Harworth Group plc
Year-end Trading Update
LEADING REGENERATION COMPANY CONTINUES TO DELIVER GOOD OPERATIONAL PERFORMANCE
Harworth Group plc (“Harworth” or “the Group”), a leading regenerator of land and property for development and investment, today provides a trading update for the financial year ended 31 December 2019.
The Group has delivered a solid operational performance in the second half of the year despite the planning headwinds reported as part of its 2019 interim results. 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 2019 (including its principal measure of Group EPRA NNNAV) will be in line with expectations and its stated aim of delivering long-term market-leading returns for its shareholders.
Harworth continues to transform its portfolio of land and property through active management across its four main business areas, realising strong financial returns as well as creating new places where people want to live and work.
Highlights for the period from 1 October to 31 December 2019 include:
GROWING AND REFINING OUR LAND AND PROPERTY PORTFOLIO
- Completed land purchases totalling over 33 acres adjacent to two of Harworth's major developments for a combined consideration of £6.25 million;
- Purchased two income-producing industrial units at Brighouse and Sherburn-in-Elmet for a combined consideration of £12.8 million, reflecting a blended net initial yield of 8.08%;
- Entered into five Planning Promotion Agreements across all three core regions as part of assuring the Group's long- term land pipeline; and
- Sold 194.86 acres of non-core land as part of reducing our agricultural landholding and our planned exit from the North East
PREPARING LAND TO CREATE NEW COMMUNITIES AS MASTER DEVELOPER
- Submitted planning applications for over 1.3m sq. ft of commercial space and 1,300 residential plots, including on the former Ironbridge Power Station in Shropshire. As at 31 December 2019, a total of over 4.1m sq. ft of employment space and over 3,000 residential plots were in the planning system awaiting determination;
- Completed initial site works and enabling contracts at Coalville in Leicestershire and Moss Nook in St Helens to unlock the delivery of nearly 3,000 consented residential plots; and
- Successfully demolished Ironbridge Power Station's four former cooling towers in December as part of ongoing site preparation
DELIVERING SERVICED PLOTS FOR NEW HOMES AND COMMERCIAL SPACE
- 25.7 acres of serviced residential land sold for a combined 288 plots at Thoresby Vale, Nottinghamshire (Harron Homes) and Riverdale Park, Doncaster (Taylor Wimpey) for a total consideration of £14.06 million, above 2018 book value;
- 43 acres of serviced commercial land sold at its joint venture Gateway 45 Leeds site to PLP for the development of up to 855,000 sq ft of industrial and distribution space; and
- Completed the freehold land sale of its Solar Portfolio – seven former Colliery sites in Yorkshire, Nottinghamshire and Derbyshire totalling 251 acres with no further development potential – to Lightsource BP for £5.0 million, at a price above 2018 book value and representing a net initial yield of 4.61%
ACTIVELY MANAGING THE GROUP'S INCOME PORTFOLIO WITH NEW LETTINGS AND PROVIDING QUALITY ACCOMMODATION FOR BUSINESSES
- Increased annualised income by over £1.0 million from new Business Space purchases at Sherburn-in-Elmet and Brighouse, where an agreement for lease was signed on the vacant building within three months of purchase;
- Agreed a 20-year pre-let with the UK Atomic Energy Authority for a 25,000 sq. ft bespoke fusion technology research facility at the Advanced Manufacturing Park (“AMP”) in Rotherham, with rent commencing on practical completion in September 2020 in line with existing headline rents at AMP; and
- Completed a new 10-year letting of the 25,497 sq. ft Unit F2/D at Multiply Logistics North, a Joint Venture with Lancashire Pension Fund, with a further 10-year letting of the 20,434 sq. ft Unit F2/F agreed after period end. Both agreements were in line with existing headline rents at the development
The Group's land and property portfolio, balance sheet and cash flow remain strong, ensuring that it is well positioned for long-term value creation.
Owen Michaelson, Chief Executive Officer, commented:
“We anticipate full year results to be in line with expectations, reflecting good progress being made across all business sectors.
“Our results reflect that the majority of our value gains are realised through the active asset management of our underlying land and property portfolio, including strong residential and commercial land sales and continued efforts to improve the depth and breadth of our income portfolio. Our regional markets in the North of England and Midlands remain solid and should benefit further from emerging government policy.
“Looking forward, the planning headwinds that we reported at the half year still remain in place and we continue to manage this risk accordingly on a site-by-site basis. In addition, the returns from large-scale sites such as ours are not linear. Whilst we therefore continue to target long-term market-leading returns, our current trading plans indicate a profile for our historic site portfolio that anticipates delivering lower returns in the near term whilst our new sites work through the development cycle.
“We will continue to deploy our capital wisely through our regional operating model on appropriate new land and property opportunities in order to drive returns whilst supporting the ongoing regeneration of our regions through the delivery of new homes and jobs.”
Harworth will announce its preliminary full year results for the financial year ended 31 December 2019 on 17 March 2020.