Harworth Group Plc · LSE:HWG
Harworth — H1 2018 Earnings Presentation
30 slides from Harworth's earnings presentation, Oct 9, 2018
Slide 1: Transforming - Regenerating - Revitalising
Transforming - Regenerating - Revitalising
Slide 2: Positive first half demonstrating ongoing progress
POSITIVE FIRST HALF DEMONSTRATING ONGOING PROGRESS Maintained long-run average total return of over 10% per annum STRONG • Over 90% of FY sales, planning for 529 plots and improved lettings agreed PERFORMANCE • RCF now £100m ending 2023, shares premium listed and indices expected Focus on large comp
Slide 3: Strategy remains clear and robust
STRATEGY REMAINS CLEAR AND ROBUST STRATEGIC PRIORITIES STRATEGIC PRIORITIES Development Regions Driving the capital growth of our Leveraging our strong portfolio through delivery of relationships in our core areas in planning permissions, the North of England and remediation and infrastructure, Midl
Slide 4: Our markets and government policy support growth
OUR MARKETS AND GOVERNMENT POLICY SUPPORT GROWTH BEDS: RESIDENTIAL National housing under-supply is driving consistently strong demand for land from housebuilders of all types House price growth in our regions remains positive and is forecast to increase further – with stronger growth expected i
Slide 5: Driving sector-leading total returns
DRIVING SECTOR-LEADING TOTAL RETURNS Recurring Income Capital Capital Realisation Receipt Asset Management Plot Sale / Build Out Reinvestment of Capital Infrastructure Development Indicative Value Add Land Preparation Planning Approval Masterplanning Competitive advantage comes from our ability to a
Slide 6: Continued progress in 2018
CONTINUED PROGRESS IN 2018 Acquisition & Land Assembly Masterplanning Planning Approval • Six sites purchased for £50 million • Applications submitted for 875 • Outline planning consents granted which: already provide £3.1m of residential plots(2) and 2.325m sq. for 529 residential plots, of which a
Slide 7: Continued progress in 2018
CONTINUED PROGRESS IN 2018 Land Preparation & Plot Sale / Build Out Asset Management Infrastructure Development • Remediation and site infrastructure • 339 consented residential plots • New headline rents secured in first works ongoing on 14 sites classed as sold at profit, with a further 71 half on
Slide 8: Continued strong net asset value growth
CONTINUED STRONG NET ASSET VALUE GROWTH For the twelve months ending 30 June 2018, EPRA NNNAV per share rose by 10.9% to 130.8p, (NAV by 9.5% and EPRA NAV by 11.1%) Transforming - Regenerating - Revitalising -8-
Slide 9: Value gains underpinned by management actions
VALUE GAINS UNDERPINNED BY MANAGEMENT ACTIONS Six months to 30 June (£’m) 2018 2017 Profit on Revaluation gains1 Total Total disposal Management Market Major Developments Further progress at Logistics North reflecting higher values from an (0.0) 1.9 (0.6) 1.3 2.3 upcoming sale and the signing of a n
Slide 10: Sales of mature income sites to enhance returns
SALES OF MATURE INCOME SITES TO ENHANCE RETURNS Harworth continues its policy of actively asset managing its income generating sites. With some of these mature income generating sites now having limited further value uplift potential, Harworth intends to sell a limited amount of these sites each y
Slide 11: Growing income to cover all business overheads
GROWING INCOME TO COVER ALL BUSINESS OVERHEADS Six months to 30 June A Capital Income Central 2018 2017 (£’000) Revenue and Growth Generation Overheads Total Total cost of sales Dev’mnt2 Other 2018 reflects Revenue (rent, royalty and operations) increased 11,032 106 10,771 - 21,909 22,920 Cost of sa
Slide 12: Significant debt and equity advances
SIGNIFICANT DEBT AND EQUITY ADVANCES RCF EXTENSION PREMIUM LISTING • On 30 April, Harworth extended its • On 29 May, Harworth announced the Revolving Credit Facility (RCF) from £75m formal start of a process to transfer its to £100m by bringing Santander in shares from standard to premium listing. a
Slide 13: Managing annual cash flows to fund growth
MANAGING ANNUAL CASH FLOWS TO FUND GROWTH Disciplined approach with investment in infrastructure and acquisitions funded through disposals • Higher H1 LTV reflecting significant acquisitions and normal skewing of sales in second half • Prudent gearing provides headroom and flexibility whilst recog
Slide 14: Portfolio is managed to diversify risk
PORTFOLIO IS MANAGED TO DIVERSIFY RISK PORTFOLIO CONCENTRATION PORTFOLIO SECTOR SPLIT 1 1 Notes: (1) Total value of all property – Investment (£256.3m), Development (£209.4m), Joint ventures (£22.4m), Available for sale (£28.2m), Overages (£2.0m) and Owner Occupied Assets (£0.8m) plus mark to market
Slide 15: Land pipeline provides significant future value
LAND PIPELINE PROVIDES SIGNIFICANT FUTURE VALUE Significant future planning pipeline in place to augment existing consented landbank, providing much of the land supply to underpin future sales and our direct development programme RESIDENTIAL PIPELINE: PLOT NUMBERS COMMERCIAL PIPELINE: SQ. FT As
Slide 16: Latent value reflected in large site discount
LATENT VALUE REFLECTED IN LARGE SITE DISCOUNT BNP Paribas, our independent valuers, have analysed 10 of our residential Major Developments to determine the gap between the valuation as at 31 December 2017 and expected future plot sales value – the implied residual discount or ‘Large site discount’
Slide 17: Further acquisitions made to support future growth
FURTHER ACQUISITIONS MADE TO SUPPORT FUTURE GROWTH £50m spent on six acquisitions to replenish the strategic land portfolio and further strengthen our recurring income base. The five key acquisitions were as follows: Month Site Acreage Cost Income (p.a) Potential development UP TO Nufarm, 112 £2.1
Slide 18: Growing value from new sites: North
GROWING VALUE FROM NEW SITES: NORTH NUFARM, BRADFORD FLAXBY, HARROGATE 112-acre site purchased for £32.45m plus acquisition 22-acre site in North Yorkshire secured for £8.75m plus costs, less than a mile from J26 of the M62 acquisition costs, less than half a mile from A1(M) • Site comprises an agro
Slide 19: Growing value from new sites: Midlands
GROWING VALUE FROM NEW SITES: MIDLANDS IRONBRIDGE, SHROPSHIRE BARDON HILL, LEICESTERSHIRE Purchase from Uniper (UK) of the 350-acre former Acquisition of 53 acres of greenfield land adjacent to our Ironbridge coal-fired power station in Shropshire existing major residential development at Coalville
Slide 20: Range of opportunities to replenish the portfolio
RANGE OF OPPORTUNITIES TO REPLENISH THE PORTFOLIO We have moved to a regional structure to allow us to maximise existing and new local relationships to increase the number of acquisition opportunities. Current position is: OPPORTUNITY TYPE NUMBER OF ACRES RESIDENTIAL COMMERCIAL SITES PLOTS SPACE A
Slide 21: Positive first half demonstrating ongoing progress
POSITIVE FIRST HALF DEMONSTRATING ONGOING PROGRESS Maintained long-run average total return of over 10% per annum STRONG • Over 90% of FY sales, planning for 529 plots and improved lettings agreed PERFORMANCE • RCF now £100m ending 2023, shares premium listed and indices expected Focus on large comp
Slide 22: Appendices
APPENDICES 11 SEPTEMBER 2018 A brief history 23 Net Asset Value growth H1 2018 vs FY 2017 27 Property portfolio – 2018 Movement and sales 24 Summary of drawn financing facilities as at 30 28 analysis June ‘18 Property portfolio – Further detail 25 Valuation Methodology 29 Income: Strategy, Progress
Slide 23: A brief history
A BRIEF HISTORY 2004-2012 2012-2014 2015 onwards Property division within Harworth Estates was Re-launched as Harworth UK Coal plc 24.9% owned by CfR plc Group plc • In 1994, RJB Mining (founded in • In December 2012, after a complex • In February 2015, Harworth Estates 1974) bought British Coal’s c
Slide 24: Property portfolio – 2018 movement and sales analysis
PROPERTY PORTFOLIO(1) – 2018 MOVEMENT AND SALES ANALYSIS Notes: (1) Total value of all property – Investment (£256.3m), Development (£209.4m), Joint ventures (£22.4m), Available for sale (£28.2m), Overages (£2.0m) and Owner Occupied Assets (£0.8m) plus mark to market value of development properties
Slide 25: Property portfolio – further detail
PROPERTY PORTFOLIO – FURTHER DETAIL TOP TEN SITES House plots Commercial space Site Type Location Acres Consented Sold/Built Consented Built Waverley (Resi) Dev’t Yorkshire 454 3,890 1,218/850 Coalville Dev’t Midlands 346 2,016 0 Nufarm Inv’t Yorkshire 112 0.3m sq. ft 0.3m sq. ft Rossington Dev’t Yo
Slide 26: Income: strategy, progress and trends
INCOME: STRATEGY, PROGRESS AND TRENDS The strategy remains to grow and improve the quality of recurring income to cover overheads (including strategic land promotion) and interest, and ultimately cover tax and dividends REVENUE BREAKDOWN MAJOR DEVELOPMENTS - ‘Promote fees’ pursued but will occur i
Slide 27: Continued net asset value growth
CONTINUED NET ASSET VALUE GROWTH In the six months ending 30 June 2018, EPRA NNNAV per share rose by 1.5% to 130.8p, (NAV by 0.9% and EPRA NAV by 1.9%) Transforming - Regenerating - Revitalising - 27 -
Slide 28: Summary of drawn financing facilities as at June '18
SUMMARY OF DRAWN FINANCING FACILITIES AS AT 30 JUNE ‘18 AMOUNT LENDER SITE INTEREST RATE END DATE DRAWN (£’K) 2.2% plus EU HCA(1) Waverley 6,093 February 2022 Reference Rate 2.2% plus EU 20 business days from the sale of last part of HCA(1) Harworth 3,968 Reference Rate site, or December 2022 Prince
Slide 29: Valuation methodology
VALUATION METHODOLOGY Portfolio is valued twice yearly. Formal year-end valuation by BNP Paribas and Savills, and half year valuation by management with review by BNP Paribas and Savills Valuation is property by property on the basis of Market Value (RICS Red Book definition) given the highest a
Slide 30: Disclaimer
DISCLAIMER For the purpose of the following disclaimer, reference to this ‘presentation’ Actual results may differ materially from those expressed in forward-looking shall be deemed to include reference to the presentation slides, the statements. As such, you are cautioned not to put undue reliance