REG - Harworth Group PLC - Year-end Trading Update

HarworthAnnouncement

31/01/2023 07:00

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RNS Number : 3291O  Harworth Group PLC  31 January 2023

Harworth Group plc

("Harworth" or "the Company")

Year-end Trading Update
Continued operational and strategic delivery despite a rapidly changing market backdrop in H2

 

Harworth Group plc, a leading regenerator of land and property for sustainable
development and investment, is today providing a trading update in respect of
its financial year ended 31 December 2022, ahead of the announcement of its
Full Year Results on 14 March 2023.

 

The Company anticipates that EPRA NDV((1)) as at 31 December 2022 will be
within the current market consensus range and towards the lower end((2)).
Demand has remained resilient throughout 2022, as evidenced by occupier
take-up in the Investment Portfolio and the completion of housebuilder land
sales on attractive terms. However, EPRA NDV has been impacted by
market-driven outward yield movements in the valuation of the Investment
Portfolio and more mature industrial & logistics major development sites,
amid rising interest rates and a softening of macroeconomic conditions.

 

Lynda Shillaw, Chief Executive of Harworth, commented: "We continued to make
significant operational progress in the second half, delivering across all
four pillars of our growth strategy, through increased levels of direct
development, accelerated land sales and targeted acquisitions. We ended the
year in a strong financial position, with low gearing and significant
available liquidity. Despite resilient demand and our management actions to
drive value across the portfolio, a combination of rising interest rates,
inflation and wider market and political headwinds have weighed heavily on
investor sentiment in the second half. This has translated into a reversal of
our first half valuation gains and a marginal net decline in valuations and
therefore in EPRA NDV over the year.

 

"Continued economic volatility means that the market backdrop for the year
ahead is challenging. Uncertainty is likely to remain in our markets until
interest rates reach their peak, and inflation falls back to manageable
levels, creating the conditions for growth and improved investor confidence.
Against this backdrop it is important to highlight that our focus markets of
residential and industrial & logistics are drivers of economic growth and
continue to have robust fundamentals, and that there remains an acute shortage
of high-quality consented land.

 

"Harworth is a long-term through-the-cycle business, which means that we look
through near-term market conditions. We control our landbank, where and when
we invest, and have a highly experienced management team who are focused on
execution. We are confident that our strategy is the right one to deliver
long-term value to stakeholders while making progress on our Net Zero Carbon
commitments, and our strong financial position, differentiated products, and
the scale and mix of our portfolio, position us well to realise the full
potential of our sites."

 

Continued direct development of Grade A space across 35.0m sq. ft industrial
& logistics pipeline, with good occupier demand

·      Completed 332,000 sq. ft development at Bardon Hill in
Leicestershire in September, which is targeting Net Zero Carbon in
construction status and is now part of the Investment Portfolio: 57% of space
currently let, with active discussions on remainder

·      Completion after year-end of 110,000 sq. ft at Gateway 36 in
Barnsley: 39,000 sq. ft already let, with significant interest received on
remaining units

·      After year-end, agreed terms for a 73,000 sq. ft built-to-suit
unit at the Advanced Manufacturing Park in Rotherham, to be retained in the
Investment Portfolio after completion

 

Robust housebuilder demand and management actions in line with strategy drove
significant growth in residential plot sales, with potential to deliver a
further 29,311 plots from pipeline

·      Completed residential land sales representing 2,236 plots (2021:
1,411 plots); H2 sales were at prices in line with, or ahead of, June 2022
valuations

·      First residential serviced land sale at Ironbridge development in
Shropshire, to Barratt and David Wilson Homes, for the delivery of the first
110 houses of the planned 1,000 at the site

·      Placemaking continues across sites: planning secured for new
retail provision at South East Coalville in Leicestershire and a medical
centre at Waverley, and planning submitted for new schools at South East
Coalville and Thoresby Vale in Nottinghamshire

·      Preferred investment and construction partners selected for
development by Harworth of a portfolio of up to 1,200 single-family Build to
Rent homes

 

Acquisitions further strengthen pipeline, with planning determinations
expected in the year

·      Acquisitions added 2,643 plots and 8.5m sq. ft to the pipeline;
these included entering option agreements to deliver up to 3.0m sq. ft of
industrial & logistics space at Fairburn in North Yorkshire, and up to
1.6m sq. ft adjacent to Junction 15 of the M1 in Northamptonshire

·      Secured planning for 248 residential units across three sites
during the year, and for 272,000 sq. ft of industrial & logistics space
after year-end across two sites

·      Applications for 2.8m sq. ft of industrial & logistics space
continuing to progress through the planning system

 

Investment Portfolio was 18% Grade A at year-end, and maintains strong
operational metrics, as a result of ongoing occupier demand and rising rents

·      Vacancy rate((3)) of 8.3% at year-end, reduced to 2.7% by
excluding recently completed Bardon Hill site (31 December 2021: 4.1%); 98% of
rent collected for 2022 to date

·      Leasing activity added £1.7m of annualised rent; new lettings at
an average 10% premium to estimated rental values ("ERVs"), and renewals on
average 8% ahead of previous passing rent

·      After year-end, completed the sale of Moorland Business Park in
Chorley for £5.3m, ahead of its June 2022 valuation, as part of strategy to
transition the Investment Portfolio to Grade A

 

Maintained focus on sustainability and plans to be Net Zero Carbon by 2040
(and by 2030 for operations)

·      All direct development constructed to Harworth's sustainable
commercial building specification

·      Significant progress in measurement, monitoring and reporting of
emissions, with Net Zero Carbon pathway to be published as part of Full Year
Results

 

Strong balance sheet and financial position, with low gearing and significant
available liquidity

·      Year-end net debt of £48.4m as at (31 December 2021: £25.7m),
representing a pro-forma LTV based on 31 December 2021 valuations of 7.2%

·      Available liquidity of £175.6m at year-end (31 December 2021:
£128.0m); no major refinancing requirements until 2027

 

Notes:

(1)    European Real Estate Association Net Disposal Value, an adjusted Net
Asset Value metric which is one of Harworth's key Alternative Performance
Measures.

(2)    Current consensus for 31 December 2022 EPRA NDV per share is 199p,
comprising four analyst forecasts ranging from 190p to 205p.

(3)    Calculated using the EPRA Best Practices Recommendations Guidelines,
with comparator recalculated on the same basis.

 

For further information

 

 Harworth Group plc
 Lynda Shillaw (Chief Executive)                               T: +44 (0114) 349 3131

 Kitty Patmore (Chief Financial Officer)                       E: investors@harworthgroup.com

 Tom Loughran (Head of Investor & Stakeholder Relations)

 FTI Consulting
 Dido Laurimore                                                T: +44 (0)20 3727 1000

 Richard Gotla                                                 E: Harworth@fticonsulting.com

 Eve Kirmatzis

 

About Harworth

 

Listed on the Premium Segment of the Main Market, Harworth Group plc (LSE:
HWG) is a leading sustainable regenerator of land and property for development
and investment which owns, develops and manages a portfolio of approximately
14,000 acres of land on around 100 sites located throughout the North of
England and Midlands. The Group specialises in the regeneration of large,
complex sites, in particular former industrial sites, into new residential and
industrial & logistics developments. Visit www.harworthgroup.com for
further information. LEI: 213800R8JSSGK2KPFG21

 

 

 

 

 

 

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