TIDMHWG
RNS Number : 3590G
Harworth Group PLC
17 March 2020
17 March 2020: 7am
LEI 213800R8JSSGK2KPFG21
HARWORTH GROUP PLC
UNAUDITED PRELIMINARY RESULTS FOR THE YEARED 31 DECEMBER
2019
SOLID PERFORMANCE, COMPELLING STRATEGY AND STRONG MARKET
FUNDAMENTALS PROVIDES BASIS FOR SUSTAINED LONG-TERM GROWTH
Harworth Group plc ("Harworth" or the "Group"), a leading
regenerator of land and property for development and investment,
announces its preliminary results for the year ended 31 December
2019.
Key Non-Statutory Measures 2019 2018 Key Statutory Measures 2019 2018
(1)
Operating profit
Total return (%) 7.8 13.3 (GBP'm) 24.3 33.0
----- ----- ------------------------ ------ ------
EPRA NNNAV per share growth
(%) 7.2 12.6 Net asset value (GBP'm) 463.8 441.9
----- ----- ------------------------ ------ ------
Basic earnings per
Value gains (GBP'm) 44.0 51.3 share (p) 7.9 10.6
----- ----- ------------------------ ------ ------
Profit excluding value Total dividend per
gains (GBP'm) 3.5 9.8 share (p) 1.0 0.9
----- ----- ------------------------ ------ ------
Net loan to portfolio
value (%) 12.1 12.3 Net debt (GBP'm) 70.9 64.4
----- ----- ------------------------ ------ ------
Harworth's Chief Executive, Owen Michaelson, said:
"We have delivered a total return of 7.8% in 2019, demonstrating
the ability of our team to create value growth from the active
asset management of our underlying land and property portfolio
alongside profits from rental income and sales. This includes the
results from the regeneration of sites through the sale of
engineered land to housebuilders and commercial occupiers, and the
continued expansion and resilience of our income portfolio.
"Five years on from Harworth's listing on the Main Market, the
Group has continued to apply its role as master developer
successfully on a range of complex sites across the Midlands and
North to create places where people want to live and work. It has
remained true to the underlying principles of sustainable
development whilst also delivering strong long-term financial
returns.
"Our move to a regional operating model(2) has begun to yield
firm results in 2019, with good progress made across all of our
core regions in extending our future land pipeline through a
mixture of freehold acquisitions, options and planning promotion
agreements. Our overall pipeline now stands at 29,596 residential
plots (9,554 plots already consented) and 24.4m sq. ft of
commercial space (9.1m sq. ft already consented), its highest point
since re-listing, providing the foundations for the continued
long-term growth of the business.
"Notwithstanding this progress, the returns from large-scale
sites like ours are not linear and this has been seen in the lower
total return in 2019, primarily as a result of the planning
headwinds at a local authority level that we reported through our
interim results. Also as previously indicated, whilst we continue
to target long-term market-leading returns, our current trading
plans suggest that our historic site portfolio will deliver lower
returns in the near term whilst our new sites move through the
development cycle, exacerbated by the continued local political
headwinds which will take some time to unwind.
"The residential and industrial property markets in the North of
England and Midlands remain solid and should benefit from the
delivery of government policy and spending commitments made within
the Chancellor's recent budget announcement. These strong
underlying market fundamentals complement our ability to create
sustainable communities where people want to live and work which
remains central to our core focus. We will continue to accelerate
the delivery of our major sites alongside the ongoing growth of the
portfolio through sustainable acquisition opportunities. This will
drive returns whilst supporting the regeneration of our regions
through the delivery of new homes and jobs, helping to support the
economic rebalancing of the UK."
CONTINUING TO DELIVER LONG-TERM MARKET-LEADING RETURNS
* Total return (EPRA NNNAV growth plus dividends per
share) of 7.8% (2018: 13.3%), in line with
expectations and contributing to our long-term market
leading returns
* EPRA NNNAV per share growth of 7.2% (2018: 12.6%)
reflecting progress across all business areas, but
held back by previously reported planning headwinds
affecting the timing of potential gains
* Operating profit of GBP24.3m (2018: GBP33.0m) and
profit excluding value gains of GBP3.5m (2018:
GBP9.8m, reflecting significant one-off fee income in
2018)
* Basic earnings per share consequently reduced to 7.9p
(2018: 10.6p)
* Dividend per share increased by 10.0% to 1.0p (2018:
0.9p) in-line with our progressive policy and
demonstrating our confidence in the long-term
potential of the business
* Net loan to portfolio value of 12.1% (2018: 12.3%) or
35.3% (2018: 34.3%) when calculated against the core
income-producing portfolio, maintaining a prudent
gearing level at the lower end of our stated target
range
SOLID OPERATIONAL DELIVERY AND STRATEGIC EXECUTION ACROSS THE
BUSINESS
Growing and refining our land portfolio
* Completed eleven strategic land purchases totalling
587 acres for a combined consideration of GBP22.6m,
providing the potential for the development of c2,900
homes and over 1.25 m sq. ft of commercial space
* Purchased four Income Generation properties for a
combined consideration of GBP20.9m (blended net
initial yield of 8.4%)
* Entered into seven Planning Promotion Agreements
(PPAs) across all three core regions, supplementing
the Group's long-term land pipeline
* Sold a further 1,918 acres of non-core land,
delivering on our stated ambition to reduce our
agricultural landholding and our planned exit from
the North East for a total consideration of GBP10.4m
Preparing land as master-developer to create new communities
* Submitted planning applications for 1.3m sq. ft of
commercial space and 1,918 residential plots,
including on the former Ironbridge power station in
Shropshire. As at 31 December 2019, a total of over
4.1m sq. ft of employment space and over 3,000
residential plots were in the planning system
awaiting determination
* Secured planning consent for 0.9m sq. ft of
commercial space across our sites
* Completed initial site works and enabling contracts
at Hugglescote Grange (Coalville) in Leicestershire
and Moss Nook in St Helens to unlock the delivery of
nearly 3,000 consented residential plots over the
lifecycle of these projects, whilst also successfully
completing the demolition of Ironbridge power
station's four former cooling towers as part of its
27-month demolition programme
Delivering places for people to live and work
* 102 acres of serviced residential land (1,379 plots)
sold for a total consideration of GBP61.0m
* 56 acres of serviced commercial land sold at our
joint venture Gateway 45 Leeds site in three separate
deals for a combined consideration of GBP30.3m
(GBP15.2m share to Harworth)
* Completed the freehold land sale of our solar
portfolio comprising seven former colliery sites in
Yorkshire, Nottinghamshire and Derbyshire for GBP5.0m
representing a net initial yield of 4.6%
Actively managing the Group's income portfolio with new lettings and
providing quality accommodation for businesses
* Increased annualised income by over GBP1.9m (2018:
GBP3.7m) from new Business Space purchases,
subsequent asset management initiatives and 21
completed new lettings and re-gears
* A new 20-year pre-let agreed with the UK Atomic
Energy Authority for a 22,300 sq. ft bespoke fusion
technology research facility at the Advanced
Manufacturing Park ("AMP") in Rotherham, with rent
commencing on practical completion in September 2020
in line with existing headline rents at AMP
* Following all this activity, the gross rental income
yield of our core income portfolio is 6.8% (2018:
6.3%)
* The weighted average unexpired lease term ("WAULT")
on our built space portfolio (including joint
ventures) at year end stood at 13.5 years (2018: 14.1
years), with a vacancy rate of 6.2% (2018: 14.4%)
BUSINESS REMAINS WELL-POSITIONED TO MAINTAIN LONG-TERM MARKET LEADING
RETURNS
* Harworth remains well-capitalised, providing
resilience in the face of medium-term economic and
political uncertainty as well as the ability to make
selective opportunistic purchases
* Significant latent value across our portfolio of
sites with planning consent standing at 9,554
residential plots (2018: 11,077) and 9.1m sq. ft of
commercial space (2018: 10.7m sq. ft). Total
unconsented pipeline of 20,042 (2018: 9,413)
identified residential plots and 15.3m sq. ft of
commercial space (2018: 10.5m sq. ft) underpins
long-term growth prospects
* Planning headwinds on a handful of sites reported at
half year remain in place and will continue to be
managed on a site-by-site basis, whilst emphasising
the potential of Harworth's placemaking credentials
* Management will continue the sales programme of
agricultural and North East sites alongside the churn
of more mature land and property during the years
ahead
* Capital for acquisitions will be deployed through our
regional operating model(2) and will continue to
focus on: purchasing major brownfield sites,
potential urban extensions or former industrial land
from corporates, private landowners, administrators
and the public sector; securing options on
development opportunities or on adjacent land;
agreeing PPAs of scale in our core regions; and
acquiring new income generating properties with
active asset management potential
* Already well advanced with 2020 sales, with 39% of
budgeted 2020 sales either with agreed heads of terms,
in legals, or exchanged at an aggregate consideration
in excess of their 31 December 2019 book value
Footnotes:
(1) Harworth discloses both statutory and alternative
performance measures. A full description and reconciliation of the
alternative performance measures is set out in Note 2 to the
financial information
(2) Within the Capital Growth segment
-S-
Enquiries:
Harworth Group plc Tel: +44 (0)114 349 3131
Owen Michaelson, Chief Executive
Kitty Patmore, Chief Financial Officer
Iain Thomson, Head of Communications and IR
FTI Consulting Tel: +44 (0)20 3727 1000 | Harworth@fticonsulting.com
Dido Laurimore
Richard Gotla
Eve Kirmatzis
Results Presentation
Harworth will be holding a presentation for analysts and
investors starting at 09.30am today at the offices of FTI
Consulting, 200 Aldersgate, Aldersgate Street, London, EC1A 4HD. If
you would like to attend, please contact Alex King on 020 3727
1000, or email harworth@fticonsulting.com .
A live webcast will also be available which can be accessed via
the following link:
https://webcasting.brrmedia.co.uk/broadcast/5e381334b9710760e29257a0
There will also be a conference call facility available. The
dial-in details are as follows:
Participants, Local - London, United
Kingdom: +44 (0)330 336 9105
Confirmation Code: 1019472
ABOUT HARWORTH GROUP PLC
Listed on the premium segment of the main market, Harworth Group
plc (LSE: HWG) invests to transform land and property into
sustainable places where people want to live and work. Harworth
owns and manages a portfolio of approximately 18,000 acres of land
on around 100 sites located throughout the North of England and
Midlands (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 2020.
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.
This announcement contains inside information. The person
responsible for making this notification is Chris Birch, General
Counsel and Company Secretary.
Chair of the Board's Message
Our purpose
A hallmark of investor thinking over recent years has been a
view that the businesses in which they are invested should be about
more than just the creation of shareholder value. This is obviously
important, and the reason institutions and retail investors invest,
but it should be what results from something more fundamental - the
purpose of the business. This is the contribution it makes to its
stakeholders, both those directly involved with it, such as its
employees, customers, suppliers, and shareholders, but also those
indirectly benefitting from its activities - communities where it
is based or operates, and society more generally, through the
impact it has on the environment and the contribution it makes to
meeting wider society's goals and challenges.
Harworth's business lends itself to being very clear about our
purpose: " Harworth invests to transform land and property into
sustainable places where people want to live and work". It is why
people join our business, why we are given a fair hearing when we
discuss development proposals with communities and their
representatives, and increasingly why funds that specialise in ESG
investing are actively investing in our business.
We have tried to make each word count! Transformation is our
business. We are expert in taking brownfield sites that have
outlived their industrial purpose and transforming them into
sustainable new commercial and residential development. There is no
better example than the Ironbridge power station, now being
flattened and transformed into a residential development of up to
1,000 new homes with supporting uses including a retirement
village, a school, allotments and sports pitches. Similarly, we
have transformed a disused sewage works on the outskirts of Leeds
next to the M1, Gateway 45 Leeds, into a site for commercial
development that is delivering hundreds of new skilled jobs.
Elsewhere we recognise the desire of local authorities to ensure
that, where they seek to meet the country's urgent need for more
homes, this does not outstrip the capacity of communities to
support the new residents with the local infrastructure they need,
including schools, healthcare facilities and shops. Rather,
therefore, than pepper-potting new houses within existing
settlements, planners are looking to develop new sustainable
edge-of-town schemes with this core supporting infrastructure and
services. This is where Harworth's capacity to master plan comes
into its own and why we talk of places where people want to live
and work. We aim to meet not only people's needs but also their
aspirations, this in turn being why our sites are attractive to our
house-builder customers.
As I travel around our regions, in Yorkshire & Central where
Harworth originated, and in our other core regions in the North
West and Midlands, I meet people in Harworth who are passionately
committed to our purpose and what they are themselves able to
create, delivering against objectives that extend far beyond just
an increase in the value of the business. When potential
residential acquisitions are presented to the Board they talk of
the new communities that will be built progressively on our sites,
in many cases requiring us to look up to 10-15 years ahead to
visualise its transformation - this is what we mean by
"placemaking". In turn we have to think about what society will
need and expect in that timeframe. What energy provision will it
need? What transport arrangements will by then be the norm? This is
what sustainability is all about.
Our strategy
One of the roles of a chair is to understand the thinking and
aspirations of the Group's major shareholders. There is a well-worn
adage that a business should have shareholders that fit its
strategy, not try to fit its strategy to its shareholders! From my
interaction with shareholders, I believe Harworth is fortunate in
having shareholders who support our strategic priorities,
recognising that this is a business that plans and delivers across
the long-term, albeit that in the short-term market conditions may
be influenced by economic and political uncertainties and, as has
been the case during the past year, planning decisions may be
delayed by political change at either a local or national level.
Whatever happens in the short-term, a good development will remain
a good development because it will become a place where people want
to live and work. What is important is not whether a decision is
made this side or the other side of the end of the year, allowing a
value gain to be realised in the accounts for the year in question,
but whether the characteristics of the site and its local market
are going to deliver a sustainable vision, with a required return,
over the life of the project. If those returns are realised then
value will be created.
As one significant shareholder said to me recently, "Big is not
necessarily beautiful". What is important is to buy the right sites
on the right terms and market conditions have been such that we
have been selective in what we have bought over the past year,
albeit recognising that the realisation of value in subsequent
years is dependent upon what we buy today. That said, we have been
pleased to identify both a number of new commercial and residential
developments, where we can achieve medium-term capital growth and
also new income-producing sites, bought on attractive yields and
with asset management opportunities, in pursuit of our strategy of
covering our overheads, financing costs and taxation from operating
activities with resilient income. Having been selective we start
the new financial year with appropriate financial firepower to take
advantage of good opportunities both to create capital growth and
to generate further income as sources such as our coal fines
business erode with the closure of coal-fired power stations.
Our aim is to deliver long term market-leading returns across
the cycle: where those will turn out in absolute terms will be
determined by where we are in the cycle. That objective does,
however, make us very discerning as to where we apply capital. Our
UK Coal heritage means that much of our asset base was inherited
rather than selected and we must, therefore, choose where we commit
development capital and where we believe another owner may be
better suited to the site given their own return profile. Hence our
decision to divest of our industrial and agricultural portfolio in
the North-East. We will continue to apply this strategy across all
our sites aiming consistently to maximise the value-creating
potential of our portfolio. During 2019 we sold 1,919 acres of
non-core land for GBP10.4m.
2019 The Year
The results of any particular year are determined by where the
portfolio is across its development life. As Harworth specialises
in large, complex sites, development gains will tend to be lumpy
and our scale does not afford us the averaging benefit inherent in
a large portfolio. It is also only relatively recently that
Harworth has had the means to acquire new sites beyond those it
inherited from UK Coal. The realisation of value gains on many of
those new sites will, therefore, lie in the future.
As a result, our EPRA NNNAV growth per share at 7.2% was lower
than it has been in recent years which themselves benefitted from
value gains created in the early stage development of major sites,
such as Waverley, as they first gained planning consent and then
realised uplifted site values as place-making was achieved
progressively. As we commented at the half year, there are also a
number of sites where changes in the make-up of councils following
spring local elections led to changes in planning policy. In turn
these changes delayed planning decisions that we would otherwise
have expected to fall into 2019 and be reflected in the year-end
valuation of those sites. As commented above, whilst to a degree
frustrating, this does not change the appropriateness of our plans
for these sites which reflect our commitment to sustainability and
only come forward after close consultation with a range of local
stakeholders.
We remain financially strong with year-end overall gearing at
12.1% and GBP24.0m of undrawn facilities, well-placed to take
advantage of opportunities that may present themselves now last
year's General Election is conclusively behind us.
Our Board
This morning we announced that our Chief Executive, Owen
Michaelson, had advised the Board of his intention to retire at the
end of 2020 after 10 years leading the business. In large part the
Harworth Group owes its existence to Owen. Having originally taken
over the management of UK Coal's real estate activities when these
were restructured as Harworth Estates in 2010, he seized the
regeneration potential of the former collieries, and in doing so
created a business that is now a leader in its field, transforming
former industrial sites and urban edge extensions into new homes
and employment areas across the breadth of the North of England and
the Midlands. When the company took over the Harworth Estates
business and relisted in 2015, he became Chief Executive.
Throughout the last 10 years, under Owen's leadership, Harworth has
remained true to its purpose, to invest to transform land and
property into sustainable places where people want to live and
work, and in doing so has created material value for our
shareholders. He will take with him our every good wish for life
after Harworth and we will now begin the process to appoint a
successor.
Last year, we said goodbye in June to Andrew Kirkman who had
been our Finance Director since the beginning of 2016 and in
October welcomed Kitty Patmore to take the role of Chief Financial
Officer on our Board. Kitty brings a wealth of real estate
expertise and capital markets knowledge and even in the few short
months she has been with us has already made a material
contribution to the business. I would also like to recognise the
excellent work of Jenny Cutler, now our Director of Finance, who
took over the finance director's remit in the interim until Kitty
joined us.
As I reported in my last statement as Chair, we also last year
welcomed Ruth Cooke and Angela Bromfield to the Board and said
goodbye to Tony Donnelly who retired after nine years as part of
the Board team that steered the business from being the property
arm of UK Coal to a self-determining premium listed specialist in
large complex sites and regeneration. This year we will also be
losing another member of that team. Lisa Clement, our Senior
Independent Director and Chair of our Remuneration Committee, will
also have served nine years and will retire in the autumn. Her role
as Senior Independent Director will be assumed by Andrew Cunningham
who chairs our Audit Committee, having been a member of our Board
since April 2016, whilst Angela Bromfield will become Chair of the
Remuneration Committee and has also replaced Lisa on our Nomination
Committee. We are currently recruiting a further independent
non-executive director whom I would expect to join the Board around
the time of our AGM in May.
Thank you
In my personal perspective on Harworth in last year's annual
report, my first statement as Chair, I commented that Harworth,
more than most companies, is all about its people. It is they who
create value through their ability to identify the right sites,
negotiate acquisitions and disposals, develop masterplans, project
manage developments, deliver on asset management plans and steer us
successfully through critical activities such as demolition and
remediation. My greatest thanks are, therefore, to them for what
they have achieved in 2019 which in turn lays the foundation for
what the Group will achieve in coming years. My thanks also to our
executive for their leadership of the business, to my colleagues on
the Board for their wise counsel, to our shareholders for their
support and commitment, to our customers who recognise the quality
of the places we create, and to all our other stakeholders who
provide input and guidance into our projects.
Alastair Lyons
Chair
17 March 2020
Chief Executive Statement
Good operational performance despite headwinds
I am pleased to report that the Harworth team continues to
deliver on the key activities and milestones which underpin the
long-term performance of the business, delivering another solid set
of results. We focus on making money in the right way - blending
the delivery of great places to live and work through the
application of placemaking principles whilst also targeting
long-term market-leading financial returns. I am fiercely proud of
how our team thoughtfully plans the regeneration of land and
property and sensitively delivers it within prudent financial
controls.
The Group has delivered a total return in 2019 of 7.8% (2018:
13.3%) with EPRA NNNAV of GBP500.5m at the year-end (2018:
GBP466.5m). The in-year result is impressive when considered
against the backdrop of the unprecedented political headwinds we
faced in 2019 and I am pleased with the way the business adapted to
the challenge. The primary impact was the change of political
control of some local authorities following elections in May which
delayed the determination of a handful of our live planning
applications. I am confident that our swift work to amend planning
strategies in these cases has prevented any long-term value erosion
in each individual project. Ultimately the nature of our business
means that we must always take a long-term view and our
acquisitions, planning and delivery strategy reflects this
discipline.
Despite these headwinds, we had a strong year of sales that
demonstrated continued demand for our developments and we made
significant progress in growing our portfolio, both in our pipeline
of new strategic land sites and increased recurring income from
investment property. We continue to drive value gains from our
underlying land portfolio in the North of England and the Midlands
through four principal management actions: preparing and securing
planning consents on major schemes; preparing land for
redevelopment; delivering sales for future residential and
commercial end uses; and actively asset managing our underlying
land and property portfolio.
Growing and refining our land and property portfolio
The rollout of our regional operating model in 2019 has been the
primary driver of the increased number of acquisition opportunities
that we are appraising and ultimately securing. We made eleven
strategic land and four income acquisitions over the year across
each of our regions for a total consideration of GBP43.5m alongside
the signing of PPAs and land option agreements with third
parties.
Capital Growth
Freehold acquisitions and PPAs combined added a further 8,847
residential plots and 1.6m sq. ft of potential commercial space to
our pipeline during the year. This activity meant that, as at 31
December 2019, we held 9,554 consented residential plots in the
portfolio alongside 9.1m sq. ft of consented employment space. In
addition, our identified planning pipeline now stands at 20,042
residential plots and 15.3m sq. ft of future commercial space, the
highest quantum since re-listing in 2015. This helps to support the
ongoing economic development of the North of England and the
Midlands which underpins our business purpose.
Income-producing property
We have continued to deliver our strategy of growing our
recurring income base through selective acquisitions with asset
management potential. Three Business Space properties were
purchased in the year located at Etherow (Glossop), Brighouse in
West Yorkshire and Sherburn-in-Elmet in North Yorkshire for a
combined consideration of GBP20.5m (including costs), reflecting a
blended net initial yield of 8.4%. Further information on these
transactions is provided within the 'Growing our Income Portfolio'
section below.
Disposal of non-core assets
In line with our stated intent to focus management attention on
those of our Capital Growth and income producing sites with the
highest value-adding potential in our three core regions, a total
of 1,918 acres of non-core land, predominantly our agricultural
landholdings and sites in the North East, were sold during the year
for a combined consideration of GBP10.4m.
Preparing land to create new communities as master developer
A significant proportion of our planning work in 2019 was spent
working with stakeholders on developing and agreeing key
development principles prior to the submission of major planning
applications including for the former Ironbridge power station in
Shropshire. Our approach to master development - working
collaboratively with stakeholders and reflecting on a site's
location and assets prior to creating and delivering sustainable
development - puts us in good stead as we continue to manage local
political risk. Planning applications for over 1.3m sq. ft of
commercial space and 1,918 residential plots were submitted in the
year, meaning that a total of over 4.1m sq. ft of employment space
and over 3,000 residential plots were in the planning system
awaiting determination at year-end.
Despite local planning headwinds, we were still able to achieve
some planning success during the year. This included receiving
outline consent for our 53-acre Bardon Hill development for 356k
sq. ft of new commercial space. The site, within two miles of
Junction 22 of the M1, now has a consent for an indicative layout
of five industrial units and is already in an established
commercial location, with nearby occupiers including Amazon, Eddie
Stobart and DHL.
Further progress was made in preparing sites at the early stages
of development ahead of future sale or build out. The most
eye-catching of these milestones was the successful demolition of
Ironbridge power station's four former cooling towers as part of
ongoing site works. Early infrastructure works have also been
completed at our Hugglescote Grange (Coalville, Leicestershire) and
Moss Nook (St Helens) residential sites ahead of the planned sale
of their respective first phases over the next 18 months,
ultimately unlocking the delivery of nearly 3,000 consented
residential plots across both developments.
Delivering serviced plots for new homes and commercial
spaces
The disposal of serviced land remains a central part of our
strategy, using our well-developed technical skills to de-risk our
sites for our housebuilder customers as well as utilising our
placemaking skills to enhance the attraction of our developments
for new home owners to support eventual house sales. Over the
course of 2019, we completed sales across six major development
sites of 102 acres of serviced land to accommodate 1,379
residential plots for a total consideration of GBP61.0m. We have
now worked with fifteen national and regional housebuilders across
our sites.
On the commercial side, The Aire Valley Land LLP, our 50/50
joint venture with Evans Property Group, agreed three separate
sales at Gateway 45 Leeds that generated a total consideration of
GBP30.3m (GBP15.2m Harworth share). This included the sale of 10
acres of fully serviced commercial land to the University of Leeds
to build out their Institute for High Speed Rail and Systems
Integration, building on our existing links with major academic
institutions, in turn supporting inward investment in the
regions.
Growing our Income Portfolio
Our investment portfolio continues to make a significant
contribution to profits and value gains and provides the recurring
income needed to cover our overhead costs. As we aim to drive value
growth by the application of proven asset management techniques and
local market knowledge, we remain committed to 'churning' the
portfolio. This continued throughout 2019, with the purchase of
high yielding investments with asset management potential alongside
the sale of more mature income assets where our business plans
developed at the time of acquisition have been executed.
Business Space
In 2019, our Business Space team continued to improve the
Group's existing income portfolio whilst also providing high
quality and flexible accommodation for businesses of all sizes. 21
new and renewed lettings were agreed across our existing Business
Space portfolio.
A notable pre-let was agreed with the UK Atomic Energy Authority
for a new 20-year term at a local headline rent for a 22,300 sq. ft
bespoke fusion technology research facility at the AMP, further
cementing the AMP's position at the heart of high-added-value
employment in the UK.
The Business Space team added to our annualised income by over
GBP1.7m through the acquisition of three commercial properties in
2019 with a total purchase price of GBP20.5m (including costs)
providing active asset management opportunities to drive further
value and income growth.
This combined activity meant that Business Space revenue in 2019
was GBP13.3m (2018: GBP11.9m). The WAULT across the portfolio
stands at 13.5 years (2018: 14.1 years), whilst the vacancy rate is
now 6.2% (2018: 14.4%).
Natural Resources and Operations
Our revenues for the year were also bolstered by the work of our
Natural Resources team. A total of 120.2MW (2018: 154.2MW) of low
carbon energy capacity remains installed on our land, providing a
long-term income stream from a combination of ground rents and
electricity royalties. The reduction in the year was due to the
freehold sale of our Solar Portfolio in December for GBP5.0m,
representing a net initial yield of 4.6%, as part of our ongoing
income churn strategy. The team's focus continues to be on growing
future income from environmental technologies including low carbon
energy, recycling, and mineral processing.
At the same time, revenue from our coal fine sales reduced
faster than expected during the year with the accelerated closure
of all coal fired power stations across the UK (2019: GBP4.0m,
2018: GBP7.7m).
Regeneration at our Heart
When we transform former industrial sites such as collieries or
power stations into places where new communities can flourish, we
are actively supporting economic growth in our regions and helping
to meet some of society's key challenges. As master developer, we
have been shaping, creating and delivering sustainable developments
for over a decade and I am very proud of the placemaking we have
achieved at a local level. We are in the process of formalising our
own sustainability framework which will reflect the way in which we
approach our projects to continue to deliver economic,
environmental and social value for the future supporting 'good
growth' across the North of England and the Midlands.
Our people are the core of the business
I would like to thank the hard work and dedication of our teams
over 2019. This was an important year in developing our staffing
capacity as we completed our transition to a regional operating
model and I am very pleased that all key regional appointments have
now been made, ultimately supporting the long-term growth of the
business. The appointment of Ian Ball as Chief Operating Officer on
1 May, alongside Kitty Patmore who joined the business as our new
Chief Financial Officer on 1 October, further enhances the strength
of our executive leadership team to plan and execute our strategy
of sustained long-term profitable growth. We have recently added a
new Head of Income to the management team to drive the active churn
and investment strategy within this side of our business.
Outlook
As previously set out, whilst we continue to target long-term
market-leading returns, our current trading plans indicate that in
the near term, returns will be lower as our more advanced
development sites begin to reach maturity whilst we wait for the
strategic land sites acquired since 2015 to contribute fully to our
long-term performance. Our identified pipeline in the pre-planning
and planning stages provides good line of sight on future
developments and will be brought forward alongside the delivery of
our current sites and the continued growth of our portfolio.
Notwithstanding the planning headwinds highlighted at the half
year, our continuing view is that the outlook for the "beds and
sheds" markets in our regions remains healthy and that our sites
persist in their popularity. The stability of the regional markets
in which we operate is underpinned by comparatively low prices, a
continuing lack of consented and engineered land for housing, and
the need for new commercial space where good quality stock is
scarce. Market evidence in the first three months of 2020 suggests
that the impasse that hung over the industrial property market in
the latter months of 2019 has subsided for some time at least, and
the sector is forecast to continue to outperform both the office
and the retail sectors in the medium-term.
We are also cautiously optimistic about proposed Government
support aimed at helping to rebalance the UK economy through
additional investment in skills, infrastructure, rail connectivity
and in sectors such as advanced manufacturing. Its ongoing
commitment to regional devolution to provide powers and funding at
local level is also welcomed, further strengthened by the Budget
announcement made in early March.
Maintaining strong financial discipline in the appraisal of
projects and the deployment of capital is essential to drive
returns whilst supporting the ongoing regeneration of our regions
through the delivery of new homes and jobs. Our focus on purchasing
major brownfield and potential urban extension sites in sustainable
locations whilst also securing options on land which complements
existing Harworth developments derives directly from our purpose.
Our strong technical track record has set us up well to bid
successfully on further complex sites and income-producing
properties with clear asset management opportunities and long-term
strategic land potential.
2020 has begun well, with 39% of this year's budgeted sales
already agreed, although we still expect performance as usual to be
second-half weighted. Whilst coronavirus has not had an impact on
the business thus far, we remain diligent in monitoring its
potential effect on all parts of the business and we have been
taking appropriate steps within the business to mitigate any
disruption.
With healthy demand for our land and property seen to date
following the December election, our business remains well
positioned for long-term growth to capitalise on the opportunities
created by the renewed political focus on the Midlands and the
North of England. There is a lot still to be done, both for this
year and future years, before I retire at the end of the year.
Owen Michaelson
Chief Executive
17 March 2020
Financial Review
Overview and key measures
In 2019, Harworth continued to deliver a solid financial
performance across its core business segments generating a total
return of 7.8% (2018: 13.3%). Over the year, net asset value rose
to GBP463.8m (2018: GBP441.9m) with EPRA NNNAV rising to GBP500.5m
(2018: GBP466.5m) representing a per share growth of 7.2% to 155.6p
(2018: 145.2p).
We find that as our property portfolio includes development
properties and joint venture arrangements, Alternative Performance
Measures ("APMs") can provide valuable insight into our business
alongside the statutory amounts. In particular, revaluation gains
on development properties are not recognised in the Statutory
Income Statement and Balance Sheet. The APMs set out to show
measures which include movements in development property
revaluations, assets held for sale, overages and joint ventures,
and also the profitability of the business excluding value gains.
We believe that these APMs assist in providing stakeholders with
additional useful disclosure on the underlying trends, performance
and position of the Group.
Our key APMs are:
-- Total return - The movement in EPRA NNNAV plus dividends per
share paid in the year expressed as a percentage of opening EPRA
NNNAV per share
-- EPRA NNNAV per share growth - The movement in EPRA NNNAV per
share expressed as a percentage of opening EPRA NNNAV per share
-- Value gains - This is the realised profits from the sales of
properties and unrealised profits from property value movements
including joint ventures and the mark to market movement on
development properties, assets held for sale and overages
-- Profit excluding value gains - Property net rental, royalty
and fee income, net of running costs of the business which
represents the underlying profitability of the business not reliant
on property value gains or profits from the sales of development
properties
-- Net loan to portfolio value - Group debt net of cash held
expressed as a percentage of portfolio value
A full description of all non-statutory measures and
reconciliations between all the statutory and non-statutory
measures are given in Note 2 to the Financial Information.
Harworth discloses some APMs which are European Public Real
Estate Association ("EPRA") measures as these are a set of standard
disclosures for the property industry and thus aid comparability
for our real estate investors and analysts. In October 2019, EPRA
announced changes to the Net Asset Value measurement to reflect the
evolution of the listed real estate sector. These changes are
applicable from accounting periods beginning on or after 1 January
2020 and will be reported in full in the 2020 Interim results.
In 2019, the Group achieved value gains of GBP44.0m (2018:
GBP51.3m). This is the result of attaining milestones in
remediating land, place-making, new lettings and site specific
opportunities, albeit that progress across the portfolio was
tempered by the impact of planning headwinds primarily resulting
from the May 2019 local elections.
The Group's profit excluding value gains was GBP3.5m (2018:
GBP9.8m). The reduction compared to the prior year is predominantly
due to one significant promote fee in 2018 of GBP6.8m and a
reduction in coal fine income in 2019 as a result of the
accelerated wind down of coal fired power stations.
Basic earnings per share for the year were 7.9p (2018: 10.6p)
reflecting lower promote fees, a reduction in income from coal
fines and higher tax charges in the year. The total dividend per
share for 2019 has been increased by 10% to 1.0p (2018: 0.9p) which
is consistent with previous years reflecting our progressive
dividend policy and our confidence in the long-term potential of
the business.
The closing net loan to portfolio value was 12.1% (2018: 12.3%),
at the lower end of our net LTV target range.
Income Statement
2019 2018
----------------------------- -------------------------------------------------
Central
Capital Income Over- Capital Income Central
Growth Generation heads Total Growth Generation Over-heads Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
-------------------------- ------- ----------- ------- ------ ------- ----------- ----------- ------
Revenue 62.0 23.5 - 85.5 52.5 25.6 - 78.1
Cost of sales (50.5) (7.1) - (57.5) (45.0) (8.6) - (53.6)
-------------------------- ------- ----------- ------- ------ ------- ----------- ----------- ------
Gross profit 11.5 16.4 - 27.9 7.4 17.0 - 24.4
Administrative expenses (2.7) (2.2) (8.0) (12.9) (2.5) (2.2) (8.2) (12.9)
Other gains - 9.3 - 9.3 8.7 13.4 - 22.1
Other operating expense - - (0.1) (0.1) - - (0.1) (0.1)
Operating profit/(loss)
before exceptional items 8.9 23.4 (8.1) 24.3 13.6 28.2 (8.3) 33.6
-------------------------- ------- ----------- ------- ------ ------- ----------- ----------- ------
Exceptional expense - - - - - - (0.6) (0.6)
-------------------------- ------- ----------- ------- ------ ------- ----------- ----------- ------
Operating profit/(loss) 8.9 23.4 (8.1) 24.3 13.6 28.2 (8.9) 33.0
Share of profit of joint
ventures 7.0 1.4 - 8.4 - 3.8 - 3.8
Interest 0.3 - (2.7) (2.4) - - (4.0) (4.0)
-------------------------- ------- ----------- ------- ------ ------- ----------- ----------- ------
Profit/(loss) before tax 16.3 24.9 (10.8) 30.3 13.6 32.0 (12.9) 32.8
Tax (charge)/credit - - (4.8) (4.8) - - 1.3 1.3
-------------------------- ------- ----------- ------- ------ ------- ----------- ----------- ------
Profit/(loss) after tax 16.3 24.9 (15.6) 25.5 13.6 32.0 (11.6) 34.1
-------------------------- ------- ----------- ------- ------ ------- ----------- ----------- ------
Notes: (1) There are some minor differences on some totals due
to roundings
Revenues in 2019 were GBP85.5m (2018: GBP78.1m), split between
revenue from Income Generation of GBP23.5m (2018: GBP25.6m) and
revenue from Capital Growth of GBP62.0m (2018: GBP52.5m). The
disposal of development properties was 36% higher in 2019
reflecting sales across multiple residential and commercial sites
including Swadlincote, Waverley, Riverdale Park and Thoresby.
Income Generation (Business Space, Natural Resources and
Operations) revenue mainly comprises property rental and royalty
income together with some sales of coal fines. Revenue in 2019 was
GBP23.5m (2018: GBP25.6m) and is lower as a result of reduced sales
of coal fines as the United Kingdom reduces its reliance on coal
fired power leading to an accelerated wind down of the associated
power stations and the recognition of a GBP6.8m promote fee for
lettings at Logistics North in 2018 . The core of our recurring
income is from rental and royalty income from Business Space and
Natural Resources which increased from GBP17.9m to GBP19.5m in the
year.
Cost of sales comprises the inventory cost of development
property sales and the operating costs of the Income Generation
business. Cost of sales increased to GBP57.5m (2018: GBP53.6m) of
which GBP49.5m related to the inventory cost of development
property sales (2018: GBP43.1m).
Joint venture profits of GBP8.4m (2018: GBP3.8m) were largely a
result of the sales from the Gateway 45 Leeds site. Value gains on
a non-statutory basis are set out below.
Non-statutory value gains(1)
Value gains are made up of profit on sales, revaluation gains on
investment properties (including joint ventures), and revaluation
gains on development properties, assets held for sale and
overages:
GBPm 2019 2018
------------------- --------------- --------- --------------- ----- --------- --------------- -----
Categorisation Profit on Revaluation Total Profit Revaluation Total
sales gains/(losses) on sales gains/(losses)
------------------- --------------- --------- --------------- ----- --------- --------------- -----
Capital Growth
------------------- -------------------------- --------------- ----- --------- --------------- -----
Major Developments Development 5.1 27.9 33.0 0.8 24.2 25.0
Strategic Land Investment 0.0 (0.3) (0.3) 0.7 8.4 9.1
Income Generation
------------------- -------------------------- --------------- ----- --------- --------------- -----
Business Space Investment 0.1 4.8 4.9 (0.0) 7.0 7.0
Natural Resources Investment 3.3 3.9 7.2 1.8 8.7 10.5
Agricultural Land Investment 0.0 (0.8) (0.8) (0.0) (0.3) (0.3)
Total 8.5 35.5 44.0 3.2 48.1 51.3
------------------------------------ --------- --------------- ----- --------- --------------- -----
Notes: (1) A full description and reconciliation of the
alternative performance measures in the above table is included in
note 2 to the financial information
Profit on sales of GBP8.5m (2018: GBP3.2m) reflect sales above
book value particularly in Natural Resources (solar portfolio sale)
and across major development sites.
Revaluation gains of GBP35.5m (2018: GBP48.1m) reflect our
master-developer skills in planning new developments and the
delivery of active asset management across our sites. Whilst
Harworth has a significant pipeline of both consented and "in the
planning pipeline" residential and commercial plots, timing and
receipt of planning approvals is inherently uncertain. Hence, in
2019, the revaluation gains were tempered by planning headwinds
across a small number of sites, as reflected earlier in the
statement. The principal revaluation gains across the divisions
reflected the following this year:
-- Major Developments - profitable sales, and development
progress, across the majority of our sites (notably Hugglescote
Grange (Coalville), Bardon Hill, Prince of Wales, Pheasant Hill
Park, Riverdale & Waverley) and a few small reductions on a
couple of sites due to cost plan increases;
-- Strategic Land - uplifts at Ironbridge, Rockingham and
Wingates as land is prepared with some reductions on sites as a
result of planning delays;
-- Business Space - good letting progress achieved across our portfolio;
-- Natural Resources - valuation uplifts from surface water
management plus an increase from progress on an agreed sale for an
Energy from Waste plant; and
-- Agricultural Land - uplifts as a result of market sales and
some minor reductions across some assets.
The net realisable value provision as at 31 December 2019 was
GBP6.9m (2018: GBP7.6m) across nine development properties with
provisions increased or decreased as a result of the latest
business plan and market conditions.
Property categorisation
Until sites receive planning permission, our view is that the
land is held for a currently undetermined future use and should
therefore be held as investment property. We categorise properties
and land that have received planning permission as development
properties. Property categorisation is reviewed as at 30 June and
31 December each year.
As at 31 December 2019, the balance sheet value of all
development sites was GBP202.1m and the valuation (based on
valuations by BNP Paribas and Savills plc) was GBP242.2m,
reflecting the GBP40.1m cumulative uplift in the value since they
were classified as development properties. In order to highlight
the market value of development properties, and overages, and to be
consistent with our investment properties, we are using EPRA NNNAV,
which includes the market value of development properties, assets
held for sale and overages less notional deferred tax, as our
primary net assets metric.
The table below sets out our top ten sites by value, which
represent 47% of the total value of all our properties, showing the
total acres and split by their categorisation, currently consented
residential plots and commercial space:
Housing plots Commercial space
Site Categorisation Region Acres Consented Sold/Built Consented Sold or
Built
----------------- ------------ ------ ---------- ------------ ---------- --------
Yorkshire 1,570/
Waverley Development & Central 432 3,890 900 - -
Hugglescote Grange Development Midlands 346 2,016 - - -
Yorkshire
Nufarm Investment & Central 112 - - 0.3m 0.3m
Pheasant Hill Yorkshire
Park Development & Central 307 1,200 522/170 0.1m 0.0m
Yorkshire
Gateway 45 Joint Venture & Central 110 - - 1.3m 0.6m
Yorkshire
Waverley AMP Investment & Central 113 - - 2.1m 1.5m
Melton Commercial
Park Investment Midlands 141 - - 0.3m 0.3m
Yorkshire
Thoresby Vale Development & Central 447 800 143/0 0.3m -
Yorkshire
Simpson Park Development & Central 416 996 316/170 - -
Four Oaks Business
Park Investment North West 19 - - 0.4m 0.4m
TOTAL 2,443 8,902 2,551/1,240 4.8m 3.1m
---------- ----------
Cash and sales
The Group made property sales(1) of GBP79.9m in 2019 (2018:
GBP93.2m) achieving profits on sales of GBP8.5m (2018: GBP3.2m).
The sales were split between those of residential serviced plots at
GBP58.1m (2018: GBP33.6m), commercial development at GBP4.4m (2018:
GBP30.9m) and other, mainly mature, income-generating sites and
agricultural land including those in the North East, at GBP17.4m
(2018: GBP28.7m).
Cash proceeds from sales were GBP58.0m (2018: GBP78.9m) as shown
in the table below:
31 December 2019 31 December
GBPm 2018
GBPm
-------------------------------- ---------------- -----------
Total property sales(1) 79.9 93.2
Less deferred consideration
on sales in the year (38.5) (22.7)
Add deferred consideration from
sales in prior years 16.6 8.4
--------------------------------- ---------------- -----------
Total cash proceeds 58.0 78.9
--------------------------------- ---------------- -----------
Notes: (1) A full description and reconciliation of the
alternative performance measures is included in note 2 to the
financial information
As at 31 December 2019, gross deferred consideration carried
forward was GBP41.1m (2018: GBP19.2m). This reflects the maturity
and scale of sites now delivering higher sales of residential
serviced plots to housebuilders over the course of the year.
Exceptional items
There were no exceptional items in 2019 (2018: GBP0.6m for the
costs of the step up to premium listing).
Tax
The income statement charge for taxation for the year was
GBP4.8m (2018: GBP1.3m credit) which comprised a current year tax
charge of GBP1.8m (2018: GBP0.8m credit) and a deferred tax charge
of GBP3.0m (2018: GBP0.5m credit).
The current tax charge resulted from profits from the sale of
development properties and assets held for sale as well as rental
income in the year together with the resubmission of prior year tax
computations and returns which, following a review, resulted in a
GBP0.5m credit.
The movement in deferred tax comprised the following:
-- the increase in valuation of investment properties (both
currently held and disposed of in the year) giving rise to GBP5.7m
of deferred tax charge;
-- a GBP0.2m credit due to the recognition of tax losses following disposals in the year;
-- the utilisation of tax losses against current year profits
resulting in a deferred tax charge of GBP1.3m;
-- recognition of tax losses as a result of increased certainty
as to their availability resulted in a deferred tax credit of
GBP2.2m;
-- following the submission of the tax computations and returns
for prior periods, a reduction in tax attributes utilised,
resulting in a deferred tax credit of GBP0.8m; and
-- a deferred tax credit of GBP0.8m in relation to other temporary differences.
At 31 December 2019, the Group had deferred tax liabilities of
GBP15.6m (2018: GBP12.3m) which largely related to unrealised gains
on investment properties and recognised deferred tax assets of
GBP7.8m (2018: GBP7.3m). The net deferred tax liability was GBP7.8m
(2018: GBP5.0m).
Basic earnings per share and Dividends
Basic earnings per share fell to 7.9p (2018: 10.6p) reflecting
lower promote fees, a reduction in income from coal fines and
higher tax charges in the year.
An interim dividend of 0.3p per share (2018 interim: 0.3p)
equivalent to GBP1.0m (2018 interim: GBP0.9m) for the 2019
financial year was paid on 18 October 2019. A final dividend for
the 2019 financial year of 0.7p per share (2018 final: 0.6p) is
proposed. The total dividend for the year of 1.0p per share (2018:
0.9p) equivalent to GBP3.2m (2018: GBP2.9m) is in line with our
progressive dividend policy and represents another 10% increase on
the prior year. The final dividend will be paid on 29 May 2020 to
shareholders on the register at the close of business on 1 May
2020. The ex-dividend date will be 30 April 2020.
Net asset value
31 December 2019 31 December
GBPm 2018
GBPm
------------------------------------------------ ---------------- -----------
Properties(1) 541.2 496.1
Cash 11.8 8.6
Trade and other receivables 59.3 66.7
Other assets 4.0 2.9
------------------------------------------------- ---------------- -----------
Total assets 616.3 574.3
Gross borrowings 82.7 73.0
Deferred tax liability 7.8 5.0
Derivative financial instruments 0.6 0.1
Other liabilities 61.4 54.3
------------------------------------------------- ---------------- -----------
Net assets 463.8 441.9
------------------------------------------------- ---------------- -----------
Mark to market value of development
properties, AHFS and overages
less notional deferred tax(2) 36.7 24.6
------------------------------------------------- ----------------
EPRA NNNAV(2) 500.5 466.5
------------------------------------------------- ---------------- -----------
Number of shares in issue less Employee Benefit
Trust shares 321,777,367 321,314,989
------------------------------------------------- ---------------- -----------
EPRA NNNAV per share(2) 155.6p 145.2p
------------------------------------------------- ---------------- -----------
(1) Properties include investment properties, development
properties, assets held for sale, occupied properties and
investment in joint ventures
(2) A full description and reconciliation of the alternative
performance measures in the above table is included in note 2 to
the financial information
EPRA NNNAV is GBP500.5m which includes the mark to market on the
value of the development properties, assets held for sale and
overages. The total portfolio value as at 31 December 2019 was
GBP585.3m, an increase of GBP59.6m over 31 December 2018
(GBP525.7m).
Three new joint ventures have been entered into over the year
and this together with the increase in profits from the existing
joint ventures has resulted in investments in joint ventures
increasing to GBP33.1m (2018: GBP25.8m). With the property sales in
the joint venture at Gateway 45 during 2019, the joint venture
investment is now split GBP23.1m in Capital Growth and GBP9.9m in
Income Generation (2018: GBP1.1m Capital Growth and GBP24.7m Income
Generation).
Trade and other receivables include deferred consideration on
sales as set out above. At year end, there was GBP41.1m (2018:
GBP19.2m) gross deferred consideration with GBP12.9m (2018: GBPnil)
due after more than one year.
Financing strategy
As has been consistently stated, Harworth's financing strategy
is to be prudently geared, with the Income Generation portfolio
providing a recurring income source to service debt facilities. We
believe this prudence 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 materially during the year;
* gives the Group the ability to complete acquisitions
quickly, which is often a differentiating factor in a
competitive situation; and
* ensures that we do not combine financial gearing with
Harworth's existing operational gearing, being the
company's exposure to planning,
remediation/engineering, letting and sales risks.
Harworth's financing strategy continues to target a net
loan-to-value of 10% to 15% and entails the Group seeking as a
principle to maintain its cash flows in balance by funding
infrastructure spend and investment in acquisitions through
disposal proceeds.
Debt Facilities
The Group benefits from a GBP100m Revolving Credit Facility
("RCF") with RBS and Santander, expiring in February 2023. The
Group also uses, as part of our funding, infrastructure financing,
provided by public bodies to promote the development of major
sites.
The Group had borrowings and loans of GBP82.7m at 31 December
2019 (2018: GBP73.0m), being the RCF of GBP75.8m (2018: GBP58.7m)
and infrastructure loans of GBP6.9m (2018: GBP14.3m). The Group's
cash and cash equivalents at 31 December 2019 were GBP11.8m (2018:
GBP8.6m). The resulting net debt was GBP70.9m (2018: GBP64.4m). The
weighted average cost of debt, using 31 December 2019 balances and
rates, was 3.1% with a 0.8% non-utilisation fee on undrawn RCF
amounts (2018: 3.3% with a 0.8% non-utilisation fee on undrawn RCF
amounts).
The Group's hedging strategy is to have roughly half its debt at
a fixed rate and half exposed to floating rates. The Group
currently has a GBP45m fixed rate interest swap at an all-in cost
of 1.2% (including fees) on top of the existing margin paid under
the RCF. The interest rate swap is hedge accounted with any
unrealised movements going through reserves to the extent that the
hedge is effective.
As at 31 December 2019, the Group's gross loan to portfolio
value was 14.1% (2018: 13.9%) and net loan to portfolio value was
12.1% (2018: 12.3%). If gearing is just assessed against the value
of the core income portfolio, this equates to a gross loan to core
income portfolio value of 41.2% (2018: 38.9%) and a net loan to
core income portfolio value of 35.3% (2018: 34.3%). Undrawn
facilities under the RCF were GBP24.0m putting the Group in a good
position entering 2020.
Kitty Patmore
Chief Financial Officer
17 March 2020
Principal risks and uncertainties
The Board has ultimate responsibility for determining the risk
appetite of the Group, for monitoring the risk profile of the
business and ensuring that measures and controls are in place to
manage risk effectively.
The Board recognises that not all risks can be eliminated, or
sufficiently mitigated at an acceptable cost, and that there are
some risks which, given the nature of Harworth's business and the
track record and experience of the team, it is prepared to accept.
The Board also recognises that the Group's insurance programme
plays an important part in reducing the impact of certain inherent
risks which are neither acceptable nor capable of removal.
Harworth's framework for monitoring and managing risk continued
to evolve and mature during 2019. The Group Risk Register ("GRR")
remains the principal tool used by the Board and Management Board
to monitor the risk profile of the business and the measures in
place at an operational level for mitigating and managing risk. It
forms part of a wider framework of measures pursuant to which risks
are monitored and managed throughout the year. These measures
include:
-- an annual review of the Board's risk appetite;
-- formal reviews of the GRR undertaken by both the Management Board and Board bi-annually;
-- an annual review of internal controls and processes by the Audit Committee;
-- an annual review of whistleblowing reports by the Board;
-- quarterly health and safety meetings chaired by the Chief
Executive Officer and attended by representatives of all
divisions;
-- consultation by all members of the Management Board with
their teams about existing and new operational risks, and the
effectiveness of risk management measures; and
-- a site risk register maintained by our Estates, Environment
and Safety team by which we continuously monitor the risk status of
each of our sites. Sites are inspected throughout the year and
material changes in risk status are reported to both the Management
Board and Board on a monthly basis.
The GRR maps the risk profile of the business. It is a dynamic
document and has continued to evolve during 2019. The GRR currently
identifies risks grouped into nine categories: Markets; Delivery;
Politics; Finance; People; Environment; Social; Governance; and
Legal and Regulatory. Risks are scored on a "heat map", from "very
low" to "very high", according to residual risk status (after
accounting for mitigation measures already in place) and
materiality. Categories and risks remain subject to regular review.
The Board's objective is to maintain, as far as possible, an
alignment between its risk appetite and the risk profile of the
business.
During 2019, Harworth operated against a backdrop of heightened
economic and political instability surrounding the UK's exit from
the EU. That backdrop did not have a materially increased adverse
effect on the housing, logistics and manufacturing markets in
Harworth's core regions, due to their long-term fundamentals, but
the Board was mindful that these macro conditions had the potential
to lead to a downturn in the regional residential and/or commercial
property markets in which Harworth operates. That being so, our
residential and commercial property Markets risks retained a "high"
status in the GRR throughout 2019. Those Markets risks have
returned to a "medium" status following the latest review of the
GRR, reflecting the decisive outcome of the General Election and
the UK's departure from the EU at the end of January 2020. We
believe this has generated increased political stability and
resulted in improved sentiment across both the commercial and
residential property markets in at least the short-term. The Board
continues to monitor Markets risks closely given that commercial
markets in some instances are considered to be operating late-cycle
and macro-economic uncertainty remains and is likely to increase as
we approach the end of the transition period agreed with the
EU.
The macro-political backdrop did lead to turbulence at a local
political level, manifested by changes in local government control
at the May local elections and in local planning policy, creating
planning headwinds for a handful of our projects. These headwinds
persist and are reflected in the "high" risk status of our planning
Delivery risk (rather than in our Politics category, as to which
see below). Evidence post-election suggests these headwinds may
begin to subside and we will continue to monitor this closely
throughout the year.
The UK also remains a highly competitive landscape for strategic
site acquisitions and, despite our success in securing new sites
and projects in 2019 and strong pipeline, this is a reflected in a
"high" acquisition Delivery risk status. Over the short term, we
expect that more acquisition opportunities will come forwards on
which we are well placed to capitalise. All other Delivery risks
remain unchanged, with a "medium" risk status.
In terms of Finance risks, our capital and income risks continue
to carry higher risk scores. This reflects that expanding our
capital sources and increasing the breadth and resilience of our
income portfolio, in both cases to support the growth of the
business, remain strategic priorities. Over the course of 2019, we
have seen lower income from coal fine sales, reflecting an
accelerated reduction in reliance on coal fired power stations.
Although the trend for coal fine sales is anticipated to continue,
overall we expect these risks to reduce in the medium term as our
strategy is implemented. There has also been an increase in our
insurance risk, due to challenging market conditions, which has
resulted in material increases in some insurance premiums, albeit a
large proportion of these increases are passed onto tenants. We
expect this risk to remain unchanged, if not increase, over the
next 12 months and will be undertaking a robust renewal exercise
for 2021.
Whilst the macro-political backdrop and local political climate
are reflected in our Markets and Delivery risk categories, our
Politics category risks are informed by changes in central
Government policy. Overall, this category remains largely
unchanged, with increases in certain risks offset by reductions in
others.
Our People and Legal and Regulatory risks remain largely
unchanged and no material movements are expected over the next 12
months. Most of our Governance risks retain a "medium" risk status,
notwithstanding modest reductions in our internal controls and
cyber security Governance risks, following work measures introduced
in 2019.
Our Environment and Social risk categories were new to the GRR
in 2019, reflecting emerging risks identified by our bi-annual
reviews, and our focus on business purpose, the sustainability and
environmental impact of our projects, and the effectiveness of our
engagement with local communities and other key stakeholders. These
risks carry a mixture of "low" and "medium" scores. They are
long-term risks, the status of which is not expected to change
materially over the next 12 months.
These risks are presented at a time of increased economic and
market uncertainty with the backdrop of coronavirus across the
world. The above risk categories have been reviewed and it is
recognised that as this backdrop evolves, there could be a
short-term increase across a number of these categories as a
result, including People with respect to resourcing, Finance
(cashflow and income risks) and our Markets risks. Based on the
current situation and combined with the mitigation measures that
are in place to reduce the impact on the Group alongside our
Business Continuity Plans, the risk ratings are considered to
remain appropriate.
The 2019 Annual Report and Financial Statements will include a
detailed analysis of the Group's principal risks and uncertainties,
reflecting the latest review of the GRR by the Management Board and
Board. This analysis will: (A) show the current status of each
risk, after mitigation; (B) identify movements in risk during 2019
and those forecast in 2020; (C) give examples of the mitigation
measures undertaken in 2019 and those planned for 2020; and (D)
indicate how each risk category could impact our strategic
priorities.
Unaudited Consolidated Income Statement
for the year ended 31 December 2019
Unaudited Audited
year ended year ended
31 December 31 December
2019 2018
Note GBP000 GBP000
------------------------------------------ ---- ------------ ------------
Revenue 3 85,455 78,055
Cost of sales 3 (57,512) (53,612)
------------------------------------------ ---- ------------ ------------
Gross profit 27,943 24,443
Administrative expenses 3 (12,926) (12,870)
Other gains 3 9,313 22,066
Other operating expense 3 (69) (70)
Operating profit before exceptional items 24,261 33,569
Exceptional expense 4 - (590)
------------------------------------------ ---- ------------ ------------
Operating profit 24,261 32,979
Share of profit of joint ventures 10 8,449 3,791
Net finance costs 5 (2,407) (3,962)
Profit before tax 30,303 32,808
Tax (charge)/credit 6 (4,823) 1,294
------------------------------------------ ---- ------------ ------------
Profit for the financial year 25,480 34,102
------------------------------------------ ---- ------------ ------------
Earnings per share from continuing operations
Note pence pence
------------------------------------------ ---- ------------ ------------
Basic 8 7.9 10.6
Diluted 8 7.9 10.5
------------------------------------------ ---- ------------ ------------
Unaudited Consolidated Statement of Comprehensive Income
for the year ended 31 December 2019
Unaudited Audited
year ended year ended
31 December 31 December
2019 2018
GBP000 GBP000
---------------------------------------------- ------------- -------------
Profit for the financial year 25,480 34,102
Other comprehensive income - items that
will not be reclassified to profit or
loss:
Actuarial loss in Blenkinsopp Pension
scheme (430) (18)
Deferred tax on other comprehensive expense
items 149 (1)
Other comprehensive income - items that
may not be reclassified to profit or
loss:
Fair value of financial instruments (449) 13
----------------------------------------------- ------------- -------------
Total other comprehensive expense (730) (6)
----------------------------------------------- ------------- -------------
Total comprehensive income for the financial
year 24,750 34,096
----------------------------------------------- ------------- -------------
Unaudited Consolidated Balance Sheet
as at 31 December 2019
Unaudited Audited
as at 31 December as at 31 December
2019 2018
Note GBP000 GBP000
----------------------------------- ---- ------------------ ------------------
ASSETS
Non-current assets
Property, plant and equipment 1,050 794
Right of use assets 122 -
Other receivables 12,754 -
Investment properties 9 293,840 254,409
Investment in joint ventures 10 33,072 25,830
340,838 281,033
----------------------------------- ---- ------------------ ------------------
Current assets
Inventories 11 205,900 207,009
Trade and other receivables 46,455 66,699
Assets classified as held for sale 12 11,252 10,956
Cash 11,833 8,595
275,440 293,259
----------------------------------- ---- ------------------ ------------------
Total assets 616,278 574,292
----------------------------------- ---- ------------------ ------------------
LIABILITIES
Current liabilities
Borrowings 13 (2,842) (5,291)
Trade and other payables (56,608) (52,555)
Lease liability (58) -
Current tax liabilities (2,725) (928)
(62,233) (58,774)
----------------------------------- ---- ------------------ ------------------
Net current assets 213,207 234,485
----------------------------------- ---- ------------------ ------------------
Non-current liabilities
Borrowings 13 (79,902) (67,747)
Trade and other payables (1,200) (300)
Lease liability (70) -
Derivative financial instruments (558) (109)
Deferred income tax liabilities 6 (7,765) (4,964)
Retirement benefit obligations (771) (462)
----------------------------------- ---- ------------------ ------------------
(90,266) (73,582)
----------------------------------- ---- ------------------ ------------------
Total liabilities (152,499) (132,356)
----------------------------------- ---- ------------------ ------------------
Net assets 463,779 441,936
----------------------------------- ---- ------------------ ------------------
SHAREHOLDERS' EQUITY
Capital and reserves
Called up share capital 14 32,191 32,150
Share premium account 24,359 24,351
Fair value reserve [1] 116,121 118,563
Capital redemption reserve 257 257
Merger reserve 45,667 45,667
Investment in own shares (67) (194)
Retained earnings [1] 219,771 187,040
Current year profit 25,480 34,102
Total shareholders' equity 463,779 441,936
----------------------------------- ---- ------------------ ------------------
[1] The fair value and retained earnings reserves have been
restated to reallocate fair value gains and losses between these
reserves. See note 16 for further detail
Unaudited Consolidated Statement of Changes in Equity
for the year ended 31 December 2019
Called Fair
up share value Retained
capital reserve Capital Investment earnings
GBP000 Share Merger (restated) redemption in own (restated) Total
premium reserve 1 reserve shares 1 equity
Note GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
--------------------- ---- --------- -------- -------- ----------- ----------- ---------- ----------- -------
Balance at 1 January
2018 32,150 24,351 45,667 105,064 257 (263) 202,085 409,311
Profit for the
financial
year - - - - - - 34,102 34,102
Fair value gains - - - 23,238 - - (23,238) -
Transfer of
unrealised
gains on disposal of
properties - - - (9,739) - - 9,739 -
Other comprehensive
(expense)/income:
Actuarial loss in
Blenkinsopp
Pension Scheme - - - - - - (18) (18)
Fair value of
financial
instruments - - - - - - 13 13
Deferred tax on other
comprehensive
(expense)/income
items - - - - - - (1) (1)
--------------------- ---- --------- -------- -------- ----------- ----------- ---------- ----------- -------
Total comprehensive
income
for year ended 31
December
2018 - - - 13,499 - - 20,597 34,096
Transaction with
owners:
Share-based payments - - - - - 69 1,200 1,269
Dividends paid 7 - - - - - - (2,740) (2,740)
Balance at 31
December
2018 32,150 24,351 45,667 118,563 257 (194) 221,142 441,936
--------------------- ---- --------- -------- -------- ----------- ----------- ---------- ----------- -------
Profit for the
financial
year - - - - - - 25,480 25,480
Fair value gains - - - 10,090 - - (10,090) -
Transfer of
unrealised
gains on disposal of
properties - - - (12,532) - - 12,532 -
Other comprehensive
(expense)/income:
Actuarial loss in
Blenkinsopp
pension scheme - - - - - - (430) (430)
Fair value of
financial
instruments - - - - - - (449) (449)
Deferred tax on other
comprehensive
expense
items - - - - - - 149 149
--------------------- ---- --------- -------- -------- ----------- ----------- ---------- ----------- -------
Total comprehensive
(expense)/income
for year ended 31
December
2019 - - - (2,442) - - 27,192 24,750
Transaction with
owners:
Share-based payments - - - - - 127 (71) 56
Dividends paid 7 - - - - - - (3,012) (3,012)
Share issue 41 8 - - - - - 49
--------------------- ---- --------- -------- -------- ----------- ----------- ---------- ----------- -------
Balance at 31
December
2019 32,191 24,359 45,667 116,121 257 (67) 245,251 463,779
--------------------- ---- --------- -------- -------- ----------- ----------- ---------- ----------- -------
[1] The fair value and retained earnings reserves have been
restated to reallocate fair value gains and losses between these
reserves. See note 16 for further detail.
Unaudited Statement of Cash Flows
for the year ended 31 December 2019
Unaudited Audited
year ended year ended
31 December 31 December
Note 2019 2018
----------------------------------------------------- ---- ------------ ------------
Cash flows from operating activities GBP000 GBP000
Profit before tax for the financial year 30,303 32,808
Net finance costs 5 2,407 3,962
Other gains 3 (9,313) (22,066)
Share of profit of joint ventures 3 (8,449) (3,791)
Depreciation of property, plant and equipment 139 9
Pension contributions in excess of charge (120) (120)
----------------------------------------------------- ---- ------------ ------------
Operating cash inflows before movements in
working capital 14,967 10,802
Decrease in inventories 2,161 4,609
Decrease/(increase) in receivables 7,490 (36,284)
Increase in payables 4,953 13,598
----------------------------------------------------- ---- ------------ ------------
Cash generated from/(used in) operations 29,571 (7,275)
Interest paid (2,337) (1,581)
Corporation tax (paid)/received (1) 99
Cash generated from/(used in) operating activities 27,233 (8,757)
----------------------------------------------------- ---- ------------ ------------
Cash flows from investing activities
Interest received 368 4
Investment in joint ventures (2,592) (2,843)
Distributions from joint ventures 3,799 -
Net proceeds from disposal of investment properties,
assets held for sale and overages 18,107 47,801
Acquisitions and subsequent expenditure on
properties (49,574) (64,124)
Expenditure on property, plant and equipment (351) (1)
Cash used in investing activities (30,243) (19,163)
----------------------------------------------------- ---- ------------ ------------
Cash flows from financing activities
Net proceeds from issue of ordinary shares 49 -
Proceeds from other loans - 8,650
Repayment of bank loans (15,000) (46,730)
Proceeds from bank loans 32,000 81,739
Repayment of other loans (7,669) (12,209)
Loan arrangement fees paid (62) (566)
Share based transactions (19) -
Payment in respect of leases (39) -
Dividends paid 7 (3,012) (2,740)
Cash generated from financing activities 6,248 28,144
----------------------------------------------------- ---- ------------ ------------
Increase in cash 3,238 224
----------------------------------------------------- ---- ------------ ------------
At 1 January
Cash 8,595 8,371
----------------------------------------------------- ---- ------------ ------------
Increase in cash 3,238 224
----------------------------------------------------- ---- ------------ ------------
At 31 December
Cash 11,833 8,595
----------------------------------------------------- ---- ------------ ------------
Notes to the financial information
for the year ended 31 December 2019
1. Accounting policies
The principal accounting policies adopted in the preparation of
these unaudited consolidated financial information 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 "Company") is a company limited by
shares incorporated and domiciled in the United Kingdom (England).
The address of its registered office is Advantage House, Poplar
Way, Catcliffe, Rotherham, South Yorkshire, S60 5TR. The Company is
listed on the London Stock Exchange.
Basis of preparation
The preliminary results for the Company and its subsidiaries
(the "Group") for the year ended 31 December 2019 are unaudited.
The financial information set out in this announcement does not
constitute the Group's financial statements for the year ended 31
December 2019 or 31 December 2018 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 2018 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 fair value reserve and
retained earnings have been restated at 1 January 2018 and 31
December 2018, however, there is no overall impact to net assets at
these dates. Details of this restatement can be found in note
16.
The statutory accounts for the year ended 31 December 2019 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.
Other than the below the same accounting policies and methods of
computation are followed as in the latest published audited
accounts for the year ended 31 December 2018, which are available
on the Group's website at harworthgroup.com.
Changes in accounting policy and disclosures
(a) New standards, amendments and interpretations
The new standards, amendments or interpretations effective for
the first time for the financial year beginning on or after 1
January 2019 and have a significant impact on the Group are:
-- 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.
On transition to IFRS 16 on 1 January 2019 the Group has recognised
right to use assets of GBP0.1m and a corresponding lease liability
of GBP0.1m.
(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 on or
after 1 January 2020 and have not been applied in preparing this
preliminary financial information. None of these are expected to
have a significant effect on the financial statements of the
Group.
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 2018. There have been no
significant changes for the year ended 31 December 2019.
2. Alternative Performance Measures ("APMs")
Introduction
The Group has applied the December 2019 European Securities and
Markets Authority ("ESMA") guidance on APMs and the November 2017
Financial Reporting Council ("FRC") corporate thematic review of
APMs in these results. An APM is a financial measure of historical
or future financial performance, position or cash flows of the
Group which is not a measure defined or specified in IFRS.
Overview of our use of APMs
The Directors believe that APMs assist in providing additional
useful information on the underlying trends, performance and
position of the Group. APMs assist our stakeholder users of the
accounts, particularly equity and debt investors, through the
comparability of information. APMs are used by the Directors and
management, both internally and externally, for performance
analysis, strategic planning, reporting and incentive-setting
purposes.
APMs are not defined by IFRS and therefore may not be directly
comparable with other companies' APMs, including peers in the real
estate industry. APMs should be considered in addition to, and are
not intended to be a substitute for, or superior to, IFRS
measurements.
The derivations of our APMs and their purpose
The primary differences between IFRS statutory amounts and the
APMs that we use are as follows:
1. Capturing all sources of value creation - Under IFRS, the
revaluation movement in development properties and assets held for
sale which are held in inventory, is not included in the balance
sheet. Also, overages are not recognised in the balance sheet until
they are highly probable. These movements, which are verified by
BNP Paribas and Savills (independent external property surveyors),
are included within our APMs;
2. Recategorising income statement amounts - Under IFRS, the
grouping of amounts, particularly within gross profit and other
gains, do not clearly allow Harworth to demonstrate the value
creation through its business model. In particular, the statutory
grouping does not distinguish value gains (being realised profits
from the sales of properties and unrealised profits from property
value movements) from the ongoing profitability of the business
which is less susceptible to movements in the property cycle.
Finally, the Group includes profits from joint ventures within our
APMs as our joint ventures conduct similar operations to Harworth,
albeit in different ownership structures; and
3. Comparability with industry peers - Harworth discloses some
APMs which are European Public Real Estate Association ("EPRA")
measures as these are a set of standard disclosures for the
property industry and thus aid comparability for our stakeholder
users.
Our key APMs
The key APMs that the Group focuses on are as follows:
-- Total return - The movement in EPRA NNNAV plus dividends per
share paid in the year expressed as a percentage of opening EPRA
NNNAV per share
-- EPRA NNNAV per share growth - The movement in EPRA NNNAV per
share expressed as a percentage of opening EPRA NNNAV per share
-- Value gains - This is the realised profits from the sales of
properties and unrealised profits from property value movements
including joint ventures and the mark to market movement on
development properties, assets held for sale and overages
-- Profit excluding value gains - Property net rental, royalty
and fee income, net of running costs of the business which
represents the underlying profitability of the business not reliant
on property value gains or profits from the sales of development
properties
-- Net loan to portfolio value - Group debt net of cash held
expressed as a percentage of portfolio value
Changes to APMs
There have been no changes to the Group's APMs in the year with
the same APMs being defined, calculated and used on a consistent
basis.
Reconciliation of APMs
Set out below is a reconciliation of the APMs used in these
results to the statutory measures.
1) Reconciliation to statutory measures
Unaudited Audited
year ended year ended
31 December 31 December
2019 2018
a. Revaluations gains Note GBP000 GBP000
--------------------------------------------------------------------- ------- -------------- --------------------
Increase in fair value of investment properties 3 5,841 21,483
Decrease in fair value of other receivables 3 - (2,000)
Decrease in fair value of assets classified as held for sale 3 (229) -
Other gains 3 - 45
Share of profit of joint ventures 3 8,449 3,791
Net realisable value provision of development properties 3 (3,574) (4,767)
Reversal of net realisable value provision of development properties 3 3,061 3,031
Amounts derived from statutory reporting 13,548 21,583
Unrealised gains on development properties 21,385 22,945
Unrealised gains on assets held for sale 584 -
Unrealised gains on overages 25 3,541
--------------------------------------------------------------------- ------- -------------- --------------------
Revaluation gains 35,542 48,069
--------------------------------------------------------------------- ------- -------------- --------------------
b. Profit on sale
--------------------------------------------------------------------- ------- -------------- --------------------
Profit on sale of investment properties 3 545 2,374
Profit on sale of assets classified as held for sale 3 3,156 164
Profit on sale of development properties 3 10,882 3,469
Release of net realisable value provision on disposal of development
properties 3 1,168 -
Amounts derived from statutory reporting 15,751 6,007
Unrealised gains on development properties released on sale in the
year (7,247) (2,794)
--------------------------------------------------------------------- ------- -------------- --------------------
Profit on sale 8,504 3,213
--------------------------------------------------------------------- ------- -------------- --------------------
c. Value gains
--------------------------------------------------------------------- ------- -------------- --------------------
Revaluation gains 35,542 48,069
Profit on sale 8,504 3,213
--------------------------------------------------------------------- ------- -------------- --------------------
Value gains 44,046 51,282
--------------------------------------------------------------------- ------- -------------- --------------------
d. Profit excluding value gains (PEVG)
--------------------------------------------------------------------------------------------------------------------
Operating profit before exceptional items 3 24,261 33,569
Add pension charge 69 70
Less other gains 3 (9,313) (22,066)
Less gross profit from development properties 3 (11,537) (1,733)
--------------------------------------------------------------------- ------- -------------- --------------------
PEVG 3,480 9,840
--------------------------------------------------------------------- ------- -------------- --------------------
Unaudited Audited
year ended year ended
31 December 31 December
2019 2018
GBP000 GBP000
e. Total property sales Note
------------------------------------------------------------------------------- -------- --------- --------------
Revenue 3 85,455 78,055
Less revenue from other property activities 3 (964) (7,629)
Less revenue from income generation activities 3 (23,468) (25,601)
Add gross proceeds from disposal of investment properties, assets held for sale and
overages 18,836 48,338
----------------------------------------------------------------------------------------- --------- --------------
Total property sales 79,859 93,163
------------------------------------------------------------------------------- -------- --------- --------------
f. Operating profit before exceptional items contributing to growth in
EPRA NNNAV
-------------------------------------------------------------------------------- ------------------------------------
Operating profit before exceptional items 3 24,261 33,569
Shares of profit of joint ventures 3 8,449 3,791
Unrealised gains on development properties 21,385 22,945
Unrealised gains assets held for sale 584 -
Unrealised gains on overages 25 3,541
Gains on development properties released on sale in the year (7,247) (2,794)
-------------------------------------------------------------------------------- --- --------- --------------------
Operating profit before exceptional items contributing to growth in EPRA NNNAV 47,457 61,052
-------------------------------------------------------------------------------- --- --------- --------------------
g. Portfolio value
-------------------------------------------------------------------------------- ------------------------------------
Land and buildings 787 787
Investment properties 9 293,840 254,409
Investments in joint ventures 10 33,072 25,830
Assets classified as held for sale 12 11,252 10,956
Development properties 11 202,092 204,157
-------------------------------------------------------------------------------- --- --------- --------------------
Amounts derived from statutory reporting 541,043 496,139
Cumulative unrealised gains on development properties as at
year end 40,135 25,997
Cumulative unrealised gains on assets held for sale as at year end 584 -
Cumulative unrealised gains on overages as at year end 3,566 3,541
-------------------------------------------------------------------------------- --- --------- --------------------
Portfolio value 585,328 525,677
-------------------------------------------------------------------------------- --- --------- --------------------
h. Net debt
-------------------------------------------------------------------------------- --- --------- --------------------
Gross borrowings 13 (82,744) (73,038)
Cash 11,833 8,595
-------------------------------------------------------------------------------- --- --------- --------------------
Net debt (70,911) (64,443)
-------------------------------------------------------------------------------- --- --------- --------------------
i. Net loan to portfolio value
-------------------------------------------------------------------------------- --- --------- --------------------
Net debt (70,911) (64,443)
Portfolio value 585,328 525,677
-------------------------------------------------------------------------------- --- --------- --------------------
Net loan to portfolio value (%) 12.1% 12.3%
-------------------------------------------------------------------------------- --- --------- --------------------
Unaudited Audited
year ended year ended
31 December 31 December
2019 2018
GBP000 GBP000
j. Net loan to core income portfolio value Note
------------------------------------------------- ------ --------- ------------------
Net debt (70,911) (64,443)
Income portfolio value 200,984 187,648
--------------------------------------------------------- --------- ------------------
Net loan to income core portfolio value (%) 35.3% 34.3%
--------------------------------------------------------- --------- ------------------
k. Gross loan to portfolio value
--------------------------------------- --- --------- ---------
Gross borrowings 13 (82,744) (73,038)
Portfolio value 585,328 525,677
--------------------------------------- --- --------- ---------
Gross loan to portfolio value (%) 14.1% 13.9%
--------------------------------------- --- --------- ---------
l. Gross loan to core income portfolio value
--------------------------------------------------- --- --------- ---------
Gross borrowings 13 (82,744) (73,038)
Income portfolio value 200,984 187,648
--------------------------------------------------- --- --------- ---------
Gross loan to core income portfolio value (%) 41.2% 38.9%
--------------------------------------------------- --- --------- ---------
m. Per share
----------------------------------------------------------- --- ------------ ------------
Number of shares in issue at 31 December 14 321,909,382 321,496,760
Employee Benefit Trust Shares (own shares) at 31 December 14 (132,015) (181,771)
----------------------------------------------------------- --- ------------ ------------
Number of shares at 31 December 14 321,777,367 321,314,989
----------------------------------------------------------- --- ------------ ------------
n. NAV per share
-------------------------------------------------- ------------ ------------
NAV GBP'000 463,779 441,936
Number of shares used for per share calculations 321,777,367 321,314,989
--------------------------------------------------- ------------ ------------
NAV per share (p) 144.1 137.5
--------------------------------------------------- ------------ ------------
2) Reconciliation to EPRA measures
Unaudited Audited
year ended year ended
31 December 31 December
2019 2018
a. EPRA NNNAV Note GBP000 GBP000
------------------------------------------------------- ------------ -------------- -------------------
Net assets 463,779 441,936
Cumulative unrealised gains on development properties 40,135 25,997
Cumulative unrealised gains on assets held for sale 584 -
Cumulative unrealised gains on overages 3,566 3,541
Notional deferred tax on unrealised gains (7,529) (5,021)
------------------------------------------------------- ------------ -------------- -------------------
EPRA NNNAV 500,535 466,453
------------------------------------------------------- ------------ -------------- -------------------
b. EPRA NAV
------------------------------------------------------- ------------ -------------- -------------------
EPRA NNNAV 500,535 466,453
Notional deferred tax on unrealised gains 7,529 5,021
Deferred tax liability 6 7,765 4,964
Mark to market valuation of financial instruments 558 109
------------------------------------------------------- ------------ -------------- -------------------
EPRA NAV 516,387 476,547
------------------------------------------------------- ------------ -------------- -------------------
c. EPRA NNNAV per share
------------------------------------------------------- ------------ -----------------------------------
EPRA NNNAV GBP'000 500,535 466,453
Number of shares used at 31 December 321,777,367 321,314,989
------------------------------------------------------- ------------ -----------------------------------
EPRA NNNAV per share (p) 155.6 145.2
------------------------------------------------------- ------------ -----------------------------------
d. EPRA NAV per share
------------------------------------------------------- ------------ -----------------------------------
EPRA NAV GBP'000 516,387 476,547
Number of shares used at 31 December 321,777,367 321,314,989
------------------------------------------------------- ------------ -----------------------------------
EPRA NAV per share (p) 160.5 148.3
------------------------------------------------------- ------------ -----------------------------------
e. EPRA NNNAV growth and total return
------------------------------------------------------- ------------ -----------------------------------
Opening EPRA NNNAV / share (p) 145.2 128.9
Closing EPRA NNNAV / share (p) 155.6 145.2
Movement in the year 10.4 16.3
EPRA NNNAV growth 7.2% 12.6%
------------------------------------------------------- ------------ -----------------------------------
Dividends paid per share (p) 0.9 0.9
Total return per share 11.3 17.2
Total return as a percentage of opening EPRA NNNAV 7.8% 13.3%
------------------------------------------------------- ------------ -----------------------------------
f. Net loan to EPRA NNNAV
------------------------------------------------------- ------------ -----------------------------------
Net debt GBP'000 (70,911) (64,443)
EPRA NNNAV GBP'000 500,535 466,453
------------------------------------------------------- ------------ -----------------------------------
Net loan to EPRA NNNAV 14.2% 13.8%
------------------------------------------------------- ------------ -----------------------------------
3. Segment information
Segmental Income Statement 31 December 2019 (Unaudited)
Capital Growth
Sale of Other property Income Central Total
development activities Generation overheads
properties
Note GBP000 GBP000 GBP000 GBP000 GBP000
--------------------------------------------------------------------------- ----------- -------------- ---------------- ---------------- --------
Revenue 61,023 964 23,468 - 85,455
Cost of sales (49,486) (960) (7,066) - (57,512)
--------------------------------------------------------------------------- ----------- -------------- ---------------- ---------------- --------
Gross profit (1) 11,537 4 16,402 - 27,943
Administrative expenses - (2,650) (2,248) (8,028) (12,926)
Other gains (2) - 24 9,289 - 9,313
Other operating expense - - - (69) (69)
Operating profit/(loss) 11,537 (2,622) 23,443 (8,097) 24,261
Share of profit of joint ventures - 7,026 1,423 - 8,449
Net finance income/( costs) 5 - 317 - (2,724) (2,407)
--------------------------------------------------------------------------- ----------- -------------- ---------------- ---------------- --------
Profit/(loss) before tax 11,537 4,721 24,866 (10,821) 30,303
--------------------------------------------------------------------------- ----------- -------------- ---------------- ---------------- --------
Gross profit (1)
Gross profit is analysed as follows:
Gross profit excluding sales of
development properties - 4 16,402 - 16,406
Gross profit on sale of development
properties 10,882 - - - 10,882
Net realisable value provision on
development properties (3,574) - - -(3,574)
Reversal of previous net realisable
value provision on development properties 3,061 - - - 3,061
Release of net realisable provision
on disposal of development properties 1,168 - - - 1,168
11,537 4 16,402 - 27,943
--------------------------------------------- ------- ----- ------ -------
Other gains (2)
Other gains are analysed as follows:
(Decrease)/increase in fair value
of investment properties - (311) 6,152 - 5,841
Decrease in the fair value of assets
classified as held for sale - - (229) - (229)
Profit on sale of investment properties - - 545 - 545
Profit on sale of assets classified
as held for sale - 335 2,821 - 3,156
- 24 9,289 - 9,313
--------------------------------------------- ------- ----- ------ -------
Segmental Balance Sheet 31 December 2019 (Unaudited)
Capital Income Central
Growth Generation overheads Total
Note GBP000 GBP000 GBP000 GBP000
------------------------------------ ------ ------- ----------- ---------- -------
Non-current assets
Property, plant and equipment - - 1,050 1,050
Right of use assets - - 122 122
Other receivables 12,754 - - 12,754
Investment properties 9 85,337 208,503 - 293,840
Investments in joint ventures 10 23,149 9,923 - 33,072
------------------------------------ ------ ------- ----------- ---------- -------
121,240 218,426 1,172 340,838
------- ----------- ---------- -------
Current assets
Inventories 11 205,217 683 - 205,900
Trade and other receivables 39,668 4,825 1,962 46,455
Assets classified as held for sale 12 600 10,652 - 11,252
Cash - - 11,833 11,833
245,485 16,160 13,795 275,440
------------------------------------ ------ ------- ----------- ---------- -------
Total assets 366,725 234,586 14,967 616,278
------------------------------------ ------ ------- ----------- ---------- -------
Financial liabilities and derivative financial instruments are
not allocated to the reporting segments as they are managed and
measured on a group basis.
Segmental Income Statement 31 December 2018 (Audited)
Capital Growth
Sale of Other Income Central Total
development property Generation overheads
properties activities
Note GBP000 GBP000 GBP000 GBP000 GBP000
--------------------------------------------------------------------------- ----------- ------------ -------------- --------- ----------
Revenue 44,825 7,629 25,601 - 78,055
Cost of sales (43,092) (1,922) (8,598) - (53,612)
--------------------------------------------------------------------------- ----------- ------------ -------------- --------- ----------
Gross Profit (1) 1,733 5,707 17,003 - 24,443
Administrative expenses - (2,473) (2,171) (8,226) (12,870)
Other gains (2) - 8,658 13,408 - 22,066
Other operating income - - - (70) (70)
Operating profit/(loss) before
exceptional items 1,733 11,892 28,240 (8,296) 33,569
Exceptional expense - - - (590) (590)
--------------------------------------------------------------------------- ----------- ------------ -------------- --------- ----------
Operating
profit/(loss) 1,733 11,892 28,240 (8,886) 32,979
Share of (loss)/profit of joint
ventures - (5) 3,796 - 3,791
Net finance costs 5 - - - (3,962) (3,962)
--------------------------------------------------------------------------- ----------- ------------ -------------- --------- ----------
Profit/(loss) before tax 1,733 11,887 32,036 (12,848) 32,808
--------------------------------------------------------------------------- ----------- ------------ -------------- --------- ----------
Gross profit (1)
Gross profit is analysed as follows:
Gross profit excluding sales of
development properties - 5,707 17,003 - 22,710
Gross profit on sale of development
properties 3,469 - - - 3,469
Net realisable value provision on
development properties (4,767) - - -(4,767)
Reversal of previous net realisable
value provision on development properties 3,031 - - - 3,031
1,733 5,707 17,003 - 24,443
--------------------------------------------- ---------- ------- ------ -------
Other gains (2)
Other gains are analysed as follows:
Increase in fair value of investment
properties - 9,859 11,624 - 21,483
Decrease in the fair value of other
receivables - (2,000) - -(2,000)
Profit on sale of investment properties - 799 1,575 - 2,374
Profit on sale of assets classified
as held for sale - - 164 - 164
Other gains - - 45 - 45
- 8,658 13,408 - 22,066
--------------------------------------------- ---------- ------- ------ -------
Segmental Balance Sheet 31 December 2018 (Audited)
Capital Income Central
Growth Generation overheads Total
Note GBP000 GBP000 GBP000 GBP000
------------------------------------ ------ ------- ----------- ---------- -------
Non-current assets
Property, plant and equipment - - 794 794
Investment properties 9 55,019 199,390 - 254,409
Investments in joint ventures 10 1,087 24,743 - 25,830
------------------------------------ ------ ------- ----------- ---------- -------
56,106 224,133 794 281,033
------- ----------- ---------- -------
Current assets
Inventories 11 206,635 374 - 207,009
Trade and other receivables 42,976 22,076 1,647 66,699
Assets classified as held for sale 12 2,775 8,181 - 10,956
Cash - - 8,595 8,595
252,386 30,631 10,242 293,259
------------------------------------ ------ ------- ----------- ---------- -------
Total assets 308,492 254,764 11,036 574,292
------------------------------------ ------ ------- ----------- ---------- -------
Financial liabilities and derivative financial instruments are
not allocated to the reporting segments as they are managed and
measured on a group basis.
4. Exceptional expense
Unaudited Audited
year ended year ended
31 December 31 December
2019 2018
GBP000 GBP000
----------------------------------------------- ------------ ------------
Cost associated with the step-up from standard
to premium listing - (590)
----------------------------------------------- ------------ ------------
Total exceptional expense - (590)
----------------------------------------------- ------------ ------------
5. Net finance costs
Unaudited Audited
year ended year ended
31 December 31 December
2019 2018
GBP000 GBP000
--------------------- ------------ ------------
Finance costs
Bank interest (2,026) (1,888)
Facility fees (455) (1,507)
Other interest (294) (618)
--------------------- ------------ ------------
(2,775) (4,013)
--------------------- ------------ ------------
Total finance income 368 51
--------------------- ------------ ------------
Net finance costs (2,407) (3,962)
--------------------- ------------ ------------
6. Tax
The income statement charge for taxation for the year was
GBP4.8m (2018: GBP1.3m credit) which comprised a current year tax
charge of GBP1.8m (2018: GBP0.8m credit) and deferred tax charge of
GBP3.0m (2018: GBP0.5m credit). The current tax charge comprised
the following:
-- a current year tax charge of GBP2.3m (2018: GBP0.9m)
resulting from profits from sale of development properties and
assets held for sale as well as rental income in the year; and
-- the resubmission of the prior year tax computations and
returns to reflect the land remediation relief and capital
allowances claims following a review resulted in a credit of
GBP0.5m.
The movement in deferred tax comprised the following:
-- the increase in valuation of investment properties (both
currently held and disposed of in the year) has given a rise to
GBP5.7m of deferred tax charge;
-- a GBP0.2m credit due to the recognition of tax losses following disposals in the year;
-- the utilisation of tax losses against current year profits
resulted in a deferred tax charge of GBP1.3m;
-- recognition of tax losses as a result of increased certainty
on their availability resulted in a deferred tax credit of
GBP2.2m;
-- following the submission of the tax computations and returns
for prior periods, there was a reduction in tax attributes
utilised, resulting in a deferred tax credit of GBP0.8m; and
-- a deferred tax credit of GBP0.8m in relation to other temporary differences.
At 31 December 2019, the Group had deferred tax liabilities of
GBP15.6m (2018: GBP12.3m), which largely related to unrealised
gains on investment properties and had recognised deferred tax
assets of GBP7.8m (2018: GBP7.3m). The net deferred tax liability
was GBP7.8m (2018: GBP5.0m).
7. Dividends
Unaudited Audited
year ended year ended
31 December 31 December
2019 2018
GBP000 GBP000
---------------------------------------- ------------- -------------
Full year dividend of 0.575p per share
for the year ended
31 December 2017 - 1,847
Interim dividend of 0.278p per share
for the six months ended 30 June 2018 - 893
Full year dividend of 0.633p per share 2,035 -
for the year ended
31 December 2018
Interim dividend of 0.304p per share 977 -
for the six months ended
30 June 2019
---------------------------------------- ------------- -------------
3,012 2,740
---------------------------------------- ------------- -------------
The proposed final dividend for the year ended 31 December 2019
is 0.698p per share which makes a total dividend for the year of
1.002p per share (2018: 0.911p). This proposed final dividend is
subject to approval by shareholders at the Annual General Meeting
and has not been included as a liability in this financial
information.
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
financial year. The weighted average number of shares for 31
December 2019 includes the adjustments necessary to reflect the new
shares issued on 25 January 2019, 23 September 2019 and 21 October
2019.
Unaudited Audited
year ended year ended
31 December 31 December
2019 2018
GBP000 GBP000
----------------------------------------------- ------------ ------------
Profit from continuing operations attributable
to owners of the parent 25,480 34,102
Weighted average number of shares used for
basic earnings per share calculation 321,502,838 321,284,013
Basic earnings per share (pence) 7.9 10.6
Weighted average number of shares used for
diluted per share calculation 322,943,178 323,754,853
----------------------------------------------- ------------ ------------
Diluted earnings per share (pence) 7.9 10.5
----------------------------------------------- ------------ ------------
9. Investment properties
Investment properties at 31 December 2019 and 31 December 2018
have been measured at fair value by BNP Paribas Real Estate and
Savills. Both are independent firms acting in the capacity of
external valuers with relevant experience of valuations of this
nature.
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 2018
(audited) 22,327 31,300 119,801 20,000 23,132 216,560
Direct acquisitions - - 43,651 - 10,771 54,422
Subsequent expenditure - 2,014 5,365 73 2,244 9,696
Disposals - (1,429) - (19,336) (120) (20,885)
(Decrease)/increase
in fair value 3 (308) 8,713 3,219 3,001 6,858 21,483
Transfers between
divisions (1,401) 5,533 (12,528) 6,159 2,237 -
Re-categorisation
as development properties 11 220 182 (1,384) (8) - (990)
Net transfer (to)/from
assets classified
as held for sale 12 (9,096) (834) (15,955) - 8 (25,877)
At 31 December 2018
(audited) 11,742 45,479 142,169 9,889 45,130 254,409
--------------------------- ---- ------------ ---------- -------- --------------- ---------- --------
Direct acquisitions - 454 20,507 5,337 11,973 38,271
Subsequent expenditure 56 946 811 498 8,651 10,962
Disposals - (463) (120) - (40) (623)
(Decrease)/increase
in fair value 3 (584) 3,306 3,430 (835) 524 5,841
Transfers between
divisions (514) 1,183 (6,000) - 5,331 -
Re-categorisation
as development properties 11 - - - - (1,052) (1,052)
Net transfer to assets
classified as held
for sale 12 (2,581) (10,718) - - (669) (13,968)
At 31 December 2019
(unaudited) 8,119 40,187 160,797 14,889 69,848 293,840
--------------------------- ---- ------------ ---------- -------- --------------- ---------- --------
10. Investment in joint ventures
Unaudited Audited
as at as at
31 December 31 December
2019 2018
GBP000 GBP000
----------------------------------------------------- ----------------------- ------------
At 1 January 25,830 18,838
Net (distribution from)/investment in joint ventures (1,207) 3,201
Share of profits of joint ventures 8,449 3,791
----------------------------------------------------- ----------------------- ------------
At 31 December 33,072 25,830
----------------------------------------------------- ----------------------- ------------
During the year the Group received distributions from its
investments in joint ventures of GBP3.8m (2018: GBPnil).
11. Inventories
Unaudited Audited
as at as at
31 December 31 December
2019 2018
GBP000 GBP000
------------------------------ ----------------------- ------------
Development properties 202,092 204,157
Planning promotion agreements 2,051 1,773
Option agreements 1,074 705
Finished goods 683 374
------------------------------ ----------------------- ------------
Total inventories 205,900 207,009
------------------------------ ----------------------- ------------
The total cost of inventory recognised as an expense within cost
of sales in the year is GBP49.2m (2018: GBP42.6m) comprised of:
GBP50.1m (2018: GBP41.4m) relating to the sale of development
properties; a credit of GBP0.6m (2018: charge of GBP1.7m) net
realisable value provision against development properties; and a
credit of GBP0.3m (2018: GBP0.3m credit) relating to finished goods
stocks. Finished goods are stated after a provision of GBP0.3m
(2018: GBP0.3m).
The movement in the development properties is as follows:
Unaudited Audited
as at as at
31 December 31 December
2019 2018
Note GBP000 GBP000
---------------------------------- ---- ------------ ------------
At 1 January 204,157 210,471
Acquisitions 3,158 3,451
Subsequent expenditure 23,235 23,320
Disposals (30,165) (32,339)
Movement in net realisable value
provision 655 (1,736)
Re-categorisation from investment
properties 9 1,052 990
---------------------------------- ---- ------------ ------------
At 31 December 202,092 204,157
---------------------------------- ---- ------------ ------------
The movement in the net realisable value provision on
development properties is as follows:
Unaudited Audited
as at as at
31 December 31 December
2019 2018
GBP000 GBP000
---------------------------------------------------- ------------ ------------
At 1 January 7,554 5,818
Net realisable value provision for the year 3,574 4,767
Released on disposals (1,168) (124)
Reversal of previous net realisable value provision (3,061) (2,907)
---------------------------------------------------- ------------ ------------
At 31 December 6,899 7,554
---------------------------------------------------- ------------ ------------
12. Assets classified as held for sale
Assets classified as held for sale relate to investment
properties expected to be sold within twelve months.
Unaudited Audited
as at as at
31 December 31 December
2019 2018
Note GBP000 GBP000
---------------------------------------- ---- ------------ ------------
At 1 January 10,956 7,688
Net transfer from investment properties 9 13,968 25,877
Subsequent expenditure 341 6
Decrease in fair value 3 (229) -
Disposals (13,784) (22,615)
---------------------------------------- ---- ------------ ------------
At 31 December 11,252 10,956
---------------------------------------- ---- ------------ ------------
13. Borrowings
Unaudited Audited
as at as at
31 December 31 December
2019 2018
GBP000 GBP000
------------------------------- ------------ ------------
Current:
Secured - infrastructure loans (2,842) (5,291)
------------------------------- ------------ ------------
(2,842) (5,291)
------------------------------- ------------ ------------
Non-current:
Secured - bank loans (75,785) (58,745)
Secured - infrastructure loans (4,117) (9,002)
------------------------------- ------------ ------------
(79,902) (67,747)
------------------------------- ------------ ------------
Total borrowings (82,744) (73,038)
------------------------------- ------------ ------------
Loans are stated after deductions of unamortised borrowing
costs:
Unaudited Audited
as at as at
31 December 31 December
2019 2018
GBP000 GBP000
----------------------------------------------------------------- ------------ ------------
Infrastructure loans
Homes and Communities Agency Waverley - (4,875)
Sheffield City Region JESSICA Advanced Manufacturing Park,
Fund Waverley (2,842) (2,766)
North West Evergreen Limited
Partnership Logistics North - (2,691)
Homes and Communities Agency Simpson Park (4,117) (3,961)
-------------------------------- ------------------------------- ------------ ------------
Total infrastructure loans (6,959) (14,293)
----------------------------------------------------------------- ------------ ------------
Bank loan (75,785) (58,745)
----------------------------------------------------------------- ------------ ------------
Total loans (82,744) (73,038)
----------------------------------------------------------------- ------------ ------------
The bank borrowings are part of a GBP100.0m revolving credit
facility ("RCF") from The Royal Bank of Scotland and Santander. On
the 13 February 2018 the Group extended the terms of its existing
RCF such that it now expires in February 2023 on a non-amortising
basis and is subject to financial and other covenants. The interest
rate on the RCF is ICE Libor rate plus 2.1%.
The infrastructure loans 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 site. The loans
are secured by way of fixed equitable charges over certain assets
of the Group. These loans have all-in funding rates of between 3.2%
and 4.0%.
Loans are stated after deduction of unamortised borrowing costs
of GBP0.3m (2018: GBP0.4m).
14. Called up share capital
On 25 January 2019, the Group issued 11,786 new ordinary shares
at 81p each, with a nominal value of 10p each. On 23 September
2019, the Group issued 346,516 new ordinary shares at 10p each,
with a nominal value of 10p each. On 21 October 2019, the Group
issued 54,320 new ordinary shares at 10p each, with a nominal value
of 10p each.
Issued and fully paid
Unaudited Audited
Unaudited Audited
year ended year ended
31 December 31 December
2019 2018
GBP000 GBP000
---------------------- ------------------------------------- ---------------------
At 1 January 32,150 32,150
Shares issued 41 -
---------------------- ------------------------------------- ---------------------
At 31 December 32,191 32,150
Own shares held (67) (194)
---------------------- ------------------------------------- ---------------------
At 31 December 32,124 31,956
---------------------- ------------------------------------- ---------------------
Issued and fully paid - number of shares
Unaudited Audited
year ended year ended
31 December 31 December
2019 2018
---------------- ------------ ------------
At 1 January 321,496,760 321,496,760
Shares issued 412,622 -
At 31 December 321,909,382 321,496,760
Own shares held (132,015) (181,771)
At 31 December 321,777,367 321,314,989
The own shares represent the number and cost of shares purchased
in the market and held by the Harworth Group plc Employee Benefit
Trusts to satisfy Long Term Incentive Plan awards for Executive
Directors and Senior Executives and Share Investment Plan awards to
employees.
15. Related party transactions
Unaudited Audited
year ended year ended
31 December 31 December
2019 2018
GBP000 GBP000
PEEL GROUP
Revenue
Sale of land - 1,600
Profit on sale from above land sales - 1,078
Cost of sales/administrative expenses
Recharges in respect of fees for Steven Underwood,
a non-executive director (43) (43)
Recharges in respect of expenses for Steven
Underwood, a non-executive director - (1)
Recharges of shared costs - (27)
Payment in respect of a deed of release at Logistics
North - (148)
Payment for the surrender of option to facilitate
grant of new lease to third party - (934)
Receivables
Trade receivables - 1,920
Cash received during the year 1,920 -
MULTIPLY LOGISTICS NORTH HOLDINGS LIMITED
& MULTIPLY LOGISTICS NORTH LP
Revenue
Sale of land 2,175 -
Recharges of costs 2 256
Development management fee - 37
Asset management fee 121 348
Water charges 92 48
Receivables
Trade receivables 10 -
Partner loan made during the year 407 2,793
BANKS GROUP
Revenue
Annual option sums 15 15
Acquisition of land
Acquisition of land at Moss Nook - 3,000
Acquisition of land at Cinderhill 2,412 -
Payables
Trade payables (1,200) -
Deferred payment in respect of the acquisition
of land at Moss Nook - (1,000)
Cash paid in the year in respect of the acquisition
of land at Moss Nook 1,000 -
Cash paid in the year in respect of the acquisition
of land at Cinderhill 2,412 -
WAVERLEY SQUARE LIMITED
Shareholder loan made during the year 25 50
THE AIRE VALLEY LAND LLP
Partner loan made during the year 250 -
Partner loan repayment (3,000) -
BATES REGENERATION LIMITED
Shareholder loan repayment (799) -
ANSTY DEVELOPMENT VEHICLE LLP
Partner loan made during the year 1,496 -
CRIMEA LAND MANSFIELD LLP
Partner loan made during the year 495 -
NORTHERN GATEWAY DEVELOPMENT VEHICLE LLP
Partner loan made during the year 22 -
16. Restatement of fair value and retained earnings reserves
The fair value and retained earnings reserves have been restated
at 1 January 2018 and 31 December 2018 to correctly reallocate fair
value gains and losses between these reserves. This restatement has
reallocated negative fair values from the fair value reserve to
retained earnings and removed fair value gains on properties
disposed of from the fair value reserve to retained earnings.
This restatement has no impact on the net assets of the Group at
1 January 2018 and 31 December 2018 or on the profit for the year
to 31 December 2018. The impact of the restatement at 31 December
2018 is to increase fair value reserve from GBP99.8m to GBP118.6m,
and 1 January 2018 increase fair value reserve from GBP85.1m to
GBP105.1m and reduce the retained earnings reserve at 31 December
2018 from GBP239.9m to GBP221.1m, and 1 January 2018 reduce the
retained earnings reserve from GBP222.0m to GBP202.1m.
This restatement has no effect on dividends paid or on the
ability of the Group to pay future dividends.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
FR ZZGMFNVZGGZM
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March 17, 2020 03:00 ET (07:00 GMT)
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