Harworth Group H1 Earnings Call Highlights

Key Points

• Pipeline growth: Harworth’s industrial, logistics and powered-land pipeline reached 34.8 million square feet, with 0.8 GW of accepted power offers and a 3.8 million-square-foot construction-ready land bank. Microsoft’s Skelton Grange data-center sale is progressing, alongside a second hyperscale opportunity and four additional potential sites.
• First-half returns weakened: EPRA net development value per share fell to 214.8 pence from 224.4 pence, while total accounting return was negative 3.7%, primarily due to weaker residential demand and construction-cost inflation. Net debt increased to £190 million, though leverage remained below the company’s 25% limit and liquidity stood at £99.5 million.
• Strategic shift: Harworth plans to exit residential development and concentrate on industrial, logistics and powered land, where it has achieved a reported 24% average annual return on capital employed over the past three years. The board also approved a 10%-higher interim dividend of 0.592 pence per share, while the company remains in an offer period following an unrecommended proposal from Peel Pepper.

Harworth Group LON: HWG reported continued progress across its industrial, logistics and powered-land pipeline in the first half of 2026, while residential-market weakness and construction-cost inflation contributed to a decline in net development value per share.

The company said it was currently in an offer period following an unrecommended proposal from Peel Pepper (U.K.) Limited, which is indirectly wholly owned by Peel Holdings Group Limited. Management said materials relating to Harworth’s response had been published separately, while the results presentation focused on first-half performance.

Pipeline progress and data-center opportunities

Harworth said its industrial, logistics and powered-land platform totaled 34.8 million square feet, supported by accepted power offers of 0.8 gigawatts. Some 73% of the pipeline was either consented or progressing through the planning system.

Investment in infrastructure and enabling works has created what the company described as its largest substantially construction-ready land bank, totaling 3.8 million square feet. Harworth estimates the land bank could support gross development value of £600 million over the next three to five years.

The company said it had completed or entered legal negotiations on three industrial and logistics pre-lets totaling more than 300,000 square feet during the year, including activity after the reporting period. The leases have terms of 15 to 20 years and are expected to generate £3.7 million in annualized rent at an average 17% premium to estimated rental value. Negotiations are continuing for a further 1.5 million square feet.

Powered land and data centers were highlighted as a major component of Harworth’s growth opportunity. Its first hyperscale powered-land sale to Microsoft at Skelton Grange was progressing toward completion. The company also entered exclusivity after the period end with another data-center provider for a second hyperscale site that has an accepted power connection offer and what Harworth characterized as strong planning prospects.

Harworth identified four further potential hyperscale data-center opportunities beyond those transactions. It said all of the sites are owned freehold or controlled through options or joint ventures, while all but one are already progressing through planning.

JLL estimated potential future profits of £292 million from Harworth’s powered-land portfolio excluding Skelton Grange, based on assumptions including full ownership, planning approval and secured power. Management said its strategy is to monetize land at an early powered-land stage rather than build and retain data centers, reducing capital needs, development timelines and execution risk.

Valuation pressure weighs on first-half return

Chief Financial Officer Kitty Patmore said financial performance reflected resilient operational activity but “macro-driven valuation pressure,” particularly in residential markets. Total accounting return was negative 3.7%, as EPRA net development value per share declined to 214.8 pence at June 30 from 224.4 pence at Dec. 31, 2025.

The decline was principally attributed to softer housebuilder demand and market construction-cost inflation. Industrial and logistics valuations were broadly stable, as actions to advance industrial, logistics and data-center sites largely offset higher labor and materials costs, Patmore said.

The company recorded a net portfolio value loss of £14.9 million during the first half. Industrial and logistics major developments generated a £12.7 million valuation gain, but industrial and logistics strategic land posted a £14.7 million loss as development-cost inflation outpaced near-term value recognition. The investment portfolio recorded a £4.3 million loss, largely due to a planned repositioning that increased vacancy at one asset.

Residential major developments and strategic land generated valuation losses of £15.8 million and £1.2 million, respectively. These were partly offset by £8.4 million of valuation gains in natural resources, agricultural land and other assets, aided by biodiversity net-gain schemes and an improved income outlook for certain energy sites.

• Total property sales were £13.2 million in the first half, compared with £18.9 million a year earlier.
• Following the period end, Harworth completed an additional £8.1 million disposal.
• Fifty-eight percent of budgeted full-year sales were completed, exchanged or in legal negotiations, including 952 residential serviced plots.
• The company sold land for more than 150 plots to a national housebuilder at Benthall Grange in Ironbridge during the half.

Harworth’s net debt rose to £190 million at June 30 from £145.9 million at the end of 2025, reflecting investment in industrial and logistics sites and the timing of expenditure before expected second-half sales receipts. Its net loan-to-portfolio value ratio was 20.3%, below its self-imposed 25% maximum.

The company reported available liquidity of £99.5 million, including £90 million of undrawn revolving credit capacity and £9.5 million of cash. Its £275 million revolving credit facility has no refinancing requirement until November 2029 and includes a £50 million uncommitted accordion option.

The board approved an interim dividend of 0.592 pence per share, up 10% year over year, in line with the company’s stated policy.

Strategy shifts toward pure-play industrial and powered land

Management announced an acceleration of initiatives intended to create a simpler, lower-cost and higher-returning platform. The company plans to exit the residential sector entirely and reallocate capital toward industrial, logistics and powered-land opportunities.

Harworth had previously targeted an 85% industrial and logistics portfolio and residential exposure below 15% by 2029. Management said industrial and logistics land and developments, including data centers, had generated an average annual return on capital employed of 24% over the past three years.

The company will focus on assembling and master-planning strategic sites, securing planning and power, conducting remediation and infrastructure work, and creating construction-ready development opportunities. It said its industrial and logistics pipeline includes 3.8 million square feet of substantially construction-ready land and another 9.6 million square feet in its medium-term pipeline.

JLL assessed additional potential net realizable value of £174 million from 75% of Harworth’s serviced, construction-ready and medium-term industrial and logistics pipeline, including future development profits. Harworth said this value is not included in its formal Red Book valuations or EPRA NDV.

The company also plans to manage its investment portfolio more actively, rather than to a fixed target size. The portfolio was valued at £301.4 million at June 30 and was 77% Grade A by value. Harworth expects it to reach a medium-term stabilized value of approximately £500 million to £600 million, while using disposals and capital recycling to support higher-returning land and development opportunities.

Management said it is working on a quantified financial benefits statement for expected cost savings from the streamlined business model and ongoing digital and operational transformation. It is targeting low-double-digit total accounting returns over the longer term and said the board could consider capital returns to shareholders if it determines that surplus capital exists after asset sales and consideration of future investment opportunities.

About Harworth Group (LON:HWG)

Harworth Group plc is a leading sustainable regenerator of land and property for development and investment which owns, develops and manages a portfolio of over 14,000 acres of land on around 100 sites located throughout the North of England and Midlands. The Group specialises in the regeneration of large, complex sites, in particular former industrial sites, into new residential and industrial & logistics developments. Visit www.harworthgroup.com for further information.

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