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30 June 2018 |
30 June 2017 |
Change (%) |
31 December 2017 |
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Net Asset Value (“NAV”) per share (p) (1) |
128.6 |
117.4 |
9.5% |
127.4 |
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EPRA NNNAV per share (p) (1) |
130.8 |
118.0 |
10.9% |
128.9 |
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EPRA NAV per share (p) (1) |
133.4 |
120.1 |
11.1% |
131.0 |
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|
|
|
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Operating profit before exceptional items (£'m) |
6.6 |
8.8 |
(24.9)% |
39.7 |
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Operating profit before exceptional items plus joint ventures (£'m) |
8.9 |
8.8 |
1.0% |
43.8 |
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Value gains (£'m) (2) |
7.7 |
7.8 |
(2.2)% |
41.6 |
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Value gains (including development properties uplift) (£'m) (3) |
10.5 |
10.1 |
3.8% |
47.4 |
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Profit excluding value gains (£'m) (4) |
1.3 |
1.0 |
23.8% |
2.2 |
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Earnings per share (p) |
1.71 |
5.37 |
(68.2)% |
15.76 |
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Dividend per share (p) |
0.278 |
0.253 |
10.0% |
0.828 |
Harworth's Chief Executive, Owen Michaelson, said:
“The Group's strategy continues to evolve to support Harworth's ongoing growth, highlighted by our moves towards:
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a regional team structure deepening our local presence in the regions in which we operate in order to increase the number of opportunities evaluated and secured; and |
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the recycling of more mature, income-producing sites to allow us to focus on those sites where we can continue to add value and drive total return. |
SOUND FINANCIAL METRICS REFLECTING GOOD OPERATIONAL PERFORMANCE
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A positive six months resulting in double-digit EPRA NNNAV growth over the last twelve months, up 10.9% (H1 2017: 13.8%), with over 80% of value gains (2) generated through active management |
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Profit excluding value gains increased by 23.8%, reflecting income from acquisitions, good progress with lettings on direct developments and active asset management of existing properties |
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Earnings per share down 68.2% to 1.71p (H1 2017: 5.37p) reflected the impact of beneficial deferred tax movements in 2017, whilst improved operating performance is not reflected in the statutory measure but only the EPRA measure |
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Dividend per share increased by 10% to 0.278p (H1 2017: 0.253p) in line with our progressive policy |
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Total return (NNNAV growth plus dividends) over the last twelve months of 11.5% (H1 2017: 15.0%) was ahead of the 10% long-run average target |
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Revolving Credit Facility increased by £25 million to £100 million, whilst maintaining a policy of prudent gearing. Net loan to value of 19.0% (FY 2017: 7.0%) or 39.9% when calculated against the income portfolio (FY 2017: 20.8%), reflecting the level of first half acquisitions and the normal skewing of completed sales into the second six months. |
CONTINUED OPERATIONAL PROGRESS DRIVING HARWORTH'S BUSINESS MODEL
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Consent secured for 529 new residential sites in the Midlands, with 444 of these from the Company's first two PPA(5) successes. One planning application submitted post period, for a total of c.2m sq. ft of commercial space |
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Six acquisitions completed for a total of £50 million. These sites have the potential for the development of up to 2,000 homes and c.1m sq. ft of commercial space, whilst two of the sites generate £3.1m of annual rental income |
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Full year sales quantum is expected to be ahead of the Board's expectations with 339 residential plots sold in the first half to a mixture of national and regional housebuilders. Since June, 71 residential plots and 0.15m sq. ft of built commercial space have been sold and currently we have exchanged contracts on a further 769 residential plots and 300k sq. ft of commercial space |
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At the end of the first half, all wholly owned directly developed commercial units were let. A further c.56,000 sq. ft practically completed at the end of August and is now being actively marketed for letting |
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At the jointly-owned Multiply Logistics North commercial development, one unit of c.47k sq. ft has been let and six further units totalling c.270k sq. ft are due to practically complete by November, with one of these units already pre-let in July. |
CONTINUED EVOLUTION OF STRATEGY SUPPORTING GROWTH AMBITIONS
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Harworth's strategy remains committed to the beds and sheds sectors in the North and the Midlands. To drive growth and to source more acquisitions we are investing in a regional structure with increased local presence in the Midlands and the North West |
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To improve the quality and resilience of our income portfolio and to drive overall total return, Harworth is looking to dispose selectively of its low-yielding agricultural land and its more mature income-generating sites. This process has commenced with sales of £20.5m for Phase 1 of Gateway 36 in Barnsley, Costa Coffee at Logistics North and Harworth Business Park in North Nottinghamshire, which were above book value, as well as the ongoing sales of agricultural land which offers little further development potential |
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The portfolio of consented sites stands at 10,638 residential plots (H1 2017: 9,171) and 12.13m sq. ft of commercial space (H1 2017: 10.9m sq. ft) |
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For the first time Harworth has quantified the large site valuation discount for residential plots on its ten largest residential sites, being the difference between the valuation as at 31 December 2017 and expected future sales value. This discount is expected to unwind over time as sites are sold adding £64.2m (20.0p per share) to NNNAV |
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Acquisitions focus remains on: purchasing major brownfield sites and potential urban extensions from corporates, administrators and the public sector; securing options ideally on medium to long term development opportunities or on adjacent land; and agreeing PPAs of scale in our core regions |
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Harworth moved to a premium listing on the London Stock Exchange on 1 August 2018 and is on course to join the FTSE indices on 24 September 2018. MARKET OUTLOOK
The outlook for our target markets remains healthy. The stability of the regional markets in which we operate is secured by comparatively low prices, a continuing lack of consented and engineered land for housing, and the need for new commercial space where good quality stock is scarce. Growth forecasts for the 'beds and sheds' markets in our regions are favourable, with the Midlands and the North West forecast to have stronger house price growth than most other regions over the next five years and the industrial sector projected to continue to outperform both the retail and office market in the medium-term.
Our assessment is supported by the legislative and regulatory landscape. Government changes to the National Planning Policy Framework were as expected, with the presumption in favour of sustainable development remaining as before, and maximising the use of previously developed sites, being central to this presumption. Incentives to support home ownership such as Help-to-Buy remain in place, whilst the Government's continued commitment to regional devolution in the form of new powers and monies to regional mayors can continue to help unlock major new residential and commercial development through new infrastructure investment without having to resort to Central Government assistance.
Overall, trading remains in line with our expectations, with strong momentum continuing into the second half of 2018.
Owen Michaelson Chief Executive Officer 11 September 2018
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