Harworth Group Plc · LSE:HWG
Harworth — H1 2020 Earnings Presentation
39 slides from Harworth's earnings presentation, Oct 6, 2020
Slide 1: Interim Results 2020
INTERIM RESULTS 2020 6TH OCTOBER 2020 www.harworthgroup.com
Slide 2: Harworth invests to transform land and property into sustainable places
Harworth invests to transform land and property into sustainable places where people want to live and work
Slide 3: Interim Results 2020 agenda
INTERIM RESULTS 2020 1. WELL POSITIONED TO DELIVER LONG-TERM VALUE 4 OWEN MICHAELSON, CHIEF EXECUTIVE 2. SOLID PERFORMANCE IN H1 5-14 OWEN MICHAELSON, CHIEF EXECUTIVE 3. AN UNDERLYING ROBUST BUSINESS 15-20 KITTY PATMORE, CHIEF FINANCIAL OFFICER 4. WELL POSITIONED FOR THE FUTURE 21-26 KITTY PATMORE,
Slide 4: Well positioned to deliver long-term value
WELL POSITIONED TO DELIVER LONG-TERM VALUE PURPOSE CREATING SUSTAINABLE NEW PLACES WHERE PEOPLE WANT TO LIVE AND WORK IS MORE RELEVANT THAN EVER FOLLOWING THE COVID-19 PANDEMIC LONG-TERM UNDERSUPPLY Annual delivery well below E-TAILING AND LACK Occupancy rates ONLY CONTINUES TO DRIVE 300,000 OF SUPP
Slide 5: Solid performance in H1 2020: key highlights
SOLID PERFORMANCE IN H1 SOLID PERFORMANCE IN H1 2020: KEY HIGHLIGHTS ACQUISITIONS & LAND ASSEMBLY Land acquisitions and PPAs with potential for 1,438 residential plots Income acquisitions generating £1.2m annual rent at 10% NIY Biggest ever land pipeline MASTERPLANNING PLANNING APPROVAL LAND PREPARA
Slide 6: Harworth is trading well through the COVID-19 pandemic
HARWORTH IS TRADING WELL THROUGH THE SOLID PERFORMANCE IN H1 COVID-19 PANDEMIC THE BUSINESS HAS REMAINED ACTIVE EPRA NDV PER SHARE REMAINS HIGHER THAN H1 2019 THROUGH THE FIRST HALF, MITIGATING 200 THE EFFECT OF COVID-19 EPRA NDV in pence per share Profitable sales, strong rent collection and milest
Slide 7: Government ambition to 'Build Build Build' further supports growth
GOVERNMENT AMBITION TO ‘BUILD BUILD BUILD’ SOLID PERFORMANCE IN H1 FURTHER SUPPORTS GROWTH DEVOLUTION Further funding to regional authorities has been announced in 2020 as part of the Government’s levelling-up agenda. This includes funding allocations for infrastructure, low-carbon energy and other
Slide 8: Acquisitions: growing the strategic land pipeline and investment portfolio
ACQUISITIONS: GROWING THE STRATEGIC LAND SOLID PERFORMANCE IN H1 PIPELINE AND INVESTMENT PORTFOLIO ACQUISITIONS TOTALLING £13.8M (INCLUDING COSTS) IN H1 2020 One strategic land acquisition made in Bolton that could deliver 140 new residential plots; application to be submitted to Bolton Council in t
Slide 9: Planning progress made but headwinds remain
SOLID PERFORMANCE IN H1 PLANNING PROGRESS MADE BUT HEADWINDS REMAIN Planning success achieved at Woodville, Derbyshire in the first half of 2020, adding 300 plots to our consented residential landbank This was followed up by the receipt of planning consent for Phases 2 and 3 of our Gateway 36 develo
Slide 10: Planning case study: Gateway 36 Phases 2 and 3
SOLID PERFORMANCE IN H1 PLANNING CASE STUDY: GATEWAY 36 PHASES 2 AND 3 BARNSLEY COUNCIL GRANTED CONSENT FOR UP TO 1.1M SQ. FT OF NEW EMPLOYMENT SPACE ACROSS 95 ACRES OF LAND IN JULY 2020, WHICH COULD DELIVER UP TO 2,410 JOBS FOR YORKSHIRE ADJACENT TO JUNCTION 36 OF THE M1 Consented masterplan propos
Slide 11: Strong commercial and residential sales progress
SOLID PERFORMANCE IN H1 STRONG COMMERCIAL AND RESIDENTIAL SALES PROGRESS SALES TOTALLING £30.8M ACHIEVED DURING THE PERIOD, ALL AT OR ABOVE BOOK VALUE Disposal in March of 19.5 acres of industrial land at Skelton Grange in Leeds to Wheelabrator Technologies for a total consideration of £13.0m, in ex
Slide 12: Sales case study: Hugglescote Grange
SOLID PERFORMANCE IN H1 SALES CASE STUDY: HUGGLESCOTE GRANGE FIRST MAJOR RESIDENTIAL LAND SALE SINCE ESTABLISHMENT OF MIDLANDS OFFICE Hugglescote Grange is a 328-acre site, less than two miles from Junction 22 of the M1, with an outline consent in place for 2,016 new homes, alongside supporting uses
Slide 13: Investment portfolio remains resilient and continues to grow
SOLID PERFORMANCE IN H1 INVESTMENT PORTFOLIO REMAINS RESILIENT & CONTINUES TO GROW INCREASING THE BREADTH AND DEPTH OF OUR INVESTMENT PORTFOLIO REMAINS A LONG-TERM PRIORITY, WITH OVERHEADS AND INTEREST COSTS CONTINUING TO BE COVERED BY OUR RECURRING INCOME BASE FROM PREDOMINANTLY INDUSTRIAL TENANTS
Slide 14: Investment case study: Thorns Road
SOLID PERFORMANCE IN H1 INVESTMENT CASE STUDY: THORNS ROAD THORNS ROAD INDUSTRIAL ESTATE ACQUIRED IN JUNE FROM XANDOR AUTOMOTIVE FOR £10.1M PLUS ACQUISITION COSTS Close to both Dudley and Stourbridge town centres and less than ten miles from Birmingham City Centre, the 20.5-acre site comprises three
Slide 15: Net asset value movement
AN UNDERLYING ROBUST BUSINESS NET ASSET VALUE MOVEMENT FOR THE SIX MONTHS ENDING 30 JUNE 2020, EPRA NDV PER SHARE FELL BY 4.5% TO 148.6p, AND NAV PER SHARE BY 1.3% TO 142.2p 160.0p 155.6p 155.0p 4.6p 150.0p 11.5p 148.6p 145.0p 0.8p 6.4p (1.4p) 0.7p (0.5p) (0.5p) (0.2p) 140.0p (5.9p) 144.1p 142.2p 13
Slide 16: Value gains across the portfolio
AN UNDERLYING ROBUST BUSINESS VALUE GAINS ACROSS THE PORTFOLIO ROBUST PERFORMANCE FROM DIVERSIFIED PORTFOLIO DESPITE PANDEMIC UNCERTAINTY HY 2020 2019 SIX MONTHS TO 30 JUNE (£’m) Profit on Revaluation Total Value Portfolio Value Total Value Gains disposal gains/(losses) Gains/(Losses) MAJOR DEVELOPM
Slide 17: Portfolio remains diversified
AN UNDERLYING ROBUST BUSINESS PORTFOLIO REMAINS DIVERSIFIED PORTFOLIO CONCENTRATION PORTFOLIO SECTOR SPLIT GATEWAY 45 WAVERLEY AMP NUFARM MELTON COMMERCIAL PARK MAJOR DEVELOPMENTS PHEASANT HILL PARK HUGGLESCOTE GRANGE (COALVILLE) COMMERCIAL £46.6m MAJOR DEVELOPMENTS FOUR OAKS BUSINESS PARK RESIDENTI
Slide 18: Underlying profitable business
AN UNDERLYING ROBUST BUSINESS UNDERLYING PROFITABLE BUSINESS Six months to 30 June (£’000) Capital Growth Income Generation Central Overheads 2020 Total 2019 Total Profit excluding value gains (850) 7,592 (4,369) 2,373 2,041 Profit from disposals1 4,168 544 4,712 4,735 Revaluation2 (34,119) 6,195 (2
Slide 19: Our income portfolio in detail
AN UNDERLYING ROBUST BUSINESS OUR INCOME PORTFOLIO IN DETAIL INCOME STRATEGY PREDOMINANTLY INDUSTRIAL TENANT PORTFOLIO Investment properties are actively managed by our in-house Income Generation team to drive recurring income and value gains BUSINESS SPACE Aim remains to grow our recurring income b
Slide 20: Continuing to manage cash flows to fund growth
AN UNDERLYING ROBUST BUSINESS CONTINUING TO MANAGE CASH FLOWS TO FUND GROWTH DISCIPLINED APPROACH WITH INVESTMENT IN INFRASTRUCTURE AND ACQUISITIONS LARGELY FUNDED THROUGH DISPOSALS • Net LTV of 12.4% at lower end of target range as at 30 June 2020 • Prudent gearing provides headroom and flexibility
Slide 21: Delivery targets for remainder of 2020
WELL POSITIONED FOR THE FUTURE DELIVERY TARGETS FOR REMAINDER OF 2020 STRATEGY REMAINS CONSISTENT: DRIVING THE CAPITAL GROWTH OF OUR PORTFOLIO AND INCREASING OUR RECURRING INCOME BASE, MAINTAINING FOCUS ON OUR CORE ASSET CLASSES AND REGIONS ACQUISITIONS SALES PLANNING INCOME Active in all three core
Slide 22: Long-term land pipeline
WELL POSITIONED FOR THE FUTURE LONG-TERM LAND PIPELINE L AND PIPELINE NOW AT HIGHEST POINT SINCE RE-LISTING, UNDERPINNING THE GROUP’S FUTURE RESIDENTIAL PIPELINE: COMMERCIAL PIPELINE: SALES AND DEVELOPMENT PROGRAMMES PLOT NUMBERS SQUARE FEET Land portfolio continues to meet our purpose of 30.0m 35,0
Slide 23: Latent value in underlying portfolio
LATENT VALUE IN UNDERLYING PORTFOLIO FOR WELL POSITIONED FOR THE FUTURE SALES & INCOME FOCUS REMAINS ON UNLOCKING LATENT PORTFOLIO VALUE AND SELECTIVE ACQUISITIONS Asset Live applications for 2,391 management Long-term non- 17 major development sites at various stages of land consented pipeline of r
Slide 24: Our residential markets have solid fundamentals
OUR RESIDENTIAL MARKETS HAVE WELL POSITIONED FOR THE FUTURE SOLID FUNDAMENTALS DELIVERING A SUFFICIENT QUANTITY OF GOOD QUALITY NEW HOUSING REMAINS THE UK GOVERNMENT’S KEY LONG-TERM DOMESTIC PRIORITY THE UK STILL DELIVERS LESS THAN ITS 300,000 HOMES TARGET DEMAND FOR LAND IS CONSISTENT 400,000 Conti
Slide 25: Industrial market is very strong, driven by e-tailing
WELL POSITIONED FOR THE FUTURE INDUSTRIAL MARKET IS VERY STRONG, DRIVEN BY E-TAILING DEMAND AND LOW VACANCY RATES PERSIST IN INDUSTRIAL PROPERTY SECTOR , UNDERPINNING ITS PROJECTED GROWTH INDUSTRIAL AND LOGISTICS TAKE UP LEADING PROPERTY SUB-SECTOR 40 Q1 Q2 Industrial sector has strengthened as a re
Slide 26: We are well positioned for growth
WELL POSITIONED FOR THE FUTURE WE ARE WELL POSITIONED FOR GROWTH WELL POSITIONED FOR LONG-TERM GROWTH CAPITALISING ON THE OPPORTUNITIES CREATED BY THE RENEWED POLITICAL FOCUS ON THE MIDLANDS AND THE NORTH OF ENGLAND AND THE ACCELERATED STRUCTURAL SECTOR CHANGES AS A RESULT OF COVID-19 PANDEMIC igges
Slide 27: Appendix 1: ESG and the Harworth Way
APPENDIX 1: ESG AND THE HARWORTH WAY BASIS OF THE HARWORTH WAY 28 COMMUNITIES 29 PLANET 30 PEOPLE 31 PARTNERS 32 GOVERNANCE 33
Slide 28: ESG: the basis of the 'Harworth Way'
APPENDIX 1: THE HARWORTH WAY ESG: THE BASIS OF THE ‘HARWORTH WAY’ We launched ‘The Harworth Way’ in March 2020 to reflect how we’re tackling some of society’s key COMMUNITIES challenges through our work. This forms part of our commitment to delivering shareholder returns in the WE BUILD AND STRENGTH
Slide 29: The Harworth Way: Communities
APPENDIX 1: THE HARWORTH WAY THE HARWORTH WAY: COMMUNITIES COMMUNITIES WE BUILD AND STRENGTHEN OUR COMMUNITIES NOW AND FOR FUTURE GENERATIONS We act as long-term site custodian on our developments, meaning that we are part of the fabric of places We are delivering some of the largest commercial and
Slide 30: The Harworth Way: Planet
APPENDIX 1: THE HARWORTH WAY THE HARWORTH WAY: PLANET PLANET WE AIM TO CREATE PLACES IN A SUSTAINABLE WAY, FUTURE PROOFING OUR SITES AS WELL AS MINIMISING OUR OWN ENVIRONMENTAL IMPACT In our role as master developer, we often regenerate sites with former industrial uses, safely managing any environm
Slide 31: The Harworth Way: People
APPENDIX 1: THE HARWORTH WAY THE HARWORTH WAY: PEOPLE PEOPLE WE AIM TO BUILD A BUSINESS WHERE PEOPLE CAN FLOURISH AND PLACEMAKE TO PROVIDE SPACES THAT PROMOTE HEALTH & WELLBEING We develop the skills of our people and live the “Harworth Values” Strong Health & Safety culture in place, promoting resp
Slide 32: The Harworth Way: Partners
APPENDIX 1: THE HARWORTH WAY THE HARWORTH WAY: PARTNERS PARTNERS WE DEVELOP STRONG PARTNERSHIPS BASED ON A SHARED SOCIALLY RESPONSIBLE APPROACH WORKING TOWARDS CREATING GREAT NEW PLACES We focus on creating sustainable value through continuing partnerships with customers, local authorities, the Gove
Slide 33: The Harworth Way: Governance
APPENDIX 1: THE HARWORTH WAY THE HARWORTH WAY: GOVERNANCE GOVERNANCE HIGH STANDARDS OF CORPORATE GOVERNANCE ARE ESSENTIAL TO THE EFFECTIVE OPERATION OF THE GROUP Good governance has been built into the foundations of the Harworth approach from the start. We are now profiling better how governance su
Slide 34: Appendix 2: Detailed portfolio information
APPENDIX 2: DETAILED PORTFOLIO INFORMATION PROPERTY VALUATION MOVEMENT 35 VALUATION METHODOLOGY 36 CURRENT FINANCING FACILITIES 37 DISCLAIMER 38
Slide 35: Property valuation movement
APPENDIX 2: DETAILED PORTFOLIO INFORMATION PROPERTY VALUATION MOVEMENT £620.0m £13.8m £600.0m £23.9m £13.4m £0.3m £580.0m £27.9m £560.0m £585.3m £560.4m £540.0m £520.0m £500.0m Value of Properties Development Acquisitions Disposals Net Investment Revaluation Value of Properties at 31/12/2019 spend i
Slide 36: Valuation methodology
APPENDIX 2: DETAILED PORTFOLIO INFORMATION VALUATION METHODOLOGY THE PORTFOLIO IS VALUED TWICE VALUATION TECHNIQUES FOR THE BROAD CATEGORIES OF THE PORTFOLIO ARE: YEARLY. FORMAL YEAR-END VALUATIONS ARE UNDERTAKEN BY BNP AND SAVILLS, WHILST THEY HAVE ALSO BUSINESS SPACE STRATEGIC LAND & UNDERTOOK A D
Slide 37: Current financing facilities
APPENDIX 2: DETAILED PORTFOLIO INFORMATION CURRENT FINANCING FACILITIES WEIGHTED AVERAGE COST OF DEBT IS 3.27% (USING 30 JUNE 2020 BALANCES AND RATES) WITH A 0.9% NON-UTILISATION FEE ON UNDRAWN RCF AMOUNTS £45m fixed at 1.235% plus 225 basis point margin until July 2022 LENDER SITE AMOUNT DRAWN (£’K
Slide 38: Disclaimer
DISCLAIMER For the purpose of the following disclaimer, reference to this ‘presentation’ shall be Actual results may differ materially from those expressed in forward-looking deemed to include reference to the presentation slides, the presenters’ speeches, statements. As such, you are cautioned not
Slide 39: Contact details
SECTION 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