Unaudited Interim Results

RNS Number : 3332A

Harworth Group PLC

11 September 2018

 

HARWORTH GROUP PLC

UNAUDITED INTERIM RESULTS FOR THE HALF YEAR ENDED 30 JUNE 2018

 SIGNIFICANT SITE ACQUISITIONS, ROBUST LAND SALES AND A FAVOURABLE REGIONAL MARKET BACKDROP UNDERPIN STRONG FIRST HALF

Harworth Group plc ("Harworth" or the "Group"), a leading regenerator of land and property for development and investment, announces its interim results for the half year ended 30 June 2018.

	30 June 2018	30 June 2017	Change (%)	31 December 2017
Net Asset Value ("NAV") per share (p) (1)	128.6	117.4	9.5%	127.4
EPRA NNNAV per share (p) (1)	130.8	118.0	10.9%	128.9
EPRA NAV per share (p) (1)	133.4	120.1	11.1%	131.0
Operating profit before exceptional items (£'m)	6.6	8.8	(24.9)%	39.7
Operating profit before exceptional items plus joint ventures (£'m)	8.9	8.8	1.0%	43.8
Value gains (£'m) (2)	7.7	7.8	(2.2)%	41.6
Value gains (including development properties uplift) (£'m) (3)	10.5	10.1	3.8%	47.4
Profit excluding value gains (£'m) (4)	1.3	1.0	23.8%	2.2
Earnings per share (p)	1.71	5.37	(68.2)%	15.76
Dividend per share (p)	0.278	0.253	10.0%	0.828

Harworth's Chief Executive, Owen Michaelson, said:

"We have had another strong first half across all of our key business areas.  Significant progress has been made in replenishing our strategic land portfolio and improving the breadth and depth of our income, with £50m worth of acquisitions in the first half.  Demand for consented land in sought after locations has also resulted in over 90% of our forecast full year residential and commercial land sales being now either completed, exchanged or in legals.  Our performance remains weighted towards the second half such that we anticipate delivering full-year results in line with the Board's expectations.

"The Group's strategy continues to evolve to support Harworth's ongoing growth, highlighted by our moves towards:

·	a regional team structure deepening our local presence in the regions in which we operate in order to increase the number of opportunities evaluated and secured; and
·	the recycling of more mature, income-producing sites to allow us to focus on those sites where we can continue to add value and drive total return.

"The economic potential of the Northern and Midlands regions in which we operate remains attractive and the long-term market fundamentals supporting residential and commercial development are favourable."

SOUND FINANCIAL METRICS REFLECTING GOOD OPERATIONAL PERFORMANCE

·	A positive six months resulting in double-digit EPRA NNNAV growth over the last twelve months, up 10.9% (H1 2017: 13.8%), with over 80% of value gains (2) generated through active management
·	Profit excluding value gains increased by 23.8%, reflecting income from acquisitions, good progress with lettings on direct developments and active asset management of existing properties
·	Earnings per share down 68.2% to 1.71p (H1 2017: 5.37p) reflected the impact of beneficial deferred tax movements in 2017, whilst improved operating performance is not reflected in the statutory measure but only the EPRA measure
·	Dividend per share increased by 10% to 0.278p (H1 2017: 0.253p) in line with our progressive policy
·	Total return (NNNAV growth plus dividends) over the last twelve months of 11.5% (H1 2017: 15.0%) was ahead of the 10% long-run average target
·	Revolving Credit Facility increased by £25 million to £100 million, whilst maintaining a policy of prudent gearing.  Net loan to value of 19.0% (FY 2017: 7.0%) or 39.9% when calculated against the income portfolio (FY 2017: 20.8%), reflecting the level of first half acquisitions and the normal skewing of completed sales into the second six months.

 

CONTINUED OPERATIONAL PROGRESS DRIVING HARWORTH'S BUSINESS MODEL

·	Consent secured for 529 new residential sites in the Midlands, with 444 of these from the Company's first two PPA(5) successes. One planning application submitted post period, for a total of c.2m sq. ft of commercial space
·	Six acquisitions completed for a total of £50 million.  These sites have the potential for the development of up to 2,000 homes and c.1m sq. ft of commercial space, whilst two of the sites generate £3.1m of annual rental income
·	Full year sales quantum is expected to be ahead of the Board's expectations with 339 residential plots sold in the first half to a mixture of national and regional housebuilders. Since June, 71 residential plots and 0.15m sq. ft of built commercial space have been sold and currently we have exchanged contracts on a further 769 residential plots and 300k sq. ft of commercial space
·	At the end of the first half, all wholly owned directly developed commercial units were let.  A further c.56,000 sq. ft practically completed at the end of August and is now being actively marketed for letting
·	At the jointly-owned Multiply Logistics North commercial development, one unit of c.47k sq. ft has been let and six further units totalling c.270k sq. ft are due to practically complete by November, with one of these units already pre-let in July.

 

CONTINUED EVOLUTION OF STRATEGY SUPPORTING GROWTH AMBITIONS

·	Harworth's strategy remains committed to the beds and sheds sectors in the North and the Midlands.  To drive growth and to source more acquisitions we are investing in a regional structure with increased local presence in the Midlands and the North West
·	To improve the quality and resilience of our income portfolio and to drive overall total return, Harworth is looking to dispose selectively of its low-yielding agricultural land and its more mature income-generating sites. This process has commenced with sales of £20.5m for Phase 1 of Gateway 36 in Barnsley, Costa Coffee at Logistics North and Harworth Business Park in North Nottinghamshire, which were above book value, as well as the ongoing sales of agricultural land which offers little further development potential
·	The portfolio of consented sites stands at 10,638 residential plots (H1 2017: 9,171) and 12.13m sq. ft of commercial space (H1 2017: 10.9m sq. ft)
·	For the first time Harworth has quantified the large site valuation discount for residential plots on its ten largest residential sites, being the difference between the valuation as at 31 December 2017 and expected future sales value. This discount is expected to unwind over time as sites are sold adding £64.2m (20.0p per share) to NNNAV
·	Acquisitions focus remains on: purchasing major brownfield sites and potential urban extensions from corporates, administrators and the public sector; securing options ideally on medium to long term development opportunities or on adjacent land; and agreeing PPAs of scale in our core regions
·	Harworth moved to a premium listing on the London Stock Exchange on 1 August 2018 and is on course to join the FTSE indices on 24 September 2018.

Footnotes:

(1) In 2017, following the March 2017 equity capital raise to accelerate the acquisition of strategic land for development and the further evolution of our strategy, £229.1m of property was categorised from investment to development.  Balance sheet measures include NAV and European Public Real Estate Association ("EPRA") NNNAV.  This is now our primary metric and includes the mark to market value of development properties (£8.7m) less notional deferred tax on development properties (£1.5m).  EPRA NAV is EPRA NNNAV excluding deferred tax (£6.7m), notional deferred tax on development properties (£1.5m), and the mark to market movement on financial instruments (£0.0m)

(2) Value gains comprise profits on sale of: investment properties (£0.2m); development properties (£0.0m); overages (£0.0m); and assets held for sale (£0.0m), plus the increase in the fair value of investment properties (£6.7m), joint ventures (£2.3m) and overages (£0.0m) less the impairment of development properties (£1.5m)

(3) Value gains (including development properties) comprises value gains (£7.7m) plus the increase in the fair market value of development properties (£2.9m)

(4) Profit excluding value gains is operating profit before exceptional items plus joint ventures (£8.9m) less value gains (£7.7m) and pension costs (£0.0m)

(5) Planning Promotion Agreements ("PPAs") are contracts with landowners by which Harworth incurs the cost and risk of promoting land through planning.  If successful, Harworth shares some of the value gain, after first recovering its costs, when the land is sold

-ENDS-

Enquiries: 

Harworth Group plc	FTI Consulting
Owen Michaelson, Chief Executive	Dido Laurimore
Andrew Kirkman, Finance Director	Richard Gotla
	Eve Kirmatzis
Tel: [phone]	Tel: [phone] | [e-mail]

ABOUT HARWORTH GROUP PLC

Listed on the main market, Harworth Group plc (LSE: HWG) is a leading regenerator of land and property for development and investment which owns, develops and manages a portfolio of approximately 21,500 acres of land on around 140 sites located throughout the Midlands and the 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)

This announcement 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 this announcement 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 this announcement should be construed as a profit forecast.

 

Operational Review

OVERVIEW

I am pleased to report on another robust set of interim results, reflecting a strong start to the year by both of our Capital Growth and Income Generation teams and underpinned by the favourable regional market backdrop.  These results demonstrate the fundamental strength of our business model and the market leading team that we have assembled, with over 80% of first half value gains achieved as a result of active management rather than market movements.   EPRA NNNAV per share as at 30 June 2018 was 130.8p (H1 2017: 118.0p), giving a total return over the last twelve months of 11.5% (H1 2017: 15.0%).

In conjunction with our independent valuers, BNP Paribas, we have for the first time quantified the large site discount, being the difference between the valuation of the sites as at 31 December 2017 and expected future plot sales values.  The large site discount for our largest ten residential-led Major Developments is £64.2m (20p per share), which is expected to unwind over time as sites are sold.

Particular success has been achieved in the first half in purchasing new land and property to replenish our strategic land portfolio and to improve the breadth and depth of our income, with five major and one minor acquisition(s) made for a total of £50 million.  These acquisitions were funded in part by our Revolving Credit Facility with RBS and Santander, which was extended in April from £75 million to £100 million.

Reflecting the strategic evolution of the business and expected activities going forward, we are moving to a regional structure for our Capital Growth team, split into three core regions of the North West, the Midlands, and Yorkshire and Central.  Each regional team will be responsible for the acquisition, promotion and development of sites in their region, building the local networks and relationships which are essential to our business.  We believe that bringing together the acquisition and delivery functions and embedding each regional team in their respective local market will further increase the profile of the business and support our efforts to secure developable land and property to grow the business in a sustainable manner.

We anticipate full-year results in line with the Board's expectations.  As in previous years, we expect performance to be second half weighted, as agreed sales formally complete and both infrastructure and development works are accelerated over the summer months, driving value gains prior to the year-end. 

CAPITAL GROWTH

We continue to make good progress in extracting optimum value from our underlying portfolio in the North of England and the Midlands through three principal management actions: securing planning consents on major schemes; preparing land for redevelopment; and delivering sales above book value for future residential and commercial development.  All have underpinned the value gains made during the first half of the year.

During the period, outline planning consents were granted for 529 residential plots, with 444 of these from the Company's first two Planning Promotion Agreement successes in Nottinghamshire and Derbyshire.  Live planning applications for a further 495 freehold residential plots, 380 partnership residential plots and 325k sq. ft of commercial space have also been submitted.  Shortly after the period, we also submitted a planning application for 2m sq. ft of commercial space to expand Sherburn Rail Freight Terminal on the site of the former Gascoigne Wood Colliery in Selby, North Yorkshire.  The majority of these applications are expected to be considered by the end of the year.  Applications for a further 350 freehold residential plots and 2.065m sq. ft of commercial space are also due to be submitted by the end of 2018.  

A central part of our strategy continues to be the careful planning of the disposal of consented land with the aim of achieving sales proceeds above book value and reinvesting the proceeds to accelerate the development of our sites.  In the first half of the year we sold land for 339 residential plots at three major development sites to national and regional housebuilders.  A number of deals were also completed after the period-end, including the sale of c.6 acres of land at the former Harworth Colliery to Jones Homes, part of our 1,500-home redevelopment of a site that has been brought forward with the support of a £4m loan from Homes England to accelerate infrastructure works.  

These disposals contributed to the current position of over 90% of forecast sales for the year being completed, exchanged or agreed.  We, therefore, anticipate that sales to housebuilders and commercial occupiers being agreed for completion during the rest of the year will lead to full year sales, including of income producing properties, being ahead of the Board's expectations.  Progress has also been made in preparing land and agreeing terms for 2019 sales.

During the period we added three sites to our strategic land pipeline within our core regions: 

·	In April we purchased two sites in the Midlands, totalling 165 acres, for a total consideration of £3.88 million plus acquisition costs.  The first, Cinderhill near Denby in Derbyshire, involved the purchase of 112 acres of land across three separate parcels.  This supplements our existing promotion agreement for a wider master-plan currently being promoted through Amber Valley District Council's Local Plan for a major new residential-led development across 421 acres that could deliver up to 3,000 new homes and 450,000 sq. ft of commercial space.
·	At Bardon Hill in Leicestershire we acquired 53 acres of greenfield land adjacent to our existing major residential development at Coalville.  We are already promoting the site through the planning process for a commercial scheme of up to 457,000 sq. ft of manufacturing, distribution and roadside uses and intend to submit an outline planning application in the autumn.
·	We purchased the 350-acre former Ironbridge coal-fired power station in Shropshire, further growing the Company's strategic land-bank and presence in the Midlands.  Located near Ironbridge town centre, the site comprises around 240 acres of brownfield land and a neighbouring parcel of over 100 acres of agricultural land.  We are already promoting the site with key local stakeholders to establish its future use, with consultation workshops taking place in the autumn to explore the potential masterplan for a significant mixed-use development.

As at 30 June 2018, the total number of consented residential plots in the portfolio was 10,638 (H1 2017: 9,171 plots) alongside 12.13m sq. ft of consented employment space (H1 2017: 10.9m sq. ft).  When combined with land within our identified planning pipeline, Harworth could potentially deliver a total of 20,416 residential plots (H1 2017: 19,705 plots) alongside 22.4m sq. ft of new commercial space (H1 2017: 18.3m sq. ft) for the regions in which we operate.

INCOME GENERATION

Our Income Generation team's focus on growing resilient, recurring income has continued in the first half of the year. Alongside asset managing our existing portfolio and directly developing new commercial space with a view to securing long term lease agreements, we have also begun to execute an active churn strategy of those more mature assets with limited further value or income growth potential, alongside the sale of low-yielding agricultural land and property with little development potential.  

The extension of our Revolving Credit Facility to £100m in April, coupled with the sale of Harworth Business Park in North Nottinghamshire at book value in the previous month, enabled the purchase in the first half of two income-producing sites that also have commercial development potential:

·

A 112-acre site at Wyke, Bradford, for £32.45 million plus acquisition costs.  Less than a mile from Junction 26 of the M62 and providing excellent access to a number of major Northern cities and ports, the site comprises an agrochemical works set over 32-acres operated by Nufarm UK Limited, alongside 80-acres of unoccupied land.   It is let on a 50-year lease, which commenced in October 2005, at a current passing rent of over £2.1m per annum, representing a net initial yield of 6.2% and a reversionary yield of 7.0% based on fixed uplifts.  The 80-acres of unoccupied land also has the long-term potential to deliver a major new commercial development.

·

The acquisition of a 22-acre site in Flaxby, North Yorkshire, for £8.75m plus acquisition costs.  Within half a mile of Junction 47 of the A1(M), the site comprises a c.276,000 sq. ft commercial unit occupied by Ilke Homes Ltd, the modular homes manufacturer.  A 14-year lease was agreed with Ilke at a stabilised rent of £1m per annum, representing a stabilised net initial yield of 10.9% and a reversionary yield of 12.1%.  The site's very low density of 29% also provides a potential opportunity for further commercial development.

In July we completed the disposal of all five built commercial units, totalling 145,282 sq. ft, at Phase 1 of our Gateway 36 Business Park in Barnsley, South Yorkshire for £15.8m, reflecting a net initial yield of 4.76% and at a price above book value.   The sale comprised four fully-let industrial/warehouse units and one drive-thru retail unit set across 8.5 acres, all developed and let by Harworth between 2015 and 2018. With little further growth potential, the proceeds will be reinvested into income-producing assets and direct development opportunities.

Lettings progress has also been strong during the period, with over 700,000 sq. ft of new and renewed letting activity to a variety of occupiers, at favourable rents.  At the end of the half year, all our wholly owned direct developments in our Business Space portfolio were fully let, reflecting the underlying strength of the industrial property market across the North of England. 

By the end of February, we had secured an additional three new long-term lettings on our directly developed commercial space at three of our key sites in the North of England, setting new headline rents at each site and growing Harworth's recurring, high quality income base by over £0.6 million per annum: 

·	At Logistics North in Bolton we agreed a ten-year lease with Vaclensa Limited for our C5 "R-evolution" unit, totalling 27,884 sq. ft, at a new headline rent for Logistics North of £7.00 psf, reflecting the continued strong demand for high quality industrial assets in the region.
·	We secured British Steel Limited as the new tenant for the final available "R-evolution" unit at the Advanced Manufacturing Park in Rotherham, the 15,063 sq. ft Unit 7A, on a 15-year lease.
·	Prior to its sale in July, we let the final vacant unit at Gateway 36 in Barnsley, the 75,277 sq. ft "Helix" building, to leading used car supermarket Motor Depot Limited on a 15-year lease at the unit at a headline rent of £5.00 psf.

With the market for new-build commercial space remaining strong, driven by a lack of good quality existing supply, we took the decision to proceed with construction of the third phase of "R-evolution" at the Advanced Manufacturing Park, comprising 55,750 sq. ft of commercial space that practically completed at the end of August 2018.  Reported interest through our retained agents is high and we anticipate announcing further lettings progress at this site this year.    

Progress also continues to be made in letting the 'Multiply Logistics North' units that we are developing in joint venture with the Lancashire County Pension Fund at Logistics North.  Three units totalling 169,500 sq. ft are practically complete, with Hardscape, the UK's premier landscaping material supplier, agreeing a 15-year lease in April for the 46,803 sq. ft Unit F2/A.  This deal encouraged the joint venture to begin construction of the next phase of six units of between 20,322 sq. ft and 149,198 sq. ft due for practical completion in October.  A 15-year pre-let at a rent of £7.25psf has also been agreed with rijo42, the UK's leading supplier of commercial coffee machines, coffee beans and coffee ingredients, for the 20,344 sq. ft Unit F2/E.

The team also continues to asset manage our existing 2.4m sq. ft Business Space portfolio to reduce voids and increase net income, whilst also deriving rental returns and royalties from energy generation, environmental technologies and the agricultural portfolio.  Business Space revenue in H1 2018 was £5.3m (H1 2017: £4.0m). The weighted average unexpired lease term ("WAULT") across the portfolio now stands at 12.3 years (H1 2017: 7.5 years), whilst the vacancy rate has reduced to 11% (H1 2017: 17%).

Our revenues for the period were also bolstered by the work of our Natural Resources and Operations teams. A total of 159.7MW of energy capacity is installed on our land, providing a long-term income stream from a combination of ground rents and royalties. The team's focus remains on growing future income from alternative technologies and from maintaining income from our tipping operations, which has the added benefit of supporting site remediation.  Our Operations team also successfully completed the demolitions of Thoresby Colliery in June and Kellingley Colliery in August, to support the ongoing clean-up and remediation of these sites.

MARKET OUTLOOK

The outlook for our target markets remains healthy. The stability of the regional markets in which we operate is secured by comparatively low prices, a continuing lack of consented and engineered land for housing, and the need for new commercial space where good quality stock is scarce.  Growth forecasts for the 'beds and sheds' markets in our regions are favourable, with the Midlands and the North West forecast to have stronger house price growth than most other regions over the next five years and the industrial sector projected to continue to outperform both the retail and office market in the medium-term.

Our assessment is supported by the legislative and regulatory landscape.  Government changes to the National Planning Policy Framework were as expected, with the presumption in favour of sustainable development remaining as before, and maximising the use of previously developed sites, being central to this presumption.  Incentives to support home ownership such as Help-to-Buy remain in place, whilst the Government's continued commitment to regional devolution in the form of new powers and monies to regional mayors can continue to help unlock major new residential and commercial development through new infrastructure investment without having to resort to Central Government assistance.

Overall, trading remains in line with our expectations, with strong momentum continuing into the second half of 2018.

Owen Michaelson

Chief Executive Officer

11 September 2018

 

Financial Review

OVERVIEW
 

Harworth continued its growth trajectory in the first six months of 2018 with strong progress across the business.  Total return (NNNAV growth plus dividends) per share, which is our primary metric to show the performance of the business, over the last twelve months was 11.5% (H1 2017: 15.0%).  The table below shows the movement in net asset value over the last twelve months:

	As at 30 June 2018		As at 30 June 2017		Growth since 30/06/17	As at 31 December 2017		Growth since 31/12/17
	Per share	£'m	Per share	£'m		Per share	£'m
EPRA NNNAV	130.8p	£420.4m	118.0p	£379.0m	10.9%	128.9p	£414.2m	1.5%
NAV	128.6p	£413.2m	117.4p	£377.0m	9.5%	127.4p	£409.3m	0.9%
EPRA NAV	133.4p	£428.7m	120.1p	£385.7m	11.1%	131.0p	£420.8m	1.9%

Operating profit before exceptional items in H1 2018 was £6.6m (H1 2017: £8.8m).  However, the statutory measure does not now fully capture the growth and profitability of the business as we are conducting some of our activities through joint ventures (H1 2018: £2.3m, H1 2017: £nil) and, as set out below, the revaluation gains on development properties post re-categorisation (H1 2018: £2.9m, H1 2017: £2.3m) fall outside of this measure.  Taking account of both of these additional sources of value creation, operating profits which contributed to EPRA NNNAV rose by 5.7% to £11.8m (H1 2017: £11.1m) reflecting active management across our portfolio.

We consider that the operating profits which contributed to EPRA NNNAV growth of £11.8m (H1 2017: £11.1m) can best be understood as being composed of two elements:

·

Value gains (£10.5m; H1 2017: £10.1m) - profits on disposals of investment, development and available for sale properties, and overages totalling £0.1m (H1 2017: £0.1m) and revaluation gains on our property portfolio of £10.4m (H1 2017: £10.0m).  Revaluation gains comprise: revaluation movements on investment property of £6.7m (H1 2017: £7.7m), profits from joint ventures of £2.3m (H1 2017: £nil) and revaluation movements on development properties of £2.9m (H1 2017: £2.3m) less impairments of development properties of £1.5m (H1 2017: £nil).  As development properties are held as inventory, the revaluation gain is not included in the balance sheet.  Instead the revaluation amount is verified by BNP Paribas and Savills, our external property surveyors.  Profits from joint ventures are included within this measure as our joint ventures conduct similar operations to Harworth, albeit in different ownership structures, and the principal profits in the joint ventures to date have been from revaluation gains; and

·

Profit excluding value gains (£1.3m; H1 2017: £1.0m) - this represents the ongoing profitability of the business which is not reliant on property value gains or profits from the sales of properties and is therefore less susceptible to movements in the property cycle. Profit excluding value gains rose by 23.8% in the first six months of 2018 compared to last year reflecting acquisitions made to improve income quality and resilience, good progress with lettings on direct developments, and active asset management of our existing properties.

Earnings per share, which fell by 68.2% to 1.71p (H1 2017: 5.37p), is distorted by the impact on the comparative of the beneficial deferred tax movements in 2017 which more than offset this year's improved operating performance.  The 2018 interim dividend per share has been increased by 10% to 0.278p (H1 2017: 0.253p) creating a total return (NNNAV growth plus dividends) over the last twelve months of 11.5% (H1 2017: 15.0%) which is ahead of the 10% long-run average target.

Net debt at £100.2m or 19.0% net loan to value (FY 2017: £32.3m and 7.0%) reflects the level of first half acquisitions and the normal skewing of sales into the second half of the year.  In February 2018, the Group extended the term of its £75.0m Revolving Credit Facility ("RCF") with RBS to February 2023, on the same terms except with an increase in margin from 200 to 210 basis points, and in April 2018 the RCF was increased to £100.0m with Santander joining the facility on the same terms.

PROPERTY CATEGORISATION

Until sites receive planning permission, our view is that the land is held for a currently undetermined future use and should thus be held as investment property. We categorise all properties/land that have received planning permission as development properties.  As at 31 December 2017, the balance sheet value of all development sites was £210.5m and the market value of all development was £216.3m reflecting the £5.8m uplift in value of these sites, which is appropriately not reflected in the balance sheet.  More detail is set out in the 2017 Annual Report and Accounts.

Property categorisation is reviewed as at 30 June and 31 December each year. Whilst in the first half of 2018 there was an amended planning permission granted at Swadlincote and our first two PPA successes, there were no sites which received first time planning permission and hence no sites were re-categorised.  As at 30 June 2018, the balance sheet value of all development sites was £209.4m and the market value of all development was £218.1m reflecting the £8.7m uplift in value of these sites.  In order to highlight the market value of development sites and be consistent with our investment properties, we are using EPRA NNNAV, which includes the market value of development properties, less notional deferred tax, as our primary metric.  We will continue to report EPRA NAV which is EPRA NNNAV excluding deferred tax and the mark to market movement on financial instruments.

The table below sets out our top ten sites by value, which represent 48% of the total value of all our properties, split by their categorisation and showing the total acres, currently consented residential plots and commercial space:

			Housing plots			Commercial space
Site	Type	Acres	Consented	Sold	Built	Consented	Built
Waverley	Development	454	3,890	1,218	850	-	-
Coalville	Development	346	2,016	-	-	-	-
Nufarm	Investment	112	-	-	-	0.3m sq. ft	0.3m sq. ft
Rossington	Development	334	1,200	170	140	0.1m sq. ft	0 sq. ft
Waverley (AMP)	Investment	115	-	-	-	2.1m sq. ft	1.3m sq. ft
Lounge	Investment	103	-	-	-	0.8m sq. ft	0 sq. ft
Asfordby	Investment	141	-	-	-	0.3m sq. ft	0.3m sq. ft
Riverdale Park	Development	112	600	-	-	0.2m sq. ft	0 sq. ft
Gateway 36 Ph. 1	Asset held for sale	9	-	-	-	0.2m sq. ft	0.2m sq. ft
Thoresby	Development	460	800	-	-	0.3m sq. ft	0 sq. ft
	TOTAL	2,186	8,506	1,388	990	4.3m sq. ft	2.1m sq. ft

OPERATING PROFIT

Revenues in the first half of 2018 were £21.9m (H1 2017: £22.9m), split between revenue from operations £10.9m (H1 2017: £14.4m) and revenue from the disposal of development properties £11.0m (H1 2017: £8.5m). Revenue from operations is split between: Income Generation £10.8m (H1 2017: £8.7m), where revenue mainly comprises rental and royalty income together with some sales of coal fines and salvage; and Capital Growth £0.1m (H1 2017: £5.7m). The increase in revenue from Income Generation reflected improved lettings and business space acquisitions made in 2017 and 2018. The reduction in revenue from Capital Growth reflected the amounts received in January 2017 relating to a promote fee on the letting of a 225,000 sq. ft unit to Whistl.  The smaller 175,000 sq. ft unit continues to be actively marketed on behalf of M&G Real Estate.

Cost of sales comprises the inventory cost of development property sales and the operating costs for business space, natural resources, agricultural land and coal fines activities. Cost of sales increased to £16.3m (H1 2017: £15.0m) of which £12.6m related to the inventory cost of development property sales (H1 2017: £8.2m) whilst in H1 2017 there were £3.6m of costs related specifically to the Whistl promote fee.

Revenue and cost of sales include amounts relating to the M&G forward funding contract at Logistics North as Harworth acted as principal in this transaction.  This principal relationship was as a result of Harworth having exposure to potential construction and credit risks as well as the potential rewards of managing the construction on time and to budget, and letting the buildings favourably and early. 

Total overheads, which include the overhead costs of the Capital Growth and Income Generation segments and central costs, amounted to £5.9m (H1 2017: £6.6m) and were in line with expectations. The table below shows the results of the business split between Capital Growth, Income Generation and Central Overheads:

	H1 2018				H1 2017
	Capital Growth £m	Income Generation £m	Central Over- heads £m	Total £m	Capital Growth £m	Income Generation £m	Central Over-heads £m	Total £m
Revenue	11.1	10.8	-	21.9	14.2	8.7	-	22.9
Cost of sales	(13.0)	(3.3)	-	(16.3)	(12.7)	(2.6)	-	(15.3)
Overheads	(1.2)	(1.3)	(3.4)	(5.9)	(1.0)	(0.9)	(4.6)	(6.6)
Notional development property costs (1)	1.6	-	-	1.6	-	-	-	-
(Loss)/profit excluding value gains (2)	(1.5)	6.2	(3.4)	1.3	0.5	5.1	(4.6)	1.0
Revaluation gains	(1.6)	6.7	-	5.2	3.5	4.2	-	7.7
Profit on disposals (2)	-	0.1	-	0.1	-	0.1	-	0.1
Operating (loss)/profit before exceptional items	(3.1)	13.0	(3.4)	6.6	4.0	9.4	(4.6)	8.8
Net exceptional items	-	-	(0.6)	(0.6)	-	-	0.1	0.1
Operating (loss)/profit	(3.1)	13.0	(4.0)	6.0	4.0	9.4	(4.5)	8.9
Joint ventures	-	2.3	-	2.3	-	-	-	-
Operating (loss)/profit before exceptional items plus JVs	(3.1)	15.3	(3.4)	8.9	4.0	9.4	(4.5)	8.9
Revaluation gains on development properties (3)	2.9	-	-	2.9	2.3	-	-	2.3
Operating (loss)/profit before exceptional items which contributed to EPRA NNNAV	(0.2)	15.3	(3.4)	11.8	6.3	9.4	(4.5)	11.2
Value gains (including JVs and development properties)	1.3	9.1	-	10.5	5.8	4.3	-	10.1

Notes: (1) The income statement has been re-presented to show loss on development property sales (£0.1m; H1 2017 £0.3m profit) within profit on disposals and development property impairment (£1.5m; H1 2017 £nil) within revaluation gains.  This notional cost is the reversal of these amounts

(2) Profit excluding value gains comprises operating profit before exceptional items of £6.6m (H1 2017: £8.8m) less value gains of £5.3m (H1 2017: £7.8m).  Value gains comprise profit/(loss) on disposals (being profits on sale of investment properties of £0.1m (H1 2017: £0.2m), assets held for sale of £nil (H1 2017: loss of £0.4m) and loss on sale of development properties of £0.1m (H1 2017: £0.3m profit)) plus increase in fair value of investment properties of £6.7m (H1 2017: £7.7m) less the development property impairment of £1.5m (H1 2017: £nil)

(3) This is the unrecognised mark to market gain since the properties were re-categorised into development properties

(4) There are minor differences on some totals due to rounding
 

Set out below are value gains for the first six months of 2017 and 2018, which comprise profit on disposals, revaluation gains on investment properties (including joint ventures) and revaluation gains on development properties:
 

	H1 2018				H1 2017
£m		Revaluation gains				Revaluation gains
	Profit on disposals	Management	Market	Total	Profit on disposals	Management	Market	Total
Development/Capital Growth
Major Developments	(0.0)	1.9	(0.6)	1.3	0.0	1.4	0.9	2.3
Strategic Land	(0.0)	0.1	0.0	0.1	0.0	3.3	0.0	3.3
Investment/Income Generation
Business Space	(0.1)	3.0	2.2	5.1	0.0	2.0	0.0	2.0
Natural Resources	0.3	3.7	0.0	4.0	0.3	1.0	0.0	1.3
Agricultural Land	(0.0)	0.0	0.0	0.0	(0.2)	0.7	0.7	1.2
Total	0.1	8.7	1.7	10.5	0.1	8.4	1.6	10.1

The Group made sales of properties of £16.1m in the first six months of 2018 (H1 2017: £24.9m) achieving a profit on disposals of £0.1m (H1 2017: £0.1m).  The sales were split between residential serviced plots of £11.8m (H1 2017: £11.7m), commercial development of £3.8m (H1 2017: £10.8m) and other, essentially agricultural land, of £0.5m (H1 2017: £2.4m).  In addition, Harworth undertook direct development on its sites with a land value of £1.0m (H1 2017: £2.1m) and its share of property sales in its joint ventures was £0.4m (H1 2017: £0.3m).

Cash proceeds from sales were £15.4m (H1 2017: £14.8m) reflecting the sales in the period of £16.1m (H1 2017: £24.9m), less deferred consideration on sales in the period of £6.9m (H1 2017: £15.2m), plus deferred consideration received from sales in the prior year of £6.2m (H1 2017: £5.1m).

In the first half of 2018, the Group had revaluation gains of £10.4m (H1 2017: £10.0m) comprising:

(£'m)	H1 2018	H1 2017
Revaluation gains from investment properties	6.7	7.7
Impairment of development properties	(1.5)	0.0
Contribution to statutory operating profit	5.2	7.7
Revaluation gains from joint ventures	2.3	0.0
Revaluation gains from development properties	2.9	2.3
Total revaluation gains	10.4	10.0

All the revaluation gains for development properties relate to Major Developments sites.

We have split the revaluation gains of £10.4m (H1 2017: £10.0m) to reflect the contribution from active management of £8.7m (H1 2017: £8.4m) and market movements of £1.7m (H1 2017: £1.6m).  Whilst there is a degree of subjectivity in this split, it highlights that the majority of the value gains continue to come from active management.  In the first half of 2018, the principal revaluation gains across the divisions reflected the following:

·	Major Developments - Further progress at Logistics North reflecting higher values from an upcoming sale and a new lease signing, partially offset by weaker expected sales at one residential site;
·	Strategic Land - Minor uplift at Cinderhill ahead of likely 2019 planning submission;
·	Business Space - Lettings of directly developed units at new headline rents at the AMP and Logistics North; sales progress at Gateway 45; and expected value increases on upcoming income site sales as part of sales process;
·	Natural Resources - Recognition of the development and subsequent valuation of ongoing income from surface water management; and
·	Agricultural Land - Minimal changes in the period.

EXCEPTIONAL ITEMS

Exceptional items in 2018 were a charge of £0.6m (H1 2017: credit £0.1m).  The exceptional items in 2018 comprised the costs for the step-up from standard to premium listing (see below).  Exceptional items in 2017 comprised three separate items which related to sundry receipts and costs from the Group's legacy activities.

TAXATION
 

The income statement charge for taxation in the period was £1.1m (H1 2017: £8.9m credit) which comprised a deferred tax charge of £1.2m (H1 2017: £8.8m credit) and a current period tax credit of £0.1m (H1 2017: £0.1m).  The movement in deferred tax in the period mainly relates to the increase in valuation of the investment properties.

The current tax credit relates to a claim for a land remediation relief tax credit in the period.

At 30 June 2018, the Group had deferred tax liabilities of £14.3m (H1 2017: £21.8m), which largely related to unrealised gains on investment properties and had recognised deferred tax assets of £7.6m (H1 2017: £15.7m).    The gross deferred tax liabilities and assets have reduced as a result of sales of investment properties and the impact of the recategorisation of properties.  The net deferred tax liability was £6.7m (H1 2017: £6.1m).

EARNINGS PER SHARE AND DIVIDENDS
 

Earnings per share fell to 1.71p (H1 2017: 5.37p) and underlying earnings per share, excluding exceptional items, fell to 1.89p (H1 2017: 5.35p).  These falls are distorted by the impact of the beneficial deferred tax movements in 2017 and as improved operating performance is not reflected in the statutory measure but only the EPRA measure.

An interim dividend of 0.278p per share (H1 2017: 0.253p) equivalent to £894k (H1 2017: £812k) will be paid.  The 10% rise in the 2018 interim dividend creates a total return (NNNAV growth plus dividends) over the last twelve months of 11.5% (H1 2017: 15.0%) which is ahead of the 10% long-run average target.  This dividend will be paid on 19 October 2018 to shareholders on the register at the close of business on 21 September 2018.  The ex-dividend date will be 20 September 2018.

NET ASSETS

As set out below, EPRA NNNAV increased to £420.4m as at 30 June 2018 from £414.2m as at 31 December 2017 (£379.0m as at 30 June 2017).  This increase was as a result of movements in the period, being operating profit before exceptionals plus share of profits of joint ventures and development property gains of £11.8m, less exceptional costs of £0.6m, interest costs of £1.7m, tax charges (including development properties notional deferred tax) of £1.6m and dividends of £1.8m plus other movements of £0.1m.

 

	30 June 2018 £m	31 December 2017 £m	30 June 2017 £m
Investment and development properties (including investments in joint ventures, assets held for sale, overages and occupied properties)	519.1	457.1	408.6
Cash	7.7	8.4	13.5
Other assets	35.5	31.5	18.9
Total assets	562.3	497.0	441.0
Gross borrowings	107.9	40.6	23.6
Deferred tax liability	6.7	5.5	6.1
Derivative financial instruments	-	0.1	0.2
Other liabilities	34.5	41.5	34.1
Net assets	413.2	409.3	377.0
Mark to market value of development properties less notional deferred tax	7.2	4.8	2.0
EPRA NNNAV	420.4	414.2	379.0
Number of shares in issue less Employee benefit trust shares (1)	321,314,989	321,250,750	321,250,750
NAV per share	128.6p	127.4p	117.4p
EPRA NNNAV per share (2)	130.8p	128.9p	118.0p
EPRA NAV per share (3)	133.4p	131.0p	120.1p
Notes: (1) Number of shares in issue (H1 2018: 321,496,760; FY 2017: 321,496,760; H1 2017 321,496,760) less Employee benefit trust shares (H1 2018: 181,771; FY 2017 246,010; H1 2017 246,010) (2) NAV (H1 2018 £413.2m; FY 2017: £409.3m; H1 2017: £377.0m) plus market value of development properties (H1 2018: £8.7m; FY 2017: £5.8m; H1 2017: £2.3m) less notional deferred tax (H1 2018: £1.5m; FY 2017: £1.0m H1 2017: £0.4m) divided by number of shares in issue less Employee benefit trust shares (3) EPRA NNNAV (H1 2018: £420.4m; FY 2017: £414.2m; H1 2017: £379.0m) excluding deferred tax liability (H1 2018: £6.7m; FY 2017: £5.5m; H1 2017: £6.1m), notional deferred tax on development properties (H1 2018: £1.5m; FY 2017: £1.0m; H1 2017: £0.4m) and mark to market movement on financial instruments (H1 2018: £nil; FY 2017 £(0.1)m; H1 2017: £(0.2)m) divided by number of shares in issue less Employee benefit trust shares

FINANCING STRATEGY AND FUNDING

As has been consistently stated, Harworth's financing strategy is to be prudently geared, in particular not gearing our Capital Growth properties being our Strategic Land and Major Developments sites, as we believe that this gives the Group a number of advantages:

·	allows working capital swings to be managed appropriately given that infrastructure spend is usually in advance of sales and thus net debt can increase materially during the year;
·	gives the Group the ability to complete acquisitions quickly, which is often a differentiating factor in a competitive situation; and
·	ensures that we do not combine financial gearing with Harworth's existing operational gearing.  Such operational gearing is the appropriate level of exposure we take in terms of planning, remediation/engineering, letting and sales risks.

Harworth's financing strategy also involves the Group seeking in principle to balance its cash flows by funding infrastructure spend and investment in acquisitions through disposal proceeds.

 

To reduce refinancing risk, on 13 February 2018 Harworth extended the term of its existing £75m Revolving Credit Facility ("RCF") with RBS by two years such that it now expires in February 2023.  The extension was on substantially the same terms with the only notable change being a slight increase in margin to 210 basis points ("bps") over LIBOR (from 200bps).  To increase financing flexibility, drive continued growth and maintain an efficient balance sheet, on 30 April 2018 Harworth increased the size of its RCF from £75m to £100m, with Santander joining the facility alongside RBS.  RBS' commitment remains at £75m with Santander's initial commitment at £25m.  There were no other material changes to the terms of the RCF.  The Group also uses infrastructure funding, provided by public bodies to promote the development of major sites for employment and housing needs, as part of our funding.  At 30 June 2018 the Group had six infrastructure facilities with all-in funding rates of between 2.5% and 3.9%.

The Group's hedging strategy is to have roughly half of its debt at a fixed rate and half of its debt exposed to floating rates.  On 20 July 2018, Harworth cancelled its existing £30m fixed rate interest swap which was due to expire on 30 June 2020 (incurring total break costs of £18.5k) and in its place entered into a 4-year, £45m fixed rate interest swap at an all-in cost of 1.235% (including fees) on top of the existing 210bps margin paid under the RCF.  The new swap was put in place to reflect increased levels of borrowing and to increase its term commensurate with the extension in the term of the RCF.  The interest rate swap is hedge accounted with any unrealised movements going through reserves. 

Reflecting the level of first half acquisitions and the normal skewing of sales into the second half of the year, as at 30 June 2018 Harworth's gross Loan To Value ("LTV") was 20.4% (FY 2017: 8.8%) and net LTV was 19.0% (FY 2017: 7.0%).  However, as set out above, Capital Growth sites are deliberately not geared, so if gearing is just assessed against the value of Business Space and Natural Resources properties this equates to a gross LTV of 43.0% (FY 2017: 26.3%) and a net LTV of 39.9% (FY 2017: 20.8%).

The Group had borrowings and loans of £107.9m at 30 June 2018 (FY 2017: £40.6m), being the RBS RCF of £87.8m (FY 2017: £23.4m) and infrastructure loans of £20.1m (FY 2017: £17.2m).  The Group's cash and cash equivalents at 30 June 2018 were £7.7m (FY 2017: £8.4m).  The resulting net debt was £100.2m (FY 2017: £32.2m).  The weighted average cost of debt, using 30 June 2018 balances and rates, was 2.9% with a 0.84% non-utilisation fee on undrawn RCF amounts (FY 2017: 3.0% with a 0.8% non-utilisation fee on undrawn RCF amounts).  For the twelve months to 30 June 2018 Harworth's interest cover, as calculated by the RBS/Santander RCF covenant calculation, was 2.65x against a covenant test of 1.5x (FY 2017: 3.41x).

MARCH 2017 EQUITY PLACING

Details of the March 2017 equity placing which raised £27.1m (net of expenses) are set out in the 2017 Annual Report and Accounts.

PREMIUM LISTING AND FTSE INDEX INCLUSION

On 1 August 2018 Harworth confirmed that it had received approval from the UK Listing Authority of the transfer of the listing category of all of its ordinary shares from a standard listing (shares) to a premium listing (commercial company).   Harworth believes that the Group has satisfied the conditions for UK FTSE indices inclusion and expects to join the indices on 24 September 2018.

Andrew Kirkman

Finance Director

11 September 2018

 

Principal risks and uncertainties

A detailed explanation of the principal risks and uncertainties affecting the Group, and the steps it takes to mitigate these risks, can be found on pages 36 to 43 of the Annual Report and Financial Statements for the year ended 31 December 2017, which is available at www.harworthgroup.com/investors.

The Group's principal risks and uncertainties are grouped into eight categories: markets, delivery, politics, finance, people, legal and regulatory, governance and internal controls, and communications and stakeholder management.  These risks and uncertainties are expected to remain relevant for the remaining six months of the financial year.

Shortly after the first half of the year we opened two new regional offices.  Our employees now operate from four offices: Rotherham (head office), Manchester, Birmingham and Leeds.  As our geographical footprint expands and more of our employees base themselves in regional offices, we are taking steps to ensure that our internal controls and processes are maintained across each of our offices to ensure consistent and efficient working practices.  This is reflected in a temporary increase in the risk status of our governance and internal controls risk category.

The overall risk status of all other risk categories remains unchanged.

As negotiations continue for the United Kingdom's withdrawal from the European Union, the Board expects that the Group will continue to operate in an uncertain economic and political climate in the short to medium term.  Whilst the Group is not immune to that uncertainty, it is mitigated by the positive economic and consumer trends in our core markets, with the residential, logistics and manufacturing sectors in the North of England and the Midlands continuing to have solid fundamentals and favourable performance.

Chris Birch

Group General Counsel and Company Secretary

11 September 2018

 

Consolidated income statement

	Note	Unaudited 6 months ended 30 June 2018 £000	Unaudited 6 months ended 30 June 2017 £000	year ended 31 December 2017 Audited £000
Revenue	2	21,909	22,920	53,673
Cost of sales	2	(16,282)	(15,014)	(37,678)
Gross profit	2	5,627	7,906	15,995
Administrative expenses	2	(5,891)	(6,570)	(12,020)
Other gains	2	6,930	7,524	35,658
Other operating (expense)/income		(27)	(24)	98
Depreciation of property, plant and equipment		(4)	(4)	-
Operating profit before exceptional items		6,635	8,832	39,731
Exceptional income	3	-	230	414
Exceptional expense	3	(590)	(168)	(83)
Operating profit		6,045	8,894	40,062
Finance income	4	5	15	16
Finance costs	4	(1,743)	(1,184)	(2,277)
Share of profit of joint ventures		2,288	-	4,039
Profit before tax		6,595	7,725	41,840
Tax	5	(1,108)	8,873	7,843
Profit for the period/year		5,487	16,598	49,683
Earnings per share from operations		pence	pence	pence
Basic and diluted	7	1.7	5.4	15.8

The notes on pages 21 to 36 are an integral part of these condensed consolidated interim financial statements.

All activities in the current period/year are derived from continuing operations.

Consolidated statement of comprehensive income

	Unaudited 6 months ended 30 June 2018 £000	Unaudited 6 months ended 30 June 2017 £000	Audited year ended 31 December 2017 £000
Profit for the period/year	5,487	16,598	49,683
Other comprehensive income - items that will not be reclassified to profit or loss:
Net actuarial profit/(loss) in Blenkinsopp Pension scheme	82	(31)	(105)
Deferred tax on actuarial loss	-	-	(51)
Fair value of financial instruments	125	142	244
Total other comprehensive income	207	111	88
Total comprehensive income for the period/year	5,694	16,709	49,771

Consolidated balance sheet

ASSETS	Note	Unaudited 6 months ended 30 June 2018 £000	Unaudited 6 months ended 30 June 2017 £000	Audited year ended 31 December 2017 £000
Non-current assets
Property, plant and equipment		797	785	802
Other receivables		2,000	1,406	2,666
Investment properties	8	256,276	310,527	216,560
Investments in joint ventures and associates		22,428	11,768	18,838
Trade receivables		-	-	5,250
Derivative financial instruments		3	-	-
		281,504	324,486	244,116
Current assets
Inventories	9	210,849	74,010	211,618
Trade and other receivables		34,008	18,214	25,165
Cash		7,718	13,484	8,371
Assets classified as held for sale	10	28,186	10,829	7,688
		280,761	116,537	252,842
Total assets		562,265	441,023	496,958
LIABILITIES
Current liabilities
Borrowings	11	(7,648)	(2,319)	(6,145)
Trade and other payables		(31,534)	(31,984)	(38,497)
Current tax liabilities		(1,698)	-	(1,538)
		(40,880)	(34,303)	(46,180)
Net current assets		239,881	82,234	206,662
Non-current liabilities
Borrowings	11	(100,242)	(21,273)	(34,501)
Trade and other payables		(760)	(1,520)	(760)
Derivative financial instruments		-	(223)	(122)
Deferred income tax liabilities		(6,743)	(6,093)	(5,521)
Retirement benefit obligations		(413)	(562)	(563)
		(108,158)	(29,671)	(41,467)
Total liabilities		(149,038)	(63,974)	(87,647)
Net assets		413,227	377,049	409,311
SHAREHOLDERS' EQUITY
Called up share capital	12	32,150	32,150	32,150
Share premium account		24,351	24,351	24,351
Investment in own shares	12	(194)	(263)	(263)
Fair value reserve		90,317	65,968	85,109
Capital redemption reserve		257	257	257
Merger reserve		45,667	45,667	45,667
Current year profit		5,487	16,598	49,683
Retained earnings		215,192	192,321	172,357
Total shareholders' equity		413,227	377,049	409,311

Consolidated statement of changes in shareholders' equity

	Called up share capital £000	Share premium account £000	Own shares £000	Fair value reserve £000	Capital redemption reserve £000	Merger reserve £000	Retained earnings £000	Total equity £000
Balance at 1 January 2017 (audited)	29,227	-	-	58,279	257	45,667	201,493	334,923
Transactions with owners:
Profit for the six months to 30 June 2017	-	-	-	-	-	-	16,598	16,598
Transfer of fair value gain on revaluation of investment properties	-	-	-	7,689	-	-	(7,689)	-
Purchase of own shares	-	-	(263)	-	-	-	86	(177)
Dividend paid	-	-	-	-	-	-	(1,680)	(1,680)
Share issue	2,923	24,142	-	-	-	-	-	27,065
Other transaction costs	-	209	-	-	-	-	-	209
Other comprehensive (expense)/income:
Actuarial loss in Blenkinsopp pension scheme	-	-	-	-	-	-	(31)	(31)
Fair value of financial instruments	-	-	-	-	-	-	142	142
Balance at 30 June 2017 (unaudited)	32,150	24,351	(263)	65,968	257	45,667	208,919	377,049
Transactions with owners:
Profit for six months to 31 December 2017	-	-	-	-	-	-	33,085	33,085
Transfer of fair value gain on revaluation of investment properties	-	-	-	24,947	-	-	(24,947)	-
Transfer of unrealised loss on development properties	-	-	-	(5,818)	-	-	5,818	-
Dividend paid	-	-	-	-	-	-	(812)	(812)
Other comprehensive (expense)/income:
Actuarial loss in Blenkinsopp pension scheme	-	-	-	-	-	-	(74)	(74)
Revaluation of group occupied property	-	-	-	12	-	-	-	12
Deferred tax on actuarial loss on pension scheme	-	-	-	-	-	-	(51)	(51)
Fair value of financial instruments	-	-	-	-	-	-	102	102
Balance at 31 December 2017 (audited)	32,150	24,351	(263)	85,109	257	45,667	222,040	409,311
Transactions with owners:
Profit for the six months to 30 June 2018	-	-	-	-	-	-	5,487	5,487
Transfer of fair value gain on revaluation of investment properties	-	-	-	6,699	-	-	(6,699)	-
Transfer of unrealised loss on development properties	-	-	-	(1,491)	-	-	1,491	-
Dividend paid	-	-	-	-	-	-	(1,847)	(1,847)
Share issue from owned shares	-	-	69	-	-	-	-	69
Other comprehensive income:
Actuarial gain in Blenkinsopp pension scheme	-	-	-	-	-	-	82	82
Fair value of financial instruments	-	-	-	-	-	-	125	125
Balance at 30 June 2018 (unaudited)	32,150	24,351	(194)	90,317	257	45,667	220,679	413,227

Consolidated statement of cash flows

	Unaudited 6 months ended 30 June 2018 £000	Unaudited 6 months ended 30 June 2017 £000	Audited year ended 31 December 2017 £000
Cash flows from operating activities
Profit for the period/year	6,595	7,725	41,840
Net interest payable	1,738	1,169	2,261
Gains on investment properties, assets held for sale and overages	(6,885)	(7,507)	(35,658)
Share of profit of joint ventures	(2,288)	-	(4,039)
Depreciation of property, plant and equipment	5	4	8
Pension contributions in excess of charge and other gains	(68)	(71)	(144)
Operating cash (outflow)/inflows before movements in working capital	(903)	1,320	4,268
Decrease in inventories	430	4,457	18,232
(Increase)/decrease in receivables	(3,593)	9,332	(5,970)
(Decrease)/increase in payables	(6,451)	(1,821)	8,394
Cash (used in)/generated from operations	(10,517)	13,288	24,924
Loan arrangement fees paid	(782)	(97)	(214)
Interest paid	(962)	(707)	(1,277)
Corporation tax received	99	174	175
Cash (used in)/generated from operating activities	(12,162)	12,658	23,608
Cash flows from investing activities
Interest received	5	15	16
Investment in joint ventures	(1,301)	(1,219)	(4,250)
Proceeds from disposal of investment properties and assets classified as held for sale	4,918	4,028	24,434
Expenditure on investment properties and assets classified as held for sale	(57,580)	(11,156)	(60,431)
Expenditure on property, plant and equipment	-	-	(9)
Cash used in investing activities	(53,958)	(8,332)	(40,240)
Cash flows from financing activities
Net proceeds from issue of ordinary shares	-	27,065	27,065
Proceeds from other loans	6,673	2,327	6,502
Repayment of other loans	(3,928)	(3,593)	(5,111)
Proceeds from bank loan	72,500	10,000	43,000
Repayment of bank loan	(8,000)	(38,000)	(57,000)
Investment in own shares	69	(177)	(177)
Other transaction costs	-	209	209
Dividends paid	(1,847)	(1,680)	(2,492)
Cash generated from/(used in) financing activities	65,467	(3,849)	11,996
(Decrease)/increase in cash	(653)	477	(4,636)
At 1 January
Cash	8,371	13,007	13,007
(Decrease)/increase in cash	(653)	477	(4,636)
At period/year end	7,718	13,484	8,371

Notes to the condensed consolidated interim financial statements

for the six months ended 30 June 2018
 

1. Basis of preparation of the condensed consolidated interim financial statements

General information

Harworth Group plc (the "Company") is a public limited company incorporated and domiciled in the UK. The address of its registered office is Advantage House, Poplar Way, Catcliffe, Rotherham, South Yorkshire, S60 5TR.

The Company is listed on the London Stock Exchange.

The condensed consolidated interim financial statements for the six months ended 30 June 2018 comprise the Company and its subsidiaries (together referred to as the "Group").

These condensed consolidated interim financial statements do not comprise statutory accounts within the meaning of section 434 of the Companies Act 2006. The Group financial statements for the year ended 31 December 2017 were approved by the Board of Directors on 24 April 2018 and delivered to the Registrar of Companies. The report of the auditor on those accounts was unqualified, did not contain an emphasis of matter paragraph and did not contain any statement under section 498 of the Companies Act 2006.

These condensed consolidated interim financial statements have not been audited.

The condensed consolidated interim financial statements for the period ended 30 June 2018 were approved by the Board on 10 September 2018.

Basis of preparation

These condensed consolidated interim financial statements for the six months ended 30 June 2018 have been prepared in accordance with the Disclosure and Transparency Rules of the Financial Conduct Authority (previously the Financial Services Authority) and with IAS 34 'Interim Financial Reporting' as adopted by the European Union ("EU"). The condensed consolidated interim financial statements should be read in conjunction with the Group financial statements for the year ended 31 December 2017 which have been prepared in accordance with IFRSs as adopted by the EU.

Going-concern basis

These condensed consolidated interim financial statements are prepared on the basis that the Group is a going concern. In forming its opinion as to going concern, the Board prepares cash flow forecasts based upon its assumptions with particular consideration to the key risks and uncertainties as summarised in the 'Managing risk' section of the 2017 annual report, as well as taking into account the funding strategy and available borrowing facilities disclosed on pages 13 and 14.

The key factor that has been considered in this regard is that the Group has a £100m revolving credit facility with The Royal Bank of Scotland and Santander, expiring February 2023, on a non-amortising basis. The facility is in the form of a debenture security whereby there is no charge on the individual assets of the Group. The facility is subject to financial and other covenants.

The covenants are based upon gearing, tangible net worth, loan to property values and interest cover. Property valuations affect the loan to value covenants. Any breach of covenants could result in the need to pay down in part some of these loans, additional costs, or a renegotiation of terms or, in extremis, a reduction or withdrawal of facilities by the banks concerned.

The Directors confirm their belief that it is appropriate to use the going concern basis of preparation for these condensed consolidated interim financial statements.

Notes to the condensed consolidated interim financial statements

for the six months ended 30 June 2018
 

1. Basis of preparation of the condensed consolidated interim financial statements (continued)

Accounting policies

The same accounting policies are followed in these condensed consolidated interim financial statements as were applied in the Group's latest audited financial statements, except as described below:

IFRS 15 'Revenue from Contracts with Customers'

The Group has adopted IFRS 15 from 1 January 2018. In accordance with the transition provisions in IFRS 15 the Group has adopted this new standard under the modified retrospective approach without the restatement of comparatives. IFRS 15 establishes a single comprehensive model to use in accounting for revenue arising from contracts with customers and has superseded the previous revenue recognition guidance which included IAS 18 Revenue, IAS 11 Construction Contracts and related Interpretations. The area of impact of the new standard on the Group is the recognition of revenues relating to the sale of development properties, particularly where revenue involves a deferred element. The Directors are satisfied that these changes did not result in any material impact on the Financial Statements on initial application.

The Revenue Recognition policy at 31 December 2017 has been replaced at 1 January 2018 with the following:

Revenue from Contracts with Customers: Revenue is measured based upon the consideration specified in a contract with a customer excluding amounts collected on behalf of third parties. The Group recognises revenue when it transfers control over a service or goods to a customer and it is highly probable that the recognition of consideration will not result in a significant reversal of revenue in a specific period. The Group will account for revenue over time and at a point in time depending upon the nature of the services or goods. Where material consideration is deferred over one year the Group will adjust the consideration for the time value of money.

IFRS 9 'Financial Instruments'

The Group has adopted IFRS 9 from 1 January 2018. This standard replaces IAS 39 Financial Instruments: Recognition and Measurement and sets out requirements for recognising and measuring financial assets and liabilities. Under IFRS 9, a financial asset is classified as either: i) amortised cost; ii) fair value through other comprehensive income (FVTOCI); or iii) fair value through profit or loss (FVTPL). Applying this classification to the Group`s financial assets does not result in changes to the accounting or the Group`s policies. Trade receivables and cash continue to be recognised at amortised cost and certain other non-current financial assets continue to be recognised at FVTPL.

A number of other standards, amendments and interpretations became effective from 1 January 2018, which are disclosed on page 115 of the 2017 Annual Report and Financial Statements. Management do not believe that these new standards will have a material impact on the Group`s financial statements or accounting policies.

Estimates and judgements

The preparation of the condensed consolidated interim financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense. Actual results may differ from these estimates.

In preparing these condensed consolidated interim financial statements, the significant judgements made by management in applying the Group's accounting policies and the key sources of estimation uncertainty were the same as those that applied to the consolidated financial statements for the year ended 31 December 2017.

Notes to the condensed consolidated interim financial statements

for the six months ended 30 June 2018
 

2.   Segment information

30 June 2018	Capital Growth		Income Generation £000	Unallocated costs £000	Total £000
	Sale of development properties £000	Other property activities £000
Revenue	11,032	106	10,771	-	21,909
Cost of sales	(12,587)	(436)	(3,259)	-	(16,282)
Gross (loss)/profit (1)	(1,555)	(330)	7,512	-	5,627
Administrative expenses	-	(1,153)	(1,327)	(3,411)	(5,891)
Other gains(2)	-	94	6,836	-	6,930
Other operating expenses	-	-	-	(27)	(27)
Depreciation of property, plant and equipment	-	-	-	(4)	(4)
Operating (loss)/profit before exceptional items	(1,555)	(1,389)	13,021	(3,442)	6,635
Exceptional expenses	-	-	-	(590)	(590)
Operating (loss)/profit	(1,555)	(1,389)	13,021	(4,032)	6,045
Finance income	-	-	-	5	5
Finance costs	-	-	-	(1,743)	(1,743)
Share of (loss)/profit of joint ventures	-	(6)	2,294	-	2,288
(Loss)/profit before tax	(1,555)	(1,395)	15,315	(5,770)	6,595
Other Information	Capital Growth		Income Generation £000	Unallocated costs £000	Total £000
	Sale of development properties £000	Other property activities £000
(1)Gross (loss)/profit is analysed as follows:
Gross (loss)/profit excluding sale of development properties	-	(330)	7,512	-	7,182
Gross loss on sale of development properties	(64)	-	-	-	(64)
Net realisable value provision on development properties	(1,491)	-	-	-	(1,491)
	(1,555)	(330)	7,512	-	5,627
(2)Other gains are analysed as follows:
Increase in fair value of investment properties	-	79	6,620	-	6,699
(Loss)/profit on sale of investment properties	-	(9)	146	-	137
Profit on sale of assets classified as held for sale	-	-	10	-	10
Profit on sale of overages	-	24	15	-	39
Other gains	-	-	45	-	45
	-	94	6,836	-	6,930

Notes to the condensed consolidated interim financial statements

for the six months ended 30 June 2018

2.  Segment information (continued)

Segmental Assets	Capital Growth £000	Income Generation £000	Unallocated  £000	Total £000
Non-current assets
Property, plant and equipment	-	787	10	797
Other receivables	2,000	-	-	2,000
Investment properties	53,663	202,613	-	256,276
Investments in joint ventures	1,037	21,391	-	22,428
Derivative financial instruments	-	-	3	3
	56,700	224,791	13	281,504
Current assets
Inventories	210,247	602	-	210,849
Trade and other receivables	23,199	4,803	6,006	34,008
Cash	-	-	7,718	7,718
Assets classified as held for sale	2,175	26,011	-	28,186
	235,621	31,416	13,724	280,761
Total assets	292,321	256,207	13,737	562,265

Financial liabilities are not allocated to the reporting segments as they are managed and measured on a group basis.

Notes to the condensed consolidated interim financial statements

30 June 2017	Capital Growth		Income Generation £000	Unallocated costs £000	Total £000
	Sale of development properties £000	Other property activities £000
Revenue	8,523	5,712	8,685	-	22,920
Cost of sales	(8,214)	(4,486)	(2,314)	-	(15,014)
Gross profit (1)	309	1,226	6,371	-	7,906
Administrative expenses	-	(676)	(1,263)	(4,631)	(6,570)
Other gains(2)	-	3,151	4,356	17	7,524
Other operating expenses	-	-	-	(24)	(24)
Depreciation of property, plant and equipment	-	-	-	(4)	(4)
Operating profit/(loss) before exceptional items	309	3,701	9,464	(4,642)	8,832
Exceptional items	-	-	-	62	62
Operating profit/(loss)	309	3,701	9,464	(4,580)	8,894
Finance income					15
Finance costs					(1,184)
Profit before tax					7,725

for the six months ended 30 June 2018

2.  Segment information (continued)

Other Information	Capital Growth		Income Generation £000	Unallocated costs £000	Total £000
	Sale of development properties £000	Other property activities £000
(1)Gross profit is analysed as follows:
Gross profit excluding sale of development properties	-	1,226	6,371	-	7,597
Gross profit on sale of development properties	309	-	-	-	309
	309	1,226	6,371	-	7,906
(2)Other gains are analysed as follows:
Increase in fair value of investment properties	-	3,443	4,246	-	7,689
(Loss)/profit on sale of investment properties	-	(59)	276	-	217
Loss on sale of assets classified as held for sale	-	(233)	(166)	-	(399)
Other gains	-	-	-	17	17
	-	3,151	4,356	17	7,524

Notes to the condensed consolidated interim financial statements

for the six months ended 30 June 2018

2.  Segment information (continued)

Segmental Assets	Capital Growth £000	Income Generation £000	Unallocated £000	Total £000
Investment properties	159,553	150,974	-	310,527
Property, plant and equipment	-	-	785	785
Assets classified as held for sale	9,100	1,729	-	10,829
Inventories	74,010	-	-	74,010
Other receivables	1,406	-	-	1,406
Investments in joint ventures	891	10,877	-	11,768
	244,960	163,580	785	409,325
Trade and other receivables	-	-	18,214	18,214
Cash	-	-	13,484	13,484
Total assets	244,960	163,580	32,483	441,023

Financial liabilities are not allocated to the reporting segments as they are managed and measured on a group basis.

 

Notes to the condensed consolidated interim financial statements

for the six months ended 30 June 2018

2.  Segment information (continued)

31 December 2017	Capital Growth			Income Generation £000	Unallocated costs £000	Total £000
	Sale of development properties £000		Other property activities £000
Revenue	29,765	5,671		18,237	-	53,673
Cost of sales	(27,893)	(4,396)		(5,389)	-	(37,678)
Gross profit (1)	1,872	1,275		12,848	-	15,995
Administrative expenses	-	(1,927)		(1,752)	(8,341)	(12,020)
Other gains(2)	-	26,924		8,734	-	35,658
Other operating expenses	-	-		17	81	98
Operating profit/(loss) before exceptional items	1,872	26,272		19,847	(8,260)	39,731
Net exceptional items	-	-		-	331	331
Operating profit/(loss)	1,872	26,272		19,847	(7,929)	40,062
Finance income	-	-		-	16	16
Finance costs	-	-		-	(2,277)	(2,277)
Share of profit of joint ventures	-	26		4,013	-	4,039
Profit/(loss) before tax	1,872	26,298		23,860	(10,190)	41,840
Other Information	Capital Growth			Income Generation £000	Unallocated costs £000	Total £000
	Sale of development properties £000		Other property activities £000
(1)Gross profit is analysed as follows:
Gross profit excluding sale of development properties	-	1,275		12,848	-	14,123
Gross profit on sale of development properties	7,690	-		-	-	7,690
Net realisable value provision on development properties	(5,818)	-		-	-	(5,818)
	1,872	1,275		12,848	-	15,995
(2)Other gains are analysed as follows:
Increase in fair value of investment properties	-	26,139		5,994	-	32,133
(Decrease)/increase in fair value of assets held for sale	-	(113)		30	-	(83)
Profit on sale of investment properties	-	216		2,703	-	2,919
Profit on sale of assets classified as held for sale	-	96		7	-	103
Profit on sale of overages	-	586		-	-	586
	-	26,924		8,734	-	35,658

 

Notes to the condensed consolidated interim financial statements

for the six months ended 30 June 2018

2.  Segment information (continued)

Segmental Assets	Capital Growth £000	Income Generation £000	Unallocated  £000	Total £000
Non-current assets
Property, plant and equipment	-	-	802	802
Other receivables	2,666	-	-	2,666
Investment properties	43,132	173,428	-	216,560
Investments in joint ventures	1,042	17,796	-	18,838
Non-current trade receivables	5,250	-	-	5,250
	52,090	191,224	802	244,116
Current assets
Inventories	211,535	83	-	211,618
Trade and other receivables	16,516	6,762	1,887	25,165
Cash	-	-	8,371	8,371
Assets classified as held for sale	2,782	4,906	-	7,688
	230,833	11,751	10,258	252,842
Total assets	282,923	202,975	11,060	496,958

Financial liabilities are not allocated to the reporting segments as they are managed and measured on a group basis.  

Notes to the condensed consolidated interim financial statements

for the six months ended 30 June 2018

3. Exceptional items

		Unaudited 6 months ended 30 June 2018 £000	Unaudited 6 months ended 30 June 2017 £000	Audited year ended 31 December 2017 £000
Exceptional income:
Settlements from the administration of legacy companies		-	202	414
Other income		-	28	-
Total exceptional income		-	230	414
Exceptional expense:
Costs associated with the premium listing		(590)	-	-
Sundry costs relating to legacy activities		-	(168)	(83)
Total exceptional expense		(590)	(168)	(83)

Exceptional items in the six months ended 30 June 2017 and the financial year to 31 December 2017 related to the Group`s legacy activities.

 

Notes to the condensed consolidated interim financial statements

for the six months ended 30 June 2018

4.  Finance (cost)/income

Note	Unaudited 6 months ended 30 June 2018 £000	Unaudited 6 months ended 30 June 2017 £000	Audited year ended 31 December 2017 £000
Interest expense
- Bank interest	(747)	(559)	(994)
- Amortisation of facility and other fees	(459)	(370)	(807)
- Extinguishment of loan fees relating to refinancing                                                     11	(298)	-	-
- Other interest	(239)	(255)	(476)
	(1,743)	(1,184)	(2,277)
Interest received	5	15	16
Net finance costs	(1,738)	(1,169)	(2,261)

5.  Tax

The income statement charge for taxation in the period was £1.1m (H1 2017: £8.9m credit) which comprised a deferred tax charge of £1.2m (H1 2017: £8.8m credit) and a current period tax credit of £0.1m (H1 2017: £0.1m credit).  The movement in deferred tax mainly relates to the increase in valuation of the investment properties.

The current tax credit relates to a claim for a land remediation relief tax credit in the period.

At 30 June 2018, the Group had deferred tax liabilities of £14.3m (H1 2017: £21.8m), which largely related to unrealised gains on investment properties and had recognised deferred tax assets of £7.6m (H1 2017: £15.7m).  The net deferred tax liability was £6.7m (H1 2016: £6.1m).

6.  Dividends

	Unaudited 6 months ended 30 June 2018 £000	Unaudited 6 months ended 30 June 2017 £000	Audited year ended 31 December 2017 £000
Final dividend of 0.575p per share proposed and paid May 2018	1,847	-	-
Final dividend of 0.523p per share proposed and paid May 2017	-	1,680	1,680
Interim dividend of 0.253p per share proposed and paid October 2017	-	-	812
	1,847	1,680	2,492

An interim dividend of 0.278p per share was approved by the Board on 10 September 2018 and is payable on 19 October 2018 to shareholders on the register on 21 September 2018. The interim dividend is not recognised as a liability in the interim condensed financial statements.

Notes to the condensed consolidated interim financial statements

for the six months ended 30 June 2018

7.  Earnings per share

Earnings per share has been calculated by dividing the profit attributable to ordinary shareholders by the weighted average number of shares in issue and ranking for dividend during the period/year.

	Unaudited 6 months ended 30 June 2018 £000	Unaudited 6 months ended 30 June 2017 £000	Audited year ended 31 December 2017 £000
Profit for the period/year	5,487	16,598	49,683
Weighted average number of shares used for basic and diluted earnings per share	321,252,525	309,242,529	315,296,192
Basic and diluted earnings per share (pence)	1.7	5.4	15.8

Notes to the condensed consolidated interim financial statements

for the six months ended 30 June 2018

8.  Investment properties

The Group holds five categories of investment property being agricultural land, natural resources, business space, major developments and strategic land in the UK, which sit within the operating segments of Income Generation and Capital Growth.

	Income Generation				Capital Growth
	Agricultural Land £000	Natural Resources £000	Business Space £000		Major Developments £000	Strategic Land £000		Total  £000
At 1 January 2017 (audited)	20,106	29,489	96,709		215,650	17,236		379,190
Subsequent expenditure	1,508	582	381		7,725	2,255		12,451
Increase in fair value	1,592	654	2,000		-	3,443		7,689
Transfer to development properties	-	-	-		(77,734)	-		(77,734)
Transfer to assets classified as held for sale	(1,160)	-	-		(8,492)	(350)		(10,002)
Disposals	(887)	-	-		-	(180)		(1,067)
At 30 June 2017 (unaudited)	21,159	30,725	99,090		137,149	22,404		310,527
Transfers between divisions	-	277	11,686		4,137	(16,100)		-
Direct acquisitions	-	-	5,536		15,281	5,198		26,015
Subsequent expenditure	176	572	8,579		5,375	2,006		16,708
(Decrease)/increase in fair value	2,068	784	(1,104)		13,072	9,624		24,444
Transfer in assets classified as held for sale	-	(276)	(3,500)		-	-		(3,776)
Recategorisation of other receivables	-	-	-		(666)	-		(666)
Recategorisation as inventories	-	-	-		(151,384)	-		(151,384)
Disposals	(1,076)	(782)	(486)		(2,964)	-		(5,308)
At 31 December 2017 (audited)	22,327	31,300	119,801		20,000	23,132		216,560
Direct acquisitions	-	-	43,692		-	9,207		52,899
Subsequent expenditure	6	222	3,733		84	633		4,678
Disposals	-	(482)	-		-	(80)		(562)
Increase in fair value	-	3,700	2,920		-	79		6,699
Transfer from assets held for sale	349	-	-		-	608		957
Transfer to assets held for sale	(4,948)	(348)	(19,659)		-	-		(24,955)
At 30 June 2018 (unaudited)	17,734	34,392	150,487		20,084	33,579		256,276

Valuation process

The properties have been valued by management who have exercised their experience and judgement in arriving at the increase in fair value at 30 June 2018 and 30 June 2017. The properties were valued by BNP Paribas Real Estate and Savills at 31 December 2017. Both are independent firms acting in the capacity of external valuers with relevant experience of valuations of this nature.

Notes to the condensed consolidated interim financial statements

for the six months ended 30 June 2018

9.  Inventories

	Unaudited 6 months ended 30 June 2018 £000	Unaudited 6 months ended 30 June 2017 £000	Audited year ended 31 December 2017 £000
Development properties	209,388	73,247	210,471
Planning promotion agreements and options	1,360	763	1,064
Finished goods	101	-	83
	210,849	74,010	211,618

The cost of inventory is recognised as an expense within cost of sales in the year.  Finished goods are stated after a provision of £0.3m (H1 2017: £0.3m; FY 2017: £0.3m).

The movement in development properties is as follows:

	£000
At 1 January 2017 (audited)	-
Re-categorisation from investment properties	77,734
Subsequent expenditure	1,116
Disposals	(5,603)
At 30 June 2017 (unaudited)	73,247
Re-categorisation from investment properties	151,384
Subsequent expenditure	1,308
Disposals	(9,650)
Net realisable value provision	(5,818)
At 1 January 2018 (audited)	210,471
Acquisitions	59
Subsequent expenditure	10,945
Disposals	(10,596)
Net realisable value provision	(1,491)
At 30 June 2018 (unaudited)	209,388

Notes to the condensed consolidated interim financial statements

for the six months ended 30 June 2018

9.  Inventories (continued)

The movement in the net realisable value provision is as follows:

	£000
At 1 January 2017 (audited)	-
Disposals	-
Net realisable value provision	-
At 30 June 2017 (unaudited)	-
Disposals	-
Net realisable value provision	5,818
At 1 January 2018 (audited)	5,818
Disposals	-
Net realisable value provision	1,491
At 30 June 2018 (unaudited)	7,309

The market value of these properties is £8.7m higher than their carrying value at 30 June 2018 (H1 2017: £2.3m; FY 2017: £5.8m).

10.  Assets classified as held for sale

Assets classified as held for sale relate to investment properties expected to be sold within twelve months.

			£000
At 1 January 2017 (audited)			8,350
Transferred from investment properties			10,002
Subsequent expenditure			188
Disposals			(7,711)
At 30 June 2017 (unaudited)			10,829
Transferred from investment properties			3,776
Subsequent expenditure			(29)
Decrease in fair value			(83)
Disposals			(6,805)
At 31 December 2017 (audited)			7,688
Transferred from investment properties			24,955
Transferred to investment properties			(957)
Disposals			(3,500)
At 30 June 2018 (unaudited)			28,186

 

Notes to the condensed consolidated interim financial statements

for the six months ended 30 June 2018

11.  Borrowings and loans

	Unaudited 6 months ended 30 June 2018 £000	Unaudited 6 months ended 30 June 2017 £000	Audited year ended 31 December 2017 £000
Current:
Secured - other loans	(7,648)	(2,319)	(6,145)
	(7,648)	(2,319)	(6,145)
Non-current:
Secured - bank loans	(87,778)	(9,164)	(23,437)
Secured - other loans	(12,464)	(12,109)	(11,064)
	(100,242)	(21,273)	(34,501)
Total current and non-current borrowings	(107,890)	(23,592)	(40,646)

Loans are stated after deduction of unamortised borrowing costs.

		Unaudited 6 months ended 30 June 2018 £000	Unaudited 6 months ended 30 June 2017 £000	Audited year ended 31 December 2017 £000
Infrastructure loans
Sheffield City Region JESSICA Fund	Gateway 36 Rockingham	-	(2,362)	(2,353)
Homes and Communities Agency	Village Farm	(18)	(138)	(141)
Leeds LEP	Prince of Wales	(206)	(614)	(396)
Homes and Communities Agency	Waverley	(6,093)	(8,302)	(7,205)
Sheffield City Region JESSICA Fund	Advanced Manufacturing Park, Waverley	(7,432)	(2,530)	(5,108)
North West Evergreen Limited Partnership	Logistics North	(2,471)	(482)	(2,006)
Homes and Communities Agency	Simpson Park	(3,892)	-	-
		(20,112)	(14,428)	(17,209)
Bank loan		(87,778)	(9,164)	(23,437)
Total loans		(107,890)	(23,592)	(40,646)

The bank borrowings are part of a £100.0m revolving credit facility ("RCF") from The Royal Bank of Scotland and Santander. On the 13 February 2018 the Group extended the terms of its existing RCF such that it now expires in February 2023 on a non-amortising basis and is subject to financial and other covenants.

Current loans are stated after deduction of unamortised borrowing costs of £nil (H1 2017: £nil, FY 2017: £nil). Non-current bank and other loans are stated after deduction of unamortised borrowing costs of £1.0m (H1 2017: £1.0m; FY 2017: £0.8m).

Notes to the condensed consolidated interim financial statements

for the six months ended 30 June 2018

12.  Called up share capital

Issued and fully paid	Unaudited 6 months ended 30 June 2018 £000	Unaudited 6 months ended 30 June 2017 £000	Audited year ended 31 December 2017 £000
At start of period/year	32,150	29,227	29,227
Shares issued	-	2,923	2,923
At end of period/year	32,150	32,150	32,150
Own shares held	(194)	(263)	(263)
At end of period/year	31,956	31,887	31,887

Issued and fully paid - Number of shares	Unaudited 6 months ended 30 June 2018	Unaudited 6 months ended 30 June 2017	Audited year ended 31 December 2017
At start of period/year	321,496,760	292,269,786	292,269,786
Shares issued	-	29,226,974	29,226,974
At end of period/year	321,496,760	321,496,760	321,496,760
Own shares held	(181,771)	(246,010)	(246,010)
At end of period/year	321,314,989	321,250,750	321,250,750

On 17 March 2017, the Group issued 29,226,974 new ordinary shares at 95 pence each.

13.  Related party transactions

There have been no material changes in the related party transactions described in the 2017 Annual report and accounts. 

 

Directors' Responsibility Statement

For the six months ended 30 June 2018

The Directors who held office at the date of approval of these Financial Statements confirm that to the best of their knowledge:

1.            the Condensed Consolidated Interim Financial Statements have been prepared in accordance with IAS 34 "Interim Financial Reporting" as adopted by the European Union; and

2.            the Interim Management Report includes a fair review of the information required by:

a.            Rule 4.2.7R of the Disclosure and Transparency Rules, being an indication of important events that have occurred during the half-year ended 30 June 2018 and their impact on the Condensed Consolidated Interim Financial Statements, and a description of the principal risks and uncertainties for the remaining six months of the year; and

b.            Rule 4.2.8R of the Disclosure and Transparency Rules, being related parties' transactions that have taken place in the half-year ended 30 June 2018 and that have materially affected the financial position or performance of the Group during that period, and any changes in the related parties' transactions described in the last Annual Report and Financial Statements that could do so.

The Directors serving during the half-year ended 30 June 2018 were as follows:

Jonson Cox	Former Chairman (retired as a director on 31 March 2018)
Alastair Lyons	Chairman (appointed on 7 March 2018)
Owen Michaelson	Chief Executive
Andrew Kirkman	Finance Director
Lisa Clement	Senior Independent Director
Anthony Donnelly	Independent Non-Executive Director
Andrew Cunningham	Independent Non-Executive Director
Steven Underwood	Non-Executive Director
Martyn Bowes	Non-Executive Director

The responsibilities of the Directors during their period of service were as set out on pages 60 and 61 of the Annual Report and Financial Statements for the financial year ended 31 December 2017.

By order of the Board

Chris Birch

Group General Counsel and Company Secretary

11 September 2018

Shareholder information

FINANCIAL CALENDAR

Interim results for the period ended 30 June 2018	Announced	11 September 2018
Interim dividend for the financial year ended 31 December 2018	Ex-dividend date Record date Payable	20 September 2018 21 September 2018 19 October 2018
Preliminary results for the year ended 31 December 2018	Announced	5 March 2019
Annual report and financial statements for the year ended 31 December 2018	Published	April 2019
2019 Annual General Meeting		May 2019
Final dividend for the year ended 31 December 2018	Payable	June 2019

REGISTRARS

All administrative enquiries relating to shareholdings should, in the first instance, be directed to Equiniti, Aspect House, Spencer Road, Lancing, West Sussex BN99 6DA (telephone: [phone]) and should clearly state the registered shareholder's name and address.

DIVIDEND MANDATE

Any shareholder wishing dividends to be paid directly into a bank or building society should contact the Registrars for a dividend mandate form. Dividends paid in this way will be paid through the Bankers' Automated Clearing System ("BACS").

WEBSITE

The Group has a website (www.harworthgroup.com) that gives further information on the Group.

 

END

 

 

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