TIDMHWG
RNS Number : 5853P
Harworth Group PLC
29 May 2018
THIS ANNOUNCEMENT DOES NOT CONSTITUTE A PROSPECTUS OR PROSPECTUS
EQUIVALENT DOCUMENT AND NEITHER THIS ANNOUNCEMENT NOR ANYTHING
HEREIN FORMS THE BASIS FOR ANY OFFER TO PURCHASE OR SUBSCRIBE FOR
ANY SHARES OR OTHER SECURITIES IN THE COMPANY NOR SHALL IT FORM THE
BASIS FOR ANY CONTRACT OR COMMITMENT WHATSOEVER.
29 May 2018
Harworth Group plc
Notification of Transfer to a Premium Listing
Harworth Group plc ("Harworth" or the "Company" and together
with its subsidiaries, the "Group") announces that it is proposing
to transfer the listing category of its ordinary shares (the
"Ordinary Shares") from a Standard Listing to a Premium Listing on
the Official List of the UK Listing Authority ("Official List") in
accordance with Rule 5.4A of the Listing Rules issued by the
Financial Conduct Authority (the "Transfer").
The provision of a minimum of 20 business days' notice (which
period commenced by way of today's announcement) is required to
effect the Transfer. No shareholder approval is required in
connection with the Transfer. It is anticipated that the Transfer
will take effect at 8.00 a.m. on 1 August 2018, conditional on the
approval of the UK Listing Authority ("UKLA").
1. Background to and reasons for the Transfer
Harworth is a leading regenerator of land and property for
development and investment that owns, develops and manages a
portfolio of over 21,000 acres of land on around 140 sites located
throughout the Midlands and the North of England. The Company
specialises in the regeneration of former coalfield sites and other
former industrial land into new residential developments and
employment areas.
The Company's strategy is to create value for shareholders by
finding long-term sustainable uses from its extensive landbank of
former colliery and largely brownfield sites, as well as
replenishing its asset base with strategic land acquisitions and
attractive investment opportunities. The Company promotes, develops
and manages its portfolio, to enhance net asset value and generate
investment returns to meet the operating costs of the business.
The Company was admitted to the Standard Listing segment of the
Official List and to trading on the Main Market of the London Stock
Exchange on 24 March 2015, following completion of its acquisition
of the remaining 75.1% of Harworth Estates Property Group Limited
("HEPGL") that it did not already own (the "Acquisition"). Since
the Acquisition the Company's board of directors ("Board") has
sought to maintain the most appropriate listing and trading
facility for the Ordinary Shares.
The Company remains ambitious and growth-focussed. The Board
believes that the Company has reached an appropriate stage in its
development to undertake the Transfer at this point in time.
The Company has therefore requested that the UKLA approve the
Transfer with effect from 8.00 a.m. on 1 August 2018. All Ordinary
Shares in issue at such time shall be subject to the Transfer. As
at 25 May 2018, the Company had 321,496,760 Ordinary Shares in
issue.
2. Effect of the Transfer
No changes to the Company's business have been or are proposed
to be made in connection with the Transfer.
The Board believes that the Transfer will bring with it a number
of benefits to the Company and its shareholders and does not
consider there to be any particular risk associated with the
Transfer. In particular, the Board believes the Transfer will:
-- provide an appropriate platform for the continued growth of
the Company and further raise its profile and status;
-- benefit its shareholders by making the Company's hitherto
voluntary adherence to Premium listing standards of corporate
governance, and regulatory and reporting compliance compulsory;
-- afford increased protection for investors under the Listing
Rules as a result of the higher standards placed on premium listed
companies, including in relation to significant and related party
transactions;
-- place the Company in a position in which it could increase
liquidity in its Ordinary Shares due to the larger number of
institutional investors who regularly trade in ordinary shares of
companies admitted to the Premium Segment of the Official List;
and
-- enable the Ordinary Shares to be considered for inclusion in
the FTSE UK Index Series which are widely utilised investment
benchmarks for institutional investors.
Following the Transfer certain additional provisions of the
Listing Rules will formally apply to the Company. These provisions,
which the Company so far has complied with on a voluntary basis to
the extent appropriate and reasonably practicable and which are set
out under Chapters 7-13 (inclusive) of the Listing Rules, relate to
the following matters:
-- the application of the Premium Listing Principles (Chapter 7);
-- the requirement to appoint a sponsor in certain circumstances (Chapter 8);
-- the requirement to comply with various continuing obligations
including: requirements relating to further issues of shares,
compliance with all relevant provisions of the UK Corporate
Governance Code (or the provisions of an explanation for any
non-compliance, if applicable, in its annual financial report) and
requirements relating to notifications and contents of financial
information (Chapter 9);
-- the requirement to announce, or obtain shareholder approval
for, certain transactions, depending on their size and nature, and
for certain transactions with 'related parties' of the Company
(Chapters 10 and 11);
-- certain restrictions in relation to the Company dealing in
its own securities and treasury shares (Chapter 12); and
-- various specific contents requirements that will apply to
circulars issued by the Company to its shareholders (Chapter
13).
3. Working capital
The Company is of the opinion that the Group has sufficient
working capital for its present requirements and for at least the
next 12 months from the date of publication of this
Announcement.
4. Corporate Governance
The Board is committed to the highest standards of corporate
governance. The annual report and accounts of the Group for the
year ended 31 December 2017 describe how, throughout the financial
year, the Company applied the principles of the current UK
Corporate Governance Code.
The Board will be required to continue to report against the
provisions of the UK Corporate Governance Code following the
Transfer.
5. UK Takeover Code
As the Company has its registered office in the UK and its
Ordinary Shares are admitted to trading on the Main Market of the
London Stock Exchange, it is currently, and, following the Transfer
will remain, subject to the UK Takeover Code, with which the
Company complies.
6. Appointment of Sponsor
The Company has appointed Canaccord Genuity Limited ("Canaccord
Genuity") to act as its Sponsor in relation to the Transfer.
Canaccord Genuity is currently joint corporate broker to the
Company.
7. Financial information incorporated by reference
The financial information listed below is incorporated by
reference into this announcement and can be found in the annual
report and financial statements of Harworth for the years ended 31
December 2015, 2016 and 2017 which can be viewed on the Company's
website via the link www.harworthgroup.com. The parts of the annual
report and financial statements of Harworth for the years ended 31
December 2015, 2016 and 2017 which are not incorporated are not
relevant for the purposes of this announcement.
Information incorporated Reference document Page number in reference document
by reference into this announcement
---------------------------------------- ---------------------------------------- ----------------------------------
Annual audited accounts of Harworth Directors' report Pages 49
Group plc for the financial year ended
December 2015 and
the independent auditor's report
thereon
----------------------------------------
Independent auditor's report Pages 56
----------------------------------------
Consolidated income statement Page 62
Consolidated statement of comprehensive Page 63
income
Consolidated statement of changes in Page 65
equity
Consolidated balance sheet Page 64
Consolidated cash flow statement Page 66
Notes to the consolidated financial Pages 67
statements
---------------------------------------- ---------------------------------------- ----------------------------------
Annual audited accounts of Harworth Directors' report Pages 86
Group plc for the financial year ended
December 2016 and
the independent auditor's report
thereon
----------------------------------------
Independent auditor's report Pages 92
----------------------------------------
Consolidated income statement Page 97
Consolidated statement of comprehensive Page 98
income
Consolidated statement of changes in Page 100
equity
Consolidated balance sheet Page 99
Consolidated cash flow statement Page 102
Notes to the consolidated financial Pages 103
statements
---------------------------------------- ---------------------------------------- ----------------------------------
Annual audited accounts of Harworth Directors' report Pages 92
Group plc for the financial year ended
December 2017 and
the independent auditor's report
thereon
----------------------------------------
Independent auditor's report Pages 98
----------------------------------------
Consolidated income statement Page 104
Consolidated statement of comprehensive Page 105
income
Consolidated statement of changes in Page 107
equity
Consolidated balance sheet Page 106
Consolidated cash flow statement Page 109
Notes to the consolidated financial Pages 110
statements
---------------------------------------- ---------------------------------------- ----------------------------------
8. Further financial information on the Group
In order to provide a three-year track record of the Group, as
required by Chapter 6 of the Listing Rules, historical financial
information for HEPGL, along with the independent accountant's
report thereon, are set out below. This historical track record has
been prepared in accordance with the basis of preparation which
applies to predecessor and successor accounting as described in
Annexure paras 56-57 of SIR 2000 (Investment Reporting Standard
applicable to public reporting engagements on historical financial
information) issued by the UK Auditing Practices Board.
Consequently, the historical financial information reflects the
consolidated financial results for HEPGL for the year ended 31
December 2015 (along with the 2014 comparators) as opposed to the
period covering 1 January 2015 to 24 March 2015 when HEPGL was
acquired by the Company. Thereafter the historical financial
information reflects the consolidated financial results of Harworth
Group plc as incorporated by reference above.
9. FTSE eligibility and qualification
FTSE's Europe, Middle East and Africa (EMEA) Committee meets on
a quarterly basis to review the constituents of the FTSE UK index
series, incorporating the FTSE 100, FTSE 250 and FTSE SmallCap
indices. It is anticipated that, subject to the Transfer becoming
effective and other conditions being met, the Company will be
eligible to be considered for inclusion into the FTSE UK Index
Series, subject to the satisfaction of the inclusion criteria.
10. Consents
Canaccord Genuity has given and has not withdrawn its written
consent to the inclusion of the reference to its name in the form
and context in which it is included in this announcement.
PricewaterhouseCoopers LLP has given and not withdrawn its
consent to the inclusion of its accountant's report on the
consolidated financial information for Harworth Estates Property
Group Limited for the year ended 31 December 2015 and the
references to it in the form and context in which they are included
in this announcement.
Enquiries
For further information:
Harworth Group plc T: 0114 349 3131
Owen Michaelson, Chief Executive
Andrew Kirkman, Finance Director
Chris Birch, General Counsel and Company Secretary
Canaccord Genuity Limited T: 0207 523 8000
Charlie Foster
Andrew Buchanan
Michael Reynolds
FTI Consulting T: 020 3727 1000
Dido Laurimore E: harworth@fticonsulting.com
Tom Gough
Richard Gotla
NOTES TO EDITORS:
About Harworth Group
Listed on the main market of the London Stock Exchange, Harworth
Group plc (LSE: HWG) ("Harworth") is a leading regenerator of land
and property for development and investment that owns, develops and
manages a portfolio of over 21,000 acres of land on around 140
sites located throughout the Midlands and the North of England. The
Company specialises in the regeneration of former coalfield sites
and other former industrial land into new residential developments
and employment areas.
IMPORTANT NOTICE:
Disclaimer
The contents of this announcement have been prepared by and are
the sole responsibility of the Company. The Company is not offering
any Ordinary Shares or other securities in connection with the
proposals described in this announcement. This announcement does
not constitute or form part of, and should not be construed as, any
offer for sale or subscription of, or solicitation of any offer to
buy or subscribe for, any securities in the Company or securities
in any other entity, in any jurisdiction, nor shall it, or any part
of it, or the fact of its distribution, form the basis of, or be
relied on in connection with, any contract or investment decision
whatsoever, in any jurisdiction. This announcement does not
constitute a recommendation regarding any securities.
This announcement may include statements that are, or may be
deemed to be, "forward-looking statements". These forward-looking
statements can be identified by the use of forward-looking
terminology, including the terms "believes", "estimates", "plans",
"anticipates", "targets", "aims", "continues", "projects",
"assumes", "expects", "intends", "may", "will", "would" or
"should", or in each case, their negative or other variations or
comparable terminology. These forward-looking statements include
all matters that are not historical facts. They appear in a number
of places throughout this announcement and include statements
regarding the Company's intentions, beliefs or current expectations
concerning, among other things, the Group's result of operations,
financial condition, prospects, growth strategies and the
industries in which the Group operates. By their nature,
forward-looking statements involve risk and uncertainty because
they relate to future events and circumstances. A number of factors
could cause actual results and developments to differ materially
from those expressed or implied by the forward-looking statements,
including without limitation: conditions in the markets, market
position, the Company's earnings, financial position, return on
capital, anticipated investments and capital expenditures, changing
business or other market conditions and general economic
conditions. These and other factors could adversely affect the
outcome and financial effects of the plans and events described
herein. Forward-looking statements contained in this announcement
based on past trends or activities should not be taken as a
representation that such trends or activities will continue in the
future.
Subject to the Company's regulatory obligations, including under
the Listing Rules, the Disclosure Guidance and Transparency Rules,
the EU Market Abuse Regulation and the Financial Services and
Markets Act 2000 ("FSMA"), neither the Company nor Canaccord
Genuity Limited undertakes any obligation to update publicly or
revise any forward looking-statement whether as a result of new
information, future events or otherwise. None of the statements
made in this announcement in any way obviates the requirements of
the Company to comply with its regulatory obligations.
The contents of the Company's website do not form part of this
announcement.
Canaccord Genuity Limited, which is authorised and regulated by
the Financial Conduct Authority in the United Kingdom, is acting
for the Company and for no one else in connection with the Transfer
and will not be responsible to any person other than the Company
for providing the protections afforded to clients of Canaccord
Genuity Limited, nor for providing advice in relation to the
Transfer, the content of this announcement or any matter referred
to in this announcement. Apart from the responsibilities and
liabilities, if any, which may be imposed on Canaccord Genuity
Limited by the FSMA or the regulatory regime established
thereunder, neither Canaccord Genuity Limited nor any of its
subsidiaries, branches or affiliates owes or accepts any duty,
liability or responsibility whatsoever (whether direct or indirect,
whether in contract, in tort, under statute or otherwise) to any
person who is not a client of Canaccord Genuity Limited in
connection with this announcement, any statement contained herein
or otherwise, nor makes any representation or warranty, express or
implied, in relation to, the contents of this announcement,
including its accuracy, completeness or verification or for any
other statement purported to be made by Canaccord Genuity Limited,
or on behalf of Canaccord Genuity Limited in connection with the
Company or the Transfer. Canaccord Genuity Limited accordingly
disclaims to the fullest extent permitted by law all and any
responsibility or liability to any person who is not a client of
Canaccord Genuity Limited, whether arising in tort, contract or
otherwise (save as referred to above) which they might otherwise
have in respect of this announcement or any such statement.
SECTION A - ACCOUNTANT'S REPORT ON THE HISTORICAL FINANCIAL
INFORMATION FOR HARWORTH ESTATES PROPERTY GROUP LIMITED FOR THE
YEARED 31 DECEMBER 2015
The Directors
Harworth Group plc
Advantage House
Poplar Way
Catcliffe
Rotherham
South Yorkshire
S60 5TR
Canaccord Genuity Limited (the "Sponsor")
88 Wood Street
London
EC2V 7QR
29 May 2018
Dear Sirs
Harworth Estates Property Group Limited
We report on the consolidated financial information of Harworth
Estates Property Group Limited ("HEPGL" and together with its
subsidiaries the "HEPGL Group") for the year ended 31 December 2015
set out in section B below (the "Financial Information Table"). The
Financial Information Table has been prepared for inclusion in the
Notification of Transfer to a Premium Listing dated 29 May 2018
(the "Transfer Announcement") of Harworth Group plc (the "Company")
on the basis of the accounting policies set out in note 1 to the
Financial Information Table. This report is required by item 20.1
of Annex I to the PD Regulation and is given for the purpose of
complying with that Schedule and for no other purpose.
We have not audited or reviewed the financial information for
the year ended 31 December 2014 which has been included for
comparative purposes only, and accordingly do not express an
opinion thereon.
Responsibilities
The Directors of the Company are responsible for preparing the
Financial Information Table in accordance with the basis of
preparation set out in note 1 to the Financial Information
Table.
It is our responsibility to form an opinion as to whether the
Financial Information Table gives a true and fair view, for the
purposes of the Transfer Announcement and to report our opinion to
you.
Save for any responsibility which we may have to those persons
to whom this report is expressly addressed, to the fullest extent
permitted by law we do not assume any responsibility and will not
accept any liability to any other person for any loss suffered by
any such other person as a result of, arising out of, or in
connection with this report.
Basis of opinion
We conducted our work in accordance with the Standards for
Investment Reporting issued by the Auditing Practices Board in the
United Kingdom. Our work included an assessment of evidence
relevant to the amounts and disclosures in the financial
information. It also included an assessment of significant
estimates and judgements made by those responsible for the
preparation of the financial information and whether the accounting
policies are appropriate to HEPGL Group's circumstances,
consistently applied and adequately disclosed.
We planned and performed our work so as to obtain all the
information and explanations which we considered necessary in order
to provide us with sufficient evidence to give reasonable assurance
that the financial information is free from material misstatement
whether caused by fraud or other irregularity or error.
Opinion
In our opinion, the Financial Information Table gives, for the
purposes of the Transfer Announcement dated 29 May 2018, a true and
fair view of the state of affairs of the HEPGL Group as at the
dates stated and of its profits, cash flows and changes in equity
for the period then ended in accordance with the basis of
preparation set out in note 1 to the Financial Information
Table.
Yours faithfully
PricewaterhouseCoopers LLP
Chartered Accountants
SECTION B - FINANCIAL INFORMATION RELATING TO HARWORTH ESTATES
PROPERTY GROUP LIMITED FOR THE YEARED 31 DECEMBER 2015
Consolidated income statement
for the year ended 31 December 2015
Year ended Year ended
31 December 31 December
2015 2014
Note GBP000 GBP000
---------------------------------------- ---- ------------ ------------
Revenue 2 16,737 13,934
Cost of sales (7,856) (5,201)
---------------------------------------- ---- ------------ ------------
Gross profit 8,881 8,733
Other operating income and expenses
Administrative expenses 4 (5,981) (7,992)
Increase in fair value of investment
properties 4 28,890 15,748
Profit on sale of investment properties 4 8,298 7,904
Other gains 4 3,208 -
Other operating income 4 176 -
---------------------------------------- ---- ------------ ------------
Operating profit before exceptional
items 43,472 24,393
Exceptional items 5 (465) -
---------------------------------------- ---- ------------ ------------
Operating profit 43,007 24,393
Finance income 7 79 318
Finance costs 8 (3,131) (3,822)
Profit before tax 39,955 20,889
Tax charge 10 (4,474) (6,905)
---------------------------------------- ---- ------------ ------------
Profit for the financial year 35,481 13,984
---------------------------------------- ---- ------------ ------------
Profit per share from continuing operations
attributable to the owners of the Parent
Earnings per share from operations Note GBP GBP
---------------------------------------- ---- ------------ ------------
Basic and diluted earnings per share 11 1,472 580
---------------------------------------- ---- ------------ ------------
Consolidated statement of comprehensive income
for the year ended 31 December 2015
Year ended Year ended
31 December 31 December
2015 2014
GBP000 GBP000
--------------------------------------------- ------------ ------------
Profit for the financial year 35,481 13,984
Other comprehensive income - -
Total other comprehensive income - -
--------------------------------------------- ------------ ------------
Total comprehensive income for the financial
year 35,481 13,984
---------------------------------------------- ------------ ------------
Attributable to:
Owners of the Parent 35,481 13,984
---------------------- ------ ------
Balance sheet
as at 31 December 2015
As at As at
31 December 31 December
2015 2014
Note GBP000 GBP000
--------------------------------- ---- ------------- ------------
ASSETS
Non-current assets
Other receivables 12 650 650
Investment properties 13 334,617 289,611
Investment in joint ventures 14 768 1,223
--------------------------------- ---- ------------- ------------
336,035 291,484
--------------------------------- ---- ------------- ------------
Current assets
Inventories 15 1,092 142
Trade and other receivables 16 19,967 17,760
Cash and cash equivalents 17 20,677 17,296
Assets classified as held
for sale 18 9,128 -
50,864 35,198
--------------------------------- ---- ------------- ------------
Total assets 386,899 326,682
--------------------------------- ---- ------------- ------------
LIABILITIES
Current liabilities
Trade and other payables 19 (24,251) (13,267)
Borrowings 20 (400) (51,088)
Derivative financial instruments 22 - (81)
(24,651) (64,436)
--------------------------------- ---- ------------- ------------
Net current assets/(liabilities) 26,213 (29,238)
--------------------------------- ---- ------------- ------------
Non-current liabilities
Trade and other payables 19 (2,280) -
Borrowings 20 (64,119) (6,223)
Provisions for liabilities
and charges 21 (435) (564)
Deferred income tax liabilities 10 (11,379) (6,905)
--------------------------------- ---- ------------- ------------
(78,213) (13,692)
--------------------------------- ---- ------------- ------------
Total liabilities (102,864) (78,128)
--------------------------------- ---- ------------- ------------
Net assets 284,035 248,554
--------------------------------- ---- ------------- ------------
SHAREHOLDERS' EQUITY
Capital and reserves
Called up share capital 24 - -
Share premium account 25 222,161 222,161
Fair value reserve 26 58,471 29,581
Retained earnings/(losses) 3,403 (3,188)
--------------------------------- ---- ------------- ------------
Total equity 284,035 248,554
--------------------------------- ---- ------------- ------------
Consolidated statement of changes in equity
for the year ended 31 December 2015
Called Share Fair value Retained
up share premium reserve (losses) Total
capital account GBP000 earnings equity
GBP000 GBP000 GBP000 GBP000
--------------------------- --------- -------- ----------- --------- -------
Balance at 1 January
2014 - 222,161 16,011 (3,602) 234,570
Profit for the financial
year to 31 December
2014 - - - 13,984 13,984
Total comprehensive
income for the year
ended 31 December
2014 - 222,161 16,011 10,382 248,554
---------------------------- --------- -------- ----------- --------- -------
Fair value gain on
revaluation of investment
properties - - 15,748 (15,748) -
Transfer to accumulated
losses on disposal
of investment properties - - (2,178) 2,178 -
At 31 December 2014 - 222,161 29,581 (3,188) 248,554
---------------------------- --------- -------- ----------- --------- -------
Comprehensive income
for the year ended
31 December 2015
Profit for the financial
year to 31 December
2015 - - - 35,481 35,481
Fair value gain on
revaluation of investment
properties - - 28,890 (28,890) -
Total comprehensive
profit for the year
ended 31 December
2015 - - 28,890 6,591 35,481
---------------------------- --------- -------- ----------- --------- -------
Balance at 31 December
2015 - 222,161 58,471 3,403 284,035
---------------------------- --------- -------- ----------- --------- -------
Statement of cash flows
for the year ended 31 December 2015
Year ended Year ended
31 December 31 December
2015 2014
Note GBP000 GBP000
--------------------------------- ---- ------------ ------------
Cash flows from operating
activities
Profit/(loss) before tax
for the financial year 39,955 20,889
7
&
Net interest payable 8 3,052 3,504
Fair value increase in
investment properties 13 (28,890) (15,748)
Profit on disposal of investment
properties 4 (8,298) (7,904)
Other gains 4 (3,208) -
Impairment of investment
in joint venture 5 465 -
Decrease in provisions (129) (119)
--------------------------------- ---- ------------ ------------
Operating cash inflow before
movements in working capital 2,947 622
Increase in inventories (950) (142)
(Increase)/decrease in
receivables (1,587) 797
Increase/(decrease) in
payables 9,197 (6,824)
--------------------------------- ---- ------------ ------------
Cash generated from/(used
in) operations 9,607 (5,547)
Loan arrangement fees paid (152) (98)
Interest paid (3,144) (3,408)
Cash generated from/(used
in) operating activities 6,311 (9,053)
--------------------------------- ---- ------------ ------------
Cash flows from investing
activities
Interest received 79 149
Proceeds from disposal
of investment properties
and option 39,053 31,260
Expenditure on investment
properties (49,425) (21,932)
Investment in joint ventures (10) -
Loan granted to third party - (4,500)
--------------------------------- ---- ------------ ------------
Cash (used in)/generated
from investing activities (10,303) 4,977
--------------------------------- ---- ------------ ------------
Cash flows from financing
activities
Proceeds from bank loans 50,392 10,015
Proceeds from other loans 16,548 -
Repayment of bank loans (50,792) (8,664)
Repayment of other loans (8,775) -
Cash generated from/(used
in) financing activities 7,373 1,351
--------------------------------- ---- ------------ ------------
Increase/(decrease) in
cash 3,381 (2,725)
--------------------------------- ---- ------------ ------------
Cash at 1 January 17,296 20,021
Increase/(decrease) in
cash 3,381 (2,725)
--------------------------------- ---- ------------ ------------
Cash at 31 December 20,677 17,296
--------------------------------- ---- ------------ ------------
Notes to the financial information
for the year ended 31 December 2015
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 the years
presented, unless otherwise stated.
General information
Harworth Estates Property Group ("HEPGL") is a limited liability
company incorporated and domiciled in the UK. The address of its
registered office was AMP Technology Centre, Advanced Manufacturing
Park, Brunel Way, Rotherham, South Yorkshire S60 5WG. HEPGL and its
subsidiaries` (collectively "the HEPGL Group"), whose principal
activity is through the Income Generation Segment, generating
rental returns from the business park portfolio; generating rental
returns and royalties from energy generation and from the
environmental, technological and agricultural portfolio; and income
generation streams from secondary coal products; and through the
Capital Growth Segment, delivering value by developing the
underlying portfolio.
The registered number of HEPGL is 08668336.
HEPGL was incorporated on 28 September 2012 as a 100 per cent
subsidiary of UK Coal plc. On 10 December 2012 HEPGL acquired 100
per cent of the property group from UK Coal plc for a share
consideration. On the same day HEPGL issued additional shares to
the Industry Wide Coal Staff Superannuation Scheme and the Industry
Wide Mine Workers Pension Scheme Pension Fund in return for a cash
injection of GBP30 million. HEPGL also issued shares to UK Coal plc
in consideration for receivables due from the property group and
the release of debt due to UK Coal plc. As a result UK Coal plc (to
be renamed Coalfield Resources Plc) retained a 24.9% ownership of
the HEPGL Group.
On 24 March 2015 Coalfield Resources Plc (subsequently renamed
Harworth Group plc) acquired the remaining 75.1% of the issued
share capital of the HEPGL Group.
Basis of preparation
This consolidated historical financial information presents the
financial track record of the HEPGL Group for the year ended 31
December 2015 along with the 2014 comparators. It has been prepared
specifically for the purposes of providing relevant historical
financial information for the proposed transfer from the standard
segment to the premium segment of the official stock exchange list
for Harworth Group plc (and its subsidaries). The accounting
policies applied in this consolidated historical financial
information are consistent with those of Harworth Group plc
financial statements for the years ended 31 December 2015, 31
December 2016 and 31 December 2017 as disclosed in those annual
financial statements.
This special purpose consolidated financial information has been
prepared on a going concern basis and in accordance with EU adopted
International Financial Reporting Standards ('IFRS'), IFRS 1C
interpretations and the Companies Act 2006 applicable to companies
reporting under IFRS and therefore complies with Article 4 of the
EU IAS regulations. 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.
Going concern basis
This historical financial information is prepared on the basis
that the HEPGL Group is a going concern. In forming its opinion as
to going concern, the Board prepares cash flow forecasts based upon
its assumptions with particular consideration to the key risks and
uncertainties, as well as taking into account the available
borrowing facilities shown in note 20.
The key factor that has been considered in this regard is:
The HEPGL Group has a GBP65m revolving credit facility ("RCF")
with The Royal Bank of Scotland, for a term of five years, on a
non-amortising basis. The facility is in the form of a debenture
security whereby there is no charge on the individual assets of the
HEPGL Group. The facility is subject to financial and other
covenants.
The covenants are based upon gearing, tangible net worth, loan
to property values and interest cover. Property valuations affect
the loan to value covenants. Breach of covenants could result in
the need to pay down in part some of these loans, additional costs,
or a renegotiation of terms or, in extremis, a reduction or
withdrawal of facilities by the banks concerned.
The Directors confirm their belief that it is appropriate to use
the going concern basis of preparation for these financial
statements.
Notes to the financial information
for the year ended 31 December 2015: continued
1. Accounting policies: continued
Accounting policies
The HEPGL Group did not early adopt any new or amended standards
and does not plan to early adopt any standards issued but not yet
effective. The following accounting policies are in place:
Revenue recognition
Revenue comprises rental and other land related income arising
on investment properties and income from construction contracts.
Rentals are accounted for on a straight-line basis over the lease
term of ongoing leases.
Revenue from the sale of coal slurry is recognised at the point
of despatch. Revenue is recognised to the extent that it is
probable that the economic benefits will flow to the HEPGL Group
and the revenue can be reliably measured. All such revenue is
reported net of discounts and value added and other sales
taxes.
Construction contracts
Contracts for the construction of substantial assets are
accounted for as construction contracts. Where the outcome of a
construction contract can be estimated reliably, revenue and costs
are recognised by reference to the stage of completion to recognise
in a given period. The assessment of the stage of completion is
dependent on the nature of the contract, 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 for the entire cost.
Interest income and expense
Interest income and expense are recognised within 'finance
income' and 'finance costs' in the income statement using the
effective interest rate method. The effective interest rate method
is a method of calculating the amortised cost of a financial asset
or financial liability and of allocating the interest income or
interest expense over the relevant period. The effective interest
rate is the rate that exactly discounts estimated future cash
payments or receipts throughout the expected life of the financial
instrument, or a shorter period where appropriate, to the net
carrying amount of the financial asset or financial liability.
Other receivables (non-current)
Other receivables (non-current) relate to overages. An overage
is the right to receive future payments following the sale of
investment properties if specified conditions relating to the site
are satisfied. The conditions may be the granting of planning
permission for development on the site or practical completion of a
development. Overages are initially recorded at fair value and are
reviewed annually or more frequently if events or changes in
circumstances indicate a potential impairment. The carrying value
of overages is compared to the recoverable amount, which is the
higher of value in use and the fair value less costs to sell. Any
impairment is recognised immediately as an expense.
Inventories
Inventories comprise coal slurry that has been processed and is
ready for sale. It is stated at the lower of cost and estimated net
realisable value. Inventories comprise all the direct costs
incurred in bringing the coal slurry to their present state.
Investments in joint ventures
Joint ventures are those entities over whose activities the
HEPGL Group has joint control established by contractual agreement.
Interests
in joint ventures through which the HEPGL 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 HEPGL Group and then, in
subsequent years, adjusting the carrying amount of the investment
to reflect the HEPGL 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.
Notes to the financial information
for the year ended 31 December 2015: continued
1. Accounting policies: continued
Investment properties
Investment properties are those properties which are not
occupied by the HEPGL Group and which are held for long term rental
yields, capital appreciation or both. Investment property also
includes property that is being developed or constructed for future
use as investment property. Investment properties comprise freehold
land and buildings and are measured at fair value. At the end of a
financial year the fair values are determined by obtaining an
independent valuation prepared in accordance with the current
edition of the Appraisal and Valuation Standards published by the
Royal Institution of Chartered Surveyors. External, independent
valuation firms having appropriate, recognised professional
qualifications and recent experience in the location and category
of property being valued are used.
Where the development of investment property commences with a
view to sale, the property is transferred from investment
properties to inventories at fair value, which is then considered
to represent deemed cost.
At each subsequent reporting date, investment properties are
re-measured to their fair value. Movements in fair value are
included in the income statement.
Where specific investment properties have been identified as
being for sale within the next twelve months, a sale is considered
highly probable and the property is immediately available for sale,
their fair value is shown under assets classified as held-for-sale
within current assets, measured in accordance with the provisions
of IAS 40 'Investment Property'.
Profit or loss on disposal of investment properties
Disposals are accounted for when legal completion of the sale
has occurred or there has been an unconditional exchange of
contracts. Profits or losses on disposal arise from deducting the
asset's net carrying value 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) and 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.
Properties in the course of development
Directly attributable costs incurred in the course of developing
a property are capitalised as part of the cost of the property.
Development costs on investment properties are capitalised and any
resultant change in value is therefore recognised through the next
revaluation.
Financial assets
Financial assets at fair value through profit or loss are
financial assets held for trading. A financial asset is classified
in this category if acquired principally for the purpose of selling
in the short term. Assets in this category are classified as
current assets if expected to be settled within 12 months,
otherwise they are classified as non-current.
Financial assets carried at fair value through profit or loss
are initially recognised at fair value, and transaction costs are
expensed in the income statement. Financial assets are derecognised
when the rights to receive cash flows from the investments have
expired or have been transferred and the HEPGL Group has
transferred substantially all risks and rewards of ownership.
Gains or losses arising from changes in the fair value of
financial assets at fair value through profit or loss are presented
in the income statement within 'other gains' in the period in which
they arise.
Provisions
Provisions are recognised when:
-- The HEPGL Group has a present legal or constructive obligation as a result of past events;
-- It is probable that an outflow of resources will be required to settle the obligation; and
-- The amount can be reliably estimated.
Notes to the financial information
for the year ended 31 December 2015: continued
1. Accounting policies: continued
Share-based payments
Equity-settled share-based payment to employees of the Company
and its subsidiary undertakings are measured at fair value of the
equity instruments at the date of grant and are expensed on a
straight line 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 charged adjusted
accordingly.
Operating segments
Management has determined the operating segments based upon the
operating reports reviewed by the Executive Board of Directors that
are used to assess both performance and strategic decisions.
Management has identified that the Executive Board of Directors is
the Chief Operating Decision Maker in accordance with the
requirements of IFRS 8 'Operating Segments'.
The HEPGL Group is now 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 Executive Board in conjunction with the reportable
segments.
The Income Generation segment focuses on generating rental
returns from the business park portfolio, rental returns and
royalties from energy generation, environmental technologies and
the agricultural portfolio, and income generating streams from
recycled aggregates and secondary coal products. The Capital Growth
segment focuses on delivering value by developing the underlying
portfolio, and includes planning and development activity, value
engineering, proactive asset management and strategic land
acquisitions.
All operations are carried out in the United Kingdom.
Segmental operating profit represents the profit earned by each
segment excluding the profit on sale and revaluation of investment
properties and is consistent with the measures reported to the
Executive Board for the purpose of the assessment of the
performance of each segment.
Consolidation
Subsidiaries
Subsidiaries are all entities (including structured entities)
over which the HEPGL Group has control. The HEPGL Group controls an
entity when it 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 HEPGL Group. They are deconsolidated from the date that control
ceases.
The HEPGL Group applies the acquisition method to account for
business combinations. The consideration transferred for the
acquisition of a subsidiary is the fair values of the assets
transferred, the liabilities incurred to the former owners of the
acquiree and the equity interests issued by the HEPGL 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 HEPGL
Group recognises any non-controlling interest in the acquiree on an
acquisition-by-acquisition basis, either at fair value or at the
non-controlling interest's proportionate share of the recognised
amounts of acquiree's identifiable net assets.
Acquisition-related costs are expensed as incurred.
If the business combination is achieved in stages, the
acquisition date carrying value of the acquirer's previously held
equity interest in the acquiree is re-measured to fair value at the
acquisition date; any gains or losses arising from such
re-measurement are recognised in profit or loss.
Inter-company transactions, balances and unrealised gains on
transactions between HEPGL Group companies are eliminated.
Unrealised losses are also eliminated.
Notes to the financial information
for the year ended 31 December 2015: continued
1. Accounting policies: continued
Exceptional items
Exceptional items are material non-recurring items excluded from
management's assessment of profit because by their nature they
could distort the HEPGL Group's underlying quality of earnings.
These are excluded to reflect performance in a consistent manner
and in line with how the business is managed and measured on a day
to day basis.
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 HEPGL Group
holds at least 90% of the nominal share capital of that company,
any premium on the shares issued as consideration is included in a
merger reserve rather than share premium.
Changes in accounting policy and disclosures
a) New standards and interpretations not yet adopted
A number of new standards and amendments to standards and
interpretations are effective for annual years beginning after 1
January 2015, and have not been applied in preparing these
consolidated financial statements. These have been set out
below:
IFRS 9, 'Financial instruments', addresses the classification,
measurement and recognition of financial assets and financial
liabilities. The complete version of IFRS 9 was issued in July
2014. It replaces the guidance in IAS 39 that relates to the
classification and measurement of financial instruments. IFRS 9
retains but simplifies the mixed measurement model and establishes
three primary measurement categories for financial assets:
amortised cost, fair value through OCI and fair value through
P&L. The basis of classification depends on the entity's
business model and the contractual cash flow characteristics of the
financial asset. Investments in equity instruments are required to
be measured at fair value through profit or loss with the
irrevocable option at inception to present changes in fair value in
OCI not recycling. There is now a new expected credit losses model
that replaces the incurred loss impairment model used in IAS 39.
For financial liabilities there were no changes to classification
and measurement except for the recognition of changes in own credit
risk in other comprehensive income, for liabilities designated at
fair value through profit or loss. IFRS 9 relaxes the requirements
for hedge effectiveness by replacing the bright line hedge
effectiveness tests. It requires an economic relationship between
the hedged item and hedging instrument and for the 'hedged ratio'
to be the same as the one management actually use for risk
management purposes. Contemporaneous documentation is still
required but is different to that currently prepared under IAS 39.
The standard is effective for accounting periods beginning on or
after 1 January 2018. Early adoption is permitted subject to EU
endorsement. The impact of IFRS 9 has been assessed on the
financial instruments of the HEPGL Group. At present, based on
these assessments, management do not believe that any significant
adjustments are required.
IFRS 15, 'Revenue from contracts with customers' deals with
revenue recognition and establishes principles for reporting useful
information to users of financial statements about the nature,
amount, timing and uncertainty of revenue and cash flows arising
from an entity's contracts with customers. Revenue is recognised
when a customer obtains control of a good or service and thus has
the ability to direct the use and obtain the benefits from the good
or service. The standard replaces IAS 18 'Revenue' and IAS 11
'Construction contracts' and related interpretations. The standard
is effective for annual periods beginning on or after 1 January
2018 and earlier application is permitted subject to EU
endorsement. The HEPGL Group has performed a detailed assessment of
the impact of IFRS 15 on existing revenue streams and policies.
This review has highlighted that revenues relating to the sales of
development properties, particularly where revenue involves a
deferred element or conditions subsequent exist, are specifically
affected by the standard. The HEPGL Group expects the impact of
implementing this standard on revenue to amount to a decrease of
GBP2.1m for the financial year ended 31 December 2017.
Notes to the financial information
for the year ended 31 December 2015: continued
1. Accounting policies: continued
Changes in accounting policy and disclosures (continued)
IFRS 16, 'Leases', replaces the current guidance in IAS 17. IFRS
16 defines a lease as a contract, or part of a contract, that
conveys the right to use an asset (the underlying asset) for a
period of time in exchange for consideration. Under IFRS 16 lessees
have to recognise a lease liability reflecting future lease
payments and a 'right-of-use asset' for almost all lease contracts.
In the income statement lessees will have to present interest
expense on the lease liability and depreciation on the right-of-use
asset. As under IAS 17, the lessor has to classify leases as either
finance or operating, depending on whether substantially all of the
risk and rewards incidental to ownership of the underlying asset
have been transferred. For both lessees and lessors IFRS 16 adds
significant new, enhanced disclosure requirements. IFRS 16 is
effective for annual reporting periods beginning on or after 1
January 2019. Earlier application is permitted, subject to EU
endorsement, but only in conjunction with IFRS 15, 'Revenue from
contracts with customers'.
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 HEPGL Group's
accounting policies and the key sources of estimation uncertainty
are as follows:
Estimation of fair value of Investment Property
The fair value of investment property reflects, amongst other
things, rental income from our current leases, assumptions about
rental income from future leases and the possible outcome of
planning applications, in the light of current market conditions.
The valuation has been arrived at primarily after consideration of
market evidence for similar property, although in the case of those
properties where fair value is based on their ultimate
redevelopment potential, development appraisals have been
undertaken to estimate the residual value of the landholding after
due regard to the cost of, and revenue from the development of the
property.
The HEPGL Group has also estimated the extent to which existing
mining tenants on investment property owned by the HEPGL Group
would perform their obligations to remediate land at the conclusion
of mining activity, and therefore the impact of any restoration
obligations which may revert to the HEPGL Group.
The values reported are based on significant assumptions and a
change in fair values could have a material impact on the HEPGL
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 13.
Notes to the financial information
for the year ended 31 December 2015: continued
2. Segment information
31 December 2015
Capital Income Unallocated
Growth Generation costs Total
GBP000 GBP000 GBP000 GBP000
---------------------------------------- ------- ----------- ----------- -------
Revenue 1,336 15,401 - 16,737
---------------------------------------- ------- ----------- ----------- -------
Operating (loss)/profit before
other income and expenses and
exceptional items (1,928) 8,325 (3,497) 2,900
Impairment of investment (465) - - (465)
Increase in fair value of investment
properties 18,403 10,487 - 28,890
Profit on sale of investment properties 7,089 1,209 - 8,298
Other gains - 3,208 - 3,208
Other operating income - 47 129 176
---------------------------------------- ------- ----------- ----------- -------
Operating profit/(loss) 23,099 23,276 (3,368) 43,007
---------------------------------------- ------- ----------- ----------- -------
Finance income 79
Finance costs (3,131)
Profit before tax 39,955
---------------------------------------- ------- ----------- ----------- -------
Other information
Investment property additions:
Direct acquisitions 14,939 9,349 -24,288
Subsequent expenditure 22,325 6,798 -29,123
-------------------------------- ------ ----- ------
Segmental assets
Capital Income Unallocated
Growth Generation costs Total
GBP000 GBP000 GBP000 GBP000
------------------------------ ------- ----------- ----------- -------
Total investment properties 210,004 124,613 - 334,617
Assets held for sale 30 9,098 - 9,128
Inventories - 1,092 - 1,092
Other receivables 650 - - 650
Investments in joint ventures 768 - - 768
------------------------------ ------- ----------- ----------- -------
211,452 134,803 - 346,255
------------------------------ ------- ----------- ----------- -------
Unallocated assets:
Trade and other receivables - - 19,967 19,967
Cash - - 20,677 20,677
------------------------------ ------- ----------- ----------- -------
Total assets 211,452 134,803 40,644 386,899
------------------------------ ------- ----------- ----------- -------
Financial liabilities are not allocated to the reporting
segments as they are managed and measured on a HEPGL Group
basis.
Notes to the financial information
for the year ended 31 December 2015: continued
2. Segment information: continued
31 December 2014
Capital Income Unallocated
Growth Generation costs Total
GBP000 GBP000 GBP000 GBP000
---------------------------------------- ------- ----------- ----------- -------
Revenue 176 13,758 - 13,934
---------------------------------------- ------- ----------- ----------- -------
Operating (loss)/profit before
other income and expenses (1,405) 7,659 (5,513) 741
Increase in fair value of investment
properties 15,695 53 - 15,748
Profit on sale of investment properties 7,309 595 - 7,904
Operating profit/(loss) 21,599 8,307 (5,513) 24,393
---------------------------------------- ------- ----------- ----------- -------
Finance income 318
Finance costs (3,822)
Profit before tax 20,889
---------------------------------------- ------- ----------- ----------- -------
Other information
Investment property additions:
Direct acquisitions 100 3,168 - 3,268
Subsequent expenditure 21,598 1,666 -23,264
-------------------------------- ------ ----- ------
Segmental assets
Capital Income Unallocated
Growth Generation costs Total
GBP000 GBP000 GBP000 GBP000
------------------------------ ------- ----------- ----------- -------
Total investment properties 178,055 111,556 - 289,611
Inventories - 142 - 142
Other receivables 650 - - 650
Investments in joint ventures 1,223 - - 1,223
------------------------------ ------- ----------- ----------- -------
179,928 111,698 - 291,626
------------------------------ ------- ----------- ----------- -------
Unallocated assets:
Trade and other receivables - - 17,760 17,760
Cash - - 17,296 17,296
------------------------------ ------- ----------- ----------- -------
Total assets 179,928 111,698 35,056 326,682
------------------------------ ------- ----------- ----------- -------
Financial liabilities are not allocated to the reporting
segments as they are managed and measured on a HEPGL Group
basis.
3. Operating profit
Year Year
ended ended
31 December 31 December
2015 2014
Note GBP000 GBP000
-------------------------------------- ---- ------------ ------------
Operating profit before tax is stated
after charging:
Staff costs 6 4,262 3,859
-------------------------------------- ---- ------------ ------------
Notes to the financial information
for the year ended 31 December 2015: continued
4. Other operating income and expenses
Year Year
ended ended
31 December 31 December
2015 2014
GBP000 GBP000
------------------------------------------------ ------------ ------------
Administrative expenses (5,981) (7,992)
Other operating income 176 -
Other gains 3,208 -
Profit on sale of investment properties 8,298 7,904
Increase in fair value of investment properties 28,890 15,748
------------------------------------------------ ------------ ------------
Other operating income and expenses 34,591 15,660
------------------------------------------------ ------------ ------------
Other gains in 2015 represents a gain on the sale of an option
(see note 28 for further information relating to this gain). Other
operating income in 2015 represents the re-measurement of the
Blenkinsopp Scheme and other items.
5. Exceptional items
Operating profit is stated after charging exceptional items
of:
Year Year
ended ended
31 December 31 December
2015 2014
GBP000 GBP000
----------------------------------------- ------------ ------------
Write down of investment in joint venture (465) -
----------------------------------------- ------------ ------------
Exceptional items (465) -
----------------------------------------- ------------ ------------
Write down of investment relates to the write down of a joint
venture investment held by the HEPGL Group at 31 December 2015
(note 14).
6. Employee information
The monthly average number of persons (including Executive
Directors) employed by the HEPGL Group during the year was:
Year Year
ended ended
31 December 31 December
2015 2014
Number Number
--------------- ------------ ------------
Administration 46 42
--------------- ------------ ------------
Total 46 42
--------------- ------------ ------------
ere:
Year Year
ended ended
31 December 31 December
Staff costs (including the Board 2015 2014
of Directors) GBP000 GBP000
--------------------------------- ------------ ------------
Wages and salaries 3,606 3,270
Social security costs 393 342
Other pension costs 263 247
----------------------------------- ------------ ------------
4,262 3,859
--------------------------------- ------------ ------------
Directors` and key management remuneration
Remuneration details for Directors` and key management of the
HEPGL Group is detailed below:
Year Year
ended ended
31 December 31 December
2015 2014
GBP000 GBP000
----------------------------- ------------ ------------
Short term employee benefits 2,052 1,669
Post-employment benefits 123 136
2,175 1,805
----------------------------- ------------ ------------
Notes to the financial information
for the year ended 31 December 2015: continued
7. Finance income
Year Year
ended ended
31 December 31 December
2015 2014
GBP000 GBP000
------------------------------- ------------ ------------
Bank interest 38 80
Other loan interest receivable 41 69
Gain on interest rate swap - 169
------------------------------- ------------ ------------
Finance income 79 318
------------------------------- ------------ ------------
8. Finance costs
Year Year
ended ended
31 December 31 December
2015 2014
GBP000 GBP000
--------------------------- ------------ ------------
Bank interest (1,483) (2,606)
Facility fee amortisation (1,191) (875)
Other interest (451) (341)
Loss on interest rate swap (6) -
--------------------------- ------------ ------------
Finance costs (3,131) (3,822)
--------------------------- ------------ ------------
9. Auditors' remuneration
During the year the HEPGL Group obtained the following services
from its auditors, PricewaterhouseCoopers LLP, at costs as detailed
below:
Year Year
ended ended
31 December 31 December
2015 2014
GBP000 GBP000
-------------------------------------------- ------------ ------------
Audit services
Fees payable to the Company auditors and
its associates for the audit of the parent
company and the
consolidated financial statements 65 72
Fees payable to the Company auditors and
its associates for other services:
- The audit of the Company's subsidiaries
pursuant to legislation 85 -
- Audit related assurance services 15 -
- Tax advisory services 98 5
- Tax compliance services 33 25
296 102
-------------------------------------------- ------------ ------------
From time to time, the HEPGL Group employs
PricewaterhouseCoopers LLP on assignments additional to their
statutory audit duties where their expertise and experience are
important. They are awarded assignments on a competitive basis. The
Audit Committee reviews non-audit assignments quarterly, and
approves all assignments above a predetermined cost threshold.
Notes to the financial information
for the year ended 31 December 2015: continued
10. Tax charge
Year Year
ended ended
31 December 31 December
2015 2014
Analysis of tax charge in the year GBP000 GBP000
----------------------------------- ------------ ------------
Deferred tax 4,474 6,905
----------------------------------- ------------ ------------
Tax charge 4,474 6,905
----------------------------------- ------------ ------------
The tax for the year is different to the standard rate of
corporation tax in the UK of 20.25% (2014: 21.5%). The differences
are explained below:
Year Year
ended ended
31 December 31 December
2015 2014
GBP000 GBP000
---------------------------------------------------- ------------ ------------
Profit before tax on continuing operations 39,955 20,889
---------------------------------------------------- ------------ ------------
Profit before tax multiplied by rate of corporation
tax in the UK of 20.25% (2014: 21.5%) 8,091 4,491
Effects of:
Non taxable income (5,781) (5,085)
Adjustments in respect of prior periods (824) -
Expenses not deducted for tax purposes 81 237
Previously unrecognised tax losses - (4,246)
Revaluation gains 5,888 6,905
Chargeable gains (2,330) 4,603
Change in tax rates (651) -
---------------------------------------------------- ------------ ------------
Total tax charge 4,474 6,905
---------------------------------------------------- ------------ ------------
Deferred tax
The analysis of deferred tax liabilities is as follows:
Year Year
ended ended
31 December 31 December
2015 2014
GBP000 GBP000
----------------------------------------------- ------------ ------------
No more than twelve months after the reporting
period - -
More than twelve months after the reporting
period 11,379 6,905
----------------------------------------------- ------------ ------------
11,379 6,905
----------------------------------------------- ------------ ------------
The gross movement on the deferred income tax account is as
follows:
Year Year
ended ended
31 December 31 December
2015 2014
GBP000 GBP000
------------------------ ------------ ------------
At 1 January 6,905 -
Income statement charge 4,474 6,905
------------------------ ------------ ------------
At 31 December 11,379 6,905
------------------------ ------------ ------------
Notes to the financial information
for the year ended 31 December 2015: continued
10. Tax charge: continued
Deferred tax: continued
Deferred tax is calculated in full on temporary differences
under the liability method using a tax rate of 18% (2014: 20%). A
reduction in the UK corporation tax rate from 20% to 19% (effective
from 1 April 2017), and further reductions to 18% (effective from 1
April 2020) were enacted as part of the Finance Act 2015. The
deferred tax liabilities are shown at 18% being the rate expected
to apply to the reversal of the liability.
The deferred tax charge of GBP4,474,000 for the year ended 31
December 2015 (2014: GBP6,905,000) is in respect of property
revaluation gains where tax is expected to arise when the property
is sold.
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 have not been recognised owing to the
uncertainty as to their recoverability. If these deferred tax
assets were recognised, the total asset would be GBP3,380,000
(2014: GBP200,000) as set out below:
As at As at As at As at
31 December 31 December 31 December 31 December
2015 2015 2014 2014
Total Total Total Total
amount potential amount potential
recognised asset recognised asset
GBP000 GBP000 GBP000 GBP000
Accelerated capital allowances - - - 61
Temporary differences on provisions - - - 132
Tax losses - 3,380 - -
------------------------------------ ------------ ------------ ------------ ------------
Net deferred tax asset - 3,380 - 193
------------------------------------ ------------ ------------ ------------ ------------
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.
Year Year
ended ended
31 December 31 December
2015 2014
----------------------------------------------- ------------ ------------
Profit from continuing operations attributable
to owners of the parent (GBP`000) 35,481 13,984
Weighted average number of shares used for
basic earnings per share calculation 24,096 24,096
Basic and diluted profit per share (GBP) 1,472 580
----------------------------------------------- ------------ ------------
12. Other receivables
The benefit of overages is recorded as a non-current receivable
as shown below:
Year Year
ended ended
31 December 31 December
2015 2014
GBP000 GBP000
--------- ------------ ------------
Overages 650 650
--------- ------------ ------------
Notes to the financial information
for the year ended 31 December 2015: continued
13. Investment properties
Investment property at 31 December 2015 and 2014 has been
measured at fair value. The HEPGL Group holds five categories of
investment property being agricultural land, natural resources,
major developments, strategic land and business parks in the UK,
which sit within the operating segments of Capital Growth and
Income Generation.
Income Generation Capital Growth
================================== ========================
Agricultural Natural Business Major Strategic
land resources parks developments land Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
----------------------- ------------ ---------- -------- ------------- --------- --------
At 31 December 2014 22,720 17,430 71,406 135,000 43,055 289,611
Direct acquisitions - 2,072 7,277 1,366 13,573 24,288
Subsequent expenditure 604 362 5,832 20,104 2,221 29,123
Increase in fair value 2,477 1,375 6,635 15,375 3,028 28,890
Transfer to assets
held for sale (6,013) (3,085) - - (30) (9,128)
Disposals (3,025) (1,200) (254) (14,256) (9,432) (28,167)
----------------------- ------------ ---------- -------- ------------- --------- --------
At 31 December 2015 16,763 16,954 90,896 157,589 52,415 334,617
----------------------- ------------ ---------- -------- ------------- --------- --------
At 31 December 2013 21,394 21,204 68,551 117,463 48,128 276,740
Direct acquisitions 285 - 2,883 - 100 3,268
Subsequent expenditure 845 382 439 19,813 1,785 23,264
Transfers 4,993 (4,993) - 4,291 (4,291) -
Increase in fair value (4,538) 1,058 3,533 17,388 (1,693) 15,748
Disposals (259) (221) (4,000) (23,955) (974) (29,409)
----------------------- ------------ ---------- -------- ------------- --------- --------
At 31 December 2014 22,720 17,430 71,406 135,000 43,055 289,611
----------------------- ------------ ---------- -------- ------------- --------- --------
Valuation process
The properties were valued in accordance with the Royal
Institute of Chartered Surveyors ("RICS") Valuation - Professional
Standards (the 'Red Book'), by BNP Paribas Real Estates and Savills
both independent firms acting in capacity of external valuers with
relevant experience of valuations of this nature. The valuations
are on the basis of Market Value as defined with the Red Book,
which RICS considers meets the criteria for assessing Fair Value
under International Reporting Standards. 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 HEPGL 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.
Notes to the financial information
for the year ended 31 December 2015: continued
13. Investment properties: continued
Valuation process: continued
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
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 HEPGL 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 in the year ended 31 December 2015.
Valuation techniques underlying management's estimation of fair
value
Agricultural land
Most of the agricultural land is valued using the market
comparison basis, with an adjustment made for the length of
remaining term on the tenancy and the estimated cost to bring the
land to its highest and best use. Where the asset is subject to a
secure letting,
this is valued on a yield basis, based upon sales of similar
types of investment.
Natural resources
Natural resource sites in the portfolio are valued based on a
discounted cashflow for the operating life of the asset.
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
observable 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 the
smaller development sites.
Strategic land
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. The 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.
Business parks
The business parks are valued on the basis of market comparison
with direct reference to observable market evidence including
rental values, 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.
At 31 December Agricultural Natural Major Strategic Business
2015 land resources developments land parks
----------------- ----------------- ------------ ---------- ------------- --------- --------
Reversionary
rental yield
% weighted average - - - - 10.54
low - - - - 5.12
high - - - - 16.95
Land value
per acre GBP000 weighted average 3 6 71 18 41
low 1 1 24 1 2
high 11 89 330 500 250
Cost report
totals* GBP000 - - 99,430 56,368 19,630
----------------- ------------------ ------------ ---------- ------------- --------- --------
* Cost report totals represent the estimated cost to bring
investment properties to their highest and best use.
Notes to the financial information
for the year ended 31 December 2015: continued
13. Investment properties: continued
Valuation techniques underlying management's estimation of fair
value: continued
At 31 December Agricultural Natural Major Strategic Business
2014 land resources developments land parks
----------------- ----------------- ------------ ---------- ------------- --------- --------
Reversionary
rental yield
% weighted average - - - - 11.0
low - - - - 8.8
high - - - - 18.1
Land value
per acre GBP000 weighted average 3 7 55 16 30
low 1 1 6 1 3
high 33 71 150 449 254
Cost report
totals* GBP000 2,334 - 107,693 56,837 19,407
----------------- ------------------ ------------ ---------- ------------- --------- --------
* Cost report totals represent the estimated cost to bring
investment properties to their highest and best use.
The table below shows some possible sensitivities to the key
valuation metrics and the resultant changes to the valuations.
At 31 December
2015
Valuation metric +/- change +/- effect on valuation
========== ============================================================
Agricultural Natural Major Strategic Business
land resources developments land parks
----------------- ---------- ------------ ---------- ------------- --------- --------
Value per acre 5% 1,237 904 7,879 2,623 4,545
Rental 5% - - - - 2,697
Yield (e.g.
11% to 10%) 1% - - - - 6,255
Cost report
totals 5% - - 4,972 2,818 982
------------------ ---------- ------------ ---------- ------------- --------- --------
At 31 December
2014
Valuation metric +/- change +/- effect on valuation
========== ============================================================
Agricultural Natural Major Strategic Business
land resources developments land parks
----------------- ---------- ------------ ---------- ------------- --------- --------
Value per acre 5% 1,136 872 6,750 2,153 3,570
Rental 5% - - - - 1,735
Yield (e.g.
11% to 10%) 1% - - - - 2,451
Cost report
totals 5% 117 - 5,385 2,842 970
------------------ ---------- ------------ ---------- ------------- --------- --------
The property rental income earned by the HEPGL Group from its
occupied investment property, all of which is leased out under
operating leases amounted to GBP6,406,000 (2014: GBP6,708,300).
Direct operating expenses arising on investment property generating
rental income in the year amounted to GBP3,853,900 (2014:
GBP3,599,700). Direct operating expenses arising on the investment
property which did not generate rental income during the year
amounted to GBP116,700 (2014: GBP392,400).
Notes to the financial information
for the year ended 31 December 2015: continued
14. Investments In joint ventures
GBP000
At 31 December 2013 and 31 December 2014 1,223
Investment in joint venture 10
Impairment of investment in joint venture (465)
------------------------------------------ -----------------
At 31 December 2015 768
------------------------------------------ -----------------
The HEPGL Group holds 50% of the issued ordinary shares of Bates
Regeneration Limited, a joint venture with Banks Property Limited
for the development of an investment property at Blyth,
Northumberland. At the end of the year the carrying value of the
investment was reviewed, the result of which was an impairment of
GBP465k which has been taken through the income statement and
disclosed as an exceptional item given its one-off nature.
The HEPGL Group's share of the assets and liabilities are:
Interest
Assets Liabilities held
2015 Country of incorporation GBP000 GBP000 %
------------------- ------------------------- ------- ----------- --------
Bates Regeneration
Limited England and Wales 1,213 (445) 50
------------------- -------------------------- ------- ----------- --------
Interest
Assets Liabilities held
2014 Country of incorporation GBP000 GBP000 %
------------------- ------------------------- ------- ----------- --------
Bates Regeneration
Limited England and Wales 2,050 (827) 50
------------------- -------------------------- ------- ----------- --------
The risks associated with this investment are as follows:
-- Decline in the availability and or an increase in the cost of
credit for residential and commercial buyers
-- Decline in market conditions and values.
The HEPGL Group also owns a number of other joint ventures whose
value is minimal.
15. Inventories
As at As at
31 December 31 December
2015 2014
GBP000 GBP000
------------------ ------------ ------------
Raw materials - -
Work in progress 114 -
Finished goods 978 142
------------------ ------------ ------------
Total inventories 1,092 142
------------------ ------------ ------------
Finished goods inventories comprises coal slurry that has been
processed and is ready for sale. The cost of inventory is
recognised as an expense within cost of sales in the year of
GBP1,083,000.
Notes to the financial information
for the year ended 31 December 2015: continued
16. Trade and other receivables
As at As at
31 December 31 December
2015 2014
GBP000 GBP000
------------------------------------ ------------ ------------
Trade receivables 1,564 1,901
Less: provision for impairment
of trade receivables (121) (383)
------------------------------------ ------------ ------------
Net trade receivables 1,443 1,518
Other receivables 16,234 15,816
Prepayments and accrued income 1,159 426
Amounts receivable from Harworth
Group Plc 550 -
Amounts recoverable on construction
contracts 581 -
19,967 17,760
------------------------------------ ------------ ------------
The carrying amount of trade and other receivables approximate
to their fair value due to the short time frame over which the
assets are realised. All of the HEPGL Group's receivables are
denominated in sterling.
Other receivables include a GBP2.0m (2014: GBP2.5m) loan to UK
Coal Production Limited, a GBP1.0m (2014: GBP2.0m) loan to UK Coal
Surface Mining Restoration Limited and GBP6.7m (2014: GBP6.1m) of
cash held in escrow accounts in respect of the disposal of plots
for housing and commercial development. In addition a balance of
GBP2.2m (2014: GBP3.1m) is included within other receivables
relating to restricted cash balances for performance bonds and
GBP4.0m (2014: GBPnil) is held in an account that RBS has control
over until 13 February 2016.
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 HEPGL Group and Company do not hold any collateral as
security.
Movements on the HEPGL Group provisions for impairment of trade
receivables are as follows:
2015 2014
GBP000 GBP000
------------------------------------ ------- -------
At the beginning of the year (383) (827)
Released to profit and loss account 262 444
At the end of the year (121) (383)
------------------------------------ ------- -------
The other classes of assets within trade and other receivables
contain impaired assets of GBP1,055,000; against which a provision
of GBP262,000 is held.
As at 31 December 2015, trade receivables of GBP1,120,000 (2014:
GBP1,014,000) were past due but not impaired. These mainly relate
to customers for whom the arrears are being collected through
agreed payment plans or where cash has been collected in 2016.
The ageing of these was as follows:
2015 2014
GBP000 GBP000
----------------------- ------- -------
Up to 3 months 1,095 986
Over 3 months 25 28
----------------------- ------- -------
At the end of the year 1,120 1,014
----------------------- ------- -------
Notes to the financial information
for the year ended 31 December 2015: continued
16. Trade and other receivables (continued)
As at 31 December 2015, trade receivables of GBP121,000 (2014:
GBP828,000) were impaired. The ageing analysis of the impaired
trade receivables was as follows:
2015 2014
GBP000 GBP000
----------------------- ------- -------
Up to 3 months - 103
Over 3 months 121 725
----------------------- ------- -------
At the end of the year 121 828
----------------------- ------- -------
Provision for impairment charged to the income statement in the
year was GBPnil (2014: GBP12,000).
17. Cash
As at As at
31 December 31 December
2015 2014
GBP000 GBP000
----- ------------ ------------
Cash 20,677 17,296
----- ------------ ------------
18. Assets classified as held for sale
As at As at
31 December 31 December
2015 2014
GBP000 GBP000
---------------------- ------------ ------------
Investment properties 9,128 -
Total 9,128 -
---------------------- ------------ ------------
The assets classified as held for sale at the year end relate to
investment properties which are expected to be sold within twelve
months.
Notes to the financial information
for the year ended 31 December 2015: continued
19. Trade and other payables
Current liabilities
As at As at
31 December 31 December
2015 2014
GBP000 GBP000
------------------------------- ------------ ------------
Current
Trade payables 856 3,883
Taxation and social security 1,317 2,070
Other creditors 2,910 -
Accruals and deferred income 11,865 7,314
Amounts owed to Harworth Group
plc 7,303 -
------------------------------- ------------ ------------
24,251 13,267
------------------------------- ------------ ------------
The amounts owed to Harworth Group plc are payable on demand and
attract interest at LIBOR plus 2%.
Non-current liabilities
As at As at
31 December 31 December
2015 2014
GBP000 GBP000
--------------- ------------ ------------
Non-current
Other creditors 2,280 -
--------------- ------------ ------------
2,280 -
--------------- ------------ ------------
Non-current creditors relate to deferred consideration due on
land purchases after one year.
Notes to the financial information
for the year ended 31 December 2015: continued
20. Borrowings
As at As at
31 December 31 December
2015 2014
GBP000 GBP000
------------------------------------ ------------ ------------
Bank loans
Current:
Secured - bank loans and overdrafts - (49,651)
Secured - other loans (400) (1,437)
------------------------------------ ------------ ------------
(400) (51,088)
------------------------------------ ------------ ------------
Non-current:
Secured - bank loans (48,968) -
Secured - other loans (15,151) (6,223)
------------------------------------ ------------ ------------
(64,119) (6,223)
------------------------------------ ------------ ------------
At 31 December 2015, the HEPGL Group had bank borrowings of
GBP50.0m (2014: GBP49.7m), GBP15.7m (2014: GBP7.7m) of
infrastructure loans offset by GBP1.2m of capitalised loan fees
which resulted in total borrowings of GBP64.5m (2014: GBP57.3m).
The bank borrowings are part of a GBP65.0m RCF facility from The
Royal Bank of Scotland. The facility is repayable on 13 February
2020 (five year term) on a non-amortising basis and is subject to
financial and other covenants. At 31 December 2014 the bank
borrowings included facilities from Lloyds Banking Group amounting
to GBP38.2m and from Barclays Bank amounting to GBP12.2m, each
repayable within one year, and capitalised loan fees of
GBP0.7m.
The infrastructure loans of GBP15.7m (2014: GBP7.7m) are
provided by public bodies in order to promote the development of
major sites. They comprise a GBP1.2m loan from Leeds LEP in respect
of the Prince of Wales site (2014: GBP1.6m), GBP10.9m from the
Homes and Community Agency in respect of Waverley (2014: GBP5.1m),
GBP3.6m from Sheffield City Region JESSICA Fund for Rockingham
(2014: GBPnil). At 31 December 2014 there was also a loan of
GBP1.0m from Greater Manchester Investment Fund In respect of
Logistics North.
The loans are drawn as work on the respective sites is
progressed and they are repaid on agreed dates or when disposals
are made from the sites.
Current loans are stated after deduction of unamortised
borrowing cost of GBPnil (2014: GBP741,000). Non-current bank and
other loans are stated after deduction of unamortised borrowing
costs of GBP1,236k (2014: GBPnil). The bank loans and overdrafts
are secured by way of fixed charges over certain assets of the
HEPGL Group.
21. Provisions for liabilities and charges
As at As at
31 December 31 December
2015 2014
GBP000 GBP000
--------------------- ------------ ------------
At 1 January 564 683
Released in the year (129) (119)
At 31 December 435 564
--------------------- ------------ ------------
Harworth Estates Mines Property Limited (a subsidiary of the
HEPGL Group) provided a guarantee to Coalfield Resources plc,
capped at GBP3,100,000 should the mining business fail to meet its
obligation to fund Coalfield Resources plc`s Blenkinsopp pension
scheme liability. Due to the uncertainty surrounding the mining
business the HEPGL Group recognised a liability and charged the
income statement accordingly. On an IAS 19 (Revised) 'Employee
benefits' basis the liability at 31 December 2015 is GBP435,000
(2016: GBP564,000).
Notes to the financial information
for the year ended 31 December 2015: continued
22. Financial instruments and derivatives
The HEPGL Group's principal financial instruments during the
year included trade and other receivables, cash, interest bearing
borrowings, trade and other payables and derivative financial
instruments.
Other financial assets and liabilities
31 December 31 December
2015 2014
================ ================
Book Fair Book Fair
value value value value
GBP000 GBP000 GBP000 GBP000
--------------------------------- ------- ------- ------- -------
Assets
Cash and cash equivalents 20,677 20,677 17,296 17,296
Trade and other receivables 19,267 19,267 16,846 16,846
Liabilities
Bank and other borrowings 64,519 64,519 57,311 57,311
Derivative financial instruments - - 81 81
Trade and other payables 23,551 23,551 11,824 11,824
--------------------------------- ------- ------- ------- -------
In accordance with IAS 39, the HEPGL Group classifies the assets
and liabilities in the analysis above as 'loans and receivables'
and 'other financial liabilities', respectively. At the 2015 and
2014 year ends, this Group did not have any 'held to maturity' or
'available for sale' financial assets or 'held for trading'
financial assets and liabilities as defined by IAS 39.
The fair value of bank and other borrowings equals their
carrying amount, as the impact of discounting is not significant.
The fair values are within Level 2 of the fair value hierarchy.
23. Financial risk management
The HEPGL Group's overall risk management programme focuses on
credit and liquidity risks to minimise potential adverse effects on
this 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 HEPGL Group is subject to credit risk arising from
outstanding receivables and committed cash and cash equivalents and
deposits with banks and financial institutions. This Group's policy
is to manage credit exposure to trading counterparties within
defined trading limits.
The HEPGL Group is exposed to counterparty credit risk on cash
and cash equivalent balances. The HEPGL Group and Company hold all
of their cash deposits with their principal bankers.
Interest rate risk
The HEPGL Group's interest rate risk arises from external
borrowings which are charged at LIBOR plus 2%.
Liquidity risk
The HEPGL Group is subject to the risk that it will not have
sufficient liquid resources to fund its on-going business. The
HEPGL Group manages its liquidity requirements with the use of both
short and long-term cash flow forecasts.
The HEPGL Group had net debt at 2015 of GBP43,842,000; (2014:
GBP40,015,000). The HEPGL Group used cash from operating activities
and investing activities for the year of GBP3,992,000 (2014:
GBP4,076,000).
Notes to the financial information
for the year ended 31 December 2015: continued
23. Financial risk management : continued
The table below analyses the HEPGL 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.
Less Between Between
than 1 and 2 and
1 year 2 years 5 years
GBP000 GBP000 GBP000
------------------------------------ ------- -------- --------
At 31 December 2015
Trade and other payables (including
deferred income) 23,551 2,280 -
Interest payable on borrowings - - 345
Bank and other borrowings 400 3,000 60,774
------------------------------------ ------- -------- --------
At December 2014
Trade and other payables (including
deferred income) 13,267 - -
Bank and other borrowings 37,842 - -
------------------------------------ ------- -------- --------
Capital risk management
The HEPGL Group is subject to the risk that its capital
structure will not be sufficient to support the growth of the
business. The HEPGL Group's objectives when managing capital
are:
-- to safeguard the HEPGL 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 HEPGL 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 17.
In order to maintain or adjust the capital structure, the HEPGL
Group may adjust the amount of dividends paid to shareholders,
return capital to shareholders, issue new shares or sell assets to
reduce debt.
The HEPGL Group monitors capital on the basis of net debt to
equity. Net debt is total debt less cash and cash equivalents and
at 31 December 2015 this was GBP43.8m (2014: GBP40.0m).
The HEPGL Group has in place a GBP65.0m RCF from The Royal Bank
of Scotland ('RBS'). The facility is a five year term facility
which ends in February 2020. It is on a non-amortising basis and is
subject to financial and other covenants.
The facility provided by RBS is subject to covenants over loan
to market value of investment properties, gearings, and minimum
consolidated net worth.
The HEPGL Group comfortably operated within its requirements
throughout the year.
24. Called up share capital
2015 2014
===================== ======================
Number Number
of shares GBP of shares GBP
--------------------------------- ---------- --------- ---------- ----------
Authorised share capital
At the start and end of the year
Ordinary shares of GBP0.001 each Unlimited Unlimited Unlimited Unlimited
--------------------------------- ---------- --------- ---------- ----------
Issued and fully paid
Ordinary shares of GBP0.001 each
1 January 24,096 24 24,096 24
31 December 24,096 24 24,096 24
---------------------------------- ---------- --------- ---------- ----------
Notes to the financial information
for the year ended 31 December 2015: continued
25. Share premium account
2015 2014
GBP000 GBP000
--------------- ------- -------
At 1 January 222,161 222,161
At 31 December 222,161 222,161
------------------- ------- -------
26. Fair value reserve
2015 2014
GBP000 GBP000
------------------------------- ------- -------
At 1 January 29,581 16,011
Fair value gain on revaluation
of investment properties 28,890 15,748
Transfer to accumulated
losses on disposal of
investment property - (2,178)
---------------------------------- ------- -------
At 31 December 58,471 29,581
---------------------------------- ------- -------
The fair value reserve does not represent realised reserves.
27. Capital and other financial commitments
Capital expenditure contracted for at 31 December 2015 is GBPnil
(2014: GBPnil).
28. Related party transactions
Directors and key management compensation
The remuneration of the Directors and key management is
disclosed in note 6
Peel
The HEPGL Group relinquished an option to purchase 50% of the
share capital of Peel Wind Farms (Blue Sky Forest) Limited in
return for GBP4.4m from Peel Holdings Wind Farms (IOM) Limited.
This has resulted in a gain of GBP3.2m shown in the consolidated
income statement within other gains.
Harworth Group plc (formerly Coalfield Resources plc)
A Management recharge was paid to Harworth Group Plc of GBP0.4m
(2014: GBP1.5m) and the balance outstanding at 31 December 2015 was
GBP0.6m (2014: GBP0.3m).
Interest of GBP78,000 (2014: GBPnil) was incurred on the loan
provided from Harworth Group plc to the Group. The amount
outstanding at 31 December 2015 was GBP7.7m (2014: GBPnil).
Harworth Estates Mines Property Limited (a subsidiary of the
Group) provided a guarantee to Harworth Group plc, capped at
GBP3,100,000 should the mining business fail to meet its obligation
to fund Harworth Group plc`s Blenkinsopp pension scheme
liability.
Notes to the financial information
for the year ended 31 December 2015: continued
29. Operating lease commitments
The Group leases a number of vehicles, office equipment and
office facilities under operating leases. The leases run between
one year and three years.
a) Future minimum lease payments
The future minimum lease payments under non-cancellable leases
were payable as follows:
As at As at
31 December 31 December
2015 2014
GBP'000 GBP'000
Less than one year 33 33
Between one and five years 30 50
63 83
Amounts recognised in the income
statement
Lease cost 25 22
b) Future minimum lease receipts
As set out in note 13 property rental income earned during the
year was GBP6.4m (2014: GBP6.7m).
The HEPGL Group had contracted with tenants for the following
future minimum lease receipts:
As at As at
31 December 31 December
2015 2014
GBP'000 GBP'000
Less than one year 5,142 4,331
Between one and five years 15,916 14,959
More than five years 27,386 28,839
48,444 48,129
30. Subsequent events
Financing
On 21 June 2016 the HEPGL Group entered into a four year swap
with RBS to fix GBP30m of borrowings at an all-in rate of 2.955%,
including fees. The swap is hedge accounted with any unrealised
movements going through reserves.
On 19 August 2016 the HEPGL Group completed a planned extension
of its RCF, increasing the limit to GBP75m and extending the term
by a further year to expiry in February 2021.
On 13 February 2018 the HEPGL Group extended the term of its
GBP75m RCF by two years such that it now expires in February 2023
and on 30 April 2018 Santander UK Plc provided an additional GBP25m
of funding to the RCF to sit alongside the existing GBP75m
commitment from The Royal Bank of Scotland.
Property portfolio
On 14 March 2016 the HEPGL Group purchased a 50% share of The
Aire Valley Land LLP from Keyland Developments Limited for a
consideration of GBP8.5m plus costs of GBP0.5m. The Aire Valley
Land LLP is a joint venture company. It controls 165 acres of land
in Leeds that abuts an existing landholding of the Group on the
former Skelton Grange power station site.
The HEPGL Group acquired two income generating sites in
Lancashire; a 10.75 acre site in Chorley known as Moorland Gate
Business Park for GBP4.5m (November 2016) and a 19.4 acre site in
Preston, Four Oaks Business Park for GBP13.2m (December 2016). Also
in December 2016 the HEPGL Group sold 43.71 acres at Logistics
North to Lidl UK for GBP22.5m to build its North West Distribution
Centre.
On 26 April 2017, the HEPGL Group entered into a joint venture
agreement with Lancashire County Pension Fund to establish Multiply
Logistics North Holdings Limited to develop part of the site at
Logistics North, near Bolton.
Notes to the financial information
for the year ended 31 December 2015: continued
30. Subsequent events (continued)
In June 2017 GBP77.7m of investment property was re-categorised
to development property (disclosed within inventory) following the
maturity and evolvement of the business model. A further GBP151.4m
of investment property was re-categorised to development as at 31
December 2017 with further evolution of the business model and
conclusion of the policy. The HEPGL Group policy now is to
categorise all properties which have received planning permission
as development properties.
On 1 May 2018 the HEPGL Group acquired a 112 acre site at Wyke,
Bradford for GBP32.45m plus acquisition costs.
Directors
The changes in the Directors of HEPGL from 1 January 2016 are as
follows:
P. Wilson (appointed 19/01/2016)
I. Ball (appointed 19/01/2016)
A. Kirkman (appointed 19/01/2016)
M. Richardson (resigned 29/02/2016)
J. Cox (resigned 03/11/2016)
C. Birch (appointed 03/11/2016)
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
MSCSEEFIUFASELI
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