Annual Report and Notice of Annual General Meeting

RNS Number : 8468L

Harworth Group PLC

24 April 2018

 

24 April 2018                                                                                                                   LEI: 213800R8JSSGK2KPFG21

Harworth Group plc

Annual Report 2017 and Notice of 2018 Annual General Meeting

Harworth Group plc ("Harworth" or the "Company") announces that it has today published its Annual Report and Financial Statements for the year ended 31 December 2017 (the "Annual Report 2017") and Notice of 2018 Annual General Meeting.  The 2018 Annual General Meeting will be held on Tuesday 29^th May 2018 at 2:00p.m. at The Bessemer Conference Room, AMP Technology Centre, Advanced Manufacturing Park, Brunel Way, Waverley, Rotherham S60 5WG.

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

1.         Annual Report 2017;

2.         Notice of 2018 Annual General Meeting; and

3.         Form of proxy for the 2018 Annual General Meeting.

A copy of each of the above mentioned documents has been submitted to the National Storage Mechanism and will be available for inspection at www.morningstar.co.uk/uk/NSM.

Both the Annual Report 2017 and the Notice of 2018 Annual General Meeting can be viewed at, and downloaded from, the Company's website at www.harworthgroup.com.

Reference is made to the Company's preliminary results announcement published on 6 March 2018 (RNS number 7613G).  In addition to the information in that announcement, 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 2017 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 the Group financial statements in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union and have prepared the Company financial statements in accordance with IFRSs as adopted by the European Union. 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 of the 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;

·     for the Group financial statements, state whether applicable IFRSs as adopted by the European Union have been followed, subject to any material departures disclosed and explained in the financial statements;

·     for the Company financial statements, state whether applicable IFRSs as adopted by the European Union have been followed, subject to any material departures disclosed and explained in the financial statements;

·    assess the Group and Company's ability to continue as a going concern, disclosing, as applicable, matters relating to their going concern status; and

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

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Group 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 and the Directors' remuneration report comply with Companies Act 2006 and, as regards the Group financial statements, Article 4 of the IAS Regulation. They are responsible for such internal control as they determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

The Directors are also responsible for taking such steps as are reasonably open to them to safeguard 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 preparing a strategic report, corporate governance statement, directors' remuneration report and directors' report that complies with applicable law and regulations.

The Directors are responsible for the maintenance and integrity of the corporate and financial information which appears on 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.

Each of the Directors who were in office during the year ended 31 December 2017 and up to the date of this Report, considers that the 2017 Annual Report and Financial Statements, taken as a whole, is fair, balanced and understandable and provides the information necessary for Shareholders to assess the Company's position, performance, business model and strategy.

Each of the Directors who were in office during the year ended 31 December 2017 and up to the date of this Report, confirms to the best of their knowledge:

·    the Group financial statements, which have been prepared in accordance with IFRSs as adopted by the European Union, give a true and fair view of the assets, liabilities, financial position and profit of the Group;

·     the Company financial statements, which have been prepared in accordance with IFRSs as adopted by the European Union, give a true and fair view of the assets, liabilities, financial position and profit of the 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 that they face.

Each of the Directors who were in office during the year ended 31 December 2017 and up to the date of this Report also confirms:

·      so far as the Director is aware, there is no relevant audit information of which the Company's auditors are unaware; and

·    the Director has taken all the steps that he/she ought to have taken as a Director in order to make himself/herself aware of any relevant audit information and to establish that the 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.

The Directors' report, prepared in accordance with the requirements of Companies Act 2006 and the FCA's Listing and Disclosure and Transparency Rules, was approved by the Board and signed on its behalf by:

Chris Birch

24 April 2018

Principal risks and uncertainties
 

The tables below set out the Group's principal risks and uncertainties, reflecting the detailed review and evolution of the Group Risk Register referred to on page 36 of the Annual Report 2017.  Each risk category has a current risk status, reflecting residual risk after accounting for mitigation measures already in place. Some of those measures are listed, together with (where applicable) any further measures we have identified for implementation over the next 12 months.

Risk category: Markets	Subject to external and/or internal factors: Exposure to largely external factors
A downturn in one or more of the property markets in which we operate, being the residential, logistics and manufacturing sectors in the North of England and the Midlands, could: limit value gains across our portfolio or, in extreme cases, cause parts of our portfolio to drop in value; restrict the number of planned sales we make; and/or result in underperformance by our Income Generation assets. Those adverse consequences could be exacerbated if our strategy does not evolve to respond to changes in our core markets
Current risk status: Medium	Anticipated movement in risk status over the next 12 months: Unchanged
Mitigation and controls already in place: ·  The diversity of our portfolio (sectors and geography) mitigates against a downturn in one of our core markets. Our core regional markets are typically less volatile than the London and South East markets. The Income Generation portfolio includes a diversity of income streams which has a similarly mitigating effect. ·   Value gains are generally driven more by active management than market movements. ·  We build headroom into our sales forecasts by identifying potential alternative sales in the event that planned sales do not proceed as quickly as anticipated. ·  We can control our working capital movements by managing acquisitions and development spend to respond to market movements. Our cash flow forecasts also provide for a minimum £5m "buffer" throughout the year. ·   The Executive Committee monitors, and updates the Board on, prevailing market conditions continuously and keeps the strategy under review, to ensure that it evolves with market movements.
Further actions to be taken to mitigate and manage risk: ·   We are taking steps to widen our geographical footprint, to mitigate against market movements at a regional level. ·  Our development plans and projected sales will inform our strategy on acquisitions and masterplans, to ensure we maintain a balanced mix of commercial and residential sites across our portfolio. ·    We will continue to grow and strengthen our recurring income portfolio, through acquisitions, asset management and targeted direct development, to further improve the sustainability of the business during periods of market downturn.

Risk category: Delivery	Subject to external and/or internal factors: Exposure to both external and internal factors
Our ability to generate EPRA NNNAV growth and/or grow our investment returns could be adversely affected by external factors, such as: a sparsity of attractive, strategic land acquisition opportunities; adverse planning decisions; or market-driven increases in development costs, or by internal factors, such as poor operational delivery.
Current risk status: Medium	Anticipated movement in risk status over the next 12 months: Unchanged
Mitigation and controls already in place: ·  Our dedicated Acquisitions team is now well-established and continues to grow, with a dedicated Technical Manager recruited into the team during 2017. The Executive Committee regularly reviews strategic priorities and the availability of capital to ensure the team can focus its time and resources appropriately. ·   Our Strategic Land team has a proven track record for promoting schemes through the planning application process. Success is achieved through careful masterplanning and preparation of applications, alongside tireless stakeholder management at a local level.

Risk category: Politics	Subject to external and/or internal factors: Largely subject to external factors
Changes in national and/or local government policy, including planning, could impact the Group's activities.
Current risk status: Medium	Anticipated movement in risk status over the next 12 months: Increasing* *The anticipated increase to risk over the next 12 months reflects: (A) Government sentiment and initiatives in relation to land value capture; and (B) the inherent uncertainty in the current political climate as the Government enters the advanced stages of negotiation on the UK's departure from the European Union.
Mitigation and controls already in place: ·    The diversity of our portfolio affords a degree of mitigation to adverse political changes which could impact our markets. ·    We make representations on our own, alongside partners and in conjunction with key industry bodies, to minimise the prospect of adverse policy changes being enacted. ·   Our Strategic Land team monitors closely the political landscape and climate at a local level where we have current or prospective planning promotions. This informs our masterplanning and promotion strategy. ·   We are proactively engaging with HS2 Limited to minimise the potential impact of the proposed HS2 route on our Gateway 45 and Lounge sites.
Further actions to be taken to mitigate and manage risk: ·   We will input into upcoming Government consultations on land value capture and other policy matters which could affect the Group's activities.

Risk category: Finance	Subject to external and/or internal factors: Subject to both external and internal factors
It remains our ambition to cover the Group's operating costs, interest, tax and dividends from ongoing rental and other operating income. A shortfall in income could impair our ability to maintain activity levels to deliver EPRA NNNAV growth and investment returns during periods of market downturn. It could also result in an interest cover covenant breach on our revolving credit facility. We use debt capital, in the form of bank debt, infrastructure loans and a bonding facility, to help fund our activities. If that capital is temporarily unavailable, or only available at a materially increased cost, that could fetter our ability to grow EPRA NNNAV and/or investment returns. Gaps in our insurance programme could lead to an irrecoverable financial loss.
Current risk status: Low	Anticipated movement in risk status over the next 12 months: Unchanged
Mitigation and controls already in place: ·   We undertook an equity raise in March 2017 to fund acceleration of our acquisitions pipeline, whilst maintaining our policy of prudent gearing. At the end of the financial year ended 31 December 2017, our Net Loan to Value was 7.0% or 20.8% when calculated against the income portfolio. ·   We have extended the term of our £75m revolving credit facility with RBS to 13th February 2023 and have increased our bonding facility from £10m to £15m. We have a £30m fixed rate swap at an all-in-rate of 2.955% (including fees) until June 2020. ·   Since 2014 (when we began to replenish our portfolio) we have spent £33.1m (at 31/12/17) on investment properties, acquiring £2.99m of rental income to replace wasting income assets such as our coal fines sales and coal mine methane royalties. ·   We have undertaken selective direct development on certain of our sites, both solely and in joint venture, to grow our recurring income. At the date of this Report, all of our wholly owned direct developments are fully let. ·   Our business model has evolved to include planning promotion, construction management, letting promotion and asset management for third parties. These generate income, although we recognise that they represent variable, rather than recurring income. ·   We appointed a new insurance broker (Marsh) in 2016 and have carried out thorough reviews of our insurance programme for the 2017 and 2018 renewals, resulting in material improvements in cover.
Further actions to be taken to mitigate and manage risk: ·   We have earmarked funding for further income acquisitions in 2018-2020. ·   Given the success of our direct development activities in 2017 and the strength of occupational demand at the AMP and Logistics North, we have commenced construction of further phases of direct development.

Risk category: People	Subject to external and/or internal factors: Largely subject to internal factors
We recognise that, alongside our property portfolio, our people are our biggest asset. If we undertake inadequate resourcing and succession planning or fail to develop and/or retain our people, this will have a severely adverse effect on the performance of the business and our ambitions for growth.
Current risk status: Medium	Anticipated movement in risk status over the next 12 months: Unchanged
Mitigation and controls already in place: ·  Whilst having a small team amplifies capacity and "key-person" risks, it also means that the Executive Committee can keep those risks under close and continuous review. ·   We have recruited five new roles since publication of the 2016 Annual Report to ensure we have capacity to meet the demands of a growing business and portfolio. · During 2017 we appointed a new Head of HR and Organisation Development. She has undertaken a comprehensive review of HR policies and processes, remuneration and our personal development programme and has identified a number of initiatives for implementation during 2018. ·   The 'Our People' section of the Annual Report 2017 on pages 55 to 57 sets out the initiatives we have introduced and intend to implement to ensure we recruit, retain and develop the right people for the business.

Risk category: Legal and Regulatory	Subject to external and/or internal factors: Subject to both external and internal factors
Given the nature of our operations and certain of our legacy and acquired sites, management: of environmental and health and safety risks; and regulatory compliance, is a key component of our activities and is afforded very high priority. The Board has limited appetite for environmental risk and no appetite for health and safety risk. Environmental and/or health and safety incidents and/or regulatory breaches could result in clean-up costs, financial penalties, liabilities to third parties and/or reputational damage. Changes to regulatory and/or licensing regimes could also have an adverse effect on our strategy and/or business model.
Current risk status: Low	Anticipated movement in risk status over the next 12 months: Unchanged
Mitigation and controls already in place: ·   Our Estates, Environment and Safety team manage health and safety, and environmental risks on a day-to-day basis. Page 53 of the Annual Report 2017 provides an explanation of how we manage and monitor health and safety. ·  Our Environmental Manager has completed his Waste Management Industry Training and Advisory Board qualification and is now able to manage our waste licences in-house, with assistance from external consultants and contractors where appropriate. We regularly review, amend and surrender permits as sites mature or activities change. ·  We maintain an open dialogue with the Environment Agency ("EA") in respect of all of our permitted sites. If issues arise, we take quick and proactive steps to address them, in collaboration with the EA.
Further actions to be taken to mitigate and manage risk: ·    A number of workstreams are underway to ensure that we will be compliant with the General Data Protection Regulation when it comes into force on 25 May 2018. ·   Online training (health and safety and management of modern slavery, bribery, facilitation of tax evasion and data protection) will be rolled out to all staff during 2018.

Risk category: Governance and Internal Controls	Subject to external and/or internal factors: Largely subject to internal factors
Deficiencies in our governance measures and/or internal controls and processes (including cyber-security measures) could lead to inefficiencies, financial underperformance, or even financial loss and/or liability.
Current risk status: Low	Anticipated movement in risk status over the next 12 months: Unchanged
Mitigation and controls already in place: ·   Whilst we are a standard listed Company on the London Stock Exchange we comply with the UK Corporate Governance Code on a comply or explain basis, with explanations for only limited instances of non-compliance in our Annual Report 2017. The high standards of governance to which we aspire are reflected in the fact that we are in the process of applying to the UKLA to step up to a Premium Listing. ·   Our revised Delegated Authorities Policy, introduced in 2016, is now well established, as are improved Board and Executive Committee processes and governance measures. ·    An external review of some of our internal financial controls was undertaken by KPMG in Q4 of 2017. The results of that review were reported to the Audit Committee and recommendations for improvements are being implemented. ·    We are progressing a number of active workstreams to ensure that we will be compliant with the General Data Protection Regulation when it comes into force on 25 May 2018. ·    Our risk review process, which is led by our Company Secretary, includes regular meetings with the Senior Management Team at which opportunities to improve internal controls, such as the process for vetting, appointing and/or paying contractors, are identified. The Audit Committee undertakes a review of the effectiveness of internal controls and processes annually.
Further actions to be taken to mitigate and manage risk: ·   An external cyber-security and business interruption review will be undertaken during 2018. ·   Our internal controls and processes are subject to ongoing review, including external audits on an annual basis, to ensure they remain "fit for purpose" as the business grows and delivers across more and more sites.

Risk category: Communications and stakeholder management	Subject to external and/or internal factors: Subject to both internal and external factors
Working with a broad spectrum of stakeholders is fundamental to our business activities and performance. If we do not communicate and maintain strong relationships with them this will lead to operational underperformance and, ultimately, underperformance of our share price.
Current risk status: Low	Anticipated movement in risk status over the next 12 months: Unchanged
Mitigation and controls already in place: ·  Communications tracker maintained including bi-weekly review to ensure that our external communications remain timely and appropriate. This tracker records, where possible, Harworth's planned activities for the next six months. ·   Please see the Harworth and its stakeholders section of the Annual Report 2017 on pages 46 and 47 for an explanation of the means by which we identify, engage with, and consider the interests of our stakeholders.

Cautionary statement and Directors' liability

The Annual Report 2017 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 2017 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 2017 should be construed as a profit forecast.

The Annual Report 2017 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 2017 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 2018 Annual General Meeting, to be held on Tuesday 29^th May 2018 at 2:00pm at The Bessemer Conference Room, AMP Technology Centre, Advanced Manufacturing Park, Brunel Way, Waverley, Rotherham S60 5WG, together with explanatory notes on the resolutions to be proposed is contained in a circular sent or made available to shareholders on 24 April 2018.

-ENDS-

Enquiries:

Harworth Group plc Chris Birch, Company Secretary	T: 0114 349 3131
	E: [e-mail]

About Harworth Group

Listed on the main market, Harworth Group plc (LSE: HWG) is a leading brownfield land and property developer & investor which owns and manages a portfolio of c.21,000 acres of land on around 135 sites located throughout the Midlands and North of England. The Group specialises in the regeneration of former coalfield sites and other brownfield land into new residential developments and employment areas. (http://www.harworthgroup.com)

 

END

 

 

MSCPGUBWCUPRGMW