TIDMHWG
RNS Number : 3401X
Harworth Group PLC
28 August 2015
HARWORTH GROUP PLC
(Formerly Coalfield Resources plc)
INTERIM RESULTS
Harworth Group plc ("Harworth" or "the Group"), the property
regeneration specialist, announces its interim results for the six
months ended 30 June 2015.
Harworth was listed on the London Stock Exchange on 24 March
2015 under its new name following the successful acquisition of the
remaining 75.1% of Harworth Estates Property Group Limited
("Harworth Estates") that the Group did not already own and the
associated equity capital fundraising. The new capital structure
was further strengthened by the completion of new bank facilities
with The Royal Bank of Scotland.
Financial Highlights (1)
-- Profit before tax of GBP51.3m, including the GBP44.2m gain
arising on the acquisition of the 75.1% of shares in Harworth
Estates on 24 March 2015.
-- Net assets value of GBP274.5m and value of investment property of GBP307.0m.
-- Net assets per share of 9.4 pence.
-- Earnings per share of 2.7 pence (2014: 0.5 pence).
Underlying Financial Performance (2)
-- Profit from operations, before valuation gains and profits on
disposals, of GBP1.1m (2014: GBP0.8m).
-- GBP8.2m revaluation gains mainly reflecting progress with
planning consents at major sites (2014: GBP10.4m).
-- Disposal proceeds of GBP21.0m (2014: GBP17.1m), with GBP5.5m
profit from disposals (2014: GBP3.1m).
-- Operating profit of GBP14.8m (2014: GBP14.3m).
Operational Review
-- Sale of 317 plots from the five key sites to national and
regional house-builders realising an average GBP37,100 per plot.
Planning permission for 230 residential units and one commercial
development secured in the period.
-- Thirteen new lettings across the portfolio, increasing the rent roll by GBP0.9m annually.
-- Continued replenishment of the property portfolio with the
acquisition of the 350 acre former Alcan smelter site at Lynemouth,
Northumberland.
Harworth's Chairman, Jonson Cox, said:
"With three months' trading after the acquisition, which brought
all of the ownership interests in Harworth Estates together under
Harworth Group plc, these results are in line with our expectations
and validate the strategic logic of the transaction."
Harworth's Chief Executive, Owen Michaelson, said:
"Over the reporting period, Harworth has continued to make good
progress in the regeneration and sale of brownfield land for
residential, commercial and low carbon energy purposes. Trading
remains in-line with expectations and we expect residential and
commercial land sales to maintain momentum into the second half of
the year."
1. The 'Financial Highlights' include the effects of accounting
for the acquisition of the 75.1% of shares in Harworth Estates on
24 March 2015, from which date the results of Harworth Estates were
fully consolidated into the Group financial statements. Prior to
this date, the results of Harworth Estates were included in the
Group income statements as a share of profit of associate.
2. The 'Underlying Financial Performance' shows the key results
of Harworth Estates and its subsidiaries for the six months to 30
June 2015, together with the results from the comparative
prior-year period, excluding any acquisition fees.
Enquiries:
Harworth Group plc Tel +44 (0) 114 30 30 880
Owen Michaelson, Chief Executive
Mike Richardson, Finance Director
Cardew Group Tel: +44 (0)20 7930 0777
Anthony Cardew
Notes to Editors:
Harworth Group Plc is a leading property and development company
which owns and manages a portfolio of some 27,000 acres of land
across approximately 200 sites located throughout the Midlands and
North of England. The Company specialises in the regeneration of
former coalfield sites and other brownfield land into employment
areas, new residential properties and low carbon energy
projects.
http://www.harworthgroup.com/
Cautionary Statement
This announcement contains unaudited information and
forward-looking statements that are based on current expectations
or beliefs, as well as assumptions about future events. These
forward-looking statements can be identified by the fact that they
do not relate only to historical or current facts and undue
reliance should not be placed on any such statements because they
speak only as at the date of this document and are subject to known
and unknown risks and uncertainties and can be affected by other
factors that could cause actual results, and Harworth's plans and
objectives, to differ materially from those expressed or implied in
the forward-looking statements. Harworth undertakes no obligation
to revise or update any forward-looking statement contained within
this announcement, regardless of whether those statements are
affected as a result of new information, future events or
otherwise, save as required by law and regulations.
Chairman's statement
Overview
I am pleased to be able to present our first report to
shareholders following the acquisition on 24 March this year of the
75.1% of Harworth Estates that we did not already own. At this time
last year, I advised you that I believed a simpler shareholding
structure would improve the visibility of the underlying value of
the business. The acquisition of the shareholding from the Pension
Protection Fund, which has now become a major shareholder of the
Company, has demonstrated the value of your board's drive to
achieve this final step in the restructuring of the business
started in 2012. With three months' trading after the acquisition,
which brought all of the ownership interests in Harworth Estates
together under Harworth Group plc, these results are in line with
our expectations and validate the strategic logic of the
transaction.
These financial results for the half year are complicated by the
fact that we have to reflect the ownership structure of the 24.9%
investment in Harworth Estates up to 24 March 2015 and the full
ownership of that business from that date. The presentation of our
results is further complicated by the accounting gain which the
acquisition created and which is explained below and in more detail
in the Financial Review section of this report. These complications
will continue for the rest of the current financial year.
I am also pleased to report that the underlying results for the
Harworth Estates business reflect the good start to the year.
Results
In the first half of 2015, Harworth recorded a profit before tax
of GBP51.3m, which includes a one-off GBP44.2m gain arising on the
completion of the acquisition of Harworth Estates on 24 March
2015.
Operationally, the team has made good progress in managing our
land bank, including securing planning consent on 230 residential
plots and securing new rental streams from our investment
portfolio. This resulted in Haworth Estates booking a revaluation
gain of GBP8.2m (2014: GBP10.4m) in addition to a profit on
disposals of investment properties and an option of GBP5.5m (2014:
GBP3.1m).
The Group's net asset value as at 30 June 2015 was GBP274.5m
(2014: GBP58.4m).
Board Membership
The Board of Directors was strengthened on the completion of the
acquisition by the appointment of four new directors. Owen
Michaelson and Mike Richardson joined as Chief Executive and
Finance Director from Harworth Estates. Martyn Bowes joined, having
been nominated by the Pension Protection Fund, which now holds a
25% investment directly in the Company, and Anthony Donnelly joined
as an independent non-executive director, both from positions on
the Harworth Estates board.
Mike Richardson has informed the Board of his intention to step
down as a Director, and from his position as Finance Director,
after the close of the 2015 results, during the course of our 2016
financial year. I am grateful to Mike for giving the Board more
than adequate time to secure a suitable successor. It is too early
for formal goodbyes, but he will leave with our thanks for the
sterling contribution he has made to Harworth's success.
On behalf of the Board, I would like to thank all of the Group's
staff for their support and commitment during the restructuring of
the business and look forward to seeing their efforts rewarded with
the successful growth of the Group.
Outlook
The Group continues to focus its efforts on achieving medium and
long-term value realisation from its property portfolio for the
benefit of shareholders. At the same time, the Group is looking to
replenish the portfolio of investment and development land. During
the period we acquired the site of the former Alcan smelter at
Lynemouth in Northumberland as well as several small strategic
parcels of land adjacent to our existing sites. The outlook for our
operations business which, in addition to generating income from
land remediation, operates the business parks and natural
resources, is good with a strong rental stream being developed.
Jonson Cox
Chairman
28 August 2015
Chief Executive's Review and Operational Report
The first half of 2015 has seen further progress by Harworth
Estates in both its Capital Growth and Income Generation business
segments, building on the inherent value in the property portfolio
and the strength of its in-house team.
During the six month period, outline planning consents were
granted for 230 residential plots, together with resolutions to
grant a further 970 plots, bringing the total number of consented
residential plots in the portfolio to 8,969.
At Gedling in Nottinghamshire, a new consent was granted for 150
residential plots. This former colliery site, which also includes a
completed country park on land provided by Harworth Estates, is
being developed for commercial and renewable energy use, as well as
residential. Planning applications for a further 1,305 residential
plots across the portfolio were in process at 30 June 2015.
(MORE TO FOLLOW) Dow Jones Newswires
August 28, 2015 02:00 ET (06:00 GMT)
Planning consent was granted for 165,000 sq ft of commercial
development at Gateway 36, near Barnsley, at the site of the former
Rockingham Colliery, with development funding from Sheffield City
Region. Construction of 65,000 sq ft of pre-let commercial property
on this site commenced in April 2015.
Harworth carefully plans the disposal of properties to extract
the maximum value from its land portfolio, with gains achieved over
book value, and to realise cash for reinvestment. On the
residential front, 317 plots were sold, from five major development
sites, to national and regional house-builders. The average price
per plot sold was GBP37,100. At 30 June 2015, several additional
sales to house-builders were in negotiation, for completion during
the second half of the year.
The main disposal for commercial use was to the mining services
company, Joy Global, at our Logistics North site in Bolton,
following on from land sales to Aldi and MBDA last year. With this
site now established as an important manufacturing and logistics
hub for the North of England, further sales in the second half of
the year are in negotiation. In addition, Harworth disposed of its
option on the Chevington wind farm project in Northumberland,
retaining the freehold of the land and the associated rental income
stream.
In response to improving sales prospects, as previously
announced, capital investment at Logistics North and at the
Advanced Manufacturing Park in Rotherham has been brought forward,
ensuring that there is land available for immediate occupation in
the next phases of these developments.
An important part of Harworth Estates strategy is to replenish
its land portfolio. The main acquisition in the first half of the
year was the former Alcan smelter site at Lynemouth,
Northumberland, which completed in April 2015. This 350 acre
brownfield site will be used for commercial development, including
the retention of several rental units. Site reclamation has
commenced in line with the masterplan for the site. In addition,
several smaller tracts of land adjacent to existing sites in our
portfolio were acquired.
In the area of renewable energy, an additional 5MW of solar wind
farm was installed, bringing the total to 36MW in our portfolio,
and the rental income for the Chevington wind farm was secured.
Harworth Estates continued to recover coal fines from its
ex-colliery sites for sale to energy companies.
Harworth made further progress with income generation from its
Business Parks, with 13 new commercial lettings signed in the six
months to 30 June 2015, with an annualised rent roll of GBP860k.
The largest of these was to Barnsley Metropolitan Borough Council
at Gateway 36. Other new tenancies included Network Rail, Amec
Foster Wheeler and Siniat Limited.
On 13 February 2015, Harworth Estates entered into a GBP65m,
five year term, revolving credit facility with The Royal Bank of
Scotland, replacing amortising facilities with the Lloyds Banking
Group and Barclays Bank. This new facility was designed to provide
the stability and flexibility to support the growth of the
business. Infrastructure funding, provided by pubic bodies to
promote the development of major sites for employment and housing
needs, continued to feature in Harworth Estates funding strategy.
The latest such transaction was the Sheffield City Region loan to
fund Gateway 36, mentioned above.
Overall, trading remains in line with expectations and we expect
residential and commercial land sales to maintain momentum into the
second half of the year.
Owen Michaelson
Chief Executive Officer
28 August 2015
Financial review
Operating results
The Group's operating profit was GBP6.8m (1H 2014: nil, FY 2014:
nil). This included revaluation gains of GBP3.4m (1H 2014: nil, FY
2014: nil) and profits from disposals of investments properties of
GBP2.2m (1H 2014: nil, FY 2014: nil). There was also a gain of
GBP3.3m (1H 2014: nil, FY 2014: nil) from the surrender of an
option on the Chevington wind farm project. Transaction costs
amounting to GBP2.4m (1H 2014: nil, FY 2014: nil) related to the
acquisition of 75.1% of Harworth Estates.
The Group's operating profit is reconciled to the underlying
operating performance of Harworth Estates for the half year to 30
June 2015 as follows:
Harworth Harworth Fair Value Fees and Harworth
Estates Estates Pre Adjustments Other Group plc
Acquisition
GBPm GBPm GBPm GBPm GBPm
Profit from operations 1.1 (0.3) (0.3) (2.4) (2.0)
Valuation gain 8.2 (4.8) - - 3.4
Profit from disposals 5.5 (0.1) - - 5.4
--------- ------------- ------------- --------- -----------
Operating profit 14.8 (5.3) (0.3) (2.4) 6.8
--------- ------------- ------------- --------- -----------
Underlying operating performance of Harworth Estates
Unaudited Unaudited Unaudited
Half Year Half Year Full Year
to 30 June to to
2015 30 June 31 December
2014 2014
GBPm GBPm GBPm
Profit from operations 1.1 0.8 0.7
Valuation gain 8.2 10.4 15.7
Profit from disposals 5.5 3.1 7.9
------------ ----------- -------------
Operating profit 14.8 14.3 24.4
------------ ----------- -------------
For Harworth Estates, the profit from operations was GBP1.1m (1H
2014: GBP0.8m). The Income Generation segment recorded revenues of
GBP7.7m (1H 2014: GBP6.9m) comprising rental and royalty income
together with the sales of coal fines and salvage. The net profit
from the Income Generation segment was GBP4.0m (1H 2014: GBP4.2m).
Other overheads amounted to GBP2.9m (1H 2014: GBP3.4m), including
the overhead costs of the Capital Growth segment and central,
unallocated costs. The latter were materially lower than the prior
year due to the synergies of combining the Harworth Group and
Harworth Estates offices and lower professional fees.
Valuation gains in the six month period, amounting to GBP8.2m
(1H 2014: GBP10.4m), comprised GBP3.6m related to progress with
planning consents in Strategic Land, GBP2.3m related to progress
with consents and engineering savings in major developments,
GBP1.9m related to new and renewed rental agreements in Business
Parks and GBP0.4m of other items.
Harworth Estates relinquished an option to purchase 50% of the
share capital of Peel Wind Farms Limited in return for a
consideration of GBP4.4m. Profits from disposals of investment
property and the above mentioned option amounted to GBP5.5m (1H
2014: GBP3.1m). The proceeds from disposals were GBP21.0m, of which
GBP11.8m were for residential development, GBP3.0m for commercial
development, GBP4.4m for the option and GBP1.9m for other sundry
disposals. All material disposals achieved a gain over book
value.
For Harworth Estates, the resulting operating profit was
GBP14.8m (1H 2014: GBP14.3m).
Net assets
30 June 2015 31 December 2014
GBPm GBPm
Harworth Estates
Investment properties 307.0 286.6
Other asset and liabilities (47.0) (40.0)
Net assets 260.0 248.6
------------------------------ ---------------- -----------------
Harworth Group plc
Investment properties 307.0 -
Other Investments 1.2 -
24.9% share in Harworth
Estates, up to 24 March
2015 - 56.9
------------------------------ ---------------- -----------------
Carrying value of investment 308.2 56.9
Other assets and liabilities (33.7) 1.8
Net assets 274.5 58.7
------------------------------ ---------------- -----------------
Number of shares in issue 2,922,697,857 605,456,480
------------------------------ ---------------- -----------------
Net assets per share 9.4p 9.7p
------------------------------ ---------------- -----------------
Group cash and net debt
The Group's cash and cash equivalents at 30 June 2015 were
GBP30.1m (1H 2014: GBP1.5m, FY 2014: GBP1.5m).
The Group had borrowing and loans of GBP60.0m at 30 June 2015
(1H 2014: GBPnil, FY 2014: GBPnil), including a bank loan of
GBP48.9m and infrastructure loans of GBP11.1m.
Taxation
The charge for taxation in the period was GBP0.6m (1H 2014:
GBPnil, FY 2014: GBPnil).
At 30 June 2015, the Group had deferred tax liabilities of
GBP8.4m (1H 2014: GBPnil, FY 2014: GBPnil), related to unrealised
gains on investment properties, and no deferred tax assets (1H
2014: GBPnil, FY 2014: GBPnil).
Dividends
As set out during the equity capital fundraising in the first
half, the Board is not proposing an interim dividend be paid, but
does expect to pay a final dividend.
Harworth Insurance Company Limited (HICL)
(MORE TO FOLLOW) Dow Jones Newswires
August 28, 2015 02:00 ET (06:00 GMT)
The Group retained a 100% shareholding in HICL, an insurance
business, which is classified as held for sale as there is a put
and call option over its shares. At 30 June 2015, the assets held
for sale were GBP4.8m (1H 2014: GBP20.9m, FY 2014: GBP5.1m) and the
liabilities held for sale were GBP0.2m (1H 2014: GBP16.3m, FY 2014:
GBP0.5m) and an amount in respect of deferred income in trade and
other payables of GBP4.6m (1H 2014: GBP4.6m, FY 2014: GBP4.6m). The
sale of the insurance business to Royal & Sun Alliance
Insurance plc completed on 31 July 2014.
Key risks and uncertainties
The key risks and uncertainties of the Group are set out
below:
Principal risks and uncertainties
The Group's performance, including the current or future value
of its assets, will depend on macro property market conditions that
affect its sole operating business, Harworth Estates. The Group's
board has established procedures to monitor the operation and
ensure, where possible, the business strategy minimises these
risks. The risks are principally:
Sales value risk
The sale of remediated brownfield land to house builders and
commercial developers is an important source of revenue and the
gaining of residential and commercial planning consents is an
important source of valuation growth for Harworth Estates. As such,
any decline in general property market conditions including: (i)
the market for residential and commercial land and/or residential
and commercial property not functioning properly; (ii) a decline in
market values; and/or (iii) a decline in the availability and/or an
increase in the cost of credit for residential and commercial
buyers, may have an adverse impact on Harworth Estates' results,
financial condition and/or prospects.
Planning risk
Harworth Estates' continued progress with its projects for
future delivery is dependent on the continued success of its
applications for planning permissions. Current or future planning
applications may not result in the desired outcome or may be
granted on unduly onerous terms. Failure to obtain such permissions
may reduce the speed the Group can implement its strategy and have
an adverse impact on its business, which may in turn have a
negative impact on the Group.
Further, Harworth Estates' development operations are contingent
upon an effectively functioning planning system. Changes in law or
policy affecting planning, infrastructure, environment (including
waste disposal) and/ or sustainability issues could adversely
affect the timing or costs associated with development
opportunities. This could lead to reduction in value or delays in
delivering project values with an adverse effect on the Group.
Property valuation movements and liquidity
Investments in land assets and property can be relatively
illiquid for reasons including but not limited to varying demand
and the large costs of acquisition. Such illiquidity may affect the
Group's ability to vary its portfolio or dispose of properties in a
timely fashion or at satisfactory prices in response to changes in
economic, property or market conditions. The valuation of property
is subject to uncertainty and cash generated on disposal may be
different from the value on the Group balance sheet. This may mean
that the value ascribed by the Group to its properties may not
reflect the value realised on sale. Valuations may fluctuate as a
result of factors such as changes in regulatory requirements and
applicable laws (including taxation and planning), political
conditions, the condition of financial markets, interest and
inflation fluctuations.
Small exposure to the UK mining industry
The Group has several mining operators occupying Harworth
Estates' land, paying rental income. Any further reduction in the
level of coal prices or other disruption to the UK mining industry
may impact the level and duration of this rental and royalty income
and/or the restoration and rehabilitation liabilities which are due
from these operators.
Certain properties in the portfolio include land with defective
title
Some of the properties in the portfolio may include land which
could be considered to have defective title. These defects might
include risks such as dormant easements or manorial rights,
breaches of historic covenants and/or missing title deeds or
unregistered land. It may be necessary to obtain indemnity
insurance in respect of such title defects and this could affect
the ability to sell parts of the portfolio.
Environmental/remediation risks of property ownership
The Group may be liable for the costs of investigation, ongoing
monitoring or remediation of hazardous or toxic substances located
on or in its properties. These costs may be substantial and
long-term. The presence of such substances or the failure to
successfully remediate may affect the ability to sell or lease
property or to borrow using the property as security. Laws and
regulations may also impose liability for the release of certain
materials, including asbestos into the air, ground or water, from a
property and such a release can create a liability to third
parties. Whilst the Group seeks to minimise or pass on such
environmental risks, it is not possible to eliminate the risk
completely.
Treasury policy and liquidity
Risk management is carried out centrally. The Group's main
interest rate risk arises on its bank borrowings, which are charged
at a floating rate. No foreign exchange contracts were entered into
in 2014 and 2015 as the Group had no material foreign exchange
exposure. The Group`s objectives when managing liquidity are: to
enable the Group to meet expected and unexpected payment
obligations at all times; and maximise the Group`s
profitability.
Impact of political and economic factors
Any changes to the Governments 'Help to Buy' scheme could affect
the sales rates of our house-building customers, particularly as
regards first time buyers, which in turn could affect the take-up
of consented housing land.
Directors responsibility
Statement of the Directors' responsibilities
The Directors confirm that to the best of their knowledge:
-- the condensed consolidated interim financial information has
been prepared in accordance with IAS 34 'Interim Management
Reporting' as adopted by the European Union; and
-- the condensed consolidated interim financial information
includes a fair review of the information required by DTR 4.2.7R
and DTR 4.2.8R, namely:
Ø An indication of important events that have occurred during
the first six months and their impact on the condensed set of
financial statements and a description of the key risks and
uncertainties for the remaining six months of the financial year;
and
Ø Material related party transactions in the first six months
and any material changes in the related party transactions
described in the last annual report.
The principal risk and uncertainties facing the business are
referred to above.
The Directors of Harworth Group plc are as listed below
Jonson Cox Chairman
Owen Michaelson Chief Executive
Mike Richardson Finance Director
Peter Hickson Senior Independent Non-executive
Martyn Bowes Non-executive
Lisa Clement Independent Non-executive
Anthony Donnelly Independent Non-executive
Steven Underwood Non-executive
A list of current Directors is also maintained on the Harworth
Group plc website: www.harworthgroup.com.
By order of the Board
Jonson Cox Mike Richardson
Chairman Finance Director
28 August 2015 28 August 2015
Consolidated Income Statement Unaudited
Unaudited Six months Audited
Six months ended year ended
ended 30 June 31 December
30 June 2015 2014 2014
Note GBP000 GBP000 GBP000
Revenue 4,171 767 1,458
Cost of sales (1,789) - -
------------------------------- ----- -------------- ------------ -------------
Gross profit 2,382 767 1,458
Administrative expenses (1,973) (752) (1,653)
Increase in fair value
of investment properties 3,356 - -
Profit on sale of investment
properties 2,200 - -
Other gains 3,265 - -
Other operating income - - 196
------------------------------- ----- -------------- ------------ -------------
Operating profit before
exceptional items 9,230 15 1
Exceptional item:
Transaction costs 2 (2,394) - -
Operating profit 6,836 15 1
Finance income 4 27 5 10
Finance costs 4 (631) - -
Share of profit of associates 856 3,136 3,454
Gain on bargain purchase 2 44,244 - -
------------------------------- ----- -------------- ------------ -------------
Profit before tax 51,332 3,156 3,465
Tax 5 (571) - -
------------------------------- ----- -------------- ------------ -------------
Profit for the period 50,761 3,156 3,465
Earnings per share from
(MORE TO FOLLOW) Dow Jones Newswires
August 28, 2015 02:00 ET (06:00 GMT)
operations Pence Pence Pence
------------------------------- ----- -------------- ------------ -------------
Basic and diluted 7 2.73 0.5 0.6
------------------------------- ----- -------------- ------------ -------------
The Notes on pages 17 to 34 are an integral part of these
condensed consolidated interim financial statements.
All activities in the current period are derived from continuing
operations.
Consolidated Statement of Comprehensive Unaudited Unaudited
Income Six months Six months Audited
ended ended year ended
30 June 30 June 31 December
2015 2014 2014
GBP000 GBP000 GBP000
----------------------------------------- ------------- ------------ -------------
Profit for the period 50,761 3,156 3,465
Other comprehensive income -
Items that will not be reclassified
to profit or loss:
Re-measurements of Blenkinsopp
Pension Scheme (12) - (8)
Total other comprehensive income (12) - (8)
----------------------------------------- ------------- ------------ -------------
Total comprehensive income for
the period 50,749 3,156 3,457
----------------------------------------- ------------- ------------ -------------
Consolidated Balance Sheet Unaudited Unaudited
Six months Six months Audited
ended ended year ended
30 June 30 June 31 December
2015 2014 2014
Note GBP000 GBP000 GBP000
Assets
Non-current assets
Other receivables 650 - -
Blenkinsopp pension asset - 588 564
Investment in associates 8 - 56,572 56,890
Investment properties 9 306,993 - -
Investments 10 1,233 - -
308,876 57,160 57,454
--------------------------------- ----- ------------ ------------ -------------
Current assets
Inventories 239 - -
Trade and other receivables 20,809 633 659
Cash and cash equivalents 11 30,065 1,503 1,489
Assets classified as held
for resale 12 4,822 20,914 5,119
--------------------------------- ----- ------------ ------------ -------------
55,935 23,050 7,267
--------------------------------- ----- ------------ ------------ -------------
Total assets 364,811 80,210 64,721
--------------------------------- ----- ------------ ------------ -------------
Liabilities
Current liabilities
Borrowings 13 (716) - -
Trade and other payables (21,207) (5,006) (5,035)
Liabilities classified as
held for resale 12 (172) (16,264) (469)
--------------------------------- ----- ------------ ------------ -------------
(22,095) (21,270) (5,504)
--------------------------------- ----- ------------ ------------ -------------
Net current assets 33,840 1,780 1,763
--------------------------------- ----- ------------ ------------ -------------
Non-current liabilities
Borrowings 13 (59,316) - -
Deferred income tax liabilities (8,442) - -
Retirement benefit obligations 14 (507) (588) (564)
--------------------------------- ----- ------------ ------------ -------------
(68,265) (588) (564)
--------------------------------- ----- ------------ ------------ -------------
Total liabilities (90,360) (21,858) (6,068)
--------------------------------- ----- ------------ ------------ -------------
Net assets 274,451 58,352 58,653
--------------------------------- ----- ------------ ------------ -------------
Shareholders' equity
Ordinary shares 15 29,227 6,055 6,055
Share premium 16 129,121 32,911 32,911
Merger reserve 45,667 - -
Capital redemption reserve 257 257 257
Fair value reserve 3,356 - -
Retained earnings 66,823 19,129 19,430
--------------------------------- ----- ------------ ------------ -------------
Total shareholders' equity 274,451 58,352 58,653
--------------------------------- ----- ------------ ------------ -------------
Consolidated Statement of Cash Unaudited Unaudited
Flows Six months Restated Audited
ended six months year ended
30 June ended 31 December
2015 30 June 2014* 2014
GBP000 GBP000 GBP000
--------------------------------------------- ------------ --------------- -------------
Cash flows from operating activities
Profit for the period 50,761 3,156 3,465
Net interest payable/(receivable) 604 (5) (10)
Share of post-tax profit from associates (856) (3,136) (3,454)
Gain on bargain purchase (44,244) - -
Net fair value increase in investment
properties (3,356) - -
Profit on disposal of investment
properties and option (5,408) - -
Pension contributions in excess
of charge (57) (95) (7)
Movement of Blenkinsopp pension
asset - 95 -
--------------------------------------------- ------------ --------------- -------------
Operating cash (outflows)/inflows
before movements in working capital (2,556) 15 (6)
Decrease in inventories 72 - -
Decrease in receivables 4,228 49 23
(Decrease)/increase in payables (946) 6 34
--------------------------------------------- ------------ --------------- -------------
Cash generated from operations 798 70 51
Loan arrangement fees paid (96) - -
Interest paid (364) - -
Cash used by discontinued operations 328 1,187 (120)
--------------------------------------------- ------------ --------------- -------------
Cash generated from/(used in) operating
activities 666 1,257 (69)
--------------------------------------------- ------------ --------------- -------------
Cash flows from investing activities
Interest received 28 5 10
Acquisition of a subsidiary, net
of cash acquired (87,823)
Proceeds from disposal of investment
properties and option 14,257 - -
Expenditure on investment properties (10,349) - -
Cash generated from discontinued
operations (1,068) (1,791) 1,275
Cash generated from investing activities (84,289) (529) 1,285
--------------------------------------------- ------------ --------------- -------------
Cash flows from financing activities
Net proceeds from issue of ordinary
shares 112,075 - -
Proceeds from other loans 3,528 - -
Repayment of bank loan (400) - -
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Repayment of other loan (3,078) - -
Cash used by discontinued operations - - (3,278)
Cash generated from financing activities 112,125 - (3,278)
--------------------------------------------- ------------ --------------- -------------
Increase/(decrease) in cash 27,836 (529) (2,062)
--------------------------------------------- ------------ --------------- -------------
At January
Cash 1,489 1,428 1,428
Cash equivalents classified as
held for sale 840 1,099 2,963
--------------------------------------------- ------------ --------------- -------------
2,329 2,527 4,391
Increase in cash 27,836 (529) (2,062)
--------------------------------------------- ------------ --------------- -------------
30,165 1,998 2,329
--------------------------------------------- ------------ --------------- -------------
At period end
Cash 30,065 1,503 1,489
Cash equivalents classified as
held for sale 100 495 840
--------------------------------------------- ------------ --------------- -------------
Cash and cash equivalents 30,165 1,998 2,329
--------------------------------------------- ------------ --------------- -------------
*2014 Group cash flow has been restated to include cash flows
of the discontinued operations and to show the split between
cash and cash equivalents and available for sale financial assets.
Consolidated Statement Share Merger Fair
of Changes in Shareholders' Ordinary premium Reserve value Other Retained Total
Equity shares account Reserve reserves earnings equity
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
------------------------------ --------- --------- ---------- --------- ---------- ---------- --------
Balance at January
2014 (audited) 6,055 32,911 - - 257 15,973 55,196
Profit for six months
to June 2014 - - - - - 3,156 3,156
Balance at 30 June
2014 (unaudited) 6,055 32,911 - - 257 19,129 58,352
Profit for the six
months to 31 December
2014 - - - - - 309 309
Other comprehensive
income:
Re-measurements of
post-retirement benefits - - - - - (8) (8)
Balance at 31 December
2014 (audited) 6,055 32,911 - - 257 19,430 58,653
Transactions with
owners:
Shares issued 15,865 99,160 - - - - 115,025
Costs relating to
share issues - (2,950) - - - - (2,950)
Shares issued in
lieu of consideration 7,307 - 45,667 - - - 52,974
Profit for the six
months to 30 June
2015 - - - 3,356 - 47,405 50,761
Other comprehensive
income:
Re-measurements of
post-retirement benefits (12) (12)
Balance at 30 June
2015 (unaudited) 29,227 129,121 45,667 3,356 257 66,823 274,451
------------------------------ --------- --------- ---------- --------- ---------- ---------- --------
Notes to the condensed consolidated interim financial
statements
For the six months ended 30 June 2015 continued:
1. Basis of preparation of the condensed consolidated interim
financial statements
General information
Harworth Group plc (formerly Coalfield Resources plc) (the
"Company") is a limited liability company incorporated and
domiciled in the UK. The address of its registered office is AMP
Technology Centre, Advanced Manufacturing Park, Brunel Way,
Rotherham, South Yorkshire S60 5WG. Coalfield Resources plc changed
its name to Harworth Group plc on 24 March 2015.
The Company is listed on the London Stock Exchange.
The condensed consolidated interim financial statements for the
six months ended 30 June 2015 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 2014 were approved by the Board of Directors on
18 February 2015 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.
The condensed consolidated interim financial statements have not
been reviewed or audited by the auditors.
The condensed consolidated interim financial statements for the
period ended 30 June 2015 were approved by the Board on 28 August
2015.
Basis of preparation
These condensed consolidated interim financial statements for
the six months ended 30 June 2015 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 2014 which have been
prepared in accordance with IFRSs as adopted by the EU.
Going-concern basis
These 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 'Key risks and uncertainties'
section of this annual report, as well as taking into account the
available borrowing facilities in line with the Treasury Policy
disclosed on page 9.
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 GBP65m revolving credit
facility with The Royal Bank of Scotland, for a term of five years,
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. 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 financial
statements.
Seasonality
No significant seasonal or cyclical variations in the Group's
operating results are expected.
Accounting policies
Except as described below, the accounting policies applied are
consistent with those of the Group financial statements for the
year ended 31 December 2014, as described in those annual financial
statements.
Taxes on income in the interim periods are accrued using the tax
rate that would be applicable to expected annual earnings.
Following the acquisition of Harworth Estates the following
accounting policies are in place:
Revenue recognition
Revenue comprises rental and other land related income arising
on investment properties. Rentals are accounted for on a
straight-line basis over the lease term of ongoing leases.
Revenue from the sale of coal slurry is recognised at the point
of despatch.
Revenue is recognised to the extent that it is probable that the
economic benefits will flow to the Company and the revenue can be
reliably measured. All such revenue is reported net of discounts
and value added and other sales taxes.
Interest income and expense
Interest income and expense are recognised within 'Finance
income' and 'Finance costs' in the Income Statement using the
effective interest rate method.
The effective interest rate method is a method of calculating
the amortised cost of a financial asset or financial liability and
of allocating the interest income or interest expense over the
relevant period. The effective interest rate is the rate that
exactly discounts estimated future cash payments or receipts
throughout the expected life of the financial instrument, or a
shorter period where appropriate, to the net carrying amount of the
financial asset or financial liability.
Other receivables
Other receivables relate to overages. An overage is the right to
receive future payments following the sale of investment properties
if specified conditions relating to the site are satisfied. The
conditions may be the granting of planning permission for
development on the site or practical completion of a
development.
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Overages are initially recorded at fair value and are reviewed
annually or more frequently if events or changes in circumstances
indicate a potential impairment. The carrying value of overages is
compared to the recoverable amount, which is the higher of value in
use and the fair value less costs to sell. Any impairment is
recognised immediately as an expense.
Inventories
Inventories comprise coal slurry that has been processed and is
ready for sale. It is stated at the lower of cost and estimated net
realisable value. Inventories comprise all the direct costs
incurred in bringing the coal slurry to their present state.
Investments in joint ventures
Joint ventures are those entities over whose activities the
Group has joint control established by contractual agreement.
Interests in joint ventures through which the Group carries on its
business are classified as jointly controlled entities and
accounted for using the equity method. This involves recording the
investment initially at cost to the Group and then, in subsequent
years, adjusting the carrying amount of the investment to reflect
the Group's share of the joint venture's results less any
impairment in carrying value and any other changes to the joint
venture's net assets such as dividends.
Impairment
Investments in subsidiaries are reviewed for impairment if there
is any indication that the carrying amount may not be
recoverable.
When a review for impairment is conducted, the recoverable
amount is assessed by reference to the higher of 'value in use'
(being the present value of expected future cash flows of the
relevant cash generating unit) or 'fair value less costs to sell'.
Where there is no binding sale agreement or active market, fair
value less costs to sell is based on the best information available
to reflect the amount the Company could receive for the cash
generating unit in an arm's length transaction.
The impairment testing is carried out under the principles
described in IAS 36 'Impairment of assets' which includes a number
of restrictions on the future cash flows that can be recognised in
respect of restructurings and improvement related to capital
expenditure.
Profit or loss on disposal
Disposals are accounted for when legal completion of the sale
has occurred or there has been an unconditional exchange of
contracts. Profits or losses on disposal arise from deducting the
asset's net carrying value from the net proceeds (being net
purchase consideration less any clawback liability arising on
disposal) and is recognised in the Income Statement within other
income. Net carrying value includes valuation in the case of
investment properties.
In the case of investment properties, any fair value reserve,
for the property disposed of is treated as realised on disposal of
the property and transferred to retained earnings.
Investment properties
Investment Properties are those properties which are not
occupied by the Group and which are held for long term rental
yields, capital appreciation or both. Investment property also
includes property that is being developed or constructed for future
use as investment property. Investment Properties comprise freehold
land and buildings and are measured at fair value. At the end of a
financial year the fair values are determined by obtaining an
independent valuation prepared in accordance with the current
edition of the Appraisal and Valuation Standards published by the
Royal Institution of Chartered Surveyors. External, independent
valuation firms having appropriate, recognised professional
qualifications and recent experience in the location and category
of property being valued, value the portfolio at each financial
year end.
At the interim reporting date, freehold land and buildings are
measured using management estimation of the fair value of
investment properties. This involves a review of individual
investment properties and management assessment of their fair
value.
Where the development of investment property commences with a
view to sale, the property is transferred from investment
properties to inventories at fair value, which is then considered
to represent deemed cost.
At each subsequent reporting date, investment properties are
re-measured to their fair value. Movements in fair value are
included in the Income Statement within other income or other
expense.
Where specific investment properties have been identified as
being for sale within the next twelve months, a sale is considered
highly probable and the property is immediately available for sale,
their fair value is shown under assets classified as held-for-sale
within current assets, measured in accordance with the provisions
of IAS 40 'Investment Property'.
Properties in the course of development
Directly attributable costs incurred in the course of developing
a property are capitalised as part of the cost of the property.
Development costs on investment properties are capitalised and any
resultant change in value is therefore recognised through the next
revaluation.
Financial assets
Financial assets at fair value through profit or loss are
financial assets held for trading. A financial asset is classified
in this category if acquired principally for the purpose of selling
in the short term. Assets in this category are classified as
current assets if expected to be settled within 12 months,
otherwise they are classified as non-current.
Financial assets carried at fair value through profit or loss
are initially recognised at fair value, and transaction costs are
expensed in the income statement. Financial assets are derecognised
when the rights to receive cash flows from the investments have
expired or have been transferred and the group has transferred
substantially all risks and rewards of ownership.
Gains or losses arising from changes in the fair value of
financial assets at fair value through profit or loss are presented
in the income statement within 'Other gains' in the period in which
they arise.
Provisions
Provisions are recognised when:
-- The Group has a present legal or constructive obligation as a result of past events;
-- It is probable that an outflow of resources will be required to settle the obligation; and
-- The amount can be reliably estimated.
A provision has been recognised in relation to the Blenkinsopp
Pension Scheme Liability details of which have been provided in
Note 14.
Operating segments
Management has determined the operating segments based upon the
operating reports reviewed by the Executive Board of Directors that
are used to assess both performance and strategic decisions.
Management has identified that the Executive Board of Directors is
the Chief Operating Decision Maker in accordance with the
requirements of IFRS 8 'Operating Segments'.
Following the acquisition of Harworth Estates, the Group is now
organised into two operating segments: the Income Generation
Segment and the Capital Growth Segment. The Harworth Group costs
are not a reportable segment. However information about them is
considered by the Executive Board in conjunction with the
reportable segments.
The Income Generation segment focuses on generating rental
returns from the business park portfolio, rental returns and
royalties from energy generation, environmental technologies and
the agricultural portfolio, and income generating streams from
recycled aggregates and secondary coal products. The Capital Growth
segment focuses on delivering value by developing the underlying
portfolio, and includes planning and development activity, value
engineering, proactive asset management and strategic land
acquisitions.
All operations are carried out in the United Kingdom.
Segmental operating profit represents the profit earned by each
segment excluding the profit on sale and revaluation of investment
properties and is consistent with the measures reported to the
Executive Board for the purpose of the assessment of the
performance of each segment.
Consolidation
Subsidiaries
Subsidiaries are all entities (including structured entities)
over which the group has control. The group controls an entity when
the group is exposed to, or has rights to, variable returns from
its involvement with the entity and has the ability to affect those
returns through its power over the entity. Subsidiaries are fully
consolidated from the date on which control is transferred to the
group. They are deconsolidated from the date that control
ceases.
The group applies the acquisition method to account for business
combinations. The consideration transferred for the acquisition of
a subsidiary is the fair values of the assets transferred, the
liabilities incurred to the former owners of the acquiree and the
equity interests issued by the group. The consideration transferred
includes the fair value of any asset or liability resulting from a
contingent consideration arrangement. Identifiable assets acquired
and liabilities and contingent liabilities assumed in a business
combination are measured initially at their fair values at the
acquisition date. The group recognises any non-controlling interest
in the acquiree on an acquisition-by-acquisition basis, either at
fair value or at the non-controlling interest's proportionate share
of the recognised amounts of acquiree's identifiable net
assets.
Acquisition-related costs are expensed as incurred.
If the business combination is achieved in stages, the
acquisition date carrying value of the acquirer's previously held
equity interest in the acquiree is re-measured to fair value at the
acquisition date; any gains or losses arising from such
re-measurement are recognised in profit or loss.
Inter-company transactions, balances and unrealised gains on
transactions between group companies are eliminated. Unrealised
losses are also eliminated.
Goodwill
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Goodwill arises on the acquisition of subsidiaries and
represents the excess of the consideration transferred, the amount
of any non-controlling interest in the acquiree and the
acquisition-date fair value of any previous equity interest in the
acquiree over the fair value of the identifiable net assets
acquired. If the total of consideration transferred,
non-controlling interest recognised and previously held interest
measured at fair value is less than the fair value of the net
assets of the subsidiary acquired, in the case of a bargain
purchase, the difference is recognised directly in the income
statement.
Share capital and reserves
Ordinary shares are classified as equity. Incremental costs
directly attributable to the issue of new ordinary shares or
options are shown in equity as a deduction, net of tax, from the
proceeds.
Where shares are issued in direct consideration for acquiring
shares in another company, and following which the Group holds at
least 90% of the nominal share capital of that company, any premium
on the shares issued as consideration is included in a merger
reserve rather than share premium.
Changes in accounting policy and disclosures
(a) New standards and interpretations not yet adopted
A number of new standards and amendments to standards and
interpretations are effective for annual years beginning after 1
January 2015, and have not been applied in preparing these
consolidated financial statements. These have been set out
below:
IFRS 9, 'Financial instruments', addresses the classification,
measurement and recognition of financial assets and financial
liabilities. The complete version of IFRS 9 was issued in July
2014. It replaces the guidance in IAS 39 that relates to the
classification and measurement of financial instruments.
IFRS 9 retains but simplifies the mixed measurement model and
establishes three primary measurement categories for financial
assets: amortised cost, fair value through OCI and fair value
through P&L. The basis of classification depends on the
entity's business model and the contractual cash flow
characteristics of the financial asset. Investments in equity
instruments are required to be measured at fair value through
profit or loss with the irrevocable option at inception to present
changes in fair value in OCI not recycling. There is now a new
expected credit losses model that replaces the incurred loss
impairment model used in IAS 39. For financial liabilities there
were no changes to classification and measurement except for the
recognition of changes in own credit risk in other comprehensive
income, for liabilities designated at fair value through profit or
loss. IFRS 9 relaxes the requirements for hedge effectiveness by
replacing the bright line hedge effectiveness tests. It requires an
economic relationship between the hedged item and hedging
instrument and for the 'hedged ratio' to be the same as the one
management actually use for risk management purposes.
Contemporaneous documentation is still required but is different to
that currently prepared under IAS 39. The standard is effective for
accounting periods beginning on or after 1 January 2018. Early
adoption is permitted subject to EU endorsement. The Group is yet
to assess IFRS 9's full impact.
IFRS 15, 'Revenue from contracts with customers' deals with
revenue recognition and establishes principles for reporting useful
information to users of financial statements about the nature,
amount, timing and uncertainty of revenue and cash flows arising
from an entity's contracts with customers. Revenue is recognised
when a customer obtains control of a good or service and thus has
the ability to direct the use and obtain the benefits from the good
or service. The standard replaces IAS 18 'Revenue' and IAS 11
'Construction contracts' and related interpretations. The standard
is effective for annual periods beginning on or after 1 January
2017 and earlier application is permitted subject to EU
endorsement. The Group is assessing the impact of IFRS 15.
IFRIC 21, 'Levies', sets out the accounting for an obligation to
pay a levy if that liability is within the scope of IAS 37
'Provisions'. The interpretation addresses what the obligating
event is that gives rise to pay a levy and when a liability should
be recognised. The Group is not currently subjected to significant
levies so the impact on the Group is not material.
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
2014, with the exception of changes in estimates that are required
in determining the provision for income taxes and the following key
estimates and judgements that exist following the acquisition of
Harworth Estates:
Estimation of fair value of Investment Property
The fair value of Investment Property reflects, amongst other
things, rental income from our current leases, assumptions about
rental income from future leases and the possible outcome of
planning applications, in the light of current market conditions.
The valuation has been arrived at primarily after consideration of
market evidence for similar property, although in the case of those
properties where fair value is based on their ultimate
redevelopment potential, development appraisals have been
undertaken to estimate the residual value of the landholding after
due regard to the cost of, and revenue from the development of the
property.
The values reported are based on significant assumptions and a
change in fair values could have a material impact on the Group`s
results. This is due to the sensitivity of fair value to the
assumptions made as regards to variances in development costs
compared to Management`s own estimates.
Investment properties are disclosed in Note 9.
Estimation of the impact of the Mining Business
The Group has estimated the impact of a failure of the mining
business on its results. This review has been subject to both
uncertainty and sequences of events outside of the control of the
Group. The provisions held in the Group relating to the failure of
the mining business are based upon assumptions relating to cost
estimates and likelihood of the timing of cashflows.
2. Business combinations
Acquisition of Harworth Estates
On 24 March 2015, the Group acquired 75.1% of the issued share
capital of Harworth Estates, a company incorporated in United
Kingdom who heads up a group which is engaged in the regeneration
of former coalfield sites and other brownfield land into 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
GBP000
Cash 97,026
Equity instruments (730m ordinary shares) 52,974
------------------------------------------- --------
Total consideration transferred 150,000
------------------------------------------- --------
Fair value of associate interest 57,746
------------------------------------------- --------
Total consideration 207,746
------------------------------------------- --------
Recognised amounts of identifiable assets acquired Attributed Fair
and liabilities assumed: Value
GBP000
Investment property (Note 9) 299,355
Investments & other non-current receivables 1,883
Cash & Cash equivalents 9,203
Inventory 311
Trade and other current receivables 23,054
Financial asset 1,200
Borrowings (60,407)
Deferred tax liability (7,871)
Trade and other payables (14,738)
---------------------------------------------------- ----------------
Fair value of acquired interest in net assets
of subsidiary 251,990
Gain 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 GBP150.0m which was satisfied by the payment of GBP97,026,000
and the allotment and issue of 730,674,465 ordinary shares of
GBP0.01 each in the 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 GBP2.4m have been recognised in the
consolidated income statement for the period ended 30 June 2015.
The fair value of the 730m ordinary shares issued as part of the
consideration paid for Harworth Estates (GBP53.0m) was based upon
the price the shares were placed at 7.25 pence. Issuance costs of
GBP2.9m have been netted against the deemed proceeds.
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The revenue included in the consolidated income statement since
24 March 2015 contributed by the Harworth Estates group was GBP3.9m
and profit before tax was GBP8.5m. Had the Harworth Estates group
been consolidated from 1 January 2015, the consolidated income
statement would show pro-forma revenue of GBP7.7m and profit before
tax of GBP10.6m.
The net cash outflow associated with the acquisition was as
follows:
GBP000
--------------------------------------------------------- ----------
Fair value of acquired interest in net assets
of subsidiary 251,990
Fair value of associate interest (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. Segment information
30 June 2015 Capital Income Unallocated
Growth Generation Costs Total
Group GBP000 GBP000 GBP000 GBP000
------------------------------- ------- ---------- ----------- -------
Revenue 18 3,833 320* 4,171
Operating (loss)/profit before
other income and expenses
and 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 - 3,356
Profit on sale of investment
properties 2,144 56 - 2,200
Other gains - 3,208 57 3,265
Operating Profit/(Loss) 3,690 6,880 (3,734) 6,836
--------------------------------- ------- ---------- ----------- -------
Finance income 27
Finance costs (631)
Share of profit of associates 856
Gain 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.
Other information
Investment property additions:
* Direct acquisitions 173 978 - 1,151
* Subsequent expenditure 9,962 2,378 - 12,340
--------------------------------- ----- ----- -------
Segmental Assets Total
GBP000
Capital Growth 190,900
Income Generation 116,093
--------------------------------- ----- ----- -------
Total Investment Properties 306,993
--------------------------------- ----- ----- -------
Unallocated Assets
Inventories 239
Other receivables 650
Investments in joint ventures 1,233
Trade & other receivables 20,809
Cash & cash equivalents 30,065
Non-current assets held for
resale 4,822
--------------------------------- ----- ----- -------
Total Assets 364,811
--------------------------------- ----- ----- -------
Financial liabilities are not allocated to the reporting
segments as they are managed and measured on a group basis. There
is no segmental analysis available for the prior period as prior to
the acquisition of Harworth Estates, the Group had only one
operating segment.
4. Finance income/(cost)
Six months Six months Year ended
ended ended
30 June 30 June 31 December
2015 2014 2014
GBP000 GBP000 GBP000
------------------------- ---------- ---------- -----------
Interest expense
* Bank interest (347) - -
* Facility fees (190) - -
* Other interest (94) - -
--------------------------- ---------- ---------- -----------
(631) - -
------------------------- ---------- ---------- -----------
Interest received 27 5 10
--------------------------- ---------- ---------- -----------
Net Finance costs (604) 5 10
--------------------------- ---------- ---------- -----------
5. Tax
The current tax in the period is GBPnil (1H 2014: GBPnil; FY
2014: GBPnil).
The Group recognised deferred tax liabilities of GBP571k using
the liability method and a tax rate of 20%, (2014: 20%) at the
period end covered by this condensed consolidated interim
statement.
The Group recognised a deferred tax liability of GBP8,442k in
respect of property revaluation gains where tax is expected to
arise when the property is sold. The Group did not recognise any
deferred tax assets at the period end covered by this interim
statement.
6. Dividends
No interim dividend is proposed for the six months ended 30 June
2015. No dividends have been paid or proposed in relation to
2014.
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. The weighted average number of shares for 30 June 2015
includes the adjustments necessary to reflect the new shares issued
on 24 March 2015.
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2015 2014 2014
GBP000 GBP000 GBP000
---------------------------------------- ------------- ----------- -----------
Profit for the period 50,761 3,156 3,465
------------------------------------------ ------------- ----------- -----------
Weighted average number of shares
used
for basic and diluted profit per share
calculations 1,860,095,458 605,456,480 605,456,480
------------------------------------------ ------------- ----------- -----------
Basic and diluted earnings per
share (pence) 2.73 0.5 0.6
------------------------------------------ ------------- ----------- -----------
Adjusted basic and diluted earnings per share for the six months
to 30 June 2015 were 0.5 pence, being based on profit before tax
adjusted for the exceptional gain on bargain purchase of GBP44,244k
and acquisition fees of GBP2,394k. There were no exceptional items
in the prior year.
8. Investment in Associates
As at 30 As at 30 As at 31
June June December
2015 2014 2014
GBP000 GBP000 GBP000
Cost
At start of period 56,890 53,436 53,436
Share of profit 856 3,136 3,454
Purchase of share capital not held (57,746) - -
------------------------------------ --------- --------- ----------
At end of period - 56,572 56,890
------------------------------------ --------- --------- ----------
The Group accounted for its investment in Harworth Estates, a
private company incorporated in England and Wales, as an associate
up to and including 24 March 2015 because it considered that it had
significant influence over that entity due to its 24.9%
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.
9. Investment Properties
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Investment property at 30 June 2015 has been measured at fair
value based upon a management estimate. The Group holds five
categories of investment property being agricultural land, natural
resources, major development, strategic land and business parks in
the UK, which sit within the operating segments of capital growth
and income generation.
Agricultural Natural Business Major Strategic Total
Land Resources Parks Developments Land
---------------------------- ------------ ----------- ----------- ------------- --------- -------
Income Income Income Capital Capital
Generation Generation Generation Growth Growth
---------------------------- ------------ ----------- ----------- ------------- --------- -------
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
---------------------------- ------------ ----------- ----------- ------------- --------- -------
At 31 December 2014 - - - - - -
Acquisition of subsidiaries 22,070 18,574 72,724 139,842 46,145 299,355
Direct acquisitions - 978 - 120 53 1,151
Subsequent expenditure 202 309 1,867 9,308 654 12,340
Increase in fair value - 386 970 2,000 - 3,356
Disposals (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
---------------------------- ------------ ----------- ----------- ------------- --------- -------
Valuation process
The properties have been valued by the management who have
exercised their experience and judgement in arriving at the
increase in fair value at June 2015.
10 Investments
Investments in joint ventures
GBP000
---------------------------------------- -------
At December 2014 -
Arising on acquisition of subsidiaries 1,233
At June 2015 1,223
---------------------------------------- -------
As a result of the acquisition of Harworth Estates the Group now
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.
The Group's share of the assets and liabilities are:
2015 Interest
Country of incorporation Assets Liabilities held
---------------------------- -------------------------- ------- ------------ ---------
GBP000 GBP000 %
Bates Regeneration Limited England and Wales 2,050 (827) 50
---------------------------- -------------------------- ------- ------------ ---------
The risks associated with this investment 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's registered office.
11. Cash and cash equivalents
As at As at As at 31
30 June 30 June December
2015 2014 2014
GBP000 GBP000 GBP000
---------------------------------- -------- -------- ---------
Cash held and other cash balances 30,065 1,503 1,489
----------------------------------- -------- -------- ---------
12. Assets and liabilities classified as held for sale
The assets and liabilities of the disposal group held for sale
relate to Harworth Insurance Company Limited (HICL). The Group
retained a 100% shareholding in HICL, an insurance business, which
is classified as held for sale as there is a put and call option
over its shares. At 30 June 2015, the assets held for sale were
GBP4.8m (1H 2014: GBP20.9m, FY 2014: GBP5.1m) and the liabilities
held for sale were GBP0.2m (1H 2014: GBP16.3m, FY 2014: GBP0.5m)
and an amount in respect of deferred income in trade and other
payables of GBP4.6m (1H 2014: GBP4.6m, FY 2014: GBP4.6m). The sale
of the insurance business to Royal & Sun Alliance Insurance plc
completed on 31 July 2014.
(a) Assets of disposal group classified as held for sale
As at As at As at 31
30 June 30 June December
2015 2014 2014
GBP000 GBP000 GBP000
--------------------------------- -------- -------- ---------
Investment properties - - 335
Assets in the course of disposal - 828 -
Trade and other receivables 28 1,072 666
Reinsurance assets - 8,298 -
Available for sale financial
assets 4,694 10,056 3,278
Cash and cash equivalents 100 660 840
Assets classified as held for
sale 4,822 20,914 5,119
---------------------------------- -------- -------- ---------
(b) Liabilities of disposal group classified as held for sale
As at As at As at 31
30 June 30 June December
2015 2014 2014
GBP000 GBP000 GBP000
--------
Trade and other payables 53 7,598 263
Provisions - 8,373 -
Re-measurement loss on carrying
value of Harworth Insurance Company
Limited 119 293 206
Liabilities classified as held
for sale 172 16,264 469
-------------------------------------- -------- -------- ---------
13. Borrowings and loans
As at 30 As at As at 31
June 30 June December
2015 2014 2014
GBP000 GBP000 GBP000
------------------------------------ -------- -------- ---------
Bank loans
Current:
Secured - bank loans and overdrafts - - -
Secured - other loans (716) - -
-------------------------------------- -------- -------- ---------
(716) - -
------------------------------------ -------- -------- ---------
Non-current:
Secured - bank loans (48,850) - -
Secured - other loans (10,466) - -
-------------------------------------- -------- -------- ---------
(59,316) - -
------------------------------------ -------- -------- ---------
Details of the borrowings acquired as part of the acquisition of
subsidiary on 24 March 2015 are provided in Note 2.
At 30 June 2015, the Group had bank borrowings of GBP48.8m
(2014: GBPnil) and a further GBP11.2m (2014: GBPnil) of
infrastructure loans, which resulted in total borrowings of
GBP60.0m (2014: GBPnil). The bank borrowings are part of a GBP65.0m
revolving credit facility from The Royal Bank of Scotland. The
facility is repayable on 13 February 2020 (five year term) on a
non-amortising basis and is subject to financial and other
covenants.
The infrastructure loans of GBP11.2m are provided by public
bodies in order to promote the development of major sites. They
comprise a GBP1.4m loan from Leeds LEP in respect of the Prince of
Wales site, GBP8.5m from the Homes and Community Agency in respect
of Waverley, GBP1.0m from Sheffield City Region JESSICA Fund for
Rockingham and GBP0.3m from Greater Manchester Investment Fund in
respect of Logistics North.
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 GBP94k (2014: GBPnil). Non-current bank and other
loans are stated after deduction of unamortised borrowing costs of
GBP1,273k (2014: GBPnil). The bank loans and overdrafts are secured
by way of fixed charges over certain assets of the Group.
14. Retirement benefit obligations
The Group's only defined benefit pension liability was for the
Blenkinsopp Section of the Industry-Wide Mineworkers Pension
Scheme. The liability of the Group to make contributions is
indemnified by UK Coal Production Limited. During the six months to
30 June 2015 and the year to 31 December 2014 all contributions
have been paid to the pension fund by UK Coal Production
Limited.
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