Interim Report 2016
Transforming | Regenerating | Revitalising
Contents
1 Performance highlights and key performance indicators2 Chairman’s statement3 Chief Executive’s statement4 Financial review9 Directors responsibility10 Consolidated income statement11 Consolidated statement of comprehensive income12 Consolidated balance sheet13 Consolidatedstatementofcashflows14 Consolidated statement of changes in shareholders’ equity15 Notestothecondensedconsolidatedinterimfinancialstatements
Company information and advisers
ChairmanJonson Cox
Chief ExecutiveOwen Michaelson
Finance DirectorAndrew Kirkman
Non-Executive DirectorsMartyn Bowes Lisa Clement Tony Donnelly Andrew Cunningham Steven Underwood
Company Secretary and Registered OfficeChristopher BirchAdvantage House Poplar Way Rotherham S60 5TR
Independent auditorsPricewaterhouseCoopers LLP Chartered Accountants and Statutory Auditors St Paul’s Place 121 Norfolk Street Sheffield S1 2LE
SolicitorsEversheds LLP Bridgewater Place Water Lane Leeds LS11 5DR
BrokersInvestec Bank PLC 2 Gresham Street London EC2V 7QP
RegistrarsEquiniti Limited Aspect House Spencer Road Lancing West Sussex BN99 6DA
Principal bankersLloyds Banking Group PLC 2nd Floor Lisbon House 116 Wellington Street Leeds LS1 4LT
The Royal Bank of Scotland 3rd Floor 2 Whitehall Quay Leeds LS1 4HR
Company Registered Number2649340
Share price informationThe Company’s Ordinary Shares are traded on the London Stock Exchange.
SEDOL number 0719072 ISIN number GB0007190720 Reuters ticker HWG.L Bloomberg ticker HWG:LN
Definitions and abbreviations usedHarworth Estates Harworth Estates Property Group Ltd and its subsidiariesHarworth or Group Harworth Group plc and its subsidiariesCompany Harworth Group plc
Harworth Group plc Interim Report 2016 1
Performance highlights and key performance indicators
Financial Highlights (1)
FullyearfinancialforecastsareinlinewiththeBoard’sexpectations but, as usual, weighted towards the second half
• Net asset value (“NAV”) of £303.0m (£1.04 per share), a 10.4% increase from H1 2015 NAV £274.5m (93.9p) and 1.8% increase from 2015 full year NAV £297.7m (£1.02)
• EPRA net asset value per share rose to £1.08 per share (H1 2015: 96.8p)
• Operatingprofitof£8.3m(H12015:£9.2m,underlying£14.8m),whichreflectsa£2.9mimpactfrom2016stampduty changes
• Earnings per share of 0.3p (H1 2015: 2.7p, adjusted 0.5p) Plannedfinancingextensioncompletedreflectingconfidencein
the future and to accelerate strategy delivery • Existing RCF limit increased from £65m to £75m. No need to
refinanceuntilFebruary2021andinfrastructurebondingsecured with new surety provider
• Portfolio remains prudently geared with gross loan to value 20.0% (net LTV 13.4%)
• First interim dividend of 0.23p per share (£0.66m in total)
Strategic and Operating Highlights Clear strategic focus on Northern regeneration market with
balanced portfolio of geographies and sectors • Fouracquisitions(£12.8mcost)madeinthefirsthalfincluding
50% purchase of The Aire Valley Land LLP, which owns Temple Green, Leeds’ largest live logistics development
• Sold £13.3m of property as part of ongoing programme to increase our focus on sites with higher value-add potential. Portfolio now comprises the ownership or management of 22,295 acres across 144 sites
• To address current market caution, future infrastructure spend will be directly linked to anticipated sales
Good ongoing operational performance with selective moves to develop and hold sites to grow income and drive NAV growth
• Three small, direct build commercial developments now beingtakenforwardacrossthreedifferentsites,totallingc.180,000 sq. ft.
• Excellent progress with the construction and letting of 2 units, totalling 400,000 sq. ft. at Logistics North in Bolton forward funded by M&G. These will reach practical completion before year end
• On residential: 335 plot sales, including Harron Homes and Avant Homes at North Gawber; consent secured for 65 new units; applications submitted for c.400 units since the end of the period; and applications progressing for a further c.900 units for submission prior to the year end
Notes:
(1)2015NAVfiguresassume2016’s1for10shareconsolidationhadoccurredin2015and2015underlyingfiguresassumethatHarworthEstatesPropertyGroupLimitedhad been owned from the start of the year.
Performance highlights and key performance indicators
£260m
£270m
£280m
£290m
£300m
£310mNet asset value
H1 2015 H1 2016
274.5
303.0
+10.4%
Income generation and value gains
H1 2015
13.7
1.1
7.40.9
Value gains Income generations
H1 2016£0m
£5m
£10m
£15m
£0.0m
£0.5m
£1.0m
£1.5m
Gross and net loan to value
H1 2015
19.6% 20.0%
H1 20165%
10%
15%
20%
25%
9.8%
13.4%
■ Gross LTV ■ Net LTV
Cash spend – Disposals less development spend and acquisitions
H1 2015
3.92.2
12.8
-4.9
Disposals less development spendAcquisitions
H1 2016£-10m
£-5m
£0m
£5m
£10m
£15m
2 Harworth Group plc Interim Report 2016
Chairman’s Statement
OverviewI am pleased to present our interim report for the half year ended 30 June 2016. It demonstrates that the Group has maintained the momentum it establishedin2015andrepresentsafirmplatformfor the second half of the year towards which development activity and sales will, as usual, be weighted.
Performance and Results Inthefirsthalfof2016,theGroupgrewitsnetasset value to £303.0m, a 10.4% increase on last June’s value of £274.5m. We continue to meet our ambition of increasing the net asset value of the business throughout the property cycle.This growth is partly attributable to the recycling ofcapitalthroughthebusiness.Inthefirsthalfwe achieved sales of £13.3m. This included both serviced plots and agricultural land with limited development potential. The proceeds covered development spend of £10.1m elsewhere in the portfolio.Weexpectsignificantlyincreasedlevelsofdisposalsinthesecondhalfandthatcashflowwill more than cover the four acquisitions, totalling £12.8m,whichweremadeinthefirsthalftoreplenish the portfolio.Operatingprofitwas£8.3mcomparedtoanunderlyinglevelof£14.8minthefirsthalfof2015.Thisreflectsa£2.9mreductioninthevalueoftheportfolioduringthisfirsthalfonaccountofstampduty changes. We continue to seek to grow and improve the quality of our recurring income.The Group’s business model is evolving to include selective property development where this unlocks additional value from existing and new sites and builds income. The Board believes its forecast full year expectations remain realistic, provided current supportive market conditions persist.
Strategic ReviewIn June 2016, the Board carried out its annual, comprehensive review of the Group’s strategy for thenextthreetofiveyears.Thatreviewre-affirmedthe fundamentals of the Group’s long-term strategy: promoting and developing our existing portfolio to extract maximum value and income, whilst replenishing our asset base with attractive investment opportunities to secure a development pipeline and further income growth. The Group continues to achieve this by:• maintaining a diverse portfolio, operating
acrossdifferentsectorsofthemarket:residential, commercial and energy;
• building recurring income to cover operating costs, bank interest and dividends;
• selectively undertaking direct commercial development where the balance of capital deployed and forecast return adds value to the portfolio; and
• continuing to grow our presence in existing regions, while looking to expand our geographic reach through new acquisitions in adjacent regions of the UK where there is a strong and stable market.
TheGroup’sstrategyaffordsitflexibilitytomanageperiods of uncertainty, including potential volatility following the EU referendum result. The Group is robustly positioned to capitalise on new opportunities, both for development and to grow income, and address any challenges that may present themselves in the current environment.
Share Consolidation and DividendI am pleased to report that the consolidation of the Company’s 1p shares into 10p shares and the capital reduction approved by shareholders at the Company’s last AGM, in April 2016, have been implemented, the latter following court approval. The capital reduction enables the Company to pay the 2015 year-end dividend, also approved at the AGM, in the aggregate sum of £1.5m (0.51p per share following the share consolidation). The 2015 finaldividendwillbepaidon9September2016toshareholders on the Company’s register of members on 19 August 2016. I am also pleased to announce that the Company willpayitsfirstinterimdividendof0.23ppershare.This dividend will be paid on 1 December 2016 to shareholders on the register at the close of business on 4 November 2016. The ex-dividend date will be 3 November 2016.
Board and Committee Membership As announced in last year’s results, Peter Hickson stepped down as senior independent director of the Company immediately following the AGM. Lisa Clement succeeds Peter as senior independent director and, from 1 October 2016, as chair of the Remuneration Committee. Andrew Cunningham was appointed as a non-executivedirectoroftheCompanywitheffectfrom 1 May 2016. From 1 October 2016, he will also chairtheAuditCommittee,fillingthepositionvacated by Lisa.The Group’s workforce has grown from 43 to 51 in thefirsthalfoftheyear,reflectingcontinuedmomentum in the business. I welcome all new employees and would like to thank all the Group’s stafffortheirsupportandcommitmentduringthefirsthalf.TheBoardlooksforwardtofurthergrowthin the business in the second half of 2016.
Jonson Cox Chairman 6 September 2016
Chairman’s Statement
Harworth Group plc Interim Report 2016 3
Chief Executive’s Statement
Wehavemadegoodprogressinthefirsthalfof2016 in both the Capital Growth and Income Generation business segments, building on the underlyingstrengthofourbusinessandreflectingthe long-term fundamentals of the markets in which we operate. As in previous years, we anticipate performance to be second half weighted, as remedial work is most easily achieved over the summer months, resulting in a greater amount of salesinthesecondhalfofourfinancialyear.
Operational PerformanceAs at 30 June 2016, the total number of consented residential plots in the portfolio was 10,029, alongside 10,482,221 sq. ft. of consented employment space. During the six-month period, outline planning consents were granted for 65 residential plots, together with 120,875 sq. ft. of commercial space. We have submitted planning applications for 400 residential plots since the end of the period and are planning to submit further planning applications for 700 residential plots and in excess of 1.5m sq. ft. of commercial space by theendofthecurrentfinancialyear.We continue to plan carefully the disposal of properties to extract the maximum value from our land portfolio, with the aim of achieving gains against book value to realise cash for reinvestment. Inthefirsthalfwesold335residentialplotsacrossthree development parcels to regional housebuilders. At 30 June 2016, a number of additional sales to housebuilders were in negotiation, for completion during the second half of the year. We have begun to deliver on our stated aim of selling sites with limited development potential in order to concentrate on a smaller number of brownfieldsiteswithgreaterpotentialforvalueenhancement. We sold over £13.3m of property in thefirsthalf,withtheportfolionowcomprisingtheownership or management of 22,295 acres across 144 sites.We have made selected moves up the development curve during the period to generate increased value for our shareholders. Good progress is being made on direct build, commercial developments totalling c.180,000 sq. ft. on three of our sites: the Advanced Manufacturing Park in Rotherham, Logistics North in Bolton and Gateway 36 in Barnsley. This responds to a continued undersupply of smaller commercial units in the NorthofEngland.Thissupportsoureffortstobuildincome and drive net asset value growth.Excellent progress has been made on the construction of two commercial units, totalling 400,000 sq. ft., which were forward funded by M&G. We expect both units to be completed and ready for occupation before the year end. Going forwards, given current market caution, strategic infrastructure investment in our sites will continue to be monitored closely and expenditure will be directly linked to anticipated sales.
We have made further progress with income generation from our Business Parks. We have signed 16 new commercial lettings or renewals in the six months to 30 June 2016, with an annualised rent roll of over £240,000.Our income stream was also supplemented by the installation of 18.9MW of additional capacity from renewable energy schemes, bringing total capacity in our portfolio to 138.3MW. Finally, although the marketforcoalfineshascontinuedtoreduce,owing to plant closures and the Government’s decisiontocloseallcoal-firedpowerstationsby2025,wehavecontinuedtosellcoalfinesfromformer colliery sites to energy companies, albeit at a reduced level.
AcquisitionsReplenishing our strategic landbank with new sites is an important part of our strategy. We remain confidentintheeconomicpotentialoftheregionsinwhichweoperateandouracquisitionsinthefirsthalfof2016reflectthis.We made four acquisitions during the period, totalling £12.8m. The largest was our acquisition of a 50% stake in The Aire Valley Land LLP for £9.0 million. It owns Temple Green, the largest live logistics development in the Leeds City Region. It has an outline consent for 2.64m sq. ft. of employment space adjacent to Junction 45 of the M1. We believe we can use our experience from similar sites, including Logistics North in Bolton, to work with our new joint venture partner, Evans Property Group, to maximise the value enhancement potential in both this site and our adjacent, 162 acre, Skelton Grange site. Our other key acquisition was that of Sanderson (Advantage) House in Rotherham for £2.3 million (with a net initial yield of 13.3%). This multi-let 20,000sq.ft.officescheme,atthegatewaytoourflagshipWaverleydevelopment,providesassetmanagement opportunities to re-gear leases and drive yield compression.
Market OutlookThe European referendum vote on 23 June 2016 led to an initial hiatus by some housebuilders and investment funds. Activity now seems to be back to previous levels however and long-term market fundamentals remain strong. In particular, the UK still needs land for new housing to meet increasing demand and there remains an under-supply of good quality, employment space in the North of England and the Midlands. We will continue to monitor market trends with our strategy and portfolioaffordingusflexibilitytomanageperiodsof uncertainty.Overall, trading remains in line with our expectations, with a healthy pipeline of anticipated sales.
Owen Michaelson ChiefExecutiveOfficer 6 September 2016
Chief Executive’s Statement
4 Harworth Group plc Interim Report 2016
Financial Review
OverviewTheGroupachievedgoodresultsinthefirsthalfof2016withbothsegmentsofthebusiness,CapitalGrowth and Income Generation, making progress. Net asset value increased to £303.0m as at 30 June 2016, representing a 10.4% increase from 30 June 2015 (£274.5m) and a 1.8% increase since 31 December 2015 (£297.7m).
Revenue from operations rose to £17.4m (H1 2015: £4.2m), largely as a result of the recognition of pass-through construction costs and development fee income arising from the construction of two industrial units at Logistics North being forward funded by M&G. Revenue also increased as a result of increasedrentfrombusinessparksandlow-carbonenergysites,albeitsomewhatoffsetbyadeclineincoalfinesrevenues.
Profitbeforetaxwas£7.4m(H12015:£51.3m)withrevaluationgainsimpactedby£2.9monaccountoftherecentstampdutychanges.The2015profitondisposalincludeda£3.3mone-offgainfromthesurrenderofanoptionontheChevingtonwindfarmproject.Exceptionalitemsinthefirsthalfnettedto£nil(H12015:£(2.4)m) largely relating to the Group’s legacy activities.
The comparative statutory results for H1 2015 are complicated by the acquisition and fundraising of March 2015 associated with the re-acquisition of 75.1% of the shares in Harworth Estates Property Group Limited (“HEPGL”). The 2015 results included a gain on bargain purchase of £44.2m. In addition, a 1 for 10 shareconsolidationoccurredinthefirsthalfof2016.Consequently,ourresultsareset-outbelowonbotha statutory and underlying basis.
Operating resultsTheGroup’soperatingprofit,excludingexceptionalitems,was£8.3m(H12015:£9.2m).Thisincludedvaluation gains of £7.9m (H1 2015: £3.4m) and a loss from disposals of investment properties and options of£0.5m(H12015:profitof£5.4m).TheGroup’scomparativeoperatingprofit,beforeexceptionalitems,forthefirsthalfof2015isreconciledtotheunderlyingoperatingperformanceforthehalfyear2015,andsetagainstthefirsthalfof2016.
Six months to June
2016 Harworth Group plc
£m
2015 Harworth Group plc
Underlying£m
2015 Harworth Group plc
Underlying Pre-acquisition
£m
2015 Fair value adjustments
£m
2015 Harworth Group plc
£m
Revenue 17.4 7.7 (3.2) (0.3) 4.2Cost of sales (11.9) (3.4) 1.6 – (1.8) Overheads (4.7) (3.3) 1.4 – (1.9) Profitfromoperations 0.9 1.1 (0.3) (0.3) 0.5
Valuation gain 7.9 8.2 (4.8) – 3.4Profitfromdisposals (0.5) 5.5 (0.1) – 5.4Pension credit 0.1 0.1 – – 0.1
Operatingprofit,beforeexceptionals 8.3 14.8 (5.3) (0.3) 9.2
Note:Thereareminordifferencesonsometotalsduetorounding.
Underlying performanceTheunderlyingprofitfromoperationswas£0.9m(H12015:£1.1m).TheGrouprecordedrevenuesof£17.4m(H12015:£7.7m)comprisingrentalandroyaltyincometogetherwithsalesofcoalfinesandsalvage.Thesignificantincreaseinrevenuesandcostofsalesreflected£9.5minrespectofcontractworkon the construction of units at Logistics North which have been forward funded by M&G. Further amounts for revenue and cost of sales will be recognised over the remainder of 2016. Only a small amount of pro-ratadevelopmentfeeprofitontheseconstructionworkshasbeenrecognisedtodate,withpotentiallymoresignificantamountstoberecognisedinthefutureifcertainmilestonesareachieved.
Financial Review
Harworth Group plc Interim Report 2016 5
Financial Reviewcontinued
Financial Reviewcontinued
Capital Growth
£m
Income Generation
£m
Central overheads
£m
H1 2016 Total
£m
H1 2015 Total
£m
Revenue 9.6 7.8 – 17.4 7.7Cost of sales (9.4) (2.3) – (11.9) (3.4) Overheads (0.8) (0.7) (3.2) (4.7) (3.3)
Profitfromoperations (0.7) 4.8 (3.2) 0.9 1.0Valuation gain 3.5 4.4 – 7.9 8.2Profitfromdisposals (0.1) (0.4) – (0.5) 5.5Pension credit – – 0.1 0.1 0.1
Operatingprofit,beforeexceptionals 2.7 8.8 (3.1) 8.3 14.8
Total overheads, which include the overhead costs of the Capital Growth and Income Generation segmentsandcentralcosts,amountedto£4.7m(H12015:£3.3m).Theincreaseincostsreflectedanumberofone-offcostsassociatedwiththeshareconsolidation,capitalreductionandrecruitment,aswell as greater operational activity.
Valuationgainsforthefirsthalfof2015and2016aresetoutbelow:
H1 2016 £m
Underlying H1 2015
£m
Major developments 2.0 2.3Strategic land 1.5 3.6Business parks 1.0 1.9Agricultural land 0.0 0.0Natural resources 3.4 0.4
Total 7.9 8.2
Thevaluationgainsinthefirsthalfof2016acrossthedivisionswereasfollows:
Capital Growth segmentMajor Developments – strong occupier interest at Logistics North, progress made in the regeneration proposal of Chatterley Valley and savings on the cost plan at Harworth; and
Strategic Land – the delivery risk has reduced at Coalville and there is also planning progress, good tenant interest and cost plan savings at Wheatley Hall Road, which was acquired in December 2015.
Income Generation segmentBusiness Parks – direct development of the Helix industrial unit and the fast-food outlets advancing at Gateway 36 (Rockingham);
Natural Resources – improved lettings at Meriden, commissioning of the wind farm at Chevington and coal mine methane revenue has started at Kellingley; and
Agricultural Land – market valuations of agricultural land did not move during the period, therefore no movements were recorded.
Thevaluationgainof£7.9mforthefirsthalfof2016isaftertherecognitionofa£2.9mreductioninthevalue of the portfolio resulting from the recent changes to stamp duty albeit similar levels of cost savings havealsobeenidentifiedacrossourproperties.
The Group made sales of £13.3m (H1 2015: £21.0m), including £3.4m of deferred consideration. The proceeds were split between residential serviced plots (£9.6m) and other, essentially agricultural, land (£3.7m).TheGroupmadeanaggregatelossof£0.5m(H12015:£5.5mprofit)onthosesalesasaresultoftheremediationworksatNorthGawberprovingmoredifficultthanexpectedinadvanceofsales.Inthefirsthalfof2015,£3.3moftheprofitondisposalwasattributabletothesurrenderoftheoptionatChevington wind farm.
TheresultingunderlyingoperatingprofitfortheGroup,beforeexceptionalitems,was£8.3m(H1 2015: £14.8m).
6 Harworth Group plc Interim Report 2016
Financial Reviewcontinued
Exceptional itemsExceptional items comprise four separate items, all of which largely relate to the Group’s legacy activities. WithregardtoHarworthInsuranceCompanyLimited,theadministratorhasconfirmedthatHarworthwillbe receiving £0.5m. A further amount of £0.2m is expected from the administrator of Ocanti Opco Limited which relates to the reimbursement of management expenses incurred by Harworth (then known as CoalfieldResourcesplc).Inrespectofcoalfinesactivities,anexceptionalchargeof£0.7mhasbeentakentoreflecttheunderrecoveryofamountsrelatingtothecessationofactivitiesatRugeleyandaprovisiontakenagainstthevalueofcoalfinesstockstoreflectreduceddemand.
Net assetsAs set out below, net assets increased to £303.0m as at 30 June 2016 from £297.7m as at 31 December 2015 (£274.5m as at 30 June 2015). This increase was as a result of movements in the half year, being operatingprofitof£8.3mlessinterestcostsof£1.0m,taxof£1.4mandothermovementsof£0.6m.
30 June 2016
£m
30 June 2015
£m
31 December 2015
£m
Investment properties (including assets held for sale and investments in joint ventures) 363.9 308.2 344.5Cash 23.7 30.1 27.6Other assets 21.8 26.5 21.6
Total assets 409.4 364.8 393.7Gross borrowings 72.6 60.0 64.5Other liabilities 33.8 30.3 31.5
Net assets 303.0 274.5 297.7
Number of shares in issue 292,269,786 2,922,697,857 2,922,697,857
Net assets per share 103.6p 9.4p 10.2p
Underlying net assets per share 103.6p 93.9p 101.8p
Funding strategyOn13February2015,HEPGLenteredintoa£65m,fiveyearterm,non-amortising,RevolvingCreditFacility (“RCF”) with The Royal Bank of Scotland (“RBS”), replacing amortising facilities with the Lloyds Banking Group and Barclays Bank. On 19 August 2016, HEPGL completed a planned extension to its RCF with RBS, increasing the limit to £75m and extending the term by a further year such that it now expires in February 2021, on substantially the same terms (including pricing) as the existing facility. This enhancedfacilityreflectsconfidenceinthebusinessandprovideseitheradditionalheadroomand/oradditional funds to accelerate the strategic growth of the Group.
Infrastructure funding, provided by public bodies to promote the development of major sites for employment and housing needs, continues to feature in our funding strategy. At 30 June 2016, the Group had four infrastructure facilities with all-in funding rates of between 2.5% and 4.0%. Despite the EU referendum vote, we expect public infrastructure funding to continue and, since the vote, we have signed a facility agreement to fund a small direct build scheme at the AMP.
On21June2016,HEPGLenteredintoafour-yearswaptofix£30mofborrowingsatanall-inrateof2.955%,includingfees.TheGroup’shedgingstrategyistohaveroughlyhalfofitsdebtatafixedrateandhalfofitsdebtexposedtofloatingrates.Theweightedaveragecostofdebt,using30June2016balancesand rates, and including fees, was 2.8%.
The Group is continuing to maintain positive momentum created by using disposal proceeds to fund investment spend on developments and further acquisitions to replenish the portfolio, with particular focus onbrownfieldsiteswithgreatervalueenhancementpotential.At30June2016,theGroupisprudentlygearedat20.0%grossloantovalue(netloantovalue13.4%),whichalsogivesflexibilitytoinvestforthefuture.
Financial Reviewcontinued
Harworth Group plc Interim Report 2016 7
Financial Reviewcontinued
Cash and net debtThe Group’s cash and cash equivalents at 30 June 2016 were £23.7m (H1 2015: £30.1m). The Group had borrowing and loans of £72.6m at 30 June 2016 (H1 2015: £60.0m), being the RBS RCF of £58.1m and infrastructure loans of £14.5m. The resulting net debt was £48.9m (H1 2015: £29.9m).
The Group seeks to utilise disposal proceeds to provide the capital for infrastructure spend to bring sites forward and for acquisitions to replenish the portfolio. Disposals tend to be second half weighted and thus net debt is usually higher in the middle of the year than at the year end.
TaxationThe charge for taxation in the half year was £1.4m (H1 2015: £0.6m) comprising the deferred tax charge on forecast future capital gains arising on the investment property portfolio.
At 30 June 2016, the Group had deferred tax liabilities of £12.8m (2015 year end: £11.4m), related to unrealised gains on investment properties, and no deferred tax assets (2015: £nil).
DividendsAt the AGM on 26 April 2016, the full year proposed dividend of £1.5m (0.051p per share), the reduction of capital and the 1 for 10 share consolidation were approved. The capital reduction was approved by the courtandtheshareconsolidationwaseffectedon3May2016.Asaresult,the2015fullyeardividendof£1.5m (now 0.51p per share) will be paid on 9 September 2016 to those shareholders on the Company’s register of members on 19 August 2016.
Reflectingconfidenceinthebusinessanditsprospects,afirstinterimdividendof£0.66m(0.23ppershare) is proposed.
Principal risks and uncertaintiesInthefirsthalf,theExecutiveTeamandtheAuditCommitteecarriedoutseparatereviewsoftheprincipalrisks and uncertainties which could have a material impact on the Group’s performance. Those risks and uncertainties, together with corresponding controls, mitigation and actions remain as set out on pages 22 and 23 of the Annual Report for the year ended 31 December 2015, which is available at www.harworthgroup.com. A further formal review, together with ongoing risk monitoring, will be carried outbytheExecutiveTeamandAuditCommitteebeforetheendofthisfinancialyear.
Theprincipalrisksanduncertaintiescomprise:fluctuationsinthepropertymarket;potentialvolatilityintheGroup’s recurring income stream from operations; the veracity of and potential impact of economic cycles on the Group’s strategy; the size and availability of requisite resource in the Group’s workforce; and the development of requisite and appropriate business processes.
These risks and uncertainties are expected to continue to remain relevant for the second half of the financialyear.Insomecases,therehavebeenexternaldevelopmentsand/orstepstakenbytheGroupduringthefirstsixmonthsofthefinancialyear,whichmayaffectthelevelofthoserisksinthesecondhalfofthefinancialyear.Themostsignificantchangesthatoccurredinthefirsthalfaresetoutbelow.
Potential volatility of income generationPotential volatility in the Group’s income stream has increased as a result of an increasing decline in the marketforcoalfines,asthecountry’scoal-firedpowerstationsbegintodecommission.TheGrouphasaddressed that decline by (i) monitoring the market closely and reducing costs in its operations division, (ii)securingnewcontractsforthesaleofcoalfinesand(iii)givingincomegenerationahighpriority,following the Board’s annual review of the Group’s strategy, and focusing resources to increase the amount and quality of the Group’s income.
StrategyThe Board carried out a comprehensive review of the Group’s strategy in June and re-appraised the strategyfollowingtheEUReferendumresult.Thereviewreconfirmedthebusiness’focusandtheappropriateness of current risks and mitigations.
8 Harworth Group plc Interim Report 2016
Financial Reviewcontinued
EU Referendum resultTheEUReferendumresultand,specifically,itsimpactontheeconomicoutlookfortheUnitedKingdom,couldincreasetherisksoffluctuationsinthecommercialandresidentialpropertymarketsforthepriceofland.
Following the EU referendum result, the Group (i) has carried out a detailed review of forecast sales, developmentexpenditureandcashflowforthesecondhalfofthefinancialyearandthefinancialyearending 31 December 2017 and (ii) is monitoring closely sales and sentiment in the commercial and residential property markets in which the Group operates and the progress of the Group’s pipeline sales.
WhilsttheGroupisyettoreachanyfinalconclusionastothelikelyeffectoftheEUreferendumresultonthe property markets in which the Company operates, indications in the period following the result suggestthat(a)anyeffectontheGroupshouldbemitigatedbythediversityintheGroup’spropertyportfolio,(b)theeffectonmarketsinLondonandtheSouthEastappearstohavebeenmoremarkedthanon the regional markets in which the Group operates, (c) housebuilders are adopting a cautious approach to acquisitions of development land, but the Group has continued to agree residential land sales since 23rd June 2016, and (d) the result has had little impact on the regional commercial property market. That said, the Group has revised its development expenditure plans to ensure future infrastructure spend is directly linked to anticipated land sales.
Human resourcesAnumberofinternalpromotionsandexternalappointmentshavebeenmadeinthefirsthalfofthefinancialyear,therebyhelpingtomitigatetherisksconnectedwithhumanresources.
Andrew Kirkman Finance Director 6 September 2016
Temple Green, Leeds, August 2016
Harworth Group plc Interim Report 2016 9
Directors responsibility
Statement of the Directors’ responsibilitiesTheDirectorsconfirmthattothebestoftheirknowledge:
• thecondensedconsolidatedinterimfinancialinformationhasbeenpreparedinaccordancewithIAS 34 ‘Interim Management Reporting’ as adopted by the European Union; and
• thecondensedconsolidatedinterimfinancialinformationincludesafairreviewof:
(a) the information required by DTR 4.2.7R of the Disclosure and Transparency Rules, being an indicationofimportanteventsthathaveoccurredduringthefirstsixmonthsofthefinancialyearandtheirimpactonthecondensedsetoffinancialstatements,andadescriptionoftheprincipalrisksanduncertaintiesfortheremainingsixmonthsofthefinancialyear;and
(b) the information required by DTR 4.2.8R of the Disclosure and Transparency Rules, being related partiestransactionsthathavetakenplaceinthefirstsixmonthsofthecurrentfinancialyearandthathavemateriallyaffectedthefinancialpositionortheperformanceofthecompanyduringthatperiod, and any changes in the related parties transactions described in the last annual report thatcouldhaveamaterialeffectonthefinancialpositionorperformanceofthecompanyinthefirstsixmonthsofthecurrentfinancialyear.
The Directors of Harworth Group plc are as listed below:
Jonson Cox ChairmanOwen Michaelson Chief ExecutiveAndrew Kirkman Finance DirectorLisa Clement Senior Independent Non-Executive DirectorMartyn Bowes Non-Executive DirectorAndrew Cunningham Independent Non-Executive DirectorAnthony Donnelly Independent Non-Executive DirectorSteven Underwood Non-Executive DirectorA list of current Directors is also maintained on the Harworth Group plc webiste: www.harworthgroup.com.
By order of the Board
Christopher Birch Company Secretary 6 September 2016
Construction of Logistics 225 and 175 at Logistics North, Bolton, September 2016
Directors responsibility
10 Harworth Group plc Interim Report 2016
Consolidated income statement
Note
Unaudited 6 months ended
30 June 2016 £000
Unaudited 6 months ended
30 June 2015 £000
Audited year ended
31 December 2015 £000
Revenue 17,405 4,171 13,172Cost of sales (11,864) (1,789) (6,013)
Gross profit 5,541 2,382 7,159Administrative expenses (4,802) (1,973) (5,731) Increase in fair value of investment properties 7,900 3,356 24,060(Loss)/profitonsaleofinvestmentproperties (307) 2,200 8,180Lossonsaleofassetsclassifiedasheldforresale (192) – –Other gains 56 3,265 3,208Other operating income 137 – 176
Operating profit before exceptional items 8,333 9,230 37,052Exceptional items 2 7 (2,394) (2,859)
Operating profit 8,340 6,836 34,193Finance income 5 242 27 62Finance costs 5 (1,196) (631) (1,803)Shareofprofitofassociates – 856 856Gain on bargain purchase 3 – 44,244 44,244
Profit before tax 7,386 51,332 77,552Tax 6 (1,422) (571) (3,508)
Profit for the period/year 5,964 50,761 74,044
Earnings per share from operations pence pence pence
Basic and diluted 8 0.30 2.73 3.10
Adjusted 0.30 0.50 1.10
Thenotesonpages15to28areanintegralpartofthesecondensedconsolidatedinterimfinancialstatements.
Allactivitiesinthecurrentperiod/yeararederivedfromcontinuingoperations.
Harworth Group plc Interim Report 2016 11
Consolidated statement of comprehensive income
Note
Unaudited 6 months ended
30 June 2016 £000
Unaudited 6 months ended
30 June 2015£000
Audited year ended
31 December 2015 £000
Profit for the period/year 5,964 50,761 74,044Other comprehensive income – items that will not be reclassified to profit or loss: Re-measurements of Blenkinsopp Pension Scheme (25) (12) (3) Fairvalueoffinancialinstruments 18 (658) – –
Total other comprehensive income (683) (12) (3)
Total other comprehensive income for the period/year 5,281 50,749 74,041
Consolidated statement of comprehensive income
12 Harworth Group plc Interim Report 2016
Consolidated balance sheet
Note
Unaudited 6 months ended
30 June 2016 £000
Unaudited 6 months ended
30 June 2015 £000
Audited year ended
31 December 2015 £000
ASSETSNon-current assetsOther receivables 650 650 650Investment in associates 9 – – –Investment properties 10 346,521 306,993 334,617Investments in joint ventures 11 9,798 1,233 768
356,969 308,876 336,035
Current assetsInventories 1,062 239 1,092Trade and other receivables 20,057 20,809 19,906Cash and cash equivalents 12 23,692 30,065 27,564Assetsclassifiedasheldforsale 13 7,606 4,822 9,128
52,417 55,935 57,690
Total assets 409,386 364,811 393,725
LIABILITIESCurrent liabilitiesBorrowings 14 (1,938 ) (716 ) (400) Trade and other payables (17,612 ) (21,207 ) (17,369 ) Liabilitiesclassifiedasheldforsale 13 – (172 ) –
(19,550 ) (22,095 ) (17,769 )
Net current assets 32,867 33,840 39,921
Non-current liabilitiesBorrowings 14 (70,669 ) (59,316 ) (64,119 ) Trade and other payables (2,280 ) – (2,280 ) Derivativefinancialinstruments (658 ) – –Deferred income tax liabilities (12,801 ) (8,442 ) (11,379 ) Retirementbenefitobligations 15 (404 ) (507 ) (435 )
(86,812 ) (68,265 ) (78,213 )
Total liabilities (106,362 ) (90,360 ) (95,982 )
Net assets 303,024 274,451 297,743
SHAREHOLDERS’ EQUITYCalled up share capital 16 29,227 29,227 29,227Share premium account 17 – 129,121 129,121Fair value reserve 31,960 3,356 24,060Capital redemption reserve 257 257 257Merger reserve 45,667 45,667 45,667Retained earnings 66,792 66,823 69,411Other reserves 17 129,121 – –
Total shareholders’ equity 303,024 274,451 297,743
Consolidated balance sheet
Harworth Group plc Interim Report 2016 13
Consolidatedstatementofcashflows
Unaudited 6 months ended
30 June 2016 £000
Unaudited 6 months ended
30 June 2015 £000
Audited year ended
31 December 2015 £000
Cash flows from operating activitiesProfitfortheperiod/year 5,964 50,761 77,552Net interest payable 954 604 1,741Shareofpost-taxprofitfromassociates – (856 ) (856 ) Gain on bargain purchase – (44,244 ) (44,244 ) Net fair value increase in investment properties (7,900 ) (3,356 ) (24,060 ) Loss/(profit)ondisposalofinvestmentproperties,assetsheldforsaleandoption 499 (5,408 ) (11,388 ) Pension contributions in excess of charge and other gains (63 ) (57 ) (132 ) Impairment of investment in joint venture – – 465
Operating cash outflow before movements in working capital (546 ) (2,556 ) (922 ) Decrease/(increase)ininventories 30 72 (781 ) (Increase)/decreaseinreceivables (151 ) 4,228 9,881Increase/(decrease)inpayables 3,428 (946 ) (10,512 )
Cash generated from/(used in) operations 2,761 798 (2,334 ) Loan arrangement fees paid (47 ) (96 ) (170 ) Interest paid (742 ) (364 ) (1,101 ) Cash from discontinued operations – 328 228
Cash generated from/(used in) operating activities 1,972 666 (3,377 )
Cash flows from investing activitiesInterest received 242 28 62Investment in joint venture (9,030 ) – –Acquisition of a subsidiary, net of cash acquired – (87,823 ) (87,823 ) Proceeds from disposal of investment properties and option 10,894 14,257 42,302Expenditure on investment properties (15,753 ) (10,349 ) (41,215 ) Cash generated from discontinued operations – (1,068 ) (1,068 )
Cash used in investing activities (13,647 ) (84,955 ) (87,742 )
Cash flows from financing activitiesNet proceeds from issue of ordinary shares – 112,075 112,075Proceeds/(repayment)from/(of)bankloan 9,000 (400 ) (400 ) Proceeds from other loans 2,905 3,528 13,455 Repayment of other loans (4,102 ) (3,078 ) (8,776 )
Cash generated from financing activities 7,803 112,125 116,354
(Decrease)/Increase in cash (3,872 ) 27,836 25,235
At 1 JanuaryCash 27,564 1,489 1,489Cashequivalentsclassifiedasheldforsale – 840 840
27,564 2,329 2,329(Decrease)/increaseincash (3,872 ) 27,836 26,075Cashequivalentsclassifiedasheldforsale – – (840 )
23,692 30,165 27,564
Atperiod/yearendCash 23,692 30,065 27,564Cashequivalentsclassifiedasheldforsale – 100 –
Cash and cash equivalents 23,692 30,165 27,564
Consolidatedstatementofcashflows
14 Harworth Group plc Interim Report 2016
Consolidated statement of changes in shareholders’ equity
Note
Ordinary shares
£000
Share premium account
£000
Merger reserve
£000
Fair value
reserve £000
Other reserves
£000
Retained earnings
£000
Total equity
£000
Balance at January 2015 (audited) 6,055 32,911 – – 257 19,430 58,653
Transactions with owners:Shares issued 16 15,865 99,160 – – – – 115,025Costs relating to share issues 17 – (2,950) – – – – (2,950) Shares issued in lieu of consideration 16 7,307 – 45,667 – – – 52,974
Profitforthesixmonthsto30June2015 – – – – – 50,761 50,761Fair value gain on revaluation of investment properties – – – 3,356 – (3,356) –
Other comprehensive income:Re-measurementsofpost-retirementbenefits – – – – – (12) (12)
Balance at 30 June 2015 (unaudited) 29,227 129,121 45,667 3,356 257 66,823 274,451Profitforthesixmonthsto31December2015 – – – – – 26,639 26,639Fair value gain on revaluation of investment properties – – – 20,704 – (24,060) (3,356) Other comprehensive income:Re-measurementsofpost-retirementbenefits – – – – – 9 9
Balance at 31 December 2015 (audited) 29,227 129,121 45,667 24,060 257 69,411 297,743Transactions with owners:Profitforthesixmonthsto30June2016 – – – – – 5,964 5,964Fair value gain on revaluation of investment properties – – – 7,900 – (7,900) –Transfer of share premium to other distributable reserves 17 – (129,121) – – 129,121 – –Other comprehensive income:Re-measurementsofpost-retirementbenefits – – – – – (25) (25) Fairvalueoffinancialinstruments 18 – – – – – (658) (658)
Balance at 30 June 2016 (unaudited) 29,227 – 45,667 31,960 129,378 66,792 303,024
Consolidated statement of changes in shareholders’ equity
Harworth Group plc Interim Report 2016 15
Notestothecondensedconsolidatedinterimfinancialstatementsfor the six months ended 30 June 2016
1. Basis of preparation of the condensed consolidated interim financial statementsGeneral informationHarworthGroupplc(formerlyCoalfieldResourcesplc)(the“Company”)isapubliclimitedcompanyincorporatedanddomiciledintheUK.TheaddressofitsregisteredofficeisAdvantageHouse,PoplarWay,Rotherham,SouthYorkshire,S605TR.CoalfieldResources plc changed its name to Harworth Group plc on 24 March 2015.
The Company is listed on the London Stock Exchange.
Thecondensedconsolidatedinterimfinancialstatementsforthesixmonthsended30June2016comprisetheCompanyanditssubsidiaries (together referred to as the “Group”).
Thesecondensedconsolidatedinterimfinancialstatementsdonotcomprisestatutoryaccountswithinthemeaningofsection434oftheCompaniesAct2006.TheGroupfinancialstatementsfortheyearended31December2015wereapprovedbytheBoardofDirectors on 31 March 2016 and delivered to the Registrar of Companies. The report of the auditor on those accounts was unqualified,didnotcontainanemphasisofmatterparagraphanddidnotcontainanystatementundersection498oftheCompaniesAct 2006.
Thecondensedconsolidatedinterimfinancialstatementshaveneitherbeenreviewednoraudited.
Thecondensedconsolidatedinterimfinancialstatementsfortheperiodended30June2016wereapprovedbytheBoardon6 September 2016.
Basis of preparationThesecondensedconsolidatedinterimfinancialstatementsforthesixmonthsended30June2016havebeenpreparedinaccordance 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 financialstatementsshouldbereadinconjunctionwiththeGroupfinancialstatementsfortheyearended31December2015whichhave been prepared in accordance with IFRSs as adopted by the EU.
Going-concern basisThesefinancialstatementsarepreparedonthebasisthattheGroupisagoingconcern.Informingitsopinionastogoingconcern,theBoardpreparescashflowforecastsbaseduponitsassumptionswithparticularconsiderationtothekeyrisksanduncertaintiesas summarised in ‘Key risks and uncertainties’ section of our 2015 Annual Report, as well as taking into account the funding strategy and available borrowing facilities disclosed on page 6.
The key factor that has been considered in this regard is:
Following the acquisition of Harworth Estates Property Group Limited (“Harworth Estates”), the Group has a £65m revolving credit facilitywithTheRoyalBankofScotland,foratermoffiveyears,onanon-amortisingbasis.ThefacilityisintheformofadebenturesecuritywherebythereisnochargeontheindividualassetsoftheGroup.Thefacilityissubjecttofinancialandothercovenants.
Thecovenantsarebasedupongearing,tangiblenetworth,loantopropertyvaluesandinterestcover.Propertyvaluationsaffecttheloan to value covenants. 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.
Subsequent to the period end, the revolving credit facility with The Royal Bank of Scotland has been increased by £10m to £75m and the term has been extended by one year to 2021.
TheDirectorsconfirmtheirbeliefthatitisappropriatetousethegoingconcernbasisofpreparationforthesefinancialstatements.
Accounting policiesExceptasdescribedbelow,theaccountingpoliciesappliedareconsistentwiththoseoftheGroupfinancialstatementsfortheyearended31December2015,asdescribedinthoseannualfinancialstatements.
Taxes on income in the interim periods are accrued using the tax rate that would be applicable to expected annual earnings.
Notestothecondensedconsolidatedinterimfinancialstatementsfor the six months ended 30 June 2016
16 Harworth Group plc Interim Report 2016
Notes to the Condensed Consolidated Interim Financial Statementsfor the six months ended 30 June 2016: continued
New standards and interpretations not yet adopted Anumberofnewstandardsandamendmentstostandardsandinterpretationsareeffectiveforannualyearsbeginningafter 1January2016,andhavenotbeenappliedinpreparingtheseconsolidatedfinancialstatements.Thesehavebeensetoutbelow:
Amendment to IFRS 11, ‘Joint arrangements’ on acquisition of an interest in a joint operation.
This amendment adds new guidance on how to account for the acquisition of an interest in a joint operation that constitutes a business. The amendments specify the appropriate accounting treatment for such acquisitions. The amendment was published in May2014andiseffectiveforannualperiodsonorafter1January2016.
AmendmentstoIAS27,‘Separatefinancialstatements’ontheequitymethod.Theseamendmentsallowentitiestousetheequitymethodtoaccountforinvestmentsinsubsidiaries,jointventuresandassociatesintheirseparatefinancialstatements.TheamendmentwaspublishedinAugust2014andiseffectiveforannualperiodsonorafter1January2016.
Annual improvements 2014. These set of amendments impacts 4 standards:
• IFRS 5, ‘Non-current assets held for sale and discontinued operations’ regarding methods of disposal.
• IFRS 7, ‘Financial instruments: Disclosures’, (with consequential amendments to IFRS 1) regarding servicing contracts.
• IAS19,‘Employeebenefits’regardingdiscountrates.
• IAS34,‘Interimfinancialreporting’regardingdisclosureofinformation.
TheamendmentwaspublishedinSeptember2014andiseffectiveforannualperiodsonorafter1January2016.
AmendmenttoIAS1,‘Presentationoffinancialstatements’onthedisclosureinitiative.TheseamendmentsareaspartoftheIASBinitiativetoimprovepresentationanddisclosureinfinancialreports.Effectiveforannualperiodsbeginningonorafter1January2016,subject to EU endorsement.
Amendment to IFRS 10 and IAS 28 on investment entities applying the consolidation exception. These amendments clarify the application of the consolidation exception for investment entities and their subsidiaries. The amendment was published in December 2014andiseffectiveforannualperiodsonorafter1January2016.
IASAmendmentstoIAS7,Statementofcashflowsondisclosureinitiative.TheseamendmentstoIAS7introduceanadditionaldisclosurethatwillenableusersoffinancialstatementstoevaluatechangesinliabilitiesarisingfromfinancingactivities.TheamendmentispartoftheIASB’sDisclosureInitiative,whichcontinuestoexplorehowfinancialstatementdisclosurecanbeimproved.TheamendmentwaspublishedinFebruary2016andiseffectiveforannualperiodsonorafter1January2017.
AmendmentstoIAS12,‘Incometaxes’onRecognitionofdeferredtaxassetsforunrealisedlosses(effective1January2017).Theseamendments on the recognition of deferred tax assets for unrealised losses clarify how to account for deferred tax assets related to debtinstrumentsmeasuredatfairvalue.TheamendmentwaspublishedinFebruary2016andiseffectiveforannualperiodsonorafter 1 January 2017.
Amendments to IFRS 2, ‘Share based payments’ on clarifying how to account for certain types of share-based payment transactions. Thisamendmentclarifiesthemeasurementbasisforcash-settled,share-basedpaymentsandtheaccountingformodificationsthatchange an award from cash-settled to equity-settled. It also introduces an exception to the principles in IFRS 2 that will require an award to be treated as if it was wholly equity-settled, where an employer is obliged to withhold an amount for the employee’s tax obligation associated with a share-based payment and pay that amount to the tax authority. The amendment was published in June 2016andiseffectiveforannualperiodsonorafter1January2018.
IFRS9‘Financialinstruments’.ThisstandardreplacestheguidanceinIAS39.Itincludesrequirementsontheclassificationandmeasurementoffinancialassetsandliabilities;italsoincludesanexpectedcreditlossesmodelthatreplacesthecurrentincurredlossimpairmentmodel.TheamendmentwaspublishedinJuly2014andiseffectiveforannualperiodsonorafter1January2018.
IFRS 15 ‘Revenue from contracts with customers’. IFRS 15, ‘Revenue from contracts with customers’ is a converged standard from theIASBandFASBonrevenuerecognition.Thestandardwillimprovethefinancialreportingofrevenueandimprovecomparabilityofthetoplineinfinancialstatementsglobally.TheamendmentwaspublishedinMay2014andiseffectiveforannualperiodsonorafter1 January 2018.
Notes to the Condensed Consolidated Interim Financial Statementsfor the six months ended 30 June 2016: continued
1. Basis of preparation of the condensed consolidated interim financial statements: continuedAccounting policies: continued
Harworth Group plc Interim Report 2016 17
Notes to the Condensed Consolidated Interim Financial Statementsfor the six months ended 30 June 2016: continued
1. Basis of preparation of the condensed consolidated interim financial statements: continuedAccounting policies: continuedEstimates and judgementsThepreparationofthecondensedconsolidatedinterimfinancialstatementsrequiresmanagementtomakejudgements,estimatesandassumptionsthataffecttheapplicationofaccountingpoliciesandthereportedamountsofassetsandliabilities,incomeandexpense.Actualresultsmaydifferfromtheseestimates.
Inpreparingthesecondensedconsolidatedinterimfinancialstatements,thesignificantjudgementsmadebymanagementinapplyingthe Group’s accounting policies and the key sources of estimation uncertainty were the same as those that applied to the consolidated financialstatementsfortheyearended31December2015,withtheexceptionofchangesinestimatesthatarerequiredindetermining the provision for income taxes.
2. Exceptional itemsUnaudited
6 months ended 30 June
2016 £000
Unaudited 6 months ended
30 June 2015 £000
Audited year ended
31 December 2015 £000
Settlement relating to Harworth Insurance Company Limited 500 – –Settlement relating to Ocanti Opco Limited 189 – –Coalfinesstockprovision (339) – –UnderrecoveryrelatingtothecessationofcoalfineactivitiesatRugeley (343) – –Transaction costs (note 3) – (2,394) (2,859)
Total exceptional items 7 (2,394) (2,859)
Exceptional items for 2016 comprise four separate items, all of which largely relate to Harworth’s legacy activities. £0.5m relates to a settlement from the administrators of Harworth Insurance Company Limited and £0.2m is expected from the administrator of Ocanti OpcoLimitedwhichrelatestothereimbursementofmanagementexpensesincurredbyCoalfieldResourcesplc(theformernameofHarworthGroupplc).Inrespectofcoalfinesactivity,anexceptionalchargehasbeentakentoreflecttheunderrecoveryofamountsrelatingtothecessationofactivitiesatRugeleyof£0.3mandaprovisionof£0.3mhasbeentakenagainstthevalueofcoalfinesstocksreflectingreduceddemand.
The exceptional items in 2015 relate to the transaction costs incurred on the acquisition of Harworth Estates of £2.4m and the write down of a joint venture investment held by the Group of £0.5m.
3. Business combinations Acquisition of Harworth EstatesOn 24 March 2015, the Group acquired 75.1% of the issued share capital of Harworth Estates, a company incorporated in the UnitedKingdomwhoheadedupagroupwhichwasengagedintheregenerationofformercoalfieldsitesandotherbrownfieldlandinto employment areas, new residential development and low carbon energy projects.
The following table summarises the consideration paid for the Harworth Estates group, the fair value of assets acquired, liabilities assumed and the non-controlling interest held at the acquisition date.
Consideration at 24 March 2015£000
Cash 97,026Equity instruments (730m ordinary shares) 52,974
Total consideration transferred 150,000
Fair value of associate interest 57,746
Total consideration 207,746
Notes to the Condensed Consolidated Interim Financial Statementsfor the six months ended 30 June 2016: continued
18 Harworth Group plc Interim Report 2016
Notes to the Condensed Consolidated Interim Financial Statementsfor the six months ended 30 June 2016: continued
Recognisedamountsofidentifiableassetsacquiredandliabilitiesassumed: Attributed Fair Value
£000
Investment property (Note 10) 299,355Investments and other non-current receivables 1,883Cash and cash equivalents 9,203Inventory 311Trade and other current receivables 23,054Financial asset 1,200Borrowings (60,407) Deferred tax liability (7,871) Trade and other payables (14,738)
Fair value of acquired interest in net assets of subsidiary 251,990Gain on bargain purchase (44,244)
Total consideration 207,746
The purchase consideration disclosed above comprises cash and cash equivalents paid to acquire the previous majority shareholder of£150.0mwhichwassatisfiedbythepaymentof£97mandtheallotmentandissueof730,674,465ordinarysharesof£0.01eachinthe capital of Harworth Group plc. The share premium arising from the shares issued to the PPF is held within the merger reserve shown in the consolidated balance sheet.
Acquisition related costs of £2.4m have been recognised in the consolidated income statement for the period ended 30 June 2015 and 31 December 2015. The fair value of the 730m ordinary shares issued as part of the consideration paid for Harworth Estates (£53.0m) was based upon the price the shares were placed at 7.25 pence. Issuance costs of £2.9m have been netted against the deemed proceeds.
During the period ended 31 December 2015, the revenue included in the consolidated income statement since 24 March 2015 contributedbyHarworthEstateswas£12.9m(H12015:£3.9m)andprofitbeforetaxwas£40.7m(H12015:£8.5m).HadtheHarworthEstates group been consolidated from 1 January 2015, the consolidated income statement would show pro-forma revenue of £16.7m (H12015:£7.7m)andprofitbeforetaxof£39.2m(H12015:£10.6m).
Thenetcashoutflowassociatedwiththeacquisitionwasasfollows:£000
Fair value of acquired interest in net assets of subsidiary 251,990
Fair value of associate interest already held (57,746) Gain on bargain purchase (44,244)
Total purchase consideration 150,000
Less: cash and cash equivalents of subsidiary acquired (9,203) Less: equity instruments issued (52,974)
Net outflow of cash and cash equivalents on acquisition 87,823
3. Business combinations: continued
Notes to the Condensed Consolidated Interim Financial Statementsfor the six months ended 30 June 2016: continued
Harworth Group plc Interim Report 2016 19
Notes to the Condensed Consolidated Interim Financial Statementsfor the six months ended 30 June 2016: continued
4. Segment information30 June 2016
GroupCapital growth
£000
Income generation
£000
Unallocated costs £000
Total£000
Revenue 9,580 7,825 – 17,405Operating(loss)/profitbeforeotherincomeandexpensesand exceptional items
(690) 4,626 (3,197) 739
Increase in fair value of investment properties 3,500 4,400 – 7,900Loss on sale of investment properties and assets held for sale (137) (362) – (499) Other gains and operating income – 137 56 193Exceptional items – (682) 689 7
Operating profit/(loss) after exceptional items 2,673 8,119 (2,452) 8,340
Finance income 242Finance costs (1,196)
Profit before tax 7,386
Other informationInvestment property additions:– Direct acquisitions 903 2,822 – 3,725– Subsequent expenditure 5,002 5,059 – 10,061
Segmental AssetsTotal£000
Capital growth 211,546Income generation 134,975
Total investment properties 346,521
Unallocated assetsInventories 1,062Other receivables 650Investments in joint ventures 9,798Trade and other receivables 20,057Cash and cash equivalents 23,692Current assets held for resale 7,606
Total assets 409,386
Financial liabilities are not allocated to the reporting segments as they are managed and measured on a Group basis.
30 June 2015
GroupCapital growth
£000
Income generation
£000
Unallocated costs £000
Total£000
Revenue 18 3,833 320* 4,171Operating(loss)/profitbeforeotherincomeandexpensesand exceptional items
(454) 2,260 (1,397) 409
Transaction costs – – (2,394) (2,394) Increase in fair value of investment properties 2,000 1,356 – 3,356Profitonsaleofinvestmentproperties 2,144 56 – 2,200Other gains – 3,208 57 3,265
Operating profit/(loss) 3,690 6,880 (3,734) 6,836
Finance income 27Finance costs (631) Shareofprofitofassociates 856Gain on bargain purchase 44,244
Profit before tax 51,332
*Unallocated revenues relate to recharges to Harworth Estates prior to its acquisition by the Group.
Notes to the Condensed Consolidated Interim Financial Statementsfor the six months ended 30 June 2016: continued
20 Harworth Group plc Interim Report 2016
Notes to the Condensed Consolidated Interim Financial Statementsfor the six months ended 30 June 2016: continued
Other informationInvestment property additions:– Direct acquisitions 173 978 – 1,151– Subsequent expenditure 9,962 2,378 – 12,340
Segmental AssetsTotal£000
Capital growth 190,900Income generation 116,093
Total investment properties 306,993
Unallocated assetsInventories 239Other receivables 650Investments in joint ventures 1,233Trade and other receivables 20,809Cash and cash equivalents 30,065Current assets held for resale 4,822
Total assets 364,811
31 December 2015
GroupCapital growth
£000
Income generation
£000
Unallocated costs £000
Total£000
Revenue 1,319 11,533 320* 13,172
Operating(loss)/profitbeforeotherincomeandexpensesand exceptional items
(1,471) 6,579 (3,680) 1,428
Transaction costs – – (2,394) (2,394) Impairment of investment (465) – – (465) Increase in fair value of investment properties 14,503 9,557 – 24,060Profitonsaleofinvestmentproperties 7,111 1,069 – 8,180Other gains – 3,208 – 3,208Other operating income – 47 129 176
Operating profit/(loss) 19,678 20,460 (5,945) 34,193
Finance income 62Finance costs (1,803) Shareofprofitofassociates 856Gain on bargain purchase 44,244
Profit before tax 77,552
*Unallocated revenues relate to recharges to Harworth Estates prior to its acquisition by the Group.
Notes to the Condensed Consolidated Interim Financial Statementsfor the six months ended 30 June 2016: continued
4. Segment information: continued
Harworth Group plc Interim Report 2016 21
Notes to the Condensed Consolidated Interim Financial Statementsfor the six months ended 30 June 2016: continued
Other informationInvestment property additions:– Direct acquisitions 14,578 8,255 – 22,833– Subsequent expenditure 17,603 6,360 – 23,963
Segmental AssetsTotal£000
Total investment properties 210,004 124,613 – 334,617Assets held for sale 30 9,098 – 9,128Inventories – 1,092 – 1,092Other receivables 650 – – 650Investments in joint ventures 768 – – 768
211,452 134,803 – 346,255
Unallocated assetsTrade and other receivables – – 19,906 19,902Cash and cash equivalents – – 27,564 27,564
Total assets 211,452 134,803 47,470 393,725
5. Finance income/(cost)Unaudited
6 months ended 30 June
2016 £000
Unaudited 6 months ended
30 June 2015 £000
Audited year ended
31 December 2015 £000
Interest expense– Bank interest (742) (347) (977) – Facility fees (249) (190) (485) – Other interest (205) (94) (341)
(1,196) (631) (1,803)
Interest received 242 27 62
Net finance costs (954) (604) (1,741)
6. TaxThecurrenttaxintheperiodis£nil(H12015:£nil;FY2015:£nil).
TheGrouprecogniseddeferredtaxliabilitiesof£1.4musingtheliabilitymethodandataxrateof18%(H12015:20%;FY201518%)atthe period end covered by this condensed consolidated interim statement.
The Group recognised a deferred tax liability of £12.8m in respect of property revaluation gains where tax is expected to arise when thepropertyissold(H12015:£8.4m;FY2015:£11.4m).TheGroupdidnotrecogniseanydeferredtaxassetsattheperiodendcoveredbythisinterimstatement(H12015:£nil;FY2015:£nil).
7. DividendsAn interim dividend of £0.66m is proposed for the six months ended 30 June 2016 and will be paid on 1 December 2016. The Board recommended and shareholders approved a full year dividend for 2015 of £1.5m which will be paid on 9 September 2016.
Notes to the Condensed Consolidated Interim Financial Statementsfor the six months ended 30 June 2016: continued
4. Segment information: continued
22 Harworth Group plc Interim Report 2016
Notes to the Condensed Consolidated Interim Financial Statementsfor the six months ended 30 June 2016: continued
8. Earnings per shareEarningspersharehasbeencalculatedbydividingtheprofitattributabletoordinaryshareholdersbytheweightedaveragenumberofshares in issue and ranking for dividend during the period. The weighted average number of shares for 30 June 2015 includes the adjustmentsnecessarytoreflectthenewsharesissuedon24March2015andfor30June2016theshareconsolidationwhichtookplace on 3 May 2016. See note 16.
Unaudited 6 months ended
30 June 2016 £000
Unaudited 6 months ended
30 June 2015 £000
Audited year ended
31 December 2015 £000
Profit for the period/year 5,964 50,761 74,044
Weighted average number of shares used for basic and diluted profit per share calculations 1,983,259,260 1,860,095,458 2,395,763,516
Basic and diluted earnings per share (pence) 0.30 2.73 3.10
Adjusted earnings per share (pence) 0.30 0.50 1.10
Adjusted, basic and diluted earnings per share for the six months to 30 June 2016 was 0.3 pence. For the period to 30 June 2015 adjustedearningspersharewas0.5pence,beingbasedonprofitbeforetaxadjustedfortheexceptionalgainonbargainpurchaseof£44.2m and acquisition fees of £2.4m. For the year ended 31 December 2015 the adjusted basic and diluted earnings per share were 1.1pence,beingbasedonprofitbeforetaxadjustedfortheexceptionalgainonbargainpurchaseof£44.2m,acquisitionfeesof£2.4m and write down of investments of £0.5m.
9. Investment in associates
Cost
Unaudited 6 months ended
30 June 2016 £000
Unaudited 6 months ended
30 June 2015 £000
Audited year ended
31 December 2015 £000
Atstartofperiod/year – 56,890 –Shareofprofit – 856 –Purchase of share capital not held – (57,746) –
At end of period/year – – –
The Group accounted for its investment in Harworth Estates, a private company incorporated in England and Wales, as an associate uptoandincluding24March2015becauseitconsideredthatithadsignificantinfluenceoverthatentityduetoits24.9%shareholding and representation on the Harworth Estates board.
On 24 March 2015 Harworth Group PLC acquired the remaining 75.1% of Harworth Estates that it did not own from the Pension Protection Fund (PPF). Harworth Estates therefore ceased to be accounted for as an associate at that date and has been fully consolidated in these accounts.
Notes to the Condensed Consolidated Interim Financial Statementsfor the six months ended 30 June 2016: continued
Harworth Group plc Interim Report 2016 23
Notes to the Condensed Consolidated Interim Financial Statementsfor the six months ended 30 June 2016: continued
10. Investment propertiesInvestmentpropertyat30June2016hasbeenmeasuredatfairvaluebaseduponamanagementestimate.TheGroupholdsfivecategories of investment property being agricultural land, natural resources, business parks, major developments and strategic land, all situated in the UK, which sit within the operating segments of income generation and capital growth.
Agricultural Land Income Generation
£000
Natural Resources
Income Generation £000
Business Parks Income Generation
£000
Major Developments Capital Growth
£000
Strategic Land Capital Growth
£000Total £000
At 31 December 2014 – – – – – –Acquisition of subsidiaries 22,070 18,574 72,724 139,842 46,145 299,355Direct acquisitions – 978 – 120 53 1,151Subsequent expenditure 202 309 1,867 9,308 654 12,340Increase in fair value – 386 970 2,000 – 3,356Disposals (787) (1,200) – (6,222) (1,000) (9,209)
At 30 June 2015 21,485 19,047 75,561 145,048 45,852 306,993
Direct acquisitions – – 7,277 1,246 13,159 21,682Subsequent expenditure 402 3 3,577 6,254 1,387 11,623Increase/(decrease)infairvalue 2,477 989 4,735 13,075 (572) 20,704Transfer to assets held for sale (6,013) (3,085) – – (30) (9,128) Disposals (1,588) – (254) (8,034) (7,381) (17,257)
At 31 December 2015 16,763 16,954 90,896 157,589 52,415 334,617
Direct acquisitions 493 – 2,329 – 903 3,725Subsequent expenditure 141 389 4,529 3,649 1,353 10,061Increase in fair value – 3,400 1,000 2,000 1,500 7,900Transfer to assets held for sale (1,531) – – – – (1,531) Disposals (388) – – (7,500) (363) (8,251)
At 30 June 2016 15,478 20,743 98,754 155,738 55,808 346,521
Valuation processThe properties have been valued by the management who have exercised their experience and judgement in arriving at the increase in fair value at June 2016 and June 2015. At 31 December 2015 these properties were valued in accordance with the Royal Institute of Charted Surveyors (RICS) Valuation – Professional Standards (the ‘Red Book’), by BNP Paribas Real Estates and Savills, both independentfirmsactingincapacityofexternalvaluerswithrelevantexperienceofvaluationsofthisnature.
Notes to the Condensed Consolidated Interim Financial Statementsfor the six months ended 30 June 2016: continued
24 Harworth Group plc Interim Report 2016
Notes to the Condensed Consolidated Interim Financial Statementsfor the six months ended 30 June 2016: continued
11. Investments in joint ventures£000
At June 2015 1,233Impairment of investment in joint venture (465)
At 31 December 2015 768
Acquisition 9,030
At 30 June 2016 9,798
As a result of the acquisition of Harworth Estates the Group holds 50% of the issued ordinary shares of Bates Regeneration Limited, a joint venture with Banks Property Limited for the development of an investment property at Blyth, Northumberland. In addition the Group purchased a 50% share of The Aire Valley Land LLP from Keyland Developments Limited for a consideration of £8.5m plus costs on 14 March 2016. The Aire Valley Land LLP is a joint venture company. It controls 165 acres of land in Leeds that abuts existing landholding of the Group on the former Skelton Grange power station site.
The Group’s share of the assets and liabilities are:
June 2016Country of incorporation
Assets £000
Liabilities £000
Interest held %
Bates Regeneration Limited England and Wales 1,213 (445) 50
The Aire Valley Land LLP England and Wales 7,798 (3,900) 50
June 2015Country of incorporation
Assets £000
Liabilities £000
Interest held %
Bates Regeneration Limited England and Wales 2,050 (827) 50
December 2015Country of incorporation
Assets £000
Liabilities £000
Interest held %
Bates Regeneration Limited England and Wales 1,213 (445) 50
The risks associated with these investments are as follows:
• Decline in the availability and or an increase in the cost of credit for residential and commercial buyers
• Decline in market conditions and values
The Group also owns a number of other joint ventures whose value is minimal. A full list of joint ventures can be obtained from the Company’sregisteredoffice.
12. Cash and cash equivalentsUnaudited
6 months ended 30 June
2016 £000
Unaudited 6 months ended
30 June 2015 £000
Audited year ended
31 December 2015 £000
Cash held and other cash balances 23,692 30,065 27,564
Notes to the Condensed Consolidated Interim Financial Statementsfor the six months ended 30 June 2016: continued
Harworth Group plc Interim Report 2016 25
Notes to the Condensed Consolidated Interim Financial Statementsfor the six months ended 30 June 2016: continued
13. Assets and liabilities classified as held for saleTheassetsclassifiedforsaleat30June2016and31December2015relatetoinvestmentpropertiesexpectedtobesoldwithintwelve months.
The assets and liabilities of the disposal group held for sale at 30 June 2015 related to Harworth Insurance Company Limited (“HICL”). Agreement was reached with the administrators of the former UK Coal Mine Holdings Limited (“Ocanti No 1 Limited”) over the exerciseoftheiroptiontoacquirethesharesofHICL.TheagreementwastoreflecttheeffortsoftheCompanysecuringtherestructure of the former insurance company to permit the transfer of the shareholding to a company in administration. The value to theCompanyreflectsthevaluerealisedbytheadministratorsintheliquidationoftheassetsofHICLafterthecostoftheliquidation.This is capped at £0.5m based on the value of the balance sheet of HICL at 30 September 2015. The share transfer completed on 8 December 2015 and the Group has now recognised the value in the Consolidated Income Statement in other gains.
(a) AssetsclassifiedasheldforsaleUnaudited
6 months ended 30 June
2016 £000
Unaudited 6 months ended
30 June 2015 £000
Audited year ended
31 December 2015 £000
Investment properties 7,606 – 9,128Trade and other receivables – 28 –Availableforsalefinancialassets – 4,694 –Cash and cash equivalents – 100 –
Assets classified as held for sale 7,606 4,822 9,128
(b) LiabilitiesclassifiedasheldforsaleUnaudited
6 months ended 30 June
2016 £000
Unaudited 6 months ended
30 June 2015 £000
Audited year ended
31 December 2015 £000
Trade and other payables – 53 –ProvisionsRe-measurement loss on carrying value of HICL – 119 –
Liabilities classified as held for sale – 172 –
The assets and liabilities held for sale excluding investment properties relate to HICL.
14. Borrowings and loansUnaudited
6 months ended 30 June
2016 £000
Unaudited 6 months ended
30 June 2015 £000
Audited year ended
31 December 2015 £000
Bank loansCurrent:Secured – bank loans and overdrafts – – –Secured – other loans (1,938) (716) (400)
(1,938) (716) (400)
Non-current:Secured – bank loans (58,100) (48,850) (48,968) Secured – other loans (12,569) (10,466) (15,151)
(70,669) (59,316) (64,119)
Notes to the Condensed Consolidated Interim Financial Statementsfor the six months ended 30 June 2016: continued
26 Harworth Group plc Interim Report 2016
Notes to the Condensed Consolidated Interim Financial Statementsfor the six months ended 30 June 2016: continued
Details of the borrowings acquired as part of the acquisition of Harworth Estates on 24 March 2015 are provided in Note 3.
At 30 June 2016, the Group had bank borrowings of £58.1m (H1 2015: £48.9m) and a further £14.4m (H1 2015: £11.2m) of infrastructure loans, which resulted in total borrowings of £72.6m (H1 2015: £60.0m). The bank borrowings are part of a £65.0m revolvingcreditfacilityfromTheRoyalBankofScotland.Thefacilityisrepayableon13February2020(fiveyearterm)onanon-amortisingbasisandissubjecttofinancialandothercovenants.Subsequenttotheperiodendthisfacilityhasbeenincreasedto £75.0m and the term has been extended by one year.
The infrastructure loans of £14.5m are provided by public bodies in order to promote the development of major sites. They comprise a £1.0m loan from Leeds City Region Enterprise Partnership (H1 2015: £1.4m) in respect of the Prince of Wales site, £11.4m from the HomesandCommunityAgencyinrespectofWaverley(H12015:£8.5m),£0.6mfromSheffieldCityRegionJointEuropeanSupportfor Sustrainable Investment In City Areas (JESSICA) Fund for Rockingham (H1 2015: £1.0m) and £1.5m from Greater Manchester Investment Fund in respect of Logistics North (H1 2015: £0.3m). The loans are drawn as work on the respective sites is progressed and they are repaid on agreed dates or when disposals are made from the sites.
Current loans are stated after deduction of unamortised borrowing cost of £nil (H1 2015: £0.09m). Non-current bank and other loans are stated after deduction of unamortised borrowing costs of £1.1m (H1 2015: £1.3m). The bank loans and overdrafts are secured by wayoffixedchargesovercertainassetsoftheGroup.
15. Retirement benefit obligationsTheGroup’sonlydefinedbenefitpensionliabilitywasfortheBlenkinsoppSectionoftheIndustry-WideMineworkersPensionScheme.TheliabilityoftheGrouptomakecontributionswasindemnifiedbyUKCoalProductionLimited.Duringthesixmonthsto30 June 2015 and the year to 31 December 2015 all contributions were paid to the pension fund by UK Coal Production Limited. From 1 January 2016 to 30 June 2016 all contributions have been made by Harworth Group plc.
ThepensionschemehasbeenvaluedbyaqualifiedindependentactuaryforthepurposesofIAS19(revised)andthepreparationofthesefinancialstatements.Theassumptionsusedareconsistentwiththosederivedat31December2015,butupdatedforcurrentmarket conditions. The main assumptions underlying the valuation of the Blenkinsopp scheme are:
Unaudited As at
30 June 2016
Unaudited As at
30 June2015
Audited As at
31 December 2015
Discount rate 3.00% 3.75% 3.80%Rate of pension increases 2.00% 2.30% 2.20% Rateofpriceinflation(RPI) 2.95% 3.30% 3.20% Rateofcostinflation(CPI) 1.95% 2.30% 2.20% Rate of cash commutation 20.0% 20.0% 20.0%
The amounts recognised in the consolidated balance sheet are as follows:Unaudited
As at 30 June
2016
Unaudited As at
30 June2015
Audited As at
31 December 2015
Fair value of plan assets 2,023 1,705 1,727Present value of funding obligations (2,427) (2,212) (2,162)
Net liability recognised in the balance sheet (404) (507) (435)
The amounts recognised in the consolidated income statement are:Unaudited
6 months ended 30 June
2016 £000
Unaudited 6 months ended
30 June2015 £000
Audited Yearended
31 December 2015 £000
Expenses (33) (18) (36) Interest costs (6) (9) (21)
(39) (27) (57)
Theneteffectofre-measurementsontheBlenkinsoppschemechargedtothestatementofcomprehensiveincomeisalossof£0.03m(H12015:lossof£12,000,FY2015:lossof£3,000).
The fair value of plan assets have increased by £0.1m through contributions paid into the scheme in H1 2016.
Notes to the Condensed Consolidated Interim Financial Statementsfor the six months ended 30 June 2016: continued
14. Borrowings and loans: continued
Harworth Group plc Interim Report 2016 27
Notes to the Condensed Consolidated Interim Financial Statementsfor the six months ended 30 June 2016: continued
16. Called up share capitalOn24March2015theCompanyissued2,317,241,377ordinarysharesat7.25penceeachaspartofaplacingandopenofferofwhich 730,674,465 ordinary shares were issued to the PPF as part of the purchase consideration for the acquisition of 75.1% of the issued share capital of Harworth Estates. On 26 April 2016 3 ordinary shares were issued at 1 pence each and all shares in issue were consolidated from 1 pence shares into 10 pence shares.
Issued and fully paid
Unaudited 6 months ended
30 June 2016 £000
Unaudited 6 months ended
30 June2015 £000
Audited Yearended
31 December 2015 £000
Atstartofperiod/year 29,227 6,055 6,055Shares issued – 23,172 23,172
At end of period/year 29,227 29,227 29,227
Issued and fully paid – Number of shares
Unaudited 6 months ended
30 June 2016
Unaudited 6 months ended
30 June2015
Audited Yearended
31 December 2015
Atstartofperiod/year 2,922,697,857 605,456,480 605,456,480Shares issued 3 2,317,241,377 2,317,241,377Share consolidation (10 for 1) (2,630,428,074) – –
At end of period/year 292,269,786 2,922,697,857 2,922,697,857
17. Share premium account
Issued and fully paid
Unaudited 6 months ended
30 June 2016 £000
Unaudited 6 months ended
30 June2015 £000
Audited Yearended
31 December 2015 £000
Atstartofperiod/year 129,121 32,911 32,911Premium on shares issued – 99,160 99,160Costs relating to issue – (2,950) (2,950) Transfer to other distributable reserve (129,121) – –
At end of period/year – 129,121 129,121
On 18 May 2016 approval was granted from the high court to cancel the £129m share premium account of the Company and for it to be re-designated as distributable reserves.
18. Derivative financial instrumentsOn21June2016,HEPGLenteredintoafour-yearswaptofix£30mofborrowingsatanall-inrateof2.955%,includingfees.Theinterest rate swap has been measured at fair value which is determined using forward interest rates extracted from observable yield curves.Thefairvalueoftheinterestrateswapat30June2016wasalossof£0.7m(H12015:£nil,FY2015:£nil).
During the period the following loss was recognised in the other comprehensive income statement in relation to the interest rate swap:
Unaudited 6 months ended
30 June 2016 £000
Unaudited 6 months ended
30 June2015 £000
Audited Yearended
31 December 2015 £000
Losses on interest rate swap – cash flow hedge 658 – –
Notes to the Condensed Consolidated Interim Financial Statementsfor the six months ended 30 June 2016: continued
28 Harworth Group plc Interim Report 2016
Notes to the Condensed Consolidated Interim Financial Statementsfor the six months ended 30 June 2016: continued
19. Related party transactionsPeel GroupThePeelGroupcharged£21,250(H12015:£20,625;FY2015:£41,875)inrespectoffeesforStevenUnderwoodand£nil(H12015:£8,128;FY2015:£8,202)fortherentalofofficespace.
During H1 of 2015 the Group relinquished an option to purchase 50% of the share capital of Peel Wind Farms (Blue Sky Forest) Limited in return for £4.4m from Peel Holdings Wind Farms (IOM) Limited. This resulted in a gain of £3.2m shown in the consolidated income statement as other gains.
Harworth EstatesRevenue includes £0.3m for the period up to 24 March 2015 in respect of recharges to Harworth Estates for on-going costs of the Company.
Scratching CatGeoffMason,ourformerCompanySecretary,suppliedhisservicesthroughScratchingCatLimited,acompanyofwhichheisadirector.Duringtheperiodchargesweremadeinrelationtocompanysecretarialdutiesof£0.07m(H12015:£0.07m;FY2015:£0.1m).
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