REG - Harworth Group PLC - Full Year Results for 12 months ended 31 Dec 2023
19/03/2024 07:00
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RNS Number : 3413H Harworth Group PLC 19 March 2024
Harworth Group plc
Full Year Results for the 12 months ended 31 December 2023
Harworth outperforms and remains confident in reaching its £1bn target in
2027
Harworth Group plc ("Harworth" or the "Group"), a leading regenerator of land
and property for sustainable development and investment, today announces its
results for the 12 months ended 31 December 2023.
Key Non-Statutory Measures((1)) 2023 2022 Key Statutory Measures 2023 2022
Total Return (%) 5.1 0.1 Operating profit (£m) 54.2 44.5
EPRA NDV per share (p)((2)) 205.1 196.5 Net asset value (£m) 637.7 602.7
Value gains (£m) 58.1 (2.0) Total dividend per share (p)((3)) 1.466 1.333
Net loan to portfolio value (%) 4.7 6.6 Net debt (£m) 36.4 48.4
Lynda Shillaw, Chief Executive of Harworth, commented: "Harworth once again
delivered another strong performance in 2023, ahead of the MSCI All Property
Index and resulting in one of the sector's leading total returns, while
maintaining a low loan-to-value of just 4.7% and significant financial
liquidity. We continue to benefit from the unique combination of our extensive
landbank and the application of our specialist skillset to develop new market
opportunities and realise the highest value from each of our sites. This saw
us complete serviced land and property sales at prices broadly in line with
book values before transaction costs, achieve lettings ahead of estimated
rental values, and progress some exciting acquisitions as we build our future
pipeline and continue to move sites through the planning system.
"Since 2015, Harworth has undergone a transformation as a business whilst
doubling its EPRA NDV. The progress made across our portfolio in 2023
underpinned a 4.4% increase in our EPRA NDV, to £663m, and we remain
confident of achieving our strategic ambition of becoming a £1bn business by
the end of 2027. I am delighted with the performance of the business over the
year, which was a tough one against a continued challenging macroeconomic
backdrop, ongoing structural changes in parts of the market and domestic
political uncertainty.
"So far in 2024, macroeconomic conditions remain challenging but there are
signs of optimism. Our key markets remain characterised by structural
undersupply and we are seeing good demand for our serviced residential land as
well as high levels of occupier interest in our employment sites. We have a
self-propelled growth strategy driven by our landbank and the skills of our
people, and our long-term through-the-cycle approach means that, as well as
securing and progressing opportunities to deliver long-term value to
investors, we are well positioned to take the management actions that will
generate further value gains from our portfolio in the year ahead."
Management actions drive strong EPRA NDV performance and Total Return
· Total Return((1)) of 5.1% (2022: 0.1%), driven by an increase in EPRA
NDV per share
· EPRA NDV((1)(2)) per share increased 4.4% to 205.1p (31 December
2022: 196.5p), driven by management actions to unlock high value uses from
sites and progress planning applications
· EPRA NDV increased £29.1 million to £662.9m (31 December 2022:
£633.8m)
· An increase of 10% in the final dividend to 1.022p per share, in line
with the Group's dividend policy, bringing the total dividend for the year to
1.466p per share
Strong balance sheet and financial position, with low gearing and significant
available liquidity
· Year-end net debt of £36.4m (31 December 2022: £48.4m),
representing a net loan to portfolio value ("LTV") of 4.7% (31 December 2022:
6.6%)
· Available liquidity of £192.2m at year-end (31 December 2022:
£175.6m) which, coupled with our ability to generate cash through land sales,
allows us to self-fund our extensive development pipeline
· No major refinancing requirement until 2027
193,000 sq. ft of industrial & logistics space developed, with a remaining
pipeline of 37.7m sq. ft
· Completed development of 110,000 sq. ft of Grade A space at Gateway 36
in Barnsley and 83,000 sq. ft at the Advanced Manufacturing Park ("AMP") in
Rotherham, with 55% currently let, exchanged or in heads of terms
· Work underway on a further 187,000 sq. ft at the AMP, comprising two
pre-let units and one occupier-owned build-to-suit unit, underscoring the
location's popularity and Harworth's flexible approach to development. In
addition to this, 21,000 sq. ft has commenced at Olive Lane, a new mixed-use
heart of the community at our Waverley site with a medical centre, pharmacy,
convenience retail and leisure.
· Enabling works underway for 1.5m sq. ft, including our first unit at
Chatterley Valley in Staffordshire, and a unit at our Droitwich site in
Worcestershire
· These developments plus recently completed vacant space are expected
to add £5.1m annualised rent, of which £1.9m is already let, exchanged or in
heads of terms.
1,170 residential plots sold, with an extensive remaining pipeline of 27,190
plots
· Nine transactions completed with six different housebuilders, comprising
national and regional operators, demonstrating sustained demand for the
Group's de-risked residential serviced land
· Headline residential sales of £52.1m, with all transactions at prices
broadly in line with book values before transaction costs
· After year-end, completed a further plot sale, at book value, to
Sky-House to construct 50 new homes at Waverley in Rotherham, with a robust
pipeline for further residential plot sales in the months ahead
Progress in securing planning approvals and forward-funding agreements for
mixed tenure products
· First forward-funding agreement signed as part of our portfolio of
sites for affordable housing, with a further one signed after year-end, both
with Great Places, for the delivery of 155 homes in total
· Planning approvals now received for 45% of our portfolio of sites for
build-to-rent ("BtR") properties; progressing towards exchange of contracts
with selected partners
· Planning approval received for the first pilot site for the Group's
net zero carbon homes product, at the Prince of Wales development in
Pontefract
Further strengthening our pipeline through acquisitions and planning progress
to unlock high value uses
· Acquisitions added 1.8m sq. ft of industrial & logistics space and
809 residential plots to the pipeline with several other significant
transactions in legals
· Secured outline planning consent for 397 residential units, with a
further 500 units approved after the year-end, and 1.1m sq. ft of industrial
& logistics space, including a 0.8m sq. ft approval at Skelton Grange,
Leeds
· Applications for 10.1m sq. ft of industrial & logistics space and
1,774 residential plots progressing through the planning system at year-end
Investment Portfolio((4)) 37% Grade A at year-end (31 December 2022: 18%)
· £70.0m of Investment Portfolio sales completed broadly in line with
book values before transaction costs, all of which are assets where value had
been maximised prior to sale through asset management initiatives
· After year-end, completed the sale of a site in Flaxby Moor
Industrial Estate, Knaresborough, previously occupied by Ilke Homes, for
£13.3m, in line with book value
· Leasing activity added £2.1m (17%) to annualised rent; new
lettings achieved an average 10% premium to ERVs, and renewals and rent
reviews achieved on average a 27% uplift to previous passing rent
· Year-end vacancy rate of 9.9% (31 December 2022: 8.3%); reduced to
1.2% when excluding space completed in the preceding 12 months (31 December
2022: 2.7%); 98% of rent due in 2023 collected to date
Delivering a positive lasting impact for our planet, people and communities
· Opened 71 acres of green space and nature recovery across Cadley Park,
Derbyshire and South East Coalville, Leicestershire, alongside a new
learn-to-ride cycle track at Waverley
· Began construction of a new forest school at South East Coalville and
a new mixed-use heart of the community at Waverley, Olive Lane, providing
retail and leisure space
· Publication of Net Zero Carbon ('NZC') Pathway, outlining the steps
that the Group is taking to achieve its ambition of being operationally NZC by
2030 and NZC for all emissions by 2040
· Our Communities Framework will be released alongside the Annual
Report, detailing Harworth's approach to delivering social value through
regeneration: our portfolio has the potential to deliver £4.8bn of GVA
Notes:
(1) Harworth discloses both statutory and alternative performance
measures ('APMs'). A full description of these is set out in Note 2 to the
financial statements with a reconciliation between statutory measures and APMs
set out in the appendix to the financial statements
(2) European Public Real Estate Association Net Disposal Value
(3) The Ex-dividend date, Record date and Payment date for the 2023
dividend can be found in the Shareholder Information section of this
announcement
(4) The Investment Portfolio excludes a site at Flaxby Moor Industrial
Estate, Knaresborough that was previously occupied by Ilke Homes, as this was
sold shortly after year-end
For further information
Harworth Group plc
Lynda Shillaw (Chief Executive) T: +44 (0)114 349 3131
Kitty Patmore (Chief Financial Officer) E: investors@harworthgroup.com (mailto:investors@harworthgroup.com)
FTI Consulting
Dido Laurimore T: +44 (0)20 3727 1000
Richard Gotla E: Harworth@fticonsulting.com (mailto:Harworth@fticonsulting.com)
Eve Kirmatzis
Results presentation
Harworth will host a presentation for analysts and investors at 9.30am today.
A live webcast and playback of this can be accessed at the following link:
https://brrmedia.news/HWG_FY23
(https://eur02.safelinks.protection.outlook.com/?url=https%3A%2F%2Fbrrmedia.news%2FHWG_FY23&data=05%7C02%7CCBirch%40harworthgroup.com%7C68ea7029f09b4823133908dc433e59dc%7C5fc64be3a587436480ed549be821ab19%7C0%7C0%7C638459182269546120%7CUnknown%7CTWFpbGZsb3d8eyJWIjoiMC4wLjAwMDAiLCJQIjoiV2luMzIiLCJBTiI6Ik1haWwiLCJXVCI6Mn0%3D%7C0%7C%7C%7C&sdata=rRBetsk5FzwlRwoNziodK2wlYSdzlsFjG58Rv3SAYM8%3D&reserved=0)
Investor Meet Company presentation
A presentation relating to these results will also be hosted via the Investor
Meet Company platform on 26 March 2024 at 3.00pm. The presentation is open to
all existing and potential shareholders. Questions can be submitted pre-event
via your Investor Meet Company dashboard up until 9am the day before the
meeting, or at any time during the live presentation.
Investors can sign up to Investor Meet Company for free and follow Harworth
via: https://www.investormeetcompany.com/harworth-group-plc/register-investor
(https://www.investormeetcompany.com/harworth-group-plc/register-investor)
Investors who already follow Harworth on the Investor Meet Company platform
will automatically be invited.
About Harworth
Listed on the Premium Segment of the Main Market, Harworth Group plc (LSE:
HWG) is a leading sustainable regenerator of land and property for development
and investment which owns, develops and manages a portfolio of over 14,000
acres of land on around 100 sites located throughout the North of England and
the Midlands. The Group specialises in the regeneration of large, complex
sites, in particular former industrial sites, into new residential and
industrial & logistics developments. Visit www.harworthgroup.com for
further information. LEI: 213800R8JSSGK2KPFG21
Chair's statement
When I wrote my statement a year ago I said that, "alongside the rest of the
market, planning what the business will achieve in 2023 has been as much an
art as a science given the prevailing uncertainty". I went on to say that
"whilst we cannot control markets we can position ourselves to make the most
of what positive momentum may develop during the year, progressing those sites
that will be most in demand by housebuilders as oven ready products in strong
locations, and working with potential occupiers of commercial space to tailor
what we bring forward to meet their requirements through build-to-suit and
pre-let development. We will also seek to advance sites through the planning
process so that when market conditions are right to invest further in
particular sites, we have the consents we need to progress." And that is
exactly what Lynda Shillaw and her management team have delivered over the
past 12 months, resulting in a creditably strong performance of a Total
Return* for the year of 5.1% against an uncertain market backdrop.
I also said that over the long term all the value created in the business will
be due to management actions and that has been fully supported by how 2023 has
turned out. Underlying markets are little changed over the year - industrial
& logistics yields have continued to increase but at a slower rate
following the material increase in the fourth quarter of last year as interest
rates increased and this yield shift has been largely offset by growth in
market rent. Current transactional evidence has underpinned the value of our
residential sites in which we have continued to see strong interest from
housebuilders. The £29m increase in EPRA NDV* during the year was, therefore,
primarily the result of the development milestones our management have
achieved: obtaining planning consents; installing site infrastructure;
securing sales on residential sites; evidencing site specific use value;
delivering practical completions; and gaining letting commitments for
commercial development.
There are of course elements outside of our control, planning being a case in
point. It is widely reported that the planning process itself is lengthening
as local authority resource constraints bite, whilst the backdrop of policy
and political uncertainty increasingly influences site specific planning
decisions. Value gains projected to be delivered during the course of a
particular year may, therefore, end up being realised in a subsequent period
despite the best endeavours of management. While our team is highly adept at
navigating these challenges, the long-term nature of the business makes
relative progress against our plans over the medium term a better measure of
the successful execution of strategy than solely focussing on the achievement
of specific targets for a discrete year. Having said this, we do continue to
outperform industry benchmarks, with our Total Return* of 5.1% comparing
favourably to the MSCI All Property Return of -1.0% in the year, as it did in
the prior year when our Total Return* was 0.1% but the MSCI All Property
Return was -8.5%.
Lynda's Chief Executive's Report sets out what has been achieved during the
year against each element of the strategy agreed by the Board in 2021
following her appointment. As will be seen material progress has been made in
every area.
· With practical completion of 193,000 sq. ft of directly developed
Grade A commercial space, and £70.0m sales of mature properties, 37% of our
investment portfolio is now Grade A, up from 18% last year.
· Against the objective to broaden our range of residential products we
are working towards exchange with partners interested in our BtR land
portfolio and have signed our first deals for our affordable homes
developments. We have also launched our pilot NZC homes development, Coze
Homes.
· Our development strategy aims to maintain a 12 to 15-year forward
pipeline of sites at varying stages of planning and development. Control of
sizeable land holdings was secured during the year, the nature of the tenure
across freehold, option, and planning promotion agreement being determined by
the degree of planning confidence, development timescales, and what is
commercially optimal. In all we added the potential for 1.8m sq. ft of
industrial & logistics space and 809 housing plots.
Within our ESG strategy we are this year setting out in detail the framework
of our social strategy under our Communities pillar, supplementing our Net
Zero Carbon Pathway that was published last year under the Planet pillar. For
every potential development we assess its environmental and social
implications, very conscious of the material impact of developments of the
scale we bring forward on both the natural world and the wider communities of
which they will form a part. Our Communities Framework sets out our approach
to regeneration and aligns as far as possible with both industry and national
guidance. We are also gaining an increasingly detailed insight into our carbon
footprint having made strong progress analysing our Scope 3 emissions, both
those of our contractors and suppliers that are upstream of our developments
and those downstream businesses that are tenants within our Investment
Portfolio. We are working with both upstream and downstream stakeholders to
reduce emissions along our path to deliver our commitment to be NZC for all
emissions by 2040.
With falling inflation and the next move in interest rates expected to be
downwards, it is good to see market interest increasing in our sector and the
Harworth share price outperforming sector benchmarks having gained 41% since
its low point in October 2023. That said, we remain acutely conscious that we
still stand at a 34% discount to NDV which is deeply frustrating for all
shareholders, the Board, management, and employees alike. We believe that, as
the sector rerates, the discount will continue to narrow: equally, we
recognise that the structure of our shareholding and the resulting lack of
liquidity in our stock can be a barrier to entry for investors wishing to
deploy significant capital. It is, therefore, the task of the Board and
management to make the investment proposition as compelling as possible by the
quality of our delivery against our strategic objectives and the effectiveness
with which we communicate what we do and the successes we achieve. We maintain
a strong balance sheet with relatively low gearing, significant available
liquidity to take advantage of opportunities developed by our team, and no
refinancing requirements under our core facilities.
The multiple discrete stages at which we realise value on our developments
make it inevitable that Harworth is managed as a through-the-cycle business.
Success at each of these stages depends primarily on one thing - people. Since
becoming Chair at Harworth I have consistently held that Harworth is all about
its people, their skills, experience, and position in our sector. It is they
who see the strategic potential of undeveloped land and create substance from
their vision through their master plan, assessing the potential of the site
given its particular characteristics. It is they who turn that master plan
into an outline capable of securing planning consent and negotiate with
planners and local communities how best to meet their, and our, objectives. It
is they who have the relationships with landowners, their agents, site finders
and housebuilders and negotiate the terms of both site acquisitions and sales.
It is they who, as seasoned professionals, have the connectivity developed
across their careers to ensure those entities with a possible interest and
their agents are fully aware of a site's potential, and who frequently work
over a long period to develop that interest to the point of being willing to
agree a transaction that fully reflects the extent of value that our work on
bringing the site forward has created.
We recognise fully that our people are at the heart of our success, a primary
focus of Lynda and her team being the recruitment and retention of the people
we need, designing policies and practices that engage, motivate, and
incentivise. In turn, the Board recognises that effective leadership of the
development and implementation of our strategy is key to our success and we
regard ourselves fortunate to have a highly capable and committed senior
leadership team, the retention of which we aim to ensure through appropriate
motivation and incentivisation.
Whilst there were no departures or new faces within either our executive or
non-executive directors last year we shall be saying goodbye at the end of
this year to Steven Underwood, our longest serving non-executive director.
Steven first joined the board in August 2010 as the representative director of
Peel Group, one of our largest shareholders, where he is currently Chief
Executive. Following the reduction of Peel Group's shareholding to below 25%
in 2019, we asked Steven to remain for a period on the Board in a personal,
rather than representative, capacity given his depth of understanding of real
estate development and the market in the north of England. At December he will
have served almost 14 and a half years on our Board, hence, whilst offering
himself for reappointment at the forthcoming AGM, he will be doing so on the
basis that he will step down on 31 December 2024. He has been a great
colleague who has added considerable value to our deliberations over a long
period, and his wise counsel will be missed.
Let me finish by conveying my grateful thanks, and those of our Board, to
everyone, both inside and outside of Harworth, who is part of, and has
supported, our team in achieving another strong year delivering the
operational milestones of our strategy. Our success is totally dependent on,
and derives from, what you contribute - thank you.
Alastair Lyons
Chair
18 March 2024
(*)Harworth discloses both statutory and alternative performance measures
("APMs"). A full description of these is set out in Note 2 to the financial
statements with a reconciliation between statutory measures and APMs set out
in the appendix to the financial statements
Chief Executive's review
Harworth delivered another strong performance in 2023 achieving sector-leading
results ahead of the MSCI All Property Index, while maintaining a low
loan-to-value* of just 4.7% and significant financial liquidity. We continue
to benefit from the unique combination of our extensive landbank and the
application of our specialist skillset to develop new market opportunities and
realise the highest value from each of our sites. This saw us complete
serviced land and property sales at prices broadly in line with book values
before transaction costs, achieve lettings ahead of estimated rental values,
and progress some exciting acquisitions as we build our future pipeline and
continue to move sites through the planning system.
Our markets
Harworth's focus markets of residential and industrial & logistics are
characterised by structural undersupply and are fundamental to delivering
growth in the UK economy.
Industrial & logistics
In the industrial & logistics sector, demand continues to be driven by
structural factors, including the growth of online retail, the need for
nearshoring and reshoring to ensure supply chain stability and a demand for
more energy efficient and sustainable space. However, softer macroeconomic
conditions naturally resulted in occupiers becoming more cautious, and so
negotiations in the occupational market became more protracted and deals took
longer to complete. This translated into more normalised levels of take-up
across the market in 2023, following three record years, albeit Savills
estimates that take-up remains 12% above the pre-Covid average.
The lower levels of take-up seen in 2023 have resulted in an increase in
supply and higher vacancy rates across the market. While no region has been
completely immune from rising supply, the three regions of the UK that
continue to have the tightest supply are the East Midlands, West Midlands and
Yorkshire. These are the only regions where there remains less than one year's
worth of supply and are also where the majority of our industrial &
logistics sites are located.
Savills estimates that logistics investment volumes totalled £3.1bn in 2023,
which again, despite being below the levels seen in the previous three record
years, were above pre-pandemic levels. These transactions were weighted
towards the second half of the year, when the macroeconomic backdrop improved.
Data from MSCI shows that the industrial sector saw only slight growth in
capital values of 0.1% during the year, a significantly better performance
than the prior year (which saw a -18.0% decline), as rental growth of 7.6% was
offset by 32 bps of average yield shift. Industrials remained the only major
real estate sector to see capital value growth in 2023, with capital values
for the MSCI All Property Index falling -5.6% over the year (an improvement
from a -14.2% decline in the prior year).
Residential
For much of the year, homebuyer demand remained subdued, as a result of high
mortgage rates, challenging affordability and low consumer confidence.
However, sentiment improved in the final quarter of the year, as the prospect
of interest rate cuts occurring earlier in 2024 than previously expected began
to impact mortgage rates and buyers adjusted to the prospect of higher rates
for longer.
This bolstering of demand in the later months meant that UK house prices
declined by only -1.8% in 2023 according to Nationwide, a less significant
fall than many had expected. Within this was a notable regional disparity,
with northern England seeing a 1.8% reduction in house prices, while southern
England saw a 2.4% decline. Yorkshire & the Humber, where many of
Harworth's mature residential major development sites are located and which
continues to benefit from good homebuyer affordability ratios, was the best
performing region in England, with an annual reduction of just -0.5%.
Reporting from housebuilders suggested a focus on reduced construction volumes
and a more selective approach to land acquisitions. Despite this, we saw good
levels of demand throughout the year from a wide range of housebuilders, both
national and regional, with many of whom we have long-term relationships. This
underscores the differentiated nature of our serviced and, therefore,
de-risked land product.
The institutional BtR market continued to grow in 2023 despite the wider
market uncertainty, demonstrating the defensive nature of the product and the
acute shortage of rental homes in the UK. Savills reports that investment
volumes in the sector totalled £4.5bn in 2023, the second highest level on
record after 2022, when levels were only marginally higher. A recent Cushman
& Wakefield report predicted the figure could rise to as much as £8bn in
2024.
The UK's BtR stock now stands at over 92,000, representing growth of 11% in
the last 12 months, with regional markets growing faster than London. Despite
this, only 11% of the built stock is single-family and transactions remain
focused on multi-family, which accounted for around 60% of investment over the
last 12 months. Rents in the sector continue to grow, but challenges facing
consumers highlight the importance of providing affordable products. Our
single-family BtR and affordable housing portfolios of sites are particularly
well-positioned to address this acute supply imbalance.
In the investment markets, Savills data shows that UK greenfield residential
land values declined -6.5% over the course of 2023, albeit a number of indices
point to declines levelling off in the final quarter. Greenfield residential
land values remain more resilient than those for urban land (which have
declined -8.4%) and again there are significant regional variations, with land
values in the North of England and the East Midlands remaining more robust due
to a resilient housing market, shortage of sites and stronger competition.
Operational performance
Our strategy sets out a clear road map for our ambition to grow EPRA NDV* to
£1bn by the end of 2027 and we remain confident in achieving this goal. It
aims to accelerate the delivery of our sites and achieve our NZC ambitions,
drawing on our highly specialist expertise and extensive land bank. The table
below shows our progress to date against the four key growth drivers of this
strategy.
Growth driver 2021 2022 Progress in 2023 Ambition by the end of 2027
Increasing direct development of industrial & logistics stock 51,000 sq. ft developed 432,000 sq. ft developed 193,000 sq. ft developed during the year and 208,000 sq. ft started or ready 800,000 sq. ft completed on average per annum
to start in 2024. Enabling works underway for 1.5m sq. ft of further
development.
Accelerating sales and broadening the range of our residential products 1,411 plots sold 2,236 plots sold 1,170 plots sold 2,000 plots sold on average per annum
Scaling up through land acquisitions and promotion activities Land supply of 12 to 15 years Maintained 12 to 15-year land supply through acquisitions representing 1.8m Maintain a land supply of 12 to 15 years
sq. ft
and 809 plots
Repositioning our Investment Portfolio to modern Grade A 11% Grade A at year-end 18% Grade A at year-end 37% Grade A at year-end 100% of the Investment Portfolio to be Grade A
We developed 193,000 sq. ft of speculative space during the year, across our
Gateway 36 site in Barnsley and the AMP in Rotherham. These are our two most
mature industrial & logistics sites and are highly sought-after locations,
having also benefitted from becoming part of the UK's first
government-designated Investment Zone this year, and we are pleased with their
letting progress to date. As previously indicated, our focus for 2023 has been
on securing pre-let and build-to-suit direct development opportunities, and we
are now progressing three of these at the AMP across a total of 187,000 sq.
ft, including the development of a new UK head office for Danieli, one of the
world's largest suppliers to the steel industry. In addition to this, 21,000
sq. ft has commenced at Olive Lane a new mixed-use heart of the community at
our Waverley development with a medical centre, pharmacy, convenience retail
and leisure.
As we enter 2024, our focus will be on completing construction currently
underway and starting new developments. At year-end, enabling works were
underway for 1.5m sq. ft of development, at Chatterley Valley in
Staffordshire, our Droitwich site in Worcestershire, and the next phase of
Gateway 36 with works to commence shortly at our Wingates site in Bolton.
Vertical developments that we expect to be on site with this year plus
recently completed vacant space are expected to add £5.1m annualised rent, of
which £1.9m is already let, exchanged or in heads of terms.
Against a challenging backdrop for housebuilders, we completed 1,170
residential plot sales during the year, transacting at prices that were
broadly in line with book values before transaction costs. While the number of
plots sold was lower than the extraordinarily high level seen in 2022, when we
brought forward transactions to take advantage of buoyant market conditions,
the average number of plots sold across 2023 and 2022 was still 21% higher
than the level seen in 2021. We saw a wide range of housebuilders active in
the market during the year and completed our first transactions with Homes by
Honey and Forge New Homes, bringing our total housebuilders transacted with to
date to 23 This figure demonstrates the depth of demand for our de-risked
serviced land product, and the strong relationships with housebuilders that
our teams cultivate.
It has been a very busy year for our mixed tenure team as we broadened the
range of residential products on offer across our sites. We signed our first
forward-funding agreement with a registered provider, Great Places, as part of
our affordable housing portfolio of sites, and signed a further agreement with
them after year end, for the delivery of 155 homes in total, with several
other transactions in the pipeline. For our single-family BtR product,
timelines have become protracted, owing mainly to delays in receiving planning
approvals. Having said this, approvals are now in place for 45% of sites and
we are progressing towards exchange with selected partners. Also of note was
the launch of our NZC homes product, Coze Homes, which we will be directly
developing in small-scale trials across two of our sites. This product has
significant potential not only to improve the vibrancy of our communities and
unlock challenging development parcels, but to develop our understanding of
the technical requirements of this relatively immature market.
Looking at land acquisitions and promotion, we further strengthened our
pipeline with the addition of 1.8m sq. ft of industrial & logistics space
and 809 residential plots during the year through a combination of freehold
acquisitions, option agreements and Planning Promotion Agreements ("PPAs"). We
also received planning approvals for 397 residential units and 1.1m sq. ft of
industrial & logistics space, most notably at our 0.8m sq. ft Skelton
Grange site in Leeds. Securing this approval on a former power station site we
acquired back in 2014 demonstrates Harworth's unique skillset in identifying
and acquiring complex brownfield sites, devising a masterplan that realises
their potential, and then progressing this through the planning system to
unlock value. This development will meet the growing demand for
high-specification and well-connected Grade A industrial space across West
Yorkshire, in turn supporting jobs and investment for the region.
Our ambition to transition the Investment Portfolio to fully Grade A also took
a major step forward during the year, and now stands at 37% Grade A, compared
to 18% just a year ago. This was driven by a significant sales programme of
assets where we had maximised value through asset management or development
initiatives, as well as through our development and letting of new space.
Sales totalled £70.0m in the year, and all were broadly in line with book
values before transaction costs - an excellent result given the wider
challenges in the investment market during the first half of the year in
particular. Leasing activity added £2.1m of annualised rent to the Investment
Portfolio during the year and was achieved at significant premiums to
estimated rental values and previous passing rents.
Financial performance
Our management actions undertaken on development sites to unlock high value
uses, alongside positive progress on planning applications, were the key
driver of a 4.4% increase in EPRA NDV* during the year to 205.1p per share
(2022: 196.5p). This resulted in a Total Return* for the year of 5.1% (2022:
0.1%), which we consider to be a strong performance given conditions in our
markets for much of the year. Statutory net asset value* was £637.7m (2022:
£602.7m).
Sales of serviced land and property, in addition to income from rent,
royalties and fees, resulted in Group revenue of £72.4m (2022: £166.7m). The
reduction in the year reflected reduced rental income following our successful
sales programme in the Investment Portfolio and lower development property
sales resulting from us bringing forward residential sales to 2022 to take
advantage of market conditions, as well as the prior year figures including
the £54m sale of the Kellingley development site.
The Board is proposing a final dividend of 1.022p per share, bringing the
total dividend per share for 2023 to 1.466p, representing 10% underlying
growth from 2022, in line with our dividend policy.
We continue to maintain a strong balance sheet and financial position, with
significant available liquidity of £192.2m as at 31 December 2023 (31
December 2022: £175.6m) and no refinancing requirement under our core
facilities until 2027. Our LTV* at year-end was 4.7% (31 December 2022: 6.6%),
affording us a high degree of flexibility and resilience as we pursue our
strategy.
The Harworth Way
As a specialist regenerator and placemaker, a commitment to our communities,
our people and our planet is at the heart of everything we do. Critical to
this is having a lasting positive impact on the communities we serve,
supporting new homes, jobs and infrastructure. The Harworth Way is our
framework for ensuring this happens.
During the year we published our NZC pathway, outlining in detail for the
first time the steps that we will take to address the challenges and
opportunities that decarbonisation brings for Harworth. It provides clear and
practical guidance for the business, and a framework through which progress
can be measured as we move towards our target to be operationally NZC by 2030
and NZC for all emissions by 2040. We have made great early progress, having
reduced our operational emissions by 24% this year through the use of
alternative fuels in our site preparation works, procuring green electricity
and the increased use of electric vehicles. We also began a woodland planting
scheme in Chevington in Northumberland, which will significantly boost our
sequestration capabilities.
It has been a very active year in delivering for our communities, and I was
delighted that we have been able to progress several initiatives to deliver
schools, green space and other amenities across our developments. We opened 71
acres of managed green space, including a new 50-acre country park at our
Cadley Park development in Derbyshire, which benefits from new purpose-built
footpaths and cycleways, a picnic area and community orchard, as well as new
habitats to protect and promote local wildlife. We also commenced construction
of a new forest school at South East Coalville as well as Olive Lane, a
mixed-use development comprising convenience retail, restaurants and new
community spaces in the heart of Waverley.
Alongside this year's Annual Report we will be releasing our Communities
Framework, which explains our approach to delivering social value through our
regeneration approach, both in the communities we serve and in wider society.
This approach ranges from creating sustainable communities, preserving
heritage and promoting healthier lifestyles through to growing regional
economies and supporting jobs. This year we once again commissioned Ekosgen,
an independent economic research consultancy, to appraise the social and
economic benefits of the regeneration and development Harworth has delivered
and plans to deliver, and it found that our portfolio has the potential to
deliver £4.8bn of GVA, support up to 76,500 jobs and generate up to £82m in
business rates, underscoring the huge potential of our activities to benefit
society.
Our people
Harworth's ambition is to be an employer of choice, providing an inspiring
place to work and attracting and retaining the best talent. Critical to our
success is our culture and the engagement, wellbeing and diversity of our
people. During the year, we progressed a wide-ranging transformation programme
that is designed to make sure that our processes, systems and people skills
keep pace with the rapid growth of our business as we work towards our £1bn
ambition.
Our culture is formed by everyone at Harworth. We know through employee
feedback that Harworth has a positive culture. As we grow, we want to be
proactive in defining how it needs to evolve whilst preserving all that is
great about Harworth. For this reason, during 2023 we reviewed and started to
refresh our vision, values, and behavioural competency framework, which will
be embedded during 2024.
Another area of focus has been on individual and professional development,
which has led to the creation of the 'Harworth Academy'. Under this banner, we
have developed the formal training and development options we want to make
available to our employees, in alignment with their career experience and
history and role level and requirements. In time, there may be minimum levels
of "hard and soft skills" training and development which colleagues at varying
stages of their careers will need to pass through before being considered
ready for progression and promotion.
Outlook
Macroeconomic conditions look set to improve modestly in the year ahead, with
inflationary pressures easing and the prospect of interest rate cuts from the
middle of the year. However, uncertainty still remains for businesses and
consumers, and this is likely to weigh on sentiment for some time to come. For
the industrial & logistics market, the structural drivers of demand remain
largely intact and supply in our regions is relatively constrained: in the
year ahead we will continue to derisk our development by focusing on pre-let
and build-to-suit opportunities and land parcel sales. For residential, while
affordability challenges will weigh on house buyer demand for some time yet,
the supply of development-ready land will remain constrained, and we are
confident that our consented, de-risked serviced land will appeal to a wide
range of housebuilders. At the same time, our increasingly diversified range
of residential products will provide us with exposure to markets that continue
to grow regardless of where the cycle is.
Harworth is a long-term through-the-cycle business - we have to be as a
regenerator of large, complex sites that may take a decade or more to move
from inception to completion. Our self-propelled growth strategy, underpinned
by our significant landbank and skillset in being able to unlock value from
it, is what sets Harworth apart. Since 2021, when we stepped into our
strategy, we have not only been focused on growing our business and
accelerating delivery across our sites, but have invested in our planning
teams to progress more applications through the system, our development teams
to ramp up delivery and our acquisitions teams to build our landbank.
As we move into year three of delivering our strategy, we have pump primed the
consented capacity of our industrial & logistics portfolio and have a
consented pipeline of 6.1m sq. ft that will deliver c.£0.8bn of GDV by 2028,
while also creating the financial headroom to crystallise this. We are also
exploring other use classes, including the development of data centres and
energy assets on our industrial & logistics sites and senior living
opportunities on our residential sites. Together these factors will ensure we
realise the full potential of our 37.7m sq. ft industrial & logistics
portfolio, which has an estimated gross development value of c.£5bn, and our
27,190 plot residential pipeline, while delivering for our people, our planet
and our communities.
Despite the unpredictability of the last couple of years, which has delivered
more than a few curve balls for the real estate sector, I am as excited about
what Harworth can do as a business, and what we can become, as the day that I
joined the company. In concluding, I would like to say a huge thank you to my
colleagues across the business, who have embraced the ambition of our strategy
and have worked extremely hard to deliver another strong year of progress, and
to our investors who have continued to support what we do. Our robust
financial performance and operational progress against a challenging market
backdrop are testament to the support, dedication, determination, skills, and
teamwork that make us proudly Harworth.
Lynda Shillaw
Chief Executive
18 March 2024
(*)Harworth discloses both statutory and alternative performance measures
("APMs"). A full description of these is set out in Note 2 to the financial
statements with a reconciliation between statutory measures and APMs set out
in the appendix to the financial statements
Operational review
Industrial & logistics land portfolio
At 31 December 2023, the industrial & logistics pipeline totalled 37.7m
sq. ft (31 December 2022: 35.0m sq. ft), of which 6.1m sq. ft was consented
(31 December 2022: 5.4m sq. ft), and 10.1m sq. ft was in the planning system
awaiting determination (31 December 2022: 5.6m sq. ft). The pipeline was 57%
owned freehold, with the remaining 43% controlled via options or PPAs.
Acquisitions and land assembly
During the year, freehold acquisitions added 1.8m sq. ft to the pipeline.
These comprised:
· Parkside East, St Helens, Merseyside: a 50-acre site with direct
access to Junction 22 of the M6, close to the M62 interchange. The site was
allocated in the recently adopted local plan and forms part of a wider
regeneration area, supported by the council. Harworth is developing a
masterplan for up to 0.8m sq. ft of employment space.
· Markham Moor, Nottinghamshire: a 29-acre site next to the A1, capable
of delivering 0.4m sq. ft of industrial & logistics space.
· Additional land parcel acquisitions as part of land assembly works at
the Group's existing sites in Rothwell, Northamptonshire and Skelton Grange,
Leeds.
Planning
During the year, planning approval was secured for 1.1m sq. ft of industrial
& logistics space. This comprised:
· Skelton Grange, Leeds: an outline planning consent to develop 0.8m
sq. ft of industrial & logistics space on a 50-acre site adjacent to
Junction 44 of the M1. It was formerly the location of the Skelton Grange
Power Station and was acquired by Harworth in 2014.
· Former Houghton Main Colliery site, South Yorkshire: outline
planning consent for 0.2m sq. ft
· Bardon West, Leicestershire: outline planning consent for 0.1m sq. ft
of space, adjacent to the Group's existing Bardon Hill site in
Leicestershire.
We also have a significant number of sites progressing through the planning
process to secure an allocation in a local plan. The "allocation" of a site
within a Local Plan is an important step towards securing a planning approval,
as it signifies that a development is acceptable in principle to a local
planning authority, and is therefore also a significant valuation driver of
sites in the portfolio. During the period, a draft allocation was secured for
0.5m sq. ft of industrial & logistics space at our Bennerley site in
Nottinghamshire. Post year end, draft allocations have also been secured for
1.6m sq. ft of space at a site close to Junction 15 of the M1 in Northampton
(under option), and for 0.7m sq. ft at our mixed-use site at Diseworth in the
East Midlands (freehold and part PPA).
Planning applications for 10.1m sq. ft of industrial & logistics space are
currently progressing through the planning system. The largest developments
within this comprise:
· Cinderhill, Derbyshire: Proposals for a mixed-use development comprising
1.8m sq. ft of high specification employment space alongside 150 houses and a
new junction on the A38 trunk road.
· Gascoigne Wood, North Yorkshire: this 185-acre former colliery site
benefits from an existing rail connection and close proximity to the A1(M) and
M62. Plans have been submitted for 1.5m sq. ft of rail-linked industrial &
logistics space at the site.
Direct development and placemaking
During the year, practical completion was reached on two direct developments,
which were both delivered to Harworth's sustainable commercial building
specification, targeting EPC A and BREEAM Excellent, with whole life carbon
assessments and renewable energy provisions incorporated into the design:
· Gateway 36, Barnsley: 110,000 sq. ft of speculative industrial &
logistics space completed, representing the start of the development's second
phase. One unit was let to lifestyle brand Lucy & Yak following
completion. A further unit was let to Dunelm after year-end, with a lease
commencement date of 31 December 2023.
· AMP, Rotherham: 83,000 sq. ft of speculative industrial &
logistics space was developed, marketed as "R-Evolution 4". The development
will build on the success of previous similar R-Evolution phases at the AMP,
with an updated and enhanced design which provides additional flexibility for
occupiers wishing to adapt the space for manufacturing or warehousing. This
flexibility will ensure the scheme appeals to a broad range of potential
occupiers, and we have already seen significant interest in the space.
At year-end, a total of 187,000 sq. ft was on site at the AMP, comprising two
pre-let units and one build-to-suit unit that will be owned by its occupier.
This underscores the location's popularity and the Group's flexible approach
to development. In addition to this, 21,000 sq. ft has commenced at Olive
Lane, a new mixed-use heart of the community at our Waverley development with
a medical centre, pharmacy, convenience retail and leisure.
During the year, the Group received development management revenue totalling
£1.0m (2022: £4.2m) from build-to-suit opportunities.
Land sales
Industrial & logistics land sales totalling £11.5m (2022: £57.0m) were
completed during the year, at prices above or in line with book values before
transaction costs, with the reduction from the prior year being due to the
£54.0m sale of the Group's Kellingley site completing in 2022. These
comprised: the sale of a land parcel at South East Coalville for the
development of a supermarket; the sale of three land parcels at Riverdale
Park, Doncaster; and the sale of land at the AMP to an occupier, on which
Harworth will be developing the above-mentioned build-to-suit unit.
Residential land portfolio
At year-end, the residential pipeline had the potential to deliver 27,190
housing plots (31 December 2022: 29,311), of which 5,296 were consented (31
December 2022: 6,111), and 1,774 were in the planning system awaiting
determination (31 December 2022: 1,890). The pipeline was 49% owned freehold,
with the remaining 51% subject to PPAs, options or overages.
Acquisitions and land assembly
During the year, a combination of freehold acquisitions, options and PPAs
added 809 residential plots to the pipeline. The majority of this related to
the signing of a PPA on a parcel of land at Aughton, Rotherham, capable of
delivering up to 700 homes. Harworth will work with local stakeholders to
bring forward a masterplan in advance of submitting a planning application.
Planning
During the year, planning was approved for 397 homes at Killamarsh in
Derbyshire comprising 297 freehold plots and 100 plots promoted via PPA. Post
period end, planning was approved for 500 homes at Hale Gate Road in
Liverpool, under a PPA agreement, and a draft allocation was secured for our
mixed-use site Diseworth in the East Midlands for 2,275 homes (freehold and
part PPA).
Plot sales
Completed residential land sales totalled 1,170 plots (2022: 2,236 plots), a
decrease from the exceptionally high level of sales seen in the prior year, as
the 2022 figure was driven by expediting sales to take advantage of robust
housebuilder demand at the time. The average number of plots sold across 2023
and 2022 was still higher than the level seen in 2021. Headline sales
totalled £52.1m and were completed at prices broadly in line with book values
before transaction costs. The headline sale prices ranged from £30k to £77k
per serviced plot (2022: £28k to £105k).
Sales were completed with six different housebuilders, comprising national and
regional operators, and including two housebuilders that the Group was
transacting with for the first time: Homes by Honey and Forge New Homes. The
largest of the disposals was the whole of a site in Killamarsh, Derbyshire,
which was sold jointly to both Harron Homes and Homes by Honey. In the first
half of 2023, an outline planning consent was secured to develop up to 397
family homes at the site.
The year also saw sales of land subject to PPAs - arrangements whereby
Harworth receives a fee from a landowner for securing a planning approval and
plot sale on their behalf - generating £0.8m in fees (2022: £5.8m)
Residential products
One of the Group's key strategic objectives is broadening the range of its
residential products, and to date it has launched three portfolios of sites to
deliver on this:
· Single-family BtR portfolio: approximately 1,000 single-family homes
across seven sites. The Group has secured planning consents for 45% of the
plots to date and is now progressing towards exchange with selected investment
and delivery partners.
· Affordable housing portfolio: approximately 550 homes across six sites,
that meet the National Planning Policy Framework criteria for affordable
housing (social rents, affordable rents, as well as a range of intermediate
rent and for-sale products, such as the shared ownership scheme), to be
delivered via a forward-funding agreement. Harworth signed its first
forward-funding agreement on part of this portfolio in December, with Great
Places, for the development of 50 homes at its Riverdale Park site in
Doncaster, and after year-end signed a further agreement with Great Places for
the development of 105 homes at Simpson Park in Nottinghamshire.
· NZC homes (Coze Homes): a portfolio of approximately 100 homes,
which will be directly developed by Harworth as a small-scale pilot at its
Prince of Wales site in Pontefract and at Waverley. The pilot is designed to
deepen the Group's understanding of the technical requirements of the still
relatively immature NZC homes market, which will help to develop improved
masterplans for future developments that further embed climate resilience and
respond to emerging regulatory and societal needs. The Prince of Wales site
has received reserved matters planning consent and construction is expected to
begin shortly, with Waverley following later in the year.
Placemaking
As a master developer, Harworth prides itself on investing in its residential
sites to provide enhanced infrastructure, amenities and green spaces. This
investment creates a sense of community that improves the wellbeing of
residents and enhances the attractiveness of these developments to
housebuilders and other partners. During the year, several placemaking
initiatives were undertaken across the portfolio:
· South East Coalville, Leicestershire: construction works began on a
new forest school. Designed by award-winning Lungfish Architects, the two-form
entry school is scheduled to open in 2024, providing 420 places. The year also
saw a land sale to Aldi for the construction of a new supermarket at the site,
and the opening of a 21-acre park, comprising a riverside corridor with
amenity space and several biodiversity enhancement features.
· Waverley, South Yorkshire: a new learn-to-ride cycle track was opened,
funded jointly by Harworth and a £45,000 grant from British Cycling's "Places
to Ride" programme. The track sits at the heart of Waverley, providing a safe,
fun and traffic-free environment for children to learn to ride a bike and
progress skills before venturing onto the site's connecting cycle paths and
roads. Planning was also approved, and construction started on site, for Olive
Lane, a new mixed-use heart of the community with a medical centre, pharmacy
and convenience retail and leisure.
· Cadley Park, Derbyshire: a new 50-acre country park was opened, having
been developed by Harworth working in close partnership with South Derbyshire
District Council as well as the National Forest, RSPB, Derbyshire Wildlife
Trust and the local community. The park benefits from new purpose-built
footpaths and cycleways, a picnic area and community orchard, as well as new
habitats to protect and promote local wildlife. The site also features a
memorial pit wheel, commemorating the site's rich mining history.
Investment portfolio
This portfolio comprises both industrial & logistics assets that have been
acquired by Harworth and, increasingly, those that have been directly
developed and retained. It provides recurring rental income in addition to
asset management opportunities and the potential for capital value growth.
As at 31 December 2023, the Investment Portfolio comprised 11 sites covering
2.5m sq. ft (31 December 2022: 19 sites covering 4.0m sq. ft). It delivered
£14.1m of annualised rent (31 December 2022: £19.7m), equating to a gross
yield of 6.3% (31 December 2022: 7.0%) and a net initial yield of 5.7% (31
December 2022: 6.2%). Annualised rent for the portfolio decreased during the
year by 28.4%, driven by property sales which more than offset the addition of
new Grade A space to the portfolio and a 13.2% like-for-like increase in
rents. Grade A space represented 37% of the portfolio (31 December 2022: 18%).
During the year, 462,000 sq. ft of leasing deals were completed, adding £2.1m
(17%) to annualised rent (2022: 722,000 sq. ft, adding £2.1m). Lease renewals
and regears were completed on terms that on average represented a 27% uplift
to previous passing rents, while new lettings were completed on average at an
10% premium to ERVs.
Across the Investment Portfolio, operational metrics remained robust. The
portfolio had a weighted average rent of £5.75 per sq. ft (31 December 2022:
£4.69), rent collection currently stands at 98% for the year (2022: 99%).
Vacancy was 9.9% at year-end (31 December 2022: 8.3%), reduced to 1.2% when
excluding space completed in the preceding 12 months (31 December 2022: 2.7%).
Disposals
A key element of Harworth's growth strategy is to transition its Investment
Portfolio to modern Grade A. This is being achieved by retaining more direct
development but also by disposing of assets where value has been maximised
through asset management and development initiatives.
The sales of six Investment Portfolio sites were completed during the year,
for total consideration of £70.0m. After year-end, the Group completed the
sale of a site in Flaxby Moor Industrial Estate, Knaresborough, previously
occupied by Ilke Homes, for a headline sales price of £13.3m. These sales
were all at prices broadly in line with book values before transaction costs.
Natural Resources portfolio
Harworth's Natural Resources portfolio comprises sites used by occupiers for a
wide range of energy production and extraction purposes, including wind and
solar energy schemes and battery storage. As at 31 December 2023, the
portfolio generated £1.8m of annualised gross rent (31 December 2022:
£2.1m), reduced following sales in 2022.
We continue to progress our energy & natural capital strategy, with the
aim of developing, alongside strategic partners where appropriate, renewable
energy generation solutions and other sustainability initiatives such as
battery storage, solar, EV charging, multi-fuel hubs and nature recovery on
Natural Resources sites. The strategy will have a wider focus on embedding
these energy concepts and future-proofing principles across all of Harworth's
sites to maximise energy availability and resilience, create economic value
and help fulfil the Group's NZC ambitions.
The Harworth Way
In 2022, the Group committed to becoming NZC for Scope 1, Scope 2 and Scope 3
business travel emissions by 2030 and to being NZC for all emissions by 2040.
To meet these objectives, the Group has developed a NZC pathway and embedded
NZC commitments into a range of workstreams and targets to guide the Group's
growth strategy in the development of industrial & logistics and
residential sites.
Further information on The Harworth Way and the Group's NZC pathway can be
found within the 2023 Annual Report and standalone NZC Pathway Progress Report
2023, which will both be published in April 2024.
The Group will also be publishing its Communities Framework in April 2024,
which outlines the steps it takes to embed social value into its developments.
Financial review
Overview
Our primary metric, Total Return* (the movement in EPRA NDV* plus dividends
per share paid in the year expressed as a percentage of opening EPRA NDV per
share*), for 2023 was 5.1% (2022: 0.1%). The Total Return* reflected a strong
performance, driven primarily by management actions focused on leveraging the
unique attributes of each of our development sites to create the opportunities
to unlock the use with the greatest value. These focused actions, alongside
completing direct development, and securing sales and asset management
initiatives across our Investment Portfolio resulted in EPRA NDV* increasing
by 4.4% during the year to 205.1p per share (2022: 196.5p). Our 2023
performance reflected continued progress against our strategic objectives,
coupled with a strong operational delivery. Alongside this, the structural
undersupply within our chosen markets remains, and provides a good foundation
for the Group's future growth.
Sales of serviced land and property, in addition to income from rent,
royalties and fees, resulted in Group revenue of £72.4m (2022: £166.7m). The
reduction in the year reflected reduced rental income following the successful
sale of properties from the Investment Portfolio for £70m during the year,
accounted for in Other Gains, and lower Development Property sales resulting
from the acceleration of residential land sales into 2022, capitalising on the
then prevailing favourable residential market conditions, as well as the 2022
sale of the Kellingley development site for £54.0m. Total property sales*,
which include proceeds from the sales of investment properties, assets held
for sale and overages, totalled £125.9m (2022: £138.5m). Rental income
collection has been consistently strong and like for like income increased
through management actions, including lettings of completed direct
developments at Bardon Hill and Gateway 36, and rent reviews. The £72.4m of
revenue also included PPA and development management fees totalling £1.7m
(2022: £10m), the reduction year on year was driven by project timelines and
a lower volume of managed developments on site. Looking forward, the sales
profile is robust with 72.1% of 2024 budgeted sales by value already
completed, exchanged or in heads of terms (budgeted sales completed, exchanged
or in heads of terms at the same point in 2023: 71.9%).
The Investment Portfolio (£221.4m 2023 (£280.9m 2022)) will vary in size
over time as, in line with our strategy, we sell those assets where we have
completed our asset management activity and where there is no long-term
opportunity in our portfolio, and replace them through the new stock that we
build alongside our investment to upgrade existing assets to Grade A. This
will mean that, at times, our overhead costs will not be fully covered by
income from this portfolio as we reposition the portfolio and build up new
sources of income from, for example, development management fees. This is a
dynamic that we are now seeing this year; we anticipated this when we set out
our ambition to transition the portfolio to Grade A, and our business model
and banking facilities provide the flexibility required to execute this
strategy effectively.
BNP Paribas and Savills, our independent valuers, completed a full valuation
of our portfolio as at 31 December 2023, resulting in full-year revaluation
gains* of £64.9m (2022: losses of £15.0m), including the movement in the
market value of development properties. These external independent valuations
have regard to conditions in the residential and industrial & logistics
markets as well as the positive factors resulting from management actions on
our sites. Outside the valuation movements, losses on sales were £6.8m (2022:
profits of £13.0m). Although sales prices were in line with book values
before transaction costs overall, the loss was driven by the impact of selling
costs, the recognition of deferred consideration at present value as a result
of higher interest rates, and increased levels of estimated future site-wide
infrastructure costs allocated to prior period sales, in particular at our
Waverley site where increased costs were driven by a change in the site
masterplan. Overall, this led to total value gains of £58.1m (2022: £2.0m
losses).
The fair value of investment properties increased by £71.4m (2022: £19.7m
decrease), which fed through to an underlying operating profit of £54.2m
(2022: £44.5m) and profit after tax of £38.0m (2022: £27.8m).
Over the year, the net asset value* of the Group grew to £637.7m (31 December
2022: £602.7m). With EPRA adjustments for development property valuations
included, EPRA NDV* at 31 December 2023 increased to £662.9m (31 December
2022: £633.8m) representing a per share increase of 4.4% to 205.1p (31
December 2022: 196.5p).
The Group has declared a final dividend of 1.022p per share, bringing the
total dividend per share for 2023 to 1.466p, representing 10% underlying
growth from 2022, in line with our dividend policy.
The Group remains well capitalised and, at 31 December 2023, had available
liquidity of £192.2m (31 December 2022: £175.6m). Net debt* was £36.4m (31
December 2022: £48.4m) resulting in an LTV* at 31 December 2023 of 4.7% (31
December 2022: 6.6%). At the same date, 35% of the Group's drawn debt was
subject to fixed rates (31 December 2022: 34%). We currently do not have
interest rate hedging in place against drawings under our Revolving Credit
Facility (RCF), although this remains under review.
Presentation of financial information
As our property portfolio includes development properties and joint venture
arrangements, Alternative Performance Measures ('APMs') can provide valuable
insight into our business alongside statutory measures. In particular,
revaluation gains on development properties are not recognised in the
Consolidated Income Statement and the Balance Sheet. The APMs outlined below
measure movements in development property revaluations, overages and joint
ventures. 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 NDV plus dividends per share paid in
the year expressed as a percentage of opening EPRA NDV per share.
· EPRA NDV per share: EPRA NDV aims to represent shareholder value under
an orderly sale of the business, where deferred tax, financial instruments and
certain other adjustments are calculated to the full extent of their liability
net of any resulting tax. EPRA NDV per share is EPRA NDV divided by the number
of shares in issue at the end of the period (less shares held by the Employee
Benefit Trust or Equiniti Share Plan Trustees Limited to satisfy Restricted
Share Plan, Share Incentive Plan and Deferred Share Bonus awards).
· Value gains: the realised profits from the sale of properties and
unrealised profits from property valuation movements including joint ventures,
and the mark-to-market movement on development properties and overages.
· Net loan to portfolio value ("LTV"): Group debt net of cash held
expressed as a percentage of portfolio value.
A full description of all non-statutory measures is set out in Note 2 and
reconciliations between all statutory and non-statutory measures are provided
in the appendix to the consolidated financial statements. Our financial
reporting is aligned to our business units of Capital Growth and Income
Generation, with any items that are not directly allocated to specific
business activities held centrally and presented separately.
Income Statement
2023 2022
Capital Growth £m Income Generation Central Overheads £m Total Capital Growth £m Income Generation Central Overheads £m Total
£m £m £m £m
Revenue 49.0 23.4 - 72.4 135.4 31.3 - 166.7
Cost of sales (54.0) (6.0) - (60.1) (74.4) (8.9) - (83.3)
Gross profit (5.0) 17.4 - 12.4 61.0 22.4 - 83.4
Administrative expenses (5.1) (3.1) (19.2) (27.4) (4.1) (1.9) (16.1) (22.1)
Other gains/(losses) 65.2 4.3 - 69.4 17.8 (34.5) - (16.8)
Other operating expense - - (0.1) (0.1) - - (0.1) (0.1)
Operating profit/(loss) 55.1 18.5 (19.3) 54.2 74.7 (14.0) (16.2) 44.5
Share of profit / (loss) of JVs 0.9 0.7 - 1.6 (4.3) (3.2) - (7.5)
Net interest credit / (expense) 0.5 - (6.5) (6.0) 0.1 - (6.2) (6.1)
Profit/(loss) before tax 56.4 19.2 (25.8) 49.8 70.4 (17.2) (22.4) 30.9
Tax charge - - (11.9) (11.9) - - (3.0) (3.0)
Profit/(loss) after tax 56.4 19.2 (37.7) 38.0 70.4 (17.2) (25.4) 27.8
Note: There are minor differences on some totals due to roundings.
Revenue in the year was £72.4m (2022: £166.7m), of which Capital Growth
contributed £49.0m (2022: £135.4m) and Income Generation contributed £23.4m
(2022: £31.3m).
Capital Growth revenue, which primarily relates to the sale of development
properties, decreased as a result of accelerating sales to take advantage of
the positive residential market conditions during the first three quarters of
2022, coupled with the 2022 sale of the Kellingley development site for
£54.0m. Capital Growth revenue also includes fees from PPAs and build-to-suit
development management, together totalling £1.7m (2022: £10.0m).
Revenue from Income Generation (the Investment Portfolio, Natural Resources
and Agricultural Land) mainly comprises property rental and royalty income.
Revenue of £23.4m (2022: £31.3m) was lower than last year reflecting the
successful sale of certain investment properties during the period for
£70.0m. Like-for-like rental income from the Investment Portfolio increased
by 13.2% during 2023 following new lettings, lease re-gears and rent reviews
on our existing assets; when including the letting of assets that practically
completed during the year, the increase achieved was 17.2%. This resulted in
annualised rent for the Investment Portfolio of £14.1m at the year-end (2022:
£19.7m), as lettings at the next phase of our Gateway 36 development,
combined with lettings, re-gears and rent reviews on existing assets, were
offset by income lost through investment property sales during the year.
Cost of sales comprises the inventory cost of development property sales,
costs incurred in undertaking build-to-suit development and both the direct
and recoverable service charge costs of the Income Generation business. Cost
of sales decreased to £60.1m (2022: £83.3m), of which £47.3m related to the
inventory cost of development property sales (2022: £67.7m). In the year, we
saw an increase in the net realisable value provision on development
properties of £4.3m (2022: £2.4m decrease) following the valuation process
as at 31 December 2023.
Administrative expenses increased in the year by £5.3m (2022: £2.9m
increase). This was due to higher salary expenses, resulting from the full
year impact of increased employee numbers recruited during 2022 as we stepped
into our strategy and set up key teams to deliver future value creation,
inflationary cost pressures and costs incurred as part of progressing
strategic objectives. Headcount was increased at a slower rate during 2023.
The nature of long-term sites can mean that transactions, while progressing,
span an accounting year end, resulting in the associated revenue not always
fitting neatly into a financial year. The strong EPRA NDV growth shows the
actions of the teams creating value as they work on sites and progress
transactions to a conclusion. Administrative expenses expressed as a
percentage of operating profit excluding administrative expenses was broadly
in line with the previous year at 34% (2022: 33%).
Other gains comprised a £71.1m combined net increase (2022: £19.9m net
decrease) in the fair value of investment properties and assets held for sale
('AHFS') less the loss on sale of investment properties, AHFS and overages of
£1.7m driven primarily by transaction costs (2022: profit £3.2m).
Joint venture profits of £1.6m (2022: £7.5m losses) were the result of an
increase in the property valuations at Gateway 45 and net rental income at
Multiply Logistics North. Value gains/(losses) on a non-statutory basis are
outlined below.
Non-statutory value gains/(losses)(*)
Value gains/(losses) are made up of profit on sale, revaluation gains/(losses)
on investment properties (including joint ventures), and revaluation
gains/(losses) on development properties, AHFS and overages. A full
description and reconciliation between statutory and non-statutory value gains
can be found in Note 2 and the appendix to the consolidated financial
statements.
£m Category 2023 2022 31 Dec 23 31 Dec 22
Profit /(loss) Reval. gains/ Total Profit /(loss) Reval. gains/ Total Total valuation Total valuation
on sale (losses) on sale (losses)
Capital Growth
Residential Development (5.4) (9.0) (14.4) 11.6 2.2 13.8 210.5 228.1
Major Developments
Industrial & Logistics Major Developments Mixed 0.1 43.1 43.2 (2.0) (3.4) (5.4) 136.0 68.2
Residential Investment (0.1) 6.1 6.0 0.4 39.8 40.2 51.6 51.4
Strategic Land
Industrial & logistics Investment (0.1) 18.4 18.3 (0.2) (12.7) (12.9) 105.9 82.2
Strategic Land
Income Generation
Investment Portfolio Investment (1.4) 6.2 4.8 - (41.0) (41.0) 221.4 280.9
Natural Resources Investment 0.1 - 0.1 3.2 (0.2) 3.0 21.6 20.3
Agricultural Land & other Investment - 0.1 0.1 - 0.3 0.3 21.1 5.7
Total (6.8) 64.9 58.1 13.0 (15.0) (2.0) 768.1 736.8
Notes: There are some minor differences on some totals due to
roundings. Profit/(loss) on sale includes the impact of transaction fees
incurred.
Loss on sale of £6.8m (2022: £13.0m profit) reflected sales broadly in line
with book value before transaction costs, the impact of discounting deferred
consideration at present value as a result of higher interest rates, and
retentions not recognised on completion, coupled with higher levels of
estimated future site-wide infrastructure costs allocated to prior period
sales, in particular at our Waverley site where increased costs were driven by
a change in the site masterplan. Revaluation gains* were £64.9m (2022: 15.0m
losses) and are outlined in the table below.
2023 2022
£m £m
Increase/(decrease) in fair value of investment properties 71.4 (19.7)
Decrease in value of assets held for sale (0.3) (0.2)
Movement in net realisable value provision on development properties (6.2) (2.0)
Contribution to statutory operating profit 64.9 (22.0)
Share of profit/(loss) of joint ventures 1.6 (7.5)
Unrealised (losses)/gains on development properties and overages(*) (1.6) 14.5
Total non-statutory revaluation gains/(losses)* 64.9 (15.0)
Note: There are minor differences on some totals due to roundings
The principal revaluation gains and losses across the divisions reflected the
following:
· Industrial & logistics:
· Across Major Developments and Strategic Land, there were value gains
relating to planning progress and unlocking high value uses at Skelton Grange,
Ansty, Bennerley and Wingates.
· The industrials & logistics market saw transaction volumes fall back
in line with the pre-Covid average. MSCI reported 0.1% capital value growth
which was driven by rental growth of 7.6% offset by 32bps average outward
yield shift.
· These market dynamics affected our industrial & logistics Major
Development sites, Strategic Land sites and the Investment Portfolio. For
development sites, costs of construction also increased over the year.
· Investment Portfolio property yields moved in line with the market but
our management actions securing new leases, renewals and rent reviews resulted
in the net initial yield moving only 50 bps to 5.7% from 6.2% as at 31
December 2022.
· Residential:
· The residential market saw house prices decline 1.8% over the year.
Housebuilders reported that they were scaling back land acquisitions although,
with a planning system which continues to be slow, short term and serviced
land remained in demand.
· Residential land sales on our Major Development sites continued to
demonstrate demand for our serviced land product and underpin valuations.
· Costs increased during the year and this was reflected in forward cost
plans on Major Development sites.
· Natural Resources: valuations remained broadly stable with minor
valuation declines in the waste and recycling portfolio.
· Agricultural Land: we experienced a small valuation increase as a
result of improving agricultural land prices.
The net realisable value provision on development properties as at 31 December
2023 was £14.1m (31 December 2022: £9.8m). This provision is held to reduce
the value of nine (31 December 2022: six) development properties from their
deemed cost (the fair value at which they were transferred from an investment
to a development categorisation) to their net realisable value at 31 December
2023. The transfer from investment to development property takes place once
planning is secured and development with a view to sale has commenced.
Cash and sales
The Group made revenue from property sales(*) in the year of £125.9m (2022:
£138.5m), achieving a total overall loss on sale of £6.8m (2022: profit
£13.0m). Revenue from sales comprised residential plot sales of £44.1m
(2022: £69.5m), industrial & logistics land sales of £11.5m (2022:
£57.0m), sales of investment portfolio properties of £70.0m (2022: £12.0m)
and receipt of overages of £0.3m (2022: £nil).
Cash proceeds from sales in the year were £132.0m (2022: £131.2m) as shown
in the table below:
2023 2022
£m £m
Total property sales* 125.9 138.5
Less deferred consideration on sales in the year (21.9) (28.5)
Add receipt of deferred consideration from sales in prior years 28.0 21.2
Total cash proceeds 132.0 131.2
Tax
The income statement charge for taxation for the year was £11.8m (2022:
£3.0m), which comprised a current year tax charge of £5.8m (2022: £21.8m
charge) and a deferred tax charge of £6.0m (2022: £18.7m credit).
The current tax charge resulted primarily from profits from the sale of
development properties, investment property, AHFS, profit on the rental of
investment property, royalties and other fees after taking into account
overheads and interest costs. The increase in deferred tax largely relates to
unrealised gains on investment properties. The deferred tax balance has been
calculated based on the rate expected to apply on the date the liability is
crystallised.
At 31 December 2023, the Group had deferred tax liabilities of £30.6m (31
December 2022: £25.9m) and deferred tax assets of £0.5m (31 December 2022:
£1.8m). The net deferred tax liability was £30.1m (31 December 2022:
£24.1m).
Basic earnings per share and dividends
Basic earnings per share for the year increased to 11.8p (2022: 8.6p)
reflecting the increase in the valuation of investment properties in 2023,
compared to a reduction in 2022, offset by lower development property sales
having taken advantage of market conditions in the first three quarters of
2022, coupled with reduced rental income following the successful sale of
investment property during 2023.
In addition to the interim dividend of 0.444p, the Board has declared a final
dividend of 1.022p (2022: 0.929p) per share to be paid, bringing the total
dividend for the year to 1.466p (2022: 1.333p) per share. The recommended 2023
final dividend and 2023 total dividend represent a 10% increase in line with
our dividend policy.
Property categorisation
Until sites receive planning permission and their future use has been
determined, 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, and
where development with a view to sale has commenced, as development
properties.
As at 31 December 2023, the balance sheet value of all our development
properties was £250.0m (2022: £205.0m) and their independent valuation by
BNP Paribas was £274.0m, reflecting a £24.0m cumulative uplift in 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 how we state our investment properties, we use EPRA NDV(*), which
includes the market value of development properties and overages less notional
deferred tax, as our primary net assets metric.
Net asset value*
31 Dec 2023 31 Dec 2022
£m £m
Properties((1)) 734.8 695.4
Cash 27.2 11.6
Trade and other receivables 48.6 60.7
Other assets 13.8 11.8
Total assets 824.4 779.5
Gross borrowings (63.6) (60.0)
Deferred tax liability (30.1) (24.1)
Derivative financial instruments - -
Other liabilities (93.0) (92.7)
Statutory net assets 637.7 602.7
Mark to market value adjustment on development properties and overages less 25.2 31.2
notional deferred tax(*)
EPRA NDV(*) 662.9 633.8
Number of shares in issue less Employee Benefit Trust & Equiniti Share 323,154,373 322,612,685
Plan Trustees Limited-held shares
EPRA NDV per share(*) 205.1p 196.5p
1. Properties include investment properties, development properties, AHFS,
occupied properties and investment in joint ventures.
EPRA NDV* at 31 December 2023 was £662.9m (31 December 2022: £633.8m), which
includes the mark to market adjustment on the value of the development
properties and overages. The total Portfolio Value* at 31 December 2023 was
£768.2m, an increase of £31.4m from 31 December 2022 (£736.8m). The
Group's share of gains from joint ventures of £1.6m (2022: £7.5m losses)
resulted in investments in joint ventures increasing to £30.7m (31 December
2022: £29.8m). Trade and other receivables include deferred consideration
on sales as set out previously. At 31 December 2023, deferred consideration of
£28.1m (31 December 2022: £34.6m) was outstanding, of which 56.1% is due
within one year.
The table below sets out our top 10 sites by value, which represent 51% of our
total portfolio, split according to their categorisation, including currently
consented residential plots and commercial space:
Site Site type Categorisation Region Progress to date
in Balance Sheet
Benthall Grange, Ironbridge Major Development Investment Midlands 1,000 residential units consented, land sold representing 110 units
Skelton Grange Major Development Development Yorkshire & Central 0.8m sq ft of industrial & logistics space consented, 0.3m sq ft awaiting
determination
South East Coalville Major Development Development Midlands 2,016 residential units consented, land sold representing 977 units
Bardon Hill Investment Portfolio Investment Midlands Fully let
Nufarm Investment Portfolio Investment Yorkshire & Central -
Waverley AMP Investment Portfolio Investment Yorkshire & Central 2.1m sq. ft of industrial & logistics space consented, 1.7m built or
sold
Ansty((1)) Strategic Land Investment Midlands Proposed industrial & logistics site, planning now submitted
Knowsley Investment Portfolio Investment North West -
Wingates Major Development Development North West Up to 1.0m sq. ft of industrial & logistics space consented and a further
1.5m sq. ft planned. Enabling works to commence shortly.
Simpson Park Major Development Development Yorkshire & Central 1,615 residential units consented, land sold representing 629 units
(1) Contracts have been conditionally exchanged for the sale of the site
Financing strategy
Harworth's financing strategy remains to be prudently geared. The Income
Generation portfolio provides a recurring income source to service debt
facilities and this is supplemented by proceeds from sales. The Group has an
established sales track record that has been built up since re-listing in
2015, with 2023 providing total property sales broadly in line with 2022.
To deliver its strategic plan, the Group has adopted a target LTV at year-end
of below 20%, with a maximum of 25% in-year. As a principle, the Group seeks
to maintain its cash flows in balance by funding the majority of
infrastructure expenditure through disposal proceeds, while allowing for
growth in the portfolio.
The Group enters into development and infrastructure loans alongside its RCF
to support its growth strategy.
Debt facilities
The Group has a £200m RCF, together with a £40m uncommitted accordion
option, which was entered into in 2022. The RCF is provided by NatWest,
Santander and HSBC and is aligned to the Group's strategy, providing
significant liquidity
and flexibility to enable us to pursue our strategic objectives. The interest
rate on the RCF is based on a loan-to-value ratchet mechanism with a margin
payable above SONIA in the range of 2.25% to 2.50%. The Group has no
refinancing requirements under its core facilities until 2027.
As part of its funding structure, the Group also uses infrastructure financing
provided by public bodies and site-specific
direct development loans to promote the development of major sites and bring
forward the development of industrial & logistics units.
The Group had borrowings and loans of £63.6m at 31 December 2023 (2022:
£60.0m), being the RCF drawn balance (net of capitalised loan fees) of
£33.8m (2022: £34.6m) and infrastructure or direct development loans (net of
capitalised loan fees) of £29.7m (2022: £25.4m). The Group's cash
balances at 31 December 2023 were £27.2m (2022: £11.6m) reflecting sales
activity during December 2023. The resulting net debt was £36.4m (2022:
£48.4m).
Net debt* decreased with property expenditure and acquisitions offset by the
completion of serviced land and property sales. The movements in net debt over
the year are shown below:
2023 2022
£m £m
Opening net debt* as at 1 January (48.4) (25.7)
Cash inflow from operations 17.4 58.9
Property expenditure and acquisitions (54.9) (66.6)
Disposal of investment property, AHFS and overages 69.6 14.2
Investments in joint ventures 0.7 (1.2)
Interest and loan arrangement fees (4.5) (6.0)
Dividends paid (4.4) (4.0)
Tax paid (10.2) (17.7)
Other cash and non-cash movements (1.7) (0.3)
Closing net debt* as at 31 December (36.4) (48.4)
The weighted average cost of debt, using an end of month average 2023 balance
and 31 December 2023 rates, was 6.88% with a 0.9% non-utilisation fee on
undrawn RCF amounts (2022: 5.52% with a 0.9% non-utilisation fee). The
weighted average term of drawn debt is now 2.2 years (31 December 2022: 3.2
years).
The Group's hedging strategy to manage its exposure to interest rate risk is
to hedge the lower of around half its average debt during the year or its net
debt* balance at year-end. At 31 December 2023, 35% (31 December 2022: 34%) of
the Group's drawn debt, reflecting 62% (31 December 2022: 44%) of net debt*,
was subject to fixed rate interest rates with no hedging instruments in place
on the remaining floating rate debt. Projected drawn debt and hedging
requirements remain under active review with any new hedging to be aligned to
future net debt requirements.
As at 31 December 2023, the Group's gross LTV* was 8.3% (31 December 2022:
8.1%) and its net LTV* was 4.7% (31 December 2022: 6.6%). If gearing is
assessed against the value of the core income generation portfolio (the
Investment Portfolio and Natural Resources portfolio) only, this equates to a
gross loan to core income generation portfolio value* of 27.9% (31 December
2022: 26.1%) and a net loan to core income generation portfolio value* of
15.9% (31 December 2022: 21.0%). Under the RCF, the Group could withstand a
material fall in portfolio value, property sales or rental income before
reaching covenant levels.
At 31 December 2023, undrawn capacity under the RCF was £165m (31 December
2022: £164.0m). Going forwards the RCF, alongside selected use of development
and infrastructure loans where appropriate, will continue to provide the Group
with sufficient liquidity to execute our growth strategy.
Kitty Patmore
Chief Financial Officer
18 March 2024
( )
* Harworth discloses both statutory and alternative performance measures
('APMs'). A full description of these is set out in Note 2 to the financial
statements with a reconciliation between statutory measures and APMs set out
in the appendix to the financial statements
Appendix 1: Supplementary operational information
1.1 Main industrial & logistics sites (as at 31 December 2023)
Name Location Sold or developed Consented or planned
(sq. ft) (sq. ft)
Advanced Manufacturing Park Rotherham, 1.7m 2.1m consented
South Yorkshire
Gateway 36 Barnsley, 0.6m 1.3m consented
South Yorkshire
Chatterley Valley Stoke-on-Trent, Staffordshire - 1.2m consented
Wingates Bolton, Greater Manchester - 1.0m consented,
a further 1.5m planned
Skelton Grange Leeds, West Yorkshire - 0.8m consented,
a further 0.3m planned
North Yorkshire North Yorkshire - 3.0m planned
site
Northern Gateway* Greater Manchester - 2.5m planned
Cinderhill Cinderhill, Derbyshire - 1.8m planned
Rothwell Rothwell, - 1.8m planned
Northamptonshire
Junction 15, M1 Northampton, Northamptonshire - 1.6m planned
Gascoigne Wood Sherburn-in-Elmet, North Yorkshire - 1.5m planned
*Harworth's share of a Joint Venture, adjacent to the M62 and close to the
M66, Northern Gateway is the core site of the Atom Valley Mayoral Development
Zone. A mix of freehold and optioned land
1.2 Main residential sites (as at 31 December 2023)
Name Location Sold Consented or planned
(plots) (plots)
Waverley Rotherham, 2,528 3,038 consented
South Yorkshire
South East Coalville Coalville, 977 2,016 consented
Leicestershire
Simpson Park Harworth, Nottinghamshire 629 1,615 consented
Pheasant Hill Park Doncaster, 645 1,200 consented
South Yorkshire
Prince of Wales Pontefract, 589 622 consented,
West Yorkshire a further 441 planned
Benthall Grange Ironbridge, 110 1,000 consented
Shropshire
Moss Nook St Helens, 256 900 consented
Merseyside
Thoresby Edwinstowe, Nottinghamshire 650 800 consented
Huyton Knowsley, - 1,500 planned
Merseyside
Staveley Staveley, Derbyshire - 590 planned
Appendix 2: Key performance indicators
2.1 Financial track record
KPI 2023 result 2022 result 2023 performance commentary
Total Return (%)* 5.1% 0.1% Our total return* of 5.1% was the result of a 4.4% increase in EPRA NDV*
during the year, as well as the payment of a 1.466p dividend.
Growth in EPRA NDV* during the year in addition to dividends paid, as a
proportion of EPRA NDV* at the beginning of the year.
EPRA Net Disposal Value ('NDV') per share* 205.1p 196.5p The increase in valuations was driven by management actions to unlock high
value uses from sites and progress planning applications, against a
A European Public Real Estate Association ("EPRA") metric that represents a challenging macroeconomic backdrop.
net asset valuation where development property is included at fair value
rather than cost and deferred tax, financial instruments and other adjustments
as set out in Note 2 and the appendix to the financial statements, are
calculated to the full extent of their liability.
Net asset value* £637.7m £602.7m Net asset value* increased as a result of crystalising valuation gains through
development property sales during the year.
The value of our assets less the value of our liabilities, based on IFRS
measures, which excludes the mark-to-market value of development properties.
Net loan to portfolio value ('LTV')* 4.7% 6.6% Our LTV* decreased during the year and remained well within our target of less
than 20% at year-end as we continued to manage carefully our levels of net
Net debt* as a proportion of the aggregate value of properties and debt.
investments.
2.2 Strategic track record
KPI 2023 result 2022 result 2023 performance commentary
Number of plots sold 1,170 2,236 While the number of plots sold was a reduction from 2022, when we brought
forward transactions to take advantage of buoyant market conditions, the
The number of plots equivalent to land parcel sales to housebuilders or average number of plots sold across 2023 and 2022 was still 21% higher than
registered providers during the year. the level seen in 2021.
Total residential pipeline 27,190 plots 29,311 plots Our residential pipeline declined slightly, but remains well within our
ambition to maintain a 12 to 15-year land supply. The reduction was due to a
The total number of residential plots that could be delivered from our successful year of plot sales, which more than offset new plots added to the
pipeline including freehold land, options and PPAs. pipeline.
Industrials & logistics space direct developed 193,000 sq. ft 432,000 sq. ft Our level of completed direct development reduced from the record amount seen
in 2022 due to a focus on pre-let schemes in 2023, but we made significant
The amount of industrial & logistics space developed by Harworth, either progress with construction starts and enabling works
speculatively or on a build-to-suit basis for an end occupier or investor,
achieving practical completion during the year.
Total industrial & logistics pipeline 37.7m 35.0m Our industrial & logistics pipeline increased due to a number of freehold
acquisitions during the year
The total amount of industrial & logistics space that could be delivered sq. ft sq. ft
from our
landbank, including freehold land, options and PPAs.
Proportion of Investment Portfolio that is 37% 18% The proportion of our Investment Portfolio that is Grade A space significantly
increased due to a successful disposal programme of mature assets and the
Grade A direct development of new space which reached practical completion during the
year.
The proportion of our Investment Portfolio by area that could be classified as
modern Grade A industrial & logistics space. Grade A is a widely-used
industry term that is understood to mean 'best in class' space which is new or
relatively new, high-specification and in a desirable location, allowing the
unit to attract a rent that is above the market average.
2.3 Environmental, economic and social track record
KPI 2023 result 2022 result 2023 performance commentary
Potential GVA that could be delivered from our portfolio £4.8bn £4.6bn The potential GVA that could be delivered from our portfolio increased due to
the
Calculated by Ekosgen, an economic impact consultancy, on our behalf. This
estimates additional employment potential created by our industrial & logistics
acquisitions during the year.
the total contribution that our portfolio could make to the economy once fully
built out.
Location based Scope 1, Scope 2 and Scope 3 business travel emissions 802 1,054((1)) Our emissions decreased during the year, driven by the use of alternative
fuels at our Ironbridge site, and increased use of electric vehicles by
Emissions that are captured by our target to be operationally NZC by 2030. tCO(2)e tCO(2)e staff.
During the year, the scope and availability of our emissions data increased,
and therefore figures for 2022 have been restated to allow for a like-for-like
comparison with 2023.
Employee pride 100% 100% Levels of staff satisfaction remained very high, as we continued our work to
ensure Harworth is an employer of choice, with initiatives aimed at promoting
The proportion of employees who said they were "proud to tell people that I employee engagement, wellbeing and equity, diversity & inclusion.
work for Harworth" in our annual employee survey.
(1) Prior year figure has been restated
* Harworth discloses both statutory and alternative performance measures
('APMs'). A full description of these is set out in Note 2 to the financial
statements with a reconciliation between statutory measures and APMs set out
in the appendix to the financial statements
Principal risks & uncertainties
The Board is responsible for identifying, setting the risk appetite for, and
evaluating the Group's principal and emerging risks, being those risks that
could threaten the delivery of our strategy, our business model, future
performance, solvency or liquidity and/or reputation. Our principal and
emerging risks are reported to the Board at each meeting, and the Board
undertakes a detailed assessment every six months, the most recent being in
November 2023.
In 2021, the Board identified through a series of workshops a refreshed set of
principal risks, informed by the Company's strategy developed that year.
During 2023, the Board continued to review principal risks, especially in the
context of the challenging and uncertain macroeconomic and geopolitical
environment which persisted throughout the year. At the time of writing, and
looking ahead, the Board anticipates national and global economic and
political uncertainty to remain elevated requiring it to continue to manage
the Group's principal risks against an uncertain backdrop.
Outlined below are the changes that have been made since reporting on our
principal risks in the 2022 Annual Report:
Risk What has changed during the period
Availability of and The Board determined the status of this risk to have reduced from "high" to
"medium" as uncertain market conditions have constrained the appetite of
competition for capital for long-term strategic sites, moderating the level of competition for
land. At the same time, our strong balance sheet and existing pipeline of
strategic sites opportunities enable us to continue to grow our strategic land portfolio in a
selective manner.
Power infrastructure The Board identified a new principal risk reflecting the challenges in
securing adequate power capacity for development sites creating uncertainty in
capacity the cost and programme for development. This new risk has a "medium" residual
risk status.
Development supply chain The previous "Supply chain cost inflation and constraints" risk has been
expanded to incorporate all risks associated with management of the
development supply chain combining supply chain counterparty risk, including
the risk of insolvencies, as well as inflation risk. Whilst inflation risk has
reduced, the Board considers that the overall development supply chain risk is
trending higher due to the increasing risk of contractor insolvency in
challenging market conditions.
Counterparties: investment The previous "Supply chain and delivery partner management (counter-party
risk)" has been reframed to focus on the risk of increased exposure to
partners and service investment partners as well as counterparty risks amongst our critical service
providers (beyond those in our development supply chain). This risk, as
providers amended, has a "medium" residual risk status.
Planning Whilst the planning risk profiles of individual projects differ, the Board
continues to consider that, overall, the residual risk status of our planning
risk remains "high" reflecting both current planning policy and local
authority resourcing headwinds. However, the Board considers that this risk is
no longer trending higher. There are signs of positive changes in planning
policy over the medium term, regardless of the outcome of the next General
Election. In the meantime, Harworth continues to make progress through
management actions.
Residential and commercial Given prevailing economic headwinds at the half-year, the Board highlighted in
the Company's interim results announcement that this risk could trend higher
markets during the second half of the year. Conditions have since stabilised in
Harworth's core markets with an improving outlook. Inflationary pressures are
easing such that there is an expectation of interest rate cuts from the middle
of the year, which should lead to a softening of gilt yields and reduction in
mortgage rates. In the industrial & logistics sector, robust rental growth
has mitigated the impact of softening yields which are expected to stabilise
with clarity on interest rates. In the residential sector, house prices have
risen moderately in recent months and improving sales rates have led
housebuilders to express optimism about the outlook for the sector. Given this
improved outlook, the Board determined that the "residential and commercial
markets" risk has reduced to "medium". However, as uncertainty remains for
businesses and consumers, not least from a volatile geo-political backdrop,
the Board will continue to monitor the status of this risk very closely.
A detailed analysis of each principal risk is set out below, and in the
"Effectively Managing our Risk" section of the 2023 Annual Report.
Risk: Availability of and competition for strategic sites
Failure to acquire strategic land at appropriate prices due to constrained
supply or competition.
Inherent risk Residual risk Change in residual risk in the year
(before mitigating actions) (after mitigating actions)
High Medium Decrease
Commentary
Competition for acquisitions remains a key risk as acquiring (or otherwise
securing an interest in) new sites underpins the third pillar of our strategy:
"Growing our strategic land portfolio and land promotion activities". During
the year the Board determined the status of this risk to have reduced to
"medium" as uncertain market conditions have constrained the appetite of
capital for long-term strategic sites, moderating the level of competition for
land. At the same time, the Group has a robust pipeline of industrial &
logistics and residential land (37.7m sq. ft of industrial & logistics
space and 27,190 housing plots at 31 December 2023), as well as a strong
balance sheet, enabling us to continue to grow our strategic land portfolio in
a selective manner.
Mitigation Additional measures planned for 2024
· Extensive external stakeholder engagement to identify opportunities, · Leveraging better our relationships with local authorities and agents.
supported by internal co-ordination via regular internal acquisitions meetings
and a Group-wide acquisitions tracker. · Deploying alternative structures to support land assembly, including
via strategic partnerships.
· We seek input from our valuers prior to making major acquisitions to
ensure we understand the latest market pricing.
· Via our portfolio strategy, we manage the timing of acquisitions.
· The review of project plans for each site helps highlight further land
assembly opportunities.
Risk: Planning
Planning promotion risk including uncertainty around local and national
changes to planning regime with adverse effects on promotion activity and/or
financial returns.
Inherent risk Residual risk Change in residual risk in the year
(before mitigating actions) (after mitigating actions)
Very high High No change
Commentary
Planning remains challenging due to a combination of factors including:
Central Government policy (the updated National Planning Policy Framework
(NPPF)); inertia pending a General Election; and Local Planning Authority
under-resourcing. The determination of planning applications on certain sites
has been slower, and we have also seen local plan processes paused or
suspended and local planning committees refuse to adopt plans. At the same
time, the short-term horizon looks unfavourable with mandatory Biodiversity
Net Gain (BNG) requirements needing to be implemented from January 2024, the
updated NPPF (which poses potential long-term headwinds for planning
promotion), and introduction of the infrastructure levy (the practical
application of which remains unclear). That said, there are signs of positive
changes in planning policy over the medium term, regardless of the outcome of
the next General Election. In the meantime, and longer-term, Harworth remains
well positioned with our large strategic landbank.
Mitigation Additional measures planned for 2024
· We review greenbelt exposure at a portfolio level at every Investment · Strategic planning for development of relationships with senior
Committee and Board meeting. political stakeholders.
· Project underwriting proposals include detailed planning strategies
(including competing sites analysis and BNG considerations), informed by
project stakeholder mapping, which continue to be monitored via site project
plans.
· Local political advisers are appointed on individual sites, where
appropriate.
· Group strategic stakeholder mapping.
· We respond to consultations on emerging planning policy, both in a
solus capacity and via representative groups, such as the British Property
Federation.
Risk: Development supply chain
Exposure to development supply chain leading to greater exposure to pricing
pressures and labour constraints, and risk of disputes with and/or default by
and/or insolvency of supply chain partners.
Inherent risk Residual risk Change in residual risk since
(before mitigating actions) (after mitigating actions) reformulation at the half-year
High Medium No change
Commentary
The previous "Supply chain cost inflation and constraints" risk has been
expanded to incorporate all risks associated with management of the
development supply chain - combining supply chain counterparty risk, including
the risk of insolvencies, as well as inflation risk. Cost inflation in the
supply chain had been identified as a distinct principal risk reflecting a
persistently high inflationary environment following the Covid pandemic, but
this risk is subsiding, and the cancellation of the HS2 Northern Leg has the
potential for more capacity to become available in the contracting market
helping further to regularise costs. However, macroeconomic conditions have
led to a materially increased prevalence of construction sector insolvencies.
The Board considers that this expanded risk is trending higher due to the
increased potential for insolvencies in our supply chain, and it, therefore,
continues to be the subject of intensive scrutiny and management.
Mitigation Additional measures planned for 2024
· Our procurement approach is considered early in project planning. · We have undertaken a comprehensive review of procurement and continue
to transition to a new operating model, which will include tiering of the
· We undertake rigorous tender processes. supply chain and more intensive relationship management of, and due diligence
on, strategic suppliers.
· Cost plans are monitored closely, updated in valuations and
adjustments made regularly to reflect pricing movements.
· Due diligence on contractors - screening of contractors ahead of
appointment together with ongoing Group-wide review of contractor
"concentration risk" and financial health. To this end, we utilise market
intelligence regarding contractors' commitments and workload.
· Performance bonds sought to support all major contracts.
· External review of contractor insurance packages for every direct
development project.
· We have established a suite of legal precedents to promote consistency
in land remediation and direct development procurement.
Risk: Counterparties: investment partners and service providers
Increase in exposure to investment partners and critical dependencies on
certain service providers, leading to increased risk from disputes with and/or
default by and/or insolvency of these counterparties.
Inherent risk Residual risk Change in residual risk since
(before mitigating actions) (after mitigating actions) formulation at the half-year
High Medium No change
Commentary
We face increased exposure to investment partners (JVs, forward funders,
strategic investors) as we continue to grow and develop our sites, seeking
opportunities with partners in connection with land assembly, direct
development and delivery of alternative residential products. Our governance
and ways of working continue to mature to counter this increased exposure. In
the near term, a difficult economic climate also increases the risk of
insolvencies amongst these counterparties, which continues to be monitored
closely. Separately, supply chain tiering, which forms part of our transition
to a new procurement operating model, will help to identify the critical
dependencies amongst our service providers (beyond those in our project
delivery supply chain) which could increase our vulnerability to disputes with
and/or defaults by and/or insolvencies of those providers.
Mitigation Additional measures planned for 2024
· A consistent process is followed for selecting and "onboarding" · The comprehensive review of procurement and transition to a new
counterparties. operating model will make more effective the way we engage with service
providers.
· Project underwriting proposals include detailed consideration of
counterparty risk, where appropriate. Due diligence to support the appraisal · Implementation of an enhanced relationship management regime for existing
of credit counterparty risk, and counterparties' ability to meet their JV partners.
financial commitments, is particularly rigorous for new investment partners.
· Development of relationships with counterparties and ongoing assessment
of their delivery of obligations.
Risk: Power infrastructure capacity
Challenges in securing power for our sites resulting in potential for adverse
impact and uncertainty as to cost and
programme for development.
Inherent risk Residual risk Change in residual risk since
(before mitigating actions) (after mitigating actions) formulation at the half-year
High Medium No change
Commentary
There are increasing challenges in securing power for our development sites
bringing uncertainty and the risk of increasing costs and delay. The current
system for securing power capacity, in which applications are made to
Distribution Network Operators (DNOs), results in the formation of queues for
available power capacity, meaning there can be a long wait for infrastructure
upgrades and/or for third parties to relinquish capacity they have secured but
no longer need. In addition, it is not uncommon for the National Grid ESO
(NGESO) to amend or withdraw offers. In some cases, NGESO is altogether unable
to provide a cost or programme for upgrades. Following
NGESO's consultation on the connections' application process and final
recommendations report published in December 2023, we will continue to monitor
and plan for implementation of the reformed process which will represent a
welcome transition to a "first ready, first connected" approach. Should the
application regime successfully change in this way, currently expected to be
implemented in January 2025, we expect the status of this risk to reduce.
Mitigation Additional measures planned for 2024
· Analysis of power capacity and upgrade potential and timing as part · Continuing to monitor the proposed changes to and implementation of the
of acquisition underwrite. reformed connections system, and future application requirements.
· Early engagement with DNOs and NGESO to identify availability of power
capacity, formulate procurement strategy, and seek earlier connection offers.
· Entry into reservation commitments to secure Harworth's position, where
appropriate.
Risk: Statutory costs of development
Legislative reforms which do, or may, impose a tax or levy on development, or
have the effect of levying an additional cost on development.
Inherent risk Residual risk Change in residual risk in the year
(before mitigating actions) (after mitigating actions)
High Medium No change
Commentary
It is the current government's settled policy to increase public financial
gain by taking a larger proportion of land value uplift derived from planning
consents. Legislative measures to achieve this aim include: the residential
property developer tax, albeit this has already been implemented with no
tangible effect noticed on pricing of land sold to housebuilders; the Building
Safety Levy, which is not yet implemented but does not seem to be high on the
agenda when we engage with housebuilders; and the Infrastructure Levy, to be
implemented via the Levelling Up and Regeneration Act, but the practical
implementation of which remains unclear. The Labour Party has indicated that
it would abandon some of these measures if it were to win the next General
Election.
Mitigation Additional measures planned for 2024
· Enhanced horizon scanning regime. · None planned.
· Sensitivity to additional statutory costs modelled when assessing
acquisitions.
· Responding to emerging policy both on a solus basis and through key
stakeholder groups.
Risk: Residential and commercial markets
Downturn in industrial & logistics and/or residential market conditions
leading to falls in property values.
Inherent risk Residual risk Change in residual risk in the year
(before mitigating actions) (after mitigating actions)
Very high Medium Decrease
Commentary
As conditions have stabilised in Harworth's core markets with an improving
outlook, the Board have assessed this risk to have reduced to a "medium"
residual risk status. However, as uncertainty remains for businesses and
consumers, which is likely to weigh on sentiment for some time to come, the
Board will continue to monitor the status of this risk very closely.
Notwithstanding market headwinds, Harworth's core markets of industrial &
logistics and residential have continued to be resilient as they remain key
drivers of economic growth. This, coupled with the scale and mix of our
portfolio and our ability to create value through management actions, means
that the Group is well positioned to mitigate and adapt to changes in the
external environment. For the industrial & logistics market, the
structural drivers of demand remain largely intact and supply in our regions
is relatively constrained. For residential, we expect that, even as interest
rates ease, affordability challenges will still impact house buyer demand in
some parts of the country. However, the supply of development-ready land will
remain constrained, and we are confident that our consented, de-risked
serviced land will appeal to a wide range of buyers. At the same time, our
increasingly diversified range of residential products will provide us with
exposure to markets that continue to grow regardless of where the cycle is.
Mitigation Additional measures planned for 2024
· Regular feedback is received from advisers on the status of · Continue to implement the strategy taking account of existing market
residential and industrial & logistics markets in our core regions to conditions. For example, we will continue to accelerate serviced land sales
supplement generic market commentary. where we see regional market opportunities, press ahead with our mixed tenure
products, and mitigate our exposure to market risk by focusing on
· Regular review of site project plans by our delivery teams and the build-to-suit vertical development opportunities and land parcel sales.
Investment Committee, informed by prevailing market conditions.
· Management actions to drive value and adapt to prevailing market
conditions - for example, during 2023 we continued to pursue mixed tenure
strategies, and did not start any new speculative direct development projects
Risk: Organisational development and design
Misalignment of culture, capability, systems and/or controls with what the
business requires to deliver the strategy.
Inherent risk Residual risk Change in residual risk in the year
(before mitigating actions) (after mitigating actions)
High Medium No change
Commentary
Following a period of rapid growth in employee numbers, the Board recognised
that a structured change management approach to both organisational
development (the "informal" elements of behaviour, values and culture) and
organisational design (the "formal" elements of operation and governance) was
critical as the Group continued to evolve and grow. During the year, we made
good progress in establishing that structured approach, examples of which are
identified in the mitigation activities below. Our organisational design and
development will be subject to continuous evolution. It will likely remain a
principal risk in the medium-term, during which time that evolution will be
more intensive, to support the marked changes in pace and scale of our
activities required by our strategy.
Mitigation Additional measures planned for 2024
· Implementation of people strategy to complement our business strategy, · Continue to implement the "People and Enabling Excellence Strategy",
focusing on the number and nature of resources required to fill skills gaps as focusing on culture, workplace and the next phase of the reward project.
well as numbers gaps.
· During the year, progress has been made in the focus areas below:
o Review of Harworth's culture
o Reward project (pay & benefits)
o Development of a new Talent and Learning & Development strategy: the
"Harworth Academy"
Risk: Availability of appropriate capital
Inability to access appropriate equity and/or debt funding to support the
strategy.
Inherent risk Residual risk Change in residual risk in the year
(before mitigating actions) (after mitigating actions)
High Medium No change
Commentary
The increase in pace and scale of activity under our strategy in turn has the
potential to require additional capital. The £200m RCF signed in early 2022,
supplemented by project specific funding where appropriate, currently supports
the funding needs of the business. Headroom is projected to remain on all LTV
covenants and could withstand a material fall in valuations. The interest rate
risk is plateauing as interest rates are expected to have peaked. However, to
leverage our growing development pipeline we are likely to need to supplement
the RCF with additional capital in future years. The Board recognises it could
be challenging, given current market uncertainty, to raise additional equity
to fund accelerated development, and therefore management is actively
reviewing other potential sources of funding.
Mitigation Additional measures planned for 2024
· Regular review of financing strategy to complement our business strategy, · Continue to identify scheme specific and grant funding.
supported by external consultants where required.
· Progress the review of capital structure funding options.
· Improvements to longer-term financial forecasting.
· In early 2022, we signed a new RCF comprising a five-year £200m
revolving credit facility together with a £40m accordion facility. This is
supplemented by accessing project specific funding where relevant.
· We continue to pursue and unlock grant funding and review additional
funding options.
Risk: Health and safety
Incident causing injury and/ or death resulting in liability, penalties and/or
reputational damage.
Inherent risk Residual risk Change in residual risk in the year
(before mitigating actions) (after mitigating actions)
High Low No change
Commentary
The health, safety and welfare of people involved in or affected by Harworth's
activities are of prime importance to us. This risk ranges from the health and
safety of visitors and workers on our sites, and trespassers (given the nature
of our sites), through to the management of health and safety on our
horizontal and vertical development projects, and the health and safety of
employees and visitors in an office environment. Full compliance with all
relevant legislation is the minimum acceptable standard but we and our
partners aim to achieve the highest possible standards of good practice. We
have a long-established Environment, Health & Safety (EHS) function with a
focused remit on health and safety and environmental policy, advice and
assurance.
Mitigation Additional measures planned for 2024
· Appropriate policies are in place, including a Safety, Health and · Continuous review of improvements to EHS reporting supported by the
Environmental Management System (SHEMS) Policy and an Employee Health and cloud-based platform.
Safety Policy.
· Improvements to the management of first line and second line assurance
· During the year we transitioned the SHEMS to a new cloud-based site inspections.
platform which facilitates reporting of site incidents and risk assessments
including real-time reporting via a mobile application.
· The EHS team undertakes a rigorous site inspection assurance regime.
· We have a panel of EHS consultants who support our project delivery,
and have undertaken a project to improve engagement with and management of
these consultants.
· EHS Committee meetings are held quarterly and attended by the
Executive and senior management from all delivery functions. These are
supplemented by a programme of attendance by EHS team members at delivery team
operational meetings.
· We host compulsory health and safety training for all employees every two
years, supplemented by an annual schedule of mandatory online learning.
· We have a programme of health and wellbeing initiatives for employees,
including access to internal physical and mental health first aiders and an
external Employee Assistance Programme.
· EHS reports are made to the Executive and Board monthly. The Head of
EHS provides a detailed update to the Board annually.
Risk: Net Zero Carbon (NZC) pathway
Failure to develop, manage and meet our NZC commitments and/or NZC
regulations, resulting in financial loss,
reduced availability of funding and/or reputational damage.
Inherent risk Residual risk Change in residual risk in the year
(before mitigating actions) (after mitigating actions)
High Medium No change
Commentary
The NZC agenda means transformational change for all businesses. It has a
wide-ranging impact on the Group, from our investment case to shareholders,
through to operational activity, including the need to embed NZC principles
into all projects, whilst remaining profitable. It also embraces external
factors such as industry and stakeholder metrics and the approach taken by
Local and Combined Authorities on e.g. carbon tax, BNG and social value
measures. In April 2023, we published our first NZC Pathway report and will
publish a NZC Pathway Progress Report for 2023 alongside this Annual Report,
as well as our Communities Framework. We consider it crucial that, in
delivering on NZC, our approach is authentic, understandable and deliverable.
Mitigation Additional measures planned for 2024
· Development of The Harworth Way and NZC Pathway with targets · Continue to improve the capture and analysis of environmental data.
identified.
· Continued development of a carbon accounting system, including
· Continued transition of our Investment Portfolio to 100% modern Grade A. appropriate accreditation.
· Improvements to the capture and analysis of environmental data · Continued development of an Energy and Natural Capital strategy.
(including from our supply chain and tenants) with measures in place for
verification of the same.
· Initiation of a pilot for the construction of our NZC homes product,
Coze Homes .
· New leases offered to existing and new tenants are on "green" lease
terms.
· We switched energy procurement for our Investment Portfolio to a new
renewable energy tariff.
· We work with prospective occupiers of our new developments to offer
tailored renewable energy provision.
· Project appraisals include better sustainability analysis.
· Development of Harworth's commercial and residential building
specifications.
· We are a member of the UK Green Building Council, which facilitates
sharing of knowledge and best practice.
Risk: Cyber security
Successful cyber-attack jeopardising business continuity.
Inherent risk Residual risk Change in residual risk in the year
(before mitigating actions) (after mitigating actions)
High Low No change
Commentary
Cyber-attacks pose a continually evolving threat to all businesses and
Harworth, like all others, is at risk. We have robust strategic and technical
measures in place to monitor and mitigate this risk. Our last biennial
penetration test (H2 2022) found Harworth to be in a strong position, and we
undertake rolling vulnerability scanning which provides real-time assurance.
Updates on cyber security risk and mitigations are provided to the Audit
Committee biannually.
Mitigation Additional measures planned for 2024
· The Business Continuity Plan. · Desktop test of Business Continuity Plan.
· We have an external provider for IT support, which remains vigilant
to the evolving cyber security backdrop, and is supported by a retained cyber
security specialist.
· We take out cyber risk insurance.
· We undertake biennial penetration testing, supported by regular
phishing simulations and continuous IT system vulnerability scanning.
· We have a rolling cyber and information security awareness programme
for all employees.
Chris Birch
General Counsel and Company Secretary
18 March 2024
Directors' Responsibilities Statement
The Directors' Responsibilities Statement below has been prepared in
connection with the full Annual Report and Financial Statements for the year
ended 31 December 2023.
The directors are responsible for preparing the Annual Report and the
Financial Statements in accordance with applicable United Kingdom law and
regulations.
Company law requires the Directors to prepare financial statements for each
financial year. Under that law the Directors have elected to prepare the Group
and Company Financial Statements in accordance with UK-adopted international
accounting standards (IFRSs). Under company law the Directors must not approve
the Financial Statements unless they are satisfied that they give a true and
fair view of the state of affairs of the Group and the Company and of the
profit or loss of the Group and the Company for that period.
In preparing these Financial Statements the Directors are required to:
· select suitable accounting policies in accordance with IAS 8
Accounting Policies, Changes in Accounting Estimates and Errors and then apply
them consistently;
· make judgements and accounting estimates that are reasonable and
prudent;
· present information, including accounting policies, in a manner that
provides relevant, reliable, comparable and understandable information;
· provide additional disclosures when compliance with the specific
requirements in IFRSs is insufficient to enable users to understand the impact
of particular transactions, other events and conditions on the Group and
Company financial position and financial performance;
· in respect of the Group Financial Statements, state whether UK-adopted
international accounting standards have been followed, subject to any material
departures disclosed and explained in the financial statements;
· in respect of the Company Financial Statements, state whether
UK-adopted international accounting standards have been followed, subject to
any material departures disclosed and explained in the Financial Statements;
and
· prepare the Financial Statements on the going concern basis unless it
is inappropriate to presume that the Company and/or the Group will continue in
business.
The Directors are responsible for keeping adequate accounting records that are
sufficient to show and explain the Company's and Group's transactions and
disclose with reasonable accuracy at any time the financial position of the
Company and the Group and enable them to ensure that the Company and the Group
Financial Statements comply with the Companies Act 2006. They are also
responsible for safeguarding the assets of the Group and Company and hence for
taking reasonable steps for the prevention and detection of fraud and other
irregularities.
Under applicable law and regulations, the Directors are also responsible for
preparing a strategic report, directors' report, directors' remuneration
report and corporate governance statement that comply with that law and those
regulations. The Directors are responsible for the maintenance and integrity
of the corporate and financial information included on the Company's website.
Responsibility statements
The Directors (see the list of names and roles in the Annual Report) confirm,
to the best of their knowledge:
· that the consolidated Financial Statements, prepared in accordance with
UK-adopted international accounting standards give a true and fair view of the
assets, liabilities, financial position and profit of the Company and
undertakings included in the consolidation taken as a whole;
· that the Annual Report, including the strategic report, includes a
fair review of the development and performance of the business and the
position of the Company and undertakings included in the consolidation taken
as a whole, together with a description of the principal risks and
uncertainties that they face; and
· that they consider the Annual Report, taken as a whole, is fair, balanced
and understandable and provides the information necessary for shareholders to
assess the Company's position, performance, business model and strategy.
Disclosure of information to the auditor
Each of the Directors who were in office at the date of approval of this
Report also confirms that:
· so far as they are aware, there is no relevant audit information of
which the auditor is unaware; and
· each Director has taken all the steps that they ought to have taken as
a Director to make themselves aware of any relevant information and to
establish that the Group's and Company's auditor is aware of that information.
This confirmation is given and should be interpreted in accordance with the
provisions of section 418 Companies Act.
This Statement of Directors' Responsibilities was approved by the Board and
signed by order of the Board:
Chris Birch
General Counsel and Company Secretary
18 March 2024
Cautionary statement and Directors' liability
This announcement and the 2023 Annual Report and Financial Statements contain
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 or the
2023 Annual Report and Financial Statements 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 or the 2023
Annual Report and Financial Statements should be construed as a profit
forecast.
This announcement and the 2023 Annual Report and Financial Statements have
been prepared for, and only for, the shareholders of the Company, as a body,
and no other persons. Neither the Company nor the Directors accept or assume
any liability to any person to whom this announcement or the 2023 Annual
Report and Financial Statements is shown or into whose hands they may come
except to the extent that such liability arises and may not be excluded under
English law.
Financial Calendar
Annual Report and Financial Statements for the year ended 31 December 2023 Published 10 April 2024
2024 Annual General Meeting Scheduled 20 May 2024
Final dividend for the year ended 31 December 2023 Ex-dividend date 25 April 2024
Record date 26 April 2024
Payable 24 May 2024
Half-year results for the six months ending 30 June 2024 Announced September 2024
Registrars
All administrative enquiries relating to shareholdings should, in the first
instance, be directed to Equiniti. Help can be found at www.shareview.co.uk.
Alternatively you can contact Equiniti at Aspect House, Spencer Road, Lancing,
West Sussex, BN99 6DA (telephone: +44 (0)371 384 2301). You should state
clearly the registered shareholder's name and address.
Dividend Mandate
Any shareholder wishing dividends to be paid directly into a bank or building
society should contact the Registrars for a dividend mandate form. Dividends
paid in this way will be paid through the Bankers' Automated Clearing System
('BACS').
Shareview service
The Shareview service from Equiniti allows shareholders to manage their
shareholding online. It gives shareholders direct access to their data held on
the share register, including recent share movements and dividend details and
the ability to change their address or dividend payment instructions online.
To visit the Shareview website, go to www.shareview.co.uk. There is no charge
to register but the 'shareholder reference number' printed on proxy forms or
dividend stationery will be required.
Website
The Group's website (harworthgroup.com (http://harworthgroup.com/) ) gives
further information on the Group. Detailed information for shareholders can
be found at harworthgroup.com/investors.
Consolidated income statement
Year ended 31 December 2023 £'000 Year ended 31 December 2022 £'000
Revenue 3 72,427 166,685
Cost of sales 3 (60,077) (83,292)
Gross profit 3 12,350 83,393
Administrative expenses 3 (27,435) (22,090)
Other gains/(losses) 3 69,426 (16,761)
Other operating expense 3 (112) (56)
Operating profit 3 54,229 44,486
Finance costs 4 (6,421) (6,367)
Finance income 4 445 227
Share of profit/(loss) of joint ventures 9 1,554 (7,487)
Profit before tax 49,807 30,859
Tax charge 5 (11,851) (3,021)
Profit for the year 37,956 27,838
Earnings per share from operations pence pence
Basic 7 11.8 8.6
Diluted 7 11.5 8.5
The notes 1 to 16 are an integral part of these condensed consolidated
financial statements.
All activities are derived from continuing operations.
Consolidated statement of comprehensive income
Year ended 31 December 2023 £'000 Year ended 31 December 2022 £'000
Profit for the year 37,956 27,838
Other comprehensive (expense) / income - items that will not be reclassified
to profit or loss:
Net actuarial (loss)/gain in Blenkinsopp Pension scheme (10) 295
Revaluation of Group occupied property (167) (133)
Deferred tax on other comprehensive income/(expense) items 3 (101)
Other comprehensive income - items that may be reclassified subsequently to
profit or loss:
Fair value of financial instruments - 156
Total other comprehensive (expense)/income (174) 217
Total comprehensive income for the year 37,782 28,055
Consolidated balance sheet
ASSETS As at 31 December 2023 £'000 As at 31 December 2022 £'000
Non-current assets
Property, plant and equipment 1,670 600
Right of use assets 512 254
Trade and other receivables 11,296 4,013
Investment properties 8 433,942 400,363
Investments in joint ventures 9 30,722 29,828
478,142 435,058
Current assets
Inventories 10 263,073 216,393
Trade and other receivables 37,289 56,658
Assets held for sale 11 18,752 59,790
Cash 12 27,182 11,583
346,296 344,424
Total assets 824,438 779,482
LIABILITIES
Current liabilities
Borrowings 13 (29,744) (3,067)
Trade and other payables (88,087) (82,499)
Lease liabilities (158) (82)
Current tax liabilities (2,643) (7,013)
(120,632) (92,661)
Net current assets 225,664 251,763
Non-current liabilities
Borrowings 13 (33,830) (56,911)
Trade and other payables (1,757) (2,819)
Lease liabilities (397) (172)
Net deferred income tax liabilities (30,089) (24,141)
Retirement benefit obligations (11) (114)
(66,084) (84,157)
Total liabilities (186,716) (176,818)
Net assets 637,722 602,664
SHAREHOLDERS' EQUITY
Called up share capital 14 32,408 32,305
Share premium account 25,034 24,688
Fair value reserve 225,177 174,520
Capital redemption reserve 257 257
Merger reserve 45,667 45,667
Investment in own shares (99) (50)
Retained earnings 271,322 297,439
Current year profit 37,956 27,838
Total shareholders' equity 637,722 602,664
Condensed consolidated statement of changes in shareholders' equity
Called up share capital £'000 Share Fair Capital redemption reserve Investment in own
premium account Merger reserve value £'000 shares Retained earnings Total
£'000 £'000 reserve £'000 £'000 equity
£'000 £'000
Balance at 1 January 2022 32,272 24,627 45,667 199,629 257 (24) 275,556 577,984
Profit for the financial year - - - - - - 27,838 27,838
Fair value losses on investment property - - - (10,019) - - 10,019 -
Transfer of unrealised gains on disposal of investment property - - - (14,957) - - 14,957 -
Other comprehensive (expense)/income: -
Actuarial gain in Blenkinsopp pension scheme - - - - - - 295 295
Revaluation of Group occupied property - - - (133) - - - (133)
Fair value of financial instruments - - - - - - 156 156
Deferred tax on other comprehensive expense items - - - - - - (101) (101)
- - - (25,109) - - 53,164 28,055
Transactions with owners:
Purchase of own shares - - - - - (26) - (26)
Share-based payments - - - - - - 589 589
Dividends paid - - - - - - (4,032) (4,032)
Share issue 33 61 - - - - - 94
Balance at 31 December 2022 32,305 24,688 45,667 174,520 257 (50) 325,277 602,664
Profit for the financial year - - - - - - 37,956 37,956
Fair value gains on investment property - - - 76,744 - - (76,744) -
Transfer of unrealised gains on disposal of investment property - - - (25,920) - - 25,920 -
Other comprehensive (expense)/income:
Actuarial gain in Blenkinsopp pension scheme - - - - - - (10) (10)
Revaluation of group occupied property - - - (167) - - - (167)
Deferred tax on other comprehensive expense items - - - - - - 3 3
- - - 50,657 - - (12,875) 37,782
Transactions with owners:
Purchase of own shares - - - - - (49) - (49)
Share-based payments - - - - - - 1,314 1,314
Dividends paid - - - - - - (4,438) (4,438)
Share issue 103 346 - - - - - 449
Balance at 31 December 2023 32,408 25,034 45,667 225,177 257 (99) 309,278 637,722
Consolidated statement of cash flows
Year ended Year ended
31 December 31 December 2022 £'000
2023
£'000
Cash flows from operating activities
Profit before tax for the year 49,807 30,859
Net finance costs 5,976 6,140
Other (gains)/losses (69,426) 16,761
Share of (profit)/loss of joint ventures (including impairment) (1,554) 7,487
Share-based transactions((1)) 1,404 728
Depreciation of property, plant and equipment and right of use assets 282 152
Pension contributions in excess of charge (113) (149)
Operating cash inflow before movements in working capital (13,624) 61,978
Decrease in inventories 5,186 16,502
Decrease/(increase) in receivables 18,868 (6,482)
Increase/(decrease) in payables 6,937 (13,137)
Cash generated from operations 17,367 58,861
Interest paid (4,302) (3,998)
Corporation tax paid (10,212) (17,702)
Cash generated from operating activities 2,853 37,161
Cash flows from investing activities
Interest received 445 227
Investment in joint ventures (250) (1,849)
Distribution from joint ventures 911 665
Net proceeds from disposal of investment properties, AHFS and overages 69,568 14,232
Property acquisitions (19,046) (13,445)
Expenditure on investment properties and AHFS (35,808) (53,107)
Expenditure on property, plant and equipment (396) (110)
Cash generated from/(used in) investing activities 15,424 (53,387)
Cash flows from financing activities
Net proceeds from issue of ordinary shares 400 67
Proceeds from other loans 5,939 19,850
Repayment of other loans (3,299) -
Proceeds from bank loans 45,000 154,000
Repayment of bank loans (46,000) (152,000)
Loan arrangement fees (162) (2,022)
Payment in respect of leases (118) (91)
Dividends paid (4,438) (4,032)
Cash (used in)/generated from financing activities (2,678) 15,772
Increase/(decrease) in cash 15,599 (454)
Cash as at beginning of year 11,583 12,037
Increase/(decrease) in cash 15,599 (454)
Cash as at end of year 27,182 11,583
( )
((1)) Share-based transactions reflect the non-cash expenses relating to
share-based payments included within the income statement
Notes to the financial information for the year ended 31 December 2023
1. Accounting policies
The principal accounting policies adopted in the preparation of this audited
consolidated financial information are set out below. These policies have been
consistently applied to all of the periods presented, unless otherwise stated.
General information
Harworth Group plc (the "Company") is a company limited by shares,
incorporated and domiciled in the UK (England). The address of its registered
office is Advantage House, Poplar Way, Catcliffe, Rotherham, South Yorkshire,
S60 5TR.
The Company is a public company listed on the London Stock Exchange.
The consolidated financial statements for the year ended 31 December 2023
comprise the accounts of the Company and its subsidiaries (together referred
to as the "Group").
Basis of preparation
These financial statements have been prepared in accordance with international
accounting standards in conformity with the requirements of the Companies Act
2006 and UK adopted International Accounting Standards ("IFRS").
The financial information set out herein does not constitute the Company's
statutory accounts for the years ended 31 December 2023 or 2022 but is derived
from those accounts. The financial information has been prepared using
accounting policies consistent with those set out in the annual report and
accounts for the year ended 31 December 2022. Statutory accounts for 2022 have
been delivered to the Registrar of Companies, and those for 2023 will be
delivered in due course. The auditors have reported on those accounts; their
report was unqualified, did not include a reference to any matters to which
the auditors drew attention by way of emphasis without qualifying their
report, and did not contain any statements under Section 498(2) or (3) of the
Companies Act 2006.
Going-concern basis
These financial statements are prepared on the basis that the Group is a going
concern. In forming its opinion as to going concern, the Company prepares cash
flow and banking covenant forecasts based upon its assumptions with particular
consideration to the key risks and uncertainties and the current
macro-economic environment as well as taking into account available borrowing
facilities. The going concern period assessed is until June 2025 which has
been selected as it can be projected with a good degree of expected accuracy.
A key focus of the assessment of going concern is the management of liquidity
and compliance with borrowing facilities for the period to June 2025. In 2022,
a five year £200m RCF was agreed with HSBC joining as a new lender in
addition to lenders NatWest and Santander. The RCF is aligned to the Group's
strategy and provides significant liquidity and flexibility to enable it to
pursue its strategic objectives. The facility is subject to financial
covenants, including minimum interest cover, maximum infrastructure debt as a
percentage of property value and gearing, all of which are tested through the
going concern assessment undertaken. Available liquidity, including cash and
cash equivalents and bank facility headroom, was £192.2m as at 31 December
2023.
The Group benefits from diversification across its Capital Growth and Income
Generation businesses including its industrial and renewable energy property
portfolio. Taking into account the independent valuation by BNP Paribas and
Savills, the Group LTV remains low at 4.7%, within the Board's target range
and with headroom to allow for falls in property values. Rent collection
remained strong, with 98% collected to date for 2023.
In addition to a base cashflow forecast, a sensitised forecast was produced
that reflected a number of severe but plausible downsides. This downside
included: 1) a severe reduction in sales to the housebuilding sector as well
as lower investment property sales; 2) notwithstanding strong rent collection
in 2023 a prudent material increase in bad debts across the portfolio over the
majority of the going concern assessment period; 3) a material decline in the
value of land and investment property values and 4) increases in interest
rates, impacting the cost of the Group's borrowings.
A scenario was also run which demonstrated that very severe loss of revenue,
valuation reductions and interest cost increases would be required to breach
cashflow and banking covenants. The Directors consider this very severe
scenario to be remote. A scenario with consideration of potential climate
change and related transition impacts was also examined as part of the Group's
focus on climate-related risks and opportunities.
Under each downside scenario, for the going concern period to June 2025, the
Group expects to continue to have sufficient cash reserves to continue to
operate with headroom on lending facilities and associated covenants and has
additional mitigation measures within management's control, for example
reducing development and acquisition expenditure and reducing operating costs,
that could be deployed to create further cash and covenant headroom.
Based on these considerations, together with available market information and
the Directors' knowledge and experience of the Group's property portfolio and
markets, the Directors considered it appropriate to adopt a going concern
basis of accounting in the preparation of the Group's and Company's financial
statements.
Accounting policies
Changes in accounting policy and disclosures
(a) New standards, amendments and interpretations
A number of new standards and amendments to standards and interpretations were
effective for annual periods beginning on or after 1 January 2023. None of
these have had a significant effect on the financial statements of the Group.
(b) New standards, amendments and interpretations not yet adopted
A number of new standards and amendments to standards and interpretations were
effective for annual periods beginning on or after 1 January 2024 and have not
been applied in preparing these financial statements. None of these are
expected to have had a significant effect on the financial statements of the
Group.
Estimates and judgements
The preparation of the consolidated financial statements requires management
to make judgements, estimates and assumptions that affect the application of
accounting policies and the reported amounts of assets and liabilities, income
and expense. Actual results may differ from these estimates.
In preparing these consolidated financial statements, the significant
judgements made by management in applying the Group's accounting policies and
the key sources of estimation uncertainty were the same as those that applied
in the consolidated financial statements for the year ended 31 December 2022.
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 under
IFRS.
Overview of 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 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 are
used by Harworth are as follows:
1. Capturing all sources of value creation - Under IFRS, the revaluation
movement in development properties 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 our
independent valuers BNP Paribas and Savills, are included within our APMs;
2. Re-categorising income statement amounts - Under IFRS, the grouping of
amounts, particularly within gross profit and other gains, does 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 its APMs as its joint
ventures conduct similar operations to Harworth, albeit in different ownership
structures; and
3. Comparability with industry peers - Harworth discloses some APMs which
are 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 NDV plus dividends per share paid
in the year expressed as a percentage of opening EPRA NDV per share
· EPRA NDV per share - EPRA NDV aims to represent shareholder value
under an orderly sale of the business, where deferred tax, financial
instruments and certain other adjustments are calculated to the full extent of
their liability net of any resulting tax. EPRA NDV per share is EPRA NDV
divided by the number of shares in issue at the end of the period, less shares
held by the Employee Benefit Trust or Equiniti Share Plan Trustees Limited to
satisfy Long Term Incentive Plan and Share Incentive Plan awards
· Value gains - These are 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, AHFS
and overages
· Net loan to portfolio value ("LTV") - Group debt net of cash and cash
equivalents held expressed as a percentage of portfolio value
3. Segment information
Segmental Income Statement
Year ended 31 December 2023
Capital Growth
Sale of development properties Other property activities Income Central Total
Generation
£'000 £'000 £'000 £'000 £'000
Revenue ((1)) 46,731 2,286 23,410 - 72,427
Cost of sales (51,709) (2,340) (6,028) - (60,077)
Gross (loss)/profit ((2)) (4,978) (54) 17,382 - 12,350
Administrative expenses - (5,062) (3,147) (19,226) (27,435)
Other gains ((3)) - 65,066 4,360 - 69,426
Other operating expense - - - (112) (112)
Operating (loss)/profit (4,978) 59,950 18,595 (19,338) 54,229
Finance costs - - - (6,421) (6,421)
Finance income - 438 7 - 445
Share of profit of joint ventures - 892 662 - 1,554
(Loss)/profit before tax (4,978) 61,280 19,264 (25,759) 49,807
((1)) Revenue
Revenue is analysed as follows:
Sale of development properties 46,731 - - - - 46,731
Revenue from PPAs - - 776 - - 776
Build-to-suit development revenue - - 956 - - 956
Rent, service charge and royalties revenue - - 340 22,657 - 22,997
Other revenue - - 214 753 - 967
46,731 2,286 23,410 - 72,427
((2)) Gross (loss)/profit
Gross (loss)/profit is analysed as follows:
Gross (loss)/profit excluding sales of development properties - (54) 17,382 - 17,328
Gross loss on sale of development properties* (618) - - - (618)
Net realisable value provision on development properties (7,442) - - - (7,442)
Reversal of previous net realisable value provision on development properties 1,213 - - - 1,213
Release of net realisable value provision on disposal of development 1,869 - - - 1,869
properties
(4,978) (54) 17,382 - 12,350
*Gross loss on sale of development properties includes a reduction of £2.0m
(2022: £0.4m) relating to the discounting of deferred consideration
receivable.
((3)) Other gains/(losses)
Other gains/(losses) are analysed as follows:
Increase in fair value of investment - 65,584 5,788 - 71,372
properties
Decrease in the fair value of AHFS - (114) (158) - (272)
Loss on sale of investment properties - (588) (365) - (953)
Loss on sale of AHFS - (134) (1,006) - (1,140)
Profit on sale of overages - 318 101 - 419
- 65,066 4,360 - 69,426
Segmental Balance Sheet
As at 31 December 2023
Capital Income Central Total £'000
Growth Generation £'000
£'000 £'000
Non-current assets
Property, plant and equipment - - 1,670 1,670
Right of use assets - - 512 512
Trade and other receivables 11,296 - - 11,296
Investment properties 199,216 234,726 - 433,942
Investments in joint ventures 17,604 13,118 - 30,722
228,116 247,844 2,182 478,142
Current assets
Inventories 263,073 - - 263,073
Trade and other receivables 23,967 11,300 2,022 37,289
AHFS 3,764 14,988 - 18,752
Cash and cash equivalents - - 27,182 27,182
290,804 26,288 29,204 346,296
Total assets 518,920 274,132 31,386 824,438
Financial liabilities and derivative financial instruments are not allocated
to the reporting segments as they are managed and measured at a Group level.
Segmental Income Statement
Year ended 31 December 2022
Capital Growth
Sale of development properties Other property activities Income Central Total
Generation
£'000 £'000 £'000 £'000 £'000
Revenue ((1)) 124,956 10,478 31,251 - 166,685
Cost of sales (68,099) (6,305) (8,888) - (83,292)
Gross profit ((2)) 56,857 4,173 22,363 - 83,393
Administrative expenses - (4,123) (1,877) (16,090) (22,090)
Other gains/(losses) ((3)) - 17,788 (34,549) - (16,761)
Other operating expense - - - (56) (56)
Operating profit/(loss) 56,857 17,838 (14,063) (16,146) 44,486
Finance costs - (168) - (6,199) (6,367)
Finance income - 227 - - 227
Share of loss of joint ventures - (4,317) (3,170) - (7,487)
Profit/(loss) before tax 56,857 13,580 (17,233) (22,345) 30,859
((1)) Revenue
Revenue is analysed as follows:
Sale of development properties 124,956 - - - - 124,956
Revenue from PPAs - - 5,810 - - 5,810
Build-to-suit development revenue - 4,215 - - 4,215
Rent, service charge and royalties revenue - 426 28,151 - 28,577
Revenue from coal fines - - 2,113 - 2,113
Other revenue - - 27 987 - 1,014
124,956 10,478 31,251 - 166,685
((2)) Gross profit
Gross profit is analysed as follows:
Gross profit excluding sales of development properties - 4,173 22,363 - 26,536
Gross profit on sale of development properties 57,252 - - - 57,252
Net realisable value provision on development properties (7,074) - - - (7,074)
Reversal of previous net realisable value provision on development properties 5,030 - - - 5,030
Release of net realisable value provision on disposal of development 1,649 - - - 1,649
properties
56,857 4,173 22,363 - 83,393
((3)) Other gains/(losses)
Other gains/(losses) are analysed as follows:
Increase/(decrease) in fair value of investment - 17,958 (37,683) - (19,725)
properties
Decrease in the fair value of AHFS - (199) - - (199)
Profit on sale of investment properties - 76 847 - 923
(Loss)/profit on sale of AHFS - (216) 2,287 - 2,071
Profit on sale of overages - 169 - - 169
- 17,788 (34,549) - (16,761)
Segmental Balance Sheet
As at 31 December 2022
Capital Income Central Total £'000
Growth Generation £'000
£'000 £'000
Non-current assets
Property, plant and equipment - - 600 600
Right of use assets - - 254 254
Trade and other receivables 4,013 - - 4,013
Investment properties 164,533 235,830 - 400,363
Investments in joint ventures 16,462 13,366 - 29,828
185,008 249,196 854 435,058
Current assets
Inventories 216,393 - - 216,393
Trade and other receivables 41,287 14,913 458 56,658
AHFS 2,627 57,163 - 59,790
Cash and cash equivalents - - 11,583 11,583
260,307 72,076 12,041 344,424
Total assets 445,315 321,272 12,895 779,482
Financial liabilities and derivative financial instruments are not allocated
to the reporting segments as they are managed and measured at a Group level.
4. Finance costs and finance income
Year ended Year ended
31 December 31 December
2023 2022 £'000
£'000
Finance costs
- Bank interest (2,778) (2,206)
- Facility fees (1,524) (1,791)
- Amortisation of up-front fees (671) (685)
- Acceleration of amortisation of up-front fees following extinguishment of - (599)
previous RCF
- Other interest (1,448) (1,086)
Total finance costs (6,421) (6,367)
Finance income 445 227
Net finance costs (5,976) (6,140)
5. Tax
Year ended 31 December 2023 £'000 Year ended 31 December 2022 £'000
Analysis of tax (charge)/credit in the year
Current tax
Current year (6,749) (21,650)
Adjustment in respect of prior periods 907 (118)
Total current tax charge (5,842) (21,768)
Deferred tax
Current year (4,779) 13,504
Adjustment in respect of prior periods (987) 409
Difference between current tax rate and rate of deferred tax (243) 4,834
Total deferred tax (charge)/credit (6,009) 18,747
Tax charge (11,851) (3,021)
Other comprehensive income items
Deferred tax - current year 3 (101)
Total 3 (101)
The tax charge for the year is higher (2022: lower) than the standard rate of
corporation tax in the UK of 23.5% (2022: 19%). The differences are explained
below:
Year ended 31 December 2023 £'000 Year ended 31 December 2022 £'000
Profit before tax 49,807 30,859
Profit before tax multiplied by rate of corporation tax in the UK of 23.5% (11,705) (5,863)
(2022: 19%)
Effects of:
Adjustments in respect of prior periods- deferred taxation (987) 409
Adjustments in respect of prior periods- current taxation 907 (118)
Expenses not deducted for tax purposes (542) (127)
Revaluation gains/(losses) 252 (755)
Share of profit/(loss) of joint ventures 365 (1,423)
Difference between current tax rate and rate of deferred tax (243) 4,834
Share options 102 22
Total tax charge (11,851) (3,021)
The difference between current tax rate and rate of deferred tax of £0.2m
(2022: £4.8m) relates to the unwinding of balances previously recognised at
25% and the reduction of the deferred tax liabilities recognised at 25% as a
result of in year movements.
At 31 December 2023, the Group had a current tax liability of £2.6m (2022:
£7.0m).
The Company has recognised a current tax liability in 2023 of £0.8m (2022:
asset £0.5m).
Deferred tax
The following is the analysis of deferred tax liabilities presented in the
consolidated balance sheet:
As at 31 December 2023 £'000 As at 31 December 2022 £'000
Deferred tax assets 503 1,839
Deferred tax liabilities (30,592) (25,980)
(30,089) (24,141)
The movements on the deferred income tax account were as follows:
Investment Properties £'000 Tax Losses £'000 Other Temporary Differences £'000 Total £'000
At 1 January 2022 (46,988) 2,558 1,783 (42,647)
Recognised in the consolidated income statement 21,008 (2,558) 297 18,747
Recognised in the consolidated statement of comprehensive income - - (101) (101)
Recognised in the consolidated statement of equity - - (140) (140)
At 31 December 2022 and 1 January 2023 (25,980) - 1,839 (24,141)
Recognised in the consolidated income statement (4,612) - (1,397) (6,009)
Recognised in the consolidated statement of comprehensive income - - 3 3
Recognised in the consolidated statement of equity - - 58 58
At 31 December 2023 (30,592) - 503 (30,089)
In the Spring Budget 2021, the Government announced an increase in the
corporation tax rate from 19% to 25% from 1 April 2023. The rate was
substantively enacted on 24 May 2021 and as such the deferred tax balances
have been calculated in full on temporary differences under the liability
method using the rate expected to apply at the time of the reversal of the
balance. As such, the deferred tax assets and liabilities have been calculated
using a 25% rate (2022: mixture of 25% and a blended rate) as appropriate.
Deferred tax assets and liabilities are offset when there is a legally
enforceable right to offset current tax assets against current tax liabilities
and when the deferred taxes relate to the same fiscal authority.
Deferred tax assets of £7.7m at 31 December 2023 (2022: £8.1m) have not been
recognised owing to the uncertainty as to their recoverability.
The Company has recognised a deferred tax asset in 2023 of £0.1m (2022:
£0.1m).
6. Dividends
Year ended Year ended
31 December 31 December
2023 2022 £'000
£'000
Interim dividend of 0.444p per share for the six months ended 30 June 2023 1,437 -
Full year dividend of 0.929p per share for the year ended 31 December 2022 3,001 -
Interim dividend of 0.404p per share for the six months ended 30 June 2022 - 1,305
Full year dividend of 0.845p per share for the year ended 31 December 2021 2,727
4,438 4,032
The Board has declared a final dividend to be paid of 1.022p (2022: 0.929p)
per share, bringing the total dividend for the year to 1.466p (2022: 1.333p).
The recommended 2023 final dividend and 2023 total dividend represent a 10%
increase in line with the Group's policy.
7. Earnings per share
Earnings per share has been calculated by dividing the profit attributable to
ordinary shareholders by the weighted average number of shares in issue and
ranking for dividend during the year.
Year ended Year ended
31 December 31 December
2023 2022
Profit from continuing operations attributable to owners of parent (£'000) 37,956 27,838
Weighted average number of shares used for basic earnings per share 322,767,356 322,571,783
calculation
Basic earnings per share (pence) 11.8 8.6
Weighted average number of shares used for diluted earnings per share 328,653,655 326,317,353
calculation
Diluted earnings per share (pence) 11.5 8.5
The difference between the weighted average number of shares used for the
basic and diluted earnings per share calculation is due to the effect of share
awards and options that are dilutive.
8. Investment properties
Investment properties at 31 December 2023 and 31 December 2022 have been
measured at fair value. The Group holds five categories of investment
property being Agricultural Land, Natural Resources, the Investment Portfolio,
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 Land Investment Major Strategic Land
£'000 Natural Portfolio Developments £'000 Total £'000
Resources £'000 £'000
£'000
At 1 January 2022 5,412 30,551 259,726 45,483 137,183 478,355
Direct acquisitions - - - - 11,863 11,863
Subsequent expenditure - 12 2,822 40,928 9,344 53,106
Disposals - (860) - - - (860)
Increase/(decrease) in fair value 282 (163) (37,802) (5,357) 23,315 (19,725)
Transfers between divisions 42,250 (42,250) - -
Transfers from/(to) development properties - - - 5,440 (60,513) (55,073)
Transfer to AHFS - (9,814) (56,589) - (900) (67,303)
At 31 December 2022 5,694 19,726 210,407 44,244 120,292 400,363
Direct acquisitions 655 - - - 15,829 16,484
Subsequent expenditure 45 1,350 677 22,104 11,558 35,734
Disposals - - (11,136) (788) (7,041) (18,965)
Increase in fair value 116 89 5,583 3,196 62,388 71,372
Transfers between divisions - - 18,551 (10,416) (8,135) -
Transfers to development properties - - - - (51,865) (51,865)
Transfers to property, plant and equipment - - (967) - - (967)
Transfer to AHFS - (1,264) (14,800) - (2,150) (18,214)
At 31 December 2023 6,510 19,901 208,315 58,340 140,876 433,942
Subsequent expenditure is recorded net of government grant receipts of £1.6m
(2022: £0.9m).
During the year £nil (2022: £5.4m) of development property was
re-categorised as investment property to reflect a change in use. During the
year £51.9m (2022: £60.5m) of investment property was re-categorised to
development properties. During the year £1.0m of investment property was
re-categorised as land and buildings (2022: £nil).
Investment property is transferred between divisions to reflect a change in
the activity arising from the asset.
Valuation process
The properties were valued in accordance with the Royal Institution of
Chartered Surveyors (RICS) Valuation - Professional Standards (the 'Red Book')
by BNP Paribas Real Estate and Savills at 31 December 2023 and 31 December
2022. Both are independent firms acting in the capacity of external valuers
with relevant experience of valuations of this nature.
The valuations are on the basis of Market Value as defined by the Red Book,
which RICS considers meets the criteria for assessing Fair Value under IFRS.
The valuations are based on what is determined to be the highest and best use.
When considering the highest and best use a valuer will consider, on a
property by property basis, its actual and potential uses which are
physically, legally and financially viable. Where the highest and best use
differs from the existing use, the valuer will consider the cost and the
likelihood of achieving and implementing this change in arriving at its
valuation.
At each financial year end, management:
· verifies all major inputs to the independent valuation report;
· assesses property valuation movements when compared to the prior
year valuation report; and
· holds discussions with the independent valuer.
The Directors determine the applicable hierarchy that each investment property
falls into by assessing the level of unobservable inputs used in the valuation
technique. As a result of the specific nature of each investment property,
valuation inputs are not based on directly observable market data and
therefore all investment properties were determined to fall into Level 3.
The Group's policy is to recognise transfers into and out of fair value
hierarchy levels as at the date of the event or change in circumstance that
caused the transfer. There were no transfers between hierarchy levels in the
year ended 31 December 2023 (2022: none).
Valuation techniques underlying management's estimation of fair value are as
follows:
Agricultural land
Most of the agricultural land is valued using the market comparison basis,
with an adjustment made for the length of the remaining term on any tenancy
and the estimated cost to bring the land to its highest and best use. Where
the asset is subject to a secure letting, it is valued on a yield basis, based
upon sales of similar types of investment.
Natural resources
Natural resource sites in the portfolio are valued based on discounted cash
flow for the operating life of the asset with regard to the residual land
value.
Investment Portfolio
The industrial & logistics investment properties are valued on the basis
of market comparison with direct reference to observable market evidence
including current rent and estimated rental value (ERV), yields and capital
values and adjusted where required for the estimated cost to bring the
property to its highest and best use. The evidence is adjusted to reflect the
quality of the property assets, the quality of the covenant profile of the
tenants and the reliability/volatility of cash flows. The Group's portfolio
has a spread of yields. In the past, income acquisitions have been made at
high yields where value can be added. As assets are enhanced and improved,
these would also be expected to be valued at lower yields. Subject to market
backdrop, properties that are built by Harworth will be modern Grade A with
typically lower yields.
Major developments
Major development sites are generally valued using residual development
appraisals, a form of discounted cash flow which estimates the current site
value from future cash flows measured by current land and/or completed built
development values, observable or estimated development costs, and observable
or estimated development returns. Where possible development sites are valued
by direct comparison to observable market evidence with appropriate adjustment
for the quality and location of the property asset, although this is generally
only a reliable method of measurement for smaller development sites.
Strategic land
Strategic land is valued on the basis of discounted cash flow, with future
cash flows measured by current land values adjusted to reflect the quality of
the development opportunity, the potential development costs estimated by
reference to observable development costs on comparable sites, and the
likelihood of securing planning consent. The valuations are then benchmarked
against observable land values reflecting the current existing use of the
land, which is generally agricultural and, where available, observable
strategic land values. The discounted cash flows across the different property
categories utilise value per acre, which takes account of the future
expectations of sales over time discounted back to a current value, and cost
report totals, which take account of the cost, as at today's value, to
complete remediation and provide the necessary site infrastructure to bring
the site forward.
9. Investment in joint ventures
As at As at
31 December 31 December
2023 2022
£'000 £'000
At 1 January 29,828 36,131
Investment in joint ventures 250 1,849
Distributions from joint ventures (910) (665)
Share of profits of joint ventures 1,554 (7,487)
At end of year 30,722 29,828
10. Inventories
As at As at
31 December 31 December 2022 £'000
2023
£'000
Development properties 250,024 204,952
Planning promotion agreements 3,805 2,994
Option agreements 9,244 8,447
Total inventories 263,073 216,393
The movement in development properties is as follows:
Year ended Year ended
31 December 31 December 2022 £'000
2023
£'000
At start of year 204,952 172,701
Subsequent expenditure 32,417 35,430
Disposals (34,850) (57,857)
Net realisable value provision charge (4,360) (395)
Net transfer from investment properties 51,865 55,073
At end of year 250,024 204,952
The movement in net realisable value provision was as follows:
Year ended Year ended
31 December 31 December
2023 2022 £'000
£'000
At start of year 9,776 12,154
Charge for the year 7,442 7,074
Released on disposals (1,213) (5,030)
Reversal of previous net realisable value provision (1,869) (1,649)
Released on transfer to investment property - (2,773)
At end of year 14,136 9,776
11. Assets held for sale
AHFS relate to investment properties identified as being for sale within 12
months, where a sale is considered highly probable and the property is
immediately available for sale.
Year ended Year ended
31 December 31 December
2023 2022 £'000
£'000
At start of year 59,790 1,925
Net transfer from investment properties 18,214 67,303
Subsequent expenditure 74 1
Decrease in fair value (272) (199)
Disposals (59,054) (9,240)
At end of year 18,752 59,790
12. Cash
As at As at
31 December 31 December
2023 2022 £'000
£'000
Cash 27,182 11,583
13. Borrowings
As at As at
31 December 31 December
2023 2022 £'000
£'000
Current:
Secured - infrastructure and direct development loans (29,744) (3,067)
(29,744) (3,067)
Non-current:
Secured - bank loan (33,830) (34,558)
Secured - infrastructure and direct development loans - (22,353)
Total non-current borrowings (33,830) (56,911)
Total borrowings (63,574) (59,978)
Loans are stated after deduction of unamortised fees of £1.5m (2022: £2.0m).
As at As at
31 December 31 December
2023 2022 £'000
£'000
Infrastructure and direct development loans
South Yorkshire Pension Fund/ Scrudf Limited Partnership Rotherham AMP (584) -
Scrudf Limited Partnership Gateway 36 (6,850) (1,413)
Merseyside Pension Fund Bardon Hill (22,310) (20,940)
North West Evergreen Limited Partnership Logistics North - (3,067)
Total infrastructure and direct development loans (29,744) (25,420)
Bank loan (33,830) (34,558)
Total borrowings (63,574) (59,978)
The bank borrowings are part of a £200m (2022: £200m) revolving credit
facility ("RCF") with a £40m uncommitted accordion option, provided by
NatWest, Santander and HSBC. The RCF is repayable on 4 March 2027 at the end
of the five-year term.
The RCF is subject to financial and other covenants. The bank borrowings are
secured by way of a floating debenture over assets not otherwise used as
security under specific infrastructure or direct development loans. Proceeds
from and repayments of bank loans are reflected gross in the Consolidated
Statement of Cash Flows and reflect timing of utilisation of the RCF.
The infrastructure and direct development loans are provided by public and
private bodies in order to promote the development of major sites or assist
with vertical direct development. The loans are drawn as work on the
respective sites is progressed and they are repaid on agreed dates or when
disposals are made from the sites.
14. Share capital
Year ended Year ended
31 December 31 December
Issued, authorised and fully paid 2023 2022 £'000
£'000
At start of year 32,305 32,272
Shares issued 103 33
At end of year 32,408 32,305
Year ended Year ended
31 December 31 December
Issued, authorised and fully paid - number of shares 2023 2022
At start of year 323,051,124 322,724,566
Shares issued 1,032,948 326,558
At end of year 324,084,072 323,051,124
Own shares held (929,699) (438,439)
At end of year 323,154,373 322,612,685
15. Related party transactions
The Group carried out the following transactions with related parties. The
following entities are related parties as a consequence of shareholdings,
joint venture arrangements and partners of such and/or common Directorships.
All related party transactions are clearly justified and beneficial to the
Group, are undertaken on an arm's-length basis on fully commercial terms and
in the normal course of business.
Year ended/ Year ended/
as at as at
31 December 31 December
2023 2022
£000 £000
MULTIPLY LOGISTICS NORTH HOLDINGS LIMITED &
MULTIPLY LOGISTICS NORTH LP
Sales
Recharges of costs 281 -
Asset management fee 100 145
Water charges 146 113
Purchases
Recharge of costs
1 -
Receivables
Other receivables 5 -
Trade receivables 281 -
GENUIT GROUP (FORMERLY POLYPIPE)
Sales
Rent 10 20
Development property disposal 1,680 -
Receivables
Trade receivables - 6
THE AIRE VALLEY LAND LLP
Receivable 26 26
CRIMEA LAND MANSFIELD LLP
Receivable 9 9
NORTHERN GATEWAY DEVELOPMENT VEHICLE LLP
Partner loan made during the year - 1,849
Investment made during the year 250 -
INVESTMENT PROPERTY FORUM
Purchases 5 1
16. Post balance sheet events
In January 2024 the Group disposed of the investment portfolio asset Flaxby
Moor Industrial Estate, Knaresborough for proceeds of £13.3m. This asset was
included within assets held for sale at the year end.
Appendix
EPRA Net Asset Measures
EPRA introduced a new set of Net Asset Value metrics in 2020: EPRA Net
Reinstatement Value ("NRV"), EPRA Net Tangible Assets ("NTA") and EPRA NDV.
While the Group uses only EPRA NDV as a key APM, the EPRA Best Practices
Recommendations guidelines require companies to report all three EPRA NAV
metrics and reconcile them to IFRS. These disclosures are provided below.
31 December 2023
EPRA NDV EPRA NTA EPRA NRV
£'000 £'000 £'000
Net assets 637,722 637,722 637,722
Cumulative unrealised gains on development properties 24,083 24,083 24,083
Cumulative unrealised gains on overages 9,400 9,400 9,400
Deferred tax liabilities (IFRS) - 30,089 30,089
Notional deferred tax on unrealised gains (8,342) - -
Deferred tax liabilities @ 50% - (19,216) -
Purchaser costs - - 52,528
662,863 682,078 753,822
Number of shares used for per share calculations 323,154,373 323,154,373 323,154,373
Per share (pence) 205.1 211.1 233.3
31 December 2022
EPRA NDV EPRA NTA EPRA NRV
£'000 £'000 £'000
Net assets 602,664 602,664 602,664
Cumulative unrealised gains on development properties 33,852 33,852 33,852
Cumulative unrealised gains on overages 7,500 7,500 7,500
Deferred tax liabilities (IFRS) - 24,141 24,141
Notional deferred tax on unrealised gains (10,171) - -
Deferred tax liabilities @ 50% - (17,156) -
Purchaser costs - - 46,307
633,845 651,001 714,464
Number of shares used for per share calculations 322,612,685 322,612,685 322,612,685
Per share (pence) 196.5 201.8 221.5
1) Reconciliation to statutory measures
Year ended Year ended
a. Revaluation gains/(losses) 31 December 31 December
2023 2022 £'000
£'000
Increase/(decrease) in fair value of investment properties 71,372 (19,725)
Decrease in fair value of AHFS (272) (199)
Share of profit/(loss) of joint ventures 1,554 (7,487)
Net realisable value provision on development properties (7,442) (7,074)
Reversal of previous net realisable value provision on development properties 1,213 5,030
Amounts derived from statutory reporting 66,425 (29,455)
Unrealised (losses) / gains on development properties (3,708) 10,493
Unrealised gains on overages 2,209 4,003
Revaluation gains/(losses) 64,926 (14,959)
b. (Loss)/profit on sale Year ended 31 December 2023 £'000 Year ended
31 December
2022 £'000
(Loss)/profit on sale of investment properties (953) 923
(Loss)/profit on sale of AHFS (1,140) 2,071
(Loss)/profit on sale of development properties (618) 57,252
Release of net realisable value provision on disposal of development 1,869 1,649
properties
Profit on sale of overages 419 169
Amounts derived from statutory reporting (423) 62,064
Less previously unrealised gains on development properties released on sale (6,061) (49,093)
Less previously unrealised gains on overages released on sale (309) -
(Loss)/profit on sale (6,793) 12,971
c. Value gains/(losses) Year ended 31 December 2023 £'000 Year ended
31 December
2022 £'000
Revaluation gains/ (losses) 64,926 (14,959)
(Loss)/profit on sale (6,793) 12,971
Value gains/(losses) 58,133 (1,988)
d. Total property sales Year ended 31 December 2023 £'000 Year ended
31 December
2022 £'000
Revenue 72,427 166,685
Less revenue from other property activities (2,286) (10,478)
Less revenue from income generation activities (23,410) (31,251)
Add proceeds from sales of investment properties, AHFS and overages 79,166 13,550
Total property sales 125,897 138,506
e. Operating profit contributing to growth in EPRA NDV Year ended 31 December 2023 £'000 Year ended
31 December
2022 £'000
Operating profit 54,229 44,486
Share of profit/(loss) on joint ventures 1,554 (7,487)
Unrealised (losses)/gains on development properties (3,708) 10,493
Unrealised gains on overages 2,209 4,003
Less previously unrealised gains on development properties released on sale (6,061) (49,093)
Less previously unrealised gains on overages released on sale (309) -
Operating profit contributing to growth in EPRA NDV 47,914 2,402
f. Portfolio value As at 31 December 2023 £'000 As at
31 December
2022 £'000
Land and buildings (included within Property, plant and equipment) 1,300 500
Investment properties 433,942 400,363
Investments in joint ventures 30,722 29,828
AHFS 18,752 59,790
Development properties (included within inventories) 250,024 204,952
Amounts derived from statutory reporting 734,740 695,433
Cumulative unrealised gains on development properties as at year end 24,083 33,852
Cumulative unrealised gains on overages as at year end 9,400 7,500
Portfolio value 768,223 736,785
g. Net debt As at 31 December 2023 £'000 As at
31 December
2022 £'000
Gross borrowings (63,574) (59,978)
Cash and cash equivalents 27,182 11,583
Net debt (36,392) (48,395)
h. Net loan to portfolio value (%) As at 31 December 2023 £'000 As at
31 December
2022 £'000
Net debt (36,392) (48,395)
Portfolio value 768,223 736,785
Net loan to portfolio value (%) 4.7% 6.6%
i. Net loan to core income generation portfolio value (%) As at As at
31 December 31 December
2023 2022 £'000
£'000
Net debt (36,392) (48,395)
Core income generation portfolio value (investment portfolio and natural 228,216 230,133
resources)
Net loan to core income generation portfolio value (%) 15.9% 21.0%
j. Gross loan to portfolio value (%) As at 31 December 2023 £'000 As at
31 December
2022 £'000
Gross borrowings (63,574) (59,978)
Portfolio value 768,223 736,785
Gross loan to portfolio value (%) 8.3% 8.1%
k. Gross loan to core income generation portfolio value (%) As at 31 December 2023 £'000 As at
31 December
2022 £'000
Gross borrowings (63,574) (59,978)
Core income generation portfolio value (investment portfolio and natural 228,216 230,133
resources)
Gross loan to core income generation portfolio value (%) 27.9% 26.1%
l. Number of shares used for per share calculations (number) As at 31 December 2023 As at
31 December
2022
Number of shares in issue at end of year 324,084,072 323,051,124
Less Employee Benefit Trust and Equiniti Share Plan Trustees Limited held (929,699) (438,439)
shares (own shares) at end of year
Number of shares used for per share calculations 323,154,373 322,612,685
m. Net Asset Value (NAV) per share As at 31 December 2023 As at
31 December
2022
NAV (£'000) 637,722 602,664
Number of shares used for per share calculations 323,154,373 322,612,685
NAV per share (p) 197.3 186.8
2) Reconciliation to EPRA measures
a) EPRA NDV As at As at
31 December 31 December
2023 2022 £'000
£'000
Net assets 637,722 602,664
Cumulative unrealised gains on development properties 24,083 33,852
Cumulative unrealised gains on overages 9,400 7,500
Notional deferred tax on unrealised gains (8,342) (10,171)
EPRA NDV 662,863 633,845
b) EPRA NDV per share (p) As at 31 December 2023 As at
31 December
2022
EPRA NDV (£'000) 662,863 633,845
Number of shares used for per share calculations 323,154,373 322,612,685
EPRA NDV per share (p) 205.1 196.5
EPRA NDV growth and total return
Opening EPRA NDV/share (p) 196.5 197.6
Closing EPRA NDV/share (p) 205.1 196.5
Movement in the year (p) 8.6 (1.1)
EPRA NDV growth 4.4% (0.6%)
Dividends paid per share (p) 1.4 1.2
Total return per share (p) 10.0 0.1
Total return as a percentage of opening EPRA NDV 5.1% 0.1%
To help retain and incentivise a management team with the requisite skills,
knowledge and experience to deliver strong, long-term, sustainable growth for
shareholders Harworth runs a number of share schemes for employees. The
dilutive impact of these on the number of shares at 31 December is set out
below:
As at 31 December 2023 As at
31 December
2022
Number of shares used for per share calculations 323,154,373 322,612,685
Outstanding share options and shares held in trust under employee share 5,223,777 3,193,351
schemes
Number of diluted shares used for per share calculations 328,378,150 325,806,036
Diluted EPRA NDV per share, Diluted NDV Growth and Total Return as a
percentage of opening diluted EPRA NDV per share are set out below:
c. Diluted EPRA NDV per share (p) As at 31 December 2023 As at
31 December
2022
EPRA NDV (£'000) 662,863 633,845
Number of diluted shares used for per share calculations 328,378,150 325,806,036
Diluted EPRA NDV per share (p) 201.9 194.5
Diluted EPRA NDV growth and total return
Opening diluted EPRA NDV/share (p) 194.5 196.2
Closing diluted EPRA NDV/share (p) 201.9 194.5
Movement in the year (p) 7.4 (1.7)
Diluted EPRA NDV growth 3.8% (0.9%)
Dividends paid per share (p) 1.4 1.2
Total diluted return per share (p) 8.8 (0.5)
Total return as a percentage of opening diluted EPRA NDV per share 4.5% (0.2%)
d) Net loan to EPRA NDV As at As at
31 December 2023 31 December 2022
£'000 £'000
Net debt (36,392) (48,395)
EPRA NDV 662,863 633,845
Net loan to EPRA NDV 5.5% 7.6%
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