Valuations broadly stable as management actions offset market movements. Strong balance sheet, with low gearing and significant available liquidity
Harworth Group plc is today providing a trading update in respect of the six months to 30 June 2023, ahead of the announcement of its Half Year Results on 12 September 2023.
The Group anticipates that EPRA NDV(1) as at 30 June 2023 will be broadly in line with its EPRA NDV as at 31 December 2022. This is the result of positive valuation movements driven by management actions across the portfolio, supported by continued demand from occupiers for industrial & logistics assets and from housebuilders for serviced residential land. These uplifts have broadly offset market-driven outward yield movements in the industrial & logistics sector which, while not as significant as in the second half of 2022, have continued over the first half, reflecting a softer macro-economic backdrop.
As of today, the Group has completed, exchanged, or is at heads of terms on 81% of budgeted sales for the year across its industrial & logistics and residential land portfolios, at prices in-line with, or at a premium to, book value.
“Harworth has delivered a strong strategic and operational performance in the first half highlighting the resilience of our through-the-cycle model, and sustained demand for our serviced residential land and industrial & logistics assets. In particular, the combination of this year’s sales of more mature industrial & logistics sites and our development of new high-specification space has accelerated the transition of our Investment Portfolio towards our goal of 100% Grade A. In residential, we continue to transact with a range of housebuilders, both national and regional, who are drawn to our de-risked serviced land, and continue to progress our portfolios of alternative residential products, including Build-to-Rent and affordable homes.
“Despite resilient demand for our products, and our management actions to drive value across the portfolio, macroeconomic challenges are still weighing on investor sentiment. This has resulted in our valuations remaining broadly stable over the first six months of the year. Continued economic headwinds mean that the landscape for the second half of the year remains challenging, although there are early signs of some of the inflationary pressures easing. Against this backdrop, our focus markets of industrial & logistics and residential remain key drivers of economic growth and have favourable supply and demand dynamics.
“Harworth is a long-term through-the-cycle business, and we remain confident that our strategy will deliver long-term value. What is more, our strong financial position, differentiated products, and the scale and mix of our portfolio, position us well to maximise the significant value embedded in our sites.”
Lynda Shillaw, Chief Executive, Harworth Group plc
Direct development of industrial & logistics stock across 37.3m sq. ft pipeline:
- Completed 110,000 sq. ft of Grade A space at Gateway 36 in Barnsley: 39,000 sq. ft already let, with good interest for remaining units
- On-site with 166,000 sq. ft at the Advanced Manufacturing Park (‘AMP’) in Rotherham, including a 73,000 sq. ft built-to-suit unit
- Site preparation works continue at Chatterley Valley in Staffordshire: early discussions underway on pre-let and build-to-suit opportunities at the site, which will deliver 1.2m sq. ft
Progressing sales and broadening the range of residential products across 28,359-plot pipeline:
- After H1 period-end, completed the sale of serviced land at Thoresby Vale, Nottinghamshire to Barratt and David Wilson Homes for £9.9m, in line with 31 December 2022 valuations
- Working towards exchange of contracts with selected investment and construction partners for development of a single-family Build-to-Rent (‘BTR’) portfolio
- Good levels of interest received so far for Affordable Housing portfolio, launched in April 2023
Scaling up land acquisitions and land promotion activities:
- H1 acquisitions added 1.1m sq. ft of industrial & logistics space and 700 housing plots to the pipeline
- Secured planning for 397 residential units and 0.3m sq. ft of industrial & logistics space
- Applications for 7.4m sq. ft of industrial & logistics space and 1,641 plots progressing through the planning system
Investment Portfolio now 29% Grade A (31 December 2022: 18%)
- Significant progress in transitioning portfolio by largely retaining directly developed assets and disposing of those where value has been maximised through asset management initiatives
- Investment Portfolio sales completed in H1 total £52.1m, with a further £16.3m disposal completed after period end, all at prices broadly in line with December 2022 valuations
- Vacancy rate(2) of 11.6% at 30 June 2023 (31 December 2022: 8.3%); reduced to 1.1% by excluding space completed in the preceding 12 months (31 December 2022: 2.7%); 97% of rent collected for H1 2023 to date
- Leasing activity added £0.9m (6%) to annualised rent; new lettings at an average 1% premium to estimated rental values (‘ERVs’), and renewals and rent reviews on average 27% ahead of previous passing rent
Continued focus on making a lasting positive impact on the planet and communities
- Publication of Net Zero Carbon (‘NZC’) Pathway in April 2023, outlining the steps that the Group will take to achieve its ambition of being operationally NZC by 2030 and NZC for all emissions by 2040
- Opening of new 50-acre country park at Cadley Park in Derbyshire, providing new recreational space and wildlife habitats at the 600-home development
Strong balance sheet and financial position, with low gearing and significant available liquidity
- As at 30 June 2023 net debt was £63.7m (31 December 2022: £48.4m), representing a pro-forma LTV based on 31 December 2022 valuations of 9.2% (31 December 2022 6.6%)
- Available liquidity of £163.5m at 30 June 2023 (31 December 2022: £175.6m); no major refinancing requirements until 2027
Notes:
- European Real Estate Association Net Disposal Value, an adjusted Net Asset Value metric which is one of Harworth’s key Alternative Performance Measures.
- Calculated using the EPRA Best Practices Recommendations Guidelines. Occupier Ilke Homes, which represents 7% of headline rent roll, entered administration during the period, but has remained in occupation to date. The related space is therefore classified as occupied for the purposes of this calculation.