Creating
sustainable
places where people
want to live
and work
Harworth Group plc
Annual Report and
Financial Statements 2022
Our purpose is to invest to transform
land and property into sustainable places
where people want to live and work
Who we are
Harworth is one of the leading land and property regeneration companies in the UK, owning
and managing over 13,000 acres across around 100 sites in the North of England and the
Midlands. Based in Rotherham, South Yorkshire, we also have regional offices in Birmingham,
Leeds and Manchester.
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 our stakeholders.
Harworth has a Premium Listing on the Main Market of the London Stock Exchange (LSE: HWG).
What we do
As a master developer, we create long-term value by acquiring and assembling sites that are
large, complex and often had former industrial uses, and transforming them into sustainable
residential and industrial & logistics developments, with a focus on placemaking.
Our team comprises experts in transactions, planning, land remediation, engineering and
development, supported by central functions and a highly experienced management team.
We have three regional teams – Yorkshire & Central, North West and the Midlands – which
bring further local knowledge, expertise and relationships.
Our Purpose, culture and values
Our ability to execute our strategy and deliver our Purpose is reliant on delivering against our
sustainability framework, The Harworth Way, and 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 ensures we succeed 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.
2022 Highlights
Total Return1
0.1%
2021: 24.6%
6
.
4
2
EPRA NDV per share1
Operating profit
196.5p
2021: 197.6p
£44.5m
2021: £121.9m
6
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18
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22
18
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20
21
22
18
19
20
21
22
Industrial & logistics
pipeline (sq. ft)
35.0m
2021: 28.2m
Residential
pipeline (plots)
29,311
2021: 30,804
Potential value to local
communities (‘GVA’)
£4.6bn
2021: £4.1bn
0
.
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.
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18
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20
21
22
Our Net Zero Carbon (‘NZC’) commitments:
NZC for Scope 1, Scope 2
and Scope 3 business travel
emissions by 2030
NZC for all emissions by 2040
Find out more about our sustainability framework,
The Harworth Way, on pages 64 to 77
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
01
Contents
Harworth at a Glance
2022 Highlights
Strategic Report
Highlights of 2022
Our portfolio
Chair's statement
Our business model
Our markets
Our growth strategy
Key performance indicators
Chief Executive’s review
Operational review
Financial review
Long-term viability statement
Section 172 statement
Effectively managing our risk
Task force on Climate-related
Financial Disclosures
SECR disclosure
The Harworth Way
The Harworth Way – Planet
The Harworth Way – Communities
The Harworth Way – People
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
IFC
01
02
04
06
08
10
12
18
22
26
29
36
39
43
54
62
64
66
71
75
79
82
86
98
106
113
115
134
138
141
152
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
158
cash flows
Company statement of cash flows 159
160
Notes to the financial statements
153
154
155
156
157
Harworth Group plc: Annual Report and Financial Statements 2022
02
Highlights of 2022
Creating
places
and work
Acquisitions during the year have the potential
to deliver 2,643 homes and 8.5m sq. ft of
employment space
Completed our Bardon Hill development
in Leicestershire, creating 332,000 sq. ft of
sustainable Grade A space
Applications for 5.6m sq. ft of employment space
progressing through the planning system at
year-end, representing our next generation of
development sites
Strong financial position, with significant available
liquidity, provides flexibility and firepower to
pursue opportunities
Delivered a 100,000 sq. ft high-specification
building at the Advanced Manufacturing Park
('AMP') in Rotherham for a growing sportswear
manufacturer
Commenced work on the next phases of our
Gateway 36 development in Barnsley and the AMP,
supporting further investment and job creation
across South Yorkshire
Land sales supported the delivery of 2,236 homes,
Formation of our Net Zero Carbon ('NZC') pathway,
including at Waverley in South Yorkshire and
targeting NZC for Scope 1, Scope 2 and Scope 3
Benthall Grange in Ironbridge
business travel emissions by 2030, and NZC for all
Placemaking continued across our developments
emissions by 2040
as we progressed plans for new retail provision,
All new commercial buildings developed in the year
medical centres, schools and green space
for our Investment Portfolio were rated EPC A and
Developing mixed tenure products, with launch of
targeted BREEAM Excellent
sites for a single-family rental portfolio, meeting the
All new masterplans and commercial buildings
needs of local people and further diversifying our
included renewable energy provision
neighbourhoods
Read more on pages 22 to 35
Read more on page 26
Read more on page 27
Read more on pages 66 to 70
Strategic ReportHarworth Group plc: Annual Report and Financial Statements 2022 03
sustainable
where people
want to live
Acquisitions during the year have the potential
to deliver 2,643 homes and 8.5m sq. ft of
employment space
Completed our Bardon Hill development
in Leicestershire, creating 332,000 sq. ft of
sustainable Grade A space
Applications for 5.6m sq. ft of employment space
Delivered a 100,000 sq. ft high-specification
progressing through the planning system at
building at the Advanced Manufacturing Park
year-end, representing our next generation of
('AMP') in Rotherham for a growing sportswear
development sites
manufacturer
Strong financial position, with significant available
Commenced work on the next phases of our
liquidity, provides flexibility and firepower to
Gateway 36 development in Barnsley and the AMP,
pursue opportunities
supporting further investment and job creation
across South Yorkshire
Land sales supported the delivery of 2,236 homes,
including at Waverley in South Yorkshire and
Benthall Grange in Ironbridge
Placemaking continued across our developments
as we progressed plans for new retail provision,
medical centres, schools and green space
Developing mixed tenure products, with launch of
sites for a single-family rental portfolio, meeting the
needs of local people and further diversifying our
neighbourhoods
Formation of our Net Zero Carbon ('NZC') pathway,
targeting NZC for Scope 1, Scope 2 and Scope 3
business travel emissions by 2030, and NZC for all
emissions by 2040
All new commercial buildings developed in the year
for our Investment Portfolio were rated EPC A and
targeted BREEAM Excellent
All new masterplans and commercial buildings
included renewable energy provision
Read more on pages 22 to 35
Read more on page 26
Read more on page 27
Read more on pages 66 to 70
Strategic ReportHarworth Group plc: Annual Report and Financial Statements 2022 04
Our portfolio
M74
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
35.0m sq. ft of industrial & logistics
space and 29,311 residential plots.
We also have a 4.0m sq. ft Investment
Portfolio spread across all three
operating regions.
Read more about our portfolio
on pages 26 to 28
A74(M)
M6
M6
6
27
M56
Liverpool
21
24
Leeds
29
18
19
23
12
10
22
17
26
M62
MManchester
30
M1
A1(M)
15
Sheffield
11
28
1
8
M180
4
Rotherham
Rotherham
3
7
M1
16
M6
M54
5
25
31
M42
Nottingham
20
2
M69
Leicester
M6
Birmingham
Birmingham
9
Coventry
14
A1(M)
M5
M50
M1
13
Key residential developments
Key industrial & logistics developments
Investment Portfolio
M40
Major
development
Strategic
Land
Major
development
M4
Strategic
Land
A1(M)
M11
M25
1 Waverley
2 South East Coalville
3 Simpson Park
4 Pheasant Hill Park
9 Ansty
10 N. Yorkshire site
19 Nufarm
20 Bardon Hill
M3
11 Advanced Manufacturing Park1
21 Knowsley
12 Gascoigne Wood
22 Preston
5 Benthall Grange (Ironbridge)
13 Junction 15, M1
23 Sherburn-in-Elmet
M23
6 Moss Nook
7 Thoresby Vale
8 Staveley
1
Sites contain some Investment Portfolio assets
14 Rothwell
15 Gateway 361
16 Chatterley Valley
17 Wingates
18 Skelton Grange
24 Flaxby
25 Dudley
26 Logistics North
27 Widnes
Strategic ReportHarworth Group plc: Annual Report and Financial Statements 2022 M74
A74(M)
M6
M6
6
27
M56
16
M6
M54
5
M5
M50
22
17
26
M62
30
MManchester
Liverpool
21
24
Leeds
29
18
19
23
12
10
Sheffield
28
Rotherham
Rotherham
M180
M1
A1(M)
15
11
1
8
M1
4
3
7
Nottingham
20
2
Leicester
M69
M6
31
Birmingham
Birmingham
9
Coventry
25
M42
14
A1(M)
M4
M25
M1
13
M40
M3
A1(M)
M11
M23
Portfolio overview
Natural Resources
& other
Industrial & lo
g
i
s
t
i
c
s
£737m
R
e
s
i
d
e
ntial
Industrial & logistics
Investment Portfolio: £281m; 4.0m sq. ft
Major developments: £68m; 5.4m sq. ft
Strategic land: £82m; 29.6m sq. ft
Residential
Major developments: £228m; 6,111 plots
Strategic Land: £51m; 23,200 plots
Strategic Report
05
Investment case
Investment case
Uniquely positioned as a
specialist regenerator of large
complex sites
Extensive, high-quality
pipeline of strategic land,
driving future growth
Focused on the resilient
industrial & logistics and
residential markets
Regional footprint provides
exposure to high-growth and
under-served markets
A responsible business,
committed to placemaking
and a NZC future
Strong financial position,
with significant available
liquidity
Growth strategy
1
Increasing direct
development of industrial
& logistics sites
2
Accelerating sales and
broadening the range of
residential products
3
Growing strategic
land portfolio and land
promotion activities
4
Repositioning Investment
Portfolio to modern Grade A
Harworth offices
28 Rotherham
29 Leeds
30 Manchester
31 Birmingham
Ambition:
£1bn
of EPRA NDV
by 2027
delivered responsibly
Harworth Group plc: Annual Report and Financial Statements 2022
06
Chair’s statement
“ Harworth is a long-term business with
a long-term strategy to build value
for all our shareholders by creating
sustainable places where people want
to live and work.”
Alastair Lyons
Chair
Lynda’s Chief Executive’s report clearly
outlines the significant progress achieved
during 2022 in advancing the strategy
that she outlined in the 2021 interim
statement during her first full year as Chief
Executive. Notwithstanding the volatile
market conditions experienced during the
second half of 2022, the sales, consents,
and acquisitions achieved demonstrated
our ability to capitalise on the fundamental
strength of our core industrial & logistics
and residential markets.
Harworth is a long-term business with a
long-term strategy to build value for our
shareholders by creating sustainable places
where people want to live and work. By
way of illustration of our long-term nature,
our portfolio contains sites such as Waverley
where we started remediation of the former
Orgreave coking works 27 years ago and we
anticipate it will be another four years before
everything there is complete from Harworth’s
perspective. It will then have 3,038 homes
and 2.1m sq. ft of commercial space, with the
potential for 4,000 jobs, 310 acres of green
space, a medical centre and a school, and
other retail and leisure provision. Looking
forward it is the same story: large sites we
buy today may still be delivering new homes
and commercial property in 10 or 15 years’
time. As a Board we must, therefore, have a
'through-the-cycle' mindset whilst ensuring
the business has the financial and operational
resilience to weather whatever the cycle may
throw at us.
That our markets have turned down
materially since we last reported six months
ago is very clear: how long this downturn
will continue and what shape it will be
is uncertain and dependent on events
outside of our, and to a great extent the
UK’s, control. What is, however, certain
is that over the long term England needs
300,000 new homes every year and that
the changing nature of our economy, in
particular in retail distribution and reducing
dependence on long complex international
supply chains, will support demand for
new energy efficient commercial space.
We, therefore, have the confidence to
continue to invest in opportunities for
future development provided, of course,
the economics reflect the current market,
and we have the financial resources to
hold assets where we consider today’s
markets apply an excessive discount for the
present uncertainty. The need to ensure
our resilience will inevitably reduce our risk
appetite, particularly for direct development
without the commitment of an occupier, but
such cautious deployment of our resources
will in turn enable us to consider whether to
take advantage of the unexpected.
Everyone in Harworth is aligned with our
shareholders in seeking to grow the value
of the business, and our senior executives
are strongly aligned to do this. Over the
past two years we have materially extended
the proportion of our employees who
receive shares under our various schemes.
The Restricted Share Plan scheme that we
launched in 2019 to just the 21 most senior
executives is now offered to 65 of our
executives and managers making up around
50% of our employees. Beyond that, we have
an All Employee Share Incentive Plan into
which we introduced Partnership Shares and
Matching Shares in 2022. We all, therefore,
share the frustration of our investors in the
discount currently applied by the stock
market to our shares and those of many other
companies in our sector. However, we are
clear from our previous experience that the
way to narrow this discount is to focus on
trading strongly by delivering a well thought
through strategy and to communicate very
clearly our progress and potential to both
current and future investors.
From the feedback that we receive from our
investors and the wider market, it is evident
that our strategy is clear, well understood,
and supported - to build on Harworth’s
long-established specialist expertise as
a master developer of large complex
sites, moving faster through our sites by
broadening the tenures we offer and
increasing our share of the value chain
through direct development. Lynda
Shillaw and Kitty Patmore have invested
considerable time and energy over the past
year developing this understanding amongst
investors both present and potential, seeking
to ensure they can fairly assess the inherent
value of our business and its assets. The
recent volatility that has resulted in our sector
being less attractive for investors will not
cause us to change our strategy although it
may impact its speed of implementation.
When I became Chair in March 2018
Harworth had 57 employees and a
last reported EPRA NDV of £414.2m
Strategic ReportHarworth Group plc: Annual Report and Financial Statements 2022 07
(and a statutory net asset value of £409.3m).
As at December 2022 this had increased
to £633.8m of ERPA NDV and £602.7m
of statutory net assets, despite the 12.6%
reduction in the value of our estate in the
second half of last year. To deploy fully this
significantly increased scale we now have
118 employees, with the specialist skills
needed to progress the development of
our expanded range of sites and support
our strategic drives into mixed tenure
and direct development. It is testament
to the culture at Harworth and the values
lived by its leaders, together with our very
progressive approach to pay, benefits, and
terms of employment that we have built
and retained the capabilities we need in a
very challenging labour market. Employers
used to choose people to work for them
and tell them where and when to work: now
people choose whom to work for and place
high value on flexibility both as to location
and how to work! We held our Employee
AGM in September, which provided an
opportunity for all our employees to engage
directly with our Non-Executive Directors.
My colleagues and I were very struck by
the extent of understanding of the strategy
evidenced at that meeting and the depth
of thought as to the implications of the then
turbulent macro-economic environment on
our markets and, therefore, our business.
To be successful the vision cannot just be
of the few who lead the business: it must
be shared by all as everyone has their part
to play in achieving it – we came away with
the firm view that the Harworth vision,
developed by Lynda and her team, is widely
shared by our people.
Alongside the rest of the market, planning
what the business will aim to achieve in 2023
has been as much art as science given the
prevailing uncertainty. However, whilst we
cannot control markets, we can position
ourselves to make the most of what positive
momentum may develop during the year,
progressing those sites that will be most in
demand by housebuilders as oven-ready
product in strong locations, working with
potential occupiers of commercial space to
tailor what we bring forward to meet their
requirements through build-to-suit and
pre-let development . We will also seek to
advance sites through the planning process
so that, when market conditions are right to
invest further in particular sites, we have the
consents we need to progress. 2023 will be
no less demanding of our management and
their teams than 2022. However, although
there will be both market headwinds and
tailwinds as we go through the cycle,
fundamentally over the long term all of the
value created in the business will be due to
management actions. It is the effectiveness
of management in these actions that we
want our annual variable bonus scheme
to recognise. This is why you will see from
our Remuneration Committee Chair’s letter
that the Committee has this year specifically
reserved discretion, both positive and
negative, to adjust the vesting outcome for
what is achieved against target for the Total
Return financial measure if our underlying
markets move materially differently to what
we are currently projecting within our
business plan for 2023.
Last year saw a considerable advance in
pulling together the elements of ESG that
are already embedded within our strategy
into an overarching framework for delivery,
and in defining the keys steps and metrics of
our NZC pathway. Our Purpose of creating
sustainable places where people want to live
and work makes ESG considerations central
to everything we do. For every potential
development we assess its environmental
and social implications: what it will contribute
to the communities it will serve; how it can
be sustainable in both construction and
operation; and how we can optimise its
impact on the environment and maximise
the resulting bio-diversity net gain. Being
an environmentally and socially focused
developer is no longer a nice to have but a
must have to meet the aspirations of our many
stakeholders: landed estates mindful of their
legacy; planners and regional development
authorities; investors seeking assets that will
retain their value for the long term; funders
conscious of the ESG requirements of their
own investors and regulators; and our people
who want more than a financial return from
their work, gaining the satisfaction of having
made a difference to the world in which
we live. We have made good progress in
understanding the carbon emissions for
which we are currently responsible, and
what will arise in the future if we deliver
against our plans. With an understanding
of the sources and their quantum we know
where to focus our efforts, and also those of
our suppliers and contractors, to minimise
both operational and embedded emissions
as we work towards our target of NZC for
all emissions by 2040. Having defined the
building blocks of our NZC pathway we
will be able to report progress against their
implementation in subsequent years.
Our ESG Committee is now well established
with a clear agenda focused on agreeing
the principal elements of our plans to
achieve our ESG objectives, measuring our
progress in their delivery, and ensuring that
we report this clearly and accurately to our
stakeholders. We were, therefore, delighted
to have Marzia Zafar join us in June as a
Non-Executive Director and a member of
the ESG Committee. Marzia brings a wealth
of knowledge and experience in the area
of sustainability, having spent over 20 years
working on policies and strategies to enable
energy transition for regulators, business
and not for profit sectors. Since joining the
Board she has been appointed as Deputy
Director of Strategy and Decarbonisation
at Ofgem. The appointment to the Board
of someone from a different personal and
professional background is testament to our
commitment to diversity and inclusion.
In signing off on 2022 my very grateful
thanks on behalf of our whole Board to
everyone within the business who did
so much to achieve so much during the
year, and in particular to Lynda and her
management team. We have moved a
long way in 12 months with much that was
in planning a year ago to implement our
strategy now a reality. My thanks also to
our investors who in very large part have
stayed the course with us: your ongoing
support is critical to us as we exist to create
value for you. As a master developer we
rely on many other organisations to make
possible what we deliver – my thanks to
all our suppliers, consultants, contractors,
and partners, those with whom we work
in planning departments, and the agents
with whose clients we transact on both
the buy and sell sides. We recognise fully
how much we owe to all our stakeholders
and commit to help them achieve their
objectives as we deliver against our own.
Alastair Lyons
Chair
13 March 2023
Strategic ReportHarworth Group plc: Annual Report and Financial Statements 2022 08
Our business model
INPUTS
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.
Strategic land
Major developments
Read more on the case study on pages 16 to 17
n
o
i
t
a
e
r
c
e
u
a
V
l
Acquisitions and
land assembly
Our acquisition teams work
across our regions to identify
new sites to add to our
portfolio, through freehold
purchases, options or Planning
Promotion Agreements
('PPAs'). Often larger sites are
assembled over a number of
years through the acquisition of
smaller land parcels.
Masterplanning
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 the wider
strategic aims of local and
central government.
Planning approval
Once a strategic vision for a
site has been determined,
our planners work with local
authorities to progress this
through the planning system.
We have a very high success
rate of securing planning
permissions, while working
collaboratively with local
stakeholders.
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.
OUTPUTS
Our people
Investors
Communities
Read more about
our approach to
stakeholders on
pages 39 to 42
An open and collaborative
culture, with teams working on
market-leading projects with
pride and enjoyment
Strong returns, with a target to
reach £1bn of EPRA NDV by
2027, delivered responsibly
Sustainable places where
people want to live and work,
with connectivity, green space
and amenities
Strategic ReportHarworth Group plc: Annual Report and Financial Statements 2022
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% in year. 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.
e
c
n
a
n
r
e
v
o
G
09
Planet
T
h
e
H
a
r
w
o
t
h
W
a
s
r
e
n
t
r
a
P
y Pillars
Major developments
Investment portfolio
Read more on pages 64 to 77
People
Communities
Read more on the case
study on pages 14 to 15
Plot sale or direct
development
At our residential sites, we largely sell
serviced plots to housebuilders. From
2023, we will also be working with
partners to deliver alternative tenures.
For our industrial & logistics sites we
either directly develop units 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 investment creates a sense
of community that improves the
wellbeing of residents and those
working there and enhances the
attractiveness and value of our sites.
Asset
management
We retain some of the Grade A
industrial & logistics units that we
directly develop and let these to a
diverse range of occupiers. These
generate a recurring income and
allows us to derive further value from
the high standards of placemaking
and environmental specifications at
our sites.
Suppliers
Customers
Funders
Government
Strong partnerships based
on trust, fairness, and shared
values and objectives
A high-quality product
delivered on time, and a strong
working relationship that drives
repeat business
A regular and open
dialogue, with updates on
our operational and financial
performance
A trusted partner in delivering
homes, jobs and opportunities
across the regions
Strategic ReportHarworth Group plc: Annual Report and Financial Statements 2022
10
Our markets
We operate in the industrial & logistics and residential markets, which continue to
benefit from favourable supply and demand dynamics, structural growth, and strong
support from local and central government.
Industrial & logistics
Demand remains above long-term
averages, but declined significantly in
the second half of 2022
A shift is underway in the sectors
driving demand, and the type of
space they require
Supply still highly constrained, while
market-wide vacancy remains close to
a record low
Data from Savills indicates that 2022 was
the third-strongest year ever for take-up,
with 48m sq. ft of space transacted.
However, it was very much a year of two
halves, with a record breaking first half
giving way to a weaker second half, and
take-up slowing in the fourth quarter, albeit
remaining well above the 15-year average.
2022, the third-strongest year on record for take-up of
UK industrial & logistics space
)
m
(
ft
.
q
s
60
50
40
30
20
10
0
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
Q1
Q2
Q3
Q4
10-year average
Source: Savills
Build-to-suit transactions reached a record
high in 2022, equating to 50% of all take-up.
Amongst the remaining speculative take-up,
over half of transactions occurred before
the space had been practically completed,
meaning the average void for speculatively
constructed units during the year was just
one month.
Occupational demand remains resilient,
although the sector is not recession proof.
Rising interest rates, a tighter lending
environment and general economic
uncertainty have weighed on demand in the
investment market, and are likely to continue
to in the short term.
In response, decisions to start new
speculative direct development projects
in the year will be market-driven, while we
continue to progress land sales, pre-let and
build-to-suit opportunities, for which we
continue to see demand across our sites.
Looking at demand by market sector,
online retailers saw their lowest take-
up of space in five years in 2022, while
traditional retailers saw their highest take-
up since 2016. The third-party logistics
(‘3PL’) and manufacturing sectors recorded
their strongest years ever, accounting for
30% and 24% of the market respectively.
The increased demand from these sectors
is likely driven by an increased focus by
occupiers on supply chain resilience,
onshoring and near-shoring.
Grade A space accounted for 86% of
take-up, a significantly higher proportion
than the long-term average of 60%,
demonstrating that, more than ever,
occupiers are demanding high-quality
space and ESG-compliant facilities in order
to provide better staff welfare and attract
and retain both talent and business.
86% of
demand was
for Grade A
space
Strongest
year ever for
manufacturing
take-up
3PL accounted for
30% of take-up
One of our key strategic objectives is to
directly develop and retain high-quality
Grade A space. This ensures we are
meeting the demand of occupiers, while
ensuring staff welfare and NZC goals are
prioritised.
During 2022, supply of industrial &
logistics space trended slightly upwards
to 26m sq. ft, reflecting a vacancy rate of
3.9%. Both of these figures remain close
to record lows, which is mainly the result
of significant levels of take-up in recent
years in addition to factors such as planning
delays, which have constrained the
creation of new space.
Grade A continues to account for an
ever-higher share of supply, as developers
respond to the sustainability needs of
occupiers.
Industrial & logistics supply continues to be constrained
)
m
ft
.
q
s
(
y
p
p
u
S
l
100
90
80
70
60
50
40
30
20
10
0
20%
10%
0%
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
Supply (LHS)
Vacancy rate (RHS)
Source: Savills
Some of Harworth’s focus regions have
particularly low supply and vacancy rates,
for example the West Midlands, where
vacancy is around 3%. This should provide
additional support to the occupational
market in these regions.
Capital markets in the industrials
sector impacted by wider headwinds
The real estate capital markets have
been negatively impacted by market
headwinds, particularly in the industrials
sector, following a period of very significant
growth. The MSCI-IPD index shows that
the UK industrial sector saw a capital
value decline of -18% during 2022, with a
decline of -27% during the last six months,
as an outward yield shift of 130bps for the
sector was only partially offset by rental
growth of +10.3%.
Strategic ReportHarworth Group plc: Annual Report and Financial Statements 2022
11
to ensure the planning system works fairly
and efficiently for all.
While we welcome some of the proposed
amendments to the National Planning
Policy Framework announced by the
Government in December 2022, other
changes such as the removal of the need
for planning authorities to maintain a
five-year supply of deliverable housing
sites could further exacerbate challenges
around delays and shortfalls in land supply.
Build-to-Rent market continues
to grow
b
e
F
-
0
1
b
e
F
-
7
1
b
e
F
-
4
2
The institutional Build-to-Rent (‘BTR’)
market continued its growth throughout
2022 as it establishes itself as an important
part of the wider private rental sector.
The latest data from the British Property
Federation and Savills projects the number
of completed BTR homes to increase
fivefold to 380,000 by 2032. Investors
are attracted to the highly defensive
and consistent returns offered and
opportunities to create low carbon homes
and sustainability-led rental communities.
Investment volumes in UK BTR continue to be strong
l
s
e
m
u
o
v
t
n
e
m
t
s
e
v
n
I
£5bn
£4bn
£3bn
£2bn
£1bn
£bn
2015
2016
2017
2018
2019
2020
2021
2022
Q1
Q2
Q3
Q4
Source: Savills
Our initial portfolio of sites for single-
family BTR homes, therefore, represents a
highly attractive proposition for investors
to access this market at scale, with
opportunities for further portfolios in the
future. For Harworth, it provides increased
resilience in the event of a material
downturn in the traditional 'Build-to-Sell'
market.
Residential
Housebuilding remains well below UK
Government targets
The UK Government has a long-standing
target to build 300,000 new homes per
year in England. While delivery has been in
excess of 200,000 for the past six years, it
remains well below the target level.
Annual net additional dwellings in England
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
2
2
-
1
2
0
2
New build completions
Other
Source: Department for Levelling Up, Housing &
Communities
Government interventions such as the
Help to Buy Mortgage Guarantee Scheme
(which has now been extended until
December 2023), Shared Ownership, and
the Affordable Homes Programme have
the potential to encourage further housing
development.
Buyer activity slowed towards the end
of 2022, with housebuilders reducing
delivery volumes and land buying
House prices fell during each of the four
final months of the year, according to data
from Nationwide, and all indicators point
to a slowdown in transactional activity
across the sector as the impact of higher
mortgage rates, challenging affordability
and subdued consumer confidence has
taken hold. As a result, supply of new
homes for sale reached around 42,000
in December 2022, its highest level since
May 2021. Reporting from housebuilders
points to a reduction in volumes over
the coming year and a more selective
approach to land acquisitions.
Data for 2023 so far shows that mortgage
rates are recovering from the disruption
seen in the second half of 2022, although
they remain some way off recent historical
averages.
Mortgage rates falling from their late 2022 highs
‘Mini-
budget’
7
6.5
6
5.5
5
4.5
4
)
%
0
(
e
t
a
r
e
g
a
g
t
r
o
M
t
p
e
S
-
2
0
t
p
e
S
-
2
1
t
p
e
S
-
6
1
t
p
e
S
-
3
2
t
p
e
S
-
0
3
t
c
O
7
0
-
-
t
c
O
1
2
t
c
O
4
1
t
c
O
8
2
v
v
o
o
N
N
4
5
0
2
Average 2-year fixed rate
v
o
N
8
1
v
o
N
-
1
1
-
-
-
-
c
e
D
2
0
-
-
-
-
n
a
J
-
n
a
J
-
n
a
J
-
n
a
J
-
c
e
D
6
1
c
e
D
3
2
c
e
D
9
0
Average 5-year fixed rate
b
e
F
-
3
0
6
0
7
2
0
2
3
1
Source: Mortgage Strategy 'Weekly rate watch'
We are encouraged by the fact that we
continue to see good levels of demand
from those housebuilders that have
stated that they are holding back on
land purchases, which underscores the
differentiated nature of our serviced and,
therefore, de-risked land product.
Planning approvals for major
residential projects fall to lowest
level for a decade
Data from the Department for Levelling
Up, Housing & Communities shows that
planning approvals for major residential
schemes reached their lowest level for
10 years in 2022. The planning system is
being constrained by limited resources,
more complex requirements and the
need for local authorities to divert funding
elsewhere.
Planning system constraints have limited
the ability of housebuilders to progress
strategic land into the development
phases. This could be a short-term benefit
for Harworth, as it drives demand for our
serviced land product, which is de-risked
and ready to build on.
We completed a record level of residential
plot sales in 2022, which was in part due
to bringing forward land sales originally
planned for the following year to take
advantage of buoyant market conditions.
However, in the longer term it is in both
ours and our housebuilding partners’
interests to ensure planning system reform
that delivers growth. We continue to work
with local authorities and industry groups
Strategic ReportHarworth Group plc: Annual Report and Financial Statements 2022
12
Our growth strategy
Our ambitious growth strategy builds on the skills of our people and the
strength of our portfolio to drive growth, maximise returns to investors and
grow the business to reach £1bn of EPRA NDV by 2027. The strategy
is focused around four key drivers of growth.
1
2
Increasing direct development
of industrial & logistics stock
Accelerating sales and broadening the
range of our residential products
Harworth is an experienced developer, having built 1.7m sq. ft of
industrial & logistics space since 2015, including a record level
of direct development in 2022.
Harworth’s residential land portfolio is significant and has the
ability to deliver around 29,000 housing units into the market,
with around a quarter of this already consented.
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.
While strong demand remains for the traditional Build-to-Sell
product offered by housebuilders, there is increased
consumer and investor appetite for mixed tenure products
such as BTR homes, affordable homes and retirement living.
What we will do
What we will do
Our strategy is to undertake the direct development of much of
our consented pipeline, scaling up to an average of 800,000
sq. ft per annum by 2027.
We intend to manage the market risk associated with
development by focusing on pre-let, build-to-suit and forward
funding opportunities alongside land sales when the market
appetite is less certain. Our programme of development will
be funded by a mixture of cash generated from the Group, our
core banking facilities and project debt and the potential use of
joint ventures.
Link to KPIs
• Total Return
• Net asset value, EPRA NDV per share and LTV
•
Industrial & logistics space directly developed
• Total industrial & logistics pipeline
• Potential GVA that could be delivered from our portfolio
• Scope 1, Scope 2 and Scope 3 business travel emissions
Link to principal risks
• Planning
• Supply chain cost inflation and constraints
• Supply chain and delivery partner management
• Residential and commercial markets
• Organisational development and design
• Availability of appropriate capital
• NZC pathway
Our portfolio is well-suited to delivering institutional quality
single-family rental homes. As a result, we launched our first
single-family BTR portfolio during the year. Our mixed tenure
team continue to explore opportunities to further diversify the
residential products at our sites.
Through a combination of increased plot sales for 'Build-to-
Sell' products and the launch of new residential products, our
ambition is to double residential sales to around 2,000 plots on
average per annum by 2027.
Link to KPIs
• Total Return
• Net asset value, EPRA NDV per share and LTV
• Number of plots sold to housebuilders
• Total residential pipeline
• Potential GVA that could be delivered from our portfolio
• Scope 1, Scope 2 and Scope 3 business travel emissions
Link to principal risks
• Planning
• Supply chain cost inflation and constraints
• Supply chain and delivery partner management
• Statutory costs of development
• Residential and commercial markets
• Organisational development and design
• Availability of appropriate capital
• NZC pathway
Strategic ReportHarworth Group plc: Annual Report and Financial Statements 2022 13
3
4
Growing our strategic land portfolio
and land promotion activities
Repositioning our Investment
Portfolio to modern Grade A
Our landbank underpins our ability to deliver our strategy.
Around a quarter of this is currently consented, as measured by
potential residential plots and industrial & logistics sq. ft.
Our Investment Portfolio is integral to the way that we fund our
business, providing recurring revenue and opportunities for
capital growth through asset management.
We take a long-term view to replenishing our landbank. Our
regional and head office teams have dedicated acquisitions
specialists, focused on acquiring and assembling land through
a mixture of freeholds, options, and PPAs.
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 lifespan.
What we will do
What we will do
We will maintain a 12–15-year land supply at any time, taking
account of our annual direct development volume and plot sale
ambitions.
As we step into the delivery of our strategy, organic growth
of the pipeline will be supplemented by developing key
partnerships to assemble and deliver large-scale regeneration
schemes with the potential for larger acquisition opportunities.
Link to KPIs
• Total Return
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 sustainable, high-quality
Grade A assets with good access to infrastructure and
proximity to urban centres.
This portfolio shift will enable us to meet our NZC targets and
provide opportunities to stabilise and grow capital values
across the units that we directly develop.
• Net asset value, EPRA NDV per share and LTV
• Total industrial & logistics pipeline
• Total residential pipeline
• Potential GVA that could be delivered from our portfolio
Link to principal risks
Link to KPIs
• Total Return
• Net asset value, EPRA NDV per share and LTV
•
Industrial & logistics space directly developed
• Total industrial & logistics pipeline
• Availability of and competition for strategic land sites
• Proportion of Investment Portfolio that is Grade A
• Planning
• Statutory costs of development
• Organisational development and design
• Availability of appropriate capital
• Scope 1, Scope 2 and Scope 3 business travel emissions
Link to principal risks
• Residential and commercial markets
• Organisational development and design
• Availability of appropriate capital
• NZC pathway
Strategic ReportHarworth Group plc: Annual Report and Financial Statements 2022 14
Case study
Direct development at Bardon Hill
During the year we completed the
direct development of 332,000 sq. ft of
Grade A industrial & logistics space at a
site in Bardon Hill, Leicestershire.
The development is strategically
located less than two miles from
Junction 22 of the M1, adjacent to
our residential South East Coalville
development, and within one of the
UK’s fastest growing manufacturing
and distribution locations, where
existing occupiers include Amazon,
Eddie Stobart and DHL.
Harworth acquired the 54-acre Bardon
Hill site in May 2018. The scheme received
outline planning consent from North West
Leicestershire Council in July 2019, and
approval of reserved matters was received
in March 2020. Construction commenced
in the second half of 2021.
The development comprises five units
ranging from 29,000 sq. ft to 119,000 sq.
ft, built to BREEAM Very Good standard,
EPC rating A and achieving NZC in
construction accreditation. All units have
first floor offices, secure service yards and
dedicated car parking spaces, ensuring the
units appeal to a wide range of potential
occupiers.
Located at the apex of UK's golden triangle
for logistics, the Bardon Hill site can serve
three-quarters of the UK population within
a single heavy-goods vehicle journey. It is
also located less than half an hour from East
Midlands Airport, home to the UK’s largest
air cargo operation.
To date, we have completed lettings
representing 188,000 sq. ft, with Charles
Kendall Freight, an international freight
forwarder, Zwilling J.A. Henckels AG,
a German kitchenware manufacturer
and retailer, and Trimark, a designer
and manufacturer of vehicle hardware
products. We are in advanced letting
negotiations regarding a further unit at
the site which, combined with the units
currently let, would represent 65% of the
total space available at the development.
Strategic ReportHarworth Group plc: Annual Report and Financial Statements 2022 15
Building efficiency and integrating
energy into development
Achieving Net Zero Carbon in construction
Harworth has worked with Winvic Construction, the main
contractor for Bardon Hill, to pilot a 'NZC in construction'
approach at Bardon Hill, which minimises embodied carbon in the
building phase. This was achieved through a sustainable approach
to material specification and the offsetting of the remaining
construction-related embodied carbon through the use of Verified
Carbon Standard or Gold Standard schemes focused on tree
planting and ecology, renewable energy, and social projects.
The units are also designed to be capable of being NZC in
operation through integrated renewable energy, enhanced build
specification, and the incorporation of green lease terms.
Protecting and promoting biodiversity
Creating new spaces for local wildlife and
enhancing on-site employee wellbeing
Bardon Hill benefits from extensive landscaping, which has included
the planting of wildflowers and over 2,300 predominantly deciduous
trees, 99% of which are native, together with the incorporation of
two storm attenuation ponds. Benches are provided throughout this
space, making it an ideal location for relaxation and contemplation,
which in turn enhances the wellbeing of employees at the site. In
addition, the creation of a 10-acre local wildlife site around the River
Sence provides a green corridor which further enhances biodiversity.
930 jobs
£71m
to be supported once
fully let
of GVA to be delivered to
the local economy
David Cockroft,
Regional Director for the Midlands:
“ Bardon Hill has delivered Grade A industrial & logistics
space in a highly sought-after location less than two
miles from the M1. In addition to providing new jobs for
the local community, this development will protect and
enhance local biodiversity through the creation of new
green spaces, and improve local infrastructure. We have
been really pleased with the demand from potential
occupiers so far.”
Strategic ReportHarworth Group plc: Annual Report and Financial Statements 2022 16
Case study
Accelerating residential sales at Waverley
Alongside residential sales, it has been
an active year for progressing other
community amenities at the site. Work
began on a 150-bedroom Marriott
Courtyard hotel, which will also provide
a restaurant and gym facilities. The hotel
will occupy a prominent position at the
entrance to the Waverley development,
and will provide an important community
asset for use by residents and businesses
at the adjacent AMP. Plans have also been
approved for a new healthcare centre at
the site, which will be delivered alongside
Olive Lane, the site's mixed-use ‘heart of
the community’ development.
At Waverley, Harworth is undertaking
Yorkshire’s largest brownfield
regeneration project – the
transformation of the former Orgreave
colliery into a new community of up to
3,038 homes set amongst 310-acres
of green space, and 2.1m sq. ft of
employment space at the Advanced
Manufacturing Park, with the potential
to support over 4,000 high-skilled
jobs. To date, land has been sold for
over 2,442 homes, and 1.6m sq. ft of
space has been delivered at the AMP.
During 2022, land sales were completed
representing 556 plots to two
housebuilders, all of which have already
delivered houses at the site. This repeat
business underscores the popularity of
Waverley as a place to live, and also the
strong relationships that Harworth has
forged with a wide range of housebuilding
partners.
In June, Harworth competed its largest-ever
residential plot sale in a £29m transaction
with Barratt and David Wilson Homes.
The housebuilder intends to deliver
approximately 450 homes, of which over
30% will be affordable. The new homes will
represent Barratt and David Wilson Homes’
fifth phase at the site and will benefit
from unique water frontage in an area
of the development known as Waverley
Waterfront. Construction will follow a
bespoke design code that complements
the existing Waverley development, while
maximising the amenity value of the area’s
waterfront location. The development
will include a pedestrianised promenade,
further enhancing the site’s placemaking
and connectivity.
Towards the end of the year, Harworth
completed a sale to regional housebuilder
Sky-House, to deliver an additional 106
homes. The planned development will
comprise a mixture of two to four-bedroom
houses and apartments designed by
CODA Architecture. The units will be
a re-imagining of Victorian terraced
homes for modern day living, providing
well-designed energy-efficient homes with
roof gardens.
Strategic ReportHarworth Group plc: Annual Report and Financial Statements 2022 17
Creating sustainable communities &
preserving heritage
Introducing single-family Built-to-Rent homes to
Waverley
In 2022, Harworth launched its single-family BTR portfolio,
responding to the significant growth in demand for this product
in recent years and delivering on our strategic objective of
broadening the range of our residential products.
One of the sites in the portfolio is Waverley, where over 150 rental
homes will be delivered. The community is ideally positioned
to provide all the attributes that single-family BTR occupiers look
for, with a primary school just moments away, plentiful green
space and other amenities, and good access to employment
opportunities at the adjacent AMP and slightly further afield in
Sheffield and Doncaster.
3,038
homes planned for Waverley
2.1m sq. ft
employment space planned for the AMP
310 acres
of green space
David Cross,
Founder & Director, Sky-House Co.
"Building our third phase of new homes at Waverley is
a significant milestone as we continue our productive
relationship with Harworth to deliver what buyers really
want from their new homes in the North of England. As
the largest Sky-House development to date, it heralds our
transition to a regional housebuilder of choice, meeting
head-on the challenges of quality design, energy efficient
homes, liveable streets and at a price point within the
reach of people across South Yorkshire."
Strategic ReportHarworth Group plc: Annual Report and Financial Statements 2022 18
Key performance indicators
Financial track record
Total Return
22 0.1%
21
20
19
18
3.0%
7.8%
13.3%
Link to strategy: 1 2 3 4
24.6%
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.
Performance in 2022
Our Total Return was a result of EPRA NDV remaining broadly flat year-on-year, due to
our management actions largely offsetting market-driven valuation movements.
EPRA Net Disposal Value (‘NDV’) per share (pence)
22
21
20
19
18
160.0
155.6
145.2
Link to strategy: 1 2 3 4
Net asset value (£m)
196.5
197.6
What we measure
A European Pubic Real Estate Association (‘EPRA’) metric that represents a net asset
valuation where deferred tax, financial instruments and other adjustments, as set out in
Note 2 to the financial statements, are calculated to the full extent of their liability.
Performance in 2022
Following a significant increase in valuations during the first half, we experienced
outward yield shifts driven by softer market conditions in the second half. Over the
course of the year, our management actions largely offset market movements, and this
resulted in valuations, and, therefore, EPRA NDV, remaining broadly flat year-on-year.
22
21
20
19
18
602.7
578.0
488.7
463.8
441.9
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.
Performance in 2022
Net asset value increased slightly as a result of crystallising valuation gains through
development property sales during the year.
Link to strategy: 1 2 3 4
Net loan to portfolio value (‘LTV’)
22
21
20
19
18
6.6%
3.4%
What we measure
Net debt as a proportion of the aggregate value of properties and investments.
11.5%
12.1%
12.3%
Performance in 2022
Our LTV increased slightly during the year, but remained well within our internal target
of less than 20% at year-end, as we continue to carefully manage our levels of net debt.
Link to strategy: 1 2 3 4
Strategic ReportHarworth Group plc: Annual Report and Financial Statements 2022 19
Strategic track record
Number of plots sold to housebuilders
22
21
20
19
18
1,411
873
1,379
1,049
Link to strategy: 2
2,236
What we measure
The number of plots equivalent to land parcel sales to housebuilders during the year.
Performance in 2022
We completed a record number of residential plot sales in 2022. This was due to
buoyant housebuilder demand and the bringing forward of land sales planned for
future years to take advantage of market conditions.
Total residential pipeline (plots)
22
21
20
19
18
29,311
30,804
30,668
29,596
20,490
Link to strategy: 2 3
What we measure
The total number of residential plots that could be delivered from our pipeline at the
end of the year including freehold land, options and PPAs.
Performance in 2022
Our residential pipeline declined slightly, but remains well within our ambition to
maintain a 12–15-year land supply. The reduction was due to a record year for plot
sales, which more than offset those added to the pipeline through acquisitions.
Strategy link key
industrial & logistics stock
1 Increasing direct development of
2 Accelerating sales and broadening
the range of our residential products 4 Repositioning our Investment
Portfolio to modern Grade A
3 Growing our strategic land portfolio
and land promotion activities
The Harworth Way
Group targets
Strategic ReportHarworth Group plc: Annual Report and Financial Statements 2022 20
Key performance indicators continued
Strategic track record
Industrials & logistics space directly developed (sq. ft)
51,000
27,000
22
21
20
19
18
0
Link to strategy: 1 4
432,000
What we measure
The proportion of industrial & logistics space developed by Harworth, either
speculatively or on a build-to-suit basis for an end occupier.
402,000
Performance in 2022
We developed a record amount of industrial & logistics space in 2022, totalling
432,000 sq. ft. This mainly comprised our 332,000 sq. ft Bardon Hill development
in Leicestershire.
Total industrial & logistics pipeline (sq. ft)
22
21
20
19
18
28.2m
27.3m
24.4m
21.3m
Link to strategy: 1 3 4
35.0m
What we measure
The total amount of industrial & logistics space that could be delivered from our
pipeline at the end of the year, including freehold land and options.
Performance in 2022
Our industrial & logistics pipeline increased significantly, with the signing of
several option agreements and a number of freehold acquisitions as part of land
assembly works.
Proportion of Investment Portfolio that is Grade A
22
21
20
19
18
n/a
n/a
n/a
18%
11%
What we measure
The proportion of our Investment Portfolio by area that could be classified as modern
Grade A industrial & logistics space. Although not officially defined, Grade A is a
widely-used industry term that is understood to mean ‘best in class’ space, which is
new or relatively new, high-specification and in a desirable location, allowing the unit
to attract a rent that is above the market average.
Link to strategy: 4
Performance in 2022
The proportion of our Investment Portfolio that is Grade A space increased as our
completed Bardon Hill development was transferred to the portfolio.
Strategic ReportHarworth Group plc: Annual Report and Financial Statements 2022 21
Economic, environmental and social track record
Potential Gross Value Added (‘GVA’) that could be delivered from our portfolio (£bn)
22
21
20
19
18
4.6
4.1
3.9
3.5
3.5
Link to strategy: 1 2 3
What we measure
Calculated by Ekosgen, an economic impact consultancy, on our behalf. This estimates
the total contribution that our portfolio could make to the economy once fully built out.
Performance in 2022
The potential GVA that could be delivered from our portfolio increased due to the
additional employment potential created by our industrial & logistics acquisitions
during the year.
Scope 1, Scope 2 and Scope 3 business travel emissions (tonnes CO2e)
960
1,083
882
22
21
20
19
18
2,353
4,016
Link to strategy:
421
Employee pride
What we measure
Emissions that are captured by our target to be NZC by 2030. During the year, the
scope and availability of our emissions data increased, and, therefore, figures for 2021
have been restated to allow for a like-for-like comparison with 2022.
Performance in 2022
Our emissions decreased during the year, mainly due to reduced energy consumption
at our company offices, communal areas of our Investment Portfolio assets and other
Harworth assets and infrastructure.
22
21
20
19
18
Link to strategy:
Strategy link key
100% What we measure
97%
The proportion of employees who said they were “proud to tell people that I work for
Harworth” in our annual employee survey.
93%
90%
88%
Performance in 2022
Levels of staff satisfaction remained very high, as we continued our work to ensure
Harworth is an employer of choice, with initiatives aimed at promoting employee
engagement, wellbeing and equity, diversity and inclusion.
3 Growing our strategic land portfolio
and land promotion activities
The Harworth Way
industrial & logistics stock
1 Increasing direct development of
2 Accelerating sales and broadening
the range of our residential products 4 Repositioning our Investment
Portfolio to modern Grade A
Group targets
Strategic ReportHarworth Group plc: Annual Report and Financial Statements 2022
22
Chief Executive’s review
“ We remain confident in our strategy,
the resilience of our products and
focus markets, and the ability of our
through-the-cycle management actions
to realise the long-term potential of
our sites.”
Lynda Shillaw
Chief Executive
Harworth has had another year of significant
operational progress, delivering against
our strategy to become a £1bn business
by 2027. We ended the period in a
strong financial position, with a low LTV,
significant available liquidity and no major
refinancing requirements until 2027. This
progress, combined with the fact that we
own the majority of our sites, and can,
therefore, determine the scale and pace
of development to suit our risk profile,
provides us with significant flexibility as we
navigate a more uncertain period.
Our strategic plan spans five to seven years,
and over this time period it was possible that
we would encounter a cyclical downturn
given the strength of our markets in the
preceding years. While the triggers, timing
and shape of a shift in the cycle are difficult to
predict, it became evident over the course of
the year that a downturn was materialising.
Despite a strong first half performance, the
wider macroeconomic challenges facing
global economies, including rising interest
rates and inflation, weighed on sentiment
in the second half. Our management
actions to generate value largely offset the
resulting market-driven yield shifts, meaning
that valuations and, therefore, EPRA NDV
remained broadly flat year-on-year, while our
statutory net assets increased slightly.
We remain confident in our strategy,
the resilience of our products and
focus markets, and the ability of our
through-the-cycle management actions
to realise the long-term potential of our
sites and returns to shareholders, and
while there have been some positive
market indicators so far in 2023, market
conditions remain uncertain. We have seen
in recent years that our markets can move
quickly, and we remain closely attuned to
the potential impacts that this could have
on our business, retaining the flexibility to
adjust our plans where necessary.
Our markets
Harworth’s focus markets of residential and
industrial & logistics both continue to be
characterised by good levels of demand,
and constrained supply.
In the industrial & logistics sector, occupier
demand is showing resilience, and there is
evidence of continued rental growth. Data
from Savills indicates that 2022 was the
third-strongest year ever for take-up, with
48m sq. ft of space transacted. However,
it was very much a year of two halves, with
a record breaking first half giving way to
a much weaker second half, and take-up
slowing markedly in the fourth quarter,
albeit remaining well above the 15-year
average. An interesting picture emerges
when looking at the market sectors driving
demand: online retailers saw their lowest
take-up in five years, while the third-party
logistics sectors and manufacturing sectors
recorded their strongest years ever, likely
driven by an increased focus on supply chain
stability, onshoring and near-shoring. Grade
A space accounted for 86% of take-up, a
significantly higher proportion than the
long-term average and an endorsement
of our strategic priority to transition our
Investment Portfolio to Grade A.
At the same time, supply of industrial &
logistics space remains close to an all-time
low, at under 4% market-wide. Across
many of our regions, supply is even lower
than the market average – according to
Savills, both Yorkshire & the North East
and the West Midlands are seeing vacancy
rates of around 3% and less than half a year
of supply as calculated by average take-up
in the last three years.
This sector is of course not recession proof.
Rising interest rates, a tighter lending
environment and general economic
uncertainty are undoubtedly weighing
on investment demand and are likely to
continue to do so in the short term.
In the residential markets, house prices fell
during each of the final four months of the
year, according to data from Nationwide,
and all indicators point to a slowdown in
transactional activity across the sector as
the combined impact of higher mortgage
rates, challenging affordability and subdued
consumer confidence has taken hold. As a
result, supply of new homes for sale reached
around 42,000 in December 2022, its
highest level since May 2021, and this figure
is expected to grow further over the course
of 2023. Recent data suggests that average
Strategic ReportHarworth Group plc: Annual Report and Financial Statements 2022 23
mortgage rates are recovering from the
disruption seen in the second half of 2022,
although they remain some way off recent
historical averages and that housebuilders
have seen enquiry levels regain some of the
ground lost.
Reporting from housebuilders points to a
reduction in construction volumes over the
coming year and a more selective approach
to land acquisitions. We are encouraged by
the fact that we continue to see good levels
of demand from housebuilders, with many
of whom we have long-term relationships,
underscoring the differentiated nature of
our serviced and, therefore, de-risked land
product. It also reflects the reality that, given
resource constraints and differing priorities
amongst local authorities, the pipeline of
consented land is becoming increasingly
constrained.
The institutional BTR market continued its
growth throughout 2022 as it establishes
itself as an important part of the wider
private rental sector. The latest data from
the British Property Federation and Savills
projects the number of completed BTR
homes to increase fivefold to 380,000
by 2032. Investors are attracted to the
highly defensive and consistent returns
offered and opportunities to create low
carbon homes and sustainability-led rental
communities. Harworth’s single-family
BTR portfolio of sites represents a highly
attractive proposition for investors to access
this market at scale, with opportunities for
further portfolios in the future.
In the second half of 2022, real estate
capital markets were negatively impacted
by market headwinds, particularly in the
industrials sector, following a period of
very significant growth. The MSCI-IPD
index shows that UK industrial assets saw a
capital value decline of -18% during 2022,
with a decline of -27% during the last six
months, as an average outward yield shift
of 130bps for the sector was only partially
offset by rental growth of +10.3%. Our
valuation performance has for the most part
outperformed these wider trends, as our
management actions, resilient occupational
demand and strong sales activity have so
far largely offset valuers’ adjustments to
reflect the effect of increased debt costs and
outward yield movement on the pricing of
the end product. In the residential space,
Knight Frank data shows that English
greenfield land values declined only -1.3%
in 2022, as softening market conditions
for house purchases was partially offset
by the ongoing scarcity of appropriate
development land, and the potential for low
grade agricultural land to be used for natural
capital projects.
Operational performance
Our strategy, outlined in September 2021,
set out a clear road map for our ambition to
grow EPRA NDV* to £1bn by 2027. As the
table below shows, we delivered across all
areas of the strategy in 2022.
Growth driver
2015–2020
2021
Progress in 2022
Ambition by 2027
Increasing direct
development
of industrial &
logistics stock
1.3m sq. ft
developed over
five years
Accelerating sales and
broadening the range of
our residential products
c.860 plots sold on
average per year
51,000 sq. ft
developed
432,000 sq. ft completed during
the year
203,000 sq. ft under construction at
year-end
1,411 plots sold
2,236 plots sold
Scaling up land
acquisitions and
promotion activities
Land supply of 12–15 years
Repositioning our
Investment Portfolio to
modern Grade A
<10% of investment
Portfolio was
Grade A
11% of the Investment
Portfolio was Grade A
at year-end
Maintained land supply of 12–15 years
through acquisitions representing
8.5m sq. ft of industrial & logistics
space and 2,643 residential plots
18% of the Investment Portfolio was
Grade A at year-end
800,000 sq. ft
completed on
average per annum
2,000 plots sold on
average per annum
Maintain a land
supply of 12–15 years
100% of the
Investment Portfolio
to be Grade A
The majority of the 432,000 sq. ft of
completed direct development related to
our Bardon Hill site, which has achieved
NZC in construction status and is currently
65% let or in heads of terms. The year
also saw the completion of a 100,000
sq. ft build-to-suit unit for a sportswear
manufacturer at the AMP in Rotherham.
After year-end, we completed a further
110,000 sq. ft as part of the next phase
of Gateway 36, with one unit already let
and another in heads of terms. Given
investment market conditions, our focus
for 2023 will be on built-to-suit and pre-let
direct development opportunities, as well
as land sales to potential occupiers. In line
with this strategy, we have pre-let a 73,000
sq. ft unit at the AMP to a technology
occupier and submitted planning for a
139,000 sq. ft unit at Gateway 36, which
we intend to pre-let before construction
commences.
We saw a record year for residential plot
sales, with completed transactions totalling
2,236 plots (2021: 1,411 plots) at prices
in line with, or ahead of, December 2021
valuations. These included our single largest
serviced residential land sale, to Barratt and
David Wilson Homes at Waverley, and also
the first land parcel sale at our Ironbridge
Strategic ReportHarworth Group plc: Annual Report and Financial Statements 2022 24
Chief Executive’s review continued
site, to the same housebuilder. We also
launched our first single-family BTR portfolio
of sites for up to 1,200 homes, which has
attracted significant levels of interest. Our
preferred investment and construction
partners have now been selected and
we are progressing towards exchange.
Offering this combination of ‘Build-to-Sell’
and BTR products will allow us to accelerate
the delivery, and enhance the vibrancy, of
our residential sites, as we target the sale
of an average of 2,000 residential plots per
annum across all tenure types by 2027.
rent so far collected for the year. We also
completed 622,000 sq. ft of lettings,
in most cases at premiums to estimated
rental values ('ERVs') and passing rents.
As Bardon Hill entered the Investment
Portfolio during the year, we also
commenced the disposal of more mature
assets where we had already maximised
value through asset management and
development initiatives, with the sale
of two sites after year-end for a total of
£12.6m, broadly in line with or ahead of
December 2022 valuations.
Turning to acquisitions, we added 2,643
plots and 8.5m sq. ft of industrial &
logistics space to our pipeline during
the year. These were achieved through
a combination of freehold acquisitions,
options and Planning Promotion
Agreements (‘PPAs’). Two significant
options were signed to deliver up to
3.0m sq. ft of industrial & logistics space
at a site in North Yorkshire, and up to
1.6m sq. ft adjacent to Junction 15 of the
M1 in Northamptonshire. The size of our
landbank remains a key differentiator for
us, providing flexibility and the potential
to smooth our returns profile at a portfolio
level, and unlocking exciting new
opportunities for the business.
Our Investment Portfolio continued to
deliver robust operational metrics, with
a vacancy rate of 8.3% at year-end (2.7%
excluding Bardon Hill, which was only
completed in September) and 99% of
During the year, we also completed a
review of our Natural Resources portfolio,
which comprises sites used for a wide
range of energy production and extraction
purposes. The review aimed to determine
how best to protect and optimise value
from this portfolio, while maximising
the role these assets play in realising our
sustainability ambitions. The outcome
has been to develop an Energy & Natural
Capital strategy, with the aim of developing,
with strategic partners, renewable energy
generation solutions and other green
initiatives such as battery storage, district
heating, and reforestation/rewilding on
Natural Resources assets. At the same time,
the Natural Resources team will have a
wider responsibility for embedding these
energy concepts and principles across
each of our development sites to maximise
energy availability and green capital for
residents and occupiers and fulfil Harworth’s
NZC ambitions.
Financial performance
Following a strong first half, the softening
macroeconomic environment and outward
yield shift applied to property valuations at
31 December 2022 resulted in EPRA NDV
per share1 remaining broadly flat year-on-
year at 196.5p, which translated into a Total
Return of 0.1% for 2022 (2021: 24.6%).
Statutory net asset value was £602.7m
(2021: £578.0m).
Sales of serviced land and property, in
addition to income from rent, royalties
and fees, resulted in Group revenue of
£166.7m (2021: £109.9m). This increase
derived primarily from the sale of our
Kellingley development site for £54.0m
and the acceleration of residential land
sales particularly during the first half, to
take advantage of then buoyant market
conditions.
The Board is proposing a final dividend
of 0.929p per share, bringing the total
dividend per share for 2022 to 1.333p,
representing 10% underlying growth from
2021, in line with our dividend policy.
As we navigate a more uncertain economic
period, we continue to maintain a strong
balance sheet and financial position, with
significant available liquidity of £175.6m as
at 31 December 2022 (31 December 2021:
£128.0m), following the signing of a new
£200m revolving credit facility (‘RCF’) in
early 2022, with no major refinancing events
until 2027. Our LTV at year-end was 6.6%
Strategic ReportHarworth Group plc: Annual Report and Financial Statements 2022 25
(31 December 2021: 3.4%), affording us a
high degree of flexibility and resilience as we
pursue our strategy.
The Harworth Way
This has been a transformative year
for Harworth’s ESG ambitions, as we
appointed our first Director of Sustainability
and created a dedicated sustainability team
within the business. Their focus during the
year has been to devise a NZC pathway
and to expand and continue to embed
The Harworth Way, our sustainability
programme, which is now in its fourth year.
The team is also building our capabilities in
measuring and reporting carbon emissions,
and reviewing our commitments and
approach beyond the year.
The resulting NZC pathway, to be published
alongside our Annual Report, confirms
the scope and boundary of the pathway,
and outlines a detailed set of targets and
delivery strategy to meet our ambition to be
operationally NZC by 2030 and fully NZC
by 2040. Central to our delivery strategy will
be the adoption of build specifications for
our industrial & logistics sites and also the
homes to be delivered by Harworth’s mixed
tenure team.
Delivering social value is an area which to
date, has been challenging for us to define
and measure as a business. We know that,
as a specialist regenerator and placemaker,
we have a lasting positive impact on the
communities we serve, supporting job
creation and delivering new infrastructure,
schools and other amenities, and a wealth
of green space to help people live healthier
lives. Our sustainability team is now
exploring how we can deliver even more for
our communities in areas such as promoting
healthier lifestyles, creating inclusive spaces
and holistic travel planning, and importantly,
how we can measure this to assess and
benchmark our progress.
Our people
Harworth’s ambition is to be an 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 and our ‘One Harworth’ culture.
As our team continued to grow over the
year, we progressed many initiatives to
promote these attributes. We also saw a
record number of promotions across the
business, reflecting both our commitment to
recognise achievement and to ensure career
progression and development opportunities.
We made several new appointments to our
Group Leadership Committee during the
year, all of which were new roles that are
critical to support our growth strategy. This
included our Director of Strategy, Investment
& Business Development, Director of
Sustainability, Director of Group Resources
and Transformation and Head of Legal.
Alongside these appointments we have
also undertaken reviews of our workspaces,
working closely with our teams, to ensure
they are motivational and inspiring places
for our people and fully accommodate our
hybrid ways of working. This included the
expansion of our Leeds and Manchester
offices, and an ongoing project to enhance
our head office space.
Outlook
Following the rapid outward yield
movements of late 2022, some signs of
stability seem to be returning to the market
in the early months of 2023 as the speed of
interest rate rises and outward yield shifts
slows. Employment levels remain high and
the S&P Global/CIPS construction PMI
has reported that UK construction activity
is at levels above analysts' expectations.
That said, the war in Ukraine continues
and economies around the globe are
still responding to the energy and other
commodity shocks that this triggered
coming so shortly after a global pandemic.
At this early stage in the year we remain
cautious about the economic backdrop
for 2023. Uncertainty is likely to remain in
our markets until interest rates reach their
peak, and inflation falls back to manageable
levels, creating the conditions for growth
and improved investor confidence.
Harworth is a long-term through-the-cycle
business: you cannot ‘do regeneration’
quickly. Most of our sites will be in
development, planning or land assembly
through the next few years and into the
next decade. This means that, while we are
active through-the-cycle and modify our
short-term plans to reflect changes in
the market, we also look through these
near-term market conditions to where we
need to invest to create the future value and
returns that we can unlock from our sites.
What we do is important to the local
economies that we invest in and the
communities we create. Our focus markets
are drivers of economic growth and continue
to have robust fundamentals. Moreover,
in an economy in need of planning reform
that truly drives growth, there remains an
acute shortage of high-quality consented
land. We control our landbank, where
and when we invest, and have a highly
experienced management team who are
focused on execution. As we navigate the
business through the challenges of the wider
economic backdrop, we are confident that
our strategy is the right one to deliver
long-term value to stakeholders, while
meeting our NZC commitments, and our
strong financial position, differentiated
products, and the scale and mix of our
portfolio, position us well to realise the full
potential of our sites.
In concluding, I would like to say a huge
thank you to my colleagues across the
business, who have embraced the ambition
of our strategy and have worked extremely
hard to deliver another year of strong
progress. Our robust financial performance
and operational progress against a
challenging market backdrop is a testament
to their dedication, determination, skills,
and teamwork.
Lynda Shillaw
Chief Executive
13 March 2023
1 Harworth discloses both statutory and alternative
performance measures (‘APMs’). A full description
of, and reconciliation to, the APMs is set out in
Note 2 to the financial statements.
Strategic ReportHarworth Group plc: Annual Report and Financial Statements 2022 26
Operational review
Industrial & logistics
land portfolio
At 31 December 2022, the industrial &
logistics pipeline totalled 35.0m sq. ft
(31 December 2021: 28.2m sq. ft), of which
5.4m sq. ft was consented (31 December
2021: 7.3m sq. ft), and 5.6m sq. ft was in the
planning system awaiting determination (31
December 2021: 6.1m sq. ft). The pipeline
was 56% owned freehold, with the remaining
44% controlled via options or PPAs.
Acquisitions and land assembly
During the year, freehold acquisitions
and options added 8.5m sq. ft to the
pipeline. The majority of this related to two
significant option agreements:
• Site in North Yorkshire: a 316-acre site
adjacent to the A1 near Selby. Harworth
intends to promote the site for the
development of up to 3.0m sq. ft of
employment space as part of the Local
Plan of the soon-to-be-formed North
Yorkshire Council.
•
Junction 15, Northamptonshire: a
168-acre site south of Junction 15 of the
M1 in Northamptonshire. Harworth will
work with local stakeholders to bring
forward plans for up to 1.6m sq. ft of
Grade A industrial & logistics space,
alongside unique landscaping features
and an ecological enhancement area.
Planning
At year-end, 5.6m sq. ft of space was in the
planning system awaiting determination.
Since year-end we have secured two
consents, the first for 206,000 sq. ft of
flexible employment space in Barnsley,
on the site of the former Houghton Main
Colliery, and the second for 72,000
sq. ft of space on a site adjacent to the
Bardon Hill development in Leicestershire.
Two significant planning applications
currently remain in the system awaiting
determination:
• 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 1.5m 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.
Direct development and placemaking
During the year, practical completion was
reached on two direct developments:
• AMP in Rotherham, South Yorkshire: a
100,000 sq. ft build-to-suit facility was
developed by Harworth for a sportswear
manufacturer, which has upsized from a
smaller unit elsewhere at the AMP.
• Bardon Hill, Leicestershire: a
development of 332,000 sq. ft of Grade
A logistics and manufacturing space
across five units, located just two miles
from Junction 22 of the M1, with 65%
of the space currently let or in heads
of terms. The site has achieved NZC in
construction status and incorporates
storm attenuation ponds, a 10-acre
wildlife centre and landscaping features
to enhance employee wellbeing.
After year-end, a further 110,000 sq. ft was
completed at Gateway 36 in Barnsley,
South Yorkshire, representing the start of
the second phase of that development.
Plans are in place to develop two additional
buildings as part of phase two, which will
be capable of delivering up to 600,000 sq.
ft of space. The units will be delivered to
Harworth’s sustainable commercial building
specification, targeting EPC A and BREEAM
Excellent, with whole life carbon assessments
incorporated into the design and renewable
energy provision included.
Direct development works totalling 93,000
sq. ft are currently underway at the AMP.
An additional 73,000 sq. ft to commence
later this year, which has been pre-let to
an occupier. During the year, the Group
received development management
revenue totalling £4.2m (2021: £2.5m)
from build-to-suit opportunities.
Land sales
Industrial & logistics land sales totalling
£57.0m were completed during the year,
at prices above or in line with 31 December
2021 valuations. The largest disposal
related to the sale of the Kellingley site in
North Yorkshire for £54.0m.
Planning status
Ownership
Consented 5.4m sq. ft
Awaiting determination
5.6m sq. ft
Pre-planning 26.5m sq. ft
56% Freehold/JVs
44% PPAs/options
Strategic ReportHarworth Group plc: Annual Report and Financial Statements 2022 27
Residential land portfolio
As at 31 December 2022, the residential
pipeline had the potential to deliver
29,311 housing plots (31 December 2021:
30,804), of which 6,111 were consented
(31 December 2021: 9,978), and 1,890
across eight sites were in the planning
system awaiting determination (31
December 2021: 811). The pipeline was
51% owned freehold, with the remaining
49% subject to PPAs, options or overages.
Acquisitions and land assembly
During the year, a combination of freehold
acquisitions, options and PPAs added
2,643 residential plots to the pipeline.
The majority of this related to the freehold
acquisition of a 174-acre site in Huyton,
Merseyside, which represents a longer-term
opportunity to deliver up to 1,500 homes.
Plot sales
Completed residential land sales totalled
2,236 plots (2021: 1,411 plots), with
the significant increase from the prior
year mainly due to expediting sales to
take advantage of robust housebuilder
demand. Sales were either in line with, or
ahead of, book values, and the headline
sales price ranged from £28k to £105k per
serviced plot (2021: £30k to £73k).
Sales were completed with a range of
housebuilders, and included the Group’s
largest serviced land sale to date by
number of residential plots, representing
450 plots, and the first land parcel sale
at Benthall Grange, the site of the former
Ironbridge Power Station in Shropshire.
Both sales were made to Barratt and David
Wilson Homes.
A sale at the South East Coalville site
to Cadeby Homes represented the
Group’s first transaction with this regional
housebuilder, the 21st housebuilder with
which Harworth has transacted with since
the Group was formed.
The year also saw the completion of a
number of PPAs – arrangements whereby
Harworth receives a fee from a landowner
for securing a planning approval and
plot sale on their behalf – generating
£5.8m in fees.
Placemaking
As a master developer, Harworth prides
itself on investing in its residential sites to
provide enhanced infrastructure, amenities
and green spaces. This investment creates
a sense of community that improves the
wellbeing of residents and enhances the
attractiveness of these developments to
housebuilders and other partners.
Planning status
Ownership
Consented 6,111 plots
Awaiting determination
1,890 plots
Pre-planning 21,310 plots
51% Freehold/JVs
49% PPAs/options/
overages
Strategic ReportHarworth Group plc: Annual Report and Financial Statements 2022 28
Operational review continued
Natural Resources portfolio
Harworth’s Natural Resources portfolio
comprises sites used by occupiers for a
wide range of energy production and
extraction purposes, including wind and
solar energy schemes, battery storage
and methane capture. As at 31 December
2022, it generated £2.1m of annualised
gross rent (31 December 2021: £4.1m),
with the reduction over the year mainly due
to the sale of the Meriden Quarry site in
Warwickshire for £11.6m.
During the year, a review of this portfolio
and the wider development portfolio took
place to determine how best to protect
and optimise value, while maximising
the role these assets can play in realising
the Group’s sustainability ambitions,
particularly with regards to meeting energy
demand, delivering biodiversity net gain,
and carbon offsetting.
The outcome has been to form an Energy
& Natural Capital strategy for the Group,
with the aim of developing, alongside
strategic partners where appropriate,
renewable energy generation solutions
and other sustainability initiatives such as
battery storage, solar, EV charging, multi-
fuel hubs and reforestation/rewilding on
Natural Resources assets. The strategy will
have a wider focus on embedding these
energy concepts and future-proofing
principles across all of Harworth’s sites to
maximise energy availability and resilience,
create economic value and help fulfil the
Group’s NZC ambitions.
2.6% like-for-like increase in rents. Grade A
space represented 18% of the portfolio
(31 December 2021: 11%), which
increased to 20% with the completion of
units at Gateway 36 after year-end.
During the year, 622,000 sq. ft of leasing
deals were completed, adding £1.7m
of annualised rent. Lease renewals and
regears were completed at terms that
on average represented an 8% uplift to
previous passing rents, while new lettings
were completed on average at a 10%
premium to 31 December 2021 ERVs.
The portfolio had an average rent per
tenant of £6.43 per sq. ft at 31 December
2022 (31 December 2021: £6.32) and a
weighted average rent of £4.69 per sq. ft
(31 December 2021: £4.50).
Across the Investment Portfolio,
operational metrics remain robust.
Rent collection currently stands at 99% for
the year (2021: 99%). Vacancy was 8.3% at
year-end, reducing to 2.7% by excluding
the recently completed Bardon Hill site
(31 December 2021: 4.1%), while the
Weighted Average Unexpired Lease Term
(‘WAULT’) was 11.3 years (31 December
2021: 11.5 years).
Disposals
A key element of Harworth’s growth
strategy is to transition its Investment
Portfolio to modern Grade A. This will
be achieved by retaining more direct
development but also by disposing of
assets where value has been maximised
through asset management and
development initiatives.
After year-end, the Group completed the
sales of Moorland Gate Business Park,
Chorley, and Sinfin Business Park, Derby
for total consideration of £12.6m, broadly
in line with or ahead of December 2022
valuations.
During the year, several placemaking
initiatives were undertaken across the
portfolio:
• South East Coalville, Leicestershire: a
planning application was submitted for
a new 420-place 'Forest School', which
maximises opportunities for learning
both inside and outside the classroom,
and integrates several sustainability
features including solar PV panel
coverage and air source heat pumps.
Planning was also secured for a new
supermarket at the site, which will form
part of a proposed local centre.
• Waverley, South Yorkshire: construction
began on a new 150-bedroom hotel,
including a restaurant and gym facilities,
which will also be available to residents
on site. Planning permission has also
been granted for a new primary health
centre, in conjunction with the local
Clinical Commissioning Group, which
will have capacity for 6,000 patients.
• Moss Nook, Merseyside: construction
of a new spine road was completed at
the site, with segregated pedestrian
and cycle routes and landscaping
features. The new road provides a more
direct connection between the site and
the amenities of St Helens town centre,
and unlocks land for further residential
development.
Investment Portfolio
This portfolio comprises both industrial &
logistics assets that have been acquired
by Harworth and, increasingly, those
that have been directly developed and
retained. It provides recurring rental
income in addition to asset management
opportunities and the potential for capital
value growth.
As at 31 December 2022, the Investment
Portfolio comprised 19 sites covering
4.0m sq. ft (31 December 2021: 18 sites
covering 3.7m sq. ft). It generated £19.7m
of annualised rent (31 December 2021:
£18.0m), equating to a gross yield of 7.0%
(31 December 2021: 6.5%) and a net initial
yield of 6.2% (31 December 2021: 5.6%).
Annualised rent for the portfolio increased
during the year, driven by the addition of
new Grade A space to the portfolio and a
Strategic ReportHarworth Group plc: Annual Report and Financial Statements 2022 Financial review
29
“ Our 2022 performance reflected good
progress against strategic objectives,
coupled with a strong operational
delivery.”
Kitty Patmore
Chief Financial Officer
Overview
Our primary metric, 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 2022 was 0.1% (2021: 24.6%).
The Total Return was impacted significantly
by the worsening macro-economic
environment in the second half of the
year, higher interest rates and increased
investment yields applied to industrial &
logistic valuations at 31 December 2022.
Over the year, the yield shift was largely offset
by management actions such as progress
on development sites, completing direct
development, securing sales and asset
management initiatives in our Investment
Portfolio resulting in EPRA NDV remaining
broadly flat, declining by 0.6% during the
year to 196.5p per share (2021: 197.6p). Our
2022 performance reflected good progress
against strategic objectives, coupled with a
strong operational delivery. Alongside this,
the structural undersupply within our chosen
markets remains, and provides a good
foundation for the Group’s future growth.
Sales of serviced land and property, in
addition to income from rent, royalties and
fees, resulted in Group revenue of £166.7m
(2021: £109.9m). This increase included
the completion of the sale of the Group’s
Kellingley development site for £54.0m
cash consideration following the conditional
exchange during 2021, enabling the Group
to crystalise value created through the
regeneration of the former colliery site.
The acceleration of serviced land sales
allowed the Group to capitalise on the
strength of the residential market in the first
three-quarters of the year and sales continued
to complete up to December as our product
remained attractive to housebuilders. Rental
income collection has been consistently
strong and income has increased because
of management actions, including the
completion of direct development at Bardon
Hill, new lettings and rent reviews. The
£166.7m of revenue also included PPA and
development management revenue fees
totalling £10.0m (2021: £2.5m). Looking
forward, the sales profile is robust with 71.9%
of 2023 budgeted sales by value already
completed, exchanged or in heads of terms
(2021: 43.1%).
BNP Paribas and Savills, our independent
valuers, completed a full valuation of
our portfolio as at 31 December 2022,
resulting in full-year valuation losses* of
£15.0m (2021: gains of £148.0m), including
the movement in the market value of
development properties. These external
independent valuations reflect conditions in
the industrial & logistics market, offset by the
positive factors resulting from management
actions on our sites. Outside of the valuation
movements, profit on sales of £13.0m
(2021: £12.5m) were achieved reflecting
prices ahead of previous book values for
sales overall. This gave us total value losses
of £2.0m (2021: £160.5m gains).
The fair value of investment properties
decreased by £19.7m (2021: £84.0m
increase), which has fed through to an
underlying operating profit of £44.5m
(2021: £121.9m) and profit after tax of
£27.8m (2021: £94.0m).
Over the year, the net asset value grew to
£602.7m (31 December 2021: £578.0m).
With EPRA adjustments for development
property valuations included, EPRA
NDV1 at 31 December 2022 reduced to
£633.8m (31 December 2021: £637.5m)
representing a per share decrease of 0.6%
to 196.5p (31 December 2021: 197.6p).
The Group has declared a final dividend
of 0.929p per share, bringing the total
dividend per share for 2022 to 1.333p,
representing 10% underlying growth from
2021, in line with our dividend policy.
During 2022, a new five-year £200m
RCF was agreed, together with a £40m
uncommitted accordion facility to support
the delivery of our growth strategy. At the
year-end, our drawings under the RCF were
low, reflecting cash conversion from sales
as well as rental and other income. Our
net loan to portfolio value at year-end was
6.6%. As a result of the low drawn level of
our variable rate borrowings, coupled with
the proportion of drawn debt under fixed
rate infrastructure loans, we currently do not
have interest rate hedging in place against
the RCF, although this will remain under
review.
Strategic ReportHarworth Group plc: Annual Report and Financial Statements 2022 30
Financial review continued
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 the
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 Equiniti Share Plan
Trustees Limited to satisfy Restricted
Share Plan and Share Incentive Plan
awards.)
• Value gains: 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. 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
2022
Capital
Growth
£m
135.4
(74.4)
61.0
(4.1)
17.8
Income
Generation
£m
31.3
(8.9)
22.4
(1.9)
(34.5)
– –
(14.0)
(3.2)
74.7
(4.3)
Central
Overheads
£m
–
–
–
(16.1)
–
(0.1)
(16.2)
–
0.1
70.4
–
70.4
–
(17.2)
–
(17.2)
(6.2)
(22.4)
(3.0)
(25.4)
Revenue
Cost of sales
Gross profit
Administrative expenses
Other gains/(losses)
Other operating expense
Operating profit/(loss)
Share of (loss)/profit of JVs
Net interest credit/
(expense)
Profit/(loss) before tax
Tax charge
Profit/(loss) after tax
2021
Capital
Growth
£m
81.1
(53.1)
28.0
(3.4)
57.5
–
82.2
4.5
Income
Generation
£m
28.8
(8.1)
20.7
(2.1)
35.0
–
53.5
4.7
Central
Overheads
£m
–
–
–
(13.7)
–
(0.1)
(13.8)
–
0.2
86.9
–
86.9
–
58.2
–
58.2
(4.1)
(17.9)
(33.3)
(51.1)
Total
£m
166.7
(83.3)
83.4
(22.1)
(16.8)
(0.1)
44.5
(7.5)
(6.1)
30.9
(3.0)
27.8
Total
£m
109.9
(61.4)
48.7
(19.2)
92.5
(0.1)
121.9
9.2
(3.9)
127.2
(33.2)
94.0
Note: There are minor differences on some totals due to roundings.
Revenue in the year was £166.7m (2021:
£109.9m), of which Capital Growth
contributed £135.4m (2021: £81.1m) and
Income Generation contributed £31.3m
(2021: £28.8m).
Capital Growth revenue, which primarily
relates to the sale of development
properties, increased due to the
completion of the sale of the Kellingley
development site for £54.0m as well
as the acceleration of residential land
sales, including our largest sale to date at
Waverley. Capital Growth revenue
also includes fees from PPAs and
build-to-suit development revenue
together totalling £10.0m (2021: £2.5m),
including in respect of the construction
of a new 100,000 sq. ft facility at the AMP
following the associated 2021 land sale.
Revenue from Income Generation (the
Investment Portfolio, Natural Resources
and Agricultural Land) mainly comprises
property rental and royalty income.
Revenue of £31.3m (2021: £28.8m) was
higher than last year and included the
impact of new lettings related to direct
development agreed during the year as
well as asset management initiatives and
increased royalties from energy assets.
Rental income from the Investment
Portfolio increased on an annualised
basis from £18.0m to £19.7m in 2022
following new lettings, re-gears and
Strategic ReportHarworth Group plc: Annual Report and Financial Statements 2022 31
the practical completion of our Bardon
Hill development, with like-for-like rent
growing by 2.6%.
Cost of sales comprises the inventory
cost of development property sales,
costs incurred in undertaking build-to-suit
development and both the direct and
recoverable service charge costs of the
Income Generation business. Cost of sales
increased to £83.3m (2021: £61.2m), of
which £67.7m related to the inventory
cost of development property sales (2021:
£55.1m) and included additional costs
related to build-to-suit development not
incurred in the previous year. In the year,
we saw a decrease in the net realisable
value provision on development properties
of £2.4m (2021: £5.2m decrease)
following the valuation process as at 31
December 2022.
Administrative expenses increased in the
year by £2.9m (2021: £4.7m increase).
This was due to higher salary expenses,
resulting from increased employee
numbers as we right sized the resources of
the Group over 2021 and 2022 to deliver
on our strategy. Growth in employee
numbers is expected to slow from 2023
onwards. Administrative expenses
expressed as a percentage of revenue
decreased from 17% in 2021 to 13% in
2022 reflecting the continued acceleration
in activity relating to sales of development
property as well as successful completion
of managed direct development projects
generating fees and PPAs.
Other losses comprised a £19.9m
combined net decrease (2021: £85.0m
net increase) in the fair value of investment
properties and assets held for sale (‘AHFS’)
less the profit on sale of investment
properties, AHFS and overages of £3.2m
(2021: £7.4m).
Joint venture losses of £7.5m (2021: £9.2m
profit) were largely the result of a decrease
in the property valuations at Multiply
Logistics North and Aire Valley Land, both
of which were impacted by the industrial
& logistics market movements. 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
Capital Growth
Residential Major
Developments
Industrial &
logistics Major
Developments
Residential
Strategic
Land
Industrial
& logistics
Strategic Land
Income
Generation
Investment
Portfolio
Natural
Resources
Agricultural
Land
Total
Category
Profit
on sale
2022
Revaluation
gains/
(losses)
Total
Profit
on sale
2021
Revaluation
gains/
(losses)
2022
2021
Total
valuation
Total
valuation
Total
Development
11.6
2.2
13.8
5.6
19.5
25.1
228.1
184.5
Mixed
(2.0)
(3.4)
(5.4)
1.0
59.9
60.9
68.2
123.7
Investment
0.4
39.8
40.2
0.5
6.2
6.7
51.4
53.0
Investment
(0.2)
(12.7)
(12.9)
0.6
28.2
28.8
82.2
91
Investment
–
(41.0)
(41.0)
0.1
36.2
36.3
280.9
277.5
Investment
3.2
(0.2)
3.0
3.5
(1.9)
1.6
20.3
30.6
Investment
–
13.0
0.3
(15.0)
0.3
(2.0)
1.2
12.5
(0.1)
148.0
1.1
160.5
5.7
736.8
5.4
765.7
Notes: A full description and reconciliation of the APMs in the above table is included in Note 2 to the consolidated financial statements. There are some minor differences
on some totals due to roundings. Profit/(loss) on sale includes the impact of transaction fees incurred.
Strategic ReportHarworth Group plc: Annual Report and Financial Statements 2022 32
Financial review continued
Profit on sale of £13.0m (2021: £12.5m) reflected the completion of sales above book value. Revaluation losses were £15.0m
(2021: £148.0m gains) and are outlined in the table below.
2022
£m
(19.7)
(0.2)
(2.0)
(22.0)
(7.5)
14.5
(15.0)
2021
£m
84.0
1.1
2.8
87.9
9.2
50.9
148.0
The net realisable value provision
on development properties as at 31
December 2022 was £9.8m (31 December
2021: £12.2m). 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 2022. 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 £138.5m (2021: £108.3m), achieving
a total profit on sale of £13.0m (2021:
£12.5m). Sales comprised residential plot
sales of £69.5m (2021: £64.9m), industrial
& logistics land sales of £57.0m (2021:
£18.1m) and sales of other, mainly mature,
income-generating sites and agricultural
land, of £12.0m (2021: £25.3m).
(Decrease)/increase in fair value of investment properties
(Decrease)/increase in value of assets held for sale
Movement in net realisable value provision on development properties
Contribution to statutory operating profit
Share of (loss)/profit of joint ventures
Unrealised gains on development properties and overages1
Total non-statutory revaluation (losses)/gains
Note: There are minor differences on some totals due to roundings.
The principal revaluation gains and losses
across the divisions reflected the following:
Industrial & logistics
• The industrial & logistics market had
a record breaking first half of the year
giving way to a much weaker second
half. In particular, rising interest rates,
a tighter lending environment and
general economic uncertainty resulted
in CBRE reporting that market-wide
investment yields moved out by 175bps
from June 2022 to December 2022
and 150bps over the 12 months of
2022 across both prime and secondary
industrial & logistics properties.
Occupier demand remained resilient
and rents across the sector increased.
• These market dynamics affected
our industrial & logistics Major
Development sites, Strategic Land
sites and the Investment Portfolio.
For development sites, costs of
construction also increased over
the year.
•
In Major Developments, gains relating
to the sale of the Kellingley site, and on
completing the direct development
at Bardon Hill, development progress
across sites, securing grant funding
at Chatterley Valley and increased
estimated rental value largely offset the
downwards movement in valuations
caused by increased yields.
• Strategic Land valuations, where the site
is close to delivery, for example in the
planning pipeline, were more affected
by the market movements than longer-
term strategic sites, although valuation
downwards movements were reduced
by progress in planning made during
the year.
• The Investment Portfolio property
yields moved in line with the market
but our management actions securing
new leases, renewals and rent reviews
resulted in the net initial yield moving
only 60bps to 6.2% from 5.6% as at
31 December 2021.
Residential
• The residential market saw house prices
fall during the final months of the year
and the supply of new homes for sale
reaching its highest level in December
2022 since May 2021.
• Residential land sales on our Major
Development sites continued to
demonstrate the demand for our
serviced land product and underpin
valuations.
•
In particular, the first sale at Benthall
Grange, our Ironbridge site, set the
pricing point for this development
and delivered a valuation gain. This
site was categorised as Strategic Land
during 2022 until transferred to Major
Developments during the second half
of the year.
Natural Resources
• Valuations remained broadly consistent
with minor valuation decline in the
waste and recycling portfolio.
Agricultural Land
• We experienced a small valuation
increase as a result of improving
agricultural land prices.
Strategic ReportHarworth Group plc: Annual Report and Financial Statements 2022 33
Cash proceeds from sales in the year were £131.2m (2021: £114.5m) 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
1 A full description and reconciliation of APMs is included in Note 2 to the condensed consolidated financial statements.
2022
£m
138.5
(28.5)
21.2
131.2
2021
£m
108.3
(27.4)
33.6
114.5
Tax
The income statement charge for taxation
for the year was £3.0m (2021: £33.2m),
which comprised a current year tax charge
of £21.8m (2021: £6.4m charge) and
a deferred tax credit of £18.7m (2021:
£26.8m charge).
The current tax charge resulted primarily
from profits from the sale of development
properties, investment property, AHFS,
profit on the rental of investment property,
royalties and other fees after taking into
account overheads and interest costs. The
decrease in deferred tax largely relates to
unrealised losses on investment properties.
The deferred tax balance has been
calculated based on the rate expected to
apply on the date the liability is reversed.
At 31 December 2022, the Group had
deferred tax liabilities of £25.9m
(31 December 2021: £46.9m) and
deferred tax assets of £1.8m (31 December
2021: £4.3m). The net deferred tax liability
was £24.1m (31 December 2021: £42.6m).
Net asset value
Basic earnings per
share and dividends
Basic earnings per share for the year
decreased to 8.6p (2021: 29.1p) reflecting
the small overall movement in the valuation
of the land and property portfolio in 2022,
compared to a significant valuation gain in
2021.
In addition to the interim dividend of
0.404p, the Board has determined that
it is appropriate for a final dividend of
0.929p (2021: 0.845p) per share to be
paid, bringing the total dividend for the
year to 1.333p (2021: 1.212p) per share.
The recommended 2022 final dividend
and 2022 total dividend represent a 10%
increase in line with our dividend policy.
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 2022, the balance sheet
value of all our development properties
was £205.0m (2021: £172.7m) and their
independent valuation by BNP Paribas was
£238.8m, reflecting a £33.9m 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.
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 & Equiniti Share Plan Trustees Limited-held shares
EPRA NDV per share2
31 Dec
2022
£m
695.4
11.6
60.7
11.8
779.5
(60.0)
(24.1)
–
(92.7)
602.7
31.2
633.8
322,612,685
196.5p
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
322,539,284
197.6p
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.
Strategic ReportHarworth Group plc: Annual Report and Financial Statements 2022 34
Financial review continued
EPRA NDV at 31 December 2022
was £633.8m (31 December 2021:
£637.5m), which includes the mark to
market adjustment on the value of the
development properties and overages.
The total portfolio value as at 31 December
2022 was £736.8m, a decrease of £28.9m
from 31 December 2021 (£765.7m). The
Group’s share of loss from joint ventures
of £7.5m (2021: £9.2m profit) resulted in
investments in joint ventures decreasing
to £29.8m (31 December 2021: £36.1m).
Trade and other receivables include
deferred consideration on sales as set
out previously. At 31 December 2022,
deferred consideration of £34.6m
(31 December 2021: £27.4m) was
outstanding, of which 91% is due within
one year.
The table below sets out our top ten
sites by value, which represent 47% 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
Benthall Grange,
Ironbridge
Major Development
Investment
Midlands
Bardon Hill
Investment Portfolio
Investment
Midlands
2,016 residential units consented, land sold
representing 771 units
1,000 residential units consented, land sold
representing 110 units
Units completed, with 65% of site let or in
heads of terms
Nufarm
Investment Portfolio
Investment
Yorkshire &
Central
n/a
Ansty1
AMP
Strategic Land
Investment
Midlands
Proposed industrial & logistics site,
planning not yet submitted
Investment Portfolio
Investment
Yorkshire &
Central
n/a
Waverley
Major Development
Development
Yorkshire &
Central
3,038 residential units consented, land
sold representing 2,442 units
Preston
Investment Portfolio
Investment
North West
n/a
Thoresby Vale
Major Development
Development
Yorkshire &
Central
800 residential units consented, land sold
representing 362 units
Knowsley
Investment Portfolio
Investment
North West
n/a
1 Contracts have been conditionally exchanged for the sale of the site.
Strategic ReportHarworth Group plc: Annual Report and Financial Statements 2022 35
Finance 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,
with 2022 providing further growth in sales.
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% in-year. As a principle, the Group will
seek to maintain its cash flows in balance
by funding the majority of infrastructure
expenditure through disposal proceeds,
while allowing for growth in the portfolio.
The Group intends to continue to enter
into development and infrastructure loans
alongside its RCF to support its growth
strategy.
Debt facilities
An RCF with NatWest and Santander
had been in place since 2015. During the
first half of 2022, we entered into a new
five-year £200m RCF, together with a £40m
uncommitted accordion option, which
replaced the original RCF. NatWest and
Santander continue to support us in the
new RCF and we welcomed HSBC to our
banking group. The new RCF is aligned
to the Group’s strategy and provides
significant additional liquidity and flexibility
to enable us to pursue our strategic
objectives. The interest rate of the new RCF
is on a loan-to-value ratchet mechanism with
a margin payable above SONIA in the range
of 2.25% to 2.50%. There are now no major
refinancing requirements until 2027.
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
forward the development of logistics units.
The Group had borrowings and loans of
£60.0m at 31 December 2022 (2021:
£37.8m), being the RCF drawn balance
(net of capitalised loan fees) of £34.6m
(2021: £33.3m) and infrastructure or direct
development loans (net of capitalised loan
fees) of £25.4m (2021: £4.5m). The Group's
cash balances at 31 December 2022 were
£11.6m (2021: £12.0m). The resulting net
debt was £48.4m (2021: £25.7m).
Net debt* increased with property
expenditure and acquisitions offset by 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 joint ventures
Interest and loan arrangement fees
Dividends paid
Tax paid
Other cash and non-cash movements
Closing net debt as at 31 December
The weighted average cost of debt, using
an end of month average 2022 balance
and 31 December 2022 rates, was 5.52%
with a 0.9% non-utilisation fee on undrawn
RCF amounts (2021: 2.90% with a 0.9%
non-utilisation fee). The weighted average
term of drawn debt is now 3.2 years
(31 December 2021: 2.2 years).
The Group’s hedging strategy to manage
its exposure to interest rate risk is to hedge
the lower of around half its average debt
during the year or its net debt1 balance
at year-end. At 31 December 2022, 34%
of the Group’s drawn debt, reflecting
44% of net debt, was subject to fixed rate
interest rates with no hedging instruments
in place on the remaining floating rate
debt. Projected drawn debt and hedging
requirements remain under active review
with any new hedging to be aligned to
future net debt requirements.
As at 31 December 2022, the Group’s
gross loan to portfolio value was 8.1%
(31 December 2021: 4.9%) and its net loan
to portfolio value was 6.6% (31 December
2021: 3.4%). 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 26.1%
(31 December 2021: 13.0%) and a net loan
to core income portfolio value of 21.0%
(31 December 2021: 8.9%). Under the RCF,
the Group could withstand a material fall
in portfolio value, property sales or rental
income before reaching covenant levels.
2022
£m
(25.7)
58.9
(66.6)
14.2
(1.2)
(6.0)
(4.0)
(17.7)
(0.3)
(48.4)
2021
£m
(71.2)
57.0
(41.0)
44.5
(1.6)
(4.6)
(5.9)
(3.6)
0.7
(25.7)
At 31 December 2022, undrawn capacity
under the RCF was £164.0m (31 December
2021: £116.0m). Going forwards the RCF,
alongside selected use of infrastructure
loans where appropriate, will continue to
provide the Group with sufficient liquidity
to execute our growth strategy.
Kitty Patmore
Chief Financial Officer
13 March 2023
* 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.
Strategic ReportHarworth Group plc: Annual Report and Financial Statements 2022 36
Long-term viability statement
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 on
pages 138 to 139.
The Board conducted a review for a period
of five years ending 31 December 2027.
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 focuses 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 & logistics buildings,
while supporting the transition to NZC. Major
development sites could be active with
phases of development combining to be
15 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 2027;
• rental income from income-producing
industrial properties which, at 31
December 2022, had a vacancy rate
of 8.3% at year-end, reduced to 2.7%
by excluding the recently completed
Bardon Hill site, a WAULT of 11.3 years
and a rent collection of 98%; and
• development and investment
management, planning promotion and
investment fees.
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). While the market
has been impacted by increased interest
rates and greater economic uncertainty
over the second half of 2022, the residential
market has a fundamental insufficient supply
of housing and sales to housebuilders
remained robust during 2022. Having teams
in Yorkshire, the Midlands and North-West
balances the exposure to any one region.
Net debt at year-end of £48.4m represented
a 6.6% net loan to portfolio value. The
Group entered into a new £200m five-year
RCF during 2022, adding HSBC to the
Group’s main lenders alongside Natwest
and Santander; this 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 kept the Group’s
principal risks under regular review and
updated them to reflect the greater
economic uncertainty as well as the
strategic progress of the Group. Of the
principal risks and uncertainties, those
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, Sustainability and People
sub-categories of risks identified in the
Effectively managing our risks section of
this Report on pages 45 to 53.
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 including dividends. The strategic
plan review 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 on the following page. Throughout
the strategic plan, the Group expects to
continue to transform land and property
into sustainable places where people
want to live and work. Whilst under the
sensitivity analysis, EPRA NDV growth plus
dividend could be impacted temporarily,
the long-term business model is expected
to continue to deliver the Group’s Purpose
in a sustainable manner.
Strategic ReportHarworth Group plc: Annual Report and Financial Statements 2022 37
Risk
Scenario
Mitigation and further analysis
Markets:
Residential
and
commercial
markets
• Further downturn in industrial & logistics and/
or 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.
• The portfolio provides a spread of sites across the Company's
three core regions and properties are diversified across the
residential and industrial sectors, both of which have strong
underlying demand fundamentals. These help to mitigate the
impact of market movements.
• Pursuant to our strategy we are working to mitigate a potential
downturn by introducing new products at our residential
sites, repositioning our Investment Portfolio to modern Grade
A and aligning the speed of our direct development to market
conditions, de-risking development through obtaining pre-let
or forward funding agreements.
• The Group works closely with tenants in the Investment
Portfolio on payment terms that support both parties to
enable the Group to continue to actively manage rent
collection.
• Development expenditure can be reduced and rephased to
match more closely market demand and conserve cash.
Finance:
Availability of
appropriate
capital
• A market downturn reducing sales volumes
• At year-end, the Group had low gearing, good liquidity
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.
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.
• The RCF agreed in 2022 included a £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 continues to actively review the risk of interest rate
increases, projected drawn debt and hedging requirements,
with 44% of the net debt balance at 31 December 2022
subject to fixed interest rates. The Group’s hedging strategy is
to hedge the lower of around half its average debt during the
year or its net debt balance at year-end.
• Reduced activity on sites as set out above would reduce
development expenditure and conserve cash resources.
Strategic ReportHarworth Group plc: Annual Report and Financial Statements 2022 38
Long-term viability statement continued
Risk
Scenario
Mitigation and further analysis
Sustainability:
Managing
climate
change
transition
• Failure to manage transitional risks associated
• Risks associated with the development of our Sustainability
with climate change covering both operational
activity and reporting.
Framework and NZC pathway are overseen by our ESG Board
Committee (see pages 113 to 114).
•
Impact of climate change on our sites, slowing
development programmes and reducing sales.
• A new Non-Executive Director with a strong background in
sustainability has been appointed to the Board
• All buildings delivered in 2022 were NZC in operation ready,
mitigating future Scope 3 emissions.
• Development of an Energy and Natural Capital strategy,
which includes opportunities for carbon sequestration,
bio-diversity net gain, carbon trading and use of renewable
energy.
• Continued transition of our Investment Portfolio towards
modern Grade A.
• We have undertaken initial high level scenario modelling
covering NZC pathway and transition risks.
Other risks
including
project
delivery and
organisational
development
and design
• 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 or reduced.
•
• 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 21.
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.
Strategic ReportHarworth Group plc: Annual Report and Financial Statements 2022 Section 172 statement
39
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 2022.
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
appraisal of stakeholder impact has
been embedded into Board project
appraisals via our Underwriting Approval
process. Our Underwriting Proposal
templates presented to the Board focus
discussion on:
Our People
Why we engage
The Board's regard to these matters in
its discussions and decision making is
fundamental to Harworth achieving its
Purpose of 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 87 to 88 and pages 90 to 91.
• how each project supports the delivery
of our Purpose and aligns with our
strategy, including review of financial
performance metrics;
• the environmental and societal impact
of each project in the context of the key
pillars of the Harworth Way – Planet,
Communities and People;
• the impact of each project on our
external stakeholder groups including a
review of risks and opportunities;
• market commentary; and
• resourcing for each project.
How we engage
The people at Harworth are key to the current and
future 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. The Board also reviews employee engagement across the
business and receives feedback from the Chief Executive on people matters
at each Board meeting. See more on page 90.
Their key interests
How do we respond? Examples of actions taken in 2022
• To work on market-leading projects with pride and
We are committed to making Harworth an employer of choice.
enjoyment.
• To work in, and contribute to, an innovative,
collaborative and diverse culture.
• To be supported in their career and personal
development, appropriately rewarded and
recognised for their contribution.
• A sustainable work-life balance.
• To feel valued and have their views heard and taken
into account in decision making.
Our people strategy, which supports our business strategy, is subject to
constant review, particularly as the business grows quickly. During the
year we appointed a Group Resources and Transformation Director who
continues to evolve the people strategy, and has developed a 'People and
Enabling Strategy' ready for deployment from 2023.
We extended the application of our employee share plans to facilitate share
ownership throughout the workforce allowing employees to share in the
future success of Harworth.
To provide some support during the 'cost-of-living crisis', we made a
one-off non-contractual payment to all employees (excluding the Executive
team) in December 2022. We have also introduced a Financial Wellbeing
Programme, which is offered to all colleagues on an optional basis, offering
online/in-person seminars to assist understanding of everyday as well as
more complex financial matters.
We have progressive maternity, adoption and paternity leave and pay
policies, and a range of wellbeing initiatives, which we enhanced during the
year with a new menopause policy.
Strategic ReportHarworth Group plc: Annual Report and Financial Statements 2022 40
Section 172 statement continued
Investors
Why we engage
How 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.
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 in 2022
• Long-term and sustainable returns.
• A business that considers and delivers a positive
environmental and societal impact, with the support of
an effective governance framework.
In response to feedback from existing and prospective investors, we have
further enhanced our financial and operational disclosures.
We hosted investors on several site visits and at a Capital Markets Day
during 2022. Our Chief Executive and Chief Financial Officer also held
their first live presentation via the Investor Meet Company platform.
We engaged with, and took account of the views of, our largest
shareholders when formulating our revised Remuneration Policy.
Communities
Why 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.
How we engage
Consultation and collaborative working with the local communities where
we are transforming sites are fundamental components of a successful
project. These include: integrating principles and measures into our
masterplans, which align with the Harworth Way and our Sustainability
Framework; early and ongoing engagement with the public on
masterplans and 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 in 2022
The creation of sustainable places where people want to
live and work. Each site is unique but key interests for those
living and working on our sites typically include: housing or
places of work 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.
• When reviewing a significant acquisition opportunity during the year, a
substantial proportion of the Board’s appraisal focused on the impact
of the proposed development on local heritage assets. The Board was
keen to understand how those assets would be preserved and opened
up to the public and how the views of the local community would be
sought and incorporated into the masterplan.
• At Bardon Hill, we completed the direct development of 332,000
sq. ft of Grade A industrial & logistics space, which achieved NZC in
construction status.
• At Waverley, construction began on a new 150-bedroom hotel, and
planning permission has been granted for a new medical centre. These
will be important community assets for residents and visitors to Waverley.
Strategic ReportHarworth Group plc: Annual Report and Financial Statements 2022 41
Customers
Why we engage
As a master developer, we want to ensure there is
long-term demand for our developments. 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
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 are needed.
Their key interests
How do we respond? Examples of actions taken in 2022
A collaborative and reciprocal relationship with Harworth
in which they trust us to deliver a high-quality, sustainable
product on time, and, for our tenants, a longer-term
relationship in which they are treated fairly and their
operational needs are understood and met.
By repositioning our Investment Portfolio to modern Grade A, we are
providing our occupiers with a high-quality product.
To support our sustainability aspirations, we have started working with
some tenants directly, and others via our managing agents, to understand
and identify the carbon emissions from their premises. In addition, all new
tenants in 2022 were offered green leases.
During this period of economic uncertainty, we continue to engage
closely with our occupiers to ensure that payment terms support both
parties.
Suppliers
Why we engage
How we engage
The successful and timely delivery of our sites depends on
strong relationships with suppliers who are professional,
trusted and share our values. Understanding their levels of,
and approach to reducing, carbon emissions also supports
the development of our own journey to NZC.
We apply a consistent “take-on” approval process for all suppliers
and maintain regular communication. 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, long-term
relationships.
Their key interests
How do we respond? Examples of actions taken in 2022
A long-term partnership with Harworth in which they are
treated fairly, get good visibility of our future requirements,
and receive timely payment, whilst contributing to
Harworth’s success.
During 2022, we undertook a detailed review of our procurement
policies and processes, covering all forms of procurement at a corporate
and project level. We identified a target operating model to which we
are transitioning during 2023, which will further enhance development
project procurement and broaden existing good practice to other forms
of procurement.
Strategic ReportHarworth Group plc: Annual Report and Financial Statements 2022 42
Section 172 statement continued
Funders
Why we engage
We need external capital to fund the Group’s activities,
long-term projects and efficient growth.
How we engage
Ahead of refinancing our RCF in Q1 2022, we engaged extensively with
existing and prospective funders. We welcomed 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.
We engage proactively with prospective grant and debt funders of project
specific activities, such as infrastructure and direct development. We
meet public and private funding partners on a regular basis to explore
partnership opportunities on one or more sites at a time.
In May we launched our single family BTR portfolio, engaging with
prospective partners to provide a unique forward funding and long-term
investment opportunity.
Their key interests
How do we respond? Examples of actions taken in 2022
An open dialogue with regular updates and assurance
about our operational and financial performance together
with delivery against all our contractual obligations.
We worked with both of our incumbent lenders and HSBC to agree and
put in place a new £200m RCF in Q1 2022.
We secured grant funding at Chatterley Valley.
Strong interest was expressed in our BTR portfolio as an attractive
investment opportunity leading to engagement with potential investors.
The prospect of establishing a long-term and strategic relationship with
one or more investors was an important factor in our appraisal of options.
Government
Why we engage
How we engage
Harworth has an important part to play in supporting some
of the Government's 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 and HS2, as well as on
site-specific matters.
We engage with local government, Combined Authorities, 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 in 2022
Environmental, societal and economic priorities, both
national and local, the achievement of which we can help
support.
During the year, we engaged with the leaders and other senior officers of
certain local authorities and Metro mayors to collaborate with them on the
delivery of local priorities via our current and prospective projects.
Housing shortages within local planning authorities and central and
local government priorities for infrastructure investment continue to be
important factors that inform our project appraisals.
Strategic ReportHarworth Group plc: Annual Report and Financial Statements 2022 Effectively managing our risk
43
Effective risk management is a key focus for the Board, and it directly informs our strategy. It helps us to create value
and deliver positive outcomes for our stakeholders in support of our Purpose: to create sustainable places where people
want to live and work.
In this section we explain how the
Board has achieved assurance as to
the effectiveness of Harworth’s risk
management and internal control system.
We present our approach to risk and set
out the Board’s analysis of the Group’s
principal risks and uncertainties informed
by our growth strategy.
Our risk management
framework
Our approach to risk management centres
on being clear about our risk appetite,
appraising risk as a fundamental part of
decision making and responding quickly to
changes in our risk profile. We have clear
roles and accountability in respect of risk
management, as outlined below.
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, whilst at the same time
making the most of our opportunities.
Our insurance programme also plays an
important role where we are unable to
eliminate certain risks.
Risk framework
INFORMING
REPORTING
Internal audit
The Board
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 identify and manage risk effectively, with its focus being on principal and
emerging risks.
Audit Committee
The Audit Committee supports the Board in the management of risk and is responsible for
reviewing the appropriateness and effectiveness of risk management activities and internal
control processes.
Group Leadership Committee (‘GLC’)
The GLC has responsibility for identifying operational risks, implementing and monitoring
risk responses and ensuring the effectiveness of key controls. Each quarter, 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.
Risk owners and champions
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 each function across the
business. Central to monitoring the effectiveness of our risk management system is our
Group Risk and Assurance Map (‘GRAM’), see more on the following page.
The internal audit function acts
as an independent and objective
assurance function by evaluating the
appropriateness and effectiveness
of our risk management and
internal control processes, through
independent review, with a
direct reporting line to the Audit
Committee including regular contact
with the Audit Committee Chair.
In 2022, as in previous years, the
Audit Committee approved a
programme of assurance activity
for the year ahead, which was
predominantly outsourced
to KPMG.
The Committee also formed the
view that the increase in pace, scale,
and complexity of activity inherent
in delivering the Group’s strategy
necessitated the establishment of
an internally resourced internal audit
function.
At the start of 2023, a new Head of
Internal Audit joined the business,
reporting to the Company Secretary
and Audit Committee.
Strategic ReportHarworth Group plc: Annual Report and Financial Statements 2022 44
Effectively managing our risk continued
Group Risk and Assurance Map
The GRAM is a “living” tool and
reviewed by risk owners and champions
(continuously), the GLC (quarterly), and
the Audit Committee (biannually). The
GRAM incorporates both the principal risks
identified by the Board and the operational
risks identified by the wider business. Each
risk has its own risk and assurance map
which details:
• the scope, and commentary on the
status, of 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 to put
together a 36-month rolling internal
audit programme (see page 111 of the
Audit Committee report).
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 systems
of internal controls, 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 which informs the Board's
assessment of the effectiveness of the Group’s risk management system (ahead of results announcements).
Biannual Board
review of principal
and emerging risks
and risk appetite1
Audit Committee review of internal audit
programme and review of effectiveness
of the internal audit function2
Biannual Board
review of principal
and emerging risks
and risk appetite1
GLC risk workshops
GLC risk workshops
JAN
FEB
MAR
APR
MAY
JUN
JUL
AUG
SEP
OCT
NOV
DEC
Continuous review of all risks by risk owners and risk champions
1 The profile of the principal risks is reported to the Board at each Board meeting, with the Board undertaking a detailed review biannually.
2 The Audit Committee receives an update from the Head of Internal Audit at each of its meetings, and internal audit reports are circulated to the Committee
throughout the year.
Strategic ReportHarworth Group plc: Annual Report and Financial Statements 2022 45
more challenging. In the short term, the
technical planning risk and delays we
already experience, due to stretched
Local Planning Authority resource, are
also heightened, in part due to the
continued impact of the impending
changes to the NPPF, upcoming local
elections, and the momentum that
will build as we go through 2023 to a
general election.
• There have been limited signs of
distress in our construction supply
chain to date, notwithstanding the
macroeconomic climate, but we
are monitoring our “supply chain
counterparty risk” very closely.
• There are indications of stabilisation in
supply chain cost inflation and forecasts
suggest the inflation rate will decline
materially over the course of 2023,
which may mean that the residual risk
status of our “supply chain cost inflation
and constraints” risk trends down from
“medium” to “low”.
• Statutory costs of development are
trending upwards, with the introduction
of the Building Safety levy and
proposals for an infrastructure levy.
However, the Residential Property
Development Tax has had a limited
impact on project and Group financial
outcomes and performance to date.
This risk retains a “medium” risk status.
Principal risks and uncertainties
The Board is responsible for identifying,
setting the risk appetite for, and evaluating
the Group’s principal and emerging risks,
being those risks that could threaten
the delivery of our strategy, our business
model, future performance, solvency or
liquidity and/or reputation. Our principal
and emerging risks are reported to
the Board in dashboard format at each
meeting, and the Board undertakes a
detailed assessment every six months, the
most recent being in January 2023.
In 2021, the Board identified through a
series of workshops a refreshed set of
principal risks, informed by the Company’s
new strategy developed that year. During
2022, the Board kept these principal
risks under regular review, especially
in the context of the war in Ukraine and
the deteriorating macroeconomic and
geopolitical climate, and resulting market
conditions. At the time of writing, and
looking ahead, the Board anticipates
national and global economic uncertainty
to remain elevated requiring it to continue
to manage the Group’s principal risks in an
uncertain and changing environment.
Since reporting on our principal risks in the
2021 Annual Report, the following changes
have been made:
• The residual risk status of our
“residential and commercial markets”
risk has increased from “medium” to
“high”, as anticipated in our interim
results announcement, due to the
uncertainty in the UK economy, with
high inflation and rising interest rates
impacting our core markets.
• The residual risk status of our
“availability of capital” risk has increased
from “low” to “medium”, reflecting
the potential requirement in the
medium term to raise capital to support
acceleration in pipeline delivery or a
major acquisition not contemplated
within the Strategic Plan.
• The “climate change” risk category
has been updated to “sustainability”
to reflect better Harworth’s evolving
Sustainability Framework. Within this
category, the “managing climate
change transition” principal risk has
been reformulated to focus on our
“NZC pathway” as a principal risk.
• The “resourcing” principal risk has
been replaced by “organisational
development and design”. As adequate
resource has been added over the last
two years, our focus is on evolving our
culture, capability, values, behaviours,
processes and ways of working to
drive continued excellence in the
organisation as we execute our
growth strategy.
In addition to the above changes:
• The planning risk profile of individual
projects differs, but overall, the residual
risk status of our “planning” risk remains
“high” reflecting both short-term
and long-term headwinds. Emerging
planning policy, principally in the form
of proposed changes to the National
Planning Policy Framework ('NPPF'),
which, amongst other things, proposes
the removal of housing targets, will
make our planning promotion activity
Strategic ReportHarworth Group plc: Annual Report and Financial Statements 2022 46
Effectively managing our risk continued
The risk heat map below illustrates the current status of our principal risks before and after mitigating actions.
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. Organisational development
and design
Finance
8. Availability of appropriate capital
Safety and Compliance
9. Health and safety
Sustainability
10. NZC pathway
Systems and Information
Resources
11. Cyber security
s t e m s a n d
a ti o
n R e s o u r c es
11
Acquisitio
ns
y
S
Info r m
bility
tain
a
s
u
S
C
S
o
a
f
m
e
9
t
p
y
l
i
a
a
n
n
d
c
e
10
10
3
4
5
1
2
11
1
9
8
7
5
2
4
3
6
6
8
7
Finance
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
Very high
Low
Inherent risk (before mitigating actions)
High
Medium
Very low
Residual risk (after mitigating actions)
See our principal risks tables on the following pages for how we
report on and mitigate our current and emerging principal risks
A detailed analysis of each principal risk is set out on the following pages, explaining our key risk mitigation actions, further measures
planned for the upcoming year, any changes in residual risk status in the year and how each risk relates to our strategic pillars (using
the key below).
Key to strategic links
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 Targets
Key to change in
residual risk in the year
No change
Increase
Decrease
Strategic ReportHarworth Group plc: Annual Report and Financial Statements 2022
47
Risk 1
Commentary
Availability of and
competition for
strategic sites
Current risk
Competition for acquisitions remains a key risk as acquiring new sites is fundamental to maintaining target
returns and driving growth consistent with our strategy. That said, our existing pipeline of industrial & logistics
and residential land provides a significant buffer, which means we can be more considered if hurdle return
aspirations cannot be met in the current market, and we secured a range of opportunities in 2022 including
two substantial industrial & logistics sites placed under option. The year ahead could increase opportunities
to acquire land if distressed sales come to market and/or competitors take a more cautious approach to
acquisitions. The residual risk profile for this risk could, therefore, reduce during 2023.
Description
Mitigation
Additional measures planned for 2023
Failure to acquire strategic
land at appropriate prices
due to constrained supply or
competition.
• Extensive external stakeholder engagement
• Leveraging better our relationships with
to identify opportunities supported by internal
co-ordination via regular internal acquisitions
meetings.
• Customer Relationship Management (‘CRM’) system,
which has been designed to help monitor our target
acquisitions pipeline, and support the coordination
of our engagement with stakeholders.
• We seek input from our valuers prior to making major
acquisitions to ensure we understand the latest
market pricing.
• Via our portfolio strategy, we manage the timing
of acquisitions.
• The review of project plans for each site helps
highlight further acquisition opportunities.
• We have continued to recruit additional
acquisitions resource.
local authorities and agents.
• Retrospective analysis of
unsuccessful bids.
Current residual risk status
HIGH
Change in residual risk in the year
Link to strategy
3
Strategic ReportHarworth Group plc: Annual Report and Financial Statements 2022
48
Effectively managing our risk continued
Risk 2
Planning
Current and emerging risk
Commentary
Whilst changes (or proposed changes) in planning legislation and policy are not uncommon, emerging
planning policy principally in the form of proposed changes to the NPPF poses long-term headwinds
for planning promotion if they remain as stated, particularly of large residential sites and development
in the greenbelt. If implemented, the removal of housing supply targets will likely mean that securing
residential development allocations in local plans, particularly in the greenbelt, becomes increasingly
difficult and bringing those sites through the planning system takes longer. In the shorter term, the
government’s proposals for changes to the NPPF have encouraged some Local Planning Authorities
to delay the adoption of their local development plans. This exacerbates the challenges and delays
we already experience due to stretched Local Planning Authority resource. We anticipate an uncertain
political backdrop as the next general election approaches, both at a central and local Government
level, which could create persistent headwinds when it comes to making significant progress on
promoting and delivering large sites over the next two years. Nevertheless, Harworth remains well
positioned with our large strategic landbank, our track record for deliverability and ability to acquire
good strategic residential and employment sites for which there is a strong demand. This, combined
with the increased resources and planning expertise within the business, gives us confidence that we
can adapt successfully to planning policy changes.
Description
Mitigation
Additional measures planned for 2023
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
• Leveraging relationships with local
portfolio level.
authorities.
• Through key stakeholder groups, we respond to
emerging planning policy.
• Stakeholder mapping is undertaken at a project level.
• Strategic planning for development
of relationships with senior political
stakeholders.
• Local political advisers are appointed on individual
Current residual risk status
sites, where appropriate.
HIGH
• Strong relationships with local planning authorities
and key local stakeholders.
•
Implementation of the CRM system.
Change in residual risk in the year
• We have continued to recruit additional internal
Link to strategy
planning resource.
• Transaction approval papers include detailed
planning strategies.
1 2 3
Strategic ReportHarworth Group plc: Annual Report and Financial Statements 2022
49
Risk 3
Commentary
Supply chain cost inflation
and constraints
Current risk
Both we, and our customers, have been experiencing supply chain challenges including shortages
of, and cost increases to, raw materials, plant and labour. However, as development activity likely
slows down during 2023, these supply chain pressures should also recede. We are seeing signs
of stabilisation in cost inflation, though not across all sectors and skilled labour shortages remain
particularly stubborn. Whilst this risk may trend down to “low” during 2023, it retains a “medium” status
at this point, reflecting continued difficulty in agreeing fixed prices with some contractors who are still
not prepared to accept cost inflation risk; more heavily negotiated contracts, particularly around the
transfer of risk; readiness of contractors to operate more sustainably; and continued volatility in energy
prices. Our cost plans are monitored closely, updated in valuations and adjustments made regularly to
reflect market movements.
Description
Mitigation
Additional measures planned for 2023
Supply chain pricing
pressures and constraints
(affecting labour, plant and
raw materials) resulting in
development cost increases,
increases to forward cost
plans, and potential project
delivery delays.
• Our procurement approach is considered early in
project planning.
• 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.
• We have continued to recruit additional direct
development and technical resource.
• Ongoing procurement review, as a
result of which we have identified
improvements in our operating model for
implementation during 2023.
Current residual risk status
MEDIUM
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 risk
A subdued and volatile economic climate increases the risk of insolvencies in the supply chain. Whilst
there is an increased occurrence of contractor insolvency in the construction market the impact on our
projects has been limited to date. Whilst a recession is forecast, it is currently expected to be shallow
and relatively short-lived. In 2023 our development activity will increase, as programmed pre-let and
build-to-suit direct development is undertaken and BTR project delivery commences, resulting in our
being more exposed to supplier/delivery partner failure. This trend will continue as Harworth grows,
increases direct development, and enters new markets for residential products. Our need to select and
manage counterparties effectively is growing and we will monitor this risk very closely.
Description
Mitigation
Additional measures planned for 2023
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
project planning.
• A consistent process is followed for selecting and
“onboarding” counterparties.
Ongoing procurement review, as a result
of which we have identified improvements
in our operating model for implementation
during 2023.
• We have established a suite of legal precedents to
Current residual risk status
promote consistency in land remediation and direct
development procurement.
• Our central technical team monitors contractor
“concentration risk” and financial health, and
promotes consistencies and knowledge-sharing
across our portfolio.
• Use of our CRM system.
• External review of contractor insurance packages for
every direct development project.
MEDIUM
Change in residual risk in the year
Link to strategy
1 2
Strategic ReportHarworth Group plc: Annual Report and Financial Statements 2022
50
Effectively managing our risk continued
Risk 5
Commentary
Statutory costs of
development
Current and emerging risk
The Board is focused on legislative changes that act as a further cost on development as it is settled
government policy to increase public financial gain by taking a larger proportion of land value uplift
derived from planning consents. In short succession there have been the introduction of two new
measures designed to fund cladding repairs on high-rise residential buildings: the residential property
developer tax and the building safety levy expected to be implemented in 2023, albeit the former has
had a limited impact on project outcomes and Group performance. On the horizon is the infrastructure
levy as part of planning reforms to be implemented via the Levelling Up and Regeneration Bill.
Description
Mitigation
Additional measures planned for 2023
Legislative reforms which do,
or may, impose a tax or levy
on development, or have the
effect of levying an additional
cost on development.
• Enhanced horizon scanning regime.
None planned.
• Sensitivity to additional statutory costs modelled
when assessing acquisitions.
• Through key stakeholder groups, we respond to
emerging policy.
Current residual risk status
MEDIUM
Change in residual risk in the year
Link to strategy
2 3
Risk 6
Commentary
Residential and
commercial markets
Current risk
The residential and industrial & logistics markets were volatile throughout 2022 as a result of
macroeconomic, political and geopolitical factors. It was largely a “tale of two halves”: whilst H1 2022
valuations had strong growth, H2 was categorised by unpredictability and a marked downward trend
in industrial & logistics, initially in market sentiment followed by some transactional evidence of a
downturn in that sector. In October 2022, the Board concluded that the residual risk status of this risk
had moved from "medium" to "high" given indications of a slowing residential market and material
yield shifts affecting both prime and secondary industrial & logistics assets.
Despite Harworth’s resilient business model and through-the-cycle approach, it is not immune to shifts in
the market. Substantial uncertainty prevails although current forecasts suggest the commercial property
market will experience a faster recovery than the residential market, which is more susceptible to further
adverse market movements. However, the structural undersupply in both of our core markets, constraints
of available consented land, and our ability to create value through our management actions will continue
to mitigate some of the impact and encourage long-term stability.
Description
Mitigation
Additional measures planned for 2023
Downturn in industrial &
logistics and/or residential
market conditions leading to
falls in property values.
• Regular feedback is received from advisers on the
status of residential and industrial & logistics markets
in our core regions to supplement generic market
commentary.
• During 2022 we took advantage of favourable
market conditions by accelerating residential sales.
• Regular review (biannual) of project plans for each
site by the Investment Committee, which is heavily
informed by prevailing market conditions.
• Management actions to drive value.
Pursuant to our strategy, but considering the
current market, we continue to pursue mixed
tenure strategies and do not intend to start
any new speculative direct development
projects this year instead focusing on land
sales, pre-let and build-to-suit opportunities.
Current residual risk status
HIGH
Change in residual risk in the year
Link to strategy
1 2 4
Strategic ReportHarworth Group plc: Annual Report and Financial Statements 2022
51
Risk 7
Commentary
Organisational
development and design
Current risk
Harworth has experienced a period of rapid growth with a significant increase in the number
of employees. The Board recognises that a structured change management approach to both
organisational development (the “informal” elements of behaviour, values and culture) and
organisational design (the “formal” elements of operation and governance) is critical as the Group
continues to evolve and grow over the long term.
Description
Mitigation
Additional measures planned for 2023
Misalignment of culture,
capability, values,
behaviours, formal
processes, systems and/
or controls with what the
business requires to deliver
the strategy.
• Appointment of Group Resources and
Transformation Director.
Implementation of "People and Enabling
Excellence Strategy".
•
Implementation of people strategy to complement
our business strategy, focusing on the number and
nature of resources required to fill skills gaps as well
as volume gaps.
Current residual risk status
MEDIUM
Change in residual risk in the year
• Better alignment of Group and personal objectives
NEW RISK
with delivery of strategy.
• Launch of a new Leadership Development
Programme.
Link to strategy
1 2 3 4
Risk 8
Commentary
Availability of
appropriate capital
Current and emerging 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 under our strategy. In early 2022 we entered
into a new senior debt facility comprising a five-year £200m RCF together with a £40m accordion facility.
This RCF, supplemented by project-specific funding where appropriate, supports the funding needs of
the business. Our net debt at the end of 2022 was low and is forecast to remain relatively modest during
2023 and we retain headroom in all covenants. However, to leverage our growing development pipeline
we will need to make full use of our debt finance capacity. The Board recognises it could be challenging,
given current market uncertainty, to raise additional equity to fund accelerated development in addition to
the Strategic Plan or a major acquisition. Whilst this is not a short-term risk, work will commence this year to
explore wider potential funding options, prompting the Board to conclude that the residual risk status of
this risk has moved from "low" to "medium".
Description
Mitigation
Additional measures planned for 2023
Inability to access
appropriate equity and/or
debt funding to support the
strategy.
• Regular review of financing strategy to complement
• Continue to identify scheme specific and
our business strategy, supported by external
consultants where required.
•
In early 2022, we signed a new RCF comprising a
five-year £200m revolving credit facility together
with a £40m accordion facility.
• This is supplemented by accessing project specific
grant funding.
• An updated review of capital structure
funding options.
Current residual risk status
MEDIUM
funding where relevant.
Change in residual risk in the year
• We continue to pursue and unlock grant funding.
• Appointment of Financial Planning and Treasury
Manager contributing to improved longer-term
financial forecasting.
Link to strategy
1 2 3 4
Strategic ReportHarworth Group plc: Annual Report and Financial Statements 2022
52
Effectively managing our risk continued
Risk 9
Commentary
Health and safety
Current risk
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.
Description
Mitigation
Additional measures planned for 2023
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.
• We have a Risk and Compliance (‘R&C’) function
with a focused remit on health and safety and
environmental policy and assurance.
• The R&C team undertakes a rigorous site inspection
regime. It monitors and reports on the risk status of
each of our sites via a cloud-based health, safety and
environment management platform.
• We have a panel of health and safety consultants who
• Review the effectiveness of our health and
safety consultant panel arrangements.
• Review Employee Health and Safety policy.
• Further improvements to health and
safety reporting supported by the new
cloud-based platform.
Current residual risk status
LOW
Change in residual risk in the year
support our project delivery.
Link to strategy
• Health, safety and environment management
meetings are held quarterly and attended by senior
management and 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.
Strategic ReportHarworth Group plc: Annual Report and Financial Statements 2022
Effectively managing our risk continued
53
Risk 10
Commentary
Net Zero Carbon (‘NZC’)
pathway
Current and emerging risk
The NZC agenda means transformational change for all businesses. It has a wide-ranging impact on the
Group, from our investment case to shareholders, through to operational activity, including the need to
embed NZC principles into all projects, whilst remaining profitable. It also embraces external factors such
as industry and stakeholder metrics and the approach taken by Local and Combined Authorities on e.g.
carbon tax, biodiversity net gain and social value measures. Following the appointment of our Director of
Sustainability in H1 2022, we focused on developing The Harworth Way, which is the Group's continually
evolving Sustainability Framework, and developing our NZC Pathway. The NZC Pathway Report has been
published alongside this Annual Report and is available on our website.
Description
Mitigation
Additional measures planned for 2023
Failure to develop,
manage and meet our
NZC commitments and/or
NZC regulations, resulting
in financial loss, reduced
investment and reputational
damage.
• Development of The Harworth Way and NZC
Pathway with targets identified (see pages 64 to 77).
• Appointment of a Director of Sustainability and wider
sustainability team.
• We have an ESG Board Committee (see pages 113
to 114) to oversee formulation and delivery of our
Sustainability Framework, target-setting and reporting.
• We appointed a new Non-Executive Director to the
Board, Marzia Zafar, with a strong background in
sustainability.
• All buildings delivered in 2022 were NZC in operation
ready, mitigating future Scope 3 emissions.
• Embed fully environmental analysis into
our project appraisals and approvals
process.
• Continue to improve the capture and
analysis of environmental data (including
from supply chain and occupiers).
• Develop a carbon accounting system,
including appropriate accreditation.
• Continued development of Harworth’s
commercial and residential building
specifications.
Current residual risk status
• Continued transition of our Investment Portfolio to
100% modern Grade A by 2027.
MEDIUM
• Development of an Energy and Natural Capital
strategy, which includes a review of opportunities for
carbon sequestration, bio-diversity net gain, carbon
trading and use of renewable energy.
• We are a member of the UK Green Building Council,
which facilitates sharing of knowledge and best practice.
Change in residual risk in the year
Link to strategy
1 2 4
Risk 11
Commentary
Cyber security
Current risk
Cyber-attacks pose a continually evolving threat to all businesses and Harworth, like all others, is at
risk of regular attacks. Strategic and technical measures are in place to monitor and mitigate this risk.
In H2 2022, we undertook our biennial penetration test, which found Harworth to be in a strong
position with no major cause for concern.
Description
Mitigation
Additional measures planned for 2023
Successful cyber-attack
jeopardising business
continuity.
• Our IT Disaster Recovery Plan has been incorporated
into an updated Business Continuity Plan.
Desktop test of updated Business
Continuity Plan.
• We have an external provider for IT support, which
remains vigilant to the evolving cyber security backdrop
and an outsourced Information Security manager.
Current residual risk status
LOW
• We take out cyber risk insurance.
• We undertake biennial penetration testing,
supported by regular phishing simulations and
continuous IT system vulnerability scanning.
• We have a rolling cyber and information security
awareness programme for all employees.
Change in residual risk in the year
Link to strategy
Strategic ReportHarworth Group plc: Annual Report and Financial Statements 2022
54
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,
save for certain items, which are
summarised below:
• Strategy: We currently have 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: Significant
progress has been made over the
year in measuring our Scope 3
greenhouse gas emissions. However,
many categories of Scope 3 emissions
rely on the disclosure of data to us by
suppliers and customers and there
remains some work to be done over the
course of 2023 to enable us to report
a full and accurate data set. Harworth
has invested in systems and resourcing,
and is engaging with stakeholders,
to ensure all categories of Scope 3
emissions are reported in our 2023
Annual Report.
Further information on The Harworth Way
and the Group's NZC pathway an be found
on pages 67 to 69 of this Annual Report,
and Harworth's standalone NZC Pathway
Report, which has been published at the
same time and is available on our website.
Greenhouse Gas ('GHG') emissions data
can be found in our Streamlined Energy &
Carbon Reporting ('SECR') disclosure on
pages 62 to 63.
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 regularly on
our sustainability and climate-related
performance and has overall accountability
for and oversight of risk, undertaking a
biannual assessment of the principal risks,
which include climate-related risks. After
each meeting of the ESG Committee, the
Committee Chair provides an update to
the Board on sustainability progress. The
Board assesses the climate-related risks and
opportunities inherent in material projects,
as part of the Board project appraisal
process. In 2022, the project appraisal
framework was extended to understanding
the embodied and operational carbon
content of direct development projects,
in line with the UK Green Building Council
Net Zero Carbon Buildings Framework. The
Board also considers climate-related risks
and impacts when assessing business plans,
major capital expenditures, acquisitions
and sales.
Climate-related opportunities and risks
were considered as part of the Board’s
strategy day that took place during the
year. In particular, the Board reviewed the
role of our Natural Resources portfolio
to determine how best to protect and
optimise value, while maximising the
role these assets can play in realising
the Group’s sustainability ambitions,
particularly with regards to meeting energy
demand, delivering biodiversity net gain
and carbon offsetting.
Ongoing oversight of climate-related
issues is carried out by our ESG
Committee, chaired by Angela Bromfield
and comprising the Chair of the Board,
Chief Executive, Chief Financial Officer
and Non-Executive Directors Martyn
Bowes and Marzia Zafar (who joined the
Committee during the year) and attended
by our Director of Sustainability.
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.
The ESG Committee is responsible for
overseeing the setting of Harworth’s ESG
targets and the Company’s progress
towards meeting them, and has oversight
of its NZC pathway. It monitors external
climate-related issues and emerging policy
and best practice through regular updates
from the Director of Sustainability and this
guides its decisions in formulating strategy
and ongoing risk management. During
the year, the ESG Committee reviewed
and recommended for approval to the
Remuneration Committee those ESG
metrics and targets to be incorporated
into the annual bonus Group targets for all
employees.
Management’s role in assessing and
managing climate-related risks and
opportunities
The ESG Committee is supported by
Harworth’s three-person sustainability team,
which was established during the year
following the appointment of Peter Henry as
Director of Sustainability, reporting directly
to the Chief Executive. The sustainability
team works with members of the Senior
Executive and representatives from
teams across the business, including the
regional delivery teams, finance, HR, asset
management, and central services, to share
knowledge, develop policies and guidance
and consider how best to address climate-
related issues in our operations. It then
reports progress and proposes policies and
actions to the ESG Committee.
For our three identified Group
climate-related risks outlined on the
following page we have allocated a risk
owner and risk champions who monitor
climate-related risks at portfolio level and
brief the Senior Executive on material
movements in risk profile.
Strategic ReportHarworth Group plc: Annual Report and Financial Statements 2022 55
Risk
Risk owner
Risk champions
Net Zero Carbon pathway
Chief Financial Officer
Director of Sustainability
Climate change and biodiversity
adaptation and resilience
Chief Financial Officer
Director of Sustainability
Director of Technical, Engineering & Delivery
Head of Risk & Compliance
Director of Asset Management
Creating sustainable communities
Chief Financial Officer
Director of Sustainability
Director of Technical, Engineering & Delivery
Director of Asset Management
We consider stakeholder impact in our
project appraisals, and all 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 over time
our quantitative measurement of impact
in our project appraisals, budgeting and
forecasting.
The management team engages with
several external bodies, including
the UN Global Compact, UK Green
Building Council, the British Property
Federation and the Construction Industry
Research and Information Association,
as well as local authorities, to enhance its
understanding and management of climate
change risk and opportunities. The team
monitors external climate-related issues
and emerging policy and best practice,
including in a horizon scanning regime led
by our legal team, with support from our
legal panel firms.
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 growth strategy outlined in September
2021 to become a £1bn business by
2027. 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
outlined in this report. The table below
shows our main assumptions relating to the
UK under each scenario, using forecasts
from the Climate Change Committee.
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 53.
Together, these factors determine the
prioritisation of individual risks and
opportunities in our asset and group-level
financial planning.
Harworth’s
assumptions for UK 2°C scenario
4°C scenario
Transition approach The UK and other nations largely meet their currently
pledged decarbonisation commitments, and
Harworth follows its NZC pathway
The UK and other nations take only very limited steps
to meet their currently pledged decarbonisation
commitments, but Harworth still follows its NZC pathway
Physical impacts
by c.2050
• Annual average temperatures: +0.6°C from present
• Mean sea level rise: +3cm to +37cm from present
• Heavy rainfall: +10% increase from present
• Heatwaves ‘like 2018 summer (the joint hottest on record)’: 50% chance each year
Strategic ReportHarworth Group plc: Annual Report and Financial Statements 2022 56
Task Force on Climate-Related Financial Disclosures
continued
Harworth’s
assumptions for UK 2°C scenario
4°C scenario
Physical impacts
by c.2100
• Annual average temperatures: +0.7°C from present
• Annual average temperatures: +3.0°C from present
• Mean sea level rise: +5cm to +67cm from present
• Mean sea level rise: +27cm to +112cm from present
• Heavy rainfall: +20% increase from present
• Heavy rainfall: +50% to +70% increase from present
• UK heatwaves ‘like summer 2018’: 50% chance
• UK heatwaves ‘like summer 2018’: 90% chance
each year
each year
Short-term risks (to 2027)
2°C scenario
Risk
Transition risks
Policy & Legal: Minimum Energy Efficiency Standards (‘MEES’)
and the introduction of “energy in-use” performance ratings could
result in increased costs, a loss of rental income and valuation
declines if our Investment Portfolio assets do not meet minimum
standards.
Policy & Legal: Increased one-off and operating costs across
our major development sites arising from regulation in areas such
as green energy procurement, EV charging point installation and
biodiversity offsetting.
Market: An increase in energy efficiency specifications expected
by occupiers and home buyers would require additional
expenditure on development and fit-out, which could depress
land values.
Market: The introduction of carbon pricing on high emission
material and activities, and premiums for and/or availability of
lower carbon alternatives could impact the costs of procuring raw
materials for our supply chain and in remediating and preparing
land across our sites.
Reputation: Investor and other stakeholder requirements in
respect 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.
Physical risks
Impact on business, strategy and financial planning
We plan to transition our Investment Portfolio to Grade A by 2027.
As part of this, we will develop a NZC pathway for every asset that
we own. A workstream reviewing Energy Performance Certificates
(‘EPCs’) and potential impact of MEES is underway.
Our developments already often exceed minimum building
regulations and emphasise high-quality placemaking. We believe
this approach improves the sustainability of our assets, and this is
reflected in their valuation and rental profile. We are also reviewing
our energy tariffs, which should provide an opportunity to lower
our Scope 2 emissions.
We work with our suppliers and housebuilder partners to deliver
high-quality products, which already exceed market expectations,
and have developed a commercial building specification to
improve environmental performance. This should be reflected in
the valuation, pricing and rental profile of our land and assets.
Our procurement approach and costs associated with remediation
and preparation are 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. We have also implemented target
emissions for our commercial buildings.
This year Harworth has further enhanced its environmental
reporting, provided new metrics and targets and outlined a
NZC pathway. We are engaging closely with investors, other
stakeholders and industry bodies to ensure our environmental
reporting continues to evolve and meet expectations.
Some increases in the incidence of acute physical risks, such as
heatwaves, storms, and flooding, could result in increased costs
to create, 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 and undertake a
flood risk assessment as part of the planning and design process.
Strategic ReportHarworth Group plc: Annual Report and Financial Statements 2022 57
Impact of a 4°C scenario
Short-term transition and physical risks would be largely unchanged from the 2°C scenario.
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 expected to be in higher demand from
occupiers, and, therefore, generate higher rental income and
valuations. Increasingly Harworth will design buildings to be NZC in
operation and construction, as best practice continues to evolve.
Resilience: Our commercial building specification 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,
undertake biodiversity improvements and use SUDS to mitigate
flood risk.
Resilience: By accelerating the transition to low carbon energy
generation and storage across our developments, we can improve
energy security and mitigate the impact of energy price rises and
volatility, as experienced during 2022.
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.
The formation of our Energy & Natural Capital strategy was
underway before the energy price volatility experienced in 2022,
but its emergence has served to underline the importance of
leveraging energy generation and storage opportunities across
our portfolio. An initial review of the portfolio is currently underway
to identify these opportunities.
Energy efficiency: Reducing energy consumption through low
carbon transport, encouraging flexible working and energy-saving
measures such as timed and LED lighting.
As part of our NZC pathway, we are introducing several measures
to improve energy efficiency, which will reduce costs and improve
staff productivity.
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 where space is more constrained,
such as urban areas.
As part of our Energy & Natural Capital strategy, the role of
our Natural Resources team has evolved 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.
Strategic ReportHarworth Group plc: Annual Report and Financial Statements 2022 58
Task Force on Climate-Related Financial Disclosures
continued
Medium-term risks (2028–2040)
2°C scenario
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
small 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, and our commitment to
be NZC in operation and construction on
commercial developments by 2030.
The development of carbon pricing may
increase the costs of remediating and
preparing strategic land sites, impacting
the viability or profitability of progressing
some sites through the planning system,
and, therefore, the valuation of our
land bank.
Investors will become less tolerant of
environmental underperformance as
they face pressure to decarbonise their
own portfolios to achieve NZC goals.
Harworth’s response to this risk is to ensure
our environmental performance improves
through our decarbonisation strategy, and
that our disclosures evolve in line with best
practice.
Additional physical risks may emerge,
with slight rises in river peak flows and
associated flood losses. Summers will
become warmer with an increased risk
of heat stress, leading to minor increases
in the cost of cooling buildings and
adaptation 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 may intensify
further and become more frequent,
increasing the speed of infrastructure
obsolescence and the cost of adaptation
measures.
Medium-term opportunities
(2028–2040)
2°C scenario
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.
Harworth’s status as master developer
will allow us to include these features in
our sites and mitigate challenges from the
outset. This will benefit the connectivity
and land value of our 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
NZC deadlines, which would provide
additional opportunities for our significant
landbank and natural resources portfolio.
Harworth has an advantage in being a
master developer, as this allows us to
mitigate challenges through our own site
planning and design.
Impact of a 4°C scenario
Under this scenario, demand for adaptation
measures, low carbon transport and land
for offsetting are all likely to decrease owing
to less focus on climate transition risks.
This lower demand would be reflected in
the valuation of Harworth sites. There may
be less opportunities to achieve energy
efficiencies and cost savings through new
technologies than under a 2°C scenario
as it is assumed there would be less
investment and incentives to encourage the
development of these technologies.
Strategic ReportHarworth Group plc: Annual Report and Financial Statements 2022 59
Long-term risks (2040–2060)
2°C scenario
Long-term opportunities
(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. This could lead to significant
decreases in land values and 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, due
to 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 over a metre 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
over 3°C by 2100 under this scenario,
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 significant impacts on
the economy in general, leading to lower
levels of economic output and higher
unemployment, impacting demand for our
sites and our ability to raise finance.
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 be
at the forefront of these needs, making
our sites more attractive. 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, and monitors the profile
of these risks throughout the year. ‘Net
Zero Carbon pathway’ is considered
by the Board to be a principal risk for
the Company. ‘Climate change and
biodiversity adaptation and resilience’
and ‘Creating sustainable communities’
are considered to be operational risks. All
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
page 44.
For our three Group 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
All business cases and project appraisals
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.
Managing risks
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 risks:
• One of our key strategic objectives is
to transition our Investment 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
• We will maximise opportunities for
on-site renewable energy generation
• We will continue to implement energy
efficiency measures, including use of
EV infrastructure and installation of
automatic and energy saving lighting
Strategic ReportHarworth Group plc: Annual Report and Financial Statements 2022 60
Task Force on Climate-Related Financial Disclosures
continued
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 issues
arising
An outline of our processes for mitigating,
transferring, accepting, or controlling risks
can be found on pages 43 to 53.
Metrics & targets
Metrics used to assess climate-related risks and opportunities
Current metrics used
2022
2021
Target
Transition
risks
GHG emissions data: Scope 1, Scope 2 and
certain categories of Scope 3 emissions
GHG emissions data can be found in our Streamlined Energy
and Carbon Reporting disclosure on pages 62 to 6. Harworth’s
NZC pathway is our commitment to be NZC by 2030 for our
business operations under our current SECR Operational Boundary
for Scope 1, 2 and 3 emissions, and to be NZC by 2040 for all
emissions. More information can be found in the Planet section on
pages 66 to 70.
Physical
risks
% Investment Portfolio that is EPC Grade C
or above
Proportion of development taking place on land
designated by the Environment Agency as flood
zone 1 (low probability) or flood zone 2 (medium
probability) following any mitigation measures
66%
100%
Opportunities % Investment Portfolio that is Grade A1 at year-end 18%
Proportion of Group targets for our annual bonus
scheme for all employees relating to ESG factors
10%
55%
100%
11%
5%
100% by 2027
Maintain at 100%
100% by 2027
n/a
1 Although not officially defined, Grade A is a widely-used industry term that is understood to mean ‘best in class’ space which is new or relatively new, high-specification
and in a desirable location, allowing the unit to attract a rent that is above the market average.
Additional metrics currently being
explored from 2023
Transition risks:
• Data on further categories of Scope 3
emissions
• % energy generated from renewable
resources
• % energy generated on-site
• % sites with EV charging capabilities
• % assets with NZC roadmap in place
Physical risks:
• Spending on infrastructure projects
that will reduce risks of physical climate
impacts at sites
Opportunities:
• Cost savings from improved energy
efficiency and sourcing
• Acreage of Harworth land used for
offsetting
• % of company shares held by
Targets to measure climate-related
risks and opportunities
Harworth’s Net Zero Carbon pathway 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
66 to 70.
• kWh of RE generated on site or
ESG-focused funds
locally, specifically for our projects/
developments
• % of energy procured for our own
operations
• Cost of offsetting and kg CO2 offset
per annum
• % of projects using commercial building
specification
Strategic ReportHarworth Group plc: Annual Report and Financial Statements 2022 Strategic Report
61
Harworth Group plc: Annual Report and Financial Statements 2022 62
Streamlined Energy & Carbon Reporting
(‘SECR’) disclosure
We report here 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
2022. Emissions data from the financial
year ended 31 December 2021 has been
provided for comparison.
Unless otherwise stated, our emissions
data has been calculated using the
GHG Protocol Corporate Accounting
and Reporting Standard (revised edition)
and emissions factors from the UK
Government’s GHG Conversion Factors
for Company Reporting 2022. We have
followed the Environmental Reporting
Guidelines: Including streamlined energy
and carbon reporting guidance March
2019 in all instances.
Harworth uses the operational control
boundary method to calculate GHG
emissions, whereby we report on sources
of environmental impact for areas over
which we have control. Occupiers’ and
contractors’ individual 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 operational
control, but it is our intention to disclose
them as Scope 3 emissions for our 2023
Annual Report.
During the year we made significant
improvements to our data collection
processes, which have enabled us to
capture a more accurate and complete
data set for the prior year (2021) as well
as the current year. As a result, we have
restated the prior year figures to allow a
year-on-year comparison.
Greenhouse gas emissions (tCO2e)
Scope 1
Scope 22
Total Scopes 1 & 2
Selected Scope 3
Total Emissions
Renewable energy exported to the National Grid7
Total Net Emissions
Site Fuel1
Natural Gas2
Leased Vehicles3
Total
Location-based
Market-based
Location-based
Market-based
Business Travel4
Homeworking5
Waste Disposal6
Water Supply2
Total
Location-based
Market-based
Location-based
Market-based
Revenue Intensity ratio for Scope 1 and Scope 2 emissions
(using location-based method) (tCO2e/£m)
2022
317
96
16
429
420
849
848
1,277
112
26
2
10
150
999
1427
(3)
996
1,424
5.1
2021
318
117
22
456
545
n/a
1,001
n/a
82
24
2
9
117
1,118
n/a
(–)
1,118
n/a
9.1
Strategic ReportHarworth Group plc: Annual Report and Financial Statements 2022 63
Energy consumption (KWh)
Scope 1
Scope 2
Total Scopes 1 & 2
2022
1,877,600
2021
1,966,590
2,169,365
2,565,304
4,046,965
4,531,894
1 Fuel used for leased plant on Harworth sites where Harworth directly controls the operation.
2
Includes consumption at company offices, communal areas of leased assets, vacant units, other Harworth assets and infrastructure such as pumping stations and
street lighting.
3 Fuel used in vehicles leased by Harworth.
4
Includes business travel in all employee-owned vehicles. Where possible we have used vehicle specific CO2e emission factors to increase accuracy of reporting. Business
Travel does not include employee commuting.
5 Working hours from home for all employees.
6
Includes waste from communal areas of leased assets and head office. Calculated emissions are based on waste weight, type, and disposal method.
7 Energy produced by the solar PV panels at Harworth's head office, Advantage House.
Our progress in 2022
• Total gross emissions decreased
-10.6% from 1,118 tCO2e to 999 tCO2e
between 2021 and 2022
• Total Scope 1 & 2 emissions
(Location-based) decreased -15.2%
from 1,001 tCO2e to 849 tCO2e
• Scope 3 emissions increased by +28.2%
from 117 tCO2e to 150 tCO2e, primarily
driven by increased Business Travel
resulting from increased staff numbers
and reduced Covid restrictions
• Carbon reporting expanded to include
market-based Scope 2 emissions and
increased Scope 3 coverage to include
Homeworking, Waste and Water Supply
Plans for 2023
Further information on The Harworth Way
and the Group’s NZC pathway can be
found on pages 64 to 77 of this Annual
Report and Harworth’s standalone NZC
Pathway Report, available on our website.
Plans for further reducing our GHG
emission data are outlined in the ‘Planet’
section of the Harworth Way, on pages
66 to 70.
Strategic ReportHarworth Group plc: Annual Report and Financial Statements 2022 64
The Harworth Way
Our integrated approach to sustainability and social value
The Harworth Way is our framework for integrating sustainability and social value into both our business and the developments we
create. It ensures these principles are embedded across our culture, strategy and, most importantly, our approach to development from
concept to completion.
Planet
Read more on pages 66 to 70
Read more in the Governance
Report on pages 78 to 97
Read more in the Section 172
statement on pages 39 to 42
T
h
e
e
c
n
a
n
r
e
v
o
G
H
a
r
w
o
t
h
W
a
s
r
e
n
t
r
a
P
y Pillars
Read more on pages 75 to 77
People
Communities
Read more on pages 71 to 74
The Harworth Way is critical to us making a
lasting positive impact on the environment
and our communities. This commitment to
integrate sustainability and social value into
our business is delivered through the five
pillars of The Harworth Way: the impact
pillars of Planet, Communities, People
and the supporting pillars of Governance
and Partners.
The Harworth Way is a continually
evolving framework. It is responsive to the
ever-changing needs of the environments
and communities we work within and,
alongside our strategy, guides how we
create sustainable places where people
want to live and work. Our approach
recognises that we cannot deliver our
developments in isolation: working with all
our stakeholders at all stages of the process
is fundamental to achieving our aims.
Alongside our growth strategy, we
continue to develop and improve our
understanding of the impact of our
regeneration processes. During 2022, we
carried out a full review and expansion of
the model to reflect both the key drivers
of growth outlined in our growth strategy,
and our wider sustainability commitments.
The interlocking model
The
Harworth Way
Pillars
Focus
impact
areas
Building
blocks
Outputs
The Harworth Way provides an
overarching framework to deliver an
integrated approach to sustainability
across the business through the
interlocking model.
The Harworth Way has three impact
pillars which each comprise six focus
impact areas, representing the key
drivers for delivering each pillar. Each
focus impact area is divided further
into building blocks, which are the key
workstreams to be undertaken within
the business, in order to deliver a set
of outputs. The focus impact areas and
building blocks will evolve over time to
reflect our progress and the priorities of
The Harworth Way.
Integrating the 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. These have
been mapped to our focus impact areas,
as indicated on the following pages.
Strategic ReportHarworth Group plc: Annual Report and Financial Statements 2022
65
The interlocking model in action
The below example shows how the building blocks and outputs interlock for the ‘Driving building efficiency and integrating energy use ’
focus impact area, which forms part of the 'Planet' pillar of the Harworth Way.
The business made a range of sustainability commitments in its 2021 Annual Report in relation to its key strategic objective of increasing
direct development on industrial & logistics sites alongside repositioning our Investment Portfolio to be modern Grade A. During 2022,
the building blocks and outputs illustrated below were developed within the framework of the interlocking model to contribute to these
aims, in particular specific targets for our industrial & logistics buildings.
Our
partners
Our
strategy
G o v ernance
People
Communities
Partn e r s
Improving
energy
efficiency in
our investment
portfolio
Commercial
building solar
strategy
How we
do business
Pillars
Our
business
model
Our purpose,
culture &
values
Net Zero Carbon
pathway
Protecting &
promoting
biodiversity
Focus
impact
areas
Building
blocks
Planet
Developing
responsibly
& building
in climate
reslience
Circular
economy &
whole life
carbon
Whole life
carbon
assessment
Development
energy
strategies
Building
regulations
review &
commercial
building
specification
Driving building
efficiency & integrating
energy into
development
Sustainability
planning
stage framework
Green lease
terms & occupier
guides
Outputs
Investment
portfolio
review
model
Energy
process
Planning
template
Competitor
analysis
Appraisal
tools
Building
specification
Solar
delivery
model &
process
Green
lease
terms
Whole life
carbon
assessment
Occupier
guides
Strategic ReportHarworth Group plc: Annual Report and Financial Statements 2022
66
The Harworth Way continued
Planet
We aim to minimise our environmental impact, whilst promoting climate resilience and biodiversity through our development and
regeneration activities. The application of this approach from initial concept to our role in long-term stewardship allows us to integrate
sustainability into all phases of development.
We align to our NZC commitments in the way we design and deliver both our infrastructure led masterplans and the individual buildings
within them, by improving building efficiency and integrating renewable energy into our developments. We continue to promote
innovation by using circular economy principles in our role as master developer, with an emphasis on maximising the recycling of
materials, and minimising the use of raw materials.
Net Zero Carbon pathway
Our approach to our net zero
carbon commitments for Scope 1,
2 and 3 business travel by 2030
and all emissions by 2040
Protecting &
promoting biodiversity
Integrating biodiversity into our entire
masterplan process to ensure our
developments are nature positive
11
9
11
12
Planet
Minimising environmental impact,
building in climate resilience and
promoting biodiversity
9
12
Improving energy
efficiency in our
investment portfolio
Enhancing specifications in our
Investment Portfolio, reducing
environmental impact, extending
asset lifespans and exceeding
regulatory requirements
9
11
12
9
11
12
9
11
12
Developing responsibly
& building in climate
resilience
Building climate resilience into
the decision-making processes for
our masterplans, development
sites and investment portfolio
Circular economy &
whole life carbon
Promoting a whole life approach
to material use and carbon
emissions through procurement,
innovative design, delivery and
long-term stewardship of our
development projects
UN SDG link
Driving building
efficiency & integrating
energy into development
The delivery of energy efficient, resilient
buildings that meet occupiers’ demands
today and in the future
Strategic ReportHarworth Group plc: Annual Report and Financial Statements 2022 67
Net Zero Carbon pathway
Our approach to reach NZC for Scope 1, Scope 2 and Scope 3 business travel by 2030 and all emissions by 2040.
What we planned for 2022
Between 2022 and 2023 we will undertake research and detailed
planning to develop our NZC pathway, and report on our progress.
Progress in 2022
• Undertaken research and planning to gather information
and understand our overall emissions impact to guide the
publication of a NZC pathway in 2023.
• Undertaken a full review of our commercial build specification
and commenced a review of our Investment Portfolio assets
to understand their emissions and allow us to set commercial
build emissions targets for all new buildings.
• Continued to assess our wider master development emissions
and started work on the creation of a master developer whole
life carbon model that will allow us to assess fully our Scope 3
emissions in 2023.
Net Zero
Carbon
pathway
Planet
Minimising environmental
impact, building in climate
resilience and promoting
biodiversity
Plans for 2023
Sources of emissions
• Develop a carbon reporting system to allow full emissions
reporting to be implemented and target the reporting of Scope
3 emissions.
The sources of Scope 1, Scope 2 and selected Scope 3 emissions
under our current SECR Operational Boundary are shown on the
below diagram.
• Set 2030 reduction targets for all emissions.
Company emissions cover our offices and our employee activities.
• Explore the creation of an internal carbon pricing mechanism on
emissions for all future development and refurbishment projects
through the establishment of a Harworth Transition Fund.
Development emissions cover: maintenance of non-adopted
infrastructure, material re-use and recycling operations undertaken
by Harworth directly.
•
Include a requirement for carbon emissions monitoring in all
construction contracts.
Investment Assets emissions cover: assets where we have
operational control and long-term stewardship of country parks.
Strategic ReportHarworth Group plc: Annual Report and Financial Statements 2022
68
The Harworth Way continued
Driving building efficiency & integrating energy into development;
improving energy efficiency in our Investment Portfolio
We aim to deliver energy efficient, resilient buildings that meet occupiers' demands today and in the future. We are also
enhancing environmental specifications in our Investment Portfolio assets to support the transition to Grade A.
What we planned for 2022
• All new industrial & logistics developments will be EPC A rated,
BREEAM Very Good and capable of being NZC in operation.
• To improve the energy efficiency of our Investment Portfolio
and explore retrofit options where possible.
Progress in 2022
• Commercial building design specification and processes
updated to meet EPC A and NZC in operation-ready status.
• All buildings delivered were BREEAM Very Good, with majority
on course for BREEAM Excellent.
•
Inclusion of whole life carbon assessments and
construction-related carbon targets in new building designs.
• Piloted NZC in construction units at Bardon Hill.
• All occupiers offered green lease terms and occupier guides
covering NZC in operation status.
• Assessment tools and templates created for carbon and retrofit
assessment across our Investment Portfolio.
• All new commercial buildings delivered into the Investment
Portfolio to include rooftop solar PV provision.
Planet
Minimising environmental
impact, building in climate
resilience and promoting
biodiversity
Driving building
efficiency & integrating
energy into development
Improving energy
efficiency in our
investment portfolio
Plans for 2023
•
Identify sequestration opportunities within our existing portfolio.
• Refinement of commercial building specifications.
• Creation of emissions targets for our BTR residential product.
• Review of our existing energy supply agreements, exploring
Circular economy &
whole life carbon
opportunities to transfer to renewable and low emission tariffs.
• Launch occupier engagement programme including review of
• Offer all new occupiers on new developments power purchase
energy usage and emissions from Investment Portfolio.
agreements from rooftop solar PV provision.
Gateway 36 case study
At Gateway 36 in Barnsley, we have worked with our construction
partner to create an integrated, sustainable new commercial
development delivered in phases through innovative earthworks
treatments. Our approach minimises material use, reducing the
need for emissions intensive foundation solutions, and material
import and export, whilst maximising the use of circular economy
principles across all phases.
Planet
Minimising environmental
impact, building in climate
resilience and promoting
biodiversity
The individual buildings incorporate energy efficiency, energy
provision and NZC measures including:
• EPC A ratings and BREEAM Very Good/Excellent certifications
• roof-mounted solar PV to meet office energy demand, and
designed to allow full coverage of roof-mounted solar PV
• LED lighting and electricity-based heating systems including
variable refrigerant flow systems featuring simultaneous
heating and cooling as well as heat-recovery capabilities
• EV charging points
• rainwater harvesting and water leak detection systems,
reducing water usage and emissions at source
• SUDS to manage water quality and surface water run off,
whilst reducing embodied emissions through a reduction in
Protecting &
promoting biodiversity
construction materials in infrastructure
Planet
Minimising environmental
impact, building in climate
resilience and promoting
biodiversity
Developing responsibly
& building in climate
resilience
Strategic ReportHarworth Group plc: Annual Report and Financial Statements 2022 Driving building
efficiency & integrating
energy into development
Planet
Minimising environmental
impact, building in climate
resilience and promoting
biodiversity
69
Circular economy & whole life carbon
We have a track record of embedding circular economy principles in the design and delivery of developments. We drive energy
efficiency in buildings and integrate nature into our developments through the remediation we undertake, the infrastructure we
provide and our placemaking across the full life cycle of a development.
Improving energy
efficiency in our
investment portfolio
What we planned for 2022
Develop metrics for measuring and enabling us to report more
fully the environmental impacts of our activities.
Progress in 2022
• Retrospective reviews of remediation schemes to understand
the carbon emissions from demolition and remediation both
within our operational control and beyond our boundaries
including how we adopt circular economy principles.
• Undertook carbon emissions reduction assessment from
pulverised fuel ash ('PFA') reuse at Ironbridge.
• All remediation contracts stipulated the re-use of materials
on site and recycling offsite in accordance with good waste
management practice.
Plans for 2023
• Develop a master developer whole life carbon model,
identifying appropriate accreditation with a conclusion of the
review of our remediation and infrastructure delivery to improve
on best practice in relation to carbon emissions for our circular
economy based design briefs.
• Whole life carbon assessments incorporated into all upgrade
and retrofit design briefs for commercial buildings.
Pheasant Hill Park case study
Brownfield remediation is, despite its wider sustainability
benefits, an emissions-intensive activity. Circular economy
principles are embedded into our design process for
remediation with a ‘no-material in, no material out’ approach as
our starting point.
Circular economy &
whole life carbon
Planet
Minimising environmental
impact, building in climate
resilience and promoting
biodiversity
•
Incorporate NZC criteria into the procurement of all
construction contracts.
• No new gas infrastructure provided for heating on our new
developments and review transition of existing developments
from gas infrastructure for heating.
Protecting &
promoting biodiversity
At Pheasant Hill Park, we are creating a new community of up to
1,200 new homes with extensive nature recovery from the spoil
heap of the former Rossington Colliery. Our circular economy
approach has minimised emissions by:
Planet
Minimising environmental
impact, building in climate
resilience and promoting
biodiversity
development
• reusing 99% and 1.7 million m3 of material within the
• using 360,000m3 of material from the site for the creation of
the Great Yorkshire Way link road
• reusing 51,000m3 of peat as part of the landscaping of the site
to capture emissions
• naturalising the former colliery spoil heap, by reusing over
Developing responsibly
& building in climate
3,000 tonnes of sewage cake and other bio-additives for soil
resilience
making on the country park
• removing around 16,000m3 of old concrete structures that
were recycled into the works, saving the import of natural
aggregate, reducing road traffic and use of quarry stone
reserves
• reusing initially unusable materials from one phase
of remediation on later phases following drying and
reprocessing
Strategic ReportHarworth Group plc: Annual Report and Financial Statements 2022 Planet
Minimising environmental
impact, building in climate
resilience and promoting
biodiversity
Driving building
efficiency & integrating
energy into development
Improving energy
efficiency in our
investment portfolio
Circular economy &
whole life carbon
70
The Harworth Way continued
Planet
Minimising environmental
impact, building in climate
resilience and promoting
biodiversity
Protecting & promoting biodiversity; developing responsibly and
building-in climate resilience
As a master developer we have the opportunity to understand and integrate biodiversity into our developments from the outset of
development. We have a track record of restoring and delivering hundreds of acres of green space, rewilding, heathland, woodland and
integrated ecological improvements for wildlife.
What we planned for 2022
• All new masterplans will incorporate renewable energy
infrastructure.
• We will identify a series of metrics that we will use to report on
the biodiversity initiatives and actions we take.
Progress in 2022
• Commercial building design specification and processes
updated to include renewable energy as part of the base
specification.
• Sustainability planning stage framework created and
implemented across our planning stage projects, which
includes renewable energy assessment.
• Devised an Energy & Natural Capital strategy.
• All developments include SUDS facilities.
• Targets identified to cover biodiversity net gain.
• Our first biodiversity net gain scheme has been agreed and
commenced at Gateway 36 in partnership with Barnsley
Metropolitan District Council.
• Completion of a significant environmental and ecological
improvement scheme at Rufford.
Protecting &
promoting biodiversity
Planet
Minimising environmental
impact, building in climate
resilience and promoting
biodiversity
Developing responsibly
& building in climate
resilience
Plans for 2023
Biodiversity net gain scheme targets to be used as reporting
metrics for the business.
Gateway 36 case study
Biodiversity Net Gain (‘BNG’) is a strategy to develop land and
contribute to the preservation and promotion of nature. It is a way
of making sure the habitat for wildlife is in a better state than it was
before development.
At Gateway 36, the former Rockingham Colliery is being transformed
into a major hub for logistics and manufacturing in Yorkshire. In co-
ordination with the local council, we have committed to delivering
a minimum of 10% BNG on the site, in advance of the requirement
being mandated by the Environment Act 2021.
We have been able to deliver this requirement both as part of on-
site habitat retention and enhancement, and off site, as we own a
parcel of land next to the site known as Barrow Colliery, where we
were able to identify 12.8 acres of space that could benefit from
significant enhancement.
Our enhancements included the creation of new ponds and wet
woodlands as well as enhancements to areas of existing neutral
grasslands and mixed scrub, improving them to a good condition.
These measures have brought several biodiversity benefits, and
the site has subsequently been identified as a Site of Special
Scientific Interest.
Strategic ReportHarworth Group plc: Annual Report and Financial Statements 2022 71
Communities
We aim to create, strengthen and support communities through our regeneration and development processes both today and in the
future. As a master developer we create new communities through our new developments and benefit existing local communities in the
regions where we work. Our developments create economic benefit through their regenerative effects at both a local and regional level,
supporting jobs, housing and investment.
We also have a long track record of delivering social value through the regeneration we have undertaken. Integrating homes, jobs,
amenities and green space within a single community has long been a driver of our masterplans. Our developments also promote
healthier lifestyles and integrate sustainable transport.
Growing economies
Measuring our regeneration impact on
deprivation and the positive economic
ripple effect through our supply chain,
occupiers and wider stakeholders
Supporting jobs
Economic and social value
assessments, forecasting the local
and regional economic and social
impacts for each development
8
10
8
10
11
3
10
11
Communities
Creating, strengthening and
supporting the communities we
create and work within both
today and in the future
3
9
11
3
Promoting healthier
lifestyles
Masterplanning for health and
wellbeing, designing &
measuring the impact and social
value benefit to all stakeholders
3
10
9
11
Holistic travel
planning
Integrating the evolving needs of
sustainable travel planning,
working with a wide range of
partners to deliver positive travel
experiences & providing annual
reporting on activity to inform our
decision making
UN SDG link
Creating inclusive
spaces
Capacity building and activating
our sites by working with our
communities through
placemaking, events and
community activities before,
during and after development
Creating sustainable
communities &
preserving heritage
Incorporating integrated neighbourhood
principles alongside a mixture of tenure
within our new developments, whilst
driving catalytic impacts and integration
beyond our development boundaries
Strategic ReportHarworth Group plc: Annual Report and Financial Statements 2022
72
The Harworth Way continued
Promoting healthier lifestyles and integrating holistic travel planning
Recognising that communities need varied and high-quality infrastructure to thrive, our masterplans address the health and wellbeing of
residents and those working across our sites. As a result, we provide facilities to promote healthier, greener lifestyles and wellbeing, and
integrate sustainable travel planning alongside partners.
What we planned for 2022
• Cycling infrastructure at Waverley and Thoresby Vale to be
delivered.
• Plans to be submitted for new football pitches at Moss Nook.
• Additional cycle and footpath infrastructure to be provided
across a number of sites.
• To explore and encourage low emission transport options.
Progress in 2022
• Cycle infrastructure delivered at Waverley and Cadley Park.
• Completion of a new spine road at Moss Nook, with
segregated pedestrian and cycle routes and landscaping
features. The road provides a more direct connection between
the site and the amenities provided in St Helens town centre.
• Commercial building design specification and processes
updated to incorporate increased EV charging.
• Plans approved for a new primary health centre at Waverley,
which will have capacity for 6,000 patients.
Communities
Creating, strengthening and
supporting the communities
we create and work within
both today and in the future
Promoting healthier
lifestyles
Holistic travel
planning
• Full review of our travel plan measures on existing sites
Plans for 2023
undertaken and best practice identified.
• Monitor usage of transport systems across our sites to evaluate
• Began consultation with regional transport stakeholders for our
Benthall Grange site in Ironbridge, exploring opportunities to
create new sustainable travel networks.
effectiveness and identify areas for improvement.
Creating sustainable
communities &
• Further enhance our integrated travel plans within all new
preserving heritage
masterplans.
Logistics North case study
Our travel planning approach helps our sites to become sustainable travel
exemplars. By reducing the environmental impact of travel, we create desirable
places to work and live and we achieve this by ensuring our travel plans are
secured, monitored, and delivered as effectively as possible.
Communities
Creating, strengthening and
supporting the communities
we create and work within
both today and in the future
Logistics North is one of the largest and most successful developments of its kind
to be brought forward in the north of England. With up to 7,000 people working
across the site, the additional travel movements caused by commuting are a source
of additional traffic and emissions. We addressed this challenge through the design
and implementation of an integrated travel plan for the entire development.
Creating inclusive
spaces
Working closely with Mosodi, a sustainable travel adviser, Bolton MBC,
Greater Manchester Passenger Transport Executive and Transport for Greater
Manchester (‘TfGM’), we produced an integrated travel plan containing a
package of measures tailored to the needs of the site and promoted greener,
cleaner travel choices by reducing reliance on the car. The travel plan is
recognised as an exemplar by TfGM and is included in its travel plan tool.
Growing
economies
We have also worked with Mosodi, to implement its “1dayaweek” behavioural
change campaign, which is designed to provide real, cost-saving solutions to
congestion, parking pressures and site accessibility.
Communities
Creating, strengthening and
supporting the communities
we create and work within
both today and in the future
Supporting
jobs & GVA
Strategic ReportHarworth Group plc: Annual Report and Financial Statements 2022 Promoting healthier
lifestyles
Communities
Creating, strengthening and
supporting the communities
we create and work within
both today and in the future
73
Holistic travel
Creating sustainable communities and preserving heritage; creating inclusive spaces
planning
Incorporating integrated neighbourhood principles alongside a mixture of tenure within our new developments, whilst driving impacts
and integration beyond our development boundaries. We also activate our sites by working with communities through placemaking,
events and community activities.
What we planned for 2022
• Olive Lane at Waverley to provide amenities including a
supermarket, restaurants, a gym and pharmacy.
• Planning to be submitted for two schools, at South East
Coalville and Thoresby Vale.
Progress in 2022
• Planning submitted for ‘Forest Schools’ at South East Coalville
and at Thoresby Vale, which maximise opportunities for
learning outside the classroom, and integrate sustainability
features.
• Launched our single-family BTR portfolio as part of our strategic
objective to diversify our residential products. These rental
homes will further enhance the vibrancy and inclusivity of
developments.
• Supported the creation of a new children's book, "Cones and
The New Community" to educate primary school children
about the role of Harworth as a master developer and the
history of the Waverley site.
Plans for 2023
• Progress the development of our Olive Lane heart of the
community site at Waverley.
• Explore other forms of mixed tenure for delivery at our sites, such
as senior living, working with strategic partners where appropriate.
Communities
Creating, strengthening and
supporting the communities
we create and work within
both today and in the future
Creating sustainable
communities &
preserving heritage
Creating inclusive
spaces
Growing
economies
'Cones and The New Community' children's book
case study
“Cones and The New Community” is the latest in a series of books written
by Chris Madeley about the construction and infrastructure industry. The
series has recently been recognised by CSR-A, the UK’s only accreditation
body for social responsibility.
Communities
Creating, strengthening and
supporting the communities
we create and work within
both today and in the future
Harworth has supported this project to help children gain an
understanding of community development and what can be achieved
in areas that may just need vision and determination to build something
special. The book also provides an accessible history of the Waverely
site, and has helped to raise awareness of Harworth's role within our
Supporting
communities.
jobs & GVA
By ‘bringing traffic cones to life’ the author has created a means of
communicating with children free from the constraints of culture, colour,
race and religion: within each story all Cones are equal, are everywhere
and have a life of their own.
Harworth has distributed 2,500 copies of the book to school students
and residents at Waverley, local libraries and residents at Harworth sites
across the regions. This engagement has given residents a further insight
into our work as master developer and includes them in the process.
Strategic ReportHarworth Group plc: Annual Report and Financial Statements 2022 Communities
Creating, strengthening and
supporting the communities
we create and work within
both today and in the future
Promoting healthier
lifestyles
Holistic travel
planning
Creating sustainable
communities &
preserving heritage
74
The Harworth Way continued
Communities
Creating, strengthening and
supporting the communities
we create and work within
both today and in the future
Growing economies; supporting jobs
Ensuring our developments have a positive economic and social impact through supporting jobs, investment and innovation throughout
our regions, and taking steps to measure this impact on our supply chain, occupiers and other stakeholders.
Creating inclusive
spaces
What we planned for 2022
• Our Bardon Hill scheme to support approximately 530 new
jobs once completed.
Progress in 2022
• Completed 332,000 sq. ft of employment space at Bardon Hill
and a further 100,000 sq. ft at the AMP, supporting new job
opportunities across the regions.
• Started on-site with 203,000 sq. ft of employment space at
Gateway 36 and the AMP.
• Commissioned Ekosgen, an independent economic research
consultancy, to appraise the social and economic benefits of
the regeneration and development Harworth has delivered and
plans to deliver. It found that our portfolio has the potential to:
– support up to 73,000 jobs (2021: 72,000)
– deliver Gross Value Added of £4.6bn (2021: £4.2bn)
– generate up to £82.3m in business rates (2021: £75.4m)
Communities
Creating, strengthening and
supporting the communities
we create and work within
both today and in the future
Growing
economies
Supporting
jobs & GVA
– deliver up to £56.1m in council tax receipts
Plans for 2023
• Supported the construction of a new hotel at Waverley and a
supermarket at South East Coalville.
• Undertook economic and social value assessments on new
acquisitions.
• Completion of employment space currently under
construction.
• Progress development of new pre-let and build-to-suit
opportunities.
• Continue and further develop the use of economic and social
value assessments to assess new acquisition opportunities.
Case study
Harworth is investing and supporting employment space 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 uses data from Ekosgen and estimates the
proportion of new jobs supported through Harworth’s existing
developments and pipeline within the most deprived areas
of England. It shows that almost two-thirds of the jobs to
be supported are in areas more deprived than the national
average, underlining Harworth's commitment to these areas
and providing a significant boost to levelling up these regions.
Harworth’s support for job creation in deprived areas
(using indices of Multiple Deprivation (England 2019))
Area deprivation decile
10% most deprived (Decile 1)
20% most deprived (Decile 2)
30% most deprived (Decile 3)
40% most deprived (Decile 4)
50% most deprived (Decile 5)
Cumulative % of jobs supported
by Harworth pipeline
15%
16%
29%
41%
64%
Strategic ReportHarworth Group plc: Annual Report and Financial Statements 2022 75
People
We aim to be an employer of choice, creating an inclusive, diverse, and empowered workplace culture in which our people can develop
and realise their full potential. Central to this is the prioritisation of employee health and wellbeing and ensuring our people remain inspired,
recognised and engaged.
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, and acting with integrity & trust.
UN SDG link
Prioritising
health & safety
Active management of risks
across our business and
development activities ensuring
the health & safety of our
people, contractors, communities
and wider stakeholders
3
8
10
8
10
Employee
experience
Enabling everyone to realise their
potential by consistently
delivering a great employee
experience through a
progressive, transparent,
equitable and inclusive approach
Culture
Driving a high-performance culture
with highly motivated employees,
which attracts and retains the best
talent, enables better performance
and delivers better outcomes for our
people and the people we serve
8
10
People
We create an inclusive, supportive
and empowered workplace culture
in which people can develop
and fulfil their potential
8
10
Being
socially responsible
Promoting a corporate
character with a strong desire
to help each other, our
communities and our planet
3
3
8
10
Wellbeing
Putting wellbeing at the heart of
our business success by creating a
healthy workplace where
colleagues feel comfortable in
their job, have meaningful
professional relationships and
take pleasure in their work
Promoting
engagement & happiness
Providing workplace conditions that
are fully aligned with the needs of our
people, demonstrating a positive,
causal link between being happy and
high performance
Strategic ReportHarworth Group plc: Annual Report and Financial Statements 2022 76
The Harworth Way continued
Maintaining a great culture and employee experience, promoting engagement and
happiness and being socially responsible
What we planned 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.
Progress in 2022
• ESG targets included in bonus scheme for all employees.
• Delivered our first equity, diversity and inclusion ('ED&I')
Company-wide training.
• Supported an initial cohort through our first Leadership
Development Programme.
• Successfully completed our ‘Will It Make The Boat Go Faster’
initiative to deliver improvements to ways of working in support
of our strategic goals.
• Extended participation in our Restricted Share Plan ('RSP') such
that 56% of employees were granted an award in 2022, and
have increased the RSP opportunity for all participants.
•
Increased the annual value of free shares awarded under our
Share Incentive Plan to the statutory maximum of £3,600 of free
shares, and started to introduce offers of Partnership Shares
and Matching Shares under the scheme.
• Successfully recruited and onboarded over 30 new colleagues,
increasing our headcount by c.40% to support our business
growth strategy.
• Donated £34k and 147 volunteering hours to a number of local
and national charities.
• Researched and developed a ‘People and Enabling Excellence
Strategy’ ready for deployment from 2023 .
• Achieved 93% in our employee engagement survey and an
above external benchmark score.
Plans for 2023
• Continue to cultivate a diverse, inclusive and equitable
organisation where everyone has the opportunity to innovate
and succeed.
• Develop the Harworth Academy, supporting the learning and
development of our people and continued future success of
our organisation.
• Create a destination workspace to enhance our ability to
co-create, collaborate and concentrate.
•
Introduce new ways of working to continue the drive towards
efficiency and optimisation of resources.
Culture
Being
socially
responsible
People
We create an inclusive,
supportive and empowered
workplace culture in which
people can develop and
fulfil their potential
Promoting
engagement &
happiness
Employee
experience
Introduction of a menopause and
hormonal change policy case study
Harworth seeks to support employee's wellbeing at every
stage in life. We know that many people feel uncomfortable
talking about hormonal change, which means that often
people suffer in silence while they or their loved ones
experience a wide range of symptoms that can affect their
physical as well as mental health.
During the year, we introduced a policy designed to ensure
people suffering with menopausal symptoms can feel
empowered to ask for adjustments to ease such symptoms
Wellbeing
without embarrassment, can carry out their daily role in
a safe working environment whether at home or in the
office, and can have open discussions with colleagues and
managers so that they feel part of an inclusive work culture.
Employees suffering symptoms are encouraged to
People
complete a wellbeing action plan to identify how their
menopausal symptoms are impacting them at work, and
We create an inclusive,
supportive and empowered
use this to discuss any changes they might need with
workplace culture in which
their manager. By creating a plan, employees can identify
people can develop and
fulfil their potential
what works and doesn’t work for them in managing their
menopause transition, what support they might need from
their manager and what they can do to support their own
health and wellbeing.
Prioritising
health & safety
Strategic ReportHarworth Group plc: Annual Report and Financial Statements 2022 Culture
Being
socially
responsible
People
We create an inclusive,
supportive and empowered
workplace culture in which
people can develop and
fulfil their potential
Promoting
engagement &
happiness
Employee
experience
77
People
We create an inclusive,
supportive and empowered
workplace culture in which
people can develop and
fulfil their potential
Wellbeing
Prioritising
health & safety
Prioritising wellbeing and health & safety
What we planned for 2022
• 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 aim for zero RIDDOR-reportable accidents on
Harworth sites.
Progress in 2022
• Trained mental health first aiders.
• Launched menopause policy and trained menopause champion.
• Established monthly drop-in sessions to discuss people
matters.
• Launched a Wellness and Healthy Workplace survey.
• Awarded a one-off ex-gratia payment to all colleagues to help
with rising energy costs.
• There were no RIDDOR reportable accidents at our sites for
either Harworth personnel or contractors working on our
behalf.
Plans for 2023
•
•
Introduce a financial wellbeing support programme to help
colleagues through the challenges presented by the current
macroeconomic environment.
Introduce an Employee Engagement Forum to encourage more
colleagues to share ideas, thoughts and feedback on ways of
working and opportunities for improvement.
•
Introduce a monthly wellbeing bulletin with tips and techniques
to support employee wellness at work and at home.
•
Introduce a fertility support policy.
• Begin refurbishment of our head office in Rotherham.
• Provide interactive health & safety training for all of our employees
together with specific training on the Construction Design and
Management Regulations, supplemented by online training.
• Run a compulsory health & safety day for all employees.
• Conduct a mock emergency to ensure organisational
arrangements and responses to health & safety matters are
suitable.
The Strategic Report has been approved by the Board of Directors
and signed on its behalf by:
Chris Birch
General Counsel and Company Secretary
Strategic ReportHarworth Group plc: Annual Report and Financial Statements 2022 Governance
Report
“ We are confident that, set in the
context of an established and
effective corporate governance
structure, our growth strategy
is well placed to navigate
the current macroeconomic
challenges and adapt to the
changing risk environment.”
Alastair Lyons
Chair
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
79
82
86
98
106
113
115
134
138
Harworth Group plc: Annual Report and Financial Statements 2022 Chair’s introduction
79
“ During 2022, the Board has continued
to focus on supporting the business in
delivering against its growth strategy,
whilst upholding high standards of
corporate governance.”
Alastair Lyons
Chair
Dear Shareholder,
On behalf of the Board, I am pleased to
present this year’s Corporate Governance
Report.
In September 2021, our then new Chief
Executive, Lynda Shillaw, unveiled our
strategy to grow Harworth to £1bn of
EPRA NDV. During 2022, the Board has
continued to focus on supporting the
business in delivering against its growth
strategy, whilst upholding high standards
of corporate governance, with notable
progress in the key areas outlined below.
The Board and the Executive have had
to navigate a challenging, uncertain
and unpredictable macroeconomic and
geopolitical environment and conditions are
likely to remain so for some time. We are,
however, confident that, set in the context
of an established and effective corporate
governance structure, our growth strategy
is well placed to navigate these challenges
and adapt to the changing risk environment.
The areas identified below are developed
in more detail in the Strategic Report
(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
When formulating our strategy, the Board
recognised that the aim of growing the
business to £1bn of EPRA NDV would
require material shifts in the pace and scale
of what we do. During the period, the
Board has supported this change in pace
by endorsing the following operational
decisions:
• To increase the depth and capability
of both our management and our
employees to deliver against our
strategy, at the same time enhancing
our offering to employees to incentivise,
develop and retain our talented
workforce.
• To sign a new five-year £200m RCF in
early 2022, affording greater flexibility
and additional liquidity to fund the
delivery of our strategy.
• To launch a single-family Build-to-
Rent (‘BTR’) product to diversify the
range of products on our residential
development sites.
• To complete a number of acquisitions to
grow our strategic landbank.
• To set in train several direct
development projects to unlock
additional value from our industrial &
logistics pipeline.
• To sell certain of the assets within our
investment portfolio as we reposition
the portfolio to modern Grade A.
Central to what the Board has spent
time on this past year has been to review
progress against the strategic objectives
in support of our Purpose – the creation
and delivery of sustainable places where
people want to live and work.
Sustainability
Our commitment to sustainability is
embedded in the Group’s culture,
strategy and operations. Our longstanding
approach was first articulated as The
Harworth Way in 2019, and in 2021 we
both established our ESG Committee and
introduced an ESG measure into the Group
targets for our annual bonus scheme for
all employees. In H1 2022, we appointed
Harworth’s first Director of Sustainability,
Peter Henry, who had previously been one
of our Regional Directors together with
Marzia Zafar, who has significant expertise
in this area, as a Non-Executive Director.
During the period, we have focused on the
evolution of several elements of Harworth’s
ESG framework. This includes the
development of the Group’s Sustainability
Framework through the expansion of
the Harworth Way (see further on pages
64 to 77), as well as the principles of the
Company’s Net Zero Carbon (‘NZC’)
Pathway, which has been published
alongside this Annual Report and can be
found on the Company’s website.
Harworth Group plc: Annual Report and Financial Statements 2022Governance Report 80
Chair’s introduction continued
Risk and assurance
Like all UK companies, the Board has had
to monitor and manage risk, and make
decisions, against an unpredictable and
continuously evolving macroeconomic
and geopolitical backdrop. As macro
and market conditions have deteriorated,
the Board has determined that the
Group’s “residential and commercial
markets” principal risk has increased from
“medium” to “high”. There have been
some other changes to the profile of our
principal risks, which are explained on
page 45, and the Board continues to
monitor closely all principal risks and the
adequacy of the mitigating actions that
have been identified. Notwithstanding an
adverse change in the overall profile of the
Group’s principal risks, the Board remains
confident in the resilience of Harworth’s
business model, financial position, and
management effectiveness to identify and
then take appropriate mitigating actions.
A detailed explanation of the Group’s risk
management framework, the principal risks
and uncertainties affecting the Group, and
the steps we are taking to mitigate these
risks, can be found on pages 43 to 53.
The Group has recently reviewed its
assurance procedures in the context of
its continuing growth and in late 2022
established an internal audit function to
reduce its reliance on external review
of the effectiveness of its framework of
management controls. An internal audit
plan for 2023 has been agreed and
the Head of Internal Audit has a direct
reporting line to the Audit Committee.
This additional resource has been long
planned, and is timely, forming part of our
preparation for the implementation of the
audit and corporate governance reforms.
See further details in the Audit Committee
Report on page 111.
People, remuneration,
and culture
Employee engagement is always high
on the Board’s agenda, and has been
especially important during the period
given operational changes to support
the growth strategy, not least a material
increase in the size of the workforce,
as well as the external uncertainty
affecting everyone created by the current
macroeconomic environment. The
Non-Executive Directors participated in
a very well attended Employee AGM in
September 2022, at which employees put
questions directly to each Board member.
The Board also undertook regional and
site visits, joined employees for informal
lunches and dinners, and continued to
receive feedback from the Chief Executive
on matters affecting our people at each
Board meeting.
During the second half of 2021, the
Remuneration Committee undertook the
triennial Remuneration Policy (‘Policy’)
review, which concluded in our revised
Policy being approved by the Board in
February 2022 and by shareholders at our
AGM in May 2022. No changes to this
Policy are proposed this year.
Harworth Group plc: Annual Report and Financial Statements 2022Governance Report 81
A summary of the Policy is set out on
pages 119 to 121, and the Policy is set out
in full on pages 127 to 137 of the 2021
Annual Report. Whilst the Committee
makes remuneration decisions in
respect of the Executive Directors and
wider Senior Executive team, those
decisions are informed by the reward
arrangements for the wider workforce,
and the Committee Chair attended a
Group-wide communication event to
explain the objectives, rationale for, and
operation of the revised Policy. The Board
is keen to promote and facilitate share
ownership throughout the workforce to
foster stewardship and to align the interests
of employees and shareholders, whilst also
allowing our employees to share in the
future success of Harworth. In pursuit of
this, the Committee approved an extended
application of both the all-employee
Share Incentive Plan and the discretionary
Restricted Share Plan.
The Board is acutely aware of the
cost-of-living crisis and has sought to
provide support to employees where the
burden is most challenging. We made a
one-off non-contractual payment of £2,000
in December 2022 to all employees
(excluding the Senior Executive). For
2023, the Remuneration Committee
approved variable salary increases relative
to role seniority, with employees on lower
salaries receiving a proportionately higher
increase.
Board composition
Given the relatively short tenures of our
Executive and Independent Non-Executive
Board members, succession planning did
not feature as prominently on the Board’s
agenda as in previous years. That said,
in June 2022, the Board was delighted
to announce the appointment of Marzia
Zafar as an additional independent
Non-Executive Director following a
recruitment process led by the Nomination
Committee. This appointment was
prompted by our 2021 external Board
effectiveness review, which recommended
that the Board remain open to recruiting a
Non-Executive Director with different skills
and experience. Marzia brings to Harworth
a wealth of experience in sustainability,
having spent over 20 years working on
policies and strategies to enable energy
transition across many sectors.
In addition, whilst all appointments to the
Board are based on merit, it is testament
to Harworth’s commitment to diversity and
inclusion that the appointment of Marzia
is a first step in improving ethnic minority
representation at Board level. We hope
this will demonstrate to our existing and
prospective employees that the Board
remains committed to enhancing diversity
(in its widest form) at all levels of the
business.
Board evaluation
As is good practice, I led an internal
evaluation of the Board’s effectiveness in
Q4 of 2022. The key conclusions from
that exercise were discussed by the Board
in January 2023 and an action plan to
implement recommendations has been
agreed. This followed an external review
of Board effectiveness in Q4 of 2021. The
agreed recommendations from this recent
internal evaluation are summarised in the
Statement of Corporate Governance on
page 97.
Annual General Meeting
This year, we will be holding our first partly
virtual Annual General Meeting (‘AGM’)
on Tuesday 23 May 2023 at 10:00 am
with the meeting being webcast live. For
statutory purposes, the place of meeting
will be The Bessemer Conference Room,
AMP Technology Centre, Advanced
Manufacturing Park, Brunel Way, Waverley,
Rotherham S60 5WG. The Chair, Chief
Executive, Chief Financial Officer and
Company Secretary will be at this location,
to meet with any shareholders who still
wish to attend in person, with other
Directors joining online. Shareholders
that view the AGM online will not be
able to vote during the meeting but are
encouraged to vote in advance.
The AGM is a key date in the Board’s
calendar, and by making the meeting
available online the Board hopes to
increase levels of shareholder engagement
by providing increased opportunity
to pose questions to Board members.
Questions can be submitted via the
webcast facility both during and in advance
of the meeting. See page 97 for further
detail on the AGM, including the ways
to submit voting instructions before the
meeting.
Alastair Lyons
Chair
13 March 2023
Harworth Group plc: Annual Report and Financial Statements 2022Governance Report 82
Board of Directors
Alastair Lyons
Chair
Date of appointment
07/03/2018
Length of service
5 years 1 month
Independent
Yes
Lynda Shillaw
Chief Executive
Date of appointment
01/11/2020
Length of service
2 years 5 months
Independent
No
Katerina (Kitty) Patmore
Chief Financial Officer
Date of appointment
01/10/2019
Length of service
3 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 a Non-Executive Director and
Senior Independent Director of Vivid
Housing Association, and is also Chair of
the BPF Regional Policy Committee and
interim Chair of the SYMCA Innovation
Board. She was also a Non-Executive
Director of The Crown Estate from January
2018 until December 2021.
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 of
LondonMetric Property plc.
External appointments
Non-Executive Director of LondonMetric
Property plc.
Harworth Group plc: Annual Report and Financial Statements 2022Governance Report 83
Angela Bromfield
Senior Independent Director
Patrick O’Donnell Bourke
Non-Executive Director
Ruth Cooke
Non-Executive Director
Date of appointment
01/04/2019
Length of service
4 years
Independent
Yes
Date of appointment
03/11/2020
Length of service
2 years 5 months
Independent
Yes
Date of appointment
19/03/2019
Length of service
4 years 1 month
Independent
Yes
Committee Membership
Committee Membership
Committee Membership
R (Chair) E (Chair) N
A (Chair)
N 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 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.
Skills and Experience
Angela is a Non-Executive Director at
Marshalls plc, where she Chairs the
Remuneration Committee. She is also
the designated employee engagement
NED and is a member of the Nomination
and Audit Committees. Until June 2022,
she was also a Non-Executive Director at
Churchill China plc, where she chaired
the Remuneration Committee and was
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.
Key
N Nomination Committee
R Remuneration Committee
E
ESG Committee
D Disclosure Committee
A Audit Committee
Skills and Experience
Patrick is 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 from January 2020 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.
Harworth Group plc: Annual Report and Financial Statements 2022Governance Report 84
Board of Directors continued
Lisa Scenna
Non-Executive Director
Date of appointment
01/09/2020
Length of service
2 years 7 months
Independent
Yes
Marzia Zafar
Non-Executive Director
Date of appointment
01/06/2022
Length of service
10 months
Independent
Yes
Committee Membership
Committee Membership
R A
E
Skills and Experience
Lisa is a Non-Executive Director of
Genuit Group plc, where she is the
Senior Independent Director, Chairs the
Remuneration Committee and is a member
of the Nomination and Audit Committees.
She is also a Non-Executive Director of
Cromwell Property Group, an Australian
listed company, where she Chairs the
ESG, Risk & Safety Committee and is a
member of the Audit, Remuneration and
Nomination Committees.
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.
Skills and Experience
Marzia is Deputy Director for Strategy &
Decarbonisation at Ofgem. Prior to this,
she was Director of Sustainability & Policy
at Kaluza Technologies.
Marzia brings to Harworth a wealth of
experience in sustainability, having spent
over 20 years working on policies and
strategies to enable energy transition for
regulators, business and not for profit
sectors. She was Director of Insights at the
World Energy Council (the UN-accredited
global energy body) and worked with
business and government leaders to
facilitate global, national and regional
energy strategies. Prior to that, Marzia
spent 11 years with the California Public
Utilities Commission, initially as a Senior
Energy Policy Advisor, and then as Director
for Policy and Planning. In this role,
Marzia contributed to drafting California’s
Energy Action Plan to make greater use of
renewable energy and led the strategy for
the deployment of smart meters.
Lisa is a member of the Australian Institute
of Company Directors and the Institute of
Chartered Accountants in Australia.
External appointments
Deputy Director for Strategy &
Decarbonisation at Ofgem.
External appointments
Non-Executive Director of Genuit Group
plc and Cromwell Property Group, an
Australian listed company.
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
(‘HEPGL’) from 19 March 2013)
Length of service
8 years 1 month (10 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.
Harworth Group plc: Annual Report and Financial Statements 2022Governance Report 85
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
12 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
6 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.
Harworth Group plc: Annual Report and Financial Statements 2022Governance Report 86
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 in alignment 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 has
complied with the principles and provisions of the 2018 Code throughout the year ended 31 December 2022.
Code
What did we focus on in 2022?
How did it support our strategy?
See further
Board
Leadership
and Company
Purpose
Division of
Responsibilities
Composition,
Succession and
Evaluation
In 2021, we developed and unveiled our
strategy to grow Harworth to £1bn of EPRA
NDV. During 2022, the Board has reviewed
the progress made by the Executive team in
delivering against the four pillars of this growth
strategy, whilst navigating a challenging
and unpredictable macroeconomic and
geopolitical environment.
The Board reviewed and contributed to the
development of further elements of our Chief
Executive’s strategy for Harworth’s long-term
growth and success. These focused on
broadening the range of products on our
residential sites, the development of an Energy
and Natural Capital strategy, and progression of
the people strategy.
Statement of
Corporate
Governance,
pages 87 to 89
We reappraised our delegated authorities
framework with the introduction of a new
Board Reserved Matters Policy and Operational
Approvals Policy, enabling effective decision
making at appropriate levels. These revisions
allowed for the Board to focus more of its
time on strategic discussion and debate and
increased the responsiveness of executive
management in a rapidly changing external
environment.
In June 2022, we appointed Marzia Zafar as
an additional independent Non-Executive
Director. This appointment was prompted by a
recommendation from our 2021 external Board
effectiveness review, which also influenced
several other changes to enhance Board
effectiveness.
More time is afforded for the Board to review the
potential impact of market developments on our
strategy and the consequent potential need for
changes, and on material strategic transactions.
Statement of
Corporate
Governance,
pages 92 to 95
Statement of
Corporate
Governance,
pages 95 to 97
The 2021 external Board effectiveness review
recommended that the Board recruit a
Non-Executive Director with different skills,
background, and experience. Marzia brings a
wealth of experience in sustainability and the
Board is benefiting greatly from her expertise
whilst a member of our ESG Committee as we
formulate our Sustainability Framework.
The recommendations implemented by the
Board from the 2021 external review, and those
to be adopted from the 2022 internal review,
will continue to enhance its performance.
Audit, Risk
and Internal
Control
The Audit Committee approved the
establishment of an internal audit function,
which in part replaces the Company’s reliance
on external review of the effectiveness of its
framework of management controls.
Following changes to our risk management
system in 2021, the Board continued to
monitor our principal risks as macro and market
conditions changed.
The Audit Committee considered that the
increase in pace, scale and complexity
of activity needed to deliver the Group’s
strategy necessitated the establishment of
an internal audit function. This function will
provide enhanced assurance around our risk
management, governance, and internal control
processes to support the effective delivery of the
strategy.
Audit Committee
Report, pages
106 to 112
Strategic Report:
Effectively
managing our
risk, pages
43 to 53
Remuneration
The new Remuneration Policy was approved
at the AGM in May 2022. In line with
remuneration decisions for the Executive
Directors, the Remuneration Committee
reviewed the Policy’s application to the wider
workforce and approved an extension in both
the all-employee SIP and discretionary RSP.
The Board monitors a principal risks dashboard
at each Board meeting to ensure risks are
managed effectively, and opportunities are
identified, in pursuit of our strategic objectives.
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.
Strategic Report:
People, pages
75 to 77
Directors’
Remuneration
Report, pages
115 to 133
Harworth Group plc: Annual Report and Financial Statements 2022Governance Report 87
Board leadership and Company Purpose
Purpose and strategy
Harworth’s Purpose: “to transform land
and property into sustainable places where
people want to live and work”, underpins
our strategy, business model and all
Board activity and decisions. Following
her appointment as Chief Executive in
November 2020, Lynda Shillaw led an
extensive review of strategy during the first
half of 2021, working closely throughout
with the Board and wider business. In
September 2021, we unveiled our strategy
to grow Harworth to £1bn of EPRA NDV,
and during 2022 the Board focused on
supporting the Senior Executive team and
business in delivering against this growth
strategy.
Our strategy to reach £1bn of EPRA NDV
has required 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 professional workforce,
a substantial well-positioned landbank,
and a commitment to creating sustainable
communities, all of which contribute
towards our aim to deliver long-term
market-leading returns for investors.
The performance of the business is
monitored by the Board throughout the
year against the strategic objectives, and
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
now presented to the Board on a rolling
basis and the Chief Executive, Chief
Financial Officer, Chief Operating Officer,
Chief Investment Officer and General
Counsel and Company Secretary give
operational and financial updates at each
Board meeting which they all attend.
The key Board activities in 2022, outlined
below, reflect that the Board’s focus has
been to oversee the implementation of the
strategy, and to review progress against the
strategic objectives.
Stakeholders
considered
All stakeholders as
set out in our s.172
Statement (pages 39
to 42).
The Board will continue
to review the progress
achieved in the delivery
of the strategy, as well as
continue to review regularly
our financial and operational
performance.
Key Board activities in 2022
Key activities and
discussions
Outcomes
Future priorities
The Board approved:
Progression of the strategy to:
• broaden the range
of products on our
residential sites and
thereby accelerate their
development
• maintain the size of our
strategic landbank
• unlock additional value
from our industrial &
logistics pipeline
• reposition the Investment
Portfolio to modern
Grade A.
Operational
decisions in
support of the
strategy
Sustainability
• the launch of a
single-family BTR product
• a number of acquisitions
and land assembly
initiatives
• several direct
development projects
• sales of certain assets
within the Investment
Portfolio
The Board also held a
Strategy Day in October to
advance the current strategy.
Following the appointment
of our first Director of
Sustainability, the Board
reviewed the evolution of
Harworth’s Sustainability
Framework and NZC
Pathway.
Following recommendation
by the ESG Committee,
the Board approved the
publication of Harworth’s
NZC Pathway.
• Continue to ensure
alignment between
our sustainability
commitments and the
Group strategy.
• Our people
• Communities
Investors
•
• Review progress against
our pathway to transition
our business and
portfolio to Net Zero
Carbon.
• Continue to oversee
evolution of our ESG data
collection and reporting.
Harworth Group plc: Annual Report and Financial Statements 2022Governance Report 88
Statement of corporate governance continued
Outcomes
Future priorities
Risk and
assurance
People
strategy
Key activities and
discussions
• The Board monitored
closely our principal
risks, which informed
decisions made against
an unpredictable and
continuously evolving
macroeconomic and
geopolitical backdrop.
• The Audit Committee
approved the
establishment of an
internal audit function.
• The Board reviewed
and supported a new
Talent and Learning &
Development strategy.
• The Board met and
engaged with staff in
various formats, including
employee lunches, site
visits, regional team
dinners, office visits, and
the Employee AGM.
Remuneration
Policy
The Remuneration
Committee concluded
the Remuneration Policy
review in early 2022,
including consultation
with shareholders and
engagement with our
employees. The policy was
approved at our 2022 AGM.
• As macro and market
conditions deteriorated
the Group’s “residential
and commercial markets”
principal risk increased
from “medium” to “high”,
which informed key
strategic and operational
decisions.
• An internal audit plan was
agreed in early 2023.
The Board’s engagement
with Harworth’s people
was especially important
this year given operational
changes to support the
strategy, including a material
increase in the size of
the workforce, as well as
the external uncertainty
affecting employees created
by the macroeconomic
environment. The Employee
AGM was very well attended
and provided all employees
the opportunity to put
questions directly to each
Board member.
The new Policy is informed
by our strategy. Further to
its approach to Executive
Director remuneration, the
Remuneration Committee
ensured that the principles
of the Policy are applied to
the wider workforce. The
Committee extended the
application of the employee
share schemes to facilitate
share ownership throughout
the workforce to align the
interests of employees and
shareholders.
Stakeholders
considered
Our principal risks
take account of all
stakeholders as
set out in our s.172
Statement (pages 39
to 42).
Our people
• The Board will continue
to review the status of
the principal risks at each
meeting and undertake
a more detailed review
biannually (or at any time
if there are significant
movements in risk
profile).
• The Audit Committee will
review outputs from the
internal audit programme
throughout the year,
supporting its assessment
of the effectiveness of
internal controls.
The Board will continue
to be appraised of the
people strategy and will
seek to optimise the
Board’s engagement with
employees to understand
the prevailing culture, and
their thinking and concerns.
• Our people
Investors
•
The Remuneration
Committee will continue
to oversee the appropriate
implementation of the Policy,
including its application
to the wider workforce,
against the backdrop of a
challenging macroeconomic
environment.
Harworth Group plc: Annual Report and Financial Statements 2022Governance Report 89
How the Board spent its time this year
Key:
Operations and
governance (15%)
The Board approved changes
to the delegated authorities
framework, and, as per its
Reserved Matters Policy, the Board
appraised all new underwriting
proposals and significant
transactions.
Stakeholder engagement
(excluding people) (10%)
The Board oversaw work in respect
of stakeholder mapping. In respect
of investors, the Board received
regular reports from the Head of
Investor and Stakeholder Relations,
reviewed feedback from the results
roadshows and the Capital Markets
Day, and reviewed an investor
relations plan for the year.
People and culture (15%)
The Board received regular
feedback from the Chief
Executive on people matters, it
reviewed talent management and
people development, as well as
undertaking Board/employee
engagement activities.
Key areas of Board focus in 2023
Continued oversight of implementation
of our strategy, ensuring the resilience of
the business, financial and operational, in
the face of challenging conditions in our
core markets
Our people: oversight of implementation
of the people strategy to support delivery
of the business strategy, including:
recruitment, engagement, welfare,
succession planning, talent development
and diversity
Strategy (20%)
Sustainability (10%)
The Board reviewed progress against
the strategic objectives and held its
annual Strategy Day to review the
evolution of the strategy.
Risk management (10%)
The Board regularly reviewed the
Group’s principal risks and the
adequacy of actions to mitigate and
manage the same.
The Board’s consideration of
sustainability is integral to the
delivery of our purpose. This
included the Board’s review of
The Harworth Way Sustainability
Framework and NZC Pathway. In
addition, the elements of our ESG
agenda were considered in detail
by the ESG Committee, which met
four times in 2022.
Financial (20%)
The Board approved a new
RCF, the 2021full-year and 2022
interim results announcements
and the 2022 budget. The Board
monitored performance against
this budget throughout the year
and approved a budget for 2023.
Oversight of progress against
Harworth’s Sustainability Framework
and NZC Pathway, including review of
targets
Implementation of the Remuneration
Policy, against the backdrop of
a challenging macroeconomic
environment
Close monitoring of the Group’s
principal risks
Implementation of outcomes of internal
Board effectiveness review
Harworth Group plc: Annual Report and Financial Statements 2022Governance Report
90
Statement of corporate governance continued
Culture and workforce engagement – One Harworth
Our “One Harworth” culture, underpinned by the Harworth values outlined below, encourages a collaborative approach in achieving
our strategy to grow Harworth to £1bn of EPRA NDV and succeeding as one team.
It is essential to the Board that it exhibits the One Harworth approach and understands, assesses and monitors the culture of the
business via effective engagement with the workforce. The Board, as a whole, undertakes this 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 inspirational work of our employees
and the challenges they face, they also allow staff to ask questions of, and share feedback and raise any concerns with, the Board.
• An annual review of employee engagement presented by the Group Resources and Transformation Director.
• 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.
The Harworth values are the principles our employees consider most important when we go about our business. At Harworth we:
Culture in action:
Culture in action:
Culture in action:
The Board recognises that Harworth’s
people are fundamental to achieving
the strategy and the continued
long-term success of the business. To
this end, there were a record number
of promotions across the business in
2022, reflecting both our commitment
to recognise achievement and to ensure
career progression and development
opportunities. The Board also supported a
new Talent and Learning & Development
Strategy, and the first cohort of employees
started the new Leadership Development
Programme in September 2022. During
2023, we will build on this programme to
support the professional development of
all individuals, continuing to drive a skilled
and engaged workforce.
The Group also promotes strong
partnerships based on shared values and
objectives with its external stakeholders,
as set out in the Section 172 Statement on
pages 39 to 42.
2022 was a transformational year for
Harworth’s ESG ambitions, as we
appointed our first Director of Sustainability
and created a dedicated sustainability
team within the business. Their focus has
been on expanding and embedding The
Harworth Way, building our capabilities in
capturing and reporting carbon emissions
to devise an initial NZC Pathway, and
reviewing our commitments and approach
beyond the year. See further details on
pages 64 to 77.
The NZC Pathway, published alongside
this Annual Report and available on the
website, outlines a delivery strategy to
meet our ambition to be operationally net
zero by 2030 and fully by 2040. Central to
this strategy will be the adoption of build
specifications for our industrial & logistics
sites and also the homes to be delivered by
Harworth’s mixed tenure teams.
During 2023, our sustainability team will
also focus on how we can deliver more for
our communities and how we can measure
this social value.
The Board is acutely aware of the
cost-of-living crisis and has sought
to provide support to employees
where the burden is most challenging.
We made a one-off non-contractual
payment of £2,000 in December 2022
to all employees (excluding the Senior
Executive).Feedback from members of
the business was that the payment was
welcome at a time of high inflation and
ahead of the festive period.
In addition, for 2023 the Remuneration
Committee approved variable salary
increases relative to role seniority, with
employees on lower salaries receiving
a proportionately higher increase than
those on higher salaries.
The Harworth values are embedded into the business through active leadership, internal communications, appraisals, the setting and scoring
of bonus objectives, and our programme of recognition. The Harworth values underpin the delivery of our strategy, by ensuring collaboration
with each other and our external stakeholders, by remaining innovative, and by encouraging employees to “do the right thing”. These values
are especially relevant during the current challenging period of economic and social uncertainty. During 2023, we are actively working on
a structured programme with the aim of continuing the positive evolution of our culture to ensure we continue to provide an outstanding
employee experience, attracting and retaining the best talent. We will report on progress in the 2023 Annual Report.
Harworth Group plc: Annual Report and Financial Statements 2022Governance Report 91
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 managed at an operational level
with oversight by the Board. During 2021,
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. During 2022,
we commissioned an external agency,
Camargue, to assist with central and
regional stakeholder strategies with a focus
on central and local government.
Our Strategic Report outlines how we
engage with our key stakeholders and how
the Board complies with its obligations
under Section 172 of the Companies
Act (pages 39 to 42). 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 the
Company’s full-year and interim results.
The Chair also meets periodically with our
largest shareholders. During the period,
Harworth hosted several investor site visits,
and in June 2022 held a Capital Markets
Day for institutional investors and analysts,
which comprised a presentation by
members of the management team and a
tour of several sites in the Midlands region.
In October 2022, Lynda Shillaw and Kitty
Patmore gave their first live presentation
via the Investor Meet Company platform,
which was open to all existing shareholders
and potential investors giving them
the opportunity to submit questions
before and during the event. In addition,
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 proposed revisions to the
Remuneration Policy.
Our Head of Investor and Stakeholder
Relations 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 shared with the Board.
During the year, our existing shareholders
remained highly supportive of our strategy,
operational progress and management
team, and we also welcomed a number of
new investors, including a large institution
which became one of our 10 largest
shareholders upon entering the register.
Aside from this new entrant, the top end of
our shareholder register remained largely
stable throughout the year.
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
consents 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 holding our
first partly virtual AGM in May 2023 (see
further details at the end of this report).
The meeting will be webcast live giving
increased numbers of shareholders the
opportunity to engage and participate
by asking questions. There have been
no material votes against recommended
resolutions at recent AGMs. Wherever
practicable, the Board seeks to ensure
that shareholder views were canvassed
in advance 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 principles of the 2018 Code.
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 2022.
Steven Underwood is Chief Executive of
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.
In Q4 2021 and extending to January
Harworth Group plc: Annual Report and Financial Statements 2022Governance Report 92
Statement of corporate governance continued
2022, Harworth entered a bidding process
to acquire a strategic land site which Peel
Group also targeted. This 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
discussions or decision making, on this
matter.
External appointments
Upon appointment, each Director is
required to notify the Company Secretary
of their 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.
The external appointments of each
Board member are set out in the Director
biographies on pages 82 to 85. The
external appointments approved during
the year are disclosed in the Nomination
Committee Report on page 101.
Inductions
The 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
relevant, such as the external auditors,
remuneration consultants and the
Company’s valuers.
Knowledge of business and markets
To 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;
• 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 CPD
All 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; and
•
the Company Secretary shares with the
Board a “horizon scanning tracker”,
which is prepared quarterly by our
in-house legal team, principally for the
Group Leadership Committee, and
identifies forthcoming and anticipated
legal changes which will or may impact
Harworth’s activities.
Division of responsibilities
There is a clear division of responsibilities
between the Board, its Committees, and
senior management at an operational
level. During the period, we reviewed
our delegated authorities framework and
made some material changes to our Board
Reserved Matters Policy and Operational
Approvals Policy. These policies reserve
certain matters for the Board and ensure
that operational decisions are made at the
most appropriate level in the business. The
revisions we have made to our governance
framework will support the Board in
focusing on strategic proposals, whilst also
giving it oversight of major operational
projects which affect the long-term success
of the business. The delegated authorities
framework is subject to review annually, led
by the Company Secretary and approved
by the Board, 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 Senior Executive, Investment
Committee and Group Leadership
Committee to support her in implementing
the strategy. The Senior Executive
comprises the Chief Executive, Chief
Financial Officer, Chief Operating Officer,
Chief Investment Officer and General
Counsel and Company Secretary.
Harworth Group plc: Annual Report and Financial Statements 2022Governance Report 93
The key responsibilities of the Board, Committees and individual roles are summarised below and on the next page.
Board Committees
Audit Committee
• Reviews the integrity of the Group’s
Financial Statements and formal
announcements on its financial
performance, including reviewing
financial reporting judgements
contained within them.
• Advises the Board on whether
the Group’s Annual Report is fair,
balanced and understandable, and
provides the information necessary
for shareholders to assess the
Group’s position and performance,
business model and strategy.
• Reviews the Group’s operational
risks, the effectiveness of the risk
management system and of our
internal controls and processes, and
the internal audit programme.
• Reviews the independence and
effectiveness of the external auditor
and the internal audit function, and
reviews the terms of appointment
and remuneration of the external
auditors and leads any tender
process for their appointment.
See pages 106 to 112 for full report
Remuneration Committee
• Determines and agrees with the
Board the Company’s Remuneration
Policy, ensuring alignment with
purpose and strategy.
• Determines the salaries, bonuses,
long-term incentive arrangements,
pension arrangements, other
benefits and contract terms of the
Executive Directors and members of
the Senior Executive.
• Monitors performance against
bonus targets and long-term
incentive underpins.
• Reviews workforce remuneration
and related policies, and the
alignment of incentives and rewards
with that of the wider workforce.
See pages 115 to 133 for full report
The Board
Examples of matters reserved for
the Board:
• Setting strategy and approval
of annual budget and strategic
plan. Oversight of the financial
and operational performance
and resilience of the business.
• Oversight of performance
and reporting against our
Sustainability Framework and
NZC Pathway.
•
Identification of, and review
of measures to mitigate
and manage, the Group’s
principal risks.
• Oversight of the appropriate
regard by the Company for the
interests of its stakeholders.
• Approval of accounts,
valuations, financial reporting
and dividends.
• Approval of underwriting
proposals for all new projects
and material changes to
project plans, determined by
appropriate financial thresholds.
• Approval of Board
appointments; external
appointments of Directors and
the Senior Executive.
• Oversight of the people strategy
including talent management,
learning and development, and
succession planning.
• New or material changes to
senior debt facilities.
• Oversight of health and safety
for all sites and projects.
• Oversight of IT strategy
including cyber and information
security.
Board Committees
Nomination Committee
• Reviews the size and composition
of the Board to ensure a balance of
skills, experience and knowledge on
the Board and its Committees.
• Oversight of succession planning for
the Board and Senior Executive.
• Leads the process for Board
appointments.
• Oversight of progress in improving
diversity across the business.
See pages 98 to 105 for full report
ESG Committee
• Oversees the Group’s Sustainability
Framework, including targets
and KPIs.
• Oversees the development of, and
progress against, the NZC Pathway.
• Reviews sustainability policies,
processes and initiatives, and the
measurement of progress towards
sustainability targets.
• Oversees how all elements of
the Sustainability Framework are
reported in the Annual Report
and other public reporting, and
recommends any ESG disclosures to
the Audit Committee.
See pages 113 to 114 for full report
Disclosure Committee
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.
Harworth Group plc: Annual Report and Financial Statements 2022Governance Report 94
Statement of corporate governance continued
Management Committees
The Chief Executive has established the following Management Committees in pursuance of the authority delegated to her by the Board
Investment Committee
Group Leadership Committee
• Supports the Chief Executive in the formulation and implementation
• Members of the Committee provide updates on each operating
of the strategy.
division and function.
• Responsible for decisions on capital allocation and deployment.
• Reviews all material projects and material departures from project
plans including matters reserved for the Board before they are
presented, where appropriate, for approval.
• Reviews the performance of the business against agreed operational
and financial KPIs.
• 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 the risk profile of the business.
Responsibilities of the Board and Senior Executive
Chair
Alastair Lyons
Chief Executive
Lynda Shillaw
Chief Financial Officer (‘CFO’)
Kitty Patmore
• Leads the Board and is responsible for its
• Leads on the formulation of Purpose
• Leads on all financial matters, including tax
overall effectiveness by facilitating a culture
of openness and debate.
• Ensures that Harworth has a defined
purpose and clear values, strategy and
objectives.
• Ensures the Board comprises diverse
individuals with the necessary skills and
experience to achieve the appropriate
oversight of the Company’s activities.
• 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, and that
the Board engages appropriately with other
key stakeholders.
• Ensures that the effectiveness of the Board
is subject to annual evaluation, including an
external evaluation every three years.
and strategy which, once agreed by the
Board, falls to the Chief Executive to
implement and communicate effectively.
• Leads the establishment and maintenance
of Harworth’s culture and values.
• Responsible for the design of Harworth’s
operational structure.
• Oversight of operational risk
management, including health and safety
and system of internal controls.
• Responsible for formulation and
implementation of Harworth’s people
strategy and for effective internal
communications.
• Responsible for Harworth’s relationships
with shareholders, both actual and
potential, and for effective engagement
with key stakeholders.
• Responsible for ensuring the Group’s
strategy embeds ESG principles and
objectives, including leading on the
formulation of ESG targets.
and treasury.
• Responsible for preparing the annual
budget and strategic plan and the
maintenance of regularly updated
reforecasts of the Group’s financial and
operational performance.
• Responsible for all statutory financial
reporting, including the preparation of the
interim and year-end financial statements
and Annual Report.
• Responsible for ensuring the adequacy
of the Group’s financial resources,
formulating the Group’s funding strategy
and raising new equity and debt capital.
• 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.
Chief Operating Officer (‘COO’)
Andrew Blackshaw
Chief Investment Officer (‘CIO’)
Jonathan Haigh
• 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 mixed tenure products across the
portfolio.
•
•
Jointly responsible, with the CFO and CIO, for ensuring that the
regional teams work effectively alongside our finance and central
support teams respectively.
Jointly with the CIO, 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 in
accordance with our strategy, including strategic disposals and the
entry of directly developed assets into the portfolio.
• Leads on portfolio and strategic acquisitions and projects.
• Oversight of the direct development programme across the portfolio.
•
Jointly responsible, with the CFO and COO, for ensuring that the
regional teams work effectively alongside our finance and central
support teams respectively.
•
Jointly with the COO, leads the half-year and year-end valuation
process.
Harworth Group plc: Annual Report and Financial Statements 2022Governance Report
95
Responsibilities of the Board and Senior Executive
Senior Independent Director
Angela Bromfield
General Counsel and Company Secretary
Chris Birch
• 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
• Secretary to the Board and some Board 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.
• Leads on arranging inductions for, and continuous professional development of, Directors.
• Responsible for governance, both at Board and operational levels, including non-financial
new Chair.
internal controls, systems and processes.
• Leads the annual appraisal of the Chair’s
performance.
• Leads on risk management.
• Leads the Risk and Compliance, Governance, Legal, Technology and Internal Audit teams.
Board and Committee meetings1
Meetings Attended
AuditCo
RemCo
4/4
Board
Alastair Lyons
10/10
Lynda Shillaw
10/10
Kitty Patmore2
9/10
Angela Bromfield
9/10
Ruth Cooke
9/10
Lisa Scenna
10/10
Patrick O’Donnell Bourke
10/10
Steven Underwood
9/10
Martyn Bowes
9/10
Marzia Zafar3
6/6
1 There were 10 scheduled Board meetings, including the Strategy Day, during 2022. There were also Board calls to sign off the trading statements and 2021 full-year
ESGCo
4/4
4/4
3/4
4/4
NomCo
1/1
1/1
5/5
5/5
5/5
1/4
1/2
1/1
1/1
4/4
4/4
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, returning to the business initially part-time in February 2022. Nigel Turner attended Board meetings
as Interim Chief Financial Officer but was not appointed a statutory Director.
3 Marzia Zafar was appointed to the Board on 1 June 2022 and has attended all Board meetings since her appointment. She also observed the May Board meeting before
she had been formally appointed.
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, General Counsel and 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.
Composition, succession and evaluation
Board evaluation
2021/2022
Externally
facilitated
evaluation
2022/2023
Internal review
2023/2024
Internal review
2024/2025
Next externally
facilitated
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.
Harworth Group plc: Annual Report and Financial Statements 2022Governance Report 96
Statement of corporate governance continued
In the final quarter of 2021, an external Board evaluation process was led by Ian White. Information about Ian and this external evaluation
is included in the 2021 Annual Report on pages 98 and 99. Below is a summary of the recommendations from the evaluation and the
actions taken during 2022 to implement them:
2021 internal evaluation
Theme
Actions agreed
Outcomes
Diversity
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.
Board papers
and debate
• 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
reviewing the effectiveness of the meeting.
Material
decisions
To track the effectiveness of its decisions, the
Board should determine, at the end of each
meeting, whether any 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.
The Board appointed Marzia Zafar as an additional
independent Non-Executive Director on 1 June 2022. Marzia
brings to Harworth a wealth of experience in sustainability and
adds to the Board’s diversity. See Marzia’s biography on page
84, and see the Nomination Committee Report on page 99 for
the process leading up to Marzia’s appointment.
Alongside the review of the delegated authorities framework,
changes were made to underwriting proposal templates, which
include guidance on what to include in the executive summary.
Each agenda sets aside time at the end of the meeting for
the Board to review the quality of debate on the agenda
items and the quality and effectiveness of Board papers
and presentations supporting those items. For example,
following the first regional update to the Board in 2022, it was
considered that it would have been beneficial for the wider
team to participate in the presentation alongside the Regional
Director and this was implemented for the other regional
updates during the year.
As part of its brief review at the end of each meeting,
the Board also considers whether any material decisions
should be revisited in the future and, if so, when. During
the year, as market conditions have evolved, the Board has
re-appraised a number of projects and proposals including
BTR project delivery, sales of investment properties and direct
development.
Changes have been made to the annual Board and Committee
timetable, including a reduction in the number of in-person
Board meetings to be supplemented by Board calls where
necessary. These changes will be implemented fully from
2024, with a transition in 2023 given that the 2023 timetable
had already been established prior to agreeing the changes.
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.
Non-Executive Directors have continued to feed into
stakeholder mapping and management which is undertaken
at an operational level, particularly where existing relationships
with local and central government can support stakeholder
engagement.
Financial
reporting and
forecasting
Continuous improvement in financial reporting
including enhancements to corporate modelling
and longer-term financial forecasting.
• Significant enhancements have been made to Group
financial modelling, which has enabled regular rolling
reforecasts to be made available to the Board.
• This has also underpinned the establishment of a Group
Overview Tracker, which supports operational and Board
appraisals of new, and changes to existing, projects by
providing a clearer picture of their impact on Group
forecast returns and capital deployment.
Harworth Group plc: Annual Report and Financial Statements 2022Governance Report 97
In Q4 2022, the Chair conducted an
internal evaluation of the Board, its
Committees and individual Directors. This
took the form of an online questionnaire
completed by all Directors and the Senior
Executive. The responses were collated
to inform one-to-one meetings between
the Chair and each Director and member
of the Senior Executive. The findings
were reported to the Board in January,
where it discussed a range of possible
actions to enhance its effectiveness. It was
determined that, due to time and resource
constraints, there would need to be a
phased implementation of proposals, and
the Senior Executive would update the
Board at its meeting in April 2023 with the
priority actions to take forward during the
year. The agreed actions will be set out
in the 2023 Annual Report along with an
update on progress made during the year.
An evaluation of the Chair’s performance
is led annually by the Senior Independent
Director. The externally facilitated
evaluation at the end of 2021 reported
that the Chair was extremely effective with
a collegiate approach, was respectful of
both the Board and Harworth’s people
as a whole and understood the Chair/
Chief Executive boundary well. For the
2022 internal evaluation, the Senior
Independent Director met with our
other Non-Executive Directors and the
Senior Executive in early 2023 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 Group Leadership
Committee.
Annual General Meeting
The Annual Report and Notice of AGM are
sent to shareholders at least 20 working
days before the meeting.
This year, we will be holding our first partly
virtual AGM on Tuesday 23 May 2023 at
10:00 am with the meeting being webcast
live. The AGM is a key date in the Board’s
calendar, and by making the meeting
available online the Board hopes to
increase levels of shareholder engagement
by providing increased opportunity to
pose questions to Board members.
For statutory purposes, the place of
meeting will be The Bessemer Conference
Room, AMP Technology Centre, Advanced
Manufacturing Park, Brunel Way, Waverley,
Rotherham S60 5WG. The Chair, Chief
Executive, Chief Financial Officer and
Company Secretary will be at this
location, to meet with any shareholders
who wish to attend in person, with other
Directors joining online. Shareholders
are encouraged to view the AGM online,
please see the Notice of AGM for further
detail on how to access the webcast
facility. Questions can be submitted via
this facility both during and in advance
of the meeting. We strongly encourage
shareholders to log on and submit any
questions they might have in advance of
the meeting, so that their views are heard
even if they are unable to participate live.
Shareholders that view the AGM online will
not be able to vote during the meeting but
are encouraged to vote in advance. There
are three ways to submit voting instructions
before the meeting, which are available
from the publication date of the Notice
of AGM:
1. By completing and returning a paper
proxy form as per the instructions on
the form. Shareholders who elected
to receive hard copy documents will
receive a proxy form with the Notice of
Meeting. Otherwise it is available from
our registrars (see contact details on
page 207);
2. By registering your proxy vote
electronically via our registrar’s
website, www.sharevote.co.uk.
Or, if you are registered, via the
Shareview platform; or
3. Via the CREST or Proxymity system for
those that are users of either platform.
The resolutions to be proposed at the
AGM, together with the explanatory
notes, appear in the separate Notice of
AGM accompanying this Annual Report.
Separate resolutions are proposed on each
substantially separate issue. The Notice is
also available on our website.
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
13 March 2023
Harworth Group plc: Annual Report and Financial Statements 2022Governance Report 98
Nomination Committee report
Committee members
Alastair Lyons (Chair)
Angela Bromfield
Ruth Cooke
Lynda Shillaw
Besides this, the Committee held one
further 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.
Membership and attendance at meetings
in 2022 are shown below:
Dear Shareholder,
I am pleased to report to shareholders on
the work of the Nomination Committee
during the year ended 31 December
2022. The report sets out the Committee’s
activities during 2022 and its priorities for
2023, which focus on reviewing Board and
Committee composition and succession
planning to ensure a balanced and diverse
Board, as well as maintaining oversight of
equity, diversity and inclusion across the
business.
The Committee’s terms of reference, which
were reviewed and updated during the
period, are available on the Company’s
website: https://harworthgroup.com/
investors/governance/. Throughout 2022
the Committee acted in accordance with
the principles of, and fulfilled its obligations
under, the 2018 Code.
Membership and meetings
The Committee has four members.
During the period I continued to Chair
the Committee, and its other members
were Angela Bromfield, Lynda Shillaw and
Ruth Cooke. Ruth’s appointment to the
Committee took effect on 25 January 2022,
following a recommendation to the Board
to appoint an additional independent
Director to the Committee.
In H1, the Committee led a recruitment
process culminating in the appointment of
Marzia Zafar as an additional independent
Non-Executive Director on 1 June 2022.
Marzia has joined our ESG Committee, and
we are already benefiting significantly from
the depth of her natural capital experience,
in particular as regards the environmental
and energy considerations of the Board.
Alastair Lyons
Angela Bromfield
Lynda Shillaw
Ruth Cooke (joined the
Committee in January 2022)
Chair
Member
Member
Member
Committee
tenure at
31 December 2022
Scheduled meetings
attended/eligible
to attend
Independent
Yes
Yes
No
Yes
4 years 10 months
3 years
2 years 2 months
11 months
1/1
1/1
1/1
1/1
Harworth Group plc: Annual Report and Financial Statements 2022Governance Report 99
The Committee’s key activities in 2022
The key activities of the Committee during 2022 are shown below:
Recruitment
Board composition and succession Diversity
External appointments
Recruitment process leading to the appointment of Marzia Zafar
Review of Board and Committee composition
Review of succession plans for the Board and Senior Executive
Annual review of time commitment of Non-Executive Directors
Review of progress to improve diversity across the business
Review of proposed external appointments for Lynda Shillaw and Lisa Scenna
The Committee’s priorities for 2023
• Ongoing review of Board composition and succession planning for the Board and Senior Executive.
• Ongoing review of effectiveness of initiatives to promote equity, diversity and inclusion across the business.
Board and Committee composition and recruitment
The Board comprises the Chair, who is considered independent, the Chief Executive, the Chief Financial Officer and seven
Non-Executive Directors, two of whom are not considered independent. Angela Bromfield continues in the role of Senior Independent
Director (‘SID’).
The composition of the Board and its Committees is reviewed regularly by the Committee to ensure that, in each case, its membership
provides 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. Informed by our 2021 external Board effectiveness review, which
recommended that the Board remain open to recruiting a Non-Executive Director with different skills and experience, Marzia Zafar was
appointed as an independent Non-Executive Director on 1 June 2022. The search process for Marzia’s appointment is outlined below:
Role brief
Longlist review
Interview
Recommendation
Informed by the recommendation from
the 2021 external Board effectiveness
review and the Committee’s review of
the balance of skills, knowledge and
experience on the Board, the Committee
engaged Warren Partners to monitor the
availability of potential candidates for
the role of Non-Executive Director with
a diverse background and expertise in
sustainability.
The Company does not retain Warren
Partners in any other capacity and it has
no other connection with the Company
or individual Directors.
A number of
relevant high-quality
candidates were
identified by
Warren Partners,
some of whom the
Committee selected
to be invited for
interview.
The Committee
undertook formal
interviews to assess
the candidates.
Marzia was identified
as a standout
candidate given her
extensive experience
in sustainability
(see below and in
Marzia’s biography
on page 84).
The Committee recommended the
appointment of Marzia as an additional
independent Non-Executive Director to
the Board.
The Committee reviewed any
potential conflicts and significant time
commitments prior to making this
recommendation.
Induction
Marzia undertook a comprehensive and
tailored induction programme following
her appointment, details of which are
set out in the Corporate Governance
Statement on page 92.
Marzia brings to Harworth a wealth of experience in sustainability, having spent over 20 years working on policies and strategies to
enable energy transition for regulators, business and not for profit sectors. Since joining the Board she has been appointed as Deputy
Director of Strategy and Decarbonisation at Ofgem. Given this experience, Marzia also joined the ESG Committee on appointment.
Whilst all appointments to the Board are based on merit, the appointment of Marzia is also a first step towards improving ethnic minority
representation at Board level.
The appointment to the Board of someone with different experience is testament to the Board’s commitment to diversity and inclusion. Like
all directors, Marzia has brought her unique approach and perspectives to Board discussion and analysis, thus contributing to the diversity of
viewpoints factored into making Board decisions as part of the culture of openness and debate in the boardroom.
Harworth Group plc: Annual Report and Financial Statements 2022Governance Report 100
Nomination Committee report continued
The Committee considers that the composition of the Board is appropriately balanced, and we are proud of the gender balance we have
achieved as well as taking steps to improve ethnic minority representation. Harworth confirms that, as of 31 December 2022, it had met the
targets on Board diversity prescribed by the new Listing Rules (LR 9.8.6R(9) and LR 14.3.33R(1)), as follows:
Target
Our progress
At least 40% of individuals on the board of directors are women
60% of our Board are women
At least one of the following senior positions on the board of
directors is held by a woman:
Three out of four senior positions on the Board are held by
women, as follows:
•
•
•
•
the chair;
the chief executive;
the senior independent director; or
the chief financial officer.
• our Chief Executive, Lynda Shillaw;
• our Senior Independent Director, Angela Bromfield;
and
• our Chief Financial Officer, Kitty Patmore.
At least one individual on the board of directors is from a minority
ethnic background
One member of the Board is from a minority
ethnic background
Numerical data on the gender identity and ethnic background of our Board members and executive management as of 31 December
2022 is set out in the tables below. For this purpose, “executive management” refers to our “Senior Executive” and comprises the Chief
Executive, Chief Financial Officer, Chief Operating Officer, Chief Investment Officer and General Counsel and Company Secretary.
Gender representation
Male
Female
Non-binary
Other gender identity
Not specified/Prefer not to say
Ethnicity representation
Number
of Board
members
Percentage
of the
Board
Number of senior
positions on the
Board (CEO, CFO,
SID and Chair)
Number in
executive
management
Percentage
of executive
management
4
6
–
–
–
40%
60%
–
–
–
1
3
–
–
–
3
2
–
–
–
60%
40%
–
–
–
Number
of Board
members
Percentage
of the
Board
Number of senior
positions on the
Board (CEO, CFO,
SID and Chair)
Number in
executive
management
Percentage
of executive
management
White British or other White
(including minority-white groups)
Mixed/Multiple Ethnic Groups
Asian/Asian British
Black/African/Caribbean/Black
British
Other ethnic group, including Arab
Not specified/Prefer not to say
9
–
–
–
1
–
90%
–
–
–
10%
–
4
–
–
–
–
–
5
–
–
–
–
–
100%
–
–
–
–
–
The data for reporting against the Board diversity targets and numerical disclosures has been collected in two ways:
• For the Senior Executive, we have relied upon the existing data stored on our HR platform where employees report their preferred
gender identity and ethnic group.
• The Non-Executive Board members, whose details are not held on the HR platform, were asked to complete a questionnaire and
select their preferred gender identity and ethnic group in line with the categories in the tables above.
Harworth Group plc: Annual Report and Financial Statements 2022Governance Report 101
Analysis of diversity across the workforce is detailed later in this report. Further 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.
Board
Composition
Age
Tenure
Male
Female
Male
Female
Male
Female
Chair
Exec Directors
Independent NEDs
Non-independent NEDs1
One Director
One Director
30–40 years
41–50 years
51–60 years
61–70 years
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.
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 133.
Board succession
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 three years, coupled with the appointment of Marzia
Zafar, this was a relatively light review.
The timeline below shows the tenure of each of our Directors.
Board tenures
Marzia Zafar –
June 2022
Patrick O’Donnell Bourke – Nov 2020
Lynda Shillaw – Nov 2020
Lisa Scenna – Sept 2020
Kitty Patmore – Oct 2019
Angela Bromfield – April 2019
Ruth Cooke – March 2019
Alastair Lyons – March 2018
Martyn Bowes – March 2013
Steven Underwood – August 2010
2010
2016
2017
2018
2019
2020
2021
2022
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 2022, the Committee reviewed the proposed appointments of: Lynda Shillaw, as Chair of the SYMCA Innovation Board;
and of Lisa Scenna, as a Board member of one of Dexus’s fund management platforms (based in Australia), and as a Non-Executive
Director of Gore Street Energy Storage Fund plc. Those appointments were recommended to, and approved by, the Board. The
external appointments of Lisa Scenna are expected to become effective following the signing of this Annual Report, and a regulatory
announcement will be made about the latter when it takes effect.
Harworth Group plc: Annual Report and Financial Statements 2022Governance Report
102
Nomination Committee report continued
Senior Executive
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 Board.
In addition to the tables on page 100,
further analysis of the composition of the
Senior Executive (at the date of this report)
is shown below.
Age
30–40 years
41–50 years
51–60 years
1
2
2
Tenure
1–3 years
3–6 years
6–10 years
3
1
1
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 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 made. A review is undertaken annually,
with the results reported to the Board. A summary of measures established in 2022 and in
previous years is set out on the following page. A key element of those initiatives was the
adoption of a new Equality, Diversity and Inclusion (‘ED&I’) Policy, which has a wider remit
than the previous Diversity and Equal Opportunities Policy (adopted in 2018) with the
objective of increasing emphasis on inclusivity and culture. Our ED&I Policy formalises our
commitment to making Harworth a diverse and inclusive organisation, which welcomes a
range of perspectives, ideas and approaches. With this Policy, and supporting initiatives,
we aim to find and nurture the best talent, as well as increase employee engagement and
retention, all of which are essential in achieving our strategy and the delivery of long-term
sustainable success.
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 2022
here, alongside the comparative results for 2021.
Gender pay gap analysis
In each case the reference point is 31 December.
Proportion of men and women in each quartile pay band
Lower quartile
Lower middle
Upper middle
Upper quartile
2022
2021
2022
2021
2022
2021
2022
2021
Males
Females
41%
43%
62%
61%
62%
65%
83%
87%
59%
57%
38%
39%
38%
35%
17%
13%
Gender Pay Gap Reporting
2022
2021
Mean gender pay gap
Median gender pay gap
Mean bonus gender pay gap
Median bonus gender pay gap
18%
27%
24%
69%
16%
34%
(4)%
67%
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.
Harworth Group plc: Annual Report and Financial Statements 2022Governance Report 103
Given that our workforce is relatively low in number, notwithstanding a substantial increase in percentage terms during 2022, our gender
pay gap statistics can move significantly due to a small number of changes and/or the impact of a senior leaver or joiner. In percentage
terms, there was substantial growth in the Group’s workforce in 2022 to support our growth strategy, from 92 to 116, an increase of 26%.
These changes had a significant impact on all quartile bands, including on their boundaries and composition. The reported data is also
affected by other factors, such as the timing of recruitment during the year. This makes it challenging to draw meaningful comparisons
between the gender pay gap data for 2021 and 2022.
By way of example, the mean gender pay gap and mean bonus gender pay gap is adversely affected by the inclusion of a full-year’s salary
and bonus paid to a cohort of senior males hired partway through 2021. By way of further example, the males recruited to more senior
roles in 2022 joined in the first half of the year, meaning (under the rules of our discretionary bonus scheme) they were entitled to a 2022
bonus, whilst the females recruited to more senior roles in 2022 joined in the second half of the year, meaning (under the rules) they
were not entitled to a 2022 bonus. This has adversely affected the mean bonus gender pay gap.
However, we can identify that the gender pay gap for 2022 joiners was higher than the employee population as a whole, partly due to
the timing of recruitment within the year but also because a higher number and proportion of females were hired into roles in the lower
quartile pay band, whilst a higher number and proportion of males were appointed into the upper middle and upper quartile pay bands.
This highlights that, whilst we are proud of the female representation on our Board and in the two most senior Executive roles, we must
continue our efforts to accelerate gender rebalancing across the wider senior leadership team.
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 2022
• Adoption of a new ED&I Policy. The launch of this Policy included
interactive, drama-based ED&I training for all employees.
• The Board supported a new Talent and Learning & Development
Strategy, which, amongst other things, is designed to create
strong internal succession wherever appropriate.
• A new Menopause Policy was introduced recognising an
employer’s role to support sensitively this potentially distressing
life stage. We also have a certified menopause champion.
• We have extended our reach through different talent pools
by providing apprenticeship schemes and internship
placements. We have also partnered with local schools,
academies, colleges and universities taking part in careers
events and providing other support. For example, three MSc
students worked with our Yorkshire and Central planning
team as part of their dissertations.
• We have improved the collection of diversity data on our
HR platform. Employees are not obliged to share personal
information, but where they do, it helps the Company
to monitor better diversity in its workforce and to make
assessments against a baseline.
• 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 precondition of candidate long-lists prepared by
recruitment consultants where possible.
• Hybrid Working and Core Business in Core Hours policies,
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.
• Market leading maternity, adoption and paternity leave and pay
policies. We are proud of our progressive stance in this area.
• A number of employees work part-time, whether that be a
reduced number of days or reduced hours every day.
Harworth Group plc: Annual Report and Financial Statements 2022Governance Report 104
Nomination Committee report continued
Assessing the diversity of our workforce
For consistency, where comparisons are given between 2022 and 2021, in each case the position reflected is at 31 December.
At 31 December 2022, the total headcount was 116 employees.
Although the gender and ethnic diversity balance of the Board and Senior Executive is set out on page 100, it is displayed again below in
the context of the whole workforce.
Board
Gender
balance
Senior
Executive
Team
Gender
balance
Investment
Committee
Gender
balance
Group
Leadership
Committee
Gender
balance
Wider
workforce1
Gender
balance
2021 2022
2021 2022
2021 2022
Female
Male
5
4
6
4
Female
Male
2
3
2
3
Female
Male
2
7
2
10
Female
Male
2021 2022
5
13
6
17
Female
Male
2021 2022
28
42
38
55
Ethnic diversity
balance
Ethnic diversity
balance
Ethnic diversity
balance
Ethnic diversity
balance
Ethnic diversity
balance
White
Ethnic
Minority
2021 2022
5
1
9
–
White
Ethnic
Minority
2021 2022
5
–
5
–
White
Ethnic
Minority
2021 2022
11
1
9
–
2021 2022
21
2
18
–
White
Ethnic
Minority
White
Ethnic
Minority
2021 2022
85
8
67
3
Recruitment into new roles
Female
Female
Male
Male
11
Promotions
Female
Male
4
Recruitment into replacement roles
Female
Male
1
1 Excludes the Group Leadership Committee.
18
18
4
White
Ethnic Minority
8
White
Ethnic Minority
White
Ethnic Minority
0
0
21
22
5
Harworth Group plc: Annual Report and Financial Statements 2022Governance Report 105
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 23 May 2023. 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
13 March 2023
Gender diversity
We are pleased to have achieved gender
balance on the Board and 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.
Ethnic diversity
It is pleasing to see that, as the number of
employees has increased during the period,
so too has the representation of employees
from an ethnic minority background.
However, we are mindful that, whilst we
have made a start with regard to ethnic
diversity in the business, including on the
Board and Group Leadership Committee,
we have much further to go in this regard.
Following the appointment of a new Group
Resources and Transformation Director in
September 2022 who has responsibility for
the people 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.
Equal opportunities for all
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.
Annual General Meeting
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.
Harworth Group plc: Annual Report and Financial Statements 2022Governance Report 106
Audit Committee report
Committee members
Patrick O’Donnell Bourke (Chair)
Ruth Cooke
Lisa Scenna
Dear Shareholder,
I am pleased to report to shareholders on
the work of the Audit Committee during
the year ended 31 December 2022.
The report sets out the Committee’s
responsibilities and highlights its activities
during 2022 and its priorities for 2023.
The Committee’s terms of reference,
which were reviewed and updated during
the year, are available on the Company’s
website: https://harworthgroup.com/
investors/governance/. Throughout 2022
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 independent 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.
I am also 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, including the Head of
Internal Audit who joined the Company in
January 2023, are also invited to attend,
as appropriate. The Head of Internal Audit
also has a direct reporting line to the
Committee.
In performing its duties, the Committee
has access to the services of the General
Counsel and Company Secretary and, if
required, external professional advisers.
During 2022, there were five scheduled
meetings of the Committee. Attendance at
meetings in 2022 is shown below:
Committee
tenure at
31 December 2022
Independent
Meetings attended/
eligible to attend
Patrick O’Donnell Bourke
Chair
Ruth Cooke
Lisa Scenna
Member
Member
Yes
Yes
Yes
2 years 2 months
3 years 10 months
2 years 2 months
5/5
5/5
5/5
Harworth Group plc: Annual Report and Financial Statements 2022Governance Report 107
The key activities of the Committee during 2022 and its priorities for 2023 are shown below :
February
Review of 2021 year-end valuations
Initial review of going concern analysis
Review of movements in year-end provisions
Review of draft of 2021 results RNS
Review of draft of 2021 Annual Report and Financial Statements
Effectiveness of risk management system and internal controls
Further assurance programme and assessment of need for
internal audit function
Review of procedures for detection of fraud and prevention of
bribery
Review of treasury policies and recommendation thereon to
the Board
Review of tax strategy and policy
June
2021 audit de-brief and review of external auditor’s
appointment (without external auditor present)
Areas of focus for 2022 interim results
Annual review of appointments of valuers and appointment of
valuer for the half-year valuations
Potential BTR transaction accounting treatment
Establishment of internal audit function and update on
(outsourced) internal audit activities
Annual tax update
Approval of new Operational Approvals Policy
Approval of revisions to Gifts & Entertainment Policy
Briefing on the government’s response to UK audit and
corporate governance reforms
November
2022 interim results de-brief and review of external auditor’s
appointment and fees (without external auditor present)
Planning for 2022 external audit
2023 insurance programme renewal
Update on (outsourced) internal audit activities
Report on audit of subsidiary management companies
Review of auditor of subsidiary management companies
Review of cyber and information security activities and
workstreams (2022/2023)
Annual review of GDPR compliance
Annual review of Committee’s terms of reference
Committee CPD seminar
March
Updated going concern analysis
External audit of 2021 accounts
2021 results and recommendation to the Board
2021 Annual Report and Financial Statements
Review of whistleblowing reports and approval of
new “Speak Up” policy and procedure
September
Feedback from external auditor
(without management present)
Review of 2022 half-year valuations
Going concern analysis
Review of movements in provisions at the half year
External auditor’s report on 2022 interim results
2022 interim results and recommendation to
the Board
Risk management update
Update on (outsourced) internal audit activities
Update on recruitment for role of Head of
Internal Audit
Review of updated Business Continuity Plan (‘BCP’)
Review of preparatory work for the government’s
audit and corporate governance reforms
Key
Financial reporting
External audit
Internal audit
Risk management and internal controls
Governance
Harworth Group plc: Annual Report and Financial Statements 2022Governance Report 108
Audit Committee report continued
The Committee’s priorities for 2023
• Review reporting of 2022 full-year
results and 2023 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’).
• Monitor the profile of the Group Risk
and Assurance Map (‘GRAM’) and
effectiveness of the risk management
system.
• Oversee establishment of new internal
audit function, approve internal audit
plan, and monitor the effectiveness
of internal controls via updates from
internal audit function.
• Continue to oversee the preparatory
work for the government’s audit and
corporate governance reforms.
• Review the appointment of the Group’s
valuers.
• Review results of BCP desktop test
• Oversee the 2024 insurance
programme renewal.
• Monitor the maturity of the Group’s
cyber and information security systems,
including GDPR compliance.
Financial reporting
The Committee reviews the contents of the full-year results, Annual Report and interim results and makes a recommendation to the
Board for their approval. Ahead of the interim and full-year results announcements and publication of the Annual Report, the following
processes are followed by the Committee to satisfy itself as to the integrity of the statements and disclosures contained therein, 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
Valuations
External audit
Going concern
• The Committee receives
early sight of going
concern analyses.
• The Committee reviews
the long-term viability
and going concern
assessments prepared
by management and the
Directors’ responsibility
statements (including
the assumptions
underpinning them)
and recommends to the
Board their adoption.
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
(and other Committee
members if available)
attends the half-year and
year-end valuation review
meetings 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.
• Valuation experts from EY
also attend those Committee
meetings to explain the
work they have undertaken
in reviewing the half-year or
year-end (as appropriate)
valuations, and to take
questions from Committee
members.
•
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.
• The Committee reviews the external
auditor’s report on the work it
has undertaken for the interim
and full-year results. The lead
audit partner attends Committee
meetings to take questions from
Committee members.
• 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.
• For the 2022 audit, there were
no specific areas the Committee
asked the external auditor to look
at beyond those identified in the
audit plan.
Harworth Group plc: Annual Report and Financial Statements 2022Governance Report 109
The Committee also reviews drafts of the
interim and Annual Reports in advance of
their publication and comments thereon.
As part of these reviews, and following
recommendation by the ESG Committee,
the Committee reviews disclosures
relating to climate change, including for
SECR and TCFD reporting.
In addition, 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 2022
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
and operational metrics referred to in the
Strategic Report and Directors’ Report.
As part of the Committee’s review of the
Group’s material internal controls (see
page 111), it considered, concluded,
and recommended to the Board that
the disclosures in, and the process and
controls underlying the production of,
the 2022 Annual Report, are appropriate
to enable the Committee to determine
that the report is fair, balanced and
understandable and provides 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 138.
Significant reporting
issues considered by the
Committee for the 2022
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. future rental amounts and financial
stability of tenants;
d. future 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 for sale or
development.
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.
Harworth Group plc: Annual Report and Financial Statements 2022Governance Report 110
Audit Committee report continued
At both the half-year and the year-end, the
Committee reviewed the reports prepared
by the external valuers and challenged
them on methodology, market conditions,
assumptions and judgements underlying
the disclosures in the consolidated balance
sheet. In its review, the Committee noted
the additional uncertainty given the
changing market conditions against which
the valuation exercise was undertaken.
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.
Going concern and viability
These are addressed in the Long-Term
Viability Statement (pages 36 to 38) and
the Statement of Directors’ Responsibilities
(pages 138 to 139), and also in the Notes
to the Financial Statements (page 160).
Management prepared forecasts on
several bases: a base case; a sensitised
forecast that reflected a number of severe
but plausible downsides; and a specific
climate change scenario case. 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.
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 2022 at the
same time as the Committee reviewed the
effectiveness of the 2021 year-end audit.
Having reviewed:
• the independence and objectivity of the
external auditor, including consideration
of potential conflicts of interest and of
any non-audit work undertaken for the
Company (for 2022 see analysis on the
next page);
• 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 quality of the audit through
feedback from the management team;
• 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 2023.
The Board recognises the importance
of safeguarding auditor objectivity and
takes the following steps to ensure that
external 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 any circulars
required by the Listing Rules) 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 2022 is shown on the
next page; and
•
the Committee reviews the external
auditor’s report to the Directors
and the Committee confirming its
independence in accordance with
auditing standards.
Whilst EY audits the accounts of the
main subsidiary entities in addition to
those of the Company and the Group
consolidation, BHP, a regional chartered
accountancy firm, audits the accounts of
certain Group management companies
and joint venture companies. The
Committee receives a report each year
from BHP on its audit of the management
companies, and at the same time reviews
BHP’s appointment.
Harworth Group plc: Annual Report and Financial Statements 2022Governance Report 111
Analysis of audit and non-audit fees
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
Year ended
31 December
2022
£’000
Year ended
31 December
2021
£’000
330
42
–
372
315
30
–
345
Risk management and
internal controls
Risk and internal controls framework
The Board has overall responsibility for
risk and has delegated to the Committee
the responsibility for overseeing
the effectiveness of the Group’s risk
management and internal control systems.
An explanation of the Group’s risk
management framework, including the
work undertaken by the Board to identify
and 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, is set out in the
“Effectively managing our risk” on pages
43 to 53.
Central to the Group’s risk management
system is the 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
internal audit programme (Internal Audit
Programme, see below).
The Committee reviews the GRAM
biannually as part of its assessment of
the effectiveness of the Group’s risk
management and internal controls
framework. When reviewing the GRAM,
the Committee focuses on the measures
management have implemented and/or
are planning to implement to mitigate each
risk and the adequacy of the assurance
afforded to the Board to determine the
effectiveness of those measures.
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 the
outputs from the Internal Audit Programme
during the year, 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 described below, 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 44.
Internal audit
The GRAM informs the Internal Audit
Programme. In early 2022, the Committee
approved a programme of further
assurance activity for the year ahead,
which was predominantly outsourced
to KPMG. Further assurance activity
completed during 2022 included audits
of: the project to establish the Group’s new
CRM and acquisitions tracking platform
and its subsequent operation; certain HR
systems and processes; supplier payments;
a new Operational Approvals Policy; and
a new electronic document execution
process. The outputs of these reviews were
reported to the Committee at meetings
in late 2022 and early 2023. Overall, no
significant control issues were identified
although some process and control
improvements were recommended, the
majority of which have been adopted and
have been or are being implemented.
In previous years, the Committee has
taken the view that the structure of, and
processes within, the business were
neither sufficiently large, nor complex, to
merit an internal audit function. However,
when undertaking its latest annual review,
the Committee formed the view that the
increase in pace, scale and complexity
of activity needed to deliver the Group’s
strategy did necessitate the establishment
of an internal audit function. During 2022
Q3, a Head of Internal Audit was recruited
and she joined the Company in January
2023. Going forward, the Head of Internal
Audit will be responsible for designing and
delivering the Internal Audit Programme.
The Committee will review the Internal
Audit Programme in November each year
and approve activity for the following 12
months. However, the programme will
remain flexible to changing assurance
needs during the year and the outputs from
internal audit activity will be reported to the
Committee throughout the year.
The establishment of this function is part
of the Group’s preparatory work for the
implementation of the government’s audit
and corporate governance reforms.
Harworth Group plc: Annual Report and Financial Statements 2022Governance Report 112
Audit Committee report continued
The Company’s 2022 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.
I will be available online at the AGM to
respond to any questions relating to the
Committee’s activities.
Patrick O’Donnell Bourke
Chair of the Audit Committee
13 March 2023
Business continuity
The Group’s BCP underwent a review in
H2 2022 and the Committee was kept
appraised during the process. The BCP
was updated to reflect recent significant
operational changes in relation to
technology and organisation structure, to
transform the plan into a more user-friendly
tool, and to broaden its use for both
localised and severe incidents. A test of
the BCP was undertaken successfully, and
the results presented to the Committee, in
early 2023.
Insurance
The Committee had oversight of the
2023 insurance programme renewal,
challenging management both on the
overall programme and on individual
aspects of the renewal. Real estate
insurance market conditions remained
broadly unchanged during 2022 albeit
there have been some signs of softening
into 2023 as the market reacts to
macroeconomic conditions. Following
another year of low claims and a rigorous
renewal process, further improvements
in pricing have been secured,
notwithstanding inflationary increases in
reinstatement costs.
Whistleblowing/Speak Up
The Committee has responsibility for
reviewing and monitoring the Group’s
whistleblowing policy and procedures,
and the appropriate investigation of
whistleblowing reports. The Committee
undertook its annual review of the Group’s
policy and procedures in March 2022
and approved the introduction of an
external “Speak Up” platform, which offers
employees and external stakeholders
another means of reporting concerns (on
a confidential basis if preferred) alongside
the Group’s existing internal reporting
mechanisms.
There was one report made to the
Speak Up platform in 2022, which was
investigated, albeit that report constituted,
and was treated as, a grievance rather than
whistleblowing.
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.
Harworth Group plc: Annual Report and Financial Statements 2022Governance Report ESG Committee report
113
Committee members
Angela Bromfield (Chair)
Alastair Lyons
Martyn Bowes
Marzia Zafar
Lynda Shillaw
Kitty Patmore
Membership and meetings
I Chair the Committee, and its other
members are Alastair Lyons, Lynda Shillaw,
Kitty Patmore, Martyn Bowes and Marzia
Zafar. Marzia joined the Committee on
1 June 2022 following her appointment
to the Board as an independent
Non-Executive Director. Marzia’s
contribution is greatly welcomed, as she
brings to Harworth a wealth of experience
in sustainability, having spent over 20
years working on policies and strategies
to enable energy transition for regulators,
business and not for profit sectors.
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 2022. This
report sets out the Committee’s activities
during the year and its priorities for 2023.
Given our 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 the Group’s
strategy, culture, values, and operations.
This was progressed in 2021 with the
establishment of the ESG Committee to
provide oversight of, and guidance on,
the Group’s Sustainability Framework,
practices and reporting. Peter Henry,
formerly one of our Regional Directors, was
appointed as Director of Sustainability in
H1 2022. Peter’s appointment, together
with his passion for sustainability and deep
knowledge of the business, has resulted
in a step change in the work carried out
on behalf of the Committee. During
2022, the Committee focused on the
development of the Group’s Sustainability
Framework through the expansion of the
Harworth Way (see further on pages 64 to
77) and the principles of the Company’s
NZC Pathway (see further on page 67).
The Committee will focus on reviewing
progress in these areas in 2023.
As the commercial and regulatory
landscapes continue to evolve in response
to climate change, social considerations
and corporate responsibility, we remain
committed to evolving our approach and
ensuring we have a sustainable business
that delivers for all stakeholders.
The Committee’s terms of reference, which
were reviewed and updated during the
period, are available on the Company’s
website: https://harworthgroup.com/
investors/governance/.
Harworth Group plc: Annual Report and Financial Statements 2022Governance Report 114
ESG Committee report continued
The Committee meets at least quarterly and meetings are also attended by our Director of Sustainability. There were four Committee
meetings during the year and membership and attendance at those meetings is shown below:
Angela Bromfield
Alastair Lyons
Martyn Bowes
Lynda Shillaw
Kitty Patmore1
Marzia Zafar2
Chair
Member
Member
Member
Member
Member
Committee
tenure at
31 December 2022
Independent
Meetings attended/
eligible to attend
Yes
Yes
No
No
No
Yes
1 year 9 months
1 year 9 months
1 year 9 months
1 year 9 months
1 year 9 months
7 months
4/4
4/4
1/4
4/4
3/4
1/2
1 Kitty Patmore went on maternity leave at the start of October 2021, returning to the business initially part-time in February 2022. Nigel Turner attended Committee
meetings in her absence as Interim Chief Financial Officer but was not formally appointed to the Committee.
2 Marzia Zafar was appointed to the Committee following her Board appointment on 1 June 2022.
2022 key activities
During the year, the Committee:
• Oversaw the development of the
Group’s Sustainability Framework
with the expansion of the three
impact pillars of the Harworth Way:
Planet, Communities and People.
The Harworth Way model and focus
areas for each impact pillar have been
updated and expanded during the year
to form the foundation of the Group’s
Sustainability Framework, as set out on
pages 64 to 77.
• Oversaw the development of the
• Reviewed investor feedback and
•
comments on ESG following the 2021
year-end and 2022 interim results
announcements.
In particular, we intend to focus on
the “Communities” pillar in 2023 and
develop and implement a methodology
for social value assessment.
• Reviewed and recommended
• Review the effectiveness of the
for approval to the Remuneration
Committee the ESG metrics and targets
to be incorporated into the 2022 annual
bonus scheme for all employees.
• Reviewed and recommended for
approval to the Audit Committee the
Group’s sustainability disclosures in the
2021 Annual Report and 2022 interim
results announcement.
implementation of the Harworth
Way principles as part of day-to-day
operations.
•
Implement, monitor progress against,
and update the NZC Pathway on an
annual basis.
• Report on our Scope 3 emissions from
2023 onwards.
• Develop further our sustainability
Group’s NZC Pathway following the
commitment we made in 2021 to reach
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. This included
review of the Group’s present and
planned carbon emissions in the
context of our business strategy. The
Group undertook a detailed assessment
of our build standards and potential
emissions and energy requirements
for our commercial and residential
buildings alongside our role as master
developer. The NZC Pathway sets
defined targets and will be updated
annually. The Pathway has been
published alongside this Annual Report
and can be found on the Company’s
website.
2023 priorities
The Committee’s priorities for 2023
include working with the Senior Executive,
Director of Sustainability and wider
business to:
• Continue to ensure alignment between
our ESG commitments and the Group
strategy with a focus on addressing
Harworth’s medium and longer-term
ESG impacts.
• Continue to determine measurable
targets across the three impact pillars
of the Harworth Way, and monitor and
review performance against the same.
disclosures through enhancing the
breadth and depth of our environmental
and social data collection, enabling us
to provide a more comprehensive and
quantitative assessment of risks and
opportunities.
I will be available online at the AGM
to respond to any questions or discuss
matters relating to the Committee’s
activities.
Angela Bromfield
Chair of the ESG Committee
13 March 2023
Harworth Group plc: Annual Report and Financial Statements 2022Governance Report Directors’ remuneration report
115
Committee members
Angela Bromfield (Chair)
Alastair Lyons
Lisa Scenna
The Committee’s
priorities for 2023
• Operation of 2023 annual bonus,
including setting targets to ensure
Executive Directors and the wider
workforce are incentivised to
deliver against financial KPIs and
strategic priorities
• Ensure our ESG goals continue
to be reflected appropriately in
our reward framework
• Grant of 2023 Restricted Share
Plan awards
• Approve grant of options
for SAYE scheme and Share
Incentive Plan awards
• Continue to keep wider
workforce remuneration
under review in the context of
current high inflation and the
competitive market for talent
Dear shareholder,
On behalf of the Board, I am pleased
to present the Directors’ Remuneration
Report for the year ended 31 December
2022, describing how we implemented
our Remuneration Policy (the ‘Policy’) in
2022 and how we intend to apply the
Policy in 2023.
Our Policy was approved by shareholders
at the 2022 AGM. A summary of the
Policy is provided within this Report on
pages 119 to 121. A copy of the complete
Policy can be found on our website at:
https://harworthgroup.com/investors/
governance/.
Performance outcomes
for 2022
Management has continued to make
significant operational progress against
our ambitious growth strategy, despite
macro-economic headwinds in the second
half of the year, increasing levels of direct
development, accelerating land sales and
completing targeted acquisitions. In doing
so, they have effectively protected the
business against a substantial downturn
in the industrial & logistics market and
navigated uncertainty in the residential
market. The Group’s Total Return was 0.1%
and EPRA NDV only declined marginally,
representing strong performance
compared to the wider real estate sector.
Lynda Shillaw’s and Kitty Patmore’s bonus
opportunity for 2022 was 125% and
100% of salary respectively based on a
combination of financial measures (50% of
the opportunity), strategic measures (30%
of the opportunity), ESG measures (5% of
the opportunity) and personal objectives
(15% of the opportunity).
Taking into account performance against
these measures, the Committee approved
a bonus outcome equal to 62.5% of
maximum (which equates to 78.1% of
salary and 62.5% for Lynda Shillaw and
Kitty Patmore respectively). Full details are
set out on pages 126 to 129.
The Committee believes that the level
of bonus outcome is appropriate in the
context of the shareholder experience
and the positive management actions
that created value during the year, albeit
that the material reversal in markets in the
second half of 2022 resulted in the inability
to realise any outcome against the Total
Return element of the bonus.
The average bonus outcome for eligible
employees (excluding the Executive
Directors) was 81% of their maximum
entitlement.
Reward for the
wider workforce
All our people contribute to the achievement
of the Group’s long-term success. When
making decisions in respect of the Executive
Directors therefore, the Committee
considers the reward arrangements for, and
views of, the wider workforce.
Harworth Group plc: Annual Report and Financial Statements 2022Governance Report 116
Directors’ remuneration report continued
We want the interests of our people to be
strongly aligned with our shareholders and
the overall performance of the business.
We actively support and encourage
employee share ownership across the
Group, so that our employees may share
in the success of the business. We have
extended RSP participation such that
55% of employees were granted an RSP
award in 2022 and have increased the RSP
opportunity for all participants.
We have also increased the annual
value of Free Shares awarded under
the all-employee Share Incentive Plan,
awarding all eligible employees £3,600
of Free Shares in 2022, being the
maximum amounted permitted under
UK tax legislation, and we have also
introduced offers of Partnership and
Matching Shares for eligible employees.
As we believe strongly in the value to the
business of increasing general employee
share ownership we intend, subject to
affordability, to continue to award Free
Shares to eligible employees on an annual
basis at the maximum amount permitted,
and to continue to offer Partnership and
Matching Shares.
The Board is acutely aware of the
cost-of-living crisis and has sought to
provide support to employees where
the burden is most challenging. We,
therefore, agreed a one-off non-contractual
payment of £2,000 in December 2022
to all employees (excluding the Senior
Executive).
The average salary increase for the wider
workforce is 8% (effective from 1 January
2023). Salary increases were tapered
with higher increases (in % of salary terms)
awarded to lower paid employees.
The Company holds an Employee AGM,
which forms part of a wider programme of
formal and informal employee engagement
by the Board, providing a platform for
employees to discuss a range of topics with
the Board, including executive and wider
workforce remuneration.
Implementation of the
Policy for 2023
Base salary
Lynda Shillaw and Kitty Patmore were each
awarded a 5% salary increase with effect
from 1 January 2023. This compares to an
average salary increase of 8% for the wider
workforce.
Performance related annual bonus
Restricted Share Plan award
The Committee disclosed its intention
in the 2021 Directors’ Remuneration
Report to increase the 2023 annual bonus
opportunity for Lynda Shillaw from 125%
to 150% of salary and for Kitty Patmore
from 100% to 125% of salary, subject to
the performance of both the Executive
Directors and the Group. This was part
of phased increases over a two-year
period (2022 and 2023) under our Policy.
The Committee considers that both the
Executive Directors and the Group have
continued to deliver strong operational
performance in the context of a clear and
well articulated strategy and that these
second stage bonus increases should,
therefore, be confirmed.
50% of the bonus opportunity will be
based on financial measures (Total Return,
acquisitions, and capital management),
25% on strategic measures (broadening
the range of mixed tenure products
and increasing the scale of direct
development), 10% on ESG measures and
15% on personal objectives. See page
122 for details. Performance targets are
considered to be commercially sensitive
at this point in the year, but they will
be fully disclosed in the 2023 Annual
Remuneration Report.
The prevailing macro-economic and
geopolitical uncertainty makes it very
difficult to forecast how markets and
property valuations may move during
2023. Through the annual bonus, we
want to reward the effectiveness of
management in acting positively to create
value. The Committee has, therefore,
this year specifically reserved discretion,
both positive and negative, to adjust
the formulaic vesting outcome of the
Total Return measure if there are material
movements in our underlying markets
which have not been projected within our
business plan for 2023, being the basis on
which bonus targets are set. There would
be full disclosure in the 2023 Directors’
Remuneration Report of any discretion
applied.
33% of any amount earned by Lynda
Shillaw and 20% of any amount earned
by Kitty Patmore will be deferred into
shares for two years. The higher level of
deferral for Lynda Shillaw reflects that she is
awarded a higher bonus opportunity.
RSP awards will be granted to Lynda
Shillaw and Kitty Patmore at 75% of salary.
In accordance with our Policy, the number
of shares under the RSP awards will be
determined by reference to the share price
following the announcement of the 2021
annual results, being £1.787, rather than
the share price at the time the awards are
granted. Based on the share price at 28
February 2023 (£1.23) this means that the
face value of the 2023 RSP awards at grant
is expected to be 28% lower compared
to the 2022 RSP awards. Granting RSP
awards based on a fixed share price
further aligns the Executive Directors with
shareholders given that the face value of
awards is reduced where the share price
has depreciated as it has over the past
year. Lynda Shillaw and Kitty Patmore will,
therefore, be granted 185,791 and 136,611
shares respectively. Given our approach
to determining the number of shares, the
Committee considers there to be sufficient
protection against windfall gains.
Time horizons as regards vesting and
holding periods and performance
underpins are the same as the 2022 RSP
awards. See page 123 and 130 for further
details.
Chair and Non-Executive Directors
The Chair’s and Non-Executive Directors’
base fees and additional fees for acting as
Senior Independent Director and chairing
Committees will be increased by 5% with
effect from 1 January 2023.
Conclusion
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
2022 financial year and consider that the
remuneration received by the Executive
Directors was appropriate, taking in the
round the Group’s performance during
2022, their personal performance, and
the experience of shareholders and
employees.
Angela Bromfield
Chair of the Remuneration Committee
13 March 2023
Harworth Group plc: Annual Report and Financial Statements 2022Governance Report 117
Annual Remuneration Report
This part of the Directors’ Remuneration Report describes how we implemented our Policy in 2022 and how we intend to apply the
Policy in 2023. Our Policy was approved by shareholders at the 2022 AGM. A summary of the Policy is provided on pages 119 to 121.
A copy of the complete Policy can be found on our website at: https://harworthgroup.com/investors/governance/.
The Annual Remuneration Report will be subject to an advisory vote by shareholders at the 2023 AGM.
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 strategic 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 a culture that will
underpin longer-term success.
Our RSP reflects our core principles of alignment with our shareholders and rewards long-term value creation in a
cyclical business, whilst also supporting 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 our long-term incentive, the RSP. The structure is simple to understand for both participants and
shareholders and promotes both near-term achievement and 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 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 SAYE scheme we encourage and enable material long-term share ownership
for all employees, further supporting both alignment with shareholders and the long-term nature of our business and
its returns.
Predictability
The range of possible rewards to individual Executive Directors is set out in the scenario charts on page 123.
Harworth Group plc: Annual Report and Financial Statements 2022Governance Report 118
Directors’ remuneration report continued
Committee membership and attendance
Membership and attendance at meetings in 2022 are shown below:
Angela Bromfield
Alastair Lyons
Lisa Scenna
Chair
Member
Member
Independent
Yes
Yes
Yes
Committee
tenure at 31
December 2022
3 years 9 months
4 years 10 months
2 years 4 months
Scheduled meetings
attended/eligible
to attend
4/4
4/4
4/4
During the year, the Committee held four scheduled meetings. The key activities of the Committee during 2022 are shown below:
January
• Approval of changes to the Remuneration Policy
• Approval of 2022 bonus measures and targets
February
• Assessment of 2021 bonus outcomes for the Senior Executive (in the context of bonus outcomes
for wider workforce)
• Assessment of the vesting of the first tranche of the 2019 RSP awards
• Approval of 2022 salary increases for the Senior Executive
(in the context of salary increases for wider workforce)
• Approval of 2022 RSP awards
• Approval of 2022 SAYE awards and SIP awards
October
• Market update on remuneration trends and corporate governance developments
• Approval of 2022 new joiner RSP awards
• Review Committee terms of reference
• Review effectiveness of Committee advisers
December
• Review 2023 bonus measures and targets
The Committee’s terms of reference, which were reviewed and updated during the period, are available on the Company’s website:
https://harworthgroup.com/investors/governance/. Throughout 2022 the Committee acted in accordance with the principles of, and
fulfilled its obligations under, the 2018 Code.
Advisers to the Committee
The Company Secretary is secretary to the Committee. The following individuals may be invited to attend Committee meetings to
provide advice and to support the Committee to make informed decisions:
• Chief Executive;
• Chief Financial Officer;
• Group Resources and Transformation Director; 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 2022.
Deloitte’s fees in relation to remuneration advice provided to the Committee during 2022 were £42,650 plus VAT, charged on a time
and expenses basis. Deloitte also provided advice to the Group during 2022 in relation to corporate tax, pensions and share plans.
The Committee did not consider that these engagements impaired Deloitte’s independence.
Harworth Group plc: Annual Report and Financial Statements 2022Governance Report 119
Shareholding voting and engagement
The table below shows the results of votes at the Harworth Group plc Annual General Meeting on 24 May 2022 on the resolutions
relating to the approval of the Annual Remuneration Report and 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
277,179,940
97.13
8,191,420
Approval of Remuneration Policy
261,511,584
91.58
24,043,640
2.87
8.42
Withheld
237,262
53,398
The Committee maintains a regular dialogue with its major shareholders. In late 2021 and early 2022, we conducted a shareholder
consultation regarding the Policy. Responding to feedback received, the Committee 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 executive remuneration remains appropriate.
Summary of the Policy and how it will be implemented in 2023
Executive Directors
Element
Operation and performance metrics
Opportunity
Implementation for 2023
Base salary
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.
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
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).
Benefits
Salary is the only element of
remuneration that is pensionable.
Executives receive benefits which
consist primarily of the provision of a
car allowance, private medical 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.
The monetary value of benefits varies
by role and individual circumstances:
eligibility and cost is 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).
Lynda Shillaw and Kitty
Patmore were each awarded a
5% salary increase with effect
from 1 January 2023. This
compares to an average salary
increase of 8% for the wider
workforce.
Salary from 1 January 2023:
• Lynda Shillaw: £442,680
• Kitty Patmore: £325,500
Company contribution and/
or cash pension allowance
equal to 10% of salary for both
Executive Directors.
Benefits will include car
allowance, private medical
cover, life insurance and the
use of a chauffeur service
for business travel and
commuting.
Harworth Group plc: Annual Report and Financial Statements 2022Governance Report 120
Directors’ remuneration report continued
Element
Operation and performance metrics
Opportunity
Implementation for 2023
Annual
bonus
The scheme is based on a combination
of financial performance and personal
and/or strategic performance objectives.
At least 50% of the bonus opportunity is
based on financial measures. No more
than 20% of the bonus opportunity will
be based on personal objectives.
The Committee has discretion to amend
the pay-out should any formulaic outturn
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.
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.
Dividend equivalents may be paid on
vested shares based on dividends paid
during the deferral period. Such amounts
will normally be paid in shares.
Maximum opportunity of up to
150% of base salary in respect of a
financial year.
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.
The maximum opportunity
for Lynda Shillaw and Kitty
Patmore will be 150% and
125% of salary respectively.
50% of the bonus opportunity
will be based on financial
measures (Total Return,
acquisitions and capital
management), 25% based
on strategic measures
(broadening the range of
mixed tenure products and
increasing the scale of direct
development), 10% based on
ESG measures and 15% based
on personal objectives. See
note 2 on page 122.
33% of any amount earned
by Lynda Shillaw and 20% of
any amount earned by Kitty
Patmore will be deferred into
shares for two years.
Restricted
Share Plan
(‘RSP’)
Annual awards will be made in the form
of conditional share awards or nil-cost
options.
Vesting 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, although all vested shares
must be held to the end of year five.
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.
Dividend equivalents may be paid on
vested shares based on dividends paid
during the holding period. Such amounts
will normally be paid in shares.
For Executive Directors in office at the
date of the 2022 AGM (the date that
the Policy was approved) the maximum
RSP award:
•
•
in respect of 2022 was 75% of
salary, converted into a number of
shares by reference to the average
mid-market closing share price for
the five trading days immediately
following the announcement of the
Company’s annual results for 2021
(£1.787) (the 2022 Price); and
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.
RSP awards will be granted to
Lynda Shillaw and Kitty Patmore
at 75% of salary. The number
of shares under the RSP awards
will be determined based on
the 2022 Price. Therefore,
Lynda Shillaw and Kitty Patmore
will be granted 185,791 and
136,611 shares respectively.
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 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 note 3 on
page 123.
Harworth Group plc: Annual Report and Financial Statements 2022Governance Report 121
Element
Operation and performance metrics
Opportunity
Implementation for 2023
Share
Incentive
Plan (‘SIP’)
and Save As
You Earn
scheme
(‘SAYE’)
Shareholding
guidelines
These plans are reviewed annually and,
if offered, are offered to all eligible
employees in accordance with their
terms and applicable legislation.
Limits are set in accordance with the
relevant legislation.
The Executive Directors will
participate in the SIP and SAYE
scheme on the same terms as
the wider workforce.
As at 31 December 2022,
Lynda Shillaw and Kitty
Patmore held shares equal
to 92% and 75% of salary
respectively (based on the
mid-market closing share
price on 30 December 2022
(£1.06)).
Within employment: Executive Directors
are required to build up a holding
equivalent to 200% of base salary. Until
the relevant shareholding levels are
achieved, 50% of any shares vesting
under the RSP or deferred bonus (post
payment of tax) are required to be held.
Post-employment: For the first 12 months
following cessation, an Executive
Director must retain such number of
“relevant shares” as have a value (as
at the point of cessation) equal to the
within employment guideline (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, they must
retain the “relevant shares” they hold.
Note 1: 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.
Harworth Group plc: Annual Report and Financial Statements 2022Governance Report 122
Directors’ remuneration report continued
Note 2: annual bonus performance metrics
Measure
Weighting (% of bonus opportunity)
Financial measures
Total Return
Acquisitions1
Capital management
Subtotal
Strategic measures
Accelerating the delivery and broadening the range of mixed tenure products
Increase in scale of direct development
Subtotal
ESG measures
Personal objectives
Total
25%
15%
10%
50%
12.5%
12.5%
25%
10%
15%
100%
1 Both direct freehold acquisitions and option agreements to purchase the freehold at a future date will contribute to acquisitions performance. The value of option
agreements will be based on the minimum future capital commitment required to exercise the option agreements. For the avoidance of doubt, the minimum future
capital commitment which contributes to 2023 acquisition performance will not count towards performance against acquisition targets for future years (i.e. there will be
no double counting).
Bonuses may be scaled back at the discretion of the Committee if a formulaic application of the performance metrics and resulting
vesting outcome is not supported by underlying financial and operational performance. Bonuses may also be scaled back and/or
subject to claw back in the event of any of the following:
• misconduct;
• material financial misstatement;
• a material breach of banking covenants or unauthorised breach of internal gearing policy;
• an error in calculation of outcomes;
• a 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;
• an unreasonable failure to protect the interests of employees and customers;
• a material corporate failure; or
•
in any other circumstance that the Committee considers appropriate.
The Committee will also have discretion to amend the bonus outcome if it is not reflective of underlying financial and operational
performance, or of the experience of shareholders or employees.
The prevailing macro-economic and geopolitical uncertainty makes it very difficult to forecast how markets and property valuations
may move during 2023. Through the annual bonus, we want to reward the effectiveness of management in acting positively to create
value. Therefore, the Committee has this year specifically reserved discretion, both positive and negative, to adjust the formulaic
vesting outcome of the Total Return measure if there are material movements in our underlying markets which have not been projected
within our business plan for 2023, being the basis on which bonus targets are set. There would be full disclosure in the 2023 Directors’
Remuneration Report of any discretion applied.
Performance targets are considered to be commercially sensitive at this point in the year but they will be fully disclosed in the
2023 Annual Remuneration Report.
Harworth Group plc: Annual Report and Financial Statements 2022Governance Report 123
Note 3: RSP award underpins
Performance underpin
Description
Detail
Financial health
Financial stability of the business
Underlying performance
Sustainability of the Group’s underlying
performance in the cyclical real estate
sector
Corporate governance
Avoidance of governance and health
and safety failures
A breach of financial covenants in the
Group’s principal banking facilities.
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.
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.
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 over the vesting period for the purpose of the RSP awards.
Potential reward opportunities are based on the Policy, applied to the base salaries effective 1 January 2023. The annual bonus and RSP
awards are based on the level of maximum opportunities applied in 2023 (annual bonus of 150% of salary for the Chief Executive and
125% of salary for the Chief Financial Officer and RSP award of 75% of salary). RSP award 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 over the vesting period
for the purposes of the RSP awards).
£1,750,000
£1,500,000
£1,250,000
£1,000,000
£750,000
£500,000
£503,069
£1,509,873
23%
£1,395,612
16%
48%
44%
£1,063,602
22%
31%
Base salary, benefits
Annual Bonus
RSP
£1,026,972
24%
£942,957
18%
43%
40%
£739,519
22%
28%
£368,050
£250,000
100%
47%
36%
33%
100%
50%
39%
36%
£0
Minimum
performance
Performance
in line with
expectations
Maximum
performance
Maximum
performance
with 50%
share price increase
Minimum
performance
Performance
in line with
expectations
Maximum
performance
Maximum
performance
with 50%
share price increase
Lynda Shillaw
Kitty Patmore
Harworth Group plc: Annual Report and Financial Statements 2022Governance Report 124
Directors’ remuneration report continued
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 2023 are set out
on page 119, benefits are based on the value of such benefits in 2022 which are taken from the single total figure remuneration table on
page 125.
The “on target” scenario reflects fixed remuneration as above, plus bonus pay-out of 50% of maximum annual bonus opportunity and
RSP vesting in full.
The “maximum” scenario reflects fixed remuneration as above, plus full pay-out of all incentives.
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% over the vesting period.
In accordance with our Policy, the number of shares under the RSP awards will be determined based on the average mid-market closing
share price for the five trading days immediately following the announcement of the annual results for 2021 (£1.787). Lynda Shillaw and
Kitty Patmore will, therefore, be granted 185,791 and 136,611 shares respectively. For the purposes of the chart, the grant date face
value of the RSP awards has been calculated using the mid-market closing share price on 28 February (£1.23) (a proxy for the share price
at the time the 2023 RSP awards will be granted). Based on this share price, the grant date face value of the 2023 RSP awards is c.28%
lower compared to the 2022 RSP awards.
Non-Executive Directors
Function
Operation
Opportunity
Implementation for 2023
Fees and
benefits
Fee levels are ordinarily reviewed
annually.
The fees of the Non-Executive Chair are
determined by the Board and those of
the other Non-Executive Directors by
the Chair and the Executive Directors.
Additional fees are payable for additional
Board duties, including but not limited
to, acting as Senior Independent
Director and as Chair 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.
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 Non-Executive
Chair and Non-Executive Directors
will remain within the limits set by the
Company’s Articles of Association.
The Chair’s and Non-Executive
Directors’ base fees and
additional fees for acting as
Senior Independent Director
and Chairing Committees will
be increased by 5% with effect
from 1 January 2023.
Fees from 1 January 2023:
• Chair fee: £179,729
• Non-Executive Director fee:
£50,549
• Additional fee for acting
as Senior Independent
Director: £8,925
• Additional fee for Chairing
the Remuneration
Committee or Audit
Committee: £8,925
• Additional fee for Chairing
the ESG Committee: £6,300
Harworth Group plc: Annual Report and Financial Statements 2022Governance Report 125
Executive Director services contracts and Non-Executive Director letters of appointment
Lynda Shillaw has a rolling service contract (dated 29 July 2020) requiring nine months’ notice of termination on either side. Kitty Patmore
has a rolling service contract (dated 5 August 2019) requiring six months’ notice of termination on either side. The service contracts for
the 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.
Subject to annual re-election by shareholders, Non-Executive Directors are appointed on a rolling annual basis. All Directors offer
themselves for re-election at each AGM. The appointment and re-appointment of Directors are matters reserved for the full Board.
A. Lyons
A. Bromfield
R. Cooke
L. Scenna
Date of letter of
appointment
Appointment date to
the Board
Current appointment
expiry date1
23 November 2017
19 February 2019
27 February 2019
7 March 2018
1 April 2019
19 March 2019
7 March 2024
1 April 2024
19 March 2024
29 June 2020
1 September 2020
1 September 2023
P. O’Donnell Bourke
2 November 2020
3 November 2020
3 November 2023
M. Zafar
M. Bowes2
S. Underwood3
31 May 2022
1 March 2015
9 December 2019
1 June 2022
24 March 2015
2 August 2010
1 June 2023
24 March 2024
1 January 2024
1 All Non-Executive Directors are subject to annual rolling appointments by reference to the date of their original appointment to the Board.
2 Martyn Bowes was previously a Non-Executive Director of Harworth Estates Property Group Limited from 19 March 2013.
3 A new letter of appointment was entered into when Steven Underwood ceased to be a representative director of Peel Group.
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 2022
with a comparison to the previous year.
Fixed pay
Salary
Taxable benefits1
Pension benefit2
Subtotal
Variable pay
Single-year variable
Multi-year variable
Other4
Subtotal
Total
L. Shillaw
K. Patmore
2022
2021
2022
2021
£421,600
£16,121
£42,160
£479,881
£329,375
–
£6,000
£335,375
£815,256
£400,000
£16,121
£40,000
£456,121
£362,000
–
£5,772
£367,772
£823,893
£310,000
£10,000
£31,000
£351,000
£193,750
£34,2953
£6,000
£234,045
£585,045
£250,000
£10,000
£25,000
£285,000
£226,250
–
£1,250
£227,500
£512,500
1 Taxable benefits consist of car allowance and private medical cover. Other benefits include life insurance.
2 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.
3 Multi-year variable relates to the vesting of the first tranche of RSP awards granted in 2020.
4 Other includes Free Shares and Matching Shares awarded during the year under the all-employee Share Incentive Plan and options granted during the year under the
all-employee SAYE scheme. The value of Free Shares and Matching 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.
Harworth Group plc: Annual Report and Financial Statements 2022Governance Report 126
Directors’ remuneration report continued
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 2022
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
2022
2021
Committee Chair fees
2021
2022
SID fee
Total
2022
2021
2022
2021
A. Lyons
M. Bowes
A. Bromfield
R. Cooke
S. Underwood
L. Scenna
P. O’Donnell Bourke
M. Zafar1
£48,141
£48,141
£48,141
£48,141
£48,141
£48,141
£28,083
£171,170
£162,400
£45,675
–
–
–
–
–
–
–
–
£45,675
£14,500
£7,613
£8,500
£7,613
£45,675
£45,675
£45,675
£45,675
–
–
–
–
–
–
–
£8,500
£7,613
–
–
–
–
–
–
–
–
–
–
–
–
£171,170
£162,400
£48,141
£71,141
£48,141
£48,141
£48,141
£45,675
£60,901
£45,675
£45,675
£45,675
£56,641
£53,288
£28,083
–
1 Appointed as Non-Executive Director with effect from 1 June 2022.
Incentive outcomes for year ended 31 December 2022 (audited)
Annual bonus
Lynda Shillaw’s and Kitty Patmore’s bonus opportunity for 2022 was equal to 125% and 100% of salary respectively subject to a
combination of financial performance measures, strategic performance measures, ESG performance measures and personal objectives.
Performance against targets and subsequent vesting of 2022 annual bonuses are set out in the tables below.
Group financial performance outcome (50% of total bonus opportunity)
Financial measure
Total Return (growth in EPRA NDV plus
dividends paid)
Acquisitions3
Total vesting on financial performance element
Weighting
(% of financial
element)
Threshold1
Target2 Maximum
Actual
performance
Vesting
outcome
70%
30%
5.35%
£30m
0.1%
8.5%
7.5%
£36.3m
£93.2m
£53m
50% weighting of total bonus opportunity
0%
30%
30%
Broadly 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.
3 During 2022 a strategic decision was made to convert certain freehold acquisitions to option agreements to purchase the freehold at a future date, in order to protect
capital whilst also securing a long-term pipeline. The Committee therefore agreed that the option agreements should contribute towards acquisition performance,
based on the minimum future capital commitment required to exercise the option agreements (£76.6m). For the avoidance of doubt, the minimum future capital
commitment which has contributed to 2022 acquisition performance will not count towards performance against acquisition targets for future years (i.e. there will be no
double counting).
Harworth Group plc: Annual Report and Financial Statements 2022Governance Report 127
Strategic measures (30% of total bonus opportunity)
Strategic
measures
Weighting
(% of strategic
element)
Launch of Build-
to-Rent portfolio
34%
Increase
scale of direct
developments:
Practical
completions
Lettings
achieved
66%
Baseline
Stretch
Actual performance
Design of products
completed and investor
acceptable, delivery
partner selected
Successful launch of a
portfolio of 600 units
or more and exchange
is completed by
31 December 2022
Launched portfolio
of >600 units,
investor identified
and negotiations well
progressed, and delivery
partners selected
Vesting
outcome
30.6%
Practical completion
of certain specific
developments by
31 December 2022
Achieve threshold plus
the practical completion
of a further specific
development by
31 December 2022
Lettings for 30% of in-year
practical completions
exchanged or completed
and/or a pre-let for
future development site
exchanged or completed
at a similar scale
Lettings for 50% or
more of in-year practical
completions exchanged
or completed and/
or a pre-let for future
development site
exchanged or completed
at a similar scale
Achieved practical
completion of
developments which
was marginally
short of stretch
performance target
Achieved lettings in
excess of stretch target
62.7%
Commencement
of enabling
works
Commencement of works
to enable 1,182,500 sq. ft
of development
Commencement of
works to enable
1,773,750 sq. ft of
development
Achieved commencement
of works to enable
development in excess
of stretch target
Total vesting on strategic element
30% weighting of total bonus opportunity
93.3%
ESG performance outcome (5% of total bonus opportunity)
ESG
measures
Weighting
(% of ESG element)
30%
40%
30%
Prioritising
health
and safety
Developing
responsibility
Delivering
homes,
support jobs
and creating
communities
Objective
Zero reportable RIDDOR
incidents at Harworth sites
Develop three key metrics
for measuring and reporting
on the ESG impact of the
Group’s activities
Completion of Bardon Hill,
work to begin on Olive Lane
(Waverley), planning applications
to be submitted for schools at
Coalville and Thoresby Value
Actual
performance
Vesting
outcome
Zero reportable RIDDOR incidents
30%
Objective achieved in full
40%
Objectives achieved with the
exception that work on Olive Lane
(Waverley) is scheduled to begin in
2023
20%
Total vesting on ESG element
5% weighting of total bonus opportunity
90%
Harworth Group plc: Annual Report and Financial Statements 2022Governance Report 128
Directors’ remuneration report continued
Personal performance outcomes (15% of total bonus opportunity)
Lynda Shillaw
Personal
objectives
Weighting
(% of personal
element)
Stakeholders
66%
Vesting
outcome
66%
Objective
Actual performance
Establish Harworth as a key regional
partner for national and local
government and other national and
local stakeholders
Elevate Harworth’s brand profile:
ensure that Harworth is perceived
as a key regional business by the
property sector
Completed stakeholder analysis and
developed an action plan for each region
at a corporate level
Continued to build relationships with
key authorities and stakeholders to
unlock sites and preserve Harworth’s
commercial position
Delivered a successful exhibition at
the UK REiiF conference, elevating
Harworth’s brand profile
Employee
engagement
34%
Improve the average percentage
points achieved in engagement scores
by 5 points
The average percentage points
achieved in 2023 engagement scores
improved by 20%
34%
Address identified areas of lower than
average engagement
All identified areas of lower than average
engagement have been addressed
Total vesting on personal element
15% weighting of total bonus opportunity
100%
Kitty Patmore
Personal
objectives
Strategic
decision
making
Weighting
(% of personal
element)
66%
Vesting
outcome
66%
Objective
Actual performance
Develop a non-financial KPI framework
and data collection system (including
ESG and external benchmark
reporting) to be adopted by the
business in regular management
reporting and support Harworth’s
positioning as a leading ESG stock
Develop a dynamic strategic reporting
platform to enhance forward
forecasting and reporting
Substantial improvements in both
financial and non-financial KPI reporting
both at an operational level, including
formulation of monthly management
packs for Regions and Investment
division, and to the Board
Significant progress was made on
ESG data collection and benchmark
reporting, which has significantly
improved Harworth NZC
understanding and reporting
Recruitment into treasury function
facilitated development of dynamic
modelling and scenario analysis to
support forecasting and reporting
Employee
engagement
34%
Improve the average percentage
points achieved in engagement scores
by 5 points
The average percentage points
achieved in 2022 engagement scores
improved by 20%
34%
Address specific areas of lower than
average engagement
All identified areas of lower than average
engagement have been addressed
Total vesting on personal element
15% weighting of total bonus opportunity
100%
Harworth Group plc: Annual Report and Financial Statements 2022Governance Report 129
Overall bonus outcomes
Financial
Strategic
ESG
Personal
Overall bonus
outcome
Executive
Director Weighting Vesting Weighting Vesting Weighting Vesting Weighting Vesting
%
of bonus
%
of salary
L. Shillaw
K. Patmore
50%
50%
15%
15%
30%
30%
28%
28%
5%
5%
4.5%
4.5%
15%
15%
15%
15%
62.5%
78.1%
62.5% 62.5%
The overall bonus payments were also subject to the additional underpins as set out on page 122. The Committee reviewed
performance against these underpins and found no cause to reduce the bonus outcomes.
Restricted Share Plan awards vesting (audited)
An RSP award was granted to Kitty Patmore at 50% of salary in 2020. No award was received by Lynda Shillaw given the date of grant
preceded her joining the business.
Vesting 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,
although all vested shares must be held to the end of year five.
The RSP award is subject to the specific performance underpins identified in note 3 to the Policy summary (see page 123). The
Committee reviewed performance against these underpins, as well as underlying financial performance, and found no cause to reduce
the vesting outcome. The Committee considers the vesting outcome to be appropriate, recognising that the Group has performed
strongly, both financially and strategically, against a backdrop of macro-economic and geopolitical uncertainty.
The first tranche of the RSP award granted to Kitty Patmore therefore vested in full following announcement of the results for the financial
year ended 31 December 2022 on 21 March 2023. The vested shares will be subject to a holding period until March 2025.
Executive Director
K. Patmore
Number of shares
granted under tranche
Number of shares
vesting under tranche
Face value at vesting1,2
32,051
32,051
£34,295
1 Face value based on the average mid-market closing share price for the three-month period ended 31 December 2022 (£1.07). The RSP award did not accrue dividend
equivalents over the vesting period.
2 The share price at the grant date of the RSP award (£1.04 based on the mid-marking closing share price on the trading day immediately preceding the date of grant
on 25 June 2020) is £0.03 less than the above mentioned share price used to calculate the face value of the shares at vesting. Therefore, 2.8% of the face value is
attributable to growth in share price between grant and vesting.
Performance against underpins
Performance
underpin
Financial health
Underlying
performance
Description
Detail
Performance
Financial stability
of the business
A breach of financial covenants
in the Group’s principal banking
facilities.
During the three-year period ended 31 December
2022 there were no breaches of financial covenants
in the Group’s principal banking facilities.
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.
The Committee considers that the Group has
performed strongly relative to peers during the
three-year period ended 31 December 2022.
Harworth’s Total Shareholder Return over the three-year
period ended 31 December 2022 was -12% compared
to -22% for the FTSE All Share Real Estate Index.
Harworth’s Total Return over that period was 9.2%,
representing strong performance across the sector.
During the three-year period ended 31 December
2022 there were no material failures in governance
or acts resulting in significant reputational damage or
material financial loss to the Group, nor any successful
prosecutions in relation to health and safety.
Harworth Group plc: Annual Report and Financial Statements 2022Governance Report 130
Directors’ remuneration report continued
Restricted Share Plan awards granted in 2022 (audited)
RSP awards were granted to Lynda Shillaw and Kitty Patmore on 8 June 2022 at 75% of salary.
Executive Director
Type of award
Date of grant
Number of shares subject to award Face value1
L. Shillaw
K. Patmore
2022 RSP award Nil-Cost Option
8 June 2022
2022 RSP award Nil-Cost Option
8 June 2022
176,944
£316,199
130,106
£232,499
1 Face value based on the average mid-market closing share price for the five trading days immediately following the announcement of the annual results for 2021 (£1.787).
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.
The RSP awards are subject to the specific performance underpins identified in note 3 to the Policy summary (see page 123).
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
2021 and 2022
% change between
2020 and 2021
% change between
2019 and 2020
Salary
& fees Benefits
Bonus
Salary
& fees Benefits
Bonus
Salary
& fees Benefits
Bonus
5.4%
24.0%
3.8%
17.1%
(9)%
(14.4)%
n/a
25%
n/a
0%
n/a
122.3%
5.4%
5.4%
16.8%
5.4%
5.4%
5.4%
6.3%
n/a
19.4%
5.4%
–
–
–
–
–
–
–
–
10.0%
28.8%9
–
–
–
–
–
–
–
–
9.5%
(7.8)%
1.5%
1.5%
28%
1.5%
1.5%
n/a
n/a
n/a
13.3%
9.4%
–
–
–
–
–
–
–
–
6.5%
3.8%
–
–
–
–
–
–
–
–
157.4%
45.7%
n/a
n/a
0%
0%
n/a
n/a
0%
n/a
n/a
n/a
7%
3.3%
n/a
n/a
–
–
–
–
–
–
–
–
34%
5%
n/a
n/a
–
–
–
–
–
–
–
–
14%
(20%)
Executive Directors
L. Shillaw1
K. Patmore2
Non-Executive Directors
A. Lyons
M. Bowes
A. Bromfield3
R. Cooke4
S. Underwood
L. Scenna5
P. O’Donnell Bourke6
M. Zafar7
Average employee (Company)8
Average employee (Group)
1 Appointed as Chief Executive with effect from 1 November 2020 and therefore the annual percentage change in remuneration between 2019 and 2020 and between
2020 and 2021 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. Kitty Patmore’s salary for 2022 was £310,000 and the percentage change in salary between 2021 and 2022 has been calculated based on this amount.
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. A fee of £6,000 per
annum for chairing the ESG Committee was introduced with effect from 1 January 2022.
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 between 2019 and 2020 and
between 2020 and 2021 is not applicable.
6 Appointed as Non-Executive Director with effect from 3 November 2020 and therefore the annual percentage change in remuneration between 2019 and 2020 and
between 2020 and 2021 is not applicable.
7 Appointed as Non-Executive Director with effect from 1 June 2022 and therefore the annual percentage change in remuneration is not applicable.
8 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
cites the equivalent figures calculated by reference to employees (excluding Directors) of the Company and its subsidiaries.
9 A one-off non-contractual payment of £2,000 was made to all employees (excluding the Senior Executive) during 2022 to provide some support during the cost-of-
living crisis. This payment is included within the 2022 benefits figure and is the primary reason for the increase in average benefits between 2021 and 2022. There have
been no changes to the broader 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 between 2020 and 2021 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.
Harworth Group plc: Annual Report and Financial Statements 2022Governance Report 131
Chief Executive 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 and 31 December 2022.
Year ended
25th percentile pay ratio
Median pay ratio
75th percentile pay ratio
31 December 2022
31 December 2021
15:1
18:1
10:1
12:1
7:1
8:1
For each year, the Company has calculated the ratio in line with the reporting regulations using Option A. 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.
Year ended
31 December 2022
Total pay and benefits
Salary
31 December 2021
Total pay and benefits
Salary
Chief
Executive
£815,2561
£421,600
£823,8932
£400,000
25th
percentile
pay ratio
£56,033
£35,309
£46,200
£42,000
Median
pay ratio
£78,384
£60,000
£67,839
£48,000
75th
percentile
pay ratio
£115,409
£77,996
£107,348
£72,500
1 The Chief Executive’s total pay and benefits is the total single figure as disclosed on page 125.
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, for the year ended 31 December 2021, the vesting of awards under the Restricted Share Plan during the year were omitted from the employee calculations.
Relative importance of spend on pay
Total employee pay expenditure
Distribution to shareholders
2022
£13.690m
2021
£11.626m
% change
18%
2022
£4.3m
2021
£3.9m
% change
10%
Total employee pay in the year reflected an increase in the average number of employees from 89 to 113 , as well as awards for career
progression and promotion.
Total dividends for 2022 were 1.333 pence per share (2021: 1.212 pence per share), resulting in total dividends of £4.3m (2021: £3.9m).
The percentage change is shown on a per share basis.
Harworth Group plc: Annual Report and Financial Statements 2022Governance Report 132
Directors’ remuneration report continued
Review of past performance
The following chart shows the Total Shareholder Return (‘TSR’) of the Company and the FTSE SmallCap Index over the period from the
Company’s relisting on 24 March 2015 to 31 December 2022. The FTSE SmallCap 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 re-listing on 24 March
2015 to 31 December 2022:
Harworth
FTSE Small Cap
)
0
0
1
£
o
t
d
e
s
a
b
e
r
(
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r
u
t
e
R
l
r
e
d
o
h
e
r
a
h
S
l
a
t
o
T
£275
£250
£225
£200
£175
£150
£125
£100
£75
5
1
-
r
a
M
5
1
-
n
u
J
5
1
-
p
e
S
5
1
-
c
e
D
6
1
-
r
a
M
6
1
-
n
u
J
6
1
-
p
e
S
6
1
-
c
e
D
7
1
-
r
a
M
7
1
-
n
u
J
7
1
-
p
e
S
7
1
-
c
e
D
8
1
-
r
a
M
8
1
-
n
u
J
8
1
-
p
e
S
8
1
-
c
e
D
9
1
-
r
a
M
9
1
-
n
u
J
9
1
-
p
e
S
9
1
-
c
e
D
0
2
-
r
a
M
0
2
-
n
u
J
-
0
2
p
e
S
0
2
-
c
e
D
1
2
-
r
a
M
1
2
-
n
u
J
-
1
2
p
e
S
1
2
-
c
e
D
2
2
-
r
a
M
2
2
-
n
u
J
-
2
2
p
e
S
2
2
-
c
e
D
Source: Thomson Reuters DataStream
Historical Chief Executive remuneration
2022
2021
2020
2019
2018
2017
2016
2015
Short term
incentive
award as a %
of maximum
opportunity
Long term
incentive
award as a %
of maximum
opportunity
Single figure
remuneration
(£’000)
£815
£824
£76
£559
£669
£901
£1,392
£599
£480
62.5%
90.5%
n/a
51.34%
44.2%
85.6%
80.6%
90.0%
85.6%
n/a
n/a
n/a
5.05%
51.5%
51.8%
n/a1
n/a
n/a
Chief Executive
L. Shillaw
L. Shillaw
L. Shillaw
O. Michaelson
O. Michaelson
O. Michaelson
O. Michaelson
O. Michaelson
O. Michaelson
1 Excludes vesting of Harworth Estates Long-Term Incentive Plan award as this was a one-off scheme put in place by HEPGL in 2013.
Harworth Group plc: Annual Report and Financial Statements 2022Governance Report
133
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 2022.
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 second tranche of the 2019 RSP award vested in full (41,178 shares) in March 2023. The vested shares will be subject to a holding
period until March 2024.
Two-thirds of the first tranche of the 2020 RSP award vested (34,722 shares) in March 2023. The vested shares will be subject to a
holding period until March 2025.
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 2022. 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 mid-market closing price
for the shares on 30 December 2022 of £1.06.
Shares held
Options held
Beneficially
owned
Unvested &
not subject to
performance1
Unvested &
subject to
performance2
Unvested &
not subject to
performance3
Vested &
exercised
during
2022
Shareholding
requirement
% salary
Current
shareholding
% salary
Requirement
met?
L. Shillaw
K. Patmore
A. Lyons
M. Bowes
A. Bromfield
R. Cooke
S. Underwood
L. Scenna
P. O’Donnell
Bourke
M. Zafar
184,317
42,202
350,000
–
36,264
–
38,385
–
40,000
–
4,861
5,822
–
–
–
–
–
–
–
–
333,683
324,222
–
–
–
–
–
–
–
–
17,595
24,357
–
–
–
–
–
–
–
–
1 Free Shares awards and Matching Shares awards under the Share Incentive Plan.
2 Nil-cost options granted under the Restricted Share Plan.
3 Options granted under the Save As You Earn scheme.
–
–
–
–
–
–
–
–
–
–
200%
200%
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
92%
75%
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
N
N
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
As at 13 March 2023, shares held by Lynda Shillaw and Kitty Patmore had increased to 189,928 and 48,774 respectively, as a result of
Partnership Shares and Matching Shares awarded under the Share Incentive Plan since 31 December 2022. There have been no further
changes to the holdings listed above between 31 December 2022 and 13 March 2023.
Angela Bromfield
Chair of the Remuneration Committee
13 March 2023
Harworth Group plc: Annual Report and Financial Statements 2022Governance Report 134
Directors’ report
Introduction
The Directors present their report and the audited consolidated financial statements for the year ended 31 December 2022.
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
Reference
Chair’s Introduction, page 81
Statement of Corporate Governance, page 97
Audit Committee Report, page 110
Statement of Corporate Governance, pages 93 to 94
Directors’ interests in shares
Directors’ remuneration
Directors’ Remuneration Report, page 133
Directors’ Remuneration Report, pages 115 to 133
Disclosure of information to auditors
Statement of Directors’ Responsibilities, page 139
Diversity
Employee numbers
Employee engagement
Employees with disabilities
Employee share schemes
Nomination Committee Report, pages 102 to 105
Nomination Committee Report, page 104
Statement of Corporate Governance, page 90
Nomination Committee Report, page 105
Directors’ Remuneration Report, pages 115 to 116
Future developments of the business
Strategic Report, page 25
Going concern
Greenhouse gas emissions
Post balance sheet events
Risk management and internal controls
Stakeholders, including regard to the need to foster
relationships with suppliers, customers and others
Statement of Directors’ Responsibilities, pages 138 to 139
Strategic Report, page 62
Financial Statements, Note 31, page 205
Strategic Report, pages 43 to 53
Audit Committee Report, page 111
Section 172 Statement, pages 39 to 42
Significant related party transactions
Financial statements, Note 30, pages 203 to 205
Viability Statement
Strategic Report, pages 36 to 38
UK Corporate Governance Code
Statement of Corporate Governance, page 86
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 2022 was £30.9m (2021: £127.2m). The net assets
attributable to shareholders of the Group increased to £602.7m (2021: £578.0m) over the financial year. During the year, the Group’s
EPRA NDV per share decreased by 0.6% to 196.5p (2021: 197.6p).
The Board is recommending a final dividend of 0.929 pence per share which, together with the interim dividend of 0.404 pence per
share paid in October 2022, makes a combined dividend of 1.333 pence (2021: 1.212 pence) per share. Payment of the final dividend, if
approved at the 2023 AGM, will be made on 26 May 2023 to shareholders on the register at the close of business on 5 May 2023. The
ex-dividend date will be 4 May 2023. The dividend paid in the year to 31 December 2022 was 1.249 pence (2021: 1.833 pence) per
share, comprising the 2021 final dividend of 0.845 pence per share and the interim dividend of 0.404 pence per share for 2022.
Harworth Group plc: Annual Report and Financial Statements 2022Governance Report 135
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 202. 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 2023
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
2022 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 2023 AGM
and a resolution will be proposed for its
renewal.
The Company’s issued share capital as
at 31 December 2021 was 322,724,566
ordinary shares of 10 pence each. During
2022 the issued share capital was
increased as follows:
Description
Date
Grant of SIP Free Shares
11 May 2022
Exercise of SAYE options
01 June 2022
Exercise of SAYE options
15 June 2022
Exercise of SAYE options
29 June 2022
Exercise of SAYE options
13 July 2022
Exercise of SAYE options
10 August 2022
Grant of SIP Matching Shares
15 August 2022
15 September 2022 Grant of SIP Matching Shares
21 September 2022
17 October 2022
19 October 2022
15 November 2022 Grant of SIP Matching Shares
Grant of SIP Matching Shares
15 December 2022
Exercise of SAYE options
Grant of SIP Matching Shares
Exercise of SAYE options
Number
of shares
issued
Price
(discount if
applicable)
210,924 Nil consideration
£1.043 (35.8%)
31,060
£1.043 (35.2%)
4,313
£1.043 (30.9%)
12,078
£1.043 (26.5%)
3,451
5,177
£1.043 (34.4%)
6,513 Nil consideration
10,468 Nil consideration
6,903
£1.043 (17.2%)
12,730 Nil consideration
£1.043 (4.3%)
12,368 Nil consideration
8,848 Nil consideration
1,725
As such, as at 31 December 2022, the Company’s issued share capital was 323,051,124 ordinary shares of 10 pence each.
Since 31 December 2022, the Company’s issued share capital has increased to 323,067,030 ordinary shares of 10p each, as follows:
Date
16 January 2023
15 February 2023
Description
Grant of SIP Matching Shares
Grant of SIP Matching Shares
Number
of shares
issued
Price
(discount if
applicable)
5,712 Nil consideration
10,194 Nil consideration
Harworth Group plc: Annual Report and Financial Statements 2022Governance Report 136
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 2022 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 2022 AGM. The
Directors propose to renew this authority at
the 2023 AGM.
Purchase of the Company’s
own shares
The Company has authority under a
shareholders’ resolution passed at the
2022 AGM to purchase up to 32,272,456
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 2023 AGM. No shares have been
purchased by the Company under that
authority. A special resolution will be
proposed at the 2023 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 2022
and up to the date of this Report are:
Chair
Alastair Lyons
Executive Directors
Lynda Shillaw (Chief Executive)
Katerina Patmore (Chief Financial Officer)
Independent Non-Executive Directors
Angela Bromfield (SID)
Ruth Cooke
Lisa Scenna
Patrick O’Donnell Bourke
Marzia Zafar (appointed 1 June 2022)
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 125 and 133 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 2023 AGM.
In accordance with the UK Corporate
Governance Code, all Directors will
offer themselves for re-election at the
2023 AGM.
Save as set out on pages 91 to 92 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 use
of financial instruments as appropriate 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 their duties, may
take independent professional advice at
the Company’s expense. No Director had
reason to use this facility in 2022.
Charitable and
political donations
The Group made charitable donations
during 2022 in the aggregate sum of
£34,330 (2021: £61,642).
No political donations were made
during the year (2021: £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 2022 AGM for certain
political donations and expenditure,
subject to financial limits, and will seek to
renew this authority at the 2023 AGM.
Harworth Group plc: Annual Report and Financial Statements 2022Governance Report 137
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. Shares issued
pursuant to Share Incentive Plan awards
are held by Equiniti Share Plan Trustees
Limited pending maturity. At 31 December
2022, the EBT held 5,669 (2021: 5,669)
ordinary shares of 10 pence each in the
Company and Equiniti Share Plan Trustees
Limited held 470,376 (2021: 170,918)
ordinary shares of 10 pence each in the
Company, being in aggregate 476,045
(2021: 176,587) shares which represent
0.15% 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
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 2022 AGM. The Directors are
proposing to seek renewal of that authority
at the 2023 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
Janus Henderson Investors
1 Goodweather Holdings Limited is a member of the Peel Group.
Number of
ordinary shares
85,100,257
73,966,672
45,500,000
15,618,416
10,606,920
Percentage
of total
voting rights
26.34%
22.90%
14.08%
4.83%
3.28%
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.
Transactions with
related parties
Transactions entered into with related
parties during 2022 are disclosed in Note
30 to the Financial Statements.
The Directors’ Report was approved by
the Board of Directors and signed on its
behalf by:
Chris Birch
General Counsel and Company Secretary
13 March 2023
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.
Harworth Group plc: Annual Report and Financial Statements 2022Governance Report 138
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.
• 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
Company and hence for taking reasonable
steps for the prevention and detection of
fraud and other irregularities.
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:
• 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 Company
and undertakings included in the
consolidation taken as a whole;
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 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.
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 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
•
•
•
•
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 and the
current macro-economic environment as well
as taking into account available borrowing
facilities. The going concern period assessed
is until June 2024, 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.
A key focus of the assessment of going
concern is the management of liquidity and
compliance with borrowing facilities for the
period to June 2024. During the year a new
five-year £200m RCF was agreed with HSBC
joining as a new lender in addition to current
lenders NatWest and Santander. 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, all of which are tested through the
going concern assessment undertaken.
Available liquidity, including cash and cash
equivalents and bank facility headroom was
£175.6m as at 31 December 2022.
Harworth Group plc: Annual Report and Financial Statements 2022Governance Report 139
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 they are aware, there is no
relevant audit information of which the
auditor is unaware; and
• each Director has taken all the steps that
they ought to have taken as a Director
to make themselves 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
13 March 2023
The Group benefits from diversification
across its Capital Growth and Income
Generation businesses including its
industrial and renewable energy property
portfolio. Taking into account the
independent valuations by BNP Paribas
and Savills, the Group net loan-to-portfolio
value remains low at 6.6%, within the
Board’s target range and with headroom
to allow for falls in property values. Rent
collection remained strong, with 98%
collected to date for 2022.
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 as a result
of macro-economic conditions; 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 cashflow and banking covenants.
A scenario with consideration of potential
climate change and related transition
impacts was also examined as part of the
Group’s focus on climate-related risks and
opportunities.
Even in the downside scenarios, for the
going concern period to June 2024,
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.
Harworth Group plc: Annual Report and Financial Statements 2022Governance Report 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
141
152
153
154
155
156
157
158
159
160
141
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 2022 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 2022 which comprise:
Group
Parent company
Consolidated income statement for the year then ended
Balance sheet as at 31 December 2022
Consolidated statement of comprehensive income for the year
then ended
Statement of changes in equity for the year then ended
Consolidated balance sheet as at 31 December 2022
Statement of cash flows for the year then ended
Consolidated statement of changes in equity for the year
then ended
Related notes 1 to 31 to the financial statements including a
summary of significant accounting policies
Consolidated statement of cash flows for the year then ended
Related notes 1 to 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.
Harworth Group plc: Annual Report and Financial Statements 2022
Financial StatementsHarworth Group plc: Annual Report and Financial Statements 2022 142
Independent auditor’s report to the members of
Harworth Group Plc continued
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 2024. 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 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;
•
testing the assumptions included in each modelled scenario for the cash forecasts and covenant calculations, considering the impact
of continuing cost inflation and increasing interest rates. We also considered the appropriateness of the models used to calculate
the cash flow forecasts and covenant calculations to determine if they were appropriate to be able to make an assessment on going
concern;
• considering the mitigating factors that could be applied to the cash flow forecasts and covenant calculations that are within control
of the Group, for example, reducing uncommitted development expenditure. This included review of the Company’s non-operating
cash outflows;
• verifying the credit facilities available to the Group including the five-year, £200m revolving credit facility which is due to expire in
March 2027;
• 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 to
30 June 2024.
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 5 components and audit procedures on
specific balances for a further 6 components.
• The components where we performed full or specific audit procedures accounted for 100% of the
Group’s Total Assets, 100% 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.
• Revenue recognition – manual topside adjustments and cut-off.
Materiality
• Overall group materiality of £7.8m which represents 1% of total assets.
• Specific group materiality of £2.8m which represents 5% of profit before property revaluation
movements, finance costs and tax.
Financial StatementsHarworth Group plc: Annual Report and Financial Statements 2022 143
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 40 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 5 components (“full scope
components”) which were selected based on their size or risk characteristics. For the remaining 6 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% (2021: 100%) of the Group’s Total Assets,
100% (2021: 99%) of the Group’s Profit before property revaluation movements, finance costs and tax and 99% (2021: 99%) of the
Group’s Total Revenue. For the current year, the full scope components contributed 84% (2021: 79%) of the Group’s Total Assets , 87%
(2021: 74%) of the Group’s Profit before property revaluation movements, finance costs and tax and 97% (2021: 78%) of the Group’s
Total Revenue. The specific scope component contributed 16% (2021: 21%) of the Group’s Total Assets, 13% (2021: 25%) of the Group’s
Profit before property revaluation movements, finance costs and tax and 2% (2021: 21%) 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 29 components that together represent 1% of the Group’s Revenue none are individually greater than 1% of the
Group’s Revenue. For these components, we performed other procedures, including analytical review, 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 our audit teams.
Total assets
Profit before property revaluation
movements, finance costs and tax
Revenue
84% Full scope components
87% Full scope components
97% Full scope components
16% Specific scope components
13% Specific scope components
2% Specific scope components
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.
Financial StatementsHarworth Group plc: Annual Report and Financial Statements 2022 144
Independent auditor’s report to the members of
Harworth Group Plc continued
Climate change
Stakeholders are increasingly interested in how climate change will impact Harworth Group plc. The Group has determined that
the most significant future impacts from climate change on its operations will be in relation to transition risks and physical risks, the
components of which are explained on pages 54 to 60 in the required Task Force for Climate related Financial Disclosures and on
pages 45 to 53 in the principal risks and uncertainties. They have also explained their climate commitments on page 67. All of these
disclosures form part of the “Other information,” rather than the audited financial statements. Our procedures on these unaudited
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, in line with our responsibilities on “Other
information”.
In planning and performing our audit we assessed the potential impacts of climate change on the Group’s business and any
consequential material impact on its financial statements.
The Group has explained in the critical accounting estimates and judgements (note 1) their articulation of how climate change has been
reflected in the financial statements.
Our audit effort in considering the impact of climate change on the financial statements was focused on evaluating management’s
assessment of the impact of climate risk, physical and transition, their climate commitments and the significant judgements and
estimates disclosed in note 1 and whether these have been appropriately reflected in the valuation of the property portfolio following
the requirements of IAS 40 ‘Investment Property’ in relation to the investment properties and IAS 2 ‘Inventories’ in relation to the
development property. As part of this evaluation, we performed our own risk assessment, supported by our climate change and
property valuation internal specialists, to determine the risks of material misstatement in the financial statements from climate change
which needed to be considered in our audit.
We also challenged the Directors’ considerations of climate change risks in their assessment of going concern and viability and
associated disclosures. Where considerations of climate change were relevant to our assessment of going concern, these are described
above.
Based on our work we have not identified the impact of climate change on the financial statements to be a key audit matter or to impact a
key audit matter.
Financial StatementsHarworth Group plc: Annual Report and Financial Statements 2022 145
Key audit matters
Key audit matters are those matters that, in our professional judgment, 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.
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 and assets held
for sale as at the balance sheet date is
appropriate
Risk
Valuation of Investment Property
and Assets held for sale
(2022: £460.2m, 2021: £480.3m)
Refer to the Audit Committee Report
(page 108); Accounting policies (page
160); and Note 14 of the Consolidated
Financial Statements (page 182)
At 31 December 2022 Investment
property held a value of £400.4m
(2021: £478.4m), with a valuation loss
of £19.7m (2021: £8m gain) reported
in the year. Investment properties
designated as assets held for sale held a
value of £59.8m (2021: £1.9m)
Property valuations are calculated by
the independent external valuer 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.
In addition, there is a risk that management
inappropriately override the valuation
determined by the external valuer.
Our response to the risk
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 a
sample of sites and holding discussions
directly with the external valuer regarding
its valuation approach, including its
consideration of climate risk;
• 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; and
Considering the location of a sample of
assets within the UK and assessing whether
there was any impairment risk due to
potential flooding.
Testing the appropriateness of any material
adjustments from the valuation determined
by the external valuer to the book value
recorded.
We performed the above audit procedures
over this risk area at a Group level covering
100% of the risk amount.
Financial StatementsHarworth Group plc: Annual Report and Financial Statements 2022 146
Independent auditor’s report to the members of
Harworth Group Plc continued
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.
Risk
Our response to the risk
Carrying value of Development
Property (2022: £205.0m,
2021: £172.7m)
Refer to the Audit Committee Report
(page 108); Accounting policies (page
160); and Note 1 and Note 16 of the
Consolidated Financial Statements
(pages 160 and 190)
The book value of development
property at 31 December 2022 was
£205.0m. 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 or planning permission uncertainty,
as well as costs to complete.
In addition, there is a risk that management
inappropriately override the valuation
determined by the external valuer.
Management LTIPs and Bonuses are
based largely on NDV and therefore
exists an incentive for management to
maximise this value.
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.
Financial StatementsHarworth Group plc: Annual Report and Financial Statements 2022 147
Key observations communicated
to the Audit Committee
Based on our audit procedures
we have concluded that revenue
is appropriately recognised, and
that there was no evidence of
management bias.
Risk
Our response to the risk
Revenue recognition – manual
topside adjustments and cut-off
(2022: £166.7m, 2021: £109.9m)
Refer to the Accounting policies (page
160); and Note 3 of the Consolidated
Financial Statements (page 173)
Revenue for the period ended
31 December 2022 is £166.7m,
made up of £124.9m from the Sale
of Development Property, £31.3m
from Income Generation activities and
£10.5m from Other Revenue activities.
Due to the manual nature of postings
to revenue in respect of property
sales and the potential for manual
topside adjustments to all revenue
streams there is a risk that management
could override the revenue recorded
throughout the year. In addition, there
is a risk that property sales recorded
around the year end are not in line
with contract completion due to
management override.
Our approach included:
• Performing walkthroughs to understand
the key processes and identify key
controls. This was done by selecting
relevant transactions and tracing them
through the processes.
Development Property Sales:
• Testing all material property disposals to
confirm revenue recognised in the period
is in line with the contract terms and
completion date.
• Testing all material January 2023 disposals
to confirm revenue should be recorded
post year end.
• Assessing material manual journals posted
to revenue throughout the year which
have not been posted to receivables
or cash by corroborating to supporting
documentation, for any evidence of
management override / bias.
Income Generation:
• Testing revenue generated from rental
income, royalty income and service
charges within our revenue analytics
programme, validating that revenue flows
through trade receivables and is settled
via cash. We tested all material items that
did not demonstrate this pattern.
External Sales:
• Testing all significant postings to external
sales, considering if they demonstrated
evidence of management override
or bias.
Design and Build Revenue
• We have agreed the total revenue that
can be recognised as per the contract.
We have then subtracted the revenue
that was recognised in the prior year from
these figures to determine the expected
FY22 revenue, which we compared to the
revenue recorded in the year.
We performed the above audit procedures
over this risk area at a Group level covering
100% of the risk amount.
In the prior year, our auditor’s report did not include a key audit matter in relation to revenue recognition. In the current year, given the
significant increase in the level of development property sales we have included a key audit matter in relation to revenue recognition.
Financial StatementsHarworth Group plc: Annual Report and Financial Statements 2022 148
Independent auditor’s report to the members of
Harworth Group Plc continued
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.
We determined materiality for the Group to be £7.8million (2021: £7.6million), which is 1% (2021: 1%) of total assets. We believe
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 £2.4 million (2021: £2.1 million), which is 1% (2021: 1%) of total assets, being
the primary focus of the users of the financial statements.
During the course of our audit, we reassessed initial materiality and amended it for the year end results.
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
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
performance materiality was 75% (2021: 75%) of our planning materiality, namely £5.9m (2021: £5.7m). We have set performance
materiality at this percentage due to this being our third 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 (2021: £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 139, 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.
Financial StatementsHarworth Group plc: Annual Report and Financial Statements 2022 149
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
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 page 138 to 139;
• 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 page 40 to 41;
• 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 138 to 139;
• Directors’ statement on fair, balanced and understandable set out on page 136;
• Board’s confirmation that it has carried out a robust assessment of the emerging and principal risks set out on pages 45 to 53;
• The section of the annual report that describes the review of effectiveness of risk management and internal control systems set out on
page 111; and
• The section describing the work of the audit committee set out on page 106 to 112.
Financial StatementsHarworth Group plc: Annual Report and Financial Statements 2022 150
Independent auditor’s report to the members of
Harworth Group Plc continued
Responsibilities of directors
As explained more fully in the directors’ responsibilities statement set out on pages 138 and 139, 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.
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 inquiries of management, those responsible
for legal and compliance procedures and the Company Secretary. We corroborated our inquiries 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 www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.
Financial StatementsHarworth Group plc: Annual Report and Financial Statements 2022 151
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 ending 31 December 2020 and subsequent financial periods.
• The period of total uninterrupted engagement including previous renewals and reappointments is three years, covering the years
ending 31 December 2020 to 31 December 2022.
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
Manchester
13 March 2023
Financial StatementsHarworth Group plc: Annual Report and Financial Statements 2022 152
Consolidated income statement
for the year ended 31 December 2022
Revenue
Cost of sales
Gross profit
Administrative expenses
Other (losses)/gains
Other operating expense
Operating profit
Finance costs
Finance income
Share of (loss)/profit of joint ventures (including impairment)
Profit before tax
Tax charge
Profit for the year
All activities in the year are derived from continuing operations.
Year ended
31 December
2022
£’000
166,685
(83,292)
83,393
(22,090)
(16,761)
(56)
44,486
(6,367)
227
(7,487)
30,859
(3,021)
27,838
Year ended
31 December
2021
£’000
109,884
(61,185)
48,699
(19,202)
92,488
(58)
121,927
(4,100)
182
9,225
127,234
(33,244)
93,990
Note
3
3
3
3
3
3
3
6
6
15
8
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 160 to 205 are an integral part of the consolidated financial statements.
Note
11
11
Pence
8.6
8.5
Pence
29.1
28.9
Financial StatementsHarworth Group plc: Annual Report and Financial Statements 2022
Consolidated statement of comprehensive income
for the year ended 31 December 2022
153
Profit for the financial year
Other comprehensive income/(expense) – items that will not be reclassified to profit or loss:
Net actuarial gain in Blenkinsopp Pension scheme
Revaluation of Group occupied property
Deferred tax on other comprehensive expense items
Other comprehensive income – items that may be reclassified to profit or loss:
Fair value of financial instruments
Total other comprehensive income
Total comprehensive income for the year
Note
24
8
22
Year ended
31 December
2022
£’000
27,838
Year ended
31 December
2021
£’000
93,990
295
(133)
(101)
156
217
28,055
262
(200)
(137)
670
595
94,585
Financial StatementsHarworth Group plc: Annual Report and Financial Statements 2022
154
Consolidated balance sheet
for the year ended 31 December 2022
ASSETS
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
LIABILITIES
Current liabilities
Borrowings
Trade and other payables
Lease liability
Current tax liabilities
Non-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
2022
£’000
As at
31 December
2021
£’000
Note
12
13
17
14
15
16
17
18
19
20
21
13
8
20
21
13
22
8
24
26
27
600
254
4,013
400,363
29,828
435,058
216,393
56,658
59,790
11,583
344,424
779,482
(3,067)
(82,499)
(82)
(7,013)
(92,661)
251,763
(56,911)
(2,819)
(172)
–
(24,141)
(114)
(84,157)
(176,818)
602,664
32,305
24,688
174,520
257
45,667
(50)
297,439
27,838
602,664
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
The financial statements on pages 152 to 205 were approved by the Board of Directors on 13 March 2023 and were signed on its behalf by:
Lynda Shillaw
Chief Executive
Company Registered Number 02649340
Katerina Patmore
Chief Financial Officer
Financial StatementsHarworth Group plc: Annual Report and Financial Statements 2022
Company balance sheet
for the year ended 31 December 2022
155
ASSETS
Non-current assets
Investment in subsidiaries
Trade and other receivables
Retirement reimbursement asset
Deferred income tax assets
Current assets
Trade and other receivables
Current tax asset
Cash
Total assets
LIABILITIES
Current liabilities
Trade and other payables
Net current (liabilities)/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
2022
£’000
As at
31 December
2021
£’000
Note
15
17
24
8
17
8
19
21
24
26
27
9
209,864
28,647
114
112
238,737
297
480
1,433
2,210
240,947
(36,347)
(36,347)
(34,137)
(114)
(114)
(36,461)
204,486
32,305
24,688
257
45,667
(50)
108,001
(6,382)
204,486
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
The financial statements on pages 152 to 205 were approved by the Board of Directors on 13 March 2023 and were signed on its behalf by:
Lynda Shillaw
Chief Executive
Company Registered Number 02649340
Katerina Patmore
Chief Financial Officer
Financial StatementsHarworth Group plc: Annual Report and Financial Statements 2022
156
Consolidated statement of changes in equity
for the year ended 31 December 2022
Called up
share
capital
£’000
32,253
–
Note
Share
premium
account
£’000
Fair
value
Merger
reserve
reserve
£’000
£’000
24,567 45,667 132,833
–
–
–
Balance at 1 January 2021
Profit for the financial year
Fair value gains on investment
property
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 items
Total comprehensive
income for year ended
31 December 2021
Transactions with owners:
Purchase of own shares
Share-based payments
Dividends paid
Share issue
Balance at
31 December 2021
Profit for the financial year
Fair value losses on investment
property
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 items
Total comprehensive
(expense)/income for year
ended 31 December 2022
Transactions with owners:
Purchase of own shares
Share-based payments
Dividends paid
Share issue
Balance at
31 December 2022
10
26,27
24
22
8
24
22
8
10
26,27
–
–
–
–
–
–
–
–
–
–
19
32,272
–
–
–
–
–
–
–
–
–
–
–
33
–
–
–
–
–
–
–
–
–
–
60
–
–
–
–
–
–
–
–
–
–
–
88,586
(21,590)
–
(200)
–
–
66,796
–
–
–
–
24,627 45,667 199,629
–
–
–
–
–
–
–
–
–
–
–
–
–
61
–
–
–
–
–
–
–
–
–
–
–
(10,019)
(14,957)
–
(133)
–
–
(25,109)
–
–
–
–
Capital
redemption
reserve
£’000
257
–
–
–
–
–
–
–
–
–
–
–
–
257
–
–
–
–
–
–
–
–
–
–
–
–
Investment
in own
shares
£’000
Retained
earnings
£’000
Total
equity
£’000
(73) 253,208 488,712
93,990
93,990
–
–
–
–
–
–
–
(88,586)
21,590
–
–
262
–
670
262
(200)
670
(137)
(137)
–
27,789
94,585
(21)
76
–
(6)
–
472
(5,913)
–
(21)
548
(5,913)
73
(24) 275,556 577,984
27,838
27,838
–
–
–
–
–
–
–
10,019
14,957
295
–
156
–
–
295
(133)
156
(101)
(101)
–
53,164
28,055
(26)
–
–
–
–
589
(4,032)
–
(26)
589
(4,032)
94
32,305
24,688 45,667 174,520
257
(50) 325,277 602,664
Financial StatementsHarworth Group plc: Annual Report and Financial Statements 2022
Company statement of changes in equity
for the year ended 31 December 2022
157
Called up
share
capital
£000
32,253
–
Share
premium
£000
24,567
–
Merger
reserve
£000
45,667
–
Capital
redemption
reserve
£000
257
–
Investment
in own
shares
£000
Total
Retained
equity
earnings
£000
£000
(73) 124,792 227,463
(8,378)
(8,378)
–
Note
24
10
26,27
24
Balance at 1 January 2021
Loss for the financial year
Actuarial gain in Blenkinsopp
pension scheme
Deferred tax on other comprehensive
expense items
Total comprehensive expense for the
year ended 31 December 2021
Transactions with owners:
Purchase of own shares
Share-based payments
Dividends paid
Share issue
Balance at 31 December 2021
Loss for the financial year
Actuarial gain in Blenkinsopp
pension scheme
Deferred tax on other comprehensive
expense items
Total comprehensive expense for the
year ended 31 December 2022
Transactions with owners:
Purchase of own shares
Share-based payments
Dividends paid
Share issue
Balance at 31 December 2022
–
–
–
–
–
–
–
–
–
–
–
–
19
32,272
–
–
–
–
60
24,627
–
–
–
–
–
45,667
–
–
–
–
–
–
–
–
–
–
–
–
–
33
32,305
–
–
–
61
24,688
–
–
–
–
45,667
10
26,27
–
–
–
–
–
–
–
257
–
–
–
–
–
–
–
–
257
–
–
–
(21)
76
–
(6)
(24)
–
–
–
–
262
262
(34)
(34)
(8,150)
(8,150)
–
374
(5,913)
–
(21)
450
(5,913)
73
111,103 213,902
(6,382)
(6,382)
295
295
(58)
(58)
(6,145)
(6,145)
(26)
–
–
–
–
693
(4,032)
–
(26)
693
(4,032)
94
(50) 101,619 204,486
Financial StatementsHarworth Group plc: Annual Report and Financial Statements 2022
158
Consolidated statement of cash flows
for the year ended 31 December 2022
Cash flows from operating activities
Profit before tax for the financial year
Net finance costs
Other losses/(gains)
Share of loss/(profit) of joint ventures (including impairment)
Share-based transactions (1)
Depreciation of property, plant and equipment and right of use assets
Pension contributions in excess of charge
Operating cash inflows before movements in working capital
Decrease in inventories
Increase in receivables
(Decrease)/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
Distribution from joint ventures
Net proceeds from disposal of investment properties, AHFS and overages
Property acquisitions
Expenditure on investment properties and AHFS
Expenditure on property, plant and equipment
Cash (used in)/generated from 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 paid
Payment in respect of leases
Dividends paid
Cash generated from/(used in) financing activities
Decrease in cash
Cash at 1 January
Decrease in cash
Cash at 31 December
Note
6
3
15
25
12,13
24
10
Year ended
31 December
2022
£’000
Year ended
31 December
2021
£’000
30,859
6,140
16,761
7,487
728
152
(149)
61,978
16,502
(6,482)
(13,137)
58,861
(3,998)
(17,702)
37,161
227
(1,849)
665
14,232
(13,445)
(53,107)
(110)
(53,387)
67
–
19,850
–
154,000
(152,000)
(2,022)
(91)
(4,032)
15,772
(454)
12,037
(454)
11,583
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)
12,037
(1) Share-based transactions reflect the non-cash expenses relating to share-based payments included within the income statement.
Financial StatementsHarworth Group plc: Annual Report and Financial Statements 2022
Company statement of cash flows
for the year ended 31 December 2022
159
Cash flows from operating activities
Loss before tax for the financial year
Net interest receivable/(payable)
Share-based transactions (1)
Pension contributions in excess of charge, net of movement in reimbursement asset
Operating cash outflows before movements in working capital
(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
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
(Decrease)/increase in cash
Cash at 1 January
(Decrease)/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
2022
£’000
Year ended
31 December
2021
£’000
(6,358)
17
165
295
(5,881)
(1,193)
10,060
2,986
(965)
(480)
1,541
948
948
67
–
(4,032)
(3,965)
(1,476)
2,909
(1,476)
1,433
(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
2,909
Financial StatementsHarworth Group plc: Annual Report and Financial Statements 2022
160
Notes to the financial statements
for the year ended 31 December 2022
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 2022 consolidate the results of the Company and its subsidiaries
(together referred to as the ‘Group’).
Basis of preparation
The Consolidated and Company financial statements of Harworth Group plc have been prepared on the going concern basis and in
accordance with UK adopted International Accounting Standards (‘IFRS’) and, as regards the company financial statements, as applied in
accordance with the provisions of the Companies Act 2006. 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 36. 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 and the current macro-economic environment as well as taking into account available borrowing facilities. The going
concern period assessed is until June 2024 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.
A key focus of the assessment of going concern is the management of liquidity and compliance with borrowing facilities for the period
to June 2024. During the year; a new five year £200m RCF was agreed with HSBC joining as a new lender in addition to current lenders
NatWest and Santander. 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, all of which are tested through the going concern assessment
undertaken. Available liquidity, including cash and cash equivalents and bank facility headroom was £175.6m as at 31 December 2022.
The Group benefits from diversification across its Capital Growth and Income Generation businesses including its industrial and
renewable energy property portfolio. Taking into account the independent valuation by BNP Paribas and Savills, the Group net loan-
to-portfolio value remains low at 6.6%, within the Board’s target range and with headroom to allow for falls in property values. Rent
collection remained strong, with 99% collected to date for 2022.
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 as a
result of macro-economic conditions; and 4) a significant increase in interest rates, impacting the cost of the Group’s borrowings.
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 cashflow and banking covenants. A scenario with consideration of potential climate change and related transition
impacts was also examined as part of the Group’s focus on climate-related risks and opportunities.
Financial StatementsHarworth Group plc: Annual Report and Financial Statements 2022 161
1. Accounting policies continued
Even in the downside scenarios, for the going concern period to June 2024, 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.
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 2022 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 2023 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 are recognised at the point in time when the associated
performance obligations contained within the agreements are satisfied.
Royalty income relates to revenue paid by customers who extract natural resources from some of the Group’s property and is recognised
at the transaction prices set out in the customer contracts in line with the volumes or values of resources extracted as determined by
individual contracts.
Revenue from the sale of coal fines is recognised at the point of despatch.
Service charge income is recognised as revenue in the period to which it relates.
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.
Financial StatementsHarworth Group plc: Annual Report and Financial Statements 2022 162
Notes to the financial statements
for the year ended 31 December 2022
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 provides
planning and promotion services 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.
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.
Financial StatementsHarworth Group plc: Annual Report and Financial Statements 2022 163
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 held for sale (AHFS) 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.
Financial StatementsHarworth Group plc: Annual Report and Financial Statements 2022 164
Notes to the financial statements
for the year ended 31 December 2022
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, 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 2022 and 31 December 2021 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.
Financial StatementsHarworth Group plc: Annual Report and Financial Statements 2022 165
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, 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.
Financial StatementsHarworth Group plc: Annual Report and Financial Statements 2022 166
Notes to the financial statements
for the year ended 31 December 2022
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 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
• 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.
Financial StatementsHarworth Group plc: Annual Report and Financial Statements 2022 167
1. Accounting policies continued
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.
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.
Financial StatementsHarworth Group plc: Annual Report and Financial Statements 2022 168
Notes to the financial statements
for the year ended 31 December 2022
2. Alternative Performance Measures (“APMs”) continued
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 AHFS 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 Equiniti
Share Plan Trustees Limited 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, AHFS 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.
Set out below is a reconciliation of the APMs used in these results to the statutory measures.
Financial StatementsHarworth Group plc: Annual Report and Financial Statements 2022 169
2. Alternative Performance Measures (“APMs”) continued
EPRA Net Asset Measures
EPRA introduced a new set of Net Asset Value metrics in 2020: EPRA Net Reinstatement Value (“NRV”), EPRA Net Tangible Assets
(“NTA”) and EPRA NDV. While the Group uses only EPRA NDV as a key APM, the EPRA Best Practices Recommendations guidelines
require companies to report all three EPRA NAV metrics and reconcile them to IFRS. These disclosures are provided below.
Net assets
Cumulative unrealised gains on development properties
Cumulative unrealised gains on AHFS
Cumulative unrealised gains on overages
Deferred tax liabilities (IFRS)
Notional deferred tax on unrealised gains
Deferred tax liabilities @ 50%
Mark to market valuation of financial instruments
Purchaser costs
Number of shares used for per share calculations
Per share
Net assets
Cumulative unrealised gains on development properties
Cumulative unrealised gains on AHFS
Cumulative unrealised gains on overages
Deferred tax liabilities (IFRS)
Notional deferred tax on unrealised gains
Deferred tax liabilities @ 50%
Mark to market valuation of financial instruments
Purchaser costs
Number of shares used for per share calculations
Per share
31 December 2022
EPRA NDV
£’000
602,664
33,852
–
EPRA NTA
£’000
602,664
33,852
–
EPRA NRV
£’000
602,664
33,852
–
7,500
–
(10,171)
–
–
–
633,845
7,500
24,141
–
–
–
46,307
714,464
322,612,685 322,612,685 322,612,685
221.5
7,500
24,141
–
(17,156)
–
–
651,001
196.5
201.8
31 December 2021
EPRA NDV
£’000
577,984
72,452
–
3,500
–
(16,483)
–
–
–
637,453
322,539,284
197.6
EPRA NTA
£’000
577,984
72,452
–
3,500
42,647
–
(29,565)
156
–
667,174
322,539,284
206.9
EPRA NRV
£’000
577,984
72,452
–
3,500
42,647
–
–
156
51,105
747,844
322,539,284
231.9
Financial StatementsHarworth Group plc: Annual Report and Financial Statements 2022
170
Notes to the financial statements
for the year ended 31 December 2022
2. Alternative Performance Measures (“APMs”) continued
1) Reconciliation to statutory measures
a. Revaluation (losses)/gains
(Decrease)/increase in fair value of investment properties
(Decrease)/increase in fair value of AHFS
Share of (loss)/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 on development properties
Unrealised losses on AHFS
Unrealised gains on overages
Revaluation (losses)/gains
b. Profit on sale
Profit on sale of investment properties
Profit on sale of AHFS
Profit on sale of development properties
Release of net realisable value provision on disposal of development properties
Profit on sale of overages
Amounts derived from statutory reporting
Less previously unrealised gains on development properties released on sale
Less previously unrealised gains on AHFS released on sale
Profit on sale
c. Value (losses)/gains
Revaluation (losses)/gains
Profit on sale
Value (losses)/gains
d. Total property sales
Revenue
Less revenue from other property activities
Less revenue from income generation activities
Add proceeds from sales of investment properties, AHFS and overages
Total property sales
e. Operating profit contributing to growth in EPRA NDV
Operating profit
Share of (loss)/profit of joint ventures
Unrealised gains on development properties
Unrealised losses on AHFS
Unrealised gains on overages
Less previously unrealised gains on development properties released on sale
Less previously unrealised gains on AHFS released on sale
Operating profit contributing to growth in EPRA NDV
Note
3
3
3
3
3
Year ended
31 December
2022
£’000
(19,725)
(199)
(7,487)
(7,074)
5,030
(29,455)
10,493
–
4,003
(14,959)
Year ended
31 December
2021
£’000
83,961
1,078
9,225
(1,574)
4,393
97,083
50,437
(15)
500
148,005
3
3
3
3
3
3
3
15
923
2,071
57,252
1,649
169
62,064
(49,093)
–
12,971
1,824
5,625
11,223
2,367
–
21,039
(7,833)
(760)
12,446
(14,959)
12,971
(1,988)
148,005
12,446
160,451
166,685
(10,478)
(31,251)
13,550
138,506
44,486
(7,487)
10,493
–
4,003
(49,093)
–
2,402
109,884
(14,799)
(28,773)
41,956
108,268
121,927
9,225
50,437
(15)
500
(7,833)
(760)
173,481
Financial StatementsHarworth Group plc: Annual Report and Financial Statements 2022
171
2. Alternative Performance Measures (“APMs”) continued
f. Portfolio Value
Land and buildings (included within property, plant and equipment)
Investment properties
Investments in joint ventures
AHFS
Development properties (included within inventories)
Amounts derived from statutory reporting
Cumulative unrealised gains on development properties as at year end
Cumulative unrealised gains on overages as at year end
Portfolio value
g. Net debt
Gross borrowings
Cash
Net debt
h. Net loan to portfolio value (%)
Net debt
Portfolio value
Net loan to portfolio value (%)
i. 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 (%)
j. Gross loan to portfolio value (%)
Gross borrowings
Portfolio value
Gross loan to portfolio value (%)
k. 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 (%)
Note
14
15
18
16
As at
31 December
2022
£’000
500
400,363
29,828
59,790
204,952
695,433
33,852
7,500
736,785
As at
31 December
2021
£’000
635
478,355
36,131
1,925
172,701
689,747
72,452
3,500
765,699
20
(59,978)
11,583
(48,395)
(37,781)
12,037
(25,744)
(48,395)
736,785
6.6%
(25,744)
765,699
3.4%
(48,395)
230,133
21.0%
(25,744)
290,277
8.9%
(59,978)
736,785
8.1%
(37,781)
765,699
4.9%
(59,978)
230,133
26.1%
(37,781)
290,277
13.0%
14
20
20
14
l. Number of shares used for per share calculations
Number of shares in issue
Less Employee Benefit Trust and Equiniti Share Plan Trustees Limited held shares (own shares)
Number of shares used for per share calculations
26 323,051,124
(438,439)
26
26 322,612,685
322,724,566
(185,282)
322,539,284
m. Net Asset Value (NAV) per share
NAV £’000
Number of shares used for per share calculations
NAV per share (p)
602,664
26 322,612,685
186.8
577,984
322,539,284
179.2
Financial StatementsHarworth Group plc: Annual Report and Financial Statements 2022
172
Notes to the financial statements
for the year ended 31 December 2022
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 overages
Notional deferred tax on unrealised gains
EPRA NDV
b. EPRA NDV per share (p)
EPRA NDV £’000
Number of shares used 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
Note
As at
31 December
2022
£’000
602,664
33,852
7,500
(10,171)
633,845
As at
31 December
2021
£’000
577,984
72,452
3,500
(16,483)
637,453
633,845
26 322,612,685
196.5
637,453
322,539,284
197.6
197.6
196.5
(1.1)
(0.6%)
1.2
0.1
0.1%
160.0
197.6
37.6
23.5%
1.8
39.4
24.6%
(48,395)
633,845
7.6%
(25,744)
637,453
4.0%
Financial StatementsHarworth Group plc: Annual Report and Financial Statements 2022 173
3. Segmental Information
Segmental Income Statement
31 December 2022
Revenue (1)
Cost of sales
Gross profit (2)
Administrative expenses
Other gains/(losses) (3)
Other operating expense
Operating profit/(loss)
Finance costs
Finance income
Share of loss of joint ventures
Profit/(loss) before tax
(1) Revenue
Capital Growth
Sale of
Development
Properties
£’000
124,956
(68,099)
56,857
–
–
–
56,857
–
–
–
56,857
Other
Property
Activities
£’000
10,478
(6,305)
4,173
(4,123)
17,788
–
17,838
(168)
227
(4,317)
13,580
Income
Generation
£’000
31,251
(8,888)
22,363
(1,877)
(34,549)
–
(14,063)
–
–
(3,170)
(17,233)
Central
£’000
–
–
–
(16,090)
–
(56)
(16,146)
(6,199)
–
–
(22,345)
Revenue is analysed as follows:
Sale of development properties
Revenue from PPAs
Build-to-suit development revenue
Rent, service charge and royalties revenue
Revenue from coal fines
Other revenue
(2) 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 previous net realisable value provision on
disposal of development properties
(3) Other gains/(losses)
Other gains/(losses) are analysed as follows:
Increase/(decrease) in fair value of investment
properties
Decrease in the fair value of AHFS
Profit on sale of investment properties
(Loss)/profit on sale of AHFS
Profit on sale of overages
124,956
–
–
–
–
–
–
124,956
5,810
4,215
426
–
27
10,478
–
–
–
28,151
2,113
987
31,251
–
57,252
(7,074)
5,030
1,649
56,857
4,173
–
22,363
–
–
–
–
–
–
4,173
–
22,363
–
–
–
–
–
–
17,958
(199)
76
(216)
169
17,788
(37,683)
–
847
2,287
–
(34,549)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Total
£’000
166,685
(83,292)
83,393
(22,090)
(16,761)
(56)
44,486
(6,367)
227
(7,487)
30,859
124,956
5,810
4,215
28,577
2,113
1,014
166,685
26,536
57,252
(7,074)
5,030
1,649
83,393
(19,725)
(199)
923
2,071
169
(16,761)
Financial StatementsHarworth Group plc: Annual Report and Financial Statements 2022
174
Notes to the financial statements
for the year ended 31 December 2022
3. Segmental Information continued
Segmental Balance Sheet
31 December 2022
Non-current assets
Property, plant and equipment
Right of use assets
Other receivables
Investment properties
Investments in joint ventures
Current assets
Inventories
Trade and other receivables
AHFS
Cash and cash equivalents
Total assets
Capital
Growth
£’000
Income
Generation
£’000
Central
£’000
Total
£’000
–
–
4,013
164,533
16,462
185,008
216,393
41,287
2,627
–
260,307
445,315
–
–
–
235,830
13,366
249,196
–
14,913
57,163
–
72,076
321,272
600
254
–
–
–
854
–
458
–
11,583
12,041
12,895
600
254
4,013
400,363
29,828
435,058
216,393
56,658
59,790
11,583
344,424
779,482
Financial liabilities and derivative financial instruments are not allocated to the reporting segments as they are managed and measured at
a Group level.
Financial StatementsHarworth Group plc: Annual Report and Financial Statements 2022
175
3. Segmental Information continued
Segmental Income Statement
31 December 2021
Revenue (1)
Cost of sales
Gross profit (2)
Administrative expenses
Other gains/losses (3)
Other operating expense
Operating profit/(loss)
Finance costs
Finance income
Share of profit of joint ventures
Profit/(loss) before tax
(1) Revenue
Capital Growth
Sale of
Development
Properties
£’000
66,312
(49,903)
16,409
–
–
–
16,409
–
–
–
16,409
Other
Property
Activities
£’000
14,799
(3,169)
11,630
(3,365)
57,483
–
65,748
–
172
4,524
70,444
Income
Generation
£’000
28,773
(8,113)
20,660
(2,130)
35,005
–
53,535
–
–
4,701
58,236
Central
£’000
–
–
–
(13,707)
–
(58)
(13,765)
(4,100)
10
–
(17,855)
Revenue is analysed as follows:
Sale of development properties
Build-to-suit development revenue
Rent, service charge and royalties revenue
Revenue from coal fines
Other revenue
(2) 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 previous net realisable value provision on
disposal of development properties
(3) Other gains/(losses)
Other gains/(losses) are analysed as follows:
Increase in fair value of investment properties
Increase in fair value of AHFS
Profit/(loss) on sale of investment properties
Profit on sale of AHFS
66,312
–
–
–
–
66,312
–
2,544
242
–
12,013
14,799
–
–
26,383
622
1,768
28,773
–
11,223
(1,574)
4,393
2,367
16,409
11,630
–
20,660
–
–
–
–
–
–
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
66,312
2,544
26,625
622
13,781
109,884
32,290
11,223
(1,574)
4,393
2,367
48,699
83,961
1,078
1,824
5,625
92,488
Financial StatementsHarworth Group plc: Annual Report and Financial Statements 2022
176
Notes to the financial statements
for the year ended 31 December 2022
3. Segmental Information continued
Segmental Balance Sheet
31 December 2021
Non-current assets
Property, plant and equipment
Right of use assets
Other receivables
Investment properties
Investments in joint ventures
Current assets
Inventories
Trade and other receivables
AHFS
Cash and cash equivalents
Total assets
Capital
Growth
£’000
Income
Generation
£’000
Central
£’000
Total
£’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
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.
4. Operating profit
Operating profit before tax is stated after charging/(crediting):
Net realisable value provision on development properties
Staff costs
Depreciation of property, plant and equipment and right of use assets
Year ended
31 December
2022
£’000
Year ended
31 December
2021
£’000
395
13,690
152
(5,186)
11,626
234
Note
16
5
12, 13
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
2022
Number
107
Year ended
31 December
2021
Number
85
Year ended
31 December
2022
Number
3
Year ended
31 December
2021
Number
3
Group
Company
Year ended
31 December
2022
£’000
10,825
703
1,383
779
13,690
Year ended
31 December
2021
£’000
9,741
546
800
539
11,626
Year ended
31 December
2022
£’000
1,399
157
278
50
1,884
Year ended
31 December
2021
£’000
2,357
116
95
41
2,609
Financial StatementsHarworth Group plc: Annual Report and Financial Statements 2022
5. Employee information continued
Key management remuneration relates to the members of the Investment Committee:
Short term employee benefits
Post employment benefits
Share-based payments
177
Group
Year ended
31 December
2022
£’000
4,514
213
490
5,217
Year ended
31 December
2021
£’000
4,278
153
463
4,894
Detailed information relating to Directors’ remuneration is disclosed in the Directors’ remuneration report on pages 115 to 133 and forms
part of these financial statements.
6. Finance costs and finance income
Total finance income
Finance costs
– Bank interest
– Facility fees
– Amortisation of up-front fees
– Acceleration of amortisation of up-front fees following extinguishment of Facility
– Other interest
Total finance costs
Net finance costs
Year ended
31 December
2022
£’000
227
Year ended
31 December
2021
£’000
182
(2,206)
(1,791)
(685)
(599)
(1,086)
(6,367)
(6,140)
(2,795)
(745)
(362)
–
(198)
(4,100)
(3,918)
During the year no interest has been capitalised in investment or development properties (2021: £nil).
In March 2022 the Group entered into a new revolving credit facility replacing the existing facility under different lending terms. This
transaction met the definition of a loan extinguishment and led to an acceleration of amortisation on the up-front fees of the old facility.
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 auditors and its associates for other services:
– The audit of the Company’s subsidiaries pursuant to legislation
Year ended
31 December
2022
£’000
Year ended
31 December
2021
£’000
330
42
372
315
30
345
Financial StatementsHarworth Group plc: Annual Report and Financial Statements 2022
178
Notes to the financial statements
for the year ended 31 December 2022
8. Tax
Analysis of tax (charge)/credit in the year
Current tax
Current year
Adjustment in respect of prior periods
Total current tax charge
Deferred tax
Current year
Adjustment in respect of prior periods
Difference between current tax rate and rate of deferred tax
Total deferred tax credit/(charge)
Tax charge
Other comprehensive income items
Deferred tax – current year
Total
Year ended
31 December
2022
£’000
Year ended
31 December
2021
£’000
(21,650)
(118)
(21,768)
13,504
409
4,834
18,747
(3,021)
(6,747)
372
(6,375)
(15,974)
(162)
(10,733)
(26,869)
(33,244)
(101)
(101)
(137)
(137)
The tax charge for the year is lower (2021: higher) than the standard rate of corporation tax in the UK of 19% (2021: 19%). The differences
are explained below:
Profit before tax
Profit before tax multiplied by rate of corporation tax in the UK of 19% (2021: 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 (losses)/gains
Share of (loss)/profit of joint ventures
Difference between current tax rate and rate of deferred tax
Share options
Total tax charge
Year ended
31 December
2022
£’000
30,859
(5,863)
Year ended
31 December
2021
£’000
127,234
(24,174)
409
(118)
(127)
(755)
(1,423)
4,834
22
(3,021)
(162)
372
(291)
68
1,753
(10,733)
(77)
(33,244)
The difference between current tax rate and rate of deferred tax of £4.8m (2021: £10.7m) relates to the unwind of balances previously
recognised at 25% and the reduction of the deferred tax liabilities recognised at 25% as a result of in year movements. The 2021
reconciling item of £10.7m is reflective of the enacted rate change from 19% to 25%.
At 31 December 2022, the Group had a current tax liability of £7.0m (2021: £2.9m).
The Company has recognised a current tax asset in 2022 of £0.5m (2021: £nil).
Deferred tax
The following is the analysis of deferred tax liabilities presented in the consolidated balance sheet:
Deferred tax liabilities
Deferred tax assets
As at
31 December
2022
£’000
(25,980)
1,839
(24,141)
As at
31 December
2021
£’000
(46,988)
4,341
(42,647)
Financial StatementsHarworth Group plc: Annual Report and Financial Statements 2022
179
8. Tax continued
The movements on the deferred income tax account were as follows:
At 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 and 1 January 2022
Recognised in the consolidated income statement
Recognised in the consolidated statement of comprehensive income
Recognised in the consolidated statement of equity
At 31 December 2022
Investment
Properties
£’000
(23,159)
(23,829)
–
–
(46,988)
21,008
–
–
(25,980)
Tax
Losses
£’000
5,774
(3,216)
–
–
2,558
(2,558)
–
–
–
Other
Temporary
Differences
£’000
1,618
176
(137)
126
1,783
297
(101)
(140)
1,839
Total
£’000
(15,767)
(26,869)
(137)
126
(42,647)
18,747
(101)
(140)
(24,141)
There is deferred tax on UK corporation tax losses carried forward of £nil (2021: £2.6m).
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 mixture of 25% or a blended rate (2021: mixture of 19%, 25% and a blended rate)
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 £8.1m at 31 December 2022 (2021: £5.3m) have not been recognised owing to the uncertainty as to their
recoverability.
The Company has recognised a deferred tax asset in 2022 of £0.1m (2021: £0.2m).
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 £6.4m (2021: £8.4m) and the total
comprehensive expense for the financial year was £6.2m (2021: £8.2m). The distributable reserves of the Company are £101.6m
(2021: £111.1m).
10. Dividends
Interim dividend of 0.404p per share for the six months ended 30 June 2022
Final dividend of 0.845p per share for the year ended 31 December 2021
Interim dividend of 0.367p per share for the six months ended 30 June 2021
Final dividend of 1.466p per share for the year ended 31 December 2020
Year ended
31 December
2022
£’000
1,305
2,727
–
–
4,032
Year ended
31 December
2021
£’000
–
–
1,184
4,729
5,913
In addition to the interim dividend of 0.404p, the Board has determined that it is appropriate for a final dividend of 0.929p (2021:
0.845p) to be paid per share, bringing the total dividend for the year to 1.333p (2021: 1.212p). The recommended 2022 final dividend
and 2022 total dividend represent a 10% increase in line with the Group’s policy.
The 2020 final dividend was increased to reflect the cancelled final 2019 dividend excluding which, the 2020 dividend totalled 1.102p
per share.
There is no change to the current dividend policy to continue to grow dividends by 10% each year.
Financial StatementsHarworth Group plc: Annual Report and Financial Statements 2022
180
Notes to the financial statements
for the year ended 31 December 2022
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 Company (£’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 per share calculation
Diluted earnings per share (pence)
Year ended
31 December
2022
27,838
322,571,783
8.6
326,317,353
8.5
Year ended
31 December
2021
93,990
322,493,443
29.1
325,059,137
28.9
The difference between the weighted average number of shares used for the basic and diluted earnings per share calculation is due to
the effect of share options that are dilutive.
12. Property, plant and equipment
Group
Cost or fair value
As at 1 January 2021
Additions
Decrease in fair value
As at 31 December 2021 and 1 January 2022
Additions
Decrease in fair value
As at 31 December 2022
Depreciation
As at 1 January 2021
Depreciation charge
As at 31 December 2021 and 1 January 2022
Depreciation charge
As at 31 December 2022
Net book value
Net book value at 31 December 2022
Net book value at 31 December 2021
Land and
Buildings
£’000
835
–
(200)
635
–
(133)
502
Office
Equipment
£’000
493
32
–
525
110
–
635
–
–
–
–
–
502
635
(321)
(158)
(479)
(58)
(537)
98
46
Total
£’000
1,328
32
(200)
1,160
110
(133)
1,137
(321)
(158)
(479)
(58)
(537)
600
681
At 31 December 2022, the Group had not entered into any contractual commitments for the acquisitions of property, plant and
equipment (2021: £nil).
Financial StatementsHarworth Group plc: Annual Report and Financial Statements 2022
13. Right of use assets
Group
Right of use assets
Buildings
Vehicles
Lease liabilities
Current
Non-current
Additions to right of use assets during 2022 were £0.2m (2021: £nil).
Group
Depreciation charge of right of use assets
Buildings
Vehicles
181
Year ended
31 December
2022
£’000
229
25
254
Year ended
31 December
2021
£’000
74
20
94
82
172
254
42
52
94
Year ended
31 December
2022
£’000
77
17
94
Year ended
31 December
2021
£’000
44
32
76
The total cash outflow for leases in 2022 was £0.1m (2021: £0.1m).
The Group leases a number of offices and vehicles. Rental contracts are typically made for fixed periods of three to five 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.
Financial StatementsHarworth Group plc: Annual Report and Financial Statements 2022
182
Notes to the financial statements
for the year ended 31 December 2022
14. Investment properties
Investment properties at 31 December 2022 and 31 December 2021 have been measured at fair value. The Group holds five categories
of investment property, being Agricultural Land, Natural Resources, the Investment Portfolio, Major Developments and Strategic Land in
the UK, which sit within the operating segments of Income Generation and Capital Growth.
At 1 January 2021
Direct acquisitions
Subsequent expenditure
Disposals
(Decrease)/increase in fair value
Transfers between divisions
Net transfers from development
properties
Net transfer to AHFS
At 31 December 2021
Direct acquisitions
Subsequent expenditure
Disposals
(Decrease)/Increase in fair value
Transfers between divisions
Transfers from/(to) development
properties
Transfer to AHFS
At 31 December 2022
Income Generation
Capital Growth
Agricultural
Land
£’000
6,135
–
12
–
(151)
115
Natural
Resources
£’000
33,098
–
239
–
(1,912)
–
Investment
Portfolio
£’000
214,906
13,502
1,988
(2,497)
30,804
6,101
Major
Developments
£’000
27,550
–
8,956
(11,207)
21,609
(6,626)
–
(699)
5,412
–
–
–
282
–
–
–
5,694
–
(874)
30,551
–
12
(860)
(163)
–
–
(9,814)
19,726
–
(5,078)
259,726
–
2,822
–
(37,802)
42,250
–
(56,589)
210,407
5,711
(509)
45,483
–
40,928
–
(5,357)
(42,250)
5,440
–
44,244
Strategic
Land
£’000
91,390
14,274
6,877
(986)
33,611
410
(5,000)
(3,394)
137,183
11,863
9,344
–
23,315
–
Total
£’000
373,079
27,776
18,072
(14,690)
83,961
–
711
(10,554)
478,355
11,863
53,106
(860)
(19,725)
–
(60,513)
(900)
120,292
(55,073)
(67,303)
400,363
Subsequent expenditure is recorded net of government grant receipts of £0.9m (2021: £nil).
Included within investment properties (agricultural land) is a provision of £0.2m (2021: £0.3m) 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 £5.4m (2021: £5.7m) of development property was re-categorised as investment property to reflect a change in use.
During the year £60.5m of investment property was re-categorised to development properties (2021: £5.0m). 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.
Financial StatementsHarworth Group plc: Annual Report and Financial Statements 2022 183
14. Investment properties continued
The fair value disclosures for investment properties are presented on a combined basis along with those properties in AHFS as
summarised in the following table:
Investment properties
Properties included within AHFS (Note 18)
Total properties (excluding
development properties)
Income Generation
Capital Growth
Agricultural
Land
£’000
5,694
–
Natural
Resources
£’000
19,726
574
Investment
Portfolio
£’000
210,407
56,589
Major
Developments
£’000
44,244
–
Strategic
Land
£’000
120,292
2,627
Total
£’000
400,363
59,790
5,694
20,300
266,996
44,244
122,919
460,153
Market value as estimated by the external valuer
Capital incentives and rent-free periods included within other receivables
Contingent interest in adjoining land included within external valuations
Other adjustments
Fair value for financial purposes
Valuation process
Year ended
31 December
2022
£’000
470,150
(5,853)
(3,848)
(296)
460,153
Year ended
31 December
2021
£’000
486,433
(4,820)
(2,687)
(571)
478,355
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 2022 (2021: none).
Financial StatementsHarworth Group plc: Annual Report and Financial Statements 2022 184
Notes to the financial statements
for the year ended 31 December 2022
14. Investment properties continued
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, it 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 a discounted cash flow for the operating life of the asset with regard to the
residual land value.
Investment Portfolio
The industrial & logistics investment 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.
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 (£’000)
Aggregate ERV (£’000)
Equivalent rental yield %
As at
31 December
2022
£’000
272,850
20,388
7.8
As at
31 December
2021
£’000
264,547
16,794
6.8
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 2022:
Change in net income by 5%
Change in portfolio net initial yield by 50 basis points
2022
2021
Increase in
Sensitivity
Value
£’000
13,568
(24,934)
Decrease in
Sensitivity
Value
£’000
(13,568)
25,980
Increase in
Sensitivity
Value
£’000
13,260
(23,206)
Decrease in
Sensitivity
Value
£’000
(13,260)
25,880
The property rental income earned by the Group from its occupied investment property, all of which is leased out under operating leases
amounted to £19.9m (2021: £19.5m). Direct operating expenses arising on investment property generating rental income in the year
amounted to £6.4m (2021: £6.6m).
The bank and other loans are secured by way of fixed equitable charges over investment and development properties.
Financial StatementsHarworth Group plc: Annual Report and Financial Statements 2022
185
14. Investment properties continued
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 2022
Market
Sales price
value
(£’000)
per sq. ft
43,941 £125–£138
Build cost
per sq. ft
£67–£93
As at 31 December 2021
Profit
Margin
%
15%
Market
Sales price
value
(£’000)
per sq. ft
44,590 £122–£127
Build cost
per sq. ft
£58–£72
Profit
Margin
%
15%
Major developments
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.
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 2022:
Change in sales price of 5%
Change in build cost of 5%
Strategic land
2022
2021
Increase in
Sensitivity
Value
£’000
7,999
(4,266)
Decrease in
Sensitivity
Value
£’000
(6,439)
5,826
Increase in
Sensitivity
Value
£’000
5,967
(4,550)
Decrease in
Sensitivity
Value
£’000
(5,967)
4,611
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 2022
As at 31 December 2021
Agricultural
Land
£’000
5,845
3
Natural
Resources
£’000
20,706
21
Strategic
Land
£’000
126,808
68
Agricultural
Land
£’000
5,560
3
Natural
Resources
£’000
31,705
20
Strategic
Land
£’000
140,031
81
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 2022:
Change in land value per acre by 5%
Agricultural Land
Natural Resources
Strategic Land
2022
2021
Increase in
Sensitivity
Value
£’000
292
1,035
6,340
Decrease in
Sensitivity
Value
£’000
(292)
(1,035)
(6,340)
Increase in
Sensitivity
Value
£’000
278
1,585
7,002
Decrease in
Sensitivity
Value
£’000
(278)
(1,585)
(7,002)
Financial StatementsHarworth Group plc: Annual Report and Financial Statements 2022
186
Notes to the financial statements
for the year ended 31 December 2022
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
As at
31 December
2022
£’000
As at
31 December
2021
£’000
209,300
564
209,864
208,974
326
209,300
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.
The Company holds investments in the following subsidiaries as at 31 December 2022:
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 Residential Development Limited
Harworth Estates Warwickshire Limited
Harworth Surface Water Management (Bardon) 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
Harworth No 1 Limited
Benthall Grange (Ironbridge) Management Company Limited
Moss Nook (St Helens) Management Company Limited
Coalfield Estates 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
Trading
Trading
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Liquidation
Proportion
of nominal
value of
issued share
capital
held by the
Company %
100
100
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
100
100
100
100
Held directly
or indirectly
by the
Company
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
Indirect
Indirect
Indirect
Direct
Description of
shares held
Ordinary
Ordinary
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
Limited by guarantee
Ordinary
Financial StatementsHarworth Group plc: Annual Report and Financial Statements 2022
187
15. Investments continued
Company name
Harworth Estates Group Limited
Harworth No.3 Limited
Waverley Square Limited
Harworth Guarantee Co. Limited
Activity
Liquidation
Liquidation
Liquidation
Liquidation
Description of
shares held
Ordinary
Ordinary
Ordinary
Limited by guarantee
Proportion
of nominal
value of
issued share
capital
held by the
Company %
100
100
100
100
Held directly
or indirectly
by the
Company
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. Control of Logistics North MC Limited is via ownership of voting
rights equal to 75% or more and the right to appoint and remove directors.
The following entities were incorporated during the year:
• Harworth Estates Residential Development Limited on 25 May 2022
• Harworth Surface Water Management (Bardon) Limited on 9 June 2022
• Harworth No 1 Limited on 12 October 2022
• Benthall Grange (Ironbridge) Management Company Limited on 20 October 2022
Konect Management Company Limited was disposed of on 9 September 2022.
The following entities were in the process of liquidation during the year, and were fully dissolved in January 2023:
Coalfield Estates Limited
Harworth Guarantee Co. Limited
Harworth Estates Group Limited
Harworth No.3 Limited
Financial StatementsHarworth Group plc: Annual Report and Financial Statements 2022 188
Notes to the financial statements
for the year ended 31 December 2022
15. Investments continued
Investment in joint ventures
At 1 January
Investments in joint ventures
Distributions from joint ventures
Share of (losses)/profits of joint ventures
Impairment
At 31 December
The Group holds investments in the following joint ventures as at 31 December 2022:
Company name
Multiply Logistics North Holdings Limited
Multiply Logistics North LP
Crimea Land Mansfield LLP
Northern Gateway Development Vehicle LLP
The Aire Valley Land LLP
Year ended
31 December
2022
£’000
36,131
1,849
(665)
(7,487)
–
29,828
Year ended
31 December
2021
£’000
25,316
1,624
(34)
9,853
(628)
36,131
Proportion
of nominal
value of
issued share
capital
held by the
Group %
20
20
50
50
50
Activity
Trading
Trading
Trading
Trading
Trading
Description
of shares held
Ordinary
Partnership
Partnership
Partnership
Partnership
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.
Aggregate information of the Group’s share of assets, liabilities and results of joint ventures, that are individually material are:
Investment property
Current assets
Total assets
Current liabilities
Equity
Group’s share in equity (50%)
Group’s carrying amount of the investment
Included within current assets are cash and cash equivalents of £0.2m (2021: £0.2m)
The Aire Valley Land LLP
As at
31 December
2022
£’000
26,350
306
26,656
(180)
26,476
13,238
13,238
As at
31 December
2021
£’000
35,000
248
35,248
(164)
35,084
17,542
17,542
Financial StatementsHarworth Group plc: Annual Report and Financial Statements 2022
15. Investments continued
Investment property
Current assets
Total assets
Current liabilities
Equity
Group’s share in equity (20%)
Group’s carrying amount of the investment
189
Multiply Logistics North LP
As at
31 December
2022
£’000
62,840
5,495
68,335
(1,505)
66,830
13,366
13,366
As at
31 December
2021
£’000
83,955
3,600
87,555
(1,545)
86,010
17,202
17,202
Included within current assets are cash and cash equivalents of £2.0m (2021: £2.3m). Included within current liabilities are accruals and
deferred income of £0.9m (2021: £1.0m) and other taxes payable of £0.5m (2021: £0.2m)
Revenue
Cost of sales
Gross profit/(loss)
Administrative expenses
Other (losses)/gains
Finance costs
(Loss)/profit for the year
Group’s share of (loss)/profit for the year (50%)
Revenue
Cost of sales
Gross profit
Administrative expenses
Other (losses)/gains
(Loss)/profit for the year
Group’s share of (loss)/profit for the year (20%)
The Aire Valley Land LLP
Year ended
31 December
2022
£’000
60
(7)
53
(11)
(8,650)
–
(8,608)
(4,304)
Year ended
31 December
2021
£’000
–
(58)
(58)
(32)
9,184
(2)
9,092
4,546
Multiply Logistics North LP
Year ended
31 December
2022
£’000
3,880
(125)
3,755
(160)
(19,450)
(15,855)
(3,171)
Year ended
31 December
2021
£’000
2,405
(170)
2,235
(760)
25,155
26,630
5,326
Financial StatementsHarworth Group plc: Annual Report and Financial Statements 2022 190
Notes to the financial statements
for the year ended 31 December 2022
15. Investments continued
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
Equity
Group share in equity (50%)
Group’s carrying amount of the investment
Loss for the year
Group’s share of losses for the year (50%)
As at
31 December
2022
£’000
–
7,088
7,088
(640)
6,448
3,224
3,224
(23)
(12)
As at
31 December
2021
£’000
750
2,142
2,892
(118)
2,774
1,387
1,387
(38)
(19)
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.
16. Inventories
Development properties
Planning promotion agreements
Options
Finished goods
As at
31 December
2022
£’000
204,952
2,994
8,447
–
216,393
As at
31 December
2021
£’000
172,701
3,865
1,154
102
177,822
The total cost of inventory recognised as an expense within cost of sales in the year is £68.4m (2021: £50.3m) and comprised of:
£67.7m (2021: £54.9m) relating to the sale of development properties; a charge of £0.4m (2021: £5.2m credit) net realisable value
provision against development properties; a charge of £0.1m (2021: £0.1m) in relation to planning promotion agreements; and a charge
of £0.2m (2021: £0.5m) relating to finished goods stocks. Finished goods are stated after a provision of £nil (2021: £0.5m).
The movement in development properties is as follows:
At 1 January
Acquisitions
Subsequent expenditure
Disposals
Net realisable value (charge)/release
Transfers from/(to) investment properties
At 31 December
Subsequent expenditure is recorded net of government grant receipts of £2.7m (2021: £1.9m).
As at
31 December
2022
£’000
172,701
–
35,430
(57,857)
(395)
55,073
204,952
As at
31 December
2021
£’000
177,712
40
29,482
(39,008)
5,186
(711)
172,701
Financial StatementsHarworth Group plc: Annual Report and Financial Statements 2022
16. Inventories continued
The movement in net realisable value provision is as follows:
At 1 January
Charge for the year
Released on disposals
Reversal of previous net realisable provision
Released on transfer to investment property
At 31 December
191
As at
31 December
2022
£’000
12,154
7,074
(5,030)
(1,649)
(2,773)
9,776
As at
31 December
2021
£’000
17,340
1,574
(2,367)
(4,393)
–
12,154
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.
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
Amounts owed by subsidiary undertakings (Note 30)
Group
Company
As at
31 December
2022
£’000
31,566
(28)
31,538
22,379
1,062
1,679
–
56,658
As at
31 December
2021
£’000
24,078
(27)
24,051
23,672
1,012
1,020
–
49,755
As at
31 December
2022
£’000
–
–
–
144
43
–
110
297
As at
31 December
2021
£’000
–
–
–
9
7
–
27,735
27,751
3,119
894
–
4,013
4,285
1,084
–
5,369
–
–
28,647
28,647
–
–
–
–
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 trade receivables is £31.4m (2021: £22.9m) of deferred consideration on the sale of investment and development
property.
The non-current trade receivable of £3.1m (2021: £4.3m) relates to deferred consideration on the sale of development properties due in
more than one year. Other receivables include debtors from agent managed properties of £7.3m (2021: £7.1m), customer retentions of
£4.1m (2021: £6.1m) and rent-free and capital incentives of £5.9m (2021: £4.8m).
The maximum exposure to credit risk at the reporting date is the carrying value of each class of receivables as disclosed in Note 22.
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% (2021:
SONIA + 2%).
Financial StatementsHarworth Group plc: Annual Report and Financial Statements 2022
192
Notes to the financial statements
for the year ended 31 December 2022
17. Trade and other receivables continued
Group
Movements on the Group provisions for impairment of trade receivables are as follows:
At the beginning of the year
(Provided for)/released in the year
At the end of the year
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
2022
£’000
(27)
(1)
(28)
As at
31 December
2021
£’000
(308)
281
(27)
As at
31 December
2022
£’000
31,489
49
28
(28)
31,538
As at
31 December
2021
£’000
21,914
2,137
27
(27)
24,051
As at
31 December
2022
£’000
3
–
46
49
As at
31 December
2021
£’000
–
2,054
83
2,137
As at
31 December
2022
£’000
28
–
28
As at
31 December
2021
£’000
16
11
27
18. Assets Held For Sale
AHFS 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
Transferred to/from investment properties
Subsequent expenditure
(Decrease)/increase in fair value
Disposals
At 31 December
As at
31 December
2022
£’000
1,925
67,303
1
(199)
(9,240)
59,790
As at
31 December
2021
£’000
7,594
10,554
1
1,078
(17,302)
1,925
Financial StatementsHarworth Group plc: Annual Report and Financial Statements 2022
193
Group
Company
As at
31 December
2022
£’000
11,583
As at
31 December
2021
£’000
12,037
As at
31 December
2022
£’000
1,433
As at
31 December
2021
£’000
2,909
19. Cash
Cash
20. Borrowings
Current:
Secured – other loans
As at
31 December
2022
£’000
As at
31 December
2021
£’000
(3,067)
(3,067)
(34,558)
(22,353)
(56,911)
(59,978)
–
–
(33,318)
(4,463)
(37,781)
(37,781)
As at
31 December
2022
£’000
As at
31 December
2021
£’000
(1,413)
(20,940)
(3,067)
(25,420)
(34,558)
(59,978)
–
(1,572)
(2,891)
(4,463)
(33,318)
(37,781)
Non-current:
Secured – bank loans
Secured – infrastructure and direct development loans
Total borrowings
Loans are stated after deduction of unamortised borrowing costs of £2.0m (2021: £1.2m).
Infrastructure Loans
Scrudf Limited Partnership
Merseyside Pension Fund
North West Evergreen Limited Partnership
Total infrastructure loans
Bank loan
Total borrowings
Rockingham
Bardon Hill
Plot H Logistics North, Bolton
In March 2022, the Group entered into a new five year £200m RCF, with a £40m uncommitted accordion option, which replaced the
previous RCF which had been in place since 2015. NatWest and Santander continue to provide bank borrowings in this new RCF and
have been joined by HSBC.
The RCF is subject to financial and other covenants. The bank borrowings are secured by way of a floating debenture over assets not
otherwise used as security under specific infrastructure loans. Proceeds from and repayments of bank loans are reflected gross in the
Consolidated Statement of Cash Flows and reflect timing of utilisation of the RCF.
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 they are repaid on agreed dates or when disposals are made from the sites.
Financial StatementsHarworth Group plc: Annual Report and Financial Statements 2022
194
Notes to the financial statements
for the year ended 31 December 2022
21. Trade and other payables
Current
Trade payables
Amounts owed to subsidiary undertakings (Note 30)
Taxation and social security
Other creditors
Accruals
Deferred income
Group
Company
As at
31 December
2022
£’000
2,361
–
513
6,611
65,338
7,676
82,499
As at
31 December
2021
£’000
2,104
–
14,394
4,102
63,166
10,550
94,316
As at
31 December
2022
£’000
28
34,481
98
187
1,553
–
36,347
As at
31 December
2021
£’000
54
24,205
190
26
1,812
–
26,287
The amounts owed by the Company to subsidiary undertakings are repayable on demand. Interest is payable at SONIA + 2% (2021:
SONIA + 2%).
Group
Company
As at
31 December
2022
£’000
As at
31 December
2021
£’000
As at
31 December
2022
£’000
As at
31 December
2021
£’000
Amounts in accruals relating to parcels of land that have been sold but
where infrastructure costs are yet to be incurred
Deferred income includes £4.3m (2021: £4.1m) in relation to rental income.
Non-current liabilities
48,595
48,781
–
–
Other creditors
Deferred income
Group
Company
As at
31 December
2022
£’000
1,925
894
2,819
As at
31 December
2021
£’000
4,540
1,146
5,686
As at
31 December
2022
£’000
–
–
–
As at
31 December
2021
£’000
–
–
–
22. Financial Instruments and derivatives
Throughout 2021 and until March 2022, the Group was party to a £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 previous 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 was ended when the Group entered into the new RCF.
The fair value of the interest rate swap at 31 December 2022 was £nil (2021: a liability of £0.2m).
During the year the following gain was recognised in the other comprehensive income statement in relation to the interest rate swap:
Gain on interest rate swap - cash flow hedge
As at
31 December
2022
£’000
156
As at
31 December
2021
£’000
670
The Group’s principal financial instruments include trade and other receivables, cash, interest bearing borrowings and trade and other
payables.
Financial StatementsHarworth Group plc: Annual Report and Financial Statements 2022
195
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 2022
As at 31 December 2021
Book value
£’000
Fair value
£’000
Book value
£’000
Fair value
£’000
11,583
57,930
59,978
76,235
11,583
57,930
59,978
76,235
12,037
53,092
37,781
85,608
12,037
53,092
37,781
85,608
As at 31 December 2022
As at 31 December 2021
Book value
£’000
Fair value
£’000
Book value
£’000
Fair value
£’000
1,433
28,901
1,433
28,901
2,909
27,744
2,909
27,744
36,249
36,249
26,097
26,097
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.
Changes in liabilities arising from financing activities
Borrowings at start of year
Repayments
Drawdowns
Interest expense
Interest paid
Borrowing costs
Amortisation of capitalised borrowing costs
Borrowings at end of year
Leases at start of year
Additions
Payments in respect of leases
Leases at end of year
Year ended
31 December
2022
£’000
37,781
(152,000)
173,850
3,392
(2,206)
(2,022)
1,283
59,978
Year ended
31 December
2022
£’000
94
251
(91)
254
Year ended
31 December
2021
£’000
83,882
(95,425)
49,900
2,992
(2,795)
(1,134)
361
37,781
Year ended
31 December
2021
£’000
179
–
(85)
94
Financial StatementsHarworth Group plc: Annual Report and Financial Statements 2022
196
Notes to the financial statements
for the year ended 31 December 2022
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 within defined trading 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 three (2021: two) infrastructure loans with an all in funding rate of between 2.2% and 5.9% (2021: between 3.0% and
5.9%), of these one loan (2021: one) has a fixed rate of interest. Based on the drawdown amounts at 31 December 2022, if the variable
interest rate changed by 50bps, the annual interest cost would increase or decrease by £0.2m.
Liquidity risk
The Group is subject to the risk that it will not have sufficient liquid resources to fund its on-going 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 2022 of £48.4m (2021: £25.7m). The Group used cash from operating activities and investing
activities for the year of £16.2m (2021: cash generated of £51.9m).
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 2022
Trade and other payables
Lease liability
Bank and other borrowings including interest payable
At 31 December 2021
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
74,310
82
3,067
83,766
42
–
1,925
63
22,353
3,456
28
–
–
109
34,558
1,084
24
37,781
–
–
–
–
–
–
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 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.
Financial StatementsHarworth Group plc: Annual Report and Financial Statements 2022
197
23. Financial risk management continued
The Group monitors capital on the basis of net debt to equity. Net debt is total debt less cash and at 31 December 2022 this was
£48.4m (2021: £25.7m).
The Group has in place a £200.0m revolving credit facility (“RCF”), with a £40m accordion (2021 £150.0m) as discussed in Note 20.
The facility is provided by Natwest, Santander and HSBC. The RCF is repayable in February 2027 (five year term) on a non-
amortising basis.
The facility is subject to financial covenants including minimum interest cover, maximum infrastructure debts as a percentage of property
value and gearing. The bank borrowings are secured by fixed equitable charges over development and investment properties.
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 £0.8m (2021: £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
2022
£’000
As at
31 December
2021
£’000
As at
31 December
2022
£’000
As at
31 December
2021
£’000
114
558
114
558
Contributions to the Blenkinsopp scheme of £0.2m were made by the Group during 2022 (2021: £0.2m). It is expected that
contributions of a similar amount will be paid in 2023. At December 2022, no contributions remained unpaid (2021: £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
As at
31 December
2022
£’000
4.90% p.a.
2.60% p.a.
3.15% p.a.
2.60% p.a.
25.00% of
pension at
a rate of
£9:£1
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
Financial StatementsHarworth Group plc: Annual Report and Financial Statements 2022
198
Notes to the financial statements
for the year ended 31 December 2022
24. Retirement benefit obligations continued
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
2022
£’000
As at
31 December
2021
£’000
19.2
22.5
20.5
24.2
19.3
22.6
20.7
24.2
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).
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
2022
£’000
1,989
(2,103)
(114)
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)
The Blenkinsopp scheme does not own any shares in the Company.
The amounts recognised in the Consolidated Income Statement are:
Expenses
Interest cost
Year ended
31 December
2022
£’000
(50)
(9)
(59)
Year ended
31 December
2021
£’000
(48)
(12)
(60)
A further credit of £0.3m (2021: £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 (loss)/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
Delegated solutions
Sterling liquidity fund
Other
Total
As at
31 December
2022
£’000
2,747
53
(883)
208
(86)
(50)
1,989
As at
31 December
2021
£’000
2,537
33
126
208
(48)
(109)
2,747
As at
31 December
2022
£’000
1,284
663
–
42
1,989
As at
31 December
2021
£’000
1,781
926
15
25
2,747
Financial StatementsHarworth Group plc: Annual Report and Financial Statements 2022
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 arising from changes in demographic assumptions
– Loss arising from changes in experience
– Gain 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 recognised in the year
At the end of the year
The duration of the defined benefit obligation is c.16 years (2021: c.17 years).
Cumulative actuarial gains and losses recognised in equity
At the start of the year
Net actuarial gain in the year
At the end of the year
Experience gains and losses
Actual (loss)/return on scheme assets excluding interest income
Remeasurements:
– Loss arising from changes in experience
– Gains arising from changes in financial assumptions
– Gains arising from changes in demographic assumptions
Net actuarial gain
199
As at
31 December
2022
£’000
(3,305)
(62)
As at
31 December
2021
£’000
(3,505)
(45)
16
(1)
1,163
86
(2,103)
10
(12)
138
109
(3,305)
As at
31 December
2022
£’000
(558)
(59)
208
295
(114)
As at
31 December
2021
£’000
(968)
(60)
208
262
(558)
As at
31 December
2022
£’000
(687)
295
(392)
As at
31 December
2021
£’000
(949)
262
(687)
Year ended
31 December
2022
£’000
(883)
Year ended
31 December
2021
£’000
126
(1)
1,163
16
295
(12)
138
10
262
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.
Financial StatementsHarworth Group plc: Annual Report and Financial Statements 2022 200
Notes to the financial statements
for the year ended 31 December 2022
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 0.5% (2021: 0.1%)
Change in price inflation (and associated assumptions) by 0.5% (2021: 0.1%)
Increase in life expectancy by 1 year
As at
31 December
2022
£’000
(115)
115
75
As at
31 December
2021
£’000
56
49
150
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. Due to a greater level of market volatility, the sensitivity of the change in discount rate and price
inflation has been calculated at 50bps for the current year in order to better reflect how markets could move over the short term. No
other 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, cash/liquidity funds and delegated solutions.
•
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. This scheme was discontinued in 2021.
• 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 129 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.
Financial StatementsHarworth Group plc: Annual Report and Financial Statements 2022
201
25. Share-based payments continued
The movements in the number of share options outstanding and their weighted average exercise prices are as follows:
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 year
Weighted average remaining contractual life
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
2022
1,067
–
(124)
–
943
943
5.26 years
2021
151,800
–
(136,469)
(14,264)
1,067
1,067
6.26 years
Weighted average
exercise price
2022
£0.00
n/a
£0.00
n/a
£0.00
£0.00
2021
£0.00
n/a
£0.00
£0.00
£0.00
£0.00
Number of shares
Weighted average
exercise price
2022
–
–
–
–
–
–
–
2021
456,101
–
(406,638)
(49,463)
–
–
–
Number of shares
2022
1,502,883
1,096,516
(186,650)
–
2,412,749
–
8.43 years
2021
921,769
664,339
(83,225)
–
1,502,883
–
8.66 years
Number of shares
2022
877,530
161,916
(80,357)
(64,707)
894,382
–
1.48 years
2021
865,055
175,063
(109,377)
(53,211)
877,530
–
2.03 years
2022
£0.00
n/a
n/a
n/a
n/a
n/a
2021
£0.00
n/a
£0.00
£0.00
n/a
n/a
Weighted average
exercise price
2022
£0.00
n/a
£0.00
n/a
n/a
n/a
2021
£0.00
n/a
£0.00
n/a
n/a
n/a
Weighted average
exercise price
2022
£0.82
£1.40
£0.82
£1.04
£0.91
n/a
2021
£0.81
£1.02
£0.79
£0.86
£0.82
n/a
Number of shares
Weighted average
exercise price
2022
147,845
286,138
(1,214)
–
432,769
2021
101,310
63,852
(14,425)
(2,892)
147,845
2022
£0.00
£0.00
£0.00
n/a
£0.00
2021
£0.00
£0.00
£0.00
n/a
£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.
Financial StatementsHarworth Group plc: Annual Report and Financial Statements 2022
202
Notes to the financial statements
for the year ended 31 December 2022
25. Share-based payments continued
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
£1.61
£0.00
0.01%
0.34%
n/a
4.73 years
£1.38
SAYE
£1.65
£1.40
0.01%
0.35%
0.02%
3.33 years
£0.50
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 2019 SAYE Scheme were exercised in the year with a weighted average share price on exercise of £1.54.
The total charge for the year relating to employee share-based payment plans was £0.7m (2021: £0.5m), 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
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
2022
£’000
32,272
33
32,305
As at
31 December
2021
£’000
32,253
19
32,272
As at
31 December
2022
322,724,566
326,558
323,051,124
(438,439)
322,612,685
As at
31 December
2021
322,530,807
193,759
322,724,566
(185,282)
322,539,284
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 Equiniti Share Plan Trustees Limited to
satisfy Deferred Share Bonus Plan, Restricted Share Plan and Share Incentive plan awards for Executive Directors, Senior Executives and
employees. For this purpose both Employee Benefit Trust and Equiniti Share Plan Trustees Limited are treated as an extension of the
Company.
27. Share premium account
Group and Company
At 1 January
Premium on shares issued
At 31 December
As at
31 December
2022
£’000
24,627
61
24,688
As at
31 December
2021
£’000
24,567
60
24,627
Financial StatementsHarworth Group plc: Annual Report and Financial Statements 2022
203
28. Commitments
At 31 December 2022 the Group had contractual commitments due under construction contracts of £0.6m (2021: £5.6m). 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 Development
properties as set out in Note 14.
29. Operating leases
Future minimum lease receipts
At 31 December 2022 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
Group
As at
31 December
2022
£’000
17,733
17,426
15,057
14,059
12,861
124,992
202,128
As at
31 December
2021
£’000
17,220
14,689
13,100
11,033
10,200
122,303
188,545
As set out in Note 14 property rental income earned during the year was £19.9m (2021: £19.5m)
30. Related party transactions
Group
The Group carried out the following transactions with related parties during 2022. 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
Sales
Disposal proceeds at Logistics North
Additions
Reimbursement of technical due diligence
Receivables
Deferred consideration for land at Logistics North
Multiply Logistics North Holdings Limited & Multiply Logistics North Lp
Sales
Recharges of costs
Asset management fee
Water charges
Receivables
Trade receivables
Year
ended/as at
31 December
2022
£000
Year
ended/as at
31 December
2021
£000
–
2,019
–
91
–
200
Year
ended/as at
31 December
2022
£000
Year
ended/as at
31 December
2021
£000
–
145
113
136
271
107
–
66
Financial StatementsHarworth Group plc: Annual Report and Financial Statements 2022
204
Notes to the financial statements
for the year ended 31 December 2022
30. Related party transactions continued
Genuit Group (formerly Polypipe)
Sales
Rent
Receivables
Trade receivables
The Aire Valley Land LLP
Receivable
Crimea Land Mansfield LLP
Partner loan repayment
Receivable
Northern Gateway Development Vehicle LLP
Investment in the year
Receivable
Investment Property Forum
Purchases
Banks Group*
Sales
Annual option sums
Bates Regeneration Limited*
Shareholder loan repayment
* Banks Group and Bates Regeneration Limited ceased to be related parties in October 2021.
Year
ended/as at
31 December
2022
£000
Year ended/
as at 31
December
2021
£000
20
6
25
6
Year
ended/as at
31 December
2022
£000
26
Year
ended/as at
31 December
2022
£000
–
9
Year
ended/as at
31 December
2022
£000
1,849
–
Year
ended/as at
31 December
2022
£000
1
Year
ended/as at
31 December
2022
£000
Year
ended/as at
31 December
2021
£000
26
Year
ended/as at
31 December
2021
£000
(30)
–
Year
ended/as at
31 December
2021
£000
1,003
25
Year
ended/as at
31 December
2021
£000
–
Year
ended/as at
31 December
2021
£000
–
5
Year
ended/as at
31 December
2022
£000
–
Year
ended/as at
31 December
2021
£000
(4)
Financial StatementsHarworth Group plc: Annual Report and Financial Statements 2022 205
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 at 31 December 2022 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
Harworth Surface Water Management (Bardon) Limited
Year ended/as at
31 December 2022
Year ended/as at
31 December 2021
Net interest
receivable/
(payable)
in the year
£’000
657
(219)
(62)
(366)
–
–
213
75
(9)
(290)
(17)
–
–
(2)
–
–
–
–
–
–
–
3
–
(17)
Net amounts
due from/(to)
£’000
19,891
(7,967)
(1,841)
(13,802)
–
1
6,464
2,290
(336)
(9,749)
(529)
–
1
(249)
1
(2)
(1)
(1)
(1)
(2)
(1)
107
2
(5,724)
Net interest
receivable/
(payable)
in the year
£’000
411
(64)
(33)
(166)
–
–
–
45
(6)
(108)
(10)
–
–
–
–
–
–
–
–
–
–
–
–
69
Net amounts
due from/(to)
£’000
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
Dividends received
During the year the Company received dividends of £nil (2021: £nil) from subsidiary undertakings.
31. Post balance sheet events
There are no post balance sheet events to disclose that have not been disclosed publicly by a regulatory news announcement.
Financial StatementsHarworth Group plc: Annual Report and Financial Statements 2022
206
Glossary of frequently used terms and abbreviations
2018 Code
AGM
AHFS
AMP
APM
BCP
BREEAM
BTR
CDM
CEO
CFO
CIO
COO
CPD
DSBP
EA
EAP
EBT
EPC
EPRA
ERV
ESG
EY
FRC
GDPR
GHG
GLC
GRAM
GVA
IPCC
KPI
KWh
LEP
LTIP
LTV
MEES
NAV
NDV
NZC
PEVG
PPA
PSG
PV
RCF
RCP
RICS
RIDDOR
RSP
SAYE
Senior Executive
SID
SIP
SSSI
TCFD
TSR
UN SDGs
WAULT
2018 UK Corporate Governance Code
Annual General Meeting
Assets held for sale
Advanced Manufacturing Park
Alternative Performance Measure
Business Continuity Plan
Building Research Establishment Environmental Assessment Method
Build to Rent
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
Energy Performance Certificate
European Public Real Estate Association
Estimated Rental Value
Environmental, Social and Governance
Ernst & Young LLP
Financial Reporting Council
General Data Protection Regulation
Greenhouse gas emissions
Group Leadership Committee
Group Risk and Assurance Map
Gross Value Added
Intergovernmental Panel on Climate Change
Key Performance Indicator
Kilowatt hours
Local Enterprise Partnership
Long-Term Incentive Plan
Loan to portfolio value
Minimum Energy Efficiency Standard
Net Asset Value
Net Disposal Value
Net Zero Carbon
Profit Excluding Value Gains
Planning Promotion Agreement
People Steering Group
Photo-Voltaic
Revolving Credit Facility
Representative Concentration Pathway
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.
Senior Independent Director
Share Incentive Plan
Site of Special Scientific Interest
Task Force on Climate-Related Financial Disclosures
Total Shareholder Return
United Nations Sustainable Development Goals
Weighted average unexpired lease term
Financial StatementsHarworth Group plc: Annual Report and Financial Statements 2022 Company information and investor timetable
207
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
Marzia Zafar
Steven Underwood
Martyn Bowes
Company Secretary and
Registered Office
Christopher Birch
Advantage House
Poplar Way
Rotherham, S60 5TR
External Auditors
Ernst & Young LLP
2 St Peter’s Square
Manchester
M2 3EY
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.
The AGM will be webcast live. For further information, please see the Notice of AGM published at
www.harworthgroup.com/investors/annual-general-meeting
Interim Results Announcement 2023
Interim Results to be published at www.harworthgroup.com/investors
23 May 2023
September 2023
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: +44 (0)371 384 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.
Financial StatementsHarworth Group plc: Annual Report and Financial Statements 2022 Harworth Group plc
Head Office
Advantage House
Poplar Way
Rotherham
S60 5TR
@harworthgroup
@HarworthGroup
harworthgroup
Visit our website for the latest company news
www.harworthgroup.com