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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Harworth Group Plc | LSE:HWG | London | Ordinary Share | GB00BYZJ7G42 | ORD 10P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 130.50 | 127.50 | 130.50 | 147 | 08:00:11 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| Offices-holdng Companies,nec | 72.43M | 37.96M | 0.1172 | 11.13 | 422.48M |
From Apr 2019 to Apr 2024
TIDMHWG
RNS Number : 3332A
Harworth Group PLC
11 September 2018
HARWORTH GROUP PLC
UNAUDITED INTERIM RESULTS FOR THE HALF YEARED 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.
Hot Features
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30 June 30 June Change 31 December
2018 2017 (%) 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
(GBP'm) 6.6 8.8 (24.9)% 39.7
Operating profit before exceptional items
plus joint ventures (GBP'm) 8.9 8.8 1.0% 43.8
Value gains (GBP'm) (2) 7.7 7.8 (2.2)% 41.6
Value gains (including development properties
uplift) (GBP'm) (3) 10.5 10.1 3.8% 47.4
Profit excluding value gains (GBP'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 GBP50m 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 GBP25 million to GBP100 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 GBP50 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 GBP3.1m
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 GBP20.5m 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 GBP64.2m (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, GBP229.1m 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 (GBP8.7m) less notional deferred tax on development properties (GBP1.5m). EPRA NAV is EPRA NNNAV excluding deferred tax (GBP6.7m), notional deferred tax on development properties (GBP1.5m), and the mark to market movement on financial instruments (GBP0.0m)
(2) Value gains comprise profits on sale of: investment properties (GBP0.2m); development properties (GBP0.0m); overages (GBP0.0m); and assets held for sale (GBP0.0m), plus the increase in the fair value of investment properties (GBP6.7m), joint ventures (GBP2.3m) and overages (GBP0.0m) less the impairment of development properties (GBP1.5m)
(3) Value gains (including development properties) comprises value gains (GBP7.7m) plus the increase in the fair market value of development properties (GBP2.9m)
(4) Profit excluding value gains is operating profit before exceptional items plus joint ventures (GBP8.9m) less value gains (GBP7.7m) and pension costs (GBP0.0m)
(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
-S-
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 GBP64.2m (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 GBP50 million. These acquisitions were funded in part by our Revolving Credit Facility with RBS and Santander, which was extended in April from GBP75 million to GBP100 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 GBP4m 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 GBP3.88 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 GBP100m 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 GBP32.45 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 GBP2.1m 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
GBP8.75m 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 GBP1m
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 GBP15.8m, 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 GBP0.6 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 GBP7.00 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 GBP5.00 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 GBP7.25psf 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 GBP5.3m (H1 2017: GBP4.0m). 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 As at 30 June Growth As at 31 December Growth
2018 2017 since 2017 since
30/06/17 31/12/17
Per share GBP'm Per share GBP'm Per share GBP'm
---------- ---------- ---------- ---------- ---------- ----------
EPRA NNNAV 130.8p GBP420.4m 118.0p GBP379.0m 10.9% 128.9p GBP414.2m 1.5%
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
NAV 128.6p GBP413.2m 117.4p GBP377.0m 9.5% 127.4p GBP409.3m 0.9%
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
EPRA NAV 133.4p GBP428.7m 120.1p GBP385.7m 11.1% 131.0p GBP420.8m 1.9%
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Operating profit before exceptional items in H1 2018 was GBP6.6m (H1 2017: GBP8.8m). 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: GBP2.3m, H1 2017: GBPnil) and, as set out below, the revaluation gains on development properties post re-categorisation (H1 2018: GBP2.9m, H1 2017: GBP2.3m) 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 GBP11.8m (H1 2017: GBP11.1m) reflecting active management across our portfolio.
We consider that the operating profits which contributed to EPRA NNNAV growth of GBP11.8m (H1 2017: GBP11.1m) can best be understood as being composed of two elements:
-- Value gains (GBP10.5m; H1 2017: GBP10.1m) - profits on disposals
of investment, development and available for sale properties, and
overages totalling GBP0.1m (H1 2017: GBP0.1m) and revaluation gains
on our property portfolio of GBP10.4m (H1 2017: GBP10.0m). Revaluation
gains comprise: revaluation movements on investment property of
GBP6.7m (H1 2017: GBP7.7m), profits from joint ventures of GBP2.3m
(H1 2017: GBPnil) and revaluation movements on development properties
of GBP2.9m (H1 2017: GBP2.3m) less impairments of development properties
of GBP1.5m (H1 2017: GBPnil). 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 (GBP1.3m; H1 2017: GBP1.0m) - 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 GBP100.2m or 19.0% net loan to value (FY 2017: GBP32.3m 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 GBP75.0m 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 GBP100.0m 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 GBP210.5m and the market value of all development was GBP216.3m reflecting the GBP5.8m 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 GBP209.4m and the market value of all development was GBP218.1m reflecting the GBP8.7m 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. 0.3m sq.
ft ft
0.1m sq. 0 sq.
Rossington Development 334 1,200 170 140 ft ft
Waverley Investment 115 - - - 2.1m sq. 1.3m sq.
(AMP) ft ft
Lounge Investment 103 - - - 0.8m sq. 0 sq.
ft ft
Asfordby Investment 141 - - - 0.3m sq. 0.3m sq.
ft ft
Riverdale 0.2m sq. 0 sq.
Park Development 112 600 - - ft ft
Gateway 36 Asset held 9 - - - 0.2m sq. 0.2m sq.
Ph. 1 for sale ft ft
0.3m sq. 0 sq.
Thoresby Development 460 800 - - ft ft
------------ ------------- ------ ---------- ------ ------ ---------- ---------
4.3m sq. 2.1m sq.
TOTAL 2,186 8,506 1,388 990 ft ft
-------------------------- ------ ---------- ------ ------ ---------- ---------
OPERATING PROFIT
Revenues in the first half of 2018 were GBP21.9m (H1 2017: GBP22.9m), split between revenue from operations GBP10.9m (H1 2017: GBP14.4m) and revenue from the disposal of development properties GBP11.0m (H1 2017: GBP8.5m). Revenue from operations is split between: Income Generation GBP10.8m (H1 2017: GBP8.7m), where revenue mainly comprises rental and royalty income together with some sales of coal fines and salvage; and Capital Growth GBP0.1m (H1 2017: GBP5.7m). 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 GBP16.3m (H1 2017: GBP15.0m) of which GBP12.6m related to the inventory cost of development property sales (H1 2017: GBP8.2m) whilst in H1 2017 there were GBP3.6m 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 GBP5.9m (H1 2017: GBP6.6m) 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
------------------------------------- -----------------------------------------
Central
Capital Income Over- Capital Income Central
Growth Generation heads Total Growth Generation Over-heads Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------------------------- ------- ----------- ------- ------ ------- ----------- ----------- ------
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 (GBP0.1m; H1 2017 GBP0.3m profit) within profit on disposals and development property impairment (GBP1.5m; H1 2017 GBPnil) within revaluation gains. This notional cost is the reversal of these amounts
(2) Profit excluding value gains comprises operating profit before exceptional items of GBP6.6m (H1 2017: GBP8.8m) less value gains of GBP5.3m (H1 2017: GBP7.8m). Value gains comprise profit/(loss) on disposals (being profits on sale of investment properties of GBP0.1m (H1 2017: GBP0.2m), assets held for sale of GBPnil (H1 2017: loss of GBP0.4m) and loss on sale of development properties of GBP0.1m (H1 2017: GBP0.3m profit)) plus increase in fair value of investment properties of GBP6.7m (H1 2017: GBP7.7m) less the development property impairment of GBP1.5m (H1 2017: GBPnil)
(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
----------------------------------------- -----------------------------------------
GBPm Revaluation gains Revaluation gains
------------------- -------------------
Profit Management Market Total Profit Management Market Total
on disposals on disposals
------------------- ------------- ----------- ------ ----- ------------- ----------- ------ -----
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 GBP16.1m in the first six months of 2018 (H1 2017: GBP24.9m) achieving a profit on disposals of GBP0.1m (H1 2017: GBP0.1m). The sales were split between residential serviced plots of GBP11.8m (H1 2017: GBP11.7m), commercial development of GBP3.8m (H1 2017: GBP10.8m) and other, essentially agricultural land, of GBP0.5m (H1 2017: GBP2.4m). In addition, Harworth undertook direct development on its sites with a land value of GBP1.0m (H1 2017: GBP2.1m) and its share of property sales in its joint ventures was GBP0.4m (H1 2017: GBP0.3m).
Cash proceeds from sales were GBP15.4m (H1 2017: GBP14.8m) reflecting the sales in the period of GBP16.1m (H1 2017: GBP24.9m), less deferred consideration on sales in the period of GBP6.9m (H1 2017: GBP15.2m), plus deferred consideration received from sales in the prior year of GBP6.2m (H1 2017: GBP5.1m).
In the first half of 2018, the Group had revaluation gains of GBP10.4m (H1 2017: GBP10.0m) comprising:
(GBP'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 GBP10.4m (H1 2017: GBP10.0m) to reflect the contribution from active management of GBP8.7m (H1 2017: GBP8.4m) and market movements of GBP1.7m (H1 2017: GBP1.6m). 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 GBP0.6m (H1 2017: credit GBP0.1m). 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 GBP1.1m (H1 2017: GBP8.9m credit) which comprised a deferred tax charge of GBP1.2m (H1 2017: GBP8.8m credit) and a current period tax credit of GBP0.1m (H1 2017: GBP0.1m). 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 GBP14.3m (H1 2017: GBP21.8m), which largely related to unrealised gains on investment properties and had recognised deferred tax assets of GBP7.6m (H1 2017: GBP15.7m). 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 GBP6.7m (H1 2017: GBP6.1m).
EARNINGS PER SHARE AND DIVIDS
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 GBP894k (H1 2017: GBP812k) 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 GBP420.4m as at 30 June 2018 from GBP414.2m as at 31 December 2017 (GBP379.0m 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 GBP11.8m, less exceptional costs of GBP0.6m, interest costs of GBP1.7m, tax charges (including development properties notional deferred tax) of GBP1.6m and dividends of GBP1.8m plus other movements of GBP0.1m.
30 June 2018 31 December 2017 30 June 2017
GBPm GBPm GBPm
----------------------------------------- ------------- ------------------ ------------
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 GBP413.2m; FY 2017: GBP409.3m; H1 2017: GBP377.0m) plus
market value of development properties (H1 2018: GBP8.7m; FY 2017: GBP5.8m;
H1 2017: GBP2.3m) less notional deferred tax (H1 2018: GBP1.5m; FY 2017:
GBP1.0m H1 2017: GBP0.4m) divided by number of shares in issue less Employee
benefit trust shares
(3) EPRA NNNAV (H1 2018: GBP420.4m; FY 2017: GBP414.2m; H1 2017: GBP379.0m)
excluding deferred tax liability (H1 2018: GBP6.7m; FY 2017: GBP5.5m;
H1 2017: GBP6.1m), notional deferred tax on development properties (H1
2018: GBP1.5m; FY 2017: GBP1.0m; H1 2017: GBP0.4m) and mark to market
movement on financial instruments (H1 2018: GBPnil; FY 2017 GBP(0.1)m;
H1 2017: GBP(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 GBP75m 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 GBP75m to GBP100m, with Santander joining the facility alongside RBS. RBS' commitment remains at GBP75m with Santander's initial commitment at GBP25m. 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 GBP30m fixed rate interest swap which was due to expire on 30 June 2020 (incurring total break costs of GBP18.5k) and in its place entered into a 4-year, GBP45m 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 GBP107.9m at 30 June 2018 (FY 2017: GBP40.6m), being the RBS RCF of GBP87.8m (FY 2017: GBP23.4m) and infrastructure loans of GBP20.1m (FY 2017: GBP17.2m). The Group's cash and cash equivalents at 30 June 2018 were GBP7.7m (FY 2017: GBP8.4m). The resulting net debt was GBP100.2m (FY 2017: GBP32.2m). 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 GBP27.1m (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
Unaudited year ended
6 months Unaudited 31 December
ended 6 months ended 2017
30 June 30 June Audited
2018 2017 GBP000
Note GBP000 GBP000
------------------------------------ ---- --------- ------------------- ----------------
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
Unaudited 6 months Audited
6 months ended ended year ended
30 June 30 June 31 December
2018 2017 2017
GBP000 GBP000 GBP000
----------------------------------------------- --------------- ------------- ----------------
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
Unaudited Unaudited
6 months 6 months Audited
ended ended year ended
30 June 30 June 31 December
2018 2017 2017
ASSETS Note GBP000 GBP000 GBP000
--------------------------------------------- ---- --------- ------------- ----------------
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 Share Fair Capital
up share premium Own value redemption Merger Retained Total
capital account shares reserve reserve reserve earnings equity
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
---------------------------------- --------- -------- ------- -------- ----------- --------- --------- -------
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 Unaudited
6 months 6 months Audited
ended ended year ended
30 June 30 June 31 December
2018 2017 2017
GBP000 GBP000 GBP000
--------------------------------------------------- --------- ------------- ----------------
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 GBP100m 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
Capital Growth
------------------------------------- ----------------------------- ----------- ----------- ---------
Sale of Other
development property Income Unallocated
properties activities Generation costs Total
30 June 2018 GBP000 GBP000 GBP000 GBP000 GBP000
------------------------------------- ------------- -------------- ----------- ----------- ---------
Revenue 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)
------------------------------------- ------------- -------------- ----------- ----------- ---------
Operating (loss)/profit (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
------------------------------------- ----------------------------- ----------- ----------- ---------
Sale of Other
development property Income Unallocated
properties activities Generation costs Total
GBP000 GBP000 GBP000 GBP000 GBP000
------------------------------------- ------------- -------------- ----------- ----------- ---------
(1) Gross (loss)/profit is analysed
as follows:
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)
Capital Income
Growth Generation Unallocated Total
Segmental Assets GBP000 GBP000 GBP000 GBP000
------- ----------- ----------- ----------
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
Capital Growth
------------------------------------------- ---------------------------- ----------- ----------- ---------
Sale of Other
development property Income Unallocated
properties activities Generation costs Total
30 June 2017 GBP000 GBP000 GBP000 GBP000 GBP000
------------------------------------------- ------------ -------------- ----------- ----------- ---------
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)
Capital Growth
------------------------------------------- ----------------------------- ----------- ----------- ---------
Sale of Other
development property Income Unallocated
properties activities Generation costs Total
Other Information GBP000 GBP000 GBP000 GBP000 GBP000
------------------------------------------- ------------- -------------- ----------- ----------- ---------
(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)
Capital Income
Growth Generation Unallocated Total
Segmental Assets GBP000 GBP000 GBP000 GBP000
----------------------------------- ------- ----------- ----------- ----------
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 Income Unallocated
Capital Growth Generation costs
GBP000 GBP000
---------------------------------------- ----------------------------- ----------- ----------- ---------
Sale of Other
development property
properties activities Total
GBP000 GBP000 GBP000
---------------------------------------- ------------- -------------- ----------- ----------- ---------
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 Income Unallocated
Capital Growth Generation costs
GBP000 GBP000
---------------------------------------- ----------------------------- ----------- ----------- ---------
Sale of Other
development property
properties activities Total
GBP000 GBP000 GBP000
---------------------------------------- ------------- -------------- ----------- ----------- ---------
(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)
Capital Income
Growth Generation Unallocated Total
Segmental Assets GBP000 GBP000 GBP000 GBP000
------- ----------- ----------- ----------
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 Unaudited
6 months ended 6 months ended Audited
30 June 30 June year ended
2018 2017 31 December 2017
GBP000 GBP000 GBP000
------------------------------------------------------ --------------- ------------------- ---------------------
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
Audited
Unaudited Unaudited year
6 months 6 months ended
ended ended 31
30 June 30 June December
2018 2017 2017
Note GBP000 GBP000 GBP000
------------------------------------------------------------------------------------------------------------------------------------ --------- ------------- ------------
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 GBP1.1m (H1 2017: GBP8.9m credit) which comprised a deferred tax charge of GBP1.2m (H1 2017: GBP8.8m credit) and a current period tax credit of GBP0.1m (H1 2017: GBP0.1m 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 GBP14.3m (H1 2017: GBP21.8m), which largely related to unrealised gains on investment properties and had recognised deferred tax assets of GBP7.6m (H1 2017: GBP15.7m). The net deferred tax liability was GBP6.7m (H1 2016: GBP6.1m).
6. Dividends
Unaudited Unaudited
6 months 6 months Audited
ended ended year ended
30 June 30 June 31 December
2018 2017 2017
GBP000 GBP000 GBP000
---------------------------------------------- --------- ------------- ----------------
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 Unaudited Audited
ended 6 months ended year ended
30 June 30 June 31 December
2018 2017 2017
GBP000 GBP000 GBP000
--------------------------------------------- ----------- ------------------- ----------------
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 Natural Business Major Strategic
Land Resources Space Developments Land Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
-------------------------------- ------------ ----------- -------- ------------- --------- ----------
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 Unaudited Audited
6 months 6 months ended year ended
ended 30 June 31 December
30 June 2017 2017
2018 GBP000 GBP000
GBP000
------------------------------------------ --------- ------------------- ----------------
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 GBP0.3m (H1 2017: GBP0.3m; FY 2017: GBP0.3m).
The movement in development properties is as follows:
GBP000
--------------------------------------------- --------
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:
GBP000
------------------------------- ------
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 GBP8.7m higher than their carrying value at 30 June 2018 (H1 2017: GBP2.3m; FY 2017: GBP5.8m).
10. Assets classified as held for sale
Assets classified as held for sale relate to investment properties expected to be sold within twelve months.
GBP000
--------------------------------------- -------
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 Unaudited Audited
ended 6 months ended year ended
30 June 30 June 31 December
2018 2017 2017
GBP000 GBP000 GBP000
----------------------------------------- --------- ------------------- ----------------
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 Unaudited Audited
ended 6 months ended year ended
30 June 30 June 31 December
2018 2017 2017
GBP000 GBP000 GBP000
----------------------------- ----------------------- --------- ------------------- ----------------
Infrastructure loans
Sheffield City Region Gateway 36
JESSICA Fund 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 Advanced Manufacturing
JESSICA Fund 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 GBP100.0m 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 GBPnil (H1 2017: GBPnil, FY 2017: GBPnil). Non-current bank and other loans are stated after deduction of unamortised borrowing costs of GBP1.0m (H1 2017: GBP1.0m; FY 2017: GBP0.8m).
Notes to the condensed consolidated interim financial statements
for the six months ended 30 June 2018
12. Called up share capital
Unaudited Unaudited Audited
6 months ended 6 months ended year ended
Issued and fully paid 30 June 30 June 31 December
2018 2017 2017
GBP000 GBP000 GBP000
------------------------ ----------------- --------------- ------------
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
------------------------ ----------------- --------------- ------------
Unaudited Unaudited Audited
6 months ended 6 months ended year ended
Issued and fully paid - Number of shares 30 June 30 June 31 December
2018 2017 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 Announced 11 September 2018
30 June 2018
Interim dividend for the financial Ex-dividend 20 September 2018
year ended 31 December 2018 date 21 September 2018
Record date 19 October 2018
Payable
Preliminary results for the year ended Announced 5 March 2019
31 December 2018
Annual report and financial statements Published April 2019
for the year ended 31 December 2018
2019 Annual General Meeting May 2019
Final dividend for the year ended Payable June 2019
31 December 2018
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.
END
IR SFMFMSFASEIU
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September 11, 2018 02:00 ET (06:00 GMT)
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