Harworth Group Plc · LSE:HWG
Harworth — H1 2019 Earnings Presentation
33 slides from Harworth's earnings presentation, Sep 10, 2019
Slide 1: Interim Results 2019
INTERIM RESULTS 2019 10 SEPTEMBER 2019 www.harworthgroup.com
Slide 2: Logistics North (August 2019)
Logistics North (August 2019) 2
Slide 3: Agenda
AGENDA 1. INVESTMENT CASE, STRATEGY, MARKETS AND PERFORMANCE 4-15 OWEN MICHAELSON, CHIEF EXECUTIVE 2. 2019 FIRST HALF FINANCIAL PERFORMANCE 16-19 JENNY CUTLER, INTERIM FINANCE DIRECTOR 3. STRATEGIC PRIORITIES AND OUTLOOK 20-22 OWEN MICHAELSON, CHIEF EXECUTIVE 4. APPENDICES 23-33 3
Slide 4: Investment Case
INVESTMENT CASE PART 1 HARWORTH GROUP PLC IS ONE OF THE UK’S LEADING REGENERATORS OF LAND AND PROPERTY FOR DEVELOPMENT AND INVESTMENT, CONSISTENTLY DELIVERING A MARKET-LEADING RETURN FOR SHAREHOLDERS STRONG PERFORMANCE SOUND MARKETS CLEAR STRATEGY WELL POSITIONED LONG-TERM TRACK RECORD FOCUS ON “BED
Slide 5: Strong Half-Year of Delivery
STRONG HALF-YEAR OF DELIVERY PART 1 POLITICAL UPHEAVAL CREATING PLANNING HEADWINDS STRONG PERFORMANCE SOUND MARKETS CLEAR STRATEGY CONTINUED MARKET-LEADING FOCUS REMAINS ON RESIDENTIAL & FOCUSED ON DELIVERING VALUE & INCOME PERFORMANCE IN THE FIRST HALF INDUSTRIAL SECTORS IN THE NORTH OF FROM CURREN
Slide 6: Vision & Strategy is Clear and Consistent
VISION & STRATEGY IS CLEAR AND CONSISTENT PART 1 Perth HARWORTH GROUP AIMS TO BE THE LEADING LAND AND PROPERTY REGENERATION SPECIALIST IN THE NORTH OF ENGLAND AND MIDLANDS, DELIVERING AGAINST SIX KEY PRIORITIES IN ITS CORE REGIONS M8 Edinburgh Glasgow M74 DEVELOPMENT REGIONS NORTH EAST 15 sites Dumf
Slide 7: Our Markets
OUR MARKETS PART 1 RESIDENTIAL INDUSTRIAL & LOGISTICS REMAINS THE UK GOVERNMENT’S KEY DOMESTIC PRIORITY FORECAST TO CONTINUE TO OUTPERFORM OTHER ASSET CLASSES GOOD DEMAND FOR LAND CONSISTENT DEMAND Continuing nationwide housing undersupply is driving consistently good Steady demand for well-located
Slide 8: Business Model Continues to Drive Sector-Leading Returns
BUSINESS MODEL CONTINUES TO DRIVE SECTOR-LEADING RETURNS PART 1 Recurring income CAPITAL Capital REALISATION receipt Asset management Plot sale / Build out Reinvestment of Capital Infrastructure Indicative Value Add development Land preparation Planning approval Masterplanning Competitive advantage
Slide 9: Strong Delivery in First Half
STRONG DELIVERY IN FIRST HALF PART 1 ACQUISITION LAND PREP & & LAND MASTER- PLANNING INFRASTRUCTURE PLOT SALE & ASSET ASSEMBLY PLANNING APPROVAL DEVELOPMENT BUILD OUT MANAGEMENT Six first half strategic Live applications for In early July, outline Remediation and site First half residential 18 new o
Slide 10: Executing on Sales
EXECUTING ON SALES PART 1 Waverley (July 2019) Gateway 45 Leeds (April 2019) RESIDENTIAL INDUSTRIAL & LOGISTICS 76 ACRES OF ENGINEERED RESIDENTIAL LAND SOLD COMMERCIAL SALES COMPLETED OR AGREED AT OUR TO HOUSEBUILDERS ACROSS FOUR SITES FOR A TOTAL GATEWAY 45 LEEDS 50/50 JOINT VENTURE WITH EVANS CONS
Slide 11: Income Case Study: Acquisition of Etherow Industrial Estate
INCOME CASE STUDY: ACQUISITION OF ETHEROW INDUSTRIAL ESTATE PART 1 10.4-acre Etherow Industrial Estate purchased in June for £6.5 million plus acquisition costs, utilising headroom within existing £100m Revolving Credit Facility (RCF) Situated two miles east of Junction 4 of the M67 with excellent a
Slide 12: Acquisitions
ACQUISITIONS PART 1 ix acquisitions made in H1 for a total consideration of S £18.8m including acquisition costs, comprising a mixture of strategic land and income-producing sites that could deliver 2,483 future residential plots, 0.1m sq ft of commercial space, and adds £0.7m per annum of new recur
Slide 13: Moss Nook site, St Helens (March 2019)
PART 1 Moss Nook site, St Helens (March 2019) 13
Slide 14: Attractive Portfolio Diversification
ATTRACTIVE PORTFOLIO DIVERSIFICATION PART 1 PORTFOLIO CONCENTRATION PORTFOLIO SECTOR SPLIT WAVERLEY AMP NUFARM THORESBY GATEWAY 45 COALVILLE MELTON COMMERCIAL PARK MAJOR DEVELOPMENTS £172.0m 4 MAJOR DEVELOPMENTS £63.3M 3 5 ROSSINGTON RESIDENTIAL 6 COMMERCIAL 2 7 FOUR OAKS BUSINESS PARK 8 47% 58% WAV
Slide 15: Land Pipeline
LAND PIPELINE PART 1 RESIDENTIAL PIPELINE: Significant future land pipeline in place, COMMERCIAL PIPELINE: providing consistent supply to underpin PLOT NUMBERS future sales and direct development based SQUARE FEET on current build-out assumptions 25,000 25m A mixture of deals are utilised to unlock
Slide 16: Delivering Net Asset Growth
DELIVERING NET ASSET GROWTH PART 2 For the twelve months ending 30 June 2019, EPRA NNNAV per share rose by 12.6% to 147.3p (NAV by 9.9% to 141.3p and EPRA NAV by 12.9% 150.6p) 150.0p 3.3p 145.0p 6.0p 4.4p 1.1p 0.6p 3.3p 0.1p 0.6p 0.4p 0.9p 140.0p 0.1p 135.0p 11.7p EPRA NAV per share 141.3p EPRA NNNA
Slide 17: Growing Income to Cover All Business Overheads
GROWING INCOME TO COVER ALL BUSINESS OVERHEADS PART 2 Six months to 30 June 19 Capital Income Central H1 2019 Total H1 2018 Total (£’m) Growth Generation Overheads Profit excluding value gains (0.8) 6.9 (4.1) 2.0 1.3 Profit from disposals 1 3.6 1.1 4.7 0.1 Revaluation gains2 6.4 6.4 10.4 Operating p
Slide 18: Managing Cash Flows to Fund Growth
MANAGING CASH FLOWS TO FUND GROWTH PART 2 DISCIPLINED APPROACH WITH INVESTMENT IN INFRASTRUCTURE AND ACQUISITIONS LARGELY FUNDED THROUGH DISPOSALS • Net LTV of 10.1%, within target 10%-15% range; this is the product of strong sales in H1 • Prudent gearing provides headroom and flexibility whilst rec
Slide 19: Substantial Cash and Facility Headroom of £53.4m at 30 June
SUBSTANTIAL CASH AND FACILITY HEADROOM OF £53.4M AT 30 JUNE PART 2 CASH PLUS AVAILABLE RCF HEADROOM £60,000k Headroom comprises a combination of £50,000k available debt from the Revolving Credit Facility (RCF) (£42.0m) and cash position £40,000k (£11.4m) £30,000k 56,215 52,255 53,436 This headroom p
Slide 20: Strategic Priorities and Outlook
STRATEGIC PRIORITIES AND OUTLOOK PART 3 ACQUISITIONS SALES PLANNING LETTINGS In exclusive negotiations Well advanced with 2019 Live applications for 1,715 Tenants being actively sought on sites within each of our sales, with over 70% of plots and c. 3.2m sq. ft for five co-interest and one core regi
Slide 21: Acquisition Focus is Resolute
ACQUISITION FOCUS IS RESOLUTE PART 3 Regional operating model improves our access to strategic land and investment acquisition opportunities that will drive future value gains Our acquisitions resource is now embedded within regional teams Acquisition focus is resolute and consistent: ‘big, dirty an
Slide 22: Strong Half-Year of Delivery
STRONG HALF-YEAR OF DELIVERY PART 1 POLITICAL UPHEAVAL CREATING PLANNING HEADWINDS STRONG PERFORMANCE SOUND MARKETS CLEAR STRATEGY CONTINUED MARKET-LEADING FOCUS REMAINS ON RESIDENTIAL & FOCUSED ON DELIVERING VALUE & INCOME PERFORMANCE IN THE FIRST HALF INDUSTRIAL SECTORS IN THE NORTH OF FROM CURREN
Slide 23: Part 4 - Appendices
PART 4 - APPENDICES A BRIEF HISTORY 24 PROPERTY PORTFOLIO IN DETAIL 25 PROPERTY PORTFOLIO - MOVEMENT 26 PROPERTY PORTFOLIO - SALES 27 VALUATION METHODOLOGY 28 INCOME PROFILE IN DETAIL 29 NET ASSET GROWTH IN H1 30 CURRENT FINANCING 31 DISCLAIMER 32 23 www.harworthgroup.com
Slide 24: A Brief History
A BRIEF HISTORY PART 4 2004 - 2012 2012 - 2014 2015 ONWARDS PROPERTY DIVISION WITHIN HARWORTH ESTATES WAS 24.9% RE-LAUNCHED AS UK COAL PLC OWNED BY CFR PLC HARWORTH GROUP PLC In 1994, RJB Mining (founded In December 2012, after a complex February 2015, Harworth agreed In in 1974) bought British Coal
Slide 25: Property Portfolio in Detail
PROPERTY PORTFOLIO IN DETAIL PART 4 HOUSE PLOTS COMMERCIAL SPACE TOP TEN SITES TYPE REGION ACRES CONSENTED SOLD/BUILT CONSENTED BUILT WAVERLEY (RESI) Development Yorkshire & Central 432 3,890 1,570/900 - - COALVILLE Development Midlands 346 2,016 - - - NUFARM Investment Yorkshire & Central 112 - - 0
Slide 26: Property Portfolio Movement and Sales Analysis | Movement
PROPERTY PORTFOLIO | MOVEMENT AND SALES ANALYSIS | MOVEMENT PART 4 £570.0m £550.0m £18.8m £33.8m £530.0m £10.0m £6.4m £2.4m £510.0m £490.0m £525.7m £524.7m £470.0m £450.0m Properties at: Development Acquisitions Disposals JVs Revaluation Properties at: 31/12/18 spend gains 30/06/19 Notes: Total valu
Slide 27: Property Portfolio Movement and Sales Analysis | Sales
PROPERTY PORTFOLIO | MOVEMENT AND SALES ANALYSIS | SALES PART 4 NNNAV Cost Accrual Fees Profit/Loss on Sale Financing Element £50.0m £50.0m £45.6m £46.3m £3.6m £3.6m £2.3m £0.5m £40.0m £2.1m £0.5m £40.0m £11.7m £11.7m £30.0m £30.0m £20.0m £20.0m £27.7m £28.2m £10.0m £10.0m £7.0m £4.8m £1.2m £2.9m £1
Slide 28: Valuation Methodology
VALUATION METHODOLOGY PART 4 PORTFOLIO IS VALUED TWICE VALUATION TECHNIQUES FOR THE BROAD CATEGORIES OF THE PORTFOLIO ARE: YEARLY. FORMAL YEAR-END VALUATION BY BNP PARIBAS BUSINESS SPACE STRATEGIC LAND DEVELOPMENT SITES AND SAVILLS, AND HALF YEAR VALUATION BY Market comparison with direct Discounted
Slide 29: Income in Detail
INCOME IN DETAIL PART 4 DEVELOPMENT PROPERTIES REVENUE BREAKDOWN Recognition of sales of development properties £70.0m OTHER PROPERTY INCOME £60.0m First PPA success with more income to come through in future years Promote fees pursued but will occur infrequently (none in H1) £50.0m BUSINESS SPACE £
Slide 30: Continued Net Asset Growth in H1
CONTINUED NET ASSET GROWTH IN H1 PART 4 For the six months ending 30 June 2019, EPRA NNNAV per share rose by 1.4% to 147.3p (NAV by 2.8% to 141.3p and EPRA NAV by 1.6% 150.6p) 150.0p EPRA NAV per share 3.3p EPRA NNNAV per share 3.1p NAV per share 145.0p 6.0p 0.6p 0.4p 0.4p 1.1p 0.6p 0.2p 7.7p 0.2p 1
Slide 31: Current Financing
CURRENT FINANCING PART 4 WEIGHTED AVERAGE COST OF DEBT IS 3.24% (USING 30 JUNE 19 BALANCES AND RATES) WITH A 0.84% NON-UTILISATION FEE ON UNDRAWN RCF AMOUNTS £45m fixed at 1.235% plus 210 basis point margin until July 2022 LENDER SITE AMOUNT DRAWN (£’K) INTEREST RATE END DATE 20 business days from t
Slide 32: Disclaimer
DISCLAIMER PART 4 FOR THE PURPOSE OF THE FOLLOWING 2019. By their nature, these statements may involve the same, provided that nothing in this paragraph shall DISCLAIMER, REFERENCE TO THIS risks, uncertainties or assumptions given future events exclude liability for any representations or warranty a
Slide 33: Ironbridge Power Station site (July 2019)
Ironbridge Power Station site (July 2019) 33