Harworth announces Half Year Results for 2023

Management actions underpin uptick in valuations and resilient EPRA NDV performance. Strong balance sheet with significant available liquidity.

Harworth Group plc, a leading regenerator of land and property for sustainable development and investment, today announces its results for the six months ended 30 June 2023.

“Harworth’s first half performance reflected good progress against strategic objectives, coupled with a strong operational delivery, which highlights 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 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, alongside progressing our alternative product offerings, including Build-to-Rent and Affordable Housing.

“Our management actions and sustained demand for our products have resulted in an uptick in valuations and EPRA NDV remaining broadly stable over the first six months of the year. The industrial & logistics market has stabilised over the period, albeit transactions are taking longer to complete, and the residential Build-to-Rent market is experiencing sustained demand. However, interest rate rises, cost inflation and planning delays are all impacting the housebuilders. House prices have remained reasonably resilient supported by reduced volumes of new build. While land buying is subdued and selective, we are seeing a good level of demand for our de-risked consented serviced land product.

“Harworth is a long-term through-the-cycle business, and we remain confident that our strategy to become a £1bn business by 2027 will deliver long-term value. Our significant landbank, specialist skillset and strong balance sheet position us well to maximise the significant value embedded in our sites.

Lynda Shillaw, Chief Executive, Harworth Group plc

Good occupier interest as direct development of industrial & logistics stock continues across 37.3m sq. ft pipeline:

  • Completed 110,000 sq. ft of Grade A space at Gateway 36 in Barnsley: 35% let, with good interest for remaining units
  • On-site with 166,000 sq. ft at the Advanced Manufacturing Park (‘AMP’) in Rotherham, which is 44% pre-let

Progressing sales and broadening the range of residential products across 28,359-plot pipeline:

  • After 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 progress securing planning approvals
  • Strong levels of interest received for Affordable Housing portfolio, launched in April 2023

Scaling up through land acquisitions and land promotion activities:

  • Acquisitions added 1.1m sq. ft of industrial & logistics space and 700 residential 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 residential 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 totalled £52.1m, with a further £17.9m of disposals completed after period end, all at prices in line with December 2022 valuations before selling costs
  • Vacancy rate(4) of 11.6% at 30 June 2023 (31 December 2022: 8.3%); reduced to 1.1% by excluding vacant space completed in the preceding 12 months (31 December 2022: 2.7%)
  • Leasing activity added £0.9m (6%) to annualised rent; new lettings, renewals and reviews at an average 4% premium to estimated rental values (‘ERV’), with renewals and reviews 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 is taking 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

Management actions drive broadly stable EPRA NDV

  • EPRA NDV(1)(2) per share decreased by 0.4% to 195.7p (31 December 2022: 196.5p), as first half valuation gains of £7.5m were offset by net operating costs, interest expenses and tax
  • Statutory net assets increased by 0.1% to £603.1m (31 December 2022: £602.7m)
  • Underlying increase of 10% in the interim dividend to 0.444p per share, in line with Group’s dividend policy
  • At reporting date, 98% of budgeted sales of the year either completed, exchanged or in heads of terms

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 an LTV of 8.6% (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:

(1) Harworth discloses both statutory and alternative performance measures (‘APMs’). A full description of, and reconciliation to, the APMs is set out in Note 2 to the financial statements
(2) European Public Real Estate Association (‘EPRA’) Net Disposal Value (‘NDV’)
(3) The Ex-dividend date, Record date and Payment date for the 2023 interim dividend can be found in the Shareholder Information section of this announcement
(4) 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.