Harworth Group plc
Annual Report and Financial
Statements 2021
Creating sustainable places where
people want to live and work
Welcome to
the Harworth
Annual Report
Harworth is one of the leading land
and property regeneration companies
in the UK, owning and managing
approximately 14,000 acres across
around 100 sites in the North of England
and the Midlands.
Our Purpose is to invest to transform land and
property into sustainable places where people
want to live and work, supporting new homes, jobs
and communities, and delivering long-term value
for all stakeholders.
Harworth has a premium listing on the Main Market
of the London Stock Exchange (LSE: HWG).
Visit our website for the latest company news
www.harworthgroup.com
Follow us on social media
Pictured: Bardon Hill
Harworth Group plc 2021 Highlights
Total Return1
24.6%
2020: 3.0%
EPRA NDV per share1
Operating profit
197.6p
2020: 160.0p
£121.9m
2020: 27.8
6
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17
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19
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21
17
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20
21
17
18
19
20
21
Total dividend
per share2
1.2p
2020: 1.8p
Net debt1
Net loan to
portfolio value1
£25.7m 3.4%
2020: £71.2m
2020: 11.5%
8
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17
18
Industrial & logistics
pipeline (sq. ft)
28.2m
2020: 27.3m
Residential
pipeline (plots)
30,804
2020: 30,668
3
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1 Harworth discloses both statutory
and alternative performance
measures (APMs). A full description
and reconciliation to the APMs is
set out in Note 2 to the financial
statements
2 Total dividend per share in 2020
comprised an interim dividend
of 0.334p, a final dividend of
0.768p for 2020 and an additional
payment of 0.698p representing
the previously cancelled 2019 final
dividend
Contents
Overview
Who we are
Our portfolio
Strategic Report
Our business model
How we create value
The Harworth Way
Our key drivers of growth
Our markets
Key performance indicators
Chair’s statement
Chief Executive’s review
Operational review
Financial review
Long-term viability statement
Section 172 statement
The Harworth Way –
Our Focus Impact Areas
The Harworth Way – Communities
The Harworth Way – Planet
The Harworth Way – People
SECR disclosure
Task Force on Climate-Related
Financial Disclosures
Effectively managing our risk
Governance report
Chair’s introduction
Board of Directors and
Company Secretary
Statement of corporate
governance
Nomination Committee report
Audit Committee report
ESG Committee report
Directors’ remuneration report
Directors’ report
Statement of Directors’
responsibilities
Financial statements
Independent auditor’s report
to the members of Harworth
Group plc
Consolidated income statement
Consolidated statement of
comprehensive income
Consolidated balance sheet
Company balance sheet
Consolidated statement of
changes in equity
Company statement of
changes in equity
Consolidated statement of
cash flows
Company statement of cash flows
Notes to the financial statements
02
04
06
08
10
18
20
22
24
27
30
34
41
44
48
52
56
60
64
65
70
80
82
86
102
110
118
120
150
154
158
166
167
168
169
170
171
172
173
174
01
Annual Report and Financial Statements 2021 Overview
Who we are
Our Purpose is to invest to transform land
and property into sustainable places where
people want to live and work
With a focus on placemaking and long-term value creation, Harworth has an established track record of transforming sites
into sustainable new communities. We are uniquely positioned as a specialist regenerator of large, complex sites, with an
extensive pipeline focused on the high growth industrial & logistics and residential markets.
T H W A Y
R
O
THE H A R W
Our strategy
Our partners
Our
Purpose,
culture and
values
Our business model
02
Harworth Group plc Our Purpose, culture and values
Harworth’s ability to execute its strategy and deliver its Purpose is reliant on
attracting, maintaining and developing great talent. We achieve this through
our “One Harworth” culture, which encourages a collaborative approach to
delivering and managing our sites, and succeeding as one team. Our culture
is underpinned by the three Harworth values: taking pride in our people &
partnerships; delivering creative solutions; and acting with integrity and trust.
Our strategy
This year we outlined our strategy to reach
£1bn of EPRA NDV* over five to seven years,
focused on four key drivers of growth.
Read more about our strategy
on pages 18 to 19
Our stakeholders
We work closely with a wide range of
stakeholders and build strong relationships to
deliver our Purpose and strategic objectives.
Read more about our stakeholders
on pages 44 to 47
Our business model
As a Master Developer, we create long-term
value by acquiring and assembling large,
complex, and often former industrial, sites and
transforming them into sustainable residential
and industrial & logistics developments.
Read more about our business model
on pages 6 to 7
The Harworth Way
A commitment to sustainability and making a
lasting positive impact is embedded across
our culture, strategy and operations.
Read more about The Harworth Way
on pages 48 to 69
* Harworth discloses both statutory and alternative performance measures (APMs). A full
description and reconciliation to the APMs is set out in Note 2 to the financial statements.
Overview
03
Annual Report and Financial Statements 2021 Strategic Report
Our Portfolio
An extensive
industrial &
logistics and
residential
portfolio in the
North of England
and the Midlands
Across Harworth’s three operating regions of Yorkshire &
Central, the Midlands and the North West, our portfolio
has the potential to deliver 28.2m sq. ft of industrial &
logistics space and 30,804 residential plots. In addition,
we have a £277m Investment Portfolio spread across all
three operating regions.
Our portfolio in numbers
Industrial & logistics land | 28.2m sq. ft
Planning status
14.8
7.3
6.1
Consented
Awaiting determination
2022+
Read more about our portfolio
on pages 30 to 32
Residential land | 30,804 plots
Planning status
9,978
20,015
811
Consented
Awaiting determination
2022+
Investment Portfolio
Number of Sites
Vacancy
18
Annualised rent roll
2.7%
Weighted Average
Unexpired Lease Term
(“WAULT”)
£18.0m 11.5 years
04
Harworth Group plc M8
M74
Strategic Report
Major Developments
Strategic Land
A74(M)
Investment Portfolio
M6
M6
6
3
M61
5
2
M57
6
M56
M56
1
M62
6
5
2
M62
M18
A1(M)
M180
3
1
1
3
4
M6
5
M54
M6 Toll
M42
M5
M50
M1
2
M69
M6
M40
4
4
M1
A1(M)
A1(M)
M11
M40
M25
Selected key industrial & logistics
developments
Investment Portfolio
(largest by valuation)
Advanced Manufacturing Park
1
2 Gascoigne Wood
3 Gateway 36
4
Rothwell
5 Wingates
6
Skelton Grange
M3
1 Nufarm, Bradford
2
M26
Saturn Business Park, Knowsley
M25
3
M23
Four Oaks Business Park, Preston
M2
M20
4 Melton Commercial Park, Melton Mowbray
5 Moor Lane Trading Estate, Sherburn-in-Elmet
A3(M)
6
Flaxby Moor Ind. Estate, Knaresborough
05
M4
Selected key residential
developments
1 Waverley
2
South East Coalville
3
4
5
Pheasant Hill Park
Simpson Park
Ironbridge
6 Moss Nook
M5
Annual Report and Financial Statements 2021 Our Business
Model
Inputs
Our business model
Our people
The Harworth team comprises experts in transactions,
planning, land remediation, engineering and
development, supported by central functions and a
highly experienced senior management team. We
have three regional teams – Yorkshire & Central, North
West, and the Midlands – which bring further local
knowledge, expertise and relationships.
Our key markets
Our portfolio is focused on the industrial & logistics
and residential sectors in the North of England and the
Midlands, which benefit from favourable supply and
demand dynamics, structural growth, and are central
to local and central government objectives to ‘Level
Up’ the economy and provide new homes, jobs and
opportunities.
Financing
Our financing strategy remains to be prudently geared,
with a target year-end net loan to portfolio value of less
than 20%, and a maximum of 25%. Acquisitions and
capital expenditure at our sites are funded through a
combination of disposal proceeds, corporate-level debt
and site-specific funding.
The Harworth Way
We aim to make a lasting positive impact on
communities and the environment by applying the five
pillars of the Harworth Way across our strategy and
operations. This ensures we deliver our Purpose of
creating sustainable places where people want to live
and work.
Read our Case Study
on pages 12 to 13
d
n
a
Strate gic L
I
n
v
M
a
j
o
r
D
e
v
e
l
o
p
m
e
n
ts
e
st
m
e
nt Portfolio
Read our Case Study
on pages 16 to 17
06
Strategic ReportHarworth Group plc
Our business model
d
n
a
Strate gic L
I
n
v
e
st
m
e
nt Portfolio
Outputs
Our people
An innovative and collaborative culture, with teams
working on market-leading projects with pride and
enjoyment
Investors
Strong returns, with a target to reach £1bn of EPRA
NDV* over five to seven years, delivered responsibly
Communities
Sustainable places where people want to live and
work, with connectivity, green space and amenities
Suppliers
Strong partnerships based on trust, fairness, and shared
values and objectives
Customers
A high-quality product delivered on time, and a strong
working relationship that drives repeat business
Funders
A regular and open dialogue, with updates on our
operational and financial performance
Government
A trusted partner in delivering homes, jobs and
opportunities across the regions
Read our Case Study
on pages 14 to 15
M
a
j
o
r
l
D
e
v
e
o
p
m
e
n
ts
07
Strategic ReportAnnual Report and Financial Statements 2021
How we
create value
Strategic Land
Major Developments
N
O
I
T
A
E
R
C
E
U
L
A
V
Acquisitions and
land assembly
Our acquisition teams work
across our regions to identify
new strategic land sites to add
to our portfolio. Often larger
sites are assembled over a
number of years through the
acquisition of smaller land
parcels.
Masterplanning
Planning approval
Working with local authorities
and other stakeholders, we
create a strategic vision for a
site that addresses local needs
for housing or employment
space in an area. Our sites often
complement or contribute to
wider strategic aims.
Once a strategic vision for a
site has been determined,
our planners work with local
authority planning teams to
progress this through the
planning system. We have
a very high success rate of
securing planning permissions.
Rothwell,
Northamptonshire
In October, we acquired this 107-
acre site in the prime Midlands
location known as the ‘Golden
Triangle’. Harworth will work with
local stakeholders to bring forward
a planning application for 1.5m sq.
ft of industrial & logistics space.
Read more in the
Operational Review
on pages 30 to 32
08
Ironbridge,
Shropshire
In September, we secured planning
permission for the regeneration of
the former Ironbridge Power Station
into a mixed use development
comprising up to 1,000 new homes,
alongside a range of commercial,
leisure and community uses.
Read more on the
Case Study
on pages 12 to 13
Plot sale or direct
Placemaking
Asset
Land remediation
and infrastructure
development
Once planning permission
has been obtained, our in-
house development teams
undertake land remediation
development
At our residential developments,
we largely sell serviced plots
to housebuilders. In 2022, we
will also be launching a Build to
Rent portfolio.
works, construct any necessary
infrastructure such as roads, and
create development platforms
for the site’s proposed use.
For our industrial & logistics
developments we either directly
develop sites using our in-house
expertise, or sell land parcels for
construction.
We invest in our sites
alongside plot sales and direct
development, to provide
additional infrastructure,
amenities and green spaces.
This creates a sense of
community that improves the
wellbeing of residents and those
working there and enhances the
attractiveness of our sites.
management
We largely retain industrial
& logistics units that we
directly develop and let
these to a diverse range of
occupiers. This generates a
recurring income and allows
us to crystallise further value
from the high standards of
placemaking and environmental
specifications at our sites.
Strategic ReportHarworth Group plc
Major Developments
Investment Portfolio
Acquisitions and
land assembly
Our acquisition teams work
across our regions to identify
new strategic land sites to add
to our portfolio. Often larger
sites are assembled over a
number of years through the
acquisition of smaller land
parcels.
Masterplanning
Planning approval
Working with local authorities
Once a strategic vision for a
and other stakeholders, we
site has been determined,
create a strategic vision for a
our planners work with local
site that addresses local needs
authority planning teams to
for housing or employment
progress this through the
space in an area. Our sites often
planning system. We have
complement or contribute to
a very high success rate of
wider strategic aims.
securing planning permissions.
Land remediation
and infrastructure
development
Once planning permission
has been obtained, our in-
house development teams
undertake land remediation
works, construct any necessary
infrastructure such as roads, and
create development platforms
for the site’s proposed use.
Plot sale or direct
development
At our residential developments,
we largely sell serviced plots
to housebuilders. In 2022, we
will also be launching a Build to
Rent portfolio.
For our industrial & logistics
developments we either directly
develop sites using our in-house
expertise, or sell land parcels for
construction.
Placemaking
We invest in our sites
alongside plot sales and direct
development, to provide
additional infrastructure,
amenities and green spaces.
This creates a sense of
community that improves the
wellbeing of residents and those
working there and enhances the
attractiveness of our sites.
Asset
management
We largely retain industrial
& logistics units that we
directly develop and let
these to a diverse range of
occupiers. This generates a
recurring income and allows
us to crystallise further value
from the high standards of
placemaking and environmental
specifications at our sites.
Bardon Hill,
Leicestershire
In September, we began
construction of 332,000 sq. ft of
industrial & logistics space across
six units, to be built to BREEAM
“Very Good” standard and EPC
rating A. Practical completion is
expected in Summer 2022.
Read more on the
Operational Review
on pages 30 to 32
Logistics North,
Bolton
Greater Manchester
During the year, we completed
331,400 sq. ft of new lettings at
Logistics North, concluding eight
years of development at the site
and triggering significant one-off
promote fees.
Read more on the
Case Study
on pages 16 to 17
09
Strategic ReportAnnual Report and Financial Statements 2021 The
Harworth Way
Doing business the Harworth Way
As a specialist regenerator of land and property, a commitment
to sustainability is embedded across our culture, strategy and
operations, and we view this as critical to making a lasting
positive impact on our communities and the environment.
This commitment is delivered through the five pillars of the
Harworth Way.
Read more about
Communities
on pages 52 to 55
Read more about
the Planet on
pages 56 to 59
Communities
Planet
G
o
v
People
e
r
n
a
n
c
e
Partners
Read more about
our Partners on
pages 44 to 47
Read more about People
on pages 60 to 63
Read more about
Governance
on pages 78 to 155
10
Strategic ReportHarworth Group plc
Impact Pillars
Supporting Pillars
Governance
Ensuring the highest standards of
corporate governance
See Governance Report
on pages 78 to 155
Partners
Building strong relationships with
all stakeholders to deliver long-
term value
See our Section 172 disclosure
on pages 44 to 47
UN SDGs
Harworth is a supporter of the UN Sustainable
Development Goals (“SDGs”) and a signatory to the UN
Global Compact. We have selected six primary UN SDGs
which are closest aligned to our strategy and operations,
and where we believe we can make the biggest impact as
a business.
Find out more on pages 48 to 51
Primary SDGs
Communities
Creating, strengthening and
supporting our communities today
and for the future
• Our industrial & logistics pipeline has the
potential to generate £4.1bn of Gross
Value Added (“GVA”) per annum
• Donated over £67,000 and volunteered
71 staff hours to support local causes
• Funding secured for two innovative
cycling infrastructure projects at
Waverley and Thoresby Vale
Planet
Minimising our environmental impact,
building climate resilience and
promoting biodiversity
• Competed LN50, our first building
capable of being Net Zero Carbon in
operation
•
•
Installed solar panels at Advantage
House, generating 80,000 kWh of
renewable electricity per annum
Introduced staff salary sacrifice car
scheme exclusively for low or zero
emission vehicles
People
Maintaining an inclusive, supportive
and empowered culture in which
people can fulfil their potential
• Enhanced maternity & adoption,
paternity and hybrid working policies
• 97% of staff say they are proud to work
for Harworth in our 2021 survey
• Trained five members of staff to date as
mental health first aiders
11
Strategic ReportAnnual Report and Financial Statements 2021 CASE STUDY
Strategic Land
Ironbridge, Shropshire
Transforming a former power station into
a sustainable new community just minutes
from a World Heritage Site.
In September 2021, Harworth received planning approval for the
regeneration of the former Ironbridge Power Station in Shropshire
into a mixed-use development comprising 1,000 new homes,
alongside a range of commercial, leisure and community uses.
Harworth acquired the 350-acre site in June 2018, before which it
had been used for electricity generation for over 80 years. Located
less than a mile from the Ironbridge Gorge World Heritage Site, the
site is bordered by the River Severn to the north and an extensive
area of ancient woodland to the south, providing a dramatic
backdrop for the development of a new community.
Harworth held its first public consultation event at the site in
October 2018 and used stakeholder feedback to create an
illustrative masterplan for the site. In June 2019, Harworth
commenced demolition works to remove the former power
station buildings and associated infrastructure, which included
the demolition of the power station’s four cooling towers later that
year. The outline planning application for the development was
submitted in December 2019, alongside a separate application to
extract up to 1.9 million tonnes of sand and gravel as part of the site
preparation works.
The proposed development will deliver around 1,000 new
homes, in addition to a retirement village, up to 200,000 sq. ft of
employment space comprising offices and light industrial units,
and a local centre offering convenience retail and other services.
The plans will also provide a range of community amenities such as
allotments, sports pitches, and a new primary school. In addition,
the former power station’s 1930s pumphouse will be retained
as part of the proposals and transformed into a flexible space for
community and leisure uses.
Protecting and enhancing
local biodiversity
The Ironbridge development will incorporate extensive
green space, including 56 acres reserved exclusively for
protecting biodiversity. As part of the site preparation
works, Harworth installed six great crested newt ponds,
a bat barn which is also used as a moth habitat, and a 21
metre-tall nesting tower for Peregrine falcons.
Aerial view of the Ironbridge site
12
Strategic ReportHarworth Group plc Strategic Report
CGI of the masterplan for Ironbridge site
The provision of green infrastructure is central to Harworth’s
masterplan. The development will include a comprehensive
network of off-road walking and cycling routes to enable active
travel choices and provide connectivity to the surrounding
area, and Harworth is currently exploring opportunities to bring
the old railway link to the site back into use. The plans will also
provide extensive green space such as pocket parks, play areas
and vegetation throughout the public realm, and several new
attenuation ponds, which will offer enhanced protection for local
wildlife.
Extensive flood risk scenario planning has been incorporated into
the development’s design, and recent flooding in February 2022 at
Ironbridge did not impact the site.
Site preparation works are ongoing, with demolition works
complete. The development will now be delivered in phases over
10 to 15 years.
Our masterplan for Ironbridge will
transform this former industrial site
into a sustainable new community,
providing additional homes, jobs and
infrastructure for local people. We
have worked with stakeholders every
step of the way to ensure this is a long-
term development that the community
can be proud of, and one that is
well connected to the existing local
network of roads, footpaths and open
spaces that surround the site.
DAVID COCKROFT
Regional Director for the Midlands
Working with partners on low emission
public transport opportunities
The Ironbridge site benefits from two rail links to the mainline
from Shrewsbury to Wolverhampton, which were originally
used to transport materials to the power station. Harworth is
exploring opportunities to bring them back into use.
During the year, we partnered with Revolution VLR, a consortium
of advanced manufacturing companies aiming to develop the
next generation of “very light rail” vehicles and technologies, to
develop a test vehicle and track along a stretch of disused
railway at the site. Combining technology from the automotive
and rail sectors, Revolution VLR has produced a lightweight,
energy-efficient vehicle that is straightforward to operate and
geared to the needs of communities, providing a modern,
attractive and cost-effective vehicle solution that it is hoped will
facilitate the reopening of disused railway lines.
13
Annual Report and Financial Statements 2021 CASE STUDY
Major Development
Gateway 36, Barnsley,
South Yorkshire
A major hub for logistics and manufacturing in
Yorkshire, adjacent to Junction 36 of the M1
Gateway 36 is a 127-acre site which was formerly home to the
Rockingham Colliery. It benefits from its adjacency to Junction 36
of the M1 and direct frontage on to the Dearne Valley Parkway in
Barnsley, providing direct links to Leeds, Sheffield and Doncaster.
The development has received £3.1 million of funding from
Sheffield City Region, to support infrastructure works at the site.
In 2015, Harworth received outline planning permission for Phase 1
of the development, comprising 145,300 sq. ft of space, with units
let to occupiers including the Environment Agency, Esco and Car
Supermarket and a number of small fast food outlets. In summer
2019, Harworth sold the commercial units on Phase 1 to Mayfair
Capital to fund new acquisition opportunities across the business.
In December 2021, Harworth sold a 24-acre plot at the site,
representing Phase 3 of the development, to Firethorn for £11.6
million. Firethorn will develop a 340,000 sq. ft logistics facility, to
BREEAM ‘Excellent’ standard.
Shortly after the year-end, Harworth secured planning permission
for 110,000 sq. ft of industrial & logistics space at the site,
representing the initial stage of Phase 2. This will comprise the
direct development of three buildings ranging from 23,000 sq ft to
49,500 sq ft, which will include up to 10% office space and will be
marketed as “R-Evolution 36”. The smallest building will be split into
four units of 5,750 sq ft each to ensure its suitability to a broad range
of occupiers.
A further stage of Phase 2 will see the development of two
buildings, which will provide an additional 425,000 sq. ft of
industrial & logistics space.
Harworth has secured a site-specific debt facility to deliver the
development, and is already well progressed with the creation
of platforms and access roads at the site. We intend to begin
construction of Phase 2 in early 2022.
CGI of the masterplan for Gateway 36
14
Strategic ReportHarworth Group plc Strategic Report
Aerial view of Gateway 36
Designing Net Zero
Carbon-capable
buildings
Phase 2 of Gateway 36 will be built to Harworth’s latest
environmental building specifications. Units will be built
to BREEAM “Very Good” standard, with 11% of the roof
area covered by solar PV panels, and an enhanced design
to allow occupiers to increase this coverage to 100%. The
scheme will also include 20 EV charging points, rainwater
harvesting and a sustainable heating and cooling system, as
well as a building envelope design that is sympathetic to the
surrounding environment.
The next phase of Gateway 36
will meet the growing demand
for well-connected, high-
specification industrial & logistics
space in Yorkshire. In addition to
supporting new jobs in the area, the
development’s environmental impact
will be minimised through the use of
on-site energy generation and energy
efficient design.
CHRIS DAVIDSON
Joint Regional Director for Yorkshire & Central
15
Annual Report and Financial Statements 2021 CASE STUDY
Investment Portfolio
Logistics North, Bolton,
Greater Manchester
One of the most high-profile logistics and
manufacturing schemes in the North West
Harworth received outline planning consent for Logistics North, the
largest live commercial development in the North West of England,
at the end of December 2013. Over 5,500 people are now
employed at the site, which was once home to the Cutacre deep
surface mine, by occupiers including Aldi, Whistl, MBDA, Greene
King, Costa and Komatsu. On completion of the development
works and asset management activities by third parties, the scheme
will deliver over 7,000 jobs and add around £300m p.a. in Gross
Value Added to the Greater Manchester economy.
The Logistics North scheme benefits from strong support from
Bolton Metropolitan Borough Council, the Greater Manchester
Combined Authority, and MIDAS – Greater Manchester’s Inward
Investment Agency.
In May 2021, Harworth completed the direct development of
a 50,800 sq. ft unit, LN50. The unit was Harworth’s first to be
designed to allow it to be Net Zero Carbon in operation, and has
since been let to a manufacturing occupier.
“Multiply” is the commercial development scheme at Logistics
North and is being delivered through a joint venture established in
May 2017 between Harworth and the LPPI Real Estate Fund. The
scheme is let to a diverse mix of regional and national occupiers,
with unit specifications that include a BREEAM rating of “Very
Good”, office space comprising 5-10% of the overall internal area,
and secure service yards with 38-50 metre depth.
Later in the year, Harworth completed two lettings which concluded
Multiply, triggering significant promote fees. This comprised a
149,300 sq ft Grade A warehouse, and an adjoining plot for a last
mile parcel facility and electric vehicle charging car park.
Aerial view of Logistics North and Cutacre Country Park
16
Strategic ReportHarworth Group plc Strategic Report
Industrial unit at Logistics North
Delivering a
550-acre
country park at
Logistics North
One of the unique aspects of Logistics North is the 550-
acre country park that surrounds the site. In addition to
providing over 18km of footpaths, bridleways and cycle
ways to connect the site to Bolton, Salford and Wigan, the
site includes woodland areas, watercourses and panoramic
viewing points. This provides a highly attractive landscape
that workers and local residents can benefit from.
The quality of the tenant mix and
speed at which we have been able to
complete lettings at Logistics North
reflects the high specification of the
individual units and accessibility of the
scheme, and the shortage of suitable
warehouse space in the North West,
as well as Harworth’s market-leading
ability to remediate and transform
brownfield and unused land.
STEVEN KNOWLES
Regional Director for the North West
17
Annual Report and Financial Statements 2021 Our key drivers
of growth
1 Increasing direct
development of industrial
& logistics sites
2 Accelerating sales and
broadening the range of
our residential products
Harworth is an experienced developer, having built
1.3 million sq. ft of industrial & logistics space since 2015.
We have a significant committed industrial & logistics
development pipeline ahead of us, with schemes spread
across our regions, in strong locations that are attractive to
both investors and occupiers.
What we will do
We aim to undertake the direct development of much of our
consented pipeline, scaling up from an average of 200,000
sq. ft of direct development per annum between 2015
and 2021 to an average of 800,000 sq. ft per annum by
2026. From our current pipeline, we expect to deliver 3.2
million sq. ft of development by 2026, representing Gross
Development Value (“GDV”) of £400 - £440 million.
We intend to manage the market risk associated with such
development by combining pre-letting and selective land
sales with speculative development. This programme of
development will be funded by a mixture of project debt,
cash generated from wider portfolio sales, our core banking
facilities, and site-specific selective use of joint ventures.
Harworth’s residential land portfolio is significant and has
the ability to deliver in excess of 30,000 housing units into
the market.
The UK housebuilding sector is in robust health, evidenced
by the strong demand from housebuilders for our
engineered land product. The sector is also evolving, with
increased consumer and investor appetite for Build to Rent
products. While initially concentrated in urban centres, this
market is now expanding into suburban areas and beyond.
What we will do
Our portfolio is particularly well-suited to delivering
institutional quality single-family rental homes in a volume
that can deliver the required return on investment. As a
result, we plan to develop an initial single-family rental
portfolio, to be launched in 2022, which we intend to be
delivered through a forward-funding agreement.
Through a combination of increased plot sales using
Harworth’s traditional “Build to Sell” markets and new
residential products, our ambition is to double sales to
around 2,000 plots per annum by 2026.
Link to KPIs
• Total Return
Link to KPIs
• Total Return
• Net Asset Value and EPRA NDV
• Net Asset Value and EPRA NDV
•
Industrial & logistics space developed
• Number of plots sold to housebuilders
• Total industrial & logistics pipeline
Link to principal risks
• Total residential pipeline
Link to principal risks
• Supply chain cost inflation and constraints
• Supply chain cost inflation and constraints
• Supply chain and delivery partner management
• Supply chain and delivery partner management
(counter-party risk)
• Statutory costs of development
• Residential and commercial markets
• Resourcing
• Availability of appropriate capital
• Managing climate change transition
(counter-party risk)
• Statutory costs of development
• Residential and commercial markets
• Availability of appropriate capital
• Managing climate change transition
18
Strategic ReportHarworth Group plc 3 Growing our strategic
land portfolio and land
promotion activities
4 Repositioning our
Investment Portfolio
to modern Grade A
Our existing landbank of approximately 14,000 acres
underpins our ability to deliver our strategy with around a
third in terms of plots and sq. ft already consented.
Our Investment Portfolio, currently valued at £277m is
integral to the way that we fund our business and will
continue to be so for the foreseeable future.
We take a long-term view ensuring we replenish our
stock, focusing resources on securing a significant future
pipeline which will deliver our continued future growth. Our
regional and head office teams have dedicated acquisitions
specialists and we leverage their expertise to acquire and
assemble land through a blend of freeholds, options and
planning promotion agreements (“PPAs”).
What we will do
We target maintaining a 12-15 year land supply at any
time. As we step into the delivery of our strategy, organic
growth of the business will be supplemented by developing
key partnerships to assemble and deliver large scale
regeneration schemes with the potential also for larger
acquisition opportunities which may present themselves.
Link to KPIs
• Total Return
• Net Asset Value and EPRA NDV
• Total industrial & logistics pipeline
• Total residential pipeline
The portfolio benefits from robust operational metrics, and a
diverse occupier base. We are also investing to improve the
environmental efficiency of these buildings, to build climate
resilience and extend their lifespans.
What we will do
We will largely retain the assets that we directly develop,
while disposing of those assets from our existing portfolio
where we have maximised value through the completion
of asset management initiatives. This approach will
progressively reposition our Investment Portfolio to
modern, high-quality Grade A assets with good access to
infrastructure and proximity to urban centres.
Having controlled all aspects of the quality, design,
sustainability and environmental impact of the end product,
this portfolio shift will enable us to leverage further upside
from our direct developments and allow us to stabilise assets
where necessary.
Link to KPIs
• Total Return
• Potential GVA that could be delivered from our portfolio
• Net Asset Value and EPRA NDV
Link to principal risks
• Availability of and competition for strategic land sites
• Residential and commercial markets
• Resourcing
• Availability of appropriate capital
• Managing climate change transition
• Proportion of our Investment Portfolio that is Grade A
• Scope 1, Scope 2 and selected Scope 3 emissions
Link to principal risks
• Residential and commercial markets
• Resourcing
• Managing climate change transition
19
Strategic ReportAnnual Report and Financial Statements 2021 Our markets
We operate in the industrial & logistics and residential markets, which
benefit from favourable supply and demand dynamics, structural
growth, and strong support from local and central government.
Industrial and logistics
Residential
Take-up of UK industrial & logistics units per year
Strong demand from a wide range of occupiers
60
50
40
30
20
10
0
Take-up of UK industrial & logistics assets reached a record high
in 2021, surpassing records set in the previous year. Demand was
driven by several factors including the growth of online retailing,
the onshoring of supply chains following the UK’s withdrawal from
the EU, and the response to the supply chain disruption seen in
the second half of the year. Data from Savills also suggests that the
breadth of demand by occupier sector is widening, with a slight
decline in demand from online retail companies and increased
demand from third-party logistics, automotive, manufacturing and
high street retail companies.
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
Q1
Q2
Q3
Q4
Long-term average
Source: Savills
Source: Department for Levelling Up, Housing & Communities
Supply of industrial & logistics units per quarter
s
n
o
i
l
l
i
m
)
t
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.
q
s
(
y
l
p
p
u
S
40
30
20
10
0
6
1
0
2
1
Q
6
1
0
2
2
Q
6
1
0
2
3
Q
6
1
0
2
4
Q
7
1
0
2
1
Q
7
1
0
2
2
Q
7
1
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3
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7
1
0
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4
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8
1
0
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1
Q
8
1
0
2
2
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8
1
0
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3
Q
8
1
0
2
4
Q
9
1
0
2
1
Q
9
1
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2
2
Q
9
1
0
2
3
Q
9
1
0
2
4
Q
0
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1
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0
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2
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0
2
0
2
3
Q
0
2
0
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1
2
0
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1
Q
1
2
0
2
2
Q
1
2
0
2
3
Q
1
2
0
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4
Q
Supply (LHS)
Grade A proportion RHS
Constrained supply resulting in record-low vacancy
60%
50%
40%
30%
20%
10%
0%
k
c
o
t
s
l
a
t
o
t
f
o
n
o
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t
r
o
p
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r
p
a
s
a
A
e
d
a
r
G
Given strong demand, supply of UK industrial space fell at its
fastest pace recorded in the fourth quarter of 2021, to 17.4m sq.
ft, reflecting a vacancy rate of 2.9%. Savills reports that Grade A
supply has fallen to 7.2m sq. ft, almost a third of the levels seen at
the beginning of 2020. The market has responded with increased
levels of construction, but there are various headwinds that could
delay the delivery of new space, including challenges in the
planning system, supply chain disruption and the rising cost of
construction materials.
Source: Savills
Source: Savills
Investment volumes for industrial & logistics assets
Active investment market
The strength of occupational markets and low levels of vacancy
have driven rental growth and continued positive investor
sentiment towards industrial & logistics assets. Total investment
volumes reached a new high in 2021, exceeding the previous
record set in 2020 by almost 75%. As well as corporate deals, the
market has seen a rise in both the number of single-unit deals and
average lot sizes. The continued flow of capital into the market
continues to put downward pressure on yields.
)
s
n
o
i
l
l
i
b
(
£
18
16
14
12
10
8
6
4
2
0
2011
2012
Source: PropertyData
20
2013
2014
Annual Investment
2015
2016
2017
2018
3 year rolling average
2019 2020 2021
Source: Historical data from Department for Levelling Up, Housing & Communities. Forecasts from Savills.
Supply remains far below UK Government targets
The UK Government has a long-standing target of 300,000 new
homes per year. Net delivery of new homes has been in excess
of 200,000 for the past five years but remains well below the
Government target. Recently proposed reforms to the planning
system and additional funding such as the Affordable Housing
Funding Programme and Housing Infrastructure Funding have
the potential to increase annual delivery. However, uncertainty
caused by rising inflation, rising interest rates and shortages of
labour and materials could provide short-term headwinds.
Strong demand for housing continues, particularly
in the North and Midlands
Demand remains high across all areas of the housing market.
As well as structural factors such as population growth and
increased urbanisation, a number of short-term factors are
impacting demand. These include competition in the mortgage
market, which has seen an increase in the affordability and
availability of mortgage finance, government interventions such as
the stamp duty holiday, and the impact of Covid-19 on consumer
preferences. Savills predicts double-digit house price rises across
every region of Great Britain over the next five years, with two of
Harworth’s focus regions – Yorkshire & Humber and the North
West – expected to see the highest growth.
Rising demand for built to rent
The UK Private Rental Sector (“PRS”) continues to grow, driven
by a shortage of social and affordable housing, the flexibility that
PRS offers to an increasingly mobile workforce, and the quality
and location of PRS homes. While the institutional market for
multi-family PRS units in urban centres is well-established, the
market for single-family PRS remains in its infancy, but is growing.
In particular, families are demanding suburban locations on the
periphery of employment hubs, with good access to local schools,
outdoor spaces, retail and health services.
Strategic ReportHarworth Group plc
Industrial and logistics
Residential
Annual net additional dwellings in England
Supply remains far below UK Government targets
Strong demand from a wide range of occupiers
Take-up of UK industrial & logistics assets reached a record high
in 2021, surpassing records set in the previous year. Demand was
driven by several factors including the growth of online retailing,
the onshoring of supply chains following the UK’s withdrawal from
the EU, and the response to the supply chain disruption seen in
the second half of the year. Data from Savills also suggests that the
breadth of demand by occupier sector is widening, with a slight
decline in demand from online retail companies and increased
demand from third-party logistics, automotive, manufacturing and
high street retail companies.
s
g
n
i
l
l
e
w
D
300,000
250,000
200,000
1500,000
1000,000
50,000
0
-
7
0
6
0
0
2
-
8
0
7
0
0
2
-
9
0
8
0
0
2
0
1
-
9
0
0
2
1
1
-
0
1
0
2
2
1
-
1
1
0
2
3
1
-
2
1
0
2
4
1
-
3
1
0
2
5
1
-
4
1
0
2
6
1
-
5
1
0
2
7
1
-
6
1
0
2
8
1
-
7
1
0
2
9
1
-
8
1
0
2
-
0
2
9
1
0
2
-
1
2
0
2
0
2
New build completions
Other
Source: Savills
Source: Department for Levelling Up, Housing & Communities
Source: Savills
Source: Savills
e
s
a
e
r
c
n
i
e
g
a
t
n
e
c
r
e
P
20%
15%
10%
5%
0%
House price forecasts for five years to 2026
D
N
A
L
G
N
E
F
O
T
S
A
E
T
S
A
E
H
T
U
O
S
N
O
D
N
O
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D
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A
L
D
M
T
S
A
E
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S
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H
T
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O
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T
S
A
E
H
T
R
O
N
T
S
E
W
H
T
R
O
N
R
E
B
M
U
H
&
E
R
H
S
K
R
O
Y
I
D
N
A
L
T
O
C
S
S
E
L
A
W
Harworth Regions
Other Regions
UK Average
Historical and forecast BTR completions in England
30,000
25,000
20,000
15,000
10,000
5,000
0
1
1
-
0
1
0
2
2
1
-
1
1
0
2
3
1
-
2
1
0
2
4
1
-
3
1
0
2
5
1
-
4
1
0
2
6
1
-
5
1
0
2
7
1
-
6
1
0
2
8
1
-
7
1
0
2
9
1
-
8
1
0
2
-
0
2
9
1
0
2
-
1
2
0
2
0
2
2
2
-
1
2
0
2
-
3
2
2
2
0
2
-
4
2
3
2
0
2
-
5
2
4
2
0
2
-
6
2
5
2
0
2
Constrained supply resulting in record-low vacancy
Given strong demand, supply of UK industrial space fell at its
fastest pace recorded in the fourth quarter of 2021, to 17.4m sq.
ft, reflecting a vacancy rate of 2.9%. Savills reports that Grade A
supply has fallen to 7.2m sq. ft, almost a third of the levels seen at
the beginning of 2020. The market has responded with increased
levels of construction, but there are various headwinds that could
delay the delivery of new space, including challenges in the
planning system, supply chain disruption and the rising cost of
construction materials.
Active investment market
The strength of occupational markets and low levels of vacancy
have driven rental growth and continued positive investor
sentiment towards industrial & logistics assets. Total investment
volumes reached a new high in 2021, exceeding the previous
record set in 2020 by almost 75%. As well as corporate deals, the
market has seen a rise in both the number of single-unit deals and
average lot sizes. The continued flow of capital into the market
continues to put downward pressure on yields.
The UK Government has a long-standing target of 300,000 new
homes per year. Net delivery of new homes has been in excess
of 200,000 for the past five years but remains well below the
Government target. Recently proposed reforms to the planning
system and additional funding such as the Affordable Housing
Funding Programme and Housing Infrastructure Funding have
the potential to increase annual delivery. However, uncertainty
caused by rising inflation, rising interest rates and shortages of
labour and materials could provide short-term headwinds.
Strong demand for housing continues, particularly
in the North and Midlands
Demand remains high across all areas of the housing market.
As well as structural factors such as population growth and
increased urbanisation, a number of short-term factors are
impacting demand. These include competition in the mortgage
market, which has seen an increase in the affordability and
availability of mortgage finance, government interventions such as
the stamp duty holiday, and the impact of Covid-19 on consumer
preferences. Savills predicts double-digit house price rises across
every region of Great Britain over the next five years, with two of
Harworth’s focus regions – Yorkshire & Humber and the North
West – expected to see the highest growth.
Rising demand for built to rent
The UK Private Rental Sector (“PRS”) continues to grow, driven
by a shortage of social and affordable housing, the flexibility that
PRS offers to an increasingly mobile workforce, and the quality
and location of PRS homes. While the institutional market for
multi-family PRS units in urban centres is well-established, the
market for single-family PRS remains in its infancy, but is growing.
In particular, families are demanding suburban locations on the
periphery of employment hubs, with good access to local schools,
outdoor spaces, retail and health services.
Source: PropertyData
Source: Historical data from Department for Levelling Up, Housing & Communities. Forecasts from Savills.
21
Strategic ReportAnnual Report and Financial Statements 2021
Key Performance
Indicators
Strategy link key
1
Increasing direct development of
industrial & logistics stock
2 Accelerating sales and broadening the
range of our residential products
3 Growing our strategic land portfolio and
land promotion activities
4 Repositioning our Investment Portfolio
to modern Grade A
The Harworth Way
Group Financial Targets
* Harworth discloses both statutory and alternative performance measures (APMs).
A full description and reconciliation to the APMs is set out in Note 2 to the
financial statements.
22
Financial Track Record
Economic and Social Track Record
Total Return
What we measure
Growth in EPRA NDV during the year in addition to dividends
paid, as a proportion of EPRA NDV at the beginning of the year.
21
24.6%
20
19
18
17
3.0%
7.8%
13.3%
13.2%
Link to strategy: 1, 2, 3, 4
EPRA NDV per share
What we measure
A European Public Real Estate Association (“EPRA”) metric that
represents Net Asset Valuation where deferred tax, financial
instruments and certain other adjustments are calculated to the
full extent of their liability.
21
197.6
20
19
18
17
160.0
155.6
145.2
128.9
Link to strategy: 1, 2, 3, 4
Net asset value
What we measure
The value of our assets less the value of our liabilities, based
on IFRS measures, which excludes the mark-to-market value of
development properties.
21
578.0
20
19
18
17
488.7
463.8
441.9
409.3
Link to strategy: 1, 2, 3, 4
Net loan to portfolio value (“LTV”)
What we measure
Net debt as a proportion of the aggregate value of properties
and investments.
21
3.4%
20
19
18
17
11.5%
12.1%
12.3%
7.0%
Link to strategy: 1, 2, 3, 4
Number of plots sold to housebuilders
What we measure
Industrials & logistics space
directly developed (sq. ft)
What we measure
The number of plots equivalent to land parcel sales to
The total amount of space directly developed by Harworth that is
housebuilders during the year.
completed during the year.
Link to strategy: 2,
Link to strategy: 1, 4,
Total residential pipeline (plots)
Total industrial & logistics pipeline (sq. ft)
What we measure
What we measure
The total number of residential plots that could be delivered
The total amount of industrial & logistics space that could be
from our pipeline, excluding any already sold but including
delivered from our pipeline, excluding any already built or sold,
options and PPAs.
but including options and PPAs.
Link to strategy: 2, 3
Link to strategy: 1, 3, 4
Proportion of Investment Portfolio that is Grade A
What we measure
Scope 1, Scope 2 and selected
Scope 3 emissions (tonnes CO2e)
What we measure
The proportion of our Investment Portfolio that is classified as
Emissions that we need to reduce to zero to achieve by our 2030
modern Grade A industrial & logistics space
Net Zero Carbon target.
Link to strategy: 4,
Link to strategy: 4,
Potential Gross Value Added (“GVA”) that could be
delivered from our portfolio (£bn)
Satisfaction of our employees
What we measure
What we measure
Calculated by Ekosgen, an economic impact consultancy, the
The proportion of employees who said they were “proud to work
estimated potential GVA of our portfolio once fully built out.
for Harworth” in our annual employee survey.
Link to strategy: 3,
Link to strategy:
Strategic ReportHarworth Group plc Financial Track Record
Economic and Social Track Record
Total Return
What we measure
Growth in EPRA NDV during the year in addition to dividends
paid, as a proportion of EPRA NDV at the beginning of the year.
Link to strategy: 1, 2, 3, 4
EPRA NDV per share
What we measure
A European Public Real Estate Association (“EPRA”) metric that
represents Net Asset Valuation where deferred tax, financial
instruments and certain other adjustments are calculated to the
full extent of their liability.
Link to strategy: 1, 2, 3, 4
Net asset value
What we measure
The value of our assets less the value of our liabilities, based
on IFRS measures, which excludes the mark-to-market value of
development properties.
Net loan to portfolio value (“LTV”)
What we measure
and investments.
Net debt as a proportion of the aggregate value of properties
Number of plots sold to housebuilders
What we measure
The number of plots equivalent to land parcel sales to
housebuilders during the year.
21
1,411
Industrials & logistics space
directly developed (sq. ft)
What we measure
The total amount of space directly developed by Harworth that is
completed during the year.
21
51,000
20
19
18
17
873
1,049
1,379
622
Link to strategy: 2,
27,000
20
19
18
17
402,000
279,000
Link to strategy: 1, 4,
Total residential pipeline (plots)
Total industrial & logistics pipeline (sq. ft)
What we measure
What we measure
The total number of residential plots that could be delivered
from our pipeline, excluding any already sold but including
options and PPAs.
21
30,804
The total amount of industrial & logistics space that could be
delivered from our pipeline, excluding any already built or sold,
but including options and PPAs.
21
28.2m
20
19
18
17
30,668
29,596
20,490
17,836
Link to strategy: 2, 3
20
19
18
17
27.3m
24.4m
21.3m
21.6m
Link to strategy: 1, 3, 4
Proportion of Investment Portfolio that is Grade A
What we measure
Scope 1, Scope 2 and selected
Scope 3 emissions (tonnes CO2e)
What we measure
The proportion of our Investment Portfolio that is classified as
modern Grade A industrial & logistics space
21
11%
Emissions that we need to reduce to zero to achieve by our 2030
Net Zero Carbon target.
21
1,180
9%
20
19
18
17
n/a
n/a
n/a
882
20
19
18
17
2,353
2,734
4,016
Link to strategy: 1, 2, 3, 4
Link to strategy: 4,
Link to strategy: 4,
Potential Gross Value Added (“GVA”) that could be
delivered from our portfolio (£bn)
What we measure
Calculated by Ekosgen, an economic impact consultancy, the
estimated potential GVA of our portfolio once fully built out.
21
4.1
Satisfaction of our employees
What we measure
The proportion of employees who said they were “proud to work
for Harworth” in our annual employee survey.
21
97%
20
19
18
17
3.9
3.5
3.5
2.9
20
19
18
17
93%
90%
88%
87%
Link to strategy: 1, 2, 3, 4
Link to strategy: 3,
Link to strategy:
23
Strategic ReportAnnual Report and Financial Statements 2021 Chair’s
Statement
Defining a strategy is one thing:
delivering on it another. At the
core of our ability to deliver are
our people and the financial
resources we have at our disposal.
Alastair Lyons
Chair
Introduction
Last year, when writing on the subject of business value, I
commented on the Harworth share price standing at a 20%
discount to EPRA NDV*. In considering how to address this I
wrote that “we are clear that the way to narrow this discount is to
trade strongly by delivering a well thought through strategy and to
communicate very clearly our progress and potential to both current
and future investors. These are the key measures of success against
which the Board will assess the achievement of our management”.
I am, therefore, very pleased that at the end of 2021 our share
price represented just a 2% discount to our last reported EPRA
NDV*, testament to a very strong year’s trading and the recognised
demonstration of progress already achieved against the clear and
ambitious strategic objectives set out by Lynda Shillaw, our Chief
Executive, at the time of the interim statement. She articulated her
goal to double the EPRA NDV* of Harworth from £515.9m at the
end of 2020 to in excess of £1bn over the following five to seven
years. After 12 months, supported by strong market tailwinds, a
quarter of that ambition has already been achieved.
Our strategy and its delivery
These revised strategic objectives do not fundamentally alter what
Harworth is: rather they seek to realise greater value and pace
from the core capabilities of our specialist and highly experienced
team in acquiring, assembling, master-planning, and developing
a strategic land bank of primarily large complex sites frequently
requiring fundamental regeneration.
We have no plans to alter materially our historic focus both on the
regions of the North and the Midlands outside city centres and
on the industrial & logistics and residential sectors. We see these
as having strong underlying drivers of growth and, therefore, of
demand for engineered land, whether these be the chronic failure
of housing supply to match demand, the e-tailing revolution that
has been turbo-charged by the pandemic, or the political aim of
levelling up the country between the South and the North.
The management team does, however, plan to take a larger share
of the value chain that we create and to move faster through our
landbank. Hence, we are increasing the direct development of
industrial & logistics stock on our sites to create our own investment
portfolio of modern Grade A buildings. This in turn will allow us
to dispose of those assets from our existing portfolio where we
have already maximised value through the completion of asset
management initiatives. At the end of this year we have 432,000
sq. ft of such development underway and another 191,000 sq.
ft planned to start in 2022. To move through sites faster we are
broadening the range of our residential products in response to
increasing consumer and investor appetite for Build to Rent (BTR)
products. We plan to test this market in 2022 with our first such
portfolio of BTR houses.
Lynda and her team are also planning to increase the scale of what
we do, growing our strategic land portfolio and land promotion
activities. The corollary of a strong market for engineered
land is strong competition for strategic sites capable of such
transformation. That requires us to ensure that those who create
and facilitate land supply know well what Harworth is looking for,
recognise our distinctive capabilities to regenerate and master-
plan sites that would deter others, and trust us to deliver on our
commitments both as to what we say we will do and how quickly
we will do it. We have, therefore, been very pleased to announce
acquisitions such as that of a 107-acre strategic site at Rothwell,
Northamptonshire, on which we plan to directly develop up to 1.5m
sq. ft of Grade A industrial & logistics space in this prime Midlands
industrial location.
24
Strategic ReportHarworth Group plc Strategic Report
Thoresby Vale, Nottinghamshire
Resourcing our strategy
Defining a strategy is one thing: delivering on it another. At the core
of our ability to deliver are our people and the financial resources
we have at our disposal.
We are hugely fortunate to have a team of very experienced and
highly committed people who have achieved excellent results
over the past years. That core team is in turn strongly supported
by those external organisations that supplement our core master-
planning, project management and development. If, however, we
are to tackle more sites and work through them more quickly we
need to grow both that core team and the external support we
contract-in. Hence, from 75 people making up Harworth at the
end of 2020 we entered 2022 with 91. Finding individuals with the
skills, experience, and culture that we require is not easy. Alongside
expanding our leadership team to add the necessary expertise in
such areas as direct development and residential BTR, we are also
committed to growing our own, providing opportunities for young
people to join us and then helping them to develop their skills and
experience to move into more senior roles.
In terms of financial resources we were very pleased to reach
agreement shortly after the year-end on a new five-year Revolving
Credit Facility (RCF) with our existing lenders NatWest and Santander
in which they have been joined by HSBC. The facility in place
during 2021 was increased during the second half of the year, from
its previous level of £130m to £150m, and the new RCF agreed in
2022 was increased to £200m, which in turn follows the growth in
Harworth’s asset value. Whilst this increases the funding we have
available to accelerate through our sites and undertake more direct
development we intend to retain our principle of low financial
gearing, planning only a modest increase in maximum year-end loan
to value from 20% to 25%. We know from our discussions with our
shareholders that our approach to low gearing has their support.
Our Environmental, Social &
Governance (“ESG”) credentials
In early 2020 we established what we call the Harworth Way – the
way in which we deliver on our purpose of investing to transform
land and property into sustainable places where people want to
live and work. We deliver through five principal themes to address
major social, economic and environmental trends: Communities,
Planet, People, Partners and Governance. In turn we map these
elements of the Harworth Way onto the relevant UN Sustainable
Development Goals.
These elements, which are at the heart of how Harworth does
business, are now recognised as the bedrock of a company’s ESG
credentials and I am personally greatly heartened by the speed
with which ESG considerations have moved up the corporate and
financial sector agenda. Investors in both debt and equity now seek
to understand companies’ positions against relevant measures of
their ESG credentials and their plans to develop those credentials
as they deliver against their strategic objectives, whether this be
their environmental credentials in terms of their pathway to Net Zero
Carbon or their social credentials in terms of the diversity of their
boards and businesses. Such considerations are no longer statistics
in the pages of the annual report but core elements by which
businesses are judged.
Last year we established an ESG Committee of the Board and I
am very grateful to Angela Bromfield, our Senior Independent
Director, for her willingness to chair this new committee. Harworth
has a considerable impact on the environment as a developer
and oft times regenerator of strategic land, and on communities
through our bringing forward of substantial commercial and
residential development, often creating whole new communities
where people live and work. How we plan, and take input from
our stakeholders on, that impact is fundamental to what our teams
25
Annual Report and Financial Statements 2021 Chair’s
Statement continued
do every day. A strategic site will often be developed fully over
10 or more years: our teams have to consider now what the world
will need in 10 years’ time as they masterplan the nature of our
developments and their infrastructure.
In considering our impact on the environment and on communities
we must have regard to both what we cause and also the impact of
our supply chain, the tenants in our commercial portfolio, and those
who will live in the developments we make possible. Suffice it to
say these considerations are complex and in many parts uncertain,
whilst there are also sharply contrasting scenarios as to how the
environment may itself be influenced by climate change. Hence
there is a need to create a focal point in the Board process where
these topics can be discussed and strategies agreed, at the same
time establishing oversight over increasingly complex and varied
reporting of these issues. We recognise that defining the pathway
to achieve our Net Zero Carbon objectives and developing
comprehensive TCFD reporting remains work-in-progress, as
it does for many others, but we are committed to maintaining
the achievement of these objectives at the forefront of Board
decision-making.
My thanks
Covid-19 made 2021 another difficult year for our people and
those in the organisations that support us. Working from home
predominated and for some families that meant both parents
seeking to fulfil their work commitments from home alongside
home schooling their children – an almost impossible ask! That we
achieved what we did despite this backdrop is testament to the
commitment and capability of our teams and those who support
them, to all of whom I express my gratitude.
Having had considerable change in our Board last year I was
delighted to have neither departures nor arrivals during 2021.
Within our executive I would like to mark Ian Ball, our Chief
Operating Officer, leaving the business at the end of January after
more than seven years. Having started his career with Harworth
managing our Investment Portfolio and then broadening his role
to have oversight over all our regions’ operating activities, Ian’s
deep commercial understanding of our sites and their potential
has been a mainstay of Harworth: we could not have achieved
what we have without his input and we wish him all the best for the
future. However, as one door closes another opens and we were
very pleased to welcome both Andrew Blackshaw, as our new
Chief Operating Officer, and Jonathan Haigh, who has taken the
new role of Chief Investment Officer. They both have considerable
experience in our sector and are already making a marked
contribution to our business.
I would also thank Nigel Turner, our interim Chief Financial Officer,
for stepping into the big gap left by Kitty Patmore’s maternity leave
– not easy to take the helm of a ship moving at speed with the wind
full in its sails! Our congratulations to Kitty on the birth of her son.
Finally my thanks to Lynda Shillaw, our Chief Executive, for what she
has achieved in her first year with us, redefining Harworth’s strategy
and repositioning our medium-term objectives whilst at the same
time putting in place the resources, human and financial, she needs
to deliver against them, and leading the achievement of a very
strong outturn for the year.
ALASTAIR LYONS
Non-Executive Chair
21 March 2022
* Harworth discloses alternative performance measures (APMs) which are reconciled in
Note 2 to the financial statements.
Bardon Hill, Leicestershire
26
Strategic ReportHarworth Group plc Chief Executive’s
Review
I would like to thank the Harworth team
for their hard work and dedication, for
delivering an outstanding set of results
in 2021, and for stepping up to help to
develop and mobilise our new strategy.
Lynda Shillaw
Chief Executive
Introduction
The end of 2021 marked my first full year at Harworth, one which
has been both exciting and challenging, as we navigated delivering
business as usual, and developing and mobilising a new strategic
plan, through another year which was impacted by Covid-19.
Our results show that 2021 was a very strong year for Harworth both
in terms of our performance - delivering significant growth in EPRA
NDV* and a Total Return* during the period of 24.6%, our highest
annual Total Return on record - and the launch and completion of my
strategic review of the business. This outlined an ambitious growth
strategy, building on the skills of our people and our asset base to
drive growth, maximise returns to investors and grow the size of the
business to £1bn of EPRA NDV* over five to seven years, starting from
the end of 2020.
Our strategy is evolution not revolution, and fundamentally we remain
a business that is regionally focused in the industrial & logistics and
residential sectors. We have a deep understanding of the regions that
we operate in and continue to deploy our specialist skills to assemble
complex sites and work them through the planning process and into
production. Our strategy work has identified the potential of our
landbank to do more, faster, and provides a roadmap to enable us to
scale up the creation of sustainable places where people want to live
and work.
Our markets
The industrial & logistics and residential markets remained buoyant
throughout 2021 and both are still characterised by structural
undersupply. We continued to see a depth of market demand
from occupiers and investors for both built stock and, increasingly,
strategic land within our industrial & logistics portfolio, as well as for
our residential serviced land product.
Investor, occupier and homeowner demand strengthened through
2021, despite cost and supply chain pressures also surfacing,
and our sales during the year were either ahead of, or in line with,
December 2020 valuations, as we continued both to drive value
into our sites through our management activities as well as capture a
strong market in underlying land values. We exchanged on the sales
of our Kellingley development site in North Yorkshire for £54.0m
and Ansty strategic land site in Warwickshire for £53.5m towards
the end of the year. Whilst both conditional, these transactions
highlight the quality and potential of our landbank, also providing
future funds to reinvest to deliver our strategy.
Government policy remains focussed on rebalancing the UK
economy and in particular driving investment into, and the
regeneration and growth of, the economies of the regions. With
the pandemic diverting government resources and focus, the
reality of this on the ground is a slower pace of change than the
expectation set.
The publication of the Integrated Rail Plan and more recently the
Levelling Up White Paper have started to provide more colour and
a framework for business to work within: however, there is much
more to do to bring this to life. Harworth is extremely well placed to
do this: regeneration in the regions is our core skillset, something
that is at the heart of what we do as a business. We have a long track
record of regenerating former brownfield sites successfully, and
we understand better than most how to assemble and remediate
strategic sites and create sustainable places where people want to
live and work. These capabilities are central to our growth to date
and our strategy going forward.
27
Strategic ReportAnnual Report and Financial Statements 2021 Chief Executive’s
Statement continued
Progress against our strategy
Our strategy, outlined in September 2021, set out a clear road map
for our ambition to grow EPRA NDV* from£515.9m at the end of
2020 to £1bn over five to seven years, through:
•
increasing direct development of industrial & logistics stock;
• accelerating sales and broadening the range of our residential
products;
•
•
scaling up land acquisitions and promotion activities; and
repositioning our Investment Portfolio to modern Grade A.
We have made a strong start on our strategic ambition. Our EPRA
NDV* at 31 December 2021 was £637.5m, a 23.5% increase on
31 Dec 2020 (and a 7.9% increase on 30 June 2021). Net assets
increased 18% from £488.7m as at 31 December 2020 to £578.0m
as at 31 December 2021.
Our plans are ramping up to increase direct development from
c.200,000 sq. ft per annum over the past six years, to 800,000 sq.
ft per annum by 2027. During 2021 we delivered and let a 50,800
sq. ft unit at Logistics North and started on site with 432,000 sq. ft in
total at Bardon Hill, Leicestershire and the Advanced Manufacturing
Park (AMP) in Waverley, South Yorkshire. In early 2022 we expect
to begin a further 191,000 sq. ft of development at Gateway 36
in Barnsley, South Yorkshire and the AMP. Also during 2022, we
will begin site preparation works for 2.0m sq. ft of development at
Wingates in Bolton, Greater Manchester and Chatterley Valley in
Staffordshire, and target planning determinations for 2.8m sq. ft at
our Skelton Grange and Gascoigne Wood sites in Yorkshire.
In 2021, we delivered a step change in residential plot sales,
completing 1,411, a 64% increase on our average annual rate
of 862 plots per annum over the past six years, as we start to
move towards our strategic target of 2,000 plot sales per annum.
Sales were achieved across all three of our regions to a range
of different housebuilders, with the largest contributors of plots
being our developments in Moss Nook, Merseyside; Simpson
Park, Nottinghamshire; and South East Coalville, Leicestershire. In
addition, we secured planning consent to deliver c.1,000 residential
plots at our Ironbridge site, and for an additional 500 new homes
across a number of smaller sites. Diversifying our product at
residential sites is a key component of our strategy, and to that end
we recruited James Crow as Head of Mixed Tenure to oversee the
development and launch of our first BTR portfolio in 2022.
We take a long-term view of replenishing our landbank, and our
strategy targets maintaining a 12-15 year land supply throughout
our five year plan period. During 2021, we have been active in
acquiring new sites to replenish our portfolio, adding Rothwell in
Northamptonshire, which has the potential to deliver up to 1.5m sq.
ft of industrial & logistics space, and Staveley in Derbyshire, which is
capable of delivering up to 600 new homes.
Our Investment Portfolio continues to deliver robust operational
metrics, with 99% of rents due in 2021 now collected, and, as at
31 December 2021, a vacancy rate of 2.7% (31 December 2020:
4.5%) and a WAULT of 11.5 years (31 December 2020: 12.5 years).
During the year we completed 696,400 sq. ft of leasing deals,
including 267,500 sq. ft of new lettings. The new lettings included:
(i) a 149,300 sq. ft unit to complete Phase 2 of the Multiply scheme,
triggering further one-off promote fees, amounting to £12m in total,
and (ii) a 50,800 sq. ft unit at Logistics North.
Harworth remains well-capitalised and continues to manage its cash
flows sustainably. As at 31 December 2021, net debt* was £25.7m
(31 December 2020: £71.2m), providing significant headroom
and flexibility. To support our growth strategy, since the year-end
we have completed on a new five-year £200m facility with a £40m
uncommitted accordion. The new facility is provided by NatWest,
Santander, and HSBC, a new lender for Harworth.
ESG is a priority for Harworth, and is embedded into the way that
we work and the developments we deliver. Harworth prides itself
on being a responsible business, and we have continued our work
embedding the Harworth Way through our strategy and operations
during the year with particular focus on the design and carbon use
in operation of the logistics assets that we build.
Throughout the year we have been working with our Board ESG
Committee to ensure that the ESG targets and metrics that we set
and measure ourselves against going forward are right for Harworth.
This has culminated in the identification of eight Focus Impact Areas,
centred around the Communities, Planet and People pillars of The
Harworth Way. These will inform our ESG approach in the coming
years, and we intend to report our progress against them regularly.
Through the work that we undertook in 2021, we have also
recognised the need to increase ESG resources in the business, and
are delighted that after a short sabbatical, Peter Henry will return
to the business as Director of Sustainability, to lead our work in this
important area.
People
In my first Chief Executive’s Review last year I highlighted the
capabilities and resilience of Harworth people and that the culture
of the business is apparent in everything that we do. I believe that
these characteristics set us apart as a business, and while 2021
has been another challenging year as we have scaled up and have
started to implement our strategy, these fundamentals have again
shone through.
However, I recognise that it is not just about our growth strategy:
change is unsettling for people within any organisation and
managing the development of a new strategy and change through
video calls is difficult. We have made a great start, but there is still
much to do to deliver on the opportunities that we have identified
and show the world what we are capable of.
Front and centre of this is ensuring that we have the right level of
skills and resources in the business, the right culture, and that we are
a great place to work. We have been successful in hiring 16 great
people into our business during 2021 to support the delivery of our
strategy and I would like to welcome to the senior leadership team:
28
Strategic ReportHarworth Group plc Andrew Blackshaw as Chief Operating Officer; Jonathan Haigh as
Chief Investment Officer; and Haroon Akram as Director of Strategy,
Investment and Business Development. It has not just been about
new hires though: we have also focussed on the talent within the
business, ensuring that there are opportunities for individuals to
thrive and develop, and we have made a number of promotions and
enabled departmental moves as a result.
During the year, we have reviewed most of our policies, from
Diversity and Inclusion through to Maternity, Adoption, Paternity
and Shared Parental leave, to ensure that they are at the market
leading end of the spectrum, as well as introducing a salary sacrifice
car scheme for low or zero emission vehicles. One of the most
significant policy changes during the year was the introduction of
hybrid working, which enables our people to work more flexibly
and underpins our focus on wellbeing and ensuring that they have
more choice as to where they work and when they start and finish
their day. Another significant change is focused on widening share
ownership within the business and from 2022 we are proposing to
extend the scale and application of our Restricted Share Plan and
Share Incentive Plan, reaching all employees in our business.
At Harworth, how we lead, our behaviours and the culture that we
are part of are things that we are immensely proud of, and I am really
pleased to highlight that in our recent engagement survey 97% of
people said they were proud to work for Harworth, and 93% of
people said they would recommend Harworth as a good place
to work.
Outlook
Our 2021 results build on our strong performance in 2020 and
highlight both the demand for our focus sectors and the resilience
of our business model. Our new strategy builds on our existing
strengths, capabilities and scale, and unlocks the potential within
our strategic landbank, delivering growth and sustainable returns
to investors. We have created a clear plan to reach £1bn of EPRA
NDV* over five to seven years. Our focus is now fully on the
execution of the strategy, but I am acutely aware that, for a strategic
land business, it is a marathon, not a sprint, and the flying start
presented by our 2021 results will moderate as we move through
the cycle – some of our sites take in excess of a decade to assemble
and deliver. My focus is on ensuring that, as we work through our
plans, the team has the skills and resources to deliver consistently
and successfully, sustainably growing the business and delivering
returns through the cycle.
The early months of 2022 have been extraordinary. Against the
backdrop of continued strong demand for our products we are
seeing rising inflation and interest rates in the UK, and a war in
Europe, which has potentially wide-reaching implications in the
near term for Western European economies, particular in our energy
and some core commodity markets. Our core markets are currently
performing well, but are not immune to global supply issues, or any
downturn in the economy driven by a combination of global and UK
economic factors. Government policy remains focused on driving
up regional investment and growth and delivering a more equal
balance of economic outcomes and opportunities for UK citizens.
Looking forward, overall commercial property returns are expected
to be lower in 2022. The industrial sector is still expected to
continue to perform well, driven by a huge weight of capital seeking
access occupiers chasing finite available stock, causing record
low void rates. The shortage in supply of new homes seen in 2021
pushed prices higher and this has continued into 2022. Order
books and demand for developable land from housebuilders, and
rental product from investors, are robust, with prices rising ahead of
inflation and cost increases, and the end of the stamp duty holiday
having remarkably little impact on buyer demand. The sector does
however face some headwinds as interest rates rise, the cladding
repair crisis remains unresolved and the sector digests the changes
to Building Regulations and the Future Homes Standards pathway.
We remain a resilient, well capitalised, through-the-cycle business
and we have made a great start as we step into the delivery of our
strategy, doing what Harworth does best – creating sustainable
places where people want to live and work.
What Harworth does in the regions and how we do it matters. I
believe that Harworth has both a track record of delivery and a deep
understanding of what it takes to successfully deliver large scale
regeneration and that we can, therefore, play a key role in helping
local and central Government to deliver on their core agendas on
housing, levelling up and the green economy.
Conclusion
I have had a very enjoyable first year as Chief Executive of Harworth,
and this is because of the people in our business. I would like to
thank the Harworth team for their hard work and dedication, for
delivering an outstanding set of results in 2021, and for stepping up
to help to develop and mobilise our new strategy.
I would also like to thank Ian Ball, our former Chief Operating Officer
who left the business in January, for the invaluable support that he
has provided to me and his service to the business over the last
seven years. I also extend a thank you to Nigel Turner, who joined us
as Interim Chief Financial Officer to cover Kitty’s maternity leave, and
to welcome Kitty back into the business.
I am excited by our strategy and extremely proud to lead Harworth
and to work with such a talented team.
LYNDA SHILLAW
Chief Executive
21 March 2022
* Harworth discloses both statutory and alternative performance measures (APMs).
A full description and reconciliation to the APMs is set out in Note 2 to the
financial statements.
29
Strategic ReportAnnual Report and Financial Statements 2021
Operational
Review
Industrial & logistics land portfolio
At 31 December 2021, the industrial & logistics pipeline totalled
28.2m sq. ft (31 December 2020: 27.3m), of which 7.3m sq. ft was
consented (31 December 2020: 9.2m sq. ft), and 6.1m sq. ft was in the
planning system awaiting determination (31 December 2020: 1.3m sq.
ft). At the same date, the pipeline was 76% owned freehold, while 24%
related to PPAs or Options.
Acquisitions and land assembly
Direct development
During the year, completed industrial & logistics land acquisitions
totalled £10.6m. A large proportion of this related to the
freehold acquisition in November of a 107-acre site in Rothwell,
Northamptonshire. Located at Junction 3 of the A14, connecting to the
A6, the site has a strong strategic position within the prime Midlands
industrial location known as the “Golden Triangle”. Harworth will
work with local stakeholders, including the newly-formed North
Northamptonshire unitary authority, to bring forward a planning
application for 1.5m sq. ft of Grade A industrial & logistics space.
The remainder related to land assembly works at Harworth’s Ansty
strategic land site in Warwickshire. Contracts were exchanged for
the conditional sale of the entire site in December 2021.
Planning
During the year, Harworth submitted planning applications for 6.1m
sq. ft of industrial & logistics space, including:
• Gascoigne Wood, North Yorkshire: This 185-acre former colliery
site benefits from an existing rail connection and close proximity
to the A1(M) and M62. Revised plans have been submitted for
2.0m sq. ft of rail-linked industrial & logistics space at the site.
• Skelton Grange, Leeds, West Yorkshire: Formerly the location
of Skelton Grange Power Station, this 50-acre site was acquired
by Harworth in 2014 and is adjacent to Junction 45 of the M1, to
the south-east of Leeds city centre. Plans have been submitted
for 800,000 sq. ft of space across five units, in addition to
infrastructure upgrades, new cycle ways and footpaths, and
ecological enhancements.
Planning was secured by Harworth during the year for 1.3m sq.
ft of industrial & logistics space. The majority of this related to the
Wingates development site in Bolton, Greater Manchester. In June,
planning consent was granted for 1.1m sq. ft of space at the site,
which is adjacent to Junction 6 of the M61, in close proximity to
Harworth’s now-completed Logistics North development.
In September, construction commenced at the Bardon Hill site in
Leicestershire, which will see the direct development by Harworth
of 332,000 sq. ft of logistics and manufacturing space across six
units. The development is expected to reach practical completion in
the second half of 2022, resulting in a total GDV of between £40m
and £50m. Harworth is also currently underway with the delivery of
a 100,000 sq. ft facility at the AMP in Waverley, South Yorkshire, on
behalf of sportswear manufacturer SBD Apparel.
In May, practical completion was reached on LN50, a 50,800 sq. ft
unit at Logistics North, concluding Harworth’s eight-year build-out
of the development site. LN50 was designed, built and future-
proofed to allow it to be Net Zero Carbon in operation, and was let
to a manufacturing occupier after the year-end.
Land sales
Harworth completed £18.1m of industrial & logistics land sales during
the year, at prices above or in line with 31 December 2020 valuations.
The largest disposal was of a 24-acre land parcel at Gateway 36 in
Barnsley, South Yorkshire, to Firethorn for £11.6m. The land parcel
represents Phase 3 of the development and will be used to develop a
BREEAM “Excellent” rated 340,000 sq. ft logistics facility.
At year-end there were two significant land sales on which Harworth
had conditionally exchanged contracts:
• Kellingley, North Yorkshire: The sale of the development site
was agreed for £54.0m. The transaction will only complete
if all sale conditions are satisfied prior to the transaction’s
long-stop date of 31 August 2022. These conditions include,
but are not limited to, the approval of a reserved matters
planning application, which is submitted and currently awaiting
determination.
• Ansty, Warwickshire: The sale of this strategic land site was
agreed for £53.5m. The completion of this transaction is
conditional on the granting of a hybrid planning permission,
which is to be submitted by Harworth and the purchaser. The
planning application is expected to be submitted later this year,
with a determination in 2023.
30
Strategic ReportHarworth Group plc Strategic Report
Moss Nook, Merseyside
Residential land portfolio
As at 31 December 2021, the residential pipeline had the potential to
deliver 30,804 housing plots (31 December 2020: 30,668), of which
9,978 were consented (31 December 2020: 9,355), and 811 were in the
planning system awaiting determination (31 December 2020: 2,536).
At the same date, the pipeline was 55% owned freehold, while 45% was
subject to PPAs, Options or Overages.
Acquisitions and land assembly
During the year, completed residential land acquisitions totalled
£3.8m. The largest purchase was the freehold acquisition in
December of a 133-acre brownfield site in Staveley, Derbyshire.
The site is located in the Staveley & Rother Valley Corridor, which
is allocated to deliver up to 1,500 new dwelling and employment
opportunities in Chesterfield Borough Council’s Local Plan. We
intend to leverage our placemaking skills to deliver 600 homes,
alongside new green spaces, a retail hub and other amenities.
Planning
In September, planning was secured for a 1,000-home mixed use
development at Ironbridge, Shropshire. The 350-acre former power
station site was acquired by Harworth in June 2018. Alongside
new homes, the development will deliver up to 0.2m sq. ft of
employment space, a retirement village, and a local centre offering
convenience retail and other services. Demolition works to remove
the power station structures were largely completed by year-end,
and enabling works for the first phase of development at the site
began in early 2022.
Planning was also secured for up to 500 homes across a number of
smaller sites in the portfolio. This included approvals for: up to 250
new homes at a 25-acre site in Awsworth, Nottinghamshire; up to
132 new homes in Little Lever, Bolton, on a former industrial site that
was acquired by Harworth in 2020; and up to 118 homes on a site in
Birdwell, South Yorkshire.
Plot sales
During the year, completed residential land sales grew significantly
to 1,411 plots (2020: 873 plots). Sales were either in line with, or
ahead of, 31 December 2020 valuations. Sales were made to a
range of different housebuilders across eight sites, including: Moss
Nook, Merseyside; Simpson Park, Nottinghamshire; and South
East Coalville, Leicestershire. The headline sales prices ranged from
£30k to £73k per serviced plot (2020: £37k to £70k).
31
Annual Report and Financial Statements 2021 Operational
Review continued
Investment Portfolio
The Investment Portfolio, previously referred to as the Business Space
portfolio, mainly comprises industrial & logistics assets that have been
directly developed and retained, and standing assets that have been
acquired. This portfolio provides recurring rental income in addition to
providing asset management opportunities and the potential for capital
value growth.
In September, Harworth completed the letting of a further plot at
Multiply Logistics North, with planning permission for a 131,300
sq. ft industrial unit. The plot represented Phase 3 of Multiply and
the completion of the development, triggering significant one-off
promote fees.
Across the Investment Portfolio, operational metrics remain strong,
with 99% of rents falling due in the year collected, vacancy falling
to 2.7% as at 31 December 2021 (31 December 2020: 4.5%), and
a sustainable weighted average unexpired lease term (“WAULT”)
of 11.5 years as at 31 December 2021 (31 December 2020: 12.5
years).
From 2022, Harworth will adjust the calculation of its Investment
Portfolio vacancy to align it with the EPRA best practice guidelines,
which use the ERV of vacant space rather than sq. ft. Based on this
calculation, Investment Portfolio vacancy as at 31 December 2021
was 4.1%.
Sales
Completed Investment Portfolio sales totalled £8.8m during
the year, at prices in line with, or ahead of 31 December 2020
valuations, and representing a net initial yield of 5.1%. These
disposals were mainly of mature assets where asset management or
development initiatives had been completed.
As at 31 December 2021, the Investment Portfolio comprised 18
sites covering 3.7m sq. ft. (31 December 2020: 19 sites covering
3.4m sq. ft). It generated £18.0m of annualised rent (31 December
2020: £15.7m), equating to a gross yield of 6.5% (31 December
2020: 6.8%) and a net initial yield of 5.6% (31 December 2020:
6.1%). Grade A space represented 11% of the portfolio (31
December 2020: 9%).
Acquisitions
In March, Harworth acquired Towngate Business Park, Widnes
for £12.7m, reflecting a net initial yield of 7.1% and a reversionary
yield of 9.4%. The asset comprises 262,000 sq. ft of fully-let
industrial space across nine industrial units, with easy access to the
M62. Harworth will leverage its asset management expertise to
capture rental reversion at the site and explore infill development
opportunities over the medium term.
Asset management
During the year we completed 696,400 sq. ft of leasing deals,
including 267,500 sq. ft of new lettings. Lease renewals and regears
were completed at terms which, on average, represented a 28%
uplift to previous passing rents. New lettings were completed on
terms in line with, or ahead of estimated rental values (ERVs). Most of
this activity related to two transactions at Logistics North: the letting in
June of a 149,300 sq. ft Grade A warehouse as part of Phase 2 of the
Company’s Multiply Joint Venture (Multiply) with the LPPI Real Estate
Fund; and the letting of LN50.
Natural Resources portfolio
The Natural Resources portfolio comprises sites used for a wide
range of energy production and extraction purposes, including
wind and solar energy schemes, battery storage and methane
capture. Sales from this portfolio during the year totalled £13.9m,
with sales prices ahead of 31 December 2020 valuations. These
sites included the former Harworth Tip in Nottinghamshire, the
former Alcan smelter at Lynefield Park, Northumberland and the
former North Selby Mine.
32
Strategic ReportHarworth Group plc Annual Report and Financial Statements 2021
33
Strategic Report Our 2021 performance was the
result of strong operational delivery,
good progress towards our strategic
objectives, a resilient residential market
and buoyant demand for industrial &
logistics land and properties.
Kitty Patmore
Chief Financial Officer
Over the year, the net asset value grew to £578.0m (31 December
2020: £488.7m). With EPRA adjustments for development property
valuations included, EPRA NDV* at 31 December 2021 was
£637.5m (31 December 2020: £515.9m) representing a per share
increase of 23.5% to 197.6p (31 December 2020: 160.0p).
The Group has declared a final dividend of 0.845p per share,
bringing the total dividend per share for 2021 to 1.212p,
representing 10% underlying growth from 2020, in line with our
dividend policy.
During 2021, the Group’s RCF was increased from £130m to
£150m and maturity extended to February 2024. In early 2022,
a new five-year £200m RCF was agreed with a £40m uncommitted
accordion facility. We welcome HSBC to our lender syndicate
alongside existing lenders NatWest and Santander. This new facility
provides more flexibility and the additional liquidity will support the
delivery of our growth strategy.
Financial
Review
Overview
Our Total Return* (the movement in EPRA NDV* plus dividends
per share paid in the year expressed as a percentage of opening
EPRA NDV per share) for 2021 was 24.6% (2020: 3.0%), our highest
annual Total Return to date and a significant increase on 2020,
which was especially impacted by Covid-19. Our 2021 performance
was the result of strong operational delivery, good progress towards
our strategic objectives, a resilient residential market and buoyant
demand for industrial & logistics land and properties.
Sales of serviced land and property, in addition to income from rent,
royalties and fees, resulted in Group revenue of £109.9m (2020:
£70.0m). This increase derived from accelerated serviced land
sales in line with our growth strategy as well as some rephasing of
serviced land sales during the Covid-19 pandemic. Rent collection
remained strong, driven by new acquisitions in 2020 and asset
management initiatives. Included within the £109.9m, there were
one-off promote fees totalling £12.0m at Multiply Logistics North.
Looking forward, the sales profile is robust with 36% of 2022
budgeted sales by value already agreed or exchanged.
BNP Paribas and Savills, our independent valuers, completed a
full valuation of our portfolio as at 31 December 2021, resulting
in valuation gains* during the year of £148.0m (2020: £15.6m),
including the movement in the market value of development
properties, in addition to profit on sales of £12.5m (2020: £6.7m).
These external independent valuations demonstrate the strength
of the industrial & logistics market for both investment properties
and development land, as well as continued demand for residential
serviced land.
The fair value of investment properties increased by £84.0m (2020:
£25.4m), which contributed to an operating profit of £121.9m
(2020: £27.8m) and a profit after tax of £94.0m (2020: £25.9m).
34
Strategic ReportHarworth Group plc Presentation of financial information
As our property portfolio includes development properties and joint venture arrangements, Alternative Performance Measures (APMs) can
provide valuable insight into our business alongside statutory measures. In particular, revaluation gains on development properties are not
recognised in the Consolidated Income Statement and Balance Sheet. The APMs outlined below measure movements in development
property revaluations, overages and joint ventures. We believe that these APMs assist in providing stakeholders with additional useful
disclosure on the underlying trends, performance and position of the Group.
Our key APMs are:
• Total Return: the movement in EPRA NDV plus dividends per share paid in the year expressed as a percentage of opening EPRA NDV
per share
• EPRA NDV per share: EPRA NDV aims to represent shareholder value under an orderly sale of the business, where deferred tax, financial
instruments and certain other adjustments are calculated to the full extent of their liability net of any resulting tax. EPRA NDV per share is
EPRA NDV divided by the number of shares in issue at the end of the period, less shares held by the Employee Benefit Trust or Yorkshire
Building Society to satisfy Long Term Incentive Plan and Share Incentive Plan awards
• Value gains: these are the realised profits from the sales of properties and unrealised profits from property valuation movements
including joint ventures, and the mark-to-market movement on development properties and overages
• Net loan to portfolio value: Group debt net of cash held expressed as a percentage of portfolio value
*A full description of all non-statutory measures and reconciliations between all statutory and non-statutory measures are provided in Note 2
to the consolidated financial statements.
Profit excluding value gains* (PEVG) is no longer included as a key APM from 2021 as it forms part of the EPRA NDV* per share and Total
Return* key APMs but is a non-material component of these measures. PEVG is defined as property net rental, royalty and fee income, net of
running costs of the business (adjusted operating profit): this represents the underlying profitability of the business excluding property value
gains or profits from the sales of properties.
Our financial reporting is aligned to our business units of Capital Growth and Income Generation with items which are not directly allocated
to specific business activities, held centrally and presented separately.
Income Statement
2021
Capital
Growth
£m
81.1
(53.1)
28.0
(3.4)
57.5
–
82.2
4.5
0.2
86.9
–
86.9
Income
Generation
£m
28.8
(8.1)
20.7
(2.1)
35.0
–
53.5
4.7
–
58.2
–
58.2
Central
Overheads
£m
–
–
–
(13.7)
–
(0.1)
(13.8)
–
(4.1)
(17.9)
(33.2)
(51.1)
2020
Capital
Growth
£m
49.6
(56.2)
(6.6)
(3.1)
12.6
–
2.9
8.0
0.4
11.3
–
11.3
Income
Generation
£m
20.4
(3.2)
17.2
(1.9)
19.1
–
34.4
0.7
–
35.1
–
35.1
Central
Overheads
£m
–
–
–
(9.6)
–
(0.1)
(9.7)
–
(3.5)
(13.2)
(7.5)
(20.7)
Total
£m
109.9
(61.2)
48.7
(19.2)
92.5
(0.1)
121.9
9.2
(3.9)
127.2
(33.2)
94.0
Total
£m
70.0
(59.4)
10.6
(14.5)
31.7
(0.1)
27.8
8.7
(3.1)
33.4
(7.5)
25.9
Revenue
Cost of sales
Gross profit/(loss)
Administrative expenses
Other gains
Other operating expense
Operating profit/(loss)
Share of profit of JVs
Net interest expense
Profit/(loss) before tax
Tax charge
Profit/(loss) after tax
Note: There are minor differences on some totals due to roundings
Revenue in the year was £109.9m (2020: £70.0m), of which Capital Growth contributed £81.1m (2020: £49.6m) and Income Generation
contributed £28.8m (2020: £20.4m).
Capital Growth revenue, which primarily relates to the sale of development properties, increased reflecting accelerated land sales under the
new strategy as well as due to Covid-19, which had a subsequent impact on development programmes and resulted in a catch-up of sales in
2021. Capital Growth revenue also includes a £12.0m promote fee from our now completed Multiply joint venture at Logistics North.
35
Strategic ReportAnnual Report and Financial Statements 2021 Financial
Review continued
Revenue from Income Generation (the Investment Portfolio, previously known as Business Space, and the Natural Resources portfolio) mainly
comprises property rental and royalty income. Revenue of £28.8m (2020: £20.4m) was higher as a result of increased rental income from
property acquisitions and asset management initiatives which drove rent increases. Rental income from the Investment Portfolio increased on an
annualised basis from £15.7m to £18.0m in 2021 following new lettings, re-gears and the acquisition of Towngate Business Park, Widnes.
Cost of sales comprises the inventory cost of development property sales and the direct costs of the Income Generation business. Cost of
sales increased to £61.2m (2020: £59.4m) of which £55.1m related to the inventory cost of development property sales (2020: £43.9m).
In the year, we saw a reduction in the net realisable value provision on development properties of £5.2m (2020: £10.4m increase) following
the valuation process as at 31 December 2021.
Administrative expenses increased in the year by £4.7m. This was due to higher salary expenses, resulting from increased employee
numbers, and higher bonus costs for 2021, increased insurance costs following the 2021 insurance renewal driven by changes in the
insurance market, and costs incurred as part of the strategy review of the business. Administrative expenses expressed as a percentage of
revenue decreased from 21% in 2020 to 17% in 2021 reflecting the acceleration in activity relating to sales of development property as well
as the promote fee from the Multiply joint venture at Logistics North.
Other gains comprised an £85.0m (2020: £25.1m) net increase in the fair value of investment properties and assets held for sale (AHFS)
plus the profit on sale of investment properties, AHFS and overages of £7.4m (2020: £6.6m).
Joint venture profits of £9.2m (2020: £8.7m) were largely a result of an increase in the value of the Multiply Logistics North site (£4.7m) and
Aire Valley Land (£4.5m). Value gains/(losses) on a non-statutory basis are outlined below.
Non-statutory value gains/(losses)
Value gains/(losses) are made up of profit on sale, revaluation gains/(losses) on investment properties (including joint ventures), and
revaluation gains/(losses) on development properties, AHFS and overages. A reconciliation between statutory and non-statutory value
gains can be found in Note 2 to the financial statements.
£m
Categorisation
Profit on sale
2021
Revaluation
gains/(losses)
2020
2021
2020
Total
Profit on sale
Revaluation
gains/(losses)
Total
Total
valuation
Total
valuation
Capital Growth
Major
Developments
Strategic
Land
Income Generation
Investment
Portfolio
Natural
Resources
Agricultural
Land
Total
Mixed
Investment
Investment
Investment
Investment
6.6
1.1
0.1
3.5
79.4
86.0
34.4
35.5
0.1
6.1
(10.4)
(10.3)
308.2
248.1
6.5
12.6
144.0
96.2
36.2
36.3
(0.2)
14.8
14.6
277.5
227.6
(1.9)
1.6
1.2
12.5
(0.2)
148.0
1.1
160.5
0.0
0.7
6.7
5.1
5.1
30.6
38.3
(0.4)
15.6
0.3
22.3
5.4
765.7
8.0
618.2
Notes: A full description and reconciliation of the APMs is included in Note 2 to the consolidated financial statements. There are some minor differences on some totals due
to roundings
36
Strategic ReportHarworth Group plc
Profit on sale of £12.5m (2020: £6.7m) reflected the completion of sales above book value. Non-statutory revaluation gains* were £148.0m
(2020: £15.6m) and are outlined in the table below.
Increase in fair value of investment properties
Increase/(decrease) in value of assets held for sale
Movement in net realisable value provision on development properties
Contribution to statutory operating profit
Share of profit of joint ventures, net of impairment
Unrealised gains/(losses) on development properties and overages
Total non-statutory revaluation gains*
2021
£m
84.0
1.1
2.8
87.9
9.2
50.9
148.0
2020
£m
25.4
(0.3)
(11.8)
13.3
8.7
(6.4)
15.6
The principal revaluation gains and losses across the divisions reflected the following:
• Major Developments: the major contribution came from industrial & logistics development sites with planning permission including the
conditional sale at our Kellingley development, alongside robust housebuilder demand for residential sites;
• Strategic Land: increased market appetite, in particular for industrial & logistics sites including the conditional sale of Ansty, as well as
planning permission received at our Wingates and Ironbridge sites;
•
Investment Portfolio: strong rent collection and good letting progress achieved across our portfolio reducing vacancy with increased
demand for industrial & logistics properties;
• Natural Resources: valuations remained broadly consistent with minor valuation decline in the waste and recycling portfolio; and
• Agricultural Land: profits achieved on sales
The net realisable value provision on development properties as at 31 December 2021 was £12.2m (31 December 2020: £17.3m). This
provision is held to reduce the value of six development properties from their deemed cost (the fair value at which they were transferred
from an investment to a development categorisation) to their net realisable value at 31 December 2021. The transfer from Investment to
development property takes place once planning is secured and development with a view to sale has commenced.
Cash and sales
The Group made property sales in the year of £108.3m (2020: £75.8m), achieving a total profit on sale of £12.5m (2020: £6.7m). Sales
comprised residential plot sales of £64.9m (2020: £44.4m), industrial & logistics land sales of £18.1m (2020: £15.4m) and sales of other,
mainly mature, income-generating sites and agricultural land, of £25.3m (2020: £16.0m)
Cash proceeds from sales in the period were £114.5m (2020: £83.8m) as shown in the table below:
Total property sales1
Less deferred consideration on sales in the year
Add receipt of deferred consideration from sales in prior years
Total cash proceeds
2021
£m
108.3
(27.4)
33.6
114.5
2020
£m
75.8
(21.6)
29.6
83.8
1 A full description and reconciliation of APMs is included in Note 2 to the consolidated financial statements.
Tax
The income statement charge for taxation for the period was £33.2m (2020: £7.5m) which comprised a current year tax charge of £6.4m
(2020: £0.4m credit) and a deferred tax charge of £26.8m (2020: £7.9m).
The current tax charge resulted primarily from profits from the sale of development properties, investment property, AHFS and PEVG.
The increase in deferred tax largely relates to unrealised gains on investment properties. In addition, the March 2021 Budget announced
a further increase to the main rate of corporation tax to 25% effective from April 2023. This increase was substantively enacted on 24 May
2021. As such, the deferred tax balance has been calculated using either 19% or 25%, dependent on the rate expected to apply on the
date the liability is reversed. The deferred tax movement resulting from the impact of the tax rate change was £10.7m.
At 31 December 2021, the Group had deferred tax liabilities of £46.9m (31 December 2020: £23.1m) and deferred tax assets of £4.3m
(31 December 2020: £7.3m). The net deferred tax liability was £42.6m (31 December2020: £15.8m).
37
Strategic ReportAnnual Report and Financial Statements 2021
Financial
Review continued
Basic earnings per share and dividends
Basic earnings per share for the year increased to 29.1p (2020: 8.0p) reflecting the increase in the valuation of the land and property
portfolio as at 31 December 2021.
In addition to the interim dividend of 0.367p, the Board has determined that it is appropriate for a final dividend of 0.845p (2020: 1.466p)
per share to be paid, bringing the total dividend for the year to 1.212p (2020: 1.800p) per share. The 2020 final dividend was increased
to reflect the cancelled final 2019 dividend excluding which, the 2020 dividends totalled 1.102p per share. Given this, the recommended
2021 final dividend and 2021 total dividend represent a 10% increase in line with our dividend policy. There is no change to the current
dividend policy to continue to grow dividends by 10% each year.
Property categorisation
Until sites receive planning permission and their future use has been determined, our view is that the land is held for a currently
undetermined future use and should therefore be held as investment property. We categorise properties and land that have received
planning permission, and where development with a view to sale has commenced, as development properties.
As at 31 December 2021, the balance sheet value of all our development properties was £172.7m (2020: £177.7m) and their independent
valuation by BNP Paribas was £245.2m, reflecting a £72.5m cumulative uplift in value since they were classified as development properties.
In order to highlight the market value of development properties, and overages, and to be consistent with how we state our investment
properties, we use EPRA NDV*, which includes the market value of development properties and overages less notional deferred tax, as our
primary net assets metric.
Net asset value
Properties1
Cash
Trade and other receivables
Other assets
Total assets
Gross borrowings
Deferred tax liability
Derivative financial instruments
Other liabilities
Statutory net assets
Mark to market value adjustment on development properties and overages less notional deferred tax2
EPRA NDV2
Number of shares in issue less Employee Benefit Trust & YBS3 held shares
EPRA NDV per share2
1 Properties include investment properties, development properties, AHFS, occupied properties and investment in joint ventures
2 A full description and reconciliation of the APMs in the above table is included in Note 2 to the consolidated financial statements
3 Yorkshire Building Society
31 Dec 2021
£m
689.8
12.0
55.1
5.3
762.2
37.8
42.6
0.2
103.6
578.0
59.5
637.5
31 Dec 2020
£m
584.5
12.7
56.4
5.4
659.0
83.9
15.8
0.8
69.8
488.7
27.2
515.9
322,539,284 322,410,320
160.0p
197.6p
EPRA NDV* at 31 December 2021 was £637.5m (31 December 2020: £515.9m) which includes the mark to market adjustment on the value
of the development properties and overages. The total portfolio value as at 31 December 2021 was £765.7m, an increase of £147.5m from
31 December 2020 (£618.2m).
The Group’s share of profit from joint ventures resulted in investments in joint ventures increasing to £36.1m (31 December 2020: £25.3m).
Trade and other receivables include deferred consideration on sales as set out above. At 31 December 2021, deferred consideration of
£27.4m (31 December 2020: £33.5m) was outstanding, of which 84% is due within one year.
38
Strategic ReportHarworth Group plc
Advanced Manufacturing Park, Rotherham
The table below sets out our top ten sites by value, which represent 44% of our total portfolio, showing the total acres for each site and split
according to their categorisation, including currently consented residential plots and commercial space:
Site
Site type
Categorisation in
balance sheet
Region
Progress to date
South East Coalville
Major Development
Development
Midlands
Nufarm
Investment Portfolio
Investment
Kellingley1
Major Development
Development
Waverley
Major Development
Development
Waverley AMP
Investment Portfolio
Investment
Yorkshire &
Central
Yorkshire &
Central
Yorkshire &
Central
Yorkshire &
Central
2,016 residential units consented, land
sold representing 679 units
–
1.4m sq. ft of industrial & logistics space
consented, less than 0.1m sq. ft sold
3,890 residential units consented, land
sold representing 1,886 units
2.1m sq. ft of industrial & logistics space
consented, 1.6m built or sold
Knowsley
Ansty1
Investment Portfolio
Investment
North West
–
Strategic Land
Investment
Midlands
Ironbridge
Major Development
Investment
Midlands
Proposed industrial & logistics site,
planning not yet submitted
1,000 residential units consented, enabling
works commenced
Four Oaks Business Park
Investment Portfolio
Investment
North West
–
Pheasant Hill Park
Major Development
Development
Yorkshire &
Central
1,200 residential units consented, land
sold representing 540 units
(1) Contracts had been conditionally exchanged for the sale of the site at year-end
Financing strategy
Harworth’s financing strategy remains to be prudently geared. The Income Generation portfolio provides a recurring income source to service
debt facilities and this is supplemented by proceeds from sales. The Group has an established sales track record that has been built up since
re-listing in 2015.
To deliver its strategic plan, the Group has adopted a target net loan to portfolio value* at year end of below 20%, with a maximum of
25%. As a principle, the Group will seek to maintain its cash flows in balance by funding the majority of infrastructure expenditure through
disposal proceeds whilst allowing for growth in the portfolio.
The Group intends to continue to enter into site-specific development and infrastructure loans alongside the main banking facilities to
support its growth strategy.
39
Strategic ReportAnnual Report and Financial Statements 2021 Financial
Review continued
Debt facilities
An RCF (the Original RCF) with NatWest and Santander has been in place since 2015. During 2021, this Original RCF was increased from
£130m to £150m in support of the strategy set out in the Group’s interim results in September 2021 and expiry date extended to February
2024. Since the 2021 year-end, we have entered into a new five year £200m RCF (the New RCF), with a £40m uncommitted accordion
option, which replaces the Original RCF. NatWest and Santander continue to support us in the New RCF and we welcome HSBC to our
banking group. The New RCF is aligned to the Group’s strategy and provides significant additional liquidity and flexibility to enable it to
pursue its strategic objectives. The interest rate of the New RCF is on an LTV ratchet mechanism with a margin payable above SONIA in the
range of 2.25% to 2.50%.
As part of its funding structure, the Group also uses infrastructure financing provided by public bodies and site-specific direct development
loans to promote the development of major sites and bring forwards the development of logistics units. Consistent with this, during the year
the Group signed three new facilities totalling £37.6m to fund the development of logistics units at Bardon Hill, Leicestershire (£23.5m),
Gateway 36 in Barnsley (£7.5m) and the AMP at Waverley, South Yorkshire (£6.6m).
The Group had borrowings and loans of £37.8m at 31 December 2021 (2020: £83.9m), being the Original RCF drawn balance (net of
capitalised loan fees) of £33.3m (2020: £79.7m) and infrastructure or direct development loans (net of capitalised loan fees) of £4.5m (2020:
£4.2m). The Group’s cash balances at 31 December 2021 were £12.0m (2020: £12.7m). The resulting net debt was £25.7m (2020: £71.2m).
Net debt* decreased with the completion of serviced land and property sales. The movements in net debt over the year are shown below:
Opening net debt as at 1 January
Cash inflow from operations
Property expenditure and acquisitions
Disposal of investment property, AHFS and overages
Investments in and distributions from joint ventures
Interest and loan arrangement fees
Dividends paid
Tax paid
Other cash and non-cash movements
Closing net debt as at 31 December
2021
£m
71.2
(57.0)
41.0
(44.5)
1.6
4.6
5.9
3.6
(0.7)
25.7
2020
£m
70.9
(25.8)
56.1
(27.7)
(8.6)
3.4
1.1
2.1
(0.4)
71.2
The weighted average cost of debt, using an end of month average 2021 balance and 31 December 2021 rates, was 2.90% with a 0.9%
non-utilisation fee on undrawn RCF amounts (2020: 2.70% with a 0.9% non-utilisation fee).
From 2022, the Group’s hedging strategy to manage its exposure to interest rate risk will be to hedge the lower of around half its average
debt during the year or its net debt balance at year end. At 31 December 2021 the Group had a £45m fixed rate interest swap (maturing in
2022) at an all-in cost of 1.2% (including fees) on top of the existing margin paid under the RCF. The interest rate swap is hedge accounted
with any unrealised movements going through reserves to the extent that the hedge is effective. With the completion of the New RCF in
early 2022, the fixed rate interest swap was terminated concurrently. New hedging will be put in place over 2022.
As at 31 December 2021, the Group’s gross loan to portfolio value was 4.9% (31 December 2020: 13.6%) and net loan to portfolio value
was 3.4% (31 Dec 2020: 11.5%). If gearing is assessed against the value of the core income portfolio (the Investment Portfolio and Natural
Resources portfolio) only, this equates to a gross loan to core income portfolio value of 13.0% (31 December 2020: 33.8%) and a net loan to
core income portfolio value of 8.9% (31 December 2020: 28.7%). Under the New RCF, the Group could withstand a material fall in portfolio
value, property sales or rental income before reaching covenant levels.
At 31 December 2021, undrawn facilities under the Original RCF were £116.0m. Going forwards, the New RCF provides additional liquidity
of £50m and headroom to execute our growth strategy.
KITTY PATMORE
Chief Financial Officer
21 March 2022
*Harworth discloses both statutory and alternative performance measures (APMs). A full description and reconciliation to the APMs is set out in Note 2 to the financial statements.
40
Strategic ReportHarworth Group plc
Long-term
Viability Statement
This balance in the portfolio means that regular income from the
income-producing portfolio with low vacancy rates will help to
support cost coverage. The income-producing properties within
the industrial and natural resources sectors have a diverse range of
tenants. The land and property portfolio is spread across all stages
of our business model which gives the opportunity, if required,
to advance sites at an earlier stage (master-planning and planning
promotion). The residential market has a fundamental insufficient
supply of housing and has seen robust demand throughout 2021.
Having teams in Yorkshire, the Midlands and the North West
balances the exposure to any one region.
Net debt at year end of £25.7m represented a 3.4% net loan to
portfolio value. The Group entered into a new £200m five-year RCF
in early 2022, adding HSBC to the Group’s main lenders in addition
to NatWest and Santander; this new facility provides greater
firepower and flexibility with which to execute on the Group’s
strategy.
Principal risks and uncertainties
Reporting on the Group’s viability requires the Directors to consider
those principal risks that could impair the solvency and liquidity
of the Group. Over the last 12 months, the Board has identified a
refreshed set of eleven principal risks and uncertainties, informed by
the Group’s strategy. Of these, the principal risks and uncertainties
that the Board considers could impair solvency and liquidity
relate to economic assumptions, income generation variability
and appropriate staffing levels. Principally, these fall within the
Markets, Project Delivery, Finance, Climate Change and People
sub-categories of risk identified in the Effectively managing our risks
section of this Report on pages 71 to 77.
Viability period and rationale
The Directors have assessed the prospects of the Group and its
principal risks over a longer period than the period required by
the Going Concern Statement (see the Statement of Directors’
Responsibilities at pages 154 to 155.
The Board conducted a review for a period of five years
ending 31 December 2026. This period was selected for the
following reasons:
•
•
the Group’s strategic plan covers a five-year period;
for a major scheme five years is a reasonable approximation
of the time taken from obtaining planning permission and
remediating the site to letting property on and/or developing
material parts of the site; and
• most leases contain a five-year rent review pattern and therefore
five years allows for forecasts to include the reversion arising
from such reviews.
The final two years of the period are by their nature less certain and
are less detailed in their projections.
Resilience of business model
The Group’s strategy focusses on continued growth through
increasing direct development of industrial & logistics buildings,
accelerating land and property sales, broadening the range of
residential products, growing our strategic land portfolio and
repositioning our Investment Portfolio to modern Grade A. When
repositioned, the Investment Portfolio will continue to provide a
diversified portfolio of income producing assets for the Group to
support coverage of operating and financing costs. This enables the
Group to create value in modern industrial and logistics buildings
while supporting the transition to Net Zero. Major development
sites could be active with phases of development combining to
be fifteen years or more and plans for sites can be adapted to the
market conditions at the time.
Projections have been prepared in the context of the Group’s
strategy and its principal income streams, which are:
•
•
sales of residential and commercial serviced land, for which
there are plans reaching out to 2026;
rental income from income-producing industrial properties
which, at 31 December 2021, had a vacancy rate of 2.7%, a
WAULT of 11.5 years and a rent collection of 99%; and
• development and investment management, planning
promotion and investment fees.
41
Strategic ReportAnnual Report and Financial Statements 2021
Long-term
Viability Statement continued
Assessment of long-term prospects
and sensitivities applied
The five-year strategic plan focuses on the expected growth of
the business primarily in terms of EPRA NDV* and Total Return*.
The strategic plan also considers the Group’s valuations, recurring
income, cash flows, covenant compliance, financing headroom and
other key financial ratios over the period. These metrics are subject
to sensitivity analysis which involves flexing the main assumptions
underlying the forecasts both individually and in unison.
The key risks and the scenarios considered as part of the sensitivity
analysis are set out below. Throughout the strategic plan, the Group
expects to continue to transform land and property into sustainable
places where people want to live and work. We have considered
a severe but plausible downside case under which the Group is
still viable and over the five-year period. Consideration has also
been given to the impact of the Russian invasion of Ukraine which,
while not directly impacting the activities of the Group, has the
potential to impact through changes in the wider macro-economic
environment. Whilst under the sensitivity analysis, EPRA NDV*
growth plus dividends could be impacted temporarily, the long-
term business model is expected to continue to deliver the Group’s
Purpose in a sustainable manner.
*Harworth discloses both statutory and alternative performance
measures (APMs). A full description and reconciliation to the APMs
is set out in Note 2 to the financial statements
Risk
Scenario
Mitigation & Further Analysis
• Downturn in industrial & logistics and/or
• The portfolio provides a spread of sites across the three core
Markets:
Residential
and
Commercial
Markets
residential market conditions could lead to a
fall in property values or reduced sales
• Notwithstanding strong rent collection
throughout the last two years, an economic
downturn could impact on some tenants’
ability to pay rent and lead to loss of rent or
restructuring of rental payments
• As a result, expenditure on new land and
property acquisitions could be restricted
Finance:
Availability
of
appropriate
capital
• A market downturn reducing sales volumes
would lower income
• Short term downward valuation movement
and lower income receipts could be
experienced which would reduce headroom
under the financial covenants in the RCF
• Higher interest rates would reduce headroom
in interest cover covenants
•
Inability to access appropriate equity and/or
debt funding to support the strategy
42
regions and properties are diversified across the residential
and industrial sectors, both of which have strong underlying
demand fundamentals. This helps to mitigate the impact of
market movements
• Pursuant to our strategy we are working to take full advantage
of current market conditions and mitigate a potential
downturn by accelerating residential sales, introducing new
products at our residential sites, repositioning our Investment
Portfolio to modern Grade A and increasing the quantum
and speed of direct development
• The Group works closely with tenants in the Investment
Portfolio on payment terms that support both parties to
continue to actively manage rent collection
• Development expenditure can be reduced and rephased to
match more closely market demand and conserve cash
• At year end, the Group had low gearing, good liquidity with
debt headroom and cash resources providing sufficient
financial flexibility to continue to operate across its sites.
Headroom on financial covenants is projected throughout
the five-year period
• We have entered into a new RCF with a resulting £50m
increase to £200m. There are now no major refinancing
deadlines ahead of when the RCF expires in 2027
• The RCF is supplemented by accessing project specific
funding where relevant. We continue to pursue and
unlock grant funding
• The Group uses financial instruments to mitigate the risk of
interest rate increases, typically hedging half the average
drawn RCF balance throughout the year
• Reduced activity on sites as set out above would reduce
development expenditure and conserve cash resources
Strategic ReportHarworth Group plc Strategic Report
Risk
Scenario
Mitigation & Further Analysis
• Failure to manage transitional risks associated
• We have established an ESG Board Committee (see pages
Climate
change:
Managing
Climate
change
transition
with climate change covering both
operational activity and reporting
•
Impact of climate change on our sites,
slowing development programmes and
reducing sales
Other risks
including
Project
Delivery
and People
• Planning promotion risk including uncertainty
around local and national changes to
planning regime with potential for adverse
effect on promotion activity, progress on sites
and EPRA NDV growth
• Supply chain pricing pressures and
constraints resulting in development cost
increases and delays and/or default by and/
or insolvency of counterparties
•
•
Legislative reforms which have the effect of
levying an additional cost on development
Insufficient and/or inappropriate resources,
resulting in increased staff costs
118 to 119) and ESG Steering Group
• External consultants have been appointed to advise on ESG
strategy formulation, implementation and reporting
• We are making progress in capturing relevant environmental
and social data and we have identified our Net Zero
Carbon pathway
• We have run initial analysis looking at the impact of climate
change such as flooding, on our sites
• Strong relationships with local planning authorities and key
local stakeholders, supplemented by local political advisers
where appropriate
• The potential impact of planning reforms is modelled in
project appraisals ahead of acquisition
• We undertake rigorous tender processes and utilise
market intelligence regarding contractors’ commitments
and workload
• Our central technical team monitors contractor
“concentration risk” and promotes consistencies and
knowledge-sharing across our portfolio
• There are high levels of employee satisfaction within the
business as reported on page 63
Viability assessment
Based on the results of this analysis and having considered the established controls and available mitigation actions for principal risks and
uncertainties, the Directors have a reasonable expectation that the Company and the Group will be able to continue in operation and meet
their liabilities as they fall due over the period of their assessment.
43
Annual Report and Financial Statements 2021 Section 172
Statement
In this section, we identify our key stakeholders and explain how
we have engaged with them and had regard to their interests when
making strategic and significant operational decisions during 2021.
Whilst the Board recognises its statutory obligation to do so under s.172(1) of the Companies Act 2006, its engagement and
collaboration with stakeholders are not merely a matter of statutory compliance: doing so effectively is key to delivering against our
Purpose and our commercial success. As we are constantly interacting with a wide range of stakeholders, the reporting of stakeholder
impact has been embedded into Board project appraisals. Transaction templates presented to the Board focus discussion on: how each
project supports the delivery of our Purpose and aligns with our strategy; the environmental and societal impact of each project; the
impact of each project on our external stakeholder groups; and resourcing for each project. The Board having regard to these matters in
its discussions and decision making is fundamental to creating sustainable places where people want to live and work. Further detail on
how the Board has had regard to the interests of stakeholders is in the Statement of Corporate Governance on pages 86 to 100.
Our People
Why we engage
How we engage
The people at Harworth are key to the success of the Company. It
is their skills, experience and hard work that allow us to create high
quality sustainable places where people want to live and work.
The Board engages with staff directly through various formats,
including employee lunches, site visits, regional team dinners,
office visits and the Employee AGM. Due to restrictions imposed
by Covid-19 during 2021, some of the above events were held
virtually. See more on page 88.
Their key interests
How do we respond? Examples of actions taken
To work on market-leading projects with pride and enjoyment. To
work in, and contribute to, an innovative and collaborative culture.
To be supported in their career and personal development,
appropriately rewarded and recognised for their contribution. A
sustainable work-life balance. To have their views heard and taken
into account in decision making.
We have developed a people strategy to support our business
strategy, which promotes both the development and career
progression of our existing employees and, where necessary, the
recruitment of new and additional skills.
We have introduced physical and mental wellbeing initiatives,
such as a new hybrid working policy.
We have made employment policy changes such as improvements
to our maternity, adoption, and paternity leave and pay provision.
44
Strategic ReportHarworth Group plc Investors
Why we engage
To explain our performance and strategy to, and understand the
views of, existing and prospective shareholders. Without the long-
term support of our shareholders, our business and the delivery of
our Purpose are not sustainable.
How we engage
We provide business updates regularly via trading statements and
regulatory releases on key transactions.
Management meets regularly with existing and prospective
investors. The Chair also meets regularly with our largest
shareholders.
Two of our Non-Executive Directors, Martyn Bowes and Steven
Underwood, are conduits for engagement with two of our largest
shareholders.
Their key interests
How do we respond? Examples of actions taken
Long-term and sustainable returns and a business which delivers a
positive environmental and societal impact.
We commissioned an investor perception study to support the
strategy review undertaken in 2021 and identified actions to
respond to investor feedback.
In response to feedback from existing and prospective investors,
we have further enhanced our financial and operational disclosures
and held a number of site visits, subject to the constraints imposed
by Covid-19.
We engaged with, and took account of the views of, our largest
shareholders when formulating our revised Remuneration Policy.
Communities
Why we engage
How we engage
By creating places where people want to live and work, we
create thriving communities and make a positive and sustainable
contribution to local areas.
Consultation and collaborative working with the local communities
where we are transforming sites are fundamental components
of a successful project. These include early and ongoing
engagement with the public on all planning applications; liaison
with key community groups as developments mature; and careful
management of the shared public open space on our sites often in
collaboration with local residents.
Their key interests
How do we respond? Examples of actions taken
Sustainable places where people want to live and work. Each site
is unique but will include housing with a high design specification;
supporting infrastructure which has been carefully designed,
delivered and “future proofed”; skilled employment; thoughtfully
constructed blue and green spaces which have a positive
ecological impact and promote wellbeing; education provision;
and comprehensive local amenities.
Consideration of the placemaking proposals for, and the impact
on local communities of, each project are key components of our
appraisals.
By way of example, we hope that our acquisition of land at
Staveley will deliver circa 600 homes, significant blue and green
space and a retail hub. It is part of a wider scheme which should
transform the site of a former steelworks and chemical facility to
deliver housing, employment and leisure facilities.
45
Strategic ReportAnnual Report and Financial Statements 2021 Section 172
Statement continued
Suppliers
Why we engage
The successful delivery of our sites depends on strong
relationships with suppliers who are professional, trusted and
share our values.
How we engage
We apply a consistent “take-on” approval process for all suppliers.
Whilst we operate a long list of approved suppliers, we usually
engage small groups of trusted consultants and contractors on a
repeat basis, fostering strong relationships.
Their key interests
How do we respond? Examples of actions taken
A long-term partnership with Harworth in which they are treated
fairly and receive timely payment.
We commissioned a stakeholder perception study, which
included feedback from suppliers. We have identified actions to
respond to that feedback.
During 2022, we are exploring how we improve our procurement
processes, both at a corporate and project level.
Funders
Why we engage
We need external capital to fund the Group’s activities, long-term
projects and efficient growth.
How we engage
In 2021 we engaged extensively with existing and prospective
funders ahead of the refinancing of our senior debt facility. We
completed that refinancing in Q1 2022 and welcome HSBC to
our group of senior lenders, alongside NatWest and Santander. In
the ordinary course, we schedule relationship meetings with our
senior lenders every six months but have a regular dialogue with
them throughout the year.
Their key interests
How do we respond? Examples of actions taken
An open dialogue with regular updates and assurances about
our operational and financial performance together with delivery
against all our contractual obligations.
Our positive relationship with NatWest and Santander supported
a successful increase to and extension of our senior debt facility in
November 2021.
We subsequently worked with both lenders and HSBC to agree
and put in place a new £200m senior debt facility in Q1 2022.
The Board having
regard to stakeholder
interests is fundamental
to creating sustainable
places where people
want to live and work
46
Strategic ReportHarworth Group plc Customers
Why we engage
As a master developer, we want to ensure there is long-term
demand for our land. Our principal customers are housebuilders,
commercial developers and occupiers.
How we engage
Engagement with housebuilders and commercial developers is
predominantly transactional, although we maintain regular contact
outside of deal cycles to understand their needs and appetite for
more land and development opportunities. We engage proactively
with commercial occupiers to identify pre-let demands.
Typically, day-to-day engagement with our existing tenants is via
our managing agents who help identify where direct involvement
and engagement from our investment team is needed.
Their key interests
How do we respond? Examples of actions taken
A collaborative and reciprocal relationship with Harworth in which
they trust us to deliver a high-quality product on time and, for our
tenants, a longer-term relationship in which they are treated fairly
and their operational needs are understood.
Following a challenging 2021 insurance renewal process, we
engaged proactively with tenants to explain why pressure in the
market had caused insurance premiums to increase markedly.
Ahead of the 2022 insurance renewal process, we worked with
tenants to improve our data on their operational activities and
security measures, helping to contribute to a material reduction
in premiums.
The stakeholder perception study we commissioned to support
the business strategy review included feedback from occupiers
and housebuilders. We have identified actions to respond to
that feedback.
Government
Why we engage
How we engage
Harworth has an important part to play in supporting some
Government priorities over the coming years, both at a national
and regional level, including in the areas of climate change,
levelling up, and addressing the housing shortage.
We participate in central Government consultation exercises on
policy proposals both on our own account and through industry
bodies such as the British Property Federation. We also engage
informally on national initiatives such as the levelling up agenda,
HS2 and site-specific matters.
We engage with local Government and Local Enterprise
Partnerships (LEP) when working collaboratively with officers
and members from local planning authorities ahead of planning
application submissions and on the discharge of planning
conditions; bidding for grant or loan monies from local authorities
and LEPs for infrastructure investment; and promotion of long-term
strategic land projects with local authorities.
Their key interests
How do we respond? Examples of actions taken
Environmental and societal priorities, both national and local,
the achievement of which we can help support.
Housing shortages within local planning authorities and central and
local Government priorities for infrastructure investment continue to
be important factors which inform our project appraisals.
The Government’s plans for high-speed rail to the North-East
of Birmingham are a determinative factor in the delivery of our
Gateway 45 and Lounge sites.
47
Strategic ReportAnnual Report and Financial Statements 2021 The
Harworth Way
Our Focus Impact Areas
Our Focus Impact Areas are centred around the three impact pillars of the Harworth Way: Communities, Planet and People. They represent
areas where we feel that Harworth can make the most societal and environmental impact as a business, and provide a framework for us to
measure our progress against over the short, medium and long term. These objectives are also aligned to our principle UN SDGs.
Communities
Communities
Delivering homes, supporting jobs
and creating communities
Promoting healthy lifestyles
and wellbeing
Through our regeneration and placemaking activities across
the North and the Midlands, we revitalise areas which have
historically been impacted by industrial and economic
decline. Our residential developments deliver a mix of
tenures and different levels of affordability.
We recognise that communities need varied and high-
quality infrastructure to thrive. Our masterplans consider the
health and wellbeing of residents and those working at our
sites, and provide facilities to promote healthier, greener
lifestyles and wellbeing.
Progress to date
Progress to date
Since 2011, Harworth’s pipeline has supported the delivery
of over 3,500 housing plots and over 12,000 new jobs,
including many that are high-skill, for example at the AMP.
We have also delivered community infrastructure, including a
primary school at Waverley. Our industrial & logistics landbank
could support over 72,000 jobs, and our portfolio overall has
the potential to deliver £4.1m of GVA into local economies.
We have delivered over 900 acres of accessible green
space across our developments. This includes footpaths,
cycle ways and other infrastructure to encourage mental
and physical wellbeing. During 2021 we submitted plans
for innovative cycling infrastructure projects at Waverley and
Thoresby Vale, including a regionally significant cycle hub.
Plans for 2022
Plans for 2022
• Our Bardon Hill scheme to support approximately 530
• Cycling infrastructure at Waverley and Thoresby Vale to
new jobs once completed
be delivered
• Olive Lane at Waverley to provide amenities including a
supermarket, restaurants, a gym and working space
• Plans to be submitted for new football pitches at
Moss Nook
• Planning to be submitted for two schools, at South East
• Additional cycle and footpath infrastructure to be
Coalville and Thoresby Vale
provided across a number of sites
By 2030
By 2040
By 2030
By 2040
Incremental progress reported annually
Incremental progress reported annually
Principle UN SDG link
Principle UN SDG link
48
Strategic ReportHarworth Group plc
Planet
Planet
Increasing
biodiversity
Reducing
CO2 emissions
Biodiversity brings significant benefits not just to wildlife
and ecosystems, but also to communities through increased
amenity value and climate resilience. Promoting and
protecting biodiversity at our sites is therefore a key priority.
Working with our partners, Harworth is committed to
becoming a Net Zero Carbon business. We believe this
will unlock new opportunities, minimise our environmental
impact and build our climate resilience.
Progress to date
Progress to date
Across our portfolio we have delivered hundreds of acres of
green space, rewilded land, undertaken SSSI conservation
work, and planted thousands of trees. In 2021, at our
Ironbridge site alone we installed six great crested newt
ponds, a bat barn and moth habitat, and a 21 metre-tall
nesting tower for peregrine falcons.
In recent years we have implemented several measures to
reduce our energy usage, improve the energy efficiency of
our assets and increase opportunities for on-site renewable
energy generation. Further details can be found on pages
56 to 59.
Plans for 2022
Plans for 2022
During 2022 we will identify a series of metrics that we
will use to report on the biodiversity initiatives and actions
we take.
Between 2022 and 2023 we will undertake research and
detailed planning to develop our Net Zero Carbon pathway,
and report on our progress.
By 2030
By 2040
By 2030
By 2040
Detailed targets to be informed by the work undertaken
in 2022
Principle UN SDG link
Net Zero Carbon for all
emissions
Net Zero Carbon for Scope
1 & Scope 2 emissions, and
those Scope 3 emissions
relating to business travel and
employee commuting
Principle UN SDG link
49
Strategic ReportAnnual Report and Financial Statements 2021
The
Harworth Way continued
Our Focus Impact Areas continued
Planet
Planet
Building
greener
Developing
responsibly
The buildings that we develop today are capable of being
Net Zero Carbon in operation and built to EPC rating A. We
are committed to going much further than this and have
the ambition that over time all of our industrial & logistics
developments will be Net Zero Carbon.
As a responsible developer, we take great care to ensure
that in remediating sites we clean, reuse and decontaminate
materials as well as incorporating low carbon infrastructure
into existing and future sites.
Progress to date
Progress to date
All buildings completed by Harworth in 2021 and 2020
were built to BREEAM “Very Good” standard and EPC rating
A. In 2021 we completed our first building that is capable of
being Net Zero Carbon in operation, LN50.
At a site level, we have reused materials where possible, and
taken steps to reduce energy consumption and waste. We
have also continued our Investment Portfolio EPC upgrade
programme and have recently installed solar panels on the
roof of our head office, Advantage House.
Plans for 2022
Plans for 2022
• All new industrial & logistics developments will be
• All new masterplans will incorporate renewable energy
EPC A rated and capable of being Net Zero Carbon
in operation
infrastructure. We will also explore retrofitting options
where possible
• All new occupiers to be offered green leases
• Develop metrics for measuring and enabling us to
report more fully the impacts of our activities
By 2030
By 2040
By 2030
By 2040
All industrial & logistics
developments will be
Net Zero Carbon
Reporting and targets to be informed by the work
undertaken in 2022.
Principle UN SDG link
All new industrial & logistics
developments to be Net
Zero Carbon in construction
and operation. All investment
portfolio assets to have green
leases (or equivalent), where
contracts permit
Principle UN SDG link
50
Strategic ReportHarworth Group plc
People
People
Engaging
our people
Prioritising
health & safety
Harworth’s ambition is to be the employer of choice,
providing an inspiring place to work and attracting and
retaining the best talent. Critical to our success is the
engagement, wellbeing and diversity of our people.
The health and wellbeing of our people, our contractors,
our communities is of paramount importance. We actively
manage the risks on all our sites. This includes physical
inspections, monitoring of accidents, incidents, near hits
and good practice, claims and work-related absences.
Progress to date
Progress to date
In 2021, 97% of respondents to our employee engagement
survey said that they were proud to work Harworth. We
revised our maternity, paternity, and adoption leave policies
to ensure that they are market leading, and introduced a
hybrid working policy.
There were no accidents involving Harworth personnel
during the year. There was one minor accident involving
a contractor under Harworth supervision. There was one
RIDDOR accident on an area of our site for which our
contractor had responsibility for health & safety, but there
were no other accidents on contractor-controlled areas.
More details are provided on page 62.
Plans for 2022
Plans for 2022
• We will continue to make Harworth a great place to
work, through engagement, prioritising the physical
and mental wellbeing of staff, our market-leading
people policies, promoting diversity, and providing
career opportunities
• We will take steps to increase share ownership amongst
employees, and introduce an ESG target that impacts
group-wide bonuses
• We will aim for zero RIDDOR-reportable accidents on
Harworth sites
By 2030
By 2040
By 2030
By 2040
Incremental progress reported annually
Zero RIDDOR-reportable accidents on Harworth sites
Principle UN SDG link
Principle UN SDG link
51
Strategic ReportAnnual Report and Financial Statements 2021
The
Harworth Way continued
Communities
As a long-term custodian of land, we create, strengthen and support our communities now
and for future generations. Harworth delivers some of the largest industrial & logistics
and residential sites in the North of England and the Midlands, creating sustainable places
where people want to live and work.
Harworth is investing and delivering development in some of the
most deprived parts of the UK, where levels of economic growth
and investment have typically been below average. The table
below shows the proportion of new jobs being supported through
Harworth’s existing developments and pipeline within the most
deprived areas of England. It shows that almost three-quarters of the
jobs to be supported are in the 50% most deprived areas of the UK,
providing a significant economic boost to these communities.
Harworth’s support for job creation in deprived areas
(using indices of Multiple Deprivation (England 2019))
Area deprivation Decile
10% most deprived
20% most deprived
30% most deprived
40% most deprived
50% most deprived
Remaining 50%
of areas in England
Total
Cumulative % of jobs
supported by Harworth pipeline
18%
19%
34%
44%
72%
28%
100%
Delivering homes, supporting jobs,
and growing economies
Harworth has delivered significant economic and social benefits
across its broad range of development sites in Yorkshire & Central,
the Midlands, and the North West. The development of these
sites has the potential to deliver significant economic benefits for
these regions, contributing to local authority and LEP strategic
objectives and delivering on the UK Government’s aim of levelling
up the economy.
As in previous years, we have commissioned Ekosgen, an
independent economic research consultancy, to appraise what
we have delivered, and what we could deliver in the future, from
our developments. The data focuses on job creation, housing
development, and the potential Gross Value Add (GVA) of each
site. Some of the highlights of its findings were:
• Harworth sites are spread across 15 LEP areas and
39 local authority areas, benefiting a large proportion
of the Midlands and the North of England.
• When fully built out, Harworth’s industrial & logistics
portfolio has the potential to accommodate over
72,000 jobs, generating £4.1bn of GVA per annum,
as well as significant levels of business rates income.
• Harworth’s residential portfolio has the potential
to generate up to £55 million per annum in council
tax receipts.
• Over half of the potential jobs supported by
Harworth’s current pipeline are concentrated in three
regions: Sheffield City Region, Leeds City Region, and
Greater Manchester, with Harworth set to support
over 12,000 jobs in each.
52
Strategic ReportHarworth Group plc
53
Strategic ReportAnnual Report and Financial Statements 2021 The
Harworth Way continued
Communities continued
Promoting healthier lifestyles
Creating inclusive spaces
Cycling has a number of benefits, including
improving personal health and wellbeing,
reducing congestion and pollution, and making
our communities more attractive places to live in.
Harworth developments have long provided cycling facilities
for residents and workers. For example, our now completed
Logistics North development includes 18km of footpaths and
cycle paths on-site, connecting to local and national traffic-free
cycling routes.
During the year, Harworth worked with local groups and Places
to Ride, a partnership between British Cycling, the Department
for Digital, Culture Media & Sport and Sports England, to
bring forward two innovative cycle infrastructure projects at its
Thoresby Vale and Waverley developments.
At Thoresby Vale, the funding will be used to deliver a multi-
use cycling facility at the heart of the scheme, which will include
a “Learn to Ride” area and a modular cycling hub, which will
host a café and other amenities. The new facility will connect
to the various multi-use paths proposed for the site’s country
park, and enhance existing cycle path infrastructure in the
area, providing direct links to the nearby communities of
Edwinstowe, Ollerton and Broughton. As well as boosting the
physical wellbeing of local residents, the facility will provide a
new cycling destination for the approximately 500,000 people
who visit Sherwood Forest every year.
At Waverley, Harworth has been working with
Sheffield Hallam University as part of an ‘active
towns’ project to look at different ways to deliver
green community spaces.
As part of this project, a community group called the Waverley
Buds was formed, which has worked on a number of small
gardening projects over the last three years.
Since the formation of the group, Harworth has created a new
community garden space in the centre of Waverley. The space,
which is located opposite the new Waverley Junior Academy, is
to be managed by the Waverley Buds, and includes a collection
of raised planters and seating areas.
During the year, teams from Harworth spent several days
with the group, helping to lay the foundations for a new path
in the community garden, plant hedgerows and create new
landscaping features.
Our Waverley site is also to be used as a test location for a
Healthy Ageing research study by Sheffield Hallam University,
in association with the Economic and Social Research Council.
The study will examine how the design and features of the built
environment can be used to encourage activity and physical
engagement across age groups.
Proposed Thoresby Vale Cycle Hub
Harworth staff at the Waverley community garden
54
Strategic ReportHarworth Group plc Supporting local and national causes
Preserving cultural heritage
Harworth introduced a new charitable giving policy
in 2021, to enhance its level of financial donations
and make it easier for staff to support charities that
matter to them, or receive match funding for their
own fundraising activities.
Under the new policy, the Senior Executive approve a sum
of money each year, which can then be bid for by individuals
or teams across the business. The People Steering Group is
responsible for approving all donation requests.
During the year Harworth donated £67,700 to a number
of local and national charities. Some of the causes that we
supported are shown below:
Harworth is committed to preserving the cultural
and natural heritage of the sites it develops.
We recognise that many of our former brownfield sites have
proud industrial histories, and continue to form part of the
fabric of the local community. As a result, plans to restore and
repurpose former industrial buildings for new community uses
are central to several of our developments. Examples include
the workshop buildings of the former Thoresby Colliery at our
Thoresby Vale development and the former power station
pumphouse at Ironbridge, both of which will be repurposed
for a range of local retail and/or leisure uses.
We also incorporate architectural and landscaping features into
our sites that reflect their history. During the year, we unveiled
a memorial to former colliery workers at our Prince of Wales
development in Pontefract, West Yorkshire, in a ceremony
attended by local MP Yvette Cooper, local councillors, and
former Prince of Wales miners. The memorial, which was
funded by Harworth and designed by local artist and former
miner Harry Malkin, stands over five metres tall at the entrance
to the site, reminding residents and visitors of the area’s rich
mining history.
Memorial sculpture at
Harworth’s Prince of Wales site
55
Strategic ReportAnnual Report and Financial Statements 2021 The
Harworth Way continued
Planet
We minimise our environmental impact through the use of renewable resources, energy
efficiency, and sustainable construction practices. We also enhance biodiversity and
climate resilience through the creation, protection and enhancement of green spaces
across our sites.
Harworth’s approach
to Net Zero Carbon
The climate emergency and imperative transition to a Net Zero
Carbon economy have particular implications for property owners
and developers – and for those invested in them – due to the very
significant contribution that our sector makes to global carbon
emissions: nearly 40% in total. As a business that specialises in
transformation, Harworth is poised to embrace this challenge and to
capture the opportunities that the transition to Net Zero presents.
Harworth’s Transformation to Net Zero will set out our commitment
to reaching Net Zero Carbon by 2030 for Scope 1 & Scope 2
emissions, and those Scope 3 emissions relating to business travel
and employee commuting. We also commit to reaching Net Zero
Carbon for all emissions by 2040.
Achieving this goal will ensure that we develop and hold assets that
are fit for the future, underpinning shareholder value in the long-
term, whilst taking full responsibility for the climate-related impacts
of our activities and those of our value chain. Whilst ambitious, this
commitment builds upon some significant areas of progress that
we have already achieved, including developing our first building
capable of being Net Zero Carbon in operation and driving energy
efficiencies throughout our business. Whilst our journey to Net
Zero is already underway, we recognise that much work remains
to achieve the full transformation needed.
We have aligned our Net Zero goal and approach to the Better
Buildings Partnership’s Climate Commitment and its supporting
Net Zero Carbon Pathway Framework. This is widely viewed as the
authoritative framework for the real estate sector and will ensure that
we reflect and account for the true impact of our business across the
whole lifecycle of our land and property assets.
Further details on Harworth’s Transformation to Net Zero, including
our CO2 emissions baseline (with Scope 3 emissions data across our
supply chain), our investment boundary and delivery plan, including
short- medium- and long-term goals, will be provided later in 2022.
We disclose Scope 1, Scope 2 and some Scope 3 emissions data in
our Streamlined Energy and Carbon Reporting disclosure on page
64. Over the coming months, Harworth will be investing in systems
and resourcing to create a fuller picture of its carbon footprint.
The chart below illustrates how we will transition our business and portfolio to Net Zero by 2040
Embodied
carbon savings
Energy efficiency
(Lower 'Energy Use
Intensity')
Increase on-site
renewables
Increase off-site
renewables
Supply chain
reductions
Our 2040 BAU
Emissions (accounting
for portfolio growth)
Supply
chain
Tenant
operations
Landlord
operations
Embodied
carbon
Today
)
e
2
O
C
(
s
n
o
i
s
s
i
m
e
s
a
g
e
s
u
o
h
n
e
e
r
G
56
Target 2040 emissions
Supply chain
Tenant operations
Landlord operations
Embodied carbon
Offset residual
emissions to
Net Zero
through
high quality
offsets
2040
Sequester
emissions within
portfolio
Strategic ReportHarworth Group plc
Integrating energy efficiency into
direct development
Improving energy efficiency in the
Investment Portfolio
Increasing our level of direct development and
transitioning our Investment Portfolio to Grade A are
two of the key components of our growth strategy.
Central to achieving both of these aims is the delivery of energy
efficient, resilient buildings that meet occupier demands today
and in the future.
During the year, Harworth commissioned consultants to
develop a new, sustainable design brief which can be used
in Harworth’s future direct development. The brief includes
recommendations on the use of low and zero carbon
technologies, off-site renewable energy supply, and carbon
offsetting arrangements.
The design brief led to the creation of Harworth’s first building
capable of being Net Zero Carbon in operation, LN50 at
Logistics North, which reached practical completion in May
2021. LN50 incorporates air source heat pumps to provide
low carbon space heating and cooling to offices, and has a
reinforced building structure to accommodate solar PV panels
on up to 75% of the roof area.
The design brief is currently being evaluated for use in the
planning and construction phases of other direct developments
in our pipeline, including at Gateway 36 in Barnsley and the
Advanced Manufacturing Park in Rotherham.
We also recognise that the carbon embodied in our
developments and income-producing assets are a significant
aspect of our impact which we need to reduce further
and ultimately eliminate in collaboration with our supply
chain partners. We therefore undertook a further detailed
embodied carbon analysis of LN50 which identified design
and procurement actions that would achieve a 25% reduction
within future similar developments, with the prospect of
achieving an embodied carbon intensity target of 357kg
CO2e/m2. These actions will be incorporated into future direct
development wherever possible to allow Harworth to achieve
its decarbonisation targets.
In addition to maximising energy efficiencies in
the assets that we build, we are committed to
improving the specification of assets we already
own in our Investment Portfolio, thereby reducing
environmental impact, extending asset lifespans,
and meeting and exceeding changing regulatory
requirements.
A breakdown of Harworth’s Investment Portfolio by EPC rating
is provided below. Our key priority is to raise all units above a C
rating well in advance of it becoming a legal requirement from
2027 under the MEES regulations. We are improving energy
efficiency primarily through electrical and lighting upgrades,
including the fitting of LED lighting and opportunities to
increase natural light, alongside insulation and re-cladding/
over-cladding upgrades. We are exploring opportunities to roll
out solar PV panels to sites.
Breakdown of EPC rating across Investment Portfolio1
%
2
3
%
2
3
%
8
1
%
5
%
9
%
2
%
2
A
D
1 excludes 0.5m sq ft of Investment Portfolio space which is not required to
G
C
B
E
F
have an EPC
In early 2022, Harworth installed over 400 sq. metres of solar
PV panels on the roof of its head office, Advantage House.
When fully operational, this will supply almost 80,000kWh
of electricity per annum, and will save over 18,000kg of CO2
per annum.
Further disclosures
Task Force for Climate-Related Financial Disclosures
recommendations. See pages 65 to 69
Streamlined Energy and Carbon Reporting
disclosures. See page 64
57
Strategic ReportAnnual Report and Financial Statements 2021 The
Harworth Way continued
Planet continued
Exploring low emission public
transport opportunities
Encouraging the use of low and
zero emission vehicles
Across our development sites we aim to increase
connectivity through the provision of public
transport links, thereby reducing congestion and its
associated emissions, and making developments a
more inclusive place for all age groups.
During the year we progressed an exciting opportunity to
achieve this at our Ironbridge development. The Ironbridge
site already benefits from two rail links to the mainline from
Shrewsbury to Wolverhampton, which were originally used to
transport materials to the site’s power station, and Harworth
was keen to explore opportunities to bring them back into use.
During the year, we partnered with Revolution VLR, a
consortium of advanced manufacturing companies aiming to
develop the next generation of “very light rail” vehicles and
technologies, to develop a test vehicle and track on a stretch
of disused railway. Combining technology from the automotive
and rail sectors, Revolution VLR has produced a lightweight,
energy-efficient vehicle that is straightforward to operate and
geared to the needs of communities, providing a modern,
attractive and cost-effective vehicle solution that it is hoped will
facilitate the reopening of disused railway lines.
Encouraging and facilitating the use of electric
and low emission vehicles is one of the key ways
in which we can reduce emissions associated with
travel by car.
Harworth owns one car, which is fully electric, and at the end
of 2021 had four EV charging points at Advantage House,
which are free to use for staff. A further six EV charging points
were installed in early 2022 as part of the installation of solar PV
panels at the site.
During the year, we introduced a salary sacrifice scheme for
staff, which is exclusively for fully-electric and low emissions
vehicles.
All future direct development by Harworth will include
EV charging facilities, and we are exploring opportunities
and partnerships to add them retrospectively to existing
developments and Investment Portfolio sites.
VLR test train at Ironbridge
EV charging at Advantage House, Rotherham
58
Strategic ReportHarworth Group plc Protecting and promoting biodiversity
Biodiversity brings significant benefits not just to
wildlife and ecosystems, but also to communities
through increased amenity value and climate
resilience.
Taking steps to promote and protect biodiversity across our sites
is therefore a priority for Harworth.
Some of the key areas of biodiversity gain we’ve been working on
in 2021 are:
•
Ironbridge: Our Ironbridge development will incorporate
extensive green space, including 56 acres reserved
exclusively for protecting biodiversity. As part of the site
preparation works, we installed six great crested newt ponds,
a bat barn which is also used as a moth habitat, and a 21-
metre tall nesting tower for Peregrine falcons.
• South East Coalville: We entered the second phase of our
South East Coalville residential development during the year.
Work is ongoing to deliver 15 acres of parkland and amenity
space at the site, in addition to a 23-acre riverside green
corridor along the River Sence. Further design elements
will include an innovative energy efficient specification for
the new school, the translocation rather than removal of
hedgerows, and the creation of an Open Mosaic Habitat to
boost biodiversity.
• Bardon Hill: Our 332,000 sq ft industrial & logistics
development at Bardon Hill will be completed in 2022. Plans
include the development of a 10-acre local wildlife centre and
new great crested newt ponds at the site, which will boost
local biodiversity and provide amenity space for the local
community.
We also partner with several wildlife and conservation
organisations to achieve biodiversity goals. For many years
we have worked in strategic partnership with Wildlife Trusts, a
collection of independent regional trusts that collectively look
after more than 2,300 nature reserves across the UK.
In December 2021, we sold over 800 acres of land in West
Chevinton, Northumberland to the Northumberland Wildlife
Trust. The site will be used for one of the most ambitious lowland
rewilding projects in the North of England, allowing conservators
to test a number of rewilding methods with the aim of storing
carbon, boosting biodiversity, and connecting wildlife habitat on
an unprecedented scale locally.
Aerial view of Ironbridge development
59
Strategic ReportAnnual Report and Financial Statements 2021 The
Harworth Way continued
People
We create an inclusive, supportive and empowered workplace culture in which people can
develop and fulfil their potential. We prioritise the health and wellbeing of our people and
ensure they remain inspired and engaged.
Harworth’s ability to execute its
strategy and deliver on its purpose
of creating places where people
want to live and work, is reliant
on attracting, maintaining and
developing great talent.
At the end of 2021, we had 91 employees working at our head
office in Rotherham and across our regional offices in Manchester,
Birmingham and Leeds, representing a diverse mix of backgrounds,
experiences, and expertise.
Harworth recognises the importance and benefits of a diverse
workforce. In 2018 we adopted a Diversity and Equal Opportunities
policy, and all employees receive mandatory diversity and inclusion
training. Our People Steering Group (PSG) has received further
training on diversity and inclusion best practice, and plays a leading
role in target setting and identifying areas for improvement across
the organisation.
We are committed to transparency and disclosure of diversity and
inclusion data. We provide statistics on gender and ethnic diversity
within our organisation on pages 107 to 108.
Embedding the Harworth Culture
We have embedded a
“One Harworth” culture
throughout our business.
This underlines our collaborative approach to delivering and
managing our sites, and succeeding as one team. Our culture
is underpinned by the three Harworth values:
• Taking Pride in our People & Partnerships
• Delivering Creative Solutions
• Acting with Integrity & Trust
We support this culture through:
•
Integrating the Harworth values into appraisals and setting
and scoring of remuneration objectives;
• Quarterly all-staff communication events and newsletters,
including peer-nominated awards for those employees
who have exemplified the Harworth values;
• Hosting staff events throughout the year, at a company-
wide and regional level
Staff away day
60
Strategic ReportHarworth Group plc
Hybrid
working
During 2021, Covid-19 continued to highlight the
importance of promoting and maintaining a good
work life balance.
In response to the long-term shift in working practices brought
on by the pandemic, we introduced a formal hybrid working
policy for all staff.
The policy allows staff to split their work time between the
workplace and home, with a maximum of two days a week
working from home. All staff were given hybrid working training
to help them navigate new ways of working while promoting
their health and wellbeing.
Harworth is committed to providing additional flexible
working options, acknowledging the numerous benefits
to both employee and employer. As part of this approach,
we have adopted a “Core Business in Core Hours” policy.
Regular meetings that colleagues need to attend should take
place within core hours, with employees free to choose their
remaining working hours to fit around other commitments such
as childcare and external appointments.
New maternity, adoption and
paternity policies
During the year we reviewed several people
policies to ensure alignment with market best
practice, promote the wellbeing and work life
balance of our staff, and enable our business to
attract the best talent.
This included enhancements to our maternity, adoption and
paternity leave policies.
Our maternity and adoption policy has been increased from
six weeks full pay, followed by 10 weeks at 50% pay and then
23 weeks of statutory pay, to 24 weeks at full pay, followed by
15 weeks at statutory maternity pay and then, on return to work,
full pay whilst working 50% hours for the first two weeks.
Our paternity policy has improved from two weeks full pay to
eight weeks full pay, which can be taken in blocks alongside
and/or after a partner’s maternity or adoption leave.
It is hoped that these new policies will provide greater flexibility
for new parents, help to address gender imbalance, and
encourage greater sharing of childcare responsibilities.
Advantage House, Rotherham
61
Strategic ReportAnnual Report and Financial Statements 2021 The
Harworth Way continued
We now have five employees who hold a mental health first aid
qualification. We have continued measures designed to promote
mental and physical wellbeing for our staff, including:
• monthly yoga sessions provided at our head office;
• a series of six “Mind Gym” sessions, teaching mental
wellness techniques; and
•
raising awareness through Mental Health Awareness week in
May 2021.
Harworth also runs an Employee Assistance Programme (EAP)
for all staff. The EAP is designed to help employees deal with any
personal problems that might impact their work performance,
health and wellbeing. These interventions typically include
assessment, short-term counselling and referral services for
employees and their immediate family.
Ongoing monitoring comprises:
• Weekly meetings between our General Counsel & Company
Secretary and the Head of Risk & Compliance
• Monthly reporting by the Head of Risk & Compliance to the
Group Leadership Committee and Board
• Quarterly health, safety and environment meetings
chaired by our Head of Risk & Compliance, attended by
representatives of each division, at which incident and near-
hit briefings are given; site-specific and business-wide issues
are identified and discussed, with action points agreed; and
best practice is shared; and
• Our Head of Risk & Compliance reports to the Board in
January each year on key issues encountered, actions taken,
and priorities for the coming year
People continued
Health, safety and wellbeing
The health, safety and wellbeing of our staff is our
number one priority.
Day-to-day review and management of health and safety issues
rest with our Project Delivery and Estates Management teams.
We have a newly established Risk & Compliance team, which
reports to our General Counsel & Company Secretary, who
undertake a rigorous assurance programme to ensure effective
management of health & safety across all our projects and sites.
Our Chief Executive has ultimate responsibility for all health
and safety matters.
Harworth’s Safety, Health and Environment Management System
is based on the “Plan, Do, Check and Act” model advocated
by the Health & Safety Executive. The Risk & Compliance
team maintains a risk register which, from a health and safety
perspective, rates each of our sites as “low risk”, “medium risk”
or “high risk”. All our low and medium risk sites are inspected at
least annually and any high risk-rated sites are inspected more
regularly. There are currently no “high risk” sites in the site risk
register. The overall risk profile of our sites is reported to both the
Group Leadership Committee and the Board monthly.
Our Risk & Compliance team ensures that health & safety is
embedded into all our activities. In 2021 mandatory health and
safety training was delivered to all employees in the form of
half- day interactive training sessions, which for the first time also
included training on mental and physical wellbeing.
We have a panel of three health and safety consultants that advise
across our portfolio. These consultants focus on health and
safety at our Major Development sites, including management
of consortium meetings between Harworth and its stakeholders,
such as contractors and local authorities.
There were no accidents involving Harworth personnel during
the year. There was one minor accident involving a contractor
under Harworth supervision. Where we have appointed
a Principal Contractor under the Construction Design and
Management (CDM) regulations, it and its sub-contractors take
responsibility for health & safety whilst works are ongoing, but
we continue to monitor health & safety via our consultants or via
our Project Managers. There was one RIDDOR accident on an
area of our site for which our contractor had responsibility for
health & safety. There were no other accidents on contractor-
controlled areas.
62
Strategic ReportHarworth Group plc Staff events
Recognition and award
A series of all-staff events were hosted throughout
the year to share success stories and best practice,
and embed the Harworth culture and values:
• Staff away day in Harrogate: Our first in-person event since
Covid-19 restrictions were relaxed, this away day allowed new
members of the team to meet the whole business for the first
time, and included teach-ins and team-building exercises.
• Employee AGM: We held our second employee AGM in
October 2021. The session was an in-person event and
provided staff with an opportunity to learn about the role of
the Board and the background of its members. The event
included Q&A breakout sessions with Board members.
• Strategy embedding day: Facilitated by an external
consultancy, in which teams were encouraged to explore how
they could contribute to the delivery of our growth strategy.
Employee engagement
Our annual employee engagement survey gauges
employee views on a wide range of topics,
including culture, values, working practices, career
opportunities and communication.
This information is key to measuring the success of our people
policies and informs areas for focus and improvement. In 2021,
we added questions on diversity and inclusion, and hybrid
working.
The response rate to our 2021 survey remained high at 77%
(2020: 81%) Of the respondents:
• 97% said they were proud to work for Harworth;
• 93% would recommend Harworth as a good place to work;
• 92% said that they had a clear understanding of the
Company’s aims and targets;
• 90% were satisfied with their line manager; and
• 89% of respondents said they felt personally driven
to go beyond what is expected of them to make
Harworth successful.
The survey identified some areas for improvement, such as
communication, sharing of knowledge and best practice,
career progression and hybrid working. These will be a focus
for the Senior Leadership team in the coming year.
We offer a comprehensive employee benefits
package for all employees.
This includes a defined contribution pension scheme with
above-market employer contributions (including the option of
salary sacrifice with additional employer pension contributions),
private medical insurance and life insurance. These benefits are
applied consistently across the whole business.
Bonuses for those employees who are contractually entitled are
awarded, in part, for performance against Group Targets which
are aligned to Harworth’s strategy and Purpose and are applied
consistently across the company. In 2021, these included a
Group-wide ESG measure for the first time.
During 2021, we operated a Restricted Share Plan (RSP)
which we first adopted in 2019. The operation of the RSP is
simple and transparent and, in the past, has been applied to
the Executive Directors and the Senior Leadership Team. The
Directors’ Remuneration Report on pages 120 to 149 outlines
how we plan to increase and extend the application of the RSP
such that, in 2022, RSP awards will be made to approximately
50% of Harworth’s employees.
We also operate a Save-As-You-Earn scheme (SAYE) and a
Share Incentive Plan (SIP). The SAYE gives employees an
annual opportunity to save up to £500 a month over a 3-year
period, with the option to purchase shares in Harworth at a
20% discount to the market price of the shares at the outset of
the scheme. To date, more than 70 employees have chosen to
participate in the SAYE scheme. The SIP provides a tax efficient
mechanism by which the Company can promote wider share
ownership amongst its employees by awarding shares, or by
encouraging them to purchase shares. Together, we believe that
the SAYE and the SIP are convenient and cost effective methods
by which we can widen share ownership amongst our workforce
and allow our employees to share in, as well as contribute to,
Harworth’s future success.
The Directors Remuneration Report on pages 120 to 149
explains how we plan to maximise our use of the SIP in 2022 to
promote share ownership across the entire Harworth team.
63
Strategic ReportAnnual Report and Financial Statements 2021 Streamlined Energy & Carbon
Reporting (SECR) disclosure
Our performance in 2021
The company saw a 36% year-on-year increase in recorded GHG
emissions but a 23% reduction in energy intensity during 2021.
The increase in recorded emissions was largely because
comparative data for 2020 was significantly impacted by Covid-19
restrictions, which reduced energy consumption across our sites.
When compared with 2019, GHG emissions for 2021 reduced
by 50%. By far the largest driver of this decrease was a reduction
in fuel used for leased plant at Harworth sites, consequent on the
discontinuance of the processing of coal fines operations.
We implemented several measures to improve energy efficiency
during the year:
•
•
•
Introduced a hybrid working policy whereby employees are
entitled to work up to two days a work from home, reducing
employee commuting
Introduced a salary sacrifice car scheme exclusively for electric
and hybrid vehicles, reducing emissions associated with
employee transport
Improved monitoring of energy usage data to identify
opportunities for reduction
• Continued our upgrade programme for Investment Portfolio
assets, aimed at improving EPC ratings
• Towards the end of the year, we installed over 400 sq. metres of
solar PV panels on the roof of our head office, Advantage House
Planned enhancements
to data collection
As is the case for most real estate companies, Scope 3 emissions
will comprise the largest proportion of our carbon footprint.
We have already started to engage suppliers and occupiers, and
adapt our own invoice and expenses systems to enable us to
accurately measure a larger proportion of this footprint, with a view
to reporting this data in the near future.
We report our greenhouse gas emissions (GHG)
and energy consumption in compliance with the
requirements of The Companies (Directors’ Report)
and Limited Liability Partnerships (Energy and Carbon
Report) Regulations 2018.
Aligned with our financial reporting, the GHG emissions data below
relates to our financial year ended 31 December 2021. Emissions
data from the financial year ended 31 December 2020 has been
provided for comparison.
Harworth uses the operational control boundary method to
calculate GHG emissions, whereby we report on all sources of
environmental impact for areas over which we have control. This
mainly comprises our office locations and the communal areas of
our Investment Portfolio assets. Occupiers’ and contractors’ energy
usage and emissions are not included in our Scope 1 and Scope 2
reporting boundary as this is not deemed to be within our operation
control, but it is our intention to disclose them as Scope 3 emissions
in the near-term.
GHG emissions have been calculated using consumption data
provided by our energy suppliers, the GHG Protocol Corporate
Accounting and Reporting Standard (revised edition) and emissions
factors from the UK Government’s GHG Conversion Factors for
Company Reporting 2020.
Harworth Group plc
Scope 1 emissions1 (tCO2e)
Scope 2 emissions2 (tCO2e)
Total Scope 1 & Scope 2
emissions (tCO2e)
Energy consumption used to
calculate above emissions (kWh)
Revenue intensity ratio for
Scope 1 & Scope 2 emissions
(tCO2e/£m)
Scope 3 emissions: Business
travel by car3 (tCO2e)
Total Scope 1, Scope 2 & Scope
3 emissions (tCO2e)
2021
569
494
1,063
2020
381
403
784
2,327,093
1,776,198
9.7
104
1,180
12.6
98
882
1
2
Includes fuel used for leased plant on Harworth sites and gas used by company
offices and communal areas of Investment Portfolio assets
Includes electricity consumption at company offices and the communal areas of
Investment Portfolio assets
3 Business travel in employee-owned vehicles where Harworth reimbursed the
cost of fuel
64
Strategic ReportHarworth Group plc Task Force on Climate-Related
Financial Disclosures
Harworth is committed to implementing the recommendations of the Task Force on Climate-Related Financial
Disclosures (TCFD). The TCFD aims to provide investors and other stakeholders with useful information on climate-
related risks and opportunities that are relevant to our business. Below we have provided more detail on how we
align with these recommendations.
In this context, we have considered our “comply or explain” obligation under the Financial Conduct Authority’s Listing Rules, and confirm
that we have made disclosures consistent with the TCFD Recommendations and Recommended Disclosures in this Annual Report &
Accounts 2021, save for certain items, which are summarised below:
• Strategy: We have provided only a limited quantitative assessment of the impact on our financial planning and performance of the
short-, medium- and long-term risks and opportunities that we have identified in our 2°C and 4°C scenarios. This is due to data
limitations, which we expect to be addressed in the near-term as Harworth invests in systems and resourcing to capture more data.
• Metrics & Targets: We currently disclose partial Scope 3 greenhouse gas emissions. This is due to data limitations, as many categories
of Scope 3 emissions rely on the disclosure of data to us by suppliers and customers. Harworth is investing in systems and resourcing,
and engaging with stakeholders, to ensure further categories of Scope 3 emissions can be captured in the near-term.
Governance
Board oversight of climate-related risks
and opportunities
The Chief Executive has overall responsibility for climate-related
risks and opportunities. The Board is updated on our sustainability
and climate-related performance and has overall responsibility
for oversight of risk, undertaking a biannual assessment of the
principal risks, which include climate-related risks. From 2022,
these updates will be provided quarterly. The Board assesses the
climate-related risks and opportunities inherent in material projects,
as part of the Board approval process. From 2022, this will extend
to understanding the embodied and operational carbon content of
direct development projects.
Ongoing oversight of climate-related issues is carried out by
our Board ESG Committee, chaired by Angela Bromfield and
comprising the Chair, Chief Executive, Chief Financial Officer
and Non-Executive Director Martyn Bowes, and attended by an
independent external ESG consultant. The Committee meets
at least quarterly and is the senior forum for oversight of the
development and implementation of the company’s sustainability
strategy and commitments. The ESG Committee supports the
Board in the assessment and management of climate risk and is
responsible for reviewing the effectiveness of the relevant risk
management and internal control processes.
Climate-related issues were considered as part of the Board’s
strategy review that took place during the year. In particular, our
plans to transition the Investment Portfolio to modern Grade A,
largely through direct development, was viewed as critical to
improving the climate resilience of our standing assets, thereby
reducing climate transition risk.
The ESG Committee will be responsible for overseeing the setting
of Harworth’s ESG targets and the company’s progress towards
meeting them. It monitors external climate-related issues and
emerging policy and best practice through regular updates from its
retained ESG consultant, and this guides its decisions in formulating
strategy and ongoing risk management.
Management’s role in assessing and managing
climate-related risks and opportunities
The Board ESG Committee is supported by an ESG Steering Group,
comprising members of the Senior Executive and representatives
from teams across the business, including finance, HR, asset
management, development and central services. The steering
group meets at least quarterly, to share knowledge and consider
how best to address climate-related issues in our operations, then
reports progress to the Board ESG Committee.
For our identified climate-related risks (outlined below) we
have allocated a risk owner (the Chief Financial Officer) and risk
champions (the Head of Investor & Stakeholder Relations, our
Technical Director and our Head of Risk & Compliance) who
monitor climate-related risks at portfolio level and brief the Senior
Executive on material movements in risk profile.
We consider stakeholder impact in our project appraisals, and all
new business cases must factor in the environmental and societal
impact of each project. Currently these are largely qualitative
assessments, but it is our intention to increase our quantitative
measurement of impact in our project appraisals, budgeting and
forecasting from 2022.
The management team engages with several external bodies,
including the UK Green Building Council, the British Property
Federation and the Construction Industry Research and Information
Association to enhance its management of climate change risk and
opportunities. The team monitors external climate-related issues
and emerging policy and best practice through regular updates
from a retained independent external ESG consultant.
During the year, the group commissioned a report detailing how
it could develop buildings to be Net Zero Carbon in construction
and operation, prepared by an independent engineering and
sustainability consultancy. The report was presented to the
Investment Committee and is being adopted in the design of
future direct developments, thereby supporting the Company’s
Transformation to Net Zero and guarding against stranded
asset risks.
65
Strategic ReportAnnual Report and Financial Statements 2021 Task force on Climate-related
financial disclosures continued
Strategy
Overview of climate-related risks and opportunities
We consider our relevant time horizons to be short-term (to 2027), medium-term (2028-2040); and long-term (2040–2060). Our short-
term time horizon is aligned to our strategy outlined in September 2021 to double the size of our business over five to seven years. Our
medium-term time horizon corresponds to approximate development timelines for the majority of our current Major Development and
Strategic Land sites.
Our assessment of climate risks and opportunities in the short-, medium- and long-term assumes a scenario in which global temperature
rise is limited to 2°C by 2100 (aligned to Representative Concentration Pathway (RCP) 2.6 as outlined by the Intergovernmental Panel on
Climate Change (IPCC)), but we have also considered the impact of a 4°C (RCP 8.5) scenario on the risks and opportunities below.
In identifying the risks and opportunities outlined in this section and their impact on our financial planning and performance, we have
considered the likelihood of the risk based on current and forecast market data and trends, and the potential impact based on the type and
condition of our portfolio assets and their location. We have also considered the mitigation measures that we currently and could potentially
implement, which have informed our risk assessment outlined on page 77. Together, these factors determine the prioritisation of individual
risks and opportunities in our asset- and group-level financial planning.
Short-term risks (to 2027)
2°C scenario
Risk
Transition risks
Impact on business, strategy and financial planning
Policy & Legal: Minimum Energy Efficiency Standards and the
introduction of “energy in-use” performance ratings could result
in increased costs and a loss of rental income if our Investment
Portfolio assets do not meet minimum standards.
We plan to transition our Investment Portfolio to Grade A over five to
seven years. These assets will have a minimum EPC rating of A and
reflect the latest environmental building specifications, mitigating
the costs of non-compliance.
Policy & Legal: Increased one-off and operating costs across our
Major Development sites arising from regulation in the areas of
green energy procurement, EV charging point installation and
biodiversity offsetting.
Our developments already often exceed minimum building
regulations and emphasize high quality placemaking. We believe
this approach improves the sustainability of our assets, and this is
reflected in their valuation and rental profile.
Market: An increase in energy efficiency specifications expected
by occupiers and home buyers would require additional
expenditure on development and fit-out, which would depress
land values.
We work with our suppliers and housebuilder partners to deliver
high quality products which already exceed market expectations.
This should be reflected in the valuation, pricing and rental profile of
our land and assets.
Market: An increase in carbon prices on high emission materials,
and premiums for and/or availability of lower carbon alternatives
could impact the costs of raw materials in our supply chains.
Our procurement approach is considered early in project planning,
and we undertake rigorous tender processes. We conduct ongoing
monitoring of material costs and use technical resource to mitigate
any impact of rising prices.
Reputation: Investor and other stakeholder requirements of
sustainability performance increase, creating a risk of reputational
damage where expectations are not met, and impacting our
ability to raise capital or create new partnerships.
This year Harworth has enhanced its environmental reporting, provided
new metrics and targets and outlined a Net Zero pathway. We are
engaging closely with investors and other stakeholders to ensure our
environmental reporting continues to evolve and meets expectations.
Physical risks
Some increases in the incidence of acute physical risks, such as
heatwaves, storms, and flooding, could result in increased costs
to repair, replace and future-proof infrastructure across our Major
Development sites and buildings in our Investment Portfolio.
Resilience is already factored into our development design, for
example through developing sustainable urban drainage systems
(SUDS) and sustainable cooling and heating systems for industrial
units. We maintain a flood risk register for all sites.
Impact of a 4°C scenario
Short-term transition and physical risks would be largely unchanged from the 2°C scenario.
66
Strategic ReportHarworth Group plc Short-term opportunities (to 2027)
2°C scenario
Opportunities
Impact on business, strategy and financial planning
Products & services: Through increasing direct development
and transitioning our Investment Portfolio to Grade A, we can
provide market-leading industrial & logistics space with a high
environmental specification.
Grade A assets would be in higher demand from occupiers, and
therefore generate higher rental income and valuations. Increasingly
Harworth will design buildings to be Net Zero Carbon in operation
and construction, as best practice continues to evolve.
Resilience: Our environmental design code for new direct
development will deliver future-proofed assets that require
less maintenance and transition costs in the future. Across our
sites we promote public transport use, create cycle paths and
walkways, plant trees and use SUDs ponds to mitigate flood risk.
Energy efficiency: Reducing energy consumption through low
carbon transport, encouraging flexible working and energy-
saving measures such as timed and LED lighting.
Energy source: Our portfolio is well-placed to meet increased
demand for land for renewable energy schemes and offsetting,
particularly on parts of our sites where other types of development
would not be viable. The scale of our sites means it is often easier
and more cost effective to implement on-site renewable energy
generation than in other settings e.g. urban developments.
An environmental appraisal is integrated into all site decision-
making, and we engage with stakeholders to ensure best practice
and to identify new opportunities. This improves the desirability of
our sites, driving land values higher.
During 2021, we introduced several measures to improve energy
efficiency, which will reduce costs and improve staff productivity.
In 2022, the role of our Natural Resources team will evolve to
support all areas of the business in identifying opportunities to
introduce energy generation and storage into our schemes,
providing additional revenue streams and an opportunity to offset
emissions from within our portfolio.
Impact of a 4°C scenario
Short-term opportunities would be largely unchanged from the 2°C scenario.
Medium-term risks (2028 - 2040)
Additional physical risks may emerge, with slight rises in river peak
flows and associated flood losses. We estimate that 4% of our sites
by area are highly exposed to flooding. Summers will become
warmer with an increased risk of heat stress, leading to minor
increases in the cost of cooling buildings and adaption measures at
our sites to protect those most vulnerable.
Impact of a 4°C scenario
Under this scenario, the physical risks outlined in the 2°C scenario will
intensify further and become more frequent, increasing the speed of
infrastructure obsolescence and the cost of adaption measures.
Transition risks will continue and intensify, with stricter regulation
on energy efficiency and planning, potentially with a greater focus
on the retrofitting and future-proofing of older assets, which may
increase the costs of direct development and those borne by our
housebuilder customers. Occupier expectations of sustainability
will also increase, particularly amongst smaller and medium-sized
businesses which may not have previously had the resources,
financial capacity, or regulatory requirement to focus on this issue.
Infrastructure obsolescence due to changes in demand for climate-
resilient technologies could result in shorter asset lifecycles and
impose additional costs on the business. Harworth will mitigate the
impact of these changes through the transition of our Investment
Portfolio to modern Grade A.
Investors will become less tolerant of environmental
underperformance as they face pressure to decarbonise their own
portfolios to achieve Net Zero Carbon goals. Harworth’s response
to this risk is to ensure our environmental performance improves
through our decarbonisation strategy, and that our disclosure
evolves in line with best practice.
67
Strategic ReportAnnual Report and Financial Statements 2021 Task force on Climate-related
financial disclosures continued
significant impacts on the economy in general, leading to lower
levels of economic output and unemployment, impacting demand
for our sites.
Long-term opportunities (2040 – 2060)
Access to secure and sustainable sources of energy and water, and
reliable transport and communications infrastructure will become
critical for ensuring the resilience of residential and industrial &
logistics developments. Harworth’s expertise in future-proofing and
resilience in the design of its developments will allow us to mitigate
some of these risks. There is also the potential for technological
advances to make future-proofing of buildings more cost effective,
thereby reducing the costs of adaption.
Impact of a 4°C scenario
As physical risks could be significantly higher, the demand for
future-proofing and resilience in the design of developments is likely
to be greater, meaning we could realise land value increases sooner
than in a 2°C scenario.
Risk Management
Identifying and assessing portfolio-level risk
The Board reviews the Group’s principal and emerging risks
formally at the half-year and year-end. Climate change transition
is considered by the Board to be a principal risk for the Company.
The physical risk of climate change is currently considered to be an
operational risk, but both are monitored and managed through the
Group Risk and Assurance Map (GRAM).
The GRAM is our principal tool for monitoring the risk profile of the
business, the measures in place at an operational level for mitigating
and managing risk, the effectiveness of those measures via an
assessment of key risk indicators, and the adequacy of the assurance
given to the management team and Board about risk management.
It is a dynamic document and remains subject to continuous
review and evolution. The GRAM is also used to monitor emerging
regulation. Further information on the GRAM can be found on
pages 70 to 71.
For our two climate-related risks we consider inherent risk (before
factoring in the mitigation measures in place), to be high, but view
residual risk (after factoring in our risk response) as medium.
Identifying and assessing asset-level risk
Since late 2020, all new business cases must factor in the
environmental risks inherent in each project. Currently these are
largely qualitative assessments, but it is our ambition to begin
quantified measurement of their impact for acquisitions and direct
development from 2022 onwards.
Medium-term opportunities (2028 - 2040)
Opportunities may arise from cheaper and more effective
technologies to achieve energy efficiency, allowing Harworth to
generate more of its operating energy from on-site renewables.
There is also likely to be a greater promotion of public transport,
for example bringing old railway lines back into use with new low
carbon and automated transport technologies. This will benefit the
connectivity and land value of Harworth sites, many of which have
former railway sidings and lie adjacent to major road networks.
There may also be greater demand for land used for offsetting, as
buyers approach their own net zero carbon deadlines, which would
provide additional opportunities for our significant landbank and
natural resources portfolio.
Impact of a 4°C scenario
Under this scenario, demand for cheaper adaption measures, low
carbon transport and land for offsetting are all likely to increase. This
could lead to higher demand and therefore land values of Harworth
sites. It could also mean that the cost of adaptation measures are
cheaper, allowing Harworth to future-proof its portfolio earlier and
at a lower cost than under a 2°C scenario.
Long-term risks (2040 – 2060)
The prevalence of physical risks is likely to be higher. These could
include material increases in the frequency of acute risks such as
flooding, particularly in low-lying areas of Yorkshire & the Humber,
such as Doncaster. In addition to the 4% of our sites by area that
we estimate to be highly exposed to flooding, the further 14% of
our sites that we consider to be at medium exposure could also
be at risk. This could lead to increased costs of repairs, mitigation
measures and insurance premiums at these sites. Chronic risks such
as hotter summers will also mean increased energy consumption
in our buildings and maintenance costs, increased demand from
occupiers for air cooling technologies, and adaptation measures
to ensure adequate rainwater collection and storage at our sites.
There is also the potential for fundamental changes in construction
methods and materials, that could increase building costs and
thereby depress land values.
Transition risks will also intensify, with even higher environmental
specifications for industrial & logistics assets and housing. The
expectations of investors and other stakeholders with regards to
environmental performance will increase further, particularly as
2050 decarbonisation targets expire.
Impact of a 4°C scenario
Physical risks could be significantly higher. The Met Office’s UK
Climate Projections 2018 predict that UK sea levels could rise by up
to 1.1m by 2100 in this scenario, which could significantly increase
flooding risk in low lying parts of Yorkshire & the Humber, such
as Doncaster. Average summer temperatures for the Yorkshire &
Humber, North West and East Midlands regions are likely to rise
on average by 5°C by 2100, which could lead to increased costs in
cooling and repairing buildings, and those costs arising sooner than
under a 2°C scenario. These increased physical risks could have
68
Strategic ReportHarworth Group plc Managing risks
• We will maximise opportunities for on-site renewable energy
Portfolio-level risk management is undertaken through the GRAM,
informed by ongoing monitoring of portfolio-specific data, investor
and other stakeholder expectations and market developments.
The company engages closely with industry bodies such as the UK
Green Building Council and receives periodic updates on sector
activity from its ESG consultant. At an asset-level, risk management is
undertaken through project appraisals and site reports.
Steps taken to manage and mitigate our Climate transition risk:
generation
• We will continue to implement energy efficiency measures,
including use of EV infrastructure and installation of automatic and
energy saving lighting
Steps taken to manage and mitigate our Climate physical risk include:
• More efficient infrastructure delivery methods and adaptation
measures such as SUDS installed across sites
• Regular flood risk assessments and proactive responses to any
• One of our key strategic objectives is to transition our Investment
issues arising
Portfolio to modern Grade A
• We have developed a sustainable building code: new buildings
to be at least BREEAM Very Good and EPC rating A
• We will continue to develop disclosure of climate-related metrics
to demonstrate progress and address stakeholder expectations
An outline of our processes for mitigating, transferring, accepting, or
controlling risks can be found on pages 70 to 77.
Metrics & Targets
Metrics used to assess climate-related risks and opportunities
Current metrics used
Additional metrics currently being explored from 2022
Transition
risks
• Data on Scope 1, Scope 2 and certain
categories of Scope 3 emissions
• Data on further categories of Scope 3 emissions
• % energy generated from renewable resources
• % Investment Portfolio that is EPC Grade C
or above
• % Investment Portfolio capable of being Net
Zero Carbon in operation
• % energy generated on-site
• % sites with EV charging capabilities
Physical
risks
• Proportion of land that is exposed to flood risk
• Flood risk assessment under temperature rise scenarios
• Spending on infrastructure projects that will reduce risks
of physical climate impacts at sites
Opportunities
• % Investment Portfolio that is Grade A
• Cost savings from improved energy efficiency and sourcing
• Acreage of Harworth land used for offsetting
• % of company shares held by ESG-focused funds
Disclosure of metrics and Greenhouse gas (GHG) emissions data
We disclose a range of metrics relating to our environmental performance in the Planet section on pages 56 to 59. GHG emissions data can
be found in our Streamlined Energy and Carbon Reporting disclosure on page 64.
Targets to measure climate-related risks and opportunities
Harworth’s Transformation to Net Zero is our commitment to reaching Net Zero Carbon by 2030 for Scope 1, Scope 2, and those
Scope 3 emissions relating to business travel and employee commuting, and to reaching Net Zero Carbon by 2040 for all emissions.
More information can be found in the Planet section on pages 56 to 59.
In addition to its Net Zero Carbon target, Harworth has three Focus Impact Areas that address climate risks, outlined on pages 49 to 50:
Building greener, Developing responsibly and Reducing CO2 emissions. Performance in these Focus Impact Areas is considered in setting
reward for all employees.
69
Strategic ReportAnnual Report and Financial Statements 2021 Effectively
managing our risk
In this section we explain how the Board has reviewed the effectiveness of Harworth’s risk management and internal
control system. We present our approach to risk, including the further improvements we have made to our risk
management system, and set out the Board’s analysis of the Group’s principal risks and uncertainties informed by
our growth strategy.
At the beginning of the year, with oversight from the Audit
Committee and the Board, management undertook a
comprehensive review of the Group’s risk management and internal
controls systems with the assistance of external consultants.
Role of the Board and Audit Committee
The Board has overall responsibility for determining the risk appetite
of the Group, for monitoring the risk profile of the business and
ensuring that measures and controls are in place to manage risk
effectively, with its focus being on principal and emerging risks. The
Audit Committee supports the Board in the management of risk and
is responsible for reviewing the effectiveness of risk management
and internal control processes and assurance activity.
Management of risks
At an operational level, ownership of risks is assigned to members
of the Senior Executive and managed on a day-to-day basis by
risk champions from across the business. The Group Leadership
Committee (GLC) has responsibility for identifying specific risks,
implementing and monitoring risk responses and ensuring
operating effectiveness of key controls. Every month, the profile of
our principal and operational risks is reported to the GLC and a risk
workshop is hosted to undertake a “deep dive” into one or more
risks, led by the risk owners and champions.
We recognise that not all risks can be eliminated, or sufficiently
mitigated at an acceptable cost, and that there are some risks
which, given the nature of Harworth’s business and the track record
and experience of the team, we are prepared to accept. Our focus
is to ensure there is an awareness of risk throughout the organisation
with an effective framework in place to respond effectively to
changes in risk profile. Our insurance programme also plays an
important role where we are unable to eliminate certain risks.
Group Risk and Assurance Map
Central to monitoring the effectiveness of our risk management
system is our new Group Risk and Assurance Map (GRAM), which
has replaced the Group Risk Register. The GRAM is a register
of the Group’s principal and operational risks grouped into ten
risk categories each with a series of sub-risks (see page 116 of
the Audit Committee Report for the full list of risk categories and
sub-risks). The GRAM is a “living” tool and reviewed by risk owners
and champions (continuously), the GLC (monthly), and the Audit
Committee (biannually). Each sub-risk has its own risk and assurance
map which details:
•
•
the definition of and commentary on each risk;
inherent risk, residual risk and risk appetite scores to evaluate
the changing status of each risk;
• mitigation measures that have either been implemented, are in
progress or planned;
• key risk indicators used to measure the profile of each risk;
• established Board assurance activity; and
• management’s proposals for further assurance activity, which
is used by the Audit Committee to approve a 36-month rolling
programme of further assurance (see page 115 of the Audit
Committee report).
The profile of our principal risks is reported to the Board monthly
and the Board undertakes a detailed review of our principal risks
and its risk appetite every six months.
Following a detailed review undertaken by the Audit Committee
ahead of publication of this report, the Board is confident that the
Group’s risk management and internal controls systems, including all
material financial, operational and compliance controls, are effective.
The full risk management system pursuant to which risks are monitored and managed throughout the year is summarised below.
Risk review framework: Annual cycle
Audit Committee review of GRAM and assessment of the effectiveness of the Group’s internal controls (ahead of results announcements)
Board assessment of the effectiveness of the Group’s risk management system (ahead of results announcements)
Bi-annual Board
review of principal
and emerging risks
and risk appetite
Audit Committee
review of
whistleblowing
policy and reporting
Bi-annual Board
review of principal
and emerging risks
and risk appetite
Audit Committee review of 36-month rolling
programme of further assurance activity
Audit Committee assessment of need for internal
audit function
GLC risk workshops
JAN
FEB
MAR
APR
MAY
JUN
JUL
AUG
SEP
OCT
NOV
DEC
70
Strategic ReportHarworth Group plc Principal risks and uncertainties
The Board is responsible for identifying, setting the risk appetite for, and evaluating the Group’s principal risks, being those risks that could
threaten the delivery of our strategy, our business model, future performance, solvency or liquidity and/or reputation. Over the last 12
months, the Board has identified through a series of workshops a refreshed set of principal risks and uncertainties, informed by the strategy.
The risk heat map below illustrates the positioning of our principal risks before and after mitigating actions. A detailed analysis of each
principal risk is set out thereafter, explaining our key risk mitigation actions, further measures planned for the upcoming year, change in
residual risk status in the year and how each risk relates to our strategic pillars.
The Senior Executive and Board are monitoring closely the conflict in Ukraine, its macro-economic implications and potential impacts on the
business. The profile of our principal risks remains subject to very regular review at an operational level, both in the context of the Ukraine/
Russia conflict, and more widely.
Principal risks
Acquisitions
1. Availability of and competition for
strategic sites
Project Delivery
2. Planning
3. Supply chain cost inflation and
constraints
4. Supply chain and delivery partner
management (counter-party risk)
5. Statutory costs of development
Markets
6. Residential and commercial markets
People
7. Resourcing
Finance
8. Availability of appropriate capital
Safety and Compliance
9. Health and safety
Climate Change
10. Managing climate change transition
Systems and Information Resources
11. Cyber security
Very high
High
Medium
Low
Very low
y
S
e Info r m
ate
g
n
Clim
a
h
C
C
S
o
a
f
m
e
9
t
p
y
l
i
a
a
n
n
d
c
e
Inherent risk
(before mitigating
actions)
Residual risk
(after mitigating
actions)
s t e m s a n d
a ti o
n R e s o u r c es
11
Acquisitio
ns
10
10
9
5
4
2
3
6
11
1
1
2
8
7
3
4
5
6
8
Finance
7
p l e
P e o
D
P
r
e
o
l
i
j
v
e
e
c
r
t
y
s
t
e
ark
M
See our principal risks tables on the following
pages for how we report on and mitigate our
current and emerging principal risks
71
Strategic ReportAnnual Report and Financial Statements 2021
Effectively
managing our risk continued
Strategic link key
1 Increasing direct
development of
industrial & logistics
stock
2 Accelerating sales
and broadening
the range of our
residential products
3 Growing our
strategic land
portfolio and land
promotion activities
4 Repositioning our
Investment Portfolio
to modern Grade A
The Harworth Way
Group Financial
Targets
Risk 1
Availability of and
competition for
strategic sites
Current risk
Commentary
In the current strong market for industrial & logistics and residential sites, competition for acquisitions
remains a key risk as acquiring new sites is fundamental to maintaining target returns and driving growth
consistent with our strategy. Having said that, we have a landbank of around 14,000 acres with a pipeline of
28.2m sq. ft (7.3m sq. ft consented) of industrial space and 30,804 plots (of which 9,978 were consented),
which means we can be patient if hurdle return aspirations cannot be met in the current market.
Description
Mitigation
Additional measures planned for 2022
Failure to acquire strategic
land at appropriate prices
due to constrained supply
or competition
• Extensive external stakeholder engagement to
identify opportunities supported by internal co-
ordination via regular internal acquisitions meetings
• Further development of
acquisition strategy
• Refresh stakeholder maps
• As part of the strategy review, we commissioned
reports from external consultants to inform our
acquisition strategy
• We seek input from our valuers prior to acquisition to
inform pricing
• Via our portfolio strategy, we manage the timing
of acquisitions
• Development of Customer Relationship
Management system
• Additional acquisitions resource
Change in residual
risk in the year
Link to
strategy
3,
Risk 2
Planning
Current and emerging risk
Commentary
Changes to the planning regime have the potential to impact adversely on promotion activity and
financial returns. There is greater uncertainty since the Government’s flagship planning reforms have
been put on hold.
Description
Mitigation
Additional measures planned for 2022
Planning promotion risk
including uncertainty
around local and national
changes to planning regime
with potential for adverse
effect on promotion activity
• We regularly review greenbelt exposure at a
• Refresh stakeholder maps
portfolio level
• Through key stakeholder groups, we respond to
emerging planning policy
• Stakeholder mapping is undertaken at a project level
•
Local political advisers are appointed on individual
sites, where appropriate
• Strong relationships with local planning authorities
and key local stakeholders
• Develop a Customer Relationship
Management (“CRM”) system
Change in residual
risk in the year
Link to
strategy
1,2,3,
72
Strategic ReportHarworth Group plc Change in residual risk in the year
No change
Increase
Decrease
Risk 3
Commentary
Supply chain cost
inflation and constraints
Both we and our customers are experiencing supply chain challenges including shortages in raw
materials and labour constraints.
Current risk
Description
Supply chain pricing
pressures and constraints
(affecting both labour and
raw materials) resulting in
development cost increases
and delays
Mitigation
Additional measures planned for 2022
• Our procurement approach is considered early in
• Additional direct development and
project planning
technical resource
• We undertake rigorous tender processes
• We have established a suite of legal precedents to
promote consistency in land remediation and direct
development procurement
• We utilise market intelligence regarding contractors’
commitments and workload
Change in residual
risk in the year
Link to
strategy
1,2,
Risk 4
Commentary
Supply chain and
delivery partner
management
(counter-party risk)
Current and emerging risk
Our strategy to increase direct development activity and enter the Build to Rent market increases delivery
and execution risk within the business, resulting in a growing need to select, monitor and manage
counterparties effectively.
Description
Mitigation
Additional measures planned for 2022
Increase in exposure to
supply chain, delivery and
investment partners leading
to increased risk of disputes
with and/or default by
and/or insolvency of
counterparties
• Our procurement approach is considered early in
• Upgrades to our supplier
project planning
• A consistent process is followed for “onboarding”
suppliers
• We have established a suite of legal precedents to
promote consistency in land remediation and direct
development procurement
• Our central technical team monitors contractor
onboarding process, extending to all
counterparties, and implementation
of improvements to ongoing
monitoring regime
• Explore viability of framework
agreements with suppliers who
undertake works at volume and/or scale
“concentration risk” and promotes consistencies and
knowledge-sharing across our portfolio
Change in residual
risk in the year
Link to
strategy
1,2,
, ,
73
Strategic ReportAnnual Report and Financial Statements 2021 Effectively
managing our risk continued
Strategic link key
1 Increasing direct
development of
industrial & logistics
stock
2 Accelerating sales
and broadening
the range of our
residential products
3 Growing our
strategic land
portfolio and land
promotion activities
4 Repositioning our
Investment Portfolio
to modern Grade A
The Harworth Way
Group Financial
Targets
Risk 5
Commentary
Statutory costs of
development
Current and emerging risk
Short-term higher risk areas are focused on biodiversity net gains, now mandated via the Environment Act
2021, changes to Part L of the Building Regulations and the recently implemented residential property
developer tax. On the horizon are planning reforms and the future Homes Standard.
Description
Mitigation
Additional measures planned for 2022
Legislative reforms which
do or may impose a tax or
levy on development, or
have the effect of levying
an additional cost on
development
• The known and potential impact of changes to the
• Enhanced horizon scanning regime
Building Regulations, implementation of biodiversity
net gain requirements and planning reforms is
modelled into project appraisals ahead of acquisition
• Through key stakeholder groups, we respond to
emerging policy
• Ongoing work to determine how we
can best address the challenges and
capitalise on the opportunities arising
from mandated biodiversity net gain
requirements
•
Initial modelling suggests limited direct impact from
the residential property developer tax at this stage
Change in residual
risk in the year
Link to
strategy
1,2,4,
, ,
Risk 6
Commentary
Residential and
commercial markets
We continue to focus on both residential and industrial & logistics markets. The Group is currently operating
in a very buoyant commercial market reflecting strong demand in the industrial & logistics sector.
Current risk
The residential market also performed well through 2021, with strong house prices and housing sales
volumes nationally including on our sites.
Description
Mitigation
Additional measures planned for 2022
Downturn in industrial &
logistics and/or residential
market conditions leading
to falls in property values
• Regular feedback is received from advisers on
• Roll-out of the first wave of our Build to
the status of residential and industrial & logistics
markets in our core regions to supplement generic
market commentary
• Pursuant to our strategy we are working to take full
Rent product
• Repositioning of Investment Portfolio
including selective disposal of certain
legacy assets.
advantage of current market conditions and mitigate
a potential downturn by accelerating residential sales,
introducing new products at our residential sites,
repositioning our Investment Portfolio and increasing
the quantum and speed of direct development (but
with controlled exposure to speculative development)
•
Appointed a Head of Mixed Tenure, a Development
Director, a Director of Strategy, Investment & Business
Development, and we are recruiting additional resource
Change in residual
risk in the year
Link to
strategy
1,2,4, ,
74
Strategic ReportHarworth Group plc Change in residual risk in the year
No change
Increase
Decrease
Risk 7
Resourcing
Current risk
Commentary
Resource stretch, in particular exacerbated by the work implications of Covid-19 and the current
challenging labour market, is currently one of the biggest concerns amongst the Board and Senior
Executive as the Group must be able to attract and retain the right people to deliver the strategy.
Significant work has been, and continues to be, undertaken on recruitment, employee engagement and
well-being initiatives.
Description
Mitigation
Insufficient and/or
inappropriate resources,
including overworked
staff and/or inability to
retain and/or attract
necessary talent
• Development of a people strategy to complement
our business strategy. External benchmarking of
organisational design, recruitment and retention,
competitiveness of reward, health and well-being
• We continue to progress recruitment for replacement
and new roles and succession planning
• New maternity, paternity, adoption and shared
parental leave policies
•
Introduced hybrid working
• Widened share ownership through the Restricted
Share Plan and Share Incentive Plan
• Alignment of Group and personal objectives on
delivery of strategy
Additional measures planned for 2022
• Continued implementation of people
strategy including expansion of talent
development programme
Change in residual
risk in the year
Link to
strategy
1,2,3,
Risk 8
Commentary
Availability of
appropriate capital
Current risk
There is a need to match capital to the operational and project specific needs of the business,
accommodating the increase in pace and scale of activity, particularly development, under our strategy.
In 2021 we engaged extensively with existing and prospective funders culminating in the entering into of
a new senior debt facility in early 2022.
Description
Mitigation
Additional measures planned for 2022
Inability to access
appropriate equity and/or
debt funding to support the
strategy
• Development of a financing strategy to complement
• Continue to identify scheme
our business strategy, supported by external
consultants
specific funding
• The prospect of raising additional
•
Informed by that strategy, we have entered into a new
senior debt facility with a resulting £50m increase
to £200m.
equity, if required to pursue specific
development opportunities, is kept
under consideration
• This is supplemented by accessing project specific
funding where relevant.
• We continue to pursue and unlock grant funding
Change in residual
risk in the year
Link to
strategy
1,2,3,4
75
Strategic ReportAnnual Report and Financial Statements 2021 Effectively
managing our risk continued
Strategic link key
1 Increasing direct
development of
industrial & logistics
stock
2 Accelerating sales
and broadening
the range of our
residential products
3 Growing our
strategic land
portfolio and land
promotion activities
4 Repositioning our
Investment Portfolio
to modern Grade A
The Harworth Way
Group Financial
Targets
Risk 9
Health and safety
Current risk
Commentary
The health, safety and welfare of people involved in or affected by Harworth’s activities are of prime
importance. This risk ranges from the health and safety of visitors and workers on our sites, and
trespassers (given the nature of our sites), through to the health and safety of employees and visitors in an
office environment. Full compliance with all relevant legislation is the minimum acceptable standard but
we and our partners aim to achieve the highest possible standards of good practice.
Additional measures planned for 2022
• Transition to a cloud-based health,
safety and environment management
platform
• Review the effectiveness of our
health and safety consultant panel
arrangements
• Additional R&C departmental resource
Change in residual
risk in the year
Link to
strategy
Description
Mitigation
Incident causing injury
and/or death resulting in
liability, penalties and/or
reputational damage
• Appropriate policies are in place, including a Safety,
Health and Environmental Management System
(SHEMS) Policy and an Employee Health and
Safety Policy
• A Risk and Compliance (R&C) function has been
established with a focused remit on health and safety
and environmental assurance
• The R&C team undertakes a rigorous site inspection
regime and maintains a sites risk register through
which it monitors and reports the risk health and
safety status of each of our sites.
• We have a panel of health and safety consultants who
support our project delivery
• Health, safety and environment management
meetings are held quarterly and attended by
representatives from all operational divisions
• We host compulsory health and safety training for
all employees every two years, supplemented by an
annual schedule of mandatory online learning
• We have a programme of health and wellbeing
initiatives for employees, including access to internal
physical and mental health first aiders and an external
Employee Assistance Programme
76
Strategic ReportHarworth Group plc Change in residual risk in the year
No change
Increase
Decrease
Risk 10
Commentary
Managing climate
change transition
Current and emerging risk
The climate change agenda has a wide-ranging impact on the Group, from our investment case to
shareholders and reporting to the stock market through to operational activity, including the need to
embed environmental sustainability into all our projects.
Description
Mitigation
Additional measures planned for 2022
Failure to manage
transitional risks associated
with climate change
covering both operational
activity and reporting
Risk 11
Cyber security
Current risk
Description
Successful cyber-attack
jeopardising business
continuity
• We have established an ESG Board Committee (see
pages 118 to 119) to oversee formulation and delivery
of our ESG strategy, target-setting and reporting
• Embed fully environmental and social
analysis into our project appraisals and
approvals process
• At an operational level, the Committee is supported
by the ESG Steering Group, comprising members
from every team across the business
• External consultants are appointed to advise on ESG
strategy formulation, implementation and reporting
•
Initial measures and short-term and long-term targets
have been developed for all areas of the ESG strategy
• We have identified a decarbonisation target and initial
measures to achieve zero carbon in Scope 1, 2 and
some Scope 3 emissions
• We have joined the UK Green Building Council which
facilitates sharing of knowledge and best practice.
• Continue to improve capture and
analysis of environmental and social
data and to enhance and extend our
climate change disclosures
• Appointment of a Director of
Sustainability, reporting to the CEO
Change in residual
risk in the year
Link to
strategy
1,2,4,
,
Commentary
Cyber-attacks pose an evolving threat to all businesses and Harworth, like others, is at risk of regular
attacks. Strategic and technical measures are in place to monitor and mitigate this risk.
Mitigation
Additional measures planned for 2022
• We have an established IT Disaster Recovery Plan
• Roll out of a new information security
which is subject to annual desktop testing
policy set
• We have an external provider for IT support which
• Our IT Disaster Recovery Plan will be
remains vigilant to the evolving cyber security backdrop
and an outsourced Information Security manager
incorporated into an updated Business
Continuity Plan.
• We take out cyber risk insurance
• We undertake phishing simulations, IT system
vulnerability scanning and annual penetration testing
• We have a rolling cyber and information security
awareness programme for all employees.
Change in residual
risk in the year
Link to
strategy
The Strategic Report has been approved by the Board of Directors and signed on its behalf by:
CHRIS BIRCH
Group General Counsel and Company Secretary
21 March 2022
77
Strategic ReportAnnual Report and Financial Statements 2021 Harworth is transitioning into its next
phase of growth with the benefit of an
established and effective corporate
governance structure.
ALASTAIR LYONS
Chair
The Harworth Way
Governance is a supporting pillar of the Harworth Way.
High standards of corporate governance underpin the
effective operation of the business and the long-term
sustainable success of the Company, for the benefit of
all stakeholders.
Read more about
The Harworth Way
on pages 48 to 69
78
Harworth Group plc Governance
Report
Contents
Chair’s introduction
Board of Directors and
Company Secretary
Statement of corporate governance
Nomination Committee report
Audit Committee report
ESG Committee report
Directors’ remuneration report
Directors’ report
Statement of Directors’ responsibilities
80
82
86
102
110
118
120
150
154
79
Annual Report and Financial Statements 2021 Chair’s
Introduction
We have made significant
progress in key areas of
governance, which have been
the focus of the Board during the
reporting period.
Alastair Lyons
Chair
Dear Shareholder,
On behalf of the Board, I am pleased to present this year’s
Corporate Governance Report.
Whilst 2020 was largely focused on responding to the pandemic,
in 2021 we dealt with Covid-19 as business as usual and navigated
to a “new normal”. We were very pleased to return to in-person
Board and Committee meetings and undertake site visits from June,
whilst keeping contingencies and Covid-19 secure precautions in
place. This momentum has allowed us to make significant progress
in key areas which, as outlined below, have been the focus of the
Board during the reporting period. We are confident that Harworth
is transitioning into its next phase of growth with the benefit of an
established and effective corporate governance structure.
The areas identified below are developed in more detail in the
Strategic Report on pages 1 to 77 and in the balance of this
Corporate Governance Report, which comprises: the Statement
of Corporate Governance, the Nomination Committee Report, the
Audit Committee Report, the ESG Committee Report, the Directors’
Remuneration Report, the Directors’ Report, and the Statement of
Directors’ Responsibilities.
Our strategy
Following Lynda Shillaw’s appointment as our Chief Executive in
November 2020, the Board has spent much of its time interacting
with the Senior Executive in reviewing and evolving the Company’s
strategy, participating in a series of workshops culminating in
approval of an updated strategy at our Strategy Day in July. Whilst
the plan represents evolution not revolution, we are planning for
there to be material shifts in the pace and scale of what we do with
the aim of reaching £1bn of EPRA NDV over five to seven years. The
Board is now focused on overseeing the implementation of our
strategy, and excited by the prospect of scaling up the creation and
delivery of sustainable places where people want to live and work.
80
Environmental, Social and Governance
(ESG)
ESG is hardwired into Harworth’s DNA and culture, and our ESG
credentials were reflected in the feedback from stakeholders in
support of the strategy review process. Our long-standing approach
to ESG was articulated as the Harworth Way in 2019, and this
has been embedded in all elements of our strategy. During the
period, we took this forward by establishing our new ESG Board
Committee, to provide oversight of and guidance on the Group’s
ESG strategy, practices and reporting. The development of our
ESG commitments includes setting a Net Zero Carbon pathway,
identifying targets aligned with the pillars of the Harworth Way,
and establishing a reporting regime which will not only satisfy our
regulatory requirements but will also demonstrate to our investors
and stakeholders the significant part we can and do play from an
ESG perspective.
Remuneration Policy
During the second half of the year, the Remuneration Committee
undertook the triennial Remuneration Policy (Policy) review with the
assistance of our remuneration consultants, Deloitte. This review
was informed by our strategy, and supported by benchmarking
exercises and cost modelling. The Committee consulted with, and
took onboard feedback from, the Company’s largest shareholders
and several proxy advisers. The new Policy was recommended to
and approved by the Board in February 2022 and will be tabled
for approval at this year’s Annual General Meeting (AGM). The
Policy is set out in full on pages 127 to 137, and an explanation of
the rationale for the proposed changes to the Policy is at pages
121 to 124.
Harworth Group plcGovernance Risk and internal controls
During the year we reviewed our risk management system, with
the assistance of external consultants, itself another reflection
of our appetite for continuous improvement when it comes to
governance. Our previous Group Risk Register has been replaced
by the Group Risk and Assurance Map, a register of our principal
and operational risks incorporating risk scores, mitigation
measures, key risk indicators and Board assurance activity. We
also added more rigour to our assurance regime, introducing
a three-year assurance programme which replaces the in-year
assurance activities we have undertaken in the past. Finally, we felt
it appropriate to undertake a detailed review of our principal risks,
to take account of the updated strategy, and any change in our risk
appetite. The implementation of this enhanced system is reflected in
our risk report on pages 70 to 77 and, following Audit Committee
recommendation, the Board’s assessment of the effectiveness of the
Group’s risk management system can be found on page 70.
Board composition
Given the relatively short tenures of our Executive Directors and
independent Board members, succession planning did not
feature as prominently on the Board’s agenda as in previous
years. In September however, the Board appointed Nigel Turner
as interim Chief Financial Officer, following a recommendation
by the Nomination Committee. Though not a statutory director,
Nigel undertook Kitty Patmore’s responsibilities whilst she was on
maternity leave.
We are committed to diversity and inclusion in the boardroom as
well as across the wider business. We are proud of our progressive
position on gender diversity at Board level, but understand there
is more work to do, particularly with respect to ethnic minority
representation albeit we have no short-term need to appoint an
additional director to the Board.
External Board evaluation
In the fourth quarter of 2021, an external Board evaluation was
undertaken by Ian White, an experienced independent Board
assessor who also undertook our previous external evaluation in
2018. Whilst it was pleasing to see the positive feedback from this
evaluation and its conclusion that we have an effective Board, there is
always room for improvement and action points have been agreed to
implement the recommendations arising from the review. A summary
of the evaluation process and the recommendations can be found on
pages 98 to 99 of the Statement of Corporate Governance.
Annual General Meeting
Covid-19 restrictions permitting, our AGM will be held at 2:00pm
on Tuesday 24 May 2022 at The Bessemer Conference Room,
AMP Technology Centre, Advanced Manufacturing Park, Brunel
Way, Waverley, Rotherham S60 5WG. Given we were required to
hold closed AGMs in 2020 and 2021, I very much look forward to
welcoming shareholders in person.
ALASTAIR LYONS
Chair
21 March 2022
The Board is focused on overseeing the
implementation of our strategy, and
excited by the prospect of scaling up the
creation and delivery of sustainable places
where people want to live and work.
81
Annual Report and Financial Statements 2021Governance
Board of Directors
and Company Secretary
Alastair Lyons
CHAIR
Date of appointment
07/03/2018
Length of service
4 years 1 month
Independent
Yes
Lynda Shillaw
CHIEF EXECUTIVE
Date of appointment
01/11/2020
Length of service
1 year 5 months
Independent
No
Katerina (Kitty) Patmore
CHIEF FINANCIAL OFFICER
Date of appointment
01/10/2019
Length of service
2 years 6 months
Independent
No
Committee Membership
Committee Membership
Committee Membership
N (Chair) R E
N E D
E D (Chair)
Skills and Experience
Alastair is Chair of Welsh Water and Vitality
UK. He was Chair of the Admiral Group
from 2000 to 2017, Deputy Chair of Bovis
Homes from 2008 to 2018, Chair of Serco
from 2010 to 2015 and of Towergate
Insurance from 2011 to 2015. Previously
in his executive career, Alastair was Chief
Executive of the National Provident
Institution and the National and Provincial
Building Society, Managing Director of
the Insurance Division of Abbey National
plc and Director of Corporate Projects at
National Westminster Bank plc. He has a
broad base of business experience with
a particular focus on the housing and
insurance industries. He was awarded the
CBE in 2001 for services to social security
having served as a Non-Executive Director
of the Department for Work and Pensions
and the Department of Social Security,
and he was also a Non-Executive Director
of the Department of Transport.
External appointments
Chair of Welsh Water (Dŵr Cymru) and
Vitality UK.
Skills and Experience
Prior to Lynda’s appointment as Chief
Executive, she was Group Property
Director at Town Centre Securities plc
where she led the management of its
land and property and its development
pipeline. Before that she was Divisional
CEO, Property at the Manchester Airports
Group (MAG), where she was responsible
for MAG’s investment portfolio and
development land bank, including its
“Airport City” joint venture. This followed
a long career managing both investment
and development real estate portfolios for
BT and Co-operative Group before joining
Lloyds Banking Group as Global Head of
its Real Estate lending division.
Lynda is also a Non-Executive Director
and Senior Independent Director of Vivid
Housing Association, and until December
2021 she was a Non-Executive Director
of The Crown Estate. At the start of 2022,
she was appointed Chair of the BPF
Regional Policy Committee.
External appointments
Non-Executive Director of Vivid Housing
Association.
Skills and Experience
Prior to joining Harworth, Kitty was
Director with responsibility for Finance
and Operations at Harwood Real Estate,
which managed one of the largest private
rented housing investment portfolios
in the United Kingdom. She led the
finance function with responsibility for
investor relations and capital markets,
including leading an LSE main market
fundraising process. Kitty started her
career in banking at Barclays specialising
in structured real estate finance before
moving into real estate mezzanine finance
across the UK and Europe for a private
debt fund, DRC Capital.
Kitty is also a Non-Executive Director
and member of the Audit Committee
of LondonMetric Property plc and
Chair of the Investment Property Forum
Finance Group.
External appointments
Non-Executive Director of LondonMetric
Property plc.
82
Harworth Group plcGovernance Angela Bromfield
SENIOR INDEPENDENT DIRECTOR
Patrick O’Donnell Bourke
NON-EXECUTIVE DIRECTOR
Date of appointment
01/04/2019
Length of service
3 years
Independent
Yes
Date of appointment
03/11/2020
Length of service
1 year 5 months
Independent
Yes
Committee Membership
Committee Membership
R (Chair) E (Chair) N
A (Chair)
Skills and Experience
Angela is a Non-Executive Director
at Marshalls plc, where she chairs the
Remuneration Committee and is a
member of the Nomination and Audit
Committees. She is also a Non-Executive
Director at Churchill China plc, where she
chairs the Remuneration Committee and
is a member of the Nomination and Audit
Committees.
Angela has extensive commercial strategy,
marketing and communications executive
experience. She was Strategic Marketing
& Communications Director at Morgan
Sindall plc until 2013 and prior to that
held senior roles at the Tarmac Group,
Premier Farnell plc and ICI plc.
External appointments
Non-Executive Director of Marshalls plc
and Churchill China plc.
Skills and Experience
Patrick was recently appointed as a Non-
Executive Director and Chair of the Audit
Committee of Pantheon Infrastructure plc
and is also Chair of Ecofin US Renewables
Infrastructure Trust plc. He was a Non-
Executive Director of Calisen plc until
March 2021, and a Non-Executive
Director of Affinity Water Limited from
2013 to 2020.
Patrick has significant senior international
experience in investing in, and managing,
infrastructure and utilities. His most recent
executive role was that of Group Finance
Director for John Laing Group plc from
2011 to 2019. Prior to that he was Group
Finance Director of Viridian Group plc
from 2000 to 2006, before becoming
Group Chief Executive from 2007 to 2011
after Viridian was taken private. Previously,
he was Group Treasurer for Powergen
plc and spent nine years in investment
banking with Barclays de Zoete Wedd
and Hill Samuel, having qualified as a
chartered accountant with Peat Marwick
(now KPMG).
External appointments
Chair of Ecofin US Renewables
Infrastructure Trust plc and Non-Executive
Director of Pantheon Infrastructure plc.
Key
N Nomination Committee
R Remuneration Committee
E
ESG Committee
D Disclosure Committee
A Audit Committee
83
Annual Report and Financial Statements 2021Governance Board of Directors
and Company Secretary continued
Martyn Bowes
NON-EXECUTIVE DIRECTOR
Representing the Pension
Protection Fund
Date of appointment
24/03/2015
(Previously Non-Executive Director of
Harworth Estates Property Group Limited
from 19 March 2013)
Length of service
7 years 1 month (9 years 1 month including
appointment to HEPGL)
Independent
No
Committee Membership
E
Skills and Experience
Martyn has spent the majority of his
career in banking, most recently from
2001 to 2007 with Barclays Capital as
Managing Director, Real Estate Finance.
Since leaving Barclays he has pursued a
portfolio business career, which in 2012
involved a takeover with fellow Directors
of the South of England based Welbeck
Land real estate business. Martyn now
acts as Finance Director for Welbeck Land
and also maintains other interests in real
estate and healthcare.
External appointments
Director of multiple private limited
companies predominantly within the
Welbeck Land Group.
Ruth Cooke
NON-EXECUTIVE DIRECTOR
Lisa Scenna
NON-EXECUTIVE DIRECTOR
Date of appointment
19/03/2019
Length of service
3 years 1 month
Independent
Yes
Date of appointment
01/09/2020
Length of service
1 year 7 months
Independent
Yes
Committee Membership
Committee Membership
N A
R A
Skills and Experience
Ruth is currently Chief Executive of
GreenSquareAccord, a housing
association operating across the North,
Midlands and South West. Before that,
she was Finance Director (from 2008 to
2012) and then Chief Executive (from
2012 to 2018) of Midland Heart, a
Birmingham-based housing association.
Prior to that, she held senior finance
and resourcing roles at Knightstone, a
housing association based in the South
West, and Anchor Trust, a provider of
housing and care to those aged 55 years
old and above. Ruth has held a number
of voluntary and non-executive positions
in the social housing and retirement
community sector. She is an Associate of
the Institute of Chartered Accountants
and a corporate treasurer.
External appointments
Chief Executive of GreenSquareAccord.
84
Skills and Experience
Lisa is a Non-Executive Director of Genuit
Group plc, where she is a member of the
Nomination, Audit and Remuneration
Committees. She is also a Non-Executive
Director of Cromwell Property Group,
an Australian listed company, where she
is a member of the Audit, Remuneration
and Nomination Committees, and the
Independent Board Committee.
Lisa has over 30 years’ experience
working at executive director level in
large multinational corporations, both
private and publicly listed, with a strong
background in real estate development
and asset management. Her most
recent executive role was with Morgan
Sindall Group as Managing Director of
MS Investments. Prior to this, she held
executive roles with Laing O’Rourke,
having led their infrastructure investment
activities globally, and Stockland Group
and Westfield Group in Australia.
Lisa is a member of the Australian Institute
of Company Directors and the Institute of
Chartered Accountants in Australia.
External appointments
Non-Executive Director of Genuit Group
plc and of Cromwell Property Group, an
Australian listed company.
Harworth Group plcGovernance Key
N Nomination Committee
R Remuneration Committee
E
ESG Committee
D Disclosure Committee
A Audit Committee
Steven Underwood
NON-EXECUTIVE DIRECTOR
Date of appointment
02/08/2010
Length of service
11 years 8 months
Independent
No
Committee Membership
None
Skills and Experience
Steven is Chief Executive of the Peel
Group of companies and brings to
the Board the extensive experience
of the Peel Group in brownfield land
remediation and regeneration. Steven
was formerly a representative Director
of Peel Group. Following the reduction
of Peel Group’s shareholding to below
25%, Steven now sits on the Board in
a personal, rather than representative,
capacity.
External appointments
Director of multiple private limited
companies connected to the Peel Group.
Trustee of the Science Museum Group.
Chris Birch
GENERAL COUNSEL &
COMPANY SECRETARY
Date of appointment
06/06/2016
Length of service
5 years 10 months
Independent
No
Committee Membership
D
Skills and Experience
Chris trained with Eversheds LLP (now
Eversheds Sutherland LLP), where he
qualified as a solicitor in 2005 and spent
12 years as a corporate restructuring
lawyer, before joining Harworth as
General Counsel and Company Secretary
in June 2016.
External appointments
None.
85
Annual Report and Financial Statements 2021Governance Statement of
Corporate Governance
The 2018 UK Corporate Governance Code (2018 Code)
Governance is a supporting pillar of The Harworth Way. High standards of corporate governance underpin the effective operation of the
business and the long-term sustainable success of the Company, for the benefit of all stakeholders. We aim to evolve and improve our
governance structures continually and align with industry best practice.
Below we outline the primary areas the Board focused on during the year to ensure compliance with the main principles of the 2018 Code.
A copy of the 2018 Code can be found on the Financial Reporting Council’s website at www.frc.org.uk. The Company complied with the
principles and provisions of the 2018 Code throughout the year ended 31 December 2021.
Code
What did we focus on in 2021?
How did it support our strategy?
See further
Board Leadership
and Company
Purpose
Whilst 2020 was largely about
responding to the pandemic, in 2021 the
Board supported the Senior Executive in
formulating an updated strategy which
underpins an ambitious plan to double
the size of the Company.
The foundation for our strategy is
Harworth’s continuing long-term focus on
generating sustainable new places. The
Board is overseeing the implementation
of the strategy which involves scaling up
and accelerating the creation and delivery
of sustainable new places where people
want to live and work.
Statement of
Corporate
Governance,
page 87
Division of
Responsibilities
Following a period of intense operational
oversight through the early stages of the
pandemic, revisions to our Delegated
Authorities Policy allowed for the Board
to focus more of its time on strategic
discussions and debate.
More time is afforded for the Board to
review material strategic transactions and
hold discussions which focus on purpose,
stakeholder interests, alignment with the
Harworth Way, and impact on the long-
term success of the Group.
Composition,
Succession and
Evaluation
An external review of the Board’s
effectiveness was undertaken in 2021,
and the Board adopted a number
of recommendations arising out of
this review.
Audit, Risk and
Internal Control
The Board oversaw the review of our risk
management system, and undertook
a detailed review of the Group’s
principal risks.
Remuneration
The Remuneration Committee undertook
a detailed review of the Remuneration
Policy, which included consultation with
shareholders and engagement with our
employees. The revised Policy will be
tabled for approval at the 2022 AGM.
The review concluded that the Board was
effective and had supported the Senior
Executive effectively in the formulation
of our ambitious growth strategy. The
recommendations adopted by the
Board will help enhance its performance
in supporting the implementation of
the strategy.
The Board’s review of principal risks was
informed by the strategy review such
that our principal risks reflect the shifts
in our strategy, including the increase
in our direct development activity. The
Board conducts a regular overview of
our principal risks as we launch into
the strategy.
The Remuneration Policy review was
informed by the strategy. Executive
remuneration is aligned with strategic
objectives and cascaded through the
business to motivate our people to deliver
the strategy and align the interests of
employees and shareholders.
Statement of
Corporate
Governance,
pages 89 to 93
Statement of
Corporate
Governance,
pages 98 to 99
Strategic Report:
Effectively
managing our risk,
pages 70 to 77
Audit Committee
Report, pages
115 to 116
Directors’
Remuneration
Report, pages
121 to 137
86
Harworth Group plcGovernance Board leadership and company purpose
Purpose and strategy
In 2019, we developed a succinct expression of Harworth’s
purpose: “to transform land and property into sustainable places
where people want to live and work”. Following her appointment
as Chief Executive, Lynda Shillaw led an extensive review of
strategy during the first half of 2021, working closely throughout
with the Board and wider business. How the Board supported the
development of the strategy is illustrated below:
Our strategy is to reach £1bn of EPRA NDV over five to seven
years starting from the end of 2020. It will require material shifts
in the pace and scale of what we do, leveraging our specialist
expertise to optimise the development of our significant consented
landbank. The strategy is exciting and ambitious, building on the
key attributes that have made Harworth successful to date, including
its passionate, innovative and collaborative people, a landbank
full of opportunities, and a commitment to creating sustainable
communities, all of which contribute towards our aim to deliver
long-term market-leading returns for investors.
Strategy workshops (H1)
In the first half of 2021, the Board participated in a series of workshops
to analyse and review different elements of a potential updated
strategy, which included contributions from external consultants.
The performance of the business is assessed by the Board
throughout the year against the approved budget and strategic
plan, with the Board satisfying itself as to the adequacy of
management’s response to variations in performance against
the plan. Financial and operational reforecasts are presented
to the Board quarterly and the Chief Executive, Chief Financial
Officer, Chief Operating Officer and Chief Investment Officer give
operational and financial updates at each Board meeting.
Strategy Day (July)
Culture
An updated strategy was approved by the Board at its Strategy Day
in July 2021 alongside a strategic plan for the following five years.
The strategy was communicated to shareholders alongside the
2021 interim results.
The Harworth Values are the principles our employees consider
most important when we go about our business and they underpin
our One Harworth approach. At Harworth we:
Ongoing strategy updates
In support of the strategy, the Board oversaw the formulation
of a new people strategy, and reviewed the conclusions and
recommendations from investor and stakeholder perception studies.
Review of Principal Risks (H2)
Informed by the strategy, the Board participated in several
workshops to review the Group’s principal risks, the Directors’
appetite for each of those risks, and the adequacy of the measures
in place to mitigate them.
Approval of Budget (November)
The Board reviewed and approved a draft budget for 2022,
pending the outcome of 2021 results.
The Harworth Values are embedded into the business through
appraisals, the setting and scoring of bonus objectives, internal
communications, and our programme of recognition. They were
at the heart of our initial and ongoing response to Covid-19,
by ensuring collaboration with each other and our external
stakeholders, by remaining innovative during challenging times,
and by continuing to “do the right thing” notwithstanding a long
period of economic and social uncertainty. The Harworth values
also underpin the delivery of our strategy.
87
Annual Report and Financial Statements 2021Governance Statement of
Corporate Governance continued
the Company’s full year and interim results. The Chair also meets
periodically with our largest shareholders. During the period
Harworth hosted four investor site visits, and later this year we will
hold our Capital Markets Day which will include a tour of some of
our sites in the Midlands region. In addition, at the end of 2021
our Senior Independent Director and Remuneration Committee
Chair engaged directly with our largest shareholders and several
proxy advisers for their views and feedback on the revised
Remuneration Policy.
During the year we recruited Tom Loughran as our new Head
of Investor and Stakeholder Relations. Tom reports to each
Board meeting on investor engagement and feedback from
the Company’s brokers and both existing and prospective
shareholders. He also reports on share price performance, trading
volumes and material changes to the composition of the Company’s
share register. Copies of all notes prepared by analysts are also
shared with the Board. During the period, we were pleased
to welcome a number of new institutional shareholders to the
register, including some motivated by Harworth’s ESG credentials,
and to see the confidence in Harworth’s long-term prospects
demonstrated by The London and Amsterdam Trust Company, the
Company’s largest shareholder, continuing to increase its holding.
The Company has a planned programme of announcements
throughout the year to ensure that investors remain updated
regularly on progress in the business. It also reports to the market
on material operational milestones, in particular significant site
acquisitions and disposals and progress with obtaining planning
consent on Major Developments. The interim results and annual
report, together with the www.harworthgroup.com website, are the
Company’s principal means of communication with all shareholders
during the year. Copies of all reports, shareholder presentations
and communications are available on the investors’ section of the
website.
We are looking forward to welcoming shareholders in person to
the 2022 AGM, having been forced to hold a closed AGM in 2020
and 2021 due to the restrictions on movement imposed during the
pandemic. Nevertheless, on those occasions, shareholders were
given an opportunity to pose written questions to the Board. There
have been no material votes against recommended resolutions
at recent AGMs. The Board would, wherever practicable, seek
to ensure that shareholder views were canvassed on any unusual
or potentially controversial proposals. That said, if there were any
significant votes against a proposal, the Board would take action to
understand the reasons behind that vote and explain the same to
shareholders, in line with the 2018 Code principles.
It is essential to the Board that it understands, assesses and monitors
the culture of the business. The Board undertakes this responsibility
in the following ways:
• Meeting and engaging with staff in various formats, including
employee lunches, site visits, regional team dinners, office
visits and the Employee AGM. Not only are these opportunities
for the Board to gain an insight into the working lives of its
employees, they also allow staff to ask questions of, and raise
any concerns with, the Board.
• Participation by Non-Executive Directors at the People Steering
Group (PSG) meetings, who then report back to the whole
Board.
• An annual review of employee engagement presented by the
Head of People.
• A review of the annual employee survey results.
• Access to the quarterly staff newsletter which reports on key
operational activity from the perspectives of employees.
• Feedback from the Chief Executive at each Board meeting on
people and culture.
• Where there are departures at a senior level, the Board seeks to
understand from the Senior Executive the motivations for, and
impact of, those departures.
Stakeholders
In 2019, the Board undertook a significant exercise to identify its key
stakeholders, understand how the business engages with them, and
review the effectiveness of that engagement. Stakeholder mapping
is now an important component of the Board’s annual timetable.
During 2021 and to support the strategy review, independent
investor and stakeholder perception studies were undertaken, the
results of which were presented to and reviewed in detail by the
Board. The results were overwhelmingly positive, but identified
some action points, such as the need to increase resources available
to the regional teams for engagement with local stakeholders.
Our Strategic Report outlines how we engage with our key
stakeholders and how the Board complies with its obligations
in section 172 of the Companies Act (pages 44 to 47). When
appraising projects and transactions, consideration of stakeholder
interests is embedded into the Board’s decision-making process,
guided by our approval templates which require commentary on
the purpose of projects and their impact on our stakeholders. For
example, prospective acquisition appraisals typically include a
detailed planning promotion strategy which explains how our teams
will engage with local community stakeholders to seek to secure
support for scheme proposals.
The Board recognises the importance of regular and open
engagement with our investors. At the end of each year, the Board
reviews and approves an investor relations plan for the following
year. The Chief Executive, Chief Financial Officer and Head of
Investor and Stakeholder Relations meet regularly with existing and
prospective investors, and analysts, including after publication of
88
Harworth Group plcGovernance Division of responsibilities
There is a clear division of responsibilities
between the Board, its Committees, and the
Senior Leadership Team at an operational level.
The Delegated Authorities Policy reserves certain
matters for the Board. It also ensures that operational
decisions are made at the most appropriate level in
the business. It is subject to review annually, led by
the Company Secretary, to ensure that it keeps pace
with Harworth’s evolving business.
The Board has delegated certain responsibilities
to the Remuneration, Audit, Nomination, ESG and
Disclosure Committees. The terms of reference
of those Committees are reviewed annually and
appear on the website: https://harworthgroup.
com/investors/governance/
The Chief Executive has responsibility for
proposing and then implementing the Company’s
strategy and leading the day-to-day management
of the business, with the agreement of the Board
on reserved matters. The Chief Executive appoints
the Group Leadership Committee to support her in
implementing the strategy.
INVESTMENT
COMMITTEE
COO
CIO
GC
CEO
CFO
GROUP
LEADERSHIP
COMMITTEE
AUDIT
COMMITTEE
BOARD
REMUNERATION
COMMITTEE
DISCLOSURE
COMMITTEE
NOMINATION
COMMITTEE
ESG
COMMITTEE
Senior Leadership Team
Senior Executive
The key responsibilities of the Board, Committees and individual roles are summarised over the following pages. The roles and membership
of Committees are as at the date of publication of this Annual Report.
Board of Directors
Role of the Board
See pages 82 to 85 for membership
• Establishes Harworth’s purpose and helps to formulate a
• Ensures an appropriate governance framework operates
to support implementation of the strategy.
• Oversight of health and safety management and reporting.
strategy for achieving it.
• Approval of interim and annual financial results.
• Stewardship of resources to ensure long-term and
• Dividend policy and payments.
sustainable success.
• Constructive challenge to the Executive Directors on
matters referred to the Board.
• Approval of projects and material changes to project
business plans.
• Scrutinises the performance of the business against the
strategy, agreed objectives and targets.
•
Identifies, determines risk appetite, and assesses the
effectiveness of mitigation measures for, the Group’s
principal risks.
• Reviews and approves the Group’s policies.
• Ensures the Company’s strategy and projects deliver
against ESG objectives.
• Promotes a culture that is aligned with the Company’s
purpose and strategy.
• Ensures appropriate engagement with employees,
shareholders, the communities around Harworth’s
projects and other key stakeholders.
• Ensures there is appropriate regard for the impact of
Harworth’s projects and activities on the environment
and key stakeholders.
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Annual Report and Financial Statements 2021Governance Statement of
Corporate Governance continued
Board reserved matters
Approval of corporate acquisitions
and joint ventures
New or material changes
to senior debt facilities
Oversight of ESG strategy
and activities
Approval of all projects and material changes
in project business plans, determined by
appropriate financial thresholds
Remuneration Policy, remuneration of
Directors and Senior Executive
Approval of accounts, valuations,
financial reporting and dividends
Identification of, and review of mitigation
measures for, the Group’s principal risks
Setting strategy and approval of
annual budget and strategic plan
Oversight of the performance
of the business
Oversight of health and
safety for all sites and projects
Board appointments;
external appointments of Directors
Oversight of IT strategy including cyber and
information security
The Board is supported by:
Audit Committee
Patrick O’Donnell Bourke (chair)
Ruth Cooke
Lisa Scenna
Board Committees
Remuneration Committee
Angela Bromfield (chair)
Alastair Lyons
Lisa Scenna
• Reviews the integrity of the annual report, full year and interim
results announcements and any other announcements relating
to financial performance.
• Determines and agrees with the Board the Company’s
Remuneration Policy.
• Determines the salaries, bonuses, long-term incentive
• Reviews the Group’s operational risks, the effectiveness of
internal controls and processes, and the programme of further
assurance activity.
arrangements, pension arrangements, other benefits and
contract terms of the Executive Directors and members of the
Senior Executive.
• Reviews and approves placement and renewal of the insurance
• Reviews the remuneration approach adopted for all employees.
• Approves grant of options and awards under the Restricted
Share Plan, Save-As-You-Earn Scheme and Share Incentive Plan.
• Undertakes a biennial review of benefits available to all
employees.
• Approves changes to certain material employment policies.
programme.
• Reviews the terms of appointment, independence, effectiveness
and remuneration of the external auditors and leads any tender
process for the appointment of external auditors.
• Reviews the effectiveness of and compliance with policies and
procedures for promotion of financial security and business
ethics, the detection and prevention of fraud, bribery and
modern slavery.
• Reviews ongoing compliance with the General Data Protection
Regulation.
• Reviews the effectiveness of the cyber and information security
strategy and measures, and of business continuity plans and
procedures.
• Reviews the Group’s approach to all forms of tax.
90
Harworth Group plcGovernance Nomination Committee
Alastair Lyons (chair)
Angela Bromfield
Ruth Cooke
Lynda Shillaw
• Reviews the size, composition and
balance of the Board and its Committees.
• Oversight of succession planning for the
Board Committees
ESG Committee
Angela Bromfield (chair)
Alastair Lyons
Martyn Bowes
Lynda Shillaw
Kitty Patmore
• Oversees the Group’s ESG strategy,
including ESG targets and KPIs.
Board and Senior Executive.
• Reviews ESG policies, processes and
•
Leads the process for Board
appointments.
• Oversight of progress in improving
diversity across the business.
• Reviews proposals for external
appointments of Directors.
initiatives.
• Reviews the measurement of progress
towards ESG targets.
• Oversees the effectiveness of internal
and external communications and
engagement on ESG matters.
Management Committees
Disclosure Committee
Kitty Patmore (chair)
Lynda Shillaw
Chris Birch
• Ensures compliance with disclosure
obligations under the Market Abuse
Regulation, as it now applies in the UK
pursuant to the legislation implemented
to effect the UK’s withdrawal from
the EU, and the FCA’s Listing Rules
and Disclosure Guidance and
Transparency Rules.
Investment Committee
Lynda Shillaw (chair)
Kitty Patmore
Chris Birch
Andrew Blackshaw (Chief Operating Officer)
Jonathan Haigh (Chief Investment Officer)
Chris Davidson (Joint Yorkshire and Central Regional Director)
Ed Catchpole (Joint Yorkshire and Central Regional Director)
Steven Knowles (North West Regional Director)
David Cockroft (Midlands Regional Director)
Tim Love (Central Services Director)
Haroon Akram (Head of Strategy and Business Development)
Peter Henry (Director of Sustainability)
Dougie Maudsley (Group Financial Controller)
• Supports the Chief Executive in the formulation and
implementation of the strategy.
• Responsible for decisions on capital allocation and deployment.
• Reviews all material projects and transactions including matters
reserved for the Board before they are presented for approval.
• Reviews the performance of the business against agreed
operational and financial key performance indicators.
Group Leadership Committee
Lynda Shillaw (chair)
Kitty Patmore
Chris Birch
Andrew Blackshaw (Chief Operating Officer)
Jonathan Haigh (Chief Investment Officer)
Chris Davidson (Joint Yorkshire and Central Regional Director)
Ed Catchpole (Joint Yorkshire and Central Regional Director)
Steven Knowles (North West Regional Director)
David Cockroft (Midlands Regional Director)
Tim Love (Central Services Director)
Haroon Akram (Head of Strategy and Business Development)
Peter Henry (Director of Sustainability)
Dougie Maudsley (Group Financial Controller)
Tom Loughran (Head of Investor and Stakeholder Relations)
John Hind (Head of Risk and Compliance)
Catherine Macdonald (Head of People)
Stefan Morgan (Technical Director)
Andrea Morley (Asset Management Director)
Chris Warren (Natural Resources Director)
David Elliott (Building Delivery Director)
James Crow (Head of Mixed Tenure)
Qasim Mohammed (Head of Legal)
Lucie Blunt (Head of Technology and Systems)
Dan Needham (Development Director)
• Provides leadership of each operating division and function.
• Ensures effective communication and collaboration between
all operating divisions and functions sharing knowledge and
experience, including site and project information, market
intelligence, innovation opportunities and contacts.
• Discussion of strategic topics.
• Monitors risk profile of the business.
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Annual Report and Financial Statements 2021Governance Statement of
Corporate Governance continued
Responsibilities of the Board and Senior Executive
•
Leads the Board and is responsible for its overall effectiveness by facilitating a culture of openness
and debate.
• Ensures that Harworth has a defined purpose and clear strategy and objectives.
• Ensures that a fixed schedule of matters is maintained for the Board’s review and approval.
• Sets the annual programme and meeting agendas.
• Facilitates a constructive relationship between the Non-Executive Directors and the Senior
Executive.
• Ensures that the Board receives regular reporting on performance.
• Ensures that Directors receive accurate, timely and clear information, and that there is adequate
time available for discussion of agenda items and an effective decision-making process in place.
• Ensures there is ongoing and effective communication with shareholders.
• Ensures that the Board identifies key stakeholders, that there is appropriate engagement with
them, and their interests are considered when decisions are made.
• Ensures that the effectiveness of the Board is subject to annual evaluation, including an external
evaluation every three years.
•
Leads on the formulation of strategy which, once agreed by the Board, falls to the Chief Executive
to implement.
•
Leads the establishment and maintenance of Harworth’s culture.
• Responsible for the design of Harworth’s operational structure.
• Responsible for formulation and implementation of Harworth’s people strategy and for effective
internal communications.
•
Leads and chairs the Investment Committee and Group Leadership Committee.
• Oversight of operational risk management, including health and safety.
• Ensures that the Board is appraised of all material matters and that Board decisions are
implemented.
• Responsible for Harworth’s relationships with shareholders and for effective engagement with
key stakeholders.
• Responsible for ensuring the Group’s strategy delivers against ESG principles and objectives,
including leading on the formulation of ESG targets.
•
Leads on all financial matters, including tax and treasury.
• Responsible for preparing the annual budget, strategic plan and reforecasting.
• Responsible for all statutory financial reporting, including the preparation of the interim and year-
end financial statements and Annual Report.
• Responsible for formulating the Group’s funding strategy and raising new equity and debt capital.
•
Leads on investor relations and for designing the communication of performance to investors.
• Responsible for the financial analysis of all major transactions, including acquisitions, sales and
capital investments.
•
Leads the monitoring of performance against the Company’s ESG targets.
• Responsible for ensuring clear, effective, and timely measurement and reporting of financial and
non-financial key performance indicators to the Board.
• Responsible for internal financial controls, systems and processes.
ALASTAIR LYONS
Chair
LYNDA SHILLAW
Chief Executive
KITTY PATMORE
Chief Financial Officer
92
Harworth Group plcGovernance ANDREW BLACKSHAW
Chief Operating Officer
JONATHAN HAIGH
Chief Investment Officer
ANGELA BROMFIELD
Senior Independent Director
CHRIS BIRCH
General Counsel and
Company Secretary
• Responsible for operational delivery by Harworth’s regional teams.
• Ensures there are appropriate resources across the regional teams to implement the strategy and
•
•
deliver the business plan.
Leads on the delivery of our build to rent product across the portfolio.
Jointly responsible, with the Chief Financial Officer and Chief Investment Officer, for ensuring that
the regional teams work effectively alongside our finance and central support teams respectively.
•
Jointly with the Chief Investment Officer, leads the half-year and year-end valuation process.
• Responsible for the expertise, support and resources provided by our Technical, Natural
Resources and Asset Management teams to the regional teams.
• Responsible for management of our Investment Portfolio, including strategic disposals.
•
Leads on M&A, portfolio and strategic acquisitions and projects.
• Oversight of the direct development programme across the portfolio.
•
Jointly responsible, with the Chief Operating Officer, for ensuring that the regional teams work
effectively alongside our central support teams.
•
Jointly with the Chief Operating Officer, leads the half-year and year-end valuation process.
• Provides a sounding board for the Chair.
• Acts, where appropriate, as an interlocutor between the Chair and other Non-Executive Directors
• Available to shareholders as an alternative point of contact.
•
•
Leads the process for appointing a new Chair.
Leads the annual appraisal of the Chair’s performance.
• Secretary to the Board and its Committees.
• Ensures that all Board reserved matters are referred to the Board for review and approval.
• Advises on regulatory compliance and corporate governance.
• Prepares Board and Committee agendas and collates and distributes papers.
• Available to advise the Directors on all legal and compliance matters.
•
Leads on arranging inductions for, and continuous professional development of, Directors.
• Responsible for governance, both at Board and operational levels, including non-financial
•
•
•
•
internal controls, systems and processes.
Leads on risk management.
Leads our Risk and Compliance team which is responsible for health and safety assurance on
all sites and projects, environmental compliance, renewal and administration of our insurance
programme and business continuity planning.
Leads the Technology and Systems team which is responsible for our IT strategy and the
effectiveness of our technology and systems, including cyber and information security, and
GDPR compliance.
Leads the In-house Legal team which provides legal support on operational matters and manages
the external legal panel.
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Annual Report and Financial Statements 2021Governance Statement of
Corporate Governance continued
Board and Committee meetings1
Alastair Lyons
Lynda Shillaw
Kitty Patmore2
Angela Bromfield
Ruth Cooke
Lisa Scenna
Patrick O’Donnell Bourke
Steven Underwood
Martyn Bowes
Meetings attended
Board
RemCo
AuditCo
NomCo
ESGCo
6/6
6/6
6/6
5/5
5/5
5/5
1/1
1/1
1/1
11/11
11/11
9/11
11/11
10/11
11/11
11/11
11/11
11/11
4/4
4/4
2/4
4/4
3/4
1 There were 11 scheduled Board meetings, including the Strategy Day, during 2021. There were also Board calls to sign off the trading statements, 2020 preliminary results and
2021 interim results, and to approve certain transactions, which are not reflected in the table above.
2 Kitty Patmore went on maternity leave at the start of October 2021. Nigel Turner attended Board meetings as Interim Chief Financial Officer but was not appointed a
statutory director.
Board and Committee papers are circulated not less than one full week prior to each meeting. The papers include: monthly reports from the
Chief Executive, Chief Financial Officer, Company Secretary, Head of Investor and Stakeholder Relations and Head of Risk and Compliance;
and quarterly reports from the Chief Operating Officer and Chief Investment Officer.
The Company Secretary maintains “Action Schedules” for the Board and each Committee which record action points agreed at each
meeting. These schedules, together with the minutes of each meeting, are reviewed by the Chair of the Board or the relevant Committee
(as appropriate), made available to the Board or relevant Committee (as appropriate), and are subject to formal approval at the following
Board or Committee meeting.
Key Board activities in 2021
Outcomes
Our updated strategy to reach
£1bn of EPRA NDV over five
to seven years starting from
December 2020 was announced
alongside our interim results in
September 2021.
Future
priorities
The Board will monitor, and
support the Senior Executive in,
the delivery of the strategy.
Stakeholders
considered
All stakeholders
as set out in our
s.172 statement
(pages 44 to 47).
The ESG Committee:
•
reviewed the alignment of the
UN Sustainable Development
Goals with The Harworth Way;
•
set targets to achieve Net
Zero Carbon; and
• approved the Company’s first
disclosures under the TCFD
requirements.
• Ensure alignment between
our ESG commitments and
the Group strategy.
• Develop Harworth’s pathway
to transitioning our business
and portfolio to Net Zero
Carbon.
• Oversee evolution of our ESG
data collection and reporting.
• Our people
• Communities
we deliver
schemes to
Key activities
and discussions
The Board, with the
Senior Executive,
participated in a
series of workshops
to review different
elements of the
strategy. The
strategy was
approved at the
Board Strategy Day
in July 2021.
An ESG Committee
was established
to oversee the
development of an
ESG strategy.
Our
strategy
ESG
approach
94
Harworth Group plcGovernance Risk
management
Key activities
and discussions
There was a
detailed review
and overhaul of
the Group’s risk
management
system and review
of the Company’s
principal risks,
informed by
our strategy.
Outcomes
• The Board identified, set its
risk appetite for, and reviewed
the risk profiles of, our
principal risks.
• The Audit Committee oversaw
the formation of the Group
Risk and Assurance Map and
approved the first iteration
of the Further Assurance
Programme.
Stakeholders
considered
Our redefined
risk categories
take account of
all stakeholders
as set out in our
s.172 statement
(pages 44 to 47).
Future
priorities
• The Board will review the
status of the principal risks
monthly and undertake
a more detailed review
biannually (or if there are
significant movements in risk
profile at any time).
• The Audit Committee will
monitor the effectiveness of
the new risk management
system and Further Assurance
Programme. As the business
grows it will also monitor
whether an internal audit
function is required.
Remuneration
Policy
Employee
engagement
Review of the
Remuneration
Policy, including
consultation with
shareholders and
engagement with
our employees.
The Board met and
engaged with staff
in various formats,
including employee
lunches, site visits,
regional team
dinners, office visits,
attendance at PSG
meetings and the
Employee AGM.
Revisions have been made to the
Remuneration Policy informed by
our strategy and feedback from
shareholders.
• We will seek shareholder
approval of the revised
Remuneration Policy at our
2022 AGM.
• Our people
•
Investors
• Subject to approval,
the Board will oversee
implementation of the Policy,
including its application to
the wider workforce.
We will continue to explore
ways of optimising Board
engagement with employees.
•
Our people
When Covid-19 restrictions
permitted, the Board re-engaged
with the business in person.
This was particularly important
following the appointment of two
new Non-Executive Directors and
the recruitment of new employees
over the periods of lockdown.
External Board
effectiveness
review (see
pages 98 to 99)
The Board
participated in an
independent review
of its effectiveness.
Harworth was found to have an
effective Board, with suggested
recommendations to enhance
the Board’s performance. The
Board held a dedicated session to
review the recommendations.
Implementation and tracking of
the agreed recommendations to
enhance the Board’s performance.
The Board has
agreed actions
to enhance its
performance
and for better
decision making
to benefit all
stakeholders as
set out in our
s.172 statement
(pages 44 to 47).
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Annual Report and Financial Statements 2021Governance Statement of
Corporate Governance continued
How the Board spent its time this year
Key:
Strategy
15%
25%
20%
10%
20%
10%
During 2021, the Board participated in several strategy review
workshops leading up to the Strategy Day in July. This was
followed by ongoing strategy updates.
People and culture
Includes the Board’s review of talent management and people
development, as well as Board/employee engagement activities.
Stakeholder engagement (excluding people)
The Board reviewed trading statement updates throughout the
year, feedback from investor and stakeholder perception studies,
feedback from the results roadshows and an investor relations
plan for the following year.
Risk management
The Board oversaw the review of the Group’s risk management
system and engaged in several risk workshops to review the
Group’s principal risks.
Financial
The Board monitored performance against the budget,
reviewed and approved a budget for 2021 as well as the
results announcements.
Operations and governance
As per the Delegated Authorities Policy, the Board appraised all
new project business cases and significant transactions.
Key areas of Board focus in 2022
Oversight of implementation
of our strategy
Oversight of development of ESG strategy
and setting of ESG targets
Implementation of new
Remuneration Policy
Our people: oversight of implementation
of people strategy to support delivery
of the business strategy, including:
recruitment, engagement, welfare, talent
development and diversity
External appointments
Implementation of outcomes of external
Board evaluation
Oversight of implementation of new risk
management and internal controls systems
Upon appointment, each Director is required to notify the Company Secretary of his or her external board appointments, other significant
commitments and any actual or potential conflict of interest. Where a Director proposes to take on additional external responsibilities,
this is reviewed first by the Nomination Committee which, having considered the time commitment and potential conflicts of interest,
makes a recommendation to the Board. The Board makes a final decision on all new external appointments.
During the year, the Board approved Patrick O’Donnell Bourke’s appointment as a Non-Executive Director of Pantheon Infrastructure plc.
96
Harworth Group plcGovernance
Conflicts of interest
Each Director can disclose actual or potential conflicts of interests,
either by way of general notice or at the beginning of each Board
or Committee meeting. The Articles of Association provide that
the Board can authorise actual and potential conflicts of interest of
Directors. Where actual or potential conflicts of interest arise, the
relevant Director does not receive Board papers and is excluded
from discussions and voting on the relevant subject matter.
Martyn Bowes is a Board representative of the Pension Protection
Fund. The Board has approved any actual or potential conflicts of
interest that arise as a result. No conflicts of interest arose in 2021.
Steven Underwood is Chief Executive of the Peel Group and is an
Executive Director of certain Peel Group companies which may
deal with Harworth at an operational level from time to time and/
or may pursue certain acquisition opportunities in competition with
Harworth. Steven has previously declared by way of general notice,
and the Board has approved, a potential conflict of interest in that
regard. During 2021, Harworth sold non-core land to a company
of which Steven was a director and entered a bidding process to
acquire a strategic land site which the Peel Group also targeted.
These represented an actual conflict of interest for Steven and, as
such, he did not have sight of any Board papers, and was not party
to any Board discussions or decision-making, on these matters.
INDUCTION AND ONGOING SUPPORT
97
InductionsThe Company Secretary oversees the delivery of a comprehensive and tailored induction programme for all new Directors, which includes:• provision of a detailed induction pack ahead of appointments taking effect;• briefings from the Chair, the Chief Executive, Chief Financial Officer, Chief Operating Officer, Chief Investment Officer and Company Secretary;• a series of one-to one meetings with members of the Group Leadership Committee; • site visits; and• meetings with external advisers where appropriate, such as the external auditors, remuneration consultants and the Company’s valuers. Knowledge of business and marketsTo give constructive challenge and support to the Senior Executive, all Non-Executive Directors must maintain a good knowledge and understanding of Harworth’s business and the markets in which it operates. To that end, the Board timetable typically includes:• site visits, which help to improve knowledge and understanding of key projects and, at the same time, are an opportunity for Non-Executive Directors to get to know better our operational teams. We were very pleased to resume site visits from June 2021.• annual health and safety updates from the head of our Risk and Compliance division (supplemented by monthly updates included in each Board pack); and • regular updates from each of the regional and functional teams, focusing on progress against strategic objectives, markets and resourcing and including project-specific reviews. Ongoing support and CPDAll Directors have access to the advice and services of the Company Secretary who also facilitates the continuous professional development (CPD) of all Directors. To that end:• external CPD briefings are made available to Directors, with a short synopsis prepared by the Company Secretary;• external advisers host CPD workshops for the Board and Committees;• the Company Secretary provides written and verbal updates to the Board and its Committees, as appropriate, on governance and regulatory changes;• Directors are made aware of, and have the opportunity to attend, external CPD updates.Annual Report and Financial Statements 2021Governance Statement of
Corporate Governance continued
Composition, succession and evaluation
Board evaluation
The Board undertakes annual evaluations of its effectiveness and of the contribution of individual Directors. The Company aspires to
membership of the FTSE 250 and, as such, the Board considers it good practice to instruct an externally facilitated evaluation every three
years, as prescribed by the 2018 Code for FTSE 350 companies. The Chair conducted internal evaluations in 2019 and 2020, and the
outcomes of some of the agreed actions from the 2020 review are listed below:
Theme
Actions agreed
Outcomes
2020 internal evaluation
Stakeholder
engagement
More use should be made of existing relationships
held by Non-Executive Directors with key
stakeholders.
Where there are issues which would benefit from external
input or support, the Non-Executive Directors are asked if they
have relevant relationships. By way of example, our Chair’s
relationships with senior individuals in the insurance sector have
facilitated our engagement with certain insurers during a period
of hard insurance market conditions.
Board
reserved
matters
Board
meetings
External
reporting
Internal
controls
The Delegated Authorities Policy should be
updated to focus more of the Board’s time on
material transactions and strategic debate, with a
complementary increase in operational oversight
by the Investment Committee.
Actioned in early 2021 with an overhaul of the Delegated
Authorities Policy. This has provided more time for strategic
discussions by the Board, whilst giving it visibility on, and the
opportunity to ask questions about, operational decisions by the
Investment Committee.
The frequency of Board meetings should remain
subject to review, and consideration should be
given to whether meetings could be occasionally
restructured to run through an afternoon, followed
by a Board dinner, and completing the following
morning (once face-to-face meetings can resume).
Opportunities to hold smaller informal meetings
between Directors should also be explored.
A restructured schedule of meetings has been implemented from
2022 and is organised to coincide with regional site visits.
During 2021, smaller Board workshops were held to discuss the
2020 Board effectiveness evaluation, the strategy review, and
principal risks. The Board will keep under review other topics
that would benefit from a smaller group discussion.
The design and content of investor presentations
should be reviewed, with a focus on improving the
explanation of the strategic direction of the business.
Full year and interim results investor presentations have been
shortened to focus on key messages, particularly with respect to
the updated strategy, and to improve financial disclosures.
Internal assurance mapping should be undertaken
and, following the Audit Committee’s annual
review of the system of internal controls, the
Audit Committee chair should report on this to
the Board.
During 2021, our risk management system was overhauled with
the development of a new Group Risk and Assurance Map:
a register of our principal and operational risks incorporating
risk scores, mitigation measures, key risk indicators and Board
assurance activity. The Map is reviewed by the Audit Committee
ahead of the full year and interim results announcements, and
informs the Committee’s assessment of the effectiveness of the
Group’s internal control framework.
2021 external Board effectiveness review
In 2021, an external evaluation process was led by an independent assessor, Ian White. Whilst Ian also undertook the Company’s
previous external evaluation in 2018, other than supporting Harworth on the update to its risk management system referred to above,
he has no other connection with the Group. The objectives of the evaluation were to:
•
focus on the dynamics of the Board and Committees to provide an assessment, from an independent perspective, of their
effectiveness;
• make practical suggestions for enhancements; and
• establish a clear set of actions and objectives for the Board to prioritise and focus on in 2022 and beyond.
98
Harworth Group plcGovernance External evaluation process and outcomes
In carrying out his review, Ian White undertook the following:
September – November 2021
Online questionnaire sent to all Directors and regular
Board attendees, focusing on:
• Board and Management
composition
• Board role, expertise
and understanding
of the business
• Executive Team
• Strategy
• Board dynamics
and culture
• Management of Board and
Committee meetings
• Board papers,
presentations and support
Leadership of the Board
• Risk management
•
• Succession planning
• Board priorities
Interviews
with each
respondent
to the
questionnaire,
and meetings
with selected
employees
who interact
frequently with
the Board
Review of
Board and
Committee
papers and
other relevant
information,
e.g. Delegated
Authorities
Policy
and Terms
of Reference
Observation
of Board and
Committee
meetings
Assessment
of progress
since previous
Board reviews
December 2021 – January 2022
Written report, including an assessment of Board effectiveness
and a list of recommendations for enhancement.
The review found that the Company has an effective Board and
one which is continuously improving. The report highlighted the
following characteristics of the Harworth Board:
• Collegiate with trust and respect between its members, and
an appropriate balance of challenge and support and little
evidence of groupthink.
• A good range of skills covering many of the areas the
Company requires for its current operation and future
direction. Board members are engaged and work well both
together and with the Senior Executive.
• Effective decision maker which prioritises well and takes the
interests of its major stakeholders into account.
• Whilst detailed on occasion, the Board has transitioned well
in a time of change and was well positioned to do so in the
future to meet the Company’s change agenda.
Facilitated session at a Board meeting to review the report, discuss the recommendations and agree an action plan.
The following recommendations were, among others, identified as areas on which the Board might focus in 2022 and beyond to
enhance its effectiveness. Alongside each recommendation are actions identified to implement the same:
January 2022
Theme
Diversity
Board papers
and debate
2021 external evaluation
Actions agreed
When succession planning, the Board should keep diversity, defined in its widest sense, as an area of focus and
be open to recruiting a Non-Executive Director with different skills and experience.
• The executive summary in Board approval papers should identify clearly the main factors for Board
consideration and the action required.
• Time should be scheduled at the end of each Board meeting for a short discussion about the quality of debate
on the agenda items as well as the quality and effectiveness of the Board papers supporting these items.
Material decisions To track the effectiveness of its decisions, the Board should determine, at the end of each meeting, which
material decisions should be revisited in the future.
Board meetings
The frequency and format of meetings and structure of the annual Board timetable to be reviewed regularly by
the Chair, Chief Executive and Company Secretary to identify areas for Board and Committee efficiency.
Engagement with
stakeholders
As part of the stakeholder mapping exercise, there should be engagement with the Non-Executive Directors to
understand how their relationships could support and strengthen further engagement with some external stakeholders.
Financial reporting
and forecasting
Continuous improvement in financial reporting including enhancements to corporate modelling and
longer-term financial forecasting.
99
Annual Report and Financial Statements 2021Governance Statement of
Corporate Governance continued
An evaluation of the Chair’s performance is led annually by the
Senior Independent Director. For the reporting period, in addition
to the feedback given on the Chair’s leadership during the external
Board evaluation, the Senior Independent Director met with our
other Non-Executive Directors and the Senior Executive earlier
in the year (February 2021) to review the Chair’s performance.
Following that review, the Senior Independent Director considered
and discussed with the Chair the comments and feedback received
from the Directors and was able to confirm that the performance
of the Chair was considered effective and that he continued to
demonstrate appropriate commitment to his role.
The Chair, taking into account the views of the other Directors,
maintains an ongoing review of the performance of the
Chief Executive.
The Chief Executive appraises the performance of the members
of the Senior Executive twice a year. Similar appraisals are
undertaken by Senior Executive members of the performance of
their direct reports on the Investment Committee.
Annual General Meeting
The Annual Report and Financial Statements and Notice of AGM
are sent to shareholders at least 20 working days before the
meeting. Covid-19 restrictions permitting, the Board encourages
shareholders to attend, participate and exercise their right to vote
at the 2022 AGM on 24 May 2022, particularly given the Company
was forced to hold closed AGMs in 2020 and 2021 due to the
Covid-19 restrictions then in place.
The resolutions to be proposed at the AGM, together with
the explanatory notes, appear in the separate Notice of AGM
accompanying this Annual Report. The Notice is also available on
our website.
Separate resolutions are proposed on each substantially separate
issue. All Directors attend the AGM and are available to answer
questions, both formally during the meeting and informally both
before and after the meeting. The Board encourages questions
from shareholders.
For each resolution the proxy appointment forms provide
shareholders with the option to direct their proxy vote either for
or against the resolution or to withhold their vote. All valid proxy
appointments are properly recorded and counted. Information
on the number of shares represented by proxy, the proxy votes for
and against each resolution, and the number of shares in respect
of which the vote was withheld for each resolution, together with
the voting result, are given at the meeting and made available
on the Company’s website. A vote withheld will not be counted
in the calculation of the proportion of the votes for and against
a resolution.
This Statement of Corporate Governance was approved on behalf
of the Board by:
ALASTAIR LYONS
Chair
21 March 2022
100
Harworth Group plcGovernance
Annual Report and Financial Statements 2021
101
Governance Nomination
Committee Report
Committee members
Alastair Lyons (Chair)
Angela Bromfield
Ruth Cooke
Lynda Shillaw
The terms of reference of the Nomination
Committee are on the Company’s website:
https://harworthgroup.com/investors/
governance/
Dear Shareholder,
I am pleased to report to shareholders on the work of the
Nomination Committee during the year ended 31 December 2021.
The report sets out the Committee’s activities during 2021 and its
priorities for 2022, which focus on reviewing Board and Committee
composition and succession planning, and the Committee’s
oversight of diversity and inclusion across the business.
The Committee’s terms of reference were reviewed and re-
approved during the period and are available on the Company’s
website. Throughout 2021 the Committee acted in accordance with
the principles of, and fulfilled its obligations under, the 2018 Code.
Membership and meetings
There were no changes to Committee membership during the
period: I continued to chair the Committee, and its other members
were Angela Bromfield and Lynda Shillaw. At its meeting in
October 2021, the Committee reviewed its membership and
resolved to recommend that an additional independent Director be
appointed to the Committee. The appointment of Ruth Cooke was
subsequently recommended to, and approved by, the Board. Her
appointment took effect, and was announced, on 25 January 2022.
The Committee held one scheduled meeting during the period to
review succession and development planning for the Board and
Senior Executive and to review the effectiveness of the initiatives in
place to improve diversity throughout the business. The Committee,
alongside the Audit Committee Chair, also had oversight of the
appointment of Nigel Turner as interim Chief Financial Officer for the
period of Kitty Patmore’s maternity leave.
Membership and attendance at meetings in 2021 are shown below:
Independent
Committee tenure at
31 December 2021
Scheduled meetings
attended/eligible to
attend
Alastair Lyons
Angela Bromfield
Lynda Shillaw
Ruth Cooke (joined the
Committee in January 2022)
Chair
Member
Member
Member
Yes
Yes
No
Yes
3 years 10 months
2 years
1 year 2 months
–
1/1
1/1
1/1
–
102
Harworth Group plcGovernance The Committee’s key activities in 2021
The key activities of the Committee during 2021 are shown below:
Recruitment
Board composition and succession
Diversity
External appointments
Review of Board and Committee composition
Review of proposed external appointment for Patrick O’Donnell Bourke
Review of succession plans for the Board and Senior Executive
Review of progress to improve diversity across the business
Oversight of the recruitment process for interim Chief Financial Officer to cover Kitty Patmore’s maternity leave
The Committee’s priorities for 2022
• Ongoing review of Board composition and of succession planning for the Board and Senior Executive
• Ongoing review of effectiveness of initiatives to promote diversity across the business
Board and Committee composition
and succession planning
The Board comprises the Chair, who is considered independent,
the Chief Executive, the Chief Financial Officer and six Non-
Executive Directors, two of whom are not considered independent.
Angela Bromfield continued in the role of Senior Independent
Director during the period.
In September 2021, the Committee and Audit Committee Chair
oversaw the appointment of Nigel Turner as interim Chief Financial
Officer. Nigel undertook Kitty Patmore’s responsibilities whilst she
was on maternity leave, but was not appointed as a statutory director,
so is not included in the analysis of Board composition on the
following page.
The composition of the Board and its Committees is reviewed
regularly by the Committee to ensure that, in each case, its
membership comprises appropriate diversity and balance of
skills, knowledge, and experience and includes the right number
of independent Directors. That review takes account of output
from the annual Board evaluation. Having regard to all these
considerations, the Committee considers that the composition
of the Board is appropriately balanced, and we are proud of the
gender balance we have achieved. However, the Committee is
mindful of the benefits afforded by diversity, in its widest sense, both
in the boardroom and across the business. It recognises there is
more work to do with respect to ethnic minority representation on
the Board albeit the Committee has assessed there is no short-term
need to appoint an additional director to the Board, given the short
tenures of existing independent Non-Executive Directors. Analysis
of diversity on the Board, and across the workforce, is detailed later
in this report.
Membership of our Committees complies with the 2018 Code. The
Non-Executive Directors have no financial or contractual interests in
the Group, other than interests in ordinary shares as disclosed in the
Directors’ interests section of the Directors’ Remuneration Report at
page 149.
Analysis of the composition of the Board (at the date of this report) is
shown below. The Directors’ biographies appear on pages 82 to 85.
103
Annual Report and Financial Statements 2021Governance Nomination
Committee Report continued
Board
Chair
Composition
Male
Female
Exec Directors
Independent NEDs
Non independent NEDs1
One Director
One Director
Age
Female
Male
30-40 years
41-50 years
51-60 years
61-70 years
Tenure
Female
Male
1-3 years
3-6 years
6-10 years
Over 10 years
1 Martyn Bowes is the representative of the Pension Protection Fund, and he is not, therefore, independent. Steven Underwood is employed by the Peel Group, which also has a
material shareholding, and he is not, therefore, considered independent.
Board Succession
Board tenures
Patrick O’Donnell Bourke -
Nov 2020
Lynda Shillaw - Nov 2020
Lisa Scenna - Sept 2020
Kitty Patmore - Dec 2019
Angela Bromfield - April 2019
Ruth Cooke - March 2019
Alastair Lyons - March 2018
Martyn Bowes - March 2013
Steven Underwood - August 2010
2010
2015
2016
2017
2018
2019
2020
2021
During the period, the Committee undertook a review of the
succession plans for Executive and Non-Executive Directors.
Given that the Committee had focused on refreshing the Board
significantly over the previous two years this was a relatively light
review. Board members appointed in 2020 had joined Harworth
in a remote working environment and the Board was therefore very
pleased to resume in-person meetings and site visits in the second
half of the year to support collaboration and engagement with each
other and the business as a whole.
External appointments
The Committee reviews all proposals for external appointments
of Executive and Non-Executive Directors. Before making a
recommendation to the Board, the Committee considers the time
commitment required by the proposed appointment and its likely
impact on the prospective appointee’s commitment to their role at
Harworth, together with the prospect of conflicts of interest arising.
The Board makes a final decision on all new external appointments.
During 2021 the Committee reviewed the proposed appointment
of Patrick O’Donnell Bourke as a Non-Executive Director and Audit
Committee Chair of Pantheon Infrastructure plc. This appointment
was recommended to, and approved by, the Board.
104
Harworth Group plcGovernance
Senior Executive
Gender pay gap analysis
Succession plans are in place for each member of the Senior
Executive and those plans are reviewed regularly (typically annually)
by the Committee. Talent management and succession planning
for the whole business is considered annually by the Investment
Committee and then by the Board.
Analysis of the composition of the Senior Executive (at the date of
this report) is shown below.
Age
Tenure
2
2
1
30-40 years
41-50 years
51-60 years
1
2
2
Less than one year
1-3 years
3-6 years
Diversity, inclusion and equal opportunities
The Board recognises the benefit of a diverse (in its widest sense)
Board and workforce comprising individuals with different
backgrounds, experience, perspectives and ideas. In common
with much of the real estate and construction sectors, achieving
that objective remains a significant challenge, but we are
committed to it.
The Committee takes the lead in monitoring the effectiveness of the
initiatives we have introduced to improve diversity, and the progress
we are making. A review is undertaken annually, the results of which
are reported to the Board.
We have published our gender pay gap statistics since 2017 despite
our not being obliged to, as the Board feels it is important to have a
transparent benchmark against which to measure our progress. We
publish the same analysis again in respect of 2021 here, alongside
the comparative results for 2020.
In each case the reference point is 31 December.
Proportion of men & women in each quartile band
Males
Females
Lower quartile
Lower middle
Upper middle
Upper quartile
2021
2020
2021
2020
2021
2020
2021
2020
Gender Pay Gap Reporting
Mean gender pay gap
Median gender pay gap
Mean bonus gender pay gap
Median bonus gender pay gap
43%
53%
61%
53%
65%
72%
87%
88%
2021
16%
34%
-4%
67%
57%
47%
39%
47%
35%
28%
13%
12%
2020
9%
30%
43%
68%
Whilst we believe that our gender pay gap is a function of historic
trends across the property and construction sectors, this does not
diminish the importance of, or the Board’s commitment to, reducing
it as quickly and effectively as we can.
During 2021, there was an increase in the number of female
employees across the lower, upper middle and upper quartile
bands as we increased recruitment to support our growth strategy.
The most substantial increase in numbers of female employees was
in the lower quartile band, which has driven the increase in our
mean and median gender pay gap measures. Notwithstanding the
progress made across the business, we recognise we have more to
do to improve female representation at senior management levels.
The significant reduction in our mean bonus gender pay gap
measure is due to this being the first year in which the bonuses paid
to both Lynda Shillaw and Kitty Patmore have been reflected. Our
commitment to gender representation at the most senior level is
championed through our two female Executive Directors. However,
as the organisation continues to grow, we are aware of the need to
accelerate gender rebalancing across the workforce.
105
Annual Report and Financial Statements 2021Governance Nomination
Committee Report continued
Promoting a diverse workforce
The Committee reviews and oversees the implementation of initiatives to promote diversity and inclusion across the business. The following
measures, some of which have been long-established, are designed to ensure that opportunities for recruitment, development and
promotion are available to everyone, regardless of background or personal circumstances:
Measures previously established
Measures established in 2021
• Adoption of a new Diversity and Equal Opportunities policy
in 2018 which addresses diversity more explicitly, gives it the
prominence it merits, and reflects the proactivity with which
the Board is looking to address the diversity challenge.
• Diversity is an active and important consideration in the
Committee’s succession plans for the Board and Senior
Executive: this is evident from appointments to both executive
and non-executive roles on the Board in recent years.
• Whilst appointments will always be based on merit, Harworth
is committed to giving everyone, regardless of gender,
ethnicity, sexuality or background, every opportunity to
apply for, and be appointed to, roles across the business
and, as such, the desire to encourage diversity is a prominent
consideration when we are recruiting for all roles. To that end,
the requirement for diversity is a pre-condition of candidate
long-lists prepared by recruitment consultants where possible.
• We have an established Talent Development Programme
which, amongst other things, is designed to create strong
internal succession wherever appropriate.
• Given the nature of our business, measures were already in
place ahead of the Covid-19 outbreak to facilitate remote
working. This was codified into a new Hybrid Working policy
and a Core Business in Core Hours policy, which recognise
the benefits of different working patterns and practices to
accommodate the different personal commitments of our
employees. These policies open up roles to a wider range of
internal and external candidates regardless of their personal
circumstances. They are accompanied by hybrid working
training for all employees, as well as a risk assessment to
ensure our staff are fully supported in working remotely.
• We have substantially enhanced our maternity, adoption
and paternity leave and pay policies. We are proud of our
progressive stance in this area.
• We launched an Employee Assistance Scheme to improve
our employee wellbeing offer, which was particularly
important during the pandemic lockdowns and continues
to offer support.
• We introduced diversity and inclusion training for
• Five of our employees (5.1%) work part-time, whether that be a
all employees.
reduced number of days or reduced hours every day.
106
Harworth Group plcGovernance Assessing the diversity of our workforce
For consistency, where comparisons are given between 2021 and 2020, in each case the position reflected is at 31 December.
Board
Gender balance
GB 2020
2020
GB 2021
2021
Senior Executive Team
Gender balance
GB 2020
2020
GB 2021
2021
4
5
4
5
2
2
3
2
Female
Male
Female
Male
Ethnic diversity balance
Ethnic diversity balance
2021EDB 2021
0
2021EDB 2021
0
9
5
White
Ethnic minority
White
Ethnic minority
Investment Committee
Gender balance
GB 2020
2020
GB 2021
2021
Ethnic diversity balance
2
2
7
7
2021
EDB 2021
0*
9
Female
Male
White
Ethnic minority
*In January 2022 our new Head of Strategy, Investment and
Business Development, who is from an ethnic minority group,
joined the Investment Committee
107
Annual Report and Financial Statements 2021Governance Nomination
Committee Report continued
Group Leadership Committee*
Gender balance
GB 2020
2020
2021
GB 2021
Wider workforce†
Gender balance
GB 2020
2020
2021
GB 2021
4
5
13
13
19
37
28
42
Ethnic diversity balance
2020
Female
Male
Female
Male
Ethnic diversity balance
2021EDB 2021
0**
18
2021EDB 2021
3
67
White
Ethnic minority
White
Ethnic minority
*The 2020 comparison is with the previous Management Board
which was replaced by the Group Leadership Committee
** In January 2022 our new Head of Strategy, Investment and
Business Development and Head of Legal, who are both from
ethnic minority groups, joined the Group Leadership Committee
†Excludes the Group Leadership Committee.
Recruitment into new roles
6
White
14
10
Ethnic minority
2
Female
Male
Promotions
Female
Male
6
7
White
Ethnic minority
0
Recruitment into replacement roles
Female
4
White
Male
2
Ethnic minority
0
108
13
6
Harworth Group plcGovernance Governance
Gender diversity
Equal opportunities for all
We are pleased to have achieved gender balance on the Board
and, whilst the addition of a male Chief Investment Officer has
impacted our previous gender balance across the Senior Executive,
we are proud that our business is led by female Executive Directors,
demonstrating our commitment to gender representation at the
most senior level. Nevertheless, we recognise that more work is
needed to accelerate gender rebalancing across the wider Group
Leadership Committee and workforce. We are hopeful that the
examples set by our Chief Executive and Chief Financial Officer will
send a positive signal to female employees and external candidates
for roles at Harworth such that gender diversity across the business
continues to improve.
Since Harworth’s formation in 2012 we have been committed to
creating a working environment that is free from discrimination,
harassment and victimisation, where everyone feels valued and
respected. This includes:
• promoting equality and fairness for all in our employment;
• making reasonable adjustments for disabled employees and
giving full and fair consideration to disabled applicants for roles
in our business; and
• providing equal opportunities for continuing professional
development and promotion within our business to any
disabled employees.
Ethnic diversity
Annual General Meeting
We are also mindful that, whilst we have made a start with regard to
ethnic diversity in the business, including on the Group Leadership
Committee, we have much further to go in this regard. This is our
first year reporting on the ethnic diversity split in the business, and
with a new people strategy to support the business strategy and
the Committee’s continued oversight of diversity and inclusion, we
hope to improve the figures year on year.
It is important to stress that, whilst our desire to improve diversity
will be a consideration in decisions on recruitment and promotion,
selection continues to be based on merit and ability.
All Directors are subject to annual re-election by shareholders.
The Directors’ biographies appear on pages 82 to 85. The
Committee has concluded that all Directors seeking re-election
continue to be effective and to demonstrate commitment to their
role. They have the requisite skills, knowledge and experience to
continue to discharge their duties effectively. The Board considers
that each Director provides valuable input to the operation of the
Board and that their contribution is important to the Company’s
long-term sustainable success, bringing a diverse range of skills from
different sectors and experience. As such, on the recommendation
of the Committee, the Board considers it appropriate to propose
the re-election of all Directors at the AGM to be held on 24 May
2022. I will be available at the meeting to respond to any questions
or discuss matters relating to the Committee’s activities.
ALASTAIR LYONS
Chair of the Nomination Committee
21 March 2022
109
Annual Report and Financial Statements 2021
Audit
Committee Report
Committee members
Patrick O’Donnell Bourke (Chair)
Ruth Cooke
Lisa Scenna
The terms of reference of the Audit Committee
are on the Company’s website: https://
harworthgroup.com/investors/governance/
Dear Shareholder,
I am pleased to report to shareholders on the work of the Audit
Committee during the year ended 31 December 2021. The report
sets out the Committee’s responsibilities and highlights its activities
during 2021 and its priorities for 2022.
The Committee’s terms of reference, which were reviewed and
updated during the period, are available on the Company’s
website. Throughout 2021 the Committee acted in accordance with
the principles of, and fulfilled its obligations under, the 2018 Code
and had regard to the FRC’s Guidance on Audit Committees.
Membership and meetings
There were no changes to Committee membership, which
continued to comprise three Non-Executive Directors: I chaired
the Committee, and its other members were Ruth Cooke and
Lisa Scenna.
The experience of each member of the Committee is summarised
on pages 83 to 84. The Board is satisfied that I have recent and
relevant financial experience. In November 2021, I was appointed
Chair of the Audit Committee of Pantheon Infrastructure PLC, an
investment trust focused on international infrastructure assets. I was
previously Chair of the Audit and Risk Committee of Calisen plc,
which was then a constituent of the FTSE 250, as well as Chair of
the Audit Committee of Affinity Water Limited. My most recent
executive position was that of Group Finance Director for John Laing
Group plc. I am a chartered accountant, and so too are Ruth Cooke
and Lisa Scenna. The Board is also satisfied that the Committee
has competence relevant to the sectors in which the Company
operates, given that I have extensive experience in infrastructure
investment and management, Lisa Scenna has a strong background
in real estate development and asset management, and Ruth Cooke
is the Chief Executive Officer of a business operating in the real
estate sector.
The Chief Executive, Chief Financial Officer and external auditors
normally attend Committee meetings. The Chair of the Board and
other members of senior management are also invited to attend,
as appropriate. In September 2021, Kitty Patmore, Chief Financial
Officer, took maternity leave. As Chair of the Audit Committee, I
worked with the Nomination Committee on the recruitment and
appointment of Nigel Turner as Interim Chief Financial Officer.
In performing its duties, the Committee has access to the services of
the General Counsel & Company Secretary and, if required, external
professional advisers.
During 2021, there were five scheduled meetings of the Committee. Membership and attendance at meetings in 2021 are shown below:
Independent
Committee tenure at
31 December 2021
Meetings attended/
eligible to attend
Patrick O’Donnell Bourke
Ruth Cooke
Lisa Scenna
Chair
Member
Member
Yes
Yes
Yes
1 year 2 months
2 years 10 months
1 year 2 months
5/5
5/5
5/5
110
Harworth Group plcGovernance
The key activities of the Committee during 2021 and its priorities for 2022 are shown below:
The Committee’s key activities in 2021
February
Initial review of going concern analysis
Review of valuations
Review of movements in provisions
Draft of 2020 preliminary results
Forward-looking Committee timetable
June
2020 audit de-brief and review of auditor’s
appointment (without auditor present)
Areas of focus for 2021 interim results
Annual review of appointments of valuers and
appointment of valuer for half-year opinion on
Directors’ valuation
Update on risk management system changes
Briefing on BEIS consultation proposals for UK
audit reform
Bi-annual review of cyber and information security
activities and workstreams for remainder of year
Approval of new auditor of subsidiary management
company accounts
Forward-looking Committee timetable
November
Planning for 2021 external audit
Risk and assurance map and further assurance
programme
2022 insurance programme renewal
Update on preparation of Treasury Policy
Bi-annual review of cyber and information security
activities and workstreams for H1 2022
Report on annual test of IT Disaster Recovery Plan
Annual review of GDPR compliance
Annual review of Committee’s terms of reference
Forward-looking Committee timetable
Committee CPD seminar
March
Updated going concern analysis
2020 preliminary results and recommendation to
the Board
2020 Annual Report and Financial Statements
External audit of 2020 accounts
Proposals to update risk management system
Review of whistleblowing reports
Forward-looking Committee timetable
September
Feedback from external auditor
(without management present)
Going concern analysis
Review of valuations
Review of movements in provisions at the half-year
External auditor’s report on 2021 interim results
2021 interim results and recommendation to the Board
Forward-looking Committee timetable
Key
Committee Governance
Financial Reporting
External Audit
Risk and Internal Controls
111
Annual Report and Financial Statements 2021Governance
Audit
Committee Report continued
As part of the Committee’s review of the Annual Report, it reviews
disclosures relating to climate change, including for SECR and TCFD
reporting.
The Committee reviews the controls in place to ensure the
completeness and accuracy of the Company’s financial records. As
part of this, as in previous years, for the 2021 results the Committee
noted (i) the reviews undertaken during preparation of the Annual
Report and Financial Statements by various internal and external
parties, including the external auditor and valuers, to ensure
consistency and balance, and (ii) the internal verification exercise
undertaken in respect of the financial metrics referred to in the
Strategic Report and Directors’ Report.
The Committee meets the external auditor annually independently
of management, ensuring it has full visibility of matters that have
been the subject of particular scrutiny by the external auditor and/or
discussions between it and management.
As part of the Committee’s review of the Group’s material internal
controls (see page 115), it has considered, concluded, and
recommended to the Board that the disclosures, and the process
and controls underlying the production of the 2021 Annual Report
and Financial Statements, are appropriate to enable it to determine
that they are fair, balanced and understandable and provide the
information necessary for shareholders to assess the Group’s
position and performance, business model and strategy. The
Board’s conclusions in this regard are set out in the Statement of
Directors’ Responsibilities on page 154.
The Committee’s priorities for 2022
• Review reporting of 2021 results and 2022 interim results
including going concern and viability analysis and significant
financial judgements by management
• Oversee and appraise external audit undertaken by Ernst &
Young LLP (EY)
• Oversee implementation and progression of the Group Risk and
Assurance Map and rolling programme of further assurance to
inform the Committee’s assessment of the effectiveness of the
Group’s internal controls framework
• Oversee the 2023 insurance programme renewal
• Monitor the maturity of the Group’s cyber and information
security systems, including GDPR compliance
• Review the appointment of the Group’s valuers and consider
tender process for valuation of all or part of portfolio
• Review Treasury Policy for recommendation to the Board
• Review and approve updates to tax strategy and policies
• Oversee review of and implementation of changes to Business
Continuity Plan
Financial reporting
In June each year, the Committee reviews the plan and timetable for
the procedures the external auditor will undertake in respect of the
interim results. This includes acceleration of some year-end audit
work. In September and/or November each year, the Committee
examines the full year-end external audit plan and timetable before
detailed audit work commences.
Ahead of the interim and full-year results announcements, the
Committee receives reports from management and the external
auditor to satisfy itself as to the integrity of the statements and
disclosures in those announcements, and to ensure that all financial
reporting is fair and balanced and provides an understandable
assessment of the Company’s position and prospects. Reports
from management include a detailed explanation of valuation
assumptions and movements, commentary on provisions, and
analysis of movements in the balance sheet and cash position.
The Committee Chair also attends the year-end valuations review
meeting in conjunction with the Company’s valuers, external
auditors and management team. The valuers attend Committee
meetings ahead of publication of the interim and full-year results
to explain valuation methodology and processes, comment on
market conditions, and take questions from Committee members.
The Committee reviews the long-term viability and going concern
assessments prepared by management and the Directors’
responsibilities statements (including the assumptions underpinning
them) and recommends to the Board their adoption.
112
Harworth Group plcGovernance Going Concern and Viability
These are addressed in the Long-Term Viability Statement
(pages 41 to 43) and the Statement of Directors’ Responsibilities
(pages 154 to 155), and also in the Notes to the Financial
Statements (page 174). Management prepared forecasts on several
bases: a base case; a sensitised forecast that reflected a number
of severe but plausible downsides; and for the first time a specific
climate change scenario case was included. The outputs, which
were reviewed in detail and discussed by the Committee, project
that the Group can continue to operate with available liquidity
and banking facilities under plausible downside scenarios. The
Committee is satisfied that the disclosures in the financial statements
on going concern and long-term viability are appropriate.
Alternative Performance Measures (APMs)
Harworth continues to believe that the use of APMs alongside
statutory measures is essential in communicating the performance
and position of the Group to its stakeholders. Note 2 to the
Financial Statements sets out a full reconciliation of APMs to
statutory measures. The Committee reviewed the appropriateness,
prominence and consistency of the APMs disclosed and concurs
with their use but has encouraged the management team to keep
reviewing the way in which APMs are set out in the Company’s
financial reporting versus statutory measures.
Significant reporting issues considered
by the Committee for the 2021
financial statements
Valuation of the property portfolio
The property portfolio accounts for the vast majority of the
Group’s total assets. This portfolio includes investment property,
development property, assets held for sale, overages, owner-
occupied properties and joint ventures. Whilst the portfolio
continues to be valued by independent external valuers, BNP
Paribas and Savills, in accordance with the Royal Institution of
Chartered Surveyors Valuation – Professional Standards, these
valuations include a significant degree of judgement. The key
judgements within the external valuations are as follows:
a.
the future intention and plans for the properties/site;
b. value per acre;
c.
rental amounts and financial stability of tenants;
d. rental yields;
e. applicability and availability of comparable sales evidence;
f. anticipated risk of delivery of a site’s masterplan; and
g. costs to bring sites forward.
The valuation of the Group’s property portfolio lies at the core of
its financial reporting and the Committee has a particular duty to
ensure it is reported in a fair, balanced and understandable manner.
At both the half-year and the year-end, the Committee reviewed
the reports prepared by the external valuers and challenged them
on methodology, assumptions and judgements underlying the
disclosures in the consolidated balance sheet. The Committee also
took into account the work carried out by the external auditor’s
valuation team and overall is satisfied that the relevant balances are
appropriately stated in the financial statements.
113
Annual Report and Financial Statements 2021Governance Audit
Committee Report continued
Whilst EY audits the accounts of the main subsidiary entities in
addition to those of the Company and the Group consolidation,
in June 2021 the Committee approved the appointment of BHP,
a regional chartered accountancy firm, to audit the accounts of
certain Group management companies. The management team has
experience of BHP as it already undertakes the audit of several of the
Group’s joint venture companies. EY was consulted and supported
BHP’s appointment.
During 2021 an exercise was undertaken to simplify the Group’s
corporate structure pursuant to which five subsidiaries entered
members’ voluntary liquidation and two further subsidiaries
commenced strike-off proceedings at Companies House. These
were long-standing dormant subsidiaries which had not traded
since before Harworth separated from UK Coal in 2012. EY was
consulted prior to this exercise starting.
Analysis of Audit and Non-Audit Fees
Year ended
31 December
2021
£’000
Year ended
31 December
2020
£’000
PwC
EY
Audit fees
Fees payable to the external
auditor and its associates for
the audit of:
• The Company and the
consolidated financial
statements
• The Company’s
subsidiaries pursuant
to legislation
Non-audit fees
Fees payable to the external
auditor and its associates for
other services
315
289
30
60
–
–
–
345
–
85
434
External audit
The Committee is responsible for making recommendations to
the Board on the appointment, reappointment and removal of
the external auditor. Following a tender process undertaken by
the Committee in 2019, details of which were included in the
2019 Annual Report, EY was appointed as the Company’s external
auditor by shareholders at the 2020 AGM. The external auditor’s
appointment is subject to annual review by the Committee, the last
of which took place in June 2021 at the same time as the Committee
reviewed the effectiveness of the 2020 year-end audit.
Having reviewed:
•
•
•
•
•
•
the independence and objectivity of the external auditor,
including consideration of potential conflicts of interest and of
the non-audit work undertaken for the Company (for 2021 see
analysis below);
the effectiveness of the last external audit;
the quality control processes that the external auditor has in
place, including any regulator’s public comments on the same;
the quality of the audit team, including the experience of the
audit partner and team and its capacity;
the proposed scope of the audit; and
the quantum of fees payable for the audit (see further analysis
below),
the Committee is recommending the re-appointment of EY at the
forthcoming AGM for the external audit of the Company’s financial
statements for the year ending 31 December 2022.
The Board recognises the importance of safeguarding auditor
objectivity and takes the following steps to ensure that auditor
independence is not compromised:
•
•
•
•
the Committee reviews the audit appointment annually;
the Company has a policy that, save for audit-related services
(such as regulatory and statutory reporting, and work relating
to circulars) and exceptional circumstances (but only with
the Committee’s prior approval), the external auditor will not
provide non-audit services to the Group;
the Group retains Deloitte to provide advice and assistance on
most tax matters and pension accounting. KPMG is retained
to advise on tax matters relating to some of the Group’s joint
venture agreements;
the Committee reviews on a regular basis all fees paid for
both audit and non-audit activity, with a view to assessing
the reasonableness of fees, value of delivery, and any
independence issues that may have arisen or may potentially
arise in the future. An analysis of all audit and non-audit fees paid
in 2021 is shown below; and
•
the Committee reviews the external auditor’s report to the
Directors and the Committee confirming its independence in
accordance with auditing standards.
114
Harworth Group plcGovernance Risk management and internal controls
Risk and internal controls framework
At the beginning of the year management undertook a
comprehensive review of the Group’s risk management and internal
controls systems with the assistance of external consultants, Board
Alchemy. With oversight from the Committee and the Board,
significant work was carried out to further improve the Group’s risk
management system. This is explained in detail in the risk report
on pages 70 to 77, including the work undertaken by the Board to
review the Group’s principal risks, the Directors’ appetite for each of
those risks, and the adequacy of the measures in place to mitigate
them, all informed by the Group’s growth strategy.
As the risk report outlines, the Group Risk Register has been
replaced by a Group Risk and Assurance Map (GRAM): a register
of the Group’s principal and operational risks grouped into 10
risk categories each with a series of sub-risks. Each sub-risk has its
own risk and assurance map which identifies internal risk owners
and “champions” and incorporates commentary on the risk, risk
scores, mitigation measures, key risk indicators, established Board
assurance activity and management’s proposals for further assurance
activity. Those proposals form the basis for a 36-month rolling
programme of further assurance (Further Assurance Programme).
The Audit Committee has overseen the formation of the GRAM and
approved the first iteration of the Further Assurance Programme.
At an operational level, the GRAM is monitored by the Group
Leadership Committee. The overall risk profile of the business is
reviewed monthly and risk owners lead risk workshops on individual
risk categories throughout the year.
The Committee reviews the GRAM biannually as part of its assessment
of the effectiveness of the Group’s internal control framework. When
reviewing the GRAM, the Committee focuses on the measures
management have implemented and/or are planning to mitigate
each risk and the adequacy of the assurance afforded to the Board
to determine the effectiveness of those measures. For each risk,
there is a residual risk score, reflecting the status of each risk after
mitigation, and an assurance score. The Committee tests the veracity
of those scores at each review and may require management to
implement additional controls and/or offer more assurance to the
Board for certain risks. The residual risk and assurance scores from the
Committee’s latest review, in February 2022, are shown in dashboard
format on the following page.
The GRAM informs the Further Assurance Programme, which
replaces the in-year assurance activities management have
undertaken in the past and affords a more structured approach to
further assurance. Going forward, the Committee will review the
Further Assurance Programme in November each year and approve
further assurance activity for the following 12 months. However, the
programme will remain flexible to changing assurance needs during
the year. Outputs from further assurance activity will be reported to
the Committee throughout the year.
Whilst the Further Assurance Programme was not established until
early 2022, some further assurance activity was undertaken in 2021,
largely to support the strategy update exercise described in the
CEO’s review. For example, investor and stakeholder perception
studies were undertaken, and there was an external assessment of
organisational design, recruitment, retention and reward. During
2022, further assurance activity will focus on the acquisitions
process, planning strategies, supplier procurement and monitoring
and data access.
Implementation of the Further Assurance Programme would
ordinarily be led by an internal audit function. The Company does
not currently have an internal audit function, but this is reviewed
annually by the Committee. The Committee undertook its last
review in February 2022 and, going forward, this will be scheduled
to coincide with, and be informed by, the Committee’s review of the
forward-looking Further Assurance Programme in November each
year. Previously, the Committee had taken the view that the structure
of, and processes within, the business were neither sufficiently
large, nor complex, to merit a separate internal audit function. At its
last review, the Committee acknowledged that the increase in pace
and scale of activity needed to deliver the strategy accelerated the
need for such a function and management will undertake a review
to determine the most effective means of resourcing an internal
audit function.
Ahead of publication of the year-end results and Annual Report,
management presents a detailed assessment of the effectiveness
of the Group’s principal financial, operational and compliance
controls, which is supported by data on key risk indicators and a
wider review of the latest iteration of the GRAM.
The Committee is satisfied that the risk management and internal
controls systems in place, and the assurance regime for the same,
are effective to support delivery of the Group’s strategy. Informed by
the Committee’s recommendation, the Board’s assessment of the
effectiveness of those systems can be found on page 70.
115
Annual Report and Financial Statements 2021Governance Audit
Committee Report continued
Key
Principal risk identified by the Board
Residual risk
Very low
Low
Medium
High
Very high
Risk and Assurance Map Dashboard
Assurance level
Sufficient Board assurance activity
Room for improvement in level of Board
assurance activity but not of concern
Insufficient Board assurance activity and
should be reviewed as a matter of priority
Residual risk
Board assurance level
Acquisitions
a. Availability of and competition for strategic sites
b. Acquisitions due diligence
Project Delivery
a. Planning
b. Supply chain cost inflation and constraint
c.
Supply chain and delivery partner management
(counter-party risk)
d. Asset management (Investment Portfolio)
Statutory costs of development
e.
Markets
a. Residential and commercial markets
b.
Emerging markets
People
a. Resourcing
b.
c.
d. Culture and diversity
Succession
Employee communication and engagement
Finance
a. Availability of appropriate capital
b.
Liquidity
Safety and compliance
a. Health and safety
b.
c.
d.
e.
Environmental management
Estates management
Insurance
Regulatory compliance (excluding health and safety and environmental)
Climate change
a.
Physical impact of climate change
b. Managing climate change transition
Systems and information resources
a. Cyber security
b. Data management and information security
c.
IT systems
Governance
Board and Committee governance
Financial reporting governance
a.
b.
c. Operational governance
d. Business continuity
Stakeholders
Investor relations
Stakeholder engagement and management
a.
b.
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
116
H
M
H
M
M
M
M
M
M
M
M
L
M
L
L
L
L
M
M
L
L
M
L
M
L
M
M
M
M
M
M
Harworth Group plcGovernance Business continuity
Compliance
The Committee is responsible for monitoring the effectiveness of,
and compliance with, the Group’s policies and procedures for
combating modern slavery, bribery and corruption, and preventing
the facilitation of tax evasion.
The Company’s 2021 Modern Slavery Statement can be found
on our website at https://harworthgroup.com/investors/
governance/, together with our policies on anti-corruption and
bribery and anti-facilitation of tax evasion. The Company operates
a regime for the approval, and a register, of all hospitality activity.
This register is monitored regularly by the Company Secretary and
annually by the Committee.
I will be available at the AGM to respond to any questions or discuss
matters relating to the Committee’s activities.
PATRICK O’DONNELL BOURKE
Chair of the Audit Committee
21 March 2022
The Group’s Business Continuity Plan (BCP) proved to be fit for
purpose in the Group’s immediate response in early 2020 to the
Covid-19 restrictions. The BCP was reviewed in 2021 and will be
reviewed again during the first half of 2022. A test of the Group’s IT
Disaster Recovery Plan was undertaken successfully, and the results
presented to the Committee, in the second half of 2021.
Insurance
Last year involved a very challenging 2021 insurance renewal,
largely attributable to insurance market conditions, which led to
markedly higher pricing, increases in excesses on certain sites
and some deterioration in the scope of certain aspects of cover.
During the year, Willis Towers Watson were appointed to replace
Lockton Group as the Group’s insurance brokers and undertook
a comprehensive exercise to remarket the property insurance
programme to insurers. Despite insurance marketing conditions
remaining broadly unchanged, if not tightening, this exercise has
resulted in some improvements in the Group’s pricing and cover
for the 2022 renewal. The Committee monitored this process and
challenged management both on the overall programme and on
individual aspects of the renewal.
Whistleblowing
The Committee has responsibility for the Group’s whistleblowing
policy and procedures, and the appropriate investigation of
whistleblowing reports. There were no incidents of whistleblowing
in 2021. The Committee undertook its annual review of the policy
and procedures in March and approved the introduction of an
external “Speak Up” platform to supplement the Group’s existing
internal reporting mechanisms. This new platform is already live
and offers employees and external stakeholders another means of
reporting concerns (on a confidential basis if preferred).
117
Annual Report and Financial Statements 2021Governance ESG Committee
Report
Committee members
Angela Bromfield (Chair)
Alastair Lyons Martyn Bowes
Lynda Shillaw Kitty Patmore
The terms of reference of the Environmental,
Social and Governance (ESG) Committee are on
the Company’s website: https://harworthgroup.
com/investors/governance/
Dear Shareholder,
I am pleased to report to shareholders on the work of the
Environmental, Social and Governance (ESG) Committee during
the year ended 31 December 2021. This report sets out the
Committee’s activities since it was established in April 2021 and
its priorities for 2022.
The ESG Committee was established to provide oversight of and
guidance on the Group’s ESG strategy, practices and reporting.
Given its underlying purpose to transform land and property into
sustainable places where people want to live and work, Harworth
has a long-standing approach to ESG and an ongoing commitment
to sustainability which is embedded in all elements of the Group’s
activities. This is articulated in the five pillars of the Harworth Way;
see further on pages 10 to 11. During 2021, the Committee oversaw
the evolution of several elements of the Harworth’s ESG framework,
including the development of targets and Harworth’s outline
approach to Net Zero Carbon. The Committee will continue to
focus on these areas in 2022.
Membership and meetings
I chair the Committee, and its other members are Alastair Lyons,
Lynda Shillaw, Kitty Patmore and Martyn Bowes. The Committee
meets at least quarterly and meetings are also attended by an
independent external ESG consultant. There were four Committee
meetings held during the year and membership and attendance at
those meetings is shown below:
Independent
Committee tenure at
31 December 2021
Scheduled meetings
attended/eligible
to attend
Angela Bromfield
Alastair Lyons
Martyn Bowes
Lynda Shillaw
Kitty Patmore1
Chair
Member
Member
Member
Member
Yes
Yes
No
No
No
9 months
9 months
9 months
9 months
9 months
4/4
4/4
3/4
4/4
2/4
1 Kitty Patmore went on maternity leave at the start of October 2021. Nigel Turner attended Committee meetings as Interim Chief Financial Officer but was not formally appointed
to the Committee.
118
Harworth Group plcGovernance 2021 Key Activities
During the year, the Committee:
• Established its terms of reference, which also received Board
2022 Priorities
The Committee’s priorities for 2022 include working with the Senior
Executive, Director of Sustainability and wider business to:
approval.
• Ensure alignment between our ESG commitments and the
• Reviewed key external ESG frameworks and principles and
Group strategy.
Harworth’s alignment with them. For example, we considered
the UN Sustainable Development Goals (SDGs) and resolved
to use six principal SDGs in our reporting as they were most
closely aligned to our strategy and operations, and relate to
areas where we believe we can make the biggest impact as a
business; see page 11.
• Reviewed investor feedback and comments on ESG following
the interim results announcement.
• Reviewed Harworth’s approach, in terms of both challenges
and opportunities, to Net Zero Carbon. We have made a
commitment to reaching Net Zero Carbon on Scope 1, Scope
2 and some Scope 3 emissions by 2030, and on the balance
of Scope 3 emissions by 2040, as well as detailing some of the
work that is already underway, on page 56.
• Reviewed Harworth’s core ESG impact areas. Our progress to
date in these areas and plans for 2022 and beyond are set out
on pages 48 to 51.
• Reviewed and approved the Group’s first Task force on Climate-
related Financial Disclosures (TCFD), set out on pages 65 to 69.
• Continue to determine measurable targets across the three
impact pillars of the Harworth Way, with a focus on addressing
Harworth’s medium and longer term ESG impact.
•
Implement the measures identified to make further progress
on our core impact areas. The Committee will oversee the
assessment and monitoring of these measures.
• Develop Harworth’s Transformation to Net Zero which will detail
our pathway to transitioning our business and portfolio to Net
Zero Carbon.
• Develop further our TCFD disclosures through enhancing
the breadth and depth of our environmental data collection,
enabling us to provide a more comprehensive and quantitative
assessment of our climate-related risks and opportunities.
I will be available at the AGM to respond to any questions or discuss
matters relating to the Committee’s activities.
ANGELA BROMFIELD
Chair of the ESG Committee
21 March 2022
119
Annual Report and Financial Statements 2021Governance Directors’
Remuneration Report
Committee members
Angela Bromfield (Chair)
Alastair Lyons
Lisa Scenna
The terms of reference of the Remuneration
Committee are on the Company’s website:
https://harworthgroup.com/investors/
governance/
Dear Shareholder,
On behalf of the Board, I am pleased to present the Directors’
Remuneration Report for the year ended 31 December 2021.
The report includes:
• my Annual Statement as Chair of the Remuneration Committee;
•
•
the new Directors’ Remuneration Policy (the Policy). This
sets out the policy intended to apply for the three years from
2022 and is subject to a binding shareholder vote at the 2022
AGM; and
the Annual Report on Remuneration. This outlines how we
implemented our current policy in 2021 and how we intend to
apply the new Policy in 2022. This is subject to an advisory vote
by shareholders.
Performance outcomes for 2021
Harworth has delivered a year of exceptional financial and
operational performance against a backdrop of continued
economic uncertainty. This is testament to the proactive
management and leadership of the Senior Executive Team and the
commitment of all our people. Highlights of the Company’s financial
and operational performance in 2021 are set out on page 1 of the
Strategic Report.
The Group has made strong progress against the ambitious growth
strategy that was announced during the year by Lynda Shillaw, our
Chief Executive, following a rigorous strategic review by the Senior
Executive Team, with support from the Board. Our ambition is to
double the size of the business, from an EPRA NDV of £516m at
the end of 2020 to in excess of £1 billion over five to seven years
by continuing to deliver places where people want to live and
work. Over the last 12 months our performance, combined with
underlying market growth, has translated into a substantial year-on-
year increase in EPRA NDV (+23.5%) and a Total Return of +24.6%.
120
Priorities for 2022:
• Consult with major shareholders on the 2022
Remuneration Policy and, if approved, ensure the Policy is
effectively implemented.
• Ensure our ESG goals continue to be appropriately
reflected in our reward framework.
• Operation of 2022 annual bonus, including setting targets.
• Grant of 2022 Restricted Share Plan awards.
• Approve grant of options for SAYE plan and Share
Incentive Plan awards.
Lynda Shillaw’s and Kitty Patmore’s bonus opportunity for 2021 was
100% of salary based on a combination of financial measures (75%
of the opportunity), an ESG measure (5% of the opportunity) and
personal objectives (20% of the opportunity).
Taking into account performance against these measures, the
Committee approved a bonus outcome equal to 90.5% of salary
for each of Lynda Shillaw and Kitty Patmore (in each case equivalent
to 90.5% of the maximum opportunity). Full details are set out on
pages 141 to 143.
The Committee believes that the level of bonus outcome is reflective
of the overall performance of the Group in the year, and appropriate
in the context of the shareholder and employee experience. The
Committee had regard to the following in particular:
• The Company’s Total Return was 24.6% and Total Shareholder
Return was up by 73% between the start and end of 2021.
Harworth Group plcGovernance • Over the course of 2020 and 2021, the Company did not utilise
furlough, or any other Government support schemes (with the
exception of the opportunity to defer VAT payments which
was repaid in 2020). No employees were furloughed or made
redundant as a result of Covid-19 during 2020 or 2021.
turn, the quality of our executive leadership is key to our people
being successful. To achieve our strategic ambitions, and deliver the
operational performance that creates our desired returns, we need
to attract and retain the appropriate calibre of staff and ensure their
strong alignment with the interests of our shareholders.
• The average bonus outcome for eligible employees was 88% of
their maximum entitlement.
The first tranche of the 2019 Restricted Share Plan (RSP) award
vested in full in March 2022. The current Executive Directors did not
participate in the 2019 RSP award, given that the award was granted
prior to their joining the business.
Policy review
Our current Directors’ Remuneration Policy was approved at the 2019
AGM (with over 99% votes cast in favour) and is approaching the end of
its three-year term. The Committee has, therefore, undertaken a review
of the remuneration framework for the Executive Directors, senior
leadership team and wider workforce to ensure that it supports the
Group’s long-term strategic ambitions and is competitively positioned.
In undertaking this review, the Committee has kept in mind the
Group’s core reward principles detailed on page 127 as well as the
factors in Provision 40 of the 2018 UK Corporate Governance Code
(see page 138).
The current incentive structure (annual bonus and RSP) has been
successful in incentivising the Executive Directors and senior
leadership team to create value by delivering strong and sustainable
returns and growth in the scale of the business. The Committee,
therefore, considers it appropriate to continue with a broadly similar
approach to the current framework. It is proposed to retain the RSP,
which received very strong support from shareholders at the 2019
AGM, and reflects our core principle of rewarding long-term value
creation in a cyclical business.
Our people are at the heart and centre of everything we achieve.
It is they who identify our strategic development opportunities,
create master plans, negotiate with relevant stakeholders, project
manage delivery, and then determine optimal exit strategies. In
As disclosed in last year’s Directors’ Remuneration Report, following
a comprehensive talent review a significant number of our below
Board workforce received career progression and promotional pay
rises at the start of 2021, in some cases to align their pay with market
rates. The competition for talent across the real estate sector has
strengthened over the last 12 months, resulting in further upwards
movement in market rates. In response, we have undertaken
another review of the salaries we pay, resulting in some further rises
to reflect that movement. Those increases took effect at the start
of 2022, alongside a pay increase applied for all employees to
mitigate the impact of steep inflation.
As part of the Policy review, the Committee carried out a
benchmarking exercise to assess the market competitive
positioning of the Executive Directors’ remuneration against both
FTSE SmallCap companies of a similar size and complexity and real
estate peers. The pan-sector comparator group was made up of
FTSE SmallCap companies (excluding financial services companies)
which operate predominantly in the UK. The real estate comparator
group consisted of real estate peers with a market capitalisation
of less than £1bn (Palace Capital; U & I; Empiric Student Property,
Inland Homes, McKay Securities, Capital & Regional, Urban & Civic,
Henry Boot, New River, Helical Bar).
The key findings were as follows:
• Chief Executive: Lynda Shillaw’s salary is currently positioned
between the lower end and mid-point of the market competitive
range and her total target compensation is positioned towards
the lower end of the market competitive range.
• Chief Financial Officer: Kitty Patmore’s salary and total target
compensation is positioned at the lower end of the market
competitive range.
121
Annual Report and Financial Statements 2021Governance Directors’
Remuneration Report continued
In the context of needing to attract, retain, and incentivise talented and experienced individuals in a highly specialised and very active
sector, and taking into account the outcome of the benchmarking exercise, the Committee proposed a number of changes which are
summarised below. The Committee consulted with 13 major shareholders (representing at that time approximately 87% of the Company’s
issued share capital) and three proxy voting agencies. I am pleased to report that a substantial majority of shareholders consulted were
supportive of the proposed changes. Responding to the feedback received, the Committee has at the same time strengthened the post-
employment shareholding guidelines that apply to Executive Directors as set out below.
Current Policy
Proposed approach under new Policy
Annual bonus
Maximum
opportunity
Normal maximum opportunity of 100% of
salary, with discretion to award up to 150% of
salary in exceptional circumstances.
No deferral.
Mandatory
bonus deferral
into Harworth
shares
Performance
measures
At least 75% of the bonus is based on financial
measures, with the remainder based on
strategic and/or personal measures.
Increase normal maximum opportunity to 150% of salary.
It is intended that the increase will be implemented in stages as set
out below subject to the performance of both the Executive Directors
and the Group.
2022
2023
2024
Lynda Shillaw
125% of salary
150% of salary
150% of salary
Kitty Patmore
100% of salary
125% of salary
125% of salary
Rationale: To deliver greater reward for more stretching performance
aligned with the Group’s strategic growth ambition, and having
regard to the market competitiveness of the current approach.
Deferral will be introduced in line with any increase in bonus
opportunity as illustrated below.
2022
20% of amount
earned deferred
Lynda Shillaw
Kitty Patmore
No deferral
2023
33% of amount
earned deferred
20% of amount
earned deferred
2024
33% of amount
earned deferred
20% of amount
earned deferred
Bonus deferral will be into Harworth shares with a two-year
deferral period.
Rationale: Supports good governance and further aligns
Executive Directors with shareholders.
At least 50% of the bonus will be based on financial measures.
The remainder will be subject to specific strategic and personal
measures, with no more than 20% of the bonus based on
personal measures.
Rationale: To ensure there is sufficient flexibility over the Policy’s
three-year term to select performance measures which align with the
Group’s financial and strategic priorities and ESG commitments.
122
Harworth Group plcGovernance Current Policy
Proposed approach under new Policy
RSP
Maximum
opportunity
Normal maximum opportunity of 50% of
salary, with discretion to award up to 100%
of salary in exceptional circumstances. The
maximum number of shares that may be
granted is based on the market value of a
share on the date of grant.
Increase the normal RSP opportunity from 50% to 75% of salary with
effect from 2022.
For the current Executive Directors, the maximum number of shares
that may be granted in respect of 2022, 2023 and 2024 will be
based on the market value of a share following the announcement of
the Company’s results for 2021 (the “2022 Price”).
The intention is that the 2022 Price will be determined on the same
basis as if the award for 2022 had been granted in the normal course
in the 42-day window following the announcement of the Company’s
results (rather than following the AGM).
A cap and collar will apply in respect of the 2023 and 2024 awards.
The cap and collar will apply if the market value of a share at the time
of grant is greater than 1.5 times the 2022 Price or less than 0.5 times
the 2022 Price. In other words, the face value of the 2023 and 2024
awards (when calculated by reference to the market value of a share
at the time of grant) may not exceed 112.5% of salary (1.5x 75% of
salary) or be less than 37.5% of salary (0.5x 75% of salary). This is in
order to mitigate exceptional movements in the share price having a
disproportionate impact on the overall incentive opportunity.
Rationale: To increase the weighting of the Executive Directors’
total reward package towards long-term value creation, and to
have regard to the market competitiveness of the current approach.
Granting awards based on a fixed share price further aligns Executive
Directors and below Board participants with shareholders and the
Group’s growth aspirations, rewarding share price appreciation whilst
depreciation is penalised.
Continue with the current approach.
Rationale: The current approach appropriately supports long-
term stewardship, aligns the Executive Directors and below Board
participants with the long-term interests of shareholders, and is
aligned with the Investment Association’s published guidance.
Continue with the current approach.
Rationale: Supports good governance and is aligned with best
practice principles.
123
Time horizons
The total time horizon between grant and the
end of the holding period is five years.
Specific
performance
underpins
Awards vest in three equal tranches after
three, four and five years. Holding periods
apply to each tranche such that no shares can
be sold until after five years post grant.
Vesting of each tranche is subject to specific
underpins which take into account the
Group’s financial health, the underlying
performance of the business relative to
the real estate market and the quality of
corporate governance.
Annual Report and Financial Statements 2021Governance Directors’
Remuneration Report continued
Current Policy
Proposed approach under new Policy
Governance
In-employment
shareholding
guidelines
Shareholding guidelines are in place that
require Executive Directors to acquire a
holding equivalent to 200% of base salary
Post-
employment
shareholding
guidelines
For the first 12 months following cessation,
an Executive Director must retain shares
with a value (as at cessation) of 100% of base
salary with that requirement tapering down
to 0% over the following 12 months; or in
either case and if fewer, all of the shares held
as at cessation.
Continue with the current approach.
Rationale: Aligns Executive Directors’ interests with shareholders
through building up a significant shareholding in the Company
Strengthen the post-employment shareholding guidelines such that
for the first 12 months following cessation, an Executive Director must
retain shares with a value (as at cessation) of 200% of base salary with
that requirement tapering down to 0% over the following 12 months;
or in either case and if fewer, all of the shares held as at cessation.
Rationale: Further promotes long-term stewardship.
• We anticipate the business continuing to grow in scale, as well
as complexity, over the next five to seven years based on the
Group’s growth ambitions.
The Committee strongly believes that these changes are in the best
interests of shareholders, noting the following points in particular:
• We take pride in our exceptional executive leadership team – it is
the key to our success and it is, therefore, essential that we retain
the team over the next three years as the business itself develops
in both scale and complexity.
• Pay differentials between Executive Directors and below Board
levels are a key consideration when setting salaries and incentive
opportunities for senior leadership roles. It is, therefore, important
that remuneration is appropriately positioned at Executive
Director level, so that we can attract, retain and motivate high
calibre individuals at senior leadership level.
124
Harworth Group plcGovernance Salary increase for the
Chief Financial Officer for 2022
When Kitty Patmore was appointed in 2019 her salary reflected that
she was new to the role of Chief Financial Officer in a premium listed
business, but the Committee resolved to increase it over time if she
performed well in the role.
further increases above those granted to the wider workforce
for the duration of the Policy period. The Committee strongly
believes that this change is in line with the principles of the
Group’s talent development programme and reflects Harworth’s
broader commitment to diversity, equality and fairness, ensuring
that individuals are appropriately rewarded on the basis of role,
experience and performance.
As disclosed in last year’s Directors’ Remuneration Report, the
Committee increased Kitty Patmore’s salary from £200,000
to £250,000 with effect from 1 January 2021. This followed an
incredibly strong first year in role and signalled the Committee’s
intention to align Kitty Patmore’s reward package with the market.
At the time, I explained in my letter to shareholders that the
Committee had been very mindful of the ongoing challenging
environment and had not, therefore, sought to address that Kitty
Patmore’s salary and total compensation opportunity were still,
after the salary increase, positioned towards the bottom end of
the market competitive range when compared to both other FTSE
SmallCap listed companies of a similar size and complexity and
other real estate peer companies. I reported that the Committee
would therefore continue to keep Kitty Patmore’s remuneration
under review over the following few years, taking into account her
performance in role and the wider performance of the Group.
Kitty has continued to perform exceptionally well. She has
transformed the quality of the Group’s financial forecasting and
reporting and her input into the strategy work was invaluable.
She has worked very closely with our new Chief Executive, Lynda
Shillaw, to reposition the business with current and prospective
investors. During the pandemic she negotiated significant
headroom into our senior debt facility before, at the start of this
year, refinancing it into a new £200m revolving credit facility on
improved terms. Kitty has also led the evolution and communication
of Harworth’s ESG strategy and data collection. She has a great
reputation across the industry and her skillset and experience
make her an attractive executive prospect in an active and
buoyant market.
After careful reflection and consulting with the Group’s major
shareholders, the Committee determined that Kitty Patmore’s
salary should be increased from £250,000 to £310,000 (24%). The
increase will formally take effect following the 2022 AGM and will
be backdated to 1 January 2022.
We are pleased that those shareholders who were consulted are
generally supportive of the proposed increase. Some shareholders
asked whether the Committee had considered awarding the
increase over two years. As noted above, absent the ongoing
challenging environment, the Committee would have fully
addressed the market competitiveness of Kitty Patmore’s salary
and total compensation positioning last year. Implemented over a
two-year period, the base salary increase last year, together with
the base salary and RSP award increases for 2022, have resulted in
her salary and total compensation opportunity now being aligned
with the market. The Committee does not anticipate making
Impact of changes on
total compensation
The Committee is very mindful of the impact of the proposed
salary and incentive opportunity increases on the value of the
Executive Directors’ total reward package. It considers these to
be appropriate, and in the best interests of shareholders, as the
proposed increases in annual bonus and RSP opportunity align
Lynda Shillaw’s total compensation opportunity with the current
market, whilst the 2022 salary increase aligns Kitty Patmore’s
salary and total compensation opportunity (taking into account the
proposed phased increases in annual bonus and RSP opportunity)
with the market.
Review of reward for the
wider workforce
All of our people contribute to the achievement of the Group’s
long-term success. It is, therefore, the Committee’s policy that
when making remuneration decisions in respect of the Executive
Directors, the reward arrangements for the wider workforce should
also be considered. Taking into account the proposed changes
to the Executive Directors’ remuneration, and to extend share
ownership throughout the Group to further foster stewardship,
and alignment with shareholders, the Committee has agreed
the following:
• RSP participation has been extended – around 50% of our
employees will be granted an RSP award in 2022.
• RSP opportunity has been increased for all participants, to
provide alignment with the proposed increase for the Executive
Directors. The increases in RSP awards applied to below
Board participants are, in percentage terms, higher than those
proposed for the Executive Directors.
• The annual value of Free Shares awarded under the all-
employee Share Incentive Plan will be increased and the Group
also intends to offer Partnership Shares and Matching Shares to
employees.
This accompanies career progression and promotion pay rises
which were awarded to a significant number of colleagues in 2021
and 2022.
To further enable and encourage share ownership across the
workforce, we operate an all-employee SAYE plan in which over half
of our employees participate.
125
Annual Report and Financial Statements 2021Governance Directors’
Remuneration Report continued
Implementation of the Policy for 2022
Base salary
Lynda Shillaw’s salary was increased from £400,000 to £421,600
(5.4%) with effect from 1 January 2022. This is in line with the
average increase for the wider workforce.
As set out above, Kitty Patmore’s salary will increase from £250,000
to £310,000 (24%). This increase will formally take effect following
the 2022 AGM and will be backdated to 1 January 2022.
Performance-related annual bonus
The annual bonus opportunity for Lynda Shillaw and Kitty Patmore
will be 125% and 100% of salary respectively.
The performance measures have been rebalanced compared to
2021, to provide alignment with the key 2022 financial and strategic
priorities under the Group’s redefined strategy. 50% of the bonus
opportunity will be based on financial measures (Total Accounting
Return and acquisitions), 30% of the bonus opportunity will be
based on strategic measures (launch of the Build to Rent portfolio
and an increase in scale of direct development), 5% of the bonus
opportunity will be based on an ESG measure and 15% of the bonus
opportunity will be based on personal objectives. See page 147 for
further details.
Performance targets are considered to be commercially sensitive at
this time but the Committee intends that they will be disclosed in
the 2022 Annual Remuneration Report.
Restricted Share Plan award
RSP awards will be granted to Lynda Shillaw and Kitty Patmore at
75% of salary. Vesting will be phased over a five-year period, with
one third vesting after three years, one third after four years and
one third after five years. All vested shares must be held to the end
of year five, resulting in a total time horizon of five years for all three
tranches. The RSP awards will be subject to performance specific
underpins which take into account the Group’s financial health, the
underlying performance of the business relative to the real estate
market and the quality of corporate governance over the vesting
periods. See page 148 for further details.
Chair and Non-Executive Directors
The Chair’s and Non-Executive Directors’ base fees will be
increased by 5.4% for 2022. This is in line with the average
increase for the wider workforce. The fees payable to the Senior
Independent Director and Chairs of our Audit and Remuneration
Committees have also been reviewed and will increase as set out
below. We will also pay a fee to the Chair of our newly formed ESG
Committee, also indicated below. These fees reflect the increasing
time commitment required in these roles, which is commensurate
with the growth in scale and complexity of the business, and the
need to attract and retain high quality Non-Executive Directors
to support the Senior Executive Team in the delivery of our
ambitious strategy.
Senior Independent
Director
Chair of Audit
Committee
Chair of Remuneration
Committee
Chair of ESG
Committee
Fee payable in
2021
Fee payable in
2022
£7,612.50
£8,500.00
£7,612.50
£8,500.00
£7,612.50
£8,500.00
N/A
£6,000.00
See page 148 for further details.
Conclusion
We greatly appreciate the feedback and the level of support we
have received from our shareholders regarding our approach
to remuneration and the changes outlined above. We are firmly
of the view they are in the best interests of the business and
its shareholders.
We remain committed to a responsible approach to executive
pay, as I trust this Directors’ Remuneration Report demonstrates.
We believe that the policy operated as intended in respect of the
2021 financial year and consider that the remuneration received by
the Executive Directors was appropriate, taking into account the
Group’s performance during 2021, their personal performance, and
the experience of shareholders and employees.
On behalf of the Board, I would like to thank you, our shareholders,
for your engagement, and I hope that we will continue to receive
your support at the AGM later this year.
ANGELA BROMFIELD
Chair of the ESG Committee
21 March 2022
126
Harworth Group plcGovernance Directors’ remuneration policy
Changes to the remuneration policy and summary of decision-making process
During 2021, the Committee carried out a comprehensive review of the current remuneration policy. The outcome of the review and
changes to the policy are outlined on page pages 121 to 124.
In determining the Policy, the Committee followed a robust process which included extended discussion on the content of the Policy at
four Committee meetings. The Committee considered input from the Executive Directors and its independent advisers and consulted with
major shareholders (representing at that time approximately 87% of the Company’s issued share capital).
In undertaking the review, the Committee kept in mind the Group’s core reward principles (set out below) as well as the factors in Provision
40 of the 2018 UK Corporate Governance Code (see page 138).
Core reward principles
Rewarding long-term value
creation in a cyclical business
To support the delivery of the Group’s strategic ambition to deliver strong, long-term sustainable
growth recognising the extended timeframes of our business model.
Fairness and equity
Base salaries should be set to be market competitive, reflecting the size and complexity of the
business and the calibre and experience of individuals in each role.
Retention and motivation
To help retain and incentivise a management team with the requisite skills, knowledge and
experience to deliver strong, long-term, sustainable growth for shareholders.
Supporting stewardship and
alignment with shareholders
A significant element of the total package should be delivered through the Restricted Share Plan,
to reflect our ethos of long-term stewardship and encourage long-term share ownership amongst
the Executive Directors and Senior Leadership Team.
Simplification and transparency
A simple and transparent framework which can be readily cascaded to the wider workforce.
This section of the report sets out the Policy for Directors which will be put to a binding shareholder vote at the 2022 AGM. Subject to
shareholder approval, the Policy will come into effect from the close of the 2022 AGM.
Policy table
Function
Operation
Opportunity
Performance metrics
Base salary
To recognise the
individual’s skills
and experience
and to provide
a competitive
base reward.
Base salaries are ordinarily reviewed
annually, with reference to: salary
levels for similar roles at comparable
companies; individual contribution
to performance; and the experience
of the Executive. Any adjustments
will typically be determined in the
first quarter of the year and take
effect retrospectively from 1 January
in that year.
None
Any base salary increases are
applied in line with the outcome
of the review as part of which the
Committee also considers average
increases across the Group.
Salary increases will generally be
in line with the range of increases
awarded to salaried employees (in
percentage terms). In exceptional
circumstances (including, but not
limited to, a material increase in job
size or complexity) the Committee
has discretion to make appropriate
adjustments to salary levels to ensure
they remain market competitive.
Pension
To provide an
opportunity for
executives to
build up income
on retirement.
All Executives are either members
of the Group pension scheme or
receive a cash pension allowance.
Aligned with the contribution rate
available to the majority of the wider
workforce (currently 10% of salary).
None
Salary is the only element of
remuneration that is pensionable.
127
Annual Report and Financial Statements 2021Governance Directors’
Remuneration Report continued
Operation
Opportunity
Performance metrics
Executives receive benefits which
consist primarily of the provision of a
car allowance, private medial cover
and life insurance although can
include any such benefits that the
Committee deems appropriate, and
the Company may make a payment
in respect of any associated tax
liability where the Committee
considers this to be appropriate.
None
The monetary value of benefits
vary by role and individual
circumstances: eligibility and cost
are reviewed periodically.
The Committee retains the
discretion to approve a higher cost
in appropriate circumstances (e.g.
relocation) or in circumstances
where factors outside the
Company’s control have changed
materially (e.g. increases in
insurance premiums).
Performance measures, targets and
weightings are set at the start of
the year.
Maximum opportunity of up to
150% of base salary in respect of a
financial year.
The scheme is based on
a combination of financial
performance and personal and/or
strategic performance objectives. At
the end of the year, the Committee
determines the extent to which
targets have been achieved.
If the maximum bonus opportunity
exceeds 100% of salary, up to one
third of any amount earned (not only
the proportion earned above 100%
of salary) will be deferred into shares
in the Company for two years. For
example, if the bonus opportunity is
equal to 125% of salary, 20% of any
amount earned will be deferred for
two years. If the bonus opportunity
is equal to 150% of salary, 33% of
any amount earned will be deferred
for two years.
Dividend equivalents may be
paid on vested shares based on
dividends paid during the deferral
period. Such amounts will normally
be paid in shares.
For 2022, the maximum annual
bonus opportunity will be 125%
of salary and 100% of salary for the
CEO and CFO respectively.
For financial metrics, up to 10%
of maximum may be earned for
threshold performance and up to
50% of maximum may be earned
for target performance with 100%
of maximum earned for meeting
or exceeding the maximum
performance level. For performance
between threshold and target and
between target and maximum the
vesting profile will be determined
by the Committee taking into
account the stretch in the targets.
Vesting of the bonus in respect of
strategic performance or personal
objectives will be between 0% and
100% based on the Committee’s
assessment of the extent to which
the relevant metric or objective has
been met.
Performance is assessed on an
annual basis, as measured against
specific objectives usually set at the
start of each year. The measures
will include financial measures and
may also include personal and/or
strategic performance objectives.
At least 50% of the bonus
opportunity is based on financial
measures which may include, but
are not limited to, total accounting
return and acquisitions.
Specific strategic and personal
objectives are set annually to reflect
the Group’s annual strategic plan
and individual contribution to
that plan, developed in line with
shareholder expectations. No more
than 20% of the annual bonus will
be based on personal objectives.
Overall payout under the annual
bonus may be subject to additional
underpins, determined by the
Committee at the start of the
financial year.
The Committee has discretion
to amend the pay-out should
any formulaic output not reflect
the Committee’s assessment of
overall business performance or
if the Committee considers the
formulaic outturn is not appropriate
in the context of other factors
considered by the Committee to
be relevant. Any such adjustments
would be fully explained in future
Remuneration Reports.
Function
Benefits
To provide
benefits which
are competitive
in the market
in which the
executive is
employed.
Annual bonus
To incentivise and
reward strong
performance
against financial
and personal
annual targets,
thus delivering
value to
shareholders
and being
consistent with
the delivery of the
strategic plan.
128
Harworth Group plcGovernance Function
Operation
Opportunity
Performance metrics
Although no formal performance
measures apply to any awards
under the RSP, the extent to which
a tranche of an award vests may
be reduced by the Committee if a
performance underpin assessed
to the end of the financial year
preceding the date of vesting is not
achieved.
In addition, the Committee may
reduce the extent to which a
tranche vests if it believes this better
reflects the underlying performance
of the Company over the relevant
period.
For Executive Directors in office at
the date of approval of this Policy
the maximum RSP award:
•
•
in respect of 2022 will be
75% of salary, converted into a
number of shares by reference
to the market value of a share
on such date or dates following
the announcement of the
Company’s results for 2021 as
the Committee determines (the
“2022 Price”);
in respect of future years, will be
75% of salary converted into a
number of shares by reference
to the 2022 Price, provided that
the grant in respect of any future
year may not exceed 112.5% of
salary or be less than 37.5% of
salary calculated by reference
to the market value of a share
at the date the relevant award
is granted.
For any Executive Director
appointed after the date of approval
of this Policy, the maximum RSP
award in respect of any financial
year is an award over shares with
a market value determined by the
Committee at the time the award is
granted of up to 112.5% of salary.
Restricted
Share Plan
(RSP)
To encourage and
enable substantial
long-term share
ownership and to
reflect our ethos
of long-term
stewardship.
Annual awards will be made in the
form of conditional share awards or
nil-cost options. The awards will be
subject to a performance underpin
explained further in the column
headed “Performance metrics”.
An award will vest in three equal
tranches following the assessment
of the relevant performance
underpin, which will be assessed
following the end of a period of no
less than three years as regards the
first tranche, no less than four years
as regards the second tranche and
no less than five years as regards the
third tranche.
The first and second tranches of an
award will be subject to a holding
period which begins on the relevant
vesting date and lasts until the
vesting date of the third tranche,
with the award not “released” until
the end of the holding period;
no holding period will apply to
the third tranche of an award. The
holding period will be structured
as either (1) the participant not
being able to acquire the shares
until the end of the holding period;
or (2) the participant being able to
acquire shares following vesting
but that, other than as regards
the sale of shares to cover tax
liabilities associated with the vesting
or acquisition, the participant
not being able to dispose of or
otherwise deal with the shares
acquired until the end of the
holding period.
If a holding period is structured
on the basis that the participant is
unable to acquire shares until its
end, dividend equivalents may be
paid on vested shares based on
dividends paid during the holding
period. Such amounts will normally
be paid in shares.
129
Annual Report and Financial Statements 2021Governance Directors’
Remuneration Report continued
Function
Operation
Opportunity
Performance metrics
These plans are reviewed annually
and if offered are offered to all
eligible employees in accordance
with their terms and applicable
legislation.
Share
Incentive
Plan (SIP)
and
Save-As-
You-Earn
plan (SAYE)
To motivate
and to facilitate
share ownership
on an all-
employee basis.
N/A
An Executive Director may
contribute up to £500 per month
(or such other limit as may be
permitted under the relevant
legislation) (SAYE) and £1,800 per
annum (or such other limit as may
be permitted under the relevant
legislation) (SIP) into these tax
advantaged all-employee schemes.
Under the SAYE, the per share
option exercise price is set at a
discount of up to 20% (or such other
amount as may be permitted under
the relevant legislation) to the share
price when participation is offered.
Under the SIP, the Company may
match the shares up to a 2 for 1
basis (or on such other basis as may
be permitted under the relevant
legislation).
Under the SIP, the Company may
also make an award to an Executive
Director of up to £3,600 of free
shares in any year (or such other
limit as may be permitted under the
relevant legislation).
130
Harworth Group plcGovernance Notes to the policy table
Performance measure selection and approach
to target setting
Annual bonus
The measures used under the annual bonus plan are selected
annually to reflect the Group’s main objectives for the year and
reflect both financial and personal contribution to the strategic
plan, developed in line with shareholder expectations. Additional
underpins may be set, for example to ensure appropriate
consideration of all relevant aspects of health and safety.
RSP
The terms of the underpins will be determined on an annual basis
taking into account the Committee’s assessment of the metrics
which will best reflect overall business health over the applicable
vesting periods. Underpins will ordinarily be qualitative, and the
Committee will use its judgement to assess “in the round” whether
the level of vesting is appropriate having regard to the underpins
and business performance. The underpins applying for the RSP
awards to be granted in respect of the Company’s FY2022 are set
out on page 144.
Recovery provisions
The annual bonus and RSP awards are subject to malus and
clawback provisions as follows:
• any bonus paid in cash may be recovered for up to two years
following payment;
• a deferred bonus award may be reduced or cancelled during
the two-year deferral period; and
• a tranche of an award under the RSP may be cancelled (if
shares have not been delivered to satisfy it) or recovered from
a participant (if shares have been delivered) up to the second
anniversary of vesting.
Malus or clawback may be applied in the event of misconduct,
material financial misstatement, error in calculation of outcomes,
material failure of risk management and internal controls, a
significant health and safety event or environmental incident,
conduct leading to financial loss or reputational damage,
unreasonable failure to protect the interests of employees and
customers, material corporate failure, material breach of banking
covenants or an unauthorised breach of the Group’s internal
gearing policy, or in any other circumstance that the Committee
considers appropriate.
SAYE and SIP
SAYE options and awards under the SIP are not subject to
performance conditions in line with the treatment of such awards for
all employees and in accordance with the applicable tax legislation.
Variations
The Committee may vary or substitute any performance measure or
RSP underpin if an event occurs which causes it to determine that
it would be appropriate to do so, provided that any such variation
is fair and reasonable and (in the opinion of the Committee) the
change would not make the measure or underpin less demanding.
If the Committee were to make such a variation, an explanation
would be given in the next Remuneration Report.
131
Annual Report and Financial Statements 2021Governance Directors’
Remuneration Report continued
Operation of share plans
The Committee will operate the Company’s share plans in
accordance with their rules. Share awards may be made in the form
of conditional share awards, options (including nil cost options)
or forfeitable share awards. Awards granted over shares may be
settled in cash. In the event of a variation of the Company’s share
capital or a demerger, special dividend or other event which, in the
Committee’s opinion may affect the price of shares, the Committee
may alter the terms of awards under the Company’s share plans and
the number of shares subject to those awards in accordance with
the terms of the relevant plan.
Remuneration policy for
other employees
Harworth’s approach to annual salary reviews is consistent across
the Group, with consideration given to the level of experience,
responsibility, individual performance and salary levels in
comparable companies.
The majority of employees are eligible to participate in an annual
bonus scheme with similar metrics to those used for the Executive
Directors. Opportunities and specific performance conditions
vary by organisational level with business area-specific metrics
incorporated where appropriate.
Senior managers participate in the RSP on similar terms to
which Executive Directors participate. Award sizes vary by
organisational level.
To encourage Group-wide share ownership, the Company operates
a SAYE plan under which awards are granted annually. Over half of
the Group’s employees currently participate in the SAYE plan. The
Company also operates a SIP and free share awards are made to all
eligible employees annually.
Shareholding guidelines
The Committee continues to recognise the importance of aligning
Executive Directors’ interests with shareholders through building up
a significant shareholding in the Company. Shareholding guidelines
are in place that require Executive Directors to acquire a holding
equivalent to 200% of base salary. Until the relevant shareholding
levels are acquired, 50% of any RSP awards vesting and 50% of any
deferred bonus awards vesting (post-payment of tax) are required to
be held. Shares subject to RSP awards which have vested but which
remain subject to a holding period and shares subject to deferred
bonus awards count towards the guidelines on a net of assumed
tax basis. Details of the Executive Directors’ current personal
shareholdings are provided in the Annual Report on Remuneration.
A post-cessation shareholding requirement is in place such that, for
the first 12 months following cessation, an Executive Director must
retain such number of his or her “relevant shares” as have a value (as
at cessation) equal to the shareholding guideline that applies during
service (200% of base salary), with that requirement tapering down
to 0% over the following 12 months. If the Executive Director holds
less than the required number of “relevant shares” at any time, he or
she must retain the “relevant shares” he or she holds. Shares which
the Executive Director has purchased are not “relevant shares” for
these purposes. Shares subject to RSP awards which have vested
but not been released, shares subject to released RSP awards which
have not been exercised, and shares subject to deferred bonus
awards count towards the post-cessation guideline on a net of
assumed tax basis. Unless the Committee determines otherwise,
when considering the extent to which this requirement is satisfied,
an Executive Director or former Executive Director shall be deemed
to have disposed of shares which are not “relevant shares” before
any ”relevant shares” that person holds.
132
Harworth Group plcGovernance Non-Executive Director remuneration
Non-Executive Directors are appointed on a rolling annual basis. All Non-Executive Directors offer themselves for re-election at each AGM.
The appointment and re-appointment and the remuneration of Non-Executive Directors are matters reserved for the full Board.
A. Lyons
A. Bromfield
R. Cooke
L. Scenna
P. O’Donnell Bourke
S. Underwood2
M. Bowes3
Date of letter
of appointment
23 November 2017
19 February 2019
27 February 2019
29 June 2020
2 November 2020
9 December 2019
1 March 2015
Appointment
date to the Board
Current appointment
expiry date1
7 March 2018
1 April 2019
19 March 2019
1 September 2020
3 November 2020
2 August 2010
24 March 2015
7 March 2023
1 April 2023
19 March 2023
1 September 2022
3 November 2022
1 January 2023
1 March 2023
1 All Non-Executive Directors are subject to annual rolling appointments by reference to the date of their original appointment to the Board.
2 A new letter of appointment was entered into when Steven Underwood ceased to be a representative director of Peel Group.
3 Martyn Bowes was previously a Non-Executive Director of Harworth Estates Property Group Limited from 19 March 2013.
The Non-Executive Directors are not eligible to participate in the Company’s performance-related bonus plan, long-term incentive plans or
pension arrangements.
Full terms and conditions for each of the Non-Executive Directors are available at the Company’s registered office during normal business
hours and will be available at the AGM for 15 minutes prior to the meeting and during the meeting.
Function
Operation
Opportunity
Performance metrics
Fees and
benefits
To attract and
retain Non-
Executive
Directors of the
highest calibre
with broad
commercial and
other experience
relevant to the
Company.
None.
Fee levels are ordinarily reviewed annually,
with any adjustments typically effective
1 January in the year following review.
The fees of the Non-Executive Chair
and other Non-Executive Directors are
determined by the Board.
Additional fees are payable for additional
Board duties, including but not limited to,
acting as Senior Independent Director and
as Chair of any of the Board’s Committees.
Additional fees may be paid in the event
that Non-Executive Directors are required
to commit substantial additional time
above that normally expected of their role.
Fee levels are benchmarked against similar
roles at comparable companies. Time
commitment and responsibility are taken
into account when reviewing fee levels.
The Non-Executive Directors may be
eligible to receive benefits linked to the
performance of their duties, including but
not limited to travel and other expenses,
and the Company may make a payment
in respect of any associated tax liability
where the Committee considers this to be
appropriate.
There is no overall maximum, but
fees are set taking into account the
responsibilities of the role and expected
time commitment.
It is expected that increases to Non-
Executive Director fee levels will be in
line with salaried employees over the life
of the Policy. However, in the event that
there is a material misalignment with the
market or a change in the complexity,
responsibility or time commitment
required to fulfil a Non-Executive
Director role, the Board has discretion to
make an appropriate adjustment to the
fee level.
Where benefits are provided to
Non-Executive Directors they will be
provided at a level considered to be
appropriate taking into account the
individual circumstances.
Overall fees paid to the Chair and Non-
Executive Directors will remain within
the limits set by the Company’s Articles
of Association.
133
Annual Report and Financial Statements 2021Governance Directors’
Remuneration Report continued
Pay for performance scenarios
The charts below provide an illustration of the potential future reward opportunities for the Executive Directors, and the potential split
between the different elements of remuneration under three different performance scenarios: “Minimum”, “On-target” and “Maximum”,
along with an illustration assuming a 50% increase in the share price for the purposes of the RSP awards.
Potential reward opportunities are based on the Policy, applied to base salaries effective 1 January 2022. The annual bonus and RSP are
based on the level of maximum opportunities applied in 2022. RSP values are based on the face value at award rather than vesting (other
than as regards that element of the charts assuming a 50% increase in the share price for the purposes of the RSP awards).
£1,500,000
£1,250,000
£1,000,000
£750,000
£1,481,181
32%
£1,323,081
24%
40%
36%
£1,059,581
30%
25%
£500,000
£479,881
£250,000
100%
45%
36%
32%
Base salary, benefits
Annual Bonus
RSP
£893,500
£1,009,750
35%
£738,500
26%
31%
21%
£351,000
35%
30%
100%
48%
39%
35%
£0
Minimum
performance
Performance
in line with
expectations
Maximum
performance
Maximum
performance
with 50%
share increase
Minimum
performance
Performance
in line with
expectations
Maximum
performance
Maximum
performance
with 50%
share increase
Lynda Shillaw
Kitty Patmore
The “minimum” scenario reflects base salary, pension and benefits (i.e., fixed remuneration) which are the only elements of the Executive
Directors’ remuneration packages not linked to performance. Base salaries and pensions (10% of salary) as at 1 January 2022 are set out
on page 147, benefits are based on the value of such benefits in 2021 which are taken from the single total figure remuneration table on
page 140.
The “on-target” scenario reflects fixed remuneration as above, plus bonus payout of 50% of maximum annual bonus opportunity (for 2022,
125% of salary for the CEO and 100% of salary for the CFO) and RSP vesting in full (for 2022, 75% of salary).
The “maximum” scenario reflects fixed remuneration as above, plus full payout of all incentives (for 2022, annual bonus of 125% of salary for
the CEO and 100% of salary for the CFO and RSP of 75% of salary).
The final scenario is based on the same assumptions as the “maximum” scenario, but also assumes, for the purposes of the RSP element of
the chart, that the share price increases by 50%.
134
Harworth Group plcGovernance Approach to recruitment remuneration
External appointment
In the cases of hiring or appointing a new Executive Director from outside the Company, the Remuneration Committee may make use of all
the existing components of remuneration, as follows:
Component
Approach
Maximum annual grant value
Base salary
Pension
Benefits
The base salaries of new appointees will be determined by reference
to relevant market data, experience and skills of the individual, internal
relativities and current base salary. Where new appointees have initial
base salaries set below market, any shortfall may be managed with phased
increases subject to the individual’s development in the role.
New appointees will receive pension contributions or an equivalent cash
supplement in line with the existing policy.
New appointees will be eligible to receive benefits which may include (but
are not limited to) the provision of a company car or cash alternative, private
medical cover, life insurance and any necessary relocation expenses.
Annual bonus
The structure described in the policy table will usually apply to new
appointees with the relevant maximum usually being prorated to reflect the
proportion of employment over the year. Targets for the personal element
will be tailored to each Executive.
Up to 150% of salary.
RSP
New appointees will be eligible to participate in the RSP, as described in the
policy table.
The maximum in respect of any
financial year is an award over shares
with a market value determined by the
Committee at the time the award is
granted of up to 112.5% of salary.
In determining appropriate remuneration, the Committee will take
into consideration all relevant factors (including quantum and nature
of remuneration for the appointee’s previous employment, and
the jurisdiction from which the candidate was recruited) to ensure
that arrangements are in the best interests of both Harworth and
its shareholders. The Committee may make an award in respect
of a new appointment to “buy out” remuneration arrangements
forfeited on leaving a previous employer, which may be awarded in
addition to the remuneration structure outlined in the table above.
The Committee will generally seek to structure “buy out” awards on a
comparable basis to the remuneration arrangements forfeited and will
consider relevant factors including time to vesting, any performance
conditions attached to these awards and the likelihood of those
conditions being met. Any such “buy out” awards will typically
be made under the annual bonus or RSP, although in exceptional
circumstances the Committee may exercise the discretion available
under Listing Rule 9.4.2 R to make awards using a different structure.
Any “buy out” awards would have a fair value no higher than the
awards forfeited (as determined by the Committee).
Other elements of remuneration may be included in appropriate
circumstances, such as:
• an interim appointment being made to fill an Executive Director
role on a short-term basis (including if exceptional circumstances
require that the Chair or other Non-Executive Director takes on an
executive function); or
•
if an Executive Director is recruited at a time in the year when
it would be inappropriate to provide an annual bonus or
long-term incentive award for that year. Subject to the limit on
variable remuneration set out below, the quantum in respect
of the months employed during the year may be transferred to
the subsequent year so that reward is provided on a fair and
appropriate basis.
However, this discretion will not be used to offer non-performance
related incentive payments (for example a “guaranteed sign-on
bonus”) and the maximum level of variable remuneration which may
be granted (excluding any “buy-out” award) is up to 262.5% of salary.
Internal promotion
In cases of appointing a new Executive Director by way of internal
promotion, the Committee and Board will be consistent with the
Policy for external appointees detailed above. Where an individual
has contractual commitments made prior to his or her promotion to
Executive Director level, the Company will continue to honour these
arrangements. The remuneration policy for other employees is set out
on page 132. Incentive opportunities for below Board employees are
typically no higher than Executive Directors, but measures may vary.
Non-Executive Directors
In recruiting a new Non-Executive Director, the Committee will utilise
the Policy as set out in the table on page 133.
135
Annual Report and Financial Statements 2021Governance Directors’
Remuneration Report continued
Service contracts and treatment for leavers and change of control
Executive Director service contracts, including arrangements for early termination, are carefully considered by the Committee. The CEO
has a rolling service contract requiring nine months’ notice of termination on either side. The CFO has a rolling service contract requiring
six months’ notice of termination on either side. Such contracts contain no specific provision for compensation for loss of office, other than
an obligation to pay for any notice period waived by the Company, where pay is defined as salary plus benefits only. Executive Director
service contracts are available to view at the Company’s registered office. The Remuneration Committee may offer a notice period of up
to 12 months (on either side) for any incumbent Executive Director or any Executive Director appointed after the date on which this Policy
becomes effective.
When considering exit payments, the Committee reviews all potential incentive outcomes to ensure they are fair to both shareholders and
participants. The table below summarises how the awards under the annual bonus and RSP are typically treated in specific circumstances,
with the final treatment remaining subject to the Committee’s discretion:
Reason for leaving
Calculation of vesting/payment
Annual Bonus
Leaving other than as a
“Good Leaver”1
“Good Leaver”1
Change of Control
RSP
Bonus for year of departure: No annual bonus payable
Deferred bonuses: Lapse
Bonus for year of departure: Cash bonuses will typically be paid to the extent that financial, strategic
and individual objectives set at the beginning of the plan year have been met. Any resulting bonus
will typically be prorated for time served during the year and paid at the usual time (although the
Committee retains discretion to pay the bonus earlier in appropriate circumstances).
The Committee has discretion to pay the whole of any bonus earned for the year of departure and
preceding year in cash in appropriate circumstances.
Deferred bonuses: Typically vest in full on the normal vesting date. The Committee has discretion for the
awards to vest earlier in appropriate circumstances.
Bonus for year of relevant event: Cash bonuses will typically be paid to the extent that financial, strategic
and individual objectives set at the beginning of the plan year have been met. Any resulting bonus will
typically be prorated for time to the relevant event. The Committee retains discretion to waive time
prorating in appropriate circumstances.
Deferred bonuses: Vest in full on occurrence of the relevant event.
Leaving before vesting other
than as a “Good Leaver”
If a participant holding an unvested tranche of an RSP award resigns or leaves for another reason which
is not a “good leaver” reason, that tranche will ordinarily lapse.
“Good Leaver”1
before vesting
Cessation after vesting
If a participant ceases employment as a “good leaver” whilst holding an unvested tranche of an RSP
award, that tranche will continue and vest following the end of the ordinary vesting period, subject to
the application of the underpin in the ordinary way and, unless the Committee determines otherwise,
a reduction to reflect the proportion of the first three years of the underpin assessment period that has
elapsed at the date of cessation. The unvested tranche will ordinarily be released following the end of
the holding period. The Committee has discretion to vest and release any unvested tranche at cessation
or to release any unvested tranche as soon as it vests.
If a participant ceases employment whilst holding a tranche of an RSP award which is subject to a
holding period, it will ordinarily continue and be released following the end of the holding period.
The Committee has discretion to release the tranche at cessation. However, if a participant ceases
employment due to dismissal for misconduct during the holding period applying to a tranche, that
tranche will lapse.
136
Harworth Group plcGovernance Change of control
In the event of a change of control of the Company or other relevant corporate event, unvested share
awards under the RSP will usually vest. In the case of any unvested tranche of an RSP award, the number of
shares in respect of which the tranche vests shall be determined by the Committee taking into account:
• whether it is appropriate to reduce vesting to reflect the extent to which the underpin is not satisfied
at the date of the relevant event, or the extent to which the Committee determines it would have
been satisfied at the end of the ordinary assessment period; and
• unless the Committee determines otherwise, the proportion of the first three years of the underpin
assessment period that has elapsed at the date of the relevant event.
Any tranche of an RSP award which has vested but which remains subject to a holding period will be
released in full.
1 “Good Leaver” is defined as a participant ceasing to be employed by the Group by reason of death, disability, ill health, redundancy, retirement or any other reason that the
Committee determines in its absolute discretion
Options under the SAYE plan and awards under the SIP may vest
and, where relevant, be exercised in the event of a cessation of
employment or change of control in accordance with the rules of
the relevant plan. The plans do not permit the exercise of discretion
and, accordingly, the treatment for Executive Directors will be the
same as for all other participants.
The terms applying to any “buy-out” award on cessation of
employment would be determined when the award was granted.
The Committee reserves the right to make any other payments in
connection with a Director’s cessation of office or employment
where the payments are made in good faith in discharge of an
existing legal obligation (or by way of damages for breach of
such an obligation) or by way of settlement of any claim arising in
connection with the cessation of a Director’s office or employment.
Any such payments may include but are not limited to paying any
fees for outplacement assistance and/or the Director’s legal and/
or professional advice fees in connection with his/her cessation of
office or employment.
External appointments
The Board will consider any request by an Executive Director to
take potential non-executive appointments on a case-by-case basis,
taking account of the overriding requirements of the Group and the
extent to which the Non-Executive Director opportunity supports
the agreed personal development objectives of the Executive.
Legacy arrangements
The Committee reserves the right to make remuneration payments
and payments for loss of office, and to exercise any discretion
available in relation to any such payment, notwithstanding that they
are not in line with the Policy set out above:
• where the terms of the payment were agreed before the Policy
came into effect; and
• where the terms of the payment were agreed at a time when the
relevant individual was not a Director of the Company and, in the
opinion of the Committee, the payment was not in consideration
of the individual becoming a Director of the Company.
For these purposes, “payments” include the satisfaction of variable
remuneration and, in relation to an award over shares, the terms
of the payment are “agreed” no later than the time the award
is granted.
Consideration of conditions elsewhere in the Company
The Committee oversees the Group-wide review of salary and
benefits as part of its work. We aim to create an inclusive and fair
environment where people can develop their skills and experience,
and contribute fully to Harworth’s success. The Company holds
an Employee AGM which, together with additional employee
forum sessions facilitated by the Non-Executive Directors, provides
a platform for employees to discuss a range of topics with the
Board, including executive remuneration. Ahead of publication of
this Policy, the Executive Directors and Chair of the Remuneration
Committee hosted a (virtual) briefing and Q&A session on the Policy
for all employees. When making decisions on Executive Director
remuneration, the Committee considers pay and conditions
across the Group as well as any feedback from employees via the
Employee Engagement Survey and Employee AGM.
Consideration of shareholder views
The Remuneration Committee maintains a regular dialogue with its
major shareholders. In late 2021 and early 2022, we conducted a
shareholder consultation regarding this Policy. A substantial majority
of shareholders consulted were supportive of the proposed
changes. Responding to the feedback received, the Committee has
strengthened the post-employment shareholding guidelines that
apply to Executive Directors.
The Committee will continue to monitor trends and developments
in corporate governance, market practice and shareholder views
to ensure the structure of the executive remuneration remains
appropriate.
137
Annual Report and Financial Statements 2021Governance Directors’
Remuneration Report continued
Annual Remuneration Report
Role of the Remuneration Committee
The role of the Committee is to determine and recommend to the Board the Remuneration Policy for the Executive Directors, and set the
remuneration for the Executive Directors and Senior Executive Team. The Policy is designed to support the Group’s strategy and help
attract, retain and incentivise a Senior Executive Team with the requisite skills, knowledge and experience to deliver strong, long-term,
sustainable value growth for shareholders. The table below describes how the Committee addressed the factors in Provision 40 of the 2018
UK Corporate Governance Code when determining the Policy.
Alignment to
strategy and
culture
The Committee is focused on ensuring a healthy culture exists across the entire Group and believes that the
Executive Directors and wider Senior Executive Team set the standards for behaviour and conduct across the Group.
Bonus awards are focused on Group performance to foster collective accountability and deliver a consistent reward
structure across all levels of management. The Group financial and non-financial performance measures ensure
that the extent to which bonuses are earned reflects the delivery of our strategy for the benefit of shareholders. The
application of ESG measures and personal objectives enables us to incentivise and reward the behaviours that lay the
foundations for longer-term success.
Our RSP reflects a core principle of rewarding long-term value creation in a cyclical business and supports retention
through the market cycle.
Clarity and
simplicity
A core reward principle of our Policy is to operate a simple and transparent framework which can be readily
cascaded. The remuneration framework is made up of three key elements: fixed pay (including base salary,
pension and benefits); annual bonus; and the RSP. The structure is simple to understand for both participants and
shareholders and promotes long-term stewardship.
Risk
Annual bonus opportunities are set so as to reflect the long-term nature of our business and at levels which reward
high performance, but which do not encourage inappropriate business risk.
The Committee has discretion to reduce vesting outcomes under the annual bonus and RSP where it considers that
they would not otherwise be representative of the underlying business performance over the vesting period.
Annual bonus and RSP awards are also subject to malus and clawback provisions.
Proportionality
and fairness
A significant proportion of an Executive Director’s reward is linked to performance through the incentive framework,
with a clear line of sight between performance against the selected measures and the delivery of long-term
shareholder value.
Performance measures and the underlying targets for the annual bonus are reviewed by the Committee each year
to ensure that they are directly aligned with the Group’s strategic priorities, and targets are calibrated to reward
Executive Directors for strong performance.
Vesting under the RSP is phased over a five-year period, with one-third vesting after three years, one-third after four
years and one-third after five years. The holding period means that participants cannot acquire shares until the end of
a five-year period, aligning their interests with those of shareholders for the longer term.
Executive Directors are also required to build material shareholdings in the Group (200% of base salary). A post-
cessation shareholding requirement applies which ensures that their interests are aligned with those of the Group for
two years post-cessation of employment.
Through the Share Incentive Plan and Save As You Earn scheme we encourage and enable material long-term share
ownership for all employees, supporting the long-term nature of our business and its returns.
Predictability
The range of possible rewards for individual Executive Directors is set out in the scenario charts on page 134.
138
Harworth Group plcGovernance Committee membership and attendance
Membership and attendance at meetings in 2021 are shown below:
Independent
Committee tenure at
31 December 2021
Scheduled meetings
attended/eligible to
attend
Angela Bromfield
Alastair Lyons
Lisa Scenna
Chair
Member
Member
Yes
Yes
Yes
2 years 9 months
3 years 10 months
1 year 4 months
6/6
6/6
6/6
During the year, the Committee held six scheduled meetings. The key activities of the Committee during 2021 are shown below:
February
July
September
October
December
Assessment of 2021 bonus outcomes
Assessment of 2018 LTIP outcomes
Approval of 2021 salary increases
Approval of 2021 bonus measures and targets
Approval of 2021 RSP awards
Approval of 2021 SAYE awards and Share Incentive Plan awards
Review of Remuneration Policy
Review of Group-wide maternity, paternity and shared parental leave and pay policies
Review of Remuneration Policy
Review of remuneration benchmarking for Executive Directors
Review of Remuneration Policy
Review of employee benefits
Review of 2021 bonus targets following approval of the Group’s revised strategy
In-principle approval of changes to the Remuneration Policy
Review 2022 bonus measures and targets
Advisers to the Committee
The Company Secretary is secretary to the Committee. The following individuals may be invited to attend Committee meetings on certain
occasions to provide advice and to help the Committee to make informed decisions:
• Chief Executive;
• Chief Financial Officer;
• Head of People; and
•
representatives of Deloitte LLP (see further below).
No individuals are involved in decisions relating to their own remuneration. The minutes of Committee meetings are circulated to all
Directors, where appropriate.
During the year under review, the Committee received advice on executive remuneration matters from Deloitte LLP (Deloitte). Deloitte
was appointed by the Committee on 18 October 2018 as its independent adviser following a competitive selection process. Deloitte is
a founder member of the Remuneration Consultants Group and, as such, voluntarily operates under its Code of Conduct in relation to
executive remuneration matters in the UK. The Committee has satisfied itself that Deloitte provided objective and independent advice
during 2021.
Deloitte’s fees in relation to remuneration advice provided to the Committee during 2021 were £49,350 plus VAT, charged on a time
and expenses basis. Deloitte also provided advice to the Group during 2021 in relation to corporate tax, pensions and share plans. The
Committee did not consider that these engagements impaired Deloitte’s independence.
139
Annual Report and Financial Statements 2021Governance Directors’
Remuneration Report continued
Single total figure of remuneration for Executive Directors (audited)
The table below sets out the remuneration received by each Executive Director of the Company for the year ended 31 December 2021 with
a comparison to the previous year, representing payments received in respect of the period during which each individual was a Director of
the Company.
Fixed pay
Salary
Taxable benefits2
Pension benefit3
Subtotal
Variable pay
Single-year variable
Multi-year variable
Other4
Subtotal
Total
L. Shillaw1
2021
2020
K. Patmore
2021
2020
£400,000
£16,121
£40,000
£456,121
£362,000
–
£5,722
£367,772
£823,893
£66,666
£2,686
£6,666
£76,018
–
–
–
–
£76,018
£250,000
£10,000
£25,000
£285,000
£226,250
–
£1,250
£227,500
£512,500
£200,000
£10,000
£20,000
£230,000
£101,760
–
£9,062
£110,822
£340,822
1 Appointed as Chief Executive with effect from 1 November 2020.
2 Taxable benefits consist of car allowance and private medical insurance. Other benefits include life assurance.
3 Kitty Patmore participated in the Company’s defined contribution scheme, in relation to which the Company contributed 10% of salary. Lynda Shillaw received a pension
allowance equivalent to 10% of salary.
4 Other includes Free Shares awarded during the year under the all-employee Share Incentive Plan and options granted during the year under the all-employee Save-As-You-Earn
plan. The value of Free Shares is determined based on the face value of the shares at the award date. The value of SAYE options is determined based on the intrinsic value of the
award at the grant date.
Single total figure of remuneration for Non-Executive Directors (audited)
The table below sets out remuneration received by each Non-Executive Director of the Company for the year ended 31 December 2021
with a comparison to the previous year, representing payments received in respect of the period during which each individual was a
Director of the Company.
Base fee
Committee chair fees
SID fee
Total
2021
£162,400
£45,675
£45,675
£45,675
£45,675
£45,675
2020
£160,000
£45,000
£45,000
£45,000
£45,000
£15,000
2021
–
–
£7,613
–
–
–
2020
–
–
£1,250
–
–
–
2021
–
–
£7,613
–
–
–
2020
–
–
£1,250
–
–
–
2021
£162,400
£45,675
£60,901
£45,675
£45,675
£45,675
2020
£160,000
£45,000
£47,500
£45,000
£45,000
£15,000
£45,675
£7,500
£7,613
£1,250
–
–
£53,288
£8,750
A. Lyons
M. Bowes
A. Bromfield1
R. Cooke
S. Underwood
L. Scenna2
P. O’Donnell
Bourke3
1 Angela Bromfield succeeded Lisa Clement as Senior Independent Director and Chair of the Remuneration Committee with effect from 1 November 2020.
2 Appointed as Non-Executive Director with effect from 1 September 2020.
3 Appointed as Non-Executive Director and Chair of the Audit Committee with effect from 3 November 2020.
140
Harworth Group plcGovernance Incentive outcomes for year ended 31 December 2021 (audited)
Annual bonus
Lynda Shillaw’s and Kitty Patmore’s bonus opportunity for 2021 was equal to 100% of salary subject to a combination of financial
performance (as regards 75% of the opportunity), ESG performance (as regards 5% of the opportunity) and personal objectives (as regards
20% of the opportunity).
Performance against targets and subsequent vesting of 2021 annual bonuses are set out in the tables below.
Group financial performance outcome (75% of total bonus opportunity)
The Group undertook a strategic review during 2021 and a redefined strategy was approved by the Board in July – to reach £1bn of EPRA
NDV over the following five to seven years. In particular, the strategic review:
1.
identified the need to accelerate sales on residential sites to optimise financial returns as sites reach maturity and fund investments in
acquisitions and direct development; and
2. shifted the Group’s focus away from acquiring income properties to directly developing and retaining more industrial & logistics
investment assets, whilst in so doing repositioning the Group’s Investment Portfolio to modern Grade A.
The Committee recognised that these changes impacted the Group’s priorities as regards acquisitions and sales for the second half of
2022. To avoid management having incentives that conflicted with the revised strategy, the Committee agreed in October to amend the
acquisitions and sales targets. Details are provided in footnotes 3 and 4 below. The Committee considered that the revised targets were no
less challenging.
Weighting
(% of financial
element)
Threshold1
Target2 Maximum
Actual
performance
Vesting
outcome
Financial measure
Total Accounting Return (growth in
EPRA NDV plus dividends paid)
Acquisitions3, 4
Sales Volume – base sales4,5
Sales Volume – non-core sites4,5
Profit Excluding Value Gains
Group Net Loan to Portfolio Value
Total vesting on financial performance element
12.5%
7.5%
20%
10%
Straight-line vesting occurs between defined levels of performance
1
10% of maximum opportunity vests at threshold.
2 50% of maximum opportunity vests at target.
30%
20%
£16.63m
Secure
annualised
rent growth
of £0.6m
Strategic
landbank
growth of
7.5%
£57m
£8.1m
£4.73m
23.0%
£23.78m
Secure
annualised
rent growth
of £0.8m
Strategic
landbank
growth of
10%
£68.7m
£9.5m
£5.98m
20.6%
£127.4m
£30.40m
Secured
Secure
annualised
annualised
rent growth
rent growth
of £0.958m
of £0.9m
Strategic
Strategic
landbank
landbank
growth of
growth of
5.5%
15%
£92.5m
£83.7m
£14.4m
£13.0m
£13.1m
£6.98m
3.4%
18.0%
75% weighting of total bonus opportunity
100%
50%
100%
100%
100%
100%
90%
3 As a result of the strategic review, the Group’s focus shifted mid-year from acquiring income properties, to directly developing and retaining industrial & logistics assets. The
Committee therefore agreed that the “secure annualised rent growth” targets should be measured over six months to 30 June 2021 only and, therefore, reduced by 50%.
4 As a result of the strategic review, the Group identified the need to accelerate sales on residential sites (“Additional Residential Sales”). As the Strategic Landbank Growth and
Sales Volume targets set at the start of 2021 did not anticipate the Additional Residential Sales, the Committee agreed to exclude them when determining performance against
those targets.
5 Based on unconditional sales completed during the year and includes non-cash consideration which removes a cost plan liability, internal sales for direct development, and sales
by joint ventures.
141
Annual Report and Financial Statements 2021Governance Directors’
Remuneration Report continued
ESG performance outcome (5% of total bonus opportunity)
Threshold1
Target2
Maximum
Actual performance
Vesting outcome
Complete an updated
ESG Strategy as part of
the Group’s strategic
review.
Develop a roadmap
to achieve the
decarbonisation target.
Collect initial base data
for key measures.
Development of initial
measures and short- and
long-term targets for
all key areas of the ESG
Strategy. To include
the identification
of an achievable
decarbonisation target.
60%
Initial measures and
short-term and long-term
targets developed for
all areas of ESG strategy.
Decarbonisation target
identified. Initial measures
identified to achieve zero
carbon on scope 1, 2 and
some scope 3 emissions.
Data collection has
improved but further work
needed.
Straight-line vesting occurs between defined levels of performance
1
10% of maximum opportunity vests at threshold.
2 50% of maximum opportunity vests at target.
Personal performance outcomes (20% of total bonus opportunity)
Executive
Director
L. Shillaw
Objectives during the year
Performance against objectives during
the year
Executive Leadership
•
Inspire and motivate Harworth’s people to embrace
the new senior leadership team, strategy and ways of
working
A number of events have been run to engage
staff in delivery of the new strategy and
significant progress was made in delivery of the
strategy in 2021.
Vesting
100%
Stakeholders
• Cement Harworth as a key regional partner by
developing key relationships with Government and
other national stakeholders
• Develop effective relationships with local government
and other local stakeholders such as Local Enterprise
Partnerships and Universities
• Elevate Harworth’s brand profile: ensure that
Harworth is perceived as a key regional business by
the property sector
Strategy review
• Evaluate the Company’s current strategy and present
analysis of this and options available to the Board in
July 2021. Identify steps to implement the approved
strategy during H2 2021
Following approval of the strategy the CEO
developed and implemented a programme of
meetings, presentations and panel interviews
designed to raise the profile of Harworth and
engage with and influence key stakeholders.
A revised strategy was developed and
approved by the Board in July 2021.
The strategy has been well received by
shareholders. Delivery of the strategy is
underway.
142
Harworth Group plcGovernance K. Patmore
Strategy
• Alongside the CEO, evaluate existing portfolio
performance and market sector opportunities
A complete portfolio evaluation was
undertaken and used as a key input into the
development of the revised strategy.
100%
• Develop a non-financial KPI framework and data
collection system to be adopted by the business in
regular management reporting
• Position the Finance team ready for growth under the
new strategy
Stakeholders
• Develop a comprehensive shareholder engagement
plan. This will include evolving investor messaging to
convey better the Harworth story (including the new
strategy)
Capital structure
• Establish a Group funding strategy which identifies
the capital structure required to deliver the updated
strategy and potential funding partners for core debt,
project-specific debt and equity partnerships
• Complete a refinance of the existing banking facilities
ahead of sign-off of the 2021 results
• Complete requisite project-specific financing or
funding at commercial direct development sites
A new KPI framework has been developed and
implemented.
The structure and skills of the Finance team
have been developed to support the new
strategy.
A shareholder engagement plan has been
successfully implemented. Feedback from
an investor survey and brokers confirm that
investors understand and support the new
strategy.
The funding strategy work has been completed
with a number of options explored. The
appropriate structure was identified and the
business has been refinanced to support the
delivery of the strategy.
Project-specific financing has been completed
as required.
Overall bonus outcomes
Executive Director Weighting
Vesting Weighting
Vesting Weighting
Vesting % of bonus % of salary
Financial
ESG
Personal
Overall bonus outcome
L. Shillaw
K. Patmore
75%
75%
90%
90%
5%
5%
60%
60%
20%
20%
100%
100%
90.5%
90.5%
90.5%
90.5%
The overall bonus payments were also subject to additional underpins based on, amongst other things, the Company’s health and safety
record, there being no deficiencies or material adverse issues which materially damage the reputation or performance of the business, and
no covenant breach or financial irregularity. The Committee reviewed performance against these underpins and found no cause to reduce
the bonus outcomes.
Restricted Share Plan awards granted in 2021 (audited)
RSP awards were granted to Lynda Shillaw and Kitty Patmore on 6 April 2021 at 50% of salary.
Taking into account that the share price used to determine the 2021 RSP awards was higher than the share price used to determine the
2020 RSP awards and that RSP awards are much less leveraged than performance-based share awards, the Committee considered there to
be sufficient protection against windfall gains.
Executive Director
Type of award
Date of grant Number of shares subject to award
Face value1
L. Shillaw
K. Patmore
2021 RSP Award
Nil-Cost Option
2021 RSP Award
Nil-Cost Option
6 April 2021
6 April 2021
156,739
£200,000
97,962
£125,000
1 Face value based on the average mid-market closing share price for the five trading days immediately preceding the date of grant (£1.276).
Vesting will be phased over a five-year period, with one third vesting after three years, one third after four years and one third after five years,
although all vested shares must be held to the end of year five.
143
Annual Report and Financial Statements 2021Governance Directors’
Remuneration Report continued
The RSP award is subject to specific performance underpins which take into account the Group’s financial health, the underlying
performance of the business relative to the real estate market, and the quality of corporate governance over the vesting periods.
Performance underpin
Description
Detail1
Financial health
Financial stability of the business
A breach of financial covenants in the Group’s principal
banking facilities.
Underlying performance
Sustainability of the Group’s
underlying performance in the
cyclical real estate sector
A material deterioration in the Group’s underlying
performance which departs significantly from any deterioration
across the real estate sector including, but not limited to, by
reference to share price, dividend and/or EPRA NDV.
Corporate governance
Avoidance of governance and
health and safety failures
A material failure in governance or an act resulting in
significant reputational damage and/or material financial
loss to the Group. This includes giving consideration to any
successful prosecutions in relation to health and safety.
1 The Committee has discretion to make a downward adjustment to awards if any of these events occur during the vesting periods.
Furthermore, the Committee has discretion to reduce vesting outcomes where it considers that they would not otherwise be representative
of the underlying business performance over the vesting period. The Committee will disclose at the time of vesting how performance
underpins and underlying business performance over the vesting period have been taken into account.
Percentage change in remuneration of Directors and employees
The table below shows the annual percentage change in each of the Directors’ remuneration compared to the average
employee remuneration.
% change between 2020 and 2021
% change between 2019 and 2020
Salary & fees
Benefits
Bonus
Salary & fees
Benefits
Bonus
Executive Directors
L. Shillaw1
K. Patmore2
Non-Executive Directors
A. Lyons
A. Bromfield3
R. Cooke4
S. Underwood
M. Bowes
L. Scenna5
P. O’Donnell Bourke6
Average employee
(Company)7
Average employee (Group)
n/a
25%
1.5%
28%
1.5%
1.5%
1.5%
n/a
n/a
13.3%
9.4%
n/a
0%
n/a
122.3%
–
–
–
–
–
–
–
–
–
–
–
–
–
–
n/a
n/a
0%
n/a
n/a
0%
0%
n/a
n/a
n/a
n/a
–
–
–
–
–
–
–
n/a
n/a
–
–
–
–
–
–
–
6.5%
3.88
157.4%
45.7%
7%
3.3%
34%
5%
14%
(20%)
1 Appointed as Chief Executive with effect from 1 November 2020 and therefore the annual percentage change in remuneration is not applicable.
2 Appointed as Chief Financial Officer with effect from 1 October 2019 and therefore the annual percentage change in remuneration between 2019 and 2020 is not applicable.
3 Appointed as Non-Executive Director with effect from 1 April 2019 and therefore the annual percentage change in remuneration between 2019 and 2020 is not applicable.
Succeeded Lisa Clement as Senior Independent Director and Chair of the Remuneration Committee with effect from 1 November 2020.
4 Appointed as Non-Executive Director with effect from 19 March 2019 and therefore the annual percentage change in remuneration between 2019 and 2020 is not applicable.
5 Appointed as Non-Executive Director with effect from 1 September 2020 and therefore the annual percentage change in remuneration is not applicable.
6 Appointed as Non-Executive Director with effect from 3 November 2020 and therefore the annual percentage change in remuneration is not applicable.
7 Calculated by reference to employees (excluding Directors) of the Company to satisfy the disclosure obligations under The Companies (Directors’ Remuneration Policy and
Directors’ Remuneration Report) Regulations 2019. However, given that the Company only employs a small proportion of the Group’s employees, the row below sets out the
equivalent figures calculated by reference to employees (excluding Directors) of the Company and its subsidiaries.
8 There have been no changes to the benefits available to our employees. Car allowances are determined by internal gradings and applied consistently. Private medical insurance
is available to all employees, their spouses/partners and dependants on the same terms. The increase in average benefits was driven by a change in the overall profile of our
workforce, with employees receiving higher car allowances and/or tending to have more dependants resulting in higher private medical insurance costs.
144
Harworth Group plcGovernance Chief Executive officer pay ratio
The Group has fewer than 250 UK employees and is not therefore required to disclose a Chief Executive pay ratio. However, in line with
best practice, the Committee considers it appropriate to disclose the pay ratio voluntarily.
The table below sets out the Chief Executive’s total remuneration as a ratio against the full-time equivalent remuneration of employees for
the year ended 31 December 2021.
Method
Option A
25th percentile pay ratio
Median pay ratio
75th percentile pay ratio
18:1
12:1
8:1
Option A methodology was selected on the basis that it is a robust approach and is preferred by shareholders and proxy voting agencies.
The calculations for the representative employees were performed as at the final day of the relevant financial year.
A substantial proportion of the Chief Executive’s total remuneration is performance related and delivered in shares. The ratios will therefore
depend significantly on the Chief Executive’s annual bonus and RSP outcomes and may fluctuate year-on-year.
The Board believes that the median pay ratio is consistent with the pay, reward and progression policies for the wider workforce.
The table below sets out the pay and benefits figures used to calculate the ratios and the salary component.
Method
Chief Executive 25th percentile pay ratio
Median pay ratio 75th percentile pay ratio
Total pay and benefits
Salary
£823,8931
£400,000
£46,200
£42,000
£67,839
£48,000
£107,348
£72,500
1 The Chief Executive’s total pay and benefits is the total single figure as disclosed on page 140.
2 The employee percentile total pay and benefits has been calculated on the same basis as required for the Chief Executive’s remuneration for single figure purposes. However,
the vesting of awards under the Long-Term Incentive and Deferred Share Bonus Schemes during the year have been omitted from the employee calculations.
Relative importance of spend on pay
2021
£11.626m
Total employee pay expenditure
2020
£8.265m
% change
40.7%
2021
£3.9m
Distribution to shareholders
2020
£5.8m
% change
-32.76%
Total employee pay in the year reflected an increase in the average number of employees from 75 to 89, as well as awards for career
progression and promotion.
Total dividends for 2021 were 1.212p per share (2020: 1.8p per share), resulting in total dividends of £3.9m (2020: £5.803m). The
percentage change is shown on a per share basis. The reduction in dividend is attributable exclusively to the fact that the 2020 final
dividend was increased to reflect the cancelled 2019 dividend. Excluding that element, the 2021 dividend represents a 10% increase on
the 2020 dividend, in line with our progressive dividend policy.
145
Annual Report and Financial Statements 2021Governance
Directors’
Remuneration Report continued
Review of past performance
The following chart shows the Total Shareholder Return (TSR) of the Company and the FTSE Small Cap Index over the period from
the Company’s relisting on 24 March 2015 to 31 December 2021. The FTSE Small Cap Index represents the most appropriate broad
index comparison for a company of Harworth’s size. The table below shows the Chief Executive’s “single-figure” remuneration over the
same period.
Historical TSR performance
Growth in the value of a hypothetical £100 holding (including re-investment of dividends) over the period from relisting on 24 March 2015
to 31 December 2021:
Source: Thomson Reuters DataStream
Harworth
FTSE Small Cap
£220
£200
£180
£160
£140
£120
£100
)
0
0
1
£
o
t
d
e
s
a
b
e
r
(
n
r
u
t
e
R
l
r
e
d
o
h
e
r
a
h
S
l
a
t
o
T
£80
M ar-15
Jun-15
Sep-15
D ec-15
M ar-16
Jun-16
Sep-16
D ec-16
M ar-17
Jun-17
Sep-17
D ec-17
M ar-18
Jun-18
Sep-18
D ec-18
M ar-19
Jun-19
Sep-19
D ec-19
M ar-20
Jun-20
Sep-20
D ec-20
M ar-21
Jun-21
Sep-21
D ec-21
Historical Chief Executive remuneration
Chief Executive
L. Shillaw
L. Shillaw
O. Michaelson
O. Michaelson
O. Michaelson
O. Michaelson
O. Michaelson
O. Michaelson
Single figure
remuneration (£’000)
Short-term incentive
award as a % of
maximum opportunity
Long-term incentive
award as a % of
maximum opportunity
£824
£76
£559
£669
£901
£1,392
£599
£480
90.5%
n/a
51.3%
44.2%
85.6%
80.6%
90.0%
85.6%
n/a
n/a
5.05%
51.5%
51.8%
n/a1
n/a
n/a
2021
2020
2019
2018
2017
2016
2015
3 Excludes vesting of Harworth Estates LTIP as this was a one-off scheme put in place by HEPGL in 2013.
146
Harworth Group plcGovernance
Loss of office payments and payment to former Directors (audited)
There were no loss of office payments made to past Directors during the year ended 31 December 2021.
As disclosed in the 2020 Directors’ Remuneration Report, on Owen Michaelson’s retirement on 31 December 2020, his 2019 RSP and two
thirds of his 2020 RSP awards remained capable of vesting subject to the satisfaction of the performance underpins and the Committee’s
assessment of underlying business performance during the respective vesting periods. The first tranche of the 2019 RSP award over 41,178
shares vested in full in March 2022. The vested shares will be subject to a holding period until March 2024.
Implementation of Executive Directors’ remuneration policy for 2022
Base salary
The Committee approved the following base salary increases for 2022:
Executive Director
L. Shillaw
K. Patmore
Annual base salary at
1 January 2021
Annual base salary at
1 January 2022
£400,000
£250,000
£421,600
£310,000
Lynda Shillaw’s salary was increased by 5.4%, in line with the average increase for the wider workforce.
As detailed in the Annual Statement from the Remuneration Committee Chair on page 125, the base salary increase for Kitty Patmore
in 2021 and the base salary increase for 2022, which were based on her performance and increased responsibilities, have the effect of
aligning her salary with the market over a two-year period. The Committee strongly believes that this change is in line with the principles of
the Group’s talent development programme and reflects Harworth’s broader commitment to diversity, equality and fairness, ensuring that
individuals are appropriately rewarded on the basis of role, experience and performance.
Pension
Executive Directors will continue to receive a pension contribution of 10% of salary or an equivalent cash allowance. This is in line with the
rate available to the majority of the wider workforce.
Performance-related annual bonus
For 2022, the annual bonus opportunity for Lynda Shillaw and Kitty Patmore will be 125% and 100% of salary respectively.
The performance measures have been rebalanced compared to 2021, to provide alignment with the key 2022 financial and strategic
priorities under the Group’s redefined strategy.
Measure
Weighting (% of bonus opportunity)
Core financial measures
Total Accounting Return
Acquisitions
Sub-total
Strategic measures
Launch of Build to Rent portfolio
Increase scale of direct developments
Sub-total
ESG measures based on progress against ESG short-term and long-term targets
Personal objectives
Total
35%
15%
50%
10%
20%
30%
5%
15%
100%
The overall payment of the bonus will be subject to additional underpins based on, amongst other things, the Company’s health and safety
record during the year, no deficiencies or material adverse issues arising which materially damage the reputation or performance of the
business, and no covenant breach or financial irregularity. The Committee will also have discretion to reduce the bonus outcome if it is not
supported by underlying financial and operational performance, or reflective of the experience of shareholders or employees.
Performance targets are considered to be commercially sensitive at this time but the Committee intends that they will be disclosed in the
2022 Annual Remuneration Report.
147
Annual Report and Financial Statements 2021Governance Directors’
Remuneration Report continued
Restricted Share Plan (RSP) award
RSP awards will be granted to Lynda Shillaw and Kitty Patmore at 75% of salary. Vesting will be phased over a five-year period, with one
third vesting after three years, one third after four years and one third after five years. All vested shares must be held to the end of year five,
resulting in a total time horizon of five years for all three tranches.
The RSP awards will be subject to specific performance underpins which take into account the Group’s financial health, the underlying
performance of the business relative to the real estate market, and the quality of corporate governance over the vesting periods. See page
144 for further details.
Furthermore, the Committee has discretion to reduce the vesting outcome if it is not deemed to reflect appropriately underlying business
performance over the vesting period.
The Committee will disclose how performance underpins and underlying business performance over the vesting period have been taken
into account at the time of vesting.
Implementation of Non-Executive Director remuneration policy for 2022
The Chair’s and Non-Executive Directors’ base fees will be increased by 5.4% for 2022. This is in line with the average increase for the wider
workforce. Following a review, the fees payable to the Senior Independent Director and Chairs of our Audit and Remuneration Committees will
increase by 11.7%, reflecting the scale and complexity inherent in the discharge of the responsibilities of these roles. We will also pay a fee to
the Chair of our newly formed ESG Committee. Accordingly, the following fee levels will apply.
Chair
Non-Executive Director Fee
Additional Fee for holding the office of Senior Independent Director
Additional Fee for Chairing the Remuneration Committee
Additional Fee for Chairing the Audit Committee
Additional Fee for Chairing the ESG Committee
£171,169.60
£48,141.45
£8,500.00
£8,500.00
£8,500.00
£6,000.00
The Committee considers that the fees paid to Non-Executive Directors appropriately reflect the work and responsibilities
associated with each role.
148
Harworth Group plcGovernance Directors’ interests (audited)
The following table sets out the beneficial interests of the Directors and their connected persons in the share capital of the Company as at
31 December 2021. None of the Directors have a beneficial interest in the shares of any other Group Company. Details of Directors’ share
options are also set out in the table below. Current shareholding as a percentage of salary is based on the middle market closing price for
the shares on 31 December 2021 of £1.80.
Shares held
Options held
y
l
l
a
i
c
i
f
e
n
e
B
d
e
n
w
o
132,480
28,842
269,460
–
22,192
–
38,385
–
o
t
j
t
c
e
b
u
s
t
o
n
1
e
c
n
a
m
r
o
f
r
e
p
&
d
e
t
s
e
v
n
U
939
1,900
–
–
–
–
–
–
2
e
c
n
a
m
r
o
f
r
e
p
&
d
e
t
s
e
v
n
U
o
t
j
t
c
e
b
u
s
156,739
194,116
–
–
–
–
–
–
o
t
j
t
c
e
b
u
s
t
o
n
3
e
c
n
a
m
r
o
f
r
e
p
&
d
e
t
s
e
v
n
U
17,595
24,357
–
–
–
–
–
–
40,000
–
–
–
1
2
0
2
g
n
i
r
u
d
&
d
e
t
s
e
V
d
e
s
i
c
r
e
x
e
–
–
–
–
–
–
–
–
–
L. Shillaw
K. Patmore
A. Lyons
M. Bowes
A. Bromfield
R. Cooke
S. Underwood
L. Scenna
P. O’Donnell
Bourke
1 Free share awards under the SIP.
2 Nil-cost options granted under the RSP.
3 Options granted under the SAYE scheme.
i
l
g
n
d
o
h
e
r
a
h
S
t
n
e
m
e
r
i
u
q
e
r
y
r
a
l
a
s
%
t
n
e
r
r
u
C
i
l
g
n
d
o
h
e
r
a
h
s
y
r
a
l
a
s
%
200%
200%
n/a
n/a
n/a
n/a
n/a
n/a
96.5%
94.5%
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
t
n
e
m
e
r
i
u
q
e
R
?
t
e
m
N
N
n/a
n/a
n/a
n/a
n/a
n/a
n/a
There have been no changes to the holdings listed above between 31 December 2021 and the date of signing of these financial statements.
Summary of Shareholder voting
The table below shows the results of votes at the Harworth Group plc AGMs on: (1) 25 May 2021 on the resolution relating to the approval
of the Annual Remuneration Report; and (2) 21 May 2019 on the resolution relating to the approval of the Remuneration Policy.
Votes
For and
discretion as a
percentage of
votes cast
For and
discretion
Against as a
percentage of
votes cast
Against
Approval of Annual
Remuneration Report
Approval of Remuneration
Policy
203,170,802
94.02
12,913,342
258,180,271
99.93
191,584
5.98
0.07
ANGELA BROMFIELD
Chair of the ESG Committee
21 March 2022
Withheld
39,676
5,733,952
149
Annual Report and Financial Statements 2021Governance
Directors’
Report
Introduction
The Directors present their report and the audited consolidated financial statements for the year ended 31 December 2021.
Some of the matters required to be included in this Directors’ Report can be found in the Strategic Report or elsewhere in the
Governance Report as indicated below:
Annual General Meeting
Auditors
Composition and operation of administrative,
management and supervisory bodies and committees
Directors’ interests in shares
Directors’ remuneration
Disclosure of information to auditors
Diversity
Employee numbers
Employee engagement
Employees with disabilities
Employee share schemes
Future developments of the business
Going concern
Greenhouse gas emissions
Post-Balance sheet events
Risk management and internal controls
Significant related party transactions
Viability statement
UK Corporate Governance Code
Reference
Chair’s Introduction, p81
Statement of Corporate Governance, p100
Audit Committee Report, p114
Statement of Corporate Governance,pp89-91
Directors’ Remuneration Report, p149
Directors’ Remuneration Report, p144
Statement of Directors’ Responsibilities, p155
Nominee Committee Report, pp105-109
Strategic Report, p25
Strategic Report, p63
Nominee Committee Report, p109
Strategic Report, p63
Directors’ Remuneration Report, p132
Strategic Report, p29
Statement of Directors’ Responsibilities, pp154-155
Strategic Report, p64
Financial Statements, Note 31, p222
Strategic Report, pp70-77
Audit Committee Report, pp115-116
Financial statements, Note 30, pp219-221
Strategic Report, pp41-43
Statement of Corporate Governance, p86
The liabilities of the Directors in connection with this Report are subject to the limitations and restrictions provided by English Company law.
Company status
Harworth Group plc is a company incorporated in England with company number 02649340. Its head office is in Rotherham. It is listed on
the London Stock Exchange Main Market. All subsidiaries and associated undertakings are listed in Note 15 to the Financial Statements.
Financial results and dividends
The Group’s profit before taxation for the financial year ended 31 December 2021 was £127.2m (2020: £33.3m). The net assets attributable
to shareholders of the Group increased to £578.0m (2020: £488.7m) over the financial year. The Group’s NAV per share and EPRA NDV
per share rose by 18.2% (2020: 5.2%) and 23.5% (2020: 2.8%) respectively during the year.
The Board is recommending a final dividend of 0.845 pence per share which, together with the interim dividend of 0.367 pence per share
paid in October 2021, makes a combined dividend of 1.212 pence (2020: 1.8 pence) per share. Payment of the final dividend, if approved
at the 2021 AGM, will be made on 27 May 2022 to shareholders on the register at the close of business on 6 May 2022. The ex-dividend
date will be 5 May 2022.
The dividend paid in the year to 31 December 2021 was 1.833 pence (2020: 0.334 pence) per share, comprising the 2020 final dividend
of 1.466 pence per share and the interim dividend of 0.367 pence per share for 2021.
150
Harworth Group plcGovernance Share capital and allotment of shares
Details of the Company’s issued share capital are shown in Note 26
to the Financial Statements on page pages 217 to 218. There is only
one class of share in issue: ordinary shares of 10 pence each.
There are no restrictions on the transfer of shares in the Company,
save for the power of the Board to refuse to transfer shares in certain
circumstances prescribed by the Articles of Association, and those
specified by law or regulation (for example, insider trading laws)
and pursuant to the Listing Rules of the Financial Conduct Authority
whereby certain employees of the Group require the approval of
the Company to deal in the shares.
All shares carry equal rights to dividends, voting and return
of capital on the winding up of the Company, as set out in the
Company’s Articles of Association, and are fully paid.
On a show of hands at a general meeting of the Company, every
holder of shares present in person and entitled to vote shall have
one vote and on a poll every member present in person or by proxy
and entitled to vote shall have one vote for every ordinary share
held. The notice of the 2022 AGM specifies deadlines for exercising
voting rights and appointing a proxy or proxies to vote in relation to
resolutions to be passed at the meeting. There are no restrictions on
any voting rights or deadlines, other than those prescribed by law or
the Articles of Association.
The Company is not aware of any arrangement between holders of
shares which may result in restrictions on the transfer of securities
or voting rights, nor any arrangement whereby a shareholder has
waived or agreed to waive dividends (other than the Employee
Benefit Trust – see below).
The Directors were granted authority at the 2021 AGM to allot
shares up to a nominal amount of one-third of the Company’s issued
nominal share capital, as well as additional authority to allot a further
one-third on a rights issue. This authority expires at the conclusion of
the 2022 AGM and a resolution will be proposed for its renewal.
The Company’s issued share capital as at 31 December 2020 was
322,530,807 ordinary shares of 10 pence each. During 2021 the
issued share capital was increased as follows:
Date
Description
Number of shares issued Price (discount if applicable)
5 January 2021
30 March 2021
13 May 2021
4 June 2021
11 June 2021
18 June 2021
25 June 2021
9 July 2021
30 September 2021
27 October 2021
Exercise of SAYE options
Vesting of LTIP awards
Grant of SIP awards
Exercise of SAYE options
Exercise of SAYE options
Exercise of SAYE options
Exercise of SAYE options
Exercise of SAYE options
Exercise of SAYE options
Exercise of SAYE options
19,014
49,463
63,852
31,845
7,762
2,054
7,442
5,136
3,082
4,109
80.6p (20.6%)
Nil consideration
Nil consideration
87.6p (39%)
87.6p (37.9%)
87.6p (37.9%)
73.9p (50.7%)
87.6p (37.7%)
87.6p (50%)
87.6p (48.5%)
As such, as at 31 December 2021, the Company’s issued share capital was 322,724,566 ordinary shares of 10 pence each. There have
been no changes to the issued share capital of the Company since 31 December 2021.
151
Annual Report and Financial Statements 2021Governance Directors’
Report continued
Under Section 561 of the Companies Act 2006 (Companies Act),
if the Directors wish to allot unissued shares for cash (subject to
certain exceptions, including allotments pursuant to an approved
employee share scheme) they must first offer them to existing
shareholders in proportion to their holdings (a pre-emptive offer).
By a special resolution at the 2021 AGM, the shareholders gave
authority to the Directors to dis-apply the above-mentioned pre-
emption and to allot shares for cash other than by way of rights issue
to existing shareholders, provided that the aggregate nominal value
of such shares does not exceed 5% of the Company’s total issued
equity capital. The Directors have not made use of this authority
since the 2021 AGM. The Directors propose to renew this authority
at the 2022 AGM.
Purchase of the Company’s own shares
The Company has authority under a shareholders’ resolution passed
at the 2021 AGM to purchase up to 32,259,928 of the Company’s
ordinary shares, representing approximately 10% of the Company’s
total issued share capital in the market during the period expiring at
the 2022 AGM. No shares have been purchased by the Company
under that authority. A special resolution will be proposed at the
2022 AGM to renew this authority. Any shares purchased under this
authority will be cancelled (unless the Directors determine that they
are to be held as treasury shares) and the number of shares in issue
will be reduced accordingly.
Directors
The Directors who held office during the financial year ended 31
December 2021 and up to the date of this Report are:
Chairman
Alastair Lyons (Chair)
Executive Directors
Lynda Shillaw (Chief Executive)
Katerina Patmore (Chief Financial Officer)
Independent Non-Executive Directors
Angela Bromfield (Senior Independent Director)
Ruth Cooke
Lisa Scenna
Patrick O’Donnell Bourke
Non-Executive Directors (not independent)
Steven Underwood
Martyn Bowes
Biographical details of the Directors are contained on pages 82 to 85.
The Directors’ Remuneration Report, which includes details of
Directors’ service agreements and their interests in the shares
of the Company, is set out on pages 133 and 149 respectively.
Copies of the service agreements of the Executive Directors
and letters of appointment for the Non-Executive Directors are
available for inspection at the Company’s registered office during
normal business hours and will be available for inspection at the
Company’s 2022 AGM.
152
In accordance with the UK Corporate Governance Code, all
Directors will offer themselves for re-election at the 2022 AGM.
Save as set out on page 97 of the Corporate Governance Statement
no Director has, or has had, a material interest, directly or indirectly,
at any time during the year under review in any contract significant
to the Company’s business.
The Directors may exercise all the powers of the Company, subject
to compliance with relevant laws, the Company’s Memorandum and
Articles of Association and any directions given by special resolution
of shareholders.
Financial Risk Management
The Group’s overall risk management programme includes a focus
on credit and liquidity risks to minimise potential adverse effects
of the Group’s financial performance; further detail, including the
Group’s use of a financial instrument as part of managing the interest
rate risk on external borrowings, is set out in Note 23 to the Financial
Statements.
Directors’ indemnities, insurance and
independent advice
The Company maintains Directors’ and Officers’ liability insurance.
To the extent permitted by UK law, the Company indemnifies its
Directors against claims brought against them as a consequence of
the execution of their duties as Directors of the Company. The Board
has established a procedure by which any Director, for the purpose
of furthering his or her duties, may take independent professional
advice at the Company’s expense. No Director had reason to use
this facility in 2021.
Charitable and political donations
The Group made charitable donations during 2021 in the aggregate
sum of £61,642 (2020: £43,700). Some of the local and national
charities we supported are displayed on page 55.
No political donations were made during the year (2020: £nil).
It remains the Company’s policy not to make any cash donations
to political parties. This policy is strictly adhered to and there is
no intention to change it. However, the definitions of “political
donation” and “political expenditure” used in the Companies Act
remain very broad, which may have the effect of covering some
normal business activities that would not be considered political
donations or political expenditure in the usual sense. These could
include support for bodies engaged in law reform or governmental
policy review or involvement in seminars and functions that may
be attended by politicians. To avoid any possibility of inadvertently
contravening the Companies Act, the Directors obtained authority
from shareholders at the 2021 AGM for certain political donations
and expenditure, subject to financial limits, and will seek to renew
this authority at the 2022 AGM.
Harworth Group plcGovernance Employee Benefit Trust
The Harworth Group plc Employee Benefit Trust (EBT) holds shares
in the Company for the purposes of satisfying awards that may
vest under the Company’s employee share plans. During 2021,
shares issued pursuant to Share Incentive Plan awards were held by
Yorkshire Building Society pending maturity. In January 2022, these
shares were transferred to Equiniti Limited. At 31 December 2021,
the EBT held 5,669 (2020: 4,726) ordinary shares of 10 pence each
in the Company and Yorkshire Building Society held 170,918 (2020:
115,760) ordinary shares of 10 pence each in the Company, being in
aggregate 176,587 (2020: 120,847) shares which represent 0.05%
of the Company’s issued share capital. The EBT has waived its right
to receive dividends on shares that it holds beneficially in respect of
awards that have not vested.
The EBT also holds shares which have been issued following the
vesting of awards under the Company’s share-based incentive
schemes but which are subject to holding periods in accordance
with the terms of those schemes. The trustee of the EBT exercises
any voting rights on such shares in accordance with the Directors’
recommendations.
Amendment of Articles of Association
The Articles of Association may be amended by special resolution of
the shareholders.
General meetings
An AGM must be called on at least 21 days’ clear notice, although
the Company typically gives not less than 20 working days’ notice
of its AGM following the latest edition of the Guidance on Board
Effectiveness.
All other general meetings are also required to be held on at least
21 days’ clear notice unless the Company offers shareholders an
electronic voting facility. A special resolution reducing the period
of notice for general meetings (other than AGMs) to not less than 14
days was passed at the 2021 AGM. The Directors are proposing to
seek renewal of that authority at the 2022 AGM.
Substantial shareholdings and
agreements with shareholders
As at the date of this Report the Company had been notified,
pursuant to paragraph 5 of the FCA’s Disclosure and Transparency
Rules, of the following notifiable voting rights:
Name of holder
London and
Amsterdam Trust
Company
Pension
Protection Fund
Goodweather
Holdings Limited1
Schroder Investment
Management
Number of
ordinary shares
Percentage of
total voting rights
84,391,475
73,966,672
45,500,000
16,194,993
26.15%
22.92%
14.10%
5.02%
1 Goodweather Holdings Limited is a member of the Peel Holdings Group Limited.
The Company’s relationship with the Pension Protection Fund
(PPF) is governed by a relationship agreement pursuant to which,
amongst other things, the PPF is entitled to appoint a representative
Director to the Board.
Change of control provisions
Under the terms of the revolving credit facility agreement entered
into between National Westminster Bank plc, Santander UK plc,
HSBC UK Bank plc and Harworth Estates Property Group Limited
(HEPGL) in March 2022, if any person or Group of persons acting
in concert gains direct or indirect control of HEPGL the facility is
capable of being cancelled in which event all outstanding loans and
bonds, guarantees or letters of credit together with accrued interest
shall become immediately due and payable.
Transactions with related parties
Transactions entered into with related parties during 2021 are
disclosed in Note 30 to the Financial Statements and referenced in
the Corporate Governance Statement at page 97.
The Directors’ Report was approved by the Board of Directors and
signed on its behalf by:
CHRIS BIRCH
General Counsel and Company Secretary
21 March 2022
153
Annual Report and Financial Statements 2021Governance Statement of Directors’
Responsibilities
The Directors are responsible for preparing the Annual Report and the
Financial Statements in accordance with applicable United Kingdom law
and regulations.
Company law requires the Directors to prepare financial statements
for each financial year. Under that law the Directors have elected
to prepare the Group and Parent Company financial statements in
accordance with UK-adopted international accounting standards
(IFRSs). Under company law the Directors must not approve the
financial statements unless they are satisfied that they give a true and
fair view of the state of affairs of the Group and the Company and of
the profit or loss of the Group and the Company for that period.
Under applicable law and regulations, the Directors are also
responsible for preparing a strategic report, directors’ report,
directors’ remuneration report and corporate governance statement
that comply with that law and those regulations. The Directors are
responsible for the maintenance and integrity of the corporate and
financial information included on the Company’s website.
Responsibility statements
The Directors (see the list of names and roles on pages 82 to 85)
confirm, to the best of their knowledge:
In preparing these Financial Statements the Directors are required to:
•
select suitable accounting policies in accordance with IAS 8
Accounting Policies, Changes in Accounting Estimates and Errors
and then apply them consistently;
• make judgements and accounting estimates that are reasonable
and prudent;
• present information, including accounting policies, in a manner
that provides relevant, reliable, comparable and understandable
information;
• provide additional disclosures when compliance with the specific
requirements in IFRSs is insufficient to enable users to understand
the impact of particular transactions, other events and conditions
on the Group and Company financial position and financial
performance;
•
•
in respect of the Group financial statements, state whether
UK-adopted international accounting standards have been
followed, subject to any material departures disclosed and
explained in the financial statements;
in respect of the Parent Company financial statements, state
whether UK-adopted international accounting standards have
been followed, subject to any material departures disclosed and
explained in the financial statements; and
• prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the Company and/or
the Group will continue in business.
The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Company’s and
Group’s transactions and disclose with reasonable accuracy at any
time the financial position of the Company and the Group and
enable them to ensure that the Company and the Group financial
statements comply with the Companies Act 2006. They are also
responsible for safeguarding the assets of the Group and Parent
Company and Group and hence for taking reasonable steps for the
prevention and detection of fraud and other irregularities.
154
•
•
•
that the consolidated Financial Statements, prepared in
accordance with UK-adopted international accounting
standards give a true and fair view of the assets, liabilities,
financial position and profit of the Parent Company and
undertakings included in the consolidation taken as a whole;
that the Annual Report, including the strategic report, includes
a fair review of the development and performance of the
business and the position of the Company and undertakings
included in the consolidation taken as a whole, together with
a description of the principal risks and uncertainties that they
face; and
that they consider the Annual Report, taken as a whole, is fair,
balanced and understandable and provides the information
necessary for shareholders to assess the Company’s position,
performance, business model and strategy.
Going concern
These financial statements are prepared on the basis that the
Group is a going concern. In forming its opinion as to going
concern, the Company prepares cash flow and banking covenant
forecasts based upon its assumptions with particular consideration
to the key risks and uncertainties, as well as taking into account
available borrowing facilities. The going concern period assessed
is until June 2023 which has been selected as it can be projected
with a good degree of expected accuracy and covers a complete
period of reporting under the Group’s RCF.
The Group remains in a strong financial position, with cash and
bank headroom of £128m (as at 31 December 2021). The spread
of sites across its three core regions, and at all stages of their
lifecycle, enables the close management of non-committed
expenditure to preserve liquidity. The Group benefits from
diversification across its Capital Growth and Income Generation
businesses including an industrial property portfolio. The Income
Generation portfolio has continued to generate income that
supports coverage of the overheads of the business and interest
from loan facilities, with rent collections for 2021 at 99%.
Harworth Group plcGovernance Based on these considerations, together with available market
information and the Directors’ knowledge and experience of the
Group’s property portfolio and markets, the Directors considered
it appropriate to adopt a going concern basis of accounting in the
preparation of the Group’s and Company’s financial statements.
Disclosure of information to the auditor
Each of the Directors who were in office at the date of approval of
this Report also confirms that:
•
so far as he or she is aware, there is no relevant audit information
of which the auditor is unaware; and
• each Director has taken all the steps that he or she ought to
have taken as a Director to make himself or herself aware of
any relevant information and to establish that the Group’s and
Company’s auditor is aware of that information.
This confirmation is given and should be interpreted in accordance
with the provisions of section 418 Companies Act.
This Statement of Directors’ Responsibilities was approved by the
Board and signed by order of the Board:
CHRIS BIRCH
General Counsel and Company Secretary
21 March 2022
The key risks considered are:
• Finance – availability of capital, interest costs, shortfalls in
income and valuations;
• Markets – a severe but temporary downturn in residential or
industrial & logistics markets could reduce potential sales of
serviced land and potentially impact on valuations;
• Climate Change – the potential impacts of managing climate
change transition;
• Project Delivery – delays in project works on sites and planning
approval processes, and
• People – impact on capacity and productivity or
increased costs.
Following the 2021 strategic review, work was undertaken
obtaining financing that supports the requirements and ambitions of
the updated strategy. In early 2022 a new £200m Revolving Credit
Facility was agreed with HSBC joining as a new lender in addition
to current lenders NatWest and Santander. The new five-year
agreement significantly increases the level of the facility from £150m
to £200m.
In addition to the base forecast, a sensitised forecast was produced
that reflected a number of severe but plausible downsides. This
downside included:
• a severe reduction in sales to the housebuilding sector as well as
lower investment property sales;
• notwithstanding strong rent collection to date in line with
previous quarters, a prudent material increase in bad debts
across the portfolio over the majority of the going concern
assessment period;
• a material decline in the value of land and investment property
values; and
• a significant increase in interest rates, impacting the cost of the
Group’s RCF.
A scenario has also been run which demonstrates that very severe
loss of revenue, valuation reductions and interest cost increases
would be required to breach cash flow and banking covenants.
A scenario with initial consideration of potential climate change
impacts was also examined for the first time as part of the Group’s
increasing focus on climate-related risks and opportunities.
Consideration has been given to the impact of the Russian invasion
of Ukraine which, whilst not directly impacting the activities of the
Group, has the potential to impact through changes in the wider
macro-economic environment. Even in the downside scenarios,
for the going concern period from the signing of these financial
statements, the Group expects to continue to have sufficient cash
reserves to continue to operate with headroom on lending facilities
and associated covenants and has additional mitigation measures
within management’s control, for example reducing development
and acquisition expenditure and reducing operating costs, that
could be deployed to create further cash and covenant headroom.
155
Annual Report and Financial Statements 2021Governance 156
Harworth Group plc Financial
Statements
Contents
Independent auditor’s report to the
members of Harworth Group Plc
Consolidated income statement
Consolidated statement of
comprehensive income
Consolidated balance sheet
Company balance sheet
Consolidated statement of
changes in equity
Company statement of changes in equity
Consolidated statement of cash flows
Company statement of cash flows
Notes to the financial statements
158
166
167
168
169
170
171
172
173
174
157
Annual Report and Financial Statements 2021 Independent auditor’s report to the
members of Harworth Group Plc
Opinion
In our opinion:
• Harworth Group plc’s Group financial statements and Parent Company financial statements (the financial statements) give a true and
fair view of the state of the Group’s and of the Parent Company’s affairs as at 31 December 2021 and of the Group’s profit for the year
then ended;
•
•
the Group financial statements have been properly prepared in accordance with UK adopted international accounting standards;
the Parent Company financial statements have been properly prepared in accordance with UK adopted international accounting
standards as applied in accordance with section 408 of the Companies Act 2006; and
•
the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.
We have audited the financial statements of Harworth Group plc (the Parent Company) and its subsidiaries (the Group) for the year ended
31 December 2021 which comprise:
Group
Consolidated income statement for the year ended
31 December 2021
Parent Company
Balance sheet as at 31 December 2021
Consolidated statement of comprehensive income for the year ended
31 December 2021
Statement of changes in equity for the year ended 31
December 2021
Consolidated balance sheet as at 31 December 2021
Statement of cash flows for the year ended 31 December 2021
Consolidated statement of changes in equity for the year ended
31 December 2021
Related notes 1-31 to the financial statements including a
summary of significant accounting policies
Consolidated statement of cash flows for the year ended
31 December 2021
Related notes 1-31 to the financial statements, including a summary of
significant accounting policies
The financial reporting framework that has been applied in their preparation is applicable law and UK adopted international accounting
standards and, as regards the Parent Company financial statements, as applied in accordance with section 408 of the Companies Act 2006.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities
under those standards are further described in the Auditor’s responsibilities for the audit of the financial statements section of our report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Independence
We are independent of the Group and Parent in accordance with the ethical requirements that are relevant to our audit of the financial
statements in the UK, including the FRC’s Ethical Standard as applied to listed public interest entities, and we have fulfilled our other ethical
responsibilities in accordance with these requirements.
The non-audit services prohibited by the FRC’s Ethical Standard were not provided to the Group or the Parent Company and we remain
independent of the Group and the Parent Company in conducting the audit.
158
Harworth Group plcFinancial Statements Conclusions relating to going concern
In auditing the financial statements, we have concluded that the Directors’ use of the going concern basis of accounting in the preparation
of the financial statements is appropriate. Our evaluation of the Directors’ assessment of the Group and Parent Company’s ability to
continue to adopt the going concern basis of accounting included:
• confirming our understanding of management’s going concern assessment process, through our walkthrough of the Group’s financial
close process and also engaging with management early to ensure all factors we identified were considered in their assessment;
• obtaining management’s going concern assessment, including the cash forecasts and covenant calculations for the going concern
period which covers the period to 30 June 2023. The Group has modelled a base scenario and a severe downside scenario in its cash
forecasts and covenant calculations in order to incorporate unexpected changes to the forecasted liquidity of the Group.
The downside scenario considered a severe but plausible reduction in development property sales, a material increase in bad debts, a
material decline in land and investment property values and a significant increase in interest rates. In this scenario the Group continues
to have sufficient cash reserves and headroom on lending facilities and associated covenants. In addition, a scenario has been run which
demonstrates that a very severe loss of revenue, valuation reductions and interest cost increases would be required to breach cash flow
and banking covenants.
•
testing the assumptions included in each modelled scenario for the cash forecasts and covenant calculations and considering the
impact of Covid-19. We also considered the appropriateness of the models used to calculate the cash forecasts and covenant
calculations to determine if they were appropriately sophisticated to be able to make an assessment on going concern;
• considering the mitigating factors that could be applied to the cash forecasts and covenant calculations that are within control of the
Group, for example, reducing uncommitted development and acquisition expenditure. This included review of the Company’s non-
operating cash outflows;
• verifying the credit facilities available to the Group including the new March 2022 agreed, five-year, £200m revolving credit facility;
• performing reverse stress testing in order to identify what factors would lead to the Group utilising all liquidity or breaching the financial
covenants during the going concern period;
•
reviewing the Group’s going concern disclosures included in the Annual Report in order to assess that the disclosures were appropriate
and in conformity with the reporting standards.
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or
collectively, may cast significant doubt on the Group and Parent Company’s ability to continue as a going concern for a period of 16 months
to June 2023.
In relation to the Group and Parent Company’s reporting on how they have applied the UK Corporate Governance Code, we have nothing
material to add or draw attention to in relation to the Directors’ statement in the financial statements about whether the Directors considered
it appropriate to adopt the going concern basis of accounting.
Our responsibilities and the responsibilities of the Directors with respect to going concern are described in the relevant sections of this
report. However, because not all future events or conditions can be predicted, this statement is not a guarantee as to the Group’s ability to
continue as a going concern.
Overview of our audit approach
Audit scope
• We performed an audit of the complete financial information of 6 components and
audit procedures on specific balances for a further 5 components.
• The components where we performed full or specific audit procedures accounted
for 100% of the Group’s Total assets, 99% of the Group’s Profit before property
revaluation movements, finance costs and tax and 99% of the Group’s Revenue.
Key audit matters
• Valuation of investment properties
• Carrying value of development property
Materiality
• Overall Group Materiality: £7.6m which represents 1% of total assets.
• Specific Group Materiality: £2.3m which represents 5% of Profit before property
revaluation movements, finance costs and tax.
159
Annual Report and Financial Statements 2021Financial Statements Independent auditor’s report to the
members of Harworth Group Plc continued
An overview of the scope of the Parent Company and Group audits
Tailoring the scope
Our assessment of audit risk, our evaluation of materiality and our allocation of performance materiality determine our audit scope for each
company within the Group. Taken together, this enables us to form an opinion on the consolidated financial statements. We take into
account size, risk profile, the organisation of the Group and effectiveness of Group-wide controls, changes in the business environment and
other factors when assessing the level of work to be performed at each company.
In assessing the risk of material misstatement to the Group financial statements, and to ensure we had adequate quantitative coverage of
significant accounts in the financial statements, of the 36 reporting components of the Group, we selected 11 components, which represent
the principal business units within the Group.
Of the 11 components selected, we performed an audit of the complete financial information of 6 components (“full scope components”)
which were selected based on their size or risk characteristics. For the remaining 5 components (“specific scope components”), we
performed audit procedures on specific accounts within that component that we considered had the potential for the greatest impact on
the significant accounts in the financial statements either because of the size of these accounts or their risk profile.
The reporting components where we performed audit procedures accounted for 100% of the Group’s Total assets, 99% of the Group’s
Profit before property revaluation movements, finance costs and tax and 99% of the Group’s Revenue. For the current year, the full scope
components contributed 79% (2020: 80%) of the Group’s Total assets, 74% (2020: 98%) of the Group’s Profit before property revaluation
movements, finance costs and tax and 78% (2020: 70%) of the Group’s Revenue. The specific scope component contributed 21% (2020:
20%) of the Group’s Total assets, 25% (2020: 1%) of the Group’s Profit before property revaluation movements, finance costs and tax and
21% (2020: 28%) of the Group’s Revenue. The audit scope of these components may not have included testing of all significant accounts of
the component but will have contributed to the coverage of significant accounts tested for the Group.
Of the remaining 25 components that together represent 1% of the Group’s Profit before property revaluation movements, finance costs
and tax and 1% of the Group’s Revenue, none are individually greater than 1% of the Group’s Profit before property revaluation movements,
finance costs and tax or the Group’s Revenue. For these components, we performed other procedures, including testing of consolidation
journals and intercompany eliminations to respond to any potential risks of material misstatement to the Group financial statements.
The charts below illustrate the coverage obtained from the work performed by the audit team.
Total assets
Profit before tax
(or adjusted PBT measure used)
Revenue
79% Full scope components
74% Full scope components
78% Full scope components
21% Specific scope components
25% Specific scope components
21% Specific scope components
0% Other procedures
1% Other procedures
1% Other procedures
Changes from the prior year
The current year scope is consistent with our approach to the prior year audit.
Involvement with component teams
All audit work performed for the purposes of the audit was undertaken by the Group audit team.
Climate change
There has been increasing interest from stakeholders as to how climate change will impact Harworth Group plc. The Group has determined
that the most significant future impacts from climate change on their operations will be from embedding environmental sustainability into
its Investment and Development property assets. These are explained on pages 65 to 69 in the required Task Force for Climate related
160
Harworth Group plcFinancial Statements Financial Disclosures and on pages 71 to 77 in the principal risks and uncertainties, which form part of the “Other information,” rather than
the audited financial statements. Our procedures on these disclosures therefore consisted solely of considering whether they are materially
inconsistent with the financial statements or our knowledge obtained in the course of the audit or otherwise appear to be materially misstated.
As explained in the Basis of Preparation note governmental and societal responses to climate change risks are still developing, and are
interdependent upon each other, and consequently financial statements cannot capture all possible future outcomes as these are not yet known.
Our audit effort in considering climate change was focused on ensuring that the effects of climate risks disclosed on pages 65 to 69 have
been appropriately reflected in asset values and associated disclosures, being Investment property and Development property. Details
of our procedures and findings on Investment property and Development property are included in our key audit matters below. We also
challenged the Directors’ considerations of climate change in their assessment of going concern and viability and associated disclosures.
Whilst the Group have stated their commitment to the aspirations of the Paris Agreement to achieve net zero emissions by 2050, the Group
are currently unable to determine the full future economic impact on their business model, operational plans and customers to achieve this
and therefore as set out above the potential impacts are not fully incorporated in these financial statements.
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements of
the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) that we identified.
These matters included those which had the greatest effect on: the overall audit strategy; the allocation of resources in the audit; and
directing the efforts of the engagement team. These matters were addressed in the context of our audit of the financial statements as a
whole, and in our opinion thereon, and we do not provide a separate opinion on these matters.
Risk
Our response to the risk
Valuation of Investment
Property (£478.4m, 2020:
£373.1m)
Refer to the Audit Committee Report
(pages 110 to 117); Accounting
policies (page 177); and Note
14 of the Consolidated Financial
Statements (pages 198 to 201)
At 31 December 2021 Investment
property held a value of £478.4m,
with a valuation gain of £84.0m
reported in the year. Property
valuations are calculated by
independent external valuers with a
number of key assumptions specific
to each individual property,
including; actual and estimated
rental values, yields, costs to
complete and expected land
values per acre.
There is a risk that the carrying
value is misstated given the
inherent uncertainty and
judgement within these
assumptions.
Our testing approach to Investment properties included:
Performing a walkthrough to understand the key process and
identify key controls. This included the valuation, acquisition and
disposal processes.
Assessing the appropriateness of the valuations, with the assistance
of our EY Valuations specialists, through:
• Testing the underlying data provided to the external valuer by
management, by checking a sample to source documents (e.g.
rental contracts, third party costs to complete assessments);
• Attending a sample of sites, alongside the external valuer to
gain a detailed understanding of the portfolio and the valuation
process and to observe the specialist’s inspection;
• Reading the external valuer reports for all sites and holding
discussions directly with the external valuer regarding its
valuation approach, including its consideration of climate
risk; and
• Validating, for a sample of assets, the appropriateness of the
key assumptions applied by the external valuer in forming its
valuation by comparing to third party evidence of market activity
(e.g. yields, price per acre) and considering contrary evidence.
Considering the location of a sample of assets within the UK
and assessing whether there was any impairment risk due to
potential flooding.
We performed the above audit procedures over this risk area at a
Group level covering 100% of the risk amount.
Key observations
communicated to the
Audit Committee
Based on the work
performed, we consider
that the external valuers’
methodologies used in
developing the estimate
are consistent with
valuation practice given
the characteristics of the
assets being measured.
Our work did not identify
evidence to contradict
the external valuers’
significant assumptions
used in developing the
estimate as at the balance
sheet date.
We consider that the
valuation of investment
properties held as at the
balance sheet date is
appropriate.
161
Annual Report and Financial Statements 2021Financial Statements Independent auditor’s report to the
members of Harworth Group Plc continued
Risk
Our response to the risk
Carrying value of Development
Property (£172.7m, 2020:
£177.7m)
Refer to the Audit Committee Report
(page 110-117); Accounting policies
(page 176); and Note 16 of the
Consolidated Financial Statements
(page 205)
Development property has a book
value of £172.7m at 31 December
2021.The Group’s portfolio consists
of a range of assets at varying
stages of development, across
various sectors and geographies.
A risk exists that the carrying
value of development property
is overstated given the inherent
judgements in determining the
net realisable value, such as value
per acre/plot as well as costs to
complete.
Our approach to assessing the net realisable value of development
property included performing the same procedures as for
investment property, as listed above, with additional consideration
of the appropriateness of the cost to complete assumptions.
For a sample of development properties, we validated cost to
complete assumptions to third party surveyor reports and also held
a discussion with management to assess the appropriateness of
climate-related costs included and corroborated their inclusion to
the surveyor reports obtained.
This testing was supplemented by procedures over the book value
(cost) of the assets, which included:
• Testing a sample of costs incurred to third party invoices to
ensure they had been accounted for correctly and coded to the
correct project
• Agreeing a sample of acquisitions and disposals made in the
year to the signed contract
• Confirming the classification of properties is appropriate based
on the nature of the site.
We performed the above audit procedures over this risk area at a
Group level covering 100% of the risk amount.
Key observations
communicated to the
Audit Committee
Based on the work
performed, we consider
that the external valuer’s
methodologies used in
developing the estimate
of net realisable value
are consistent with
valuation practice given
the characteristics of the
assets being measured.
Our work did not identify
evidence to contradict
the external valuer’s
significant assumptions
used in developing the
estimate as of the balance
sheet date.
We consider that
the carrying value of
development properties
held as of the balance
sheet date is appropriate.
Our application of materiality
We apply the concept of materiality in planning and performing the audit, in evaluating the effect of identified misstatements on the audit
and in forming our audit opinion.
Materiality
The magnitude of an omission or misstatement that, individually or in the aggregate, could reasonably be expected to influence the economic
decisions of the users of the financial statements. Materiality provides a basis for determining the nature and extent of our audit procedures.
Overall materiality
When establishing our overall audit strategy, we determined a magnitude of uncorrected misstatements that we judged would be material for
the Financial statements as a whole. We determined materiality for the Group to be £7.6 million (2020: £7.5 million), which is 1% (2020: 1%) of
total assets. We determined that total assets would be the most appropriate basis for determining overall materiality given that key users of the
Group’s Financial statements are primarily focused on the valuation of the Group’s assets, primarily the investment property portfolio.
We determined materiality for the Parent Company to be £2.1 million (2020: £2.2 million), which is 1% (2020: 1%) of total assets, being the
primary focus of the users of the financial statements.
Specific materiality
We assessed that for account balances not related to the property portfolio, and loans and borrowings, a misstatement of less than overall
materiality for the financial statements could influence the economic decisions of users. We determined that specific materiality for these
areas should be based on Profit before property revaluation movements, finance costs and tax. We believe that it is appropriate to use a
profit-based measure for specific materiality as profit is also a focus of users of the financial statements.
During the course of our audit, we reassessed initial materiality and amended it for the year end results.
162
Harworth Group plcFinancial Statements Performance materiality
The application of materiality at the individual account or balance level. It is set at an amount to reduce to an appropriately low level the
probability that the aggregate of uncorrected and undetected misstatements exceeds materiality.
On the basis of our risk assessments, together with our assessment of the Group’s overall control environment, our judgement was that
overall and specific performance materiality was 75% (2020: 50%) of our planning materiality, being £5.7m (2020: £3.7m). For balances
where we consider specific materiality to be appropriate, our performance materiality was £1.7m (2020 - £0.4m). We have set performance
materiality at this percentage due to this being our second year of engagement and, from our prior year experience, an expectation of a low
level of audit differences.
Reporting threshold
An amount below which identified misstatements are considered as being clearly trivial.
We agreed with the Audit Committee that we would report to them all uncorrected audit differences in excess of £0.4m (2020: £0.4m), which
is set at 5% of planning materiality, as well as differences below that threshold that, in our view, warranted reporting on qualitative grounds.
We evaluate any uncorrected misstatements against both the quantitative measures of materiality discussed above and in light of other
relevant qualitative considerations in forming our opinion.
Other information
The other information comprises the information included in the Annual Report set out on pages 2 to 155, other than the financial
statements and our auditor’s report thereon. The Directors are responsible for the other information contained within the Annual Report.
Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in this
report, we do not express any form of assurance conclusion thereon.
Our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the
financial statements or our knowledge obtained in the course of the audit or otherwise appears to be materially misstated. If we identify such
material inconsistencies or apparent material misstatements, we are required to determine whether this gives rise to a material misstatement
in the financial statements themselves. If, based on the work we have performed, we conclude that there is a material misstatement of the
other information, we are required to report that fact.
We have nothing to report in this regard
Opinions on other matters prescribed by the Companies Act 2006
In our opinion, the part of the Directors’ remuneration report to be audited has been properly prepared in accordance with the Companies
Act 2006.
In our opinion, based on the work undertaken in the course of the audit:
•
•
the information given in the Strategic Report and the Directors’ Report for the financial year for which the financial statements are
prepared is consistent with the financial statements and those reports have been prepared in accordance with applicable legal
requirements;
the information about internal control and risk management systems in relation to financial reporting processes and about share capital
structures, given in compliance with rules 7.2.5 and 7.2.6 in the Disclosure Rules and Transparency Rules sourcebook made by the
Financial Conduct Authority (the FCA Rules), is consistent with the financial statements and has been prepared in accordance with
applicable legal requirements; and
•
information about the Company’s corporate governance statement and practices and about its administrative, management and
supervisory bodies and their committees complies with rules 7.2.2, 7.2.3 and 7.2.7 of the FCA Rules.
Matters on which we are required to report by exception
In the light of the knowledge and understanding of the Group and the Parent Company and its environment obtained in the course of the
audit, we have not identified material misstatements in:
•
•
the Strategic Report or the Directors’ Report; or
the information about internal control and risk management systems in relation to financial reporting processes and about share capital
structures, given in compliance with rules 7.2.5 and 7.2.6 of the FCA Rules
163
Annual Report and Financial Statements 2021Financial Statements Independent auditor’s report to the
members of Harworth Group Plc continued
We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report to you if, in
our opinion:
• adequate accounting records have not been kept by the Parent Company, or returns adequate for our audit have not been received
from branches not visited by us; or
•
the Parent Company financial statements and the part of the Directors’ Remuneration Report to be audited are not in agreement with the
accounting records and returns; or
• certain disclosures of Directors’ remuneration specified by law are not made; or
• we have not received all the information and explanations we require for our audit
• a Corporate Governance Statement has not been prepared by the Company
Corporate Governance Statement
We have reviewed the Directors’ statement in relation to going concern, longer-term viability and that part of the Corporate Governance
Statement relating to the Group and Company’s compliance with the provisions of the UK Corporate Governance Code specified for our
review by the Listing Rules.
Based on the work undertaken as part of our audit, we have concluded that each of the following elements of the Corporate Governance
Statement is materially consistent with the financial statements or our knowledge obtained during the audit:
• Directors’ statement with regards to the appropriateness of adopting the going concern basis of accounting and any material
uncertainties identified set out on pages 154 to 155;
• Directors’ explanation as to its assessment of the Company’s prospects, the period this assessment covers and why the period is
appropriate set out on pages 41 to 43;
• Director’s statement on whether it has a reasonable expectation that the Group will be able to continue in operation and meets its
liabilities set out on page 43;
• Directors’ statement on fair, balanced and understandable set out on page 154;
• Board’s confirmation that it has carried out a robust assessment of the emerging and principal risks set out on pages 70 to 77;
• The section of the Annual Report that describes the review of effectiveness of risk management and internal control systems set out on
pages 115 to 117; and;
• The section describing the work of the Audit Committee set out on pages 110 to 117
Responsibilities of Directors
As explained more fully in the Directors’ responsibilities statement set out on page 154, the Directors are responsible for the preparation of
the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the Directors determine is
necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the Directors are responsible for assessing the Group and Parent Company’s ability to continue as a
going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the
Directors either intend to liquidate the Group or the Parent Company or to cease operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement,
whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance,
but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists.
Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be
expected to influence the economic decisions of users taken on the basis of these financial statements.
Explanation as to what extent the audit was considered capable of detecting irregularities, including fraud
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our
responsibilities, outlined above, to detect irregularities, including fraud. The risk of not detecting a material misstatement due to fraud
is higher than the risk of not detecting one resulting from error, as fraud may involve deliberate concealment by, for example, forgery
or intentional misrepresentations, or through collusion. The extent to which our procedures are capable of detecting irregularities,
including fraud is detailed below.
164
Harworth Group plcFinancial Statements However, the primary responsibility for the prevention and detection of fraud rests with both those charged with governance of the
Company and management.
• We obtained an understanding of the legal and regulatory frameworks that are applicable to the Group and determined that the most
significant frameworks which are directly relevant to specific assertions in the financial statements are those that relate to the reporting
framework (UK adopted International Accounting Standards, the Companies Act 2006, and the UK Corporate Governance Code).
• We understood how Harworth Group plc is complying with those frameworks by making enquiries of management, those responsible
for legal and compliance procedures and the Company Secretary. We corroborated our enquiries through our review of board minutes,
papers provided to the audit committee and discussions with the audit committee.
• We assessed the susceptibility of the Group’s financial statements to material misstatement, including how fraud might occur by
meeting with management and those charged with governance to understand where it considered there was a susceptibility to fraud.
We also considered performance targets and the propensity to influence efforts made by management to manage earnings. Where
the risk was considered to be higher, we performed audit procedures to address each identified fraud risk. These procedures included
testing manual journals and were designed to provide reasonable assurance that the financial statements were free from fraud and error.
• Based on this understanding we designed our audit procedures to identify non-compliance with such laws and regulations. Our
procedures involved journal entry testing, with a focus on manual consolidation journals and journals indicating large or unusual
transactions based on our understanding of the business; enquiries of Legal Counsel, Group management and focused testing, as
referred to in the key audit matters section above. In addition, we completed procedures to conclude on the compliance of the
disclosures in the Annual Report and Accounts with the requirements of the relevant accounting standards, UK legislation and the UK
Corporate Governance Code 2016.
A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council’s website at
https://www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.
Other matters we are required to address
• Following the recommendation from the Audit Committee, we were appointed by the Company on 13 July 2020 to audit the financial
statements for the year ended 31 December 2020 and subsequent financial periods.
The period of total uninterrupted engagement including previous renewals and reappointments is two years, covering the years ended
31 December 2020 to 31 December 2021.
• The audit opinion is consistent with the additional report to the Audit Committee.
Use of our report
This report is made solely to the Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006.
Our audit work has been undertaken so that we might state to the Company’s members those matters we are required to state to them in an
auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other
than the Company and the Company’s members as a body, for our audit work, for this report, or for the opinions we have formed.
VICTORIA VENNING
(Senior statutory auditor)
for and on behalf of Ernst & Young LLP, Statutory Auditor
Leeds
21 March 2022
165
Annual Report and Financial Statements 2021Financial Statements Consolidated Income Statement
for the year ended 31 December 2021
Revenue
Cost of sales
Gross profit
Administrative expenses
Other gains
Other operating expense
Operating profit
Finance costs
Finance income
Share of profit of joint ventures
Profit before tax
Tax charge
Profit for the financial year
Year ended
31 December
2021
£’000
Year ended
31 December
2020
£’000
Note
3
3
3
3
3
3
3
6
6
15
8
109,884
(61,185)
48,699
(19,202)
92,488
(58)
121,927
(4,100)
182
9,225
127,234
(33,244)
93,990
70,001
(59,385)
10,616
(14,522)
31,734
(63)
27,765
(3,473)
377
8,655
33,324
(7,528)
25,796
All activities in the year are derived from continuing operations.
Earnings per share from continuing operations attributable to the owners of the Group during the year
Basic earnings per share
Diluted earnings per share
The Notes on pages 174 to 222 are an integral part of the consolidated financial statements.
Note
11
11
Pence
29.1
28.9
Pence
8.0
8.0
166
Harworth Group plcFinancial Statements Consolidated Statement of
Comprehensive Income
for the year ended 31 December 2021
Profit for the financial year
Other comprehensive income/(expense) - items that will not be reclassified to profit or loss:
Net actuarial gain/(loss) in Blenkinsopp Pension scheme
Revaluation of Group occupied property
Deferred tax on other comprehensive (expense)/income items
Other comprehensive income/(expense) - items that may be reclassified to profit or loss:
Fair value of financial instruments
Total other comprehensive income/(expense)
Total comprehensive income for the financial year
Note
24
8
22
Year ended
31 December
2021
£’000
Year ended
31 December
2020
£’000
93,990
25,796
262
(200)
(137)
670
595
94,585
(339)
48
115
(267)
(443)
25,353
167
Annual Report and Financial Statements 2021Financial Statements Consolidated Balance Sheet
as at 31 December 2021
ASSETS
Non-current assets
Property, plant and equipment
Right of use assets
Trade and other receivables
Investment properties
Investment in joint ventures
Current assets
Inventories
Trade and other receivables
Assets classified as held for sale
Cash
Total assets
LIABILITIES
Current liabilities
Trade and other payables
Lease liability
Current tax liabilities
Net current assets
Non-current liabilities
Borrowings
Trade and other payables
Lease liability
Derivative financial instruments
Deferred income tax liabilities
Retirement benefit obligations
Total liabilities
Net assets
SHAREHOLDERS’ EQUITY
Capital and reserves
Called up share capital
Share premium account
Fair value reserve
Capital redemption reserve
Merger reserve
Investment in own shares
Retained earnings
Current year profit
Total shareholders’ equity
As at
31 December
2021
£’000
As at
31 December
2020
£’000
Note
12
13
17
14
15
16
17
18
19
21
13
8
20
21
13
22
8
24
26
27
681
94
5,369
478,355
36,131
520,630
177,822
49,755
1,925
12,037
241,539
762,169
(94,316)
(42)
(2,947)
(97,305)
144,234
(37,781)
(5,686)
(52)
(156)
(42,647)
(558)
(86,880)
(184,185)
577,984
32,272
24,627
199,629
257
45,667
(24)
181,566
93,990
577,984
1,007
170
–
373,079
25,316
399,572
182,666
56,441
7,594
12,710
259,411
658,983
(66,486)
(77)
(209)
(66,772)
192,639
(83,882)
(1,954)
(102)
(826)
(15,767)
(968)
(103,499)
(170,271)
488,712
32,253
24,567
132,833
257
45,667
(73)
227,412
25,796
488,712
The financial statements on pages 166 to 222 were approved by the Board of Directors on 21 March 2022 and were signed on its behalf by:
LYNDA SHILLAW
Chief Executive
Company Registered Number 02649340
168
KATERINA PATMORE
Chief Financial Officer
Harworth Group plcFinancial Statements Company Balance Sheet
as at 31 December 2021
ASSETS
Non-current assets
Investments in subsidiaries
Retirement reimbursement asset
Deferred income tax assets
Current assets
Trade and other receivables
Cash
Total assets
LIABILITIES
Current liabilities
Trade and other payables
Net current assets
Non-current liabilities
Retirement benefit obligations
Total liabilities
Net assets
SHAREHOLDERS’ EQUITY
Called up share capital
Share premium account
Capital redemption reserve
Merger reserve
Investment in own shares
Retained earnings
Current year loss
Total shareholders’ equity
As at
31 December
2021
£’000
As at
31 December
2020
£’000
Note
15
24
8
17
19
21
24
26
27
9
209,300
558
229
210,087
27,751
2,909
30,660
240,747
(26,287)
(26,287)
4,373
(558)
(558)
(26,845)
213,902
32,272
24,627
257
45,667
(24)
119,481
(8,378)
213,902
208,974
968
2,142
212,084
29,495
1,652
31,147
243,231
(14,800)
(14,800)
16,347
(968)
(968)
(15,768)
227,463
32,253
24,567
257
45,667
(73)
127,709
(2,917)
227,463
The financial statements on pages 166 to 222 were approved by the Board of Directors on 21 March 2022 and were signed on its behalf by:
LYNDA SHILLAW
Chief Executive
Company Registered Number 02649340
KATERINA PATMORE
Chief Financial Officer
169
Annual Report and Financial Statements 2021Financial Statements Consolidated Statement of
Changes in Equity
for the year ended 31 December 2021
Note
Called up
share
capital
£’000
32,191
–
–
Share
premium
£’000
24,359
–
–
Merger
reserve
£’000
Fair value
reserve
£’000
45,667
–
–
116,121
–
35,658
Capital
redemption
reserve
£’000
Investment
in own
shares
£’000
Retained
earnings
£’000
Total
equity
£’000
257
–
–
(67) 245,251 463,779
25,796
25,796
–
(35,658)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(18,994)
–
–
–
–
–
–
48
–
–
16,712
24
22
8
25
10
26,27
–
–
62
32,253
–
–
–
–
208
24,567
–
–
–
–
–
–
–
–
45,667 132,833
–
88,586
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(21,590)
–
–
–
–
–
–
(200)
–
–
66,796
24
22
8
–
–
–
–
–
–
–
–
–
257
–
–
–
–
–
–
–
–
–
18,994
–
–
–
–
–
–
(339)
(339)
–
(267)
48
(267)
115
8,641
115
25,353
(6)
–
–
393
(1,077)
–
387
(1,077)
270
(73) 253,208 488,712
93,990
93,990
–
(88,586)
–
–
–
21,590
–
–
–
–
262
262
–
670
(200)
670
(137)
–
– 27,789
(137)
94,585
25
10
26,27
–
–
–
19
32,272
–
–
–
60
24,627
–
–
–
–
–
–
–
–
45,667 199,629
–
–
–
–
257
(21)
76
–
(6)
–
472
(5,913)
–
(21)
548
(5,913)
73
(24) 275,556 577,984
Balance at 1 January 2020
Profit for the financial year
Fair value gains
Transfer of unrealised gains on
disposal of investment property
Other comprehensive
(expense)/income:
Actuarial loss in Blenkinsopp
pension Scheme
Revaluation of Group occupied
property
Fair value of financial instruments
Deferred tax on other
comprehensive (expense)/
income items
Total comprehensive income for
year ended 31 December 2020
Transaction with owners:
Share-based payment
Dividends paid
Share issue
Balance at 31 December 2020
Profit for the financial year
Fair value gains
Transfer of unrealised gains on
disposal of investment property
Other comprehensive
(expense)/income:
Actuarial gain in Blenkinsopp
pension scheme
Revaluation of Group occupied
property
Fair value of financial instruments
Deferred tax on other
comprehensive (expense)/
income items
Total comprehensive income for
year ended 31 December 2021
Transaction with owners:
Purchase of own shares
Share-based payment
Dividends paid
Share issue
Balance at 31 December 2021
170
Harworth Group plcFinancial Statements Called up
share
capital
£’000
32,191
–
Share
premium
£’000
24,359
–
Merger
reserve
£’000
45,667
–
Capital
redemption
reserve
£’000
257
–
Investment
in own
shares
£’000
(67)
–
Retained
earnings
£’000
128,554
(2,917)
Total
equity
£’000
230,961
(2,917)
Company Statement of
Changes in Equity
for the year ended 31 December 2021
Note
24
25
10
26,27
24
Balance at 1 January 2020
Loss for the financial year
Actuarial loss in Blenkinsopp
pension scheme
Deferred tax on actuarial loss on
pension scheme
Total comprehensive income for
year ended 31 December 2020
Transaction with owners:
Share-based payment
Dividends paid
Share issue
Balance at 31 December 2020
Loss for the financial year
Actuarial gain in Blenkinsopp
pension scheme
Deferred tax on other
comprehensive (expense)/
income items
Total comprehensive income for
year ended 31 December 2021
Transaction with owners:
Purchase of own shares
Share-based payment
Dividends paid
Share issue
Balance at 31 December 2021
–
–
–
–
–
–
–
–
–
–
–
62
32,253
–
–
–
208
24,567
–
–
–
–
45,667
–
–
–
–
–
–
–
–
–
–
25
10
26,27
–
–
–
19
32,272
–
–
–
60
24,627
–
–
–
–
45,667
–
–
–
–
–
–
257
–
–
–
–
–
–
–
–
257
–
–
–
(339)
(339)
64
(3,192)
64
(3,192)
(6)
–
–
(73)
–
507
(1,077)
–
124,792
(8,378)
501
(1,077)
270
227,463
(8,378)
–
–
–
262
262
(34)
(8,150)
(34)
(8,150)
(21)
76
–
(6)
(24)
–
374
(5,913)
–
111,103
(21)
450
(5,913)
73
213,902
171
Annual Report and Financial Statements 2021Financial Statements Consolidated Statement of Cash Flows
for the year ended 31 December 2021
Cash flows from operating activities
Profit before tax for the financial year
Net finance costs
Other gains
Share of profit of joint ventures
Share-based transactions(1)
Depreciation of property, plant and equipment and right of use assets
Pension contributions in excess of charge
Operating cash inflow/(outflow) before movements in working capital
Decrease in inventories
(Increase)/decrease in receivables
Increase in payables
Cash generated from operations
Interest paid
Corporation tax paid
Cash generated from operating activities
Cash flows from investing activities
Interest received
Investment in joint ventures
Distributions from joint ventures
Acquisition of group of assets
Net proceeds from disposal of investment properties, assets held for sale and overages
Property acquisitions
Expenditure on investment properties and assets held for sale
Expenditure on property, plant and equipment
Cash generated from/(used in) investing activities
Cash flows from financing activities
Net proceeds from issue of ordinary shares
Purchase of own shares
Proceeds from other loans
Repayment of other loans
Proceeds from bank loans
Repayment of bank loans
Loan arrangement fees
Payment in respect of leases
Dividends paid
Cash used in financing activities
(Decrease)/Increase in cash
Cash at 1 January
(Decrease)/Increase in cash
Cash at 31 December
Note
6
3
15
25
12, 13
24
10
Year ended
31 December
2021
£’000
Year ended
31 December
2020
£’000
127,234
3,918
(92,488)
(9,225)
426
234
(148)
29,951
4,133
(3,715)
26,669
57,038
(3,531)
(3,646)
49,861
182
(1,624)
34
–
44,472
(18,105)
(22,851)
(32)
2,076
68
(21)
4,900
(4,425)
45,000
(91,000)
(1,134)
(85)
(5,913)
(52,610)
(673)
12,710
(673)
33,324
3,096
(31,734)
(8,655)
618
285
(140)
(3,206)
19,385
2,768
6,830
25,777
(2,924)
(2,127)
20,726
377
(289)
8,930
(4,092)
27,651
(9,340)
(42,647)
(115)
(19,525)
237
–
–
(2,932)
82,000
(78,000)
(479)
(73)
(1,077)
(324)
877
11,833
877
12,037
12,710
(1) Share-based transactions reflect the non-cash expenses relating to share-based payments included within the income statement.
172
Harworth Group plcFinancial Statements Company Statement of Cash Flows
for the year ended 31 December 2021
Cash flows from operating activities
Loss before tax for the financial year
Net interest receivable
Share-based transactions(1)
Pension contributions in excess of charge
Operating cash outflows before movements in working capital
Decrease/(increase) in receivables
Increase in payables
Cash generated from operations
Interest paid
Cash generated from operating activities
Cash flows from investing activities
Interest received
Cash generated from investing activities
Cash flows from financing activities
Net proceeds from issue of ordinary shares
Purchase of own shares
Dividends paid
Cash used in financing activities
Increase in cash
Cash at 1 January
Increase in cash
Cash at 31 December
(1) Share-based transactions reflect the non-cash expenses relating to share-based payments included within the income statement.
Year ended
31 December
2021
£’000
Year ended
31 December
2020
£’000
(6,479)
(80)
109
262
(6,188)
1,744
11,487
7,043
–
7,043
80
80
68
(21)
(5,913)
(5,866)
1,257
1,652
1,257
(3,110)
(300)
118
(339)
(3,631)
(328)
4,645
686
(281)
405
581
581
237
–
(1,077)
(840)
146
1,506
146
2,909
1,652
173
Annual Report and Financial Statements 2021Financial Statements 1. Accounting policies
The principal accounting policies adopted in the preparation of these consolidated financial statements are set out below. These policies
have been consistently applied to all of the years presented, unless otherwise stated.
General information
Harworth Group plc, company number 02649340, (the ‘Company’) is a company limited by shares, incorporated and domiciled in the
United Kingdom. The address of its registered office is Advantage House, Poplar Way, Catcliffe, Rotherham, South Yorkshire, S60 5TR.
The Company is a public company listed on the London Stock Exchange.
The consolidated financial statements for the year ended 31 December 2021 consolidate the results of the Company and its subsidiaries
(together referred to as the ‘Group’).
Basis of preparation
The Group and Company financial statements of Harworth Group plc have been prepared on the going concern basis and in accordance
with international accounting standards in conformity with the requirements of the Companies Act 2006 and UK adopted International
Accounting Standards (‘IFRS’). The consolidated financial statements have been prepared under the historical cost convention, as modified
by the revaluation of investment properties and financial assets and liabilities at fair value through profit or loss.
The Group’s business activities, together with the factors likely to affect its future development, performance and position are set out in the
Strategic Report in the Annual Report and the financial statements and notes. The Directors believe that the Group is well placed to manage
its business risks successfully. The principal risks that may impact the Group’s performance and their mitigation are outlined in the Principal
Risks & Uncertainties statement starting on page 71. After making enquiries, the Directors have a reasonable expectation that the Group
has adequate resources to fund its operations for the foreseeable future. For this reason, they continue to adopt the going concern basis in
preparing the annual financial statements.
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
Company prepares cash flow and banking covenant forecasts based upon its assumptions with particular consideration to the key risks
and uncertainties, as well as taking into account available borrowing facilities. The going concern period assessed is until June 2023 which
has been selected as it can be projected with a good degree of expected accuracy and covers a complete period of reporting under the
Group’s RCF.
The Group remains in a strong financial position, with cash and bank headroom of £128m (as at 31 December 2021). The spread of sites
across its three core regions, and at all stages of their lifecycle, enables the close management of non-committed expenditure to preserve
liquidity. The Group benefits from diversification across its Capital Growth and Income Generation businesses including an industrial
property portfolio. The Income Generation portfolio has continued to generate income that supports coverage of the overheads of the
business and interest from loan facilities, with rent collections for 2021 at 99%.
The key risks considered are: 1) Finance – availability of capital, interest costs, shortfalls in income and valuations; 2) Markets – a severe but
temporary downturn in residential or industrial & logistics markets could reduce potential sales of serviced land and potentially impact on
valuations; 3) Climate Change – the potential impacts of managing climate change transition; 4) Project Delivery – delays in project works on
sites and planning approval processes, and 5) People – impact on capacity and productivity or increased costs.
Following the 2021 strategic review, work was undertaken obtaining financing that supports the requirements and ambitions of the updated
strategy. In early 2022 a new £200m Revolving Credit Facility was agreed with HSBC joining as a new lender in addition to current lenders
NatWest and Santander. The new five-year agreement significantly increases the level of the facility from £150m to £200m.
In addition to the base forecast, a sensitised forecast was produced that reflected a number of severe but plausible downsides. This
downside included: 1) a severe reduction in sales to the housebuilding sector as well as lower investment property sales; 2) notwithstanding
strong rent collection to date in line with previous quarters, a prudent material increase in bad debts across the portfolio over the majority of
the going concern assessment period; 3) a material decline in the value of land and investment property values; and 4) a significant increase
in interest rates, impacting the cost of the Group’s RCF.
A scenario has also been run which demonstrates that very severe loss of revenue, valuation reductions and interest cost increases would
be required to breach cash flow and banking covenants. A scenario with initial consideration of potential climate change impacts was also
examined for the first time as part of the Group’s increasing focus on climate-related risks and opportunities. Consideration has been given
to the impact of the Russian invasion of Ukraine which, while not directly impacting the activities of the Group, has the potential to impact
174
Notes to the financial statementsfor the year ended 31 December 2021Harworth Group plcFinancial Statements 1. Accounting policies continued
through changes in the wider macro-economic environment. Even in the downside scenarios, for the going concern period from the
signing of these financial statements, the Group expects to continue to have sufficient cash reserves to continue to operate with headroom
on lending facilities and associated covenants and has additional mitigation measures within management’s control, for example reducing
development and acquisition expenditure and reducing operating costs, that could be deployed to create further cash and covenant
headroom.
Based on these considerations, together with available market information and the Directors’ knowledge and experience of the Group’s
property portfolio and markets, the Directors considered it appropriate to adopt a going concern basis of accounting in the preparation of
the Group’s and Company’s financial statements.
Accounting policies
Changes in accounting policy and disclosures
(a) New standards, amendments and interpretations
A number of new standards and amendments to standards and interpretations are effective for annual periods beginning on or after
1 January 2021 and have not been applied in preparing these financial statements. None of these would have a significant effect on the
financial statements of the Group.
(b) New standards, amendments and interpretations not yet adopted
A number of new standards and amendments to standards and interpretations are effective for annual periods beginning on or after
1 January 2022 and have not been applied in preparing these financial statements. None of these are expected to have a significant effect
on the financial statements of the Group.
Revenue recognition
Revenue comprises rental and other land-related income arising on investment properties, income from construction contracts, planning
promotion agreements, promote fees and overages, the sale of coal fines and the sale of development properties.
Revenue is recognised to the extent that it is probable that the economic benefit will flow to the Group and the revenue can be reliably
measured. All such revenue is reported net of discounts, and value added and other sales taxes.
Rental income
Under IFRS 16 ‘Leases’, rental and other land related income is recognised on a straight-line basis over the term of the lease. Lease
incentives, including rent-free periods and payments to tenants, are allocated to the consolidated income statement on a straight-line basis
over the lease term as a deduction from rental and other land-related income.
Revenue from contracts with customers
Under IFRS 15 ‘Revenue from Contracts with Customers’, revenue is measured based on the consideration specified in a contract with a
customer at an amount that reflects the consideration to which the Group expects to be entitled in exchange for transferring promised
goods or services to a customer, and excludes amounts collected on behalf of third parties. The Group recognises revenue when it transfers
control over a product or service to a customer.
Income from construction contracts is recognised in line with the accounting policy for construction contracts. Revenue is recognised when
the Group is acting as a principal under a contract with primary responsibility for the contract.
Revenue from planning promotion agreements, promote fees and overages is recognised when it is highly probable that all performance
obligations have been completed.
Revenue from the sale of coal fines is recognised at the point of despatch.
The sale of development properties, including land parcels sold to housebuilders for residential development, usually have performance
obligations such as transferring legal title that are satisfied at a point in time. Revenue is recognised when control of the property passes
to the buyer on completion of contracts. Any variable consideration including overages is estimated at the point of sale, taking into
consideration the time to recover overage amounts as well as other factors which may give rise to variability. Revenue is only recognised
to the extent that it is highly probable that there will not be a significant reversal in the future. Any deferred consideration is discounted to
present value with the discount being unwound to the consolidated income statement as finance income.
175
Annual Report and Financial Statements 2021Financial Statements 1. Accounting policies continued
Construction contracts
Contracts for the construction of substantial assets are accounted for as construction contracts. Revenue on construction contracts is
recognised over time, as the performance obligations are satisfied. Revenue is recognised over time if the Group’s performance creates or
enhances an asset that the customer controls as the asset is created. Otherwise, the revenue is recognised at a point in time. The revenue is
reported in Other Property Activities within Note 3. Where the outcome of a construction contract can be estimated reliably, revenue and
costs are recognised by reference to the stage of completion. The assessment of the stage of completion is dependent on the nature of the
contracts but will generally be based on the estimated proportion of the total contract costs which have been incurred to date. If a contract
is expected to be loss making, a provision is recognised when the contract is, or has become, onerous in accordance with IAS 37.
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.
Inventories
Inventories comprise development properties, land held for development, options to purchase land, planning promotion agreements and
coal fines that have been processed and are ready for sale.
Development properties are included in the consolidated balance sheet at the lower of cost and net realisable value. Net realisable value
is the expected net sales proceeds of the developed property in the ordinary course of business less estimated costs to complete and
anticipated selling costs. Properties re-categorised to development properties from investment properties are transferred at deemed cost,
being the fair value at the date of re-categorisation. Properties are re-categorised as development properties once planning is secured and
where development with a view to sale has commenced.
Where individual parcels of land held for development are disposed of out of a larger overall development site, costs are apportioned
based on an acreage, or other specific allocation where appropriate, after taking into account the cost or net realisable value of any
remaining residual land which may not form part of the overall development site or which may not be available for development. Where
the Group retains obligations attached to the development site as a whole, accruals are made relating to these disposals on the same
allocation basis.
Land held for development is land that has planning permission and is being developed for onward sale.
Options to purchase land are agreements that the Group has entered into with landowners whereby the Group has the option to purchase
their land within a limited timeframe. The landowners are not generally permitted to sell to any other party during this period, unless agreed
by the Group. All costs, including the cost of entering into the option, are capitalised. At each reporting date, recoverability of the costs
is considered by management and where required provisions are made such that the agreements are held at the lower of cost and net
realisable value.
Planning promotion agreements are agreements that the Group has entered into with landowners whereby the Group acts as an agent
in exchange for a fixed fee and/or a set percentage of the proceeds or profit of the eventual sale of the land that is the subject of the
agreement. The Group promotes the land through the planning process at its own expense. If the land is sold, the Group receives a fee for
its services.
The Group incurs various costs in promoting land held under promotion planning agreements, in some instances the agreements allow for
the Group to be reimbursed certain expenditure following the conclusion of a successful sale. These costs are held in inventory at the lower
of cost and net realisable value. Upon reimbursement, inventory is reduced by the value of the reimbursed cost.
Coal fines that have been processed and are ready for sale are stated at the lower of cost and estimated net realisable value. Inventories
comprise all of the direct costs incurred in bringing the coal fines to their present state.
Investments in subsidiaries
Investments held by the Company in subsidiary undertakings are carried at cost less impairments to write them down to their
recoverable amount.
176
Notes to the financial statementsfor the year ended 31 December 2021Harworth Group plcFinancial Statements 1. Accounting policies continued
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.
Impairments in subsidiaries
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.
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 improvements related to capital expenditure.
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 properties also include property that is being developed or constructed for future use as investment
property by the Group. 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 are used.
A transfer to the fair value reserve is made for all fair value gains in the year from retained earnings. Where there have been previous fair value
gains transferred to the fair value reserve and fair value losses have been incurred in the year then a transfer is made to retained earnings to
offset as much of the fair value losses as possible.
Investment properties are re-categorised as development properties and moved to inventory once planning is secured and where
development with a view to sale has commenced.
A transfer from the fair value reserve to retained earnings is made if any net realisable value provision is required on any development
property where gains had previously been recorded as an investment property.
At each subsequent reporting date, investment properties are re-measured to their fair value. Movements in fair value are included in the
income statement.
Where specific investment properties have been identified as being for sale within the next 12 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’.
Profit or loss on disposal of investment properties
Disposals are accounted for when control of the investment property is passed to a customer, typically at the point of legal completion and
when title passes. Profits or losses on disposal arise from deducting the asset’s net carrying value, selling costs and where appropriate a
proportion of future costs attributable to the development of the overall land area from the net proceeds (being net purchase consideration
less any clawback liability arising on disposal) is recognised in the income statement. 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 in the course of construction
Directly attributable costs incurred in the course of constructing a property, not including interest, are capitalised as part of the cost of the
property. Any resultant change in value is therefore recognised through the next revaluation.
177
Annual Report and Financial Statements 2021Financial Statements 1. Accounting policies continued
Government grants
Government grants are recognised when there is reasonable assurance that the conditions associated with the grants have been complied
with and the grants will be received. Grants related to the development of Investment Property and Development Property are deducted
from the cost of the related asset. Grants for the reimbursement of operating expenditure are deducted from the related category of
costs in the income statement. Once a government grant is recognised, any related deferred income is treated in accordance with IAS 20
‘Accounting for Government Grants and Disclosure of Government Assistance’.
Financial assets
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 include cash received from the sale of certain development properties but held in separate bank accounts over which third
party infrastructure loan providers have a charge.
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 assessed for their recoverability under the Expected Credit Loss model on a periodic basis with
a provision being made if required under this model. Financial assets are de-recognised 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 are presented in the income statement within ‘other gains’ in the year
in which they arise.
Interest income is recognised on financial assets by applying the effective interest rate, except for short-term receivables when the
recognition of interest would be immaterial.
Financial liabilities
Liabilities within the scope of IFRS 9 are classified as financial liabilities at fair value through profit or loss or as other liabilities, as appropriate.
A financial liability is de-recognised when the obligation under the liability is discharged, or cancelled or expires.
All loans and borrowings are classified as other liabilities. Initial recognition is at fair value less directly attributable transaction costs. After
initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised cost using the effective interest method.
Financial liabilities included in trade and other payables are recognised initially at fair value and subsequently at amortised cost. The fair value of
a non interest bearing liability is its discounted repayment amount. If the due date of the liability is less than one year, discounting is omitted.
Pension obligations
The Group contributes to defined contribution schemes for its current employees. The cost is charged to the consolidated income
statement as incurred.
Blenkinsopp pension
Following the 2012 Restructuring, the Group’s only defined benefit pension liability was in respect of the Blenkinsopp Section of the
Industry-Wide Mineworkers Pension Scheme.
During the years to 31 December 2021 and 31 December 2020 all contributions have been paid to this scheme by the Company.
In the Company balance sheet, a net liability equal to the IAS 19 (revised) liability is recognised, and an equal amount within non-current
assets, due to its ability to call upon an indemnity from Harworth Estates Mines Property Limited for this liability if required. Harworth Estates
Mines Property Limited is a wholly owned subsidiary of the Group.
Share-based payments
Equity-settled share-based payments to employees of the Company and its subsidiary undertakings are measured at the fair value of
the equity instruments at the date of grant and are expensed on a straight-line basis over the vesting period in the consolidated income
statement. The fair value of the equity instruments is determined at the date of grant taking into account any market-based vesting
conditions attached to the award. Non-market based vesting conditions are taken into account in estimating the number of awards likely to
vest. The estimate of the number of awards likely to vest is reviewed regularly and the expense charge adjusted accordingly.
178
Notes to the financial statementsfor the year ended 31 December 2021Harworth Group plcFinancial Statements 1. Accounting policies continued
Operating segments
Management has determined the operating segments based upon the operating reports reviewed by the Investment Committee that are
used to assess both performance and strategic decisions. Management has identified that the Investment Committee is the Chief Operating
Decision Maker in accordance with the requirements of IFRS 8 ‘Operating Segments’.
The Group is organised into two operating segments: Income Generation and Capital Growth. Group costs are not a reportable segment.
However, information about them is considered by the Investment Committee in conjunction with the reportable segments.
The Income Generation segment focuses on generating rental returns from the investment portfolio (previously referred to as the business
space portfolio), rental returns and royalties from energy generation, environmental technologies and the agricultural portfolio, and
generating income from recycled aggregates and secondary coal products. The Capital Growth segment focuses on delivering value
by developing the underlying investment and development property portfolios, and includes planning and development activity, value
engineering, proactive asset management and strategic land acquisition.
All operations are carried out in the United Kingdom.
Consolidation
Subsidiaries
Subsidiaries are all 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 value 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 the acquiree’s identifiable net assets.
Costs related to acquisitions, other than those associated with the issue of debt or equity securities, 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.
Intercompany transactions, balances and unrealised gains on transactions between Group companies are eliminated. Unrealised losses are
also eliminated.
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.
The merger reserve reflects the premium on the shares issued to the Pension Protection Fund as part of the consideration for the purchase of
75.1% of the issued share capital of Harworth Estates Property Group Limited in 2016.
The fair value reserve reflects the accumulation of fair value adjustments as detailed in the investment property and property, plant and
equipment accounting policies.
179
Annual Report and Financial Statements 2021Financial Statements 1. Accounting policies continued
Property, plant and equipment
Land and buildings relate to Group-occupied properties. These properties are stated at their fair value, based on market values, less any
subsequent accumulated depreciation or accumulated impairment loss. Depreciation is provided where it is considered significant having
regard to the estimated remaining useful lives and residual values of individual properties. Surpluses on revaluations are recorded in other
comprehensive income and credited to the revaluation fair value reserve. However, to the extent that it reverses a revaluation deficit of the
same asset previously recognised in profit or loss, the increase is recognised in profit or loss. Deficits on revaluations are charged against the
fair value reserve to the extent that there are available surpluses relating to the same asset and are otherwise charged to profit or loss.
Office equipment is stated at cost less accumulated depreciation and any recognised impairment loss. Depreciation is charged on these
assets so as to write off the cost or valuation of assets over their estimated useful lives of three to four years, using the straight-line method.
Derivatives and hedging
Derivative financial instruments such as interest rate swaps are entered into in order to manage interest rate risks. Such derivative instruments
are initially recognised at fair value on the date on which a derivative contract is entered into and are subsequently re-measured at fair value.
Derivatives are carried as assets when the fair value is positive and as liabilities when the fair value is negative.
At the inception of a hedge relationship, the Group formally designates and documents the hedge relationship to which the Group wishes
to apply hedge accounting, and the risk management objective and strategy for undertaking the hedge. The documentation includes
identification of the hedging instrument, the hedge item or transaction, the nature of the risk being hedged and how the entity will assess
the hedging instrument’s effectiveness in offsetting the exposure to changes in the hedged item’s fair value or cash flows attributable to the
hedge risk. Such hedges are expected to be highly effective in achieving offsetting changes in fair value or cash flows and are assessed on
an ongoing basis to determine that they actually have been highly effective throughout the financial reporting periods for which they are
designated.
The effective portion of the gain or loss on the hedging instrument is recognised through other comprehensive income, while any
ineffective portion is recognised immediately in profit or loss, such as when the hedged financial income or financial expense is recognised
or when a forecast sale of the hedged item occurs.
If the forecast transaction or firm commitment is no longer expected to occur, amounts previously recognised in equity are transferred to
profit or loss. If the hedging instrument expires or is sold, terminated or exercised without replacement or rollover, or if its designation as a
hedge is revoked, amounts previously recognised in equity remain in equity until the forecast transaction or firm commitment occurs.
When a derivative is held as an economic hedge for a period beyond 12 months after the end of the reporting period, the derivative is
classified as non-current (or separated into current and non-current portions) consistent with the classification of the underlying item. A
derivative instrument that is a designated and effective hedging instrument is classified consistent with the classification of the underlying
hedged item. The derivative instrument is separated into a current portion and non-current portion only if: 1) a reliable allocation can be
made; and 2) it is applied to all designated and effective hedging instruments.
Tax
Current tax
The charge or credit for current tax is based on the results for the year adjusted for items that are either not subject to taxation or for
expenditure which cannot be deducted in computing the tax charge or credit. The tax charge or credit is calculated using taxation rates that
have been enacted or substantively enacted at the balance sheet date.
Deferred tax
Deferred tax is recognised using the balance sheet liability method on temporary differences between the carrying amounts of assets and
liabilities in the financial statements and the corresponding tax basis used in the computation of taxable profit. Deferred tax is recognised in
respect of all taxable temporary timing differences, with certain limited exceptions:
• Deferred tax is not provided on the initial recognition of an asset or liability in a transaction that does not affect accounting profit or
taxable profit and is not a business combination; and
180
Notes to the financial statementsfor the year ended 31 December 2021Harworth Group plcFinancial Statements 1. Accounting policies continued
• Deferred tax assets are only recognised if it is probable that there will be sufficient profits from which the future reversal of the underlying
timing differences can be deducted. In deciding whether future reversal is probable, the Directors review the Group’s forecasts and
make an estimate of the aggregate deferred tax asset that should be recognised. This aggregate deferred tax asset is then allocated into
the different categories of deferred tax.
Deferred tax is calculated at the tax rates that are expected to apply in the years in which timing differences reverse, based on tax rates
and laws enacted or substantively enacted at the balance sheet date. Deferred tax is charged or credited to the income statement, except
where it applies to items credited or charged to other comprehensive income or equity in which case the deferred tax is also dealt with in
other comprehensive income or equity.
The carrying value of the Group’s investment properties is assumed to be realised by sale at the end of use. The capital gains tax rate applied
is that which would apply on a direct sale of the property recorded in the Balance Sheet regardless of whether the Group would structure
the sale via the disposal of the subsidiary holding the asset, to which a different tax rate may apply. The deferred tax is then calculated based
on the respective temporary differences and tax consequences arising from recovery through sale.
Critical accounting estimates and judgements
The preparation of the 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 financial statements, the significant judgements made by management in applying the Group’s accounting policies and
the key sources of estimation uncertainty are as follows:
Estimation of fair value of investment properties
The fair value of investment property reflects, amongst other things, rental income from 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.
In determining fair value measurement, the impact of potential climate-related matters, including legislation, which may affect the fair value
measurement of investment property has been considered.
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 14.
Estimation of valuation of development properties
For the purposes of calculating net realisable value for both EPRA reporting and ensuring that development properties are stated at the
lower of cost and net realisable value, the Group obtains an independent valuation of these properties, prepared in accordance with the
current edition of the Appraisal and Valuation Standards published by the Royal Institution of Chartered Surveyors.
If the net realisable value of the property is lower than cost, a provision is made to reduce the value of the property.
181
Annual Report and Financial Statements 2021Financial Statements 2. Alternative Performance Measures (“APMs”)
Introduction
The Group has applied the December 2019 European Securities and Markets Authority (“ESMA”) guidance on APMs and the November
2017 Financial Reporting Council (“FRC”) corporate thematic review of APMs in these results. An APM is a financial measure of historical or
future financial performance, position or cash flows of the Group which is not a measure defined or specified in IFRS.
Overview of our use of APMs
The Directors believe that APMs assist in providing additional useful information on the underlying trends, performance and position of the
Group. APMs assist our stakeholder users of the accounts, particularly equity and debt investors, through the comparability of information.
APMs are used by the Directors and management, both internally and externally, for performance analysis, strategic planning, reporting and
incentive-setting purposes.
APMs are not defined by IFRS and therefore may not be directly comparable with other companies’ APMs, including peers in the real estate
industry. APMs should be considered in addition to, and are not intended to be a substitute for, or superior to, IFRS measurements.
The derivations of our APMs and their purpose
The primary differences between IFRS statutory amounts and the APMs that we use are as follows:
1. Capturing all sources of value creation – Under IFRS, the revaluation movement in development properties and assets held for sale which are
held in inventory, is not included in the balance sheet. Also, overages are not recognised in the balance sheet until they are highly probable.
These movements, which are verified by BNP Paribas and Savills (independent external property valuers), are included within our APMs;
2. Recategorising income statement amounts – Under IFRS, the grouping of amounts, particularly within gross profit and other gains, does
not clearly allow Harworth to demonstrate the value creation through its business model. In particular, the statutory grouping does not
distinguish value gains (being realised profits from the sales of properties and unrealised profits from property value movements) from the
ongoing profitability of the business which is less susceptible to movements in the property cycle. Finally, the Group includes profits from
joint ventures within our APMs as our joint ventures conduct similar operations to Harworth, albeit in different ownership structures; and
3. Comparability with industry peers – Harworth discloses some APMs which are European Public Real Estate Association (“EPRA”)
measures as these are a set of standard disclosures for the property industry and thus aid comparability for our stakeholder users.
Our key APMs
The key APMs that the Group focuses on are as follows:
• Total Return – The movement in EPRA NDV plus dividends per share paid in the year expressed as a percentage of opening EPRA NDV
per share
• EPRA NDV per share – EPRA NDV divided by the number of shares in issue less shares held by the Employee Benefit Trust and Yorkshire
Building Society to satisfy Long Term Incentive Plan and Share Incentive Plan awards
• Value gains – These are the realised profits from the sales of properties and unrealised profits from property value movements including
joint ventures and the mark to market movement on development properties, assets held for sale and overages
• Net loan to portfolio value (Net LTV) – Group debt net of cash held expressed as a percentage of portfolio value
Profit excluding value gains (PEVG) has not been included as a key APM from 2021 as it forms part of the EPRA NDV per share and Total
Return key APMs but is a non-material component of these measures. PEVG is defined as property net rental, royalty and fee income, net
of running costs of the business (adjusted operating profit). It represents the underlying profitability of the business not reliant on property
value gains or profits from the sales of properties.
182
Notes to the financial statementsfor the year ended 31 December 2021Harworth Group plcFinancial Statements 2. Alternative Performance Measures (“APMs”) continued
Set out below is a reconciliation of the APMs used in these results to the statutory measures.
1) Reconciliation to statutory measures
a. Revaluation gains
Increase in fair value of investment properties
Increase/(decrease) in fair value of assets classified as held for sale
Share of profit of joint ventures
Net realisable value provision on development properties
Reversal of previous net realisable value provision on development properties
Amounts derived from statutory reporting
Unrealised gains/(losses) on development properties
Unrealised (losses)/gains on assets held for sale
Unrealised gains/(losses) on overages
Revaluation gains
b. Profit on sale
Profit on sale of investment properties
Profit on sale of assets classified as held for sale
Profit on sale of development properties
Release of net realisable value provision on disposal of development properties
Profit on sales of overages
Amounts derived from statutory reporting
Unrealised gains on development properties released on sale in the year
Less previously unrealised gains on assets held for sale released on sale
Profit on sale
Year ended
31 December
2021
£’000
Year ended
31 December
2020
£’000
Note
3
3
3
3
3
3
3
3
3
3
83,961
1,078
9,225
(1,574)
4,393
97,083
50,437
(15)
500
148,005
1,824
5,625
11,223
2,367
–
21,039
(7,833)
(760)
12,446
25,405
(295)
8,655
(16,208)
4,408
21,965
(5,992)
191
(566)
15,598
5,030
554
2,999
1,359
1,040
10,982
(4,295)
–
6,687
183
Annual Report and Financial Statements 2021Financial Statements 2. Alternative Performance Measures (“APMs”) continued
c. Value gains
Revaluation gains
Profit on sale
Value gains
d. Profit excluding value gains (PEVG)
Operating profit
Add pension charge
Less other gains
Less gross (profit)/loss from development properties
PEVG
e. Total property sales
Revenue
Less revenue from other property activities
Less revenue from income generation activities
Add proceeds from sales of investment properties, assets held for sale and overages
Total property sales
f. Operating profit contributing to growth in EPRA NDV
Operating profit
Share of profit of joint ventures
Unrealised gains/(losses) on development properties
Unrealised (losses)/gains on assets held for sale
Unrealised gains/(losses) on overages
Less previously unrealised gains on development properties released on sale
Less previously unrealised gains on assets held for sale released on sale
Operating profit contributing to growth in EPRA NDV
Year ended
31 December
2021
£’000
Year ended
31 December
2020
£’000
Note
148,005
12,446
160,451
121,927
58
(92,488)
(16,409)
13,088
109,884
(14,799)
(28,773)
41,956
108,268
121,927
9,225
50,437
(15)
500
(7,833)
(760)
173,481
15,598
6,687
22,285
27,765
63
(31,734)
7,442
3,536
70,001
(2,676)
(20,396)
28,858
75,787
27,765
8,655
(5,992)
191
(566)
(4,295)
–
25,758
3
3
3
3
15
184
Notes to the financial statementsfor the year ended 31 December 2021Harworth Group plcFinancial Statements 2. Alternative Performance Measures (“APMs”) continued
g. Portfolio value
Land and buildings (included within Property, plant and equipment)
Investment properties
Investments in joint ventures
Assets classified as held for sale
Development properties (included within inventories)
Amounts derived from statutory reporting
Cumulative unrealised gains on development properties as at year end
Cumulative unrealised gains on assets held for sale as at year end
Cumulative unrealised gains on overages as at year end
Portfolio value
Note
14
15
18
16
635
478,355
36,131
1,925
172,701
689,747
72,452
–
3,500
765,699
As at
31 December
2021
£’000
As at
31 December
2020
£’000
h. Net debt
Gross borrowings
Cash
Net debt
i. Net loan to portfolio value %
Net debt
Portfolio value
Net loan to portfolio value (%)
20
(37,781)
12,037
(25,744)
(25,744)
765,699
3.4%
835
373,079
25,316
7,594
177,712
584,536
29,848
775
3,000
618,159
(83,882)
12,710
(71,172)
(71,172)
618,159
11.5%
185
Annual Report and Financial Statements 2021Financial Statements 2. Alternative Performance Measures (“APMs”) continued
j. Net loan to core income generation portfolio value (%)
Net debt
Core income generation portfolio value (investment portfolio and natural resources)
Net loan to core income generation portfolio value (%)
k. Gross loan to portfolio value (%)
Gross borrowings
Portfolio value
Gross loan to portfolio value (%)
l. Gross loan to core income generation portfolio value (%)
Gross borrowings
Core income generation portfolio value (investment portfolio and natural resources)
Gross loan to core income generation portfolio value (%)
m. Number of shares used for per share calculations (number)
Number of shares in issue at 31 December
Employee Benefit Trust and Yorkshire Building Society held shares (own shares) at 31
December
Number of shares used for per share calculations
n. Net Asset Value (NAV) per share
NAV (£’000)
Number of shares used for per share calculations
NAV per share (p)
As at
31 December
2021
£’000
As at
31 December
2020
£’000
(25,744)
290,277
8.9%
(71,172)
248,004
28.7%
(37,781)
765,699
4.9%
(83,882)
618,159
13.6%
(37,781)
290,277
13.0%
(83,882)
248,004
33.8%
14
20
20
14
26
322,724,566
322,530,807
26
26
(185,282)
322,539,284
(120,487)
322,410,320
26
577,984
322,539,284
179.2
488,712
322,410,320
151.6
186
Notes to the financial statementsfor the year ended 31 December 2021Harworth Group plcFinancial Statements 2. Alternative Performance Measures (“APMs”) continued
2) Reconciliation to EPRA measures
a. EPRA NDV
Net assets
Cumulative unrealised gains on development properties
Cumulative unrealised gains on assets held for sale
Cumulative unrealised gains on overages
Notional deferred tax on unrealised gains
EPRA NDV
b. EPRA NDV per share (p)
EPRA NDV £’000
Number of shares used at 31 December for per share calculations
EPRA NDV per share (p)
c. EPRA NDV growth and total return
Opening EPRA NDV/share (p)
Closing EPRA NDV/share (p)
Movement in the year (p)
EPRA NDV growth
Dividends paid per share (p)
Total return per share (p)
Total return as a percentage of opening EPRA NDV
d. Net loan to EPRA NDV
Net debt
EPRA NDV
Net loan to EPRA NDV
As at
31 December
2021
£’000
As at
31 December
2020
£’000
Note
577,984
72,452
–
3,500
(16,483)
637,453
488,712
29,848
775
3,000
(6,388)
515,947
26
637,453
322,539,284
197.6
515,947
322,410,320
160.0
160.0
197.6
37.6
23.5%
1.8
39.4
24.6%
155.6
160.0
4.4
2.8%
0.3
4.7
3.0%
(25,744)
637,453
4.0%
(71,172)
515,947
13.8%
187
Annual Report and Financial Statements 2021Financial Statements 3. Segmental Information
Segmental Income Statement
31 December 2021
Capital Growth
Sale of
Development
properties
£’000
66,312
(49,903)
16,409
–
–
–
16,409
–
–
–
16,409
–
11,223
(1,574)
4,393
Other
Property
Activities
£’000
14,799
(3,169)
11,630
(3,365)
57,483
–
65,748
–
172
4,524
70,444
Income
Generation
£’000
Central
overheads
£’000
28,773
(8,113)
20,660
(2,130)
35,005
–
53,535
–
–
4,701
58,236
–
–
–
(13,707)
–
(58)
(13,765)
(4,100)
10
–
(17,855)
11,630
–
20,660
–
–
–
–
–
2,367
16,409
–
11,630
–
20,660
–
–
–
–
–
55,220
364
1,871
28
57,483
28,741
714
(47)
5,597
35,005
–
–
–
–
–
–
–
–
–
–
–
Total
£’000
109,884
(61,185)
48,699
(19,202)
92,488
(58)
121,927
(4,100)
182
9,225
127,234
32,290
11,223
(1,574)
4,393
2,367
48,699
83,961
1,078
1,824
5,625
92,488
Revenue
Cost of sales
Gross profit (1)
Administrative expenses
Other gains (2)
Other operating expense
Operating profit/(loss)
Finance costs
Finance income
Share of profit of joint ventures
Profit/(loss) before tax
(1) Gross profit
Gross profit is analysed as follows:
Gross profit excluding sales of development
properties
Gross profit on sale of development properties
Net realisable value provision on development
properties
Reversal of previous net realisable value provision
on development properties
Release of net realisable value provision on
disposal of development properties
(2) Other Gains
Other gains are analysed as follows:
Increase in fair value of investment properties
Increase in the fair value of assets held for sale
Profit/(loss) on sale of investment properties
Profit on sale of assets held for sale
188
Notes to the financial statementsfor the year ended 31 December 2021Harworth Group plcFinancial Statements 3. Segmental Information continued
Segmental Balance Sheet
31 December 2021
Non-current assets
Property, plant and equipment
Right of use assets
Trade and other receivables
Investment properties
Investments in joint ventures
Current assets
Inventories
Trade and other receivables
Assets held for sale
Cash
Total assets
Capital
Growth
£’000
Income
Generation
£’000
Central
overheads
£’000
–
–
4,285
182,666
18,929
205,880
177,720
35,737
1,925
–
215,382
421,262
–
–
1,084
295,689
17,202
313,975
102
13,665
–
–
13,767
327,742
681
94
–
–
–
775
–
353
–
12,037
12,390
13,165
Total
£’000
681
94
5,369
478,355
36,131
520,630
177,822
49,755
1,925
12,037
241,539
762,169
Financial liabilities and derivative financial instruments are not allocated to the reporting segments as they are managed and measured at a
Group level.
189
Annual Report and Financial Statements 2021Financial Statements 3. Segmental Information continued
Segmental Income Statement
31 December 2020
Revenue
Cost of sales
Gross profit (1)
Administrative expenses
Other gains (2)
Other operating expense
Operating profit/(loss)
Finance costs
Finance income
Share of profit of joint ventures
Profit/(loss) before tax
(1) Gross profit
Gross profit is analysed as follows:
Gross profit excluding sales of development
properties
Gross profit on sale of development properties
Net realisable value provision on development
properties
Reversal of previous net realisable value provision
on development properties
Release of net realisable value provision on
disposal of development properties
(2) Other Gains
Other gains are analysed as follows:
Increase in fair value of investment properties
Decrease in the fair value of assets held for sale
Profit/(loss) on sale of investment properties
Profit on sale of assets held for sale
Profit on sale of overages
Capital Growth
Sale of
Development
properties
£’000
46,929
(54,371)
(7,442)
–
–
–
(7,442)
–
–
–
(7,442)
Other Property
Activities
£’000
2,676
(1,834)
842
(3,080)
12,598
–
10,360
–
367
7,953
18,680
Income
Generation
£’000
20,396
(3,180)
17,216
(1,872)
19,136
–
34,480
–
1
702
35,183
Central
overheads
£’000
–
–
–
(9,570)
–
(63)
(9,633)
(3,473)
9
–
(13,097)
–
2,999
(16,208)
4,408
1,359
(7,442)
842
–
–
–
–
842
–
–
–
–
–
–
6,459
–
5,099
72
968
12,598
17,216
–
–
–
–
17,216
18,946
(295)
(69)
482
72
19,136
–
–
–
–
–
–
–
–
–
–
–
–
Total
£’000
70,001
(59,385)
10,616
(14,522)
31,734
(63)
27,765
(3,473)
377
8,655
33,324
18,058
2,999
(16,208)
4,408
1,359
10,616
25,405
(295)
5,030
554
1,040
31,734
190
Notes to the financial statementsfor the year ended 31 December 2021Harworth Group plcFinancial Statements 3. Segmental Information continued
Segmental Balance Sheet
31 December 2020
Non-current assets
Property, plant and equipment
Right of use assets
Investment properties
Investments in joint ventures
Current assets
Inventories
Trade and other receivables
Assets held for sale
Cash
Total assets
Capital
Growth
£’000
Income
Generation
£’000
Central
overheads
£’000
–
–
118,940
13,434
132,374
182,017
39,736
1,384
–
223,137
355,511
–
–
254,139
11,882
266,021
649
12,574
6,210
–
19,433
285,454
1,007
170
–
–
1,177
–
4,131
–
12,710
16,841
18,018
Total
£’000
1,007
170
373,079
25,316
399,572
182,666
56,441
7,594
12,710
259,411
658,983
Financial liabilities and derivative financial instruments are not allocated to the reporting segments as they are managed and measured at a
Group level.
4. Operating profit
Operating profit before tax is stated after charging/(crediting):
Net movement in realisable value provision on development properties
Staff costs
Depreciation of property, plant and equipment and right of use assets
Year ended
31 December
2021
£’000
Year ended
31 December
2020
£’000
(5,186)
11,626
234
10,441
8,265
285
Note
16
5
12, 13
191
Annual Report and Financial Statements 2021Financial Statements 5. Employee information
The monthly average number of persons (excluding Non-Executive Directors) employed by the Group during the year was:
Management and administration
Remuneration details of these persons were as follows:
Wages and salaries
Share-based payment expense
Social security costs
Other pension costs
Group
Company
Year ended
31 December
2021
Number
Year ended
31 December
2020
Number
Year ended
31 December
2021
Number
Year ended
31 December
2020
Number
85
75
3
3
Group
Company
Year ended
31 December
2021
£’000
Year ended
31 December
2020
£’000
Year ended
31 December
2021
£’000
Year ended
31 December
2020
£’000
9,741
546
800
539
11,626
6,419
633
702
511
8,265
2,357
116
95
41
2,609
1,200
109
135
84
1,528
Key management remuneration relates to the members of the Investment Committee:
Short-term employee benefits
Post-employment benefits
Share-based payments
Group
Year ended
31 December
2021
£’000
Year ended
31 December
2020
£’000
4,278
153
463
4,894
2,749
166
247
3,162
Detailed information relating to Directors’ remuneration is disclosed in the Directors’ remuneration report on pages 120 to 149 and forms
part of these financial statements.
192
Notes to the financial statementsfor the year ended 31 December 2021Harworth Group plcFinancial Statements 6. Finance costs and finance income
Total finance income
Finance costs
– Bank interest
– Amortisation of RCF up-front fees and other fees
– Other interest
Total finance costs
Net finance costs
During the year no interest has been capitalised in investment or development properties (2020: £nil).
7. Auditors’ remuneration
Fees payable to the Company’s auditors and its associates for the audit of the Company and the
consolidated financial statements
Fees payable to the Company’s auditors and its associates for other services:
– The audit of the Company’s subsidiaries pursuant to legislation
8. Tax
Analysis of tax (charge)/credit in the year
Current tax
Current year
Adjustment in respect of prior periods
Total current tax (charge)/credit
Deferred tax
Current year
Adjustment in respect of prior periods
Difference between current tax rate and rate of deferred tax
Total deferred tax charge
Tax charge
Other comprehensive income items
Deferred tax - current year
Total
Year ended
31 December
2021
£’000
Year ended
31 December
2020
£’000
182
377
(2,795)
(1,107)
(198)
(4,100)
(3,918)
(2,654)
(622)
(197)
(3,473)
(3,096)
Year ended
31 December
2021
£’000
Year ended
31 December
2020
£’000
315
30
345
334
100
434
Year ended
31 December
2021
£’000
Year ended
31 December
2020
£’000
(6,747)
372
(6,375)
(15,974)
(162)
(10,733)
(26,869)
(33,244)
(137)
(137)
(449)
838
389
(7,139)
136
(914)
(7,917)
(7,528)
115
115
193
Annual Report and Financial Statements 2021Financial Statements 8. Tax continued
The tax charge for the year is higher (2020: higher) than the standard rate of corporation tax in the UK of 19% (2020: 19%). The differences
are explained below:
Profit before tax
Profit before tax multiplied by rate of corporation tax in the UK of 19% (2020: 19%)
Effects of:
Adjustments in respect of prior periods - deferred taxation
Adjustments in respect of prior periods - current taxation
Expenses not deducted for tax purposes
Revaluation gains/(losses)
Share of profit of joint ventures
Difference between current tax rate and rate of deferred tax
Share options
Total tax charge
Year ended
31 December
2021
£’000
127,234
(24,174)
Year ended
31 December
2020
£’000
33,324
(6,332)
(162)
372
(291)
68
1,753
(10,733)
(77)
(33,244)
136
838
(109)
(2,848)
1,644
(914)
57
(7,528)
The difference between current tax rate and rate of deferred tax of £10.7m (2020: £0.9m) relates to the increase in deferred tax as a result
of new corporation tax rates being substantively enacted. The 2021 reconciling item of £10.7m is reflective of the enacted rate change from
19% to 25% whilst the 2020 reconciling item of £0.9m is reflective of the enacted rate change from 17% to 19%.
At 31 December 2021, the Group had a current tax liability of £2.9m (2020: £0.2m)
Deferred tax
The following is the analysis of deferred tax liabilities presented in the consolidated balance sheet:
Deferred tax liabilities
Deferred tax assets
The movements on the deferred tax account were as follows:
At 1 January 2020
Recognised in the consolidated income statement
Recognised in the consolidated statement of comprehensive income
Recognised in the consolidated statement of equity
At 31 December 2020 and 1 January 2021
Recognised in the consolidated income statement
Recognised in the consolidated statement of comprehensive income
Recognised in the consolidated statement of equity
At 31 December 2021
As at
31 December
2021
£’000
As at
31 December
2020
£’000
(46,988)
4,341
(42,647)
(23,159)
7,392
(15,767)
Investment
Properties
£’000
(15,637)
(7,522)
–
–
(23,159)
(23,829)
–
–
(46,988)
Tax
Losses
£’000
6,188
(414)
–
–
5,774
(3,216)
–
–
2,558
Other
Temporary
Differences
£’000
1,684
19
115
(200)
1,618
176
(137)
126
1,783
Total
£’000
(7,765)
(7,917)
115
(200)
(15,767)
(26,869)
(137)
126
(42,647)
194
Notes to the financial statementsfor the year ended 31 December 2021Harworth Group plcFinancial Statements 8. Tax continued
There is deferred tax on UK corporation tax losses carried forward of £2.6m (2020: £5.8m); this balance may be carried forward indefinitely
as there is no time limit in respect of using these deferred tax assets.
In the March 2020 Budget it was announced that the main rate of UK corporation tax will not reduce to 17% from 1 April 2020 and the
Corporation Tax Rate will be held at 19%. The Provisional Collection of Taxes Act was used to substantively enact the revised 19% tax rate on
17 March 2020 and accordingly deferred tax balances at 31 December 2020 were calculated at 19%.
In the Spring Budget 2021, the Government announced an increase in the corporation tax rate from 19% to 25% from 1 April 2023. The
rate was substantively enacted on 24 May 2021 and as such the deferred tax balances have been calculated in full on temporary differences
under the liability method using the rate expected to apply at the time of the reversal of the balance. As such, the deferred tax assets and
liabilities have been calculated using a 19%, a 25% or a blended rate (2020: 19%) as appropriate.
Deferred tax assets and liabilities are offset when there is a legally enforced right to offset current tax assets against current tax liabilities and
when the deferred taxes relate to the same fiscal authority.
Deferred tax assets of £5.3m at 31 December 2021 have not been recognised owing to the uncertainty as to their recoverability.
Deferred tax assets of £5.6m were not recognised at 31 December 2020.
The Company has recognised a deferred tax asset on its Balance Sheet in 2021 of £0.2m (2020: £2.1m).
9. Result of the parent entity
As permitted by section 408 of the Companies Act 2006, the Company’s income statement and statement of comprehensive income
have not been included separately in these financial statements. The loss for the financial year was £8.4m (2020: £2.9m) and the total
comprehensive expense for the financial year was £8.2m (2020: £3.2m). The distributable reserves of the Company are £111.1m
(2020: £124.8m).
10. Dividends
Interim dividend of 0.367p per share for the six months ended 30 June 2021
Full year dividend of 1.466p per share for the year ended 31 December 2020
Interim dividend of 0.334p per share for the six months ended 30 June 2020
Year ended
31 December
2021
£’000
Year ended
31 December
2020
£’000
1,184
4,729
–
5,913
–
–
1,077
1,077
In addition to the interim dividend of 0.367p, the Board has determined that it is appropriate for a final dividend of 0.845p (2020: 1.466p)
to be paid per share, bringing the total dividend for the year to 1.212p (2020: 1.800p). The 2020 final dividend was increased to reflect
the cancelled final 2019 dividend, excluding which the 2020 dividends totalled 1.102p per share. Given this, the recommended 2021
final dividend and 2021 total dividend represent a 10% increase in line with our dividend policy. There is no change to the current dividend
policy to continue to grow dividends by 10% each year.
195
Annual Report and Financial Statements 2021Financial Statements 11. 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 year.
Profit from continuing operations attributable to owners of the parent (£’000)
Weighted average number of shares used for basic earnings per share calculation
Basic earnings per share (pence)
Weighted average number of shares used for diluted earnings per share calculation
Diluted earnings per share (pence)
Year ended
31 December
2021
£’000
93,990
322,493,443
29.1
325,059,137
28.9
Year ended
31 December
2020
£’000
25,796
322,104,415
8.0
323,840,504
8.0
The difference between the weighted average number of shares used for the basic and diluted earnings per share calculation is the effect of
share options and own shares.
12. Property, plant and equipment
Group
Cost or fair value
As at 1 January 2020
Additions
Increase in fair value
As at 31 December 2020 and 1 January 2021
Additions
Decrease in fair value
As at 31 December 2021
Depreciation
As at 1 January 2020
Depreciation charge
As at 31 December 2020 and 1 January 2021
Depreciation charge
As at 31 December 2021
Net book value
Net book value at 31 December 2021
Net book value at 31 December 2020
Land and
Buildings
£’000
Office
Equipment
£’000
787
–
48
835
–
(200)
635
–
–
–
–
–
378
115
–
493
32
–
525
(115)
(206)
(321)
(158)
(479)
Total
£’000
1,165
115
48
1,328
32
(200)
1,160
(115)
(206)
(321)
(158)
(479)
635
835
46
172
681
1,007
At 31 December 2021, the Group had not entered into any contractual commitments for the acquisitions of property, plant and equipment
(2020: £nil).
196
Notes to the financial statementsfor the year ended 31 December 2021Harworth Group plcFinancial Statements 13. Right of use assets
Group
Right of use assets
Buildings
Vehicles
Lease liabilities
Current
Non-current
Additions to right of use assets during 2021 were £nil (2020: £0.1m).
Group
Depreciation charge of right of use assets
Buildings
Vehicles
As at
31 December
2021
£’000
As at
31 December
2020
£’000
74
20
94
42
52
94
117
53
170
77
102
179
Year ended
31 December
2021
£’000
Year ended
31 December
2020
£’000
44
32
76
44
35
79
The total cash outflow for leases in 2021 was £0.1m (2020: £0.1m).
The Group leases a number of offices and vehicles. Rental contracts are typically made for fixed periods of three years but may have
extension options.
Contracts may contain both lease and non-lease components. The Group allocates the consideration in the contract to the lease and non-
lease components based on their relative stand-alone prices.
However, for leases of real estate for which the Group is a lessee, it has elected not to separate lease and non-lease components and
instead accounts for these as a single lease component.
Lease terms are negotiated on an individual basis and contain a wide range of different terms and conditions. The lease agreements do not
impose any covenants other than the security interests in the leased assets that are held by the lessor.
Lease assets may not be used as security for borrowing purposes.
Assets and liabilities arising from a lease are initially measured on a present value basis. Lease liabilities include the net present value of the
following lease payments:
•
fixed payments (including in-substance fixed payments), less any lease incentives receivable
• variable lease payment that are based on an index or a rate, initially measured using the index or rate as at the commencement date
Lease payments to be made under reasonably certain extension options are also included in the measurement of the liability.
197
Annual Report and Financial Statements 2021Financial Statements 14. Investment properties
Investment properties at 31 December 2021 and 31 December 2020 have been measured at fair value. The Group holds five categories
of investment property, being Agricultural Land, Natural Resources, the Investment Portfolio (previously called Business Space), Major
Developments and Strategic Land in the UK, which sit within the operating segments of Income Generation and Capital Growth.
Income Generation
Capital Growth
At 1 January 2020
Direct acquisitions
Subsequent expenditure
Disposals
(Decrease)/Increase in fair value
Transfers between divisions
Transfers from development
properties
Net transfer to assets held for sale
At 31 December 2020
Direct acquisitions
Subsequent expenditure
Disposals
(Decrease)/increase in fair value
Transfers between divisions
Net transfers from development
properties
Net transfer to assets held for sale
At 31 December 2021
Agricultural
Land
£’000
Natural
Resources
£’000
Investment
Portfolio
£’000
Major
Developments
£’000
8,119
–
46
(9)
(339)
400
–
(2,082)
6,135
–
12
–
(151)
115
–
(699)
5,412
40,187
1,825
157
(1,012)
5,218
(9,500)
–
(3,777)
33,098
–
239
–
(1,912)
–
–
(874)
30,551
160,797
38,168
864
–
14,067
4,150
1,025
(4,165)
214,906
13,502
1,988
(2,497)
30,804
6,101
–
(5,078)
259,726
14,889
27
2,446
–
4,514
2,850
2,824
–
27,550
–
8,956
(11,207)
21,609
(6,626)
5,711
(509)
45,483
Strategic
Land
£’000
69,848
18,300
5,796
(6,552)
1,945
2,100
–
(47)
91,390
14,274
6,877
(986)
33,611
410
(5,000)
(3,394)
137,183
Total
£’000
293,840
58,320
9,309
(7,573)
25,405
–
3,849
(10,071)
373,079
27,776
18,072
(14,690)
83,961
–
711
(10,554)
478,355
Included within investment properties (agricultural land) is a provision of £0.3m (2020: £1.0m) relating to the restoration liability on sites
formerly rented to mining tenants. This provision is treated as a reduction of the individual property valuations.
During the year, £5.7m (2020: £3.8m) of development property was re-categorised as investment property to reflect a change in use.
During the year, £5.0m of investment property was re-categorised to development properties (2020: £nil). Properties that have obtained
planning permission and where development with a view to sale has commenced are now held as development properties in inventories.
Until sites receive planning permission and the future use has been determined, our view is that the land is held for a currently undetermined
future use and should thus be held as investment property. Where there is a subsequent change in use, typically in properties and land that
have received planning permission and where development with a view to sale has commenced, these are re-categorised as development
properties in inventories.
Investment property is transferred between divisions to reflect a change in the activity arising from the asset.
Market value as estimated by the external valuer
Capital incentives and rent free periods included within prepayments and accrued income
Contingent interest in adjoining land included within external valuations
Other adjustments
Fair value for financial reporting purposes
As at
31 December
2021
£’000
As at
31 December
2020
£’000
486,433
(4,820)
(2,687)
(571)
478,355
380,659
(3,420)
(2,407)
(1,753)
373,079
198
Notes to the financial statementsfor the year ended 31 December 2021Harworth Group plcFinancial Statements
14. Investment properties continued
Valuation Process
The properties were valued in accordance with the Royal Institution of Chartered Surveyors (RICS) Valuation – Professional Standards (the
‘Red Book’) by BNP Paribas Real Estate and Savills. Both are independent firms acting in the capacity of external valuers with relevant
experience of valuations of this nature. The valuations are on the basis of Market Value as defined by the Red Book, which RICS considers
meets the criteria for assessing Fair Value under IFRS. The valuations are based on what is determined to be the highest and best use.
When considering the highest and best use a valuer will consider, on a property by property basis, its actual and potential uses which are
physically, legally and financially viable. Where the highest and best use differs from the existing use, the valuer will consider the cost and
the likelihood of achieving and implementing this change in arriving at its valuation. Most of the Group’s properties have been valued on the
basis of their development potential which differs from their existing use.
At each financial year end, management:
• verifies all major inputs to the independent valuation report;
• assesses property valuation movements when compared to the prior year valuation report; and
• holds discussions with the independent valuer.
The different valuation levels are defined as:
Level 1: valuation based on quoted market prices traded in active markets.
Level 2: valuation based on inputs other than quoted prices included within Level 1 that maximise the use of observable data either directly
or from market prices or indirectly derived from market prices.
Level 3: where one or more inputs to valuation are not based on observable market data.
The Directors determine the applicable hierarchy that each investment property falls into by assessing the level of significant unobservable
inputs used in the valuation technique. As a result of the specific nature of each investment property, valuation inputs are not based on
directly observable market data and therefore all investment properties were determined to fall into Level 3.
The Group’s policy is to recognise transfers into and out of fair value hierarchy levels as at the date of the event or change in circumstance
that caused the transfer. There were no transfers between hierarchy levels in the year ended 31 December 2021 (2020: none).
Valuation techniques underlying management’s estimation of fair value are as follows:
Agricultural land
Most of the agricultural land is valued using the market comparison basis, with an adjustment made for the length of the remaining term on
any tenancy and the estimated cost to bring the land to its highest and best use. Where the asset is subject to a secure letting, this is valued
on a yield basis, based upon sales of similar types of investment.
Natural resources
Natural resource sites in the portfolio are valued based on discounted cash flows for the operating life of the asset with regard to the residual
land value.
Investment portfolio
The business parks and individual business space properties are valued on the basis of market comparison with direct reference to observable
market evidence including current rent and estimated rental value (ERV), yields and capital values and adjusted where required for the
estimated cost to bring the property to its highest and best use. The evidence is adjusted to reflect the quality of the property assets, the quality
of the covenant profile of the tenants and the reliability/volatility of cash flows. The Group’s portfolio has a spread of yields. New income
acquisitions are generally acquired at high yields where value can be added. Subject to market backdrop, properties that are newly built by
Harworth typically have lower yields. As assets are enhanced and improved, these would also be expected to be valued at lower yields.
199
Annual Report and Financial Statements 2021Financial Statements 14. Investment properties continued
ERV and reversionary rental yields are considered to be significant unobservable inputs. Details of the aggregate ERV and weighted average
reversionary rental yields used for the Investment Portfolio properties are provided in the following table:
Market value
Aggregate ERV
Equivalent rental yield %
As at
31 December
2021
£’000
As at
31 December
2020
£’000
264,547
16,794
6.8
218,327
14,832
7.1
All other factors being equal, a higher equivalent yield would lead to a decrease in the valuation of an asset and an increase in the current
or estimated future rental stream, or market demand for the asset, would have the effect of increasing the capital value, and vice versa.
However, there are inter-relationships between the significant unobservable inputs which are partially determined by market conditions,
which would impact on these changes.
The table below sets out a sensitivity analysis for the key sources of estimation uncertainty with the resulting increase/(decrease) in the fair
value of Investment Portfolio assets at 31 December 2021:
Change in net income by 5%
Change in portfolio net initial yield by 50 basis points
2021
2020
Increase in
Sensitivity
Value
£’000
13,260
(23,206)
Decrease in
Sensitivity
Value
£’000
(13,260)
25,880
Increase in
Sensitivity
Value
£’000
10,742
(16,831)
Decrease in
Sensitivity
Value
£’000
(10,742)
18,726
The property rental income earned by the Group from its occupied investment property, all of which is leased out under operating leases
amounted to £19.5m (2020: £14.8m). Direct operating expenses arising on investment property generating rental income in the year
amounted to £6.6m (2020: £3.5m).
The bank and other loans are secured by way of fixed equitable charges over investment and development properties.
Major developments
Major development sites are generally valued using residual development appraisals, a form of discounted cash flow which estimates the
current site value from future cash flows measured by current land and/or completed built development values, observable or estimated
development costs, and observable or estimated development returns.
Where possible development sites are valued by direct comparison to observable market evidence with appropriate adjustment for the
quality and location of the property asset, although this is generally only a reliable method of measurement for smaller development sites.
The discounted cash flows utilise gross development value, which takes account of the future expectations of sales over time, less costs, as
at today’s value, to complete remediation and provide the necessary site infrastructure to bring the site forward. Sales prices, build costs
and profit margins are considered to be significant unobservable inputs for sites valued using residual development appraisals and details of
these are provided below:
As at 31 December 2021
As at 31 December 2020
Market
value
(£’000)
Sales price
per sq. ft
Build cost
per sq. ft
Major developments
44,590 £122-£127
£58-£72
Profit
margin
%
15%
Market value
(£’000)
Sales price
per sq. ft
Build cost
per sq. ft
Profit
margin
%
27,500
£93–£122
£46–£58 15%–17.5%
All other factors being equal, a higher land value reflecting future expectations on sales would lead to an increase in the valuation of
an asset, an increase in costs would lead to a decrease in the valuation of an asset. However, there are inter-relationships between the
significant unobservable inputs which are partially determined by market conditions, which would impact on these changes.
200
Notes to the financial statementsfor the year ended 31 December 2021Harworth Group plcFinancial Statements
14. Investment properties continued
The table below sets out a sensitivity analysis for the key sources of estimation uncertainty with the resulting increase/(decrease) in the fair
value of Major Development investment properties at 31 December 2021:
Change in sales price of 5%
Change in build cost of 5%
Strategic land
2021
2020
Increase in
Sensitivity
Value
£’000
5,967
(4,550)
Decrease in
Sensitivity
Value
£’000
(5,967)
4,611
Increase in
Sensitivity
Value
£’000
6,100
(3,910)
Decrease in
Sensitivity
Value
£’000
(5,935)
4,070
Strategic land is valued on the basis of discounted cash flows, with future cash flows measured by current land values adjusted to reflect
the quality of the development opportunity, the potential development costs estimated by reference to observable development costs
on comparable sites, and the likelihood of securing planning consent. Valuations are then benchmarked against observable land values
reflecting the current existing use of the land, which is generally agricultural and, where available, observable strategic land values. The land
value per acre is considered to be a significant unobservable input and details of the ranges used are provided below:
Market value
Weighted Average Land value per
acre
As at 31 December 2021
As at 31 December 2020
Agricultural
Land
£’000
5,560
Natural
Resources
£’000
31,705
Strategic
Land
£’000
140,031
Agricultural
Land
£’000
7,088
Natural
Resources
£’000
34,258
Strategic
Land
£’000
93,436
3
20
81
2
18
56
All things being equal, a higher value per acre would lead to an increase in the valuation of an asset and vice versa. The table below sets out
a sensitivity analysis for the key source of estimation uncertainty with the resulting increase/(decrease) in the fair value at 31 December 2021:
Change in land value per acre by 5%
Agricultural Land
Natural Resources
Strategic Land
15. Investments
Investment in subsidiaries (Company balance sheet)
Cost and net book amount:
At 1 January
Grant of equity instruments to employees of subsidiaries
At 31 December
2021
2020
Increase in
Sensitivity
Value
£’000
278
1,585
7,002
Decrease in
Sensitivity
Value
£’000
(278)
(1,585)
(7,002)
Increase in
Sensitivity
Value
£’000
354
1,713
4,639
Decrease in
Sensitivity
Value
£’000
(354)
(1,713)
(4,639)
As at
31 December
2021
£’000
As at
31 December
2020
£’000
208,974
326
209,300
208,473
501
208,974
Investments in subsidiaries are stated at cost less provision for impairment. As permitted by section 616 of the Companies Act 2006, where
the relief afforded under section 612 of the Companies Act 2006 applies, cost is the aggregate of the nominal value of the relevant number
of the Company’s shares and the fair value of any other consideration given to acquire the share capital of the subsidiary undertakings.
201
Annual Report and Financial Statements 2021Financial Statements 15. Investments continued
The Company holds investments in the following subsidiaries as at 31 December 2021:
Company name
Harworth Estates Property Group Limited
Cadley Park Management Company Limited
Cutacre Country Park Management Company Limited
EOS Inc Limited
Harworth Estates (Agricultural Land) Limited
Harworth Estates (Waverley Prince) Limited
Harworth Estates Curtilage Limited
Harworth Estates Investments Limited
Harworth Estates Limited
Harworth Estates Mines Property Limited
Harworth Estates Overage Limited
Harworth Estates Warwickshire Limited
Harworth Surface Water Management (North West) Limited
Harworth TRR Limited
Logistics North MC Limited
Thoresby Vale Management Company Limited
Flass Lane Management Company Limited
Mapplewell Management Company Limited
POW Management Company Limited
Riverdale Park Management Company Limited
Rossington Community Management Company Limited
Simpson Park Management Company Limited
South East Coalville Management Company Limited
Waverley Community Management Company Limited
Ansty Development Vehicle LLP
Harworth PV Limited
Harworth Regeneration Limited
Harworth Services Limited
Harworth Estates No 2 Limited
Konect Management Company Limited
Moss Nook (St Helens) Management Company Limited
Coalfield Estates Limited
Harworth Estates Group Limited
Harworth No.3 Limited
Waverley Square Limited
Harworth Guarantee Co. Limited
Activity
Trading
Trading
Trading
Trading
Trading
Trading
Trading
Trading
Trading
Trading
Trading
Trading
Trading
Trading
Trading
Trading
Trading
Trading
Trading
Trading
Trading
Trading
Trading
Trading
Trading
Non–trading
Non–trading
Non–trading
Dormant
Dormant
Dormant
Liquidation
Liquidation
Liquidation
Liquidation
Liquidation
Description
of shares held
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Limited by guarantee
Limited by guarantee
Limited by guarantee
Limited by guarantee
Limited by guarantee
Limited by guarantee
Limited by guarantee
Limited by guarantee
Partnership
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Limited by guarantee
Ordinary
Ordinary
Ordinary
Ordinary
Limited by guarantee
Proportion of
nominal value
of issued share
capital held by
the Company %
Held
directly or
indirectly
by the
Company
100
100
100
100
100
100
100
100
100
100
100
100
100
100
10.86
100
100
100
100
100
100
100
100
100
100
100
100
100
100
7.14
100
100
100
100
100
100
Direct
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Direct
Indirect
Indirect
Indirect
Direct
Except for those in liquidation, all of the above companies are incorporated in England and Wales and have a registered address of
Advantage House, Poplar Way, Rotherham, South Yorkshire, S60 5TR.
202
Notes to the financial statementsfor the year ended 31 December 2021Harworth Group plcFinancial Statements 15. Investments continued
Control of Logistics North MC Limited and Konect Management Company Limited is via ownership of voting rights equal to 75% or more
and the right to appoint and remove directors.
Harworth PV Limited was incorporated during the year, on 21 July 2021.
Moss Nook (St Helens) Management Company Limited was incorporated during the year, on 1 December 2021.
Harworth Trustees Limited and Harworth Secretariat Services Limited were dissolved post year end, on 11 January 2022.
The following entities are in the process of liquidation, to complete within 12 months of the year end:
Coalfield Estates Limited
Harworth Guarantee Co. Limited
Harworth Estates Group Limited
Harworth No.3 Limited
Waverley Square Limited
Investment in joint ventures
At 1 January
Investment in joint ventures
Distributions from joint ventures
De-recognition on acquisition
Share of profits of joint ventures
Impairment
At 31 December
As at
31 December
2021
£’000
As at
31 December
2020
£’000
25,316
1,624
(34)
–
9,853
(628)
36,131
33,072
289
(8,930)
(7,770)
8,655
–
25,316
The Group holds investments in the following joint ventures as at 31 December 2021:
Company name
Multiply Logistics North Holdings Limited
Multiply Logistics North LP
The Aire Valley Land LLP
Crimea Land Mansfield LLP
Northern Gateway Development Vehicle LLP
Activity
Trading
Trading
Trading
Trading
Trading
Description of shares
held
Ordinary
Partnership
Partnership
Partnership
Partnership
Proportion of
nominal value of
issued share capital
held by the Company
%
All of the above companies are incorporated in England and Wales and have a registered address of Advantage House, Poplar Way,
Rotherham, South Yorkshire, S60 5TR. Multiply Logistics North Holdings Limited and Multiply Logistics North LP are joint ventures as a
consequence of equal voting rights.
Gateway 45 No.1 Limited was dissolved during the year, on 12 January 2021.
Bates Regeneration Limited was dissolved during the year, on 12 October 2021.
20
20
50
50
50
203
Annual Report and Financial Statements 2021Financial Statements 15. Investments continued
Summarised financial information in respect of each of the Group’s material joint ventures is set out below:
Investment property
Current assets
Total assets
Current liabilities
Net investment
Revenue
Cost of sales
Gross (loss)/profit
Administrative expenses
Other gains
Finance costs
Share of profits
The Aire Valley Land LLP
Multiply Logistics North LP
As at
31 December
2021
£’000
As at
31 December
2020
£’000
As at
31 December
2021
£’000
As at
31 December
2020
£’000
17,500
124
17,624
(82)
17,542
13,000
272
13,272
(273)
12,999
16,791
720
17,511
(309)
17,202
11,662
270
11,932
(50)
11,882
The Aire Valley Land LLP
Multiply Logistics North LP
Year ended
31 December
2021
£’000
Year ended
31 December
2020
£’000
Year ended
31 December
2021
£’000
Year ended
31 December
2020
£’000
–
(29)
(29)
(16)
4,592
(1)
4,546
225
(40)
185
(5)
1,601
–
1,781
481
(34)
447
(152)
5,031
–
5,326
407
(89)
318
(33)
417
–
702
Aggregate information of the Group’s share of assets, liabilities and results of joint ventures, that are not individually material are:
Investment property
Current assets
Total assets
Current liabilities
Net investment
Share of losses
As at
31 December
2021
£’000
As at
31 December
2020
£’000
375
1,071
1,446
(59)
1,387
(19)
376
64
440
(5)
435
(173)
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; and
• Decline in market conditions and values.
204
Notes to the financial statementsfor the year ended 31 December 2021Harworth Group plcFinancial Statements 16. Inventories
Development properties
Planning promotion agreements
Option agreements
Finished goods
Total inventories
As at
31 December
2021
£’000
As at
31 December
2020
£’000
172,701
3,865
1,154
102
177,822
177,712
2,961
1,344
649
182,666
The total cost of inventory recognised as an expense within cost of sales in the year is £50.3m (2020: £54.7m) and comprises: £54.9m
(2020: £43.9m) relating to the sale of development properties; a credit of £5.2m (2020: £10.5m charge) in relation to the net realisable
value provision against development properties; a charge of £0.1m (2020: £0.3m) in relation to planning promotion agreements; and a
charge of £0.5m (2020: £0.0m) relating to finished goods stocks. Finished goods are stated after a provision of £0.5m (2020: £0.2m).
The movement in development properties is as follows:
At 1 January
Acquisitions
Subsequent expenditure
Disposals
Net realisable value provision release/(charge)
Net transfer to investment properties
At 31 December
The movement in net realisable value provision on development properties was as follows:
At 1 January
Charge for the year
Released on disposals
Reversal of previous net realisable value provision
At 31 December
As at
31 December
2021
£’000
As at
31 December
2020
£’000
177,712
40
29,482
(39,008)
5,186
(711)
172,701
202,092
–
27,860
(37,950)
(10,441)
(3,849)
177,712
As at
31 December
2021
£’000
As at
31 December
2020
£’000
17,340
1,574
(2,367)
(4,393)
12,154
6,899
16,208
(1,359)
(4,408)
17,340
The reversal of previous net realisable value provision occurs where development properties have an increase in net realisable value which
offsets a previous net realisable value charge.
The bank and other loans are secured by fixed equitable charges over development and investment properties.
205
Annual Report and Financial Statements 2021Financial Statements 17. Trade and other receivables
Current
Trade receivables
Less: provision for impairment of trade receivables
Net trade receivables
Other receivables
Prepayments
Accrued Income
Amounts owed by subsidiary undertakings (note 30)
Non-current
Trade receivables
Other receivables
Group
Company
As at
31 December
2021
£’000
As at
31 December
2020
£’000
As at
31 December
2021
£’000
As at
31 December
2020
£’000
24,078
(27)
24,051
23,672
1,012
1,020
–
49,755
4,285
1,084
5,369
35,742
(308)
35,434
18,785
957
1,265
–
56,441
–
–
–
–
–
–
9
7
–
27,735
27,751
–
–
–
–
–
–
59
46
–
29,390
29,495
–
–
–
The carrying amount of trade and other receivables approximates to their fair value due to the short time frame over which the assets are
realised. All of the Group and Company receivables are denominated in sterling.
Included within current trade receivables is £22.9m (2020: £33.4m) of deferred consideration on the sale of investment and
development property.
The non-current trade receivable of £4.3m (2020: £nil) relates to deferred consideration on the sale of development properties due in more
than one year.
Included within other receivables are £0.0m (2020: £3.5m) of cash held in accounts over which third party infrastructure loan providers
have a charge and £2.5m (2020: £nil) of restricted cash as part of an agreement with a third party.
The maximum exposure to credit risk at the reporting date is the carrying value of each class of receivables as disclosed in Note 23. The
Group and Company do not hold any collateral as security.
The amounts owed to the Company by subsidiary undertakings are repayable on demand. Interest is payable at SONIA + 2%
(2020: LIBOR +2%).
Group
Movements on provisions for impairment of trade receivables are as follows:
As at
31 December
2021
£’000
As at
31 December
2020
£’000
(308)
281
(27)
(109)
(199)
(308)
At the beginning of the year
Released/(provided) for in the year
At the end of the year
206
Notes to the financial statementsfor the year ended 31 December 2021Harworth Group plcFinancial Statements 17. Trade and other receivables continued
Trade receivables can be analysed as follows:
Amounts receivable not past due
Amounts receivable past due but not impaired
Amounts receivable impaired (gross)
Less impairment
Ageing of past due but not impaired trade receivables
31 – 60 days
61 – 90 days
91 – 120 days
Ageing of impaired trade receivables:
91 – 120 days
120+ Days
As at
31 December
2021
£’000
As at
31 December
2020
£’000
21,914
2,137
27
(27)
24,051
33,666
1,768
308
(308)
35,434
As at
31 December
2021
£’000
As at
31 December
2020
£’000
–
2,054
83
2,137
1,389
7
372
1,768
As at
31 December
2021
£’000
As at
31 December
2020
£’000
16
11
27
308
–
308
18. Assets Held For Sale
Assets classified as held for sale relate to investment properties identified as being for sale within 12 months, where a sale is considered
highly probable and the property is immediately available for sale.
At 1 January
Net transfer from investment properties
Subsequent expenditure
Increase/(decrease) in fair value
Disposals
At 31 December
As at
31 December
2021
£’000
As at
31 December
2020
£’000
7,594
10,554
1
1,078
(17,302)
1,925
11,252
10,071
24
(295)
(13,458)
7,594
207
Annual Report and Financial Statements 2021Financial Statements 19. Cash
Cash
20. Borrowings
Group
Company
As at
31 December
2021
£’000
As at
31 December
2020
£’000
As at
31 December
2021
£’000
As at
31 December
2020
£’000
12,037
12,710
2,909
1,652
Non-current:
Secured – bank loans
Secured – infrastructure loans and direct development loans
Total borrowings
Loans are stated after deduction of unamortised borrowing costs of £1.2m (2020: £0.4m).
Infrastructure loans
Homes and Communities Agency
Merseyside Pension Fund
North West Evergreen Limited Partnership
Simpson Park
Bardon Hill
Plot H Logistics North, Bolton
Total infrastructure loans
Bank loan
Total borrowings
As at
31 December
2021
£’000
As at
31 December
2020
£’000
(33,318)
(4,463)
(37,781)
(37,781)
(79,740)
(4,142)
(83,882)
(83,882)
As at
31 December
2021
£’000
As at
31 December
2020
£’000
–
(1,572)
(2,891)
(4,463)
(33,318)
(37,781)
(4,142)
–
–
(4,142)
(79,740)
(83,882)
The bank borrowings are part of a £150.0m (2020: £130.0m) Revolving Credit Facility (‘RCF’) provided by NatWest and Santander in place
at 31 December 2021. The term of the facility was extended for two years on 13 February 2018 and was repayable on 13 February 2023
(five-year term) on a non-amortising basis and subject to financial and other covenants. In November 2021 NatWest and Santander agreed
to increase the RCF by £20.0m to £150.0m and extend the repayment date to February 2024. Following the year end, a new RCF has been
put in place with NatWest, Santander and HSBC. The new RCF has a limit of £200.0m with an uncommitted accordion facility of £40.0m
and is repayable in 2027. The bank borrowings are secured by fixed equitable charges over investment properties. The facility is non-
amortising and subject to financial and other covenants.
The infrastructure loans are provided by public bodies in order to promote the development of major sites. The loans are drawn as work on
the respective sites is progressed and are repaid on agreed dates or when disposals are made from the sites.
208
Notes to the financial statementsfor the year ended 31 December 2021Harworth Group plcFinancial Statements 21. Trade and other payables
Current liabilities
Trade payables
Amounts owed to subsidiary undertakings
Taxation and social security
Other creditors
Accruals
Deferred income
Group
Company
As at
31 December
2021
£’000
As at
31 December
2020
£’000
As at
31 December
2021
£’000
As at
31 December
2020
£’000
2,104
–
14,394
4,102
63,166
10,550
94,316
1,658
–
4,968
9,528
43,308
7,024
66,486
54
24,205
190
26
1,812
–
26,287
22
13,926
78
16
758
–
14,800
The amounts owed by the Company to subsidiary undertakings are repayable on demand. Interest is payable at SONIA + 2%
(2020: LIBOR + 2%).
Amounts in accruals and deferred income relating to parcels
of land that have been sold but where infrastructure costs are
yet to be incurred
Non-current liabilities
Other creditors
Deferred income
Group
Company
As at
31 December
2021
£’000
As at
31 December
2020
£’000
As at
31 December
2021
£’000
As at
31 December
2020
£’000
48,781
33,361
–
–
Group
Company
As at
31 December
2021
£’000
As at
31 December
2020
£’000
As at
31 December
2021
£’000
As at
31 December
2020
£’000
4,540
1,146
5,686
720
1,234
1,954
–
–
–
–
–
–
22. Financial instruments and derivatives
On 20 July 2018, Harworth cancelled its £30m fixed rate interest swap which was due to expire on 30 June 2020 (incurring total break
costs of £18.5k) and in its place entered into a four-year, £45m fixed rate interest swap at an all-in cost of 1.235% (including fees) on top of
the existing 2.35% margin under the RCF. The all-in cost changed to 1.184% from 31 December 2021 as part of the transition from LIBOR to
SONIA. The interest rate swap is hedge accounted with any unrealised movements going through reserves.
The fair value of the interest rate swap at 31 December 2021 was a liability of £0.2m (2020: £0.8m) .
During the year the following gain/(loss) was recognised in the other comprehensive income statement in relation to the interest rate swap:
Gain/(loss) on interest rate swap - cash flow hedge
As at
31 December
2021
£’000
As at
31 December
2020
£’000
670
(267)
The Group’s principal financial instruments include trade and other receivables, cash, interest bearing borrowings and trade and
other payables.
209
Annual Report and Financial Statements 2021Financial Statements 22. Financial instruments and derivatives continued
Other financial assets and liabilities
Group
Financial assets held at amortised cost
Cash
Trade and other receivables
Financial liabilities held at amortised cost
Bank and other borrowings
Trade and other payables
Company
Financial assets held at amortised cost
Cash
Trade and other receivables
Financial liabilities held at amortised cost
Trade and other payables
As at 31 December 2021
As at 31 December 2020
Book value
£’000
Fair value
£’000
Book value
£’000
Fair value
£’000
12,037
53,092
37,781
85,608
12,037
53,092
37,781
85,608
12,710
54,219
83,882
63,472
12,710
54,219
83,882
63,472
As at 31 December 2021
As at 31 December 2020
Book value
£’000
Fair value
£’000
Book value
£’000
2,909
27,744
2,909
27,744
1,652
29,392
Fair value
£’000
1,652
29,392
26,097
26,097
14,722
14,722
In accordance with IFRS 9, the Group classifies the assets and liabilities in the analysis above as ‘loans and receivables’ and ‘other financial
liabilities’, respectively.
The fair value of bank and other borrowings equals their carrying amount, as the impact of discounting is not significant. The fair values are
within Level 2 of the fair value hierarchy.
23. Financial risk management
The Group’s overall risk management programme focuses on credit and liquidity risks to minimise potential adverse effects on the Group’s
financial performance.
Risk management is carried out centrally under policies approved by the Board of Directors. The Board discusses and agrees courses of
action to cover material risk management areas, including credit risk and investment of excess liquidity.
Credit risk
The Group is subject to credit risk arising from outstanding receivables and committed cash and cash equivalents and deposits with banks
and financial institutions. The Group’s policy is to manage credit exposure to trading counterparties by trading within defined limits.
The Group is exposed to counterparty credit risk on cash and cash equivalent balances. The Group and Company hold all of their cash
deposits with their principal bankers.
Interest rate risk
The Group’s interest rate risk arises from external borrowings, the details of which are set out in Note 22.
The Group also has two (2020: one) infrastructure loans with an all-in funding rate of between 3.0% and 5.9% (2020: 4.0%).
Liquidity risk
The Group is subject to the risk that it will not have sufficient liquid resources to fund its ongoing business. The Group manages its liquidity
requirements with the use of operating cash flows, cash balances and drawdowns under its RCF.
The Group had net debt at 31 December 2021 of £25.7m (2020: £71.2m). The Group generated cash from operating activities and
investing activities for the year of £51.9m (2020: cash generated of £1.2m).
210
Notes to the financial statementsfor the year ended 31 December 2021Harworth Group plcFinancial Statements
23. Financial risk management continued
The table below analyses the Group’s financial liabilities which will be settled on a net basis into relevant maturity groupings based on the
remaining period at the balance sheet date to the contractual maturity date. The amounts disclosed in the table are the gross contractual
undiscounted cash flows.
At 31 December 2021
Trade and other payables
Lease liability
Bank and other borrowings including interest payable
At 31 December 2020
Trade and other payables
Lease liability
Bank and other borrowings including interest payable
Capital risk management
Less than
1 year
£’000
Between
1 and 2 years
£’000
Between
2 and 5 years
£’000
Over
5 years
£’000
83,766
42
–
66,486
77
–
3,456
28
–
872
50
4,142
1,084
24
37,781
457
52
79,740
–
–
–
625
–
–
The Group is subject to the risk that its capital structure will not be sufficient to support the growth of the business. The Group’s objectives
when managing capital are:
•
•
•
to safeguard the Group’s ability to continue as a going concern and have the resources to provide returns for shareholders and benefits
for other stakeholders;
to maximise returns to shareholders by allocating capital across the business based upon the expected level of return and risk; and
to maintain an optimal capital structure to reduce the cost of capital.
The Group manages and monitors its cash balances and bank borrowings to ensure it has sufficient capital to manage and maintain its
business activities. Cash balances are disclosed in Note 19.
In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, return capital to
shareholders, issue new shares or sell assets to reduce debt.
The Group monitors capital on the basis of net debt to equity. Net debt is total debt less cash and at 31 December 2021 this was £25.7m
(2020: £71.2m)
The Group had in place at 31 December 2021 a £150.0m (2020: £130.0m) RCF from NatWest and Santander as discussed in Note 20.
The facility is subject to financial covenants, including loan to market value of investment properties, minimum interest cover, gearing, and
minimum consolidated net worth.
The Group operated within these requirements throughout the year.
Following the balance sheet date, the Group entered into a new five year £200m RCF (the “New RCF”), with a £40m accordion. The facility
is provided by NatWest, Santander and HSBC, bringing a new bank into the Group’s syndicate. The New RCF is aligned to the Group’s
strategy and provides significant additional liquidity and flexibility to enable it to pursue its strategic objectives. The new facility is subject to
financial covenants, including minimum interest cover, maximum infrastructure debt as a percentage of property value and gearing.
211
Annual Report and Financial Statements 2021Financial Statements 24. Retirement benefit obligations
Defined contribution pension schemes
The Group pays defined contribution payments to pension insurance plans. Contributions to defined contribution schemes in the
year amounted to £0.5m (2020: £0.5m) . The Group has no further payment obligations once the contributions have been paid.
The contributions are recognised as an expense when they are due.
Defined benefit obligations
The Group and Company have defined benefit obligations in respect of the Blenkinsopp Section of the Industry-Wide Mineworkers’
Pension Scheme (the Blenkinsopp scheme). This scheme is closed to new members.
The Balance Sheet liability in respect of retirement benefit obligations is:
Relating to continuing activities
Blenkinsopp
Group
Company
As at
31 December
2021
£’000
As at
31 December
2020
£’000
As at
31 December
2021
£’000
As at
31 December
2020
£’000
558
968
558
968
Contributions to the Blenkinsopp scheme of £0.2m were made by the Group during 2021 (2020: £0.2m). It is expected that contributions
of a similar amount will be paid in 2022. At December 2021, no contributions remained unpaid (2020: £nil).
The pension scheme is valued annually by a qualified independent actuary for the purposes of IAS 19 (revised) and the preparation of
financial statements. The assumptions which usually have the most significant effect on the results of the valuation are the discount rate,
which is based on corporate bond yields, and the rates of increase in pensions. There are no active members of this scheme. The main
assumptions underlying the valuation of the Blenkinsopp scheme were:
Discount rate
Rate of pension increases
Rate of price inflation (RPI)
Rate of price inflation (CPI)
Rate of cash commutation
Life expectancy at age 65 for current pensioners (years)
Male
Female
Life expectancy at age 65 for future pensioners currently aged 45 (years)
Male
Female
As at
31 December
2021
£’000
1.90% p.a.
2.70% p.a.
3.35% p.a.
2.75% p.a.
25.00% of
pension at a
rate of £9:£1
As at
31 December
2020
£’000
1.30% p.a.
2.35% p.a.
2.95% p.a.
2.35% p.a.
25.00% of
pension at a
rate of £9:£1
As at
31 December
2021
As at
31 December
2020
19.3
22.6
20.7
24.2
19.3
22.6
20.7
24.1
The assumed pension increases depend on the period of service accrual (before April 1997: no increases, after 1997: in line with statutory
minimum increases based on consumer price inflation).
212
Notes to the financial statementsfor the year ended 31 December 2021Harworth Group plcFinancial Statements 24. Retirement benefit obligations continued
Defined benefit obligations
The amounts recognised in the Balance Sheet are:
Fair value of plan assets
Present value of funding obligations
Net liability recognised in the Balance Sheet
2021
£’000
2,747
(3,305)
(558)
2020
£’000
2,537
(3,505)
(968)
2019
£’000
2,313
(3,084)
(771)
2018
£’000
2,249
(2,711)
(462)
2017
£’000
2,228
(2,791)
(563)
The Blenkinsopp scheme does not own any shares in the Company.
The amounts recognised in the Consolidated Income Statement are:
Analysis of the amounts recognised in the Income Statement
Expenses
Interest cost
Year ended
31 December
2021
£’000
Year ended
31 December
2020
£’000
(48)
(12)
(60)
(49)
(14)
(63)
A further credit of £0.3m (2020: cost £0.3m) has been reflected in the Statement of Comprehensive Income in the year. This represents the
net effect of experience, and actuarial gains and losses on the scheme in the year.
Change in assets
Fair value of plan assets at the start of the year
Interest income
Actual return on scheme assets excluding interest income
Employer contributions
Expenses
Benefits paid
Fair value of plan assets at the end of the year
Plan assets, which are all quoted investments, are comprised as follows:
Analysis of plan assets (which are all quoted investments)
Gilts
Diversified and multi-asset growth funds
Delegated solutions
Sterling liquidity fund
Other
Total
As at
31 December
2021
£’000
As at
31 December
2020
£’000
2,537
33
126
208
(48)
(109)
2,747
2,313
48
104
205
(49)
(84)
2,537
As at
31 December
2021
£’000
As at
31 December
2020
£’000
1,781
–
926
15
25
2,747
1,626
268
–
–
643
2,537
213
Annual Report and Financial Statements 2021Financial Statements 24. Retirement benefit obligations continued
Change in defined benefit obligations
Present value of defined benefit obligations at the start of the year
Interest cost
Remeasurements:
– Gain/(loss) arising from changes in demographic assumptions
– (Loss)/gain arising from changes in experience
– Gain/(loss) arising from changes in financial assumptions
Benefits paid
Present value of defined benefit obligation at the end of the year
Analysis of the movement of the Balance Sheet liability
At the start of the year
Total amounts recognised in the Income Statement
Employer contributions
Net actuarial gain/(loss) recognised in the year
At the end of the year
The duration of the defined benefit obligation is c.17 years (2020: c.18 years).
Cumulative actuarial gains and losses recognised in equity
At the start of the year
Net actuarial gain/(loss) recognised in the year
At the end of the year
Experience gains and losses
Actual return on scheme assets excluding interest income
Remeasurements:
– Loss arising from changes in experience
– Loss arising from changes in financial assumptions
– Loss arising from changes in demographic assumptions
Net actuarial loss
As at
31 December
2021
£’000
As at
31 December
2020
£’000
(3,505)
(45)
10
(12)
138
109
(3,305)
(3,084)
(62)
(14)
68
(497)
84
(3,505)
As at
31 December
2021
£’000
As at
31 December
2020
£’000
(968)
(60)
208
262
(558)
(771)
(63)
205
(339)
(968)
As at
31 December
2021
£’000
As at
31 December
2020
£’000
(949)
262
(687)
(610)
(339)
(949)
Year ended
31 December
2021
£’000
Year ended
31 December
2020
£’000
126
(12)
138
10
262
104
68
(498)
(13)
(339)
Contributions are determined by a qualified actuary on the basis of a triennial valuation, using the projected credit unit method. The most
recent valuation for the purpose of determining contributions was at 31 December 2018, which was agreed in March 2020. This showed an
estimated past service deficit of £1.2m.
214
Notes to the financial statementsfor the year ended 31 December 2021Harworth Group plcFinancial Statements 24. Retirement benefit obligations continued
The sensitivity of the defined benefit obligations to changes in the weighted principal assumptions is:
Change in discount rate by 0.1%
Change in price inflation (and associated assumptions) by 0.1%
Increase in life expectancy by 1 year
As at
31 December
2021
£’000
As at
31 December
2020
£’000
56
49
150
62
54
163
The above sensitivity analyses are based on a change in an assumption while holding all other assumptions constant. In practice, some of
the assumptions may be correlated. No changes have been made to the method and types of assumptions from those in the previous year.
The Scheme exposes the Group to actuarial risks such as: investment risk, interest rate risk and longevity risk.
•
•
•
Investment risk: the present value of the defined benefit obligation is calculated using a discount rate determined by reference to
high quality corporate bond yields; if the return on Scheme assets is below this rate, it will create a deficit. The majority of the Scheme
investments are held within index-linked government bonds or delegated solutions as detailed earlier in the note.
Interest rate risk: a decrease in the corporate bond interest rate will increase the liability but this would likely be partially offset by an
increase in the return on the Scheme’s debt investments.
Longevity risk: the present value of the defined benefit obligation is calculated by reference to the best estimate of the mortality
of Scheme participants both during and after retirement. An increase in the life expectancy of the participants will increase the
Scheme’s liability.
25. Share-based payments
During the year, there were five classes of equity-settled share incentive plans outstanding:
• Deferred Share Bonus Plan (DSBP). Under this scheme share options with a nil-cost exercise price are granted to eligible employees.
Vesting of the share options is subject to the achievement of a performance condition relating to Total Return and continued
employment.
•
Long Term Incentive Plan (LTIP). Under this scheme share options with a nil-cost exercise price are granted to eligible employees.
Vesting of the share options is subject to the achievement of performance conditions relating to Total Return and Relative Total
Shareholder Return and continued employment.
• Restricted Share Plan (RSP). Under this scheme share options with a nil-cost exercise price are granted to eligible employees. Vesting
of the share options is subject to continued employment and the satisfaction of underpin conditions relating to Financial Health,
Underlying performance and Corporate Governance as detailed on page 144 of the Directors’ Remuneration Report.
• Save As You Earn (SAYE). Under this scheme eligible employees enter into a savings contract for a period of three years. Share options
are granted on commencement of the savings contract and are exercisable using the amount saved under the contract at the time it
terminates. Share options are granted at a discount of up to 20% of the market value of the shares at the time of invitation. The exercise
of the share options is subject to continued employment only.
• Share Incentive Plan (SIP). Under this scheme eligible employees are granted free shares which vest after three years subject to
continued employment only.
Share options granted under the DSBP, LTIP and RSP are exercisable no later than the tenth anniversary of the grant date. Share options
granted under the SAYE are exercisable for a six-month period after the end of the three-year savings period.
215
Annual Report and Financial Statements 2021Financial Statements 25. Share-based payments continued
The movements in the number of share options outstanding and their weighted average exercise prices are as follows:
Number of shares
Weighted average
exercise price
2021
151,800
–
(136,469)
(14,264)
1,067
1,067
6.26 years
2020
169,799
–
(17,999)
–
151,800
–
7.27 years
Number of shares
2021
2020
456,101
–
(406,638)
(49,463)
–
–
–
972,507
–
(250,355)
(266,050)
456,101
–
7.27 years
2021
£0.00
n/a
£0.00
£0.00
£0.00
£0.00
2020
£0.00
n/a
£0.00
n/a
£0.00
n/a
Weighted average
exercise price
2021
£0.00
n/a
£0.00
£0.00
n/a
n/a
2020
£0.00
n/a
£0.00
£0.00
£0.00
n/a
Number of shares
Weighted average
exercise price
2021
921,769
664,339
(83,225)
–
1,502,883
–
8.66 years
2020
379,230
593,801
(51,262)
–
921,769
–
9.19 years
Number of shares
2021
2020
865,055
175,063
(109,377)
(53,211)
877,530
–
2.03 years
571,976
787,692
(149,088)
(345,525)
865,055
1,339
2.76 years
2021
£0.00
n/a
£0.00
£0.00
n/a
n/a
2020
£0.00
£0.00
£0.00
n/a
£0.00
n/a
Weighted average
exercise price
2021
£0.81
£1.02
£0.79
£0.86
£0.82
n/a
2020
£0.88
£0.74
£0.94
£0.80
£0.78
£0.81
DSBP
Outstanding at beginning of the year
Granted during the year
Forfeited during the year
Exercised during the year
Outstanding at end of the year
Exercisable at end of the year
Weighted average remaining contractual life
LTIP
Outstanding at beginning of the year
Granted during the year
Forfeited during the year
Exercised during the year
Outstanding at end of the year
Exercisable at end of the year
Weighted average remaining contractual life
RSP
Outstanding at beginning of the year
Granted during the year
Forfeited during the year
Exercised during the year
Outstanding at end of the year
Exercisable at end of the year
Weighted average remaining contractual life
SAYE
Outstanding at beginning of the year
Granted during the year
Forfeited during the year
Exercised during the year
Outstanding at end of the year
Exercisable at end of the year
Weighted average remaining contractual life
216
Notes to the financial statementsfor the year ended 31 December 2021Harworth Group plcFinancial Statements
25. Share-based payments continued
SIP
Outstanding at beginning of the year
Granted during the year
Forfeited during the year
Exercised during the year
Outstanding at end of the year
Number of shares
Weighted average
exercise price
2021
101,310
63,852
(14,425)
(2,892)
147,845
2020
54,320
62,465
(9,673)
(5,802)
101,310
2021
£0.00
£0.00
£0.00
£0.00
£0.00
2020
£0.00
£0.00
£0.00
£0.00
£0.00
The fair values of the share options granted under the RSP and SAYE during the year were determined using Black–Scholes valuation
methodology.
The significant inputs to the valuation models were as follows:
Share price at date of grant
Exercise price
Dividend yield
Expected volatility
Risk free interest rate
Expected term
Weighted average fair value
RSP
SAYE
£1.28
£0.00
0.01%
0.33%
n/a
4.90 years
£1.06
£1.28
£1.02
0.01%
0.32%
–
3.33 years
£0.35
The expected volatility reflects the assumption that the historical volatility is indicative of future trends, which may not necessarily be the
actual outcome.
Awards under the 2018 DSBP Scheme were exercised in the year with a weighted average share price on exercise of £1.50.
Awards under the 2018 LTIP Scheme were exercised in the year with a weighted average share price on exercise of £1.26.
Awards under the 2018 SAYE Scheme and 2020 SAYE Scheme were exercised in the year with a weighted average share price on exercise
of £1.47.
The total charge for the year relating to employee share-based payment plans was £0.5m (2020: £0.6m), all of which related to equity-
settled share-based payment transactions.
26.Share capital
Issued, authorised and fully paid
Group and Company
At 1 January
Shares issued
At 31 December
As at
31 December
2021
£’000
As at
31 December
2020
£’000
32,253
19
32,272
32,191
62
32,253
217
Annual Report and Financial Statements 2021Financial Statements 26.Share capital continued
Issued, authorised and fully paid – number of shares
Group and Company
At 1 January
Shares issued
At 31 December
Own shares held
At 31 December
As at
31 December
2021
As at
31 December
2020
322,530,807
193,759
322,724,566
(185,282)
322,539,284
321,909,382
621,425
322,530,807
(120,487)
322,410,320
There is only one class of share in issue: ordinary shares of 10 pence each. All shares carry equal rights to dividends, voting and return of
capital on a winding up of the Company, as set out in the Company’s Articles of Association.
The own shares held represent the number of shares held by the Employee Benefit Trust and Yorkshire Building Society to satisfy Long Term
Incentive Plan awards for Executive Directors and Senior Executives and Share Investment Plan awards for employees.
27. Share premium account
Group and Company
At 1 January
Premium on shares issued
At 31 December
As at
31 December
2021
£’000
As at
31 December
2020
£’000
24,567
60
24,627
24,359
208
24,567
28. Commitments
At 31 December 2021 the Group had contractual commitments due under construction contracts of £5.6m (2020: £nil). Capital
commitments for the acquisition of property, plant and equipment are disclosed in Note 12. Future expenditure required to bring our
investment and development properties to their highest and best use are not considered to be capital commitments; however, such build
costs for our investment properties are disclosed as a significant unobservable input in the valuation of Major Developments as set out in
Note 14.
29. Operating leases
Future minimum lease receipts
At 31 December 2021 the Group had contracted with tenants for the following future minimum lease payments:
Less than one year
Between one and two years
Between two and three years
Between three and four years
Between four and five years
More than five years
As set out in Note 14, property rental income earned during the year was £19.5m (2020: £14.8m).
Group
As at
31 December
2021
£’000
As at
31 December
2020
£’000
17,220
14,689
13,100
11,033
10,200
122,303
188,545
15,991
13,353
12,003
11,150
10,469
118,267
181,233
218
Notes to the financial statementsfor the year ended 31 December 2021Harworth Group plcFinancial Statements 30. Related party transactions
Group
The Group carried out the following transactions with related parties during 2021. The following entities are related parties as a
consequence of shareholdings, joint venture arrangements and partners of such and/or common Directorships. All related party
transactions are clearly justified and beneficial to the Group, are undertaken on an arm’s-length basis on fully commercial terms and in the
normal course of business.
PEEL GROUP
Revenue
Profit on sale from overages
Disposal proceeds at Logistics North
Purchases
Reimbursement of technical due diligence
Receivables
Deferred consideration for land at Logistics North
MULTIPLY LOGISTICS NORTH HOLDINGS LIMITED & MULTIPLY LOGISTICS NORTH LP
Revenue
Recharges of costs
Asset management fee
Water charges
Purchases
Diversion of surface water drain
Receivables
Trade receivables
Other receivables
POLYPIPE
Revenue
Rent
Receivables
Trade receivables
WAVERLEY SQUARE LIMITED
Shareholder loan made during the year*
Year ended/as at
31 December
2021
£’000
Year ended/as at
31 December
2020
£’000
–
2,019
91
200
987
–
–
–
Year ended/as at
31 December
2021
£’000
Year ended/as at
31 December
2020
£’000
136
271
107
–
66
–
–
107
100
97
153
285
Year ended/as at
31 December
2021
£’000
Year ended/as at
31 December
2020
£’000
25
6
5
–
Year ended/as at
31 December
2021
£’000
Year ended/as at
31 December
2020
£’000
–
169
* Waverley Square Limited became a fully owned subsidiary of the Group on 26 June 2020 and has been placed into liquidation, to complete within 12 months of the year end.
219
Annual Report and Financial Statements 2021Financial Statements 30. Related party transactions continued
THE AIRE VALLEY LAND LLP
Partner loan repayment
Profit share received during the year
Receivable
CRIMEA LAND MANSFIELD LLP
Partner loan repayment
Receivable
NORTHERN GATEWAY DEVELOPMENT VEHICLE LLP
Partner loan made during the year
Receivable
HALLAM LAND MANAGEMENT LIMITED
Purchases
Purchase of share of interest of Ansty Development Vehicle LLP
Payables
Deferred payment in respect of the acquisition of Ansty Development Vehicle LLP
BATES REGENERATION LIMITED
Shareholder loan repayment*
*Bates Regeneration Limited was dissolved during the year, on 12 October 2021.
BANKS GROUP
Revenue
Annual option sums
Provision of certificate regarding title
Payables
Trade payables
Deferred payment in respect of the acquisition of land at Moss Nook
220
Year ended/as at
31 December
2021
£’000
Year ended/as at
31 December
2020
£’000
–
–
26
(7,951)
(979)
2
Year ended/as at
31 December
2021
£’000
Year ended/as at
31 December
2020
£’000
(30)
–
–
2
Year ended/as at
31 December
2021
£’000
Year ended/as at
31 December
2020
£’000
1,003
25
–
528
Year ended/as at
31 December
2021
£’000
Year ended/as at
31 December
2020
£’000
–
–
7,848
(3,803)
Year ended/as at
31 December
2021
£’000
Year ended/as at
31 December
2020
£’000
(4)
–
Year ended/as at
31 December
2021
£’000
Year ended/as at
31 December
2020
£’000
5
–
–
–
5
1
(5)
(1,000)
Notes to the financial statementsfor the year ended 31 December 2021Harworth Group plcFinancial Statements 30. Related party transactions continued
Company
The Company carried out the following transactions with subsidiary undertakings.
Details of the Company’s intercompany balances and interest receivable/(payable) are set out below:
EOS Inc. Limited
Harworth Estates Limited
Harworth Estates (Agricultural Land) Limited
Harworth Estates Investments Limited
Harworth Guarantee Co. Limited
Harworth Estates Overages Limited
Harworth Estates Mines Property Limited
Harworth Estates Curtilage Limited
Harworth Estates Waverley Prince Limited
Harworth Estates Property Group Limited
Harworth Surface Water Management (North West) Limited
Coalfield Estates Limited
Harworth Estates Warwickshire Limited
Harworth TRR Ltd
Logistics North MC Limited
POW Management Company Limited
Rossington Community Management Company Limited
Flass Lane Management Company Limited
Mapplewell Management Company Limited
Cadley Park Management Company Limited
Simpson Park Management Company Limited
Ansty Development Vehicle LLP
Year ended/as at 31 December 2021 Year ended/as at 31 December 2020
Net interest
receivable/
(payable)
in the year
£’000
Net amounts due
from/(to)
£’000
Net interest
receivable/
(payable)
in the year
£’000
Net amounts
due from/(to)
£’000
411
(64)
(33)
(166)
–
–
–
45
(6)
(108)
(10)
–
–
–
–
–
–
–
–
–
–
–
69
19,238
(4,655)
(1,824)
(10,283)
–
2
6,256
2,216
(265)
(6,662)
(510)
–
2
13
2
(1)
(1)
(1)
(1)
(1)
(1)
6
3,530
526
(51)
(39)
(92)
–
–
–
54
(7)
(90)
(2)
–
–
–
–
–
–
–
–
–
–
–
299
20,970
(2,881)
(1,551)
(4,605)
(49)
–
6,250
2,170
(274)
(4,035)
(502)
(29)
–
–
–
–
–
–
–
–
–
–
15,464
Dividends received
During the year the Company received dividends of £nil (2020: £nil) from subsidiary undertakings.
221
Annual Report and Financial Statements 2021Financial Statements 31. Post balance sheet events
Following the balance sheet date Harworth has agreed a new senior debt package comprising a five-year £200 million RCF together with a
£40 million uncommitted accordion option, provided by NatWest, Santander and HSBC.
The facility replaces Harworth’s previous RCF with NatWest and Santander, which was increased from £130 million to £150 million in 2021,
and had an expiry date of February 2024.
The new RCF is aligned to Harworth’s strategy to reach £1bn of EPRA NDV over five to seven years and provides significant additional
liquidity and flexibility. The interest rate of the facility is on a ratchet mechanism with a margin payable above SONIA in the range of 2.25%
to 2.50%.
Harworth’s financing strategy remains to be prudently geared. The Income Generation portfolio provides a recurring income source to service
debt facilities and this is supplemented by proceeds from an established sales track record that has been built up since re-listing in 2015.
To deliver the strategic plan, Harworth has adopted a target net loan to portfolio value at year end of below 20%, with a maximum year end
net loan to portfolio value of 25%. The Group will continue to use site-specific development and infrastructure loans alongside the main
banking facilities to support the revised strategy.
There are no other post balance sheet events to disclose that have not been disclosed publicly by a regulatory news announcement.
222
Notes to the financial statementsfor the year ended 31 December 2021Harworth Group plcFinancial Statements Glossary of frequently used
terms and abbreviations
2018 Code
AGM
AMP
APM
BCP
BREEAM
CDM
CEO
CFO
CIO
COO
CPD
DSBP
EA
EAP
EBT
EPRA
ERV
ESG
EY
GDPR
GLC
GRAM
GVA
KPI
KWh
LEP
LTIP
LTV
NAV
NDV
PEVG
PPA
PSG
PV
RCF
RICS
RIDDOR
RSP
SAYE
Senior Executive
Senior Leadership Team
SIP
SSSI
TCFD
TSR
WAULT
2018 UK Corporate Governance Code
Annual General Meeting
Advanced Manufacturing Park
Alternative Performance Measure
Business Continuity Plan
Building Research Establishment Environmental Assessment Method
Construction Design and Management
Chief Executive
Chief Financial Officer
Chief Investment Officer
Chief Operating Officer
Continuous Professional Development
Deferred Share Bonus Plan
Environment Agency
Employee Assistance Programme
Employee Benefit Trust
European Public Real Estate Association
Estimated Rental Value
Environmental, Social and Governance
Ernst & Young LLP
General Data Protection Regulation
Group Leadership Committee
Group Risk and Assurance Map
Gross Value Added
Key Performance Indicator
Kilowatt hours
Local Enterprise Partnership
Long-Term Incentive Plan
Loan to portfolio value
Net Asset Value
Net Disposal Value
Profit Excluding Value Gains
Planning Promotion Agreement
People Steering Group
Photo-Voltaic
Revolving Credit Facility
Royal Institution of Chartered Surveyors
Reporting of Injuries, Diseases and Dangerous Occurrences Regulations
Restricted Share Plan
Save As You Earn
Comprises the CEO, CFO, COO, CIO and General Counsel
Comprises the Investment Committee and Group Leadership Committee, see page 89
Share Incentive Plan
Site of Special Scientific Interest
Task Force on Climate-Related Financial Disclosures
Total Shareholder Return
Weighted average unexpired lease-term
223
Annual Report and Financial Statements 2021Financial Statements Company information
and investor timetable
Chair
Alastair Lyons
Chief Executive
Lynda Shillaw
Chief Financial Officer
Kitty Patmore
Non-Executive Directors
Angela Bromfield
Ruth Cooke
Lisa Scenna
Patrick O’Donnell Bourke
Steven Underwood
Martyn Bowes
Company Secretary
and Registered Office
Christopher Birch
Advantage House
Poplar Way
Rotherham, S60 5TR
External Auditors
Ernst & Young LLP
1 Bridgewater Place
Water Lane
Leeds, LS11 5QR
Solicitors
DLA Piper UK LLP
1 St Paul’s Place
Sheffield, S1 2JX
Brokers
Peel Hunt LLP
100 Liverpool Street
London, EC2M 2AT
Liberum Group Limited
Ropemaker Place
25 Ropemaker Street
London, EC2Y 9LY
Registrars
Equiniti Limited
Aspect House
Spencer Road
Lancing
West Sussex, BN99 6DA
Principal lenders
National Westminster Bank plc
3rd Floor
2 Whitehall Quay
Leeds, LS1 4HR
Santander UK plc
44 Merrion Street
Leeds, LS2 8JQ
HSBC UK Bank plc
1 Centenary Square
Birmingham, B1 1HQ
Company Registered Number
02649340
Share price information
The Company’s Ordinary Shares are traded
on the London Stock Exchange.
SEDOL number BYZJ7G4
ISIN number GB00BYZJ7G42
Reuters ticker HWG.L
Bloomberg ticker HWG:LN
LEI Code
213800R8JSSGK2KPFG21
Financial Calendar
Annual General Meeting
The Bessemer Conference Room, AMP Technology Centre, Advanced Manufacturing Park,
Brunel Way, Catcliffe, Rotherham, S60 5WG.
Interim Results Announcement 2022
Interim Results to be published at www.harworthgroup.com/investors
24 May 2022
September 2022
Registrars
All administrative enquiries relating to shareholdings should, in the first instance, be directed to Equiniti, Aspect House, Spencer Road,
Lancing, West Sussex, BN99 6DA (telephone: 0371 384 2301) and should clearly state the registered shareholder’s name and address.
Dividend mandate
Any shareholder wishing dividends to be paid directly into a bank or building society should contact the Registrars for a dividend mandate
form. Dividends paid in this way will be paid through the Bankers’ Automated Clearing System (BACS).
Website
The Group has a website (www.harworthgroup.com) that gives further information on the Group.
224
Harworth Group plcFinancial Statements
Harworth Group plc
Head Office
Advantage House
Poplar Way
Rotherham
S60 5TR
@harworthgroup
@HarworthGroup
harworthgroup
harworthgroup.com