Annual Report 2020 and Notice of 2021 AGM

RNS Number : 1779W

Harworth Group PLC

22 April 2021

 

22 April 2021   LEI: 213800R8JSSGK2KPFG21

Harworth Group plc

Annual Report 2020 and Notice of 2021 Annual General Meeting

Harworth Group plc ("Harworth" or the "Company" or the "Group") announces that it has today published its Annual Report and Financial Statements for the year ended 31 December 2020 (the "Annual Report 2020") and Notice of 2021 Annual General Meeting ("AGM"). 

The AGM will be held on Tuesday 25 May 2021 at 2:00 p.m. at Mercure Sheffield St. Paul's Hotel and Spa, City Suite, 119 Norfolk Street, Sheffield, S1 2JE. At present, due to continuing restrictions on public gatherings in England in response to the COVID-19 pandemic, shareholder attendance at the AGM is not possible. Given this, shareholders are encouraged to use the proxy facility to appoint the Chair of the meeting to cast their vote for them. If restrictions ease prior to the AGM, there are contingency plans in place to facilitate shareholder attendance and, in that event, a further announcement will be made ahead of the AGM via the Regulatory News Service and on the Company's website at www.harworthgroup.com/investors.

Shareholders can also submit questions in advance of the AGM by emailing them to [e-mail]. Responses will be provided in writing as soon as practicable and, where a series of questions follow a common theme, responses will be published on the website at www.harworthgroup.com/investors.

Following the conclusion of the AGM the results will be announced via the Regulatory News Service and made available on the Company's website at www.harworthgroup.com.

Reference is made to the Company's preliminary results announcement published on 16 March 2021 (RNS number 4640S), when it was announced that a final dividend for the 2020 financial year of 1.466p is proposed. Subject to shareholder approval at the AGM, the final dividend will be paid on 28 May 2021 to shareholders on the register at the close of business on 7 May 2021. The ex-dividend date will be 6 May 2021.

The following documents have been posted or made available to shareholders today:

1.  Annual Report 2020;

2.  Notice of 2021 AGM; and

3.  Form of proxy for the 2021 AGM.

A copy of each of the above-mentioned documents has been submitted to the National Storage Mechanism and will be available for inspection at: https://data.fca.org.uk/#/nsm/nationalstoragemechanism.

Both the Annual Report 2020 and the Notice of the 2021 AGM can be viewed at, and downloaded from, the Company's website at www.harworthgroup.com/investors.

In addition to the information in the Company's preliminary results announcement published on 16 March 2021, in accordance with Rule 6.3.5(2)(b) of the Disclosure and Transparency Rules, the Company also sets out below the following extracts from the Annual Report 2020 in full text:-

Statement of Directors' responsibilities

Principal risks and uncertainties

STATEMENT OF DIRECTORS' RESPONSIBILITIES IN RESPECT OF THE FINANCIAL STATEMENTS

The Directors are responsible for preparing the Annual Report and Financial Statements in accordance with applicable law and regulations.

Company law requires the Directors to prepare financial statements for each financial year. Under that law, the Directors have prepared both the Group and the Company Financial Statements in accordance with International Financial Reporting Standards (IFRS) adopted pursuant to Regulation (EC) No.1606/2002 as it applies in the European Union and in accordance with the Companies Act 2006.

Under Company law the Directors must not approve the Financial Statements unless they are satisfied that they give a true and fair view of the state of affairs of the Group and Company and of the profit or loss of the Group and Company for that period.

In preparing the Financial Statements, the Directors are required to:

· select suitable accounting policies and then apply them consistently;

· make judgements and accounting estimates that are reasonable and prudent;

· state whether applicable IFRSs adopted pursuant to Regulation (EC) No.1606/2002 as it applies in the European Union have been followed, subject to any material departures disclosed and explained in the Financial Statements; and

· prepare the Financial Statements on the going concern basis unless it is inappropriate to presume that the Group and Company will continue in business.

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Group's and Company's transactions and disclose with reasonable accuracy at any time the financial position of the Group and Company and enable them to ensure that the Financial Statements comply with the Companies Act 2006.

The Directors are also responsible for safeguarding the assets of the Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

The Directors are responsible for the maintenance and integrity of the Company's website www.harworthgroup.com. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

Responsibility statements

Each of the Directors who were in office during the year ended 31 December 2020 and up to the date of this Report (see the list of names and roles on page 134 of the Annual Report 2020) confirms that, to the best of his or her knowledge:

· the Group and Company Financial Statements, which have been prepared in accordance with applicable IFRSs adopted pursuant to Regulation (EC) No.1606/2002 as it applies in the European Union and in accordance with the Companies Act 2006, give a true and fair view of the assets, liabilities, financial position and profit and loss of the Group and Company; and

· the Strategic Report includes a fair review of the development and performance of the business and the position of the Group and the Company, together with a description of the principal risks and uncertainties they face; and

· the 2020 Annual Report and Financial Statements, taken as a whole, are fair, balanced and understandable and provide the information necessary for shareholders to assess the Group's and Company's position, performance, business model and strategy.

Disclosure of information to the auditor

Each of the Directors who were in office at the date of approval of this Report also confirms that:

· so far as he or she is aware, there is no relevant audit information of which the auditors are unaware; and

· each Director has taken all the steps that he/she ought to have taken as a Director to make himself/herself aware of any relevant information and to establish that the Group's and Company's auditors are aware of that information.

This confirmation is given and should be interpreted in accordance with the provisions of section 418 Companies Act 2006.

This Statement of Directors' Responsibilities was approved by the Board and signed by order of the Board:

Chris Birch
Group General Counsel and Company Secretary
22 April 2021
 

PRINCIPAL RISKS AND UNCERTAINTIES

Within our 2019 Annual Report, we presented the risk profile of the business both on a "business as usual" basis and with a "COVID-19" overlay. Ahead of publication of the Annual Report 2020, the Directors have carried out a robust assessment of the Company's principal and emerging risks. Given its prolonged impact, our Group Risk Register (GRR) now reflects risk on a COVID-19 basis only. As would be expected, the materially higher risk environment attributable to COVID-19 is reflected in a higher than normal risk profile across some of our principal risk categories.

Changes in the status of our principal risks

Our principal Markets risks have returned to a "medium" risk status, reflecting underlying strength in our core industrial and residential markets, albeit the latter is expected to increase in risk as we head towards the end of 2021. There have been reductions across our Finance risk category including our capital, income and cashflow risks, reflecting strong 2020 financial performance and metrics, and our valuations risk, now that material uncertainty clauses have been dropped and we have transaction evidence from the second half of 2020. However, our insurance risk has increased reflecting a very challenging 2021 renewal. In our People risk category, our resourcing risk has increased to a "high" risk status, reflecting resource stretch due to COVID-19 in the short-term and the growth trajectory of the business. However, our employee engagement and culture risks have reduced thanks to extensive work undertaken to promote internal communication, employee engagement and wellbeing. In our Social risk category, sustainability risk has increased, reflecting the growing impact of the climate change agenda on the business (as opposed to the impact of climate change itself which is measured in our Environment risk category).

A detailed analysis of our principal risk categories is set out on pages 35 to 39 of the Annual Report 2020.

RISK CATEGORY: MARKETS
	Current risk profile (after mitigation)	Change in risk rating during last six months	Forecast change in risk rating during next six months
1.  Commercial property market	Medium	Decreased	Unchanged
2.  Residential property market	Medium	Decreased	Increase
3.  Energy market	Low	Unchanged	Unchanged
4.  Adaptation of strategy	Medium	Decreased	Increase
Stakeholder groups impacted Investors, suppliers, customers, advisers, joint venture partners, our people
Risk profile: Despite the severe downturn and turbulence in the macro-economic climate, largely attributable to COVID-19, industrial property market evidence shows resilience and even strength. Both house prices and housing sales volumes have remained strong nationally including on our sites. There remains political support for our core markets, and the agreement reached between the UK and the EU prior to the end of the Brexit transition period affords some stability. This is reflected in our principal Markets risks returning to a "medium" risk status. However, demand in the housing market is being positively affected in the short-term by the Government's stamp duty holiday and the introduction of the Mortgage Guarantee Scheme. Whilst the stamp duty holiday has now been extended to the end of June and will then taper off until the end of September, the housing market may soften as those deadlines approach. There are also concerns about the outlook for employment over the medium-term, notwithstanding recent budget initiatives, and this might adversely affect the market for residential development land. Given this, we expect the residential property market risk to increase in the second half of FYE'21.
Examples of mitigation measures taken during 2020 · We continued to broaden our search for acquisitions and footprint of projects. · We continued to explore alternative residential tenure delivery models. · The profile of our strategic land acquisitions was weighted towards commercial projects, helping towards rebalancing of our portfolio. · Regular property market updates were commissioned. ·		Examples of mitigation measures planned in 2021 · The business review will include horizon scanning of existing and potential new markets, products and projects at a Group and regional level, and a review of the balance of residential and commercial sites. · Close monitoring of market dynamics. · Energy sector initiatives across the portfolio.

RISK CATEGORY: DELIVERY
	Current risk profile (after mitigation)	Change in risk rating during last six months	Forecast change in risk rating during next six months
5.  Acquisitions	High	Unchanged	Unchanged
6.  Planning	High	Unchanged	Unchanged
7.  Project delivery	High	Unchanged	Unchanged
8.  Other operational shortfalls	Medium	Unchanged	Unchanged
9.  Mining legacy	Medium	Unchanged	Unchanged
Stakeholder groups impacted Investors, suppliers, customers, advisers, regulatory bodies, our people, communities
Risk profile: The UK remains a highly competitive landscape for strategic land and investment property acquisitions, with limited COVID-19 distress reflected in pricing in our core markets to date. Despite a strong pipeline, this is reflected in a "high" acquisitions risk status. Some local authorities have slowed progress on their local plans pending progress and clarity on central Government planning reforms, which could affect our short-term pipeline of planning applications. That said, at the time of publishing this report, it appears that local and mayoral elections will go ahead which may assist with local political stability. Overall, we have retained a "high" risk status for our planning risk. Our project delivery risk also retains a "high" risk status, reflecting concerns about supply chain pressures attributable to multiple factors, including COVID-19, the impact of major infrastructure projects such as HS2 on materials, the recognised skills shortage within the construction industry, and the increased cost of insurance. Our other Delivery category risks remain unchanged, both carrying a "medium" risk status.
Examples of mitigation measures taken during 2020 · Local political stakeholder mapping was undertaken and advisers were appointed. · Standardisation of our financial modelling for acquisitions. · The Harworth Common Platform of resources was rolled out. · PPA target parameters were agreed.		Examples of mitigation measures planned in 2021 · The business review will include a review of Group and regional acquisition strategies. · Further work will be undertaken on financial modelling for acquisitions. · We will continue to promote consistency in procurement, led by our Central Services team, particularly as we broaden our supply chain. · Sales of more surplus land will further reduce our mining legacy.

RISK CATEGORY: POLITICS
	Current risk profile (after mitigation)	Change in risk rating during last six months	Forecast change in risk rating during next six months
10.  Planning policy changes	Medium	Unchanged	Unchanged
11.  Other policy changes	Medium	Decreased	Unchanged
Stakeholder groups impacted Investors, advisers, joint venture parties, our people, Government, communities
Risk profile: Whilst the macro-political backdrop and local political climate are reflected in our Markets and Delivery risk categories, our Politics category risks are informed by changes in central Government policy. Overall, political risks remain largely unchanged with some increases in risk, such as the growing prospect of some form of tax on development, being offset by positive movement, such as on levelling up, regional devolution and infrastructure investment.
Examples of mitigation measures taken during 2020 · Bio-diversity pilot schemes were appraised. · Public funding applications were progressed, linked to regional devolution.		Examples of mitigation measures planned in 2021 · The business review will continue to appraise alternative housing models. A modular homes initiative is being explored. · We will continue to progress funding for a new railway station at Waverley, which has now been allocated to Sheffield City Region via the National Infrastructure Fund. · Ongoing negotiation with HS2 Ltd on our compensation claim for Gateway 45 Leeds. · Business cases will be worked up with Local Enterprise Partnerships to secure Government funding support via the 'Levelling Up Fund'. · Engagement with central Government and Transport for the North on rail freight use at certain sites.

RISK CATEGORY: FINANCE
	Current risk profile (after mitigation)	Change in risk rating during last six months	Forecast change in risk rating during next six months
12.  Availability of capital	High	Decreased	Unchanged
13.  Income	High	Decreased	Unchanged
14.  Cashflow	Medium	Decreased	Unchanged
15.  Valuations	Medium	Decreased	Unchanged
16.  Insurance	High	Increased	Unchanged
Stakeholder groups impacted Investors, suppliers, funders, advisers, our people
Risk profile: There have been reductions in our capital, income and cashflow risks, reflecting strong financial performance and metrics in 2020 including our net debt position and the corresponding headroom in our RCF, rent collections, sales and deferred consideration payments, and investment property acquisitions, offset to some extent by higher insurance and headcount costs. That said, our capital and income risks continue to carry "high" risk scores. This reflects persistent economic uncertainty and that expanding our capital sources and increasing the breadth and resilience of our income portfolio, in both cases to support the growth of the business, remain strategic priorities. Our valuations risk, which monitors the risk of deficiencies in the valuation process, has reduced now that material uncertainty clauses have been dropped and we have transaction evidence from the second half of 2020. The insurance risk has been increased to a "high" risk status, reflecting a very challenging 2021 renewal, resulting in markedly higher pricing, material increases in excesses on certain sites and some deterioration in the scope of certain aspects of cover.
Examples of mitigation measures taken during 2020 · A £30m increase in our RCF. · Tight capital management during the early COVID-19 period including strong rent collections. · Acquisitions of investment properties in Brierley Hill and Knowsley and direct development at Advanced Manufacturing Park and Logistics North. · The appointment of a Partnerships Manager to support public funding applications. · The appointment of a Head of Income and additional Business Space resource. · The appointment of a new insurance broker and extensive re-marketing of our insurance programme ahead of the 2021 renewal.		Examples of mitigation measures planned in 2021 · Planned programme of direct development. · Continued "churn" of investment property portfolio to further increase recurring income. · Long-term and temporary income opportunities will continue to form a key element of Major Development site strategies. · Proactive asset management will continue across the Business Space and Natural Resources investment portfolio, including on rent collections, new lettings and lease re-gears. · Risk management and mitigation measures to be implemented across the portfolio ahead of the 2022 insurance renewal with a focus on sites perceived by insurers as high risk.

RISK CATEGORY: PEOPLE
	Current risk profile (after mitigation)	Change in risk rating during last six months	Forecast change in risk rating during next six months
17.  Resourcing	High	Increased	Unchanged
18.  Succession planning	Medium	Unchanged	Unchanged
19.  Employee engagement	Medium	Decreased	Unchanged
20.  Communication and connectivity	Medium	Decreased	Unchanged
21.  Diversity	Medium	Unchanged	Unchanged
22.  Culture	Medium	Decreased	Unchanged
Stakeholder groups impacted Our people
Risk profile: Our resourcing risk has increased to a "high" risk status, reflecting resource stretch due to COVID-19 in the short-term and the growth trajectory of the business. Short-term measures have been, and continue to be, implemented to mitigate the COVID-19 impact whilst longer-term measures will take time to bear fruit. Our other People risks have either remained unchanged or reduced, reflecting the extensive work undertaken to promote internal communication, employee engagement and wellbeing, all of which have been impactful and well received, demonstrated by the positive results from our most recent employee survey.
Examples of mitigation measures taken during 2020 · See the People section on pages 58 to 63 of the Annual Report 2020 for the measures we have implemented during 2020 including to look after the health and wellbeing of our people, to embed the Harworth Values into the business, to promote diversity, and on engagement and communication, recruitment, succession, reward and talent development.		Examples of mitigation measures planned in 2021 · The business review will cover organisation design, systems and resources. · We will continue progress on recruitment for replacement and new roles. · Regular reviews of resourcing will be undertaken which may lead to outsourcing of workstreams and/or appointment of additional interim support where needed to overcome short-term capacity pressures. · Further work on personal development plans for certain employees. · Employee engagement initiatives will continue and, where they have been curtailed by COVID-19, they will be revived when restrictions are lifted. · The People Steering Group will lead reviews of 'How we want to work' post COVID-19 and of what more can be done to promote all forms of diversity across the business.

RISK CATEGORY: ENVIRONMENT
	Current risk profile (after mitigation)	Change in risk rating during last six months	Forecast change in risk rating during next six months
23.  Environmental incident	Medium	Unchanged	Unchanged
24.  Harworth's environmental impact	Low	Unchanged	Unchanged
25.  Climate change	Low	Unchanged	Unchanged
Stakeholder groups impacted Investors, advisers, regulatory bodies, our people, communities
Risk profile: Our environmental risks remain largely unchanged. The risk of an environmental incident continues to carry a "medium" risk profile. Whilst the prospect is considered unlikely the impact of an incident could be material. As such, given the nature of the business, the profile of this risk is unlikely to reduce further. Environmental impact and climate change continue to have "low" risk scores, reflecting that, overall, Harworth's projects have a positive environmental impact and that the physical impacts of climate change, predominantly flooding, are limited at this stage. The impact of the climate change agenda on the business is more marked but this is reflected within the sustainability risk below.
Examples of mitigation measures taken during 2020 · We continued to operate a "re-use and re-cycle" approach to site remediation to minimise off site waste and importation of virgin materials. · We continued to factor climate change guidance into remediation and infrastructure design. · We undertook a review of, and implemented improvements to, our internal controls and assurance in respect of permitted activities undertaken by tenants.		Examples of mitigation measures planned in 2021 · We will continue our collaborative engagement with the Environment Agency. · We will maintain a proactive approach to flood management. · We will maintain our strong performance in recycling materials during the land remediation process.

RISK CATEGORY: SOCIAL
	Current risk profile (after mitigation)	Change in risk rating during last six months	Forecast change in risk rating during next six months
26.  Purpose	Medium	Unchanged	Unchanged
27.  Sustainability	High	Increased	Unchanged
28.  Communities and stakeholders	Medium	Unchanged	Unchanged
Stakeholder groups impacted All
Risk profile: Our sustainability risk has increased to a "high" risk status reflecting the current and anticipated impact of the climate change agenda on the business (as opposed to the currently low impact of climate change itself which is measured in our Environment risk category) including on project delivery and costs, investor expectations, planning obligations, market demand and, ultimately, valuations. The status of our other Social risks remains unchanged.
Examples of mitigation measures taken during 2020 · An evolution in our articulation of "the Harworth Way" in investor materials. · The format of our Board and Investment Committee project appraisals has been updated to promote analysis and debate as to the alignment of new projects with our Purpose and the Harworth Way and their impact on stakeholders. · See the Partners section on pages 64 to 67 of the Annual Report 2020 for the ways we engaged with our stakeholders and had regard for their interests during 2020. · We have made some progress with our funding bids for innovative transport measures, health and wellbeing and 5G provision at new developments. We have continued to promote certain of our sites for rail freight use.		Examples of mitigation measures planned in 2021 · Establish an ESG Committee of the Board. · We will further evolve our reporting on ESG matters including the identification of KPIs and external benchmarks against which we will measure our performance. · Working with external suppliers, we will continue to review utility and energy delivery strategies for our Major Developments. · We will continue to explore and promote environmental initiatives which align with the zero-carbon agenda, such as rail freight sites, bio-diversity offsetting and solar panel retrofit of our existing investment portfolio.

RISK CATEGORY: GOVERNANCE
	Current risk profile (after mitigation)	Change in risk rating during last six months	Forecast change in risk rating during next six months
29.  Investors	High	Unchanged	Unchanged
30.  Internal controls and processes	Medium	Decreased	Unchanged
31.  Joint ventures	Medium	Decreased	Unchanged
32.  Cyber and information security	Medium	Unchanged	Unchanged
33.  Business continuity	Medium	Unchanged	Unchanged
Stakeholder groups impacted Investors, advisers, regulatory bodies, our people, joint ventures
Risk profile: The status of our Governance risks remains unchanged. Our investors risk retains a "high" risk status, reflecting the share price discount to EPRA NDV which has narrowed but persists. Our other Governance category risks continue to carry a "medium" risk status.
Examples of mitigation measures taken during 2020 · Virtual engagement with investors has been maintained throughout the COVID-19 period. Lynda Shillaw has now met with our largest shareholders. · Upgrades to our finance platform including automation of our purchase order and invoice payment systems. · A comprehensive review of our risk management and internal controls systems is underway which will lead to further improvements being made. · Our Delegated Authorities Policy has been updated and re-profiled across the business. · Continued improvements in data management. · KPMG undertook a review of our COVID-19 remote working measures. · Our annual cyber penetration test has been undertaken and IT system vulnerability scanning has been implemented. · A consistent approach to joint venture governance has been implemented, overseen by our recently appointed Company Secretarial Assistant.		Examples of mitigation measures planned in 2021 · We will continue to work with our brokers to maintain regular news flow via RNS/RNS Reach and our engagement with existing and prospective investors. · Maintenance and evolution of cyber and information security measures. · The review of our risk management and internal controls systems will be completed. · Desktop tests of our Business Continuity and IT Disaster Recovery plans are scheduled.

RISK CATEGORY: LEGAL AND REGULATORY
	Current risk profile (after mitigation)	Change in risk rating during last six months	Forecast change in risk rating during next six months
34.  Health and safety incident	Medium	Unchanged	Unchanged
35.  Other regulatory breach	Low	Unchanged	Unchanged
36.  Legislative and regulatory changes	Low	Unchanged	Unchanged
Stakeholder groups impacted Suppliers, advisers, our people, regulatory bodies
Risk profile: There have been no material movements to the risks in this category, which have all maintained a "medium" or "low" risk rating.
Examples of mitigation measures taken during 2020 · At the outset of COVID-19 we undertook a review of the risk status of every site (accounting for reduced activity on certain sites) which informed our inspection regime. · We expanded our panel of health and safety consultants. · We implemented measures to ensure compliance with IR35 and payment practices reporting. · We maintained our online health and safety training programme for all employees. · The Company Secretary continued to inform the Board and wider business of applicable legislative and regulatory changes.		Examples of mitigation measures planned in 2021 · We will host our biennial Group-wide Health and Safety Day, in person if possible but virtually if not, supplemented by ongoing online training. · We will review the effectiveness of our new health and safety consultant panel arrangements.

CAUTIONARY STATEMENT AND DIRECTORS' LIABILITY

The Annual Report 2020 contains certain forward-looking statements which, by their nature, involve risk, uncertainties and assumptions because they relate to future events and circumstances. Actual outcomes and results may differ materially from any outcomes or results expressed or implied by such forward looking statements. Any forward-looking statements made by or on behalf of the Group are made in good faith based on current expectations and beliefs and on the information available at the time the statement is made. No representation or warranty is given in relation to these forward-looking statements, including as to their completeness or accuracy or the basis on which they were prepared, and undue reliance should not be placed on them. The Group does not undertake to revise or update any forward-looking statement contained in the Annual Report 2020 to reflect any changes in its expectations with regard thereto or any new information or changes in events, conditions or circumstances on which any such statement is based, save as required by law and regulations. Nothing in the Annual Report 2020 should be construed as a profit forecast.

The Annual Report 2020 has been prepared for, and only for, the shareholders of the Company, as a body, and no other persons. Neither the Company nor the Directors accept or assume any liability to any person to whom the Annual Report 2020 is shown or into whose hands it may come except to the extent that such liability arises and may not be excluded under English law.

ANNUAL GENERAL MEETING

The Notice of 2021 Annual General Meeting, to be held on Tuesday 25 May 2021 at 2:00 p.m. at Mercure Sheffield St. Paul's Hotel and Spa, City Suite, 119 Norfolk Street, Sheffield, S1 2JE, together with explanatory notes on the resolutions to be proposed is contained in a circular sent or made available to shareholders on 22 April 2021.

ENDS

Enquiries: 

Harworth Group plc

Tom Loughran, Head of Investor and Stakeholder Relations

Chris Birch, General Counsel and Company Secretary

Tel: [phone] [e-mail]

ABOUT HARWORTH GROUP PLC

Listed on the premium segment of the main market, Harworth Group plc (LSE: HWG) is a leading sustainable regenerator of land and property for development and investment which owns, develops and manages a portfolio of approximately 16,000 acres of land on around 100 sites located throughout the North of England and Midlands. The Group specialises in the regeneration of large, complex sites, in particular former industrial sites, into new residential developments and employment areas (www.harworthgroup.com).

 

END

 

 

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