The Group has delivered another strong operational performance in the second half of the year across all its business segments. This, coupled with the indicative outcome of the independent annual valuation of the property portfolio, means that the Group anticipates that its financial performance for the year ended 31 December 2017 will be ahead of its expectations:
· Value gains (revaluation gains and profit on disposals) are anticipated to be appreciably ahead of expectations;
· As a result, Group EPRA NNNAV(1) as at 31 December 2017 is anticipated to be moderately ahead of expectations, ensuring another year of double-digit growth; and
· Profit excluding value gains is anticipated to be in line with expectations.
The value gains achieved have been driven principally by management-led actions, most notably:
· Revaluation gains outperformance:
o receipt of outline planning consent for two major sites at Thoresby in Nottinghamshire and Kellingley in North Yorkshire;
o the realisation of marriage value following the purchase of two sites at Chatterley Valley, Stoke and Coalville, Leicestershire, that neighbour existing Harworth landholdings; and
o good progress on lettings across the income portfolio, including Harworth's direct developments, resulting in higher valuations.
· Healthy profit on disposals:
o the sale of engineered development land for over 600 residential plots, including two land parcels totalling 13.87 acres to regional housebuilders at Waverley, Rotherham during December for a total in excess of £11m;
o the sale of key development plots for nearly 1m sq. ft of commercial uses, including an 18.3-acre plot at Logistics North, Bolton and a 6-acre plot at Riverdale Park, Doncaster during December for a total of £12.5m; and
o the continued disposal of non-core sites achieving prices above book value, allowing proceeds to be re-invested in new acquisitions.
The Group's balance sheet and cash flow remain strong, ensuring that it is well positioned for future value creation:
· Harworth has now invested all the £27.1m raised in the Group's March 2017 equity placing into five sites, which will reinforce the Group's long term strategic landbank and recurring income base while increasing its geographic reach;
· Harworth's placemaking credentials continue to underpin value growth on its maturing development sites, evidenced by rising residential and commercial property values. This is demonstrated by recent and future sales with around half planned 2018 sales already agreed, providing a strong underpin for the Group's performance for the year ahead; and
· a clear planning pipeline is in place for the next three years comprising further potential 4,200 residential plots and 5.9m sq. ft of commercial space to underpin the Group's future disposals programme.
Owen Michaelson, Chief Executive Officer, commented:
“The Group had a strong first half of the year as highlighted in our interim results. This momentum has continued into the second half, with full year results anticipated to exceed our expectations. Sales on consented land at our key development sites have been achieved at above book value and good progress on planning and lettings has driven the growth in the valuation of our portfolio. This includes progress at Riverdale Park in Doncaster, where we have realised an engineered land sale above book value less than two years after we purchased the site.
“This robust position reflects the underlying strength of our business model and the ability of our management team to deliver the majority of our value gains. We remain confident in the long-term fundamentals of the residential and commercial markets in the North of England and the Midlands. This in turn gives us the assurance we need to continue to invest in new sites to deliver future shareholder value.”
The Company will announce its full year results for the financial year ended 31 December 2017 on 6 March 2018.