Harworth Gp Regulatory News (HWG)

RNS Number : 3401X

Harworth Group PLC

28 August 2015

 

HARWORTH GROUP PLC

(Formerly Coalfield Resources plc)

INTERIM RESULTS

 

Harworth Group plc ("Harworth" or "the Group"), the property regeneration specialist, announces its interim results for the six months ended 30 June 2015.

 

Harworth was listed on the London Stock Exchange on 24 March 2015 under its new name following the successful acquisition of the remaining 75.1% of Harworth Estates Property Group Limited ("Harworth Estates") that the Group did not already own and the associated equity capital fundraising. The new capital structure was further strengthened by the completion of new bank facilities with The Royal Bank of Scotland.

 

Financial Highlights (1)

· Profit before tax of £51.3m, including the £44.2m gain arising on the acquisition of the 75.1% of shares in Harworth Estates on 24 March 2015.

· Net assets value of £274.5m and value of investment property of £307.0m.

· Net assets per share of 9.4 pence.

· Earnings per share of 2.7 pence (2014: 0.5 pence).

 

Underlying Financial Performance (2)

· Profit from operations, before valuation gains and profits on disposals, of £1.1m (2014: £0.8m).

· £8.2m revaluation gains mainly reflecting progress with planning consents at major sites (2014: £10.4m).

· Disposal proceeds of £21.0m (2014: £17.1m), with £5.5m profit from disposals (2014: £3.1m).

· Operating profit of £14.8m (2014: £14.3m).

 

Operational Review

· Sale of 317 plots from the five key sites to national and regional house-builders realising an average £37,100 per plot. Planning permission for 230 residential units and one commercial development secured in the period.

· Thirteen new lettings across the portfolio, increasing the rent roll by £0.9m annually.

· Continued replenishment of the property portfolio with the acquisition of the 350 acre former Alcan smelter site at Lynemouth, Northumberland.

 

Harworth's Chairman, Jonson Cox, said:

 

"With three months' trading after the acquisition, which brought all of the ownership interests in Harworth Estates together under Harworth Group plc, these results are in line with our expectations and validate the strategic logic of the transaction."

 

Harworth's Chief Executive, Owen Michaelson, said:

 

"Over the reporting period, Harworth has continued to make good progress in the regeneration and sale of brownfield land for residential, commercial and low carbon energy purposes. Trading remains in-line with expectations and we expect residential and commercial land sales to maintain momentum into the second half of the year."

 

1. The 'Financial Highlights' include the effects of accounting for the acquisition of the 75.1% of shares in Harworth Estates on 24 March 2015, from which date the results of Harworth Estates were fully consolidated into the Group financial statements. Prior to this date, the results of Harworth Estates were included in the Group income statements as a share of profit of associate.

2. The 'Underlying Financial Performance' shows the key results of Harworth Estates and its subsidiaries for the six months to 30 June 2015, together with the results from the comparative prior-year period, excluding any acquisition fees.

 

 

Enquiries:

 

Harworth Group plc	Tel +44 (0) 114 30 30 880
Owen Michaelson, Chief Executive
Mike Richardson, Finance Director
Cardew Group	Tel: +44 (0)20 7930 0777
Anthony Cardew

 

Notes to Editors:

Harworth Group Plc is a leading property and development company which owns and manages a portfolio of some 27,000 acres of land across approximately 200 sites located throughout the Midlands and North of England. The Company specialises in the regeneration of former coalfield sites and other brownfield land into employment areas, new residential properties and low carbon energy projects.

http://www.harworthgroup.com/ 

 

Cautionary Statement

This announcement contains unaudited information and forward-looking statements that are based on current expectations or beliefs, as well as assumptions about future events. These forward-looking statements can be identified by the fact that they do not relate only to historical or current facts and undue reliance should not be placed on any such statements because they speak only as at the date of this document and are subject to known and unknown risks and uncertainties and can be affected by other factors that could cause actual results, and Harworth's plans and objectives, to differ materially from those expressed or implied in the forward-looking statements. Harworth undertakes no obligation to revise or update any forward-looking statement contained within this announcement, regardless of whether those statements are affected as a result of new information, future events or otherwise, save as required by law and regulations.

 

Chairman's statement

Overview

I am pleased to be able to present our first report to shareholders following the acquisition on 24 March this year of the 75.1% of Harworth Estates that we did not already own. At this time last year, I advised you that I believed a simpler shareholding structure would improve the visibility of the underlying value of the business. The acquisition of the shareholding from the Pension Protection Fund, which has now become a major shareholder of the Company, has demonstrated the value of your board's drive to achieve this final step in the restructuring of the business started in 2012. With three months' trading after the acquisition, which brought all of the ownership interests in Harworth Estates together under Harworth Group plc, these results are in line with our expectations and validate the strategic logic of the transaction.

These financial results for the half year are complicated by the fact that we have to reflect the ownership structure of the 24.9% investment in Harworth Estates up to 24 March 2015 and the full ownership of that business from that date. The presentation of our results is further complicated by the accounting gain which the acquisition created and which is explained below and in more detail in the Financial Review section of this report. These complications will continue for the rest of the current financial year.

I am also pleased to report that the underlying results for the Harworth Estates business reflect the good start to the year.

 

Results

In the first half of 2015, Harworth recorded a profit before tax of £51.3m, which includes a one-off £44.2m gain arising on the completion of the acquisition of Harworth Estates on 24 March 2015. 

Operationally, the team has made good progress in managing our land bank, including securing planning consent on 230 residential plots and securing new rental streams from our investment portfolio. This resulted in Haworth Estates booking a revaluation gain of £8.2m (2014: £10.4m) in addition to a profit on disposals of investment properties and an option of £5.5m (2014: £3.1m).

The Group's net asset value as at 30 June 2015 was £274.5m (2014: £58.4m).

Board Membership

The Board of Directors was strengthened on the completion of the acquisition by the appointment of four new directors. Owen Michaelson and Mike Richardson joined as Chief Executive and Finance Director from Harworth Estates. Martyn Bowes joined, having been nominated by the Pension Protection Fund, which now holds a 25% investment directly in the Company, and Anthony Donnelly joined as an independent non-executive director, both from positions on the Harworth Estates board.

Mike Richardson has informed the Board of his intention to step down as a Director, and from his position as Finance Director, after the close of the 2015 results, during the course of our 2016 financial year. I am grateful to Mike for giving the Board more than adequate time to secure a suitable successor. It is too early for formal goodbyes, but he will leave with our thanks for the sterling contribution he has made to Harworth's success.

On behalf of the Board, I would like to thank all of the Group's staff for their support and commitment during the restructuring of the business and look forward to seeing their efforts rewarded with the successful growth of the Group.

Outlook

The Group continues to focus its efforts on achieving medium and long-term value realisation from its property portfolio for the benefit of shareholders. At the same time, the Group is looking to replenish the portfolio of investment and development land. During the period we acquired the site of the former Alcan smelter at Lynemouth in Northumberland as well as several small strategic parcels of land adjacent to our existing sites. The outlook for our operations business which, in addition to generating income from land remediation, operates the business parks and natural resources, is good with a strong rental stream being developed.

 

 

Jonson Cox

Chairman

28 August 2015

 

Chief Executive's Review and Operational Report

The first half of 2015 has seen further progress by Harworth Estates in both its Capital Growth and Income Generation business segments, building on the inherent value in the property portfolio and the strength of its in-house team.

During the six month period, outline planning consents were granted for 230 residential plots, together with resolutions to grant a further 970 plots, bringing the total number of consented residential plots in the portfolio to 8,969.

At Gedling in Nottinghamshire, a new consent was granted for 150 residential plots. This former colliery site, which also includes a completed country park on land provided by Harworth Estates, is being developed for commercial and renewable energy use, as well as residential. Planning applications for a further 1,305 residential plots across the portfolio were in process at 30 June 2015. 

Planning consent was granted for 165,000 sq ft of commercial development at Gateway 36, near Barnsley, at the site of the former Rockingham Colliery, with development funding from Sheffield City Region. Construction of 65,000 sq ft of pre-let commercial property on this site commenced in April 2015.

Harworth carefully plans the disposal of properties to extract the maximum value from its land portfolio, with gains achieved over book value, and to realise cash for reinvestment. On the residential front, 317 plots were sold, from five major development sites, to national and regional house-builders. The average price per plot sold was £37,100. At 30 June 2015, several additional sales to house-builders were in negotiation, for completion during the second half of the year.

The main disposal for commercial use was to the mining services company, Joy Global, at our Logistics North site in Bolton, following on from land sales to Aldi and MBDA last year. With this site now established as an important manufacturing and logistics hub for the North of England, further sales in the second half of the year are in negotiation. In addition, Harworth disposed of its option on the Chevington wind farm project in Northumberland, retaining the freehold of the land and the associated rental income stream.

In response to improving sales prospects, as previously announced, capital investment at Logistics North and at the Advanced Manufacturing Park in Rotherham has been brought forward, ensuring that there is land available for immediate occupation in the next phases of these developments.

An important part of Harworth Estates strategy is to replenish its land portfolio. The main acquisition in the first half of the year was the former Alcan smelter site at Lynemouth, Northumberland, which completed in April 2015. This 350 acre brownfield site will be used for commercial development, including the retention of several rental units. Site reclamation has commenced in line with the masterplan for the site. In addition, several smaller tracts of land adjacent to existing sites in our portfolio were acquired.

In the area of renewable energy, an additional 5MW of solar wind farm was installed, bringing the total to 36MW in our portfolio, and the rental income for the Chevington wind farm was secured. Harworth Estates continued to recover coal fines from its ex-colliery sites for sale to energy companies.

Harworth made further progress with income generation from its Business Parks, with 13 new commercial lettings signed in the six months to 30 June 2015, with an annualised rent roll of £860k. The largest of these was to Barnsley Metropolitan Borough Council at Gateway 36. Other new tenancies included Network Rail, Amec Foster Wheeler and Siniat Limited. 

On 13 February 2015, Harworth Estates entered into a £65m, five year term, revolving credit facility with The Royal Bank of Scotland, replacing amortising facilities with the Lloyds Banking Group and Barclays Bank. This new facility was designed to provide the stability and flexibility to support the growth of the business. Infrastructure funding, provided by pubic bodies to promote the development of major sites for employment and housing needs, continued to feature in Harworth Estates funding strategy. The latest such transaction was the Sheffield City Region loan to fund Gateway 36, mentioned above. 

Overall, trading remains in line with expectations and we expect residential and commercial land sales to maintain momentum into the second half of the year.

 

Owen Michaelson

Chief Executive Officer

28 August 2015

 

Financial review

Operating results

The Group's operating profit was £6.8m (1H 2014: nil, FY 2014: nil). This included revaluation gains of £3.4m (1H 2014: nil, FY 2014: nil) and profits from disposals of investments properties of £2.2m (1H 2014: nil, FY 2014: nil). There was also a gain of £3.3m (1H 2014: nil, FY 2014: nil) from the surrender of an option on the Chevington wind farm project. Transaction costs amounting to £2.4m (1H 2014: nil, FY 2014: nil) related to the acquisition of 75.1% of Harworth Estates.

 

The Group's operating profit is reconciled to the underlying operating performance of Harworth Estates for the half year to 30 June 2015 as follows:

 

	Harworth Estates	Harworth Estates Pre Acquisition	Fair Value Adjustments	Fees and Other	Harworth Group plc
	£m	£m	£m	£m	£m
Profit from operations	1.1	(0.3)	(0.3)	(2.4)	(2.0)
Valuation gain	8.2	(4.8)	-	-	3.4
Profit from disposals	5.5	(0.1)	-	-	5.4
Operating profit	14.8	(5.3)	(0.3)	(2.4)	6.8

 

 

Underlying operating performance of Harworth Estates

	Unaudited Half Year to 30 June 2015	Unaudited Half Year to 30 June 2014	Unaudited Full Year to 31 December 2014
	£m	£m	£m
Profit from operations	1.1	0.8	0.7
Valuation gain	8.2	10.4	15.7
Profit from disposals	5.5	3.1	7.9
Operating profit	14.8	14.3	24.4

 

For Harworth Estates, the profit from operations was £1.1m (1H 2014: £0.8m). The Income Generation segment recorded revenues of £7.7m (1H 2014: £6.9m) comprising rental and royalty income together with the sales of coal fines and salvage. The net profit from the Income Generation segment was £4.0m (1H 2014: £4.2m). Other overheads amounted to £2.9m (1H 2014: £3.4m), including the overhead costs of the Capital Growth segment and central, unallocated costs. The latter were materially lower than the prior year due to the synergies of combining the Harworth Group and Harworth Estates offices and lower professional fees.

Valuation gains in the six month period, amounting to £8.2m (1H 2014: £10.4m), comprised £3.6m related to progress with planning consents in Strategic Land, £2.3m related to progress with consents and engineering savings in major developments, £1.9m related to new and renewed rental agreements in Business Parks and £0.4m of other items.

Harworth Estates relinquished an option to purchase 50% of the share capital of Peel Wind Farms Limited in return for a consideration of £4.4m. Profits from disposals of investment property and the above mentioned option amounted to £5.5m (1H 2014: £3.1m). The proceeds from disposals were £21.0m, of which £11.8m were for residential development, £3.0m for commercial development, £4.4m for the option and £1.9m for other sundry disposals. All material disposals achieved a gain over book value.

For Harworth Estates, the resulting operating profit was £14.8m (1H 2014: £14.3m).

 

Net assets

	30 June 2015	31 December 2014
	£m	£m
Harworth Estates
Investment properties	307.0	286.6
Other asset and liabilities	(47.0)	(40.0)
Net assets	260.0	248.6
Harworth Group plc
Investment properties	307.0	-
Other Investments	1.2	-
24.9% share in Harworth Estates, up to 24 March 2015	-	56.9
Carrying value of investment	308.2	56.9
Other assets and liabilities	(33.7)	1.8
Net assets	274.5	58.7
Number of shares in issue	2,922,697,857	605,456,480
Net assets per share	9.4p	9.7p

 

Group cash and net debt

The Group's cash and cash equivalents at 30 June 2015 were £30.1m (1H 2014: £1.5m, FY 2014: £1.5m).

 

The Group had borrowing and loans of £60.0m at 30 June 2015 (1H 2014: £nil, FY 2014: £nil), including a bank loan of £48.9m and infrastructure loans of £11.1m.

 

Taxation

The charge for taxation in the period was £0.6m (1H 2014: £nil, FY 2014: £nil).

At 30 June 2015, the Group had deferred tax liabilities of £8.4m (1H 2014: £nil, FY 2014: £nil), related to unrealised gains on investment properties, and no deferred tax assets (1H 2014: £nil, FY 2014: £nil).

Dividends

As set out during the equity capital fundraising in the first half, the Board is not proposing an interim dividend be paid, but does expect to pay a final dividend.

Harworth Insurance Company Limited (HICL)

The Group retained a 100% shareholding in HICL, an insurance business, which is classified as held for sale as there is a put and call option over its shares. At 30 June 2015, the assets held for sale were £4.8m (1H 2014: £20.9m, FY 2014: £5.1m) and the liabilities held for sale were £0.2m (1H 2014: £16.3m, FY 2014: £0.5m) and an amount in respect of deferred income in trade and other payables of £4.6m (1H 2014: £4.6m, FY 2014: £4.6m). The sale of the insurance business to Royal & Sun Alliance Insurance plc completed on 31 July 2014.

Key risks and uncertainties

The key risks and uncertainties of the Group are set out below:

Principal risks and uncertainties

The Group's performance, including the current or future value of its assets, will depend on macro property market conditions that affect its sole operating business, Harworth Estates. The Group's board has established procedures to monitor the operation and ensure, where possible, the business strategy minimises these risks. The risks are principally:

Sales value risk

The sale of remediated brownfield land to house builders and commercial developers is an important source of revenue and the gaining of residential and commercial planning consents is an important source of valuation growth for Harworth Estates. As such, any decline in general property market conditions including: (i) the market for residential and commercial land and/or residential and commercial property not functioning properly; (ii) a decline in market values; and/or (iii) a decline in the availability and/or an increase in the cost of credit for residential and commercial buyers, may have an adverse impact on Harworth Estates' results, financial condition and/or prospects.

Planning risk

Harworth Estates' continued progress with its projects for future delivery is dependent on the continued success of its applications for planning permissions. Current or future planning applications may not result in the desired outcome or may be granted on unduly onerous terms. Failure to obtain such permissions may reduce the speed the Group can implement its strategy and have an adverse impact on its business, which may in turn have a negative impact on the Group.

Further, Harworth Estates' development operations are contingent upon an effectively functioning planning system. Changes in law or policy affecting planning, infrastructure, environment (including waste disposal) and/ or sustainability issues could adversely affect the timing or costs associated with development opportunities. This could lead to reduction in value or delays in delivering project values with an adverse effect on the Group.

Property valuation movements and liquidity

Investments in land assets and property can be relatively illiquid for reasons including but not limited to varying demand and the large costs of acquisition. Such illiquidity may affect the Group's ability to vary its portfolio or dispose of properties in a timely fashion or at satisfactory prices in response to changes in economic, property or market conditions. The valuation of property is subject to uncertainty and cash generated on disposal may be different from the value on the Group balance sheet. This may mean that the value ascribed by the Group to its properties may not reflect the value realised on sale. Valuations may fluctuate as a result of factors such as changes in regulatory requirements and applicable laws (including taxation and planning), political conditions, the condition of financial markets, interest and inflation fluctuations.

Small exposure to the UK mining industry

The Group has several mining operators occupying Harworth Estates' land, paying rental income. Any further reduction in the level of coal prices or other disruption to the UK mining industry may impact the level and duration of this rental and royalty income and/or the restoration and rehabilitation liabilities which are due from these operators.

Certain properties in the portfolio include land with defective title

Some of the properties in the portfolio may include land which could be considered to have defective title. These defects might include risks such as dormant easements or manorial rights, breaches of historic covenants and/or missing title deeds or unregistered land. It may be necessary to obtain indemnity insurance in respect of such title defects and this could affect the ability to sell parts of the portfolio.

Environmental/remediation risks of property ownership

The Group may be liable for the costs of investigation, ongoing monitoring or remediation of hazardous or toxic substances located on or in its properties. These costs may be substantial and long-term. The presence of such substances or the failure to successfully remediate may affect the ability to sell or lease property or to borrow using the property as security. Laws and regulations may also impose liability for the release of certain materials, including asbestos into the air, ground or water, from a property and such a release can create a liability to third parties. Whilst the Group seeks to minimise or pass on such environmental risks, it is not possible to eliminate the risk completely.

Treasury policy and liquidity

Risk management is carried out centrally. The Group's main interest rate risk arises on its bank borrowings, which are charged at a floating rate. No foreign exchange contracts were entered into in 2014 and 2015 as the Group had no material foreign exchange exposure. The Group`s objectives when managing liquidity are: to enable the Group to meet expected and unexpected payment obligations at all times; and maximise the Group`s profitability.

Impact of political and economic factors

Any changes to the Governments 'Help to Buy' scheme could affect the sales rates of our house-building customers, particularly as regards first time buyers, which in turn could affect the take-up of consented housing land.

 

Directors responsibility

Statement of the Directors' responsibilities

The Directors confirm that to the best of their knowledge:

· the condensed consolidated interim financial information has been prepared in accordance with IAS 34 'Interim Management Reporting' as adopted by the European Union; and

· the condensed consolidated interim financial information includes a fair review of the information required by DTR 4.2.7R and DTR 4.2.8R, namely:

 

Ø An indication of important events that have occurred during the first six months and their impact on the condensed set of financial statements and a description of the key risks and uncertainties for the remaining six months of the financial year; and

Ø Material related party transactions in the first six months and any material changes in the related party transactions described in the last annual report.

The principal risk and uncertainties facing the business are referred to above.

The Directors of Harworth Group plc are as listed below

Jonson Cox	Chairman
Owen Michaelson	Chief Executive
Mike Richardson	Finance Director
Peter Hickson	Senior Independent Non-executive
Martyn Bowes	Non-executive
Lisa Clement	Independent Non-executive
Anthony Donnelly	Independent Non-executive
Steven Underwood	Non-executive

A list of current Directors is also maintained on the Harworth Group plc website: www.harworthgroup.com.

By order of the Board

 

 

Jonson Cox	Mike Richardson
Chairman	Finance Director
28 August 2015	28 August 2015

 

 

Consolidated Income Statement		Unaudited Six months ended 30 June 2015	Unaudited Six months ended 30 June 2014	Audited year ended 31 December 2014
	Note	£000	£000	£000
Revenue		4,171	767	1,458
Cost of sales		(1,789)	-	-
Gross profit		2,382	767	1,458
Administrative expenses		(1,973)	(752)	(1,653)
Increase in fair value of investment properties		3,356	-	-
Profit on sale of investment properties		2,200	-	-
Other gains		3,265	-	-
Other operating income		-	-	196
Operating profit before exceptional items		9,230	15	1
Exceptional item:
Transaction costs	2	(2,394)	-	-
Operating profit		6,836	15	1
Finance income	4	27	5	10
Finance costs	4	(631)	-	-
Share of profit of associates		856	3,136	3,454
Gain on bargain purchase	2	44,244	-	-
Profit before tax		51,332	3,156	3,465
Tax	5	(571)	-	-
Profit for the period		50,761	3,156	3,465
Earnings per share from operations		Pence	Pence	Pence
Basic and diluted	7	2.73	0.5	0.6

 

The Notes on pages 17 to 34 are an integral part of these condensed consolidated interim financial statements.

All activities in the current period are derived from continuing operations.

 

Consolidated Statement of Comprehensive Income	Unaudited Six months ended 30 June 2015	Unaudited Six months ended 30 June 2014	Audited year ended 31 December 2014
	£000	£000	£000
Profit for the period	50,761	3,156	3,465
Other comprehensive income - Items that will not be reclassified to profit or loss:
Re-measurements of Blenkinsopp Pension Scheme	(12)	-	(8)
Total other comprehensive income	(12)	-	(8)
Total comprehensive income for the period	50,749	3,156	3,457

 

Consolidated Balance Sheet		Unaudited Six months ended 30 June 2015	Unaudited Six months ended 30 June 2014	Audited year ended 31 December 2014
	Note	£000	£000	£000
Assets
Non-current assets
Other receivables		650	-	-
Blenkinsopp pension asset		-	588	564
Investment in associates	8	-	56,572	56,890
Investment properties	9	306,993	-	-
Investments	10	1,233	-	-
		308,876	57,160	57,454
Current assets
Inventories		239	-	-
Trade and other receivables		20,809	633	659
Cash and cash equivalents	11	30,065	1,503	1,489
Assets classified as held for resale	12	4,822	20,914	5,119
		55,935	23,050	7,267
Total assets		364,811	80,210	64,721
Liabilities
Current liabilities
Borrowings	13	(716)	-	-
Trade and other payables		(21,207)	(5,006)	(5,035)
Liabilities classified as held for resale	12	(172)	(16,264)	(469)
		(22,095)	(21,270)	(5,504)
Net current assets		33,840	1,780	1,763
Non-current liabilities
Borrowings	13	(59,316)	-	-
Deferred income tax liabilities		(8,442)	-	-
Retirement benefit obligations	14	(507)	(588)	(564)
		(68,265)	(588)	(564)
Total liabilities		(90,360)	(21,858)	(6,068)
Net assets		274,451	58,352	58,653
Shareholders' equity
Ordinary shares	15	29,227	6,055	6,055
Share premium	16	129,121	32,911	32,911
Merger reserve		45,667	-	-
Capital redemption reserve		257	257	257
Fair value reserve		3,356	-	-
Retained earnings		66,823	19,129	19,430
Total shareholders' equity		274,451	58,352	58,653

 

Consolidated Statement of Cash Flows		Unaudited Six months ended 30 June 2015	Unaudited Restated six months ended 30 June 2014*		Audited year ended 31 December 2014
		£000	£000		£000
Cash flows from operating activities
Profit for the period		50,761	3,156		3,465
Net interest payable/(receivable)		604	(5)		(10)
Share of post-tax profit from associates		(856)	(3,136)		(3,454)
Gain on bargain purchase		(44,244)	-		-
Net fair value increase in investment properties		(3,356)	-		-
Profit on disposal of investment properties and option		(5,408)	-		-
Pension contributions in excess of charge		(57)	(95)		(7)
Movement of Blenkinsopp pension asset		-	95		-
Operating cash (outflows)/inflows before movements in working capital		(2,556)	15		(6)
Decrease in inventories		72	-		-
Decrease in receivables		4,228	49		23
(Decrease)/increase in payables		(946)	6		34
Cash generated from operations		798	70		51
Loan arrangement fees paid		(96)	-		-
Interest paid		(364)	-		-
Cash used by discontinued operations		328	1,187		(120)
Cash generated from/(used in) operating activities		666	1,257		(69)
Cash flows from investing activities
Interest received		28	5		10
Acquisition of a subsidiary, net of cash acquired		(87,823)
Proceeds from disposal of investment properties and option		14,257	-		-
Expenditure on investment properties		(10,349)	-		-
Cash generated from discontinued operations		(1,068)	(1,791)		1,275
Cash generated from investing activities		(84,289)	(529)		1,285
Cash flows from financing activities
Net proceeds from issue of ordinary shares		112,075	-		-
Proceeds from other loans		3,528	-		-
Repayment of bank loan		(400)	-		-
Repayment of other loan		(3,078)	-		-
Cash used by discontinued operations		-	-		(3,278)
Cash generated from financing activities		112,125	-		(3,278)
Increase/(decrease) in cash		27,836	(529)		(2,062)
At January
Cash		1,489	1,428		1,428
Cash equivalents classified as held for sale		840	1,099		2,963
		2,329	2,527		4,391
Increase in cash		27,836	(529)		(2,062)
		30,165	1,998		2,329
At period end
Cash		30,065	1,503		1,489
Cash equivalents classified as held for sale		100	495		840
Cash and cash equivalents		30,165	1,998		2,329
*2014 Group cash flow has been restated to include cash flows of the discontinued operations and to show the split between cash and cash equivalents and available for sale financial assets.

 

Consolidated Statement of Changes in Shareholders' Equity	Ordinary shares	Share premium account	Merger Reserve	Fair value Reserve	Other reserves	Retained earnings	Total equity
	£000	£000	£000	£000	£000	£000	£000
Balance at January 2014 (audited)	6,055	32,911	-	-	257	15,973	55,196
Profit for six months to June 2014	-	-	-	-	-	3,156	3,156
Balance at 30 June 2014 (unaudited)	6,055	32,911	-	-	257	19,129	58,352
Profit for the six months to 31 December 2014	-	-	-	-	-	309	309
Other comprehensive income:
Re-measurements of post-retirement benefits	-	-	-	-	-	(8)	(8)
Balance at 31 December 2014 (audited)	6,055	32,911	-	-	257	19,430	58,653
Transactions with owners:
Shares issued	15,865	99,160	-	-	-	-	115,025
Costs relating to share issues	-	(2,950)	-	-	-	-	(2,950)
Shares issued in lieu of consideration	7,307	-	45,667	-	-	-	52,974
Profit for the six months to 30 June 2015	-	-	-	3,356	-	47,405	50,761
Other comprehensive income:
Re-measurements of post-retirement benefits						(12)	(12)
Balance at 30 June 2015 (unaudited)	29,227	129,121	45,667	3,356	257	66,823	274,451

 

Notes to the condensed consolidated interim financial statements

For the six months ended 30 June 2015 continued:

 

 

1. Basis of preparation of the condensed consolidated interim financial statements

General information

Harworth Group plc (formerly Coalfield Resources plc) (the "Company") is a limited liability company incorporated and domiciled in the UK. The address of its registered office is AMP Technology Centre, Advanced Manufacturing Park, Brunel Way, Rotherham, South Yorkshire S60 5WG. Coalfield Resources plc changed its name to Harworth Group plc on 24 March 2015.

The Company is listed on the London Stock Exchange.

The condensed consolidated interim financial statements for the six months ended 30 June 2015 comprise the Company and its subsidiaries (together referred to as the "Group").

These condensed consolidated interim financial statements do not comprise statutory accounts within the meaning of section 434 of the Companies Act 2006. The Group financial statements for the year ended 31 December 2014 were approved by the Board of Directors on 18 February 2015 and delivered to the Registrar of Companies. The report of the auditor on those accounts was unqualified, did not contain an emphasis of matter paragraph and did not contain any statement under section 498 of the Companies Act 2006.

The condensed consolidated interim financial statements have not been reviewed or audited by the auditors.

The condensed consolidated interim financial statements for the period ended 30 June 2015 were approved by the Board on 28 August 2015.

Basis of preparation

These condensed consolidated interim financial statements for the six months ended 30 June 2015 have been prepared in accordance with the Disclosure and Transparency Rules of the Financial Conduct Authority (previously the Financial Services Authority) and with IAS 34 'Interim financial reporting' as adopted by the European Union ('EU'). The condensed consolidated interim financial statements should be read in conjunction with the Group financial statements for the year ended 31 December 2014 which have been prepared in accordance with IFRSs as adopted by the EU.

Going-concern basis

These financial statements are prepared on the basis that the Group is a going concern. In forming its opinion as to going concern, the Board prepares cash flow forecasts based upon its assumptions with particular consideration to the key risks and uncertainties as summarised in 'Key risks and uncertainties' section of this annual report, as well as taking into account the available borrowing facilities in line with the Treasury Policy disclosed on page 9.

The key factor that has been considered in this regard is:

Following the acquisition of Harworth Estates Property Group Limited (Harworth Estates), the Group has a £65m revolving credit facility with The Royal Bank of Scotland, for a term of five years, on a non-amortising basis. The facility is in the form of a debenture security whereby there is no charge on the individual assets of the Group. The facility is subject to financial and other covenants.

The covenants are based upon gearing, tangible net worth, loan to property values and interest cover. Property valuations affect the loan to value covenants. Breach of covenants could result in the need to pay down in part some of these loans, additional costs, or a renegotiation of terms or, in extremis, a reduction or withdrawal of facilities by the banks concerned.

The Directors confirm their belief that it is appropriate to use the going concern basis of preparation for these financial statements.

Seasonality

No significant seasonal or cyclical variations in the Group's operating results are expected.

Accounting policies

Except as described below, the accounting policies applied are consistent with those of the Group financial statements for the year ended 31 December 2014, as described in those annual financial statements.

Taxes on income in the interim periods are accrued using the tax rate that would be applicable to expected annual earnings.

Following the acquisition of Harworth Estates the following accounting policies are in place:

Revenue recognition

Revenue comprises rental and other land related income arising on investment properties. Rentals are accounted for on a straight-line basis over the lease term of ongoing leases.

Revenue from the sale of coal slurry is recognised at the point of despatch.

Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Company and the revenue can be reliably measured. All such revenue is reported net of discounts and value added and other sales taxes.

Interest income and expense

Interest income and expense are recognised within 'Finance income' and 'Finance costs' in the Income Statement using the effective interest rate method.

The effective interest rate method is a method of calculating the amortised cost of a financial asset or financial liability and of allocating the interest income or interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments or receipts throughout the expected life of the financial instrument, or a shorter period where appropriate, to the net carrying amount of the financial asset or financial liability.

Other receivables

Other receivables relate to overages. An overage is the right to receive future payments following the sale of investment properties if specified conditions relating to the site are satisfied. The conditions may be the granting of planning permission for development on the site or practical completion of a development.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.

InventoriesInventories comprise coal slurry that has been processed and is ready for sale. It is stated at the lower of cost and estimated net realisable value. Inventories comprise all the direct costs incurred in bringing the coal slurry to their present state.

Investments in joint ventures

Joint ventures are those entities over whose activities the Group has joint control established by contractual agreement. Interests in joint ventures through which the Group carries on its business are classified as jointly controlled entities and accounted for using the equity method. This involves recording the investment initially at cost to the Group and then, in subsequent years, adjusting the carrying amount of the investment to reflect the Group's share of the joint venture's results less any impairment in carrying value and any other changes to the joint venture's net assets such as dividends.

 

Impairment

 

Investments in subsidiaries are reviewed for impairment if there is any indication that the carrying amount may not be recoverable.

 

When a review for impairment is conducted, the recoverable amount is assessed by reference to the higher of 'value in use' (being the present value of expected future cash flows of the relevant cash generating unit) or 'fair value less costs to sell'. Where there is no binding sale agreement or active market, fair value less costs to sell is based on the best information available to reflect the amount the Company could receive for the cash generating unit in an arm's length transaction.

 

The impairment testing is carried out under the principles described in IAS 36 'Impairment of assets' which includes a number of restrictions on the future cash flows that can be recognised in respect of restructurings and improvement related to capital expenditure.

 

Profit or loss on disposal

 

Disposals are accounted for when legal completion of the sale has occurred or there has been an unconditional exchange of contracts. Profits or losses on disposal arise from deducting the asset's net carrying value from the net proceeds (being net purchase consideration less any clawback liability arising on disposal) and is recognised in the Income Statement within other income. Net carrying value includes valuation in the case of investment properties.

In the case of investment properties, any fair value reserve, for the property disposed of is treated as realised on disposal of the property and transferred to retained earnings.

 

Investment properties

 

Investment Properties are those properties which are not occupied by the Group and which are held for long term rental yields, capital appreciation or both. Investment property also includes property that is being developed or constructed for future use as investment property. Investment Properties comprise freehold land and buildings and are measured at fair value. At the end of a financial year the fair values are determined by obtaining an independent valuation prepared in accordance with the current edition of the Appraisal and Valuation Standards published by the Royal Institution of Chartered Surveyors. External, independent valuation firms having appropriate, recognised professional qualifications and recent experience in the location and category of property being valued, value the portfolio at each financial year end.

 

At the interim reporting date, freehold land and buildings are measured using management estimation of the fair value of investment properties. This involves a review of individual investment properties and management assessment of their fair value.

 

Where the development of investment property commences with a view to sale, the property is transferred from investment properties to inventories at fair value, which is then considered to represent deemed cost.

 

At each subsequent reporting date, investment properties are re-measured to their fair value. Movements in fair value are included in the Income Statement within other income or other expense.

 

Where specific investment properties have been identified as being for sale within the next twelve months, a sale is considered highly probable and the property is immediately available for sale, their fair value is shown under assets classified as held-for-sale within current assets, measured in accordance with the provisions of IAS 40 'Investment Property'.

 

Properties in the course of development

 

Directly attributable costs incurred in the course of developing a property are capitalised as part of the cost of the property. Development costs on investment properties are capitalised and any resultant change in value is therefore recognised through the next revaluation.

 

Financial assets

 

Financial assets at fair value through profit or loss are financial assets held for trading. A financial asset is classified in this category if acquired principally for the purpose of selling in the short term. Assets in this category are classified as current assets if expected to be settled within 12 months, otherwise they are classified as non-current.

 

Financial assets carried at fair value through profit or loss are initially recognised at fair value, and transaction costs are expensed in the income statement. Financial assets are derecognised when the rights to receive cash flows from the investments have expired or have been transferred and the group has transferred substantially all risks and rewards of ownership.

 

Gains or losses arising from changes in the fair value of financial assets at fair value through profit or loss are presented in the income statement within 'Other gains' in the period in which they arise.

 

Provisions

 

Provisions are recognised when:

· The Group has a present legal or constructive obligation as a result of past events;

· It is probable that an outflow of resources will be required to settle the obligation; and

· The amount can be reliably estimated.

A provision has been recognised in relation to the Blenkinsopp Pension Scheme Liability details of which have been provided in Note 14.

 

Operating segments

 

Management has determined the operating segments based upon the operating reports reviewed by the Executive Board of Directors that are used to assess both performance and strategic decisions. Management has identified that the Executive Board of Directors is the Chief Operating Decision Maker in accordance with the requirements of IFRS 8 'Operating Segments'.

 

Following the acquisition of Harworth Estates, the Group is now organised into two operating segments: the Income Generation Segment and the Capital Growth Segment. The Harworth Group costs are not a reportable segment. However information about them is considered by the Executive Board in conjunction with the reportable segments.

 

The Income Generation segment focuses on generating rental returns from the business park portfolio, rental returns and royalties from energy generation, environmental technologies and the agricultural portfolio, and income generating streams from recycled aggregates and secondary coal products. The Capital Growth segment focuses on delivering value by developing the underlying portfolio, and includes planning and development activity, value engineering, proactive asset management and strategic land acquisitions.

 

All operations are carried out in the United Kingdom.

 

Segmental operating profit represents the profit earned by each segment excluding the profit on sale and revaluation of investment properties and is consistent with the measures reported to the Executive Board for the purpose of the assessment of the performance of each segment.

 

Consolidation

 

Subsidiaries

 

Subsidiaries are all entities (including structured entities) over which the group has control. The group controls an entity when the group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the group. They are deconsolidated from the date that control ceases.

 

The group applies the acquisition method to account for business combinations. The consideration transferred for the acquisition of a subsidiary is the fair values of the assets transferred, the liabilities incurred to the former owners of the acquiree and the equity interests issued by the group. The consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration arrangement. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date. The group recognises any non-controlling interest in the acquiree on an acquisition-by-acquisition basis, either at fair value or at the non-controlling interest's proportionate share of the recognised amounts of acquiree's identifiable net assets.

 

Acquisition-related costs are expensed as incurred.

 

If the business combination is achieved in stages, the acquisition date carrying value of the acquirer's previously held equity interest in the acquiree is re-measured to fair value at the acquisition date; any gains or losses arising from such re-measurement are recognised in profit or loss.

 

Inter-company transactions, balances and unrealised gains on transactions between group companies are eliminated. Unrealised losses are also eliminated.

 

Goodwill

 

Goodwill arises on the acquisition of subsidiaries and represents the excess of the consideration transferred, the amount of any non-controlling interest in the acquiree and the acquisition-date fair value of any previous equity interest in the acquiree over the fair value of the identifiable net assets acquired. If the total of consideration transferred, non-controlling interest recognised and previously held interest measured at fair value is less than the fair value of the net assets of the subsidiary acquired, in the case of a bargain purchase, the difference is recognised directly in the income statement.

 

Share capital and reserves

 

Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new ordinary shares or options are shown in equity as a deduction, net of tax, from the proceeds.

 

Where shares are issued in direct consideration for acquiring shares in another company, and following which the Group holds at least 90% of the nominal share capital of that company, any premium on the shares issued as consideration is included in a merger reserve rather than share premium.

 

Changes in accounting policy and disclosures

 

(a) New standards and interpretations not yet adopted

A number of new standards and amendments to standards and interpretations are effective for annual years beginning after 1 January 2015, and have not been applied in preparing these consolidated financial statements. These have been set out below:

 

IFRS 9, 'Financial instruments', addresses the classification, measurement and recognition of financial assets and financial liabilities. The complete version of IFRS 9 was issued in July 2014. It replaces the guidance in IAS 39 that relates to the classification and measurement of financial instruments.

 

IFRS 9 retains but simplifies the mixed measurement model and establishes three primary measurement categories for financial assets: amortised cost, fair value through OCI and fair value through P&L. The basis of classification depends on the entity's business model and the contractual cash flow characteristics of the financial asset. Investments in equity instruments are required to be measured at fair value through profit or loss with the irrevocable option at inception to present changes in fair value in OCI not recycling. There is now a new expected credit losses model that replaces the incurred loss impairment model used in IAS 39. For financial liabilities there were no changes to classification and measurement except for the recognition of changes in own credit risk in other comprehensive income, for liabilities designated at fair value through profit or loss. IFRS 9 relaxes the requirements for hedge effectiveness by replacing the bright line hedge effectiveness tests. It requires an economic relationship between the hedged item and hedging instrument and for the 'hedged ratio' to be the same as the one management actually use for risk management purposes. Contemporaneous documentation is still required but is different to that currently prepared under IAS 39. The standard is effective for accounting periods beginning on or after 1 January 2018. Early adoption is permitted subject to EU endorsement. The Group is yet to assess IFRS 9's full impact.

 

IFRS 15, 'Revenue from contracts with customers' deals with revenue recognition and establishes principles for reporting useful information to users of financial statements about the nature, amount, timing and uncertainty of revenue and cash flows arising from an entity's contracts with customers. Revenue is recognised when a customer obtains control of a good or service and thus has the ability to direct the use and obtain the benefits from the good or service. The standard replaces IAS 18 'Revenue' and IAS 11 'Construction contracts' and related interpretations. The standard is effective for annual periods beginning on or after 1 January 2017 and earlier application is permitted subject to EU endorsement. The Group is assessing the impact of IFRS 15.

 

IFRIC 21, 'Levies', sets out the accounting for an obligation to pay a levy if that liability is within the scope of IAS 37 'Provisions'. The interpretation addresses what the obligating event is that gives rise to pay a levy and when a liability should be recognised. The Group is not currently subjected to significant levies so the impact on the Group is not material.

 

Estimates and judgements

 

The preparation of the condensed consolidated interim financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense. Actual results may differ from these estimates.

 

In preparing these condensed consolidated interim financial statements, the significant judgements made by management in applying the Group's accounting policies and the key sources of estimation uncertainty were the same as those that applied to the consolidated financial statements for the year ended 31 December 2014, with the exception of changes in estimates that are required in determining the provision for income taxes and the following key estimates and judgements that exist following the acquisition of Harworth Estates:

 

Estimation of fair value of Investment Property

 

The fair value of Investment Property reflects, amongst other things, rental income from our current leases, assumptions about rental income from future leases and the possible outcome of planning applications, in the light of current market conditions. The valuation has been arrived at primarily after consideration of market evidence for similar property, although in the case of those properties where fair value is based on their ultimate redevelopment potential, development appraisals have been undertaken to estimate the residual value of the landholding after due regard to the cost of, and revenue from the development of the property.

 

 

The values reported are based on significant assumptions and a change in fair values could have a material impact on the Group`s results. This is due to the sensitivity of fair value to the assumptions made as regards to variances in development costs compared to Management`s own estimates.

 

Investment properties are disclosed in Note 9.

 

Estimation of the impact of the Mining Business

The Group has estimated the impact of a failure of the mining business on its results. This review has been subject to both uncertainty and sequences of events outside of the control of the Group. The provisions held in the Group relating to the failure of the mining business are based upon assumptions relating to cost estimates and likelihood of the timing of cashflows.

 

 

2. Business combinations

 

Acquisition of Harworth Estates

On 24 March 2015, the Group acquired 75.1% of the issued share capital of Harworth Estates, a company incorporated in United Kingdom who heads up a group which is engaged in the regeneration of former coalfield sites and other brownfield land into employment areas, new residential development and low carbon energy projects.

The following table summarises the consideration paid for the Harworth Estates group, the fair value of assets acquired, liabilities assumed and the non - controlling interest held at the acquisition date.

Consideration at 24 March 2015
	£000
Cash	97,026
Equity instruments (730m ordinary shares)	52,974
Total consideration transferred	150,000
Fair value of associate interest	57,746
Total consideration	207,746

 

Recognised amounts of identifiable assets acquired and liabilities assumed:	Attributed Fair Value
	£000
Investment property (Note 9)	299,355
Investments & other non-current receivables	1,883
Cash & Cash equivalents	9,203
Inventory	311
Trade and other current receivables	23,054
Financial asset	1,200
Borrowings	(60,407)
Deferred tax liability	(7,871)
Trade and other payables	(14,738)
Fair value of acquired interest in net assets of subsidiary	251,990
Gain on bargain purchase	(44,244)
Total consideration	207,746

The purchase consideration disclosed above comprises cash and cash equivalents paid to acquire the previous majority shareholder of £150.0m which was satisfied by the payment of £97,026,000 and the allotment and issue of 730,674,465 ordinary shares of £0.01 each in the capital of Harworth Group plc. The share premium arising from the shares issued to the PPF is held within the merger reserve shown in the consolidated balance sheet.

 

Acquisition related costs of £2.4m have been recognised in the consolidated income statement for the period ended 30 June 2015. The fair value of the 730m ordinary shares issued as part of the consideration paid for Harworth Estates (£53.0m) was based upon the price the shares were placed at 7.25 pence. Issuance costs of £2.9m have been netted against the deemed proceeds.

 

The revenue included in the consolidated income statement since 24 March 2015 contributed by the Harworth Estates group was £3.9m and profit before tax was £8.5m. Had the Harworth Estates group been consolidated from 1 January 2015, the consolidated income statement would show pro-forma revenue of £7.7m and profit before tax of £10.6m.

 

The net cash outflow associated with the acquisition was as follows:

	£000
Fair value of acquired interest in net assets of subsidiary	251,990
Fair value of associate interest	(57,746)
Gain on bargain purchase	(44,244)
Total purchase consideration	150,000
Less: cash and cash equivalents of subsidiary acquired	(9,203)
Less: equity instruments issued	(52,974)
Net outflow of cash and cash equivalents on acquisition	87,823

 

3. Segment information

 

30 June 2015			Capital	Income	Unallocated
			Growth	Generation	Costs	Total
Group			£000	£000	£000	£000
Revenue			18	3,833	320*	4,171
Operating (loss)/profit before other income and expenses and exceptional items			(454)	2,260	(1,397)	409
Transaction costs			-	-	(2,394)	(2,394)
Increase in fair value of investment properties			2,000	1,356	-	3,356
Profit on sale of investment properties			2,144	56	-	2,200
Other gains			-	3,208	57	3,265
Operating Profit/(Loss)			3,690	6,880	(3,734)	6,836
Finance income						27
Finance costs						(631)
Share of profit of associates						856
Gain on bargain purchase						44,244
Profit before tax						51,332

* Unallocated revenues relate to recharges to Harworth Estates prior to its acquisition by the Group.

Other information
Investment property additions:
- Direct acquisitions			173	978	-	1,151
- Subsequent expenditure			9,962	2,378	-	12,340
Segmental Assets						Total
						£000
Capital Growth						190,900
Income Generation						116,093
Total Investment Properties						306,993
Unallocated Assets
Inventories						239
Other receivables						650
Investments in joint ventures						1,233
Trade & other receivables						20,809
Cash & cash equivalents						30,065
Non-current assets held for resale						4,822
Total Assets						364,811

 

Financial liabilities are not allocated to the reporting segments as they are managed and measured on a group basis. There is no segmental analysis available for the prior period as prior to the acquisition of Harworth Estates, the Group had only one operating segment.

 

4. Finance income/(cost)

			Six months ended	Six months ended	Year ended
			30 June	30 June	31 December
			2015	2014	2014
			£000	£000	£000
Interest expense
- Bank interest			(347)	-	-
- Facility fees			(190)	-	-
- Other interest			(94)	-	-
			(631)	-	-
Interest received			27	5	10
Net Finance costs			(604)	5	10

 

5. Tax

 

The current tax in the period is £nil (1H 2014: £nil; FY 2014: £nil).

 

The Group recognised deferred tax liabilities of £571k using the liability method and a tax rate of 20%, (2014: 20%) at the period end covered by this condensed consolidated interim statement.

 

The Group recognised a deferred tax liability of £8,442k in respect of property revaluation gains where tax is expected to arise when the property is sold. The Group did not recognise any deferred tax assets at the period end covered by this interim statement.

 

6. Dividends

 

No interim dividend is proposed for the six months ended 30 June 2015. No dividends have been paid or proposed in relation to 2014.

 

7. Earnings per share

 

Earnings per share has been calculated by dividing the profit attributable to ordinary shareholders by the weighted average number of shares in issue and ranking for dividend during the period. The weighted average number of shares for 30 June 2015 includes the adjustments necessary to reflect the new shares issued on 24 March 2015.

			Six months	Six months	Year
			ended	ended	ended
			30 June	30 June	31 December
			2015	2014	2014
			£000	£000	£000
Profit for the period			50,761	3,156	3,465
Weighted average number of shares used for basic and diluted profit per share calculations			1,860,095,458	605,456,480	605,456,480
Basic and diluted earnings per share (pence)			2.73	0.5	0.6

 

Adjusted basic and diluted earnings per share for the six months to 30 June 2015 were 0.5 pence, being based on profit before tax adjusted for the exceptional gain on bargain purchase of £44,244k and acquisition fees of £2,394k. There were no exceptional items in the prior year.

 

8. Investment in Associates

 

	As at 30 June	As at 30 June	As at 31 December
	2015	2014	2014
	£000	£000	£000
Cost
At start of period	56,890	53,436	53,436
Share of profit	856	3,136	3,454
Purchase of share capital not held	(57,746)	-	-
At end of period	-	56,572	56,890

 

The Group accounted for its investment in Harworth Estates, a private company incorporated in England and Wales, as an associate up to and including 24 March 2015 because it considered that it had significant influence over that entity due to its 24.9% shareholding and representation on the Harworth Estates board.

 

On 24 March 2015 Harworth Group PLC acquired the remaining 75.1% of Harworth Estates that it did not own from the Pension Protection Fund (PPF). Harworth Estates therefore ceased to be accounted for as an associate at that date and has been fully consolidated in these accounts.

 

9. Investment Properties

Investment property at 30 June 2015 has been measured at fair value based upon a management estimate. The Group holds five categories of investment property being agricultural land, natural resources, major development, strategic land and business parks in the UK, which sit within the operating segments of capital growth and income generation.

 

	Agricultural Land	Natural Resources	Business Parks	Major Developments	Strategic Land	Total
	Income Generation	Income Generation	Income Generation	Capital Growth	Capital Growth
	£000	£000	£000	£000	£000	£000
At 31 December 2014	-	-	-	-	-	-
Acquisition of subsidiaries	22,070	18,574	72,724	139,842	46,145	299,355
Direct acquisitions	-	978	-	120	53	1,151
Subsequent expenditure	202	309	1,867	9,308	654	12,340
Increase in fair value	-	386	970	2,000	-	3,356
Disposals	(787)	(1,200)	-	(6,222)	(1,000)	(9,209)
At 30 June 2015	21,485	19,047	75,561	145,048	45,852	306,993

 

Valuation process

 

The properties have been valued by the management who have exercised their experience and judgement in arriving at the increase in fair value at June 2015.

 

10 Investments

 

Investments in joint ventures

	£000
At December 2014	-
Arising on acquisition of subsidiaries	1,233
At June 2015	1,223

As a result of the acquisition of Harworth Estates the Group now holds 50% of the issued ordinary shares of Bates Regeneration Limited, a joint venture with Banks Property Limited for the development of an investment property at Blyth, Northumberland.

The Group's share of the assets and liabilities are:

2015	Country of incorporation	Assets	Liabilities	Interest held
		£000	£000	%
Bates Regeneration Limited	England and Wales	2,050	(827)	50

 

The risks associated with this investment are as follows:

· Decline in the availability and or an increase in the cost of credit for residential and commercial buyers

· Decline in market conditions and values.

The Group also owns a number of other joint ventures whose value is minimal. A full list of joint ventures can be obtained from the Company's registered office.

 

11. Cash and cash equivalents

			As at 30 June	As at 30 June	As at 31 December
			2015	2014	2014
			£000	£000	£000
Cash held and other cash balances			30,065	1,503	1,489

 

 

12. Assets and liabilities classified as held for sale

 

The assets and liabilities of the disposal group held for sale relate to Harworth Insurance Company Limited (HICL). The Group retained a 100% shareholding in HICL, an insurance business, which is classified as held for sale as there is a put and call option over its shares. At 30 June 2015, the assets held for sale were £4.8m (1H 2014: £20.9m, FY 2014: £5.1m) and the liabilities held for sale were £0.2m (1H 2014: £16.3m, FY 2014: £0.5m) and an amount in respect of deferred income in trade and other payables of £4.6m (1H 2014: £4.6m, FY 2014: £4.6m). The sale of the insurance business to Royal & Sun Alliance Insurance plc completed on 31 July 2014.

 

(a) Assets of disposal group classified as held for sale

 

			As at 30 June	As at 30 June	As at 31 December
			2015	2014	2014
			£000	£000	£000
Investment properties			-	-	335
Assets in the course of disposal			-	828	-
Trade and other receivables			28	1,072	666
Reinsurance assets			-	8,298	-
Available for sale financial assets			4,694	10,056	3,278
Cash and cash equivalents			100	660	840
Assets classified as held for sale			4,822	20,914	5,119

 

 

(b) Liabilities of disposal group classified as held for sale

 

			As at 30 June	As at 30 June	As at 31 December
			2015	2014	2014
			£000	£000	£000
Trade and other payables			53	7,598	263
Provisions			-	8,373	-
Re-measurement loss on carrying value of Harworth Insurance Company Limited			119	293	206
Liabilities classified as held for sale			172	16,264	469

 

13. Borrowings and loans

 

			As at 30 June	As at 30 June	As at 31 December
			2015	2014	2014
			£000	£000	£000
Bank loans
Current:
Secured - bank loans and overdrafts			-	-	-
Secured - other loans			(716)	-	-
			(716)	-	-
Non-current:
Secured - bank loans			(48,850)	-	-
Secured - other loans			(10,466)	-	-
			(59,316)	-	-

 

Details of the borrowings acquired as part of the acquisition of subsidiary on 24 March 2015 are provided in Note 2.

 

At 30 June 2015, the Group had bank borrowings of £48.8m (2014: £nil) and a further £11.2m (2014: £nil) of infrastructure loans, which resulted in total borrowings of £60.0m (2014: £nil). The bank borrowings are part of a £65.0m revolving credit facility from The Royal Bank of Scotland. The facility is repayable on 13 February 2020 (five year term) on a non-amortising basis and is subject to financial and other covenants.

 

The infrastructure loans of £11.2m are provided by public bodies in order to promote the development of major sites. They comprise a £1.4m loan from Leeds LEP in respect of the Prince of Wales site, £8.5m from the Homes and Community Agency in respect of Waverley, £1.0m from Sheffield City Region JESSICA Fund for Rockingham and £0.3m from Greater Manchester Investment Fund in respect of Logistics North.

 

The loans are drawn as work on the respective sites is progressed and they are repaid on agreed dates or when disposals are made from the sites.

 

Current loans are stated after deduction of unamortised borrowing cost of £94k (2014: £nil). Non-current bank and other loans are stated after deduction of unamortised borrowing costs of £1,273k (2014: £nil). The bank loans and overdrafts are secured by way of fixed charges over certain assets of the Group.

 

14. Retirement benefit obligations

 

The Group's only defined benefit pension liability was for the Blenkinsopp Section of the Industry-Wide Mineworkers Pension Scheme. The liability of the Group to make contributions is indemnified by UK Coal Production Limited. During the six months to 30 June 2015 and the year to 31 December 2014 all contributions have been paid to the pension fund by UK Coal Production Limited.

 

The pension scheme has been valued by a qualified independent actuary for the purposes of IAS19 (revised) and the preparation of these financial statements. The assumptions used are consistent with those derived at 31 December 2014, but updated for current market conditions. The main assumptions underlying the valuation are of the Blenkinsopp scheme are:

 

			As at 30 June	As at 30 June	As at 31 December
			2015	2014	2014
Discount rate			3.75%	4.40%	3.60%
Rate of pension increases			2.30%	2.40%	2.10%
Rate of price inflation (RPI)			3.30%	3.40%	3.10%
Rate of cost inflation (CPI)			2.30%	2.40%	2.10%
Rate of cash commutation			20.0%	20.0%	20.0%

 

The amounts recognised in the consolidated balance sheet are as follows:

 

				As at 30 June	As at 30 June	As at 31 December
				2015	2014	2014
				£000	£000	£000
Fair value of plan assets				1,705	1,488	1,740
Present value of funding obligations				(2,212)	(2,076)	(2,304)
Net liability recognised in the balance sheet				(507)	(588)	(564)

 

The amounts recognised in the consolidated income statement are:

 

				Six months ended	Six months ended	Year ended
				30 June	30 June	31 December
				2015	2014	2014
				£000	£000	£000
Expenses				(18)	-	(36)
Interest costs				(9)	-	(26)
				(27)	-	(62)

 

The net effect of re-measurements on the Blenkinsopp scheme charged to the statement of comprehensive income is a loss of £12k (June 2014: £nil, December 2014: loss of £8k).

 

The fair value of plan assets have increased by the third party contributions of £95k paid to the scheme in 1H 2015.

 

15. Called up Share Capital

 

Issued and fully paid				Six months ended	Six months ended	Year ended
				30 June	30 June	31 December
£000				2015	2014	2014
At start of period				6,055	6,055	6,055
Shares issued				23,172	-	-
At end of period				29,227	6,055	6,055

 

 

Issued and fully paid				Six months ended	Six months ended	Year ended
				30 June	30 June	31 December
Number of shares				2015	2014	2014
At start of period				605,456,480	605,456,480	605,456,480
Shares issued				2,317,241,377	-	-
At end of period				2,922,697,857	605,456,480	605,456,480

 

On 24 March 2015 the Company issued 2,317,241,377 ordinary shares at 7.25 pence each as part of a placing and open offer of which 730,674,465 ordinary shares were issued to the PPF as part of the purchase consideration for the acquisition of 75.1% of the issued share capital of Harworth Estates.

 

16. Share Premium Account

 

				Six months ended	Six months ended	Year ended
				30 June	30 June	31 December
				2015	2014	2014
				£000	£000	£000
At start of period				32,911	32,911	32,911
Premium on shares issued				99,160	-	-
Costs relating to issue				(2,950)	-	-
At end of period				129,121	32,911	32,911

 

17. Related party transactions

 

Peel Group

The Peel Group charged £20,625 (1H 2014: £20k; FY 2014: £41,666) in respect of fees for Steven Underwood and £8,128 for the rental of office space (1H 2014: £8k; FY 2014: £16k).

 

The Group relinquished an option to purchase 50% of the share capital of Peel Wind Farms (Blue Sky Forest) Limited in return for £4.4m from Peel Holdings Wind Farms (IOM) Limited. This has resulted in a gain of £3.2m shown in the consolidated income statements as other gains.

 

Harworth Estates Group

Revenue includes £320k for the period up to 24 March 2015 (1H 2014: £767k; FY 2014: £1,458k) in respect of recharges to the Harworth Estates Group for on-going costs of the Company.

 

The Harworth Estates Group owed £nil to the Company at 30 June 2014 as the results are now fully consolidated (1H 2014: £143k; FY 2014: £261k).

 

Scratching Cat

Geoff Mason, our Company Secretary, supplies his services through Scratching Cat Limited, a company of which he is a director. During the period charges were made in relation to company secretarial duties of £66k (1H 2014: £nil; FY 2014: £32k).

 

 

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