The Group has delivered another strong operational performance in the second half of the year across all of its business segments. This, coupled with the indicative outcome of the independent annual valuation of the property portfolio, means that the Group anticipates that its financial performance for the year ended 31 December 2018 will be ahead of its expectations:
· Value gains (revaluation gains and profit on disposals) and profit excluding value gains are both anticipated to be ahead of its expectations; and
· As a result, Group EPRA NNNAV(1) as at 31 December 2018 is anticipated to be moderately ahead of its expectations, achieving a total return of the order of 12%, ensuring another year of performance ahead of our 10% long-run average target.
Value gains have continued to be driven by active management, most notably:
1) Planning delivery and pipeline
· Continued success in securing residential and commercial planning consents, with planning secured for 761 residential plots and c.77,000 sq. ft of commercial space on six sites
· Planning permissions submitted in H2 for over 3.3m sq. ft of commercial space and nearly 1,000 residential plots with the majority due to be determined in 2019
2) Record quantum of sales, which were realised above book value
· Profits on sale from the disposal of four engineered development land parcels for 632 residential plots, across three major projects, to national and regional housebuilders during the fourth quarter for a total in excess of £20.0m
· Profits on sale from the disposal of engineered development land for commercial uses totalling 1.1m sq. ft, including the sale in October of the 55-acre Lounge site in Leicestershire for £18.7m and the £10.9m sale of the G2 plot at Logistics North in December
3) Strong lettings progress at key developments
· Advances across the income portfolio, including securing new headline rents on key sites including Waverley (Rotherham) and Logistics North (Bolton), resulting in higher valuations. This includes Multiply Logistics North, Harworth's Joint Venture with the Lancashire County Pension Fund, achieving a new headline rent for the North West of £7.75psf for the letting of a 30,577 sq. ft unit in November on a ten-year lease, with strong continuing demand likely to drive further headline rent increases on its remaining units
Stronger than anticipated profit excluding value gains driven by:
· A one-off net 'promote profit' of c.£6.7m achieved at Logistics North through the 20-year letting of Logistics 175, M&G Real Estate's last remaining forward-funded unit totalling 174,970 sq. ft; and
· Increased recurring income from the acquisitions of commercial space at Nufarm, Bradford and Flaxby, North Yorkshire
The Group's land and property portfolio, balance sheet and cash flow remain strong, ensuring that it is well positioned for future value creation.
Owen Michaelson, Chief Executive Officer, commented:
“The momentum generated from the Group's strong first half results continued into the second half, meaning that we anticipate full year results to exceed our expectations. Sales of consented land at our key development sites have been realised at prices above book value whilst good progress on planning, and future sales and lettings has driven the indicated growth in the valuation of our portfolio. The realisation of new headline rents at Waverley and Logistics North has been particularly pleasing, with £7.75psf for manufacturing space at the latter, reflecting the underlying strength of the regional markets in which we operate.
“This year's strong performance also demonstrates the ability of our management team to generate the majority of our value gains from acquisitions through to active asset management, taking full advantage of particular opportunities as they arise. We remain confident in the long-term fundamentals of the residential and commercial markets in our focus regions in the North of England and the Midlands, notwithstanding any short-term political or economic uncertainty resulting from Brexit negotiations. This gives us the assurance we need to continue to invest selectively in new sites to deliver future shareholder value.”
The Company will announce its full year results for the financial year ended 31 December 2018 on 5 March 2019.
Forward Looking Statements
Certain statements in this Trading Update are forward looking statements. These statements may contain the words “anticipate”, “will”, or words of similar meaning. By their nature, forward looking statements involve risks, uncertainties or assumptions that could cause actual results or events to differ materially from those expressed or implied by those statements. As such, undue reliance should not be placed on forward looking statements. Except as required by applicable law or regulation, Harworth Group plc disclaims any obligation or undertaking to update these statements to reflect events occurring after the date these statements were published.
About Harworth Group
Listed on the main market of the London Stock Exchange, Harworth Group plc (LSE: HWG) is a leading regenerator of land and property for development and investment which owns, develops and manages a portfolio of approximately 21,500 acres of land on around 140 sites located throughout the Midlands and the North of England. The Group specialises in the regeneration of former coalfield sites and other brownfield land into new residential developments and employment areas.