Harworth Group Plc · LSE:HWG
Harworth — Investor Day (June 2022)
50 slides from Harworth's investor day presentation, Jun 15, 2022
Slide 1: Capital Markets Day
CAPITAL MARKETS DAY 15 June 2022 Picture: South East Coalville
Slide 2: Introduction & Strategy Update
INTRODUCTION & STRATEGY UPDATE LYNDA SHILLAW Chief Executive
Slide 3: What we will cover in today's session
What we will cover in today’s session An update on our progress in delivering our strategy to reach £1bn of EPRA NDV An overview of our focus markets of industrial & logistics and residential, which have strong underlying market drivers Further detail on our direct development strategy in indu
Slide 4: Today's speakers
Today’s speakers Lynda Shillaw Andrew Blackshaw Jonathan Haigh David Cockroft Chief Executive Chief Operating Officer Chief Investment Officer Regional Director - Midlands 4
Slide 5: Also joining us today
Also joining us today Kitty Patmore Haroon Akram James Crow Tom Loughran Chief Financial Officer Director of Strategy, Business Head of Mixed Tenure Head of Investor & Development & Investment Stakeholder Relations 5
Slide 6: Agenda
Agenda TIME ITEM LOCATION 10:30 PRESENTATION • Introduction and strategy update (Lynda Shillaw) • Our markets (Andrew Blackshaw) Ansty Hall Hotel, Coventry, Warwickshire • Our direct development strategy in industrial & logistics (Jonathan Haigh) • Overview of the Midlands region (David Cockroft) •
Slide 7: Latest highlights
Latest highlights INDUSTRIAL & LOGISTICS RESIDENTIAL PIPELINE GROWING OUR STRATEGIC ADVANCING 635,000 SQ. FT PIPELINE (SQ. FT) (PLOTS) LANDBANK OF DIRECT DEVLOPMENT 32.2m 30,804 30,557 Bardon Hill to practically 30,668 29,596 27.3m 28.2m 24.4m Land assembly acquisitions complete in August 2022 21.3m
Slide 8: Progress against our growth strategy
Progress against our growth strategy GROWTH DRIVERS 2015 - 2020 TODAY AMBITION BY 2027 1. Increasing direct development of industrial 200k sq. ft developed 635,000 sq. ft of direct development 800k sq. ft developed on average per annum underway on average per annum & logistics stock 100% of budgeted
Slide 9: Delivering the Harworth Way
Delivering the Harworth Way 1. Delivering homes, 3. Reducing CO2 emissions supporting jobs, creating communities Operationally Net Zero Carbon by 2030 2. Promoting healthy lifestyles and wellbeing Fully Net Zero Carbon by 2040 4. Building greener 5. Increasing biodiversity 6. Developing responsibly
Slide 10: Market backdrop
Market backdrop A very challenging environment for businesses and consumers Demand for residential plots and industrial & logistics space has remained robust Resilience in Harworth’s strategy and operating model: Sale of serviced plots provides a de-risked option for housebuilders Launch o
Slide 11: Our Markets
OUR MARKETS ANDREW BLACKSHAW Chief Operating Officer
Slide 12: The role of the Chief Operating Officer
The role of the Chief Operating Officer Operational delivery by Harworth’s regional teams Shared Ensuring regional teams Ensuring appropriate responsibilities work effectively with resources across with CFO and CIO finance and central regional teams to teams implement strategy Chief Operating Office
Slide 13: Supply and demand drivers in-tact, despite headwinds
INDUSTRIAL & LOGISTICS Supply and demand drivers in-tact, despite headwinds Driving demand Headwinds Near-shoring, New uses e.g. Cost Online Faster Population and re-shoring and robotics, data inflation retail deliveries housing growth stockpiling centres Economic growth Availability of Planning lab
Slide 14: Record take-up, from a diverse range of occupiers
INDUSTRIAL & LOGISTICS Record take-up, from a diverse range of occupiers UK industrial space take-up in 2021 the strongest on record Third-party logistics and manufacturers driving demand 60 100% 90% Third-party logistics (3PL) 50 80% 70% 40 60% Sq. ft. (m) Take-up 30 50% Online 40% retail 20 30% 20
Slide 15: Harworth regions saw highest demand growth in 2021
INDUSTRIAL & LOGISTICS Harworth regions saw highest demand growth in 2021 Harworth regions 14 12 10 Take-up (Sq. ft millions) 8 6 4 2 0 SE & London East Midlands West Midlands Yorkshire & The North West South West and Wales East of England Scotland Humber 2017 2018 2019 2020 2021 15-year average Sou
Slide 16: Supply continues to be constrained
INDUSTRIAL & LOGISTICS Supply continues to be constrained Supply at its lowest level on record in Q4 2021 Average rents increasing across the market, vacancy falling 40 60% £7.40 14% 35 £6.90 12% 50% 30 £6.40 10% 40% 25 £5.90 Supply (sq. ft. m) 8% Vacancy Rate Average Rent 20 30% £5.40 6% 15 £4.90 2
Slide 17: Priorities for occupiers
INDUSTRIAL & LOGISTICS Priorities for occupiers Long standing priorities Growing in importance Accessibility Net Zero Carbon Power Power+++ Workforce Potential for automation Rental affordability Workplace environment Intermodal connectivity 17
Slide 18: Continued strong demand and constrained supply
RESIDENTIAL Continued strong demand and constrained supply Driving demand Headwinds The ‘race for Government Availability of Different types Cost of Population space’ e.g. for incentives for mortgage and tenures of materials growth homeworking home buyers finance housing Cost of living Availability
Slide 19: House prices have continued to grow, despite consumer headwinds
RESIDENTIAL House prices have continued to grow, despite consumer headwinds 16% 14% 12% 10% 8% 6% 4% 2% 0% 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 House price growth Consumer Prices Index including owner occupiers' housing costs (CPIH) Sources: Nationwide House Price Index, ONS 19
Slide 20: Build to rent market growing
RESIDENTIAL Build to rent market growing Rising demand for purpose-built PRS Investment market for PRS remains strong Forecast 35,000 £2,500 30,000 £2,000 25,000 Completions of PRS units £1,500 20,000 15,000 £1,000 10,000 £500 5,000 0 £0 Q1 2015 Q4 2015 Q1 2016 Q4 2016 Q1 2017 Q4 2017 Q1 2018 Q4 201
Slide 21: The market for single-family BTR
RESIDENTIAL The market for single-family BTR Market backdrop Characteristics of a single-family BTR housing scheme Suburban locations, more reliant on car and road infrastructure; bus stops desirable On the periphery of employment hubs 53% of the private c.60% of renters are rented sector (2.3m
Slide 22: Harworth's single-family BTR portfolio
RESIDENTIAL Harworth’s single-family BTR portfolio Launched in May 2022 Portfolio of up to 1,200 homes across up to 10 sites in Yorkshire, the Midlands and the North West Unique forward funding and long-term investment opportunity for prospective partner Portfolio optimised for single- famil
Slide 23: Single-family BTR: Waverley, South Yorkshire
RESIDENTIAL Single-family BTR: Waverley, South Yorkshire Proposed site for c.154 single- Existing residential area: 1,886 family BTR homes plots sold of 3,890 planned Olive Lane to 310 acres bring further of green community space amenities Waverley Junior Academy Employment opportunities at the AMP
Slide 24: Project Spur indicative timeline
RESIDENTIAL Project Spur indicative timeline 5 May 2022 June 2022 Summer 2022 End of 2022 Next 3 years Launch of marketing Deadline for first Preferred Target date for Build-out, with materials stage of bidding investment partner exchange of phased handovers process selected contracts with over this
Slide 25: Our Direct Development Strategy in Industrial & Logistics
OUR DIRECT DEVELOPMENT STRATEGY IN INDUSTRIAL & LOGISTICS JONATHAN HAIGH Chief Investment Officer
Slide 26: The role of the Chief Investment Officer
The role of the Chief Investment Officer Managing the Investment Portfolio Shared Oversight of responsibilities Ensuring regional Technical, Natural with COO and teams work effectively Resources and Asset CFO with central teams Management teams Chief Investment Officer Shared responsibilities Direct
Slide 27: An experienced industrial & logistics developer
An experienced industrial & logistics developer 1.3m sq. ft Total development 19 UKAEA BUILDING, AMP Buildings developed c.100% Planning success rate MCLAREN FACILITY, AMP LOGISTICS NORTH 27
Slide 28: 635,000 sq. ft of direct development currently underway
635,000 sq. ft of direct development currently underway GATEWAY 36, BARNSLEY ADVANCED MANUFACTURING PARK, 110,000 sq. ft across three ROTHERHAM buildings as part of the second 100,000 sq. ft build-to-suit unit under phase of development construction for SBD Apparel 93,000 sq. ft across three b
Slide 29: Strong foundations to increase direct development
Strong foundations to increase direct development • 1.3m sq. ft delivered since 2015 Strong development track-record • Combination of speculative and build-to-suit development One of the UK’s largest • 32.2m sq. ft pipeline, with 7.2m sq. ft consented industrial & logistics land banks • Focused in t
Slide 30: One of the UK's largest industrial & logistics pipelines
One of the UK’s largest industrial & logistics pipelines CHATTERLEY VALEY WINGATES 1.2 OWNERSHIP 1.1 GATEWAY 36 (REMAINING DEVELOPMENT) 0.7 WAVERLEY (REMAINING DEVELOPMENT) PPAs / 0.5 GATEWAY 45 OPTIONS 0.4 RIVERDALE PARK (REMAINING DEVELOPMENT) 0.4 LOUNGE 34% 0.4 BARDON HILL 32.2m 0.3 sq. ft 66% 32
Slide 31: Key sites to be delivered by 2028
Key sites to be delivered by 2028 MAIN INDUSTRIAL & LOGISTICS SITES ESTIMATED SOLD OR DEVELOPED / GDV DELIVERY NAME CONSENTED OR PLANNED (SQ. FT) REMAINING TO TIME DEVELOP 1 AMP 1.6m / 2.1m £50m - £70m to 2027 2 GATEWAY 36 0.5m / 1.3m £90m - £100m to 2027 3 CHATTERLEY VALLEY 0.0m / 1.2m £140m - £170
Slide 32: Why increase direct development?
Why increase direct development? Market fundamentals Increased returns and Allows transition of our remain strong greater share of the Investment Portfolio to upside Grade A Greater control over Builds deeper Access to further quality, specification and relationships with local acquisition and build
Slide 33: A disciplined approach to direct development
A disciplined approach to direct development • At portfolio level, targeting a pre-let to speculative development ratio of c.50:50, with the majority of speculative buildings <100,000 sq. ft • Flexible approach where direct development is supplemented by land sales and development in JVs (e.g. Logis
Slide 34: Direct development the Harworth Way
Direct development the Harworth Way What we have achieved What’s next Communities The 550-acre Cutacre Country Park, a Promoting healthy Prioritising green space, cycle and unique feature of our 4m sq. ft lifestyles and wellbeing Logistics North development pedestrian access across our sites Constru
Slide 35: Overview of the Midlands Region
OVERVIEW OF THE MIDLANDS REGION DAVID COCKROFT Regional Director, Midlands
Slide 36: Harworth's regional structure
Harworth’s regional structure Total headcount of 91 as at 31 Dec 2021 (31 Dec 2020: 75) across four offices in Rotherham, Leeds, Manchester and Birmingham Established a regional structure in 2018, creating a Midlands and North West region, operating alongside our existing Yorkshire & Central reg
Slide 37: Introducing the Midlands team
Introducing the Midlands team David Cockroft Tim Hurdiss Claire Biddle Matt Timmins Stuart Doolittle Regional Director, Midlands Development Director Regional Head of Project Director Regional Head of Planning Acquisitions George Bagley Stephanie Allcock Sharne Sahajpal Claire Mansell Development Ma
Slide 38: Midlands region in numbers
Midlands region in numbers 6,560 plots 6.6m sq ft 11 sites Total residential pipeline Total industrial & logistics pipeline Across six local authority areas and five Local Enterprise Partnership areas of which of which 2,337 plots 0.9m sq ft 9 team members based in Birmingham and supported are conse
Slide 39: Midlands market backdrop and key Harworth sites
Midlands market backdrop and key Harworth sites MARKET BACKDROP £249k +16% 2 1 3 average house house price growth 4 price, +2% over forecast over next the past 12 months five years HARWORTH’S KEY MIDLANDS RESIDENTIAL SITES 1.7% NAME PLOTS SOLD / CONSENTED DELIVERY TIME East Midlands accounted for 33
Slide 40: Update on Ironbridge, Shropshire
Update on Ironbridge, Shropshire • Demolition work now completed • Site preparation works beginning for the delivery of c.1,000 homes, alongside a range of commercial, leisure and community uses • Reclamation works now underway for JUNE 2018 the first phase of development, with the potential to deli
Slide 41: Delivering the Harworth Way at Ironbridge
Delivering the Harworth Way at Ironbridge Championing local Recycling and reuse Protecting Sustainable causes of materials biodiversity and transport solutions green space 41
Slide 42: Today's Site Tours
TODAY’S SITE TOURS DAVID COCKROFT Regional Director, Midlands
Slide 43: Today's site tours
Today’s site tours • South East Coalville and Bardon Hill located south east of Coalville town centre, close to J22 of the M1 Tour stops: A Huggelscote Grange (Phase 1 of South East Coalville) A C B Swinfen Vale (Phase 2 of South East Coalville) C Bardon Hill (Unit 2 of the development) B December 2
Slide 44: Update on South East Coalville, Leicestershire
Update on South East Coalville, Leicestershire • Harworth’s largest residential development in the Midlands region, and second largest overall (after Waverley) • Plans to develop over 2,000 homes • Phase 1 began in 2020, with land sold to Redrow (204 homes), Bellway (166), and Morris Homes (123) • E
Slide 45: Update on Bardon Hill, Leicestershire
Update on Bardon Hill, Leicestershire • Acquired 54-acre site in 2018 and secured outline planning consent from North West Leicestershire Council in 2019 • Six units ranging from 28,000 sq. ft to 116,000 sq. ft, build to BREEAM Very Good and EPC Rating A • Proximity to existing concentration of indu
Slide 46: Disposal of Ansty, Warwickshire
Disposal of Ansty, Warwickshire In December 2021, exchanged on the sale of the Ansty strategic land site for £53.5m. Adjacent to Junction 2 of the M6, connecting to the M69 Site had a valuation of £23.9m as at 30 June 2021 Harworth first acquired land at the site in a JV in October 2019 and
Slide 47: Conclusion
Conclusion Progressing our strategy to reach £1bn of EPRA NDV, with robust demand for industrial & logistics space and serviced residential plots Launch of Harworth’s single-family BTR product and increased direct development accelerates delivery, enhances and diversifies returns Not immune to
Slide 48: Q&A
Q&A
Slide 49: Disclaimer
Disclaimer For the purpose of the following disclaimer, reference to this ‘presentation’ shall be deemed Actual results may differ materially from those expressed in forward-looking statements. As to include reference to the presentation slides, the presenters’ speeches, the question and such, you a
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