preliminary results 2019 17 march 2020...gateway 45 leeds joint venture income from new acquisitions...

PRELIMINARY RESULTS 201917 MARCH 2020

www.harworthgroup.com

2

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

3

OUR PURPOSE

Harworth invests to transform land and property

into sustainable places where people want to

live and work

4

HARWORTH REMAINS WELL-POSITIONED FOR LONG-TERM GROWTH

GOOD OPERATIONAL PERFORMANCE DESPITE HEADWINDS Total return of 7.8% achieved from continued

focus on beds and sheds sectors

Strong focus on acquisitions, resulting in a c.30% increase in strategic land pipeline

Good progress in submitting planning applications BUT with delays in their determination acting as a headwind

Regional team structure now fully operational and further North East sales made as part of portfolio refinement

PURPOSE AND STRATEGY IS CLEAR Refinement of purpose: emphasises our technical

skills and vision as master developer

Regional model implemented to drive returns and new acquisition opportunities

Continued delivery of solid financial returns alongside societal benefits including new jobs and homes

Intention to acquire more income assets with opportunity for asset management

SOUND MARKETS - BUT POLITICAL CHALLENGES REMAIN Solid fundamentals in place across our

core regions

National Government support is welcomed, particularly policy continuation on Help to Buy and recent announcements made within the Chancellor’s budget that will increase regional investment

Some commercial investment pause over Brexit

Continued local political headwinds that have affected a small number of planning applications

NEAR TERM LOWER RETURNS BUT WELL-POSITIONED FOR LONG-TERM GROWTH

Significant latent value from future portfolio: land bank growth in 2019 has resulted in our largest ever total pipeline of 29,596 residential plots and 24.4m sq. ft of commercial space across the North of England and the Midlands

Near term returns will be lower as a result of the development profile on more mature sites and ongoing rationalisation of the historic portfolio whilst new sites come forward

Business remains well-capitalised with a strong balance sheet and a net loan to portfolio value of 12.1%, at lower end of target range

Strong technical track record has set the company up well to bid successfully on further big, dirty or complex sites and on income-producing property with clear asset management opportunities

INVESTMENT CASE, STRATEGY AND MARKETS

5

SOLID PERFORMANCE IN 2019: KEY HIGHLIGHTS

MASTER-PLANNING

PLANNING APPROVAL

11 strategic land acquisitions and 7 PPA agreements signed for a total consideration of £22.6m (including costs) which have the potential to deliver a total of 8,847 residential plots and 1.6m sq. ft of commercial space1

4 income acquisitions made for a total consideration of £20.9m (including costs)

Live applications for 3,133 residential plots and c.4.1m sq. ft of commercial space awaiting determination at year end1

Outline planning permission secured for 0.9m sq. ft of commercial space; this included 0.4m sq. ft at Bardon Hill in Leicestershire in July

Timing of a handful of live applications are more uncertain, owing to change of control in some local authorities affecting Local Plan progress

ACQUISITION & LAND ASSEMBLY

Notes: (1) Includes freehold, share of joint venture, land options, PPA and overage sites

PLOT SALE & BUILD OUT

ASSET MANAGEMENT

Remediation and site infrastructure works ongoing on 17 sites classed as ‘Major Developments’, underpinning our sales and direct development programmes

27 month demolition programme at Ironbridge began, with successful demolition of cooling towers in December

Residential land sales of £61.0m projected to deliver 1,379 new homes; fifteen separate housebuilders have now bought plots on our developments to deliver a range of new homes

Completed commercial land sales of £30.3m (£15.2m Harworth share) at Gateway 45 Leeds joint venture

Income from new acquisitions was supplemented by 21 new or renewed lettings, adding £1.9m of recurring income per annum to the business

Total income derived from Natural Resources portfolio increased to £6.2m per annum

Income from coal fines sales continued to decline in line with phase out of coal-fired power stations in UK

LAND PREP & INFRASTRUCTURE DEVELOPMENT


6

A LONG TERM TRACK RECORD OF SUCCESS

HARWORTH HAS DELIVERED A LONG-TERM MARKET LEADING TOTAL RETURN WHILST PROVIDING SIGNIFICANT ECONOMIC AND SOCIETAL BENEFITS

19.0%

13.2% 13.2% 13.3%

7.8%

101.9p

114.6p

128.9p 145.2p

155.6p

0p

20p

40p

60p

80p

100p

120p

140p

160p

180p

0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

16.0%

18.0%

20.0%

2015 2016 2017 2018 2019

Total Return (%) EPRA NNNAV per share Share price (p)

5 yearAverage

13.3%


CONSENTED RESIDENTIAL PLOTS SOLD PER YEAR

CONSENTED COMMERCIAL LAND SOLD PER YEAR

POTENTIAL GROSS VALUE ADDED PER ANNUM FROM HARWORTH SITES

CONSENTED RESIDENTIAL LANDBANK AT YEAR-END

0

300

600

900

1,200

1,500

2015 2016 2017 2018 2019

Plot

s

64

5

619

62

2

1,0

49 1,

379

0

0.2

0.4

0.6

0.8

1.0

1.2

2015 2016 2017 2018 2019

m s

q. �

0.8

4 m

illio

n sq

ft

0.5

mill

ion

sq ft

0.8

5 m

illio

n sq

ft

1.15

mill

ion

sq ft

0.5

5 m

illio

n sq

ft

0

2,000

4,000

6,000

8,000

10,000

12,000

2015 2016 2017 2018 2019

Plot

s

10,3

08

9,5

29

10,4

48

11,0

07

9,5

54

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

2015 2016 2017 2018 2019

Bill

ions

(£)

£2

.6 b

n

£2

.8 b

n

£2

.9 b

n

£3

.5 b

n

£3

.5 b

n

TOTAL RETURN

Source: Ekosgen (2019)

Notes: On re-listing the business in March 2015, additional capital of c.£15m was raised. Given the complicated nature of the transaction, it is not feasible to split this out of the 2015 total return

7

BUSINESS MODEL DELIVERS LONG TERM VALUE CREATIONRe

inve

stm

ent o

f Cap

ital

Acquisitions &land assembly

Masterplanning

Planningapproval

Landpreparation

Infrastructuredevelopment

Plot sale / Build out

Recurringincome

Capital receipt

CAPITALREALISATION

Time

Ind

icat

ive

Val

ue A

dd

Harworth acts as master developer across its developments, taking a

strategic role in delivering long-term shareholder and societal value

Acquisitions Strategic land Major developments Income generation

Placemaking

Assetmanagement


8

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

North West

Yorkshire & Humber

East Midlands

East

London

South East

South West

West Midlands

Wales

North East

0 2 4 6 8 10 14Affordability ratios

12

GOOD DEMAND FOR LANDContinuing nationwide housing undersupply is driving consistently good demand for prepared land from housebuilders of all types in our regions. Fifteen separate housebuilders have now purchased land from Harworth, helping to tackle the UK’s continued under-supply of around 100,000 homes per annum of all types in our regions, as shown by national completions data for 2018/19

COMPARATIVE AFFORDABILITY OF NEW HOMESNew houses on our sites in the North West, Midlands and Yorkshire & Central remain more affordable than in the South. Each of our regions has an affordability ratio for first time buyers of less than 8, compared to over 11 in London and the South East

GOVERNMENT SUPPORTS ACCELERATION OF BUILD-OUTHousing remains the UK government’s key domestic priority, supported by Help to Buy remaining in place until 2023 for first time buyers and maintenance of NPPF as UK’s key planning document

Source: MHCLG, 2019


NET ADDITIONAL DWELLINGS DELIVERED PER 1000 STOCK IN 2018

Source: ONS, 2019

9

INDUSTRIAL PROPERTY MARKET IS SOLID

DEMAND AND VACANCY RATES PERSIST IN INDUSTRIAL PROPERTY SECTOR , UNDERPINNING ITS PROJECTED GROWTH

Supply

Supply and vacancy broadly stable

0%

5%

10%

15%

20%

25%

0m

10m

20m

30m

40m

50m

60m

70m

80m

90m

100m

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019YTD

Vacancy

Sup

ply

(sq

�)

Vac

ancy

Rat

e

Nationally, distribution rentsare forecast to grow by 0.8% in 2020.

0.8%

The investment market remainedresilient in 2019 with good levelsof demand for logistics assets.

Growth projected to continue in 2020

Source: Savills, 2020

CONSISTENT DEMAND FOR NEW SPACESteady demand for well-located industrial space of all sizes remains in our regions. UK vacancy rate continues to stand at well below 10%. Reported demand from our agents in our regions for units of under 100,000 sq. ft is strong and has continued to improve into 2020

LEADING PROPERTY SUB-SECTORIndustrial sector is forecast to be one of the best performing property asset classes in the medium-term

SUPPORTED BY STAKEHOLDERSOn the whole, local and national support for sustainable new commercial development remains, driven by the desire for economic regeneration and the need for business rate receipts


Source: JLL, UK Big Box Industrial and Logistics Market Report, January 2020

10

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

As at:31/12/18

Value gains Profit excludingvalue gains

Interest &finance costs

Tax Dividends Other (pension, swap, share dilution)

As at:31/12/19

150.0p

145.0p

140.0p

135.0p

130.0p

125.0p

144.1p

11.5p

0.9p

1.5p

0.8p

0.7p

4.6p

137.5p

7.7p9.1p

1.1p

0.5p

160.0p

155.0p

+7.2%

NAV per share EPRA NNNAV per share

155.6p

145.2p

2019 FULL YEAR FINANCIAL PERFORMANCE AND MILESTONES DELIVERED

11

VALUE GAINS REFLECT PROGRESS ACROSS THE PORTFOLIO

TWELVE MONTHS TO 31 DECEMBER (£’m)

2019 2018

Profit on disposal

Revaluation gains

Total Value Gains

Total Value Gains

MAJOR DEVELOPMENTS Profitable sales, and development progress across most sites (notably Coalville, Bardon Hill, Prince of Wales, Rossington, Riverdale & Waverley) and small reductions on a couple of sites

5.1 27.9 33.0 25.0

STRATEGIC LAND Uplifts at Ironbridge, Rockingham and Wingates as land is prepared for development, offset by reductions on sites as a result of planning delays

0.0 (0.3) (0.3) 9.1

BUSINESS SPACE Reflective of lettings and re-gear progress across the portfolio

0.1 4.8 4.9 7.0

NATURAL RESOURCES Value uplifts from surface water management initiatives plus a site increase from continued interest for/progress on an agreed sale for an Energy from Waste plant;Profitable sale of our solar portfolio

3.3 3.9 7.2 10.5

AGRICULTURAL LAND Variances both up and down as a result of market activity

0.0 (0.8) (0.8) (0.3)

TOTAL 8.5 35.5 44.0 51.3

Notes: The table above is presented on a non-statutory basis

STRONG VALUE GAINS PERFORMANCE BUT STRATEGIC LAND REVALUATION GAINS IMPACTED BY PLANNING HEADWINDS


12

STRONG RESIDENTIAL LAND SALES

RESIDENTIAL101.6 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 disposals: 10.7 acres of land to Taylor Wimpey for the construction of 175 new homes, alongside the sale of 11.7 acres to Barratt to build 177 homes - bringing the total number of housing plots sold at the site to over 1,500 since 2012.

At our Cadley Park, Swadlincote development, 26 acres of engineered land were sold to Avant Homes, where it plans to deliver 400 homes, our single largest plot sale to date.

Avant also purchased a further 8 acres at our Prince of Wales development in Pontefract for the construction of 89 new homes. At our nearby Flass Lane development in Castleford, we also sold 19.5 acres of land to regional housebuilder, Strata Homes, its first purchase from us, for the delivery of 250 new homes.

In the second half of the year we sold the first phase of our Thoresby Vale development, to Harron Homes, just over four years after the Midlands’ last deep mine closed - a strong reflection of how quickly we can bring sites to market.

The final deal of the year was to Taylor Wimpey for the second phase of our Riverdale Park development in Doncaster, continuing our long-standing relationship in providing ready to build on sites.

Residential development at Waverley


13

STRONG COMMERCIAL LAND SALES

INDUSTRIAL & LOGISTICSCOMMERCIAL 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 commercial land was sold to the University of Leeds to build out their ‘Institute for High Speed Rail & Systems Integration’, earmarked as the UK’s advanced rail education facility.

2.5 acres were also sold to Leeds City Council for an extension to its existing park and ride facility.

Finally, PLP UK Logistics Venture (UKLV) acquired 43 acres from the joint venture to deliver 855k sq. ft of speculative distribution space. Construction of these units will begin in 2020, delivering thousands of new jobs to Leeds City Region.

Commercial development at Gateway 45 Leeds


14

CONTINUING TO MANAGE CASH FLOWS TO FUND GROWTH

Openingnet debt

31/12/18

Developmentspend

Salesproceeds

Profit excludingvalue gains

Interest,finance costs,

pension charges

Cash and workingcapital used in

operations

JVs Dividends Closingnet debt

31/12/19

£110,000k

£100,000k

£0

£90,000k

£70,000k

£60,000k

£50,000k

£40,000k

£30,000k

£20,000k

£10,000k

Acquisitionsand PPA spend

70,911

42,433

2,035

2,9731,207

2,407

3,480

68,261

34,537

64,443

£80,000k

3,012

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 and flexibility whilst recognising higher operational gearing

POSITION AS AT 31 DECEMBER 2019 £’000

DRAWN BANK BORROWINGS – RCF 76,000

INFRASTRUCTURE LOANS 7,065

GROSS INTEREST-BEARING DEBT 83,065

CASH 11,833

CAPITALISED FEES 321

NET DEBT 70,911


15

Notes: (1) Profits/(losses) from disposals of property categorised as investment, overages, development and assets held for sale (2) Revaluation gains from investment and development properties, joint ventures, overages and assets held for sale (3) The above table is stated on an EPRA NNNAV basis

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 disposals1 5,139 3,365 8,504 3,213

Revaluation gains2 27,611 7,931 35,542 48,069

Pension charge (69) (69) (70)

Operating profit before exceptionals plus JVs 30,106 25,448 (8,097) 47,457 61,052

Exceptional items - (590)

Interest and finance costs 317 (2,724) (2,407) (3,962)

Profit before tax 30,423 25,448 (10,821) 45,050 56,500

Tax (7,331) (2,733)

Profit after tax 37,719 53,767

Earnings per share - Statutory 7.9p 10.6p

Dividend per share 1.002p 0.911p

Profit excluding value gainsPEVG reduced due to lower promote fees and coal fine income however our core income-producing property revenue increased by 8%

Profit from disposalsProfits achieved on multiple sales at development sites as well as the sale of the solar portfolio

Dividend per shareTotal dividend of 1.002p share. This represents a 10% rise on 2018 total dividend

Revaluation gainsContinued value growth demonstrating progress across our major development sites and following income asset management

RESILIENT INCOME CONTINUES TO COVER OPERATING COSTS

TaxTax charge arising from profits on sale plus deferred tax


16

ACTIVE ASSET MANAGEMENT STRATEGY IN PLACE

Business Space portfolio value has grown by 45% in five years

£0m

£20m

£40m

£60m

£80m

£100m

£120m

£140m

£160m

£180m

2015 2016 2017 2018 2019

SEGMENT VALUATIONANNUALISED

RENTGROSS YIELD

BUSINESS SPACE £172.8m £11.8m 6.8%

NATURAL RESOURCES £46.8m £3.2m 6.8%

TOTAL £219.6m £15.0m 6.8%

TOP 3 ASSETS BY VALUE

REGION VALUATIONCURRENT

PASSING RENTCOMMENTS

NUFARMYorkshire & Central

£35.0m £2.1m

Chemical works in a 112 acre landholding with

future development potential WAULT – 35 years

ADVANCED MANUFACTURING PARK (WAVERLEY)

Yorkshire & Central

£19.8m £1.0mIncludes commercial

development land plus 10 buildings

MELTON COMMERCIAL PARK

Midlands £17.9m £1.5mMulti-let industrial estate

with Network Rail as a key tenant

BUSINESS SPACE PORTFOLIO IN DETAIL Vacancy (based on sq ft.): 6.2% WAULT: 13.5 years

Notes: The valuation represents the fair value, which is the external market value adjusted for rent free periods and capital contributions

INCOME STRATEGY Properties actively managed to drive rental income and create value

Intention to sustainably grow the Income Portfolio and recurring income

Continued refinement of portfolio with sales of lower yielding properties once business plans are completed

In 2019, this included the freehold sale of our Solar Portfolio - 7 former colliery sites in Yorkshire, Nottinghamshire and Derbyshire totalling 251 acres - for £5m (4.61% NIY)

BUSINESS SPACE PORTFOLIO VALUE HAS GROWN BY 120% IN FIVE YEARS

INCOME BREAKDOWN


17

INCOME CASE STUDY ACQUISITION OF UNIT AND LETTING: BRIGHOUSE

PURCHASE AND LET OF INDUSTRIAL UNIT IN WEST YORKSHIREHARWORTH PURCHASED THE c.65,000 SQ. FT UNIT OFF RUSSELL WAY, CLOSE TO JUNCTION 25 OF THE M62, IN OCTOBER FOR £3.8 MILLION (INCLUDING COSTS).

Unit was purchased off-market and without a tenant in place.

Harworth subsequently undertook two months of refurbishment works to bring the property up to standard, including refurbishment of the office accommodation and energy efficiency works such as repairing roofs and installing new gas heaters to the warehouse.

It then agreed a 10-year lease with Mobus Fabrics, a leading upholstery fabric manufacturer, at a rent of £5.22 psf – representing a Net Initial Yield on the purchase of 9.44%.

This lease was negotiated and agreed in parallel with other key asset management actions, which included Harworth working with Calderdale Council to extend the site’s permitted use and to agree a noise management plan in order to support Mobus’ operation.


18

PORTFOLIO REMAINS DIVERSIFIED

Strategic land Major developments Business space Natural resources Agriculture & Other

Notes: 1) Total value of all property – Investment (£293.8m), Development (£202.1m), Joint ventures (£33.1m), Available for sale (£11.2m), Owner Occupied Assets (£0.8m), plus mark to market value of development properties, overages and assets held for sale (£44.3m)

£585.3m1AGRICULTURE & OTHER £12.7M

STRATEGIC LAND £42.2M

RESIDENTIAL

MAJOR DEVELOPMENTS £77.9M

COMMERCIAL

NATURAL RESOURCES £46.8M

BUSINESS SPACE £172.8M

PORTFOLIO CONCENTRATION PORTFOLIO SECTOR SPLIT

STRATEGIC LAND £33.5M COMMERCIAL

MAJOR DEVELOPMENTS £199.4m

RESIDENTIAL

£585.3m1

47% FROM TOP 10 SITES

18%

MELTON COMMERCIAL PARKHUGGLESCOTE GRANGE (COALVILLE)

WAVERLEY (NEW COMMUNITY)

NUFARM

SIMPSON PARK

THORESBY VALE

WAVERLEY AMPGATEWAY 45

PHEASANT HILL PARK

NEXT 10 SITES

35%

REMAINING SITES

FOUR OAKS BUSINESS PARK

10

9

8

76

543

2

1

60% CAPITAL GROWTH

INCOME GENERATION 40%


19

30,000

25,000

15,000

5,000

0

10,000

20,000

LAND PIPELINE STRENGTHENED

Land pipeline now at highest point since re-listing, underpinning the Group’s future sales and development programmes

We will remain flexible in adapting to market conditions by ensuring deals satisfy three management tests:

customer requirements funding and covenants; and risks and projected returns

RESIDENTIAL PIPELINE: PLOT NUMBERS

COMMERCIAL PIPELINE: SQUARE FEET

25.0m

22.5m

20.0m

17.5m

15.0m

12.5m

5.0m

0.0m

10.0m

7.5m

2.5m

Notes: (1) Planning pipeline numbers include sites where we have signed PPAs, options, our share of joint venture agreements and taken overages. (2) The above charts show indicative planning submission dates correct as at 31 December 2019

CURRENTLY CONSENTED

9.1m sq ft

AWAITING DETERMINATION AND 2020

4.2m sq ft

2021 ONWARDS

11.1m sq ft

FREEHOLD/JV

19.9m sq ft

PPAS/OPTIONS/OVERAGES

4.5m sq ft

CURRENTLY CONSENTED

9,554

AWAITING DETERMINATION AND 2020

3,711

2021 ONWARDS

16,331

FREEHOLD/JV

17,667

PPAS/OPTIONS/OVERAGES

11,929

TOTAL 24.4m sq ftTOTAL 29,596 plots


20

ACQUISITIONS FOCUS IS RESOLUTE

M1

M69

M6

M6 Toll

M1

M11

M25

A3(M)

A1(M)

A1(M)

A1(M)

M25

M23

M2M26M3

M4

M20

M40

M40

M42

M5

M50

M5

M6

M6

M6

A74(M)

M74

M56

M62M61

M62

M180M18

M56

M57

M54

M8

Manchester

Leicester

Birmingham

Coventry

Derby Nottingham

Sheffield

Stoke-on-Trent

Liverpool

Bristol

Gloucester

Cardiff

Plymouth

Cambridge

MiltonKeynes

Folkestone

Dover

Felixstowe

London

Middlesbrough

Scarborough

Whitehaven

Dumfries

Carlisle

Leeds

Immingham

Grimsby

York

NewcastleUpon Tyne

Edinburgh

Perth

Glasgow

2020 AND BEYOND

WE REMAIN A TRUSTED PARTNER TO CORPORATES AND OTHER LAND/PROPERTY OWNERS IN PROVIDING THEM WITH A CLEAN EXIT, AS EVIDENCED BY OUR 2019 PURCHASES

Our acquisitions focus across all three core regions remains consistent and is tied to our purpose of creating great new places to live and work:

Purchasing major brownfield and potential urban extension sites in sustainable locations from corporate vendors, administrators and private landowners, with current focus on former coal-fired power stations;

Securing options on development opportunities on land which complements existing Harworth developments; and

Selective income-led purchases with active asset management opportunities (and long-term strategic land potential) will be actively pursued as part of our ongoing income strategy.

Placemaking credentials are extremely important to us, including early stakeholder engagement, masterplanning capability, a robust approach to long-term sustainability and emphasis on social value. We have a strong track record on these aspects

North West

Yorkshire and Central

Midlands

21

Acquisitions &land assembly

Masterplanning

Planningapproval

Landpreparation

Infrastructuredevelopment

Plot sale/Build out

Time

Ind

icat

ive

Val

ue A

dd

Acquisitions Strategic land Major developments Income generation

Placemaking

Assetmanagement

OUTLOOK IN DETAIL2020 AND BEYOND

17 major development sites at various stages of land preparations and infrastructure development.

Harworth’s remaining consented portfolio currently stands at over 9,500 residential plots and over 9m sq. ft of commercial space

Identified surplus land to be sold

Tenants sought for all existing vacant space

Pre-lets continue to be sought on a selective basis for build out of further direct development

Sale of mature income producing sites and sites where business plans are already maximised as part of portfolio churn

Long-term non-consented pipeline of over 16,000 plots and 11.1m sq. ft of commercial space

A mixture of freehold acquisitions and the signing of PPAs and option agreements will continue to be made

Selective income producing purchases to be made as part of income churn strategy

Live applications for 3,133 residential plots and over 4m sq. ft of commercial space are in the planning system awaiting determination

Applications for a further 578 residential plots and 0.12m sq. ft of commercial space expected to be made in 2020

MOSS NOOK0/900 plots sold

HUGGLESCOTE GRANGE0/2,016 plots sold

WARMSWORTH GATE0/375 plots sold

SIMPSON PARK316/996 plots sold

RIVERDALE PARK333/600 plots sold

FLASS LANE407/560 plots sold

THORESBY VALE143/800 plots sold

CADLEY PARK507/570 plots sold

IRONBRIDGEPlanning submitted; demolition underway

CHATTERLEY VALLEY0/1.36m sq ft commercial space built or sold

WAVERLEY1,570/3,890 plots sold

1.5m/2.1m sq ft commercial space built or sold

LOGISTICS NORTH3.5m/4.0 m sq ft commercial space built or sold

PRINCE OF WALES488/917 plots sold

PHEASANT HILL PARK522/1,200 plots sold

SAXON VALE194/400 plots sold

KELLINGLEY 0/1.45m sq ft commercial space built or sold

BARDON HILL 0/0.4m sq ft sold

FURTHER SITES Planning underway

FOCUS REMAINS ON UNLOCKING LATENT PORTFOLIO VALUE AND SELECTIVE ACQUISITION

22

PLANETWE 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 environmental liabilities while we do so

We are landlord for a number of low carbon energy schemes and several leading low-carbon firms are occupiers on our sites such as ITM, Xeros and UKAEA

Surface water attenuation schemes are installed across all of our major developments

PEOPLEWE 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”

Health & Safety across our sites is our first priority with a strong culture, promoting responsible working across its sites from its staff and contractors in delivering new places

Hundreds of acres of new public open space are delivered each year to support more active lifestyles and mental wellbeing

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 residential sites in the Midlands and North with the potential to contribute over £3.5bn GVA p.a, helping to ‘level up’ the national economy

This work is helping to meet the UK’s undersupply of housing, with developments including affordable housing and a range of tenures

COMMUNITIES GOVERNANCELEADING ON GOVERNANCE AND DISCLOSURE: 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 supports the delivery of our long-term purpose and furtherance of our strategic priorities

We aim to improve continually in these areas and align with industry best practice

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 Government and our suppliers

Harworth sites are often centres of excellence for industry and stimulate growth. This includes partnerships with 3 leading Universities to promote new skills and innovation relating to advanced manufacturing, wellness and rail

PARTNERS

CREATING SUSTAINABLE PLACES: THE ‘HARWORTH WAY’

Further information on the “Harworth Way” will be provided in our Annual Report and Financial Statements 2019

2020 AND BEYOND

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 ADDRESS MAJOR SOCIAL, ECONOMIC AND ENVIRONMENTAL TRENDS TO CREATE VALUE FOR OUR STAKEHOLDERS AND THE BUSINESS, “THE HARWORTH WAY”.

THESE THEMES IN TURN SUPPORT THE DELIVERY OF 10 OF THE UN’S SUSTAINABLE DEVELOPMENT GOALS:

23

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 development ahead of the Government’s consultation on ‘Building Better Building Beautiful’;

Instigating feasibility studies on the re-use or introduction of rail connections at key sites including Waverley;

The installation of a number of Electric Vehicle charging points to encourage early adoption;

Continuing to deliver environmentally sound new commercial buildings, all rated at EPC ‘A’ and BREEEAM ‘very good’; and

Actively supporting the delivery of new technologies and innovations on our sites, including the build out of the UKAEA’s new nuclear fusion research facility at the Advanced Manufacturing Park

2020 AND BEYOND

24

HARWORTH IS WELL POSITIONED FOR CONTINUED GROWTH2020 AND BEYOND

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 developments

Growing income portfolio continues to cover Group overheads and contribute to value gains

Placemaking capabilities embedded within each of our regional teams to add value at all stages of development process

“Beds and sheds” markets in our regions remain fundamentally sound, with additional Government financial support and incentives welcomed

Further value gains to be driven by sale of mature income producing properties and sites where business plans are maximised as part of portfolio churn

Financial headroom and strong balance sheet provides potential for further strategic land and income acquisitions

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

26

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 ACTIVELY SUPPORT THE SUSTAINABLE GROWTH OF OUR REGIONSAPPENDICES

WE HAVE ALREADY DELIVERED:

NEW HOMES, JOBS AND ENERGY DELIVERED ACROSS 9 LEP AREAS

WE COULD DELIVER FROM THE CURRENT PORTFOLIO:

THE POTENTIAL OF THE PRESENT PORTFOLIO ACROSS 14 LEP AREAS IS SIGNIFICANT

7million sq ft employment space

9,700 FTE jobs

£558m GVA added per annum

2,340 new homes built

£3.4m of council tax receipts

120mw of energy

61,000 FTE jobs

£3.5bn GVA added per annum

£60.7m in business rate receipts

over

29,950 new homes

up to

£44m of council tax receipts

over

270mw of energy

27

PROPERTY PORTFOLIO IN DETAIL: TOP 4 APPENDICES

1. WAVERLEY NEW COMMUNITYYORKSHIRE’S LARGEST EVER BROWNFIELD REDEVELOPMENT AT THE FORMER ORGREAVE COLLIERY

DEVELOPMENT PLANNED

Consent in place for 3,890 homes, alongside a new local centre, two new primary schools and 300 acres of public open space

DEVELOPMENT DELIVERED

15 phases of residential land sold to Harron, Barratt, Taylor Wimpey, Avant and alongside the delivery of public open space and the first pieces of community infrastructure including a new school

2. HUGGLESCOTE GRANGE (COALVILLE)ONE OF THE MIDLANDS’ LARGEST NEW RESIDENTIAL DEVELOPMENTS

DEVELOPMENT PLANNED

Consent in place for 2,016 homes, alongside two new primary schools and supporting community uses


Initial infrastructure works completed; first phase of land to be sold by Summer 2020

CURRENT SITEAFTERBEFORE

28

PROPERTY PORTFOLIO IN DETAIL: TOP 4 APPENDICES

3. AMP (ADVANCED MANUFACTURING PARK)

ONE OF THE UK’S KEY CENTRES OF INDUSTRY AND PART OF WAVERLEY’S ONGOING REGENERATION

DEVELOPMENT PLANNED

2.1m sq. ft employment consent, with the majority zoned solely for advanced manufacturing to deliver over 4,000 jobs and over £300m in Gross Value Added to UK plc


1.5m sq. ft of employment space: Occupiers include Rolls-Royce, Boeing, McLaren Automotive and the UK Atomic Energy Authority, with the University of Sheffield’s Advanced Manufacturing Research Centre playing a central role. Over 2,000 people already employed on-site

4. PHEASANT HILL PARKREDEVELOPMENT OF THE FORMER ROSSINGTON COLLIERY IN SOUTH YORKSHIRE WHICH CLOSED IN 2004

DEVELOPMENT PLANNED

Consent in place for 1,200 homes and 70,000 sq. ft of employment space for supporting uses


3 phases of housing sold to Harron, Taylor Wimpey and Barratt to deliver 522 new homes; 170 homes already built. Restoration of the colliery’s former tip has also commenced, alongside Harworth financially contributing to a new link road for Doncaster to open up development opportunities across the Borough

AFTERBEFOREAFTERBEFORE

29

PROPERTY PORTFOLIO | VALUE MOVEMENT

£620.0m

£600.0m

£580.0m

£560.0m

£540.0m

£520.0m

£500.0mValue of Properties

at 31/12/18Development

spendAcquisitions Disposals Net investment

in JVsRevaluation

gainsValue of Properties

at 31/12/19

£525.7m

£34.5m

£41.4m£50.6m

£1.2m

£35.5m

£585.3m

APPENDICES

Notes: 1) Total value of all property – Investment (£293.8m), Development (£202.1m), Joint ventures (£33.1m), Available for sale (£11.2m), Owner Occupied Assets (£0.8m), plus mark to market value of development properties, overages and assets held for sale (£44.3m)

30

FURTHER INCOME BREAKDOWN

REVENUE CATEGORIES

DEVELOPMENT PROPERTIES

Recognition of sales of development properties to housebuilders and commercial occupiers

OTHER PROPERTY INCOME

Fee income including first PPA success with more income to come through in future years

Lower promote income in 2019

BUSINESS SPACE

Good progress with new and renewed lettings, and acquisitions to our income portfolio over the course of 2019

NATURAL RESOURCES

Core income from 120MW of low-carbon energy developments in place, alongside income from recycling and mineral processing

OPERATIONS

Coal fine income is now in decline with the accelerated wind-down of coal fired power station operations across the UK

APPENDICES

REVENUE BREAKDOWN£90.0m

FY 2018 FY 2019

£80.0m

£70.0m

£60.0m

£50.0m

£40.0m

£10.0m

£0.0m

Development properties

Other property income

£30.0m

£20.0m

Operations

Natural resources

Business space

31

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

HOMES ENGLAND Harworth 2,859 2.2% plus EU Reference Rate20 business days from the sale of last

part of site, or December 2022

SHEFFIELD CITY REGION JESSICA

AMP 4,206 2.2% plus EU Reference RateDecember 2020 but with an ability to

extend if development not let

RBS/SANTANDERAll sites.

Floating debenture 76,000 ICE Libor rate plus 2.1% February 2023

GROSS INTEREST-BEARING DEBT 83,065

CAPITALISED FEES (321)

TOTAL GROSS BORROWINGS 82,744

APPENDICES

32

VALUATION METHODOLOGY

PORTFOLIO IS VALUED TWICE YEARLY. FORMAL YEAR-END VALUATION BY BNP PARIBAS AND SAVILLS, AND HALF YEAR VALUATION BY MANAGEMENT WITH SELECTIVE REVIEW BY BNP PARIBAS AND SAVILLS

VALUATION IS PROPERTY BY PROPERTY ON THE BASIS OF MARKET VALUE (RICS RED BOOK DEFINITION) GIVEN THE HIGHEST AND BEST USE OF THE PORTFOLIO

BUSINESS SPACEMarket comparison with direct reference to observable market evidence: rental values; yields; and capital values, adjusted for: the quality of the properties; the covenant profile of the tenants; and the volatility of cash flows.

STRATEGIC LAND & DEVELOPMENT SITESDiscounted cash flows, measured by current land values adjusted to reflect the: quality of the development opportunity; potential development costs; and likelihood of planning consent

Residual development appraisals, a form of discounted cash flow which estimates the current site value from future cash flows measured by observable current land and/or completed built development values and estimated developments costs and returns.

VALUATION TECHNIQUES FOR THE BROAD CATEGORIES OF THE PORTFOLIO ARE:

APPENDICES

33

DISCLAIMER

FOR THE PURPOSE OF THE FOLLOWING DISCLAIMER, REFERENCE TO THIS ‘PRESENTATION’ SHALL BE DEEMED TO INCLUDE REFERENCE TO THE PRESENTATION SLIDES, THE PRESENTERS’ SPEECHES, THE QUESTION AND ANSWER SESSION AND ANY OTHER RELATED VERBAL OR WRITTEN COMMUNICATION.

This presentation, which has been issued by Harworth Group plc (“Harworth”), comprises slides for a presentation in relation to Harworth’s results for the financial year ended 31 December 2019 and is solely for use at such presentation. This presentation is confidential and may not be reproduced, redistributed or passed directly or indirectly to any person or published in whole or in part for any purpose.

This presentation includes forward-looking statements with respect to the business, performance and financial condition of Harworth. These forward-looking statements can be identified by the use of forward-looking terminology, including without limitation the terms “estimates”, “plans”, “anticipates”, “targets”, “aims”, “continues”, “expects”, “intends”, “may”, “will”, “would”, “could” or “should“ or, in each case, their negative or other various or comparable terminology. These statements are made by Harworth’s directors in good faith based on the information available to them at the date of Harworth’s preliminary results announcement for the financial year ended 31 December 2019. By their

nature, these statements may involve risks, uncertainties or assumptions given future events and circumstances which are beyond Harworth’s control, including amongst other things, fluctuations in the property market for the price of land, the timing effect and other uncertainties of future acquisitions, the effect of tax and other legislation or regulations in the United Kingdom, all or any of which can cause results and developments to differ materially from those anticipated. Further details of certain risks and uncertainties will be set out in Harworth’s Annual Report and Financial Statements for the year ended 31 December 2019, available to view at www.harworthgroup.com. Nothing in this presentation should be construed as a profit forecast. Except as required by applicable law or regulation, Harworth disclaims any obligation or undertaking to update these statements to reflect events occurring after the date these statements were published.

Actual results may differ materially from those expressed in forward-looking statements. As such, you are cautioned not to put undue reliance on any forward-looking statements. No investment advice is being given in this presentation. No representation, warranty or undertaking is given by, or on behalf of, Harworth or any of its directors, officers, employees and advisers that Harworth will achieve any results set out in such statement or as to the accuracy, completeness or reasonableness of any projections, targets, estimates, forecasts, beliefs, opinions or information contained in or given during this presentation and no liability is accepted or incurred by any of them for or in respect of the same, provided that nothing in this paragraph shall exclude liability for any representations or warranty made fraudulently.

In making this presentation available, Harworth makes no recommendation to buy, sell or otherwise deal in shares in Harworth or in any other securities or investments whatsoever, and you should neither rely nor act upon, directly or indirectly, any of the information contained in this presentation in respect of any such investment activity. Past performance is no guide to future performance. If you are considering engaging in investment activity, you should seek appropriate independent financial advice and make your own assessment.

By accepting these presentation slides, you agree to be bound by the above conditions and limitations.

This presentation does not constitute or form part of any offer or invitation to sell, or any solicitation of any offer to purchase, any shares in Harworth or any other securities, nor shall it or any part of it, nor the fact of its distribution form the basis of, or be relied upon in connection with, any contract or investment decision related thereof.

The financial results contained within this presentation are extracted from Harworth’s preliminary results announcement for the financial year ended 31 December 2019.

APPENDICES

T: 0114 349 3131 E: [email protected]

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MANCHESTERPhoenix House Cross Street Manchester M2 4JF

LEEDSPinnacle 67 Albion Street Leeds LS1 5AA

preliminary results 2019 17 march 2020...gateway 45 leeds joint venture income from new acquisitions...

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