Harworth Group Plc · LSE:HWG
Harworth — FY2019 Earnings Presentation
34 slides from Harworth's earnings presentation, Mar 17, 2020
Slide 1: Preliminary Results 2019
PRELIMINARY RESULTS 2019 17 MARCH 2020 www.harworthgroup.com
Slide 2: Contents
CONTENTS 1. INVESTMENT CASE, STRATEGY AND MARKETS 3-9 OWEN MICHAELSON, CHIEF EXECUTIVE 2. 2019 FULL YEAR FINANCIAL PERFORMANCE AND MILESTONES DELIVERED 10-19 KITTY PATMORE, CHIEF FINANCIAL OFFICER 3. 2020 AND BEYOND 20-24 OWEN MICHAELSON, CHIEF EXECUTIVE 4. APPENDICES 25-33 2
Slide 3: Our Purpose
OUR PURPOSE Harworth invests to transform land and property into sustainable places where people want to live and work 3
Slide 4: Harworth remains well-positioned for long-term growth
INVESTMENT CASE, STRATEGY AND MARKETS HARWORTH REMAINS WELL-POSITIONED FOR LONG-TERM GROWTH GOOD OPERATIONAL PURPOSE SOUND MARKETS - PERFORMANCE DESPITE AND STRATEGY BUT POLITICAL CHALLENGES HEADWINDS IS CLEAR REMAIN Total return of 7.8% achieved from continued Refinement of purpose: emphasises our
Slide 5: Solid performance in 2019: key highlights
INVESTMENT CASE, STRATEGY AND MARKETS SOLID PERFORMANCE IN 2019: KEY HIGHLIGHTS ACQUISITION LAND PREP & & LAND MASTER- PLANNING INFRASTRUCTURE PLOT SALE & ASSET ASSEMBLY PLANNING APPROVAL DEVELOPMENT BUILD OUT MANAGEMENT 11 strategic land Live applications for Outline planning Remediation and site R
Slide 6: A long term track record of success
INVESTMENT CASE, STRATEGY AND MARKETS A LONG TERM TRACK RECORD OF SUCCESS HARWORTH HAS DELIVERED A LONG-TERM MARKET LEADING TOTAL RETURN WHILST PROVIDING SIGNIFICANT ECONOMIC AND SOCIETAL BENEFITS TOTAL RETURN CONSENTED RESIDENTIAL PLOTS CONSENTED COMMERCIAL LAND SOLD PER YEAR SOLD PER YEAR 20.0% 19
Slide 7: Business model delivers long term value creation
INVESTMENT CASE, STRATEGY AND MARKETS BUSINESS MODEL DELIVERS LONG TERM VALUE CREATION Recurring income CAPITAL Capital Asset REALISATION receipt management Placemaking Plot sale / Build out Reinvestment of Capital Indicative Value Add Infrastructure development Land preparation Planning approval Ha
Slide 8: Continuing residential market demand
INVESTMENT CASE, STRATEGY AND MARKETS CONTINUING RESIDENTIAL MARKET DEMAND DELIVERING A SUFFICIENT QUANTITY OF GOOD QUALITY NEW HOUSING REMAINS THE UK GOVERNMENT’S KEY LONG-TERM DOMESTIC PRIORITY TO ADDRESS Prospective first-time buyer affordability ratios, by region England and Wales, 2018 GOOD DEM
Slide 9: Industrial property market is solid
INVESTMENT CASE, STRATEGY AND MARKETS INDUSTRIAL PROPERTY MARKET IS SOLID DEMAND AND VACANCY RATES PERSIST IN INDUSTRIAL PROPERTY SECTOR , UNDERPINNING ITS PROJECTED GROWTH Supply and vacancy broadly stable CONSISTENT DEMAND FOR NEW SPACE 100m 25% Steady demand for well-located industrial space of a
Slide 10: Continued net asset growth
2019 FULL YEAR FINANCIAL PERFORMANCE AND MILESTONES DELIVERED CONTINUED NET ASSET GROWTH FOR THE TWELVE MONTHS ENDING 31 DECEMBER 2019, EPRA NNNAV PER SHARE ROSE BY 7.2% TO 155.6p, AND NAV PER SHARE BY 4.8% TO 144.1p 160.0p +7.2% 155.0p 155.6p 150.0p 11.5p 4.6p 1.1p 1.5p 0.7p 145.0p 145.2p 0.8p 0.9p
Slide 11: Value gains reflect progress across the portfolio
2019 FULL YEAR FINANCIAL PERFORMANCE AND MILESTONES DELIVERED VALUE GAINS REFLECT PROGRESS ACROSS THE PORTFOLIO STRONG VALUE GAINS PERFORMANCE BUT STRATEGIC LAND REVALUATION GAINS IMPACTED BY PLANNING HEADWINDS 2019 2018 TWELVE MONTHS TO 31 DECEMBER (£’m) Profit on Revaluation Total Value Total Valu
Slide 12: Strong residential land sales
2019 FULL YEAR FINANCIAL PERFORMANCE AND MILESTONES DELIVERED STRONG RESIDENTIAL LAND SALES RESIDENTIAL 101.6 ACRES OF ENGINEERED RESIDENTIAL LAND SOLD TO NATIONAL AND REGIONAL HOUSEBUILDERS ACROSS 6 SITES FOR A TOTAL CONSIDERATION OF £61.0M At our flagship development at Waverley, we made two dispo
Slide 13: Strong commercial land sales
2019 FULL YEAR FINANCIAL PERFORMANCE AND MILESTONES DELIVERED STRONG COMMERCIAL LAND SALES INDUSTRIAL & LOGISTICS COMMERCIAL LAND SALES AT OUR GATEWAY 45 LEEDS 50/50 JOINT VENTURE WITH EVANS PROPERTY GROUP THAT GENERATED A TOTAL OF £30.3M (£15.2M SHARE TO HARWORTH) 10 acres of fully serviced commerc
Slide 14: Continuing to manage cash flows to fund growth
2019 FULL YEAR FINANCIAL PERFORMANCE AND MILESTONES DELIVERED CONTINUING TO MANAGE CASH FLOWS TO FUND GROWTH DISCIPLINED APPROACH WITH INVESTMENT IN INFRASTRUCTURE AND ACQUISITIONS LARGELY FUNDED THROUGH DISPOSALS • Net LTV of 12.1% at lower end of target range • Prudent gearing provides headroom an
Slide 15: Resilient income continues to cover operating costs
2019 FULL YEAR FINANCIAL PERFORMANCE AND MILESTONES DELIVERED RESILIENT INCOME CONTINUES TO COVER OPERATING COSTS Twelve months to 31 December (£’000) Capital Growth Income Generation Central Overheads 2019 Total 2018 Total Profit excluding value gains (2,644) 14,152 (8,028) 3,480 9,840 Profit from
Slide 16: Active asset management strategy in place
2019 FULL YEAR FINANCIAL PERFORMANCE AND MILESTONES DELIVERED ACTIVE ASSET MANAGEMENT STRATEGY IN PLACE INCOME STRATEGY BUSINESS SPACE PORTFOLIO IN DETAIL Properties actively managed to drive rental income and create value Vacancy (based on sq ft.): 6.2% WAULT: 13.5 years Intention to sustainably gr
Slide 17: Acquisition of unit and letting: Brighouse
INCOME CASE STUDY 2019 FULL YEAR FINANCIAL PERFORMANCE AND MILESTONES DELIVERED ACQUISITION OF UNIT AND LETTING: BRIGHOUSE PURCHASE AND LET OF INDUSTRIAL UNIT IN WEST YORKSHIRE HARWORTH PURCHASED THE c.65,000 SQ. FT UNIT OFF RUSSELL WAY, CLOSE TO JUNCTION 25 OF THE M62, IN OCTOBER FOR £3.8 MILLION (
Slide 18: Portfolio remains diversified
2019 FULL YEAR FINANCIAL PERFORMANCE AND MILESTONES DELIVERED PORTFOLIO REMAINS DIVERSIFIED PORTFOLIO CONCENTRATION PORTFOLIO SECTOR SPLIT NUFARM PHEASANT HILL PARK GATEWAY 45 WAVERLEY AMP HUGGLESCOTE GRANGE (COALVILLE) MELTON COMMERCIAL PARK MAJOR DEVELOPMENTS £199.4m 3 4 5 THORESBY VALE RESIDENTIA
Slide 19: Land pipeline strengthened
2019 FULL YEAR FINANCIAL PERFORMANCE AND MILESTONES DELIVERED LAND PIPELINE STRENGTHENED RESIDENTIAL PIPELINE: COMMERCIAL PIPELINE: PLOT NUMBERS SQUARE FEET TOTAL 29,596 plots 25.0m TOTAL 24.4m sq ft 30,000 Land pipeline now at highest point since re-listing, underpinning the PPAS/OPTIONS/ Group’s f
Slide 20: Acquisitions focus is resolute
2020 AND BEYOND ACQUISITIONS FOCUS IS RESOLUTE Perth WE REMAIN A TRUSTED PARTNER TO CORPORATES AND OTHER M8 Edinburgh LAND/PROPERTY OWNERS IN PROVIDING THEM WITH A CLEAN Glasgow EXIT, AS EVIDENCED BY OUR 2019 PURCHASES M74 Our acquisitions focus across all three core regions remains consistent and i
Slide 21: Outlook in detail
2020 AND BEYOND OUTLOOK IN DETAIL FOCUS REMAINS ON UNLOCKING LATENT PORTFOLIO VALUE AND SELECTIVE ACQUISITION Asset management Long-term non- Live applications for 3,133 17 major development sites at various stages of land consented pipeline of residential plots and over preparations and infrastruct
Slide 22: Creating sustainable places: the 'Harworth Way'
2020 AND BEYOND CREATING SUSTAINABLE PLACES: THE ‘HARWORTH WAY’ HARWORTH GROUP IS COMMITTED TO DELIVERING SHAREHOLDER RETURNS IN THE RIGHT WAY THROUGH CREATING SUSTAINABLE NEW PLACES THAT SUPPORT THE REGENERATION OF THE NORTH OF ENGLAND AND THE MIDLANDS. WE HAVE SELECTED 5 PRINCIPAL THEMES TO ADDRES
Slide 23: Making our developments more sustainable
2020 AND BEYOND MAKING OUR DEVELOPMENTS MORE SUSTAINABLE SIGNIFICANT WORK CONTINUES ACROSS OUR LANDHOLDINGS TO FUTURE-PROOF THEM FOR THE EVER-CHANGING NEEDS AND DEMANDS OF SOCIETY. IN 2019, THIS HAS INCLUDED THE FOLLOWING: Formulation and agreement of design codes covering key standards of developme
Slide 24: Harworth is well positioned for continued growth
2020 AND BEYOND HARWORTH IS WELL POSITIONED FOR CONTINUED GROWTH SOLID 2019 PERFORMANCE MEANS THAT HARWORTH IS WELL POSITIONED FOR FURTHER VALUE GROWTH AND DELIVERY OF PURPOSE Strong long-term pipeline of land for both residential and commercial development, including ongoing progress on 17 major de
Slide 25: Appendices
APPENDICES WE ACTIVELY SUPPORT THE SUSTAINABLE GROWTH OF OUR REGIONS 26 PROPERTY PORTFOLIO IN DETAIL: TOP 4 27 PROPERTY PORTFOLIO - VALUE MOVEMENT 29 FURTHER INCOME BREAKDOWN 30 CURRENT FINANCING FACILITIES 31 VALUATION METHODOLOGY 32 DISCLAIMER 33
Slide 26: We actively support the sustainable growth of our regions
APPENDICES WE ACTIVELY SUPPORT THE SUSTAINABLE GROWTH OF OUR REGIONS EVERY YEAR, WE ASK INDEPENDENT ECONOMIC RESEARCH CONSULTANCY EKOSGEN TO ASSESS THE ECONOMIC EFFECT OF WHAT THE HARWORTH GROUP HAS ALREADY DELIVERED THROUGH ITS LAND & PROPERTY PORTFOLIO AND WHAT IT COULD DELIVER IN THE FUTURE WE HA
Slide 27: Property portfolio in detail: top 4
APPENDICES PROPERTY PORTFOLIO IN DETAIL: TOP 4 BEFORE AFTER CURRENT SITE 1. WAVERLEY NEW COMMUNITY 2. HUGGLESCOTE GRANGE (COALVILLE) YORKSHIRE’S LARGEST EVER BROWNFIELD REDEVELOPMENT ONE OF THE MIDLANDS’ LARGEST AT THE FORMER ORGREAVE COLLIERY NEW RESIDENTIAL DEVELOPMENTS DEVELOPMENT PLANNED DEVELOP
Slide 28: Property portfolio in detail: top 4
APPENDICES PROPERTY PORTFOLIO IN DETAIL: TOP 4 BEFORE AFTER BEFORE AFTER 3. AMP (ADVANCED MANUFACTURING PARK) 4. PHEASANT HILL PARK ONE OF THE UK’S KEY CENTRES OF INDUSTRY AND REDEVELOPMENT OF THE FORMER ROSSINGTON COLLIERY PART OF WAVERLEY’S ONGOING REGENERATION IN SOUTH YORKSHIRE WHICH CLOSED IN 2
Slide 29: Property portfolio value movement
APPENDICES PROPERTY PORTFOLIO | VALUE MOVEMENT £620.0m £600.0m £580.0m £41.4m £50.6m £35.5m £560.0m £1.2m £34.5m £585.3m £540.0m £520.0m £525.7m £500.0m Value of Properties Development Acquisitions Disposals Net investment Revaluation Value of Properties at 31/12/18 spend in JVs gains at 31/12/19 No
Slide 30: Further income breakdown
APPENDICES FURTHER INCOME BREAKDOWN REVENUE CATEGORIES REVENUE BREAKDOWN £90.0m DEVELOPMENT PROPERTIES Recognition of sales of development properties to housebuilders and commercial occupiers £80.0m OTHER PROPERTY INCOME £70.0m Fee income including first PPA success with more income to come through
Slide 31: Current financing facilities
APPENDICES CURRENT FINANCING FACILITIES WEIGHTED AVERAGE COST OF DEBT IS 3.14% (USING 31 DECEMBER 2019 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
Slide 32: Valuation methodology
APPENDICES VALUATION METHODOLOGY PORTFOLIO IS VALUED TWICE YEARLY. VALUATION TECHNIQUES FOR THE BROAD CATEGORIES OF THE PORTFOLIO ARE: FORMAL YEAR-END VALUATION BY BNP PARIBAS AND SAVILLS, AND HALF YEAR VALUATION BY MANAGEMENT WITH BUSINESS SPACE STRATEGIC LAND & SELECTIVE REVIEW BY BNP PARIBAS Mark
Slide 33: Disclaimer
APPENDICES DISCLAIMER FOR THE PURPOSE OF THE FOLLOWING nature, these statements may involve risks, uncertainties In making this presentation available, Harworth makes no DISCLAIMER, REFERENCE TO THIS or assumptions given future events and circumstances recommendation to buy, sell or otherwise deal i
Slide 34: Head office and contact details
HEAD OFFICE BIRMINGHAM MANCHESTER LEEDS Advantage House Waterloo House Phoenix House Pinnacle T: 0114 349 3131 Poplar Way 20 Waterloo Street Cross Street 67 Albion Street E: enquiries@harworthgroup.com Rotherham Birmingham Manchester Leeds www.harworthgroup.com S60 5TR B2 5TB M2 4JF LS1 5AA