tax (credit)/charge (continued)
Deferred tax
The following is the analysis of deferred tax
assets/(liabilities) presented in the consolidated statement of
financial position:
As at As at
31 December 31 December
2017 2016
GBP000 GBP000
-------------------------- ------------- ------------
Deferred tax liabilities (13,067) (23,352)
Deferred tax assets 7,546 8,501
-------------------------- ------------- ------------
(5,521) (14,851)
-------------------------- ------------- ------------
The movement on the deferred income tax account is as
follows:
Other
Investment temporary
properties Tax losses differences Total
GBP000 GBP000 GBP000 GBP000
---------------------------- ----------- ---------- ------------ --------
At 1 January 2016 (11,379) - - (11,379)
Recognised in Consolidated
Income Statement (11,973) 8,427 (20) (3,566)
Recognised in Consolidated
Statement of Comprehensive
Income - - 94 94
---------------------------- ----------- ---------- ------------ --------
At 31 December 2016 (23,352) 8,427 74 (14,851)
Recognised in Consolidated
Income Statement 10,353 (2,522) 1,550 9,381
Recognised in Consolidated
Statement of Comprehensive
Income (68) - 17 (51)
----------------------------
At 31 December 2017 (13,067) 5,905 1,641 (5,521)
---------------------------- ----------- ---------- ------------ --------
There are UK corporation tax losses carried forward of GBP15.9m;
these may be carried forward indefinitely as there is no time limit
in respect of using these deferred tax assets.
Deferred tax is calculated in full on temporary differences
under the liability method using a tax rate of 17% (2016: 17%). A
reduction in the UK corporation tax rate from 20% to 19% (effective
from 1 April 2017), and a further reduction to 17% (effective from
1 April 2020) were enacted as part of the Finance Act 2015. The
deferred tax liabilities are shown at 17% (2016: 18%) being the
rate expected to apply to the reversal of the liability.
Deferred tax assets and liabilities are offset when there is a
legally enforced right to offset current tax assets against current
tax liabilities and when the deferred taxes relate to the same
fiscal authority.
Deferred tax assets of GBP6.1m at 31 December 2017 have not been
recognised owing to the uncertainty as to their recoverability,
deferred tax assets of GBP19.7m were not recognised at 31 December
2016.
7. Dividends
The Board recommended and shareholders approved a full year
dividend for financial year 2016 of GBP1.7m (0.523p per share)
which was paid on 30 May 2017 and an interim dividend of GBP0.8m
(0.253p per share) for the six months ended 30 June 2017 which was
paid on 13 October 2017. The Company is proposing to recommend a
final dividend of 0.575 pence per share (GBP1.8m in total) for the
year ended 31 December 2017 at the Annual General Meeting in
May.
8. Earnings per share
Earnings per share has been calculated by dividing the profit
attributable to ordinary shareholders by the weighted average
number of shares in issue and ranking for dividend during the year.
The weighted average number of shares for 31 December 2017 includes
the adjustments necessary to reflect the new shares issued on 17
March (See note 17).
Year ended Year ended
31 December 31 December
2017 2016
GBP000 GBP000
----------------------------------------------- ------------- ------------
Profit from continuing operations attributable
to owners of the parent 49,683 39,901
Weighted average number of shares used
for basic and diluted earnings per share
calculation 315,296,192 292,269,786*
-------------
Basic and diluted profit per share (pence) 15.8 13.7*
----------------------------------------------- ------------- ------------
*The 2016 EPS has been restated following discussions with the
Financial Reporting Council and their review of the 2016 Financial
Statements, which did not correctly reflect the effect of the May
2016 1 for 10 share consolidation on EPS.
9. Investment properties
Investment property at 31 December 2017 and 31 December 2016 has
been measured at fair value. The Group holds five categories of
investment property being agricultural land, natural resources,
business space, major developments and strategic land in the UK,
which sit within the operating segments of Income Generation and
Capital Growth.
Income Generation Capital Growth
Agricultural Natural Business Major Strategic
Land Resources Space Developments Land Total
Note GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
------------------------- ---- ------------ ---------- -------- ------------- --------- ---------
At 1 January 2016 16,763 16,954 90,896 157,589 52,415 334,617
Transfers 4,617 5,682 (25,424) 64,763 (49,638) -
Direct acquisitions 1,390 - 21,134 - - 22,524
Subsequent expenditure 286 1,663 5,998 11,223 3,484 22,654
(Decrease)/increase
in fair value 3 (894) 5,203 5,971 12,103 11,330 33,713
Transfer to assets
classified as
held for sale 14 (1,680) - (477) (6,153) - (8,310)
Transfer to property,
plant and
equipment - - (783) - - (783)
Disposals (376) (13) (606) (23,875) (355) (25,225)
At 31 December
2016 20,106 29,489 96,709 215,650 17,236 379,190
Transfers - 277 11,686 4,137 (16,100) -
Direct acquisitions - - 5,536 15,281 5,198 26,015
Subsequent expenditure 1,684 1,154 8,960 13,100 4,261 29,159
Increase in fair
value 3 3,660 1,438 896 13,072 13,067 32,133
Transfer to assets
classified as
held for sale 14 (1,160) (276) (3,500) (8,492) (350) (13,778)
Reclassification
as other receivables 11 - - - (666) - (666)
Reclassification
as development
property in inventories 12 - - - (229,118) - (229,118)
Disposals (1,963) (782) (486) (2,964) (180) (6,375)
------------------------- ---- ------------ ---------- -------- ------------- --------- ---------
At 31 December
2017 22,327 31,300 119,801 20,000 23,132 216,560
------------------------- ---- ------------ ---------- -------- ------------- --------- ---------
Included within investment properties (agricultural land) is a
provision of GBP3.2m (2016: GBP6.0m) relating to the restoration
liability on sites formerly rented to mining tenants. This
provision is treated as a reduction of the individual property
valuations.
During the year GBP229.1m of investment property was
re-categorised to development properties. Properties that have
obtained planning permission and are being taken forward for
development are now held in inventory. Following further evolution
of Harworth's business model during 2017, we have refined our
thinking in the light of site and market opportunities, and
concluded that it is appropriate, on the whole, to re-categorise
all properties which have received planning permission as
development properties. For until sites receive planning
permission, our view is that the land is held for a currently
undetermined future use and should thus be held as investment
property.
9. Investment properties (continued)
Valuation process
The properties were valued in accordance with the Royal
Institute of Chartered Surveyors (RICS) Valuation - Professional
Standards (the "Red Book"), by BNP Paribas Real Estates and Savills
both independent firms acting in capacity of external valuers with
relevant experience of valuations of this nature. The valuations
are on the basis of Market Value as defined within the Red Book,
which RICS considers meets the criteria for assessing Fair Value
under International Financial Reporting Standards. The valuations
are based on what is determined to be the highest and best use.
When considering the highest and best use a valuer will consider,
on a property by property basis, its actual and potential uses
which are physically, legally and financially viable. Where the
highest and best use differs from the existing use, the valuer will
consider the cost and the likelihood of achieving and implementing
this change in arriving at its valuation. Most of the Group's
properties have been valued on the basis of their development
potential which differs from their existing use.
At each financial year end, Management:
o verifies all major inputs to the independent valuation
report;
o assesses property valuation movements when compared to the
prior year valuation report; and
o holds discussions with the independent valuer.
The different valuation levels are defined as:
o Level 1: valuation based on quoted market prices traded in
active markets.
o Level 2: valuation based on inputs other than quoted prices
included within Level 1 that maximise the use of observable data
either directly or from market prices or indirectly derived from
market prices.
o Level 3: where one or more inputs to valuation are not based
on observable market data.
The Directors determine the applicable hierarchy that each
investment property falls into by assessing the level of
unobservable inputs used in the valuation technique. As a result of
the specific nature of each investment property, valuation inputs
are not based on directly observable market data and therefore all
investment properties were determined to fall into Level 3.
The Group's policy is to recognise transfers into and out of
fair value hierarchy levels as at the date of the event or change
in circumstance that caused the transfer. There were no transfers
between hierarchy in the year ended 31 December 2017 (2016:
zero).
Valuation techniques underpin management's estimation of fair
value.
Agricultural Land
Most of the agricultural land is valued using the market
comparison basis, with an adjustment made for the length of
remaining term on the tenancy and the estimated cost to bring the
land to its highest and best use. Where the asset is subject to a
secure letting, this is valued on a yield basis, based upon sales
of similar types of investment.
Natural Resources
Natural resources sites in the portfolio are valued based on a
discounted cashflow for the operating life of the asset.
Major Developments
Major developments sites are generally valued using residual
development appraisals, a form of discounted cash flow which
estimates the current site value from future cash flows measured by
observable current land and/or completed built development values,
observable or estimated development costs, and observable or
estimated development returns.
Where possible development sites are valued by direct comparison
to observable market evidence with appropriate adjustment for the
quality and location of the property asset, although this is
generally only a reliable method of measurement for the smaller
development sites.
9. Investment properties (continued)
Strategic Land
Strategic land is valued on the basis of discounted cash flows,
with future cash flows measured by current land values adjusted to
reflect the quality of the development opportunity, the potential
development costs estimated by reference to observable development
costs on comparable sites, and the likelihood of securing planning
consent. The valuations are then benchmarked against observable
land values reflecting the current existing use of the land, which
is generally agricultural and where available, observable strategic
land values.
Business Space
The business parks are valued on the basis of market comparison
with direct reference to observable market evidence including
rental values, yields and capital values and adjusted where
required for the estimated cost to bring the property to its
highest and best use. The evidence is adjusted to reflect the
quality of the property assets, the quality of the covenant profile
of the tenants and the reliability/volatility of cash flows.
10. Investments
Investment in joint ventures
GBP000
---------------------------------- ------
At 1 January 2016 768
Acquisitions 9,134
Share of profit of joint ventures 647
At 31 December 2016 10,549
Investment in joint ventures 4,250
Share of profit of joint ventures 4,039
---------------------------------- ------
At 31 December 2017 18,838
---------------------------------- ------
On 26 April 2017, the Group entered into a joint venture
agreement with Lancashire County Pension Fund to establish Multiply
Logistics North Holdings Limited and Multiply Logistics North LP,
to develop part of the site at Logistics North, near Bolton.
On 16 December 2016 the Group entered into a joint venture
agreement with Dransfield Properties Limited for a 50% share of
Waverley Square Limited.
The Group purchased a 50% share of Aire Valley Land LLP from
Keyland Developments Limited for a consideration of GBP8.5m plus
costs of GBP0.5m on 14 March 2016. The Aire Valley Land LLP is a
joint venture company. It controls 165 acres of land in Leeds that
abuts an existing landholding of the Group on the former Skelton
Grange power station site.
The Group holds 50% of the issued ordinary shares of Bates
Regeneration Limited, a joint venture with Banks Property Limited
for the development of an investment property at Blyth,
Northumberland.
11. Other receivables
The benefit of overages is recorded as a non-current receivable
as follows:
Year ended Year ended
31 December 31 December
2017 2016
Note GBP000 GBP000
--------------------------------------------- ---- ------------ ------------
At 1 January 1,397 650
Re-categorisation from investment properties 9 666 -
Additions 17 -
Fair value gains 2 586 747
--------------------------------------------- ---- ------------ ------------
At 31 December 2,666 1,397
--------------------------------------------- ---- ------------ ------------
Overages were valued at 31 December 2017 and 2016 in accordance
with the RICS Red Book valuation by BNP Paribas Real Estate. The
same valuation process is used to value overages as investment
properties as described in note 9.
12. Inventories
As at As at
31 December 31 December
2017 2016
GBP000 GBP000
----------------------------------------- ------------ ------------
Development properties 210,471 -
Planning promotion and option agreements 1,064 454
Finished goods 83 279
Total inventories 211,618 733
----------------------------------------- ------------ ------------
The cost of inventory is recognised as an expense within cost of
sales in the year of GBP28.1m (2016: GBP0.4m). Finished goods are
stated after a provision of GBP0.3m (2016: GBP0.3m)
The movement in the development properties is as follows:
Note GBP000
------------------------- ---- --------
At 1 January 2017 -
Transfer from investment
properties 9 229,118
Subsequent expenditure 2,424
Disposals (15,253)
Provision for impairment 2 (5,818)
At 31 December 2017 210,471
------------------------- ---- --------
13. Trade and other receivables
As at As at
31 December 31 December
2017 2016
GBP000 GBP000
---------------------------------- ------------ ------------
Current
Trade receivables 11,572 4,179
Less: provision for impairment of
trade receivables (207) (221)
---------------------------------- ------------ ------------
Net trade receivables 11,365 3,958
Other receivables 12,399 19,111
Prepayments and accrued income 1,401 1,375
25,165 24,444
---------------------------------- ------------ ------------
Non-current
Trade receivables 5,250 -
---------------------------------- ------------ ------------
All of the Group's receivables are denominated in sterling. The
non-current receivable of GBP5.3m relates to deferred consideration
on the sale of development properties due after more than one
year.
14. Assets classified as held for sale
As at As at
31 December 31 December
2017 2016
Investment properties Note GBP000 GBP000
---------------------------- ---- ------------ ------------
At 1 January 8,350 9,128
Transferred from investment
properties 9 13,778 8,310
Subsequent expenditure 159 1,588
Decrease in fair value 2 (83) (224)
Disposals (14,516) (10,452)
---------------------------- ---- ------------ ------------
At 31 December 7,688 8,350
---------------------------- ---- ------------ ------------
The assets classified as held for sale at each year end relate
to investment properties expected to be sold within twelve
months.
15. Borrowings
As at As at
31 December 31 December
2017 2016
GBP000 GBP000
---------------------- ------------ ------------
Bank loans
Current:
Secured - other loans (6,145) (1,819)
---------------------- ------------ ------------
(6,145) (1,819)
---------------------- ------------ ------------
Non-current:
Secured - bank loans (23,437) (37,142)
Secured - other loans (11,064) (13,517)
---------------------- ------------ ------------
(34,501) (50,659)
---------------------- ------------ ------------
The other loans relate to infrastructure loans. These are
provided by public bodies in order to promote the development of
major sites. The loans are drawn as work on the respective sites is
progressed and they are repaid on agreed dates or when disposals
are made from the sites.
The bank borrowings are part of a GBP75.0m (2016: GBP75.0m)
revolving credit facility from The Royal Bank of Scotland. The
facility is repayable on 13 February 2023 (five-year term) after
being extended by two years on 13 February 2018. The facility is
non-amortising and subject to financial and other covenants.
16. Trade and other payables
Current liabilities
As at As at
31 December 31 December
2017 2016
GBP000 GBP000
----------------------------- ------------ ------------
Trade payables 3,428 1,555
Taxation and social security 3,590 7,852
Corporation tax 1,712 -
Other creditors 2,402 2,087
Accruals and deferred income 28,903 22,225
----------------------------- ------------ ------------
40,035 33,719
----------------------------- ------------ ------------
Non-current liabilities
As at As at
31 December 31 December
2017 2016
GBP000 GBP000
---------------- ------------ ------------
Other creditors 760 1,520
---------------- ------------ ------------
Accruals and deferred income include GBP17.2m (2016: GBP15.4m)
of liabilities relating to parcels of land that have been sold but
where infrastructure costs are yet to be incurred. Non-current
other creditors relate to deferred consideration due on land
purchases after one year.
17. Share Capital and Share Premium
On 17 March 2017, the Group issued 29,226,974 new ordinary
shares at 95 pence each, with a nominal value of 10 pence each. On
26 April 2016 3 ordinary shares were issued at 1 pence each and all
shares in issue were consolidated from 1 pence shares into 10 pence
shares.
Share Total
Number Par Value Premium GBP'000
of shares GBP000 GBP'000
-------------------------------- --------------- --------- --------- ---------
At 1 January 2016 2,922,697,857 29,227 129,121 158,348
Shares issued 3 - - -
Share consolidation (10 for
1) (2,630,428,074) - - -
Transfer to other distributable
reserve - - (129,121) (129,121)
-------------------------------- --------------- --------- --------- ---------
At 31 December 2016 2 292,269,786 29,227 - 29,227
Shares issued 29,226,974 2,923 24,842 27,765
Costs relating to share issue - - (700) (700)
Other transaction costs - - 209 209
-------------------------------- --------------- --------- --------- ---------
At 31 December 2017 321,496,760 32,150 24,351 56,501
Own shares held (246,010) (263) - (263)
321,250,750 31,887 24,351 56,238
-------------------------------- --------------- --------- --------- ---------
On 18 May 2016 approval was granted from the High Court to
cancel the GBP129.1m share premium account of the Group and for it
to be re-designated as distributable reserves.
18. Derivative Financial Instruments
On 21 June 2016, the Group entered into a four-year swap to fix
GBP30.0m of borrowings at an all-in rate of 2.955% including fees.
The interest rate swap has been measured at fair value which is
determined using forward interest rates extracted from observable
yield curves. The fair value of the interest rate swap at 31
December 2017 was a loss of GBP0.1m (2016: GBP0.4m).
The following gain/(loss) was recognised in the other
comprehensive income statement in relation to the interest rate
swap:
As at As at
31 December 31 December
2017 2016
GBP000 GBP000
------------------------------------ ------------ ------------
Gain/(loss) on interest rate swap -
cash flow hedge 244 (366)
------------------------------------ ------------ ------------
19. Related party transactions
Peel Group
The Peel Group charged GBP42,500 (2016: GBP42,500) in respect of
fees for Steven Underwood in his position as a non-executive
director.
The Group paid GBP0.8m to Peel Group in respect of a deed of
release at Logistics North (2016: GBPnil). GBP0.3m (2016: GBPnil)
of this was subsequently re-charged to Multiply Logistics North
LP.
During the year the Group made two land sales to Peel
Environmental Limited amounting to GBP3.1m (2016: GBPnil) resulting
in a GBP1.2m (2016: nil) profit on sale.
Multiply Logistics North LP
The Group made two land sales to Multiply Logistics North LP
during the year amounting to GBP8.1m (2016: GBPnil), recharged
costs of GBP0.6m (2016: GBPnil) and charged a development manager
fee of GBP0.2m (2016: GBPnil).
Scratching Cat
Geoff Mason, our former Company Secretary, supplied his services
through Scratching Cat Limited, a company of which he is a
director. During the year charges were made in relation to company
secretarial duties of GBPnil (2016: GBP73,000).
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR UVSWRWBAORAR
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