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Harworth Group Plc - Interim Results

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HARWORTH GROUP PLC

UNAUDITED INTERIM RESULTS FOR THE HALF YEAR ENDED 30 JUNE 2020

RESILIENT PORTFOLIO, OPERATIONAL STRENGTH AND EXPOSURE TO STRUCTURALLY SUPPORTED BEDS & SHEDS SECTORS PROVIDES STRONG PLATFORM FOR CONTINUED PROGRESS

Harworth Group plc ("Harworth" or the "Group"), a leading regenerator of land and property for development and investment, announces its interim results for the half year ended 30 June 2020.

Key Non-Statutory Measures (1)

H1

2020

H1 2019

FY 2019

Key Statutory Measures

H1 2020

H1 2019

FY 2019

Total return (%)

(4.5)

1.9

7.8

Operating (loss)/profit (£'m)

(3.7)

13.3

24.3

EPRA NDV(2) per share (p)

148.6

147.3

155.6

Net asset value (£'m)

458.1

454.3

463.8

Value (losses)/gains (£'m)

(23.2)

11.1

44.0

Basic earnings per share (p)

(1.6)

4.7

7.9

Profit excluding value gains (£'m)

2.4

2.0

3.5

Total dividend per share (p)

0.3

0.3

0.3

Net loan to portfolio value (%)

12.4

10.1

12.1

Net debt (£'m)

69.2

53.1

70.9


Harworth's Chief Executive, Owen Michaelson, said:

"Whilst Harworth has not been immune to the effect of COVID-19, the business is weathering the pandemic well. We have had an active first nine months, remaining at full operational strength throughout. The independent valuation as at 30 June resulted in a limited c.4.75% decline in portfolio value following the delivery of key management milestones and the Group remains well positioned for the future.  Given our demonstrated financial and operational resilience and our long-term confidence in our business model, we are returning to paying dividends with an interim dividend per share of 0.334p, a 10% increase on our 2019 interim dividend.

"The Group's purpose of delivering sustainable places for people to live and work remains as relevant as ever to support the UK's economic recovery. Demand for residential and commercial land in the "beds and sheds" sectors, which have demonstrated their resilience during this unprecedented period, remains strong in the North of England and Midlands. This is further reflected in our sales in the first half being achieved at or above 2019 book value.  

"Our income portfolio continues to drive value growth whilst covering the operating costs of the business and we have continued to add to this with the acquisition of two high yielding income-producing properties in the period and on-site commercial development.  This predominantly industrial portfolio has also performed dependably with c.95% of income collected for March and June quarters. 

"The Government's priority to 'build build build' and to level up the national economy in support of the regions, backed by sensible proposed planning reforms and significant regional infrastructure investment, remains an important underpin. This together with the strength of our balance sheet and diverse portfolio provides a solid platform for future growth whilst also affording significant flexibility to take advantage of strategic land or income-generating opportunities in the regions.

"With over 70% of all budgeted sales for 2020 completed or agreed, financial headroom today of £63.3m in place to take advantage of market opportunities, a substantial well-positioned pipeline of major developments and strategic land, and a resilient income portfolio, I will be handing Harworth over to my successor Lynda Shillaw in excellent health."

GOOD PROGRESS MADE ACROSS ALL BUSINESS AREAS

GROWING AND REFINING THE LAND AND PROPERTY PORTFOLIO

·  One strategic land acquisition and one PPA agreed, for a total consideration of £1.8m, with the potential to deliver a further 1,438 residential plots

· Continuing strategic land and income producing acquisition opportunities under review

· Further progress made in the disposal of the non-core portfolio, with nine sites totalling 899 acres sold in H1 to focus management time on key value-adding projects

PREPARING LAND TO CREATE NEW COMMUNITIES AS MASTER DEVELOPER

· Infrastructure works continued on seven major development sites to support the planned sales and direct development programme, with all housebuilders back on-site following a short hiatus in April

Planning consent secured at Woodville in Derbyshire, a 300 plot PPA site being brought forward with a third-party landowner

Planning consent also secured after period end for Phases 2 and 3 of Gateway 36 development in Barnsley which will provide a further 1.1m sq. ft of employment space close to Junction 36 of the M1 

· Live applications for 2,391 residential plots and c. 2.4m sq. ft of commercial space in the planning system awaiting determination as at 30 June 2020

DELIVERING SERVICED PLOTS FOR NEW HOMES AND INDUSTRIAL SPACES

· Sales totalling £30.8m achieved, with over 70% of budgeted sales for the full year already completed or agreed, in line with previous year

·As at 30 June 2020, the Group's portfolio includes 30,132 potential residential plots (10,074 plots consented) and 25.4m sq. ft of potential industrial space (8.2m sq. ft of space consented), providing significant latent value

GROWING THE INVESTMENT PORTFOLIO

· Two income-producing acquisitions made during the period for a total of £11.3m plus acquisition costs:

Ø Thorns Road Industrial Estate near Dudley for £10.1m plus acquisition costs, reflecting a Net Initial Yield of 10.2%; and

Ø A Short-Term Operating Reserve (STOR) facility in Gloucester for £1.2m, reflecting a Net Initial Yield of 8.3%

· c.95% of all rent due in Q1 and Q2 collected, demonstrating portfolio resilience

· Income collection covers all Group business overheads and interest 

· Vacancy on Business Space portfolio reduced to its lowest-ever figure of only 3.7% (FY 2019: 6.2%) with a WAULT of 13.2 years (FY 2019: 13.5 years)

· Annualised rental income from Business Space increased from £11.8m to £13.3m in the period

·Live direct development programmes on-track, with practical completion of the UK Atomic Energy's new 22,300 sq. ft nuclear fusion research facility at the AMP, Rotherham achieved in late September

OPERATIONAL PERFORMANCE REMAINS STABLE, REFLECTING STRENGTH OF UNDERLYING BUSINESS 

·Profitable sales, strong rent collection and active management helped to mitigate the downward property valuation movement as at 30 June 2020

· Profit excluding value gains(1) up 16.3% reflecting the full impact of additional income generated from acquisitions in 2019, a promote fee and continued strong rent collection levels

· Valuation adjustments led to an operating loss of £(3.7)m (H1 2019: operating profit of £13.3m)

· Net asset value was £458.1m (H1 2019: £454.3m and FY 2019: £463.8m)

·EPRA NDV(1) was £478.7m (H1 2019: £473.3m and FY 2019: £500.5m) representing EPRA NDV per share(1) of 148.6p (H1 2019: 147.3p and FY 2019: 155.6p)

·Total return(1) (EPRA NDV (reduction)/growth plus dividends per share) for H1 of (4.5)% (H1 2019: 1.9%);  total return over the last twelve months of 1.1% (H1 2019: 13.3%)

· Interim dividend increased by 10% to 0.334p (H1 2019: 0.30p) per share. The Board remains committed to considering, at the time of the final 2020 dividend, an increased payment for 2020 to reflect the cancellation of the 2019 full-year dividend

·Prudent gearing, with a net loan to portfolio value(1) of 12.4% (FY 2019: 12.1%) or 34.1% when calculated against the income generation portfolio(1) (FY 2019: 35.3%)

ROBUST STRATEGY & STRONG FINANCIAL POSITION SUPPORTS LONG-TERM GROWTH

· Strategic focus remains firmly positioned on the beds and sheds sectors in the North and the Midlands, with their strong underlying fundamentals, utilising the significant underlying value of its land and property portfolio

·Well capitalised, with net debt of £69.2m (FY 2019: £70.9m) and substantial available liquidity of £67.5m (comprising £7.5m of cash and £60.0m of undrawn facilities) as at 30 June 2020

·  Lynda Shillaw will be appointed as Harworth's new Chief Executive Officer on 1 November 2020 at which point Owen Michaelson will step down from the Board, but remain in the business, to facilitate a smooth transition, until he retires at the end of the year. With no staff furloughed at any point during lockdown, the Group remains at optimal operational strength to drive management actions across the busines