Harworth Group Plc · LSE:HWG
Harworth — FY2017 Earnings Presentation
29 slides from Harworth's earnings presentation, Mar 6, 2018
Slide 1: 2017 Preliminary Results
2017 PRELIMINARY RESULTS 6 MARCH 2018 Transforming - Regenerating - Revitalising
Slide 2: Overview of Successful 2017 and Positive Start to 2018
OVERVIEW OF SUCCESSFUL 2017 AND POSITIVE START TO 2018 Another year of double digit growth – EPRA NNNAV per share up 12.5% STRONG • Active management delivered 80% of gains from planning, lettings & sales PERFORMANCE • Significant revaluation gains achieved on acquisitions made in 2017 Focus on “bed
Slide 3: Vision & Strategy Remains Clear and Robust
VISION & STRATEGY REMAINS CLEAR AND ROBUST VISION: To be the UK’s leading developer of brownfield land and regeneration partner of choice, delivering a total return to shareholders of over 10% per annum through the property cycle STRATEGIC PRIORITIES STRATEGIC PRIORITIES Development Regions Driving
Slide 4: Our Markets and Government Policy Support Growth
OUR MARKETS AND GOVERNMENT POLICY SUPPORT GROWTH BEDS: RESIDENTIAL Projected House Price Growth forecasts 2018-2022 National housing under-supply is driving consistently strong demand for land from housebuilders House price growth in our regions remains positive and is forecast to further grow
Slide 5: Driving Sector-Leading Returns
DRIVING SECTOR-LEADING RETURNS Recurring Income Capital Capital Realisation Receipt Asset Management Plot Sale / Build Out Reinvestment of Capital Infrastructure Development Indicative Value Add Land Remediation & Preparation Planning Approval Masterplanning Competitive advantage comes from our abil
Slide 6: Strong Active Management in 2017
STRONG ACTIVE MANAGEMENT IN 2017 Acquisition & Land Assembly Masterplanning Planning Approval • Successful £27.1m equity raise in • 10,448 consented residential • Major outline planning consents March for new acquisitions, all plots and 12.13m sq. ft of secured in April at Kellingley (1.45m deployed
Slide 7: Strong Active Management in 2017
STRONG ACTIVE MANAGEMENT IN 2017 Land Remediation & Plot Sale / Build Out Asset Management Infrastructure Development • 14 sites classed as ‘Major • 622 consented residential plots and • Over 50 new commercial lettings, Developments’; remediation and site 0.85m sq. ft of commercial space sold renewa
Slide 8: Continued Double Digit Net Asset Value Growth
CONTINUED DOUBLE DIGIT NET ASSET VALUE GROWTH In 2017, EPRA NNNAV per share rose by 12.5% to 128.9p, NAV by 11.2% and EPRA NAV by 9.3% Opening NAV/ Profit Other (Pension, Closing NAV/ Capital Raise Interest and Dividends Tax/ Interest EPRA NAV excluding Value Gains EBT, Current EPRA NNNAV/ finance
Slide 9: Value Gains Underpinned by Milestone Delivery
VALUE GAINS UNDERPINNED BY MILESTONE DELIVERY Twelve months to 31 December (£’m) 2017 2016 Profit on Revaluation gains1 Total Total disposal Management Market Major Developments Capture of marriage value from 2017 acquisitions which 8.0 8.7 4.3 21.0 18.9 adjoined existing sites (Chatterley Valley an
Slide 10: Growing Income to Cover All Business Overheads
GROWING INCOME TO COVER ALL BUSINESS OVERHEADS A Twelve months to 31 December 2016 Capital Income Central 2017 Revenue and (£’000) Total Growth Generation Overheads Total cost of sales 2017 includes Dev’mnt2 Other development Revenue (rent, royalty and operations) 33,693 29,765 5,671 18,237 - 53,673
Slide 11: Creating Recurring Income at Logistics North
CREATING RECURRING INCOME AT LOGISTICS NORTH Transforming - Regenerating - Revitalising - 11 -
Slide 12: Matching Cash Flows to Achieve Net Debt Neutrality
MATCHING CASH FLOWS TO ACHIEVE “NET DEBT NEUTRALITY” Disciplined approach with investment in infrastructure and acquisitions funded through disposals • Fully deployed 2017 capital raise was used to accelerate acquisitions and maintain low gearing Transforming - Regenerating - Revitalising - 12 -
Slide 13: Low Gearing to Complement Operational Risk
LOW GEARING TO COMPLEMENT OPERATIONAL RISK Position as at 31 December 2017 £’000 Policy of prudent gearing Drawn bank borrowings – RBS RCF (23,437) • As at 31 December 2017, gross Loan To Value (LTV) was 8.8% (2016: 13.1%) and net LTV 7.0% (2016: Infrastructure loans (17,209) 9.9%) Gross interest
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 (£216.6m), Development (£210.5m), Joint ventures (£18.8m), Available for sale (£7.7m), Overages (£2.7m) and Owner Occupied Assets (£0.8m) plus mark to market
Slide 15: Land Pipeline Provides Significant Latent Value
LAND PIPELINE PROVIDES SIGNIFICANT LATENT VALUE Significant future planning pipeline in place to augment existing consented landbank, providing a healthy 10+ year land supply to underpin future sales and direct development programme RESIDENTIAL PIPELINE: PLOT NUMBERS COMMERCIAL PIPELINE: SQ. FT 20
Slide 16: Growing Value from Legacy and Acquired Sites
GROWING VALUE FROM LEGACY AND ACQUIRED SITES THORESBY, NOTTINGHAMSHIRE RIVERDALE PARK, DONCASTER 450 acres adjacent to the Sherwood Forest: Former Tractor Factory site in heart of South Yorkshire: • Former colliery closed in July 2015 – the UK’s second last • 112 acre site purchased from receivershi
Slide 17: 2017 Acquisitions Underpin Future NNNAV Growth
2017 ACQUISITIONS UNDERPIN FUTURE NNNAV GROWTH Target returns for all 2017 acquisitions were ahead of our hurdle return on capital. Significant revaluation gains were achieved on these acquisitions in 2017 given marriage value capture Coalville, Leicestershire • 145 acres acquired, increasing wide
Slide 18: Accretive Acquisitions Supporting NNNAV Growth
ACCRETIVE ACQUISITIONS SUPPORTING NNNAV GROWTH HEADLINE NUMBERS EXAMPLES OF SITES ACQUIRED Harworth effectively re-started acquisitions at the end of 2014. Since then: Total number 17 Total cost £79.8m Current value1 £121.3m (£32.7m value gains) Acres acquired 1,472 Residential plots 2,074 currently
Slide 19: No Shortage of Opportunities to Refill the Portfolio
NO SHORTAGE OF OPPORTUNITIES TO REFILL THE PORTFOLIO In 2018, adjacent site with direct development potential acquired for £0.6m. Preferred bidder on a major brownfield development site, several options and PPAs have been secured OPPORTUNITY TYPE NUMBER OF ACRES RESIDENTIAL COMMERCIAL SITES PLOTS
Slide 20: 2018 Strategy Delivery Targets
2018 STRATEGY DELIVERY TARGETS Acquisitions Sales • Progressing due • Over 50% of 2018 diligence on several expected sales agreed DEVELOPMENT freehold sites and the with over £35m in six sites under option legals • One acquisition • Sales targeted at 20 (£0.6m) already made sites to residential and
Slide 21: Overview of Successful 2017 and Positive Start to 2018
OVERVIEW OF SUCCESSFUL 2017 AND POSITIVE START TO 2018 Another year of double digit growth – EPRA NNNAV per share up 12.5% STRONG • Active management delivered 80% of gains from planning, lettings & sales PERFORMANCE • Significant revaluation gains achieved on acquisitions made in 2017 Focus on “bed
Slide 22: Appendices
APPENDICES 6 MARCH 2018 A brief history 23 Income: Strategy, Progress and Trends 26 Property portfolio – 2017 Movement and sales 24 Summary of drawn financing facilities as at 27 analysis 31/12/17 Property portfolio – Further detail 25 Valuation Methodology 28 Transforming - Regenerating - Revitalis
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 – 2017 Movement and Sales Analysis
PROPERTY PORTFOLIO(1) – 2017 MOVEMENT AND SALES ANALYSIS Notes: (1) Total value of all property – Investment (£216.6m), Development (£210.5m), Joint ventures (£18.8m), Available for sale (£7.7m), Overages (£2.7m) 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 Location Acres Consented Sold/Built Consented Built Waverley (Resi) Yorkshire 454 3,890 1,218/800 Coalville Midlands 346 2,016 0 Rossington Yorkshire 334 1,200 170/100 0.1m sq. ft 0 sq. ft Lounge Midlands 103 0.8m sq
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 fee received for Whistl deal at
Slide 27: Summary of Drawn Financing Facilities as at 31/12/17
SUMMARY OF DRAWN FINANCING FACILITIES AS AT 31/12/17 ASSOCIATED AMOUNT DRAWN INTEREST LENDER END DATE SITE (£’K) RATE 2.2% plus EU HCA Waverley 7,299 February 2022 Reference Rate 2.2% plus EU April 2018 but with an ability to extend if JESSICA Gateway 36 2,395 Reference Rate development not let Leed
Slide 28: 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 29: 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