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Harworth Group PLC  -  HWG   

Unaudited Interim Results

Released 07:00 11-Sep-2018

RNS Number : 3332A
Harworth Group PLC
11 September 2018
 

HARWORTH GROUP PLC

UNAUDITED INTERIM RESULTS FOR THE HALF YEAR ENDED 30 JUNE 2018

 

 SIGNIFICANT SITE ACQUISITIONS, ROBUST LAND SALES AND A FAVOURABLE REGIONAL MARKET BACKDROP UNDERPIN STRONG FIRST HALF

 

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 2018.

 

 

30 June 2018

30 June 2017

Change (%)

31 December 2017

Net Asset Value ("NAV") per share (p) (1)

128.6

117.4

9.5%

127.4

EPRA NNNAV per share (p) (1)

130.8

118.0

10.9%

128.9

EPRA NAV per share (p) (1)

133.4

120.1

11.1%

131.0

 

 

 

 

 

Operating profit before exceptional items (£'m)

6.6

8.8

(24.9)%

39.7

Operating profit before exceptional items plus joint ventures (£'m)

8.9

8.8

1.0%

43.8

Value gains (£'m) (2)

7.7

7.8

(2.2)%

41.6

Value gains (including development properties uplift) (£'m) (3)

10.5

10.1

3.8%

47.4

Profit excluding value gains (£'m) (4)

1.3

1.0

23.8%

2.2

 

 

 

 

 

Earnings per share (p)

1.71

5.37

(68.2)%

15.76

Dividend per share (p)

0.278

0.253

10.0%

0.828

 

Harworth's Chief Executive, Owen Michaelson, said:

"We have had another strong first half across all of our key business areas.  Significant progress has been made in replenishing our strategic land portfolio and improving the breadth and depth of our income, with £50m worth of acquisitions in the first half.  Demand for consented land in sought after locations has also resulted in over 90% of our forecast full year residential and commercial land sales being now either completed, exchanged or in legals.  Our performance remains weighted towards the second half such that we anticipate delivering full-year results in line with the Board's expectations.

 

"The Group's strategy continues to evolve to support Harworth's ongoing growth, highlighted by our moves towards:

·    

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

·    

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.

 

"The economic potential of the Northern and Midlands regions in which we operate remains attractive and the long-term market fundamentals supporting residential and commercial development are favourable."

 

SOUND FINANCIAL METRICS REFLECTING GOOD OPERATIONAL PERFORMANCE

·    

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

·    

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

·    

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

·    

Dividend per share increased by 10% to 0.278p (H1 2017: 0.253p) in line with our progressive policy 

·    

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

·    

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

·    

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

·    

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

·    

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

·    

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

·    

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

·    

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

·    

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

·    

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)

·    

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 

·    

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

·    

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.

 

Footnotes:

(1) In 2017, following the March 2017 equity capital raise to accelerate the acquisition of strategic land for development and the further evolution of our strategy, £229.1m of property was categorised from investment to development.  Balance sheet measures include NAV and European Public Real Estate Association ("EPRA") NNNAV.  This is now our primary metric and includes the mark to market value of development properties (£8.7m) less notional deferred tax on development properties (£1.5m).  EPRA NAV is EPRA NNNAV excluding deferred tax (£6.7m), notional deferred tax on development properties (£1.5m), and the mark to market movement on financial instruments (£0.0m)

(2) Value gains comprise profits on sale of: investment properties (£0.2m); development properties (£0.0m); overages (£0.0m); and assets held for sale (£0.0m), plus the increase in the fair value of investment properties (£6.7m), joint ventures (£2.3m) and overages (£0.0m) less the impairment of development properties (£1.5m)

(3) Value gains (including development properties) comprises value gains (£7.7m) plus the increase in the fair market value of development properties (£2.9m)

(4) Profit excluding value gains is operating profit before exceptional items plus joint ventures (£8.9m) less value gains (£7.7m) and pension costs (£0.0m)

(5) Planning Promotion Agreements ("PPAs") are contracts with landowners by which Harworth incurs the cost and risk of promoting land through planning.  If successful, Harworth shares some of the value gain, after first recovering its costs, when the land is sold

 

-ENDS-

 

 

 

Enquiries: 

Harworth Group plc

FTI Consulting

Owen Michaelson, Chief Executive

Dido Laurimore

Andrew Kirkman, Finance Director

Richard Gotla

  

Eve Kirmatzis

 

 

Tel: +44 (0)114 349 3131

Tel: +44 (0)20 3727 1000 | Harworth@fticonsulting.com

 

ABOUT HARWORTH GROUP PLC

Listed on the main market, 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. (http://www.harworthgroup.com)


This announcement contains 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 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 should be construed as a profit forecast.

 

Operational Review

 

OVERVIEW


I am pleased to report on another robust set of interim results, reflecting a strong start to the year by both of our Capital Growth and Income Generation teams and underpinned by the favourable regional market backdrop.  These results demonstrate the fundamental strength of our business model and the market leading team that we have assembled, with over 80% of first half value gains achieved as a result of active management rather than market movements.   EPRA NNNAV per share as at 30 June 2018 was 130.8p (H1 2017: 118.0p), giving a total return over the last twelve months of 11.5% (H1 2017: 15.0%).

 

In conjunction with our independent valuers, BNP Paribas, we have for the first time quantified the large site discount, being the difference between the valuation of the sites as at 31 December 2017 and expected future plot sales values.  The large site discount for our largest ten residential-led Major Developments is £64.2m (20p per share), which is expected to unwind over time as sites are sold.

 

Particular success has been achieved in the first half in purchasing new land and property to replenish our strategic land portfolio and to improve the breadth and depth of our income, with five major and one minor acquisition(s) made for a total of £50 million.  These acquisitions were funded in part by our Revolving Credit Facility with RBS and Santander, which was extended in April from £75 million to £100 million.

 

Reflecting the strategic evolution of the business and expected activities going forward, we are moving to a regional structure for our Capital Growth team, split into three core regions of the North West, the Midlands, and Yorkshire and Central.  Each regional team will be responsible for the acquisition, promotion and development of sites in their region, building the local networks and relationships which are essential to our business.  We believe that bringing together the acquisition and delivery functions and embedding each regional team in their respective local market will further increase the profile of the business and support our efforts to secure developable land and property to grow the business in a sustainable manner.

 

We anticipate full-year results in line with the Board's expectations.  As in previous years, we expect performance to be second half weighted, as agreed sales formally complete and both infrastructure and development works are accelerated over the summer months, driving value gains prior to the year-end. 

 

CAPITAL GROWTH

 

We continue to make good progress in extracting optimum value from our underlying portfolio in the North of England and the Midlands through three principal management actions: securing planning consents on major schemes; preparing land for redevelopment; and delivering sales above book value for future residential and commercial development.  All have underpinned the value gains made during the first half of the year.

 

During the period, outline planning consents were granted for 529 residential plots, with 444 of these from the Company's first two Planning Promotion Agreement successes in Nottinghamshire and Derbyshire.  Live planning applications for a further 495 freehold residential plots, 380 partnership residential plots and 325k sq. ft of commercial space have also been submitted.  Shortly after the period, we also submitted a planning application for 2m sq. ft of commercial space to expand Sherburn Rail Freight Terminal on the site of the former Gascoigne Wood Colliery in Selby, North Yorkshire.  The majority of these applications are expected to be considered by the end of the year.  Applications for a further 350 freehold residential plots and 2.065m sq. ft of commercial space are also due to be submitted by the end of 2018.  

 

A central part of our strategy continues to be the careful planning of the disposal of consented land with the aim of achieving sales proceeds above book value and reinvesting the proceeds to accelerate the development of our sites.  In the first half of the year we sold land for 339 residential plots at three major development sites to national and regional housebuilders.  A number of deals were also completed after the period-end, including the sale of c.6 acres of land at the former Harworth Colliery to Jones Homes, part of our 1,500-home redevelopment of a site that has been brought forward with the support of a £4m loan from Homes England to accelerate infrastructure works.  

 

These disposals contributed to the current position of over 90% of forecast sales for the year being completed, exchanged or agreed.  We, therefore, anticipate that sales to housebuilders and commercial occupiers being agreed for completion during the rest of the year will lead to full year sales, including of income producing properties, being ahead of the Board's expectations.  Progress has also been made in preparing land and agreeing terms for 2019 sales.

 

During the period we added three sites to our strategic land pipeline within our core regions: 

 

·    

In April we purchased two sites in the Midlands, totalling 165 acres, for a total consideration of £3.88 million plus acquisition costs.  The first, Cinderhill near Denby in Derbyshire, involved the purchase of 112 acres of land across three separate parcels.  This supplements our existing promotion agreement for a wider master-plan currently being promoted through Amber Valley District Council's Local Plan for a major new residential-led development across 421 acres that could deliver up to 3,000 new homes and 450,000 sq. ft of commercial space.

·    

At Bardon Hill in Leicestershire we acquired 53 acres of greenfield land adjacent to our existing major residential development at Coalville.  We are already promoting the site through the planning process for a commercial scheme of up to 457,000 sq. ft of manufacturing, distribution and roadside uses and intend to submit an outline planning application in the autumn.

·    

We purchased the 350-acre former Ironbridge coal-fired power station in Shropshire, further growing the Company's strategic land-bank and presence in the Midlands.  Located near Ironbridge town centre, the site comprises around 240 acres of brownfield land and a neighbouring parcel of over 100 acres of agricultural land.  We are already promoting the site with key local stakeholders to establish its future use, with consultation workshops taking place in the autumn to explore the potential masterplan for a significant mixed-use development.

 

As at 30 June 2018, the total number of consented residential plots in the portfolio was 10,638 (H1 2017: 9,171 plots) alongside 12.13m sq. ft of consented employment space (H1 2017: 10.9m sq. ft).  When combined with land within our identified planning pipeline, Harworth could potentially deliver a total of 20,416 residential plots (H1 2017: 19,705 plots) alongside 22.4m sq. ft of new commercial space (H1 2017: 18.3m sq. ft) for the regions in which we operate.

 

INCOME GENERATION

 

Our Income Generation team's focus on growing resilient, recurring income has continued in the first half of the year. Alongside asset managing our existing portfolio and directly developing new commercial space with a view to securing long term lease agreements, we have also begun to execute an active churn strategy of those more mature assets with limited further value or income growth potential, alongside the sale of low-yielding agricultural land and property with little development potential.  

 

The extension of our Revolving Credit Facility to £100m in April, coupled with the sale of Harworth Business Park in North Nottinghamshire at book value in the previous month, enabled the purchase in the first half of two income-producing sites that also have commercial development potential:

 

·    

A 112-acre site at Wyke, Bradford, for £32.45 million plus acquisition costs.  Less than a mile from Junction 26 of the M62 and providing excellent access to a number of major Northern cities and ports, the site comprises an agrochemical works set over 32-acres operated by Nufarm UK Limited, alongside 80-acres of unoccupied land.   It is let on a 50-year lease, which commenced in October 2005, at a current passing rent of over £2.1m per annum, representing a net initial yield of 6.2% and a reversionary yield of 7.0% based on fixed uplifts.  The 80-acres of unoccupied land also has the long-term potential to deliver a major new commercial development.

·    

The acquisition of a 22-acre site in Flaxby, North Yorkshire, for £8.75m plus acquisition costs.  Within half a mile of Junction 47 of the A1(M), the site comprises a c.276,000 sq. ft commercial unit occupied by Ilke Homes Ltd, the modular homes manufacturer.  A 14-year lease was agreed with Ilke at a stabilised rent of £1m per annum, representing a stabilised net initial yield of 10.9% and a reversionary yield of 12.1%.  The site's very low density of 29% also provides a potential opportunity for further commercial development.

 

In July we completed the disposal of all five built commercial units, totalling 145,282 sq. ft, at Phase 1 of our Gateway 36 Business Park in Barnsley, South Yorkshire for £15.8m, reflecting a net initial yield of 4.76% and at a price above book value.   The sale comprised four fully-let industrial/warehouse units and one drive-thru retail unit set across 8.5 acres, all developed and let by Harworth between 2015 and 2018. With little further growth potential, the proceeds will be reinvested into income-producing assets and direct development opportunities.

 

Lettings progress has also been strong during the period, with over 700,000 sq. ft of new and renewed letting activity to a variety of occupiers, at favourable rents.  At the end of the half year, all our wholly owned direct developments in our Business Space portfolio were fully let, reflecting the underlying strength of the industrial property market across the North of England. 

 

By the end of February, we had secured an additional three new long-term lettings on our directly developed commercial space at three of our key sites in the North of England, setting new headline rents at each site and growing Harworth's recurring, high quality income base by over £0.6 million per annum: 

 

·    

At Logistics North in Bolton we agreed a ten-year lease with Vaclensa Limited for our C5 "R-evolution" unit, totalling 27,884 sq. ft, at a new headline rent for Logistics North of £7.00 psf, reflecting the continued strong demand for high quality industrial assets in the region. 

·    

We secured British Steel Limited as the new tenant for the final available "R-evolution" unit at the Advanced Manufacturing Park in Rotherham, the 15,063 sq. ft Unit 7A, on a 15-year lease. 

·    

Prior to its sale in July, we let the final vacant unit at Gateway 36 in Barnsley, the 75,277 sq. ft "Helix" building, to leading used car supermarket Motor Depot Limited on a 15-year lease at the unit at a headline rent of £5.00 psf.

 

With the market for new-build commercial space remaining strong, driven by a lack of good quality existing supply, we took the decision to proceed with construction of the third phase of "R-evolution" at the Advanced Manufacturing Park, comprising 55,750 sq. ft of commercial space that practically completed at the end of August 2018.  Reported interest through our retained agents is high and we anticipate announcing further lettings progress at this site this year.    

 

Progress also continues to be made in letting the 'Multiply Logistics North' units that we are developing in joint venture with the Lancashire County Pension Fund at Logistics North.  Three units totalling 169,500 sq. ft are practically complete, with Hardscape, the UK's premier landscaping material supplier, agreeing a 15-year lease in April for the 46,803 sq. ft Unit F2/A.  This deal encouraged the joint venture to begin construction of the next phase of six units of between 20,322 sq. ft and 149,198 sq. ft due for practical completion in October.  A 15-year pre-let at a rent of £7.25psf has also been agreed with rijo42, the UK's leading supplier of commercial coffee machines, coffee beans and coffee ingredients, for the 20,344 sq. ft Unit F2/E.

 

The team also continues to asset manage our existing 2.4m sq. ft Business Space portfolio to reduce voids and increase net income, whilst also deriving rental returns and royalties from energy generation, environmental technologies and the agricultural portfolio.  Business Space revenue in H1 2018 was £5.3m (H1 2017: £4.0m). The weighted average unexpired lease term ("WAULT") across the portfolio now stands at 12.3 years (H1 2017: 7.5 years), whilst the vacancy rate has reduced to 11% (H1 2017: 17%).

 

Our revenues for the period were also bolstered by the work of our Natural Resources and Operations teams. A total of 159.7MW of energy capacity is installed on our land, providing a long-term income stream from a combination of ground rents and royalties. The team's focus remains on growing future income from alternative technologies and from maintaining income from our tipping operations, which has the added benefit of supporting site remediation.  Our Operations team also successfully completed the demolitions of Thoresby Colliery in June and Kellingley Colliery in August, to support the ongoing clean-up and remediation of these sites.

 

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

 

 

Financial Review

 

OVERVIEW
 

Harworth continued its growth trajectory in the first six months of 2018 with strong progress across the business.  Total return (NNNAV growth plus dividends) per share, which is our primary metric to show the performance of the business, over the last twelve months was 11.5% (H1 2017: 15.0%).  The table below shows the movement in net asset value over the last twelve months:

 

 

As at 30 June 2018

As at 30 June 2017

Growth since 30/06/17

As at 31 December 2017

Growth since 31/12/17

 

Per share

£'m

Per share

£'m

Per share

£'m

EPRA NNNAV

130.8p

£420.4m

118.0p

£379.0m

10.9%

128.9p

£414.2m

1.5%

NAV

128.6p

£413.2m

117.4p

£377.0m

9.5%

127.4p

£409.3m

0.9%

EPRA NAV

133.4p

£428.7m

120.1p

£385.7m

11.1%

131.0p

£420.8m

1.9%

 

Operating profit before exceptional items in H1 2018 was £6.6m (H1 2017: £8.8m).  However, the statutory measure does not now fully capture the growth and profitability of the business as we are conducting some of our activities through joint ventures (H1 2018: £2.3m, H1 2017: £nil) and, as set out below, the revaluation gains on development properties post re-categorisation (H1 2018: £2.9m, H1 2017: £2.3m) fall outside of this measure.  Taking account of both of these additional sources of value creation, operating profits which contributed to EPRA NNNAV rose by 5.7% to £11.8m (H1 2017: £11.1m) reflecting active management across our portfolio.

 

We consider that the operating profits which contributed to EPRA NNNAV growth of £11.8m (H1 2017: £11.1m) can best be understood as being composed of two elements:

 

·    

Value gains (£10.5m; H1 2017: £10.1m) - profits on disposals of investment, development and available for sale properties, and overages totalling £0.1m (H1 2017: £0.1m) and revaluation gains on our property portfolio of £10.4m (H1 2017: £10.0m).  Revaluation gains comprise: revaluation movements on investment property of £6.7m (H1 2017: £7.7m), profits from joint ventures of £2.3m (H1 2017: £nil) and revaluation movements on development properties of £2.9m (H1 2017: £2.3m) less impairments of development properties of £1.5m (H1 2017: £nil).  As development properties are held as inventory, the revaluation gain is not included in the balance sheet.  Instead the revaluation amount is verified by BNP Paribas and Savills, our external property surveyors.  Profits from joint ventures are included within this measure as our joint ventures conduct similar operations to Harworth, albeit in different ownership structures, and the principal profits in the joint ventures to date have been from revaluation gains; and

·    

Profit excluding value gains (£1.3m; H1 2017: £1.0m) - this represents the ongoing profitability of the business which is not reliant on property value gains or profits from the sales of properties and is therefore less susceptible to movements in the property cycle. Profit excluding value gains rose by 23.8% in the first six months of 2018 compared to last year reflecting acquisitions made to improve income quality and resilience, good progress with lettings on direct developments, and active asset management of our existing properties.

 

Earnings per share, which fell by 68.2% to 1.71p (H1 2017: 5.37p), is distorted by the impact on the comparative of the beneficial deferred tax movements in 2017 which more than offset this year's improved operating performance.  The 2018 interim dividend per share has been increased by 10% to 0.278p (H1 2017: 0.253p) creating a total return (NNNAV growth plus dividends) over the last twelve months of 11.5% (H1 2017: 15.0%) which is ahead of the 10% long-run average target.

 

Net debt at £100.2m or 19.0% net loan to value (FY 2017: £32.3m and 7.0%) reflects the level of first half acquisitions and the normal skewing of sales into the second half of the year.  In February 2018, the Group extended the term of its £75.0m Revolving Credit Facility ("RCF") with RBS to February 2023, on the same terms except with an increase in margin from 200 to 210 basis points, and in April 2018 the RCF was increased to £100.0m with Santander joining the facility on the same terms.

 

PROPERTY CATEGORISATION


Until sites receive planning permission, our view is that the land is held for a currently undetermined future use and should thus be held as investment property. We categorise all properties/land that have received planning permission as development properties.  As at 31 December 2017, the balance sheet value of all development sites was £210.5m and the market value of all development was £216.3m reflecting the £5.8m uplift in value of these sites, which is appropriately not reflected in the balance sheet.  More detail is set out in the 2017 Annual Report and Accounts.

 

Property categorisation is reviewed as at 30 June and 31 December each year. Whilst in the first half of 2018 there was an amended planning permission granted at Swadlincote and our first two PPA successes, there were no sites which received first time planning permission and hence no sites were re-categorised.  As at 30 June 2018, the balance sheet value of all development sites was £209.4m and the market value of all development was £218.1m reflecting the £8.7m uplift in value of these sites.  In order to highlight the market value of development sites and be consistent with our investment properties, we are using EPRA NNNAV, which includes the market value of development properties, less notional deferred tax, as our primary metric.  We will continue to report EPRA NAV which is EPRA NNNAV excluding deferred tax and the mark to market movement on financial instruments.

 

The table below sets out our top ten sites by value, which represent 48% of the total value of all our properties, split by their categorisation and showing the total acres, currently consented residential plots and commercial space:

 

 

 

 

Housing plots

Commercial space

Site

Type

Acres

Consented

Sold

Built

Consented

Built

Waverley

Development

454

3,890

1,218

850

-

-

Coalville

Development

346

2,016

-

-

-

-

Nufarm

Investment

112

-

-

-

0.3m sq. ft

0.3m sq. ft

Rossington

Development

334

1,200

170

140

0.1m sq. ft

0 sq. ft

Waverley (AMP)

Investment

115

-

-

-

2.1m sq. ft

1.3m sq. ft

Lounge

Investment

103

-

-

-

0.8m sq. ft

0 sq. ft

Asfordby

Investment

141

-

-

-

0.3m sq. ft

0.3m sq. ft

Riverdale Park

Development

112

600

-

-

0.2m sq. ft

0 sq. ft

Gateway 36 Ph. 1

Asset held for sale

9

-

-

-

0.2m sq. ft

0.2m sq. ft

Thoresby

Development

460

800

-

-

0.3m sq. ft

0 sq. ft

 

TOTAL

2,186

8,506

1,388

990

4.3m sq. ft

2.1m sq. ft

 

OPERATING PROFIT


Revenues in the first half of 2018 were £21.9m (H1 2017: £22.9m), split between revenue from operations £10.9m (H1 2017: £14.4m) and revenue from the disposal of development properties £11.0m (H1 2017: £8.5m). Revenue from operations is split between: Income Generation £10.8m (H1 2017: £8.7m), where revenue mainly comprises rental and royalty income together with some sales of coal fines and salvage; and Capital Growth £0.1m (H1 2017: £5.7m). The increase in revenue from Income Generation reflected improved lettings and business space acquisitions made in 2017 and 2018. The reduction in revenue from Capital Growth reflected the amounts received in January 2017 relating to a promote fee on the letting of a 225,000 sq. ft unit to Whistl.  The smaller 175,000 sq. ft unit continues to be actively marketed on behalf of M&G Real Estate.

 

Cost of sales comprises the inventory cost of development property sales and the operating costs for business space, natural resources, agricultural land and coal fines activities. Cost of sales increased to £16.3m (H1 2017: £15.0m) of which £12.6m related to the inventory cost of development property sales (H1 2017: £8.2m) whilst in H1 2017 there were £3.6m of costs related specifically to the Whistl promote fee.

Revenue and cost of sales include amounts relating to the M&G forward funding contract at Logistics North as Harworth acted as principal in this transaction.  This principal relationship was as a result of Harworth having exposure to potential construction and credit risks as well as the potential rewards of managing the construction on time and to budget, and letting the buildings favourably and early. 

 

Total overheads, which include the overhead costs of the Capital Growth and Income Generation segments and central costs, amounted to £5.9m (H1 2017: £6.6m) and were in line with expectations. The table below shows the results of the business split between Capital Growth, Income Generation and Central Overheads:

 

 

H1 2018

H1 2017

 

Capital
Growth
£m

Income Generation

£m

Central Over-

heads
£m

Total

£m

Capital
Growth
£m

Income Generation

£m

Central Over-heads
£m

Total

£m

Revenue

11.1

10.8

-

21.9

14.2

8.7

-

22.9

Cost of sales

(13.0)

(3.3)

-

(16.3)

(12.7)

(2.6)

-

(15.3)

Overheads

(1.2)

(1.3)

(3.4)

(5.9)

(1.0)

(0.9)

(4.6)

(6.6)

Notional development property costs (1)

1.6

-

-

1.6

-

-

-

-

(Loss)/profit excluding value gains (2)

(1.5)

6.2

(3.4)

1.3

0.5

5.1

(4.6)

1.0

Revaluation gains

(1.6)

6.7

-

5.2

3.5

4.2

-

7.7

Profit on disposals (2)

-

0.1

-

0.1

-

0.1

-

0.1

Operating (loss)/profit before exceptional items

(3.1)

13.0

(3.4)

6.6

4.0

9.4

(4.6)

8.8

Net exceptional items

-

-

(0.6)

(0.6)

-

-

0.1

0.1

Operating (loss)/profit

(3.1)

13.0

(4.0)

6.0

4.0

9.4

(4.5)

8.9

Joint ventures

-

2.3

-

2.3

-

-

-

-

 

 

 

 

 

 

 

 

 

Operating (loss)/profit before exceptional items plus JVs

(3.1)

15.3

(3.4)

8.9

4.0

9.4

(4.5)

8.9

Revaluation gains on development properties (3)

2.9

-

-

2.9

2.3

-

-

2.3

Operating (loss)/profit before exceptional items which contributed to EPRA NNNAV

(0.2)

15.3

(3.4)

11.8

6.3

9.4

(4.5)

11.2

 

 

 

 

 

 

 

 

 

Value gains (including JVs and development properties)

1.3

9.1

-

10.5

5.8

4.3

-

10.1

Notes: (1) The income statement has been re-presented to show loss on development property sales (£0.1m; H1 2017 £0.3m profit) within profit on disposals and development property impairment (£1.5m; H1 2017 £nil) within revaluation gains.  This notional cost is the reversal of these amounts

(2) Profit excluding value gains comprises operating profit before exceptional items of £6.6m (H1 2017: £8.8m) less value gains of £5.3m (H1 2017: £7.8m).  Value gains comprise profit/(loss) on disposals (being profits on sale of investment properties of £0.1m (H1 2017: £0.2m), assets held for sale of £nil (H1 2017: loss of £0.4m) and loss on sale of development properties of £0.1m (H1 2017: £0.3m profit)) plus increase in fair value of investment properties of £6.7m (H1 2017: £7.7m) less the development property impairment of £1.5m (H1 2017: £nil)

(3) This is the unrecognised mark to market gain since the properties were re-categorised into development properties

(4) There are minor differences on some totals due to rounding
 

Set out below are value gains for the first six months of 2017 and 2018, which comprise profit on disposals, revaluation gains on investment properties (including joint ventures) and revaluation gains on development properties:
 

 

H1 2018

H1 2017

£m

 

Revaluation gains

 

 

Revaluation gains

 

 

Profit on disposals

Management

Market

Total

Profit on disposals

Management

Market

Total

Development/Capital Growth

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Major Developments

(0.0)

1.9

(0.6)

1.3

0.0

1.4

0.9

2.3

Strategic Land

(0.0)

0.1

0.0

0.1

0.0

3.3

0.0

3.3

 

 

 

 

 

 

 

 

Investment/Income Generation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Business Space

(0.1)

3.0

2.2

5.1

0.0

2.0

0.0

2.0

Natural Resources

0.3

3.7

0.0

4.0

0.3

1.0

0.0

1.3

Agricultural Land

(0.0)

0.0

0.0

0.0

(0.2)

0.7

0.7

1.2

Total

0.1

8.7

1.7

10.5

0.1

8.4

1.6

10.1

 

The Group made sales of properties of £16.1m in the first six months of 2018 (H1 2017: £24.9m) achieving a profit on disposals of £0.1m (H1 2017: £0.1m).  The sales were split between residential serviced plots of £11.8m (H1 2017: £11.7m), commercial development of £3.8m (H1 2017: £10.8m) and other, essentially agricultural land, of £0.5m (H1 2017: £2.4m).  In addition, Harworth undertook direct development on its sites with a land value of £1.0m (H1 2017: £2.1m) and its share of property sales in its joint ventures was £0.4m (H1 2017: £0.3m).

 

Cash proceeds from sales were £15.4m (H1 2017: £14.8m) reflecting the sales in the period of £16.1m (H1 2017: £24.9m), less deferred consideration on sales in the period of £6.9m (H1 2017: £15.2m), plus deferred consideration received from sales in the prior year of £6.2m (H1 2017: £5.1m).

 

In the first half of 2018, the Group had revaluation gains of £10.4m (H1 2017: £10.0m) comprising:

 

(£'m)

H1 2018

H1 2017

Revaluation gains from investment properties

6.7

7.7

Impairment of development properties

(1.5)

0.0

Contribution to statutory operating profit

5.2

7.7

Revaluation gains from joint ventures

2.3

0.0

Revaluation gains from development properties

2.9

2.3

Total revaluation gains

10.4

10.0

 

All the revaluation gains for development properties relate to Major Developments sites.

 

We have split the revaluation gains of £10.4m (H1 2017: £10.0m) to reflect the contribution from active management of £8.7m (H1 2017: £8.4m) and market movements of £1.7m (H1 2017: £1.6m).  Whilst there is a degree of subjectivity in this split, it highlights that the majority of the value gains continue to come from active management.  In the first half of 2018, the principal revaluation gains across the divisions reflected the following:

 

·    

Major Developments - Further progress at Logistics North reflecting higher values from an upcoming sale and a new lease signing, partially offset by weaker expected sales at one residential site;

·    

Strategic Land - Minor uplift at Cinderhill ahead of likely 2019 planning submission;

·    

Business Space - Lettings of directly developed units at new headline rents at the AMP and Logistics North; sales progress at Gateway 45; and expected value increases on upcoming income site sales as part of sales process;

·    

Natural Resources - Recognition of the development and subsequent valuation of ongoing income from surface water management; and

·    

Agricultural Land - Minimal changes in the period.

 

EXCEPTIONAL ITEMS

 

Exceptional items in 2018 were a charge of £0.6m (H1 2017: credit £0.1m).  The exceptional items in 2018 comprised the costs for the step-up from standard to premium listing (see below).  Exceptional items in 2017 comprised three separate items which related to sundry receipts and costs from the Group's legacy activities.

 

TAXATION
 

The income statement charge for taxation in the period was £1.1m (H1 2017: £8.9m credit) which comprised a deferred tax charge of £1.2m (H1 2017: £8.8m credit) and a current period tax credit of £0.1m (H1 2017: £0.1m).  The movement in deferred tax in the period mainly relates to the increase in valuation of the investment properties.

 

The current tax credit relates to a claim for a land remediation relief tax credit in the period.

 

At 30 June 2018, the Group had deferred tax liabilities of £14.3m (H1 2017: £21.8m), which largely related to unrealised gains on investment properties and had recognised deferred tax assets of £7.6m (H1 2017: £15.7m).    The gross deferred tax liabilities and assets have reduced as a result of sales of investment properties and the impact of the recategorisation of properties.  The net deferred tax liability was £6.7m (H1 2017: £6.1m).

 

EARNINGS PER SHARE AND DIVIDENDS
 

Earnings per share fell to 1.71p (H1 2017: 5.37p) and underlying earnings per share, excluding exceptional items, fell to 1.89p (H1 2017: 5.35p).  These falls are distorted by the impact of the beneficial deferred tax movements in 2017 and as improved operating performance is not reflected in the statutory measure but only the EPRA measure.

 

An interim dividend of 0.278p per share (H1 2017: 0.253p) equivalent to £894k (H1 2017: £812k) will be paid.  The 10% rise in the 2018 interim dividend creates a total return (NNNAV growth plus dividends) over the last twelve months of 11.5% (H1 2017: 15.0%) which is ahead of the 10% long-run average target.  This dividend will be paid on 19 October 2018 to shareholders on the register at the close of business on 21 September 2018.  The ex-dividend date will be 20 September 2018.

 

NET ASSETS


As set out below, EPRA NNNAV increased to £420.4m as at 30 June 2018 from £414.2m as at 31 December 2017 (£379.0m as at 30 June 2017).  This increase was as a result of movements in the period, being operating profit before exceptionals plus share of profits of joint ventures and development property gains of £11.8m, less exceptional costs of £0.6m, interest costs of £1.7m, tax charges (including development properties notional deferred tax) of £1.6m and dividends of £1.8m plus other movements of £0.1m.

 

 

 

30 June 2018

£m

31 December 2017

£m

30 June 2017

£m

Investment and development properties (including investments in joint ventures, assets held for sale, overages and occupied properties)

519.1

457.1

408.6

Cash

7.7

8.4

13.5

Other assets

35.5

31.5

18.9

Total assets

562.3

497.0

441.0

Gross borrowings

107.9

40.6

23.6

Deferred tax liability

6.7

5.5

6.1

Derivative financial instruments

-

0.1

0.2

Other liabilities

34.5

41.5

34.1

Net assets

413.2

409.3

377.0

Mark to market value of development properties less notional deferred tax

7.2

4.8

2.0

EPRA NNNAV

420.4

414.2

379.0

Number of shares in issue less Employee benefit trust shares (1)

321,314,989

321,250,750

321,250,750

NAV per share

128.6p

127.4p

117.4p

EPRA NNNAV per share (2)

130.8p

128.9p

118.0p

EPRA NAV per share (3)

133.4p

131.0p

120.1p

 

Notes: (1) Number of shares in issue (H1 2018: 321,496,760; FY 2017: 321,496,760; H1 2017 321,496,760) less Employee benefit trust shares (H1 2018: 181,771; FY 2017 246,010; H1 2017 246,010)

(2) NAV (H1 2018 £413.2m; FY 2017: £409.3m; H1 2017: £377.0m) plus market value of development properties (H1 2018: £8.7m; FY 2017: £5.8m; H1 2017: £2.3m) less notional deferred tax (H1 2018: £1.5m; FY 2017: £1.0m H1 2017: £0.4m) divided by number of shares in issue less Employee benefit trust shares

(3) EPRA NNNAV (H1 2018: £420.4m; FY 2017: £414.2m; H1 2017: £379.0m) excluding deferred tax liability (H1 2018: £6.7m; FY 2017: £5.5m; H1 2017: £6.1m), notional deferred tax on development properties (H1 2018: £1.5m; FY 2017: £1.0m; H1 2017: £0.4m) and mark to market movement on financial instruments (H1 2018: £nil; FY 2017 £(0.1)m; H1 2017: £(0.2)m) divided by number of shares in issue less Employee benefit trust shares

 

FINANCING STRATEGY AND FUNDING


As has been consistently stated, Harworth's financing strategy is to be prudently geared, in particular not gearing our Capital Growth properties being our Strategic Land and Major Developments sites, as we believe that this gives the Group a number of advantages:

·  

allows working capital swings to be managed appropriately given that infrastructure spend is usually in advance of sales and thus net debt can increase materially during the year;

·  

gives the Group the ability to complete acquisitions quickly, which is often a differentiating factor in a competitive situation; and

·  

ensures that we do not combine financial gearing with Harworth's existing operational gearing.  Such operational gearing is the appropriate level of exposure we take in terms of planning, remediation/engineering, letting and sales risks.

 

Harworth's financing strategy also involves the Group seeking in principle to balance its cash flows by funding infrastructure spend and investment in acquisitions through disposal proceeds.

 

To reduce refinancing risk, on 13 February 2018 Harworth extended the term of its existing £75m Revolving Credit Facility ("RCF") with RBS by two years such that it now expires in February 2023.  The extension was on substantially the same terms with the only notable change being a slight increase in margin to 210 basis points ("bps") over LIBOR (from 200bps).  To increase financing flexibility, drive continued growth and maintain an efficient balance sheet, on 30 April 2018 Harworth increased the size of its RCF from £75m to £100m, with Santander joining the facility alongside RBS.  RBS' commitment remains at £75m with Santander's initial commitment at £25m.  There were no other material changes to the terms of the RCF.  The Group also uses infrastructure funding, provided by public bodies to promote the development of major sites for employment and housing needs, as part of our funding.  At 30 June 2018 the Group had six infrastructure facilities with all-in funding rates of between 2.5% and 3.9%.

 

The Group's hedging strategy is to have roughly half of its debt at a fixed rate and half of its debt exposed to floating rates.  On 20 July 2018, Harworth cancelled its existing £30m fixed rate interest swap which was due to expire on 30 June 2020 (incurring total break costs of £18.5k) and in its place entered into a 4-year, £45m fixed rate interest swap at an all-in cost of 1.235% (including fees) on top of the existing 210bps margin paid under the RCF.  The new swap was put in place to reflect increased levels of borrowing and to increase its term commensurate with the extension in the term of the RCF.  The interest rate swap is hedge accounted with any unrealised movements going through reserves. 

 

Reflecting the level of first half acquisitions and the normal skewing of sales into the second half of the year, as at 30 June 2018 Harworth's gross Loan To Value ("LTV") was 20.4% (FY 2017: 8.8%) and net LTV was 19.0% (FY 2017: 7.0%).  However, as set out above, Capital Growth sites are deliberately not geared, so if gearing is just assessed against the value of Business Space and Natural Resources properties this equates to a gross LTV of 43.0% (FY 2017: 26.3%) and a net LTV of 39.9% (FY 2017: 20.8%).

 

The Group had borrowings and loans of £107.9m at 30 June 2018 (FY 2017: £40.6m), being the RBS RCF of £87.8m (FY 2017: £23.4m) and infrastructure loans of £20.1m (FY 2017: £17.2m).  The Group's cash and cash equivalents at 30 June 2018 were £7.7m (FY 2017: £8.4m).  The resulting net debt was £100.2m (FY 2017: £32.2m).  The weighted average cost of debt, using 30 June 2018 balances and rates, was 2.9% with a 0.84% non-utilisation fee on undrawn RCF amounts (FY 2017: 3.0% with a 0.8% non-utilisation fee on undrawn RCF amounts).  For the twelve months to 30 June 2018 Harworth's interest cover, as calculated by the RBS/Santander RCF covenant calculation, was 2.65x against a covenant test of 1.5x (FY 2017: 3.41x).

 

MARCH 2017 EQUITY PLACING


Details of the March 2017 equity placing which raised £27.1m (net of expenses) are set out in the 2017 Annual Report and Accounts.

 

PREMIUM LISTING AND FTSE INDEX INCLUSION


On 1 August 2018 Harworth confirmed that it had received approval from the UK Listing Authority of the transfer of the listing category of all of its ordinary shares from a standard listing (shares) to a premium listing (commercial company).   Harworth believes that the Group has satisfied the conditions for UK FTSE indices inclusion and expects to join the indices on 24 September 2018.

 

Andrew Kirkman

Finance Director

11 September 2018

 

 

Principal risks and uncertainties

A detailed explanation of the principal risks and uncertainties affecting the Group, and the steps it takes to mitigate these risks, can be found on pages 36 to 43 of the Annual Report and Financial Statements for the year ended 31 December 2017, which is available at www.harworthgroup.com/investors.

 

The Group's principal risks and uncertainties are grouped into eight categories: markets, delivery, politics, finance, people, legal and regulatory, governance and internal controls, and communications and stakeholder management.  These risks and uncertainties are expected to remain relevant for the remaining six months of the financial year.

 

Shortly after the first half of the year we opened two new regional offices.  Our employees now operate from four offices: Rotherham (head office), Manchester, Birmingham and Leeds.  As our geographical footprint expands and more of our employees base themselves in regional offices, we are taking steps to ensure that our internal controls and processes are maintained across each of our offices to ensure consistent and efficient working practices.  This is reflected in a temporary increase in the risk status of our governance and internal controls risk category.

 

The overall risk status of all other risk categories remains unchanged.

 

As negotiations continue for the United Kingdom's withdrawal from the European Union, the Board expects that the Group will continue to operate in an uncertain economic and political climate in the short to medium term.  Whilst the Group is not immune to that uncertainty, it is mitigated by the positive economic and consumer trends in our core markets, with the residential, logistics and manufacturing sectors in the North of England and the Midlands continuing to have solid fundamentals and favourable performance.

 

Chris Birch

Group General Counsel and Company Secretary

11 September 2018

 

 

Consolidated income statement

 

Note

Unaudited

6 months ended

30 June
2018
£000

Unaudited

6 months ended

30 June

2017

£000

year ended

31 December 2017
Audited

£000

Revenue

 

2

21,909

22,920

53,673

Cost of sales

2

(16,282)

(15,014)

(37,678)

Gross profit

2

5,627

7,906

15,995

Administrative expenses

2

(5,891)

(6,570)

(12,020)

Other gains

2

6,930

7,524

35,658

Other operating (expense)/income

 

(27)

(24)

98

Depreciation of property, plant and equipment

 

(4)

(4)

-

Operating profit before exceptional items

 

6,635

8,832

39,731

Exceptional income

3

-

230

414

Exceptional expense

3

(590)

(168)

(83)

Operating profit

 

6,045

8,894

40,062

Finance income

4

5

15

16

Finance costs

4

(1,743)

(1,184)

(2,277)

Share of profit of joint ventures

 

2,288

-

4,039

Profit before tax

 

6,595

7,725

41,840

Tax

5

(1,108)

8,873

7,843

Profit for the period/year

 

5,487

16,598

49,683

 

 

 

 

 

Earnings per share from operations

 

pence

pence

pence

Basic and diluted

7

1.7

5.4

15.8

The notes on pages 21 to 36 are an integral part of these condensed consolidated interim financial statements.

All activities in the current period/year are derived from continuing operations.

 

Consolidated statement of comprehensive income

 

Unaudited

6 months ended

30 June
2018
£000

Unaudited

6 months ended

30 June

2017

£000

Audited

year ended

31 December 2017
£000

Profit for the period/year

5,487

16,598

49,683

Other comprehensive income - items that will not be reclassified to profit or loss:

 

 

 

Net actuarial profit/(loss) in Blenkinsopp Pension scheme

82

(31)

(105)

Deferred tax on actuarial loss

-

-

(51)

Fair value of financial instruments

125

142

244

Total other comprehensive income

207

111

88

Total comprehensive income for the period/year

5,694

16,709

49,771

Consolidated balance sheet

ASSETS

Note

Unaudited

6 months ended

30 June
2018
£000

Unaudited

6 months ended

30 June

2017

£000

Audited

year ended

31 December 2017
£000

Non-current assets

 

 

 

 

Property, plant and equipment

 

797

785

802

Other receivables

 

2,000

1,406

2,666

Investment properties

8

256,276

310,527

216,560

Investments in joint ventures and associates

 

22,428

11,768

18,838

Trade receivables

 

-

-

5,250

Derivative financial instruments

 

3

-

-

 

 

281,504

324,486

244,116

Current assets

 

 

 

 

Inventories

9

210,849

74,010

211,618

Trade and other receivables

 

34,008

18,214

25,165

Cash

 

7,718

13,484

8,371

Assets classified as held for sale

10

28,186

10,829

7,688

 

 

280,761

116,537

252,842

Total assets

 

562,265

441,023

496,958

LIABILITIES

 

 

 

 

Current liabilities

 

 

 

 

Borrowings

11

(7,648)

(2,319)

(6,145)

Trade and other payables

 

(31,534)

(31,984)

(38,497)

Current tax liabilities

 

(1,698)

-

(1,538)

 

 

(40,880)

(34,303)

(46,180)

Net current assets

 

239,881

82,234

206,662

Non-current liabilities

 

 

 

 

Borrowings

11

(100,242)

(21,273)

(34,501)

Trade and other payables

 

(760)

(1,520)

(760)

Derivative financial instruments

 

-

(223)

(122)

Deferred income tax liabilities

 

(6,743)

(6,093)

(5,521)

Retirement benefit obligations

 

(413)

(562)

(563)

 

 

(108,158)

(29,671)

(41,467)

Total liabilities

 

(149,038)

(63,974)

(87,647)

Net assets

 

413,227

377,049

409,311

SHAREHOLDERS' EQUITY

 

 

 

 

Called up share capital

12

32,150

32,150

32,150

Share premium account

 

24,351

24,351

24,351

Investment in own shares

12

(194)

(263)

(263)

Fair value reserve

 

90,317

65,968

85,109

Capital redemption reserve

 

257

257

257

Merger reserve

 

45,667

45,667

45,667

Current year profit

 

5,487

16,598

49,683

Retained earnings

 

215,192

192,321

172,357

Total shareholders' equity

 

413,227

377,049

409,311

 

Consolidated statement of changes in shareholders' equity

 

Called up share capital £000

Share

premium account

£000

Own

shares

£000

Fair

value

reserve

£000

Capital redemption reserve

£000

 

Merger reserve

£000

Retained earnings

£000

Total

equity

£000

Balance at 1 January 2017 (audited)

29,227

-

-

58,279

257

45,667

201,493

334,923

Transactions with owners:

 

 

 

 

 

 

 

 

Profit for the six months to 30 June 2017

-

-

-

-

-

-

16,598

16,598

Transfer of fair value gain on revaluation of investment properties

-

-

-

7,689

-

-

(7,689)

-

Purchase of own shares

-

-

(263)

-

-

-

86

(177)

Dividend paid

-

-

-

-

-

-

(1,680)

(1,680)

Share issue

2,923

24,142

-

-

-

-

-

27,065

Other transaction costs

-

209

-

-

-

-

-

209

Other comprehensive (expense)/income:

 

 

 

 

 

 

 

 

Actuarial loss in Blenkinsopp pension scheme

-

-

-

-

-

-

(31)

(31)

Fair value of financial instruments                                                       

-

-

-

-

-

-

142

142

Balance at 30 June 2017 (unaudited)

32,150

24,351

(263)

65,968

257

45,667

208,919

377,049

Transactions with owners:

 

 

 

 

 

 

 

 

Profit for six months to 31 December 2017

-

-

-

-

-

-

33,085

33,085

Transfer of fair value gain on revaluation of investment properties

-

-

-

24,947

-

-

(24,947)

-

Transfer of unrealised loss on development properties

-

-

-

(5,818)

-

-

5,818

-

Dividend paid

-

-

-

-

-

-

(812)

(812)

Other comprehensive (expense)/income:

 

 

 

 

 

 

 

 

Actuarial loss in Blenkinsopp pension scheme

-

-

-

-

-

-

(74)

(74)

Revaluation of group occupied property

-

-

-

12

-

-

-

12

Deferred tax on actuarial loss on pension scheme

-

-

-

-

-

-

(51)

(51)

Fair value of financial instruments

-

-

-

-

-

-

102

102

Balance at 31 December 2017 (audited)

32,150

24,351

(263)

85,109

257

45,667

222,040

409,311

Transactions with owners:

 

 

 

 

 

 

 

 

Profit for the six months to 30 June 2018

-

-

-

-

-

-

5,487

5,487

Transfer of fair value gain on revaluation of investment properties

-

-

-

6,699

-

-

(6,699)

-

Transfer of unrealised loss on development properties

-

-

-

(1,491)

-

-

1,491

-

Dividend paid

-

-

-

-

-

-

(1,847)

(1,847)

Share issue from owned shares

-

-

69

-

-

-

-

69

Other comprehensive income:

 

 

 

 

 

 

 

 

Actuarial gain in Blenkinsopp pension scheme

-

-

-

-

-

-

82

82

Fair value of financial instruments                                                       

-

-

-

-

-

-

125

125

Balance at 30 June 2018 (unaudited)

32,150

24,351

(194)

90,317

257

45,667

220,679

413,227

 

Consolidated statement of cash flows

 

Unaudited

6 months ended

30 June
2018
£000

Unaudited

6 months ended

30 June

2017

£000

Audited

year ended

31 December 2017
£000

Cash flows from operating activities

 

 

 

Profit for the period/year

6,595

7,725

41,840

Net interest payable

1,738

1,169

2,261

Gains on investment properties, assets held for sale and overages

(6,885)

(7,507)

(35,658)

Share of profit of joint ventures

(2,288)

-

(4,039)

Depreciation of property, plant and equipment

5

4

8

Pension contributions in excess of charge and other gains

(68)

(71)

(144)

Operating cash (outflow)/inflows before movements in working capital

(903)

1,320

4,268

Decrease in inventories

430

4,457

18,232

(Increase)/decrease in receivables

(3,593)

9,332

(5,970)

(Decrease)/increase in payables

(6,451)

(1,821)

8,394

Cash (used in)/generated from operations

(10,517)

13,288

24,924

Loan arrangement fees paid

(782)

(97)

(214)

Interest paid

(962)

(707)

(1,277)

Corporation tax received

99

174

175

Cash (used in)/generated from operating activities

(12,162)

12,658

23,608

Cash flows from investing activities

 

 

 

Interest received

5

15

16

Investment in joint ventures

(1,301)

(1,219)

(4,250)

Proceeds from disposal of investment properties and assets classified as held for sale

4,918

4,028

24,434

Expenditure on investment properties and assets classified as held for sale

(57,580)

(11,156)

(60,431)

Expenditure on property, plant and equipment

-

-

(9)

Cash used in investing activities

(53,958)

(8,332)

(40,240)

Cash flows from financing activities

 

 

 

Net proceeds from issue of ordinary shares

-

27,065

27,065

Proceeds from other loans

6,673

2,327

6,502

Repayment of other loans

(3,928)

(3,593)

(5,111)

Proceeds from bank loan

72,500

10,000

43,000

Repayment of bank loan

(8,000)

(38,000)

(57,000)

Investment in own shares

69

(177)

(177)

Other transaction costs

-

209

209

Dividends paid

(1,847)

(1,680)

(2,492)

Cash generated from/(used in) financing activities

65,467

(3,849)

11,996

(Decrease)/increase in cash

(653)

477

(4,636)

At 1 January

 

 

 

Cash

8,371

13,007

13,007

(Decrease)/increase in cash

(653)

477

(4,636)

 At period/year end

7,718

13,484

8,371

 

Notes to the condensed consolidated interim financial statements

for the six months ended 30 June 2018
 

1. Basis of preparation of the condensed consolidated interim financial statements

 

General information

Harworth Group plc (the "Company") is a public limited company incorporated and domiciled in the UK. The address of its registered office is Advantage House, Poplar Way, Catcliffe, Rotherham, South Yorkshire, S60 5TR.

 

The Company is listed on the London Stock Exchange.

 

The condensed consolidated interim financial statements for the six months ended 30 June 2018 comprise the Company and its subsidiaries (together referred to as the "Group").

 

These condensed consolidated interim financial statements do not comprise statutory accounts within the meaning of section 434 of the Companies Act 2006. The Group financial statements for the year ended 31 December 2017 were approved by the Board of Directors on 24 April 2018 and delivered to the Registrar of Companies. The report of the auditor on those accounts was unqualified, did not contain an emphasis of matter paragraph and did not contain any statement under section 498 of the Companies Act 2006.

 

These condensed consolidated interim financial statements have not been audited.

 

The condensed consolidated interim financial statements for the period ended 30 June 2018 were approved by the Board on 10 September 2018.

 

Basis of preparation

These condensed consolidated interim financial statements for the six months ended 30 June 2018 have been prepared in accordance with the Disclosure and Transparency Rules of the Financial Conduct Authority (previously the Financial Services Authority) and with IAS 34 'Interim Financial Reporting' as adopted by the European Union ("EU"). The condensed consolidated interim financial statements should be read in conjunction with the Group financial statements for the year ended 31 December 2017 which have been prepared in accordance with IFRSs as adopted by the EU.

 

Going-concern basis

These condensed consolidated interim financial statements are prepared on the basis that the Group is a going concern. In forming its opinion as to going concern, the Board prepares cash flow forecasts based upon its assumptions with particular consideration to the key risks and uncertainties as summarised in the 'Managing risk' section of the 2017 annual report, as well as taking into account the funding strategy and available borrowing facilities disclosed on pages 13 and 14.

 

The key factor that has been considered in this regard is that the Group has a £100m revolving credit facility with The Royal Bank of Scotland and Santander, expiring February 2023, on a non-amortising basis. The facility is in the form of a debenture security whereby there is no charge on the individual assets of the Group. The facility is subject to financial and other covenants.

 

The covenants are based upon gearing, tangible net worth, loan to property values and interest cover. Property valuations affect the loan to value covenants. Any breach of covenants could result in the need to pay down in part some of these loans, additional costs, or a renegotiation of terms or, in extremis, a reduction or withdrawal of facilities by the banks concerned.

 

The Directors confirm their belief that it is appropriate to use the going concern basis of preparation for these condensed consolidated interim financial statements.

Notes to the condensed consolidated interim financial statements

for the six months ended 30 June 2018
 

1. Basis of preparation of the condensed consolidated interim financial statements (continued)

 

Accounting policies

The same accounting policies are followed in these condensed consolidated interim financial statements as were applied in the Group's latest audited financial statements, except as described below:

 

IFRS 15 'Revenue from Contracts with Customers'

The Group has adopted IFRS 15 from 1 January 2018. In accordance with the transition provisions in IFRS 15 the Group has adopted this new standard under the modified retrospective approach without the restatement of comparatives. IFRS 15 establishes a single comprehensive model to use in accounting for revenue arising from contracts with customers and has superseded the previous revenue recognition guidance which included IAS 18 Revenue, IAS 11 Construction Contracts and related Interpretations. The area of impact of the new standard on the Group is the recognition of revenues relating to the sale of development properties, particularly where revenue involves a deferred element. The Directors are satisfied that these changes did not result in any material impact on the Financial Statements on initial application.

 

The Revenue Recognition policy at 31 December 2017 has been replaced at 1 January 2018 with the following:

Revenue from Contracts with Customers: Revenue is measured based upon the consideration specified in a contract with a customer excluding amounts collected on behalf of third parties. The Group recognises revenue when it transfers control over a service or goods to a customer and it is highly probable that the recognition of consideration will not result in a significant reversal of revenue in a specific period. The Group will account for revenue over time and at a point in time depending upon the nature of the services or goods. Where material consideration is deferred over one year the Group will adjust the consideration for the time value of money.

 

IFRS 9 'Financial Instruments'

The Group has adopted IFRS 9 from 1 January 2018. This standard replaces IAS 39 Financial Instruments: Recognition and Measurement and sets out requirements for recognising and measuring financial assets and liabilities. Under IFRS 9, a financial asset is classified as either: i) amortised cost; ii) fair value through other comprehensive income (FVTOCI); or iii) fair value through profit or loss (FVTPL). Applying this classification to the Group`s financial assets does not result in changes to the accounting or the Group`s policies. Trade receivables and cash continue to be recognised at amortised cost and certain other non-current financial assets continue to be recognised at FVTPL.

 

A number of other standards, amendments and interpretations became effective from 1 January 2018, which are disclosed on page 115 of the 2017 Annual Report and Financial Statements. Management do not believe that these new standards will have a material impact on the Group`s financial statements or accounting policies.

 

Estimates and judgements

The preparation of the condensed consolidated interim 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 condensed consolidated interim 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 to the consolidated financial statements for the year ended 31 December 2017.

 

 

Notes to the condensed consolidated interim financial statements

for the six months ended 30 June 2018
 

2.   Segment information

30 June 2018

 

 

 

 

Capital Growth

Income
Generation

£000

Unallocated

costs

£000

 

Total

£000

 Sale of development

properties

£000

    Other property activities

£000

11,032

106

10,771

-

21,909

Cost of sales

(12,587)

(436)

(3,259)

-

(16,282)

Gross (loss)/profit (1)

(1,555)

(330)

7,512

-

5,627

Administrative expenses

-

(1,153)

(1,327)

(3,411)

(5,891)

Other gains(2)

-

94

6,836

-

6,930

Other operating expenses

-

-

-

(27)

(27)

Depreciation of property, plant and equipment

-

-

-

(4)

(4)

Operating (loss)/profit before exceptional items

(1,555)

(1,389)

13,021

(3,442)

6,635

Exceptional expenses

-

-

-

(590)

(590)

(1,555)

(1,389)

13,021

(4,032)

6,045

Finance income

-

-

-

5

5

Finance costs

-

-

-

(1,743)

(1,743)

Share of (loss)/profit of joint ventures

-

(6)

2,294

-

2,288

(Loss)/profit before tax

(1,555)

(1,395)

15,315

(5,770)

6,595

 

Other Information

 

 

 

 

Capital Growth

Income
Generation

£000

Unallocated

costs

£000

 

Total

£000

 Sale of development

properties

£000

    Other property activities

£000

 

 

 

 

 

Gross (loss)/profit excluding sale of development properties

-

(330)

7,512

-

7,182

Gross loss on sale of development properties

(64)

-

-

-

(64)

Net realisable value provision on development properties

(1,491)

-

-

-

(1,491)

 

(1,555)

(330)

7,512

-

5,627

 

 

 

 

 

(2)Other gains are analysed as follows:

 

 

 

 

 

Increase in fair value of investment properties

-

79

6,620

-

6,699

(Loss)/profit on sale of investment properties

-

(9)

146

-

137

Profit on sale of assets classified as held for sale

-

-

10

-

10

Profit on sale of overages

-

24

15

-

39

Other gains

-

-

45

-

45

 

-

94

6,836

-

6,930

 

 

 

 

 

 

 

 

Notes to the condensed consolidated interim financial statements

for the six months ended 30 June 2018

2.  Segment information (continued)

Segmental Assets

Capital
Growth

£000

Income
Generation

£000

Unallocated

 £000

 

Total

£000

Non-current assets

 

 

 

 

Property, plant and equipment

-

787

10

797

Other receivables

2,000

-

-

2,000

Investment properties

53,663

202,613

-

256,276

Investments in joint ventures

1,037

21,391

-

22,428

Derivative financial instruments

-

-

3

3

 

56,700

224,791

13

281,504

Current assets

 

 

 

 

Inventories

210,247

602

-

210,849

Trade and other receivables

23,199

4,803

6,006

34,008

Cash

-

-

7,718

7,718

Assets classified as held for sale

2,175

26,011

-

28,186

 

235,621

31,416

13,724

280,761

Total assets

292,321

256,207

13,737

562,265

Financial liabilities are not allocated to the reporting segments as they are managed and measured on a group basis.

 

Notes to the condensed consolidated interim financial statements

 

30 June 2017

 

 

 

 

Capital Growth

Income
Generation

£000

Unallocated

costs

£000

 

Total

£000

Sale of development

properties

£000

    Other property activities

£000

Revenue

8,523

5,712

8,685

-

22,920

Cost of sales

(8,214)

(4,486)

(2,314)

-

(15,014)

Gross profit (1)

309

1,226

6,371

-

7,906

Administrative expenses

-

(676)

(1,263)

(4,631)

(6,570)

Other gains(2)

-

3,151

4,356

17

7,524

Other operating expenses

-

-

-

(24)

(24)

Depreciation of property, plant and equipment

-

-

-

(4)

(4)

Operating profit/(loss) before exceptional items

309

3,701

9,464

(4,642)

8,832

Exceptional items

-

-

-

62

62

Operating profit/(loss)

309

3,701

9,464

(4,580)

8,894

Finance income

 

 

 

 

15

Finance costs

 

 

 

 

(1,184)

Profit before tax

 

 

 

 

7,725

for the six months ended 30 June 2018

 


2.  Segment information (continued)

 

Other Information

 

 

 

 

Capital Growth

Income
Generation

£000

Unallocated

costs

£000

 

Total

£000

 Sale of development

properties

£000

    Other property activities

£000

(1)Gross profit is analysed as follows:

 

 

 

 

 

Gross profit excluding sale of development properties

-

1,226

6,371

-

7,597

Gross profit on sale of development properties

309

-

-

-

309

 

309

1,226

6,371

-

7,906

(2)Other gains are analysed as follows:

 

 

 

 

 

Increase in fair value of investment properties

-

3,443

4,246

-

7,689

(Loss)/profit on sale of investment properties

-

(59)

276

-

217

Loss on sale of assets classified as held for sale

-

(233)

(166)

-

(399)

Other gains

-

-

-

17

17

 

-

3,151

4,356

17

7,524

 

 

Notes to the condensed consolidated interim financial statements

for the six months ended 30 June 2018

2.  Segment information (continued)

 

Segmental Assets

Capital
Growth

£000

Income
Generation

£000

Unallocated

£000

 

Total

£000

 

 

 

 

 

 

 

Investment properties

159,553

150,974

-

310,527

 

Property, plant and equipment

-

-

785

785

 

Assets classified as held for sale

9,100

1,729

-

10,829

 

Inventories

74,010

-

-

74,010

 

Other receivables

1,406

-

-

1,406

 

Investments in joint ventures

891

10,877

-

11,768

 

 

244,960

163,580

785

409,325

 

Trade and other receivables

-

-

18,214

18,214

 

Cash

-

-

13,484

13,484

 

Total assets

244,960

163,580

32,483

441,023

 

Financial liabilities are not allocated to the reporting segments as they are managed and measured on a group basis.

 

 

Notes to the condensed consolidated interim financial statements

for the six months ended 30 June 2018

2.  Segment information (continued)

31 December 2017

 

 

 

 

Capital Growth

Income
Generation

£000

Unallocated

costs

£000

 

Total

£000

 Sale of development

properties

£000

    Other property activities

£000

Revenue

29,765

5,671

18,237

-

53,673

Cost of sales

(27,893)

(4,396)

(5,389)

-

(37,678)

Gross profit (1)

1,872

1,275

12,848

-

15,995

Administrative expenses

-

(1,927)

(1,752)

(8,341)

(12,020)

Other gains(2)

-

26,924

8,734

-

35,658

Other operating expenses

-

-

17

81

98

Operating profit/(loss) before exceptional items

1,872

26,272

19,847

(8,260)

39,731

Net exceptional items

-

-

-

331

331

Operating profit/(loss)

1,872

26,272

19,847

(7,929)

40,062

Finance income

-

-

-

16

16

Finance costs

-

-

-

(2,277)

(2,277)

Share of profit of joint ventures

-

26

4,013

-

4,039

Profit/(loss) before tax

1,872

26,298

23,860

(10,190)

41,840

 

 

 

 

 

Other Information

 

 

 

 

Capital Growth

Income
Generation

£000

Unallocated

costs

£000

 

Total

£000

 Sale of development

properties

£000

    Other property activities

£000

(1)Gross profit is analysed as follows:

 

 

 

 

 

Gross profit excluding sale of development properties

-

1,275

12,848

-

14,123

Gross profit on sale of development properties

7,690

-

-

-

7,690

Net realisable value provision on development properties

(5,818)

-

-

-

(5,818)

 

1,872

1,275

12,848

-

15,995

 

 

 

 

 

 

(2)Other gains are analysed as follows:

 

 

 

 

 

Increase in fair value of investment properties

-

26,139

5,994

-

32,133

(Decrease)/increase in fair value of assets held for sale

-

(113)

30

-

(83)

Profit on sale of investment properties

-

216

2,703

-

2,919

Profit on sale of assets classified as held for sale

-

96

7

-

103

Profit on sale of overages

-

586

-

-

586

 

-

26,924

8,734

-

35,658

 

 

 

 

 

 

             

 

 

Notes to the condensed consolidated interim financial statements

for the six months ended 30 June 2018

2.  Segment information (continued)

Segmental Assets

Capital
Growth

£000

Income
Generation

£000

Unallocated

 £000

 

Total

£000

Non-current assets

 

 

 

 

Property, plant and equipment

-

-

802

802

Other receivables

2,666

-

-

2,666

Investment properties

43,132

173,428

-

216,560

Investments in joint ventures

1,042

17,796

-

18,838

Non-current trade receivables

5,250

-

-

5,250

 

52,090

191,224

802

244,116

Current assets

 

 

 

 

Inventories

211,535

83

-

211,618

Trade and other receivables

16,516

6,762

1,887

25,165

Cash

-

-

8,371

8,371

Assets classified as held for sale

2,782

4,906

-

7,688

 

230,833

11,751

10,258

252,842

Total assets

282,923

202,975

11,060

496,958

 

Financial liabilities are not allocated to the reporting segments as they are managed and measured on a group basis.  

 

Notes to the condensed consolidated interim financial statements

for the six months ended 30 June 2018

3. Exceptional items

 

 

Unaudited

6 months ended

30 June
2018
£000

Unaudited

6 months ended

30 June

2017

£000

Audited

year ended

31 December 2017
£000

Exceptional income:

 

 

 

 

Settlements from the administration of legacy companies

 

-

202

414

Other income

 

-

28

-

Total exceptional income

 

-

230

414

Exceptional expense:

 

 

 

 

Costs associated with the premium listing

 

(590)

-

-

Sundry costs relating to legacy activities

 

-

(168)

(83)

Total exceptional expense

 

(590)

(168)

(83)

 

Exceptional items in the six months ended 30 June 2017 and the financial year to 31 December 2017 related to the Group`s legacy activities.

 

 

Notes to the condensed consolidated interim financial statements

for the six months ended 30 June 2018

4.  Finance (cost)/income

                                                                                                                                   Note

Unaudited

6 months ended

30 June
2018
£000

Unaudited

6 months ended

30 June

2017

£000

Audited

year ended

31 December 2017
£000

Interest expense

 

 

 

- Bank interest

(747)

(559)

(994)

- Amortisation of facility and other fees

(459)

(370)

(807)

- Extinguishment of loan fees relating to refinancing                                                     11

(298)

-

-

- Other interest

(239)

(255)

(476)

 

(1,743)

(1,184)

(2,277)

Interest received

5

15

16

Net finance costs

(1,738)

(1,169)

(2,261)


5.  Tax

The income statement charge for taxation in the period was £1.1m (H1 2017: £8.9m credit) which comprised a deferred tax charge of £1.2m (H1 2017: £8.8m credit) and a current period tax credit of £0.1m (H1 2017: £0.1m credit).  The movement in deferred tax mainly relates to the increase in valuation of the investment properties.

 

The current tax credit relates to a claim for a land remediation relief tax credit in the period.

 

At 30 June 2018, the Group had deferred tax liabilities of £14.3m (H1 2017: £21.8m), which largely related to unrealised gains on investment properties and had recognised deferred tax assets of £7.6m (H1 2017: £15.7m).  The net deferred tax liability was £6.7m (H1 2016: £6.1m).

 

6.  Dividends

 

Unaudited

6 months ended

30 June
2018
£000

Unaudited

6 months ended

30 June

2017

£000

Audited

year ended

31 December 2017
£000

Final dividend of 0.575p per share proposed and paid May 2018

1,847

-

-

Final dividend of 0.523p per share proposed and paid May 2017

-

1,680

1,680

Interim dividend of 0.253p per share proposed and paid October 2017

-

-

812

 

1,847

1,680

2,492


An interim dividend of 0.278p per share was approved by the Board on 10 September 2018 and is payable on 19 October 2018 to shareholders on the register on 21 September 2018. The interim dividend is not recognised as a liability in the interim condensed financial statements.

 

Notes to the condensed consolidated interim financial statements

for the six months ended 30 June 2018

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 period/year.

 

 

Unaudited

6 months ended

30 June
2018
£000

Unaudited

6 months ended

30 June

2017

£000

Audited

year ended

31 December 2017
£000

Profit for the period/year

5,487

16,598

49,683

Weighted average number of shares used for basic and diluted earnings per share

321,252,525

309,242,529

315,296,192

Basic and diluted earnings per share (pence)

1.7

                5.4

15.8

 

Notes to the condensed consolidated interim financial statements

for the six months ended 30 June 2018

 

8.  Investment properties

 

The Group holds five categories of investment property being agricultural land, natural resources, business space, 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

£000

 

Natural

Resources

£000

Business Space

£000

 

Major

Developments

£000

Strategic Land

£000

 

 

Total
 £000

At 1 January 2017 (audited)

20,106

29,489

96,709

 

215,650

17,236

 

379,190

Subsequent expenditure

1,508

582

381

 

7,725

2,255

 

12,451

Increase in fair value

1,592

654

2,000

 

-

3,443

 

7,689

Transfer to development properties

-

-

-

 

(77,734)

-

 

(77,734)

Transfer to assets classified as held for sale

(1,160)

-

-

 

(8,492)

(350)

 

(10,002)

Disposals

(887)

-

-

 

-

(180)

 

(1,067)

At 30 June 2017 (unaudited)

21,159

30,725

99,090

 

137,149

22,404

 

310,527

Transfers between divisions

-

277

11,686

 

4,137

(16,100)

 

-

Direct acquisitions

-

-

5,536

 

15,281

5,198

 

26,015

Subsequent expenditure

176

572

8,579

 

5,375

2,006

 

16,708

(Decrease)/increase in fair value

2,068

784

(1,104)

 

13,072

9,624

 

24,444

Transfer in assets classified as held for sale

-

(276)

(3,500)

 

-

-

 

(3,776)

Recategorisation of other receivables

-

-

-

 

(666)

-

 

(666)

Recategorisation as inventories

-

-

-

 

(151,384)

-

 

(151,384)

Disposals

(1,076)

(782)

(486)

 

(2,964)

-

 

(5,308)

At 31 December 2017 (audited)

22,327

31,300

119,801

 

20,000

23,132

 

216,560

Direct acquisitions

-

-

43,692

 

-

9,207

 

52,899

Subsequent expenditure

6

222

3,733

 

84

633

 

4,678

Disposals

-

(482)

-

 

-

(80)

 

(562)

Increase in fair value

-

3,700

2,920

 

-

79

 

6,699

Transfer from assets held for sale

349

-

-

 

-

608

 

957

Transfer to assets held for sale

(4,948)

(348)

(19,659)

 

-

-

 

(24,955)

At 30 June 2018 (unaudited)

17,734

34,392

150,487

 

20,084

33,579

 

256,276

 

Valuation process


The properties have been valued by management who have exercised their experience and judgement in arriving at the increase in fair value at 30 June 2018 and 30 June 2017. The properties were valued by BNP Paribas Real Estate and Savills at 31 December 2017. Both are independent firms acting in the capacity of external valuers with relevant experience of valuations of this nature.

 

 

Notes to the condensed consolidated interim financial statements

for the six months ended 30 June 2018

9.  Inventories

 

Unaudited

6 months ended

30 June
2018
£000

Unaudited

6 months ended

30 June

2017

£000

Audited

year ended

31 December 2017
£000

Development properties

209,388

73,247

210,471

Planning promotion agreements and options

1,360

763

1,064

Finished goods

101

-

83

 

210,849

74,010

211,618

 

The cost of inventory is recognised as an expense within cost of sales in the year.  Finished goods are stated after a provision of £0.3m (H1 2017: £0.3m; FY 2017: £0.3m).

The movement in development properties is as follows:

 

£000

At 1 January 2017 (audited)

-

Re-categorisation from investment properties

77,734

Subsequent expenditure

1,116

Disposals

(5,603)

At 30 June 2017 (unaudited)

73,247

Re-categorisation from investment properties

151,384

Subsequent expenditure

1,308

Disposals

(9,650)

Net realisable value provision

(5,818)

At 1 January 2018 (audited)

210,471

Acquisitions

59

Subsequent expenditure

10,945

Disposals

(10,596)

Net realisable value provision

(1,491)

At 30 June 2018 (unaudited)

209,388

 

 

Notes to the condensed consolidated interim financial statements

for the six months ended 30 June 2018


9.  Inventories (continued)

The movement in the net realisable value provision is as follows:

 

£000

At 1 January 2017 (audited)

-

Disposals

-

Net realisable value provision

-

At 30 June 2017 (unaudited)

-

Disposals

-

Net realisable value provision

5,818

At 1 January 2018 (audited)

5,818

Disposals

-

Net realisable value provision

1,491

At 30 June 2018 (unaudited)

7,309

 

The market value of these properties is £8.7m higher than their carrying value at 30 June 2018 (H1 2017: £2.3m; FY 2017: £5.8m).

 

10.  Assets classified as held for sale


Assets classified as held for sale relate to investment properties expected to be sold within twelve months.

 

 

 

£000

At 1 January 2017 (audited)

 

 

8,350

Transferred from investment properties

 

 

10,002

Subsequent expenditure

 

 

188

Disposals

 

 

(7,711)

At 30 June 2017 (unaudited)

 

 

10,829

Transferred from investment properties

 

 

3,776

Subsequent expenditure

 

 

(29)

Decrease in fair value

 

 

(83)

Disposals

 

 

(6,805)

At 31 December 2017 (audited)

 

 

7,688

Transferred from investment properties

 

 

24,955

Transferred to investment properties

 

 

(957)

Disposals

 

 

(3,500)

At 30 June 2018 (unaudited)

 

 

28,186

 

 

Notes to the condensed consolidated interim financial statements

for the six months ended 30 June 2018

 

11.  Borrowings and loans

 

Unaudited

6 months ended

30 June
2018
£000

Unaudited

6 months ended

30 June

2017

£000

Audited

year ended

31 December 2017
£000

Current:

 

 

 

Secured - other loans

(7,648)

(2,319)

(6,145)

 

(7,648)

(2,319)

(6,145)

Non-current:

 

 

 

Secured - bank loans

(87,778)

(9,164)

(23,437)

Secured - other loans

(12,464)

(12,109)

(11,064)

 

(100,242)

(21,273)

(34,501)

Total current and non-current borrowings

(107,890)

(23,592)

(40,646)

 

Loans are stated after deduction of unamortised borrowing costs.

 

 

 

Unaudited

6 months ended

30 June
2018
£000

Unaudited

6 months ended

30 June

2017

£000

Audited

year ended

31 December 2017
£000

Infrastructure loans

 

 

 

 

Sheffield City Region JESSICA Fund

Gateway 36

Rockingham

-

(2,362)

(2,353)

Homes and Communities Agency

Village Farm

(18)

(138)

(141)

Leeds LEP

Prince of Wales

(206)

(614)

(396)

Homes and Communities Agency

Waverley

(6,093)

(8,302)

(7,205)

Sheffield City Region JESSICA Fund

Advanced Manufacturing Park, Waverley

(7,432)

(2,530)

(5,108)

North West Evergreen Limited Partnership

Logistics North

(2,471)

(482)

(2,006)

Homes and Communities Agency

Simpson Park

(3,892)

-

-

 

 

(20,112)

(14,428)

(17,209)

Bank loan

 

(87,778)

(9,164)

(23,437)

Total loans

 

(107,890)

(23,592)

(40,646)

 

The bank borrowings are part of a £100.0m revolving credit facility ("RCF") from The Royal Bank of Scotland and Santander. On the 13 February 2018 the Group extended the terms of its existing RCF such that it now expires in February 2023 on a non-amortising basis and is subject to financial and other covenants.

 

Current loans are stated after deduction of unamortised borrowing costs of £nil (H1 2017: £nil, FY 2017: £nil). Non-current bank and other loans are stated after deduction of unamortised borrowing costs of £1.0m (H1 2017: £1.0m; FY 2017: £0.8m).

 

 

Notes to the condensed consolidated interim financial statements

for the six months ended 30 June 2018

 

12.  Called up share capital

 

 

Issued and fully paid

Unaudited

6 months ended
30 June
2018
£000

Unaudited

6 months ended
30 June

2017
£000

Audited

year ended
31 December
2017
£000

At start of period/year

32,150

29,227

29,227

Shares issued

-

2,923

2,923

At end of period/year

32,150

32,150

32,150

Own shares held

(194)

(263)

(263)

At end of period/year

31,956

31,887

31,887

 

 

 

Issued and fully paid - Number of shares

Unaudited

6 months ended

30 June
2018

 

Unaudited

6 months ended

30 June

2017

 

Audited

year ended

31 December 2017
 

At start of period/year

321,496,760

292,269,786

292,269,786

Shares issued

-

29,226,974

29,226,974

At end of period/year

321,496,760

321,496,760

321,496,760

Own shares held

(181,771)

(246,010)

(246,010)

At end of period/year

321,314,989

321,250,750

321,250,750

 

On 17 March 2017, the Group issued 29,226,974 new ordinary shares at 95 pence each.


13.  Related party transactions

There have been no material changes in the related party transactions described in the 2017 Annual report and accounts. 

 

 

Directors' Responsibility Statement

For the six months ended 30 June 2018

 

The Directors who held office at the date of approval of these Financial Statements confirm that to the best of their knowledge:

 

1.            the Condensed Consolidated Interim Financial Statements have been prepared in accordance with IAS 34 "Interim Financial Reporting" as adopted by the European Union; and

 

2.            the Interim Management Report includes a fair review of the information required by:

 

a.            Rule 4.2.7R of the Disclosure and Transparency Rules, being an indication of important events that have occurred during the half-year ended 30 June 2018 and their impact on the Condensed Consolidated Interim Financial Statements, and a description of the principal risks and uncertainties for the remaining six months of the year; and

 

b.            Rule 4.2.8R of the Disclosure and Transparency Rules, being related parties' transactions that have taken place in the half-year ended 30 June 2018 and that have materially affected the financial position or performance of the Group during that period, and any changes in the related parties' transactions described in the last Annual Report and Financial Statements that could do so.

 

The Directors serving during the half-year ended 30 June 2018 were as follows:

 

Jonson Cox

Former Chairman (retired as a director on 31 March 2018)

Alastair Lyons

Chairman (appointed on 7 March 2018)

Owen Michaelson

Chief Executive                        

Andrew Kirkman

Finance Director

Lisa Clement

Senior Independent Director

Anthony Donnelly

Independent Non-Executive Director

Andrew Cunningham

Independent Non-Executive Director

Steven Underwood

Non-Executive Director

Martyn Bowes

Non-Executive Director

 

The responsibilities of the Directors during their period of service were as set out on pages 60 and 61 of the Annual Report and Financial Statements for the financial year ended 31 December 2017.

 

By order of the Board

 

Chris Birch

Group General Counsel and Company Secretary

11 September 2018

 

 

Shareholder information

 

FINANCIAL CALENDAR

 

Interim results for the period ended 30 June 2018

 

Announced

11 September 2018

Interim dividend for the financial year ended 31 December 2018

 

Ex-dividend date

Record date

Payable

 

20 September 2018

21 September 2018

19 October 2018

 

Preliminary results for the year ended 31 December 2018

 

Announced

5 March 2019

Annual report and financial statements for the year ended 31 December 2018

 

Published

April 2019

2019 Annual General Meeting

 

 

May 2019

Final dividend for the year ended 31 December 2018

 

Payable

June 2019

 

REGISTRARS

 

All administrative enquiries relating to shareholdings should, in the first instance, be directed to Equiniti, Aspect House, Spencer Road, Lancing, West Sussex BN99 6DA (telephone: 0371 384 2301) and should clearly state 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").

 

WEBSITE

 

The Group has a website (www.harworthgroup.com) that gives further information on the Group.

 


This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.
 
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