Untitled

Creating

sustainable

places where people

want to live

and

work

Harworth Group plc

Annual Report and

FinancialStatements 2022

Our purpose is to invest to transform

land and property into sustainable places

where people want to live and work

Who we are

Harworth is one of the leading land and property regeneration companies in the UK, owning

and managing over 13,000 acres across around 100 sites in the North of England and the

Midlands. Based in Rotherham, South Yorkshire, we also have regional offices in Birmingham,

Leeds and Manchester.

Our purpose is to invest to transform land and property into sustainable places where

people want to live and work, supporting new homes, jobs and communities, and delivering

long-term value for all our stakeholders.

Harworth has a Premium Listing on the Main Market of the London Stock Exchange (LSE: HWG).

What we do

As a master developer, we create long-term value by acquiring and assembling sites that are

large, complex and often had former industrial uses, and transforming them into sustainable

residential and industrial & logistics developments, with a focus on placemaking.

Our team comprises experts in transactions, planning, land remediation, engineering and

development, supported by central functions and a highly experienced management team.

We have three regional teams – Yorkshire & Central, North West and the Midlands – which

bring further local knowledge, expertise and relationships.

Our Purpose, culture and values

Our ability to execute our strategy and deliver our Purpose is reliant on delivering against our

sustainability framework, The Harworth Way, and on attracting, maintaining and developing

great talent. We achieve this through our 'One Harworth' culture, which encourages a

collaborative approach to delivering and managing our sites, and ensures we succeed as one

team. Our culture is underpinned by the three Harworth values: taking pride in our people &

partnerships, delivering creative solutions, and acting with integrity and trust.

Contents

Harworth at a Glance IFC

2022 Highlights 01

Strategic Report

Highlights of 2022 02

Our portfolio 04

Chair's statement 06

Our business model 08

Our markets 10

Our growth strategy 12

Key performance indicators 18

Chief Executive’s review 22

Operational review 26

Financial review 29

Long-term viability statement 36

Section 172 statement 39

Effectively managing our risk 43

Task force on Climate-related

Financial Disclosures 54

SECR disclosure 62

The Harworth Way 64

The Harworth Way – Planet 66

The Harworth Way – Communities 71

The Harworth Way – People 75

Governance report

Chair’s introduction 79

Board of Directors and

Company Secretary 82

Statement of corporate

governance 86

Nomination Committee report 98

Audit Committee report 106

ESG Committee report 113

Directors’ remuneration report 115

Directors’ report 134

Statement of Directors’

responsibilities 138

Financial statements

Independent auditor’s report

to the members of Harworth

Group plc 141

Consolidated income statement 152

Consolidated statement of

comprehensive income 153

Consolidated balance sheet 154

Company balance sheet 155

Consolidated statement of

changesin equity 156

Company statement of

changesin equity 157

Consolidated statement of

cash flows 158

Company statement of cash flows 159

Notes to the financial statements 160

2022 Highlights

Total Return

EPRA NDV per share

Operating profit

0.1% 196.5p £44.5m

2021: 24.6% 2021: 197.6p 2021: £121.9m

2221201918

13.3

7.8

3.0

24.6

0.1

2221201918

145.2

155.6

160.0

197.6

196.5

2221201918

33.0

24.3

27.8

121.9

44.5

Industrial & logistics

pipeline (sq. ft)

Residential

pipeline (plots)

Potential value to local

communities (‘GVA’)

35.0m 29,311 £4.6bn

2021: 28.2m 2021: 30,804 2021: £4.1bn

2221201918

21.3

24.4

27.3

28.2

35.0

2221201918

20,490

29,596

30,668

30,804

29,311

2221201918

3.5

3.9

4.1

4.6

Our Net Zero Carbon (‘NZC’) commitments:

NZC for Scope 1, Scope 2

and Scope 3 business travel

emissions by 2030

NZC for all emissions by 2040

Find out more about our sustainability framework,

The Harworth Way, on pages 64 to 77

Harworth discloses both statutory and alternative performance measures (‘APMs’). A full description and

reconciliation to the APMs is set out in Note 2 to the Financial Statements

Harworth Group plc: Annual Report and Financial Statements 2022

Creating

places

and

work

Acquisitions during the year have the potential

to deliver 2,643 homes and 8.5m sq. ft of

employment space

Applications for 5.6m sq. ft of employment space

progressing through the planning system at

year-end, representing our next generation of

development sites

Strong financial position, with significant available

liquidity, provides flexibility and firepower to

pursue opportunities

Completed our Bardon Hill development

in Leicestershire, creating 332,000 sq. ft of

sustainable Grade A space

Delivered a 100,000 sq. ft high-specification

building at the Advanced Manufacturing Park

('AMP') in Rotherham for a growing sportswear

manufacturer

Commenced work on the next phases of our

Gateway 36 development in Barnsley and the AMP,

supporting further investment and job creation

across South Yorkshire

Land sales supported the delivery of 2,236 homes,

including at Waverley in South Yorkshire and

Benthall Grange in Ironbridge

Placemaking continued across our developments

as we progressed plans for new retail provision,

medical centres, schools and green space

Developing mixed tenure products, with launch of

sites for a single-family rental portfolio, meeting the

needs of local people and further diversifying our

neighbourhoods

Formation of our Net Zero Carbon ('NZC') pathway,

targeting NZC for Scope 1, Scope 2 and Scope 3

business travel emissions by 2030, and NZC for all

emissions by 2040

All new commercial buildings developed in the year

for our Investment Portfolio were rated EPC A and

targeted BREEAM Excellent

All new masterplans and commercial buildings

included renewable energy provision

Read more on pages 66 to 70

Highlights of 2022

Strategic Report02

Harworth Group plc: Annual Report and Financial Statements 2022

sustainable

where people

want to live

Acquisitions during the year have the potential

to deliver 2,643 homes and 8.5m sq. ft of

employment space

Applications for 5.6m sq. ft of employment space

progressing through the planning system at

year-end, representing our next generation of

development sites

Strong financial position, with significant available

liquidity, provides flexibility and firepower to

pursue opportunities

Completed our Bardon Hill development

in Leicestershire, creating 332,000 sq. ft of

sustainable Grade A space

Delivered a 100,000 sq. ft high-specification

building at the Advanced Manufacturing Park

('AMP') in Rotherham for a growing sportswear

manufacturer

Commenced work on the next phases of our

Gateway 36 development in Barnsley and the AMP,

supporting further investment and job creation

across South Yorkshire

Land sales supported the delivery of 2,236 homes,

including at Waverley in South Yorkshire and

Benthall Grange in Ironbridge

Placemaking continued across our developments

as we progressed plans for new retail provision,

medical centres, schools and green space

Developing mixed tenure products, with launch of

sites for a single-family rental portfolio, meeting the

needs of local people and further diversifying our

neighbourhoods

Formation of our Net Zero Carbon ('NZC') pathway,

targeting NZC for Scope 1, Scope 2 and Scope 3

business travel emissions by 2030, and NZC for all

emissions by 2040

All new commercial buildings developed in the year

for our Investment Portfolio were rated EPC A and

targeted BREEAM Excellent

All new masterplans and commercial buildings

included renewable energy provision

Read more about our portfolio

on pages 26 to 28

Key residential developments Key industrial & logistics developments Investment Portfolio

Major

development

Strategic

Land

Major

development

Strategic

Land

1 Waverley 9 Ansty 19 Nufarm

2 South East Coalville 10 N. Yorkshire site 20 Bardon Hill

3 Simpson Park 11 Advanced Manufacturing Park

21 Knowsley

4 Pheasant Hill Park 12 Gascoigne Wood 22 Preston

5 Benthall Grange (Ironbridge) 13 Junction 15, M1 23 Sherburn-in-Elmet

6 Moss Nook 14 Rothwell 24 Flaxby

7 Thoresby Vale 15 Gateway 36

25 Dudley

8 Staveley 16 Chatterley Valley 26 Logistics North

17 Wingates 27 Widnes

18 Skelton Grange

Sites contain some Investment Portfolio assets

Strategic Report04

Harworth Group plc: Annual Report and Financial Statements 2022

A1(M)

M62

M25

M23

M69

M11

(

)

(

)

M40

M42

M50

A74

(

)

M74

M56

M180

M54

Leeds

Rotherham

Manchester

Rotherham

Sheﬃeld

Liverpool

Birmingham

Leicester

Nottingham

Coventry

£737m

Natural Resources

& other

Investment case

Portfolio overview

Industrial & logistics

Investment Portfolio: £281m; 4.0m sq. ft

Major developments: £68m; 5.4m sq. ft

Strategic land: £82m; 29.6m sq. ft

Residential

Major developments: £228m; 6,111 plots

Strategic Land: £51m; 23,200 plots

Investment case

Uniquely positioned as a

specialist regenerator of large

complex sites

Extensive, high-quality

pipeline of strategic land,

driving future growth

Focused on the resilient

industrial & logistics and

residential markets

Regional footprint provides

exposure to high-growth and

under-served markets

A responsible business,

committed to placemaking

and a NZC future

Strong financial position,

with significant available

liquidity

Growth strategy

1 2

Increasing direct

development of industrial

& logistics sites

Accelerating sales and

broadening the range of

residential products

3 4

Growing strategic

land portfolio and land

promotion activities

Repositioning Investment

Portfolio to modern Grade A

Ambition:

£1bn

of EPRA NDV

by 2027

delivered responsibly

Harworth offices

28 Rotherham

29 Leeds

30 Manchester

31 Birmingham

Harworth Group plc: Annual Report and Financial Statements 2022

Strategic Report

Chair’s statement

“ Harworth is a long-term business with

a long-term strategy to build value

for all our shareholders by creating

sustainable places where people want

to live and work.”

Alastair Lyons

Chair

Lynda’s Chief Executive’s report clearly

outlines the significant progress achieved

during 2022 in advancing the strategy

that she outlined in the 2021 interim

statement during her first full year as Chief

Executive. Notwithstanding the volatile

market conditions experienced during the

second half of 2022, the sales, consents,

and acquisitions achieved demonstrated

our ability to capitalise on the fundamental

strength of our core industrial & logistics

and residential markets.

Harworth is a long-term business with a

long-term strategy to build value for our

shareholders by creating sustainable places

where people want to live and work. By

way of illustration of our long-term nature,

our portfolio contains sites such as Waverley

where we started remediation of the former

Orgreave coking works 27 years ago and we

anticipate it will be another four years before

everything there is complete from Harworth’s

perspective. It will then have 3,038 homes

and 2.1m sq. ft of commercial space, with the

potential for 4,000 jobs, 310 acres of green

space, a medical centre and a school, and

other retail and leisure provision. Looking

forward it is the same story: large sites we

buy today may still be delivering new homes

and commercial property in 10 or 15 years’

time. As a Board we must, therefore, have a

'through-the-cycle' mindset whilst ensuring

the business has the financial and operational

resilience to weather whatever the cycle may

throw at us.

That our markets have turned down

materially since we last reported six months

ago is very clear: how long this downturn

will continue and what shape it will be

is uncertain and dependent on events

outside of our, and to a great extent the

UK’s, control. What is, however, certain

is that over the long term England needs

300,000 new homes every year and that

the changing nature of our economy, in

particular in retail distribution and reducing

dependence on long complex international

supply chains, will support demand for

new energy efficient commercial space.

We, therefore, have the confidence to

continue to invest in opportunities for

future development provided, of course,

the economics reflect the current market,

and we have the financial resources to

hold assets where we consider today’s

markets apply an excessive discount for the

present uncertainty. The need to ensure

our resilience will inevitably reduce our risk

appetite, particularly for direct development

without the commitment of an occupier, but

such cautious deployment of our resources

will in turn enable us to consider whether to

take advantage of the unexpected.

Everyone in Harworth is aligned with our

shareholders in seeking to grow the value

of the business, and our senior executives

are strongly aligned to do this. Over the

past two years we have materially extended

the proportion of our employees who

receive shares under our various schemes.

The Restricted Share Plan scheme that we

launched in 2019 to just the 21 most senior

executives is now offered to 65 of our

executives and managers making up around

50% of our employees. Beyond that, we have

an All Employee Share Incentive Plan into

which we introduced Partnership Shares and

Matching Shares in 2022. We all, therefore,

share the frustration of our investors in the

discount currently applied by the stock

market to our shares and those of many other

companies in our sector. However, we are

clear from our previous experience that the

way to narrow this discount is to focus on

trading strongly by delivering a well thought

through strategy and to communicate very

clearly our progress and potential to both

current and future investors.

From the feedback that we receive from our

investors and the wider market, it is evident

that our strategy is clear, well understood,

and supported - to build on Harworth’s

long-established specialist expertise as

a master developer of large complex

sites, moving faster through our sites by

broadening the tenures we offer and

increasing our share of the value chain

through direct development. Lynda

Shillaw and Kitty Patmore have invested

considerable time and energy over the past

year developing this understanding amongst

investors both present and potential, seeking

to ensure they can fairly assess the inherent

value of our business and its assets. The

recent volatility that has resulted in our sector

being less attractive for investors will not

cause us to change our strategy although it

may impact its speed of implementation.

When I became Chair in March 2018

Harworth had 57 employees and a

last reported EPRA NDV of £414.2m

Strategic Report06

Harworth Group plc: Annual Report and Financial Statements 2022

(and a statutory net asset value of £409.3m).

As at December 2022 this had increased

to £633.8m of ERPA NDV and £602.7m

of statutory net assets, despite the 12.6%

reduction in the value of our estate in the

second half of last year. To deploy fully this

significantly increased scale we now have

118 employees, with the specialist skills

needed to progress the development of

our expanded range of sites and support

our strategic drives into mixed tenure

and direct development. It is testament

to the culture at Harworth and the values

lived by its leaders, together with our very

progressive approach to pay, benefits, and

terms of employment that we have built

and retained the capabilities we need in a

very challenging labour market. Employers

used to choose people to work for them

and tell them where and when to work: now

people choose whom to work for and place

high value on flexibility both as to location

and how to work! We held our Employee

AGM in September, which provided an

opportunity for all our employees to engage

directly with our Non-Executive Directors.

My colleagues and I were very struck by

the extent of understanding of the strategy

evidenced at that meeting and the depth

of thought as to the implications of the then

turbulent macro-economic environment on

our markets and, therefore, our business.

To be successful the vision cannot just be

of the few who lead the business: it must

be shared by all as everyone has their part

to play in achieving it – we came away with

the firm view that the Harworth vision,

developed by Lynda and her team, is widely

shared by our people.

Alongside the rest of the market, planning

what the business will aim to achieve in 2023

has been as much art as science given the

prevailing uncertainty. However, whilst we

cannot control markets, we can position

ourselves to make the most of what positive

momentum may develop during the year,

progressing those sites that will be most in

demand by housebuilders as oven-ready

product in strong locations, working with

potential occupiers of commercial space to

tailor what we bring forward to meet their

requirements through build-to-suit and

pre-let development . We will also seek to

advance sites through the planning process

so that, when market conditions are right to

invest further in particular sites, we have the

consents we need to progress. 2023 will be

no less demanding of our management and

their teams than 2022. However, although

there will be both market headwinds and

tailwinds as we go through the cycle,

fundamentally over the long term all of the

value created in the business will be due to

management actions. It is the effectiveness

of management in these actions that we

want our annual variable bonus scheme

to recognise. This is why you will see from

our Remuneration Committee Chair’s letter

that the Committee has this year specifically

reserved discretion, both positive and

negative, to adjust the vesting outcome for

what is achieved against target for the Total

Return financial measure if our underlying

markets move materially differently to what

we are currently projecting within our

business plan for 2023.

Last year saw a considerable advance in

pulling together the elements of ESG that

are already embedded within our strategy

into an overarching framework for delivery,

and in defining the keys steps and metrics of

our NZC pathway. Our Purpose of creating

sustainable places where people want to live

and work makes ESG considerations central

to everything we do. For every potential

development we assess its environmental

and social implications: what it will contribute

to the communities it will serve; how it can

be sustainable in both construction and

operation; and how we can optimise its

impact on the environment and maximise

the resulting bio-diversity net gain. Being

an environmentally and socially focused

developer is no longer a nice to have but a

must have to meet the aspirations of our many

stakeholders: landed estates mindful of their

legacy; planners and regional development

authorities; investors seeking assets that will

retain their value for the long term; funders

conscious of the ESG requirements of their

own investors and regulators; and our people

who want more than a financial return from

their work, gaining the satisfaction of having

made a difference to the world in which

we live. We have made good progress in

understanding the carbon emissions for

which we are currently responsible, and

what will arise in the future if we deliver

against our plans. With an understanding

of the sources and their quantum we know

where to focus our efforts, and also those of

our suppliers and contractors, to minimise

both operational and embedded emissions

as we work towards our target of NZC for

all emissions by 2040. Having defined the

building blocks of our NZC pathway we

will be able to report progress against their

implementation in subsequent years.

Our ESG Committee is now well established

with a clear agenda focused on agreeing

the principal elements of our plans to

achieve our ESG objectives, measuring our

progress in their delivery, and ensuring that

we report this clearly and accurately to our

stakeholders. We were, therefore, delighted

to have Marzia Zafar join us in June as a

Non-Executive Director and a member of

the ESG Committee. Marzia brings a wealth

of knowledge and experience in the area

of sustainability, having spent over 20 years

working on policies and strategies to enable

energy transition for regulators, business

and not for profit sectors. Since joining the

Board she has been appointed as Deputy

Director of Strategy and Decarbonisation

at Ofgem. The appointment to the Board

of someone from a different personal and

professional background is testament to our

commitment to diversity and inclusion.

In signing off on 2022 my very grateful

thanks on behalf of our whole Board to

everyone within the business who did

so much to achieve so much during the

year, and in particular to Lynda and her

management team. We have moved a

long way in 12 months with much that was

in planning a year ago to implement our

strategy now a reality. My thanks also to

our investors who in very large part have

stayed the course with us: your ongoing

support is critical to us as we exist to create

value for you. As a master developer we

rely on many other organisations to make

possible what we deliver – my thanks to

all our suppliers, consultants, contractors,

and partners, those with whom we work

in planning departments, and the agents

with whose clients we transact on both

the buy and sell sides. We recognise fully

how much we owe to all our stakeholders

and commit to help them achieve their

objectives as we deliver against our own.

Alastair Lyons

Chair

13 March 2023

Strategic Report 07

Harworth Group plc: Annual Report and Financial Statements 2022

Strategic land Major developments

Our business model

Our people: The Harworth team comprises

experts in transactions, planning, land remediation,

engineering and development, supported by

central functions and a highly experienced senior

management team. We have three regional teams –

Yorkshire & Central, North West, and the Midlands –

which bring further local knowledge, expertise and

relationships.

Our key markets: Our portfolio is focused on

the industrial & logistics and residential sectors in the

North of England and the Midlands, which benefit

from favourable supply and demand dynamics,

structural growth, and are central to local and central

government objectives to ‘level up’ the economy

and provide new homes, jobs and opportunities.

Our people

An open and collaborative

culture, with teams working on

market-leading projects with

pride and enjoyment

Investors

Strong returns, with a target to

reach £1bn of EPRA NDV by

2027, delivered responsibly

Communities

Sustainable places where

people want to live and work,

with connectivity, green space

andamenities

INPUTS

OUTPUTS

Acquisitions and

land assembly

Our acquisition teams work

across our regions to identify

new sites to add to our

portfolio, through freehold

purchases, options or Planning

Promotion Agreements

('PPAs'). Often larger sites are

assembled over a number of

years through the acquisition of

smaller land parcels.

Masterplanning

Working with local authorities

and other stakeholders,

we create a strategic vision

for a site that addresses

local needs for housing or

employment space in an area.

Our sites often complement

or contribute to the wider

strategic aims of local and

central government.

Planning approval

Once a strategic vision for a

site has been determined,

our planners work with local

authorities to progress this

through the planning system.

We have a very high success

rate of securing planning

permissions, while working

collaboratively with local

stakeholders.

Land remediation

and infrastructure

development

Once planning permission

has been obtained, our

in-house development teams

undertake land remediation

works, construct any necessary

infrastructure such as roads,

and create development

platforms for the site’s

proposed use.

Read more on the case study on pages 16 to 17

Read more on the case

study on pages 14 to 15

Strategic Report 09

Harworth Group plc: Annual Report and Financial Statements 2022

Our markets

We operate in the industrial & logistics and residential markets, which continue to

benefit from favourable supply and demand dynamics, structural growth, and strong

support from local and central government.

Industrial & logistics

Demand remains above long-term

averages, but declined significantly in

the second half of 2022

Data from Savills indicates that 2022 was

the third-strongest year ever for take-up,

with 48m sq. ft of space transacted.

However, it was very much a year of two

halves, with a record breaking first half

giving way to a weaker second half, and

take-up slowing in the fourth quarter, albeit

remaining well above the 15-year average.

2022, the third-strongest year on record for take-up of

UK industrial & logistics space

2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

Q1 Q2 Q3 Q4

10-year average

sq.  (m)

Source: Savills

Build-to-suit transactions reached a record

high in 2022, equating to 50% of all take-up.

Amongst the remaining speculative take-up,

over half of transactions occurred before

the space had been practically completed,

meaning the average void for speculatively

constructed units during the year was just

one month.

Occupational demand remains resilient,

although the sector is not recession proof.

Rising interest rates, a tighter lending

environment and general economic

uncertainty have weighed on demand in the

investment market, and are likely to continue

to in the short term.

In response, decisions to start new

speculative direct development projects

in the year will be market-driven, while we

continue to progress land sales, pre-let and

build-to-suit opportunities, for which we

continue to see demand across our sites.

A shift is underway in the sectors

driving demand, and the type of

space they require

Looking at demand by market sector,

online retailers saw their lowest take-

up of space in five years in 2022, while

traditional retailers saw their highest take-

up since 2016. The third-party logistics

(‘3PL’) and manufacturing sectors recorded

their strongest years ever, accounting for

30% and 24% of the market respectively.

The increased demand from these sectors

is likely driven by an increased focus by

occupiers on supply chain resilience,

onshoring and near-shoring.

Grade A space accounted for 86% of

take-up, a significantly higher proportion

than the long-term average of 60%,

demonstrating that, more than ever,

occupiers are demanding high-quality

space and ESG-compliant facilities in order

to provide better staff welfare and attract

and retain both talent and business.

86% of

demand was

for Grade A

space

Strongest

year ever for

manufacturing

take-up

3PL accounted for

30% of take-up

One of our key strategic objectives is to

directly develop and retain high-quality

Grade A space. This ensures we are

meeting the demand of occupiers, while

ensuring staff welfare and NZC goals are

prioritised.

Supply still highly constrained, while

market-wide vacancy remains close to

a record low

During 2022, supply of industrial &

logistics space trended slightly upwards

to 26m sq. ft, reflecting a vacancy rate of

3.9%. Both of these figures remain close

to record lows, which is mainly the result

of significant levels of take-up in recent

years in addition to factors such as planning

delays, which have constrained the

creation of new space.

Grade A continues to account for an

ever-higher share of supply, as developers

respond to the sustainability needs of

occupiers.

Industrial & logistics supply continues to be constrained

Supply (LHS)

Vacancy rate (RHS)

10%

20%

100

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

Supply (sq.  m)

Source: Savills

Some of Harworth’s focus regions have

particularly low supply and vacancy rates,

for example the West Midlands, where

vacancy is around 3%. This should provide

additional support to the occupational

market in these regions.

Capital markets in the industrials

sector impacted by wider headwinds

The real estate capital markets have

been negatively impacted by market

headwinds, particularly in the industrials

sector, following a period of very significant

growth. The MSCI-IPD index shows that

the UK industrial sector saw a capital

value decline of -18% during 2022, with a

decline of -27% during the last six months,

as an outward yield shift of 130bps for the

sector was only partially offset by rental

growth of +10.3%.

Strategic Report10

Harworth Group plc: Annual Report and Financial Statements 2022

Residential

Housebuilding remains well below UK

Government targets

The UK Government has a long-standing

target to build 300,000 new homes per

year in England. While delivery has been in

excess of 200,000 for the past six years, it

remains well below the target level.

200,000

250,000

300,000

Dwellings

New build completions

Other

2006-07

2007-08

2008-09

2009-10

2010-11

2011-12

2012-13

2013-14

2014-15

2015-16

2016-17

2017-18

2019-20

50,000

1000,000

1500,000

Annual net additional dwellings in England

2020-21

2021-22

2018-19

Source: Department for Levelling Up, Housing &

Communities

Government interventions such as the

Help to Buy Mortgage Guarantee Scheme

(which has now been extended until

December 2023), Shared Ownership, and

the Affordable Homes Programme have

the potential to encourage further housing

development.

Buyer activity slowed towards the end

of 2022, with housebuilders reducing

delivery volumes and land buying

House prices fell during each of the four

final months of the year, according to data

from Nationwide, and all indicators point

to a slowdown in transactional activity

across the sector as the impact of higher

mortgage rates, challenging affordability

and subdued consumer confidence has

taken hold. As a result, supply of new

homes for sale reached around 42,000

in December 2022, its highest level since

May 2021. Reporting from housebuilders

points to a reduction in volumes over

the coming year and a more selective

approach to land acquisitions.

We completed a record level of residential

plot sales in 2022, which was in part due

to bringing forward land sales originally

planned for the following year to take

advantage of buoyant market conditions.

Data for 2023 so far shows that mortgage

rates are recovering from the disruption

seen in the second half of 2022, although

they remain some way off recent historical

averages.

Mortgage rates falling from their late 2022 highs

02-Sept

12-Sept

16-Sept

23-Sept

30-Sept

07-Oct

14-Oct

21Oct

28-Oct

04-Nov

11-Nov

24-Feb

‘Mini-

budget’

4.5

5.5

6.5

Mortgage rate (0%)

18-Nov

25-Nov

02-Dec

09-Dec

16-Dec

23-Dec

06-Jan

13-Jan

20-Jan

27-Jan

03-Feb

10-Feb

17-Feb

Average 2-year fixed rate

Average 5-year fixed rate

Source: Mortgage Strategy 'Weekly rate watch'

We are encouraged by the fact that we

continue to see good levels of demand

from those housebuilders that have

stated that they are holding back on

land purchases, which underscores the

differentiated nature of our serviced and,

therefore, de-risked land product.

Planning approvals for major

residential projects fall to lowest

level for a decade

Data from the Department for Levelling

Up, Housing & Communities shows that

planning approvals for major residential

schemes reached their lowest level for

10 years in 2022. The planning system is

being constrained by limited resources,

more complex requirements and the

need for local authorities to divert funding

elsewhere.

Planning system constraints have limited

the ability of housebuilders to progress

strategic land into the development

phases. This could be a short-term benefit

for Harworth, as it drives demand for our

serviced land product, which is de-risked

and ready to build on.

However, in the longer term it is in both

ours and our housebuilding partners’

interests to ensure planning system reform

that delivers growth. We continue to work

with local authorities and industry groups

to ensure the planning system works fairly

and efficiently for all.

While we welcome some of the proposed

amendments to the National Planning

Policy Framework announced by the

Government in December 2022, other

changes such as the removal of the need

for planning authorities to maintain a

five-year supply of deliverable housing

sites could further exacerbate challenges

around delays and shortfalls in land supply.

Build-to-Rent market continues

to grow

The institutional Build-to-Rent (‘BTR’)

market continued its growth throughout

2022 as it establishes itself as an important

part of the wider private rental sector.

The latest data from the British Property

Federation and Savills projects the number

of completed BTR homes to increase

fivefold to 380,000 by 2032. Investors

are attracted to the highly defensive

and consistent returns offered and

opportunities to create low carbon homes

and sustainability-led rental communities.

Investment volumes in UK BTR continue to be strong

Q1 Q2 Q3 Q4

£bn

£1bn

£2bn

£3bn

£4bn

£5bn

2015 2016 2017 2018 2019 2020 2021 2022

Investment volumes

Source: Savills

Our initial portfolio of sites for single-

family BTR homes, therefore, represents a

highly attractive proposition for investors

to access this market at scale, with

opportunities for further portfolios in the

future. For Harworth, it provides increased

resilience in the event of a material

downturn in the traditional 'Build-to-Sell'

market.

Strategic Report 11

Harworth Group plc: Annual Report and Financial Statements 2022

1 2

Our growth strategy

Our ambitious growth strategy builds on the skills of our people and the

strength of our portfolio to drive growth, maximise returns to investors and

grow the business to reach £1bn of EPRA NDV by 2027. The strategy

is focused around four key drivers of growth.

Increasing direct development

of industrial & logistics stock

Harworth is an experienced developer, having built 1.7m sq. ft of

industrial & logistics space since 2015, including a record level

of direct development in 2022.

We have a significant committed industrial & logistics

development pipeline ahead of us, with schemes spread

across our regions, in strong locations that are attractive to

both investors and occupiers.

What we will do

Our strategy is to undertake the direct development of much of

our consented pipeline, scaling up to an average of 800,000

sq. ft per annum by 2027.

We intend to manage the market risk associated with

development by focusing on pre-let, build-to-suit and forward

funding opportunities alongside land sales when the market

appetite is less certain. Our programme of development will

be funded by a mixture of cash generated from the Group, our

core banking facilities and project debt and the potential use of

joint ventures.

Link to KPIs

• Total Return

• Net asset value, EPRA NDV per share and LTV

• Industrial & logistics space directly developed

• Total industrial & logistics pipeline

• Potential GVA that could be delivered from our portfolio

• Scope 1, Scope 2 and Scope 3 business travel emissions

Link to principal risks

• Planning

• Supply chain cost inflation and constraints

• Supply chain and delivery partner management

• Residential and commercial markets

• Organisational development and design

• Availability of appropriate capital

• NZC pathway

Accelerating sales and broadening the

range of our residential products

Harworth’s residential land portfolio is significant and has the

ability to deliver around 29,000 housing units into the market,

with around a quarter of this already consented.

While strong demand remains for the traditional Build-to-Sell

product offered by housebuilders, there is increased

consumer and investor appetite for mixed tenure products

such as BTR homes, affordable homes and retirement living.

What we will do

Our portfolio is well-suited to delivering institutional quality

single-family rental homes. As a result, we launched our first

single-family BTR portfolio during the year. Our mixed tenure

team continue to explore opportunities to further diversify the

residential products at our sites.

Through a combination of increased plot sales for 'Build-to-

Sell' products and the launch of new residential products, our

ambition is to double residential sales to around 2,000 plots on

average per annum by 2027.

Link to KPIs

• Total Return

• Net asset value, EPRA NDV per share and LTV

• Number of plots sold to housebuilders

• Total residential pipeline

• Potential GVA that could be delivered from our portfolio

• Scope 1, Scope 2 and Scope 3 business travel emissions

Link to principal risks

• Planning

• Supply chain cost inflation and constraints

• Supply chain and delivery partner management

• Statutory costs of development

• Residential and commercial markets

• Organisational development and design

• Availability of appropriate capital

• NZC pathway

Strategic Report12

Harworth Group plc: Annual Report and Financial Statements 2022

3 4

Growing our strategic land portfolio

and land promotion activities

Our landbank underpins our ability to deliver our strategy.

Around a quarter of this is currently consented, as measured by

potential residential plots and industrial & logistics sq. ft.

We take a long-term view to replenishing our landbank. Our

regional and head office teams have dedicated acquisitions

specialists, focused on acquiring and assembling land through

a mixture of freeholds, options, and PPAs.

What we will do

We will maintain a 12–15-year land supply at any time, taking

account of our annual direct development volume and plot sale

ambitions.

As we step into the delivery of our strategy, organic growth

of the pipeline will be supplemented by developing key

partnerships to assemble and deliver large-scale regeneration

schemes with the potential for larger acquisition opportunities.

Link to KPIs

• Total Return

• Net asset value, EPRA NDV per share and LTV

• Total industrial & logistics pipeline

• Total residential pipeline

• Potential GVA that could be delivered from our portfolio

Link to principal risks

• Availability of and competition for strategic land sites

• Planning

• Statutory costs of development

• Organisational development and design

• Availability of appropriate capital

Repositioning our Investment

Portfolio to modern Grade A

Our Investment Portfolio is integral to the way that we fund our

business, providing recurring revenue and opportunities for

capital growth through asset management.

The portfolio benefits from robust operational metrics, and a

diverse occupier base. We are also investing to improve the

environmental efficiency of these buildings, to build climate

resilience and extend their lifespan.

What we will do

We will largely retain the assets that we directly develop,

while disposing of those assets from our existing portfolio

where we have maximised value through the completion of

asset management initiatives. This approach will progressively

reposition our Investment Portfolio to sustainable, high-quality

Grade A assets with good access to infrastructure and

proximity to urban centres.

This portfolio shift will enable us to meet our NZC targets and

provide opportunities to stabilise and grow capital values

across the units that we directly develop.

Link to KPIs

• Total Return

• Net asset value, EPRA NDV per share and LTV

• Industrial & logistics space directly developed

• Total industrial & logistics pipeline

• Proportion of Investment Portfolio that is Grade A

• Scope 1, Scope 2 and Scope 3 business travel emissions

Link to principal risks

• Residential and commercial markets

• Organisational development and design

• Availability of appropriate capital

• NZC pathway

Strategic Report 13

Harworth Group plc: Annual Report and Financial Statements 2022

Case study

Direct development at Bardon Hill

During the year we completed the

direct development of 332,000 sq. ft of

Grade A industrial & logistics space at a

site in Bardon Hill, Leicestershire.

The development is strategically

located less than two miles from

Junction 22 of the M1, adjacent to

our residential South East Coalville

development, and within one of the

UK’s fastest growing manufacturing

and distribution locations, where

existing occupiers include Amazon,

Eddie Stobart and DHL.

Harworth acquired the 54-acre Bardon

Hill site in May 2018. The scheme received

outline planning consent from North West

Leicestershire Council in July 2019, and

approval of reserved matters was received

in March 2020. Construction commenced

in the second half of 2021.

The development comprises five units

ranging from 29,000 sq. ft to 119,000 sq.

ft, built to BREEAM Very Good standard,

EPC rating A and achieving NZC in

construction accreditation. All units have

first floor offices, secure service yards and

dedicated car parking spaces, ensuring the

units appeal to a wide range of potential

occupiers.

Located at the apex of UK's golden triangle

for logistics, the Bardon Hill site can serve

three-quarters of the UK population within

a single heavy-goods vehicle journey. It is

also located less than half an hour from East

Midlands Airport, home to the UK’s largest

air cargo operation.

To date, we have completed lettings

representing 188,000 sq. ft, with Charles

Kendall Freight, an international freight

forwarder, Zwilling J.A. Henckels AG,

a German kitchenware manufacturer

and retailer, and Trimark, a designer

and manufacturer of vehicle hardware

products. We are in advanced letting

negotiations regarding a further unit at

the site which, combined with the units

currently let, would represent 65% of the

total space available at the development.

Strategic Report14

Harworth Group plc: Annual Report and Financial Statements 2022

Building efficiency and integrating

energy into development

Achieving Net Zero Carbon in construction

Harworth has worked with Winvic Construction, the main

contractor for Bardon Hill, to pilot a 'NZC in construction'

approach at Bardon Hill, which minimises embodied carbon in the

building phase. This was achieved through a sustainable approach

to material specification and the offsetting of the remaining

construction-related embodied carbon through the use of Verified

Carbon Standard or Gold Standard schemes focused on tree

planting and ecology, renewable energy, and social projects.

The units are also designed to be capable of being NZC in

operation through integrated renewable energy, enhanced build

specification, and the incorporation of green lease terms.

Protecting and promoting biodiversity

Creating new spaces for local wildlife and

enhancing on-site employee wellbeing

Bardon Hill benefits from extensive landscaping, which has included

the planting of wildflowers and over 2,300 predominantly deciduous

trees, 99% of which are native, together with the incorporation of

two storm attenuation ponds. Benches are provided throughout this

space, making it an ideal location for relaxation and contemplation,

which in turn enhances the wellbeing of employees at the site. In

addition, the creation of a 10-acre local wildlife site around the River

Sence provides a green corridor which further enhances biodiversity.

930 jobs £71m

to be supported once

fully let

of GVA to be delivered to

the local economy

David Cockroft,

Regional Director for the Midlands:

“ Bardon Hill has delivered Grade A industrial & logistics

space in a highly sought-after location less than two

miles from the M1. In addition to providing new jobs for

the local community, this development will protect and

enhance local biodiversity through the creation of new

green spaces, and improve local infrastructure. We have

been really pleased with the demand from potential

occupiers so far.”

Strategic Report 15

Harworth Group plc: Annual Report and Financial Statements 2022

At Waverley, Harworth is undertaking

Yorkshire’s largest brownfield

regeneration project – the

transformation of the former Orgreave

colliery into a new community of up to

3,038 homes set amongst 310-acres

of green space, and 2.1m sq. ft of

employment space at the Advanced

Manufacturing Park, with the potential

to support over 4,000 high-skilled

jobs. To date, land has been sold for

over 2,442 homes, and 1.6m sq. ft of

space has been delivered at the AMP.

During 2022, land sales were completed

representing 556 plots to two

housebuilders, all of which have already

delivered houses at the site. This repeat

business underscores the popularity of

Waverley as a place to live, and also the

strong relationships that Harworth has

forged with a wide range of housebuilding

partners.

In June, Harworth competed its largest-ever

residential plot sale in a £29m transaction

with Barratt and David Wilson Homes.

The housebuilder intends to deliver

approximately 450 homes, of which over

30% will be affordable. The new homes will

represent Barratt and David Wilson Homes’

fifth phase at the site and will benefit

from unique water frontage in an area

of the development known as Waverley

Waterfront. Construction will follow a

bespoke design code that complements

the existing Waverley development, while

maximising the amenity value of the area’s

waterfront location. The development

will include a pedestrianised promenade,

further enhancing the site’s placemaking

and connectivity.

Towards the end of the year, Harworth

completed a sale to regional housebuilder

Sky-House, to deliver an additional 106

homes. The planned development will

comprise a mixture of two to four-bedroom

houses and apartments designed by

CODA Architecture. The units will be

a re-imagining of Victorian terraced

homes for modern day living, providing

well-designed energy-efficient homes with

roof gardens.

Alongside residential sales, it has been

an active year for progressing other

community amenities at the site. Work

began on a 150-bedroom Marriott

Courtyard hotel, which will also provide

a restaurant and gym facilities. The hotel

will occupy a prominent position at the

entrance to the Waverley development,

and will provide an important community

asset for use by residents and businesses

at the adjacent AMP. Plans have also been

approved for a new healthcare centre at

the site, which will be delivered alongside

Olive Lane, the site's mixed-use ‘heart of

the community’ development.

Case study

Accelerating residential sales at Waverley

Strategic Report16

Harworth Group plc: Annual Report and Financial Statements 2022

Creating sustainable communities &

preserving heritage

Introducing single-family Built-to-Rent homes to

Waverley

In 2022, Harworth launched its single-family BTR portfolio,

responding to the significant growth in demand for this product

in recent years and delivering on our strategic objective of

broadening the range of our residential products.

One of the sites in the portfolio is Waverley, where over 150 rental

homes will be delivered. The community is ideally positioned

to provide all the attributes that single-family BTR occupiers look

for, with a primary school just moments away, plentiful green

space and other amenities, and good access to employment

opportunities at the adjacent AMP and slightly further afield in

Sheffield and Doncaster.

3,038

homes planned for Waverley

2.1m sq. ft

employment space planned for the AMP

310 acres

of green space

David Cross,

Founder & Director, Sky-House Co.

"Building our third phase of new homes at Waverley is

a significant milestone as we continue our productive

relationship with Harworth to deliver what buyers really

want from their new homes in the North of England. As

the largest Sky-House development to date, it heralds our

transition to a regional housebuilder of choice, meeting

head-on the challenges of quality design, energy efficient

homes, liveable streets and at a price point within the

reach of people across South Yorkshire."

Strategic Report 17

Harworth Group plc: Annual Report and Financial Statements 2022

Key performance indicators

Financial track record

Total Return

0.1%

24.6%

3.0%

7.8%

13.3%

What we measure

Growth in EPRA NDV during the year in addition to dividends paid, as a proportion of

EPRA NDV at the beginning of the year.

Performance in 2022

Our Total Return was a result of EPRA NDV remaining broadly flat year-on-year, due to

our management actions largely offsetting market-driven valuation movements.

Link to strategy:

1 2 3 4

EPRA Net Disposal Value (‘NDV’) per share (pence)

196.5

197.6

160.0

155.6

145.2

What we measure

A European Pubic Real Estate Association (‘EPRA’) metric that represents a net asset

valuation where deferred tax, financial instruments and other adjustments, as set out in

Note 2 to the financial statements, are calculated to the full extent of their liability.

Performance in 2022

Following a significant increase in valuations during the first half, we experienced

outward yield shifts driven by softer market conditions in the second half. Over the

course of the year, our management actions largely offset market movements, and this

resulted in valuations, and, therefore, EPRA NDV, remaining broadly flat year-on-year.

Link to strategy:

1 2 3 4

Net asset value (£m)

602.7

578.0

488.7

463.8

441.9

What we measure

The value of our assets less the value of our liabilities, based on IFRS measures, which

excludes the mark-to-market value of development properties.

Performance in 2022

Net asset value increased slightly as a result of crystallising valuation gains through

development property sales during the year.

Link to strategy:

1 2 3 4

Net loan to portfolio value (‘LTV’)

6.6%

3.4%

11.5%

12.1%

12.3%

What we measure

Net debt as a proportion of the aggregate value of properties and investments.

Performance in 2022

Our LTV increased slightly during the year, but remained well within our internal target

of less than 20% at year-end, as we continue to carefully manage our levels of net debt.

Link to strategy:

1 2 3 4

Strategic Report18

Harworth Group plc: Annual Report and Financial Statements 2022

Strategy link key

Increasing direct development of

industrial & logistics stock

Growing our strategic land portfolio

and land promotion activities

The Harworth Way

Accelerating sales and broadening

the range of our residential products

Repositioning our Investment

Portfolio to modern Grade A

Group targets

Strategic track record

Number of plots sold to housebuilders

2,236

1,411

873

1,379

1,049

What we measure

The number of plots equivalent to land parcel sales to housebuilders during the year.

Performance in 2022

We completed a record number of residential plot sales in 2022. This was due to

buoyant housebuilder demand and the bringing forward of land sales planned for

future years to take advantage of market conditions.

Link to strategy:

Total residential pipeline (plots)

29,311

30,804

30,668

29,596

20,490

What we measure

The total number of residential plots that could be delivered from our pipeline at the

end of the year including freehold land, options and PPAs.

Performance in 2022

Our residential pipeline declined slightly, but remains well within our ambition to

maintain a 12–15-year land supply. The reduction was due to a record year for plot

sales, which more than offset those added to the pipeline through acquisitions.

Link to strategy:

2 3

Strategic Report 19

Harworth Group plc: Annual Report and Financial Statements 2022

Key performance indicators continued

Strategic track record

Industrials & logistics space directly developed (sq. ft)

432,000

51,000

27,000

402,000

What we measure

The proportion of industrial & logistics space developed by Harworth, either

speculatively or on a build-to-suit basis for an end occupier.

Performance in 2022

We developed a record amount of industrial & logistics space in 2022, totalling

432,000 sq. ft. This mainly comprised our 332,000 sq. ft Bardon Hill development

in Leicestershire.

Link to strategy:

1 4

Total industrial & logistics pipeline (sq. ft)

35.0m

28.2m

27.3m

24.4m

21.3m

What we measure

The total amount of industrial & logistics space that could be delivered from our

pipeline at the end of the year, including freehold land and options.

Performance in 2022

Our industrial & logistics pipeline increased significantly, with the signing of

several option agreements and a number of freehold acquisitions as part of land

assembly works.

Link to strategy:

1 3 4

Proportion of Investment Portfolio that is Grade A

18%

11%

n/a

What we measure

The proportion of our Investment Portfolio by area that could be classified as modern

Grade A industrial & logistics space. Although not officially defined, Grade A is a

widely-used industry term that is understood to mean ‘best in class’ space, which is

new or relatively new, high-specification and in a desirable location, allowing the unit

to attract a rent that is above the market average.

Performance in 2022

The proportion of our Investment Portfolio that is Grade A space increased as our

completed Bardon Hill development was transferred to the portfolio.

Link to strategy:

Strategic Report20

Harworth Group plc: Annual Report and Financial Statements 2022

Economic, environmental and social track record

Potential Gross Value Added (‘GVA’) that could be delivered from our portfolio (£bn)

4.6

4.1

3.9

3.5

What we measure

Calculated by Ekosgen, an economic impact consultancy, on our behalf. This estimates

the total contribution that our portfolio could make to the economy once fully built out.

Performance in 2022

The potential GVA that could be delivered from our portfolio increased due to the

additional employment potential created by our industrial & logistics acquisitions

during the year.

Link to strategy:

1 2 3

Scope 1, Scope 2 and Scope 3 business travel emissions (tonnes CO

1,083

960

882

2,353

4,016

What we measure

Emissions that are captured by our target to be NZC by 2030. During the year, the

scope and availability of our emissions data increased, and, therefore, figures for 2021

have been restated to allow for a like-for-like comparison with 2022.

Performance in 2022

Our emissions decreased during the year, mainly due to reduced energy consumption

at our company offices, communal areas of our Investment Portfolio assets and other

Harworth assets and infrastructure.

Link to strategy:

Employee pride

97%

93%

90%

88%

100%

What we measure

The proportion of employees who said they were “proud to tell people that I work for

Harworth” in our annual employee survey.

Performance in 2022

Levels of staff satisfaction remained very high, as we continued our work to ensure

Harworth is an employer of choice, with initiatives aimed at promoting employee

engagement, wellbeing and equity, diversity and inclusion.

Link to strategy:

Strategy link key

Increasing direct development of

industrial & logistics stock

Growing our strategic land portfolio

and land promotion activities

The Harworth Way

Accelerating sales and broadening

the range of our residential products

Repositioning our Investment

Portfolio to modern Grade A

Group targets

Strategic Report 21

Harworth Group plc: Annual Report and Financial Statements 2022

Chief Executive’s review

“ We remain confident in our strategy,

the resilience of our products and

focus markets, and the ability of our

through-the-cycle management actions

to realise the long-term potential of

our sites.”

Lynda Shillaw

Chief Executive

Harworth has had another year of significant

operational progress, delivering against

our strategy to become a £1bn business

by 2027. We ended the period in a

strong financial position, with a low LTV,

significant available liquidity and no major

refinancing requirements until 2027. This

progress, combined with the fact that we

own the majority of our sites, and can,

therefore, determine the scale and pace

of development to suit our risk profile,

provides us with significant flexibility as we

navigate a more uncertain period.

Our strategic plan spans five to seven years,

and over this time period it was possible that

we would encounter a cyclical downturn

given the strength of our markets in the

preceding years. While the triggers, timing

and shape of a shift in the cycle are difficult to

predict, it became evident over the course of

the year that a downturn was materialising.

Despite a strong first half performance, the

wider macroeconomic challenges facing

global economies, including rising interest

rates and inflation, weighed on sentiment

in the second half. Our management

actions to generate value largely offset the

resulting market-driven yield shifts, meaning

that valuations and, therefore, EPRA NDV

remained broadly flat year-on-year, while our

statutory net assets increased slightly.

We remain confident in our strategy,

the resilience of our products and

focus markets, and the ability of our

through-the-cycle management actions

to realise the long-term potential of our

sites and returns to shareholders, and

while there have been some positive

market indicators so far in 2023, market

conditions remain uncertain. We have seen

in recent years that our markets can move

quickly, and we remain closely attuned to

the potential impacts that this could have

on our business, retaining the flexibility to

adjust our plans where necessary.

Our markets

Harworth’s focus markets of residential and

industrial & logistics both continue to be

characterised by good levels of demand,

and constrained supply.

In the industrial & logistics sector, occupier

demand is showing resilience, and there is

evidence of continued rental growth. Data

from Savills indicates that 2022 was the

third-strongest year ever for take-up, with

48m sq. ft of space transacted. However,

it was very much a year of two halves, with

a record breaking first half giving way to

a much weaker second half, and take-up

slowing markedly in the fourth quarter,

albeit remaining well above the 15-year

average. An interesting picture emerges

when looking at the market sectors driving

demand: online retailers saw their lowest

take-up in five years, while the third-party

logistics sectors and manufacturing sectors

recorded their strongest years ever, likely

driven by an increased focus on supply chain

stability, onshoring and near-shoring. Grade

A space accounted for 86% of take-up, a

significantly higher proportion than the

long-term average and an endorsement

of our strategic priority to transition our

Investment Portfolio to Grade A.

At the same time, supply of industrial &

logistics space remains close to an all-time

low, at under 4% market-wide. Across

many of our regions, supply is even lower

than the market average – according to

Savills, both Yorkshire & the North East

and the West Midlands are seeing vacancy

rates of around 3% and less than half a year

of supply as calculated by average take-up

in the last three years.

This sector is of course not recession proof.

Rising interest rates, a tighter lending

environment and general economic

uncertainty are undoubtedly weighing

on investment demand and are likely to

continue to do so in the short term.

In the residential markets, house prices fell

during each of the final four months of the

year, according to data from Nationwide,

and all indicators point to a slowdown in

transactional activity across the sector as

the combined impact of higher mortgage

rates, challenging affordability and subdued

consumer confidence has taken hold. As a

result, supply of new homes for sale reached

around 42,000 in December 2022, its

highest level since May 2021, and this figure

is expected to grow further over the course

of 2023. Recent data suggests that average

Strategic Report22

Harworth Group plc: Annual Report and Financial Statements 2022

mortgage rates are recovering from the

disruption seen in the second half of 2022,

although they remain some way off recent

historical averages and that housebuilders

have seen enquiry levels regain some of the

ground lost.

Reporting from housebuilders points to a

reduction in construction volumes over the

coming year and a more selective approach

to land acquisitions. We are encouraged by

the fact that we continue to see good levels

of demand from housebuilders, with many

of whom we have long-term relationships,

underscoring the differentiated nature of

our serviced and, therefore, de-risked land

product. It also reflects the reality that, given

resource constraints and differing priorities

amongst local authorities, the pipeline of

consented land is becoming increasingly

constrained.

The institutional BTR market continued its

growth throughout 2022 as it establishes

itself as an important part of the wider

private rental sector. The latest data from

the British Property Federation and Savills

projects the number of completed BTR

homes to increase fivefold to 380,000

by 2032. Investors are attracted to the

highly defensive and consistent returns

offered and opportunities to create low

carbon homes and sustainability-led rental

communities. Harworth’s single-family

BTR portfolio of sites represents a highly

attractive proposition for investors to access

this market at scale, with opportunities for

further portfolios in the future.

In the second half of 2022, real estate

capital markets were negatively impacted

by market headwinds, particularly in the

industrials sector, following a period of

very significant growth. The MSCI-IPD

index shows that UK industrial assets saw a

capital value decline of -18% during 2022,

with a decline of -27% during the last six

months, as an average outward yield shift

of 130bps for the sector was only partially

offset by rental growth of +10.3%. Our

valuation performance has for the most part

outperformed these wider trends, as our

management actions, resilient occupational

demand and strong sales activity have so

far largely offset valuers’ adjustments to

reflect the effect of increased debt costs and

outward yield movement on the pricing of

the end product. In the residential space,

Knight Frank data shows that English

greenfield land values declined only -1.3%

in 2022, as softening market conditions

for house purchases was partially offset

by the ongoing scarcity of appropriate

development land, and the potential for low

grade agricultural land to be used for natural

capital projects.

Operational performance

Our strategy, outlined in September 2021,

set out a clear road map for our ambition to

grow EPRA NDV* to £1bn by 2027. As the

table below shows, we delivered across all

areas of the strategy in 2022.

Growth driver 2015–2020 2021 Progress in 2022 Ambition by 2027

Increasing direct

development

of industrial &

logistics stock

1.3m sq. ft

developed over

five years

51,000 sq. ft

developed

432,000 sq. ft completed during

the year

203,000 sq. ft under construction at

year-end

800,000 sq. ft

completed on

average per annum

Accelerating sales and

broadening the range of

our residential products

c.860 plots sold on

average per year

1,411 plots sold 2,236 plots sold 2,000 plots sold on

average per annum

Scaling up land

acquisitions and

promotion activities

Land supply of 12–15 years Maintained land supply of 12–15 years

through acquisitions representing

8.5m sq. ft of industrial & logistics

space and 2,643 residential plots

Maintain a land

supply of 12–15 years

Repositioning our

Investment Portfolio to

modern Grade A

<10% of investment

Portfolio was

Grade A

11% of the Investment

Portfolio was Grade A

at year-end

18% of the Investment Portfolio was

Grade A at year-end

100% of the

Investment Portfolio

to be Grade A

The majority of the 432,000 sq. ft of

completed direct development related to

our Bardon Hill site, which has achieved

NZC in construction status and is currently

65% let or in heads of terms. The year

also saw the completion of a 100,000

sq. ft build-to-suit unit for a sportswear

manufacturer at the AMP in Rotherham.

After year-end, we completed a further

110,000 sq. ft as part of the next phase

of Gateway 36, with one unit already let

and another in heads of terms. Given

investment market conditions, our focus

for 2023 will be on built-to-suit and pre-let

direct development opportunities, as well

as land sales to potential occupiers. In line

with this strategy, we have pre-let a 73,000

sq. ft unit at the AMP to a technology

occupier and submitted planning for a

139,000 sq. ft unit at Gateway 36, which

we intend to pre-let before construction

commences.

We saw a record year for residential plot

sales, with completed transactions totalling

2,236 plots (2021: 1,411 plots) at prices

in line with, or ahead of, December 2021

valuations. These included our single largest

serviced residential land sale, to Barratt and

David Wilson Homes at Waverley, and also

the first land parcel sale at our Ironbridge

Strategic Report 23

Harworth Group plc: Annual Report and Financial Statements 2022

site, to the same housebuilder. We also

launched our first single-family BTR portfolio

of sites for up to 1,200 homes, which has

attracted significant levels of interest. Our

preferred investment and construction

partners have now been selected and

we are progressing towards exchange.

Offering this combination of ‘Build-to-Sell’

and BTR products will allow us to accelerate

the delivery, and enhance the vibrancy, of

our residential sites, as we target the sale

of an average of 2,000 residential plots per

annum across all tenure types by 2027.

Turning to acquisitions, we added 2,643

plots and 8.5m sq. ft of industrial &

logistics space to our pipeline during

the year. These were achieved through

a combination of freehold acquisitions,

options and Planning Promotion

Agreements (‘PPAs’). Two significant

options were signed to deliver up to

3.0m sq. ft of industrial & logistics space

at a site in North Yorkshire, and up to

1.6m sq. ft adjacent to Junction 15 of the

M1 in Northamptonshire. The size of our

landbank remains a key differentiator for

us, providing flexibility and the potential

to smooth our returns profile at a portfolio

level, and unlocking exciting new

opportunities for the business.

Our Investment Portfolio continued to

deliver robust operational metrics, with

a vacancy rate of 8.3% at year-end (2.7%

excluding Bardon Hill, which was only

completed in September) and 99% of

rent so far collected for the year. We also

completed 622,000 sq. ft of lettings,

in most cases at premiums to estimated

rental values ('ERVs') and passing rents.

As Bardon Hill entered the Investment

Portfolio during the year, we also

commenced the disposal of more mature

assets where we had already maximised

value through asset management and

development initiatives, with the sale

of two sites after year-end for a total of

£12.6m, broadly in line with or ahead of

December 2022 valuations.

During the year, we also completed a

review of our Natural Resources portfolio,

which comprises sites used for a wide

range of energy production and extraction

purposes. The review aimed to determine

how best to protect and optimise value

from this portfolio, while maximising

the role these assets play in realising our

sustainability ambitions. The outcome

has been to develop an Energy & Natural

Capital strategy, with the aim of developing,

with strategic partners, renewable energy

generation solutions and other green

initiatives such as battery storage, district

heating, and reforestation/rewilding on

Natural Resources assets. At the same time,

the Natural Resources team will have a

wider responsibility for embedding these

energy concepts and principles across

each of our development sites to maximise

energy availability and green capital for

residents and occupiers and fulfil Harworth’s

NZC ambitions.

Financial performance

Following a strong first half, the softening

macroeconomic environment and outward

yield shift applied to property valuations at

31 December 2022 resulted in EPRA NDV

per share

remaining broadly flat year-on-

year at 196.5p, which translated into a Total

Return of 0.1% for 2022 (2021: 24.6%).

Statutory net asset value was £602.7m

(2021: £578.0m).

Sales of serviced land and property, in

addition to income from rent, royalties

and fees, resulted in Group revenue of

£166.7m (2021: £109.9m). This increase

derived primarily from the sale of our

Kellingley development site for £54.0m

and the acceleration of residential land

sales particularly during the first half, to

take advantage of then buoyant market

conditions.

The Board is proposing a final dividend

of 0.929p per share, bringing the total

dividend per share for 2022 to 1.333p,

representing 10% underlying growth from

2021, in line with our dividend policy.

As we navigate a more uncertain economic

period, we continue to maintain a strong

balance sheet and financial position, with

significant available liquidity of £175.6m as

at 31 December 2022 (31 December 2021:

£128.0m), following the signing of a new

£200m revolving credit facility (‘RCF’) in

early 2022, with no major refinancing events

until 2027. Our LTV at year-end was 6.6%

Chief Executive’s review continued

Strategic Report24

Harworth Group plc: Annual Report and Financial Statements 2022

(31 December 2021: 3.4%), affording us a

high degree of flexibility and resilience as we

pursue our strategy.

The Harworth Way

This has been a transformative year

for Harworth’s ESG ambitions, as we

appointed our first Director of Sustainability

and created a dedicated sustainability team

within the business. Their focus during the

year has been to devise a NZC pathway

and to expand and continue to embed

The Harworth Way, our sustainability

programme, which is now in its fourth year.

The team is also building our capabilities in

measuring and reporting carbon emissions,

and reviewing our commitments and

approach beyond the year.

The resulting NZC pathway, to be published

alongside our Annual Report, confirms

the scope and boundary of the pathway,

and outlines a detailed set of targets and

delivery strategy to meet our ambition to be

operationally NZC by 2030 and fully NZC

by 2040. Central to our delivery strategy will

be the adoption of build specifications for

our industrial & logistics sites and also the

homes to be delivered by Harworth’s mixed

tenure team.

Delivering social value is an area which to

date, has been challenging for us to define

and measure as a business. We know that,

as a specialist regenerator and placemaker,

we have a lasting positive impact on the

communities we serve, supporting job

creation and delivering new infrastructure,

schools and other amenities, and a wealth

of green space to help people live healthier

lives. Our sustainability team is now

exploring how we can deliver even more for

our communities in areas such as promoting

healthier lifestyles, creating inclusive spaces

and holistic travel planning, and importantly,

how we can measure this to assess and

benchmark our progress.

Our people

Harworth’s ambition is to be an employer

of choice, providing an inspiring place

to work and attracting and retaining the

best talent. Critical to our success is the

engagement, wellbeing and diversity of our

people and our ‘One Harworth’ culture.

As our team continued to grow over the

year, we progressed many initiatives to

promote these attributes. We also saw a

record number of promotions across the

business, reflecting both our commitment to

recognise achievement and to ensure career

progression and development opportunities.

We made several new appointments to our

Group Leadership Committee during the

year, all of which were new roles that are

critical to support our growth strategy. This

included our Director of Strategy, Investment

& Business Development, Director of

Sustainability, Director of Group Resources

and Transformation and Head of Legal.

Alongside these appointments we have

also undertaken reviews of our workspaces,

working closely with our teams, to ensure

they are motivational and inspiring places

for our people and fully accommodate our

hybrid ways of working. This included the

expansion of our Leeds and Manchester

offices, and an ongoing project to enhance

our head office space.

Outlook

Following the rapid outward yield

movements of late 2022, some signs of

stability seem to be returning to the market

in the early months of 2023 as the speed of

interest rate rises and outward yield shifts

slows. Employment levels remain high and

the S&P Global/CIPS construction PMI

has reported that UK construction activity

is at levels above analysts' expectations.

That said, the war in Ukraine continues

and economies around the globe are

still responding to the energy and other

commodity shocks that this triggered

coming so shortly after a global pandemic.

At this early stage in the year we remain

cautious about the economic backdrop

for 2023. Uncertainty is likely to remain in

our markets until interest rates reach their

peak, and inflation falls back to manageable

levels, creating the conditions for growth

and improved investor confidence.

Harworth is a long-term through-the-cycle

business: you cannot ‘do regeneration’

quickly. Most of our sites will be in

development, planning or land assembly

through the next few years and into the

next decade. This means that, while we are

active through-the-cycle and modify our

short-term plans to reflect changes in

the market, we also look through these

near-term market conditions to where we

need to invest to create the future value and

returns that we can unlock from our sites.

What we do is important to the local

economies that we invest in and the

communities we create. Our focus markets

are drivers of economic growth and continue

to have robust fundamentals. Moreover,

in an economy in need of planning reform

that truly drives growth, there remains an

acute shortage of high-quality consented

land. We control our landbank, where

and when we invest, and have a highly

experienced management team who are

focused on execution. As we navigate the

business through the challenges of the wider

economic backdrop, we are confident that

our strategy is the right one to deliver

long-term value to stakeholders, while

meeting our NZC commitments, and our

strong financial position, differentiated

products, and the scale and mix of our

portfolio, position us well to realise the full

potential of our sites.

In concluding, I would like to say a huge

thank you to my colleagues across the

business, who have embraced the ambition

of our strategy and have worked extremely

hard to deliver another year of strong

progress. Our robust financial performance

and operational progress against a

challenging market backdrop is a testament

to their dedication, determination, skills,

and teamwork.

Lynda Shillaw

Chief Executive

13 March 2023

Harworth discloses both statutory and alternative

performance measures (‘APMs’). A full description

of, and reconciliation to, the APMs is set out in

Note 2 to the financial statements.

Strategic Report 25

Harworth Group plc: Annual Report and Financial Statements 2022

Operational review

Planning status

Consented 5.4m sq. ft

Awaiting determination

5.6m sq. ft

Pre-planning 26.5m sq. ft

Industrial & logistics

land portfolio

At 31 December 2022, the industrial &

logistics pipeline totalled 35.0m sq. ft

(31 December 2021: 28.2m sq. ft), of which

5.4m sq. ft was consented (31 December

2021: 7.3m sq. ft), and 5.6m sq. ft was in the

planning system awaiting determination (31

December 2021: 6.1m sq. ft). The pipeline

was 56% owned freehold, with the remaining

44% controlled via options or PPAs.

Acquisitions and land assembly

During the year, freehold acquisitions

and options added 8.5m sq. ft to the

pipeline. The majority of this related to two

significant option agreements:

• Site in North Yorkshire: a 316-acre site

adjacent to the A1 near Selby. Harworth

intends to promote the site for the

development of up to 3.0m sq. ft of

employment space as part of the Local

Plan of the soon-to-be-formed North

Yorkshire Council.

• Junction 15, Northamptonshire: a

168-acre site south of Junction 15 of the

M1 in Northamptonshire. Harworth will

work with local stakeholders to bring

forward plans for up to 1.6m sq. ft of

Grade A industrial & logistics space,

alongside unique landscaping features

and an ecological enhancement area.

Planning

At year-end, 5.6m sq. ft of space was in the

planning system awaiting determination.

Since year-end we have secured two

consents, the first for 206,000 sq. ft of

flexible employment space in Barnsley,

on the site of the former Houghton Main

Colliery, and the second for 72,000

sq. ft of space on a site adjacent to the

Bardon Hill development in Leicestershire.

Two significant planning applications

currently remain in the system awaiting

determination:

• Gascoigne Wood, North Yorkshire: this

185-acre former colliery site benefits

from an existing rail connection and

close proximity to the A1(M) and M62.

Revised plans have been submitted

for 1.5m sq. ft of rail-linked industrial &

logistics space at the site.

• Skelton Grange, Leeds, West Yorkshire:

formerly the location of Skelton Grange

Power Station, this 50-acre site was

acquired by Harworth in 2014 and is

adjacent to Junction 45 of the M1, to the

south-east of Leeds city centre. Plans

have been submitted for 800,000 sq.

ft of space across five units, in addition

to infrastructure upgrades, new cycle

ways and footpaths, and ecological

enhancements.

Direct development and placemaking

During the year, practical completion was

reached on two direct developments:

• AMP in Rotherham, South Yorkshire: a

100,000 sq. ft build-to-suit facility was

developed by Harworth for a sportswear

manufacturer, which has upsized from a

smaller unit elsewhere at the AMP.

• Bardon Hill, Leicestershire: a

development of 332,000 sq. ft of Grade

A logistics and manufacturing space

across five units, located just two miles

from Junction 22 of the M1, with 65%

of the space currently let or in heads

of terms. The site has achieved NZC in

construction status and incorporates

storm attenuation ponds, a 10-acre

wildlife centre and landscaping features

to enhance employee wellbeing.

After year-end, a further 110,000 sq. ft was

completed at Gateway 36 in Barnsley,

South Yorkshire, representing the start of

the second phase of that development.

Plans are in place to develop two additional

buildings as part of phase two, which will

be capable of delivering up to 600,000 sq.

ft of space. The units will be delivered to

Harworth’s sustainable commercial building

specification, targeting EPC A and BREEAM

Excellent, with whole life carbon assessments

incorporated into the design and renewable

energy provision included.

Direct development works totalling 93,000

sq. ft are currently underway at the AMP.

An additional 73,000 sq. ft to commence

later this year, which has been pre-let to

an occupier. During the year, the Group

received development management

revenue totalling £4.2m (2021: £2.5m)

from build-to-suit opportunities.

Land sales

Industrial & logistics land sales totalling

£57.0m were completed during the year,

at prices above or in line with 31 December

2021 valuations. The largest disposal

related to the sale of the Kellingley site in

North Yorkshire for £54.0m.

Ownership

56% Freehold/JVs

44% PPAs/options

Strategic Report26

Harworth Group plc: Annual Report and Financial Statements 2022

Residential land portfolio

As at 31 December 2022, the residential

pipeline had the potential to deliver

29,311 housing plots (31 December 2021:

30,804), of which 6,111 were consented

(31 December 2021: 9,978), and 1,890

across eight sites were in the planning

system awaiting determination (31

December 2021: 811). The pipeline was

51% owned freehold, with the remaining

49% subject to PPAs, options or overages.

Acquisitions and land assembly

During the year, a combination of freehold

acquisitions, options and PPAs added

2,643 residential plots to the pipeline.

The majority of this related to the freehold

acquisition of a 174-acre site in Huyton,

Merseyside, which represents a longer-term

opportunity to deliver up to 1,500 homes.

Plot sales

Completed residential land sales totalled

2,236 plots (2021: 1,411 plots), with

the significant increase from the prior

year mainly due to expediting sales to

take advantage of robust housebuilder

demand. Sales were either in line with, or

ahead of, book values, and the headline

sales price ranged from £28k to £105k per

serviced plot (2021: £30k to £73k).

Sales were completed with a range of

housebuilders, and included the Group’s

largest serviced land sale to date by

number of residential plots, representing

450 plots, and the first land parcel sale

at Benthall Grange, the site of the former

Ironbridge Power Station in Shropshire.

Both sales were made to Barratt and David

Wilson Homes.

A sale at the South East Coalville site

to Cadeby Homes represented the

Group’s first transaction with this regional

housebuilder, the 21st housebuilder with

which Harworth has transacted with since

the Group was formed.

The year also saw the completion of a

number of PPAs – arrangements whereby

Harworth receives a fee from a landowner

for securing a planning approval and

plot sale on their behalf – generating

£5.8m in fees.

Placemaking

As a master developer, Harworth prides

itself on investing in its residential sites to

provide enhanced infrastructure, amenities

and green spaces. This investment creates

a sense of community that improves the

wellbeing of residents and enhances the

attractiveness of these developments to

housebuilders and other partners.

Planning status

Ownership

51% Freehold/JVs

49% PPAs/options/

overages

Consented 6,111 plots

Awaiting determination

1,890 plots

Pre-planning 21,310 plots

Strategic Report 27

Harworth Group plc: Annual Report and Financial Statements 2022

During the year, several placemaking

initiatives were undertaken across the

portfolio:

• South East Coalville, Leicestershire: a

planning application was submitted for

a new 420-place 'Forest School', which

maximises opportunities for learning

both inside and outside the classroom,

and integrates several sustainability

features including solar PV panel

coverage and air source heat pumps.

Planning was also secured for a new

supermarket at the site, which will form

part of a proposed local centre.

• Waverley, South Yorkshire: construction

began on a new 150-bedroom hotel,

including a restaurant and gym facilities,

which will also be available to residents

on site. Planning permission has also

been granted for a new primary health

centre, in conjunction with the local

Clinical Commissioning Group, which

will have capacity for 6,000 patients.

• Moss Nook, Merseyside: construction

of a new spine road was completed at

the site, with segregated pedestrian

and cycle routes and landscaping

features. The new road provides a more

direct connection between the site and

the amenities of St Helens town centre,

and unlocks land for further residential

development.

Investment Portfolio

This portfolio comprises both industrial &

logistics assets that have been acquired

by Harworth and, increasingly, those

that have been directly developed and

retained. It provides recurring rental

income in addition to asset management

opportunities and the potential for capital

value growth.

As at 31 December 2022, the Investment

Portfolio comprised 19 sites covering

4.0m sq. ft (31 December 2021: 18 sites

covering 3.7m sq. ft). It generated £19.7m

of annualised rent (31 December 2021:

£18.0m), equating to a gross yield of 7.0%

(31 December 2021: 6.5%) and a net initial

yield of 6.2% (31 December 2021: 5.6%).

Annualised rent for the portfolio increased

during the year, driven by the addition of

new Grade A space to the portfolio and a

2.6% like-for-like increase in rents. Grade A

space represented 18% of the portfolio

(31 December 2021: 11%), which

increased to 20% with the completion of

units at Gateway 36 after year-end.

During the year, 622,000 sq. ft of leasing

deals were completed, adding £1.7m

of annualised rent. Lease renewals and

regears were completed at terms that

on average represented an 8% uplift to

previous passing rents, while new lettings

were completed on average at a 10%

premium to 31 December 2021 ERVs.

The portfolio had an average rent per

tenant of £6.43 per sq. ft at 31 December

2022 (31 December 2021: £6.32) and a

weighted average rent of £4.69 per sq. ft

(31 December 2021: £4.50).

Across the Investment Portfolio,

operational metrics remain robust.

Rent collection currently stands at 99% for

the year (2021: 99%). Vacancy was 8.3% at

year-end, reducing to 2.7% by excluding

the recently completed Bardon Hill site

(31 December 2021: 4.1%), while the

Weighted Average Unexpired Lease Term

(‘WAULT’) was 11.3 years (31 December

2021: 11.5 years).

Disposals

A key element of Harworth’s growth

strategy is to transition its Investment

Portfolio to modern Grade A. This will

be achieved by retaining more direct

development but also by disposing of

assets where value has been maximised

through asset management and

development initiatives.

After year-end, the Group completed the

sales of Moorland Gate Business Park,

Chorley, and Sinfin Business Park, Derby

for total consideration of £12.6m, broadly

in line with or ahead of December 2022

valuations.

Natural Resources portfolio

Harworth’s Natural Resources portfolio

comprises sites used by occupiers for a

wide range of energy production and

extraction purposes, including wind and

solar energy schemes, battery storage

and methane capture. As at 31 December

2022, it generated £2.1m of annualised

gross rent (31 December 2021: £4.1m),

with the reduction over the year mainly due

to the sale of the Meriden Quarry site in

Warwickshire for £11.6m.

During the year, a review of this portfolio

and the wider development portfolio took

place to determine how best to protect

and optimise value, while maximising

the role these assets can play in realising

the Group’s sustainability ambitions,

particularly with regards to meeting energy

demand, delivering biodiversity net gain,

and carbon offsetting.

The outcome has been to form an Energy

& Natural Capital strategy for the Group,

with the aim of developing, alongside

strategic partners where appropriate,

renewable energy generation solutions

and other sustainability initiatives such as

battery storage, solar, EV charging, multi-

fuel hubs and reforestation/rewilding on

Natural Resources assets. The strategy will

have a wider focus on embedding these

energy concepts and future-proofing

principles across all of Harworth’s sites to

maximise energy availability and resilience,

create economic value and help fulfil the

Group’s NZC ambitions.

Operational review continued

Strategic Report28

Harworth Group plc: Annual Report and Financial Statements 2022

Financial review

“ Our 2022 performance reflected good

progress against strategic objectives,

coupled with a strong operational

delivery.”

Kitty Patmore

Chief Financial Officer

Overview

Our primary metric, Total Return (the

movement in EPRA NDV* plus dividends

per share paid in the year expressed as

a percentage of opening EPRA NDV per

share), for 2022 was 0.1% (2021: 24.6%).

The Total Return was impacted significantly

by the worsening macro-economic

environment in the second half of the

year, higher interest rates and increased

investment yields applied to industrial &

logistic valuations at 31 December 2022.

Over the year, the yield shift was largely offset

by management actions such as progress

on development sites, completing direct

development, securing sales and asset

management initiatives in our Investment

Portfolio resulting in EPRA NDV remaining

broadly flat, declining by 0.6% during the

year to 196.5p per share (2021: 197.6p). Our

2022 performance reflected good progress

against strategic objectives, coupled with a

strong operational delivery. Alongside this,

the structural undersupply within our chosen

markets remains, and provides a good

foundation for the Group’s future growth.

Sales of serviced land and property, in

addition to income from rent, royalties and

fees, resulted in Group revenue of £166.7m

(2021: £109.9m). This increase included

the completion of the sale of the Group’s

Kellingley development site for £54.0m

cash consideration following the conditional

exchange during 2021, enabling the Group

to crystalise value created through the

regeneration of the former colliery site.

The acceleration of serviced land sales

allowed the Group to capitalise on the

strength of the residential market in the first

three-quarters of the year and sales continued

to complete up to December as our product

remained attractive to housebuilders. Rental

income collection has been consistently

strong and income has increased because

of management actions, including the

completion of direct development at Bardon

Hill, new lettings and rent reviews. The

£166.7m of revenue also included PPA and

development management revenue fees

totalling £10.0m (2021: £2.5m). Looking

forward, the sales profile is robust with 71.9%

of 2023 budgeted sales by value already

completed, exchanged or in heads of terms

(2021: 43.1%).

BNP Paribas and Savills, our independent

valuers, completed a full valuation of

our portfolio as at 31 December 2022,

resulting in full-year valuation losses* of

£15.0m (2021: gains of £148.0m), including

the movement in the market value of

development properties. These external

independent valuations reflect conditions in

the industrial & logistics market, offset by the

positive factors resulting from management

actions on our sites. Outside of the valuation

movements, profit on sales of £13.0m

(2021: £12.5m) were achieved reflecting

prices ahead of previous book values for

sales overall. This gave us total value losses

of £2.0m (2021: £160.5m gains).

The fair value of investment properties

decreased by £19.7m (2021: £84.0m

increase), which has fed through to an

underlying operating profit of £44.5m

(2021: £121.9m) and profit after tax of

£27.8m (2021: £94.0m).

Over the year, the net asset value grew to

£602.7m (31 December 2021: £578.0m).

With EPRA adjustments for development

property valuations included, EPRA

NDV

at 31 December 2022 reduced to

£633.8m (31 December 2021: £637.5m)

representing a per share decrease of 0.6%

to 196.5p (31 December 2021: 197.6p).

The Group has declared a final dividend

of 0.929p per share, bringing the total

dividend per share for 2022 to 1.333p,

representing 10% underlying growth from

2021, in line with our dividend policy.

During 2022, a new five-year £200m

RCF was agreed, together with a £40m

uncommitted accordion facility to support

the delivery of our growth strategy. At the

year-end, our drawings under the RCF were

low, reflecting cash conversion from sales

as well as rental and other income. Our

net loan to portfolio value at year-end was

6.6%. As a result of the low drawn level of

our variable rate borrowings, coupled with

the proportion of drawn debt under fixed

rate infrastructure loans, we currently do not

have interest rate hedging in place against

the RCF, although this will remain under

review.

Strategic Report 29

Harworth Group plc: Annual Report and Financial Statements 2022

Presentation of financial

information

As our property portfolio includes

development properties and joint venture

arrangements, Alternative Performance

Measures (‘APMs’) can provide valuable

insight into our business alongside

statutory measures. In particular,

revaluation gains on development

properties are not recognised in the

Consolidated Income Statement and the

Balance Sheet. The APMs outlined below

measure movements in development

property revaluations, overages and

joint ventures. We believe that these

APMs assist in providing stakeholders

with additional useful disclosure on the

underlying trends, performance and

position of the Group.

Our key APMs* are:

• Total Return: the movement in EPRA

NDV plus dividends per share paid in

the year expressed as a percentage of

opening EPRA NDV per share.

• EPRA NDV per share: EPRA NDV aims

to represent shareholder value under

an orderly sale of the business, where

deferred tax, financial instruments and

certain other adjustments are calculated

to the full extent of their liability net of

any resulting tax. EPRA NDV per share

is EPRA NDV divided by the number of

shares in issue at the end of the period

(less shares held by the Employee

Benefit Trust or Equiniti Share Plan

Trustees Limited to satisfy Restricted

Share Plan and Share Incentive Plan

awards.)

• Value gains: the realised profits from

the sales of properties and unrealised

profits from property valuation

movements including joint ventures,

and the mark-to-market movement on

development properties and overages.

• Net loan to portfolio value: Group

debt net of cash held expressed as a

percentage of portfolio value.

A full description of all non-statutory

measures and reconciliations between all

statutory and non-statutory measures are

provided in Note 2 to the consolidated

financial statements. Our financial

reporting is aligned to our business units

of Capital Growth and Income Generation

with items which are not directly allocated

to specific business activities, held centrally

and presented separately

Income Statement

2022 2021

Capital

Growth

£m

Income

Generation

£m

Central

Overheads

£m

Total

£m

Capital

Growth

£m

Income

Generation

£m

Central

Overheads

£m

Total

£m

Revenue 135.4 31.3 – 166.7 81.1 28.8 – 109.9

Cost of sales (74.4) (8.9) – (83.3) (53.1) (8.1) – (61.4)

Gross profit 61.0 22.4 – 83.4 28.0 20.7 – 48.7

Administrative expenses (4.1) (1.9) (16.1) (22.1) (3.4) (2.1) (13.7) (19.2)

Other gains/(losses) 17.8 (34.5) – (16.8) 57.5 35.0 – 92.5

Other operating expense – – (0.1) (0.1) – – (0.1) (0.1)

Operating profit/(loss) 74.7 (14.0) (16.2) 44.5 82.2 53.5 (13.8) 121.9

Share of (loss)/profit of JVs (4.3) (3.2) – (7.5) 4.5 4.7 – 9.2

Net interest credit/

(expense) 0.1 – (6.2) (6.1) 0.2 – (4.1) (3.9)

Profit/(loss) before tax 70.4 (17.2) (22.4) 30.9 86.9 58.2 (17.9) 127.2

Tax charge – – (3.0) (3.0) – – (33.3) (33.2)

Profit/(loss) after tax 70.4 (17.2) (25.4) 27.8 86.9 58.2 (51.1) 94.0

Note: There are minor differences on some totals due to roundings.

Revenue in the year was £166.7m (2021:

£109.9m), of which Capital Growth

contributed £135.4m (2021: £81.1m) and

Income Generation contributed £31.3m

(2021: £28.8m).

Capital Growth revenue, which primarily

relates to the sale of development

properties, increased due to the

completion of the sale of the Kellingley

development site for £54.0m as well

as the acceleration of residential land

sales, including our largest sale to date at

Waverley. Capital Growth revenue

also includes fees from PPAs and

build-to-suit development revenue

together totalling £10.0m (2021: £2.5m),

including in respect of the construction

of a new 100,000 sq. ft facility at the AMP

following the associated 2021 land sale.

Revenue from Income Generation (the

Investment Portfolio, Natural Resources

and Agricultural Land) mainly comprises

property rental and royalty income.

Revenue of £31.3m (2021: £28.8m) was

higher than last year and included the

impact of new lettings related to direct

development agreed during the year as

well as asset management initiatives and

increased royalties from energy assets.

Rental income from the Investment

Portfolio increased on an annualised

basis from £18.0m to £19.7m in 2022

following new lettings, re-gears and

Financial review continued

Strategic Report30

Harworth Group plc: Annual Report and Financial Statements 2022

the practical completion of our Bardon

Hill development, with like-for-like rent

growing by 2.6%.

Cost of sales comprises the inventory

cost of development property sales,

costs incurred in undertaking build-to-suit

development and both the direct and

recoverable service charge costs of the

Income Generation business. Cost of sales

increased to £83.3m (2021: £61.2m), of

which £67.7m related to the inventory

cost of development property sales (2021:

£55.1m) and included additional costs

related to build-to-suit development not

incurred in the previous year. In the year,

we saw a decrease in the net realisable

value provision on development properties

of £2.4m (2021: £5.2m decrease)

following the valuation process as at 31

December 2022.

Administrative expenses increased in the

year by £2.9m (2021: £4.7m increase).

This was due to higher salary expenses,

resulting from increased employee

numbers as we right sized the resources of

the Group over 2021 and 2022 to deliver

on our strategy. Growth in employee

numbers is expected to slow from 2023

onwards. Administrative expenses

expressed as a percentage of revenue

decreased from 17% in 2021 to 13% in

2022 reflecting the continued acceleration

in activity relating to sales of development

property as well as successful completion

of managed direct development projects

generating fees and PPAs.

Other losses comprised a £19.9m

combined net decrease (2021: £85.0m

net increase) in the fair value of investment

properties and assets held for sale (‘AHFS’)

less the profit on sale of investment

properties, AHFS and overages of £3.2m

(2021: £7.4m).

Joint venture losses of £7.5m (2021: £9.2m

profit) were largely the result of a decrease

in the property valuations at Multiply

Logistics North and Aire Valley Land, both

of which were impacted by the industrial

& logistics market movements. Value

gains/(losses) on a non-statutory basis are

outlined below.

Non-statutory value

gains/(losses)*

Value gains/(losses) are made up of profit

on sale, revaluation gains/(losses) on

investment properties (including joint

ventures), and revaluation gains/(losses)

on development properties, AHFS and

overages. A reconciliation between

statutory and non-statutory value gains

can be found in Note 2 to the financial

statements.

£m 2022 2021 2022 2021

Category

Profit

on sale

Revaluation

gains/

(losses) Total

Profit

on sale

Revaluation

gains/

(losses) Total

Total

valuation

Total

valuation

Capital Growth

Residential Major

Developments Development 11.6 2.2 13.8 5.6 19.5 25.1 228.1 184.5

Industrial &

logistics Major

Developments Mixed (2.0) (3.4) (5.4) 1.0 59.9 60.9 68.2 123.7

Residential

Strategic

Land Investment 0.4 39.8 40.2 0.5 6.2 6.7 51.4 53.0

Industrial

& logistics

Strategic Land Investment (0.2) (12.7) (12.9) 0.6 28.2 28.8 82.2 91

Income

Generation

Investment

Portfolio Investment – (41.0) (41.0) 0.1 36.2 36.3 280.9 277.5

Natural

Resources Investment 3.2 (0.2) 3.0 3.5 (1.9) 1.6 20.3 30.6

Agricultural

Land Investment – 0.3 0.3 1.2 (0.1) 1.1 5.7 5.4

Total 13.0 (15.0) (2.0) 12.5 148.0 160.5 736.8 765.7

Notes: A full description and reconciliation of the APMs in the above table is included in Note 2 to the consolidated financial statements. There are some minor differences

on some totals due to roundings. Profit/(loss) on sale includes the impact of transaction fees incurred.

Strategic Report 31

Harworth Group plc: Annual Report and Financial Statements 2022

Profit on sale of £13.0m (2021: £12.5m) reflected the completion of sales above book value. Revaluation losses were £15.0m

(2021: £148.0m gains) and are outlined in the table below.

2022

£m

2021

£m

(Decrease)/increase in fair value of investment properties (19.7) 84.0

(Decrease)/increase in value of assets held for sale (0.2) 1.1

Movement in net realisable value provision on development properties (2.0) 2.8

Contribution to statutory operating profit (22.0) 87.9

Share of (loss)/profit of joint ventures (7.5) 9.2

Unrealised gains on development properties and overages

14.5 50.9

Total non-statutory revaluation (losses)/gains (15.0) 148.0

Note: There are minor differences on some totals due to roundings.

The principal revaluation gains and losses

across the divisions reflected the following:

Industrial & logistics

• The industrial & logistics market had

a record breaking first half of the year

giving way to a much weaker second

half. In particular, rising interest rates,

a tighter lending environment and

general economic uncertainty resulted

in CBRE reporting that market-wide

investment yields moved out by 175bps

from June 2022 to December 2022

and 150bps over the 12 months of

2022 across both prime and secondary

industrial & logistics properties.

Occupier demand remained resilient

and rents across the sector increased.

• These market dynamics affected

our industrial & logistics Major

Development sites, Strategic Land

sites and the Investment Portfolio.

For development sites, costs of

construction also increased over

the year.

• In Major Developments, gains relating

to the sale of the Kellingley site, and on

completing the direct development

at Bardon Hill, development progress

across sites, securing grant funding

at Chatterley Valley and increased

estimated rental value largely offset the

downwards movement in valuations

caused by increased yields.

• Strategic Land valuations, where the site

is close to delivery, for example in the

planning pipeline, were more affected

by the market movements than longer-

term strategic sites, although valuation

downwards movements were reduced

by progress in planning made during

the year.

• The Investment Portfolio property

yields moved in line with the market

but our management actions securing

new leases, renewals and rent reviews

resulted in the net initial yield moving

only 60bps to 6.2% from 5.6% as at

31 December 2021.

Residential

• The residential market saw house prices

fall during the final months of the year

and the supply of new homes for sale

reaching its highest level in December

2022 since May 2021.

• Residential land sales on our Major

Development sites continued to

demonstrate the demand for our

serviced land product and underpin

valuations.

• In particular, the first sale at Benthall

Grange, our Ironbridge site, set the

pricing point for this development

and delivered a valuation gain. This

site was categorised as Strategic Land

during 2022 until transferred to Major

Developments during the second half

of the year.

Natural Resources

• Valuations remained broadly consistent

with minor valuation decline in the

waste and recycling portfolio.

Agricultural Land

• We experienced a small valuation

increase as a result of improving

agricultural land prices.

The net realisable value provision

on development properties as at 31

December 2022 was £9.8m (31 December

2021: £12.2m). This provision is held

to reduce the value of six development

properties from their deemed cost (the

fair value at which they were transferred

from an investment to a development

categorisation) to their net realisable value

at 31 December 2022. The transfer from

Investment to Development Property

takes place once planning is secured

and development with a view to sale has

commenced.

Cash and sales

The Group made property sales* in the year

of £138.5m (2021: £108.3m), achieving

a total profit on sale of £13.0m (2021:

£12.5m). Sales comprised residential plot

sales of £69.5m (2021: £64.9m), industrial

& logistics land sales of £57.0m (2021:

£18.1m) and sales of other, mainly mature,

income-generating sites and agricultural

land, of £12.0m (2021: £25.3m).

Financial review continued

Strategic Report32

Harworth Group plc: Annual Report and Financial Statements 2022

Cash proceeds from sales in the year were £131.2m (2021: £114.5m) as shown in the table below:

2022

£m

2021

£m

Total property sales

138.5 108.3

Less deferred consideration on sales in the year (28.5) (27.4)

Add receipt of deferred consideration from sales in prior years 21.2 33.6

Total cash proceeds 131.2 114.5

A full description and reconciliation of APMs is included in Note 2 to the condensed consolidated financial statements.

Tax

The income statement charge for taxation

for the year was £3.0m (2021: £33.2m),

which comprised a current year tax charge

of £21.8m (2021: £6.4m charge) and

a deferred tax credit of £18.7m (2021:

£26.8m charge).

The current tax charge resulted primarily

from profits from the sale of development

properties, investment property, AHFS,

profit on the rental of investment property,

royalties and other fees after taking into

account overheads and interest costs. The

decrease in deferred tax largely relates to

unrealised losses on investment properties.

The deferred tax balance has been

calculated based on the rate expected to

apply on the date the liability is reversed.

At 31 December 2022, the Group had

deferred tax liabilities of £25.9m

(31 December 2021: £46.9m) and

deferred tax assets of £1.8m (31 December

2021: £4.3m). The net deferred tax liability

was £24.1m (31 December 2021: £42.6m).

Basic earnings per

share and dividends

Basic earnings per share for the year

decreased to 8.6p (2021: 29.1p) reflecting

the small overall movement in the valuation

of the land and property portfolio in 2022,

compared to a significant valuation gain in

2021.

In addition to the interim dividend of

0.404p, the Board has determined that

it is appropriate for a final dividend of

0.929p (2021: 0.845p) per share to be

paid, bringing the total dividend for the

year to 1.333p (2021: 1.212p) per share.

The recommended 2022 final dividend

and 2022 total dividend represent a 10%

increase in line with our dividend policy.

Property categorisation

Until sites receive planning permission and

their future use has been determined, our

view is that the land is held for a currently

undetermined future use and should,

therefore, be held as investment property.

We categorise properties and land that

have received planning permission, and

where development with a view to sale has

commenced, as development properties.

As at 31 December 2022, the balance sheet

value of all our development properties

was £205.0m (2021: £172.7m) and their

independent valuation by BNP Paribas was

£238.8m, reflecting a £33.9m cumulative

uplift in value since they were classified as

development properties. In order to highlight

the market value of development properties,

and overages, and to be consistent with

how we state our investment properties,

we use EPRA NDV, which includes the

market value of development properties and

overages less notional deferred tax, as our

primary net assets metric.

Net asset value

31 Dec

2022

£m

31 Dec

2021

£m

Properties

695.4 689.8

Cash 11.6 12.0

Trade and other receivables 60.7 55.1

Other assets 11.8 5.3

Total assets 779.5 762.2

Gross borrowings (60.0) (37.8)

Deferred tax liability (24.1) (42.6)

Derivative financial instruments – 0.2

Other liabilities (92.7) (103.6)

Statutory net assets 602.7 578.0

Mark to market value adjustment on development properties and overages less notional deferred tax

31.2 59.5

EPRA NDV

633.8 637.5

Number of shares in issue less Employee Benefit Trust & Equiniti Share Plan Trustees Limited-held shares 322,612,685 322,539,284

EPRA NDV per share

196.5p 197.6p

Properties include investment properties, development properties, AHFS, occupied properties and investment in joint ventures.

A full description and reconciliation of the APMs in the above table is included in Note 2 to the consolidated financial statements.

Strategic Report 33

Harworth Group plc: Annual Report and Financial Statements 2022

EPRA NDV at 31 December 2022

was £633.8m (31 December 2021:

£637.5m), which includes the mark to

market adjustment on the value of the

development properties and overages.

The total portfolio value as at 31 December

2022 was £736.8m, a decrease of £28.9m

from 31 December 2021 (£765.7m). The

Group’s share of loss from joint ventures

of £7.5m (2021: £9.2m profit) resulted in

investments in joint ventures decreasing

to £29.8m (31 December 2021: £36.1m).

Trade and other receivables include

deferred consideration on sales as set

out previously. At 31 December 2022,

deferred consideration of £34.6m

(31 December 2021: £27.4m) was

outstanding, of which 91% is due within

one year.

The table below sets out our top ten

sites by value, which represent 47% of

our total portfolio, showing the total

acres for each site and split according

to their categorisation, including

currently consented residential plots and

commercial space:

Financial review continued

Site Site type

Categorisation in

balance sheet Region Progress to date

South East Coalville Major Development Development Midlands 2,016 residential units consented, land sold

representing 771 units

Benthall Grange,

Ironbridge

Major Development Investment Midlands 1,000 residential units consented, land sold

representing 110 units

Bardon Hill Investment Portfolio Investment Midlands Units completed, with 65% of site let or in

heads of terms

Nufarm Investment Portfolio Investment Yorkshire &

Central

n/a

Ansty

Strategic Land Investment Midlands Proposed industrial & logistics site,

planning not yet submitted

AMP Investment Portfolio Investment Yorkshire &

Central

n/a

Waverley Major Development Development Yorkshire &

Central

3,038 residential units consented, land

sold representing 2,442 units

Preston Investment Portfolio Investment North West n/a

Thoresby Vale Major Development Development Yorkshire &

Central

800 residential units consented, land sold

representing 362 units

Knowsley Investment Portfolio Investment North West n/a

Contracts have been conditionally exchanged for the sale of the site.

Strategic Report34

Harworth Group plc: Annual Report and Financial Statements 2022

Finance strategy

Harworth’s financing strategy remains to be

prudently geared. The Income Generation

portfolio provides a recurring income

source to service debt facilities and this is

supplemented by proceeds from sales. The

Group has an established sales track record

that has been built up since re-listing in 2015,

with 2022 providing further growth in sales.

To deliver its strategic plan, the Group has

adopted a target net loan to portfolio value*

at year-end of below 20%, with a maximum

of 25% in-year. As a principle, the Group will

seek to maintain its cash flows in balance

by funding the majority of infrastructure

expenditure through disposal proceeds,

while allowing for growth in the portfolio.

The Group intends to continue to enter

into development and infrastructure loans

alongside its RCF to support its growth

strategy.

Debt facilities

An RCF with NatWest and Santander

had been in place since 2015. During the

first half of 2022, we entered into a new

five-year £200m RCF, together with a £40m

uncommitted accordion option, which

replaced the original RCF. NatWest and

Santander continue to support us in the

new RCF and we welcomed HSBC to our

banking group. The new RCF is aligned

to the Group’s strategy and provides

significant additional liquidity and flexibility

to enable us to pursue our strategic

objectives. The interest rate of the new RCF

is on a loan-to-value ratchet mechanism with

a margin payable above SONIA in the range

of 2.25% to 2.50%. There are now no major

refinancing requirements until 2027.

As part of its funding structure, the Group

also uses infrastructure financing provided

by public bodies and site-specific direct

development loans to promote the

development of major sites and bring

forward the development of logistics units.

The Group had borrowings and loans of

£60.0m at 31 December 2022 (2021:

£37.8m), being the RCF drawn balance

(net of capitalised loan fees) of £34.6m

(2021: £33.3m) and infrastructure or direct

development loans (net of capitalised loan

fees) of £25.4m (2021: £4.5m). The Group's

cash balances at 31 December 2022 were

£11.6m (2021: £12.0m). The resulting net

debt was £48.4m (2021: £25.7m).

Net debt* increased with property

expenditure and acquisitions offset by the

completion of serviced land and property

sales. The movements in net debt over the

year are shown below:

2022

£m

2021

£m

Opening net debt as at 1 January (25.7) (71.2)

Cash inflow from operations 58.9 57.0

Property expenditure and acquisitions (66.6) (41.0)

Disposal of investment property, AHFS and overages 14.2 44.5

Investments in joint ventures (1.2) (1.6)

Interest and loan arrangement fees (6.0) (4.6)

Dividends paid (4.0) (5.9)

Tax paid (17.7) (3.6)

Other cash and non-cash movements (0.3) 0.7

Closing net debt as at 31 December

(48.4) (25.7)

The weighted average cost of debt, using

an end of month average 2022 balance

and 31 December 2022 rates, was 5.52%

with a 0.9% non-utilisation fee on undrawn

RCF amounts (2021: 2.90% with a 0.9%

non-utilisation fee). The weighted average

term of drawn debt is now 3.2 years

(31 December 2021: 2.2 years).

The Group’s hedging strategy to manage

its exposure to interest rate risk is to hedge

the lower of around half its average debt

during the year or its net debt

balance

at year-end. At 31 December 2022, 34%

of the Group’s drawn debt, reflecting

44% of net debt, was subject to fixed rate

interest rates with no hedging instruments

in place on the remaining floating rate

debt. Projected drawn debt and hedging

requirements remain under active review

with any new hedging to be aligned to

future net debt requirements.

As at 31 December 2022, the Group’s

gross loan to portfolio value was 8.1%

(31 December 2021: 4.9%) and its net loan

to portfolio value was 6.6% (31 December

2021: 3.4%). If gearing is assessed against

the value of the core income portfolio (the

Investment Portfolio and Natural Resources

portfolio) only, this equates to a gross loan

to core income portfolio value of 26.1%

(31 December 2021: 13.0%) and a net loan

to core income portfolio value of 21.0%

(31 December 2021: 8.9%). Under the RCF,

the Group could withstand a material fall

in portfolio value, property sales or rental

income before reaching covenant levels.

At 31 December 2022, undrawn capacity

under the RCF was £164.0m (31 December

2021: £116.0m). Going forwards the RCF,

alongside selected use of infrastructure

loans where appropriate, will continue to

provide the Group with sufficient liquidity

to execute our growth strategy.

Kitty Patmore

Chief Financial Officer

13 March 2023

* Harworth discloses both statutory and alternative performance measures (‘APMs’). A full description and reconciliation to the APMs is set out in Note 2 to the financial statements.

Strategic Report 35

Harworth Group plc: Annual Report and Financial Statements 2022

Long-term viability statement

Viability period and rationale

The Directors have assessed the prospects

of the Group and its principal risks over a

longer period than the period required

by the Going Concern Statement (see the

Statement of Directors’ Responsibilities on

pages 138 to 139.

The Board conducted a review for a period

of five years ending 31 December 2027.

This period was selected for the following

reasons:

• the Group’s strategic plan covers a

five-year period;

• for a major scheme five years is a

reasonable approximation of the

time taken from obtaining planning

permission and remediating the site to

letting property on and/or developing

material parts of the site; and

• most leases contain a five-year rent

review pattern and, therefore, five

years allows for forecasts to include the

reversion arising from such reviews.

The final two years of the period are,

by their nature, less certain and are less

detailed in their projections.

Resilience of business model

The Group’s strategy focuses on continued

growth through increasing direct

development of industrial & logistics

buildings, accelerating land and property

sales, broadening the range of residential

products, growing our Strategic Land

portfolio, and repositioning our Investment

Portfolio to modern Grade A. When

repositioned, the Investment Portfolio will

continue to provide a diversified portfolio of

income-producing assets for the Group to

support coverage of operating and financing

costs. This enables the Group to create value

in modern industrial & logistics buildings,

while supporting the transition to NZC. Major

development sites could be active with

phases of development combining to be

15 years or more and plans for sites can be

adapted to the market conditions at the time.

Projections have been prepared in the

context of the Group’s Strategy and its

principal income streams, which are:

• sales of residential and commercial

serviced land, for which there are plans

reaching out to 2027;

• rental income from income-producing

industrial properties which, at 31

December 2022, had a vacancy rate

of 8.3% at year-end, reduced to 2.7%

by excluding the recently completed

Bardon Hill site, a WAULT of 11.3 years

and a rent collection of 98%; and

• development and investment

management, planning promotion and

investment fees.

This balance in the portfolio means that

regular income from the income-producing

portfolio with low vacancy rates will

help to support cost coverage. The

income-producing properties within the

industrial and natural resources sectors

have a diverse range of tenants. The land

and property portfolio is spread across all

stages of our business model, which gives

the opportunity, if required, to advance

sites at an earlier stage (master-planning

and planning promotion). While the market

has been impacted by increased interest

rates and greater economic uncertainty

over the second half of 2022, the residential

market has a fundamental insufficient supply

of housing and sales to housebuilders

remained robust during 2022. Having teams

in Yorkshire, the Midlands and North-West

balances the exposure to any one region.

Net debt at year-end of £48.4m represented

a 6.6% net loan to portfolio value. The

Group entered into a new £200m five-year

RCF during 2022, adding HSBC to the

Group’s main lenders alongside Natwest

and Santander; this facility provides greater

firepower and flexibility with which to

execute on the Group’s strategy.

Principal risks

and uncertainties

Reporting on the Group’s viability requires

the Directors to consider those principal

risks that could impair the solvency and

liquidity of the Group. Over the last 12

months, the Board has kept the Group’s

principal risks under regular review and

updated them to reflect the greater

economic uncertainty as well as the

strategic progress of the Group. Of the

principal risks and uncertainties, those

that the Board considers could impair

solvency and liquidity relate to economic

assumptions, income generation variability

and appropriate staffing levels. Principally,

these fall within the Markets, Project

Delivery, Finance, Sustainability and People

sub-categories of risks identified in the

Effectively managing our risks section of

this Report on pages 45 to 53.

Assessment of long-term

prospects and sensitivities

applied

The five-year strategic plan focuses on

the expected growth of the business

primarily in terms of EPRA NDV and Total

Return including dividends. The strategic

plan review also considers the Group’s

valuations, recurring income, cash flows,

covenant compliance, financing headroom

and other key financial ratios over the

period. These metrics are subject to

sensitivity analysis, which involves flexing

the main assumptions underlying the

forecasts both individually and in unison.

The key risks and the scenarios considered

as part of the sensitivity analysis are set

out on the following page. Throughout

the strategic plan, the Group expects to

continue to transform land and property

into sustainable places where people

want to live and work. Whilst under the

sensitivity analysis, EPRA NDV growth plus

dividend could be impacted temporarily,

the long-term business model is expected

to continue to deliver the Group’s Purpose

in a sustainable manner.

Strategic Report36

Harworth Group plc: Annual Report and Financial Statements 2022

Risk Scenario Mitigation and further analysis

Markets:

Residential

and

commercial

markets

• Further downturn in industrial & logistics and/

or residential market conditions could lead to a

fall in property values or reduced sales.

• Notwithstanding strong rent collection

throughout the last two years, an economic

downturn could impact on some tenants’

ability to pay rent and lead to loss of rent or

restructuring of rental payments.

• As a result, expenditure on new land and

property acquisitions could be restricted.

• The portfolio provides a spread of sites across the Company's

three core regions and properties are diversified across the

residential and industrial sectors, both of which have strong

underlying demand fundamentals. These help to mitigate the

impact of market movements.

• Pursuant to our strategy we are working to mitigate a potential

downturn by introducing new products at our residential

sites, repositioning our Investment Portfolio to modern Grade

A and aligning the speed of our direct development to market

conditions, de-risking development through obtaining pre-let

or forward funding agreements.

• The Group works closely with tenants in the Investment

Portfolio on payment terms that support both parties to

enable the Group to continue to actively manage rent

collection.

• Development expenditure can be reduced and rephased to

match more closely market demand and conserve cash.

Finance:

Availability of

appropriate

capital

• A market downturn reducing sales volumes

would lower income.

• Short-term downward valuation movement

and lower income receipts could be

experienced, which would reduce headroom

under the financial covenants in the RCF.

• Higher interest rates would reduce headroom

in interest cover covenants.

• Inability to access appropriate equity and/or

debt funding to support the strategy.

• At year-end, the Group had low gearing, good liquidity

with debt headroom and cash resources providing sufficient

financial flexibility to continue to operate across its sites.

Headroom on financial covenants is projected throughout the

five-year period.

• The RCF agreed in 2022 included a £50m increase to

£200m. There are now no major refinancing deadlines ahead

of when the RCF expires in 2027.

• The RCF is supplemented by accessing project specific

funding where relevant. We continue to pursue and unlock

grant funding.

• The Group continues to actively review the risk of interest rate

increases, projected drawn debt and hedging requirements,

with 44% of the net debt balance at 31 December 2022

subject to fixed interest rates. The Group’s hedging strategy is

to hedge the lower of around half its average debt during the

year or its net debt balance at year-end.

• Reduced activity on sites as set out above would reduce

development expenditure and conserve cash resources.

Strategic Report 37

Harworth Group plc: Annual Report and Financial Statements 2022

Long-term viability statement continued

Risk Scenario Mitigation and further analysis

Sustainability:

Managing

climate

change

transition

• Failure to manage transitional risks associated

with climate change covering both operational

activity and reporting.

• Impact of climate change on our sites, slowing

development programmes and reducing sales.

• Risks associated with the development of our Sustainability

Framework and NZC pathway are overseen by our ESG Board

Committee (see pages 113 to 114).

• A new Non-Executive Director with a strong background in

sustainability has been appointed to the Board

• All buildings delivered in 2022 were NZC in operation ready,

mitigating future Scope 3 emissions.

• Development of an Energy and Natural Capital strategy,

which includes opportunities for carbon sequestration,

bio-diversity net gain, carbon trading and use of renewable

energy.

• Continued transition of our Investment Portfolio towards

modern Grade A.

• We have undertaken initial high level scenario modelling

covering NZC pathway and transition risks.

Other risks

including

project

delivery and

organisational

development

and design

• Planning promotion risk including uncertainty

around local and national changes to planning

regime with potential for adverse effect on

promotion activity, progress on sites and EPRA

NDV growth.

• Supply chain pricing pressures and constraints

resulting in development cost increases and

delays and/or default by and/or insolvency of

counterparties.

• Legislative reforms, which have the effect of

levying an additional cost on development.

• Insufficient and/or inappropriate resources,

resulting in increased staff costs or reduced.

• Strong relationships with local planning authorities and key

local stakeholders, supplemented by local political advisers

where appropriate.

• The potential impact of planning reforms is modelled in

project appraisals ahead of acquisition.

• We undertake rigorous tender processes and utilise market

intelligence regarding contractors’ commitments and

workload.

• Our central technical team monitors contractor

“concentration risk” and promotes consistencies and

knowledge-sharing across our portfolio.

• There are high levels of employee satisfaction within the

business as reported on page 21.

Viability assessment

Based on the results of this analysis and having considered the established controls and available mitigation actions for principal risks and

uncertainties, the Directors have a reasonable expectation that the Company and the Group will be able to continue in operation and

meet their liabilities as they fall due over the period of their assessment.

Strategic Report38

Harworth Group plc: Annual Report and Financial Statements 2022

Section 172 statement

In this section, we identify our key stakeholders and explain how we have

engaged with them and had regard to their interests when making strategic

and significant operational decisions during 2022.

Whilst the Board recognises its statutory

obligation to do so under s.172(1) of the

Companies Act 2006, its engagement and

collaboration with stakeholders are not

merely a matter of statutory compliance:

doing so effectively is key to delivering

against our Purpose and our commercial

success.

As we are constantly interacting with

a wide range of stakeholders, the

appraisal of stakeholder impact has

been embedded into Board project

appraisals via our Underwriting Approval

process. Our Underwriting Proposal

templates presented to the Board focus

discussion on:

• how each project supports the delivery

of our Purpose and aligns with our

strategy, including review of financial

performance metrics;

• the environmental and societal impact

of each project in the context of the key

pillars of the Harworth Way – Planet,

Communities and People;

• the impact of each project on our

external stakeholder groups including a

review of risks and opportunities;

• market commentary; and

• resourcing for each project.

The Board's regard to these matters in

its discussions and decision making is

fundamental to Harworth achieving its

Purpose of creating sustainable places

where people want to live and work.

Further detail on how the Board has had

regard to the interests of stakeholders is in

the Statement of Corporate Governance

on pages 87 to 88 and pages 90 to 91.

Our People

Why we engage How we engage

The people at Harworth are key to the current and

future success of the Company. It is their skills,

experience and hard work that allow us to create

high-quality, sustainable places where people want to

live and work.

The Board engages with staff directly through various formats, including

employee lunches, site visits, regional team dinners, office visits and the

Employee AGM. The Board also reviews employee engagement across the

business and receives feedback from the Chief Executive on people matters

at each Board meeting. See more on page 90.

Their key interests How do we respond? Examples of actions taken in 2022

• To work on market-leading projects with pride and

enjoyment.

• To work in, and contribute to, an innovative,

collaborative and diverse culture.

• To be supported in their career and personal

development, appropriately rewarded and

recognised for their contribution.

• A sustainable work-life balance.

• To feel valued and have their views heard and taken

into account in decision making.

We are committed to making Harworth an employer of choice.

Our people strategy, which supports our business strategy, is subject to

constant review, particularly as the business grows quickly. During the

year we appointed a Group Resources and Transformation Director who

continues to evolve the people strategy, and has developed a 'People and

Enabling Strategy' ready for deployment from 2023.

We extended the application of our employee share plans to facilitate share

ownership throughout the workforce allowing employees to share in the

future success of Harworth.

To provide some support during the 'cost-of-living crisis', we made a

one-off non-contractual payment to all employees (excluding the Executive

team) in December 2022. We have also introduced a Financial Wellbeing

Programme, which is offered to all colleagues on an optional basis, offering

online/in-person seminars to assist understanding of everyday as well as

more complex financial matters.

We have progressive maternity, adoption and paternity leave and pay

policies, and a range of wellbeing initiatives, which we enhanced during the

year with a new menopause policy.

Strategic Report 39

Harworth Group plc: Annual Report and Financial Statements 2022

Investors

Why we engage How we engage

To explain our performance and strategy to, and

understand the views of, existing and prospective

shareholders. Without the long-term support of our

shareholders, our business and the delivery of our Purpose

are not sustainable.

We provide business updates regularly via trading statements and

regulatory releases on key transactions.

Management meets regularly with existing and prospective investors.

The Chair also meets regularly with our largest shareholders.

Two of our Non-Executive Directors, Martyn Bowes and Steven

Underwood, are conduits for engagement with two of our largest

shareholders.

Their key interests How do we respond? Examples of actions taken in 2022

• Long-term and sustainable returns.

• A business that considers and delivers a positive

environmental and societal impact, with the support of

an effective governance framework.

In response to feedback from existing and prospective investors, we have

further enhanced our financial and operational disclosures.

We hosted investors on several site visits and at a Capital Markets Day

during 2022. Our Chief Executive and Chief Financial Officer also held

their first live presentation via the Investor Meet Company platform.

We engaged with, and took account of the views of, our largest

shareholders when formulating our revised Remuneration Policy.

Communities

Why we engage How we engage

By creating places where people want to live and work,

we create thriving communities and make a positive and

sustainable contribution to local areas.

Consultation and collaborative working with the local communities where

we are transforming sites are fundamental components of a successful

project. These include: integrating principles and measures into our

masterplans, which align with the Harworth Way and our Sustainability

Framework; early and ongoing engagement with the public on

masterplans and all planning applications; liaison with key community

groups as developments mature; and careful management of the shared

public open space on our sites often in collaboration with local residents.

Their key interests How do we respond? Examples of actions taken in 2022

The creation of sustainable places where people want to

live and work. Each site is unique but key interests for those

living and working on our sites typically include: housing or

places of work with a high design specification; supporting

infrastructure, which has been carefully designed, delivered

and “future proofed”; skilled employment; thoughtfully

constructed blue and green spaces, which have a positive

ecological impact and promote wellbeing; education

provision; and comprehensive local amenities.

Consideration of the placemaking proposals for, and the impact on local

communities of, each project are key components of our appraisals.

• When reviewing a significant acquisition opportunity during the year, a

substantial proportion of the Board’s appraisal focused on the impact

of the proposed development on local heritage assets. The Board was

keen to understand how those assets would be preserved and opened

up to the public and how the views of the local community would be

sought and incorporated into the masterplan.

• At Bardon Hill, we completed the direct development of 332,000

sq. ft of Grade A industrial & logistics space, which achieved NZC in

construction status.

• At Waverley, construction began on a new 150-bedroom hotel, and

planning permission has been granted for a new medical centre. These

will be important community assets for residents and visitors to Waverley.

Section 172 statement continued

Strategic Report40

Harworth Group plc: Annual Report and Financial Statements 2022

Customers

Why we engage How we engage

As a master developer, we want to ensure there is

long-term demand for our developments. Our principal

customers are housebuilders, commercial developers and

occupiers.

Engagement with housebuilders and commercial developers is

predominantly transactional, although we maintain regular contact outside

deal cycles to understand their needs and appetite for more land and

development opportunities. We engage proactively with commercial

occupiers to identify pre-let demands.

Typically, day-to-day engagement with our existing tenants is via our

managing agents who help identify where direct involvement and

engagement from our investment team are needed.

Their key interests How do we respond? Examples of actions taken in 2022

A collaborative and reciprocal relationship with Harworth

in which they trust us to deliver a high-quality, sustainable

product on time, and, for our tenants, a longer-term

relationship in which they are treated fairly and their

operational needs are understood and met.

By repositioning our Investment Portfolio to modern Grade A, we are

providing our occupiers with a high-quality product.

To support our sustainability aspirations, we have started working with

some tenants directly, and others via our managing agents, to understand

and identify the carbon emissions from their premises. In addition, all new

tenants in 2022 were offered green leases.

During this period of economic uncertainty, we continue to engage

closely with our occupiers to ensure that payment terms support both

parties.

Suppliers

Why we engage How we engage

The successful and timely delivery of our sites depends on

strong relationships with suppliers who are professional,

trusted and share our values. Understanding their levels of,

and approach to reducing, carbon emissions also supports

the development of our own journey to NZC.

We apply a consistent “take-on” approval process for all suppliers

and maintain regular communication. Whilst we operate a long list

of approved suppliers, we usually engage small groups of trusted

consultants and contractors on a repeat basis, fostering strong, long-term

relationships.

Their key interests How do we respond? Examples of actions taken in 2022

A long-term partnership with Harworth in which they are

treated fairly, get good visibility of our future requirements,

and receive timely payment, whilst contributing to

Harworth’s success.

During 2022, we undertook a detailed review of our procurement

policies and processes, covering all forms of procurement at a corporate

and project level. We identified a target operating model to which we

are transitioning during 2023, which will further enhance development

project procurement and broaden existing good practice to other forms

of procurement.

Strategic Report 41

Harworth Group plc: Annual Report and Financial Statements 2022

Section 172 statement continued

Funders

Why we engage How we engage

We need external capital to fund the Group’s activities,

long-term projects and efficient growth.

Ahead of refinancing our RCF in Q1 2022, we engaged extensively with

existing and prospective funders. We welcomed HSBC to our group of

senior lenders, alongside NatWest and Santander. In the ordinary course,

we schedule relationship meetings with our senior lenders every six months

but have a regular dialogue with them throughout the year.

We engage proactively with prospective grant and debt funders of project

specific activities, such as infrastructure and direct development. We

meet public and private funding partners on a regular basis to explore

partnership opportunities on one or more sites at a time.

In May we launched our single family BTR portfolio, engaging with

prospective partners to provide a unique forward funding and long-term

investment opportunity.

Their key interests How do we respond? Examples of actions taken in 2022

An open dialogue with regular updates and assurance

about our operational and financial performance together

with delivery against all our contractual obligations.

We worked with both of our incumbent lenders and HSBC to agree and

put in place a new £200m RCF in Q1 2022.

We secured grant funding at Chatterley Valley.

Strong interest was expressed in our BTR portfolio as an attractive

investment opportunity leading to engagement with potential investors.

The prospect of establishing a long-term and strategic relationship with

one or more investors was an important factor in our appraisal of options.

Government

Why we engage How we engage

Harworth has an important part to play in supporting some

of the Government's priorities over the coming years, both

at a national and regional level, including in the areas of

climate change, levelling up, and addressing the housing

shortage.

We participate in central government consultation exercises on policy

proposals both on our own account and through industry bodies such

as the British Property Federation. We also engage informally on national

initiatives such as the levelling up agenda and HS2, as well as on

site-specific matters.

We engage with local government, Combined Authorities, and Local

Enterprise Partnerships (‘LEP’) when working collaboratively with

officers and members from local planning authorities ahead of planning

application submissions and on the discharge of planning conditions;

bidding for grant or loan monies from local authorities and LEPs for

infrastructure investment; and promotion of long-term strategic land

projects with local authorities.

Their key interests How do we respond? Examples of actions taken in 2022

Environmental, societal and economic priorities, both

national and local, the achievement of which we can help

support.

During the year, we engaged with the leaders and other senior officers of

certain local authorities and Metro mayors to collaborate with them on the

delivery of local priorities via our current and prospective projects.

Housing shortages within local planning authorities and central and

local government priorities for infrastructure investment continue to be

important factors that inform our project appraisals.

Strategic Report42

Harworth Group plc: Annual Report and Financial Statements 2022

Effectively managing our risk

Risk framework

INFORMING

REPORTING

Internal audit

The Board

The internal audit function acts

as an independent and objective

assurance function by evaluating the

appropriateness and effectiveness

of our risk management and

internal control processes, through

independent review, with a

direct reporting line to the Audit

Committee including regular contact

with the Audit Committee Chair.

In 2022, as in previous years, the

Audit Committee approved a

programme of assurance activity

for the year ahead, which was

predominantly outsourced

to KPMG.

The Committee also formed the

view that the increase in pace, scale,

and complexity of activity inherent

in delivering the Group’s strategy

necessitated the establishment of

an internally resourced internal audit

function.

At the start of 2023, a new Head of

Internal Audit joined the business,

reporting to the Company Secretary

and Audit Committee.

The Board has overall responsibility for determining the risk appetite of the Group, for

monitoring the risk profile of the business, and ensuring that measures and controls are

in place to identify and manage risk effectively, with its focus being on principal and

emerging risks.

Audit Committee

The Audit Committee supports the Board in the management of risk and is responsible for

reviewing the appropriateness and effectiveness of risk management activities and internal

control processes.

Group Leadership Committee (‘GLC’)

The GLC has responsibility for identifying operational risks, implementing and monitoring

risk responses and ensuring the effectiveness of key controls. Each quarter, the profile of

our principal and operational risks is reported to the GLC and a risk workshop is hosted to

undertake a “deep dive” into one or more risks, led by the risk owners and champions.

Risk owners and champions

At an operational level, ownership of risks is assigned to members of the Senior Executive

and managed on a day-to-day basis by risk champions from each function across the

business. Central to monitoring the effectiveness of our risk management system is our

Group Risk and Assurance Map (‘GRAM’), see more on the following page.

Effective risk management is a key focus for the Board, and it directly informs our strategy. It helps us to create value

and deliver positive outcomes for our stakeholders in support of our Purpose: to create sustainable places where people

want to live and work.

In this section we explain how the

Board has achieved assurance as to

the effectiveness of Harworth’s risk

management and internal control system.

We present our approach to risk and set

out the Board’s analysis of the Group’s

principal risks and uncertainties informed

by our growth strategy.

Our risk management

framework

Our approach to risk management centres

on being clear about our risk appetite,

appraising risk as a fundamental part of

decision making and responding quickly to

changes in our risk profile. We have clear

roles and accountability in respect of risk

management, as outlined below.

We recognise that not all risks can be

eliminated, or sufficiently mitigated at an

acceptable cost, and that there are some

risks which, given the nature of Harworth’s

business and the track record and

experience of the team, we are prepared

to accept. Our focus is to ensure there

is an awareness of risk throughout the

organisation with an effective framework

in place to respond effectively to changes

in risk profile, whilst at the same time

making the most of our opportunities.

Our insurance programme also plays an

important role where we are unable to

eliminate certain risks.

Strategic Report 43

Harworth Group plc: Annual Report and Financial Statements 2022

Risk review framework: annual cycle

JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC

Biannual Board

review of principal

and emerging risks

and risk appetite

Audit Committee review of GRAM and assessment of the effectiveness of the Group’s internal controls which informs the Board's

assessment of the effectiveness of the Group’s risk management system (ahead of results announcements).

Biannual Board

review of principal

and emerging risks

and risk appetite

Audit Committee review of internal audit

programme and review of effectiveness

of the internal audit function

GLC risk workshops

Continuous review of all risks by risk owners and risk champions

GLC risk workshops

Group Risk and Assurance Map

The GRAM is a “living” tool and

reviewed by risk owners and champions

(continuously), the GLC (quarterly), and

the Audit Committee (biannually). The

GRAM incorporates both the principal risks

identified by the Board and the operational

risks identified by the wider business. Each

risk has its own risk and assurance map

which details:

• the scope, and commentary on the

status, of each risk;

• inherent risk, residual risk and risk

appetite scores to evaluate the

changing status of each risk;

• mitigation measures that have either

been implemented, are in progress or

planned;

• key risk indicators used to measure the

profile of each risk;

• established Board assurance

activity; and

• management’s proposals for further

assurance activity, which is used to put

together a 36-month rolling internal

audit programme (see page 111 of the

Audit Committee report).

Following a detailed review undertaken by

the Audit Committee ahead of publication

of this report, the Board is confident that

the Group’s risk management and systems

of internal controls, including all material

financial, operational and compliance

controls, are effective.

The full risk management system pursuant

to which risks are monitored and managed

throughout the year is summarised below.

The profile of the principal risks is reported to the Board at each Board meeting, with the Board undertaking a detailed review biannually.

The Audit Committee receives an update from the Head of Internal Audit at each of its meetings, and internal audit reports are circulated to the Committee

throughout the year.

Effectively managing our risk continued

Strategic Report44

Harworth Group plc: Annual Report and Financial Statements 2022

Principal risks and uncertainties

The Board is responsible for identifying,

setting the risk appetite for, and evaluating

the Group’s principal and emerging risks,

being those risks that could threaten

the delivery of our strategy, our business

model, future performance, solvency or

liquidity and/or reputation. Our principal

and emerging risks are reported to

the Board in dashboard format at each

meeting, and the Board undertakes a

detailed assessment every six months, the

most recent being in January 2023.

In 2021, the Board identified through a

series of workshops a refreshed set of

principal risks, informed by the Company’s

new strategy developed that year. During

2022, the Board kept these principal

risks under regular review, especially

in the context of the war in Ukraine and

the deteriorating macroeconomic and

geopolitical climate, and resulting market

conditions. At the time of writing, and

looking ahead, the Board anticipates

national and global economic uncertainty

to remain elevated requiring it to continue

to manage the Group’s principal risks in an

uncertain and changing environment.

Since reporting on our principal risks in the

2021 Annual Report, the following changes

have been made:

• The residual risk status of our

“residential and commercial markets”

risk has increased from “medium” to

“high”, as anticipated in our interim

results announcement, due to the

uncertainty in the UK economy, with

high inflation and rising interest rates

impacting our core markets.

• The residual risk status of our

“availability of capital” risk has increased

from “low” to “medium”, reflecting

the potential requirement in the

medium term to raise capital to support

acceleration in pipeline delivery or a

major acquisition not contemplated

within the Strategic Plan.

• The “climate change” risk category

has been updated to “sustainability”

to reflect better Harworth’s evolving

Sustainability Framework. Within this

category, the “managing climate

change transition” principal risk has

been reformulated to focus on our

“NZC pathway” as a principal risk.

• The “resourcing” principal risk has

been replaced by “organisational

development and design”. As adequate

resource has been added over the last

two years, our focus is on evolving our

culture, capability, values, behaviours,

processes and ways of working to

drive continued excellence in the

organisation as we execute our

growth strategy.

In addition to the above changes:

• The planning risk profile of individual

projects differs, but overall, the residual

risk status of our “planning” risk remains

“high” reflecting both short-term

and long-term headwinds. Emerging

planning policy, principally in the form

of proposed changes to the National

Planning Policy Framework ('NPPF'),

which, amongst other things, proposes

the removal of housing targets, will

make our planning promotion activity

more challenging. In the short term, the

technical planning risk and delays we

already experience, due to stretched

Local Planning Authority resource, are

also heightened, in part due to the

continued impact of the impending

changes to the NPPF, upcoming local

elections, and the momentum that

will build as we go through 2023 to a

general election.

• There have been limited signs of

distress in our construction supply

chain to date, notwithstanding the

macroeconomic climate, but we

are monitoring our “supply chain

counterparty risk” very closely.

• There are indications of stabilisation in

supply chain cost inflation and forecasts

suggest the inflation rate will decline

materially over the course of 2023,

which may mean that the residual risk

status of our “supply chain cost inflation

and constraints” risk trends down from

“medium” to “low”.

• Statutory costs of development are

trending upwards, with the introduction

of the Building Safety levy and

proposals for an infrastructure levy.

However, the Residential Property

Development Tax has had a limited

impact on project and Group financial

outcomes and performance to date.

This risk retains a “medium” risk status.

Strategic Report 45

Harworth Group plc: Annual Report and Financial Statements 2022

Effectively managing our risk continued

The risk heat map below illustrates the current status of our principal risks before and after mitigating actions.

See our principal risks tables on the following pages for how we

report on and mitigate our current and emerging principal risks

Very high

High

Medium

Low

Very low

Inherent risk (before mitigating actions)

Residual risk (after mitigating actions)

Principal risks

Acquisitions

1. Availability of and competition for

strategic sites

Project Delivery

2. Planning

3. Supply chain cost inflation and

constraints

4. Supply chain and delivery partner

management (counter-party risk)

5. Statutory costs of development

Markets

6. Residential and commercial

markets

People

7. Organisational development

and design

Finance

8. Availability of appropriate capital

Safety and Compliance

9. Health and safety

Sustainability

10. NZC pathway

Systems and Information

Resources

11. Cyber security

Increasing direct development of

industrial & logistics stock

Accelerating sales and broadening the

range of our residential products

Growing our strategic land

portfolio and land

promotion activities

Repositioning our

Investment Portfolio

to modern Grade A

The Harworth Way

Group Targets

Key to change in

residual risk in the year

No change

Increase

Decrease

Key to strategic links

A detailed analysis of each principal risk is set out on the following pages, explaining our key risk mitigation actions, further measures

planned for the upcoming year, any changes in residual risk status in the year and how each risk relates to our strategic pillars (using

the key below).

Strategic Report46

Harworth Group plc: Annual Report and Financial Statements 2022

Risk 1 Commentary

Availability of and

competition for

strategic sites

Current risk

Competition for acquisitions remains a key risk as acquiring new sites is fundamental to maintaining target

returns and driving growth consistent with our strategy. That said, our existing pipeline of industrial & logistics

and residential land provides a significant buffer, which means we can be more considered if hurdle return

aspirations cannot be met in the current market, and we secured a range of opportunities in 2022 including

two substantial industrial & logistics sites placed under option. The year ahead could increase opportunities

to acquire land if distressed sales come to market and/or competitors take a more cautious approach to

acquisitions. The residual risk profile for this risk could, therefore, reduce during 2023.

Description Mitigation Additional measures planned for 2023

Failure to acquire strategic

land at appropriate prices

due to constrained supply or

competition.

• Extensive external stakeholder engagement

to identify opportunities supported by internal

co-ordination via regular internal acquisitions

meetings.

• Customer Relationship Management (‘CRM’) system,

which has been designed to help monitor our target

acquisitions pipeline, and support the coordination

of our engagement with stakeholders.

• We seek input from our valuers prior to making major

acquisitions to ensure we understand the latest

market pricing.

• Via our portfolio strategy, we manage the timing

of acquisitions.

• The review of project plans for each site helps

highlight further acquisition opportunities.

• We have continued to recruit additional

acquisitions resource.

• Leveraging better our relationships with

local authorities and agents.

• Retrospective analysis of

unsuccessful bids.

Current residual risk status

HIGH

Change in residual risk in the year

Link to strategy

Strategic Report 47

Harworth Group plc: Annual Report and Financial Statements 2022

Effectively managing our risk continued

Risk 2 Commentary

Planning

Current and emerging risk

Whilst changes (or proposed changes) in planning legislation and policy are not uncommon, emerging

planning policy principally in the form of proposed changes to the NPPF poses long-term headwinds

for planning promotion if they remain as stated, particularly of large residential sites and development

in the greenbelt. If implemented, the removal of housing supply targets will likely mean that securing

residential development allocations in local plans, particularly in the greenbelt, becomes increasingly

difficult and bringing those sites through the planning system takes longer. In the shorter term, the

government’s proposals for changes to the NPPF have encouraged some Local Planning Authorities

to delay the adoption of their local development plans. This exacerbates the challenges and delays

we already experience due to stretched Local Planning Authority resource. We anticipate an uncertain

political backdrop as the next general election approaches, both at a central and local Government

level, which could create persistent headwinds when it comes to making significant progress on

promoting and delivering large sites over the next two years. Nevertheless, Harworth remains well

positioned with our large strategic landbank, our track record for deliverability and ability to acquire

good strategic residential and employment sites for which there is a strong demand. This, combined

with the increased resources and planning expertise within the business, gives us confidence that we

can adapt successfully to planning policy changes.

Description Mitigation Additional measures planned for 2023

Planning promotion risk

including uncertainty around

local and national changes

to planning regime with

potential for adverse effect

on promotion activity.

• We regularly review greenbelt exposure at a

portfolio level.

• Through key stakeholder groups, we respond to

emerging planning policy.

• Stakeholder mapping is undertaken at a project level.

• Local political advisers are appointed on individual

sites, where appropriate.

• Strong relationships with local planning authorities

and key local stakeholders.

• Implementation of the CRM system.

• We have continued to recruit additional internal

planning resource.

• Transaction approval papers include detailed

planning strategies.

• Leveraging relationships with local

authorities.

• Strategic planning for development

of relationships with senior political

stakeholders.

Current residual risk status

HIGH

Change in residual risk in the year

Link to strategy

Strategic Report48

Harworth Group plc: Annual Report and Financial Statements 2022

Risk 3 Commentary

Supply chain cost inflation

and constraints

Current risk

Both we, and our customers, have been experiencing supply chain challenges including shortages

of, and cost increases to, raw materials, plant and labour. However, as development activity likely

slows down during 2023, these supply chain pressures should also recede. We are seeing signs

of stabilisation in cost inflation, though not across all sectors and skilled labour shortages remain

particularly stubborn. Whilst this risk may trend down to “low” during 2023, it retains a “medium” status

at this point, reflecting continued difficulty in agreeing fixed prices with some contractors who are still

not prepared to accept cost inflation risk; more heavily negotiated contracts, particularly around the

transfer of risk; readiness of contractors to operate more sustainably; and continued volatility in energy

prices. Our cost plans are monitored closely, updated in valuations and adjustments made regularly to

reflect market movements.

Description Mitigation Additional measures planned for 2023

Supply chain pricing

pressures and constraints

(affecting labour, plant and

raw materials) resulting in

development cost increases,

increases to forward cost

plans, and potential project

delivery delays.

• Our procurement approach is considered early in

project planning.

• We undertake rigorous tender processes.

• We have established a suite of legal precedents to

promote consistency in land remediation and direct

development procurement.

• We utilise market intelligence regarding contractors’

commitments and workload.

• We have continued to recruit additional direct

development and technical resource.

• Ongoing procurement review, as a

result of which we have identified

improvements in our operating model for

implementation during 2023.

Current residual risk status

MEDIUM

Change in residual risk in the year

Link to strategy

Risk 4 Commentary

Supply chain and delivery

partner management

(counter-party risk)

Current risk

A subdued and volatile economic climate increases the risk of insolvencies in the supply chain. Whilst

there is an increased occurrence of contractor insolvency in the construction market the impact on our

projects has been limited to date. Whilst a recession is forecast, it is currently expected to be shallow

and relatively short-lived. In 2023 our development activity will increase, as programmed pre-let and

build-to-suit direct development is undertaken and BTR project delivery commences, resulting in our

being more exposed to supplier/delivery partner failure. This trend will continue as Harworth grows,

increases direct development, and enters new markets for residential products. Our need to select and

manage counterparties effectively is growing and we will monitor this risk very closely.

Description Mitigation Additional measures planned for 2023

Increase in exposure to

supply chain, delivery

and investment partners

leading to increased risk of

disputes with and/or default

by and/or insolvency of

counterparties.

• Our procurement approach is considered early in

project planning.

• A consistent process is followed for selecting and

“onboarding” counterparties.

• We have established a suite of legal precedents to

promote consistency in land remediation and direct

development procurement.

• Our central technical team monitors contractor

“concentration risk” and financial health, and

promotes consistencies and knowledge-sharing

across our portfolio.

• Use of our CRM system.

• External review of contractor insurance packages for

every direct development project.

Ongoing procurement review, as a result

of which we have identified improvements

in our operating model for implementation

during 2023.

Current residual risk status

MEDIUM

Change in residual risk in the year

Link to strategy

Strategic Report 49

Harworth Group plc: Annual Report and Financial Statements 2022

Effectively managing our risk continued

Risk 5 Commentary

Statutory costs of

development

Current and emerging risk

The Board is focused on legislative changes that act as a further cost on development as it is settled

government policy to increase public financial gain by taking a larger proportion of land value uplift

derived from planning consents. In short succession there have been the introduction of two new

measures designed to fund cladding repairs on high-rise residential buildings: the residential property

developer tax and the building safety levy expected to be implemented in 2023, albeit the former has

had a limited impact on project outcomes and Group performance. On the horizon is the infrastructure

levy as part of planning reforms to be implemented via the Levelling Up and Regeneration Bill.

Description Mitigation Additional measures planned for 2023

Legislative reforms which do,

or may, impose a tax or levy

on development, or have the

effect of levying an additional

cost on development.

• Enhanced horizon scanning regime.

• Sensitivity to additional statutory costs modelled

when assessing acquisitions.

• Through key stakeholder groups, we respond to

emerging policy.

None planned.

Current residual risk status

MEDIUM

Change in residual risk in the year

Link to strategy

Risk 6 Commentary

Residential and

commercial markets

Current risk

The residential and industrial & logistics markets were volatile throughout 2022 as a result of

macroeconomic, political and geopolitical factors. It was largely a “tale of two halves”: whilst H1 2022

valuations had strong growth, H2 was categorised by unpredictability and a marked downward trend

in industrial & logistics, initially in market sentiment followed by some transactional evidence of a

downturn in that sector. In October 2022, the Board concluded that the residual risk status of this risk

had moved from "medium" to "high" given indications of a slowing residential market and material

yield shifts affecting both prime and secondary industrial & logistics assets.

Despite Harworth’s resilient business model and through-the-cycle approach, it is not immune to shifts in

the market. Substantial uncertainty prevails although current forecasts suggest the commercial property

market will experience a faster recovery than the residential market, which is more susceptible to further

adverse market movements. However, the structural undersupply in both of our core markets, constraints

of available consented land, and our ability to create value through our management actions will continue

to mitigate some of the impact and encourage long-term stability.

Description Mitigation Additional measures planned for 2023

Downturn in industrial &

logistics and/or residential

market conditions leading to

falls in property values.

• Regular feedback is received from advisers on the

status of residential and industrial & logistics markets

in our core regions to supplement generic market

commentary.

• During 2022 we took advantage of favourable

market conditions by accelerating residential sales.

• Regular review (biannual) of project plans for each

site by the Investment Committee, which is heavily

informed by prevailing market conditions.

• Management actions to drive value.

Pursuant to our strategy, but considering the

current market, we continue to pursue mixed

tenure strategies and do not intend to start

any new speculative direct development

projects this year instead focusing on land

sales, pre-let and build-to-suit opportunities.

Current residual risk status

HIGH

Change in residual risk in the year

Link to strategy

Strategic Report50

Harworth Group plc: Annual Report and Financial Statements 2022

Risk 7 Commentary

Organisational

development and design

Current risk

Harworth has experienced a period of rapid growth with a significant increase in the number

of employees. The Board recognises that a structured change management approach to both

organisational development (the “informal” elements of behaviour, values and culture) and

organisational design (the “formal” elements of operation and governance) is critical as the Group

continues to evolve and grow over the long term.

Description Mitigation Additional measures planned for 2023

Misalignment of culture,

capability, values,

behaviours, formal

processes, systems and/

or controls with what the

business requires to deliver

the strategy.

• Appointment of Group Resources and

Transformation Director.

• Implementation of people strategy to complement

our business strategy, focusing on the number and

nature of resources required to fill skills gaps as well

as volume gaps.

• Better alignment of Group and personal objectives

with delivery of strategy.

• Launch of a new Leadership Development

Programme.

Implementation of "People and Enabling

Excellence Strategy".

Current residual risk status

MEDIUM

Change in residual risk in the year

NEW RISK

Link to strategy

Risk 8 Commentary

Availability of

appropriate capital

Current and emerging risk

There is a need to match capital to the operational and project specific needs of the business,

accommodating the increase in pace and scale of activity under our strategy. In early 2022 we entered

into a new senior debt facility comprising a five-year £200m RCF together with a £40m accordion facility.

This RCF, supplemented by project-specific funding where appropriate, supports the funding needs of

the business. Our net debt at the end of 2022 was low and is forecast to remain relatively modest during

2023 and we retain headroom in all covenants. However, to leverage our growing development pipeline

we will need to make full use of our debt finance capacity. The Board recognises it could be challenging,

given current market uncertainty, to raise additional equity to fund accelerated development in addition to

the Strategic Plan or a major acquisition. Whilst this is not a short-term risk, work will commence this year to

explore wider potential funding options, prompting the Board to conclude that the residual risk status of

this risk has moved from "low" to "medium".

Description Mitigation Additional measures planned for 2023

Inability to access

appropriate equity and/or

debt funding to support the

strategy.

• Regular review of financing strategy to complement

our business strategy, supported by external

consultants where required.

• In early 2022, we signed a new RCF comprising a

five-year £200m revolving credit facility together

with a £40m accordion facility.

• This is supplemented by accessing project specific

funding where relevant.

• We continue to pursue and unlock grant funding.

• Appointment of Financial Planning and Treasury

Manager contributing to improved longer-term

financial forecasting.

• Continue to identify scheme specific and

grant funding.

• An updated review of capital structure

funding options.

Current residual risk status

MEDIUM

Change in residual risk in the year

Link to strategy

Strategic Report 51

Harworth Group plc: Annual Report and Financial Statements 2022

Effectively managing our risk continued

Risk 9 Commentary

Health and safety

Current risk

The health, safety and welfare of people involved in or affected by Harworth’s activities are of prime

importance. This risk ranges from the health and safety of visitors and workers on our sites, and trespassers

(given the nature of our sites), through to the health and safety of employees and visitors in an office

environment. Full compliance with all relevant legislation is the minimum acceptable standard but we and

our partners aim to achieve the highest possible standards of good practice.

Description Mitigation Additional measures planned for 2023

Incident causing injury and/

or death resulting in liability,

penalties and/or reputational

damage.

• Appropriate policies are in place, including a Safety,

Health and Environmental Management System

(‘SHEMS’) Policy and an Employee Health and

Safety Policy.

• We have a Risk and Compliance (‘R&C’) function

with a focused remit on health and safety and

environmental policy and assurance.

• The R&C team undertakes a rigorous site inspection

regime. It monitors and reports on the risk status of

each of our sites via a cloud-based health, safety and

environment management platform.

• We have a panel of health and safety consultants who

support our project delivery.

• Health, safety and environment management

meetings are held quarterly and attended by senior

management and representatives from all operational

divisions.

• We host compulsory health and safety training for

all employees every two years, supplemented by an

annual schedule of mandatory online learning.

• We have a programme of health and wellbeing

initiatives for employees, including access to internal

physical and mental health first aiders and an external

Employee Assistance Programme.

• Review the effectiveness of our health and

safety consultant panel arrangements.

• Review Employee Health and Safety policy.

• Further improvements to health and

safety reporting supported by the new

cloud-based platform.

Current residual risk status

LOW

Change in residual risk in the year

Link to strategy

Strategic Report52

Harworth Group plc: Annual Report and Financial Statements 2022

Effectively managing our risk continued

Risk 10 Commentary

Net Zero Carbon (‘NZC’)

pathway

Current and emerging risk

The NZC agenda means transformational change for all businesses. It has a wide-ranging impact on the

Group, from our investment case to shareholders, through to operational activity, including the need to

embed NZC principles into all projects, whilst remaining profitable. It also embraces external factors such

as industry and stakeholder metrics and the approach taken by Local and Combined Authorities on e.g.

carbon tax, biodiversity net gain and social value measures. Following the appointment of our Director of

Sustainability in H1 2022, we focused on developing The Harworth Way, which is the Group's continually

evolving Sustainability Framework, and developing our NZC Pathway. The NZC Pathway Report has been

published alongside this Annual Report and is available on our website.

Description Mitigation Additional measures planned for 2023

Failure to develop,

manage and meet our

NZC commitments and/or

NZC regulations, resulting

in financial loss, reduced

investment and reputational

damage.

• Development of The Harworth Way and NZC

Pathway with targets identified (see pages 64 to 77).

• Appointment of a Director of Sustainability and wider

sustainability team.

• We have an ESG Board Committee (see pages 113

to 114) to oversee formulation and delivery of our

Sustainability Framework, target-setting and reporting.

• We appointed a new Non-Executive Director to the

Board, Marzia Zafar, with a strong background in

sustainability.

• All buildings delivered in 2022 were NZC in operation

ready, mitigating future Scope 3 emissions.

• Continued transition of our Investment Portfolio to

100% modern Grade A by 2027.

• Development of an Energy and Natural Capital

strategy, which includes a review of opportunities for

carbon sequestration, bio-diversity net gain, carbon

trading and use of renewable energy.

• We are a member of the UK Green Building Council,

which facilitates sharing of knowledge and best practice.

• Embed fully environmental analysis into

our project appraisals and approvals

process.

• Continue to improve the capture and

analysis of environmental data (including

from supply chain and occupiers).

• Develop a carbon accounting system,

including appropriate accreditation.

• Continued development of Harworth’s

commercial and residential building

specifications.

Current residual risk status

MEDIUM

Change in residual risk in the year

Link to strategy

Risk 11 Commentary

Cyber security

Current risk

Cyber-attacks pose a continually evolving threat to all businesses and Harworth, like all others, is at

risk of regular attacks. Strategic and technical measures are in place to monitor and mitigate this risk.

In H2 2022, we undertook our biennial penetration test, which found Harworth to be in a strong

position with no major cause for concern.

Description Mitigation Additional measures planned for 2023

Successful cyber-attack

jeopardising business

continuity.

• Our IT Disaster Recovery Plan has been incorporated

into an updated Business Continuity Plan.

• We have an external provider for IT support, which

remains vigilant to the evolving cyber security backdrop

and an outsourced Information Security manager.

• We take out cyber risk insurance.

• We undertake biennial penetration testing,

supported by regular phishing simulations and

continuous IT system vulnerability scanning.

• We have a rolling cyber and information security

awareness programme for all employees.

Desktop test of updated Business

Continuity Plan.

Current residual risk status

LOW

Change in residual risk in the year

Link to strategy

Strategic Report 53

Harworth Group plc: Annual Report and Financial Statements 2022

Task Force on Climate-Related Financial Disclosures

Harworth is committed to implementing the recommendations of the Task Force on Climate-Related Financial Disclosures

(‘TCFD’). The TCFD aims to provide investors and other stakeholders with useful information on climate-related risks

and opportunities that are relevant to our business. Below we have provided more detail on how we align with these

recommendations.

In this context, we have considered our

“comply or explain” obligation under

the Financial Conduct Authority’s Listing

Rules, and confirm that we have made

disclosures consistent with the TCFD

Recommendations and Recommended

Disclosures in this Annual Report,

save for certain items, which are

summarised below:

• Strategy: We currently have a

limited quantitative assessment of the

impact on our financial planning and

performance of the short-, medium- and

long-term risks and opportunities that

we have identified in our 2°C and 4°C

scenarios. This is due to data limitations,

which we expect to be addressed in the

near term as Harworth invests in systems

and resourcing to capture more data.

• Metrics & Targets: Significant

progress has been made over the

year in measuring our Scope 3

greenhouse gas emissions. However,

many categories of Scope 3 emissions

rely on the disclosure of data to us by

suppliers and customers and there

remains some work to be done over the

course of 2023 to enable us to report

a full and accurate data set. Harworth

has invested in systems and resourcing,

and is engaging with stakeholders,

to ensure all categories of Scope 3

emissions are reported in our 2023

Annual Report.

Further information on The Harworth Way

and the Group's NZC pathway an be found

on pages 67 to 69 of this Annual Report,

and Harworth's standalone NZC Pathway

Report, which has been published at the

same time and is available on our website.

Greenhouse Gas ('GHG') emissions data

can be found in our Streamlined Energy &

Carbon Reporting ('SECR') disclosure on

pages 62 to 63.

Governance

Board oversight of climate-related

risks and opportunities

The Chief Executive has overall responsibility

for climate-related risks and opportunities.

The Board is updated regularly on

our sustainability and climate-related

performance and has overall accountability

for and oversight of risk, undertaking a

biannual assessment of the principal risks,

which include climate-related risks. After

each meeting of the ESG Committee, the

Committee Chair provides an update to

the Board on sustainability progress. The

Board assesses the climate-related risks and

opportunities inherent in material projects,

as part of the Board project appraisal

process. In 2022, the project appraisal

framework was extended to understanding

the embodied and operational carbon

content of direct development projects,

in line with the UK Green Building Council

Net Zero Carbon Buildings Framework. The

Board also considers climate-related risks

and impacts when assessing business plans,

major capital expenditures, acquisitions

and sales.

Climate-related opportunities and risks

were considered as part of the Board’s

strategy day that took place during the

year. In particular, the Board reviewed the

role of our Natural Resources portfolio

to determine how best to protect and

optimise value, while maximising the

role these assets can play in realising

the Group’s sustainability ambitions,

particularly with regards to meeting energy

demand, delivering biodiversity net gain

and carbon offsetting.

Ongoing oversight of climate-related

issues is carried out by our ESG

Committee, chaired by Angela Bromfield

and comprising the Chair of the Board,

Chief Executive, Chief Financial Officer

and Non-Executive Directors Martyn

Bowes and Marzia Zafar (who joined the

Committee during the year) and attended

by our Director of Sustainability.

The Committee meets at least quarterly

and is the senior forum for oversight of

the development and implementation

of the Company’s sustainability strategy

and commitments. The ESG Committee

supports the Board in the assessment and

management of climate risk.

The ESG Committee is responsible for

overseeing the setting of Harworth’s ESG

targets and the Company’s progress

towards meeting them, and has oversight

of its NZC pathway. It monitors external

climate-related issues and emerging policy

and best practice through regular updates

from the Director of Sustainability and this

guides its decisions in formulating strategy

and ongoing risk management. During

the year, the ESG Committee reviewed

and recommended for approval to the

Remuneration Committee those ESG

metrics and targets to be incorporated

into the annual bonus Group targets for all

employees.

Management’s role in assessing and

managing climate-related risks and

opportunities

The ESG Committee is supported by

Harworth’s three-person sustainability team,

which was established during the year

following the appointment of Peter Henry as

Director of Sustainability, reporting directly

to the Chief Executive. The sustainability

team works with members of the Senior

Executive and representatives from

teams across the business, including the

regional delivery teams, finance, HR, asset

management, and central services, to share

knowledge, develop policies and guidance

and consider how best to address climate-

related issues in our operations. It then

reports progress and proposes policies and

actions to the ESG Committee.

For our three identified Group

climate-related risks outlined on the

following page we have allocated a risk

owner and risk champions who monitor

climate-related risks at portfolio level and

brief the Senior Executive on material

movements in risk profile.

Strategic Report54

Harworth Group plc: Annual Report and Financial Statements 2022

Risk Risk owner Risk champions

Net Zero Carbon pathway Chief Financial Officer Director of Sustainability

Climate change and biodiversity

adaptation and resilience

Chief Financial Officer Director of Sustainability

Director of Technical, Engineering & Delivery

Head of Risk & Compliance

Director of Asset Management

Creating sustainable communities Chief Financial Officer Director of Sustainability

Director of Technical, Engineering & Delivery

Director of Asset Management

We consider stakeholder impact in our

project appraisals, and all business cases

must factor in the environmental and

societal impact of each project. Currently

these are largely qualitative assessments,

but it is our intention to increase over time

our quantitative measurement of impact

in our project appraisals, budgeting and

forecasting.

The management team engages with

several external bodies, including

the UN Global Compact, UK Green

Building Council, the British Property

Federation and the Construction Industry

Research and Information Association,

as well as local authorities, to enhance its

understanding and management of climate

change risk and opportunities. The team

monitors external climate-related issues

and emerging policy and best practice,

including in a horizon scanning regime led

by our legal team, with support from our

legal panel firms.

Strategy

Overview of climate-related risks

and opportunities

We consider our relevant time horizons

to be short-term (to 2027), medium-term

(2028–2040); and long-term (2040–2060).

Our short-term time horizon is aligned to

our growth strategy outlined in September

2021 to become a £1bn business by

2027. Our medium-term time horizon

corresponds to approximate development

timelines for the majority of our current

major development and strategic land sites.

Our assessment of climate risks and

opportunities in the short-, medium- and

long-term assumes a scenario in which

global temperature rise is limited to

2°C by 2100 (aligned to Representative

Concentration Pathway (‘RCP’) 2.6 as

outlined by the Intergovernmental Panel

on Climate Change (‘IPCC’)), but we have

also considered the impact of a 4°C (RCP

8.5) scenario on the risks and opportunities

outlined in this report. The table below

shows our main assumptions relating to the

UK under each scenario, using forecasts

from the Climate Change Committee.

In identifying the risks and opportunities

outlined in this section and their impact on

our financial planning and performance,

we have considered the likelihood of the

risk based on current and forecast market

data and trends, and the potential impact

based on the type and condition of our

portfolio assets and their location. We have

also considered the mitigation measures

that we currently and could potentially

implement, which have informed our risk

assessment outlined on page 53.

Together, these factors determine the

prioritisation of individual risks and

opportunities in our asset and group-level

financial planning.

Harworth’s

assumptions for UK 2°C scenario 4°C scenario

Transition approach The UK and other nations largely meet their currently

pledged decarbonisation commitments, and

Harworth follows its NZC pathway

The UK and other nations take only very limited steps

to meet their currently pledged decarbonisation

commitments, but Harworth still follows its NZC pathway

Physical impacts

by c.2050

• Annual average temperatures: +0.6°C from present

• Mean sea level rise: +3cm to +37cm from present

• Heavy rainfall: +10% increase from present

• Heatwaves ‘like 2018 summer (the joint hottest on record)’: 50% chance each year

Strategic Report 55

Harworth Group plc: Annual Report and Financial Statements 2022

Task Force on Climate-Related Financial Disclosures

continued

Harworth’s

assumptions for UK 2°C scenario 4°C scenario

Physical impacts

by c.2100

• Annual average temperatures: +0.7°C from present

• Mean sea level rise: +5cm to +67cm from present

• Heavy rainfall: +20% increase from present

• UK heatwaves ‘like summer 2018’: 50% chance

each year

• Annual average temperatures: +3.0°C from present

• Mean sea level rise: +27cm to +112cm from present

• Heavy rainfall: +50% to +70% increase from present

• UK heatwaves ‘like summer 2018’: 90% chance

each year

Short-term risks (to 2027)

2°C scenario

Risk Impact on business, strategy and financial planning

Transition risks

Policy & Legal: Minimum Energy Efficiency Standards (‘MEES’)

and the introduction of “energy in-use” performance ratings could

result in increased costs, a loss of rental income and valuation

declines if our Investment Portfolio assets do not meet minimum

standards.

We plan to transition our Investment Portfolio to Grade A by 2027.

As part of this, we will develop a NZC pathway for every asset that

we own. A workstream reviewing Energy Performance Certificates

(‘EPCs’) and potential impact of MEES is underway.

Policy & Legal: Increased one-off and operating costs across

our major development sites arising from regulation in areas such

as green energy procurement, EV charging point installation and

biodiversity offsetting.

Our developments already often exceed minimum building

regulations and emphasise high-quality placemaking. We believe

this approach improves the sustainability of our assets, and this is

reflected in their valuation and rental profile. We are also reviewing

our energy tariffs, which should provide an opportunity to lower

our Scope 2 emissions.

Market: An increase in energy efficiency specifications expected

by occupiers and home buyers would require additional

expenditure on development and fit-out, which could depress

land values.

We work with our suppliers and housebuilder partners to deliver

high-quality products, which already exceed market expectations,

and have developed a commercial building specification to

improve environmental performance. This should be reflected in

the valuation, pricing and rental profile of our land and assets.

Market: The introduction of carbon pricing on high emission

material and activities, and premiums for and/or availability of

lower carbon alternatives could impact the costs of procuring raw

materials for our supply chain and in remediating and preparing

land across our sites.

Our procurement approach and costs associated with remediation

and preparation are considered early in project planning, and

we undertake rigorous tender processes. We conduct ongoing

monitoring of material costs and use technical resource to mitigate

any impact of rising prices. We have also implemented target

emissions for our commercial buildings.

Reputation: Investor and other stakeholder requirements in

respect of sustainability performance increase, creating a risk

of reputational damage where expectations are not met, and

impacting our ability to raise capital or create new partnerships.

This year Harworth has further enhanced its environmental

reporting, provided new metrics and targets and outlined a

NZC pathway. We are engaging closely with investors, other

stakeholders and industry bodies to ensure our environmental

reporting continues to evolve and meet expectations.

Physical risks

Some increases in the incidence of acute physical risks, such as

heatwaves, storms, and flooding, could result in increased costs

to create, repair, replace and future-proof infrastructure across our

major development sites and buildings in our Investment Portfolio.

Resilience is already factored into our development design, for

example through developing sustainable urban drainage systems

(‘SUDS’) and sustainable cooling and heating systems for industrial

units. We maintain a flood risk register for all sites and undertake a

flood risk assessment as part of the planning and design process.

Strategic Report56

Harworth Group plc: Annual Report and Financial Statements 2022

Impact of a 4°C scenario

Short-term transition and physical risks would be largely unchanged from the 2°C scenario.

Short-term opportunities (to 2027)

2°C scenario

Opportunities Impact on business, strategy and financial planning

Products & services: Through increasing direct development

and transitioning our Investment Portfolio to Grade A, we can

provide market-leading industrial & logistics space with a high

environmental specification.

Grade A assets would be expected to be in higher demand from

occupiers, and, therefore, generate higher rental income and

valuations. Increasingly Harworth will design buildings to be NZC in

operation and construction, as best practice continues to evolve.

Resilience: Our commercial building specification for new direct

development will deliver future-proofed assets that require less

maintenance and transition costs in the future. Across our sites we

promote public transport use, create cycle paths and walkways,

undertake biodiversity improvements and use SUDS to mitigate

flood risk.

An environmental appraisal is integrated into all site decision

making, and we engage with stakeholders to ensure best practice

and to identify new opportunities. This improves the desirability of

our sites, driving land values higher.

Resilience: By accelerating the transition to low carbon energy

generation and storage across our developments, we can improve

energy security and mitigate the impact of energy price rises and

volatility, as experienced during 2022.

The formation of our Energy & Natural Capital strategy was

underway before the energy price volatility experienced in 2022,

but its emergence has served to underline the importance of

leveraging energy generation and storage opportunities across

our portfolio. An initial review of the portfolio is currently underway

to identify these opportunities.

Energy efficiency: Reducing energy consumption through low

carbon transport, encouraging flexible working and energy-saving

measures such as timed and LED lighting.

As part of our NZC pathway, we are introducing several measures

to improve energy efficiency, which will reduce costs and improve

staff productivity.

Energy source: Our portfolio is well-placed to meet increased

demand for land for renewable energy schemes and offsetting,

particularly on parts of our sites where other types of development

would not be viable. The scale of our sites means it is often easier

and more cost effective to implement on-site renewable energy

generation than in other settings where space is more constrained,

such as urban areas.

As part of our Energy & Natural Capital strategy, the role of

our Natural Resources team has evolved to support all areas of

the business in identifying opportunities to introduce energy

generation and storage into our schemes, providing additional

revenue streams and an opportunity to offset emissions from

within our portfolio.

Impact of a 4°C scenario

Short-term opportunities would be largely unchanged from the 2°C scenario.

Strategic Report 57

Harworth Group plc: Annual Report and Financial Statements 2022

Task Force on Climate-Related Financial Disclosures

continued

Medium-term risks (2028–2040)

2°C scenario

Transition risks will continue and intensify,

with stricter regulation on energy efficiency

and planning, potentially with a greater

focus on the retrofitting and future-proofing

of older assets, which may increase the

costs of direct development and those

borne by our housebuilder customers.

Occupier expectations of sustainability

will also increase, particularly amongst

small and medium-sized businesses,

which may not have previously had

the resources, financial capacity, or

regulatory requirement to focus on this

issue. Infrastructure obsolescence due to

changes in demand for climate-resilient

technologies could result in shorter asset

lifecycles and impose additional costs

on the business. Harworth will mitigate

the impact of these changes through the

transition of our Investment Portfolio to

modern Grade A, and our commitment to

be NZC in operation and construction on

commercial developments by 2030.

The development of carbon pricing may

increase the costs of remediating and

preparing strategic land sites, impacting

the viability or profitability of progressing

some sites through the planning system,

and, therefore, the valuation of our

land bank.

Investors will become less tolerant of

environmental underperformance as

they face pressure to decarbonise their

own portfolios to achieve NZC goals.

Harworth’s response to this risk is to ensure

our environmental performance improves

through our decarbonisation strategy, and

that our disclosures evolve in line with best

practice.

Additional physical risks may emerge,

with slight rises in river peak flows and

associated flood losses. Summers will

become warmer with an increased risk

of heat stress, leading to minor increases

in the cost of cooling buildings and

adaptation measures at our sites to protect

those most vulnerable.

Impact of a 4°C scenario

Under this scenario, the physical risks

outlined in the 2°C scenario may intensify

further and become more frequent,

increasing the speed of infrastructure

obsolescence and the cost of adaptation

measures.

Medium-term opportunities

(2028–2040)

2°C scenario

Opportunities may arise from cheaper and

more effective technologies to achieve

energy efficiency, allowing Harworth to

generate more of its operating energy

from on-site renewables. There is also

likely to be a greater promotion of public

transport, for example bringing old railway

lines back into use with new low carbon

and automated transport technologies.

Harworth’s status as master developer

will allow us to include these features in

our sites and mitigate challenges from the

outset. This will benefit the connectivity

and land value of our sites, many of which

have former railway sidings and lie adjacent

to major road networks. There may also

be greater demand for land used for

offsetting, as buyers approach their own

NZC deadlines, which would provide

additional opportunities for our significant

landbank and natural resources portfolio.

Harworth has an advantage in being a

master developer, as this allows us to

mitigate challenges through our own site

planning and design.

Impact of a 4°C scenario

Under this scenario, demand for adaptation

measures, low carbon transport and land

for offsetting are all likely to decrease owing

to less focus on climate transition risks.

This lower demand would be reflected in

the valuation of Harworth sites. There may

be less opportunities to achieve energy

efficiencies and cost savings through new

technologies than under a 2°C scenario

as it is assumed there would be less

investment and incentives to encourage the

development of these technologies.

Strategic Report58

Harworth Group plc: Annual Report and Financial Statements 2022

Long-term risks (2040–2060)

2°C scenario

The prevalence of physical risks is likely to

be higher. These could include material

increases in the frequency of acute risks

such as flooding, particularly in low-lying

areas of Yorkshire & the Humber, such as

Doncaster. This could lead to significant

decreases in land values and increased

costs of repairs, mitigation measures and

insurance premiums at these sites. Chronic

risks such as hotter summers will also

mean increased energy consumption in

our buildings and maintenance costs, due

to increased demand from occupiers for

air cooling technologies, and adaptation

measures to ensure adequate rainwater

collection and storage at our sites. There is

also the potential for fundamental changes

in construction methods and materials, that

could increase building costs and thereby

depress land values.

Transition risks will also intensify, with even

higher environmental specifications for

industrial & logistics assets and housing.

The expectations of investors and other

stakeholders with regards to environmental

performance will increase further,

particularly as 2050 decarbonisation

targets expire.

Impact of a 4°C scenario

Physical risks could be significantly higher.

The Met Office’s UK Climate Projections

2018 predict that UK sea levels could rise

by over a metre by 2100 in this scenario,

which could significantly increase flooding

risk in low lying parts of Yorkshire & the

Humber, such as Doncaster. Average

summer temperatures for the Yorkshire &

Humber, North West and East Midlands

regions are likely to rise on average by

over 3°C by 2100 under this scenario,

which could lead to increased costs in

cooling and repairing buildings, and

those costs arising sooner than under a

2°C scenario. These increased physical

risks could have significant impacts on

the economy in general, leading to lower

levels of economic output and higher

unemployment, impacting demand for our

sites and our ability to raise finance.

Long-term opportunities

(2040–2060)

Access to secure and sustainable sources

of energy and water, and reliable transport

and communications infrastructure will

become critical for ensuring the resilience

of residential and industrial & logistics

developments. Harworth’s expertise in

future-proofing and resilience in the design

of its developments will allow us to be

at the forefront of these needs, making

our sites more attractive. There is also the

potential for technological advances to

make future-proofing of buildings more

cost effective, thereby reducing the costs

of adaption.

Impact of a 4°C scenario

As physical risks could be significantly

higher, the demand for future-proofing and

resilience in the design of developments

is likely to be greater, meaning we could

realise land value increases sooner than in

a 2°C scenario.

Risk management

Identifying and assessing

portfolio-level risk

The Board reviews the Group’s principal

and emerging risks formally at the half-year

and year-end, and monitors the profile

of these risks throughout the year. ‘Net

Zero Carbon pathway’ is considered

by the Board to be a principal risk for

the Company. ‘Climate change and

biodiversity adaptation and resilience’

and ‘Creating sustainable communities’

are considered to be operational risks. All

are monitored and managed through the

Group Risk and Assurance Map (‘GRAM’).

The GRAM is our principal tool for

monitoring the risk profile of the business,

the measures in place at an operational

level for mitigating and managing risk,

the effectiveness of those measures via an

assessment of key risk indicators, and the

adequacy of the assurance given to the

management team and Board about risk

management. It is a dynamic document

and remains subject to continuous review

and evolution. The GRAM is also used

to monitor emerging regulation. Further

information on the GRAM can be found on

page 44.

For our three Group climate-related risks

we consider inherent risk (before factoring

in the mitigation measures in place), to be

high, but view residual risk (after factoring

in our risk response) as medium.

Identifying and assessing

asset-level risk

All business cases and project appraisals

must factor in the environmental risks

inherent in each project. Currently, these

are largely qualitative assessments, but

it is our ambition to begin quantified

measurement of their impact for

acquisitions and direct development from

2022 onwards.

Managing risks

Portfolio-level risk management is

undertaken through the GRAM,

informed by ongoing monitoring of

portfolio-specific data, investor and other

stakeholder expectations and market

developments. The Company engages

closely with industry bodies such as the

UK Green Building Council and receives

periodic updates on sector activity from

its ESG consultant. At an asset-level,

risk management is undertaken through

project appraisals and site reports.

Steps taken to manage and mitigate our

Climate transition risks:

• One of our key strategic objectives is

to transition our Investment Portfolio to

modern Grade A

• We have developed a sustainable

building code: new buildings to be

at least BREEAM Very Good and EPC

rating A

• We will continue to develop

disclosure of climate-related metrics

to demonstrate progress and address

stakeholder expectations

• We will maximise opportunities for

on-site renewable energy generation

• We will continue to implement energy

efficiency measures, including use of

EV infrastructure and installation of

automatic and energy saving lighting

Strategic Report 59

Harworth Group plc: Annual Report and Financial Statements 2022

Task Force on Climate-Related Financial Disclosures

continued

Steps taken to manage and mitigate our

climate physical risk include:

• More efficient infrastructure delivery

methods and adaptation measures such

as SUDS installed across sites

• Regular flood risk assessments and

proactive responses to any issues

arising

An outline of our processes for mitigating,

transferring, accepting, or controlling risks

can be found on pages 43 to 53.

Metrics & targets

Metrics used to assess climate-related risks and opportunities

Current metrics used 2022 2021 Target

Transition

risks

GHG emissions data: Scope 1, Scope 2 and

certain categories of Scope 3 emissions

GHG emissions data can be found in our Streamlined Energy

and Carbon Reporting disclosure on pages 62 to 6. Harworth’s

NZC pathway is our commitment to be NZC by 2030 for our

business operations under our current SECR Operational Boundary

for Scope 1, 2 and 3 emissions, and to be NZC by 2040 for all

emissions. More information can be found in the Planet section on

pages 66 to 70.

% Investment Portfolio that is EPC Grade C

or above

66% 55% 100% by 2027

Physical

risks

Proportion of development taking place on land

designated by the Environment Agency as flood

zone 1 (low probability) or flood zone 2 (medium

probability) following any mitigation measures

100% 100% Maintain at 100%

Opportunities % Investment Portfolio that is Grade A

at year-end 18% 11% 100% by 2027

Proportion of Group targets for our annual bonus

scheme for all employees relating to ESG factors

10% 5% n/a

Although not officially defined, Grade A is a widely-used industry term that is understood to mean ‘best in class’ space which is new or relatively new, high-specification

and in a desirable location, allowing the unit to attract a rent that is above the market average.

Additional metrics currently being

explored from 2023

Transition risks:

• Data on further categories of Scope 3

emissions

• % energy generated from renewable

resources

• % energy generated on-site

• % sites with EV charging capabilities

• % assets with NZC roadmap in place

• kWh of RE generated on site or

locally, specifically for our projects/

developments

• % of energy procured for our own

operations

• Cost of offsetting and kg CO

offset

per annum

• % of projects using commercial building

specification

Physical risks:

• Spending on infrastructure projects

that will reduce risks of physical climate

impacts at sites

Opportunities:

• Cost savings from improved energy

efficiency and sourcing

• Acreage of Harworth land used for

offsetting

• % of company shares held by

ESG-focused funds

Targets to measure climate-related

risks and opportunities

Harworth’s Net Zero Carbon pathway is

our commitment to reaching Net Zero

Carbon by 2030 for Scope 1, Scope 2,

and those Scope 3 emissions relating to

business travel and employee commuting,

and to reaching Net Zero Carbon by 2040

for all emissions. More information can

be found in the Planet section on pages

66 to 70.

Strategic Report60

Harworth Group plc: Annual Report and Financial Statements 2022

Strategic Report

Streamlined Energy & Carbon Reporting

(‘SECR’) disclosure

We report here our greenhouse gas emissions (‘GHG’) and energy consumption in compliance with the requirements of

The Companies (Directors’ Report) and Limited Liability Partnerships (Energy and Carbon Report) Regulations 2018.

Aligned with our financial reporting, the

GHG emissions data below relates to

our financial year ended 31 December

2022. Emissions data from the financial

year ended 31 December 2021 has been

provided for comparison.

Unless otherwise stated, our emissions

data has been calculated using the

GHG Protocol Corporate Accounting

and Reporting Standard (revised edition)

and emissions factors from the UK

Government’s GHG Conversion Factors

for Company Reporting 2022. We have

followed the Environmental Reporting

Guidelines: Including streamlined energy

and carbon reporting guidance March

2019 in all instances.

Harworth uses the operational control

boundary method to calculate GHG

emissions, whereby we report on sources

of environmental impact for areas over

which we have control. Occupiers’ and

contractors’ individual energy usage and

emissions are not included in our Scope 1

and Scope 2 reporting boundary as this is

not deemed to be within our operational

control, but it is our intention to disclose

them as Scope 3 emissions for our 2023

Annual Report.

During the year we made significant

improvements to our data collection

processes, which have enabled us to

capture a more accurate and complete

data set for the prior year (2021) as well

as the current year. As a result, we have

restated the prior year figures to allow a

year-on-year comparison.

Greenhouse gas emissions (tCO

2022 2021

Scope 1 Site Fuel

317 318

Natural Gas

96 117

Leased Vehicles

16 22

Total 429 456

Scope 2

Location-based 420 545

Market-based 849 n/a

Total Scopes 1 & 2 Location-based 848 1,001

Market-based 1,277 n/a

Selected Scope 3 Business Travel

112 82

Homeworking

26 24

Waste Disposal

2 2

Water Supply

10 9

Total 150 117

Total Emissions Location-based 999 1,118

Market-based 1427 n/a

Renewable energy exported to the National Grid

(3) (–)

Total Net Emissions Location-based 996 1,118

Market-based 1,424 n/a

Revenue Intensity ratio for Scope 1 and Scope 2 emissions

(using location-based method) (tCO

e/£m)

5.1 9.1

Strategic Report62

Harworth Group plc: Annual Report and Financial Statements 2022

Energy consumption (KWh)

2022 2021

Scope 1 1,877,600 1,966,590

Scope 2 2,169,365 2,565,304

Total Scopes 1 & 2 4,046,965 4,531,894

Fuel used for leased plant on Harworth sites where Harworth directly controls the operation.

Includes consumption at company offices, communal areas of leased assets, vacant units, other Harworth assets and infrastructure such as pumping stations and

street lighting.

Fuel used in vehicles leased by Harworth.

Includes business travel in all employee-owned vehicles. Where possible we have used vehicle specific CO

e emission factors to increase accuracy of reporting. Business

Travel does not include employee commuting.

Working hours from home for all employees.

Includes waste from communal areas of leased assets and head office. Calculated emissions are based on waste weight, type, and disposal method.

Energy produced by the solar PV panels at Harworth's head office, Advantage House.

Our progress in 2022

• Total gross emissions decreased

-10.6% from 1,118 tCO

e to 999 tCO

between 2021 and 2022

• Total Scope 1 & 2 emissions

(Location-based) decreased -15.2%

from 1,001 tCO

e to 849 tCO

• Scope 3 emissions increased by +28.2%

from 117 tCO

e to 150 tCO

e, primarily

driven by increased Business Travel

resulting from increased staff numbers

and reduced Covid restrictions

• Carbon reporting expanded to include

market-based Scope 2 emissions and

increased Scope 3 coverage to include

Homeworking, Waste and Water Supply

Plans for 2023

Further information on The Harworth Way

and the Group’s NZC pathway can be

found on pages 64 to 77 of this Annual

Report and Harworth’s standalone NZC

Pathway Report, available on our website.

Plans for further reducing our GHG

emission data are outlined in the ‘Planet’

section of the Harworth Way, on pages

66 to 70.

Strategic Report 63

Harworth Group plc: Annual Report and Financial Statements 2022

People Communities

Planet

The Harworth Way

Our integrated approach to sustainability and social value

The Harworth Way is our framework for integrating sustainability and social value into both our business and the developments we

create. It ensures these principles are embedded across our culture, strategy and, most importantly, our approach to development from

concept to completion.

Read more onpages 71 to 74 Read more onpages 75 to 77

Read more in the Governance

Report on pages 78 to 97

The Harworth Way is critical to us making a

lasting positive impact on the environment

and our communities. This commitment to

integrate sustainability and social value into

our business is delivered through the five

pillars of The Harworth Way: the impact

pillars of Planet, Communities, People

and the supporting pillars of Governance

and Partners.

The Harworth Way is a continually

evolving framework. It is responsive to the

ever-changing needs of the environments

and communities we work within and,

alongside our strategy, guides how we

create sustainable places where people

want to live and work. Our approach

recognises that we cannot deliver our

developments in isolation: working with all

our stakeholders at all stages of the process

is fundamental to achieving our aims.

Alongside our growth strategy, we

continue to develop and improve our

understanding of the impact of our

regeneration processes. During 2022, we

carried out a full review and expansion of

the model to reflect both the key drivers

of growth outlined in our growth strategy,

and our wider sustainability commitments.

The interlocking model

The Harworth Way provides an

overarching framework to deliver an

integrated approach to sustainability

across the business through the

interlocking model.

The Harworth Way has three impact

pillars which each comprise six focus

impact areas, representing the key

drivers for delivering each pillar. Each

focus impact area is divided further

into building blocks, which are the key

workstreams to be undertaken within

the business, in order to deliver a set

of outputs. The focus impact areas and

building blocks will evolve over time to

reflect our progress and the priorities of

The Harworth Way.

Integrating the UN SDGs

Harworth is a supporter of the UN

Sustainable Development Goals

('SDGs') and a signatory to the UN

Global Compact. We have selected six

primary UN SDGs, which are closest

aligned to our strategy and operations,

and where we believe we can make the

biggest impact as a business. These have

been mapped to our focus impact areas,

as indicated on the following pages.

Focus

impact

areas

Building

blocks

Pillars

The

Harworth Way

Outputs

Strategic Report64

Harworth Group plc: Annual Report and Financial Statements 2022

The interlocking model in action

The below example shows how the building blocks and outputs interlock for the ‘Driving building efficiency and integrating energy use ’

focus impact area, which forms part of the 'Planet' pillar of the Harworth Way.

The business made a range of sustainability commitments in its 2021 Annual Report in relation to its key strategic objective of increasing

direct development on industrial & logistics sites alongside repositioning our Investment Portfolio to be modern Grade A. During 2022,

the building blocks and outputs illustrated below were developed within the framework of the interlocking model to contribute to these

aims, in particular specific targets for our industrial & logistics buildings.

Communities

People

Our

strategy

Our

partners

Planet

Improving

energy

eﬃciency in

our investment

portfolio

Driving building

eﬃciency & integrating

energy into

development

Developing

responsibly

& building

in climate

reslience

Protecting &

promoting

biodiversity

Net Zero Carbon

pathway

Pillars

How we

do business

Focus

impact

areas

Building

blocks

Outputs

Investment

portfolio

review

model

Appraisal

tools

Building

specification

Solar

delivery

model &

process

Green

lease

terms

Occupier

guides

Whole life

carbon

assessment

Competitor

analysis

Planning

template

Energy

process

Our

business

model

Whole life

carbon

assessment

Sustainability

planning

stage framework

Green lease

terms & occupier

guides

Development

energy

strategies

Commercial

building solar

strategy

Building

regulations

review &

commercial

building

specification

Our purpose,

culture &

values

Circular

economy &

whole life

carbon

Strategic Report 65

Harworth Group plc: Annual Report and Financial Statements 2022

The Harworth Way continued

Planet

We aim to minimise our environmental impact, whilst promoting climate resilience and biodiversity through our development and

regeneration activities. The application of this approach from initial concept to our role in long-term stewardship allows us to integrate

sustainability into all phases of development.

We align to our NZC commitments in the way we design and deliver both our infrastructure led masterplans and the individual buildings

within them, by improving building efficiency and integrating renewable energy into our developments. We continue to promote

innovation by using circular economy principles in our role as master developer, with an emphasis on maximising the recycling of

materials, and minimising the use of raw materials.

Planet

Minimising environmental impact,

building in climate resilience and

promoting biodiversity

Driving building

eﬃciency & integrating

energy into development

The delivery of energy efficient, resilient

buildings that meet occupiers’ demands

today and in the future

Improving energy

eﬃciency in our

investment portfolio

Enhancing specifications in our

Investment Portfolio, reducing

environmental impact, extending

asset lifespans and exceeding

regulatory requirements

Circular economy &

whole life carbon

Promoting a whole life approach

to material use and carbon

emissions through procurement,

innovative design, delivery and

long-term stewardship of our

development projects

Developing responsibly

& building in climate

resilience

Building climate resilience into

the decision-making processes for

our masterplans, development

sites and investment portfolio

Protecting &

promoting biodiversity

Integrating biodiversity into our entire

masterplan process to ensure our

developments are nature positive

Net Zero Carbon pathway

Our approach to our net zero

carbon commitments for Scope 1,

2 and 3 business travel by 2030

and all emissions by 2040

UN SDG link

Strategic Report66

Harworth Group plc: Annual Report and Financial Statements 2022

What we planned for 2022

Between 2022 and 2023 we will undertake research and detailed

planning to develop our NZC pathway, and report on our progress.

Progress in 2022

• Undertaken research and planning to gather information

and understand our overall emissions impact to guide the

publication of a NZC pathway in 2023.

• Undertaken a full review of our commercial build specification

and commenced a review of our Investment Portfolio assets

to understand their emissions and allow us to set commercial

build emissions targets for all new buildings.

• Continued to assess our wider master development emissions

and started work on the creation of a master developer whole

life carbon model that will allow us to assess fully our Scope 3

emissions in 2023.

Plans for 2023

• Develop a carbon reporting system to allow full emissions

reporting to be implemented and target the reporting of Scope

3 emissions.

• Set 2030 reduction targets for all emissions.

• Explore the creation of an internal carbon pricing mechanism on

emissions for all future development and refurbishment projects

through the establishment of a Harworth Transition Fund.

• Include a requirement for carbon emissions monitoring in all

construction contracts.

Sources of emissions

The sources of Scope 1, Scope 2 and selected Scope 3 emissions

under our current SECR Operational Boundary are shown on the

below diagram.

Company emissions cover our offices and our employee activities.

Development emissions cover: maintenance of non-adopted

infrastructure, material re-use and recycling operations undertaken

by Harworth directly.

Investment Assets emissions cover: assets where we have

operational control and long-term stewardship of country parks.

Planet

Minimising environmental

impact, building in climate

resilience and promoting

biodiversity

Net Zero

Carbon

pathway

Net Zero Carbon pathway

Our approach to reach NZC for Scope 1, Scope 2 and Scope 3 business travel by 2030 and all emissions by 2040.

Strategic Report 67

Harworth Group plc: Annual Report and Financial Statements 2022

The Harworth Way continued

Planet

Minimising environmental

impact, building in climate

resilience and promoting

biodiversity

Driving building

eﬃciency & integrating

energy into development

Improving energy

eﬃciency in our

investment portfolio

Planet

Minimising environmental

impact, building in climate

resilience and promoting

biodiversity

Protecting &

promoting biodiversity

Developing responsibly

& building in climate

resilience

Planet

Minimising environmental

impact, building in climate

resilience and promoting

biodiversity

Circular economy &

whole life carbon

What we planned for 2022

• All new industrial & logistics developments will be EPC A rated,

BREEAM Very Good and capable of being NZC in operation.

• To improve the energy efficiency of our Investment Portfolio

and explore retrofit options where possible.

Progress in 2022

• Commercial building design specification and processes

updated to meet EPC A and NZC in operation-ready status.

• All buildings delivered were BREEAM Very Good, with majority

on course for BREEAM Excellent.

• Inclusion of whole life carbon assessments and

construction-related carbon targets in new building designs.

• Piloted NZC in construction units at Bardon Hill.

• All occupiers offered green lease terms and occupier guides

covering NZC in operation status.

• Assessment tools and templates created for carbon and retrofit

assessment across our Investment Portfolio.

• All new commercial buildings delivered into the Investment

Portfolio to include rooftop solar PV provision.

Plans for 2023

• Refinement of commercial building specifications.

• Creation of emissions targets for our BTR residential product.

• Launch occupier engagement programme including review of

energy usage and emissions from Investment Portfolio.

Gateway 36 case study

At Gateway 36 in Barnsley, we have worked with our construction

partner to create an integrated, sustainable new commercial

development delivered in phases through innovative earthworks

treatments. Our approach minimises material use, reducing the

need for emissions intensive foundation solutions, and material

import and export, whilst maximising the use of circular economy

principles across all phases.

The individual buildings incorporate energy efficiency, energy

provision and NZC measures including:

• EPC A ratings and BREEAM Very Good/Excellent certifications

• roof-mounted solar PV to meet office energy demand, and

designed to allow full coverage of roof-mounted solar PV

• LED lighting and electricity-based heating systems including

variable refrigerant flow systems featuring simultaneous

heating and cooling as well as heat-recovery capabilities

• EV charging points

• rainwater harvesting and water leak detection systems,

reducing water usage and emissions at source

• SUDS to manage water quality and surface water run off,

whilst reducing embodied emissions through a reduction in

construction materials in infrastructure

Driving building efficiency & integrating energy into development;

improving energy efficiency in our Investment Portfolio

We aim to deliver energy efficient, resilient buildings that meet occupiers' demands today and in the future. We are also

enhancing environmental specifications in our Investment Portfolio assets to support the transition to Grade A.

• Identify sequestration opportunities within our existing portfolio.

• Review of our existing energy supply agreements, exploring

opportunities to transfer to renewable and low emission tariffs.

• Offer all new occupiers on new developments power purchase

agreements from rooftop solar PV provision.

Strategic Report68

Harworth Group plc: Annual Report and Financial Statements 2022

Planet

Minimising environmental

impact, building in climate

resilience and promoting

biodiversity

Driving building

eﬃciency & integrating

energy into development

Improving energy

eﬃciency in our

investment portfolio

Planet

Minimising environmental

impact, building in climate

resilience and promoting

biodiversity

Protecting &

promoting biodiversity

Developing responsibly

& building in climate

resilience

Planet

Minimising environmental

impact, building in climate

resilience and promoting

biodiversity

Circular economy &

whole life carbon

What we planned for 2022

Develop metrics for measuring and enabling us to report more

fully the environmental impacts of our activities.

Progress in 2022

• Retrospective reviews of remediation schemes to understand

the carbon emissions from demolition and remediation both

within our operational control and beyond our boundaries

including how we adopt circular economy principles.

• Undertook carbon emissions reduction assessment from

pulverised fuel ash ('PFA') reuse at Ironbridge.

• All remediation contracts stipulated the re-use of materials

on site and recycling offsite in accordance with good waste

management practice.

Plans for 2023

• Develop a master developer whole life carbon model,

identifying appropriate accreditation with a conclusion of the

review of our remediation and infrastructure delivery to improve

on best practice in relation to carbon emissions for our circular

economy based design briefs.

• Whole life carbon assessments incorporated into all upgrade

and retrofit design briefs for commercial buildings.

Pheasant Hill Park case study

Brownfield remediation is, despite its wider sustainability

benefits, an emissions-intensive activity. Circular economy

principles are embedded into our design process for

remediation with a ‘no-material in, no material out’ approach as

our starting point.

At Pheasant Hill Park, we are creating a new community of up to

1,200 new homes with extensive nature recovery from the spoil

heap of the former Rossington Colliery. Our circular economy

approach has minimised emissions by:

• reusing 99% and 1.7 million m

of material within the

development

• using 360,000m

of material from the site for the creation of

the Great Yorkshire Way link road

• reusing 51,000m

of peat as part of the landscaping of the site

to capture emissions

• naturalising the former colliery spoil heap, by reusing over

3,000 tonnes of sewage cake and other bio-additives for soil

making on the country park

• removing around 16,000m

of old concrete structures that

were recycled into the works, saving the import of natural

aggregate, reducing road traffic and use of quarry stone

reserves

• reusing initially unusable materials from one phase

of remediation on later phases following drying and

reprocessing

Circular economy & whole life carbon

We have a track record of embedding circular economy principles in the design and delivery of developments. We drive energy

efficiency in buildings and integrate nature into our developments through the remediation we undertake, the infrastructure we

provide and our placemaking across the full life cycle of a development.

• Incorporate NZC criteria into the procurement of all

construction contracts.

• No new gas infrastructure provided for heating on our new

developments and review transition of existing developments

from gas infrastructure for heating.

Strategic Report 69

Harworth Group plc: Annual Report and Financial Statements 2022

The Harworth Way continued

Planet

Minimising environmental

impact, building in climate

resilience and promoting

biodiversity

Driving building

eﬃciency & integrating

energy into development

Improving energy

eﬃciency in our

investment portfolio

Planet

Minimising environmental

impact, building in climate

resilience and promoting

biodiversity

Protecting &

promoting biodiversity

Developing responsibly

& building in climate

resilience

Planet

Minimising environmental

impact, building in climate

resilience and promoting

biodiversity

Circular economy &

whole life carbon

What we planned for 2022

• All new masterplans will incorporate renewable energy

infrastructure.

• We will identify a series of metrics that we will use to report on

the biodiversity initiatives and actions we take.

Progress in 2022

• Commercial building design specification and processes

updated to include renewable energy as part of the base

specification.

• Sustainability planning stage framework created and

implemented across our planning stage projects, which

includes renewable energy assessment.

• Devised an Energy & Natural Capital strategy.

• All developments include SUDS facilities.

• Targets identified to cover biodiversity net gain.

• Our first biodiversity net gain scheme has been agreed and

commenced at Gateway 36 in partnership with Barnsley

Metropolitan District Council.

• Completion of a significant environmental and ecological

improvement scheme at Rufford.

Plans for 2023

Biodiversity net gain scheme targets to be used as reporting

metrics for the business.

Protecting & promoting biodiversity; developing responsibly and

building-in climate resilience

As a master developer we have the opportunity to understand and integrate biodiversity into our developments from the outset of

development. We have a track record of restoring and delivering hundreds of acres of green space, rewilding, heathland, woodland and

integrated ecological improvements for wildlife.

Gateway 36 case study

Biodiversity Net Gain (‘BNG’) is a strategy to develop land and

contribute to the preservation and promotion of nature. It is a way

of making sure the habitat for wildlife is in a better state than it was

before development.

At Gateway 36, the former Rockingham Colliery is being transformed

into a major hub for logistics and manufacturing in Yorkshire. In co-

ordination with the local council, we have committed to delivering

a minimum of 10% BNG on the site, in advance of the requirement

being mandated by the Environment Act 2021.

We have been able to deliver this requirement both as part of on-

site habitat retention and enhancement, and off site, as we own a

parcel of land next to the site known as Barrow Colliery, where we

were able to identify 12.8 acres of space that could benefit from

significant enhancement.

Our enhancements included the creation of new ponds and wet

woodlands as well as enhancements to areas of existing neutral

grasslands and mixed scrub, improving them to a good condition.

These measures have brought several biodiversity benefits, and

the site has subsequently been identified as a Site of Special

Scientific Interest.

Strategic Report70

Harworth Group plc: Annual Report and Financial Statements 2022

Communities

We aim to create, strengthen and support communities through our regeneration and development processes both today and in the

future. As a master developer we create new communities through our new developments and benefit existing local communities in the

regions where we work. Our developments create economic benefit through their regenerative effects at both a local and regional level,

supporting jobs, housing and investment.

We also have a long track record of delivering social value through the regeneration we have undertaken. Integrating homes, jobs,

amenities and green space within a single community has long been a driver of our masterplans. Our developments also promote

healthier lifestyles and integrate sustainable transport.

Communities

Creating, strengthening and

supporting the communities we

create and work within both

today and in the future

Creating sustainable

communities &

preserving heritage

Incorporating integrated neighbourhood

principles alongside a mixture of tenure

within our new developments, whilst

driving catalytic impacts and integration

beyond our development boundaries

Promoting healthier

lifestyles

Masterplanning for health and

wellbeing, designing &

measuring the impact and social

value benefit to all stakeholders

Creating inclusive

spaces

Capacity building and activating

our sites by working with our

communities through

placemaking, events and

community activities before,

during and after development

Holistic travel

planning

Integrating the evolving needs of

sustainable travel planning,

working with a wide range of

partners to deliver positive travel

experiences & providing annual

reporting on activity to inform our

decision making

Supporting jobs

Economic and social value

assessments, forecasting the local

and regional economic and social

impacts for each development

Growing economies

Measuring our regeneration impact on

deprivation and the positive economic

ripple effect through our supply chain,

occupiers and wider stakeholders

UN SDG link

Strategic Report 71

Harworth Group plc: Annual Report and Financial Statements 2022

Communities

Creating, strengthening and

supporting the communities

we create and work within

both today and in the future

Growing

economies

Supporting

jobs & GVA

Communities

Creating, strengthening and

supporting the communities

we create and work within

both today and in the future

Creating sustainable

communities &

preserving heritage

Creating inclusive

spaces

Communities

Creating, strengthening and

supporting the communities

we create and work within

both today and in the future

Promoting healthier

lifestyles

Holistic travel

planning

What we planned for 2022

• Cycling infrastructure at Waverley and Thoresby Vale to be

delivered.

• Plans to be submitted for new football pitches at Moss Nook.

• Additional cycle and footpath infrastructure to be provided

across a number of sites.

• To explore and encourage low emission transport options.

Progress in 2022

• Cycle infrastructure delivered at Waverley and Cadley Park.

• Completion of a new spine road at Moss Nook, with

segregated pedestrian and cycle routes and landscaping

features. The road provides a more direct connection between

the site and the amenities provided in St Helens town centre.

• Commercial building design specification and processes

updated to incorporate increased EV charging.

• Plans approved for a new primary health centre at Waverley,

which will have capacity for 6,000 patients.

• Full review of our travel plan measures on existing sites

undertaken and best practice identified.

• Began consultation with regional transport stakeholders for our

Benthall Grange site in Ironbridge, exploring opportunities to

create new sustainable travel networks.

Logistics North case study

Our travel planning approach helps our sites to become sustainable travel

exemplars. By reducing the environmental impact of travel, we create desirable

places to work and live and we achieve this by ensuring our travel plans are

secured, monitored, and delivered as effectively as possible.

Logistics North is one of the largest and most successful developments of its kind

to be brought forward in the north of England. With up to 7,000 people working

across the site, the additional travel movements caused by commuting are a source

of additional traffic and emissions. We addressed this challenge through the design

and implementation of an integrated travel plan for the entire development.

Working closely with Mosodi, a sustainable travel adviser, Bolton MBC,

Greater Manchester Passenger Transport Executive and Transport for Greater

Manchester (‘TfGM’), we produced an integrated travel plan containing a

package of measures tailored to the needs of the site and promoted greener,

cleaner travel choices by reducing reliance on the car. The travel plan is

recognised as an exemplar by TfGM and is included in its travel plan tool.

We have also worked with Mosodi, to implement its “1dayaweek” behavioural

change campaign, which is designed to provide real, cost-saving solutions to

congestion, parking pressures and site accessibility.

Promoting healthier lifestyles and integrating holistic travel planning

Recognising that communities need varied and high-quality infrastructure to thrive, our masterplans address the health and wellbeing of

residents and those working across our sites. As a result, we provide facilities to promote healthier, greener lifestyles and wellbeing, and

integrate sustainable travel planning alongside partners.

The Harworth Way continued

Plans for 2023

• Monitor usage of transport systems across our sites to evaluate

effectiveness and identify areas for improvement.

• Further enhance our integrated travel plans within all new

masterplans.

Strategic Report72

Harworth Group plc: Annual Report and Financial Statements 2022

Communities

Creating, strengthening and

supporting the communities

we create and work within

both today and in the future

Growing

economies

Supporting

jobs & GVA

Communities

Creating, strengthening and

supporting the communities

we create and work within

both today and in the future

Creating sustainable

communities &

preserving heritage

Creating inclusive

spaces

Communities

Creating, strengthening and

supporting the communities

we create and work within

both today and in the future

Promoting healthier

lifestyles

Holistic travel

planning

What we planned for 2022

• Olive Lane at Waverley to provide amenities including a

supermarket, restaurants, a gym and pharmacy.

• Planning to be submitted for two schools, at South East

Coalville and Thoresby Vale.

Progress in 2022

• Planning submitted for ‘Forest Schools’ at South East Coalville

and at Thoresby Vale, which maximise opportunities for

learning outside the classroom, and integrate sustainability

features.

• Launched our single-family BTR portfolio as part of our strategic

objective to diversify our residential products. These rental

homes will further enhance the vibrancy and inclusivity of

developments.

• Supported the creation of a new children's book, "Cones and

The New Community" to educate primary school children

about the role of Harworth as a master developer and the

history of the Waverley site.

Plans for 2023

• Progress the development of our Olive Lane heart of the

community site at Waverley.

• Explore other forms of mixed tenure for delivery at our sites, such

as senior living, working with strategic partners where appropriate.

'Cones and The New Community' children's book

case study

“Cones and The New Community” is the latest in a series of books written

by Chris Madeley about the construction and infrastructure industry. The

series has recently been recognised by CSR-A, the UK’s only accreditation

body for social responsibility.

Harworth has supported this project to help children gain an

understanding of community development and what can be achieved

in areas that may just need vision and determination to build something

special. The book also provides an accessible history of the Waverely

site, and has helped to raise awareness of Harworth's role within our

communities.

By ‘bringing traffic cones to life’ the author has created a means of

communicating with children free from the constraints of culture, colour,

race and religion: within each story all Cones are equal, are everywhere

and have a life of their own.

Harworth has distributed 2,500 copies of the book to school students

and residents at Waverley, local libraries and residents at Harworth sites

across the regions. This engagement has given residents a further insight

into our work as master developer and includes them in the process.

Creating sustainable communities and preserving heritage; creating inclusive spaces

Incorporating integrated neighbourhood principles alongside a mixture of tenure within our new developments, whilst driving impacts

and integration beyond our development boundaries. We also activate our sites by working with communities through placemaking,

events and community activities.

Strategic Report 73

Harworth Group plc: Annual Report and Financial Statements 2022

The Harworth Way continued

Communities

Creating, strengthening and

supporting the communities

we create and work within

both today and in the future

Growing

economies

Supporting

jobs & GVA

Communities

Creating, strengthening and

supporting the communities

we create and work within

both today and in the future

Creating sustainable

communities &

preserving heritage

Creating inclusive

spaces

Communities

Creating, strengthening and

supporting the communities

we create and work within

both today and in the future

Promoting healthier

lifestyles

Holistic travel

planning

What we planned for 2022

• Our Bardon Hill scheme to support approximately 530 new

jobs once completed.

Progress in 2022

• Completed 332,000 sq. ft of employment space at Bardon Hill

and a further 100,000 sq. ft at the AMP, supporting new job

opportunities across the regions.

• Started on-site with 203,000 sq. ft of employment space at

Gateway 36 and the AMP.

• Commissioned Ekosgen, an independent economic research

consultancy, to appraise the social and economic benefits of

the regeneration and development Harworth has delivered and

plans to deliver. It found that our portfolio has the potential to:

– support up to 73,000 jobs (2021: 72,000)

– deliver Gross Value Added of £4.6bn (2021: £4.2bn)

– generate up to £82.3m in business rates (2021: £75.4m)

– deliver up to £56.1m in council tax receipts

• Supported the construction of a new hotel at Waverley and a

supermarket at South East Coalville.

• Undertook economic and social value assessments on new

acquisitions.

Case study

Harworth is investing and supporting employment space in some

of the most deprived parts of the UK, where levels of economic

growth and investment have typically been below average.

The table below uses data from Ekosgen and estimates the

proportion of new jobs supported through Harworth’s existing

developments and pipeline within the most deprived areas

of England. It shows that almost two-thirds of the jobs to

be supported are in areas more deprived than the national

average, underlining Harworth's commitment to these areas

and providing a significant boost to levelling up these regions.

Harworth’s support for job creation in deprived areas

(using indices of Multiple Deprivation (England 2019))

Area deprivation decile

Cumulative % of jobs supported

by Harworth pipeline

10% most deprived (Decile 1) 15%

20% most deprived (Decile 2) 16%

30% most deprived (Decile 3)

29%

40% most deprived (Decile 4) 41%

50% most deprived (Decile 5) 64%

Growing economies; supporting jobs

Ensuring our developments have a positive economic and social impact through supporting jobs, investment and innovation throughout

our regions, and taking steps to measure this impact on our supply chain, occupiers and other stakeholders.

Plans for 2023

• Completion of employment space currently under

construction.

• Progress development of new pre-let and build-to-suit

opportunities.

• Continue and further develop the use of economic and social

value assessments to assess new acquisition opportunities.

Strategic Report74

Harworth Group plc: Annual Report and Financial Statements 2022

People

We aim to be an employer of choice, creating an inclusive, diverse, and empowered workplace culture in which our people can develop

and realise their full potential. Central to this is the prioritisation of employee health and wellbeing and ensuring our people remain inspired,

recognised and engaged.

We have embedded a “One Harworth” culture throughout our business. This underlines our collaborative approach to delivering and

managing our sites and succeeding as one team. Our culture is underpinned by the three Harworth values: taking pride in our people &

partnerships, delivering creative solutions, and acting with integrity & trust.

People

We create an inclusive, supportive

and empowered workplace culture

in which people can develop

and fulfil their potential

Promoting

engagement & happiness

Providing workplace conditions that

are fully aligned with the needs of our

people, demonstrating a positive,

causal link between being happy and

high performance

Being

socially responsible

Promoting a corporate

character with a strong desire

to help each other, our

communities and our planet

Wellbeing

Putting wellbeing at the heart of

our business success by creating a

healthy workplace where

colleagues feel comfortable in

their job, have meaningful

professional relationships and

take pleasure in their work

Employee

experience

Enabling everyone to realise their

potential by consistently

delivering a great employee

experience through a

progressive, transparent,

equitable and inclusive approach

Prioritising

health & safety

Active management of risks

across our business and

development activities ensuring

the health & safety of our

people, contractors, communities

and wider stakeholders

Culture

Driving a high-performance culture

with highly motivated employees,

which attracts and retains the best

talent, enables better performance

and delivers better outcomes for our

people and the people we serve

UN SDG link

Strategic Report 75

Harworth Group plc: Annual Report and Financial Statements 2022

The Harworth Way continued

People

We create an inclusive,

supportive and empowered

workplace culture in which

people can develop and

fulfil their potential

Being

socially

responsible

Promoting

engagement &

happiness

Culture

Employee

experience

People

We create an inclusive,

supportive and empowered

workplace culture in which

people can develop and

fulfil their potential

Wellbeing

Prioritising

health & safety

What we planned for 2022

• We will continue to make Harworth a great place to work,

through engagement, prioritising the physical and mental

wellbeing of staff, our market-leading people policies,

promoting diversity, and providing career opportunities.

• We will take steps to increase share ownership amongst

employees, and introduce an ESG target that impacts

Group-wide bonuses.

Progress in 2022

• ESG targets included in bonus scheme for all employees.

• Delivered our first equity, diversity and inclusion ('ED&I')

Company-wide training.

• Supported an initial cohort through our first Leadership

Development Programme.

• Successfully completed our ‘Will It Make The Boat Go Faster’

initiative to deliver improvements to ways of working in support

of our strategic goals.

• Extended participation in our Restricted Share Plan ('RSP') such

that 56% of employees were granted an award in 2022, and

have increased the RSP opportunity for all participants.

• Increased the annual value of free shares awarded under our

Share Incentive Plan to the statutory maximum of £3,600 of free

shares, and started to introduce offers of Partnership Shares

and Matching Shares under the scheme.

• Successfully recruited and onboarded over 30 new colleagues,

increasing our headcount by c.40% to support our business

growth strategy.

• Donated £34k and 147 volunteering hours to a number of local

and national charities.

• Researched and developed a ‘People and Enabling Excellence

Strategy’ ready for deployment from 2023 .

• Achieved 93% in our employee engagement survey and an

above external benchmark score.

Plans for 2023

• Continue to cultivate a diverse, inclusive and equitable

organisation where everyone has the opportunity to innovate

and succeed.

• Develop the Harworth Academy, supporting the learning and

development of our people and continued future success of

our organisation.

• Create a destination workspace to enhance our ability to

co-create, collaborate and concentrate.

• Introduce new ways of working to continue the drive towards

efficiency and optimisation of resources.

Introduction of a menopause and

hormonal change policy case study

Harworth seeks to support employee's wellbeing at every

stage in life. We know that many people feel uncomfortable

talking about hormonal change, which means that often

people suffer in silence while they or their loved ones

experience a wide range of symptoms that can affect their

physical as well as mental health.

During the year, we introduced a policy designed to ensure

people suffering with menopausal symptoms can feel

empowered to ask for adjustments to ease such symptoms

without embarrassment, can carry out their daily role in

a safe working environment whether at home or in the

office, and can have open discussions with colleagues and

managers so that they feel part of an inclusive work culture.

Employees suffering symptoms are encouraged to

complete a wellbeing action plan to identify how their

menopausal symptoms are impacting them at work, and

use this to discuss any changes they might need with

their manager. By creating a plan, employees can identify

what works and doesn’t work for them in managing their

menopause transition, what support they might need from

their manager and what they can do to support their own

health and wellbeing.

Maintaining a great culture and employee experience, promoting engagement and

happiness and being socially responsible

Strategic Report76

Harworth Group plc: Annual Report and Financial Statements 2022

People

We create an inclusive,

supportive and empowered

workplace culture in which

people can develop and

fulfil their potential

Being

socially

responsible

Promoting

engagement &

happiness

Culture

Employee

experience

People

We create an inclusive,

supportive and empowered

workplace culture in which

people can develop and

fulfil their potential

Wellbeing

Prioritising

health & safety

What we planned for 2022

• Continue to make Harworth a great place to work, through

engagement, prioritising the physical and mental wellbeing of

staff, our market-leading people policies, promoting diversity,

and providing career opportunities.

• We will aim for zero RIDDOR-reportable accidents on

Harworth sites.

Progress in 2022

• Trained mental health first aiders.

• Launched menopause policy and trained menopause champion.

• Established monthly drop-in sessions to discuss people

matters.

• Launched a Wellness and Healthy Workplace survey.

• Awarded a one-off ex-gratia payment to all colleagues to help

with rising energy costs.

• There were no RIDDOR reportable accidents at our sites for

either Harworth personnel or contractors working on our

behalf.

Plans for 2023

• Introduce a financial wellbeing support programme to help

colleagues through the challenges presented by the current

macroeconomic environment.

• Introduce an Employee Engagement Forum to encourage more

colleagues to share ideas, thoughts and feedback on ways of

working and opportunities for improvement.

• Introduce a monthly wellbeing bulletin with tips and techniques

to support employee wellness at work and at home.

• Introduce a fertility support policy.

• Begin refurbishment of our head office in Rotherham.

• Provide interactive health & safety training for all of our employees

together with specific training on the Construction Design and

Management Regulations, supplemented by online training.

• Run a compulsory health & safety day for all employees.

• Conduct a mock emergency to ensure organisational

arrangements and responses to health & safety matters are

suitable.

The Strategic Report has been approved by the Board of Directors

and signed on its behalf by:

Chris Birch

General Counsel and Company Secretary

Prioritising wellbeing and health & safety

Strategic Report 77

Harworth Group plc: Annual Report and Financial Statements 2022

Report

Governance

“ We are confident that, set in the

context of an established and

effective corporate governance

structure, our growth strategy

is well placed to navigate

the current macroeconomic

challenges and adapt to the

changing risk environment.”

Alastair Lyons

Chair

Contents

Chair’s introduction 79

Board of Directors and

Company Secretary 82

Statement of corporate governance 86

Nomination Committee report 98

Audit Committee report 106

ESG Committee report 113

Directors’ remuneration report 115

Directors’ report 134

Statement of Directors’ responsibilities 138

Harworth Group plc: Annual Report and Financial Statements 2022

Chair’s introduction

“ During 2022, the Board has continued

to focus on supporting the business in

delivering against its growth strategy,

whilst upholding high standards of

corporate governance.”

Alastair Lyons

Chair

Dear Shareholder,

On behalf of the Board, I am pleased to

present this year’s Corporate Governance

Report.

In September 2021, our then new Chief

Executive, Lynda Shillaw, unveiled our

strategy to grow Harworth to £1bn of

EPRA NDV. During 2022, the Board has

continued to focus on supporting the

business in delivering against its growth

strategy, whilst upholding high standards

of corporate governance, with notable

progress in the key areas outlined below.

The Board and the Executive have had

to navigate a challenging, uncertain

and unpredictable macroeconomic and

geopolitical environment and conditions are

likely to remain so for some time. We are,

however, confident that, set in the context

of an established and effective corporate

governance structure, our growth strategy

is well placed to navigate these challenges

and adapt to the changing risk environment.

The areas identified below are developed

in more detail in the Strategic Report

(pages 1 to 77) and in the balance of this

Corporate Governance Report, which

comprises: the Statement of Corporate

Governance, the Nomination Committee

Report, the Audit Committee Report, the

ESG Committee Report, the Directors’

Remuneration Report, the Directors’

Report, and the Statement of Directors’

Responsibilities.

Our Strategy

When formulating our strategy, the Board

recognised that the aim of growing the

business to £1bn of EPRA NDV would

require material shifts in the pace and scale

of what we do. During the period, the

Board has supported this change in pace

by endorsing the following operational

decisions:

• To increase the depth and capability

of both our management and our

employees to deliver against our

strategy, at the same time enhancing

our offering to employees to incentivise,

develop and retain our talented

workforce.

• To sign a new five-year £200m RCF in

early 2022, affording greater flexibility

and additional liquidity to fund the

delivery of our strategy.

• To launch a single-family Build-to-

Rent (‘BTR’) product to diversify the

range of products on our residential

development sites.

• To complete a number of acquisitions to

grow our strategic landbank.

• To set in train several direct

development projects to unlock

additional value from our industrial &

logistics pipeline.

• To sell certain of the assets within our

investment portfolio as we reposition

the portfolio to modern Grade A.

Central to what the Board has spent

time on this past year has been to review

progress against the strategic objectives

in support of our Purpose – the creation

and delivery of sustainable places where

people want to live and work.

Sustainability

Our commitment to sustainability is

embedded in the Group’s culture,

strategy and operations. Our longstanding

approach was first articulated as The

Harworth Way in 2019, and in 2021 we

both established our ESG Committee and

introduced an ESG measure into the Group

targets for our annual bonus scheme for

all employees. In H1 2022, we appointed

Harworth’s first Director of Sustainability,

Peter Henry, who had previously been one

of our Regional Directors together with

Marzia Zafar, who has significant expertise

in this area, as a Non-Executive Director.

During the period, we have focused on the

evolution of several elements of Harworth’s

ESG framework. This includes the

development of the Group’s Sustainability

Framework through the expansion of

the Harworth Way (see further on pages

64 to 77), as well as the principles of the

Company’s Net Zero Carbon (‘NZC’)

Pathway, which has been published

alongside this Annual Report and can be

found on the Company’s website.

Harworth Group plc: Annual Report and Financial Statements 2022

Governance Report

Chair’s introduction continued

Risk and assurance

Like all UK companies, the Board has had

to monitor and manage risk, and make

decisions, against an unpredictable and

continuously evolving macroeconomic

and geopolitical backdrop. As macro

and market conditions have deteriorated,

the Board has determined that the

Group’s “residential and commercial

markets” principal risk has increased from

“medium” to “high”. There have been

some other changes to the profile of our

principal risks, which are explained on

page 45, and the Board continues to

monitor closely all principal risks and the

adequacy of the mitigating actions that

have been identified. Notwithstanding an

adverse change in the overall profile of the

Group’s principal risks, the Board remains

confident in the resilience of Harworth’s

business model, financial position, and

management effectiveness to identify and

then take appropriate mitigating actions.

A detailed explanation of the Group’s risk

management framework, the principal risks

and uncertainties affecting the Group, and

the steps we are taking to mitigate these

risks, can be found on pages 43 to 53.

The Group has recently reviewed its

assurance procedures in the context of

its continuing growth and in late 2022

established an internal audit function to

reduce its reliance on external review

of the effectiveness of its framework of

management controls. An internal audit

plan for 2023 has been agreed and

the Head of Internal Audit has a direct

reporting line to the Audit Committee.

This additional resource has been long

planned, and is timely, forming part of our

preparation for the implementation of the

audit and corporate governance reforms.

See further details in the Audit Committee

Report on page 111.

People, remuneration,

and culture

Employee engagement is always high

on the Board’s agenda, and has been

especially important during the period

given operational changes to support

the growth strategy, not least a material

increase in the size of the workforce,

as well as the external uncertainty

affecting everyone created by the current

macroeconomic environment. The

Non-Executive Directors participated in

a very well attended Employee AGM in

September 2022, at which employees put

questions directly to each Board member.

The Board also undertook regional and

site visits, joined employees for informal

lunches and dinners, and continued to

receive feedback from the Chief Executive

on matters affecting our people at each

Board meeting.

During the second half of 2021, the

Remuneration Committee undertook the

triennial Remuneration Policy (‘Policy’)

review, which concluded in our revised

Policy being approved by the Board in

February 2022 and by shareholders at our

AGM in May 2022. No changes to this

Policy are proposed this year.

Harworth Group plc: Annual Report and Financial Statements 2022

Governance Report

A summary of the Policy is set out on

pages 119 to 121, and the Policy is set out

in full on pages 127 to 137 of the 2021

Annual Report. Whilst the Committee

makes remuneration decisions in

respect of the Executive Directors and

wider Senior Executive team, those

decisions are informed by the reward

arrangements for the wider workforce,

and the Committee Chair attended a

Group-wide communication event to

explain the objectives, rationale for, and

operation of the revised Policy. The Board

is keen to promote and facilitate share

ownership throughout the workforce to

foster stewardship and to align the interests

of employees and shareholders, whilst also

allowing our employees to share in the

future success of Harworth. In pursuit of

this, the Committee approved an extended

application of both the all-employee

Share Incentive Plan and the discretionary

Restricted Share Plan.

The Board is acutely aware of the

cost-of-living crisis and has sought to

provide support to employees where the

burden is most challenging. We made a

one-off non-contractual payment of £2,000

in December 2022 to all employees

(excluding the Senior Executive). For

2023, the Remuneration Committee

approved variable salary increases relative

to role seniority, with employees on lower

salaries receiving a proportionately higher

increase.

Board composition

Given the relatively short tenures of our

Executive and Independent Non-Executive

Board members, succession planning did

not feature as prominently on the Board’s

agenda as in previous years. That said,

in June 2022, the Board was delighted

to announce the appointment of Marzia

Zafar as an additional independent

Non-Executive Director following a

recruitment process led by the Nomination

Committee. This appointment was

prompted by our 2021 external Board

effectiveness review, which recommended

that the Board remain open to recruiting a

Non-Executive Director with different skills

and experience. Marzia brings to Harworth

a wealth of experience in sustainability,

having spent over 20 years working on

policies and strategies to enable energy

transition across many sectors.

In addition, whilst all appointments to the

Board are based on merit, it is testament

to Harworth’s commitment to diversity and

inclusion that the appointment of Marzia

is a first step in improving ethnic minority

representation at Board level. We hope

this will demonstrate to our existing and

prospective employees that the Board

remains committed to enhancing diversity

(in its widest form) at all levels of the

business.

Board evaluation

As is good practice, I led an internal

evaluation of the Board’s effectiveness in

Q4 of 2022. The key conclusions from

that exercise were discussed by the Board

in January 2023 and an action plan to

implement recommendations has been

agreed. This followed an external review

of Board effectiveness in Q4 of 2021. The

agreed recommendations from this recent

internal evaluation are summarised in the

Statement of Corporate Governance on

page 97.

Annual General Meeting

This year, we will be holding our first partly

virtual Annual General Meeting (‘AGM’)

on Tuesday 23 May 2023 at 10:00 am

with the meeting being webcast live. For

statutory purposes, the place of meeting

will be The Bessemer Conference Room,

AMP Technology Centre, Advanced

Manufacturing Park, Brunel Way, Waverley,

Rotherham S60 5WG. The Chair, Chief

Executive, Chief Financial Officer and

Company Secretary will be at this location,

to meet with any shareholders who still

wish to attend in person, with other

Directors joining online. Shareholders

that view the AGM online will not be

able to vote during the meeting but are

encouraged to vote in advance.

The AGM is a key date in the Board’s

calendar, and by making the meeting

available online the Board hopes to

increase levels of shareholder engagement

by providing increased opportunity

to pose questions to Board members.

Questions can be submitted via the

webcast facility both during and in advance

of the meeting. See page 97 for further

detail on the AGM, including the ways

to submit voting instructions before the

meeting.

Alastair Lyons

Chair

13 March 2023

Harworth Group plc: Annual Report and Financial Statements 2022

Governance Report

Board of Directors

Alastair Lyons

Chair

Date of appointment

07/03/2018

Length of service

5 years 1 month

Independent

Yes

Committee Membership

(Chair)

Skills and Experience

Alastair is Chair of Welsh Water and Vitality

UK. He was Chair of the Admiral Group

from 2000 to 2017, Deputy Chair of Bovis

Homes from 2008 to 2018, Chair of Serco

from 2010 to 2015 and of Towergate

Insurance from 2011 to 2015. Previously

in his executive career, Alastair was Chief

Executive of the National Provident

Institution and the National and Provincial

Building Society, Managing Director of

the Insurance Division of Abbey National

plc and Director of Corporate Projects at

National Westminster Bank plc. He has a

broad base of business experience with

a particular focus on the housing and

insurance industries. He was awarded the

CBE in 2001 for services to social security

having served as a Non-Executive Director

of the Department for Work and Pensions

and the Department of Social Security, and

he was also a Non-Executive Director of the

Department of Transport.

External appointments

Chair of Welsh Water (Dŵr Cymru) and

Vitality UK.

Lynda Shillaw

Chief Executive

Date of appointment

01/11/2020

Length of service

2 years 5 months

Independent

Committee Membership

Skills and Experience

Prior to Lynda’s appointment as Chief

Executive, she was Group Property

Director at Town Centre Securities plc

where she led the management of its

land and property and its development

pipeline. Before that she was Divisional

CEO, Property at the Manchester

Airports Group (‘MAG’), where she was

responsible for MAG’s investment portfolio

and development land bank, including its

“Airport City” joint venture. This followed

a long career managing both investment

and development real estate portfolios for

BT and Co-operative Group before joining

Lloyds Banking Group as Global Head of

its Real Estate lending division.

Lynda is a Non-Executive Director and

Senior Independent Director of Vivid

Housing Association, and is also Chair of

the BPF Regional Policy Committee and

interim Chair of the SYMCA Innovation

Board. She was also a Non-Executive

Director of The Crown Estate from January

2018 until December 2021.

External appointments

Non-Executive Director of Vivid Housing

Association.

Katerina (Kitty) Patmore

Chief Financial Officer

Date of appointment

01/10/2019

Length of service

3 years 6 months

Independent

Committee Membership

(Chair)

Skills and Experience

Prior to joining Harworth, Kitty was

Director with responsibility for Finance and

Operations at Harwood Real Estate, which

managed one of the largest private rented

housing investment portfolios in the United

Kingdom. She led the finance function

with responsibility for investor relations

and capital markets, including leading an

LSE main market fundraising process. Kitty

started her career in banking at Barclays

specialising in structured real estate finance

before moving into real estate mezzanine

finance across the UK and Europe for a

private debt fund, DRC Capital.

Kitty is also a Non-Executive Director of

LondonMetric Property plc.

External appointments

Non-Executive Director of LondonMetric

Property plc.

Harworth Group plc: Annual Report and Financial Statements 2022

Governance Report

Angela Bromfield

Senior Independent Director

Date of appointment

01/04/2019

Length of service

4 years

Independent

Yes

Committee Membership

(Chair)

Skills and Experience

Angela is a Non-Executive Director at

Marshalls plc, where she Chairs the

Remuneration Committee. She is also

the designated employee engagement

NED and is a member of the Nomination

and Audit Committees. Until June 2022,

she was also a Non-Executive Director at

Churchill China plc, where she chaired

the Remuneration Committee and was

a member of the Nomination and Audit

Committees.

Angela has extensive commercial strategy,

marketing and communications executive

experience. She was Strategic Marketing

& Communications Director at Morgan

Sindall plc until 2013 and prior to that held

senior roles at the Tarmac Group, Premier

Farnell plc and ICI plc.

External appointments

Non-Executive Director of Marshalls plc.

Patrick O’Donnell Bourke

Non-Executive Director

Date of appointment

03/11/2020

Length of service

2 years 5 months

Independent

Yes

Committee Membership

(Chair)

Skills and Experience

Patrick is a Non-Executive Director and

Chair of the Audit Committee of Pantheon

Infrastructure plc and is also Chair of Ecofin

US Renewables Infrastructure Trust plc. He

was a Non-Executive Director of Calisen

plc from January 2020 until March 2021,

and a Non-Executive Director of Affinity

Water Limited from 2013 to 2020.

Patrick has significant senior international

experience in investing in, and managing,

infrastructure and utilities. His most recent

executive role was that of Group Finance

Director for John Laing Group plc from

2011 to 2019. Prior to that he was Group

Finance Director of Viridian Group plc

from 2000 to 2006, before becoming

Group Chief Executive from 2007 to 2011

after Viridian was taken private. Previously,

he was Group Treasurer for Powergen

plc and spent nine years in investment

banking with Barclays de Zoete Wedd

and Hill Samuel, having qualified as a

chartered accountant with Peat Marwick

(now KPMG).

External appointments

Chair of Ecofin US Renewables

Infrastructure Trust plc and Non-Executive

Director of Pantheon Infrastructure plc.

Key

Nomination Committee

Remuneration Committee

ESG Committee

Disclosure Committee

Audit Committee

Ruth Cooke

Non-Executive Director

Date of appointment

19/03/2019

Length of service

4 years 1 month

Independent

Yes

Committee Membership

Skills and Experience

Ruth is currently Chief Executive of

GreenSquareAccord, a housing

association operating across the North,

Midlands and South West. Before that,

she was Finance Director (from 2008 to

2012) and then Chief Executive (from

2012 to 2018) of Midland Heart, a

Birmingham-based housing association.

Prior to that, she held senior finance and

resourcing roles at Knightstone, a housing

association based in the South West,

and Anchor Trust, a provider of housing

and care to those aged 55 and above.

Ruth has held a number of voluntary and

non-executive positions in the social

housing and retirement community sector.

She is an Associate of the Institute of

Chartered Accountants and a corporate

treasurer.

External appointments

Chief Executive of GreenSquareAccord.

Harworth Group plc: Annual Report and Financial Statements 2022

Governance Report

Board of Directors continued

Lisa Scenna

Non-Executive Director

Date of appointment

01/09/2020

Length of service

2 years 7 months

Independent

Yes

Committee Membership

Skills and Experience

Lisa is a Non-Executive Director of

Genuit Group plc, where she is the

Senior Independent Director, Chairs the

Remuneration Committee and is a member

of the Nomination and Audit Committees.

She is also a Non-Executive Director of

Cromwell Property Group, an Australian

listed company, where she Chairs the

ESG, Risk & Safety Committee and is a

member of the Audit, Remuneration and

Nomination Committees.

Lisa has over 30 years’ experience

working at executive director level in large

multinational corporations, both private and

publicly listed, with a strong background

in real estate development and asset

management. Her most recent executive

role was with Morgan Sindall Group as

Managing Director of MS Investments. Prior

to this, she held executive roles with Laing

O’Rourke, having led their infrastructure

investment activities globally, and Stockland

Group and Westfield Group in Australia.

Lisa is a member of the Australian Institute

of Company Directors and the Institute of

Chartered Accountants in Australia.

External appointments

Non-Executive Director of Genuit Group

plc and Cromwell Property Group, an

Australian listed company.

Martyn Bowes

Non-Executive Director

Representing the Pension

Protection Fund

Date of appointment

24/03/2015

(Previously Non-Executive Director of

Harworth Estates Property Group Limited

(‘HEPGL’) from 19 March 2013)

Length of service

8 years 1 month (10 years 1 month

including appointment to HEPGL)

Independent

Committee Membership

Skills and Experience

Martyn has spent the majority of his career

in banking, most recently from 2001 to

2007 with Barclays Capital as Managing

Director, Real Estate Finance. Since

leaving Barclays he has pursued a portfolio

business career, which in 2012 involved

a takeover with fellow Directors of the

South of England based Welbeck Land

real estate business. Martyn now acts as

Finance Director for Welbeck Land and

also maintains other interests in real estate

and healthcare.

External appointments

Director of multiple private limited

companies predominantly within the

Welbeck Land Group.

Marzia Zafar

Non-Executive Director

Date of appointment

01/06/2022

Length of service

10 months

Independent

Yes

Committee Membership

Skills and Experience

Marzia is Deputy Director for Strategy &

Decarbonisation at Ofgem. Prior to this,

she was Director of Sustainability & Policy

at Kaluza Technologies.

Marzia brings to Harworth a wealth of

experience in sustainability, having spent

over 20 years working on policies and

strategies to enable energy transition for

regulators, business and not for profit

sectors. She was Director of Insights at the

World Energy Council (the UN-accredited

global energy body) and worked with

business and government leaders to

facilitate global, national and regional

energy strategies. Prior to that, Marzia

spent 11 years with the California Public

Utilities Commission, initially as a Senior

Energy Policy Advisor, and then as Director

for Policy and Planning. In this role,

Marzia contributed to drafting California’s

Energy Action Plan to make greater use of

renewable energy and led the strategy for

the deployment of smart meters.

External appointments

Deputy Director for Strategy &

Decarbonisation at Ofgem.

Harworth Group plc: Annual Report and Financial Statements 2022

Governance Report

Steven Underwood

Non-Executive Director

Date of appointment

02/08/2010

Length of service

12 years 8 months

Independent

Committee Membership

None

Skills and Experience

Steven is Chief Executive of the Peel

Group of companies and brings to the

Board the extensive experience of the Peel

Group in brownfield land remediation

and regeneration. Steven was formerly

a representative Director of Peel Group.

Following the reduction of Peel Group’s

shareholding to below 25%, Steven now

sits on the Board in a personal, rather than

representative, capacity.

External appointments

Director of multiple private limited

companies connected to the Peel Group.

Trustee of the Science Museum Group.

Chris Birch

General Counsel &

Company Secretary

Date of appointment

06/06/2016

Length of service

6 years 10 months

Independent

Committee Membership

Skills and Experience

Chris trained with Eversheds LLP (now

Eversheds Sutherland LLP), where he

qualified as a solicitor in 2005 and spent

12 years as a corporate restructuring

lawyer, before joining Harworth as General

Counsel and Company Secretary in

June 2016.

External appointments

None.

Key

Nomination Committee

Remuneration Committee

ESG Committee

Disclosure Committee

Audit Committee

Harworth Group plc: Annual Report and Financial Statements 2022

Governance Report

Statement of corporate governance

The 2018 UK Corporate Governance Code (2018 Code)

Governance is a supporting pillar of The Harworth Way. High standards of corporate governance underpin the effective operation of the

business and the long-term sustainable success of the Company, for the benefit of all stakeholders. We aim to evolve and improve our

governance structures continually in alignment with industry best practice.

Below we outline the primary areas the Board focused on during the year to ensure compliance with the main principles of the 2018

Code. A copy of the 2018 Code can be found on the Financial Reporting Council’s website at www.frc.org.uk. The Company has

complied with the principles and provisions of the 2018 Code throughout the year ended 31 December 2022.

Code What did we focus on in 2022? How did it support our strategy? See further

Board

Leadership

and Company

Purpose

In 2021, we developed and unveiled our

strategy to grow Harworth to £1bn of EPRA

NDV. During 2022, the Board has reviewed

the progress made by the Executive team in

delivering against the four pillars of this growth

strategy, whilst navigating a challenging

and unpredictable macroeconomic and

geopolitical environment.

The Board reviewed and contributed to the

development of further elements of our Chief

Executive’s strategy for Harworth’s long-term

growth and success. These focused on

broadening the range of products on our

residential sites, the development of an Energy

and Natural Capital strategy, and progression of

the people strategy.

Statement of

Corporate

Governance,

pages 87 to 89

Division of

Responsibilities

We reappraised our delegated authorities

framework with the introduction of a new

Board Reserved Matters Policy and Operational

Approvals Policy, enabling effective decision

making at appropriate levels. These revisions

allowed for the Board to focus more of its

time on strategic discussion and debate and

increased the responsiveness of executive

management in a rapidly changing external

environment.

More time is afforded for the Board to review the

potential impact of market developments on our

strategy and the consequent potential need for

changes, and on material strategic transactions.

Statement of

Corporate

Governance,

pages 92 to 95

Composition,

Succession and

Evaluation

In June 2022, we appointed Marzia Zafar as

an additional independent Non-Executive

Director. This appointment was prompted by a

recommendation from our 2021 external Board

effectiveness review, which also influenced

several other changes to enhance Board

effectiveness.

The 2021 external Board effectiveness review

recommended that the Board recruit a

Non-Executive Director with different skills,

background, and experience. Marzia brings a

wealth of experience in sustainability and the

Board is benefiting greatly from her expertise

whilst a member of our ESG Committee as we

formulate our Sustainability Framework.

The recommendations implemented by the

Board from the 2021 external review, and those

to be adopted from the 2022 internal review,

will continue to enhance its performance.

Statement of

Corporate

Governance,

pages 95 to 97

Audit, Risk

and Internal

Control

The Audit Committee approved the

establishment of an internal audit function,

which in part replaces the Company’s reliance

on external review of the effectiveness of its

framework of management controls.

Following changes to our risk management

system in 2021, the Board continued to

monitor our principal risks as macro and market

conditions changed.

The Audit Committee considered that the

increase in pace, scale and complexity

of activity needed to deliver the Group’s

strategy necessitated the establishment of

an internal audit function. This function will

provide enhanced assurance around our risk

management, governance, and internal control

processes to support the effective delivery of the

strategy.

The Board monitors a principal risks dashboard

at each Board meeting to ensure risks are

managed effectively, and opportunities are

identified, in pursuit of our strategic objectives.

Audit Committee

Report, pages

106 to 112

Strategic Report:

Effectively

managing our

risk, pages

43 to 53

Remuneration The new Remuneration Policy was approved

at the AGM in May 2022. In line with

remuneration decisions for the Executive

Directors, the Remuneration Committee

reviewed the Policy’s application to the wider

workforce and approved an extension in both

the all-employee SIP and discretionary RSP.

The Remuneration Policy review was informed

by the strategy. Executive remuneration is

aligned with strategic objectives and cascaded

through the business to motivate our people

to deliver the strategy and align the interests of

employees and shareholders.

Strategic Report:

People, pages

75 to 77

Directors’

Remuneration

Report, pages

115 to 133

Harworth Group plc: Annual Report and Financial Statements 2022

Governance Report

Board leadership and Company Purpose

Purpose and strategy

Harworth’s Purpose: “to transform land

and property into sustainable places where

people want to live and work”, underpins

our strategy, business model and all

Board activity and decisions. Following

her appointment as Chief Executive in

November 2020, Lynda Shillaw led an

extensive review of strategy during the first

half of 2021, working closely throughout

with the Board and wider business. In

September 2021, we unveiled our strategy

to grow Harworth to £1bn of EPRA NDV,

and during 2022 the Board focused on

supporting the Senior Executive team and

business in delivering against this growth

strategy.

Our strategy to reach £1bn of EPRA NDV

has required material shifts in the pace

and scale of what we do, leveraging

our specialist expertise to optimise the

development of our significant consented

landbank. The strategy is exciting and

ambitious, building on the key attributes

that have made Harworth successful to

date, including its passionate, innovative

and collaborative professional workforce,

a substantial well-positioned landbank,

and a commitment to creating sustainable

communities, all of which contribute

towards our aim to deliver long-term

market-leading returns for investors.

The performance of the business is

monitored by the Board throughout the

year against the strategic objectives, and

approved budget and strategic plan,

with the Board satisfying itself as to the

adequacy of management’s response to

variations in performance against the plan.

Financial and operational reforecasts are

now presented to the Board on a rolling

basis and the Chief Executive, Chief

Financial Officer, Chief Operating Officer,

Chief Investment Officer and General

Counsel and Company Secretary give

operational and financial updates at each

Board meeting which they all attend.

The key Board activities in 2022, outlined

below, reflect that the Board’s focus has

been to oversee the implementation of the

strategy, and to review progress against the

strategic objectives.

Key Board activities in 2022

Key activities and

discussions Outcomes Future priorities

Stakeholders

considered

Operational

decisions in

support of the

strategy

The Board approved:

• the launch of a

single-family BTR product

• a number of acquisitions

and land assembly

initiatives

• several direct

development projects

• sales of certain assets

within the Investment

Portfolio

The Board also held a

Strategy Day in October to

advance the current strategy.

Progression of the strategy to:

• broaden the range

of products on our

residential sites and

thereby accelerate their

development

• maintain the size of our

strategic landbank

• unlock additional value

from our industrial &

logistics pipeline

• reposition the Investment

Portfolio to modern

Grade A.

The Board will continue

to review the progress

achieved in the delivery

of the strategy, as well as

continue to review regularly

our financial and operational

performance.

All stakeholders as

set out in our s.172

Statement (pages 39

to 42).

Sustainability Following the appointment

of our first Director of

Sustainability, the Board

reviewed the evolution of

Harworth’s Sustainability

Framework and NZC

Pathway.

Following recommendation

by the ESG Committee,

the Board approved the

publication of Harworth’s

NZC Pathway.

• Continue to ensure

alignment between

our sustainability

commitments and the

Group strategy.

• Review progress against

our pathway to transition

our business and

portfolio to Net Zero

Carbon.

• Continue to oversee

evolution of our ESG data

collection and reporting.

• Our people

• Communities

• Investors

Harworth Group plc: Annual Report and Financial Statements 2022

Governance Report

Statement of corporate governance continued

Key activities and

discussions Outcomes Future priorities

Stakeholders

considered

Risk and

assurance

• The Board monitored

closely our principal

risks, which informed

decisions made against

an unpredictable and

continuously evolving

macroeconomic and

geopolitical backdrop.

• The Audit Committee

approved the

establishment of an

internal audit function.

• As macro and market

conditions deteriorated

the Group’s “residential

and commercial markets”

principal risk increased

from “medium” to “high”,

which informed key

strategic and operational

decisions.

• An internal audit plan was

agreed in early 2023.

• The Board will continue

to review the status of

the principal risks at each

meeting and undertake

a more detailed review

biannually (or at any time

if there are significant

movements in risk

profile).

• The Audit Committee will

review outputs from the

internal audit programme

throughout the year,

supporting its assessment

of the effectiveness of

internal controls.

Our principal risks

take account of all

stakeholders as

set out in our s.172

Statement (pages 39

to 42).

People

strategy

• The Board reviewed

and supported a new

Talent and Learning &

Development strategy.

• The Board met and

engaged with staff in

various formats, including

employee lunches, site

visits, regional team

dinners, office visits, and

the Employee AGM.

The Board’s engagement

with Harworth’s people

was especially important

this year given operational

changes to support the

strategy, including a material

increase in the size of

the workforce, as well as

the external uncertainty

affecting employees created

by the macroeconomic

environment. The Employee

AGM was very well attended

and provided all employees

the opportunity to put

questions directly to each

Board member.

The Board will continue

to be appraised of the

people strategy and will

seek to optimise the

Board’s engagement with

employees to understand

the prevailing culture, and

their thinking and concerns.

Our people

Remuneration

Policy

The Remuneration

Committee concluded

the Remuneration Policy

review in early 2022,

including consultation

with shareholders and

engagement with our

employees. The policy was

approved at our 2022 AGM.

The new Policy is informed

by our strategy. Further to

its approach to Executive

Director remuneration, the

Remuneration Committee

ensured that the principles

of the Policy are applied to

the wider workforce. The

Committee extended the

application of the employee

share schemes to facilitate

share ownership throughout

the workforce to align the

interests of employees and

shareholders.

The Remuneration

Committee will continue

to oversee the appropriate

implementation of the Policy,

including its application

to the wider workforce,

against the backdrop of a

challenging macroeconomic

environment.

• Our people

• Investors

Harworth Group plc: Annual Report and Financial Statements 2022

Governance Report

How the Board spent its time this year

Key:

Operations and

governance (15%)

The Board approved changes

to the delegated authorities

framework, and, as per its

Reserved Matters Policy, the Board

appraised all new underwriting

proposals and significant

transactions.

Stakeholder engagement

(excluding people) (10%)

The Board oversaw work in respect

of stakeholder mapping. In respect

of investors, the Board received

regular reports from the Head of

Investor and Stakeholder Relations,

reviewed feedback from the results

roadshows and the Capital Markets

Day, and reviewed an investor

relations plan for the year.

People and culture (15%)

The Board received regular

feedback from the Chief

Executive on people matters, it

reviewed talent management and

people development, as well as

undertaking Board/employee

engagement activities.

Key areas of Board focus in 2023

Continued oversight of implementation

of our strategy, ensuring the resilience of

the business, financial and operational, in

the face of challenging conditions in our

core markets

Oversight of progress against

Harworth’s Sustainability Framework

and NZC Pathway, including review of

targets

Implementation of the Remuneration

Policy, against the backdrop of

a challenging macroeconomic

environment

Our people: oversight of implementation

of the people strategy to support delivery

of the business strategy, including:

recruitment, engagement, welfare,

succession planning, talent development

and diversity

Close monitoring of the Group’s

principal risks

Implementation of outcomes of internal

Board effectiveness review

Sustainability (10%)

The Board’s consideration of

sustainability is integral to the

delivery of our purpose. This

included the Board’s review of

The Harworth Way Sustainability

Framework and NZC Pathway. In

addition, the elements of our ESG

agenda were considered in detail

by the ESG Committee, which met

four times in 2022.

Financial (20%)

The Board approved a new

RCF, the 2021full-year and 2022

interim results announcements

and the 2022 budget. The Board

monitored performance against

this budget throughout the year

and approved a budget for 2023.

Strategy (20%)

The Board reviewed progress against

the strategic objectives and held its

annual Strategy Day to review the

evolution of the strategy.

Risk management (10%)

The Board regularly reviewed the

Group’s principal risks and the

adequacy of actions to mitigate and

manage the same.

Harworth Group plc: Annual Report and Financial Statements 2022

Governance Report

Culture and workforce engagement – One Harworth

Our “One Harworth” culture, underpinned by the Harworth values outlined below, encourages a collaborative approach in achieving

our strategy to grow Harworth to £1bn of EPRA NDV and succeeding as one team.

Statement of corporate governance continued

It is essential to the Board that it exhibits the One Harworth approach and understands, assesses and monitors the culture of the

business via effective engagement with the workforce. The Board, as a whole, undertakes this in the following ways:

• Meeting and engaging with staff in various formats, including employee lunches, site visits, regional team dinners, office visits and

the Employee AGM. Not only are these opportunities for the Board to gain an insight into the inspirational work of our employees

and the challenges they face, they also allow staff to ask questions of, and share feedback and raise any concerns with, the Board.

• An annual review of employee engagement presented by the Group Resources and Transformation Director.

• A review of the annual employee survey results.

• Access to the quarterly staff newsletter, which reports on key operational activity from the perspectives of employees.

• Feedback from the Chief Executive at each Board meeting on people and culture.

• Where there are departures at a senior level, the Board seeks to understand from the Senior Executive the motivations for, and

impact of, those departures.

The Harworth values are the principles our employees consider most important when we go about our business. At Harworth we:

Culture in action:

The Board recognises that Harworth’s

people are fundamental to achieving

the strategy and the continued

long-term success of the business. To

this end, there were a record number

of promotions across the business in

2022, reflecting both our commitment

to recognise achievement and to ensure

career progression and development

opportunities. The Board also supported a

new Talent and Learning & Development

Strategy, and the first cohort of employees

started the new Leadership Development

Programme in September 2022. During

2023, we will build on this programme to

support the professional development of

all individuals, continuing to drive a skilled

and engaged workforce.

The Group also promotes strong

partnerships based on shared values and

objectives with its external stakeholders,

as set out in the Section 172 Statement on

pages 39 to 42.

Culture in action:

2022 was a transformational year for

Harworth’s ESG ambitions, as we

appointed our first Director of Sustainability

and created a dedicated sustainability

team within the business. Their focus has

been on expanding and embedding The

Harworth Way, building our capabilities in

capturing and reporting carbon emissions

to devise an initial NZC Pathway, and

reviewing our commitments and approach

beyond the year. See further details on

pages 64 to 77.

The NZC Pathway, published alongside

this Annual Report and available on the

website, outlines a delivery strategy to

meet our ambition to be operationally net

zero by 2030 and fully by 2040. Central to

this strategy will be the adoption of build

specifications for our industrial & logistics

sites and also the homes to be delivered by

Harworth’s mixed tenure teams.

During 2023, our sustainability team will

also focus on how we can deliver more for

our communities and how we can measure

this social value.

Culture in action:

The Board is acutely aware of the

cost-of-living crisis and has sought

to provide support to employees

where the burden is most challenging.

We made a one-off non-contractual

payment of £2,000 in December 2022

to all employees (excluding the Senior

Executive).Feedback from members of

the business was that the payment was

welcome at a time of high inflation and

ahead of the festive period.

In addition, for 2023 the Remuneration

Committee approved variable salary

increases relative to role seniority, with

employees on lower salaries receiving

a proportionately higher increase than

those on higher salaries.

The Harworth values are embedded into the business through active leadership, internal communications, appraisals, the setting and scoring

of bonus objectives, and our programme of recognition. The Harworth values underpin the delivery of our strategy, by ensuring collaboration

with each other and our external stakeholders, by remaining innovative, and by encouraging employees to “do the right thing”. These values

are especially relevant during the current challenging period of economic and social uncertainty. During 2023, we are actively working on

a structured programme with the aim of continuing the positive evolution of our culture to ensure we continue to provide an outstanding

employee experience, attracting and retaining the best talent. We will report on progress in the 2023 Annual Report.

Harworth Group plc: Annual Report and Financial Statements 2022

Governance Report

Stakeholders

In 2019, the Board undertook a significant

exercise to identify its key stakeholders,

understand how the business engages

with them, and review the effectiveness of

that engagement. Stakeholder mapping

is now managed at an operational level

with oversight by the Board. During 2021,

independent investor and stakeholder

perception studies were undertaken,

the results of which were presented to

and reviewed in detail by the Board. The

results were overwhelmingly positive,

but identified some action points, such as

the need to increase resources available

to the regional teams for engagement

with local stakeholders. During 2022,

we commissioned an external agency,

Camargue, to assist with central and

regional stakeholder strategies with a focus

on central and local government.

Our Strategic Report outlines how we

engage with our key stakeholders and how

the Board complies with its obligations

under Section 172 of the Companies

Act (pages 39 to 42). When appraising

projects and transactions, consideration of

stakeholder interests is embedded into the

Board’s decision-making process, guided

by our approval templates, which require

commentary on the purpose of projects

and their impact on our stakeholders.

For example, prospective acquisition

appraisals typically include a detailed

planning promotion strategy, which

explains how our teams will engage with

local community stakeholders to seek to

secure support for scheme proposals.

The Board recognises the importance of

regular and open engagement with our

investors. At the end of each year, the

Board reviews and approves an investor

relations plan for the following year. The

Chief Executive, Chief Financial Officer

and Head of Investor and Stakeholder

Relations meet regularly with existing

and prospective investors, and analysts,

including after publication of the

Company’s full-year and interim results.

The Chair also meets periodically with our

largest shareholders. During the period,

Harworth hosted several investor site visits,

and in June 2022 held a Capital Markets

Day for institutional investors and analysts,

which comprised a presentation by

members of the management team and a

tour of several sites in the Midlands region.

In October 2022, Lynda Shillaw and Kitty

Patmore gave their first live presentation

via the Investor Meet Company platform,

which was open to all existing shareholders

and potential investors giving them

the opportunity to submit questions

before and during the event. In addition,

our Senior Independent Director and

Remuneration Committee Chair engaged

directly with our largest shareholders and

several proxy advisers for their views and

feedback on the proposed revisions to the

Remuneration Policy.

Our Head of Investor and Stakeholder

Relations reports to each Board meeting

on investor engagement and feedback

from the Company’s brokers and both

existing and prospective shareholders. He

also reports on share price performance,

trading volumes and material changes to

the composition of the Company’s share

by analysts are shared with the Board.

During the year, our existing shareholders

remained highly supportive of our strategy,

operational progress and management

team, and we also welcomed a number of

new investors, including a large institution

which became one of our 10 largest

shareholders upon entering the register.

Aside from this new entrant, the top end of

our shareholder register remained largely

stable throughout the year.

The Company has a planned programme

of announcements throughout the year

to ensure that investors remain updated

regularly on progress in the business.

It also reports to the market on material

operational milestones, in particular

significant site acquisitions and disposals

and progress with obtaining planning

consents on Major Developments. The

interim results and Annual Report, together

with the www.harworthgroup.com website,

are the Company’s principal means of

communication with all shareholders during

the year.

Copies of all reports, shareholder

presentations and communications are

available on the investors’ section of the

website.

We are looking forward to holding our

first partly virtual AGM in May 2023 (see

further details at the end of this report).

The meeting will be webcast live giving

increased numbers of shareholders the

opportunity to engage and participate

by asking questions. There have been

no material votes against recommended

resolutions at recent AGMs. Wherever

practicable, the Board seeks to ensure

that shareholder views were canvassed

in advance on any unusual or potentially

controversial proposals. That said, if

there were any significant votes against a

proposal, the Board would take action to

understand the reasons behind that vote

and explain the same to shareholders, in

line with the principles of the 2018 Code.

Conflicts of interest

Each Director can disclose actual or

potential conflicts of interests, either by

way of general notice or at the beginning

of each Board or Committee meeting. The

Articles of Association provide that the

Board can authorise actual and potential

conflicts of interest of Directors. Where

actual or potential conflicts of interest

arise, the relevant Director does not

receive Board papers and is excluded from

discussions and voting on the relevant

subject matter.

Martyn Bowes is a Board representative of

the Pension Protection Fund. The Board

has approved any actual or potential

conflicts of interest that arise as a result. No

conflicts of interest arose in 2022.

Steven Underwood is Chief Executive of

Peel Group and is an Executive Director

of certain Peel Group companies which

may deal with Harworth at an operational

level from time to time and/or may

pursue certain acquisition opportunities

in competition with Harworth. Steven has

previously declared by way of general

notice, and the Board has approved, a

potential conflict of interest in that regard.

In Q4 2021 and extending to January

Harworth Group plc: Annual Report and Financial Statements 2022

Governance Report

2022, Harworth entered a bidding process

to acquire a strategic land site which Peel

Group also targeted. This represented

an actual conflict of interest for Steven

and, as such, he did not have sight of any

Board papers, and was not party to any

discussions or decision making, on this

matter.

External appointments

Upon appointment, each Director is

required to notify the Company Secretary

of their external board appointments, other

significant commitments and any actual

or potential conflict of interest. Where a

Director proposes to take on additional

external responsibilities, this is reviewed

first by the Nomination Committee which,

having considered the time commitment

and potential conflicts of interest, makes a

recommendation to the Board. The Board

makes a final decision on all new external

appointments.

The external appointments of each

Board member are set out in the Director

biographies on pages 82 to 85. The

external appointments approved during

the year are disclosed in the Nomination

Committee Report on page 101.

Inductions

The Company Secretary oversees the

delivery of a comprehensive and tailored

induction programme for all new Directors,

which includes:

• provision of a detailed induction pack

ahead of appointments taking effect;

• briefings from the Chair, the Chief

Executive, Chief Financial Officer, Chief

Operating Officer, Chief Investment

Officer and Company Secretary;

• a series of one-to one meetings with

members of the Group Leadership

Committee;

• site visits; and

• meetings with external advisers where

relevant, such as the external auditors,

remuneration consultants and the

Company’s valuers.

Knowledge of business and markets

To give constructive challenge and support

to the Senior Executive, all Non-Executive

Directors must maintain a good knowledge

and understanding of Harworth’s business

and the markets in which it operates. To

that end, the Board timetable typically

includes:

• site visits, which help to improve

knowledge and understanding of key

projects and, at the same time, are an

opportunity for Non-Executive Directors

to get to know better our operational

teams;

• annual health and safety updates from

the head of our Risk and Compliance

division (supplemented by monthly

updates included in each Board

pack); and

• regular updates from each of the

regional and functional teams,

focusing on progress against strategic

objectives, markets and resourcing and

including project-specific reviews.

Ongoing support and CPD

All Directors have access to the advice and

services of the Company Secretary who

also facilitates the continuous professional

development (‘CPD’) of all Directors. To

that end:

• external CPD briefings are made

available to Directors, with a short

synopsis prepared by the Company

Secretary;

• external advisers host CPD workshops

for the Board and Committees;

• the Company Secretary provides

written and verbal updates to the Board

and its Committees, as appropriate, on

governance and regulatory changes;

• Directors are made aware of, and have

the opportunity to attend, external CPD

updates; and

• the Company Secretary shares with the

Board a “horizon scanning tracker”,

which is prepared quarterly by our

in-house legal team, principally for the

Group Leadership Committee, and

identifies forthcoming and anticipated

legal changes which will or may impact

Harworth’s activities.

Statement of corporate governance continued

Division of responsibilities

There is a clear division of responsibilities

between the Board, its Committees, and

senior management at an operational

level. During the period, we reviewed

our delegated authorities framework and

made some material changes to our Board

Reserved Matters Policy and Operational

Approvals Policy. These policies reserve

certain matters for the Board and ensure

that operational decisions are made at the

most appropriate level in the business. The

revisions we have made to our governance

framework will support the Board in

focusing on strategic proposals, whilst also

giving it oversight of major operational

projects which affect the long-term success

of the business. The delegated authorities

framework is subject to review annually, led

by the Company Secretary and approved

by the Board, to ensure that it keeps pace

with Harworth’s evolving business.

The Board has delegated certain

responsibilities to the Remuneration,

Audit, Nomination, ESG and Disclosure

Committees. The terms of reference

of those Committees are reviewed

annually and appear on the website:

https://harworthgroup.com/investors/

governance/.

The Chief Executive has responsibility

for proposing and then implementing

the Company’s strategy and leading the

day-to-day management of the business,

with the agreement of the Board on

reserved matters. The Chief Executive

appoints the Senior Executive, Investment

Committee and Group Leadership

Committee to support her in implementing

the strategy. The Senior Executive

comprises the Chief Executive, Chief

Financial Officer, Chief Operating Officer,

Chief Investment Officer and General

Counsel and Company Secretary.

Harworth Group plc: Annual Report and Financial Statements 2022

Governance Report

Board Committees Board Committees

Audit Committee

• Reviews the integrity of the Group’s

Financial Statements and formal

announcements on its financial

performance, including reviewing

financial reporting judgements

contained within them.

• Advises the Board on whether

the Group’s Annual Report is fair,

balanced and understandable, and

provides the information necessary

for shareholders to assess the

Group’s position and performance,

business model and strategy.

• Reviews the Group’s operational

risks, the effectiveness of the risk

management system and of our

internal controls and processes, and

the internal audit programme.

• Reviews the independence and

effectiveness of the external auditor

and the internal audit function, and

reviews the terms of appointment

and remuneration of the external

auditors and leads any tender

process for their appointment.

See pages 106 to 112 for full report

The Board

Examples of matters reserved for

the Board:

• Setting strategy and approval

of annual budget and strategic

plan. Oversight of the financial

and operational performance

and resilience of the business.

• Oversight of performance

and reporting against our

Sustainability Framework and

NZC Pathway.

• Identification of, and review

of measures to mitigate

and manage, the Group’s

principal risks.

• Oversight of the appropriate

regard by the Company for the

interests of its stakeholders.

• Approval of accounts,

valuations, financial reporting

and dividends.

• Approval of underwriting

proposals for all new projects

and material changes to

project plans, determined by

appropriate financial thresholds.

• Approval of Board

appointments; external

appointments of Directors and

the Senior Executive.

• Oversight of the people strategy

including talent management,

learning and development, and

succession planning.

• New or material changes to

senior debt facilities.

• Oversight of health and safety

for all sites and projects.

• Oversight of IT strategy

including cyber and information

security.

Remuneration Committee

• Determines and agrees with the

Board the Company’s Remuneration

Policy, ensuring alignment with

purpose and strategy.

• Determines the salaries, bonuses,

long-term incentive arrangements,

pension arrangements, other

benefits and contract terms of the

Executive Directors and members of

the Senior Executive.

• Monitors performance against

bonus targets and long-term

incentive underpins.

• Reviews workforce remuneration

and related policies, and the

alignment of incentives and rewards

with that of the wider workforce.

See pages 115 to 133 for full report

The key responsibilities of the Board, Committees and individual roles are summarised below and on the next page.

Nomination Committee

• Reviews the size and composition

of the Board to ensure a balance of

skills, experience and knowledge on

the Board and its Committees.

• Oversight of succession planning for

the Board and Senior Executive.

• Leads the process for Board

appointments.

• Oversight of progress in improving

diversity across the business.

See pages 98 to 105 for full report

ESG Committee

• Oversees the Group’s Sustainability

Framework, including targets

and KPIs.

• Oversees the development of, and

progress against, the NZC Pathway.

• Reviews sustainability policies,

processes and initiatives, and the

measurement of progress towards

sustainability targets.

• Oversees how all elements of

the Sustainability Framework are

reported in the Annual Report

and other public reporting, and

recommends any ESG disclosures to

the Audit Committee.

See pages 113 to 114 for full report

Disclosure Committee

Ensures compliance with disclosure

obligations under the Market

Abuse Regulation, as it now applies

in the UK pursuant to the legislation

implemented to effect the UK’s

withdrawal from the EU, and the

FCA’s Listing Rules and Disclosure

Guidance and Transparency Rules.

Harworth Group plc: Annual Report and Financial Statements 2022

Governance Report

Statement of corporate governance continued

Management Committees

The Chief Executive has established the following Management Committees in pursuance of the authority delegated to her by the Board

Investment Committee Group Leadership Committee

•

Supports the Chief Executive in the formulation and implementation

of the strategy.

• Responsible for decisions on capital allocation and deployment.

• Reviews all material projects and material departures from project

plans including matters reserved for the Board before they are

presented, where appropriate, for approval.

• Reviews the performance of the business against agreed operational

and financial KPIs.

• Members of the Committee provide updates on each operating

division and function.

• Ensures effective communication and collaboration between

all operating divisions and functions sharing knowledge and

experience, including site and project information, market

intelligence, innovation opportunities and contacts.

• Discussion of strategic topics.

• Monitors the risk profile of the business.

Responsibilities of the Board and Senior Executive

Chair

Alastair Lyons

Chief Executive

Lynda Shillaw

Chief Financial Officer (‘CFO’)

Kitty Patmore

•

Leads the Board and is responsible for its

overall effectiveness by facilitating a culture

of openness and debate.

• Ensures that Harworth has a defined

purpose and clear values, strategy and

objectives.

• Ensures the Board comprises diverse

individuals with the necessary skills and

experience to achieve the appropriate

oversight of the Company’s activities.

• Ensures that the Board receives regular

reporting on performance.

• Ensures that Directors receive accurate,

timely and clear information, and that

there is adequate time available for

discussion of agenda items and an effective

decision-making process in place.

• Ensures there is ongoing and effective

communication with shareholders, and that

the Board engages appropriately with other

key stakeholders.

• Ensures that the effectiveness of the Board

is subject to annual evaluation, including an

external evaluation every three years.

• Leads on the formulation of Purpose

and strategy which, once agreed by the

Board, falls to the Chief Executive to

implement and communicate effectively.

• Leads the establishment and maintenance

of Harworth’s culture and values.

• Responsible for the design of Harworth’s

operational structure.

• Oversight of operational risk

management, including health and safety

and system of internal controls.

• Responsible for formulation and

implementation of Harworth’s people

strategy and for effective internal

communications.

• Responsible for Harworth’s relationships

with shareholders, both actual and

potential, and for effective engagement

with key stakeholders.

• Responsible for ensuring the Group’s

strategy embeds ESG principles and

objectives, including leading on the

formulation of ESG targets.

• Leads on all financial matters, including tax

and treasury.

• Responsible for preparing the annual

budget and strategic plan and the

maintenance of regularly updated

reforecasts of the Group’s financial and

operational performance.

• Responsible for all statutory financial

reporting, including the preparation of the

interim and year-end financial statements

and Annual Report.

• Responsible for ensuring the adequacy

of the Group’s financial resources,

formulating the Group’s funding strategy

and raising new equity and debt capital.

• Leads the monitoring of performance

against the Company’s ESG targets.

• Responsible for ensuring clear, effective,

and timely measurement and reporting of

financial and non-financial key performance

indicators to the Board.

• Responsible for internal financial controls,

systems and processes.

Chief Operating Officer (‘COO’)

Andrew Blackshaw

Chief Investment Officer (‘CIO’)

Jonathan Haigh

•

Responsible for operational delivery by Harworth’s regional teams.

• Ensures there are appropriate resources across the regional teams to

implement the strategy and deliver the business plan.

• Leads on the delivery of our mixed tenure products across the

portfolio.

• Jointly responsible, with the CFO and CIO, for ensuring that the

regional teams work effectively alongside our finance and central

support teams respectively.

• Jointly with the CIO, leads the half-year and year-end valuation

process.

• Responsible for the expertise, support and resources provided by our

Technical, Natural Resources and Asset Management teams to the

regional teams.

• Responsible for management of our Investment Portfolio in

accordance with our strategy, including strategic disposals and the

entry of directly developed assets into the portfolio.

• Leads on portfolio and strategic acquisitions and projects.

• Oversight of the direct development programme across the portfolio.

• Jointly responsible, with the CFO and COO, for ensuring that the

regional teams work effectively alongside our finance and central

support teams respectively.

• Jointly with the COO, leads the half-year and year-end valuation

process.

Harworth Group plc: Annual Report and Financial Statements 2022

Governance Report

Responsibilities of the Board and Senior Executive

Senior Independent Director

Angela Bromfield

General Counsel and Company Secretary

Chris Birch

•

Provides a sounding board for the Chair.

• Acts, where appropriate, as an

interlocutor between the Chair and other

Non-Executive Directors.

• Available to shareholders as an alternative

point of contact.

• Leads the process for appointing a

new Chair.

• Leads the annual appraisal of the Chair’s

performance.

• Secretary to the Board and some Board Committees.

• Ensures that all Board reserved matters are referred to the Board for review and approval.

• Advises on regulatory compliance and corporate governance.

• Prepares Board and Committee agendas and collates and distributes papers.

• Leads on arranging inductions for, and continuous professional development of, Directors.

• Responsible for governance, both at Board and operational levels, including non-financial

internal controls, systems and processes.

• Leads on risk management.

• Leads the Risk and Compliance, Governance, Legal, Technology and Internal Audit teams.

Board and Committee meetings

Meetings Attended

Board RemCo AuditCo NomCo ESGCo

Alastair Lyons 10/10 4/4 1/1 4/4

Lynda Shillaw 10/10 1/1 4/4

Kitty Patmore

9/10 3/4

Angela Bromfield 9/10 4/4 1/1 4/4

Ruth Cooke 9/10 5/5 1/1

Lisa Scenna 10/10 4/4 5/5

Patrick O’Donnell Bourke 10/10 5/5

Steven Underwood 9/10

Martyn Bowes 9/10 1/4

Marzia Zafar

6/6 1/2

There were 10 scheduled Board meetings, including the Strategy Day, during 2022. There were also Board calls to sign off the trading statements and 2021 full-year

results, and to approve certain transactions, which are not reflected in the table above.

Kitty Patmore went on maternity leave at the start of October 2021, returning to the business initially part-time in February 2022. Nigel Turner attended Board meetings

as Interim Chief Financial Officer but was not appointed a statutory Director.

Marzia Zafar was appointed to the Board on 1 June 2022 and has attended all Board meetings since her appointment. She also observed the May Board meeting before

she had been formally appointed.

Board and Committee papers are circulated not less than one full week prior to each meeting. The papers include: monthly reports from

the Chief Executive, Chief Financial Officer, General Counsel and Company Secretary, Head of Investor and Stakeholder Relations and

Head of Risk and Compliance; and quarterly reports from the Chief Operating Officer and Chief Investment Officer.

The Company Secretary maintains “Action Schedules” for the Board and each Committee, which record action points agreed at each

meeting. These schedules, together with the minutes of each meeting, are reviewed by the Chair of the Board or the relevant Committee

(as appropriate), made available to the Board or relevant Committee (as appropriate), and are subject to formal approval at the following

Board or Committee meeting.

Composition, succession and evaluation

Board evaluation

2021/2022

Externally

facilitated

evaluation

2022/2023

Internal review

2023/2024

Internal review

2024/2025

Next externally

facilitated

evaluation

The Board undertakes annual evaluations of its effectiveness and of the contribution of individual Directors. The Company aspires to

membership of the FTSE 250 and, as such, the Board considers it good practice to instruct an externally facilitated evaluation every three

years, as prescribed by the 2018 Code for FTSE 350 companies.

Harworth Group plc: Annual Report and Financial Statements 2022

Governance Report

Statement of corporate governance continued

In the final quarter of 2021, an external Board evaluation process was led by Ian White. Information about Ian and this external evaluation

is included in the 2021 Annual Report on pages 98 and 99. Below is a summary of the recommendations from the evaluation and the

actions taken during 2022 to implement them:

2021 internal evaluation

Theme Actions agreed Outcomes

Diversity When succession planning, the Board should

keep diversity, defined in its widest sense, as

an area of focus and be open to recruiting a

Non-Executive Director with different skills and

experience.

The Board appointed Marzia Zafar as an additional

independent Non-Executive Director on 1 June 2022. Marzia

brings to Harworth a wealth of experience in sustainability and

adds to the Board’s diversity. See Marzia’s biography on page

84, and see the Nomination Committee Report on page 99 for

the process leading up to Marzia’s appointment.

Board papers

and debate

• The executive summary in Board approval

papers should identify clearly the main

factors for Board consideration and the action

required.

• Time should be scheduled at the end of

each Board meeting for a short discussion

reviewing the effectiveness of the meeting.

Alongside the review of the delegated authorities framework,

changes were made to underwriting proposal templates, which

include guidance on what to include in the executive summary.

Each agenda sets aside time at the end of the meeting for

the Board to review the quality of debate on the agenda

items and the quality and effectiveness of Board papers

and presentations supporting those items. For example,

following the first regional update to the Board in 2022, it was

considered that it would have been beneficial for the wider

team to participate in the presentation alongside the Regional

Director and this was implemented for the other regional

updates during the year.

Material

decisions

To track the effectiveness of its decisions, the

Board should determine, at the end of each

meeting, whether any material decisions should

be revisited in the future.

As part of its brief review at the end of each meeting,

the Board also considers whether any material decisions

should be revisited in the future and, if so, when. During

the year, as market conditions have evolved, the Board has

re-appraised a number of projects and proposals including

BTR project delivery, sales of investment properties and direct

development.

Board

meetings

The frequency and format of meetings and

structure of the annual Board timetable to be

reviewed regularly by the Chair, Chief Executive

and Company Secretary to identify areas for

Board and Committee efficiency.

Changes have been made to the annual Board and Committee

timetable, including a reduction in the number of in-person

Board meetings to be supplemented by Board calls where

necessary. These changes will be implemented fully from

2024, with a transition in 2023 given that the 2023 timetable

had already been established prior to agreeing the changes.

Engagement

with

stakeholders

As part of the stakeholder mapping exercise, there

should be engagement with the Non-Executive

Directors to understand how their relationships

could support and strengthen further engagement

with some external stakeholders.

Non-Executive Directors have continued to feed into

stakeholder mapping and management which is undertaken

at an operational level, particularly where existing relationships

with local and central government can support stakeholder

engagement.

Financial

reporting and

forecasting

Continuous improvement in financial reporting

including enhancements to corporate modelling

and longer-term financial forecasting.

• Significant enhancements have been made to Group

financial modelling, which has enabled regular rolling

reforecasts to be made available to the Board.

• This has also underpinned the establishment of a Group

Overview Tracker, which supports operational and Board

appraisals of new, and changes to existing, projects by

providing a clearer picture of their impact on Group

forecast returns and capital deployment.

Harworth Group plc: Annual Report and Financial Statements 2022

Governance Report

In Q4 2022, the Chair conducted an

internal evaluation of the Board, its

Committees and individual Directors. This

took the form of an online questionnaire

completed by all Directors and the Senior

Executive. The responses were collated

to inform one-to-one meetings between

the Chair and each Director and member

of the Senior Executive. The findings

were reported to the Board in January,

where it discussed a range of possible

actions to enhance its effectiveness. It was

determined that, due to time and resource

constraints, there would need to be a

phased implementation of proposals, and

the Senior Executive would update the

Board at its meeting in April 2023 with the

priority actions to take forward during the

year. The agreed actions will be set out

in the 2023 Annual Report along with an

update on progress made during the year.

An evaluation of the Chair’s performance

is led annually by the Senior Independent

Director. The externally facilitated

evaluation at the end of 2021 reported

that the Chair was extremely effective with

a collegiate approach, was respectful of

both the Board and Harworth’s people

as a whole and understood the Chair/

Chief Executive boundary well. For the

2022 internal evaluation, the Senior

Independent Director met with our

other Non-Executive Directors and the

Senior Executive in early 2023 to review

the Chair’s performance. Following that

review, the Senior Independent Director

considered and discussed with the Chair

the comments and feedback received

from the Directors and was able to confirm

that the performance of the Chair was

considered effective and that he continued

to demonstrate appropriate commitment

to his role.

The Chair, taking into account the views of

the other Directors, maintains an ongoing

review of the performance of the Chief

Executive.

The Chief Executive appraises the

performance of the members of the Senior

Executive twice a year. Similar appraisals

are undertaken by Senior Executive

members of the performance of their

direct reports on the Group Leadership

Committee.

Annual General Meeting

The Annual Report and Notice of AGM are

sent to shareholders at least 20 working

days before the meeting.

This year, we will be holding our first partly

virtual AGM on Tuesday 23 May 2023 at

10:00 am with the meeting being webcast

live. The AGM is a key date in the Board’s

calendar, and by making the meeting

available online the Board hopes to

increase levels of shareholder engagement

by providing increased opportunity to

pose questions to Board members.

For statutory purposes, the place of

meeting will be The Bessemer Conference

Room, AMP Technology Centre, Advanced

Manufacturing Park, Brunel Way, Waverley,

Rotherham S60 5WG. The Chair, Chief

Executive, Chief Financial Officer and

Company Secretary will be at this

location, to meet with any shareholders

who wish to attend in person, with other

Directors joining online. Shareholders

are encouraged to view the AGM online,

please see the Notice of AGM for further

detail on how to access the webcast

facility. Questions can be submitted via

this facility both during and in advance

of the meeting. We strongly encourage

shareholders to log on and submit any

questions they might have in advance of

the meeting, so that their views are heard

even if they are unable to participate live.

Shareholders that view the AGM online will

not be able to vote during the meeting but

are encouraged to vote in advance. There

are three ways to submit voting instructions

before the meeting, which are available

from the publication date of the Notice

of AGM:

1. By completing and returning a paper

proxy form as per the instructions on

the form. Shareholders who elected

to receive hard copy documents will

receive a proxy form with the Notice of

Meeting. Otherwise it is available from

our registrars (see contact details on

page 207);

2. By registering your proxy vote

electronically via our registrar’s

website, www.sharevote.co.uk.

Or, if you are registered, via the

Shareview platform; or

3. Via the CREST or Proxymity system for

those that are users of either platform.

The resolutions to be proposed at the

AGM, together with the explanatory

notes, appear in the separate Notice of

AGM accompanying this Annual Report.

Separate resolutions are proposed on each

substantially separate issue. The Notice is

also available on our website.

For each resolution the proxy appointment

forms provide shareholders with the

option to direct their proxy vote either for

or against the resolution or to withhold

their vote. All valid proxy appointments

are properly recorded and counted.

Information on the number of shares

represented by proxy, the proxy votes

for and against each resolution, and the

number of shares in respect of which the

vote was withheld for each resolution,

together with the voting result, are given

at the meeting and made available on the

Company’s website. A vote withheld will

not be counted in the calculation of the

proportion of the votes for and against a

resolution.

This Statement of Corporate Governance

was approved on behalf of the Board by:

Alastair Lyons

Chair

13 March 2023

Harworth Group plc: Annual Report and Financial Statements 2022

Governance Report

Nomination Committee report

Committee members

Alastair Lyons (Chair)

Angela Bromfield

Ruth Cooke

Lynda Shillaw

Dear Shareholder,

I am pleased to report to shareholders on

the work of the Nomination Committee

during the year ended 31 December

2022. The report sets out the Committee’s

activities during 2022 and its priorities for

2023, which focus on reviewing Board and

Committee composition and succession

planning to ensure a balanced and diverse

Board, as well as maintaining oversight of

equity, diversity and inclusion across the

business.

The Committee’s terms of reference, which

were reviewed and updated during the

period, are available on the Company’s

website: https://harworthgroup.com/

investors/governance/. Throughout 2022

the Committee acted in accordance with

the principles of, and fulfilled its obligations

under, the 2018 Code.

Membership and meetings

The Committee has four members.

During the period I continued to Chair

the Committee, and its other members

were Angela Bromfield, Lynda Shillaw and

Ruth Cooke. Ruth’s appointment to the

Committee took effect on 25 January 2022,

following a recommendation to the Board

to appoint an additional independent

Director to the Committee.

In H1, the Committee led a recruitment

process culminating in the appointment of

Marzia Zafar as an additional independent

Non-Executive Director on 1 June 2022.

Marzia has joined our ESG Committee, and

we are already benefiting significantly from

the depth of her natural capital experience,

in particular as regards the environmental

and energy considerations of the Board.

Besides this, the Committee held one

further meeting during the period to review

succession and development planning

for the Board and Senior Executive and to

review the effectiveness of the initiatives in

place to improve diversity throughout the

business.

Membership and attendance at meetings

in 2022 are shown below:

Independent

Committee

tenure at

31 December 2022

Scheduled meetings

attended/eligible

to attend

Alastair Lyons Chair Yes 4 years 10 months 1/1

Angela Bromfield Member Yes 3 years 1/1

Lynda Shillaw Member No 2 years 2 months 1/1

Ruth Cooke (joined the

Committee in January 2022)

Member Yes 11 months 1/1

Harworth Group plc: Annual Report and Financial Statements 2022

Governance Report

The Committee’s key activities in 2022

The key activities of the Committee during 2022 are shown below:

Recruitment Board composition and succession Diversity External appointments

Recruitment process leading to the appointment of Marzia Zafar

Review of Board and Committee composition

Review of succession plans for the Board and Senior Executive

Annual review of time commitment of Non-Executive Directors

Review of progress to improve diversity across the business

Review of proposed external appointments for Lynda Shillaw and Lisa Scenna

The Committee’s priorities for 2023

• Ongoing review of Board composition and succession planning for the Board and Senior Executive.

• Ongoing review of effectiveness of initiatives to promote equity, diversity and inclusion across the business.

Board and Committee composition and recruitment

The Board comprises the Chair, who is considered independent, the Chief Executive, the Chief Financial Officer and seven

Non-Executive Directors, two of whom are not considered independent. Angela Bromfield continues in the role of Senior Independent

Director (‘SID’).

The composition of the Board and its Committees is reviewed regularly by the Committee to ensure that, in each case, its membership

provides appropriate diversity and balance of skills, knowledge, and experience and includes the right number of independent Directors.

That review takes account of output from the annual Board evaluation. Informed by our 2021 external Board effectiveness review, which

recommended that the Board remain open to recruiting a Non-Executive Director with different skills and experience, Marzia Zafar was

appointed as an independent Non-Executive Director on 1 June 2022. The search process for Marzia’s appointment is outlined below:

Role brief Longlist review Interview Recommendation

Informed by the recommendation from

the 2021 external Board effectiveness

review and the Committee’s review of

the balance of skills, knowledge and

experience on the Board, the Committee

engaged Warren Partners to monitor the

availability of potential candidates for

the role of Non-Executive Director with

a diverse background and expertise in

sustainability.

The Company does not retain Warren

Partners in any other capacity and it has

no other connection with the Company

or individual Directors.

A number of

relevant high-quality

candidates were

identified by

Warren Partners,

some of whom the

Committee selected

to be invited for

interview.

The Committee

undertook formal

interviews to assess

the candidates.

Marzia was identified

as a standout

candidate given her

extensive experience

in sustainability

(see below and in

Marzia’s biography

on page 84).

The Committee recommended the

appointment of Marzia as an additional

independent Non-Executive Director to

the Board.

The Committee reviewed any

potential conflicts and significant time

commitments prior to making this

recommendation.

Induction

Marzia undertook a comprehensive and

tailored induction programme following

her appointment, details of which are

set out in the Corporate Governance

Statement on page 92.

Marzia brings to Harworth a wealth of experience in sustainability, having spent over 20 years working on policies and strategies to

enable energy transition for regulators, business and not for profit sectors. Since joining the Board she has been appointed as Deputy

Director of Strategy and Decarbonisation at Ofgem. Given this experience, Marzia also joined the ESG Committee on appointment.

Whilst all appointments to the Board are based on merit, the appointment of Marzia is also a first step towards improving ethnic minority

representation at Board level.

The appointment to the Board of someone with different experience is testament to the Board’s commitment to diversity and inclusion. Like

all directors, Marzia has brought her unique approach and perspectives to Board discussion and analysis, thus contributing to the diversity of

viewpoints factored into making Board decisions as part of the culture of openness and debate in the boardroom.

Harworth Group plc: Annual Report and Financial Statements 2022

Governance Report

The Committee considers that the composition of the Board is appropriately balanced, and we are proud of the gender balance we have

achieved as well as taking steps to improve ethnic minority representation. Harworth confirms that, as of 31 December 2022, it had met the

targets on Board diversity prescribed by the new Listing Rules (LR 9.8.6R(9) and LR 14.3.33R(1)), as follows:

Target Our progress

At least 40% of individuals on the board of directors are women 60% of our Board are women

At least one of the following senior positions on the board of

directors is held by a woman:

• the chair;

• the chief executive;

• the senior independent director; or

• the chief financial officer.

Three out of four senior positions on the Board are held by

women, as follows:

• our Chief Executive, Lynda Shillaw;

• our Senior Independent Director, Angela Bromfield;

and

• our Chief Financial Officer, Kitty Patmore.

At least one individual on the board of directors is from a minority

ethnic background

One member of the Board is from a minority

ethnic background

Numerical data on the gender identity and ethnic background of our Board members and executive management as of 31 December

2022 is set out in the tables below. For this purpose, “executive management” refers to our “Senior Executive” and comprises the Chief

Executive, Chief Financial Officer, Chief Operating Officer, Chief Investment Officer and General Counsel and Company Secretary.

Gender representation

Number

of Board

members

Percentage

of the

Board

Number of senior

positions on the

Board (CEO, CFO,

SID and Chair)

Number in

executive

management

Percentage

of executive

management

Male 4 40% 1 3 60%

Female 6 60% 3 2 40%

Non-binary – – – – –

Other gender identity – – – – –

Not specified/Prefer not to say – – – – –

Ethnicity representation

Number

of Board

members

Percentage

of the

Board

Number of senior

positions on the

Board (CEO, CFO,

SID and Chair)

Number in

executive

management

Percentage

of executive

management

White British or other White

(including minority-white groups)

9 90% 4 5 100%

Mixed/Multiple Ethnic Groups – – – – –

Asian/Asian British – – – – –

Black/African/Caribbean/Black

British

– – – – –

Other ethnic group, including Arab 1 10% – – –

Not specified/Prefer not to say – – – – –

The data for reporting against the Board diversity targets and numerical disclosures has been collected in two ways:

• For the Senior Executive, we have relied upon the existing data stored on our HR platform where employees report their preferred

gender identity and ethnic group.

• The Non-Executive Board members, whose details are not held on the HR platform, were asked to complete a questionnaire and

select their preferred gender identity and ethnic group in line with the categories in the tables above.

Nomination Committee report continued

Harworth Group plc: Annual Report and Financial Statements 2022

100

Governance Report

Analysis of diversity across the workforce is detailed later in this report. Further analysis of the composition of the Board (at the date of this

report) is shown below. The Directors’ biographies appear on pages 82 to 85.

Board

Composition Age Tenure

Male Female Male Female Male Female

Chair

30–40 years 1–3 years

Exec Directors

41–50 years

3–6 years

Independent NEDs

51–60 years

6–10 years

Non-independent NEDs

61–70 years

Over 10 years

One Director

Martyn Bowes is the representative of the Pension Protection Fund, and he is not, therefore, independent. Steven Underwood is employed by the Peel Group, which

also has a material shareholding, and he is not, therefore, considered independent.

Membership of our Committees complies with the 2018 Code. The Non-Executive Directors have no financial or contractual interests in

the Group, other than interests in ordinary shares as disclosed in the Directors’ interests section of the Directors’ Remuneration Report at

page 133.

Board succession

During the period, the Committee undertook a review of the succession plans for Executive and Non-Executive Directors. Given that

the Committee had focused on refreshing the Board significantly over the previous three years, coupled with the appointment of Marzia

Zafar, this was a relatively light review.

The timeline below shows the tenure of each of our Directors.

Board tenures

2010 2016 2017 2018 2019 2020 2021 2022

Steven Underwood – August 2010

Martyn Bowes – March 2013

Alastair Lyons – March 2018

Ruth Cooke – March 2019

Angela Bromfield – April 2019

Kitty Patmore – Oct 2019

Lisa Scenna – Sept 2020

Lynda Shillaw – Nov 2020

Marzia Zafar –

June 2022

Patrick O’Donnell Bourke – Nov 2020

External appointments

The Committee reviews all proposals for external appointments of Executive and Non-Executive Directors. Before making a

recommendation to the Board, the Committee considers the time commitment required by the proposed appointment and its likely

impact on the prospective appointee’s commitment to their role at Harworth, together with the prospect of conflicts of interest arising.

The Board makes a final decision on all new external appointments.

During 2022, the Committee reviewed the proposed appointments of: Lynda Shillaw, as Chair of the SYMCA Innovation Board;

and of Lisa Scenna, as a Board member of one of Dexus’s fund management platforms (based in Australia), and as a Non-Executive

Director of Gore Street Energy Storage Fund plc. Those appointments were recommended to, and approved by, the Board. The

external appointments of Lisa Scenna are expected to become effective following the signing of this Annual Report, and a regulatory

announcement will be made about the latter when it takes effect.

Harworth Group plc: Annual Report and Financial Statements 2022

101

Governance Report

Nomination Committee report continued

Senior Executive

Succession plans are in place for each

member of the Senior Executive and those

plans are reviewed regularly (typically

annually) by the Committee. Talent

management and succession planning for

the whole business is considered annually

by the Board.

In addition to the tables on page 100,

further analysis of the composition of the

Senior Executive (at the date of this report)

is shown below.

Age

30–40 years 1

41–50 years 2

51–60 years 2

Tenure

1–3 years 3

3–6 years 1

6–10 years 1

Diversity, inclusion and equal opportunities

The Board recognises the benefit of a diverse (in its widest sense) Board and workforce

comprising individuals with different backgrounds, experience, perspectives and ideas.

In common with much of the real estate and construction sectors, achieving that objective

remains a challenge, but we are committed to it.

The Committee takes the lead in monitoring the effectiveness of the initiatives we have

introduced to improve diversity, and the progress made. A review is undertaken annually,

with the results reported to the Board. A summary of measures established in 2022 and in

previous years is set out on the following page. A key element of those initiatives was the

adoption of a new Equality, Diversity and Inclusion (‘ED&I’) Policy, which has a wider remit

than the previous Diversity and Equal Opportunities Policy (adopted in 2018) with the

objective of increasing emphasis on inclusivity and culture. Our ED&I Policy formalises our

commitment to making Harworth a diverse and inclusive organisation, which welcomes a

range of perspectives, ideas and approaches. With this Policy, and supporting initiatives,

we aim to find and nurture the best talent, as well as increase employee engagement and

retention, all of which are essential in achieving our strategy and the delivery of long-term

sustainable success.

We have published our gender pay gap statistics since 2017 despite our not being

obliged to, as the Board feels it is important to have a transparent benchmark against

which to measure our progress. We publish the same analysis again in respect of 2022

here, alongside the comparative results for 2021.

Gender pay gap analysis

In each case the reference point is 31 December.

Proportion of men and women in each quartile pay band

Males Females

Lower quartile 2022 41% 59%

2021 43% 57%

Lower middle 2022 62% 38%

2021 61% 39%

Upper middle 2022 62% 38%

2021 65% 35%

Upper quartile 2022 83% 17%

2021 87% 13%

Gender Pay Gap Reporting 2022 2021

Mean gender pay gap 18% 16%

Median gender pay gap 27% 34%

Mean bonus gender pay gap 24% (4)%

Median bonus gender pay gap 69% 67%

Whilst we believe that our gender pay gap is a function of historic trends across the

property and construction sectors, this does not diminish the importance of, or the

Board’s commitment to, reducing it as quickly and effectively as we can.

Harworth Group plc: Annual Report and Financial Statements 2022

102

Governance Report

Given that our workforce is relatively low in number, notwithstanding a substantial increase in percentage terms during 2022, our gender

pay gap statistics can move significantly due to a small number of changes and/or the impact of a senior leaver or joiner. In percentage

terms, there was substantial growth in the Group’s workforce in 2022 to support our growth strategy, from 92 to 116, an increase of 26%.

These changes had a significant impact on all quartile bands, including on their boundaries and composition. The reported data is also

affected by other factors, such as the timing of recruitment during the year. This makes it challenging to draw meaningful comparisons

between the gender pay gap data for 2021 and 2022.

By way of example, the mean gender pay gap and mean bonus gender pay gap is adversely affected by the inclusion of a full-year’s salary

and bonus paid to a cohort of senior males hired partway through 2021. By way of further example, the males recruited to more senior

roles in 2022 joined in the first half of the year, meaning (under the rules of our discretionary bonus scheme) they were entitled to a 2022

bonus, whilst the females recruited to more senior roles in 2022 joined in the second half of the year, meaning (under the rules) they

were not entitled to a 2022 bonus. This has adversely affected the mean bonus gender pay gap.

However, we can identify that the gender pay gap for 2022 joiners was higher than the employee population as a whole, partly due to

the timing of recruitment within the year but also because a higher number and proportion of females were hired into roles in the lower

quartile pay band, whilst a higher number and proportion of males were appointed into the upper middle and upper quartile pay bands.

This highlights that, whilst we are proud of the female representation on our Board and in the two most senior Executive roles, we must

continue our efforts to accelerate gender rebalancing across the wider senior leadership team.

Promoting a diverse workforce

The Committee reviews and oversees the implementation of initiatives to promote diversity and inclusion across the business.

The following measures, some of which have been long-established, are designed to ensure that opportunities for recruitment,

development and promotion are available to everyone, regardless of background or personal circumstances:

Measures previously established Measures established in 2022

• Diversity is an active and important consideration in

the Committee’s succession plans for the Board and

Senior Executive: this is evident from appointments to

both Executive and Non-Executive roles on the Board in

recent years.

• Whilst appointments will always be based on merit,

Harworth is committed to giving everyone, regardless

of gender, ethnicity, sexuality or background, every

opportunity to apply for, and be appointed to, roles across

the business and, as such, the desire to encourage diversity

is a prominent consideration when we are recruiting

for all roles. To that end, the requirement for diversity

is a precondition of candidate long-lists prepared by

recruitment consultants where possible.

• Hybrid Working and Core Business in Core Hours policies,

which recognise the benefits of different working patterns

and practices to accommodate the different personal

commitments of our employees. These policies open up

roles to a wider range of internal and external candidates

regardless of their personal circumstances. They are

accompanied by hybrid working training for all employees, as

well as a risk assessment to ensure our staff are fully supported

in working remotely.

• Market leading maternity, adoption and paternity leave and pay

policies. We are proud of our progressive stance in this area.

• A number of employees work part-time, whether that be a

reduced number of days or reduced hours every day.

• Adoption of a new ED&I Policy. The launch of this Policy included

interactive, drama-based ED&I training for all employees.

• The Board supported a new Talent and Learning & Development

Strategy, which, amongst other things, is designed to create

strong internal succession wherever appropriate.

• A new Menopause Policy was introduced recognising an

employer’s role to support sensitively this potentially distressing

life stage. We also have a certified menopause champion.

• We have extended our reach through different talent pools

by providing apprenticeship schemes and internship

placements. We have also partnered with local schools,

academies, colleges and universities taking part in careers

events and providing other support. For example, three MSc

students worked with our Yorkshire and Central planning

team as part of their dissertations.

• We have improved the collection of diversity data on our

HR platform. Employees are not obliged to share personal

information, but where they do, it helps the Company

to monitor better diversity in its workforce and to make

assessments against a baseline.

Harworth Group plc: Annual Report and Financial Statements 2022

103

Governance Report

Nomination Committee report continued

Assessing the diversity of our workforce

For consistency, where comparisons are given between 2022 and 2021, in each case the position reflected is at 31 December.

At 31 December 2022, the total headcount was 116 employees.

Although the gender and ethnic diversity balance of the Board and Senior Executive is set out on page 100, it is displayed again below in

the context of the whole workforce.

Board

Senior

Executive

Team

Investment

Committee

Group

Leadership

Committee

Wider

workforce

Gender

balance

Gender

balance

Gender

balance

Gender

balance

Gender

balance

2021 2022 2021 2022 2021 2022 2021 2022 2021 2022

Female

Male

Female

Male

Female

Male

Female

Male

Female

Male

Ethnic diversity

balance

Ethnic diversity

balance

Ethnic diversity

balance

Ethnic diversity

balance

Ethnic diversity

balance

2021 2022 2021 2022 2021 2022 2021 2022 2021 2022

White

Ethnic

Minority

–

White

Ethnic

Minority

–

White

Ethnic

Minority

–

White

Ethnic

Minority

–

White

Ethnic

Minority

Recruitment into new roles

Male

Female

Male

Female

Ethnic Minority

White

Promotions

Male

Female

Ethnic Minority

White

Recruitment into replacement roles

Male

Female

Ethnic Minority

White

Excludes the Group Leadership Committee.

Harworth Group plc: Annual Report and Financial Statements 2022

104

Governance Report

Gender diversity

We are pleased to have achieved gender

balance on the Board and proud that

our business is led by female Executive

Directors, demonstrating our commitment

to gender representation at the most senior

level. Nevertheless, we recognise that

more work is needed to accelerate gender

rebalancing across the wider Group

Leadership Committee and workforce.

We are hopeful that the examples set by

our Chief Executive and Chief Financial

Officer will send a positive signal to female

employees and external candidates

for roles at Harworth such that gender

diversity across the business continues to

improve.

Ethnic diversity

It is pleasing to see that, as the number of

employees has increased during the period,

so too has the representation of employees

from an ethnic minority background.

However, we are mindful that, whilst we

have made a start with regard to ethnic

diversity in the business, including on the

Board and Group Leadership Committee,

we have much further to go in this regard.

Following the appointment of a new Group

Resources and Transformation Director in

September 2022 who has responsibility for

the people strategy, and the Committee’s

continued oversight of diversity and

inclusion, we hope to improve the figures

year on year.

It is important to stress that, whilst our

desire to improve diversity will be a

consideration in decisions on recruitment

and promotion, selection continues to be

based on merit and ability.

Equal opportunities for all

Since Harworth’s formation in 2012

we have been committed to creating

a working environment that is free

from discrimination, harassment and

victimisation, where everyone feels valued

and respected. This includes:

• promoting equality and fairness for all in

our employment;

• making reasonable adjustments for

disabled employees and giving full and

fair consideration to disabled applicants

for roles in our business; and

• providing equal opportunities for

continuing professional development

and promotion within our business to

any disabled employees.

Annual General Meeting

All Directors are subject to annual

re-election by shareholders. The Directors’

biographies appear on pages 82 to 85.

The Committee has concluded that all

Directors seeking re-election continue

to be effective and to demonstrate

commitment to their role. They have the

requisite skills, knowledge and experience

to continue to discharge their duties

effectively.

The Board considers that each Director

provides valuable input to the operation

of the Board and that their contribution

is important to the Company’s long-

term sustainable success, bringing a

diverse range of skills from different

sectors and experience. As such, on the

recommendation of the Committee, the

Board considers it appropriate to propose

the re-election of all Directors at the AGM

to be held on 23 May 2023. I will be

available at the meeting to respond to any

questions or discuss matters relating to the

Committee’s activities.

Alastair Lyons

Chair of the Nomination Committee

13 March 2023

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105

Governance Report

Audit Committee report

Committee members

Patrick O’Donnell Bourke (Chair)

Ruth Cooke

Lisa Scenna

Dear Shareholder,

I am pleased to report to shareholders on

the work of the Audit Committee during

the year ended 31 December 2022.

The report sets out the Committee’s

responsibilities and highlights its activities

during 2022 and its priorities for 2023.

The Committee’s terms of reference,

which were reviewed and updated during

the year, are available on the Company’s

website: https://harworthgroup.com/

investors/governance/. Throughout 2022

the Committee acted in accordance with

the principles of, and fulfilled its obligations

under, the 2018 Code and had regard to

the FRC’s Guidance on Audit Committees.

Membership and meetings

There were no changes to Committee

membership, which continued to comprise

three independent Non-Executive

Directors. I chaired the Committee, and its

other members were Ruth Cooke and Lisa

Scenna.

The experience of each member of the

Committee is summarised on pages 83

to 84. The Board is satisfied that I have

recent and relevant financial experience.

I am also Chair of the Audit Committee of

Pantheon Infrastructure PLC, an investment

trust focused on international infrastructure

assets. I was previously Chair of the Audit

and Risk Committee of Calisen plc, which

was then a constituent of the FTSE 250,

as well as Chair of the Audit Committee

of Affinity Water Limited. My most recent

executive position was that of Group

Finance Director for John Laing Group

plc. I am a chartered accountant, and so

too are Ruth Cooke and Lisa Scenna. The

Board is also satisfied that the Committee

has competence relevant to the sectors in

which the Company operates, given that I

have extensive experience in infrastructure

investment and management, Lisa Scenna

has a strong background in real estate

development and asset management, and

Ruth Cooke is the Chief Executive Officer

of a business operating in the real estate

sector.

The Chief Executive, Chief Financial

Officer and external auditors normally

attend Committee meetings. The Chair of

the Board and other members of senior

management, including the Head of

Internal Audit who joined the Company in

January 2023, are also invited to attend,

as appropriate. The Head of Internal Audit

also has a direct reporting line to the

Committee.

In performing its duties, the Committee

has access to the services of the General

Counsel and Company Secretary and, if

required, external professional advisers.

During 2022, there were five scheduled

meetings of the Committee. Attendance at

meetings in 2022 is shown below:

Independent

Committee

tenure at

31 December 2022

Meetings attended/

eligible to attend

Patrick O’Donnell Bourke Chair Yes 2 years 2 months 5/5

Ruth Cooke Member Yes 3 years 10 months 5/5

Lisa Scenna Member Yes 2 years 2 months 5/5

Harworth Group plc: Annual Report and Financial Statements 2022

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Governance Report

Key

Financial reporting

External audit

Internal audit

Risk management and internal controls

Governance

November

2022 interim results de-brief and review of external auditor’s

appointment and fees (without external auditor present)

Planning for 2022 external audit

2023 insurance programme renewal

Update on (outsourced) internal audit activities

Report on audit of subsidiary management companies

Review of auditor of subsidiary management companies

Review of cyber and information security activities and

workstreams (2022/2023)

Annual review of GDPR compliance

Annual review of Committee’s terms of reference

Committee CPD seminar

September

Feedback from external auditor

(without management present)

Review of 2022 half-year valuations

Going concern analysis

Review of movements in provisions at the half year

External auditor’s report on 2022 interim results

2022 interim results and recommendation to

the Board

Risk management update

Update on (outsourced) internal audit activities

Update on recruitment for role of Head of

Internal Audit

Review of updated Business Continuity Plan (‘BCP’)

Review of preparatory work for the government’s

audit and corporate governance reforms

June

2021 audit de-brief and review of external auditor’s

appointment (without external auditor present)

Areas of focus for 2022 interim results

Annual review of appointments of valuers and appointment of

valuer for the half-year valuations

Potential BTR transaction accounting treatment

Establishment of internal audit function and update on

(outsourced) internal audit activities

Annual tax update

Approval of new Operational Approvals Policy

Approval of revisions to Gifts & Entertainment Policy

Briefing on the government’s response to UK audit and

corporate governance reforms

March

Updated going concern analysis

External audit of 2021 accounts

2021 results and recommendation to the Board

2021 Annual Report and Financial Statements

Review of whistleblowing reports and approval of

new “Speak Up” policy and procedure

February

Review of 2021 year-end valuations

Initial review of going concern analysis

Review of movements in year-end provisions

Review of draft of 2021 results RNS

Review of draft of 2021 Annual Report and Financial Statements

Effectiveness of risk management system and internal controls

Further assurance programme and assessment of need for

internal audit function

Review of procedures for detection of fraud and prevention of

bribery

Review of treasury policies and recommendation thereon to

the Board

Review of tax strategy and policy

The key activities of the Committee during 2022 and its priorities for 2023 are shown below :

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Governance Report

The Committee’s priorities for 2023

• Review reporting of 2022 full-year

results and 2023 interim results

including going concern and viability

analysis and significant financial

judgements by management.

• Oversee and appraise external audit

undertaken by Ernst & Young LLP (‘EY’).

• Monitor the profile of the Group Risk

and Assurance Map (‘GRAM’) and

effectiveness of the risk management

system.

• Oversee establishment of new internal

audit function, approve internal audit

plan, and monitor the effectiveness

of internal controls via updates from

internal audit function.

• Continue to oversee the preparatory

work for the government’s audit and

corporate governance reforms.

• Review the appointment of the Group’s

valuers.

• Review results of BCP desktop test

• Oversee the 2024 insurance

programme renewal.

• Monitor the maturity of the Group’s

cyber and information security systems,

including GDPR compliance.

Financial reporting

The Committee reviews the contents of the full-year results, Annual Report and interim results and makes a recommendation to the

Board for their approval. Ahead of the interim and full-year results announcements and publication of the Annual Report, the following

processes are followed by the Committee to satisfy itself as to the integrity of the statements and disclosures contained therein, and to

ensure that all financial reporting is fair and balanced and provides an understandable assessment of the Company’s position

and prospects:

Reports from

management Valuations External audit Going concern

Reports from

management include a

detailed explanation of

valuation assumptions

and movements,

commentary on

provisions, and analysis

of movements in the

balance sheet and cash

position.

• The Committee Chair

(and other Committee

members if available)

attends the half-year and

year-end valuation review

meetings in conjunction

with the Company’s valuers,

external auditors and

management team.

• The valuers attend

Committee meetings

ahead of publication of

the interim and full-year

results to explain valuation

methodology and

processes, comment on

market conditions, and take

questions from Committee

members.

• Valuation experts from EY

also attend those Committee

meetings to explain the

work they have undertaken

in reviewing the half-year or

year-end (as appropriate)

valuations, and to take

questions from Committee

members.

• In June each year, the Committee

reviews the plan and timetable for the

procedures the external auditor will

undertake in respect of the interim

results. This includes acceleration

of some year-end audit work. In

September and/or November each

year, the Committee examines the

full year-end external audit plan and

timetable before detailed audit work

commences.

• The Committee reviews the external

auditor’s report on the work it

has undertaken for the interim

and full-year results. The lead

audit partner attends Committee

meetings to take questions from

Committee members.

• The Committee meets the external

auditor annually independently

of management, ensuring it has

full visibility of matters that have

been the subject of particular

scrutiny by the external auditor

and/or discussions between it and

management.

• For the 2022 audit, there were

no specific areas the Committee

asked the external auditor to look

at beyond those identified in the

audit plan.

• The Committee receives

early sight of going

concern analyses.

• The Committee reviews

the long-term viability

and going concern

assessments prepared

by management and the

Directors’ responsibility

statements (including

the assumptions

underpinning them)

and recommends to the

Board their adoption.

Audit Committee report continued

Harworth Group plc: Annual Report and Financial Statements 2022

108

Governance Report

The Committee also reviews drafts of the

interim and Annual Reports in advance of

their publication and comments thereon.

As part of these reviews, and following

recommendation by the ESG Committee,

the Committee reviews disclosures

relating to climate change, including for

SECR and TCFD reporting.

In addition, the Committee reviews

the controls in place to ensure the

completeness and accuracy of the

Company’s financial records. As part of

this, as in previous years, for the 2022

results the Committee noted (i) the reviews

undertaken during preparation of the

Annual Report and Financial Statements

by various internal and external parties,

including the external auditor and valuers,

to ensure consistency and balance;

and (ii) the internal verification exercise

undertaken in respect of the financial

and operational metrics referred to in the

Strategic Report and Directors’ Report.

As part of the Committee’s review of the

Group’s material internal controls (see

page 111), it considered, concluded,

and recommended to the Board that

the disclosures in, and the process and

controls underlying the production of,

the 2022 Annual Report, are appropriate

to enable the Committee to determine

that the report is fair, balanced and

understandable and provides the

information necessary for shareholders

to assess the Group’s position and

performance, business model and

strategy. The Board’s conclusions in this

regard are set out in the Statement of

Directors’ Responsibilities on page 138.

Significant reporting

issues considered by the

Committee for the 2022

financial statements

Valuation of the property portfolio

The property portfolio accounts for

the vast majority of the Group’s total

assets. This portfolio includes investment

property, development property, assets

held for sale, overages, owner-occupied

properties and joint ventures. Whilst

the portfolio continues to be valued by

independent external valuers, BNP Paribas

and Savills, in accordance with the

Royal Institution of Chartered Surveyors

Valuation – Professional Standards, these

valuations include a significant degree of

judgement. The key judgements within

the external valuations are as follows:

a. the future intention and plans for the

properties/site;

b. value per acre;

c. future rental amounts and financial

stability of tenants;

d. future rental yields;

e. applicability and availability of

comparable sales evidence;

f. anticipated risk of delivery of a site’s

masterplan; and

g. costs to bring sites forward for sale or

development.

The valuation of the Group’s property

portfolio lies at the core of its financial

reporting and the Committee has a

particular duty to ensure it is reported in a

fair, balanced and understandable manner.

Harworth Group plc: Annual Report and Financial Statements 2022

109

Governance Report

At both the half-year and the year-end, the

Committee reviewed the reports prepared

by the external valuers and challenged

them on methodology, market conditions,

assumptions and judgements underlying

the disclosures in the consolidated balance

sheet. In its review, the Committee noted

the additional uncertainty given the

changing market conditions against which

the valuation exercise was undertaken.

The Committee also took into account the

work carried out by the external auditor’s

valuation team and overall is satisfied that

the relevant balances are appropriately

stated in the financial statements.

Going concern and viability

These are addressed in the Long-Term

Viability Statement (pages 36 to 38) and

the Statement of Directors’ Responsibilities

(pages 138 to 139), and also in the Notes

to the Financial Statements (page 160).

Management prepared forecasts on

several bases: a base case; a sensitised

forecast that reflected a number of severe

but plausible downsides; and a specific

climate change scenario case. The

outputs, which were reviewed in detail and

discussed by the Committee, project that

the Group can continue to operate with

available liquidity and banking facilities

under plausible downside scenarios.

The Committee is satisfied that the

disclosures in the financial statements on

going concern and long-term viability are

appropriate.

Alternative Performance Measures

(‘APMs’)

Harworth continues to believe that

the use of APMs alongside statutory

measures is essential in communicating the

performance and position of the Group

to its stakeholders. Note 2 to the Financial

Statements sets out a full reconciliation of

APMs to statutory measures.

The Committee reviewed the

appropriateness, prominence and

consistency of the APMs disclosed.

External audit

The Committee is responsible for making

recommendations to the Board on the

appointment, reappointment and removal

of the external auditor. Following a tender

process undertaken by the Committee in

2019, details of which were included in the

2019 Annual Report, EY was appointed

as the Company’s external auditor by

shareholders at the 2020 AGM. The

external auditor’s appointment is subject

to annual review by the Committee, the

last of which took place in June 2022 at the

same time as the Committee reviewed the

effectiveness of the 2021 year-end audit.

Having reviewed:

• the independence and objectivity of the

external auditor, including consideration

of potential conflicts of interest and of

any non-audit work undertaken for the

Company (for 2022 see analysis on the

next page);

• the effectiveness of the last

external audit;

• the quality control processes that the

external auditor has in place, including

any regulator’s public comments on

the same;

• the quality of the audit team, including

the experience of the audit partner and

team and its capacity;

• the quality of the audit through

feedback from the management team;

• the proposed scope of the audit; and

• the quantum of fees payable for the

audit (see further analysis below),

the Committee is recommending the

re-appointment of EY at the forthcoming

AGM for the external audit of the

Company’s financial statements for the year

ending 31 December 2023.

The Board recognises the importance

of safeguarding auditor objectivity and

takes the following steps to ensure that

external auditor independence is not

compromised:

• the Committee reviews the audit

appointment annually;

• the Company has a policy that, save

for audit-related services (such as

regulatory and statutory reporting,

and work relating to any circulars

required by the Listing Rules) and

exceptional circumstances (but only

with the Committee’s prior approval),

the external auditor will not provide

non-audit services to the Group;

• the Group retains Deloitte to provide

advice and assistance on most tax

matters and pension accounting. KPMG

is retained to advise on tax matters

relating to some of the Group’s joint

venture agreements;

• the Committee reviews on a regular

basis all fees paid for both audit

and non-audit activity, with a view

to assessing the reasonableness

of fees, value of delivery, and any

independence issues that may have

arisen or may potentially arise in the

future. An analysis of all audit and non-

audit fees paid in 2022 is shown on the

next page; and

• the Committee reviews the external

auditor’s report to the Directors

and the Committee confirming its

independence in accordance with

auditing standards.

Whilst EY audits the accounts of the

main subsidiary entities in addition to

those of the Company and the Group

consolidation, BHP, a regional chartered

accountancy firm, audits the accounts of

certain Group management companies

and joint venture companies. The

Committee receives a report each year

from BHP on its audit of the management

companies, and at the same time reviews

BHP’s appointment.

Audit Committee report continued

Harworth Group plc: Annual Report and Financial Statements 2022

110

Governance Report

Analysis of audit and non-audit fees

Year ended

31 December

2022

£’000

Year ended

31 December

2021

£’000

Audit fees

Fees payable to the external auditor and its associates for

the audit of:

The Company and the consolidated financial statements 330 315

The Company’s subsidiaries pursuant

to legislation 42 30

Non-audit fees

Fees payable to the external auditor and its associates for other services – –

372 345

Risk management and

internal controls

Risk and internal controls framework

The Board has overall responsibility for

risk and has delegated to the Committee

the responsibility for overseeing

the effectiveness of the Group’s risk

management and internal control systems.

An explanation of the Group’s risk

management framework, including the

work undertaken by the Board to identify

and review the Group’s principal risks,

the Directors’ appetite for each of those

risks, and the adequacy of the measures

in place to mitigate them, is set out in the

“Effectively managing our risk” on pages

43 to 53.

Central to the Group’s risk management

system is the GRAM: a register of the

Group’s principal and operational risks

grouped into 10 risk categories each with a

series of sub-risks. Each sub-risk has its own

risk and assurance map, which identifies

internal risk owners and “champions”

and incorporates commentary on the risk,

risk scores, mitigation measures, key risk

indicators, established Board assurance

activity and management’s proposals for

further assurance activity. Those proposals

form the basis for a 36-month rolling

internal audit programme (Internal Audit

Programme, see below).

The Committee reviews the GRAM

biannually as part of its assessment of

the effectiveness of the Group’s risk

management and internal controls

framework. When reviewing the GRAM,

the Committee focuses on the measures

management have implemented and/or

are planning to implement to mitigate each

risk and the adequacy of the assurance

afforded to the Board to determine the

effectiveness of those measures.

Ahead of publication of the year-end

results and Annual Report, management

presents a detailed assessment of the

effectiveness of the Group’s principal

financial, operational and compliance

controls, which is supported by the

outputs from the Internal Audit Programme

during the year, data on key risk indicators

and a wider review of the latest iteration of

the GRAM.

The Committee is satisfied that the risk

management and internal controls systems

in place, and the assurance regime for

the same described below, are effective

to support delivery of the Group’s

strategy. Informed by the Committee’s

recommendation, the Board’s assessment

of the effectiveness of those systems can

be found on page 44.

Internal audit

The GRAM informs the Internal Audit

Programme. In early 2022, the Committee

approved a programme of further

assurance activity for the year ahead,

which was predominantly outsourced

to KPMG. Further assurance activity

completed during 2022 included audits

of: the project to establish the Group’s new

CRM and acquisitions tracking platform

and its subsequent operation; certain HR

systems and processes; supplier payments;

a new Operational Approvals Policy; and

a new electronic document execution

process. The outputs of these reviews were

reported to the Committee at meetings

in late 2022 and early 2023. Overall, no

significant control issues were identified

although some process and control

improvements were recommended, the

majority of which have been adopted and

have been or are being implemented.

In previous years, the Committee has

taken the view that the structure of, and

processes within, the business were

neither sufficiently large, nor complex, to

merit an internal audit function. However,

when undertaking its latest annual review,

the Committee formed the view that the

increase in pace, scale and complexity

of activity needed to deliver the Group’s

strategy did necessitate the establishment

of an internal audit function. During 2022

Q3, a Head of Internal Audit was recruited

and she joined the Company in January

2023. Going forward, the Head of Internal

Audit will be responsible for designing and

delivering the Internal Audit Programme.

The Committee will review the Internal

Audit Programme in November each year

and approve activity for the following 12

months. However, the programme will

remain flexible to changing assurance

needs during the year and the outputs from

internal audit activity will be reported to the

Committee throughout the year.

The establishment of this function is part

of the Group’s preparatory work for the

implementation of the government’s audit

and corporate governance reforms.

Harworth Group plc: Annual Report and Financial Statements 2022

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Governance Report

Business continuity

The Group’s BCP underwent a review in

H2 2022 and the Committee was kept

appraised during the process. The BCP

was updated to reflect recent significant

operational changes in relation to

technology and organisation structure, to

transform the plan into a more user-friendly

tool, and to broaden its use for both

localised and severe incidents. A test of

the BCP was undertaken successfully, and

the results presented to the Committee, in

early 2023.

Insurance

The Committee had oversight of the

2023 insurance programme renewal,

challenging management both on the

overall programme and on individual

aspects of the renewal. Real estate

insurance market conditions remained

broadly unchanged during 2022 albeit

there have been some signs of softening

into 2023 as the market reacts to

macroeconomic conditions. Following

another year of low claims and a rigorous

renewal process, further improvements

in pricing have been secured,

notwithstanding inflationary increases in

reinstatement costs.

Whistleblowing/Speak Up

The Committee has responsibility for

reviewing and monitoring the Group’s

whistleblowing policy and procedures,

and the appropriate investigation of

whistleblowing reports. The Committee

undertook its annual review of the Group’s

policy and procedures in March 2022

and approved the introduction of an

external “Speak Up” platform, which offers

employees and external stakeholders

another means of reporting concerns (on

a confidential basis if preferred) alongside

the Group’s existing internal reporting

mechanisms.

There was one report made to the

Speak Up platform in 2022, which was

investigated, albeit that report constituted,

and was treated as, a grievance rather than

whistleblowing.

Compliance

The Committee is responsible for

monitoring the effectiveness of, and

compliance with, the Group’s policies and

procedures for combating modern slavery,

bribery and corruption, and preventing the

facilitation of tax evasion.

The Company’s 2022 Modern Slavery

Statement can be found on our website at

https://harworthgroup.com/investors/

governance/, together with our policies

on anti-corruption and bribery and

anti-facilitation of tax evasion.

I will be available online at the AGM to

respond to any questions relating to the

Committee’s activities.

Patrick O’Donnell Bourke

Chair of the Audit Committee

13 March 2023

Audit Committee report continued

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112

Governance Report

ESG Committee report

Committee members

Angela Bromfield (Chair)

Alastair Lyons

Martyn Bowes

Marzia Zafar

Lynda Shillaw

Kitty Patmore

Dear shareholder,

I am pleased to report to shareholders on

the work of the Environmental, Social and

Governance (‘ESG’) Committee during

the year ended 31 December 2022. This

report sets out the Committee’s activities

during the year and its priorities for 2023.

Given our purpose to transform land and

property into sustainable places where

people want to live and work, Harworth

has a long-standing approach to ESG and

an ongoing commitment to sustainability,

which is embedded in the Group’s

strategy, culture, values, and operations.

This was progressed in 2021 with the

establishment of the ESG Committee to

provide oversight of, and guidance on,

the Group’s Sustainability Framework,

practices and reporting. Peter Henry,

formerly one of our Regional Directors, was

appointed as Director of Sustainability in

H1 2022. Peter’s appointment, together

with his passion for sustainability and deep

knowledge of the business, has resulted

in a step change in the work carried out

on behalf of the Committee. During

2022, the Committee focused on the

development of the Group’s Sustainability

Framework through the expansion of the

Harworth Way (see further on pages 64 to

77) and the principles of the Company’s

NZC Pathway (see further on page 67).

The Committee will focus on reviewing

progress in these areas in 2023.

As the commercial and regulatory

landscapes continue to evolve in response

to climate change, social considerations

and corporate responsibility, we remain

committed to evolving our approach and

ensuring we have a sustainable business

that delivers for all stakeholders.

The Committee’s terms of reference, which

were reviewed and updated during the

period, are available on the Company’s

website: https://harworthgroup.com/

investors/governance/.

Membership and meetings

I Chair the Committee, and its other

members are Alastair Lyons, Lynda Shillaw,

Kitty Patmore, Martyn Bowes and Marzia

Zafar. Marzia joined the Committee on

1 June 2022 following her appointment

to the Board as an independent

Non-Executive Director. Marzia’s

contribution is greatly welcomed, as she

brings to Harworth a wealth of experience

in sustainability, having spent over 20

years working on policies and strategies

to enable energy transition for regulators,

business and not for profit sectors.

Harworth Group plc: Annual Report and Financial Statements 2022

113

Governance Report

The Committee meets at least quarterly and meetings are also attended by our Director of Sustainability. There were four Committee

meetings during the year and membership and attendance at those meetings is shown below:

Independent

Committee

tenure at

31 December 2022

Meetings attended/

eligible to attend

Angela Bromfield Chair Yes 1 year 9 months 4/4

Alastair Lyons Member Yes 1 year 9 months 4/4

Martyn Bowes Member No 1 year 9 months 1/4

Lynda Shillaw Member No 1 year 9 months 4/4

Kitty Patmore

Member No 1 year 9 months 3/4

Marzia Zafar

Member Yes 7 months 1/2

Kitty Patmore went on maternity leave at the start of October 2021, returning to the business initially part-time in February 2022. Nigel Turner attended Committee

meetings in her absence as Interim Chief Financial Officer but was not formally appointed to the Committee.

Marzia Zafar was appointed to the Committee following her Board appointment on 1 June 2022.

2022 key activities

During the year, the Committee:

• Oversaw the development of the

Group’s Sustainability Framework

with the expansion of the three

impact pillars of the Harworth Way:

Planet, Communities and People.

The Harworth Way model and focus

areas for each impact pillar have been

updated and expanded during the year

to form the foundation of the Group’s

Sustainability Framework, as set out on

pages 64 to 77.

• Oversaw the development of the

Group’s NZC Pathway following the

commitment we made in 2021 to reach

Net Zero Carbon on Scope 1, Scope

2 and some Scope 3 emissions by

2030, and on the balance of Scope

3 emissions by 2040. This included

review of the Group’s present and

planned carbon emissions in the

context of our business strategy. The

Group undertook a detailed assessment

of our build standards and potential

emissions and energy requirements

for our commercial and residential

buildings alongside our role as master

developer. The NZC Pathway sets

defined targets and will be updated

annually. The Pathway has been

published alongside this Annual Report

and can be found on the Company’s

website.

• Reviewed investor feedback and

comments on ESG following the 2021

year-end and 2022 interim results

announcements.

• Reviewed and recommended

for approval to the Remuneration

Committee the ESG metrics and targets

to be incorporated into the 2022 annual

bonus scheme for all employees.

• Reviewed and recommended for

approval to the Audit Committee the

Group’s sustainability disclosures in the

2021 Annual Report and 2022 interim

results announcement.

2023 priorities

The Committee’s priorities for 2023

include working with the Senior Executive,

Director of Sustainability and wider

business to:

• Continue to ensure alignment between

our ESG commitments and the Group

strategy with a focus on addressing

Harworth’s medium and longer-term

ESG impacts.

• Continue to determine measurable

targets across the three impact pillars

of the Harworth Way, and monitor and

review performance against the same.

• In particular, we intend to focus on

the “Communities” pillar in 2023 and

develop and implement a methodology

for social value assessment.

• Review the effectiveness of the

implementation of the Harworth

Way principles as part of day-to-day

operations.

• Implement, monitor progress against,

and update the NZC Pathway on an

annual basis.

• Report on our Scope 3 emissions from

2023 onwards.

• Develop further our sustainability

disclosures through enhancing the

breadth and depth of our environmental

and social data collection, enabling us

to provide a more comprehensive and

quantitative assessment of risks and

opportunities.

I will be available online at the AGM

to respond to any questions or discuss

matters relating to the Committee’s

activities.

Angela Bromfield

Chair of the ESG Committee

13 March 2023

ESG Committee report continued

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114

Governance Report

Directors’ remuneration report

Committee members

Angela Bromfield (Chair)

Alastair Lyons

Lisa Scenna

Dear shareholder,

On behalf of the Board, I am pleased

to present the Directors’ Remuneration

Report for the year ended 31 December

2022, describing how we implemented

our Remuneration Policy (the ‘Policy’) in

2022 and how we intend to apply the

Policy in 2023.

Our Policy was approved by shareholders

at the 2022 AGM. A summary of the

Policy is provided within this Report on

pages 119 to 121. A copy of the complete

Policy can be found on our website at:

https://harworthgroup.com/investors/

governance/.

Performance outcomes

for 2022

Management has continued to make

significant operational progress against

our ambitious growth strategy, despite

macro-economic headwinds in the second

half of the year, increasing levels of direct

development, accelerating land sales and

completing targeted acquisitions. In doing

so, they have effectively protected the

business against a substantial downturn

in the industrial & logistics market and

navigated uncertainty in the residential

market. The Group’s Total Return was 0.1%

and EPRA NDV only declined marginally,

representing strong performance

compared to the wider real estate sector.

Lynda Shillaw’s and Kitty Patmore’s bonus

opportunity for 2022 was 125% and

100% of salary respectively based on a

combination of financial measures (50% of

the opportunity), strategic measures (30%

of the opportunity), ESG measures (5% of

the opportunity) and personal objectives

(15% of the opportunity).

Taking into account performance against

these measures, the Committee approved

a bonus outcome equal to 62.5% of

maximum (which equates to 78.1% of

salary and 62.5% for Lynda Shillaw and

Kitty Patmore respectively). Full details are

set out on pages 126 to 129.

The Committee believes that the level

of bonus outcome is appropriate in the

context of the shareholder experience

and the positive management actions

that created value during the year, albeit

that the material reversal in markets in the

second half of 2022 resulted in the inability

to realise any outcome against the Total

Return element of the bonus.

The average bonus outcome for eligible

employees (excluding the Executive

Directors) was 81% of their maximum

entitlement.

Reward for the

wider workforce

All our people contribute to the achievement

of the Group’s long-term success. When

making decisions in respect of the Executive

Directors therefore, the Committee

considers the reward arrangements for, and

views of, the wider workforce.

The Committee’s

priorities for 2023

• Operation of 2023 annual bonus,

including setting targets to ensure

Executive Directors and the wider

workforce are incentivised to

deliver against financial KPIs and

strategic priorities

• Ensure our ESG goals continue

to be reflected appropriately in

our reward framework

• Grant of 2023 Restricted Share

Plan awards

• Approve grant of options

for SAYE scheme and Share

Incentive Plan awards

• Continue to keep wider

workforce remuneration

under review in the context of

current high inflation and the

competitive market for talent

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115

Governance Report

We want the interests of our people to be

strongly aligned with our shareholders and

the overall performance of the business.

We actively support and encourage

employee share ownership across the

Group, so that our employees may share

in the success of the business. We have

extended RSP participation such that

55% of employees were granted an RSP

award in 2022 and have increased the RSP

opportunity for all participants.

We have also increased the annual

value of Free Shares awarded under

the all-employee Share Incentive Plan,

awarding all eligible employees £3,600

of Free Shares in 2022, being the

maximum amounted permitted under

UK tax legislation, and we have also

introduced offers of Partnership and

Matching Shares for eligible employees.

As we believe strongly in the value to the

business of increasing general employee

share ownership we intend, subject to

affordability, to continue to award Free

Shares to eligible employees on an annual

basis at the maximum amount permitted,

and to continue to offer Partnership and

Matching Shares.

The Board is acutely aware of the

cost-of-living crisis and has sought to

provide support to employees where

the burden is most challenging. We,

therefore, agreed a one-off non-contractual

payment of £2,000 in December 2022

to all employees (excluding the Senior

Executive).

The average salary increase for the wider

workforce is 8% (effective from 1 January

2023). Salary increases were tapered

with higher increases (in % of salary terms)

awarded to lower paid employees.

The Company holds an Employee AGM,

which forms part of a wider programme of

formal and informal employee engagement

by the Board, providing a platform for

employees to discuss a range of topics with

the Board, including executive and wider

workforce remuneration.

Implementation of the

Policy for 2023

Base salary

Lynda Shillaw and Kitty Patmore were each

awarded a 5% salary increase with effect

from 1 January 2023. This compares to an

average salary increase of 8% for the wider

workforce.

Performance related annual bonus

The Committee disclosed its intention

in the 2021 Directors’ Remuneration

Report to increase the 2023 annual bonus

opportunity for Lynda Shillaw from 125%

to 150% of salary and for Kitty Patmore

from 100% to 125% of salary, subject to

the performance of both the Executive

Directors and the Group. This was part

of phased increases over a two-year

period (2022 and 2023) under our Policy.

The Committee considers that both the

Executive Directors and the Group have

continued to deliver strong operational

performance in the context of a clear and

well articulated strategy and that these

second stage bonus increases should,

therefore, be confirmed.

50% of the bonus opportunity will be

based on financial measures (Total Return,

acquisitions, and capital management),

25% on strategic measures (broadening

the range of mixed tenure products

and increasing the scale of direct

development), 10% on ESG measures and

15% on personal objectives. See page

122 for details. Performance targets are

considered to be commercially sensitive

at this point in the year, but they will

be fully disclosed in the 2023 Annual

Remuneration Report.

The prevailing macro-economic and

geopolitical uncertainty makes it very

difficult to forecast how markets and

property valuations may move during

2023. Through the annual bonus, we

want to reward the effectiveness of

management in acting positively to create

value. The Committee has, therefore,

this year specifically reserved discretion,

both positive and negative, to adjust

the formulaic vesting outcome of the

Total Return measure if there are material

movements in our underlying markets

which have not been projected within our

business plan for 2023, being the basis on

which bonus targets are set. There would

be full disclosure in the 2023 Directors’

Remuneration Report of any discretion

applied.

33% of any amount earned by Lynda

Shillaw and 20% of any amount earned

by Kitty Patmore will be deferred into

shares for two years. The higher level of

deferral for Lynda Shillaw reflects that she is

awarded a higher bonus opportunity.

Restricted Share Plan award

RSP awards will be granted to Lynda

Shillaw and Kitty Patmore at 75% of salary.

In accordance with our Policy, the number

of shares under the RSP awards will be

determined by reference to the share price

following the announcement of the 2021

annual results, being £1.787, rather than

the share price at the time the awards are

granted. Based on the share price at 28

February 2023 (£1.23) this means that the

face value of the 2023 RSP awards at grant

is expected to be 28% lower compared

to the 2022 RSP awards. Granting RSP

awards based on a fixed share price

further aligns the Executive Directors with

shareholders given that the face value of

awards is reduced where the share price

has depreciated as it has over the past

year. Lynda Shillaw and Kitty Patmore will,

therefore, be granted 185,791 and 136,611

shares respectively. Given our approach

to determining the number of shares, the

Committee considers there to be sufficient

protection against windfall gains.

Time horizons as regards vesting and

holding periods and performance

underpins are the same as the 2022 RSP

awards. See page 123 and 130 for further

details.

Chair and Non-Executive Directors

The Chair’s and Non-Executive Directors’

base fees and additional fees for acting as

Senior Independent Director and chairing

Committees will be increased by 5% with

effect from 1 January 2023.

Conclusion

We remain committed to a responsible

approach to executive pay, as I trust

this Directors’ Remuneration Report

demonstrates. We believe that the Policy

operated as intended in respect of the

2022 financial year and consider that the

remuneration received by the Executive

Directors was appropriate, taking in the

round the Group’s performance during

2022, their personal performance, and

the experience of shareholders and

employees.

Angela Bromfield

Chair of the Remuneration Committee

13 March 2023

Directors’ remuneration report continued

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Annual Remuneration Report

This part of the Directors’ Remuneration Report describes how we implemented our Policy in 2022 and how we intend to apply the

Policy in 2023. Our Policy was approved by shareholders at the 2022 AGM. A summary of the Policy is provided on pages 119 to 121.

A copy of the complete Policy can be found on our website at: https://harworthgroup.com/investors/governance/.

The Annual Remuneration Report will be subject to an advisory vote by shareholders at the 2023 AGM.

Role of the Remuneration Committee

The role of the Committee is to determine and recommend to the Board the Remuneration Policy for the Executive Directors and set the

remuneration for the Executive Directors and Senior Executive team. The Policy is designed to support the Group’s strategy and help

attract, retain, and incentivise a Senior Executive team with the requisite skills, knowledge and experience to deliver strong, long-term,

sustainable value growth for shareholders. The table below describes how the Committee addressed the factors in Provision 40 of the

2018 UK Corporate Governance Code when determining the Policy.

Alignment to

strategy and

culture

The Committee is focused on ensuring a healthy culture exists across the entire Group and believes that the

Executive Directors and wider Senior Executive team set the standards for behaviour and conduct across the Group.

Bonus awards are focused on Group performance to foster collective accountability and deliver a consistent

reward structure across all levels of management. The Group financial and strategic performance measures ensure

that the extent to which bonuses are earned reflects the delivery of our strategy for the benefit of shareholders.

The application of ESG measures and personal objectives enables us to incentivise and reward a culture that will

underpin longer-term success.

Our RSP reflects our core principles of alignment with our shareholders and rewards long-term value creation in a

cyclical business, whilst also supporting retention through the market cycle.

Clarity and

simplicity

A core reward principle of our Policy is to operate a simple and transparent framework, which can be readily cascaded.

The remuneration framework is made up of three key elements: fixed pay (including base salary, pension and benefits);

annual bonus; and our long-term incentive, the RSP. The structure is simple to understand for both participants and

shareholders and promotes both near-term achievement and long-term stewardship.

Risk Annual bonus opportunities are set so as to reflect the long-term nature of our business and at levels which reward

high performance, but do not encourage inappropriate business risk.

The Committee has discretion to reduce vesting outcomes under the annual bonus and RSP where it considers that

they would not otherwise be representative of the underlying business performance over the vesting period.

Annual bonus and RSP awards are also subject to malus and clawback provisions.

Proportionality

and fairness

A significant proportion of an Executive Director’s reward is linked to performance through the incentive framework,

with a clear line of sight between performance against the selected measures and the delivery of long-term

shareholder value.

Performance measures and the underlying targets for the annual bonus are reviewed by the Committee each year

to ensure that they are directly aligned with the Group’s strategic priorities, and targets are calibrated to reward

Executive Directors for strong performance.

Vesting under the RSP is phased over a five-year period, with one-third vesting after three years, one-third after four

years and one-third after five years. The holding period means that participants cannot acquire shares until the end of

a five-year period, aligning their interests with those of shareholders for the longer term.

Executive Directors are also required to build material shareholdings in the Group (200% of base salary). A

post-cessation shareholding requirement applies, which ensures that their interests are aligned with those of the

Group for two years post-cessation of employment.

Through the Share Incentive Plan and SAYE scheme we encourage and enable material long-term share ownership

for all employees, further supporting both alignment with shareholders and the long-term nature of our business and

its returns.

Predictability The range of possible rewards to individual Executive Directors is set out in the scenario charts on page 123.

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Directors’ remuneration report continued

Committee membership and attendance

Membership and attendance at meetings in 2022 are shown below:

Independent

Committee

tenure at 31

December 2022

Scheduled meetings

attended/eligible

to attend

Angela Bromfield Chair Yes 3 years 9 months 4/4

Alastair Lyons Member Yes 4 years 10 months 4/4

Lisa Scenna Member Yes 2 years 4 months 4/4

During the year, the Committee held four scheduled meetings. The key activities of the Committee during 2022 are shown below:

January • Approval of changes to the Remuneration Policy

• Approval of 2022 bonus measures and targets

February • Assessment of 2021 bonus outcomes for the Senior Executive (in the context of bonus outcomes

for wider workforce)

• Assessment of the vesting of the first tranche of the 2019 RSP awards

• Approval of 2022 salary increases for the Senior Executive

(in the context of salary increases for wider workforce)

• Approval of 2022 RSP awards

• Approval of 2022 SAYE awards and SIP awards

October • Market update on remuneration trends and corporate governance developments

• Approval of 2022 new joiner RSP awards

• Review Committee terms of reference

• Review effectiveness of Committee advisers

December • Review 2023 bonus measures and targets

The Committee’s terms of reference, which were reviewed and updated during the period, are available on the Company’s website:

https://harworthgroup.com/investors/governance/. Throughout 2022 the Committee acted in accordance with the principles of, and

fulfilled its obligations under, the 2018 Code.

Advisers to the Committee

The Company Secretary is secretary to the Committee. The following individuals may be invited to attend Committee meetings to

provide advice and to support the Committee to make informed decisions:

• Chief Executive;

• Chief Financial Officer;

• Group Resources and Transformation Director; and

• representatives of Deloitte LLP (see further below).

No individuals are involved in decisions relating to their own remuneration. The minutes of Committee meetings are circulated to all

Directors, where appropriate.

During the year under review, the Committee received advice on executive remuneration matters from Deloitte LLP (Deloitte). Deloitte was

appointed by the Committee on 18 October 2018 as its independent adviser following a competitive selection process. Deloitte is a founder

member of the Remuneration Consultants Group and, as such, voluntarily operates under its Code of Conduct in relation to executive

remuneration matters in the UK. The Committee has satisfied itself that Deloitte provided objective and independent advice during 2022.

Deloitte’s fees in relation to remuneration advice provided to the Committee during 2022 were £42,650 plus VAT, charged on a time

and expenses basis. Deloitte also provided advice to the Group during 2022 in relation to corporate tax, pensions and share plans.

The Committee did not consider that these engagements impaired Deloitte’s independence.

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Shareholding voting and engagement

The table below shows the results of votes at the Harworth Group plc Annual General Meeting on 24 May 2022 on the resolutions

relating to the approval of the Annual Remuneration Report and Remuneration Policy.

Votes

For and

discretion

For and

discretion as a

percentage of

votes cast Against

Against as a

percentage of

votes cast Withheld

Approval of Annual Remuneration Report 277,179,940 97.1 3 8,191,420 2.87 237,262

Approval of Remuneration Policy 261,511,584 91.58 24,043,640 8.42 53,398

The Committee maintains a regular dialogue with its major shareholders. In late 2021 and early 2022, we conducted a shareholder

consultation regarding the Policy. Responding to feedback received, the Committee strengthened the post-employment shareholding

guidelines that apply to Executive Directors.

The Committee will continue to monitor trends and developments in corporate governance, market practice and shareholder views to

ensure the structure of executive remuneration remains appropriate.

Summary of the Policy and how it will be implemented in 2023

Executive Directors

Element Operation and performance metrics Opportunity Implementation for 2023

Base salary Base salaries are ordinarily reviewed

annually, with reference to: salary

levels for similar roles at comparable

companies; individual contribution to

performance; and the experience of

the Executive.

Salary increases will generally be in line

with the range of increases awarded

to salaried employees (in percentage

terms). In exceptional circumstances

(including, but not limited to, a material

increase in job size or complexity) the

Committee has discretion to make

appropriate adjustments to salary

levels to ensure they remain market

competitive.

Lynda Shillaw and Kitty

Patmore were each awarded a

5% salary increase with effect

from 1 January 2023. This

compares to an average salary

increase of 8% for the wider

workforce.

Salary from 1 January 2023:

• Lynda Shillaw: £442,680

• Kitty Patmore: £325,500

Pension All Executives are either members of

the Group pension scheme or receive

a cash pension allowance.

Salary is the only element of

remuneration that is pensionable.

Aligned with the contribution rate

available to the majority of the wider

workforce (currently 10% of salary).

Company contribution and/

or cash pension allowance

equal to 10% of salary for both

Executive Directors.

Benefits Executives receive benefits which

consist primarily of the provision of a

car allowance, private medical cover

and life insurance although can include

any such benefits that the Committee

deems appropriate, and the Company

may make a payment in respect of

any associated tax liability where

the Committee considers this to be

appropriate.

The monetary value of benefits varies

by role and individual circumstances:

eligibility and cost is reviewed

periodically.

The Committee retains the discretion

to approve a higher cost in appropriate

circumstances (e.g. relocation) or in

circumstances where factors outside

the Company’s control have changed

materially (e.g. increases in insurance

premiums).

Benefits will include car

allowance, private medical

cover, life insurance and the

use of a chauffeur service

for business travel and

commuting.

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Governance Report

Directors’ remuneration report continued

Element Operation and performance metrics Opportunity Implementation for 2023

Annual

bonus

The scheme is based on a combination

of financial performance and personal

and/or strategic performance objectives.

At least 50% of the bonus opportunity is

based on financial measures. No more

than 20% of the bonus opportunity will

be based on personal objectives.

The Committee has discretion to amend

the pay-out should any formulaic outturn

not reflect the Committee’s assessment

of overall business performance or if

the Committee considers the formulaic

outturn is not appropriate in the context

of other factors considered by the

Committee to be relevant.

If the maximum bonus opportunity

exceeds 100% of salary, up to one-third

of any amount earned (not only the

proportion earned above 100% of

salary) will be deferred into shares in the

Company for two years.

Dividend equivalents may be paid on

vested shares based on dividends paid

during the deferral period. Such amounts

will normally be paid in shares.

Maximum opportunity of up to

150% of base salary in respect of a

financial year.

For financial metrics, up to 10% of

maximum may be earned for threshold

performance and up to 50% of

maximum may be earned for target

performance with 100% of maximum

earned for meeting or exceeding

the maximum performance level.

For performance between threshold

and target and between target and

maximum the vesting profile will be

determined by the Committee taking

into account the stretch in the targets.

Vesting of the bonus in respect of

strategic performance or personal

objectives will be between 0% and

100% based on the Committee’s

assessment of the extent to which

the relevant metric or objective has

been met.

The maximum opportunity

for Lynda Shillaw and Kitty

Patmore will be 150% and

125% of salary respectively.

50% of the bonus opportunity

will be based on financial

measures (Total Return,

acquisitions and capital

management), 25% based

on strategic measures

(broadening the range of

mixed tenure products and

increasing the scale of direct

development), 10% based on

ESG measures and 15% based

on personal objectives. See

note 2 on page 122.

33% of any amount earned

by Lynda Shillaw and 20% of

any amount earned by Kitty

Patmore will be deferred into

shares for two years.

Restricted

Share Plan

(‘RSP’)

Annual awards will be made in the form

of conditional share awards or nil-cost

options.

Vesting is phased over a five-year period,

with one-third vesting after three years,

one-third after four years and one-third

after five years, although all vested shares

must be held to the end of year five.

The extent to which a tranche of an award

vests may be reduced by the Committee

if a performance underpin assessed to

the end of the financial year preceding

the date of vesting is not achieved.

In addition, the Committee may reduce

the extent to which a tranche vests

if it believes this better reflects the

underlying performance of the Company

over the relevant period.

Dividend equivalents may be paid on

vested shares based on dividends paid

during the holding period. Such amounts

will normally be paid in shares.

For Executive Directors in office at the

date of the 2022 AGM (the date that

the Policy was approved) the maximum

RSP award:

• in respect of 2022 was 75% of

salary, converted into a number of

shares by reference to the average

mid-market closing share price for

the five trading days immediately

following the announcement of the

Company’s annual results for 2021

(£1.787) (the 2022 Price); and

• in respect of future years, will be

75% of salary converted into a

number of shares by reference to the

2022 Price, provided that the grant

in respect of any future year may not

exceed 112.5% of salary or be less

than 37.5% of salary calculated by

reference to the market value of a

share at the date the relevant award

is granted.

For any Executive Director appointed

after the date of approval of this Policy,

the maximum RSP award in respect

of any financial year is an award over

shares with a market value determined

by the Committee at the time the award

is granted of up to 112.5% of salary.

RSP awards will be granted to

Lynda Shillaw and Kitty Patmore

at 75% of salary. The number

of shares under the RSP awards

will be determined based on

the 2022 Price. Therefore,

Lynda Shillaw and Kitty Patmore

will be granted 185,791 and

136,611 shares respectively.

Vesting will be phased over a

five-year period, with one-third

vesting after three years,

one-third after four years and

one-third after five years. All

vested shares must be held to

the end of year five, resulting in

a total time horizon of five years

for all three tranches.

The RSP awards will be subject

to performance underpins

which take into account the

Group’s financial health, the

underlying performance of the

business relative to the real

estate market and the quality of

corporate governance over the

vesting periods. See note 3 on

page 123.

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Governance Report

Element Operation and performance metrics Opportunity Implementation for 2023

Incentive

Plan (‘SIP’)

and Save As

You Earn

scheme

(‘SAYE’)

These plans are reviewed annually and,

if offered, are offered to all eligible

employees in accordance with their

terms and applicable legislation.

Limits are set in accordance with the

relevant legislation.

The Executive Directors will

participate in the SIP and SAYE

scheme on the same terms as

the wider workforce.

Shareholding

guidelines

Within employment: Executive Directors

are required to build up a holding

equivalent to 200% of base salary. Until

the relevant shareholding levels are

achieved, 50% of any shares vesting

under the RSP or deferred bonus (post

payment of tax) are required to be held.

Post-employment: For the first 12 months

following cessation, an Executive

Director must retain such number of

“relevant shares” as have a value (as

at the point of cessation) equal to the

within employment guideline (200%

of base salary), with that requirement

tapering down to 0% over the following

12 months. If the Executive Director

holds less than the required number of

“relevant shares” at any time, they must

retain the “relevant shares” they hold.

As at 31 December 2022,

Lynda Shillaw and Kitty

Patmore held shares equal

to 92% and 75% of salary

respectively (based on the

mid-market closing share

price on 30 December 2022

(£1.06)).

Note 1: recovery provisions

The annual bonus and RSP awards are subject to malus and clawback provisions as follows:

• any bonus paid in cash may be recovered for up to two years following payment;

• a deferred bonus award may be reduced or cancelled during the two-year deferral period; and

• a tranche of an award under the RSP may be cancelled (if shares have not been delivered to satisfy it) or recovered from a participant

(if shares have been delivered) up to the second anniversary of vesting.

Malus or clawback may be applied in the event of misconduct, material financial misstatement, error in calculation of outcomes,

material failure of risk management and internal controls, a significant health and safety event or environmental incident, conduct

leading to financial loss or reputational damage, unreasonable failure to protect the interests of employees and customers, material

corporate failure, material breach of banking covenants or an unauthorised breach of the Group’s internal gearing policy, or in any other

circumstance that the Committee considers appropriate.

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Directors’ remuneration report continued

Note 2: annual bonus performance metrics

Measure Weighting (% of bonus opportunity)

Financial measures

Total Return 25%

Acquisitions

15%

Capital management 10%

Subtotal 50%

Strategic measures

Accelerating the delivery and broadening the range of mixed tenure products 12.5%

Increase in scale of direct development 12.5%

Subtotal 25%

ESG measures 10%

Personal objectives 15%

Total 100%

Both direct freehold acquisitions and option agreements to purchase the freehold at a future date will contribute to acquisitions performance. The value of option

agreements will be based on the minimum future capital commitment required to exercise the option agreements. For the avoidance of doubt, the minimum future

capital commitment which contributes to 2023 acquisition performance will not count towards performance against acquisition targets for future years (i.e. there will be

no double counting).

Bonuses may be scaled back at the discretion of the Committee if a formulaic application of the performance metrics and resulting

vesting outcome is not supported by underlying financial and operational performance. Bonuses may also be scaled back and/or

subject to claw back in the event of any of the following:

• misconduct;

• material financial misstatement;

• a material breach of banking covenants or unauthorised breach of internal gearing policy;

• an error in calculation of outcomes;

• a material failure of risk management and internal controls;

• a significant health and safety event or environmental incident;

• conduct leading to financial loss or reputational damage;

• an unreasonable failure to protect the interests of employees and customers;

• a material corporate failure; or

• in any other circumstance that the Committee considers appropriate.

The Committee will also have discretion to amend the bonus outcome if it is not reflective of underlying financial and operational

performance, or of the experience of shareholders or employees.

The prevailing macro-economic and geopolitical uncertainty makes it very difficult to forecast how markets and property valuations

may move during 2023. Through the annual bonus, we want to reward the effectiveness of management in acting positively to create

value. Therefore, the Committee has this year specifically reserved discretion, both positive and negative, to adjust the formulaic

vesting outcome of the Total Return measure if there are material movements in our underlying markets which have not been projected

within our business plan for 2023, being the basis on which bonus targets are set. There would be full disclosure in the 2023 Directors’

Remuneration Report of any discretion applied.

Performance targets are considered to be commercially sensitive at this point in the year but they will be fully disclosed in the

2023 Annual Remuneration Report.

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Note 3: RSP award underpins

Performance underpin Description Detail

Financial health Financial stability of the business A breach of financial covenants in the

Group’s principal banking facilities.

Underlying performance Sustainability of the Group’s underlying

performance in the cyclical real estate

sector

A material deterioration in the Group’s

underlying performance which departs

significantly from any deterioration across

the real estate sector including, but not

limited to, by reference to share price,

dividend and/or EPRA NDV.

Corporate governance Avoidance of governance and health

and safety failures

A material failure in governance or an act

resulting in significant reputational damage

and/or material financial loss to the Group.

This includes giving consideration to any

successful prosecutions in relation to health

and safety.

Pay for performance scenarios

The charts below provide an illustration of the potential future reward opportunities for the Executive Directors, and the potential split

between the different elements of remuneration under three different performance scenarios: “minimum”, “on-target” and “maximum”,

along with an illustration assuming a 50% increase in the share price over the vesting period for the purpose of the RSP awards.

Potential reward opportunities are based on the Policy, applied to the base salaries effective 1 January 2023. The annual bonus and RSP

awards are based on the level of maximum opportunities applied in 2023 (annual bonus of 150% of salary for the Chief Executive and

125% of salary for the Chief Financial Officer and RSP award of 75% of salary). RSP award values are based on the face value at award

rather than vesting (other than as regards that element of the charts assuming a 50% increase in the share price over the vesting period

for the purposes of the RSP awards).

100% 47% 36% 33%

31%

48%

44%

22%

16%

23%

£503,069

£1,063,602

£1,395,612

£1,509,873

100% 50% 39% 36%

28%

43%

40%

22%

18%

24%

£368,050

£739,519

£942,957

£1,026,972

£0

£250,000

£500,000

£750,000

£1,000,000

£1,250,000

Minimum

performance

Performance

in line with

expectations

Maximum

performance

Maximum

performance

with 50%

share price increase

Minimum

performance

Performance

in line with

expectations

Maximum

performance

Maximum

performance

with 50%

share price increase

£1,750,000

Base salary, benefits

Kitty Patmore

Lynda Shillaw

Annual Bonus

RSP

£1,500,000

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Directors’ remuneration report continued

The “minimum” scenario reflects base salary, pension and benefits (i.e. fixed remuneration) which are the only elements of the Executive

Directors’ remuneration packages not linked to performance. Base salaries and pensions (10% of salary) as at 1 January 2023 are set out

on page 119, benefits are based on the value of such benefits in 2022 which are taken from the single total figure remuneration table on

page 125.

The “on target” scenario reflects fixed remuneration as above, plus bonus pay-out of 50% of maximum annual bonus opportunity and

RSP vesting in full.

The “maximum” scenario reflects fixed remuneration as above, plus full pay-out of all incentives.

The final scenario is based on the same assumptions as the “maximum” scenario, but also assumes, for the purposes of the RSP element

of the chart, that the share price increases by 50% over the vesting period.

In accordance with our Policy, the number of shares under the RSP awards will be determined based on the average mid-market closing

share price for the five trading days immediately following the announcement of the annual results for 2021 (£1.787). Lynda Shillaw and

Kitty Patmore will, therefore, be granted 185,791 and 136,611 shares respectively. For the purposes of the chart, the grant date face

value of the RSP awards has been calculated using the mid-market closing share price on 28 February (£1.23) (a proxy for the share price

at the time the 2023 RSP awards will be granted). Based on this share price, the grant date face value of the 2023 RSP awards is c.28%

lower compared to the 2022 RSP awards.

Non-Executive Directors

Function Operation Opportunity Implementation for 2023

Fees and

benefits

Fee levels are ordinarily reviewed

annually.

The fees of the Non-Executive Chair are

determined by the Board and those of

the other Non-Executive Directors by

the Chair and the Executive Directors.

Additional fees are payable for additional

Board duties, including but not limited

to, acting as Senior Independent

Director and as Chair of the Board’s

Committees. Additional fees may be

paid in the event that Non-Executive

Directors are required to commit

substantial additional time above that

normally expected of their role.

The Non-Executive Directors may be

eligible to receive benefits linked to the

performance of their duties, including

but not limited to travel and other

expenses, and the Company may make

a payment in respect of any associated

tax liability where the Committee

considers this to be appropriate.

There is no overall maximum, but

fees are set taking into account

the responsibilities of the role and

expected time commitment.

It is expected that increases to

Non-Executive Director fee levels will

be in line with salaried employees

over the life of the Policy. However,

in the event that there is a material

misalignment with the market or a

change in the complexity, responsibility

or time commitment required to fulfil a

Non-Executive Director role, the Board

has discretion to make an appropriate

adjustment to the fee level.

Where benefits are provided to

Non-Executive Directors they will be

provided at a level considered to be

appropriate taking into account the

individual circumstances.

Overall fees paid to the Non-Executive

Chair and Non-Executive Directors

will remain within the limits set by the

Company’s Articles of Association.

The Chair’s and Non-Executive

Directors’ base fees and

additional fees for acting as

Senior Independent Director

and Chairing Committees will

be increased by 5% with effect

from 1 January 2023.

Fees from 1 January 2023:

• Chair fee: £179,729

• Non-Executive Director fee:

£50,549

• Additional fee for acting

as Senior Independent

Director: £8,925

• Additional fee for Chairing

the Remuneration

Committee or Audit

Committee: £8,925

• Additional fee for Chairing

the ESG Committee: £6,300

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Executive Director services contracts and Non-Executive Director letters of appointment

Lynda Shillaw has a rolling service contract (dated 29 July 2020) requiring nine months’ notice of termination on either side. Kitty Patmore

has a rolling service contract (dated 5 August 2019) requiring six months’ notice of termination on either side. The service contracts for

the Executive Directors are available at the Company’s registered office during normal business hours and will be available at the AGM

for 15 minutes prior to the meeting and during the meeting.

Subject to annual re-election by shareholders, Non-Executive Directors are appointed on a rolling annual basis. All Directors offer

themselves for re-election at each AGM. The appointment and re-appointment of Directors are matters reserved for the full Board.

Date of letter of

appointment

Appointment date to

the Board

Current appointment

expiry date

A. Lyons 23 November 2017 7 March 2018 7 March 2024

A. Bromfield 19 February 2019 1 April 2019 1 April 2024

R. Cooke 27 February 2019 19 March 2019 19 March 2024

L. Scenna 29 June 2020 1 September 2020 1 September 2023

P. O’Donnell Bourke 2 November 2020 3 November 2020 3 November 2023

M. Zafar 31 May 2022 1 June 2022 1 June 2023

M. Bowes

1 March 2015 24 March 2015 24 March 2024

S. Underwood

9 December 2019 2 August 2010 1 January 2024

All Non-Executive Directors are subject to annual rolling appointments by reference to the date of their original appointment to the Board.

Martyn Bowes was previously a Non-Executive Director of Harworth Estates Property Group Limited from 19 March 2013.

A new letter of appointment was entered into when Steven Underwood ceased to be a representative director of Peel Group.

Single total figure of remuneration for Executive Directors (audited)

The table below sets out the remuneration received by each Executive Director of the Company for the year ended 31 December 2022

with a comparison to the previous year.

L. Shillaw K. Patmore

2022 2021 2022 2021

Fixed pay

Salary £421,600 £400,000 £310,000 £250,000

Taxable benefits

£16,121 £16,121 £10,000 £10,000

Pension benefit

£42,160 £40,000 £31,000 £25,000

Subtotal £479,881 £456,121 £351,000 £285,000

Variable pay

Single-year variable £329,375 £362,000 £193,750 £226,250

Multi-year variable – – £34,295

–

Other

£6,000 £5,772 £6,000 £1,250

Subtotal £335,375 £367,772 £234,045 £227,500

Total £815,256 £823,893 £585,045 £512,500

Taxable benefits consist of car allowance and private medical cover. Other benefits include life insurance.

Kitty Patmore participated in the Company’s defined contribution scheme, in relation to which the Company contributed 10% of salary. Lynda Shillaw received a pension

allowance equivalent to 10% of salary.

Multi-year variable relates to the vesting of the first tranche of RSP awards granted in 2020.

Other includes Free Shares and Matching Shares awarded during the year under the all-employee Share Incentive Plan and options granted during the year under the

all-employee SAYE scheme. The value of Free Shares and Matching Shares is determined based on the face value of the shares at the award date. The value of SAYE

options is determined based on the intrinsic value of the award at the grant date.

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Directors’ remuneration report continued

Single total figure of remuneration for Non-Executive Directors (audited)

The table below sets out remuneration received by each Non-Executive Director of the Company for the year ended 31 December 2022

with a comparison to the previous year, representing payments received in respect of the period during which each individual was a

Director of the Company.

Base fee Committee Chair fees SID fee Total

2022 2021 2022 2021 2022 2021 2022 2021

A. Lyons £171,170 £162,400 – – – – £171,170 £162,400

M. Bowes £48,141 £45,675 – – – – £48,141 £45,675

A. Bromfield £48,141 £45,675 £14,500 £7,613 £8,500 £7,613 £71,141 £60,901

R. Cooke £48,141 £45,675 – – – – £48,141 £45,675

S. Underwood £48,141 £45,675 – – – – £48,141 £45,675

L. Scenna £48,141 £45,675 – – – – £48,141 £45,675

P. O’Donnell Bourke £48,141 £45,675 £8,500 £7,613 – – £56,641 £53,288

M. Zafar

£28,083 – – – – – £28,083 –

Appointed as Non-Executive Director with effect from 1 June 2022.

Incentive outcomes for year ended 31 December 2022 (audited)

Annual bonus

Lynda Shillaw’s and Kitty Patmore’s bonus opportunity for 2022 was equal to 125% and 100% of salary respectively subject to a

combination of financial performance measures, strategic performance measures, ESG performance measures and personal objectives.

Performance against targets and subsequent vesting of 2022 annual bonuses are set out in the tables below.

Group financial performance outcome (50% of total bonus opportunity)

Financial measure

Weighting

(% of financial

element) Threshold

Target

Maximum

Actual

performance

Vesting

outcome

Total Return (growth in EPRA NDV plus

dividends paid) 70% 5.35% 7.5% 8.5% 0.1% 0%

Acquisitions

30% £30m £36.3m £53m £93.2m 30%

Total vesting on financial performance element 50% weighting of total bonus opportunity 30%

Broadly straight-line vesting occurs between defined levels of performance

10% of maximum opportunity vests at threshold.

50% of maximum opportunity vests at target.

During 2022 a strategic decision was made to convert certain freehold acquisitions to option agreements to purchase the freehold at a future date, in order to protect

capital whilst also securing a long-term pipeline. The Committee therefore agreed that the option agreements should contribute towards acquisition performance,

based on the minimum future capital commitment required to exercise the option agreements (£76.6m). For the avoidance of doubt, the minimum future capital

commitment which has contributed to 2022 acquisition performance will not count towards performance against acquisition targets for future years (i.e. there will be no

double counting).

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Strategic measures (30% of total bonus opportunity)

Strategic

measures

Weighting

(% of strategic

element) Baseline Stretch Actual performance

Vesting

outcome

Launch of Build-

to-Rent portfolio

34% Design of products

completed and investor

acceptable, delivery

partner selected

Successful launch of a

portfolio of 600 units

or more and exchange

is completed by

31 December 2022

Launched portfolio

of >600 units,

investor identified

and negotiations well

progressed, and delivery

partners selected

30.6%

Increase

scale of direct

developments:

66%

Practical

completions

Practical completion

of certain specific

developments by

31 December 2022

Achieve threshold plus

the practical completion

of a further specific

development by

31 December 2022

Achieved practical

completion of

developments which

was marginally

short of stretch

performance target

62.7%

Lettings

achieved

Lettings for 30% of in-year

practical completions

exchanged or completed

and/or a pre-let for

future development site

exchanged or completed

at a similar scale

Lettings for 50% or

more of in-year practical

completions exchanged

or completed and/

or a pre-let for future

development site

exchanged or completed

at a similar scale

Achieved lettings in

excess of stretch target

Commencement

of enabling

works

Commencement of works

to enable 1,182,500 sq. ft

of development

Commencement of

works to enable

1,773,750 sq. ft of

development

Achieved commencement

of works to enable

development in excess

of stretch target

Total vesting on strategic element 30% weighting of total bonus opportunity 93.3%

ESG performance outcome (5% of total bonus opportunity)

ESG

measures

Weighting

(% of ESG element) Objective

Actual

performance

Vesting

outcome

Prioritising

health

and safety

30% Zero reportable RIDDOR

incidents at Harworth sites

Zero reportable RIDDOR incidents 30%

Developing

responsibility

40% Develop three key metrics

for measuring and reporting

on the ESG impact of the

Group’s activities

Objective achieved in full 40%

Delivering

homes,

support jobs

and creating

communities

30% Completion of Bardon Hill,

work to begin on Olive Lane

(Waverley), planning applications

to be submitted for schools at

Coalville and Thoresby Value

Objectives achieved with the

exception that work on Olive Lane

(Waverley) is scheduled to begin in

2023

20%

Total vesting on ESG element 5% weighting of total bonus opportunity 90%

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Directors’ remuneration report continued

Personal performance outcomes (15% of total bonus opportunity)

Lynda Shillaw

Personal

objectives

Weighting

(% of personal

element) Objective Actual performance

Vesting

outcome

Stakeholders 66% Establish Harworth as a key regional

partner for national and local

government and other national and

local stakeholders

Elevate Harworth’s brand profile:

ensure that Harworth is perceived

as a key regional business by the

property sector

Completed stakeholder analysis and

developed an action plan for each region

at a corporate level

Continued to build relationships with

key authorities and stakeholders to

unlock sites and preserve Harworth’s

commercial position

Delivered a successful exhibition at

the UK REiiF conference, elevating

Harworth’s brand profile

66%

Employee

engagement

34% Improve the average percentage

points achieved in engagement scores

by 5 points

Address identified areas of lower than

average engagement

The average percentage points

achieved in 2023 engagement scores

improved by 20%

All identified areas of lower than average

engagement have been addressed

34%

Total vesting on personal element 15% weighting of total bonus opportunity 100%

Kitty Patmore

Personal

objectives

Weighting

(% of personal

element) Objective Actual performance

Vesting

outcome

Strategic

decision

making

66% Develop a non-financial KPI framework

and data collection system (including

ESG and external benchmark

reporting) to be adopted by the

business in regular management

reporting and support Harworth’s

positioning as a leading ESG stock

Develop a dynamic strategic reporting

platform to enhance forward

forecasting and reporting

Substantial improvements in both

financial and non-financial KPI reporting

both at an operational level, including

formulation of monthly management

packs for Regions and Investment

division, and to the Board

Significant progress was made on

ESG data collection and benchmark

reporting, which has significantly

improved Harworth NZC

understanding and reporting

Recruitment into treasury function

facilitated development of dynamic

modelling and scenario analysis to

support forecasting and reporting

66%

Employee

engagement

34% Improve the average percentage

points achieved in engagement scores

by 5 points

Address specific areas of lower than

average engagement

The average percentage points

achieved in 2022 engagement scores

improved by 20%

All identified areas of lower than average

engagement have been addressed

34%

Total vesting on personal element 15% weighting of total bonus opportunity 100%

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Overall bonus outcomes

Financial Strategic ESG Personal

Overall bonus

outcome

Executive

Director Weighting Vesting Weighting Vesting Weighting Vesting Weighting Vesting

of bonus

of salary

L. Shillaw 50% 15% 30% 28% 5% 4.5% 15% 15% 62.5% 78.1%

K. Patmore 50% 15% 30% 28% 5% 4.5% 15% 15% 62.5% 62.5%

The overall bonus payments were also subject to the additional underpins as set out on page 122. The Committee reviewed

performance against these underpins and found no cause to reduce the bonus outcomes.

Restricted Share Plan awards vesting (audited)

An RSP award was granted to Kitty Patmore at 50% of salary in 2020. No award was received by Lynda Shillaw given the date of grant

preceded her joining the business.

Vesting is phased over a five-year period, with one-third vesting after three years, one-third after four years and one-third after five years,

although all vested shares must be held to the end of year five.

The RSP award is subject to the specific performance underpins identified in note 3 to the Policy summary (see page 123). The

Committee reviewed performance against these underpins, as well as underlying financial performance, and found no cause to reduce

the vesting outcome. The Committee considers the vesting outcome to be appropriate, recognising that the Group has performed

strongly, both financially and strategically, against a backdrop of macro-economic and geopolitical uncertainty.

The first tranche of the RSP award granted to Kitty Patmore therefore vested in full following announcement of the results for the financial

year ended 31 December 2022 on 21 March 2023. The vested shares will be subject to a holding period until March 2025.

Executive Director

Number of shares

granted under tranche

Number of shares

vesting under tranche Face value at vesting

1,2

K. Patmore 32,051 32,051 £34,295

Face value based on the average mid-market closing share price for the three-month period ended 31 December 2022 (£1.07). The RSP award did not accrue dividend

equivalents over the vesting period.

The share price at the grant date of the RSP award (£1.04 based on the mid-marking closing share price on the trading day immediately preceding the date of grant

on 25 June 2020) is £0.03 less than the above mentioned share price used to calculate the face value of the shares at vesting. Therefore, 2.8% of the face value is

attributable to growth in share price between grant and vesting.

Performance against underpins

Performance

underpin

Description Detail Performance

Financial health Financial stability

of the business

A breach of financial covenants

in the Group’s principal banking

facilities.

During the three-year period ended 31 December

2022 there were no breaches of financial covenants

in the Group’s principal banking facilities.

Underlying

performance

Sustainability

of the Group’s

underlying

performance in the

cyclical real estate

sector

A material deterioration in the

Group’s underlying performance,

which departs significantly from

any deterioration across the real

estate sector including, but not

limited to, by reference to share

price, dividend and/or EPRA NDV.

The Committee considers that the Group has

performed strongly relative to peers during the

three-year period ended 31 December 2022.

Harworth’s Total Shareholder Return over the three-year

period ended 31 December 2022 was -12% compared

to -22% for the FTSE All Share Real Estate Index.

Harworth’s Total Return over that period was 9.2%,

representing strong performance across the sector.

Corporate

governance

Avoidance of

governance and

health and safety

failures

A material failure in governance

or an act resulting in significant

reputational damage and/or

material financial loss to the Group.

This includes giving consideration

to any successful prosecutions in

relation to health and safety.

During the three-year period ended 31 December

2022 there were no material failures in governance

or acts resulting in significant reputational damage or

material financial loss to the Group, nor any successful

prosecutions in relation to health and safety.

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Restricted Share Plan awards granted in 2022 (audited)

RSP awards were granted to Lynda Shillaw and Kitty Patmore on 8 June 2022 at 75% of salary.

Executive Director Type of award Date of grant Number of shares subject to award Face value

L. Shillaw 2022 RSP award Nil-Cost Option 8 June 2022 176,944 £316,199

K. Patmore 2022 RSP award Nil-Cost Option 8 June 2022 130,106 £232,499

Face value based on the average mid-market closing share price for the five trading days immediately following the announcement of the annual results for 2021 (£1.787).

Vesting will be phased over a five-year period, with one-third vesting after three years, one-third after four years, and one-third after

five years, although all vested shares must be held to the end of year five.

The RSP awards are subject to the specific performance underpins identified in note 3 to the Policy summary (see page 123).

Furthermore, the Committee has discretion to reduce vesting outcomes where it considers that they would not otherwise be

representative of the underlying business performance over the vesting period. The Committee will disclose at the time of vesting

how performance underpins and underlying business performance over the vesting period have been taken into account.

Percentage change in remuneration of Directors and employees

The table below shows the annual percentage change in each of the Directors’ remuneration compared to the average employee

remuneration.

% change between

2021 and 2022

% change between

2020 and 2021

% change between

2019 and 2020

Salary

& fees Benefits Bonus

Salary

& fees Benefits Bonus

Salary

& fees Benefits Bonus

Executive Directors

L. Shillaw

5.4% 3.8% (9)% n/a n/a n/a n/a n/a n/a

K. Patmore

24.0% 17.1% (14.4)% 25% 0% 122.3% n/a n/a n/a

Non-Executive Directors

A. Lyons 5.4% – – 1.5% – – 0% – –

M. Bowes 5.4% – – 1.5% – – 0% – –

A. Bromfield

16.8% – – 28% – – n/a – –

R. Cooke

5.4% – – 1.5% – – n/a – –

S. Underwood 5.4% – – 1.5% – – 0% – –

L. Scenna

5.4% – – n/a – – n/a – –

P. O’Donnell Bourke

6.3% – – n/a – – n/a – –

M. Zafar

n/a – – n/a – – n/a – –

Average employee (Company)

19.4% 10.0% 9.5% 13.3% 6.5% 157.4% 7% 34% 14%

Average employee (Group) 5.4% 28.8%

(7.8)% 9.4% 3.8% 45.7% 3.3% 5% (20%)

Appointed as Chief Executive with effect from 1 November 2020 and therefore the annual percentage change in remuneration between 2019 and 2020 and between

2020 and 2021 is not applicable.

Appointed as Chief Financial Officer with effect from 1 October 2019 and therefore the annual percentage change in remuneration between 2019 and 2020 is not

applicable. Kitty Patmore’s salary for 2022 was £310,000 and the percentage change in salary between 2021 and 2022 has been calculated based on this amount.

Appointed as Non-Executive Director with effect from 1 April 2019 and therefore the annual percentage change in remuneration between 2019 and 2020 is not

applicable. Succeeded Lisa Clement as Senior Independent Director and Chair of the Remuneration Committee with effect from 1 November 2020. A fee of £6,000 per

annum for chairing the ESG Committee was introduced with effect from 1 January 2022.

Appointed as Non-Executive Director with effect from 19 March 2019 and therefore the annual percentage change in remuneration between 2019 and 2020 is not

applicable.

Appointed as Non-Executive Director with effect from 1 September 2020 and therefore the annual percentage change in remuneration between 2019 and 2020 and

between 2020 and 2021 is not applicable.

Appointed as Non-Executive Director with effect from 3 November 2020 and therefore the annual percentage change in remuneration between 2019 and 2020 and

between 2020 and 2021 is not applicable.

Appointed as Non-Executive Director with effect from 1 June 2022 and therefore the annual percentage change in remuneration is not applicable.

Calculated by reference to employees (excluding Directors) of the Company to satisfy the disclosure obligations under The Companies (Directors’ Remuneration Policy

and Directors’ Remuneration Report) Regulations 2019. However, given that the Company only employs a small proportion of the Group’s employees, the row below

cites the equivalent figures calculated by reference to employees (excluding Directors) of the Company and its subsidiaries.

A one-off non-contractual payment of £2,000 was made to all employees (excluding the Senior Executive) during 2022 to provide some support during the cost-of-

living crisis. This payment is included within the 2022 benefits figure and is the primary reason for the increase in average benefits between 2021 and 2022. There have

been no changes to the broader benefits available to our employees. Car allowances are determined by internal gradings and applied consistently. Private medical

insurance is available to all employees, their spouses/partners and dependants on the same terms. The increase in average benefits between 2020 and 2021 was driven

by a change in the overall profile of our workforce, with employees receiving higher car allowances and/or tending to have more dependants resulting in higher private

medical insurance costs.

Directors’ remuneration report continued

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Chief Executive pay ratio

The Group has fewer than 250 UK employees and is not therefore required to disclose a Chief Executive pay ratio. However, in line with

best practice, the Committee considers it appropriate to disclose the pay ratio voluntarily.

The table below sets out the Chief Executive’s total remuneration as a ratio against the full-time equivalent remuneration of employees for

the year ended 31 December 2021 and 31 December 2022.

Year ended 25th percentile pay ratio Median pay ratio 75th percentile pay ratio

31 December 2022 15:1 10:1 7:1

31 December 2021 18:1 12:1 8:1

For each year, the Company has calculated the ratio in line with the reporting regulations using Option A. Option A methodology was

selected on the basis that it is a robust approach and is preferred by shareholders and proxy voting agencies. The calculations for the

representative employees were performed as at the final day of the relevant financial year.

A substantial proportion of the Chief Executive’s total remuneration is performance related and delivered in shares. The ratios will

therefore depend significantly on the Chief Executive’s annual bonus and RSP outcomes and may fluctuate year-on-year.

The Board believes that the median pay ratio is consistent with the pay, reward and progression policies for the wider workforce.

The table below sets out the pay and benefits figures used to calculate the ratios and the salary component.

Year ended

Chief

Executive

25th

percentile

pay ratio

Median

pay ratio

75th

percentile

pay ratio

31 December 2022 Total pay and benefits £815,256

£56,033 £78,384 £115,409

Salary £421,600 £35,309 £60,000 £77,996

31 December 2021 Total pay and benefits £823,893

£46,200 £67,839 £107,348

Salary £400,000 £42,000 £48,000 £72,500

The Chief Executive’s total pay and benefits is the total single figure as disclosed on page 125.

The employee percentile total pay and benefits has been calculated on the same basis as required for the Chief Executive’s remuneration for single figure purposes.

However, for the year ended 31 December 2021, the vesting of awards under the Restricted Share Plan during the year were omitted from the employee calculations.

Relative importance of spend on pay

Total employee pay expenditure Distribution to shareholders

2022 2021 % change 2022 2021 % change

£13.690m £11.626m 18% £4.3m £3.9m 10%

Total employee pay in the year reflected an increase in the average number of employees from 89 to 113 , as well as awards for career

progression and promotion.

Total dividends for 2022 were 1.333 pence per share (2021: 1.212 pence per share), resulting in total dividends of £4.3m (2021: £3.9m).

The percentage change is shown on a per share basis.

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Review of past performance

The following chart shows the Total Shareholder Return (‘TSR’) of the Company and the FTSE SmallCap Index over the period from the

Company’s relisting on 24 March 2015 to 31 December 2022. The FTSE SmallCap Index represents the most appropriate broad index

comparison for a company of Harworth’s size. The table below shows the Chief Executive’s “single-figure” remuneration over the same period.

Historical TSR performance

Growth in the value of a hypothetical £100 holding (including re-investment of dividends) over the period from re-listing on 24 March

2015 to 31 December 2022:

£75

£100

£125

£150

£175

£200

£225

£275

£250

Total Shareholder Return (rebased to £100)

Harworth

FTSE Small Cap

Source: Thomso n Reuters DataStream

Mar-15

Jun-15

Sep-15

Dec-15

Mar-16

Jun-16

Sep-16

Dec-16

Mar-17

Jun-17

Sep-17

Dec-17

Mar-18

Jun-18

Sep-18

Dec-18

Mar-19

Jun-19

Sep-19

Dec-19

Mar-20

Jun-20

Sep-20

Dec-20

Mar-21

Jun-21

Sep-21

Dec-21

Mar-22

Jun-22

Sep-22

Dec-22

Historical Chief Executive remuneration

Chief Executive

Single figure

remuneration

(£’000)

Short term

incentive

award as a %

of maximum

opportunity

Long term

incentive

award as a %

of maximum

opportunity

2022 L. Shillaw £815 62.5% n/a

2021 L. Shillaw £824 90.5% n/a

2020 L. Shillaw £76 n/a n/a

O. Michaelson £559 51.34% 5.05%

2019 O. Michaelson £669 44.2% 51.5%

2018 O. Michaelson £901 85.6% 51.8%

2017 O. Michaelson £1,392 80.6% n/a

2016 O. Michaelson £599 90.0% n/a

2015 O. Michaelson £480 85.6% n/a

Excludes vesting of Harworth Estates Long-Term Incentive Plan award as this was a one-off scheme put in place by HEPGL in 2013.

Directors’ remuneration report continued

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Loss of office payments and payment to former Directors (audited)

There were no loss of office payments made to past Directors during the year ended 31 December 2022.

As disclosed in the 2020 Directors’ Remuneration Report, on Owen Michaelson’s retirement on 31 December 2020, his 2019 RSP

and two-thirds of his 2020 RSP awards remained capable of vesting subject to the satisfaction of the performance underpins and the

Committee’s assessment of underlying business performance during the respective vesting periods.

The second tranche of the 2019 RSP award vested in full (41,178 shares) in March 2023. The vested shares will be subject to a holding

period until March 2024.

Two-thirds of the first tranche of the 2020 RSP award vested (34,722 shares) in March 2023. The vested shares will be subject to a

holding period until March 2025.

Directors’ interests (audited)

The following table sets out the beneficial interests of the Directors and their connected persons in the share capital of the Company as

at 31 December 2022. None of the Directors have a beneficial interest in the shares of any other Group Company. Details of Directors’

share options are also set out in the table below. Current shareholding as a percentage of salary is based on the mid-market closing price

for the shares on 30 December 2022 of £1.06.

Shares held Options held

Beneficially

owned

Unvested &

not subject to

performance

Unvested &

subject to

performance

Unvested &

not subject to

performance

Vested &

exercised

during

2022

Shareholding

requirement

% salary

Current

shareholding

% salary

Requirement

met?

L. Shillaw 184,317 4,861 333,683 17,595 – 200% 92% N

K. Patmore 42,202 5,822 324,222 24,357 – 200% 75% N

A. Lyons 350,000 – – – – n/a n/a n/a

M. Bowes – – – – – n/a n/a n/a

A. Bromfield 36,264 – – – – n/a n/a n/a

R. Cooke – – – – – n/a n/a n/a

S. Underwood 38,385 – – – – n/a n/a n/a

L. Scenna – – – – – n/a n/a n/a

P. O’Donnell

Bourke 40,000

– – – – n/a n/a n/a

M. Zafar – – – – – n/a n/a n/a

Free Shares awards and Matching Shares awards under the Share Incentive Plan.

Nil-cost options granted under the Restricted Share Plan.

Options granted under the Save As You Earn scheme.

As at 13 March 2023, shares held by Lynda Shillaw and Kitty Patmore had increased to 189,928 and 48,774 respectively, as a result of

Partnership Shares and Matching Shares awarded under the Share Incentive Plan since 31 December 2022. There have been no further

changes to the holdings listed above between 31 December 2022 and 13 March 2023.

Angela Bromfield

Chair of the Remuneration Committee

13 March 2023

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Introduction

The Directors present their report and the audited consolidated financial statements for the year ended 31 December 2022.

Some of the matters required to be included in this Directors’ Report can be found in the Strategic Report or elsewhere in the

Governance Report as indicated below:

Reference

Annual General Meeting Chair’s Introduction, page 81

Statement of Corporate Governance, page 97

Auditors Audit Committee Report, page 110

Composition and operation of administrative,

management and supervisory bodies and committees

Statement of Corporate Governance, pages 93 to 94

Directors’ interests in shares Directors’ Remuneration Report, page 133

Directors’ remuneration Directors’ Remuneration Report, pages 115 to 133

Disclosure of information to auditors Statement of Directors’ Responsibilities, page 139

Diversity Nomination Committee Report, pages 102 to 105

Employee numbers Nomination Committee Report, page 104

Employee engagement Statement of Corporate Governance, page 90

Employees with disabilities Nomination Committee Report, page 105

Employee share schemes Directors’ Remuneration Report, pages 115 to 116

Future developments of the business Strategic Report, page 25

Going concern Statement of Directors’ Responsibilities, pages 138 to 139

Greenhouse gas emissions Strategic Report, page 62

Post balance sheet events Financial Statements, Note 31, page 205

Risk management and internal controls Strategic Report, pages 43 to 53

Audit Committee Report, page 111

Stakeholders, including regard to the need to foster

relationships with suppliers, customers and others

Section 172 Statement, pages 39 to 42

Significant related party transactions Financial statements, Note 30, pages 203 to 205

Viability Statement Strategic Report, pages 36 to 38

UK Corporate Governance Code Statement of Corporate Governance, page 86

The liabilities of the Directors in connection with this Report are subject to the limitations and restrictions provided by English

Company law.

Company status

Harworth Group plc is a company incorporated in England with company number 02649340. Its head office is in Rotherham. It is listed

on the London Stock Exchange Main Market. All subsidiaries and associated undertakings are listed in Note 15 to the

Financial Statements.

Financial results and dividends

The Group’s profit before taxation for the financial year ended 31 December 2022 was £30.9m (2021: £127.2m). The net assets

attributable to shareholders of the Group increased to £602.7m (2021: £578.0m) over the financial year. During the year, the Group’s

EPRA NDV per share decreased by 0.6% to 196.5p (2021: 197.6p).

The Board is recommending a final dividend of 0.929 pence per share which, together with the interim dividend of 0.404 pence per

share paid in October 2022, makes a combined dividend of 1.333 pence (2021: 1.212 pence) per share. Payment of the final dividend, if

approved at the 2023 AGM, will be made on 26 May 2023 to shareholders on the register at the close of business on 5 May 2023. The

ex-dividend date will be 4 May 2023. The dividend paid in the year to 31 December 2022 was 1.249 pence (2021: 1.833 pence) per

share, comprising the 2021 final dividend of 0.845 pence per share and the interim dividend of 0.404 pence per share for 2022.

Directors’ report

Harworth Group plc: Annual Report and Financial Statements 2022

134

Governance Report

Share capital and allotment

of shares

Details of the Company’s issued share

capital are shown in Note 26 to the

Financial Statements on page 202. There

is only one class of share in issue: ordinary

shares of 10 pence each.

There are no restrictions on the transfer of

shares in the Company, save for the power

of the Board to refuse to transfer shares in

certain circumstances prescribed by the

Articles of Association, and those specified

by law or regulation (for example, insider

trading laws) and pursuant to the Listing

Rules of the Financial Conduct Authority

whereby certain employees of the Group

require the approval of the Company to

deal in the shares.

All shares carry equal rights to dividends,

voting and return of capital on the winding

up of the Company, as set out in the

Company’s Articles of Association, and are

fully paid.

On a show of hands at a general meeting

of the Company, every holder of shares

present in person and entitled to vote shall

have one vote and on a poll every member

present in person or by proxy and entitled

to vote shall have one vote for every

ordinary share held. The notice of the 2023

AGM specifies deadlines for exercising

voting rights and appointing a proxy or

proxies to vote in relation to resolutions

to be passed at the meeting. There are

no restrictions on any voting rights or

deadlines, other than those prescribed by

law or the Articles of Association.

The Company is not aware of any

arrangement between holders of shares

which may result in restrictions on the

transfer of securities or voting rights, nor

any arrangement whereby a shareholder

has waived or agreed to waive dividends

(other than the Employee Benefit Trust –

see below).

The Directors were granted authority at the

2022 AGM to allot shares up to a nominal

amount of one-third of the Company’s

issued nominal share capital, as well

as additional authority to allot a further

one-third on a rights issue. This authority

expires at the conclusion of the 2023 AGM

and a resolution will be proposed for its

renewal.

The Company’s issued share capital as

at 31 December 2021 was 322,724,566

ordinary shares of 10 pence each. During

2022 the issued share capital was

increased as follows:

Date Description

Number

of shares

issued

Price

(discount if

applicable)

11 May 2022 Grant of SIP Free Shares 210,924 Nil consideration

01 June 2022 Exercise of SAYE options 31,060 £1.043 (35.8%)

15 June 2022 Exercise of SAYE options 4,313 £1.043 (35.2%)

29 June 2022 Exercise of SAYE options 12,078 £1.043 (30.9%)

13 July 2022 Exercise of SAYE options 3,451 £1.043 (26.5%)

10 August 2022 Exercise of SAYE options 5,177 £1.043 (34.4%)

15 August 2022 Grant of SIP Matching Shares 6,513 Nil consideration

15 September 2022 Grant of SIP Matching Shares 10,468 Nil consideration

21 September 2022 Exercise of SAYE options 6,903 £1.043 (17.2%)

17 October 2022 Grant of SIP Matching Shares 12,730 Nil consideration

19 October 2022 Exercise of SAYE options 1,725 £1.043 (4.3%)

15 November 2022 Grant of SIP Matching Shares 12,368 Nil consideration

15 December 2022 Grant of SIP Matching Shares 8,848 Nil consideration

As such, as at 31 December 2022, the Company’s issued share capital was 323,051,124 ordinary shares of 10 pence each.

Since 31 December 2022, the Company’s issued share capital has increased to 323,067,030 ordinary shares of 10p each, as follows:

Date Description

Number

of shares

issued

Price

(discount if

applicable)

16 January 2023 Grant of SIP Matching Shares 5,712 Nil consideration

15 February 2023 Grant of SIP Matching Shares 10,194 Nil consideration

Harworth Group plc: Annual Report and Financial Statements 2022

135

Governance Report

Directors’ report continued

Under Section 561 of the Companies Act

2006 (Companies Act), if the Directors

wish to allot unissued shares for cash

(subject to certain exceptions, including

allotments pursuant to an approved

employee share scheme) they must

first offer them to existing shareholders

in proportion to their holdings (a pre-

emptive offer). By a special resolution at

the 2022 AGM, the shareholders gave

authority to the Directors to dis-apply

the above-mentioned pre-emption and

to allot shares for cash other than by way

of rights issue to existing shareholders,

provided that the aggregate nominal

value of such shares does not exceed

5% of the Company’s total issued equity

capital. The Directors have not made use

of this authority since the 2022 AGM. The

Directors propose to renew this authority at

the 2023 AGM.

Purchase of the Company’s

own shares

The Company has authority under a

shareholders’ resolution passed at the

2022 AGM to purchase up to 32,272,456

of the Company’s ordinary shares,

representing approximately 10% of the

Company’s total issued share capital in

the market during the period expiring

at the 2023 AGM. No shares have been

purchased by the Company under that

authority. A special resolution will be

proposed at the 2023 AGM to renew this

authority. Any shares purchased under

this authority will be cancelled (unless the

Directors determine that they are to be

held as treasury shares) and the number of

shares in issue will be reduced accordingly.

Directors

The Directors who held office during the

financial year ended 31 December 2022

and up to the date of this Report are:

Chair

Alastair Lyons

Executive Directors

Lynda Shillaw (Chief Executive)

Katerina Patmore (Chief Financial Officer)

Independent Non-Executive Directors

Angela Bromfield (SID)

Ruth Cooke

Lisa Scenna

Patrick O’Donnell Bourke

Marzia Zafar (appointed 1 June 2022)

Non-Executive Directors

(not independent)

Steven Underwood

Martyn Bowes

Biographical details of the Directors are

contained on pages 82 to 85.

The Directors’ Remuneration Report,

which includes details of Directors’

service agreements and their interests in

the shares of the Company, is set out on

pages 125 and 133 respectively. Copies

of the service agreements of the Executive

Directors and letters of appointment for

the Non-Executive Directors are available

for inspection at the Company’s registered

office during normal business hours and

will be available for inspection at the

Company’s 2023 AGM.

In accordance with the UK Corporate

Governance Code, all Directors will

offer themselves for re-election at the

2023 AGM.

Save as set out on pages 91 to 92 of the

Corporate Governance Statement no

Director has, or has had, a material interest,

directly or indirectly, at any time during

the year under review in any contract

significant to the Company’s business.

The Directors may exercise all the powers

of the Company, subject to compliance

with relevant laws, the Company’s

Memorandum and Articles of Association

and any directions given by special

resolution of shareholders.

Financial risk management

The Group’s overall risk management

programme includes a focus on credit

and liquidity risks to minimise potential

adverse effects of the Group’s financial

performance; further detail, including use

of financial instruments as appropriate as

part of managing the interest rate risk on

external borrowings, is set out in Note 23

to the Financial Statements.

Directors’ indemnities,

insurance and independent

advice

The Company maintains Directors’ and

Officers’ liability insurance. To the extent

permitted by UK law, the Company

indemnifies its Directors against claims

brought against them as a consequence of

the execution of their duties as Directors of

the Company. The Board has established

a procedure by which any Director, for the

purpose of furthering their duties, may

take independent professional advice at

the Company’s expense. No Director had

reason to use this facility in 2022.

Charitable and

political donations

The Group made charitable donations

during 2022 in the aggregate sum of

£34,330 (2021: £61,642).

No political donations were made

during the year (2021: £nil). It remains

the Company’s policy not to make any

cash donations to political parties. This

policy is strictly adhered to and there

is no intention to change it. However,

the definitions of “political donation”

and “political expenditure” used in the

Companies Act remain very broad, which

may have the effect of covering some

normal business activities that would

not be considered political donations or

political expenditure in the usual sense.

These could include support for bodies

engaged in law reform or governmental

policy review or involvement in seminars

and functions that may be attended by

politicians. To avoid any possibility of

inadvertently contravening the Companies

Act, the Directors obtained authority from

shareholders at the 2022 AGM for certain

political donations and expenditure,

subject to financial limits, and will seek to

renew this authority at the 2023 AGM.

Harworth Group plc: Annual Report and Financial Statements 2022

136

Governance Report

Employee Benefit Trust

The Harworth Group plc Employee

Benefit Trust (‘EBT’) holds shares in the

Company for the purposes of satisfying

awards that may vest under the Company’s

employee share plans. Shares issued

pursuant to Share Incentive Plan awards

are held by Equiniti Share Plan Trustees

Limited pending maturity. At 31 December

2022, the EBT held 5,669 (2021: 5,669)

ordinary shares of 10 pence each in the

Company and Equiniti Share Plan Trustees

Limited held 470,376 (2021: 170,918)

ordinary shares of 10 pence each in the

Company, being in aggregate 476,045

(2021: 176,587) shares which represent

0.15% of the Company’s issued share

capital. The EBT has waived its right to

receive dividends on shares that it holds

beneficially in respect of awards that have

not vested.

The EBT also holds shares which have

been issued following the vesting of

awards under the Company’s share-based

incentive schemes but which are subject

to holding periods in accordance with the

terms of those schemes. The trustee of the

EBT exercises any voting rights on such

shares in accordance with the Directors’

recommendations.

Amendment of Articles

of Association

The Articles of Association may be

amended by special resolution of the

shareholders.

General meetings

An AGM must be called on at least 21

days’ clear notice, although the Company

typically gives not less than 20 working

days’ notice of its AGM following the

Guidance on Board Effectiveness.

All other general meetings are also

required to be held on at least 21 days’

clear notice unless the Company offers

shareholders an electronic voting facility.

A special resolution reducing the period

of notice for general meetings (other than

AGMs) to not less than 14 days was passed

at the 2022 AGM. The Directors are

proposing to seek renewal of that authority

at the 2023 AGM.

Substantial shareholdings and agreements with shareholders

As at the date of this Report, the Company had been notified, pursuant to paragraph 5 of the FCA’s Disclosure and Transparency Rules, of

the following notifiable voting rights:

Name of holder

Number of

ordinary shares

Percentage

of total

voting rights

London and Amsterdam Trust Company 85,100,257 26.34%

Pension Protection Fund 73,966,672 22.90%

Goodweather Holdings Limited

45,500,000 14.08%

Schroder Investment Management 15,618,416 4.83%

Janus Henderson Investors 10,606,920 3.28%

Goodweather Holdings Limited is a member of the Peel Group.

The Company’s relationship with the Pension Protection Fund (‘PPF’) is governed by a relationship agreement pursuant to which,

amongst other things, the PPF is entitled to appoint a representative Director to the Board.

Change of control

provisions

Under the terms of the revolving credit

facility agreement entered into between

National Westminster Bank plc, Santander

UK plc, HSBC UK Bank plc and Harworth

Estates Property Group Limited (‘HEPGL’)

in March 2022, if any person or Group

of persons acting in concert gains direct

or indirect control of HEPGL the facility

is capable of being cancelled, in which

event all outstanding loans and bonds,

guarantees or letters of credit together with

accrued interest shall become immediately

due and payable.

Transactions with

related parties

Transactions entered into with related

parties during 2022 are disclosed in Note

30 to the Financial Statements.

The Directors’ Report was approved by

the Board of Directors and signed on its

behalf by:

Chris Birch

General Counsel and Company Secretary

13 March 2023

Harworth Group plc: Annual Report and Financial Statements 2022

137

Governance Report

The Directors are responsible for preparing the Annual Report and the Financial

Statements in accordance with applicable United Kingdom law and regulations.

Company law requires the Directors to

prepare financial statements for each

financial year. Under that law the Directors

have elected to prepare the Group

and Company financial statements in

accordance with UK-adopted international

accounting standards (‘IFRSs’). Under

company law the Directors must not

approve the financial statements unless they

are satisfied that they give a true and fair

view of the state of affairs of the Group and

the Company and of the profit or loss of the

Group and the Company for that period.

In preparing these Financial Statements the

Directors are required to:

• select suitable accounting policies in

accordance with IAS 8 Accounting

Policies, Changes in Accounting

Estimates and Errors and then apply

them consistently;

• make judgements and accounting

estimates that are reasonable and

prudent;

• present information, including

accounting policies, in a manner that

provides relevant, reliable, comparable

and understandable information;

• provide additional disclosures

when compliance with the specific

requirements in IFRSs is insufficient to

enable users to understand the impact

of particular transactions, other events

and conditions on the Group and

Company financial position and financial

performance;

• in respect of the Group financial

statements, state whether UK-adopted

international accounting standards have

been followed, subject to any material

departures disclosed and explained in

the financial statements;

• in respect of the Company financial

statements, state whether UK-adopted

international accounting standards have

been followed, subject to any material

departures disclosed and explained in

the financial statements; and

• prepare the financial statements on

the going concern basis unless it is

inappropriate to presume that the

Company and/or the Group will

continue in business.

The Directors are responsible for keeping

adequate accounting records that

are sufficient to show and explain the

Company’s and Group’s transactions and

disclose with reasonable accuracy at any

time the financial position of the Company

and the Group and enable them to ensure

that the Company and the Group financial

statements comply with the Companies

Act 2006. They are also responsible for

safeguarding the assets of the Group and

Company and hence for taking reasonable

steps for the prevention and detection of

fraud and other irregularities.

Under applicable law and regulations,

the Directors are also responsible for

preparing a strategic report, directors’

report, directors’ remuneration report

and corporate governance statement that

comply with that law and those regulations.

The Directors are responsible for the

maintenance and integrity of the corporate

and financial information included on the

Company’s website.

Responsibility statements

The Directors (see the list of names and

roles on pages 82 to 85), confirm, to the

best of their knowledge:

• that the consolidated Financial

Statements, prepared in accordance

with UK-adopted international

accounting standards give a true and

fair view of the assets, liabilities, financial

position and profit of the Company

and undertakings included in the

consolidation taken as a whole;

• that the Annual Report, including the

strategic report, includes a fair review

of the development and performance

of the business and the position of the

Company and undertakings included

in the consolidation taken as a whole,

together with a description of the

principal risks and uncertainties that

they face; and

• that they consider the Annual Report,

taken as a whole, is fair, balanced and

understandable and provides the

information necessary for shareholders

to assess the Company’s position,

performance, business model and

strategy.

Going concern

These financial statements are prepared on

the basis that the Group is a going concern.

In forming its opinion as to going concern,

the Company prepares cash flow and

banking covenant forecasts based upon its

assumptions with particular consideration

to the key risks and uncertainties and the

current macro-economic environment as well

as taking into account available borrowing

facilities. The going concern period assessed

is until June 2024, which has been selected

as it can be projected with a good degree of

expected accuracy and covers a complete

period of reporting under the Group’s RCF.

A key focus of the assessment of going

concern is the management of liquidity and

compliance with borrowing facilities for the

period to June 2024. During the year a new

five-year £200m RCF was agreed with HSBC

joining as a new lender in addition to current

lenders NatWest and Santander. The new

RCF is aligned to the Group’s strategy and

provides significant additional liquidity and

flexibility to enable it to pursue its strategic

objectives. The new facility is subject to

financial covenants, including minimum

interest cover, maximum infrastructure

debt as a percentage of property value and

gearing, all of which are tested through the

going concern assessment undertaken.

Available liquidity, including cash and cash

equivalents and bank facility headroom was

£175.6m as at 31 December 2022.

Statement of Directors’ responsibilities

Harworth Group plc: Annual Report and Financial Statements 2022

138

Governance Report

The Group benefits from diversification

across its Capital Growth and Income

Generation businesses including its

industrial and renewable energy property

portfolio. Taking into account the

independent valuations by BNP Paribas

and Savills, the Group net loan-to-portfolio

value remains low at 6.6%, within the

Board’s target range and with headroom

to allow for falls in property values. Rent

collection remained strong, with 98%

collected to date for 2022.

In addition to the base forecast, a

sensitised forecast was produced

that reflected a number of severe but

plausible downsides. This downside

included: 1) a severe reduction in sales

to the housebuilding sector as well as

lower investment property sales; 2)

notwithstanding strong rent collection

to date in line with previous quarters, a

prudent material increase in bad debts

across the portfolio over the majority of

the going concern assessment period;

3) a material decline in the value of land

and investment property values as a result

of macro-economic conditions; and 4)

a significant increase in interest rates,

impacting the cost of the Group’s RCF.

A scenario has also been run which

demonstrates that very severe loss of

revenue, valuation reductions and interest

cost increases would be required to

breach cashflow and banking covenants.

A scenario with consideration of potential

climate change and related transition

impacts was also examined as part of the

Group’s focus on climate-related risks and

opportunities.

Even in the downside scenarios, for the

going concern period to June 2024,

the Group expects to continue to have

sufficient cash reserves to continue to

operate with headroom on lending

facilities and associated covenants and

has additional mitigation measures within

management’s control, for example

reducing development and acquisition

expenditure and reducing operating costs,

that could be deployed to create further

cash and covenant headroom.

Based on these considerations, together

with available market information and the

Directors’ knowledge and experience of

the Group’s property portfolio and markets,

the Directors considered it appropriate to

adopt a going concern basis of accounting

in the preparation of the Group’s and

Company’s financial statements.

Disclosure of information

to the auditor

Each of the Directors who were in office

at the date of approval of this Report also

confirms that:

• so far as they are aware, there is no

relevant audit information of which the

auditor is unaware; and

• each Director has taken all the steps that

they ought to have taken as a Director

to make themselves aware of any

relevant information and to establish

that the Group’s and Company’s auditor

is aware of that information.

This confirmation is given and should

be interpreted in accordance with the

provisions of section 418 Companies Act.

This Statement of Directors’

Responsibilities was approved by the

Board and signed by order of the Board.

Chris Birch

General Counsel and Company Secretary

13 March 2023

Harworth Group plc: Annual Report and Financial Statements 2022

139

Governance Report

Statements

Financial

Contents

Independent auditor’s report to the members of

Harworth Group plc 141

Consolidated income statement 152

Consolidated statement of comprehensive income 153

Consolidated balance sheet 154

Company balance sheet 155

Consolidated statement of changesin equity 156

Company statement of changesin equity 157

Consolidated statement of cash flows 158

Company statement of cash flows 159

Notes to the financial statements 160

Independent auditor’s report to the members of

Harworth Group Plc

Opinion

In our opinion:

• Harworth Group plc’s group financial statements and parent company financial statements (the “financial statements”) give a true and

fair view of the state of the group’s and of the parent company’s affairs as at 31 December 2022 and of the group’s profit for the year

then ended;

• the group financial statements have been properly prepared in accordance with UK adopted international accounting standards;

• the parent company financial statements have been properly prepared in accordance with UK adopted international accounting

standards as applied in accordance with section 408 of the Companies Act 2006; and

• the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.

We have audited the financial statements of Harworth Group Plc (the ‘parent company’) and its subsidiaries (the ‘group’) for the year

ended 31 December 2022 which comprise:

Group Parent company

Consolidated income statement for the year then ended Balance sheet as at 31 December 2022

Consolidated statement of comprehensive income for the year

then ended

Statement of changes in equity for the year then ended

Consolidated balance sheet as at 31 December 2022 Statement of cash flows for the year then ended

Consolidated statement of changes in equity for the year

then ended

Related notes 1 to 31 to the financial statements including a

summary of significant accounting policies

Consolidated statement of cash flows for the year then ended

Related notes 1 to 31 to the financial statements, including a

summary of significant accounting policies

The financial reporting framework that has been applied in their preparation is applicable law and UK adopted international accounting

standards and as regards the parent company financial statements, as applied in accordance with section 408 of the Companies

Act 2006.

Basis for opinion

We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities

under those standards are further described in the Auditor’s responsibilities for the audit of the financial statements section of our report.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Independence

We are independent of the group and parent in accordance with the ethical requirements that are relevant to our audit of the financial

statements in the UK, including the FRC’s Ethical Standard as applied to listed public interest entities, and we have fulfilled our other

ethical responsibilities in accordance with these requirements.

The non-audit services prohibited by the FRC’s Ethical Standard were not provided to the group or the parent company and we remain

independent of the group and the parent company in conducting the audit.

141

Financial Statements

Harworth Group plc: Annual Report and Financial Statements 2022Harworth Group plc: Annual Report and Financial Statements 2022

Independent auditor’s report to the members of

Harworth Group Plc continued

Conclusions relating to going concern

In auditing the financial statements, we have concluded that the directors’ use of the going concern basis of accounting in the

preparation of the financial statements is appropriate. Our evaluation of the directors’ assessment of the group and parent company’s

ability to continue to adopt the going concern basis of accounting included:

• confirming our understanding of management’s going concern assessment process, through our walkthrough of the Group’s financial

close process and also engaging with management early to ensure all factors we identified were considered in their assessment;

• obtaining management’s going concern assessment, including the cash forecasts and covenant calculations for the going concern

period which covers the period to 30 June 2024. The Group has modelled a base scenario and a severe downside scenario in its cash

forecasts and covenant calculations in order to incorporate unexpected changes to the forecasted liquidity of the Group.

The downside scenario considered a severe but plausible reduction in development property sales, a material decline in land and

investment property values and a significant increase in interest rates. In this scenario the Group continues to have sufficient cash

reserves and headroom on lending facilities and associated covenants;

• testing the assumptions included in each modelled scenario for the cash forecasts and covenant calculations, considering the impact

of continuing cost inflation and increasing interest rates. We also considered the appropriateness of the models used to calculate

the cash flow forecasts and covenant calculations to determine if they were appropriate to be able to make an assessment on going

concern;

• considering the mitigating factors that could be applied to the cash flow forecasts and covenant calculations that are within control

of the Group, for example, reducing uncommitted development expenditure. This included review of the Company’s non-operating

cash outflows;

• verifying the credit facilities available to the Group including the five-year, £200m revolving credit facility which is due to expire in

March 2027;

• performing reverse stress testing in order to identify what factors would lead to the Group utilising all liquidity or breaching the

financial covenants during the going concern period;

• reviewing the Group’s going concern disclosures included in the Annual Report in order to assess that the disclosures were

appropriate and in conformity with the reporting standards.

Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually

or collectively, may cast significant doubt on the group and parent company’s ability to continue as a going concern for a period to

30June 2024.

In relation to the group and parent company’s reporting on how they have applied the UK Corporate Governance Code, we have

nothing material to add or draw attention to in relation to the directors’ statement in the financial statements about whether the directors

considered it appropriate to adopt the going concern basis of accounting.

Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this

report. However, because not all future events or conditions can be predicted, this statement is not a guarantee as to the group’s ability

to continue as a going concern.

Overview of our audit approach

Audit scope • We performed an audit of the complete financial information of 5 components and audit procedures on

specific balances for a further 6 components.

• The components where we performed full or specific audit procedures accounted for 100% of the

Group’s Total Assets, 100% of the Group’s Profit before property revaluation movements, finance costs

and tax and 99% of the Group’s Revenue.

Key audit matters • Valuation of investment properties.

• Carrying value of development property.

• Revenue recognition – manual topside adjustments and cut-off.

Materiality • Overall group materiality of £7.8m which represents 1% of total assets.

• Specific group materiality of £2.8m which represents 5% of profit before property revaluation

movements, finance costs and tax.

142

Financial Statements

Harworth Group plc: Annual Report and Financial Statements 2022

An overview of the scope of the parent company and group audits

Tailoring the scope

Our assessment of audit risk, our evaluation of materiality and our allocation of performance materiality determine our audit scope

for each company within the Group. Taken together, this enables us to form an opinion on the consolidated financial statements.

Wetake into account size, risk profile, the organisation of the group and effectiveness of group-wide controls, changes in the

businessenvironment and other factors when assessing the level of work to be performed at each company.

In assessing the risk of material misstatement to the Group financial statements, and to ensure we had adequate quantitative coverage

of significant accounts in the financial statements, of the 40 reporting components of the Group, we selected 11 components which

represent the principal business units within the Group.

Of the 11 components selected, we performed an audit of the complete financial information of 5 components (“full scope

components”) which were selected based on their size or risk characteristics. For the remaining 6 components (“specific scope

components”), we performed audit procedures on specific accounts within that component that we considered had the potential for the

greatest impact on the significant accounts in the financial statements either because of the size of these accounts or their risk profile.

The reporting components where we performed audit procedures accounted for 100% (2021: 100%) of the Group’s Total Assets,

100% (2021: 99%) of the Group’s Profit before property revaluation movements, finance costs and tax and 99% (2021: 99%) of the

Group’s Total Revenue. For the current year, the full scope components contributed 84% (2021: 79%) of the Group’s Total Assets , 87%

(2021:74%) of the Group’s Profit before property revaluation movements, finance costs and tax and 97% (2021: 78%) of the Group’s

Total Revenue. The specific scope component contributed 16% (2021: 21%) of the Group’s Total Assets, 13% (2021: 25%) of the Group’s

Profit before property revaluation movements, finance costs and tax and 2% (2021: 21%) of the Group’s Revenue. The audit scope of

these components may not have included testing of all significant accounts of the component but will have contributed to the coverage

of significant accounts tested for the Group.

Of the remaining 29 components that together represent 1% of the Group’s Revenue none are individually greater than 1% of the

Group’s Revenue. For these components, we performed other procedures, including analytical review, testing of consolidation journals

and intercompany eliminations to respond to any potential risks of material misstatement to the Group financial statements.

The charts below illustrate the coverage obtained from the work performed by our audit teams.

Total assets

Profit before property revaluation

movements, finance costs and tax Revenue

84% Full scope components

16% Specific scope components

87% Full scope components

13%

Specific scope components

97% Full scope components

Specific scope components

1% Other procedures

Changes from the prior year

The current year scope is consistent with our approach to the prior year audit.

Involvement with component teams

All audit work performed for the purposes of the audit was undertaken by the Group audit team.

143

Financial Statements

Harworth Group plc: Annual Report and Financial Statements 2022

Independent auditor’s report to the members of

Harworth Group Plc continued

Climate change

Stakeholders are increasingly interested in how climate change will impact Harworth Group plc. The Group has determined that

the most significant future impacts from climate change on its operations will be in relation to transition risks and physical risks, the

components of which are explained on pages 54 to 60 in the required Task Force for Climate related Financial Disclosures and on

pages 45 to 53 in the principal risks and uncertainties. They have also explained their climate commitments on page 67. All of these

disclosures form part of the “Other information,” rather than the audited financial statements. Our procedures on these unaudited

disclosures therefore consisted solely of considering whether they are materially inconsistent with the financial statements or our

knowledge obtained in the course of the audit or otherwise appear to be materially misstated, in line with our responsibilities on “Other

information”.

In planning and performing our audit we assessed the potential impacts of climate change on the Group’s business and any

consequential material impact on its financial statements.

The Group has explained in the critical accounting estimates and judgements (note 1) their articulation of how climate change has been

reflected in the financial statements.

Our audit effort in considering the impact of climate change on the financial statements was focused on evaluating management’s

assessment of the impact of climate risk, physical and transition, their climate commitments and the significant judgements and

estimates disclosed in note 1 and whether these have been appropriately reflected in the valuation of the property portfolio following

the requirements of IAS 40 ‘Investment Property’ in relation to the investment properties and IAS 2 ‘Inventories’ in relation to the

development property. As part of this evaluation, we performed our own risk assessment, supported by our climate change and

property valuation internal specialists, to determine the risks of material misstatement in the financial statements from climate change

which needed to be considered in our audit.

We also challenged the Directors’ considerations of climate change risks in their assessment of going concern and viability and

associated disclosures. Where considerations of climate change were relevant to our assessment of going concern, these are described

above.

Based on our work we have not identified the impact of climate change on the financial statements to be a key audit matter or to impact a

key audit matter.

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Key audit matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements

of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) that we

identified. These matters included those which had the greatest effect on: the overall audit strategy, the allocation of resources in the

audit; and directing the efforts of the engagement team. These matters were addressed in the context of our audit of the financial

statements as a whole, and in our opinion thereon, and we do not provide a separate opinion on these matters.

Risk Our response to the risk

Key observations communicated

to the Audit Committee

Valuation of Investment Property

and Assets held for sale

(2022: £460.2m, 2021: £480.3m)

Refer to the Audit Committee Report

(page 108); Accounting policies (page

160); and Note 14 of the Consolidated

Financial Statements (page 182)

At 31 December 2022 Investment

property held a value of £400.4m

(2021: £478.4m), with a valuation loss

of £19.7m (2021: £8m gain) reported

in the year. Investment properties

designated as assets held for sale held a

value of £59.8m (2021: £1.9m)

Property valuations are calculated by

the independent external valuer with

a number of key assumptions specific

to each individual property, including

actual and estimated rental values,

yields, costs to complete and expected

land values per acre. There is a risk that

the carrying value is misstated given

the inherent uncertainty and judgement

within these assumptions.

In addition, there is a risk that management

inappropriately override the valuation

determined by the external valuer.

Our testing approach to Investment

properties included:

Performing a walkthrough to understand

the key process and identify key controls.

This included the valuation, acquisition and

disposal processes.

Assessing the appropriateness of the

valuations, with the assistance of our EY

Valuations specialists, through:

• Testing the underlying data provided to

the external valuer by management, by

checking a sample to source documents

(e.g. rental contracts, third party costs to

complete assessments);

• Attending a sample of sites, alongside

the external valuer to gain a detailed

understanding of the portfolio and the

valuation process and to observe the

specialist’s inspection;

• Reading the external valuer reports for a

sample of sites and holding discussions

directly with the external valuer regarding

its valuation approach, including its

consideration of climate risk;

• Validating, for a sample of assets, the

appropriateness of the key assumptions

applied by the external valuer in forming

its valuation by comparing to third party

evidence of market activity (e.g. yields,

price per acre) and considering contrary

evidence; and

Considering the location of a sample of

assets within the UK and assessing whether

there was any impairment risk due to

potential flooding.

Testing the appropriateness of any material

adjustments from the valuation determined

by the external valuer to the book value

recorded.

Based on the work performed, we

consider that the external valuers’

methodologies used in developing the

estimate are consistent with valuation

practice given the characteristics of the

assets being measured.

Our work did not identify evidence to

contradict the external valuers’ significant

assumptions used in developing the

estimate as at the balance sheet date.

We consider that the valuation of

investment properties and assets held

for sale as at the balance sheet date is

appropriate

We performed the above audit procedures

over this risk area at a Group level covering

100% of the risk amount.

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Independent auditor’s report to the members of

Harworth Group Plc continued

Risk Our response to the risk

Key observations communicated

to the Audit Committee

Carrying value of Development

Property (2022: £205.0m,

2021: £172.7m)

Refer to the Audit Committee Report

(page 108); Accounting policies (page

160); and Note 1 and Note 16 of the

Consolidated Financial Statements

(pages 160 and 190)

The book value of development

property at 31 December 2022 was

£205.0m. The Group’s portfolio

consists of a range of assets at varying

stages of development, across various

sectors and geographies. A risk exists

that the carrying value of development

property is overstated given the inherent

judgements in determining the net

realisable value, such as value per acre/

plot or planning permission uncertainty,

as well as costs to complete.

In addition, there is a risk that management

inappropriately override the valuation

determined by the external valuer.

Management LTIPs and Bonuses are

based largely on NDV and therefore

exists an incentive for management to

maximise this value.

Our approach to assessing the net realisable

value of development property included

performing the same procedures as for

investment property, as listed above,

with additional consideration of the

appropriateness of the cost to complete

assumptions.

For a sample of development properties, we

validated cost to complete assumptions to

third party surveyor reports and also held a

discussion with management to assess the

appropriateness of climate related costs

included and corroborated their inclusion to

the surveyor reports obtained.

This testing was supplemented by

procedures over the book value (cost) of the

assets, which included:

• Testing a sample of costs incurred to third

party invoices to ensure they had been

accounted for correctly and coded to the

correct project.

• Agreeing a sample of acquisitions and

disposals made in the year to the signed

contract.

• Confirming the classification of properties

is appropriate based on the nature of

the site.

Based on the work performed, we

consider that the external valuer’s

methodologies used in developing

the estimate of net realisable value are

consistent with valuation practice given

the characteristics of the assets being

measured. Our work did not identify

evidence to contradict the external

valuer’s significant assumptions used in

developing the estimate as of the balance

sheet date.

We consider that the carrying value of

development properties held as of the

balance sheet date is appropriate.

We performed the above audit procedures

over this risk area at a Group level covering

100% of the risk amount.

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Risk Our response to the risk

Key observations communicated

to the Audit Committee

Revenue recognition – manual

topside adjustments and cut-off

(2022: £166.7m, 2021: £109.9m)

Refer to the Accounting policies (page

160); and Note 3 of the Consolidated

Financial Statements (page 173)

Revenue for the period ended

31 December 2022 is £166.7m,

made up of £124.9m from the Sale

of Development Property, £31.3m

from Income Generation activities and

£10.5m from Other Revenue activities.

Due to the manual nature of postings

to revenue in respect of property

sales and the potential for manual

topside adjustments to all revenue

streams there is a risk that management

could override the revenue recorded

throughout the year. In addition, there

is a risk that property sales recorded

around the year end are not in line

with contract completion due to

management override.

Our approach included:

• Performing walkthroughs to understand

the key processes and identify key

controls. This was done by selecting

relevant transactions and tracing them

through the processes.

Development Property Sales:

• Testing all material property disposals to

confirm revenue recognised in the period

is in line with the contract terms and

completion date.

• Testing all material January 2023 disposals

to confirm revenue should be recorded

post year end.

• Assessing material manual journals posted

to revenue throughout the year which

have not been posted to receivables

or cash by corroborating to supporting

documentation, for any evidence of

management override / bias.

Income Generation:

• Testing revenue generated from rental

income, royalty income and service

charges within our revenue analytics

programme, validating that revenue flows

through trade receivables and is settled

via cash. We tested all material items that

did not demonstrate this pattern.

External Sales:

• Testing all significant postings to external

sales, considering if they demonstrated

evidence of management override

or bias.

Design and Build Revenue

• We have agreed the total revenue that

can be recognised as per the contract.

We have then subtracted the revenue

that was recognised in the prior year from

these figures to determine the expected

FY22 revenue, which we compared to the

revenue recorded in the year.

Based on our audit procedures

we have concluded that revenue

is appropriately recognised, and

that there was no evidence of

management bias.

We performed the above audit procedures

over this risk area at a Group level covering

100% of the risk amount.

In the prior year, our auditor’s report did not include a key audit matter in relation to revenue recognition. In the current year, given the

significant increase in the level of development property sales we have included a key audit matter in relation to revenue recognition.

147

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Independent auditor’s report to the members of

Harworth Group Plc continued

Our application of materiality

We apply the concept of materiality in planning and performing the audit, in evaluating the effect of identified misstatements on the audit

and in forming our audit opinion.

Materiality

The magnitude of an omission or misstatement that, individually or in the aggregate, could reasonably be expected to influence the

economic decisions of the users of the financial statements. Materiality provides a basis for determining the nature and extent of our audit

procedures.

We determined materiality for the Group to be £7.8million (2021: £7.6million), which is 1% (2021: 1%) of total assets. We believe

that total assets would be the most appropriate basis for determining overall materiality given that key users of the Group’s financial

statements are primarily focused on the valuation of the Group’s assets, primarily the investment property portfolio.

We determined materiality for the Parent Company to be £2.4 million (2021: £2.1 million), which is 1% (2021: 1%) of total assets, being

the primary focus of the users of the financial statements.

During the course of our audit, we reassessed initial materiality and amended it for the year end results.

Specific materiality

We assessed that for account balances not related to the property portfolio, and loans and borrowings, a misstatement of less than

overall materiality for the financial statements could influence the economic decisions of users. We determined that specific materiality

for these areas should be based on Profit before property revaluation movements, finance costs and tax. We believe that it is appropriate

to use a profit-based measure for specific materiality as profit is also a focus of users of the financial statements.

During the course of our audit, we reassessed initial materiality and amended it for the year end results

Performance materiality

The application of materiality at the individual account or balance level. It is set at an amount to reduce to an appropriately low level the

probability that the aggregate of uncorrected and undetected misstatements exceeds materiality.

On the basis of our risk assessments, together with our assessment of the Group’s overall control environment, our judgement was that

performance materiality was 75% (2021: 75%) of our planning materiality, namely £5.9m (2021: £5.7m). We have set performance

materiality at this percentage due to this being our third year of engagement and, from our prior year experience, an expectation of a low

level of audit differences.

Reporting threshold

An amount below which identified misstatements are considered as being clearly trivial.

We agreed with the Audit Committee that we would report to them all uncorrected audit differences in excess of £0.4m (2021: £0.4m),

which is set at 5% of planning materiality, as well as differences below that threshold that, in our view, warranted reporting on qualitative

grounds.

We evaluate any uncorrected misstatements against both the quantitative measures of materiality discussed above and in light of other

relevant qualitative considerations in forming our opinion.

Other information

The other information comprises the information included in the annual report set out on pages 2 to 139, other than the financial

statements and our auditor’s report thereon. The directors are responsible for the other information contained within the annual report.

Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in this

report, we do not express any form of assurance conclusion thereon.

Our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent

with the financial statements or our knowledge obtained in the course of the audit or otherwise appears to be materially misstated. If

we identify such material inconsistencies or apparent material misstatements, we are required to determine whether this gives rise to

a material misstatement in the financial statements themselves. If, based on the work we have performed, we conclude that there is a

material misstatement of the other information, we are required to report that fact.

We have nothing to report in this regard.

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Harworth Group plc: Annual Report and Financial Statements 2022

Opinions on other matters prescribed by the Companies Act 2006

In our opinion, the part of the directors’ remuneration report to be audited has been properly prepared in accordance with the

Companies Act 2006.

In our opinion, based on the work undertaken in the course of the audit:

• the information given in the strategic report and the directors’ report for the financial year for which the financial statements are

prepared is consistent with the financial statements and those reports have been prepared in accordance with applicable legal

requirements;

• the information about internal control and risk management systems in relation to financial reporting processes and about share

capital structures, given in compliance with rules 7.2.5 and 7.2.6 in the Disclosure Rules and Transparency Rules sourcebook made by

the Financial Conduct Authority (the FCA Rules), is consistent with the financial statements and has been prepared in accordance with

applicable legal requirements; and

• information about the company’s corporate governance statement and practices and about its administrative, management and

supervisory bodies and their committees complies with rules 7.2.2, 7.2.3 and 7.2.7 of the FCA Rules.

Matters on which we are required to report by exception

In the light of the knowledge and understanding of the group and the parent company and its environment obtained in the course of the

audit, we have not identified material misstatements in:

• the strategic report or the directors’ report; or

• the information about internal control and risk management systems in relation to financial reporting processes and about share

capital structures, given in compliance with rules 7.2.5 and 7.2.6 of the FCA Rules

We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report to you if,

in our opinion:

• adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received

from branches not visited by us; or

• the parent company financial statements and the part of the Directors’ Remuneration Report to be audited are not in agreement with

the accounting records and returns; or

• certain disclosures of directors’ remuneration specified by law are not made; or

• we have not received all the information and explanations we require for our audit

• a Corporate Governance Statement has not been prepared by the company

Corporate Governance Statement

We have reviewed the directors’ statement in relation to going concern, longer-term viability and that part of the Corporate Governance

Statement relating to the group and company’s compliance with the provisions of the UK Corporate Governance Code specified for our

review by the Listing Rules.

Based on the work undertaken as part of our audit, we have concluded that each of the following elements of the Corporate Governance

Statement is materially consistent with the financial statements or our knowledge obtained during the audit:

• Directors’ statement with regards to the appropriateness of adopting the going concern basis of accounting and any material

uncertainties identified set out on page 138 to 139;

• Directors’ explanation as to its assessment of the company’s prospects, the period this assessment covers and why the period is

appropriate set out on page 40 to 41;

• Director’s statement on whether it has a reasonable expectation that the group will be able to continue in operation and meets its

liabilities set out on page 138 to 139;

• Directors’ statement on fair, balanced and understandable set out on page 136;

• Board’s confirmation that it has carried out a robust assessment of the emerging and principal risks set out on pages 45 to 53;

• The section of the annual report that describes the review of effectiveness of risk management and internal control systems set out on

page 111; and

• The section describing the work of the audit committee set out on page 106 to 112.

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Harworth Group plc: Annual Report and Financial Statements 2022

Responsibilities of directors

As explained more fully in the directors’ responsibilities statement set out on pages 138 and 139, the directors are responsible for the

preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the

directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due

to fraud or error.

In preparing the financial statements, the directors are responsible for assessing the group and parent company’s ability to continue as a

going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the

directors either intend to liquidate the group or the parent company or to cease operations, or have no realistic alternative but to do so.

Auditor’s responsibilities for the audit of the financial statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement,

whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of

assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it

exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably

be expected to influence the economic decisions of users taken on the basis of these financial statements.

Explanation as to what extent the audit was considered capable of detecting irregularities, including fraud

Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our

responsibilities, outlined above, to detect irregularities, including fraud. The risk of not detecting a material misstatement due to fraud

is higher than the risk of not detecting one resulting from error, as fraud may involve deliberate concealment by, for example, forgery

or intentional misrepresentations, or through collusion. The extent to which our procedures are capable of detecting irregularities,

including fraud is detailed below.

However, the primary responsibility for the prevention and detection of fraud rests with both those charged with governance of the

company and management.

• We obtained an understanding of the legal and regulatory frameworks that are applicable to the group and determined that the most

significant frameworks which are directly relevant to specific assertions in the financial statements are those that relate to the reporting

framework (UK adopted International Accounting Standards, the Companies Act 2006 and the UK Corporate Governance Code).

• We understood how Harworth Group plc is complying with those frameworks by making inquiries of management, those responsible

for legal and compliance procedures and the Company Secretary. We corroborated our inquiries through our review of board

minutes, papers provided to the audit committee and discussions with the audit committee.

• We assessed the susceptibility of the group’s financial statements to material misstatement, including how fraud might occur by

meeting with management and those charged with governance to understand where it considered there was a susceptibility to

fraud. We also considered performance targets and the propensity to influence efforts made by management to manage earnings.

Where the risk was considered to be higher, we performed audit procedures to address each identified fraud risk. These procedures

included testing manual journals and were designed to provide reasonable assurance that the financial statements were free from

fraud and error.

• Based on this understanding we designed our audit procedures to identify non-compliance with such laws and regulations. Our

procedures involved journal entry testing, with a focus on manual consolidation journals and journals indicating large or unusual

transactions based on our understanding of the business; enquiries of Legal Counsel, Group management and focused testing, as

referred to in the key audit matters section above. In addition, we completed procedures to conclude on the compliance of the

disclosures in the Annual Report and Accounts with the requirements of the relevant accounting standards, UK legislation and the UK

Corporate Governance Code 2016.

A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council’s website

at www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.

Independent auditor’s report to the members of

Harworth Group Plc continued

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Harworth Group plc: Annual Report and Financial Statements 2022

Other matters we are required to address

• Following the recommendation from the audit committee we were appointed by the company on 13 July 2020 to audit the financial

statements for the year ending 31 December 2020 and subsequent financial periods.

• The period of total uninterrupted engagement including previous renewals and reappointments is three years, covering the years

ending 31 December 2020 to 31 December 2022.

The audit opinion is consistent with the additional report to the audit committee.

Use of our report

This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006.

Our audit work has been undertaken so that we might state to the company’s members those matters we are required to state to them in

an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone

other than the company and the company’s members as a body, for our audit work, for this report, or for the opinions we have formed.

Victoria Venning (Senior statutory auditor)

for and on behalf of Ernst & Young LLP, Statutory Auditor

Manchester

13 March 2023

151

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Harworth Group plc: Annual Report and Financial Statements 2022

Consolidated income statement

for the year ended 31 December 2022

Note

Year ended

31 December

2022

£’000

Year ended

31 December

2021

£’000

Revenue 3 166,685 109,884

Cost of sales 3 (83,292) (61,185)

Gross profit 3 83,393 48,699

Administrative expenses 3 (22,090) (19,202)

Other (losses)/gains 3 (16,761) 92,488

Other operating expense 3 (56) (58)

Operating profit 3 44,486 121,927

Finance costs 6 (6,367) (4,100)

Finance income 6 227 182

Share of (loss)/profit of joint ventures (including impairment) 15 (7,487) 9,225

Profit before tax  30,859 127,234

Tax charge 8 (3,021) (33,244)

Profit for the year  27,838 93,990

All activities in the year are derived from continuing operations.

Earnings per share from continuing operations attributable to the owners of the Group during the year

Note Pence Pence

Basic earnings per share 11 8.6 29.1

Diluted earnings per share 11 8.5 28.9

The Notes on pages 160 to 205 are an integral part of the consolidated financial statements.

152

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Harworth Group plc: Annual Report and Financial Statements 2022

Consolidated statement of comprehensive income

for the year ended 31 December 2022

Note

Year ended

31 December

2022

£’000

Year ended

31 December

2021

£’000

Profit for the financial year 27,838 93,990

Other comprehensive income/(expense) – items that will not be reclassified to profit or loss:

Net actuarial gain in Blenkinsopp Pension scheme 24 295 262

Revaluation of Group occupied property (133) (200)

Deferred tax on other comprehensive expense items 8 (101) (137)

Other comprehensive income – items that may be reclassified to profit or loss:

Fair value of financial instruments 22 156 670

Total other comprehensive income  217 595

Total comprehensive income for the year  28,055 94,585

153

Financial Statements

Harworth Group plc: Annual Report and Financial Statements 2022

Consolidated balance sheet

for the year ended 31 December 2022

Note

As at

31 December

2022

£’000

As at

31 December

2021

£’000

ASSETS

Non-current assets

Property, plant and equipment 12 600 681

Right of use assets 13 254 94

Trade and other receivables 17 4,013 5,369

Investment properties 14 400,363 478,355

Investments in joint ventures 15 29,828 36,131

435,058 520,630

Current assets

Inventories 16 216,393 177,822

Trade and other receivables 17 56,658 49,755

Assets held for sale 18 59,790 1,925

Cash 19 11,583 12,037

344,424 241,539

Total assets 779,482 762,169

LIABILITIES

Current liabilities

Borrowings 20 (3,067) –

Trade and other payables 21 (82,499) (94,316)

Lease liability 13 (82) (42)

Current tax liabilities 8 (7,013) (2,947)

(92,661) (97,305)

Non-current assets 251,763 144,234

Non-current liabilities

Borrowings 20 (56,911) (37,781)

Trade and other payables 21 (2,819) (5,686)

Lease liability 13 (172) (52)

Derivative financial instruments 22 – (156)

Deferred income tax liabilities 8 (24,141) (42,647)

Retirement benefit obligations 24 (114) (558)

(84,157) (86,880)

Total liabilities (176,818) (184,185)

Net assets 602,664 577,984

SHAREHOLDERS’ EQUITY

Capital and reserves

Called up share capital 26 32,305 32,272

Share premium account 27 24,688 24,627

Fair value reserve 174,520 199,629

Capital redemption reserve 257 257

Merger reserve 45,667 45,667

Investment in own shares (50) (24)

Retained earnings 297,439 181,566

Current year profit 27,838 93,990

Total shareholders’ equity 602,664 577,984

The financial statements on pages 152 to 205 were approved by the Board of Directors on 13 March 2023 and were signed on its behalf by:

Lynda Shillaw

Chief Executive

Company Registered Number 02649340

Katerina Patmore

Chief Financial Officer

154

Financial Statements

Harworth Group plc: Annual Report and Financial Statements 2022

Company balance sheet

for the year ended 31 December 2022

Note

As at

31 December

2022

£’000

As at

31 December

2021

£’000

ASSETS

Non-current assets

Investment in subsidiaries 15 209,864 209,300

Trade and other receivables 17 28,647 –

Retirement reimbursement asset 24 114 558

Deferred income tax assets 8 112 229

  238,737 210,087

Current assets

Trade and other receivables 17 297 27,751

Current tax asset 8 480 –

Cash 19 1,433 2,909

  2,210 30,660

Total assets  240,947 240,747

LIABILITIES

Current liabilities

Trade and other payables 21 (36,347) (26,287)

  (36,347) (26,287)

Net current (liabilities)/assets  (34,137) 4,373

Non-current liabilities

Retirement benefit obligations 24 (114) (558)

 (114) (558)

Total liabilities  (36,461) (26,845)

Net assets  204,486 213,902

SHAREHOLDERS’ EQUITY

Called up share capital 26 32,305 32,272

Share premium account 27 24,688 24,627

Capital redemption reserve 257 257

Merger reserve 45,667 45,667

Investment in own shares (50) (24)

Retained earnings 108,001 119,481

Current year loss 9 (6,382) (8,378)

Total shareholders’ equity  204,486 213,902

The financial statements on pages 152 to 205 were approved by the Board of Directors on 13 March 2023 and were signed on its behalf by:

Lynda Shillaw

Chief Executive

Company Registered Number 02649340

Katerina Patmore

Chief Financial Officer

155

Financial Statements

Harworth Group plc: Annual Report and Financial Statements 2022

Consolidated statement of changes in equity

for the year ended 31 December 2022

 Note

Called up

capital

£’000

premium

account

£’000

Merger

reserve

£’000

Fair

value

reserve

£’000

Capital

redemption

reserve

£’000

Investment

in own

£’000

Retained

earnings

£’000

Total

equity

£’000

Balance at 1 January 2021 32,253 24,567 45,667 132,833 257 (73) 253,208 488,712

Profit for the financial year – – – – – – 93,990 93,990

Fair value gains on investment

property – – – 88,586 – – (88,586) –

Transfer of unrealised gains on

disposal of investment property – – – (21,590) – – 21,590 –

Other comprehensive

(expense)/income:

Actuarial gain in Blenkinsopp

pension scheme 24 – – – – – – 262 262

Revaluation of group occupied

property – – – (200) – – – (200)

Fair value of financial instruments 22 – – – – – – 670 670

Deferred tax on other

comprehensive expense items 8 – – – – – – (137) (137)

Total comprehensive

income for year ended

31December 2021 – – – 66,796 – – 27,789 94,585

Transactions with owners:

Purchase of own shares – – – – – (21) – (21)

Share-based payments – – – – – 76 472 548

Dividends paid 10 – – – – – – (5,913) (5,913)

Share issue 26,27 19 60 – – – (6) – 73

Balance at

31December 2021 32,272 24,627 45,667 199,629 257 (24) 275,556 577,984

Profit for the financial year – – – – – – 27,838 27,838

Fair value losses on investment

property – – – (10,019) – – 10,019 –

Transfer of unrealised gains on

disposal of investment property – – – (14,957) – – 14,957 –

Other comprehensive

(expense)/income:

Actuarial gain in Blenkinsopp

pension scheme 24 – – – – – – 295 295

Revaluation of group occupied

property – – – (133) – – – (133)

Fair value of financial instruments 22 – – – – – – 156 156

Deferred tax on other

comprehensive expense items 8 – – – – – – (101) (101)

Total comprehensive

(expense)/income for year

ended 31 December 2022 – – – (25,109) – – 53,164 28,055

Transactions with owners:

Purchase of own shares – – – – – (26) – (26)

Share-based payments – – – – – – 589 589

Dividends paid 10 – – – – – – (4,032) (4,032)

Share issue 26,27 33 61 – – – – – 94

Balance at

31December 2022 32,305 24,688 45,667 174,520 257 (50) 325,277 602,664

156

Financial Statements

Harworth Group plc: Annual Report and Financial Statements 2022

Company statement of changes in equity

for the year ended 31 December 2022

 Note

Called up

capital

£000

premium

£000

Merger

reserve

£000

Capital

redemption

reserve

£000

Investment

in own

£000

Retained

earnings

£000

Total

equity

£000

Balance at 1 January 2021 32,253 24,567 45,667 257 (73) 124,792 227,463

Loss for the financial year – – – – – (8,378) (8,378)

Actuarial gain in Blenkinsopp

pension scheme 24 – – – – – 262 262

Deferred tax on other comprehensive

expense items – – – – – (34) (34)

Total comprehensive expense for the

year ended 31 December 2021 – – – – – (8,150) (8,150)

Transactions with owners:

Purchase of own shares – – – – (21) – (21)

Share-based payments – – – – 76 374 450

Dividends paid 10 – – – – – (5,913) (5,913)

Share issue 26,27 19 60 – – (6) – 73

Balance at 31 December 2021 32,272 24,627 45,667 257 (24) 111,103 213,902

Loss for the financial year – – – – – (6,382) (6,382)

Actuarial gain in Blenkinsopp

pension scheme 24 – – – – – 295 295

Deferred tax on other comprehensive

expense items – – – – – (58) (58)

Total comprehensive expense for the

year ended 31 December 2022 – – – – – (6,145) (6,145)

Transactions with owners:

Purchase of own shares – – – – (26) – (26)

Share-based payments – – – – – 693 693

Dividends paid 10 – – – – – (4,032) (4,032)

Share issue 26,27 33 61 – – – – 94

Balance at 31 December 2022 32,305 24,688 45,667 257 (50) 101,619 204,486

157

Financial Statements

Harworth Group plc: Annual Report and Financial Statements 2022

Consolidated statement of cash flows

for the year ended 31 December 2022

Note

Year ended

31 December

2022

£’000

Year ended

31 December

2021

£’000

Cash flows from operating activities

Profit before tax for the financial year 30,859 127,234

Net finance costs 6 6,140 3,918

Other losses/(gains) 3 16,761 (92,488)

Share of loss/(profit) of joint ventures (including impairment) 15 7,487 (9,225)

Share-based transactions

(1)

25 728 426

Depreciation of property, plant and equipment and right of use assets 12,13 152 234

Pension contributions in excess of charge 24 (149) (148)

Operating cash inflows before movements in working capital  61,978 29,951

Decrease in inventories 16,502 4,133

Increase in receivables (6,482) (3,715)

(Decrease)/increase in payables (13,137) 26,669

Cash generated from operations  58,861 57,038

Interest paid (3,998) (3,531)

Corporation tax paid (17,702) (3,646)

Cash generated from operating activities  37,161 49,861

Cash flows from investing activities

Interest received 227 182

Investment in joint ventures (1,849) (1,624)

Distribution from joint ventures 665 34

Net proceeds from disposal of investment properties, AHFS and overages 14,232 44,472

Property acquisitions (13,445) (18,105)

Expenditure on investment properties and AHFS (53,107) (22,851)

Expenditure on property, plant and equipment (110) (32)

Cash (used in)/generated from investing activities  (53,387) 2,076

Cash flows from financing activities

Net proceeds from issue of ordinary shares 67 68

Purchase of own shares – (21)

Proceeds from other loans 19,850 4,900

Repayment of other loans – (4,425)

Proceeds from bank loans 154,000 45,000

Repayment of bank loans (152,000) (91,000)

Loan arrangement fees paid (2,022) (1,134)

Payment in respect of leases (91) (85)

Dividends paid 10 (4,032) (5,913)

Cash generated from/(used in) financing activities  15,772 (52,610)

Decrease in cash  (454) (673)

Cash at 1 January  12,037 12,710

Decrease in cash (454) (673)

Cash at 31 December  11,583 12,037

(1)

Share-based transactions reflect the non-cash expenses relating to share-based payments included within the income statement.

158

Financial Statements

Harworth Group plc: Annual Report and Financial Statements 2022

Company statement of cash flows

for the year ended 31 December 2022

Year ended

31 December

2022

£’000

Year ended

31 December

2021

£’000

Cash flows from operating activities

Loss before tax for the financial year (6,358) (6,479)

Net interest receivable/(payable) 17 (80)

Share-based transactions

(1)

165 109

Pension contributions in excess of charge, net of movement in reimbursement asset 295 262

Operating cash outflows before movements in working capital  (5,881) (6,188)

(Increase)/decrease in receivables (1,193) 1,744

Increase in payables 10,060 11,487

Cash generated from operations  2,986 7,043

Interest paid (965) –

Corporation tax paid (480) –

Cash generated from operating activities  1,541 7,043

Cash flows from investing activities

Interest received 948 80

Cash generated from investing activities 948 80

Cash flows from financing activities

Net proceeds from issue of ordinary shares 67 68

Purchase of own shares – (21)

Dividends paid (4,032) (5,913)

Cash used in financing activities (3,965) (5,866)

(Decrease)/increase in cash  (1,476) 1,257

Cash at 1 January  2,909 1,652

(Decrease)/increase in cash (1,476) 1,257

Cash at 31 December  1,433 2,909

(1)

Share-based transactions reflect the non-cash expenses relating to share-based payments included within the income statement

159

Financial Statements

Harworth Group plc: Annual Report and Financial Statements 2022

Notes to the financial statements

for the year ended 31 December 2022

1. Accounting policies

The principal accounting policies adopted in the preparation of these consolidated financial statements are set out below. These policies

have been consistently applied to all of the years presented, unless otherwise stated.

General information

Harworth Group plc, company number 02649340, (the ‘Company’) is a company limited by shares, incorporated and domiciled in the

United Kingdom. The address of its registered office is Advantage House, Poplar Way, Catcliffe, Rotherham, South Yorkshire, S60 5TR.

The Company is a public company listed on the London Stock Exchange.

The consolidated financial statements for the year ended 31 December 2022 consolidate the results of the Company and its subsidiaries

(together referred to as the ‘Group’).

Basis of preparation

The Consolidated and Company financial statements of Harworth Group plc have been prepared on the going concern basis and in

accordance with UK adopted International Accounting Standards (‘IFRS’) and, as regards the company financial statements, as applied in

accordance with the provisions of the Companies Act 2006. The consolidated financial statements have been prepared under the historical

cost convention, as modified by the revaluation of investment properties and financial assets and liabilities at fair value through profit or loss.

The Group’s business activities, together with the factors likely to affect its future development, performance and position are set out in

the Strategic Report in the Annual Report and the financial statements and notes. The Directors believe that the Group is well placed to

manage its business risks successfully. The principal risks that may impact the Group’s performance and their mitigation are outlined in

the Principal Risks & Uncertainties statement starting on page 36. After making enquiries, the Directors have a reasonable expectation

that the Group has adequate resources to fund its operations for the foreseeable future. For this reason, they continue to adopt the

going concern basis in preparing the annual financial statements.

Going-concern basis

These financial statements are prepared on the basis that the Group is a going concern. In forming its opinion as to going concern, the

Company prepares cash flow and banking covenant forecasts based upon its assumptions with particular consideration to the key risks

and uncertainties and the current macro-economic environment as well as taking into account available borrowing facilities. The going

concern period assessed is until June 2024 which has been selected as it can be projected with a good degree of expected accuracy

and covers a complete period of reporting under the Group’s RCF.

A key focus of the assessment of going concern is the management of liquidity and compliance with borrowing facilities for the period

to June 2024. During the year; a new five year £200m RCF was agreed with HSBC joining as a new lender in addition to current lenders

NatWest and Santander. The new RCF is aligned to the Group’s strategy and provides significant additional liquidity and flexibility to

enable it to pursue its strategic objectives. The new facility is subject to financial covenants, including minimum interest cover, maximum

infrastructure debt as a percentage of property value and gearing, all of which are tested through the going concern assessment

undertaken. Available liquidity, including cash and cash equivalents and bank facility headroom was £175.6m as at 31 December 2022.

The Group benefits from diversification across its Capital Growth and Income Generation businesses including its industrial and

renewable energy property portfolio. Taking into account the independent valuation by BNP Paribas and Savills, the Group net loan-

to-portfolio value remains low at 6.6%, within the Board’s target range and with headroom to allow for falls in property values. Rent

collection remained strong, with 99% collected to date for 2022.

In addition to the base forecast, a sensitised forecast was produced that reflected a number of severe but plausible downsides.

This downside included: 1) a severe reduction in sales to the housebuilding sector as well as lower investment property sales; 2)

notwithstanding strong rent collection to date in line with previous quarters, a prudent material increase in bad debts across the portfolio

over the majority of the going concern assessment period; 3) a material decline in the value of land and investment property values as a

result of macro-economic conditions; and 4) a significant increase in interest rates, impacting the cost of the Group’s borrowings.

A scenario has also been run which demonstrates that very severe loss of revenue, valuation reductions and interest cost increases would

be required to breach cashflow and banking covenants. A scenario with consideration of potential climate change and related transition

impacts was also examined as part of the Group’s focus on climate-related risks and opportunities.

160

Financial Statements

Harworth Group plc: Annual Report and Financial Statements 2022

1. Accounting policies continued

Even in the downside scenarios, for the going concern period to June 2024, the Group expects to continue to have sufficient cash

reserves to continue to operate with headroom on lending facilities and associated covenants and has additional mitigation measures

within management’s control, for example reducing development and acquisition expenditure and reducing operating costs, that could

be deployed to create further cash and covenant headroom.

Based on these considerations, together with available market information and the Directors’ knowledge and experience of the Group’s

property portfolio and markets, the Directors considered it appropriate to adopt a going concern basis of accounting in the preparation

of the Group’s and Company’s financial statements.

Changes in accounting policy and disclosures

(a) New standards, amendments and interpretations

A number of new standards and amendments to standards and interpretations are effective for annual periods beginning on or after

1 January 2022 and have not been applied in preparing these financial statements. None of these would have a significant effect on the

financial statements of the Group.

(b) New standards, amendments and interpretations not yet adopted

A number of new standards and amendments to standards and interpretations are effective for annual periods beginning on or after

1 January 2023 and have not been applied in preparing these financial statements. None of these are expected to have a significant

effect on the financial statements of the Group.

Revenue recognition

Revenue comprises rental and other land-related income arising on investment properties, income from construction contracts, planning

promotion agreements, promote fees and overages, the sale of coal fines and the sale of development properties.

Revenue is recognised to the extent that it is probable that the economic benefit will flow to the Group and the revenue can be reliably

measured. All such revenue is reported net of discounts, and value added and other sales taxes.

Rental income

Under IFRS 16 ‘Leases’, rental and other land related income is recognised on a straight-line basis over the term of the lease. Lease

incentives, including rent-free periods and payments to tenants, are allocated to the consolidated income statement on a straight-line

basis over the lease term as a deduction from rental and other land-related income.

Revenue from contracts with customers

Under IFRS 15 ‘Revenue from Contracts with Customers’, revenue is measured based on the consideration specified in a contract with a

customer at an amount that reflects the consideration to which the Group expects to be entitled in exchange for transferring promised

goods or services to a customer, and excludes amounts collected on behalf of third parties. The Group recognises revenue when it

transfers control over a product or service to a customer.

Income from construction contracts is recognised in line with the accounting policy for construction contracts. Revenue is recognised

when the Group is acting as a principal under a contract with primary responsibility for the contract.

Revenue from planning promotion agreements, promote fees and overages are recognised at the point in time when the associated

performance obligations contained within the agreements are satisfied.

Royalty income relates to revenue paid by customers who extract natural resources from some of the Group’s property and is recognised

at the transaction prices set out in the customer contracts in line with the volumes or values of resources extracted as determined by

individual contracts.

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

Service charge income is recognised as revenue in the period to which it relates.

The sale of development properties, including land parcels sold to housebuilders for residential development, usually have performance

obligations such as transferring legal title that are satisfied at a point in time. Revenue is recognised when control of the property passes

to the buyer on completion of contracts. Any variable consideration including overages is estimated at the point of sale, taking into

consideration the time to recover overage amounts as well as other factors which may give rise to variability. Revenue is only recognised

to the extent that it is highly probable that there will not be a significant reversal in the future. Any deferred consideration is discounted to

present value with the discount being unwound to the consolidated income statement as finance income.

161

Financial Statements

Harworth Group plc: Annual Report and Financial Statements 2022

Notes to the financial statements

for the year ended 31 December 2022

1. Accounting policies continued

Construction contracts

Contracts for the construction of substantial assets are accounted for as construction contracts. Revenue on construction contracts is

recognised over time, as the performance obligations are satisfied. Revenue is recognised over time if the Group’s performance creates

or enhances an asset that the customer controls as the asset is created. Otherwise, the revenue is recognised at a point in time. The

revenue is reported in Other Property Activities within Note 3. Where the outcome of a construction contract can be estimated reliably,

revenue and costs are recognised by reference to the stage of completion. The assessment of the stage of completion is dependent

on the nature of the contracts but will generally be based on the estimated proportion of the total contract costs which have been

incurred to date. If a contract is expected to be loss making, a provision is recognised when the contract is, or has become, onerous in

accordance with IAS 37.

Interest income and expense

Interest income and expense are recognised within ‘finance income’ and ‘finance costs’ in the income statement using the effective

interest rate method.

The effective interest rate method is a method of calculating the amortised cost of a financial asset or financial liability and of allocating

the interest income or interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated

future cash payments or receipts throughout the expected life of the financial instrument, or a shorter period where appropriate, to the

net carrying amount of the financial asset or financial liability.

Inventories

Inventories comprise development properties, land held for development, options to purchase land, planning promotion agreements

and coal fines that have been processed and are ready for sale.

Development properties are included in the consolidated balance sheet at the lower of cost and net realisable value. Net realisable value

is the expected net sales proceeds of the developed property in the ordinary course of business less estimated costs to complete and

anticipated selling costs. Properties re-categorised to development properties from investment properties are transferred at deemed

cost, being the fair value at the date of re-categorisation. Properties are re-categorised as development properties once planning is

secured and where development with a view to sale has commenced.

Where individual parcels of land held for development are disposed of out of a larger overall development site, costs are apportioned

based on an acreage, or other specific allocation where appropriate, after taking into account the cost or net realisable value of any

remaining residual land which may not form part of the overall development site or which may not be available for development. Where

the Group retains obligations attached to the development site as a whole, accruals are made relating to these disposals on the same

allocation basis.

Land held for development is land that has planning permission and is being developed for onward sale.

Options to purchase land are agreements that the Group has entered into with landowners whereby the Group has the option to

purchase their land within a limited timeframe. The landowners are not generally permitted to sell to any other party during this

period, unless agreed by the Group. All costs, including the cost of entering into the option, are capitalised. At each reporting date,

recoverability of the costs is considered by management and where required provisions are made such that the agreements are held at

the lower of cost and net realisable value.

Planning promotion agreements are agreements that the Group has entered into with landowners whereby the Group provides

planning and promotion services in exchange for a fixed fee and/or a set percentage of the proceeds or profit of the eventual sale of the

land that is the subject of the agreement. The Group promotes the land through the planning process at its own expense. If the land is

sold, the Group receives a fee for its services.

The Group incurs various costs in promoting land held under promotion planning agreements, in some instances the agreements allow

for the Group to be reimbursed certain expenditure following the conclusion of a successful sale. These costs are held in inventory at the

lower of cost and net realisable value.

Coal fines that have been processed and are ready for sale are stated at the lower of cost and estimated net realisable value. Inventories

comprise all of the direct costs incurred in bringing the coal fines to their present state.

Investments in subsidiaries

Investments held by the Company in subsidiary undertakings are carried at cost less impairments to write them down to their

recoverableamount.

162

Financial Statements

Harworth Group plc: Annual Report and Financial Statements 2022

1. Accounting policies continued

Investments in joint ventures

Joint ventures are those entities over whose activities the Group has joint control established by contractual agreement. Interests in

joint ventures through which the Group carries on its business are classified as jointly controlled entities and accounted for using the

equity method. This involves recording the investment initially at cost to the Group and then, in subsequent years, adjusting the carrying

amount of the investment to reflect the Group’s share of the joint venture’s results less any impairment in carrying value and any other

changes to the joint venture’s net assets such as dividends.

Impairments in subsidiaries

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

When a review for impairment is conducted, the recoverable amount is assessed by reference to the higher of ‘value in use’ (being

the present value of expected future cash flows of the relevant cash-generating unit) or ‘fair value less costs to sell’. Where there is no

binding sale agreement or active market, fair value less costs to sell is based on the best information available to reflect the amount the

Company could receive for the cash-generating unit in an arm’s length transaction.

Impairment testing is carried out under the principles described in IAS 36 ‘Impairment of assets’ which includes a number of restrictions

on the future cash flows that can be recognised in respect of restructurings and improvements related to capital expenditure.

Investment properties

Investment properties are those properties which are not occupied by the Group and which are held for long-term rental yields, capital

appreciation or both. Investment properties also include property that is being developed or constructed for future use as investment

property by the Group. Investment properties comprise freehold land and buildings and are measured at fair value. At the end of a

financial year the fair values are determined by obtaining an independent valuation prepared in accordance with the current edition of

the Appraisal and Valuation Standards published by the Royal Institution of Chartered Surveyors. External, independent valuation firms

having appropriate, recognised professional qualifications and recent experience in the location and category of property being valued

are used. A transfer to the fair value reserve is made for all fair value gains in the year from retained earnings. Where there have been

previous fair value gains transferred to the fair value reserve and fair value losses have been incurred in the year then a transfer is made to

retained earnings to offset as much of the fair value losses as possible.

Investment properties are re-categorised as development properties and moved to inventory once planning is secured and where

development with a view to sale has commenced.

A transfer from the fair value reserve to retained earnings is made if any net realisable value provision is required on any development

property where gains had previously been recorded as an investment property.

At each subsequent reporting date, investment properties are re-measured to their fair value. Movements in fair value are included in the

income statement.

Where specific investment properties have been identified as being for sale within the next 12 months, a sale is considered highly

probable and the property is immediately available for sale, their fair value is shown under assets held for sale (AHFS) within current

assets, measured in accordance with the provisions of IAS 40 ‘Investment Property’.

Profit or loss on disposal of investment properties

Disposals are accounted for when control of the investment property is passed to a customer, typically at the point of legal completion

and when title passes. Profits or losses on disposal arise from deducting the asset’s net carrying value, selling costs and where

appropriate a proportion of future costs attributable to the development of the overall land area from the net proceeds (being net

purchase consideration less any clawback liability arising on disposal) is recognised in the income statement. Net carrying value includes

valuation in the case of investment properties.

In the case of investment properties, any fair value reserve for the property disposed of is treated as realised on disposal of the property

and transferred to retained earnings.

Investment properties in the course of construction

Directly attributable costs incurred in the course of constructing a property, not including interest, are capitalised as part of the cost of

the property. Any resultant change in value is therefore recognised through the next revaluation.

163

Financial Statements

Harworth Group plc: Annual Report and Financial Statements 2022

Notes to the financial statements

for the year ended 31 December 2022

1. Accounting policies continued

Government grants

Government grants are recognised when there is reasonable assurance that the conditions associated with the grants have been

complied with and the grants will be received. Grants related to the development of Investment Property and Development Property

are deducted from the cost of the related asset. Grants for the reimbursement of operating expenditure are deducted from the

related category of costs in the income statement. Once a government grant is recognised, any related deferred income is treated in

accordance with IAS 20 ‘Accounting for Government Grants and Disclosure of Government Assistance’.

Financial assets

A financial asset is classified in this category if acquired principally for the purpose of selling in the short term. Assets in this category are

classified as current assets if expected to be settled within 12 months, otherwise they are classified as non-current.

Financial assets include cash received from the sale of certain development properties but held in separate bank accounts over which

third party infrastructure loan providers have a charge.

Financial assets carried at fair value through profit or loss are initially recognised at fair value and transaction costs are expensed in the

income statement. Financial assets are assessed for their recoverability under the Expected Credit Loss model on a periodic basis with

a provision being made if required under this model. Financial assets are de-recognised when the rights to receive cash flows from the

investments have expired or have been transferred and the Group has transferred substantially all risks and rewards of ownership.

Gains or losses arising from changes in the fair value of financial assets are presented in the income statement within ‘other gains’ in the

year in which they arise.

Interest income is recognised on financial assets by applying the effective interest rate, except for short-term receivables when the

recognition of interest would be immaterial.

Financial liabilities

Liabilities within the scope of IFRS 9 are classified as financial liabilities at fair value through profit or loss or as other liabilities, as

appropriate. A financial liability is de-recognised when the obligation under the liability is discharged, cancelled or expires.

All loans and borrowings are classified as other liabilities. Initial recognition is at fair value less directly attributable transaction costs.

After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised cost using the effective interest

method.

Financial liabilities included in trade and other payables are recognised initially at fair value and subsequently at amortised cost. The fair

value of a non interest bearing liability is its discounted repayment amount. If the due date of the liability is less than one year, discounting

is omitted.

Pension obligations

The Group contributes to defined contribution schemes for its current employees. The cost is charged to the consolidated income

statement as incurred.

Blenkinsopp pension

Following the 2012 Restructuring, the Group’s only defined benefit pension liability was in respect of the Blenkinsopp Section of the

Industry-Wide Mineworkers Pension Scheme.

During the years to 31 December 2022 and 31 December 2021 all contributions have been paid to this scheme by the Company.

In the Company balance sheet, a net liability equal to the IAS 19 (revised) liability is recognised, and an equal amount within non-current

assets, due to its ability to call upon an indemnity from Harworth Estates Mines Property Limited for this liability if required. Harworth

Estates Mines Property Limited is a wholly owned subsidiary of the Group.

Share-based payments

Equity-settled share-based payments to employees of the Company and its subsidiary undertakings are measured at the fair value of

the equity instruments at the date of grant and are expensed on a straight-line basis over the vesting period in the consolidated income

statement. The fair value of the equity instruments is determined at the date of grant taking into account any market-based vesting

conditions attached to the award. Non-market based vesting conditions are taken into account in estimating the number of awards likely

to vest. The estimate of the number of awards likely to vest is reviewed regularly and the expense charge adjusted accordingly.

164

Financial Statements

Harworth Group plc: Annual Report and Financial Statements 2022

1. Accounting policies continued

Operating segments

Management has determined the operating segments based upon the operating reports reviewed by the Investment Committee that

are used to assess both performance and strategic decisions. Management has identified that the Investment Committee is the Chief

Operating Decision Maker in accordance with the requirements of IFRS 8 ‘Operating Segments’.

The Group is organised into two operating segments: Income Generation and Capital Growth. Group costs are not a reportable

segment. However, information about them is considered by the Investment Committee in conjunction with the reportable segments.

The Income Generation segment focuses on generating rental returns from the investment portfolio, rental returns and royalties from

energy generation, environmental technologies and the agricultural portfolio, and generating income from recycled aggregates and

secondary coal products. The Capital Growth segment focuses on delivering value by developing the underlying investment and

development property portfolios, and includes planning and development activity, value engineering, proactive asset management and

strategic land acquisition.

All operations are carried out in the United Kingdom.

Consolidation

Subsidiaries

Subsidiaries are all entities over which the Group has control. The Group controls an entity when the Group is exposed to, or has

rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity.

Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are deconsolidated from the date

that control ceases.

The Group applies the acquisition method to account for business combinations. The consideration transferred for the acquisition

of a subsidiary is the fair value of the assets transferred, the liabilities incurred to the former owners of the acquiree and the equity

interests issued by the Group. The consideration transferred includes the fair value of any asset or liability resulting from a contingent

consideration arrangement. Identifiable assets acquired, and liabilities and contingent liabilities, assumed in a business combination

are measured initially at their fair values at the acquisition date. The Group recognises any non-controlling interest in the acquiree on an

acquisition-by-acquisition basis, either at fair value or at the non-controlling interest’s proportionate share of the recognised amounts of

the acquiree’s identifiable net assets.

Costs related to acquisitions, other than those associated with the issue of debt or equity securities, are expensed as incurred.

If the business combination is achieved in stages, the acquisition date carrying value of the acquirer’s previously held equity interest in

the acquiree is re-measured to fair value at the acquisition date; any gains or losses arising from such re-measurement are recognised in

profit or loss.

Intercompany transactions, balances and unrealised gains on transactions between Group companies are eliminated. Unrealised losses

are also eliminated.

Share capital and reserves

Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new ordinary shares or options are shown in

equity as a deduction, net of tax, from the proceeds.

Where shares are issued in direct consideration for acquiring shares in another company, and following which the Group holds at least

90% of the nominal share capital of that company, any premium on the shares issued as consideration is included in a merger reserve

rather than share premium.

The merger reserve reflects the premium on the shares issued to the Pension Protection Fund as part of the consideration for the

purchase of 75.1% of the issued share capital of Harworth Estates Property Group Limited in 2016.

The fair value reserve reflects the accumulation of fair value adjustments as detailed in the investment property and property, plant and

equipment accounting policies.

165

Financial Statements

Harworth Group plc: Annual Report and Financial Statements 2022

Notes to the financial statements

for the year ended 31 December 2022

1. Accounting policies continued

Property, plant and equipment

Land and buildings relate to Group-occupied properties. These properties are stated at their fair value, based on market values, less

any subsequent accumulated depreciation or accumulated impairment loss. Depreciation is provided where it is considered significant

having regard to the estimated remaining useful lives and residual values of individual properties. Surpluses on revaluations are recorded

in other comprehensive income and credited to the fair value reserve. However, to the extent that it reverses a revaluation deficit of the

same asset previously recognised in profit or loss, the increase is recognised in profit or loss. Deficits on revaluations are charged against

the fair value reserve to the extent that there are available surpluses relating to the same asset and are otherwise charged to profit or loss.

Office equipment is stated at cost less accumulated depreciation and any recognised impairment loss. Depreciation is charged on

these assets so as to write off the cost or valuation of assets over their estimated useful lives of three to four years, using the straight-line

method.

Derivatives and hedging

Derivative financial instruments such as interest rate swaps are entered into in order to manage interest rate risks. Such derivative

instruments are initially recognised at fair value on the date on which a derivative contract is entered into and are subsequently re-

measured at fair value. Derivatives are carried as assets when the fair value is positive and as liabilities when the fair value is negative.

At the inception of a hedge relationship, the Group formally designates and documents the hedge relationship to which the Group

wishes to apply hedge accounting, and the risk management objective and strategy for undertaking the hedge. The documentation

includes identification of the hedging instrument, the hedge item or transaction, the nature of the risk being hedged and how the entity

will assess the hedging instrument’s effectiveness in offsetting the exposure to changes in the hedged item’s fair value or cash flows

attributable to the hedge risk. Such hedges are expected to be highly effective in achieving offsetting changes in fair value or cash flows

and are assessed on an ongoing basis to determine that they actually have been highly effective throughout the financial reporting

periods for which they are designated.

The effective portion of the gain or loss on the hedging instrument is recognised through other comprehensive income, while any

ineffective portion is recognised immediately in profit or loss, such as when the hedged financial income or financial expense is

recognised or when a forecast sale of the hedged item occurs.

If the forecast transaction or firm commitment is no longer expected to occur, amounts previously recognised in equity are transferred to

profit or loss. If the hedging instrument expires or is sold, terminated or exercised without replacement or rollover, or if its designation as

a hedge is revoked, amounts previously recognised in equity remain in equity until the forecast transaction or firm commitment occurs.

When a derivative is held as an economic hedge for a period beyond 12 months after the end of the reporting period, the derivative is

classified as non-current (or separated into current and non-current portions) consistent with the classification of the underlying item. A

derivative instrument that is a designated and effective hedging instrument is classified consistent with the classification of the underlying

hedged item. The derivative instrument is separated into a current portion and non-current portion only if: 1) a reliable allocation can be

made; and 2) it is applied to all designated and effective hedging instruments.

Tax

Current tax

The charge or credit for current tax is based on the results for the year adjusted for items that are either not subject to taxation or for

expenditure which cannot be deducted in computing the tax charge or credit. The tax charge or credit is calculated using taxation rates

that have been enacted or substantively enacted at the balance sheet date.

Deferred tax

Deferred tax is recognised using the balance sheet liability method on temporary differences between the carrying amounts of assets

and liabilities in the financial statements and the corresponding tax basis used in the computation of taxable profit. Deferred tax is

recognised in respect of all taxable temporary timing differences, with certain limited exceptions:

• Deferred tax is not provided on the initial recognition of an asset or liability in a transaction that does not affect accounting profit or

taxable profit and is not a business combination; and

• Deferred tax assets are only recognised if it is probable that there will be sufficient profits from which the future reversal of the

underlying timing differences can be deducted. In deciding whether future reversal is probable, the Directors review the Group’s

forecasts and make an estimate of the aggregate deferred tax asset that should be recognised. This aggregate deferred tax asset is

then allocated into the different categories of deferred tax.

166

Financial Statements

Harworth Group plc: Annual Report and Financial Statements 2022

1. Accounting policies continued

Deferred tax is calculated at the tax rates that are expected to apply in the years in which timing differences reverse, based on tax rates

and laws enacted or substantively enacted at the balance sheet date. Deferred tax is charged or credited to the income statement,

except where it applies to items credited or charged to other comprehensive income or equity in which case the deferred tax is also

dealt with in other comprehensive income or equity.

The carrying value of the Group’s investment properties is assumed to be realised by sale at the end of use. The capital gains tax rate

applied is that which would apply on a direct sale of the property recorded in the Balance Sheet regardless of whether the Group would

structure the sale via the disposal of the subsidiary holding the asset, to which a different tax rate may apply. The deferred tax is then

calculated based on the respective temporary differences and tax consequences arising from recovery through sale.

Critical accounting estimates and judgements

The preparation of the financial statements requires management to make judgements, estimates and assumptions that affect the

application of accounting policies and the reported amounts of assets and liabilities, income and expense. Actual results may differ from

these estimates.

In preparing these financial statements, the significant judgements made by management in applying the Group’s accounting policies

and the key sources of estimation uncertainty are as follows:

Estimation of fair value of investment properties

The fair value of investment property reflects, amongst other things, rental income from current leases, assumptions about rental income

from future leases and the possible outcome of planning applications, in the light of current market conditions. The valuation has been

arrived at primarily after consideration of market evidence for similar property, although in the case of those properties where fair value

is based on their ultimate redevelopment potential, development appraisals have been undertaken to estimate the residual value of the

landholding after due regard to the cost of, and revenue from, the development of the property.

In determining fair value measurement, the impact of potential climate-related matters, including legislation, which may affect the fair

value measurement of investment property has been considered.

The values reported are based on significant assumptions and a change in fair values could have a material impact on the Group’s

results. This is due to the sensitivity of fair value to the assumptions made as regards to variances in development costs compared to

management`s own estimates.

Investment properties are disclosed in Note 14.

Estimation of valuation of development properties

For the purposes of calculating net realisable value for both EPRA reporting and ensuring that development properties are stated at the

lower of cost and net realisable value, the Group obtains an independent valuation of these properties, prepared in accordance with the

current edition of the Appraisal and Valuation Standards published by the Royal Institution of Chartered Surveyors.

If the net realisable value of the property is lower than cost, a provision is made to reduce the value of the property.

2. Alternative Performance Measures (“APMs”)

Introduction

The Group has applied the December 2019 European Securities and Markets Authority (“ESMA”) guidance on APMs and the November

2017 Financial Reporting Council (“FRC”) corporate thematic review of APMs in these results. An APM is a financial measure of historical

or future financial performance, position or cash flows of the Group which is not a measure defined or specified in IFRS.

Overview of our use of APMs

The Directors believe that APMs assist in providing additional useful information on the underlying trends, performance and position

of the Group. APMs assist our stakeholder users of the accounts, particularly equity and debt investors, through the comparability

of information. APMs are used by the Directors and management, both internally and externally, for performance analysis, strategic

planning, reporting and incentive-setting purposes.

APMs are not defined by IFRS and therefore may not be directly comparable with other companies’ APMs, including peers in the

real estate industry. APMs should be considered in addition to, and are not intended to be a substitute for, or superior to, IFRS

measurements.

167

Financial Statements

Harworth Group plc: Annual Report and Financial Statements 2022

Notes to the financial statements

for the year ended 31 December 2022

2. Alternative Performance Measures (“APMs”) continued

The derivations of our APMs and their purpose

The primary differences between IFRS statutory amounts and the APMs that we use are as follows:

1. Capturing all sources of value creation – Under IFRS, the revaluation movement in development properties and AHFS which are

held in inventory, is not included in the balance sheet. Also, overages are not recognised in the balance sheet until they are highly

probable. These movements, which are verified by BNP Paribas and Savills (independent external property valuers), are included

within our APMs;

2. Recategorising income statement amounts – Under IFRS, the grouping of amounts, particularly within gross profit and other gains,

does not clearly allow Harworth to demonstrate the value creation through its business model. In particular, the statutory grouping

does not distinguish value gains (being realised profits from the sales of properties and unrealised profits from property value

movements) from the ongoing profitability of the business which is less susceptible to movements in the property cycle. Finally, the

Group includes profits from joint ventures within our APMs as our joint ventures conduct similar operations to Harworth, albeit in

different ownership structures; and

3. Comparability with industry peers – Harworth discloses some APMs which are European Public Real Estate Association (“EPRA”)

measures as these are a set of standard disclosures for the property industry and thus aid comparability for our stakeholder users.

Our key APMs

The key APMs that the Group focuses on are as follows:

• Total Return – The movement in EPRA NDV plus dividends per share paid in the year expressed as a percentage of opening EPRA

NDV per share

• EPRA NDV per share – EPRA NDV divided by the number of shares in issue less shares held by the Employee Benefit Trust and Equiniti

Share Plan Trustees Limited to satisfy Long Term Incentive Plan and Share Incentive Plan awards

• Value gains – These are the realised profits from the sales of properties and unrealised profits from property value movements

including joint ventures and the mark to market movement on development properties, AHFS and overages

• Net loan to portfolio value (Net LTV) – Group debt net of cash held expressed as a percentage of portfolio value

Profit excluding value gains (PEVG) has not been included as a key APM from 2021 as it forms part of the EPRA NDV per share and Total

Return key APMs but is a non-material component of these measures. PEVG is defined as property net rental, royalty and fee income,

net of running costs of the business (adjusted operating profit). It represents the underlying profitability of the business not reliant on

property value gains or profits from the sales of properties.

Set out below is a reconciliation of the APMs used in these results to the statutory measures.

168

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Harworth Group plc: Annual Report and Financial Statements 2022

2. Alternative Performance Measures (“APMs”) continued

EPRA Net Asset Measures

EPRA introduced a new set of Net Asset Value metrics in 2020: EPRA Net Reinstatement Value (“NRV”), EPRA Net Tangible Assets

(“NTA”) and EPRA NDV. While the Group uses only EPRA NDV as a key APM, the EPRA Best Practices Recommendations guidelines

require companies to report all three EPRA NAV metrics and reconcile them to IFRS. These disclosures are provided below.

31 December 2022

EPRA NDV

£’000

EPRA NTA

£’000

EPRA NRV

£’000

Net assets 602,664 602,664 602,664

Cumulative unrealised gains on development properties 33,852 33,852 33,852

Cumulative unrealised gains on AHFS – – –

Cumulative unrealised gains on overages 7,500 7,500 7,500

Deferred tax liabilities (IFRS) – 24,141 24,141

Notional deferred tax on unrealised gains (10,171) – –

Deferred tax liabilities @ 50% – (17,156) –

Mark to market valuation of financial instruments – – –

Purchaser costs – – 46,307

 633,845 651,001 714,464

Number of shares used for per share calculations 322,612,685 322,612,685 322,612,685

Per share 196.5 201.8 221.5

31 December 2021

EPRA NDV

£’000

EPRA NTA

£’000

EPRA NRV

£’000

Net assets 577,984 577,984 577,984

Cumulative unrealised gains on development properties 72,452 72,452 72,452

Cumulative unrealised gains on AHFS – – –

Cumulative unrealised gains on overages 3,500 3,500 3,500

Deferred tax liabilities (IFRS) – 42,647 42,647

Notional deferred tax on unrealised gains (16,483) – –

Deferred tax liabilities @ 50% – (29,565) –

Mark to market valuation of financial instruments – 156 156

Purchaser costs – – 51,105

 637,453 667,174 747,844

Number of shares used for per share calculations 322,539,284 322,539,284 322,539,284

Per share 197.6 206.9 231.9

169

Financial Statements

Harworth Group plc: Annual Report and Financial Statements 2022

Notes to the financial statements

for the year ended 31 December 2022

2. Alternative Performance Measures (“APMs”) continued

1) Reconciliation to statutory measures

a. Revaluation (losses)/gains Note

Year ended

31 December

2022

£’000

Year ended

31 December

2021

£’000

(Decrease)/increase in fair value of investment properties 3 (19,725) 83,961

(Decrease)/increase in fair value of AHFS 3 (199) 1,078

Share of (loss)/profit of joint ventures 3 (7,487) 9,225

Net realisable value provision on development properties 3 (7,074) (1,574)

Reversal of previous net realisable value provision on development properties 3 5,030 4,393

Amounts derived from statutory reporting (29,455) 97,083

Unrealised gains on development properties 10,493 50,437

Unrealised losses on AHFS – (15)

Unrealised gains on overages  4,003 500

Revaluation (losses)/gains  (14,959) 148,005

b. Profit on sale

Profit on sale of investment properties 3 923 1,824

Profit on sale of AHFS 3 2,071 5,625

Profit on sale of development properties 3 57,252 11,223

Release of net realisable value provision on disposal of development properties 3 1,649 2,367

Profit on sale of overages 3 169 –

Amounts derived from statutory reporting  62,064 21,039

Less previously unrealised gains on development properties released on sale (49,093) (7,833)

Less previously unrealised gains on AHFS released on sale  – (760)

Profit on sale  12,971 12,446

c. Value (losses)/gains

Revaluation (losses)/gains (14,959) 148,005

Profit on sale 12,971 12,446

Value (losses)/gains  (1,988) 160,451

d. Total property sales

Revenue 166,685 109,884

Less revenue from other property activities 3 (10,478) (14,799)

Less revenue from income generation activities 3 (31,251) (28,773)

Add proceeds from sales of investment properties, AHFS and overages  13,550 41,956

Total property sales  138,506 108,268

e. Operating profit contributing to growth in EPRA NDV

Operating profit 44,486 121,927

Share of (loss)/profit of joint ventures 15 (7,487) 9,225

Unrealised gains on development properties 10,493 50,437

Unrealised losses on AHFS – (15)

Unrealised gains on overages 4,003 500

Less previously unrealised gains on development properties released on sale (49,093) (7,833)

Less previously unrealised gains on AHFS released on sale – (760)

Operating profit contributing to growth in EPRA NDV  2,402 173,481

170

Financial Statements

Harworth Group plc: Annual Report and Financial Statements 2022

2. Alternative Performance Measures (“APMs”) continued

f. Portfolio Value Note

As at

31 December

2022

£’000

As at

31 December

2021

£’000

Land and buildings (included within property, plant and equipment) 500 635

Investment properties 14 400,363 478,355

Investments in joint ventures 15 29,828 36,131

AHFS 18 59,790 1,925

Development properties (included within inventories) 16 204,952 172,701

Amounts derived from statutory reporting  695,433 689,747

Cumulative unrealised gains on development properties as at year end 33,852 72,452

Cumulative unrealised gains on overages as at year end  7,500 3,500

Portfolio value  736,785 765,699

g. Net debt

Gross borrowings 20 (59,978) (37,781)

Cash  11,583 12,037

Net debt  (48,395) (25,744)

h. Net loan to portfolio value (%)

Net debt (48,395) (25,744)

Portfolio value  736,785 765,699

Net loan to portfolio value (%)  6.6% 3.4%

i. Net loan to core income generation portfolio value (%)

Net debt (48,395) (25,744)

Core income generation portfolio value (investment portfolio and natural resources) 14 230,133 290,277

Net loan to core income generation portfolio value (%)  21.0% 8.9%

j. Gross loan to portfolio value (%)

Gross borrowings 20 (59,978) (37,781)

Portfolio value 736,785 765,699

Gross loan to portfolio value (%)  8.1% 4.9%

k. Gross loan to core income generation portfolio value (%)

Gross borrowings 20 (59,978) (37,781)

Core income generation portfolio value (investment portfolio and natural resources) 14 230,133 290,277

Gross loan to core income generation portfolio value (%)  26.1% 13.0%

l. Number of shares used for per share calculations

Number of shares in issue 26 323,051,124 322,724,566

Less Employee Benefit Trust and Equiniti Share Plan Trustees Limited held shares (own shares) 26 (438,439) (185,282)

Number of shares used for per share calculations 26 322,612,685 322,539,284

m. Net Asset Value (NAV) per share

NAV £’000 602,664 577,984

Number of shares used for per share calculations 26 322,612,685 322,539,284

NAV per share (p)  186.8 179.2

171

Financial Statements

Harworth Group plc: Annual Report and Financial Statements 2022

Notes to the financial statements

for the year ended 31 December 2022

2. Alternative Performance Measures (“APMs”) continued

2) Reconciliation to EPRA measures

a. EPRA NDV Note

As at

31 December

2022

£’000

As at

31 December

2021

£’000

Net assets 602,664 577,984

Cumulative unrealised gains on development properties 33,852 72,452

Cumulative unrealised gains on overages 7,500 3,500

Notional deferred tax on unrealised gains (10,171) (16,483)

EPRA NDV 633,845 637,453

b. EPRA NDV per share (p)

EPRA NDV £’000 633,845 637,453

Number of shares used for per share calculations 26 322,612,685 322,539,284

EPRA NDV per share (p) 196.5 197.6

c. EPRA NDV growth and total return

Opening EPRA NDV/share (p) 197.6 160.0

Closing EPRA NDV/share (p) 196.5 197.6

Movement in the year (p) (1.1) 37.6

EPRA NDV growth (0.6%) 23.5%

Dividends paid per share (p) 1.2 1.8

Total return per share (p) 0.1 39.4

Total return as a percentage of opening EPRA NDV 0.1% 24.6%

d. Net loan to EPRA NDV

Net debt (48,395) (25,744)

EPRA NDV 633,845 637,453

Net loan to EPRA NDV 7.6% 4.0%

172

Financial Statements

Harworth Group plc: Annual Report and Financial Statements 2022

3. Segmental Information

Segmental Income Statement

31 December 2022

Capital Growth

Sale of

Development

Properties

£’000

Other

Property

Activities

£’000

Income

Generation

£’000

Central

£’000

Total

£’000

Revenue

(1)

124,956 10,478 31,251 – 166,685

Cost of sales (68,099) (6,305) (8,888) – (83,292)

Gross profit

(2)

56,857 4,173 22,363 – 83,393

Administrative expenses – (4,123) (1,877) (16,090) (22,090)

Other gains/(losses)

(3)

– 17,788 (34,549) – (16,761)

Other operating expense – – – (56) (56)

Operating profit/(loss) 56,857 17,838 (14,063) (16,146) 44,486

Finance costs – (168) – (6,199) (6,367)

Finance income – 227 – – 227

Share of loss of joint ventures – (4,317) (3,170) – (7,487)

Profit/(loss) before tax 56,857 13,580 (17,233) (22,345) 30,859

(1) Revenue

Revenue is analysed as follows:

Sale of development properties 124,956 – – – 124,956

Revenue from PPAs – 5,810 – – 5,810

Build-to-suit development revenue – 4,215 – – 4,215

Rent, service charge and royalties revenue – 426 28,151 – 28,577

Revenue from coal fines – – 2,113 – 2,113

Other revenue – 27 987 – 1,014

124,956 10,478 31,251 – 166,685

(2) Gross profit     

Gross profit is analysed as follows: 

Gross profit excluding sales of development

properties – 4,173 22,363 – 26,536

Gross profit on sale of development properties 57,252 – – – 57,252

Net realisable value provision on development

properties (7,074) – – – (7,074)

Reversal of previous net realisable value provision on

development properties 5,030 – – – 5,030

Release of previous net realisable value provision on

disposal of development properties 1,649 – – – 1,649

 56,857 4,173 22,363 – 83,393

(3) Other gains/(losses)     

Other gains/(losses) are analysed as follows: 

Increase/(decrease) in fair value of investment

properties – 17,958 (37,683) – (19,725)

Decrease in the fair value of AHFS – (199) – – (199)

Profit on sale of investment properties – 76 847 – 923

(Loss)/profit on sale of AHFS – (216) 2,287 – 2,071

Profit on sale of overages – 169 – – 169

 – 17,788 (34,549) – (16,761)

173

Financial Statements

Harworth Group plc: Annual Report and Financial Statements 2022

Notes to the financial statements

for the year ended 31 December 2022

3. Segmental Information continued

Segmental Balance Sheet

31 December 2022

Capital

Growth

£’000

Income

Generation

£’000

Central

£’000

Total

£’000

Non-current assets

Property, plant and equipment – – 600 600

Right of use assets – – 254 254

Other receivables 4,013 – – 4,013

Investment properties 164,533 235,830 – 400,363

Investments in joint ventures 16,462 13,366 – 29,828

 185,008 249,196 854 435,058

Current assets

Inventories 216,393 – – 216,393

Trade and other receivables 41,287 14,913 458 56,658

AHFS 2,627 57,163 – 59,790

Cash and cash equivalents – – 11,583 11,583

 260,307 72,076 12,041 344,424

Total assets 445,315 321,272 12,895 779,482

Financial liabilities and derivative financial instruments are not allocated to the reporting segments as they are managed and measured at

a Group level.

174

Financial Statements

Harworth Group plc: Annual Report and Financial Statements 2022

3. Segmental Information continued

Segmental Income Statement

31 December 2021

Capital Growth



Sale of

Development

Properties

£’000

Other

Property

Activities

£’000

Income

Generation

£’000

Central

£’000

Total

£’000

Revenue

(1)

66,312 14,799 28,773 – 109,884

Cost of sales (49,903) (3,169) (8,113) – (61,185)

Gross profit

(2)

16,409 11,630 20,660 – 48,699

Administrative expenses – (3,365) (2,130) (13,707) (19,202)

Other gains/losses

(3)

– 57,483 35,005 – 92,488

Other operating expense – – – (58) (58)

Operating profit/(loss) 16,409 65,748 53,535 (13,765) 121,927

Finance costs – – – (4,100) (4,100)

Finance income – 172 – 10 182

Share of profit of joint ventures – 4,524 4,701 – 9,225

Profit/(loss) before tax 16,409 70,444 58,236 (17,855) 127,234

(1) Revenue

Revenue is analysed as follows:

Sale of development properties 66,312 – – – 66,312

Build-to-suit development revenue – 2,544 – – 2,544

Rent, service charge and royalties revenue – 242 26,383 – 26,625

Revenue from coal fines – – 622 – 622

Other revenue – 12,013 1,768 – 13,781

66,312 14,799 28,773 – 109,884

(2) Gross profit     

Gross profit is analysed as follows: 

Gross profit excluding sales of development

properties – 11,630 20,660 – 32,290

Gross profit on sale of development properties 11,223 – – – 11,223

Net realisable value provision on development

properties (1,574) – – – (1,574)

Reversal of previous net realisable value provision on

development properties 4,393 – – – 4,393

Release of previous net realisable value provision on

disposal of development properties 2,367 – – – 2,367

 16,409 11,630 20,660 – 48,699

(3) Other gains/(losses)

    

Other gains/(losses) are analysed as follows:



Increase in fair value of investment properties – 55,220 28,741 – 83,961

Increase in fair value of AHFS – 364 714 – 1,078

Profit/(loss) on sale of investment properties – 1,871 (47) – 1,824

Profit on sale of AHFS – 28 5,597 – 5,625

 – 57,483 35,005 – 92,488

175

Financial Statements

Harworth Group plc: Annual Report and Financial Statements 2022

Notes to the financial statements

for the year ended 31 December 2022

3. Segmental Information continued

Segmental Balance Sheet

31 December 2021



Capital

Growth

£’000

Income

Generation

£’000

Central

£’000

Total

£’000

Non-current assets

Property, plant and equipment – – 681 681

Right of use assets – – 94 94

Other receivables 4,285 1,084 – 5,369

Investment properties 182,666 295,689 – 478,355

Investments in joint ventures 18,929 17,202 – 36,131

 205,880 313,975 775 520,630

Current assets

Inventories 177,720 102 – 177,822

Trade and other receivables 35,737 13,665 353 49,755

AHFS 1,925 – – 1,925

Cash and cash equivalents – – 12,037 12,037

 215,382 13,767 12,390 241,539

Total assets 421,262 327,742 13,165 762,169

Financial liabilities and derivative financial instruments are not allocated to the reporting segments as they are managed and measured at

a Group level.

4. Operating profit

 Note

Year ended

31 December

2022

£’000

Year ended

31 December

2021

£’000

Operating profit before tax is stated after charging/(crediting):

Net realisable value provision on development properties 16 395 (5,186)

Staff costs 5 13,690 11,626

Depreciation of property, plant and equipment and right of use assets 12, 13 152 234

5. Employee information

The monthly average number of persons (excluding Non-Executive Directors) employed by the Group during the year was:

Group Company



Year ended

31 December

2022

Number

Year ended

31 December

2021

Number

Year ended

31 December

2022

Number

Year ended

31 December

2021

Number

Management and administration 107 85 3 3

Remuneration details of these persons were as follows:

Group Company



Year ended

31 December

2022

£’000

Year ended

31 December

2021

£’000

Year ended

31 December

2022

£’000

Year ended

31 December

2021

£’000

Wages and salaries 10,825 9,741 1,399 2,357

Share-based payment expense 703 546 157 116

Social security costs 1,383 800 278 95

Other pension costs 779 539 50 41

 13,690 11,626 1,884 2,609

176

Financial Statements

Harworth Group plc: Annual Report and Financial Statements 2022

5. Employee information continued

Key management remuneration relates to the members of the Investment Committee:

Group



Year ended

31 December

2022

£’000

Year ended

31 December

2021

£’000

Short term employee benefits 4,514 4,278

Post employment benefits 213 153

Share-based payments 490 463

 5,217 4,894

Detailed information relating to Directors’ remuneration is disclosed in the Directors’ remuneration report on pages 115 to 133 and forms

part of these financial statements.

6. Finance costs and finance income

Year ended

31 December

2022

£’000

Year ended

31 December

2021

£’000

Total finance income 227 182

Finance costs

– Bank interest (2,206) (2,795)

– Facility fees (1,791) (745)

– Amortisation of up-front fees (685) (362)

– Acceleration of amortisation of up-front fees following extinguishment of Facility (599) –

– Other interest (1,086) (198)

Total finance costs (6,367) (4,100)

Net finance costs (6,140) (3,918)

During the year no interest has been capitalised in investment or development properties (2021: £nil).

In March 2022 the Group entered into a new revolving credit facility replacing the existing facility under different lending terms. This

transaction met the definition of a loan extinguishment and led to an acceleration of amortisation on the up-front fees of the old facility.

7. Auditors’ remuneration



Year ended

31 December

2022

£’000

Year ended

31 December

2021

£’000

Fees payable to the Company’s auditors and its associates for the audit of the Company and the

consolidated financial statements 330 315

Fees payable to the Company auditors and its associates for other services:

– The audit of the Company’s subsidiaries pursuant to legislation 42 30

 372 345

177

Financial Statements

Harworth Group plc: Annual Report and Financial Statements 2022

Notes to the financial statements

for the year ended 31 December 2022

8. Tax

Analysis of tax (charge)/credit in the year

Year ended

31 December

2022

£’000

Year ended

31 December

2021

£’000

Current tax

Current year (21,650) (6,747)

Adjustment in respect of prior periods (118) 372

Total current tax charge (21,768) (6,375)

Deferred tax

Current year 13,504 (15,974)

Adjustment in respect of prior periods 409 (162)

Difference between current tax rate and rate of deferred tax 4,834 (10,733)

Total deferred tax credit/(charge) 18,747 (26,869)

Tax charge (3,021) (33,244)

Other comprehensive income items  

Deferred tax – current year (101) (137)

Total (101) (137)

The tax charge for the year is lower (2021: higher) than the standard rate of corporation tax in the UK of 19% (2021: 19%). The differences

are explained below:

Year ended

31 December

2022

£’000

Year ended

31 December

2021

£’000

Profit before tax 30,859 127,234

Profit before tax multiplied by rate of corporation tax in the UK of 19% (2021: 19%) (5,863) (24,174)

Effects of:

Adjustments in respect of prior periods - deferred taxation 409 (162)

Adjustments in respect of prior periods - current taxation (118) 372

Expenses not deducted for tax purposes (127) (291)

Revaluation (losses)/gains (755) 68

Share of (loss)/profit of joint ventures (1,423) 1,753

Difference between current tax rate and rate of deferred tax 4,834 (10,733)

Share options 22 (77)

Total tax charge (3,021) (33,244)

The difference between current tax rate and rate of deferred tax of £4.8m (2021: £10.7m) relates to the unwind of balances previously

recognised at 25% and the reduction of the deferred tax liabilities recognised at 25% as a result of in year movements. The 2021

reconciling item of £10.7m is reflective of the enacted rate change from 19% to 25%.

At 31 December 2022, the Group had a current tax liability of £7.0m (2021: £2.9m).

The Company has recognised a current tax asset in 2022 of £0.5m (2021: £nil).

Deferred tax

The following is the analysis of deferred tax liabilities presented in the consolidated balance sheet:



As at

31 December

2022

£’000

As at

31 December

2021

£’000

Deferred tax liabilities (25,980) (46,988)

Deferred tax assets 1,839 4,341

 (24,141) (42,647)

178

Financial Statements

Harworth Group plc: Annual Report and Financial Statements 2022

8. Tax continued

The movements on the deferred income tax account were as follows:

Investment

Properties

£’000

Tax

Losses

£’000

Other

Temporary

Differences

£’000

Total

£’000

At 1 January 2021 (23,159) 5,774 1,618 (15,767)

Recognised in the consolidated income statement (23,829) (3,216) 176 (26,869)

Recognised in the consolidated statement of comprehensive income – – (137) (137)

Recognised in the consolidated statement of equity – – 126 126

At 31 December 2021 and 1 January 2022 (46,988) 2,558 1,783 (42,647)

Recognised in the consolidated income statement 21,008 (2,558) 297 18,747

Recognised in the consolidated statement of comprehensive income – – (101) (101)

Recognised in the consolidated statement of equity – – (140) (140)

At 31 December 2022 (25,980) – 1,839 (24,141)

There is deferred tax on UK corporation tax losses carried forward of £nil (2021: £2.6m).

In the Spring Budget 2021, the Government announced an increase in the corporation tax rate from 19% to 25% from 1 April 2023.

The rate was substantively enacted on 24 May 2021 and as such the deferred tax balances have been calculated in full on temporary

differences under the liability method using the rate expected to apply at the time of the reversal of the balance. As such, the deferred

tax assets and liabilities have been calculated using a mixture of 25% or a blended rate (2021: mixture of 19%, 25% and a blended rate)

as appropriate.

Deferred tax assets and liabilities are offset when there is a legally enforced right to offset current tax assets against current tax liabilities

and when the deferred taxes relate to the same fiscal authority.

Deferred tax assets of £8.1m at 31 December 2022 (2021: £5.3m) have not been recognised owing to the uncertainty as to their

recoverability.

The Company has recognised a deferred tax asset in 2022 of £0.1m (2021: £0.2m).

9. Result of the parent entity

As permitted by section 408 of the Companies Act 2006, the Company’s income statement and statement of comprehensive income

have not been included separately in these financial statements. The loss for the financial year was £6.4m (2021: £8.4m) and the total

comprehensive expense for the financial year was £6.2m (2021: £8.2m). The distributable reserves of the Company are £101.6m

(2021:£111.1m).

10. Dividends



Year ended

31 December

2022

£’000

Year ended

31 December

2021

£’000

Interim dividend of 0.404p per share for the six months ended 30 June 2022 1,305 –

Final dividend of 0.845p per share for the year ended 31 December 2021 2,727 –

Interim dividend of 0.367p per share for the six months ended 30 June 2021 – 1,184

Final dividend of 1.466p per share for the year ended 31 December 2020 – 4,729

 4,032 5,913

In addition to the interim dividend of 0.404p, the Board has determined that it is appropriate for a final dividend of 0.929p (2021:

0.845p) to be paid per share, bringing the total dividend for the year to 1.333p (2021: 1.212p). The recommended 2022 final dividend

and 2022 total dividend represent a 10% increase in line with the Group’s policy.

The 2020 final dividend was increased to reflect the cancelled final 2019 dividend excluding which, the 2020 dividend totalled 1.102p

per share.

There is no change to the current dividend policy to continue to grow dividends by 10% each year.

179

Financial Statements

Harworth Group plc: Annual Report and Financial Statements 2022

Notes to the financial statements

for the year ended 31 December 2022

11. Earnings per share

Earnings per share has been calculated by dividing the profit attributable to ordinary shareholders by the weighted average number of

shares in issue and ranking for dividend during the year.



Year ended

31 December

2022

Year ended

31 December

2021

Profit from continuing operations attributable to owners of the Company (£’000) 27,838 93,990

Weighted average number of shares used for basic earnings per share calculation 322,571,783 322,493,443

Basic earnings per share (pence) 8.6 29.1

Weighted average number of shares used for diluted per share calculation 326,317,353 325,059,137

Diluted earnings per share (pence) 8.5 28.9

The difference between the weighted average number of shares used for the basic and diluted earnings per share calculation is due to

the effect of share options that are dilutive.

12. Property, plant and equipment

Group

Cost or fair value

Land and

Buildings

£’000

Office

Equipment

£’000

Total

£’000

As at 1 January 2021 835 493 1,328

Additions – 32 32

Decrease in fair value (200) – (200)

As at 31 December 2021 and 1 January 2022 635 525 1,160

Additions – 110 110

Decrease in fair value (133) – (133)

As at 31 December 2022 502 635 1,137

Depreciation   

As at 1 January 2021 – (321) (321)

Depreciation charge – (158) (158)

As at 31 December 2021 and 1 January 2022 – (479) (479)

Depreciation charge – (58) (58)

As at 31 December 2022 – (537) (537)

Net book value   

Net book value at 31 December 2022 502 98 600

Net book value at 31 December 2021 635 46 681

At 31 December 2022, the Group had not entered into any contractual commitments for the acquisitions of property, plant and

equipment (2021: £nil).

180

Financial Statements

Harworth Group plc: Annual Report and Financial Statements 2022

13. Right of use assets

Group

Right of use assets

Year ended

31 December

2022

£’000

Year ended

31 December

2021

£’000

Buildings 229 74

Vehicles 25 20

 254 94

Lease liabilities

Current 82 42

Non-current 172 52

 254 94

Additions to right of use assets during 2022 were £0.2m (2021: £nil).

Group

Depreciation charge of right of use assets

Year ended

31 December

2022

£’000

Year ended

31 December

2021

£’000

Buildings 77 44

Vehicles 17 32

 94 76

The total cash outflow for leases in 2022 was £0.1m (2021: £0.1m).

The Group leases a number of offices and vehicles. Rental contracts are typically made for fixed periods of three to five years but may

have extension options.

Contracts may contain both lease and non-lease components. The Group allocates the consideration in the contract to the lease and

non-lease components based on their relative stand-alone prices.

However, for leases of real estate for which the Group is a lessee, it has elected not to separate lease and non-lease components and

instead accounts for these as a single lease component.

Lease terms are negotiated on an individual basis and contain a wide range of different terms and conditions. The lease agreements do

not impose any covenants other than the security interests in the leased assets that are held by the lessor.

Lease assets may not be used as security for borrowing purposes.

Assets and liabilities arising from a lease are initially measured on a present value basis. Lease liabilities include the net present value of

the following lease payments:

• fixed payments (including in-substance fixed payments), less any lease incentives receivable

• variable lease payment that are based on an index or a rate, initially measured using the index or rate as at the commencement date

Lease payments to be made under reasonably certain extension options are also included in the measurement of the liability.

181

Financial Statements

Harworth Group plc: Annual Report and Financial Statements 2022

Notes to the financial statements

for the year ended 31 December 2022

14. Investment properties

Investment properties at 31 December 2022 and 31 December 2021 have been measured at fair value. The Group holds five categories

of investment property, being Agricultural Land, Natural Resources, the Investment Portfolio, Major Developments and Strategic Land in

the UK, which sit within the operating segments of Income Generation and Capital Growth.

Income Generation Capital Growth

Agricultural

Land

£’000

Natural

Resources

£’000

Investment

Portfolio

£’000

Major

Developments

£’000

Strategic

Land

£’000

Total

£’000

At 1 January 2021 6,135 33,098 214,906 27,550 91,390 373,079

Direct acquisitions – – 13,502 – 14,274 27,776

Subsequent expenditure 12 239 1,988 8,956 6,877 18,072

Disposals – – (2,497) (11,207) (986) (14,690)

(Decrease)/increase in fair value (151) (1,912) 30,804 21,609 33,611 83,961

Transfers between divisions 115 – 6,101 (6,626) 410 –

Net transfers from development

properties – – – 5,711 (5,000) 711

Net transfer to AHFS (699) (874) (5,078) (509) (3,394) (10,554)

At 31 December 2021 5,412 30,551 259,726 45,483 137,183 478,355

Direct acquisitions – – – – 11,863 11,863

Subsequent expenditure – 12 2,822 40,928 9,344 53,106

Disposals – (860) – – – (860)

(Decrease)/Increase in fair value 282 (163) (37,802) (5,357) 23,315 (19,725)

Transfers between divisions – – 42,250 (42,250) – –

Transfers from/(to) development

properties – – – 5,440 (60,513) (55,073)

Transfer to AHFS – (9,814) (56,589) – (900) (67,303)

At 31 December 2022 5,694 19,726 210,407 44,244 120,292 400,363

Subsequent expenditure is recorded net of government grant receipts of £0.9m (2021: £nil).

Included within investment properties (agricultural land) is a provision of £0.2m (2021: £0.3m) relating to the restoration liability on sites

formerly rented to mining tenants. This provision is treated as a reduction of the individual property valuations.

During the year £5.4m (2021: £5.7m) of development property was re-categorised as investment property to reflect a change in use.

During the year £60.5m of investment property was re-categorised to development properties (2021: £5.0m). Properties that have

obtained planning permission and where development with a view to sale has commenced are now held as development properties

in inventories. Until sites receive planning permission and the future use has been determined, our view is that the land is held for a

currently undetermined future use and should thus be held as investment property. Where there is a subsequent change in use, typically

in properties and land that have received planning permission and where development with a view to sale has commenced, these are

re-categorised as development properties in inventories.

Investment property is transferred between divisions to reflect a change in the activity arising from the asset.

182

Financial Statements

Harworth Group plc: Annual Report and Financial Statements 2022

14. Investment properties continued

The fair value disclosures for investment properties are presented on a combined basis along with those properties in AHFS as

summarised in the following table:

Income Generation Capital Growth

Agricultural

Land

£’000

Natural

Resources

£’000

Investment

Portfolio

£’000

Major

Developments

£’000

Strategic

Land

£’000

Total

£’000

Investment properties 5,694 19,726 210,407 44,244 120,292 400,363

Properties included within AHFS (Note 18) – 574 56,589 – 2,627 59,790

Total properties (excluding

development properties) 5,694 20,300 266,996 44,244 122,919 460,153

Year ended

31 December

2022

£’000

Year ended

31 December

2021

£’000

Market value as estimated by the external valuer 470,150 486,433

Capital incentives and rent-free periods included within other receivables (5,853) (4,820)

Contingent interest in adjoining land included within external valuations (3,848) (2,687)

Other adjustments (296) (571)

Fair value for financial purposes 460,153 478,355

Valuation process

The properties were valued in accordance with the Royal Institution of Chartered Surveyors (RICS) Valuation – Professional Standards (the

‘Red Book’) by BNP Paribas Real Estate and Savills. Both are independent firms acting in the capacity of external valuers with relevant

experience of valuations of this nature. The valuations are on the basis of Market Value as defined by the Red Book, which RICS considers

meets the criteria for assessing Fair Value under IFRS. The valuations are based on what is determined to be the highest and best use.

When considering the highest and best use a valuer will consider, on a property by property basis, its actual and potential uses which are

physically, legally and financially viable. Where the highest and best use differs from the existing use, the valuer will consider the cost and

the likelihood of achieving and implementing this change in arriving at its valuation. Most of the Group’s properties have been valued on

the basis of their development potential which differs from their existing use.

At each financial year end, management:

• verifies all major inputs to the independent valuation report;

• assesses property valuation movements when compared to the prior year valuation report; and

• holds discussions with the independent valuer.

The different valuation levels are defined as:

Level 1: valuation based on quoted market prices traded in active markets.

Level 2: valuation based on inputs other than quoted prices included within Level 1 that maximise the use of observable data either

directly or from market prices or indirectly derived from market prices.

Level 3: where one or more inputs to valuation are not based on observable market data.

The Directors determine the applicable hierarchy that each investment property falls into by assessing the level of significant

unobservable inputs used in the valuation technique. As a result of the specific nature of each investment property, valuation inputs are

not based on directly observable market data and therefore all investment properties were determined to fall into Level 3.

The Group’s policy is to recognise transfers into and out of fair value hierarchy levels as at the date of the event or change in circumstance

that caused the transfer. There were no transfers between hierarchy levels in the year ended 31 December 2022 (2021: none).

183

Financial Statements

Harworth Group plc: Annual Report and Financial Statements 2022

Notes to the financial statements

for the year ended 31 December 2022

14. Investment properties continued

Valuation techniques underlying management’s estimation of fair value are as follows:

Agricultural land

Most of the agricultural land is valued using the market comparison basis, with an adjustment made for the length of the remaining term

on any tenancy and the estimated cost to bring the land to its highest and best use. Where the asset is subject to a secure letting, it is

valued on a yield basis, based upon sales of similar types of investment.

Natural resources

Natural resource sites in the portfolio are valued based on a discounted cash flow for the operating life of the asset with regard to the

residual land value.

Investment Portfolio

The industrial & logistics investment properties are valued on the basis of market comparison with direct reference to observable market

evidence including current rent and estimated rental value (ERV), yields and capital values and adjusted where required for the estimated

cost to bring the property to its highest and best use. The evidence is adjusted to reflect the quality of the property assets, the quality of

the covenant profile of the tenants and the reliability/volatility of cash flows. The Group’s portfolio has a spread of yields. New income

acquisitions are generally acquired at high yields where value can be added. Subject to market backdrop, properties that are newly built

by Harworth typically have lower yields. As assets are enhanced and improved, these would also be expected to be valued at lower yields.

ERV and reversionary rental yields are considered to be significant unobservable inputs. Details of the aggregate ERV and weighted

average reversionary rental yields used for the Investment Portfolio properties are provided in the following table:



As at

31 December

2022

£’000

As at

31 December

2021

£’000

Market value (£’000) 272,850 264,547

Aggregate ERV (£’000) 20,388 16,794

Equivalent rental yield % 7.8 6.8

All other factors being equal, a higher equivalent yield would lead to a decrease in the valuation of an asset and an increase in the current

or estimated future rental stream, or market demand for the asset, would have the effect of increasing the capital value, and vice versa.

However, there are inter-relationships between the significant unobservable inputs which are partially determined by market conditions,

which would impact on these changes.

The table below sets out a sensitivity analysis for the key sources of estimation uncertainty with the resulting increase/(decrease) in the fair

value of Investment Portfolio assets at 31 December 2022:

2022 2021



Increase in

Sensitivity

Value

£’000

Decrease in

Sensitivity

Value

£’000

Increase in

Sensitivity

Value

£’000

Decrease in

Sensitivity

Value

£’000

Change in net income by 5% 13,568 (13,568) 13,260 (13,260)

Change in portfolio net initial yield by 50 basis points (24,934) 25,980 (23,206) 25,880

The property rental income earned by the Group from its occupied investment property, all of which is leased out under operating leases

amounted to £19.9m (2021: £19.5m). Direct operating expenses arising on investment property generating rental income in the year

amounted to £6.4m (2021: £6.6m).

The bank and other loans are secured by way of fixed equitable charges over investment and development properties.

184

Financial Statements

Harworth Group plc: Annual Report and Financial Statements 2022

14. Investment properties continued

Major developments

Major development sites are generally valued using residual development appraisals, a form of discounted cash flow which estimates

the current site value from future cash flows measured by current land and/or completed built development values, observable or

estimated development costs, and observable or estimated development returns.

Where possible development sites are valued by direct comparison to observable market evidence with appropriate adjustment for the

quality and location of the property asset, although this is generally only a reliable method of measurement for smaller development sites.

The discounted cash flows utilise gross development value, which takes account of the future expectations of sales over time, less costs,

as at today’s value, to complete remediation and provide the necessary site infrastructure to bring the site forward. Sales prices, build

costs and profit margins are considered to be significant unobservable inputs for sites valued using residual development appraisals and

details of these are provided below:

As at 31 December 2022 As at 31 December 2021

Market

value

(£’000)

Sales price

per sq. ft

Build cost

per sq. ft

Profit

Margin

Market

value

(£’000)

Sales price

per sq. ft

Build cost

per sq. ft

Profit

Margin

Major developments 43,941 £125–£138 £67–£93 15% 44,590 £122–£127 £58–£72 15%

All other factors being equal, a higher land value reflecting future expectations on sales would lead to an increase in the valuation of

an asset, an increase in costs would lead to a decrease in the valuation of an asset. However, there are inter-relationships between the

significant unobservable inputs which are partially determined by market conditions, which would impact on these changes.

The table below sets out a sensitivity analysis for the key sources of estimation uncertainty with the resulting increase/(decrease) in the fair

value of Major Development investment properties at 31 December 2022:

2022 2021



Increase in

Sensitivity

Value

£’000

Decrease in

Sensitivity

Value

£’000

Increase in

Sensitivity

Value

£’000

Decrease in

Sensitivity

Value

£’000

Change in sales price of 5% 7,999 (6,439) 5,967 (5,967)

Change in build cost of 5% (4,266) 5,826 (4,550) 4,611

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. Valuations are then benchmarked against observable land values

reflecting the current existing use of the land, which is generally agricultural and, where available, observable strategic land values. The

land value per acre is considered to be a significant unobservable input and details of the ranges used are provided below:

As at 31 December 2022 As at 31 December 2021

Agricultural

Land

£’000

Natural

Resources

£’000

Strategic

Land

£’000

Agricultural

Land

£’000

Natural

Resources

£’000

Strategic

Land

£’000

Market value 5,845 20,706 126,808 5,560 31,705 140,031

Weighted Average Land value per acre 3 21 68 3 20 81

All things being equal, a higher value per acre would lead to an increase in the valuation of an asset and vice versa. The table below sets out

a sensitivity analysis for the key source of estimation uncertainty with the resulting increase/(decrease) in the fair value at 31 December 2022:

2022 2021

Change in land value per acre by 5%

Increase in

Sensitivity

Value

£’000

Decrease in

Sensitivity

Value

£’000

Increase in

Sensitivity

Value

£’000

Decrease in

Sensitivity

Value

£’000

Agricultural Land 292 (292) 278 (278)

Natural Resources 1,035 (1,035) 1,585 (1,585)

Strategic Land 6,340 (6,340) 7,002 (7,002)

185

Financial Statements

Harworth Group plc: Annual Report and Financial Statements 2022

Notes to the financial statements

for the year ended 31 December 2022

15. Investments

Investment in subsidiaries (Company balance sheet)



As at

31 December

2022

£’000

As at

31 December

2021

£’000

Cost and net book amount:

At 1 January 209,300 208,974

Grant of equity instruments to employees of subsidiaries 564 326

At 31 December 209,864 209,300

Investments in subsidiaries are stated at cost less provision for impairment. As permitted by section 616 of the Companies Act 2006, where

the relief afforded under section 612 of the Companies Act 2006 applies, cost is the aggregate of the nominal value of the relevant number

of the Company’s shares and the fair value of any other consideration given to acquire the share capital of the subsidiary undertakings.

The Company holds investments in the following subsidiaries as at 31 December 2022:

Company name Activity

Description of

shares held

Proportion

of nominal

value of

issued share

capital

held by the

Company %

Held directly

or indirectly

by the

Company

Harworth Estates Property Group Limited Trading Ordinary 100 Direct

Cadley Park Management Company Limited Trading Ordinary 100 Indirect

Cutacre Country Park Management Company Limited Trading Ordinary 100 Indirect

EOS Inc Limited Trading Ordinary 100 Indirect

Harworth Estates (Agricultural Land) Limited Trading Ordinary 100 Indirect

Harworth Estates (Waverley Prince) Limited Trading Ordinary 100 Indirect

Harworth Estates Curtilage Limited Trading Ordinary 100 Indirect

Harworth Estates Investments Limited Trading Ordinary 100 Indirect

Harworth Estates Limited Trading Ordinary 100 Indirect

Harworth Estates Mines Property Limited Trading Ordinary 100 Indirect

Harworth Estates Overage Limited Trading Ordinary 100 Indirect

Harworth Estates Residential Development Limited Trading Ordinary 100 Indirect

Harworth Estates Warwickshire Limited Trading Ordinary 100 Indirect

Harworth Surface Water Management (Bardon) Limited Trading Ordinary 100 Indirect

Harworth Surface Water Management (North West) Limited Trading Ordinary 100 Indirect

Harworth TRR Limited Trading Ordinary 100 Indirect

Logistics North MC Limited Trading Ordinary 10.86 Indirect

Thoresby Vale Management Company Limited Trading Ordinary 100 Indirect

Flass Lane Management Company Limited Trading Limited by guarantee 100 Indirect

Mapplewell Management Company Limited Trading Limited by guarantee 100 Indirect

POW Management Company Limited Trading Limited by guarantee 100 Indirect

Riverdale Park Management Company Limited Trading Limited by guarantee 100 Indirect

Rossington Community Management Company Limited Trading Limited by guarantee 100 Indirect

Simpson Park Management Company Limited Trading Limited by guarantee 100 Indirect

South East Coalville Management Company Limited Trading Limited by guarantee 100 Indirect

Waverley Community Management Company Limited Trading Limited by guarantee 100 Indirect

Ansty Development Vehicle LLP Trading Partnership 100 Indirect

Harworth PV Limited Dormant Ordinary 100 Indirect

Harworth Regeneration Limited Dormant Ordinary 100 Indirect

Harworth Services Limited Dormant Ordinary 100 Indirect

Harworth Estates No 2 Limited Dormant Ordinary 100 Indirect

Harworth No 1 Limited Dormant Ordinary 100 Indirect

Benthall Grange (Ironbridge) Management Company Limited Dormant Limited by guarantee 100 Indirect

Moss Nook (St Helens) Management Company Limited Dormant Limited by guarantee 100 Indirect

Coalfield Estates Limited Liquidation Ordinary 100 Direct

186

Financial Statements

Harworth Group plc: Annual Report and Financial Statements 2022

Company name Activity

Description of

shares held

Proportion

of nominal

value of

issued share

capital

held by the

Company %

Held directly

or indirectly

by the

Company

Harworth Estates Group Limited Liquidation Ordinary 100 Indirect

Harworth No.3 Limited Liquidation Ordinary 100 Indirect

Waverley Square Limited Liquidation Ordinary 100 Indirect

Harworth Guarantee Co. Limited Liquidation Limited by guarantee 100 Direct

Except for those in liquidation, all of the above companies are incorporated in England and Wales and have a registered address of

Advantage House, Poplar Way, Rotherham, South Yorkshire, S60 5TR. Control of Logistics North MC Limited is via ownership of voting

rights equal to 75% or more and the right to appoint and remove directors.

The following entities were incorporated during the year:

• Harworth Estates Residential Development Limited on 25 May 2022

• Harworth Surface Water Management (Bardon) Limited on 9 June 2022

• Harworth No 1 Limited on 12 October 2022

• Benthall Grange (Ironbridge) Management Company Limited on 20 October 2022

Konect Management Company Limited was disposed of on 9 September 2022.

The following entities were in the process of liquidation during the year, and were fully dissolved in January 2023:

Coalfield Estates Limited

Harworth Guarantee Co. Limited

Harworth Estates Group Limited

Harworth No.3 Limited

15. Investments continued

187

Financial Statements

Harworth Group plc: Annual Report and Financial Statements 2022

Notes to the financial statements

for the year ended 31 December 2022

15. Investments continued

Investment in joint ventures



Year ended

31 December

2022

£’000

Year ended

31 December

2021

£’000

At 1 January 36,131 25,316

Investments in joint ventures 1,849 1,624

Distributions from joint ventures (665) (34)

Share of (losses)/profits of joint ventures (7,487) 9,853

Impairment – (628)

At 31 December 29,828 36,131

The Group holds investments in the following joint ventures as at 31 December 2022:

Company name Activity

Description

of shares held

Proportion

of nominal

value of

issued share

capital

held by the

Group %

Multiply Logistics North Holdings Limited Trading Ordinary 20

Multiply Logistics North LP Trading Partnership 20

Crimea Land Mansfield LLP Trading Partnership 50

Northern Gateway Development Vehicle LLP Trading Partnership 50

The Aire Valley Land LLP Trading Partnership 50

All of the above companies are incorporated in England and Wales and, have a registered address of Advantage House, Poplar Way,

Rotherham, South Yorkshire, S60 5TR. Multiply Logistics North Holdings Limited and Multiply Logistics North LP are joint ventures as a

consequence of equal voting rights.

Aggregate information of the Group’s share of assets, liabilities and results of joint ventures, that are individually material are:

The Aire Valley Land LLP

As at

31 December

2022

£’000

As at

31 December

2021

£’000

Investment property 26,350 35,000

Current assets 306 248

Total assets 26,656 35,248

Current liabilities (180) (164)

Equity 26,476 35,084

Group’s share in equity (50%) 13,238 17,542

Group’s carrying amount of the investment 13,238 17,542

Included within current assets are cash and cash equivalents of £0.2m (2021: £0.2m)

188

Financial Statements

Harworth Group plc: Annual Report and Financial Statements 2022

15. Investments continued

Multiply Logistics North LP

As at

31 December

2022

£’000

As at

31 December

2021

£’000

Investment property 62,840 83,955

Current assets 5,495 3,600

Total assets 68,335 87,555

Current liabilities (1,505) (1,545)

Equity 66,830 86,010

Group’s share in equity (20%) 13,366 17,202

Group’s carrying amount of the investment 13,366 17,202

Included within current assets are cash and cash equivalents of £2.0m (2021: £2.3m). Included within current liabilities are accruals and

deferred income of £0.9m (2021: £1.0m) and other taxes payable of £0.5m (2021: £0.2m)

The Aire Valley Land LLP

Year ended

31 December

2022

£’000

Year ended

31 December

2021

£’000

Revenue 60 –

Cost of sales (7) (58)

Gross profit/(loss) 53 (58)

Administrative expenses (11) (32)

Other (losses)/gains (8,650) 9,184

Finance costs – (2)

(Loss)/profit for the year (8,608) 9,092

Group’s share of (loss)/profit for the year (50%) (4,304) 4,546

Multiply Logistics North LP

Year ended

31 December

2022

£’000

Year ended

31 December

2021

£’000

Revenue 3,880 2,405

Cost of sales (125) (170)

Gross profit 3,755 2,235

Administrative expenses (160) (760)

Other (losses)/gains (19,450) 25,155

(Loss)/profit for the year (15,855) 26,630

Group’s share of (loss)/profit for the year (20%) (3,171) 5,326

189

Financial Statements

Harworth Group plc: Annual Report and Financial Statements 2022

Notes to the financial statements

for the year ended 31 December 2022

15. Investments continued

Aggregate information of the Group’s share of assets, liabilities and results of joint ventures, that are not individually material are:

As at

31 December

2022

£’000

As at

31 December

2021

£’000

Investment property – 750

Current assets 7,088 2,142

Total assets 7,088 2,892

Current liabilities (640) (118)

Equity 6,448 2,774

Group share in equity (50%) 3,224 1,387

Group’s carrying amount of the investment 3,224 1,387

Loss for the year (23) (38)

Group’s share of losses for the year (50%) (12) (19)

The risks associated with these investments are as follows:

• Decline in the availability, and/or an increase in the cost, of credit for residential and commercial buyers; and

• Decline in market conditions and values.

16. Inventories



As at

31 December

2022

£’000

As at

31 December

2021

£’000

Development properties 204,952 172,701

Planning promotion agreements 2,994 3,865

Options 8,447 1,154

Finished goods – 102

 216,393 177,822

The total cost of inventory recognised as an expense within cost of sales in the year is £68.4m (2021: £50.3m) and comprised of:

£67.7m (2021: £54.9m) relating to the sale of development properties; a charge of £0.4m (2021: £5.2m credit) net realisable value

provision against development properties; a charge of £0.1m (2021: £0.1m) in relation to planning promotion agreements; and a charge

of £0.2m (2021: £0.5m) relating to finished goods stocks. Finished goods are stated after a provision of £nil (2021: £0.5m).

The movement in development properties is as follows:



As at

31 December

2022

£’000

As at

31 December

2021

£’000

At 1 January 172,701 177,712

Acquisitions – 40

Subsequent expenditure 35,430 29,482

Disposals (57,857) (39,008)

Net realisable value (charge)/release (395) 5,186

Transfers from/(to) investment properties 55,073 (711)

At 31 December 204,952 172,701

Subsequent expenditure is recorded net of government grant receipts of £2.7m (2021: £1.9m).

190

Financial Statements

Harworth Group plc: Annual Report and Financial Statements 2022

16. Inventories continued

The movement in net realisable value provision is as follows:



As at

31 December

2022

£’000

As at

31 December

2021

£’000

At 1 January 12,154 17,340

Charge for the year 7,074 1,574

Released on disposals (5,030) (2,367)

Reversal of previous net realisable provision (1,649) (4,393)

Released on transfer to investment property (2,773) –

At 31 December 9,776 12,154

The reversal of previous net realisable value provision occurs where development properties have an increase in net realisable value

which offsets a previous net realisable value charge.

17. Trade and other receivables

Group Company

Current

As at

31 December

2022

£’000

As at

31 December

2021

£’000

As at

31 December

2022

£’000

As at

31 December

2021

£’000

Trade receivables 31,566 24,078 – –

Less: provision for impairment of trade receivables (28) (27) – –

Net trade receivables 31,538 24,051 – –

Other receivables 22,379 23,672 144 9

Prepayments 1,062 1,012 43 7

Accrued income 1,679 1,020 – –

Amounts owed by subsidiary undertakings (Note 30) – – 110 27,735

 56,658 49,755 297 27,751

Non-current

Trade receivables 3,119 4,285 – –

Other receivables 894 1,084 – –

Amounts owed by subsidiary undertakings (Note 30) – – 28,647 –

 4,013 5,369 28,647 –

The carrying amount of trade and other receivables approximates to their fair value due to the short time frame over which the assets are

realised. All of the Group and Company receivables are denominated in sterling.

Included within trade receivables is £31.4m (2021: £22.9m) of deferred consideration on the sale of investment and development

property.

The non-current trade receivable of £3.1m (2021: £4.3m) relates to deferred consideration on the sale of development properties due in

more than one year. Other receivables include debtors from agent managed properties of £7.3m (2021: £7.1m), customer retentions of

£4.1m (2021: £6.1m) and rent-free and capital incentives of £5.9m (2021: £4.8m).

The maximum exposure to credit risk at the reporting date is the carrying value of each class of receivables as disclosed in Note 22.

The Group and Company do not hold any collateral as security.

The amounts owed to the Company by subsidiary undertakings are repayable on demand. Interest is payable at SONIA + 2% (2021:

SONIA + 2%).

191

Financial Statements

Harworth Group plc: Annual Report and Financial Statements 2022

Notes to the financial statements

for the year ended 31 December 2022

17. Trade and other receivables continued

Group

Movements on the Group provisions for impairment of trade receivables are as follows:

As at

31 December

2022

£’000

As at

31 December

2021

£’000

At the beginning of the year (27) (308)

(Provided for)/released in the year (1) 281

At the end of the year (28) (27)

Trade receivables can be analysed as follows:

As at

31 December

2022

£’000

As at

31 December

2021

£’000

Amounts receivable not past due 31,489 21,914

Amounts receivable past due but not impaired 49 2,137

Amounts receivable impaired (gross) 28 27

Less impairment (28) (27)

 31,538 24,051

Ageing of past due but not impaired trade receivables:



As at

31 December

2022

£’000

As at

31 December

2021

£’000

31– 60 days 3 –

61– 90 days – 2,054

91– 120 days 46 83

 49 2,137

Ageing of impaired trade receivables:

As at

31 December

2022

£’000

As at

31 December

2021

£’000

91– 120 days 28 16

120+ days – 11

 28 27

18. Assets Held For Sale

AHFS relate to investment properties identified as being for sale within 12 months, where a sale is considered highly probable and the

property is immediately available for sale.



As at

31 December

2022

£’000

As at

31 December

2021

£’000

At 1 January 1,925 7,594

Transferred to/from investment properties 67,303 10,554

Subsequent expenditure 1 1

(Decrease)/increase in fair value (199) 1,078

Disposals (9,240) (17,302)

At 31 December 59,790 1,925

192

Financial Statements

Harworth Group plc: Annual Report and Financial Statements 2022

19. Cash

Group Company

As at

31 December

2022

£’000

As at

31 December

2021

£’000

As at

31 December

2022

£’000

As at

31 December

2021

£’000

Cash 11,583 12,037 1,433 2,909

20. Borrowings



As at

31 December

2022

£’000

As at

31 December

2021

£’000

Current:

Secured – other loans (3,067) –

 (3,067) –

Non-current:

Secured – bank loans (34,558) (33,318)

Secured – infrastructure and direct development loans (22,353) (4,463)

 (56,911) (37,781)

Total borrowings (59,978) (37,781)

Loans are stated after deduction of unamortised borrowing costs of £2.0m (2021: £1.2m).

As at

31 December

2022

£’000

As at

31 December

2021

£’000

Infrastructure Loans

Scrudf Limited Partnership Rockingham (1,413) –

Merseyside Pension Fund Bardon Hill (20,940) (1,572)

North West Evergreen Limited Partnership Plot H Logistics North, Bolton (3,067) (2,891)

Total infrastructure loans (25,420) (4,463)

Bank loan (34,558) (33,318)

Total borrowings (59,978) (37,781)

In March 2022, the Group entered into a new five year £200m RCF, with a £40m uncommitted accordion option, which replaced the

previous RCF which had been in place since 2015. NatWest and Santander continue to provide bank borrowings in this new RCF and

have been joined by HSBC.

The RCF is subject to financial and other covenants. The bank borrowings are secured by way of a floating debenture over assets not

otherwise used as security under specific infrastructure loans. Proceeds from and repayments of bank loans are reflected gross in the

Consolidated Statement of Cash Flows and reflect timing of utilisation of the RCF.

The infrastructure loans are provided by public bodies in order to promote the development of major sites. The loans are drawn as work

on the respective sites is progressed and they are repaid on agreed dates or when disposals are made from the sites.

193

Financial Statements

Harworth Group plc: Annual Report and Financial Statements 2022

Notes to the financial statements

for the year ended 31 December 2022

21. Trade and other payables

Group Company

Current

As at

31 December

2022

£’000

As at

31 December

2021

£’000

As at

31 December

2022

£’000

As at

31 December

2021

£’000

Trade payables 2,361 2,104 28 54

Amounts owed to subsidiary undertakings (Note 30) – – 34,481 24,205

Taxation and social security 513 14,394 98 190

Other creditors 6,611 4,102 187 26

Accruals 65,338 63,166 1,553 1,812

Deferred income 7,676 10,550 – –

 82,499 94,316 36,347 26,287

The amounts owed by the Company to subsidiary undertakings are repayable on demand. Interest is payable at SONIA + 2% (2021:

SONIA + 2%).

Group Company



As at

31 December

2022

£’000

As at

31 December

2021

£’000

As at

31 December

2022

£’000

As at

31 December

2021

£’000

Amounts in accruals relating to parcels of land that have been sold but

where infrastructure costs are yet to be incurred 48,595 48,781 – –

Deferred income includes £4.3m (2021: £4.1m) in relation to rental income.

Non-current liabilities

Group Company



As at

31 December

2022

£’000

As at

31 December

2021

£’000

As at

31 December

2022

£’000

As at

31 December

2021

£’000

Other creditors 1,925 4,540 – –

Deferred income 894 1,146 – –

2,819 5,686 – –

22. Financial Instruments and derivatives

Throughout 2021 and until March 2022, the Group was party to a £45m fixed rate interest swap at an all-in cost of 1.235% (including

fees) on top of the existing 2.35% margin under the previous RCF. The all-in cost changed to 1.184% from 31 December 2021 as part of

the transition from LIBOR to SONIA. The interest rate swap was ended when the Group entered into the new RCF.

The fair value of the interest rate swap at 31 December 2022 was £nil (2021: a liability of £0.2m).

During the year the following gain was recognised in the other comprehensive income statement in relation to the interest rate swap:



As at

31 December

2022

£’000

As at

31 December

2021

£’000

Gain on interest rate swap - cash flow hedge 156 670

The Group’s principal financial instruments include trade and other receivables, cash, interest bearing borrowings and trade and other

payables.

194

Financial Statements

Harworth Group plc: Annual Report and Financial Statements 2022

22. Financial Instruments and derivatives continued

Other financial assets and liabilities



As at 31 December 2022 As at 31 December 2021

Group

Book value

£’000

Fair value

£’000

Book value

£’000

Fair value

£’000

Financial assets held at amortised cost

Cash 11,583 11,583 12,037 12,037

Trade and other receivables 57,930 57,930 53,092 53,092

Financial liabilities held at amortised cost

Bank and other borrowings 59,978 59,978 37,781 37,781

Trade and other payables 76,235 76,235 85,608 85,608



As at 31 December 2022 As at 31 December 2021

Company

Book value

£’000

Fair value

£’000

Book value

£’000

Fair value

£’000

Financial assets held at amortised cost

Cash 1,433 1,433 2,909 2,909

Trade and other receivables 28,901 28,901 27,744 27,744

Financial liabilities held at amortised cost

Trade and other payables 36,249 36,249 26,097 26,097

The Group classifies the assets and liabilities in the analysis above as ‘loans and receivables’ and ‘other financial liabilities’, respectively.

The fair value of bank and other borrowings equals their carrying amount, as the impact of discounting is not significant. The fair values

are within Level 2 of the fair value hierarchy.

Changes in liabilities arising from financing activities

Year ended

31 December

2022

£’000

Year ended

31 December

2021

£’000

Borrowings at start of year 37,781 83,882

Repayments (152,000) (95,425)

Drawdowns 173,850 49,900

Interest expense 3,392 2,992

Interest paid (2,206) (2,795)

Borrowing costs (2,022) (1,134)

Amortisation of capitalised borrowing costs 1,283 361

Borrowings at end of year 59,978 37,781

Year ended

31 December

2022

£’000

Year ended

31 December

2021

£’000

Leases at start of year 94 179

Additions 251 –

Payments in respect of leases (91) (85)

Leases at end of year 254 94

195

Financial Statements

Harworth Group plc: Annual Report and Financial Statements 2022

Notes to the financial statements

for the year ended 31 December 2022

23. Financial risk management

The Group’s overall risk management programme focuses on credit and liquidity risks to minimise potential adverse effects on the

Group’s financial performance.

Risk management is carried out centrally under policies approved by the Board of Directors. The Board discusses and agrees courses of

action to cover material risk management areas, including credit risk and investment of excess liquidity.

Credit risk

The Group is subject to credit risk arising from outstanding receivables and committed cash and cash equivalents and deposits with

banks and financial institutions. The Group’s policy is to manage credit exposure to trading counterparties within defined trading limits.

The Group is exposed to counterparty credit risk on cash and cash equivalent balances. The Group and Company hold all of their cash

deposits with their principal bankers.

Interest rate risk

The Group’s interest rate risk arises from external borrowings, the details of which are set out in Note 22.

The Group also has three (2021: two) infrastructure loans with an all in funding rate of between 2.2% and 5.9% (2021: between 3.0% and

5.9%), of these one loan (2021: one) has a fixed rate of interest. Based on the drawdown amounts at 31 December 2022, if the variable

interest rate changed by 50bps, the annual interest cost would increase or decrease by £0.2m.

Liquidity risk

The Group is subject to the risk that it will not have sufficient liquid resources to fund its on-going business. The Group manages its

liquidity requirements with the use of operating cash flows, cash balances and drawdowns under its RCF.

The Group had net debt at 31 December 2022 of £48.4m (2021:£25.7m). The Group used cash from operating activities and investing

activities for the year of £16.2m (2021:cash generated of £51.9m).

The table below analyses the Group’s financial liabilities which will be settled on a net basis into relevant maturity groupings based on the

remaining period at the Balance sheet date to the contractual maturity date. The amounts disclosed in the table are the gross contractual

undiscounted cash flows.

Less than

1 year

£’000

Between

1 and 2 years

£’000

Between

2 and 5 years

£’000

Over

5 years

£’000

At 31 December 2022

Trade and other payables 74,310 1,925 – –

Lease liability 82 63 109 –

Bank and other borrowings including interest payable 3,067 22,353 34,558 –

At 31 December 2021

Trade and other payables 83,766 3,456 1,084 –

Lease liability 42 28 24 –

Bank and other borrowings including interest payable – – 37,781 –

Capital risk management

The Group is subject to the risk that its capital structure will not be sufficient to support the growth of the business. The Group’s

objectives when managing capital are:

• to safeguard the Group’s ability to continue as a going concern and have the resources to provide returns for Shareholders and

benefits for other Stakeholders;

• to maximise returns to Shareholders by allocating capital across the business based upon the expected level of return and risk; and

• to maintain an optimal capital structure to reduce the cost of capital.

The Group manages and monitors its cash balances to ensure it has sufficient capital to manage and maintain its business activities. Cash

balances are disclosed in Note 19.

In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to Shareholders, return capital to

Shareholders, issue new shares or sell assets to reduce debt.

196

Financial Statements

Harworth Group plc: Annual Report and Financial Statements 2022

23. Financial risk management continued

The Group monitors capital on the basis of net debt to equity. Net debt is total debt less cash and at 31December 2022 this was

£48.4m (2021:£25.7m).

The Group has in place a £200.0m revolving credit facility (“RCF”), with a £40m accordion (2021 £150.0m) as discussed in Note 20.

The facility is provided by Natwest, Santander and HSBC. The RCF is repayable in February 2027 (five year term) on a non-

amortising basis.

The facility is subject to financial covenants including minimum interest cover, maximum infrastructure debts as a percentage of property

value and gearing. The bank borrowings are secured by fixed equitable charges over development and investment properties.

24. Retirement benefit obligations

Defined contribution pension schemes

The Group pays defined contribution payments to pension insurance plans. Contributions to defined contribution schemes in the

year amounted to £0.8m (2021:£0.5m) . The Group has no further payment obligations once the contributions have been paid. The

contributions are recognised as an expense when they are due.

Defined benefit obligations

The Group and Company have defined benefit obligations in respect of the Blenkinsopp Section of the Industry-Wide Mineworkers’

Pension Scheme (the Blenkinsopp scheme). This scheme is closed to new members.

The Balance sheet liability in respect of retirement benefit obligations is:

Group Company



As at

31 December

2022

£’000

As at

31 December

2021

£’000

As at

31 December

2022

£’000

As at

31 December

2021

£’000

Relating to continuing activities

Blenkinsopp 114 558 114 558

Contributions to the Blenkinsopp scheme of £0.2m were made by the Group during 2022 (2021: £0.2m). It is expected that

contributions of a similar amount will be paid in 2023. At December 2022, no contributions remained unpaid (2021:£nil).

The pension scheme is valued annually by a qualified independent actuary for the purposes of IAS 19 (revised) and the preparation of

financial statements. The assumptions which usually have the most significant effect on the results of the valuation are the discount rate,

which is based on corporate bond yields, and the rates of increase in pensions. There are no active members of this scheme. The main

assumptions underlying the valuation of the Blenkinsopp scheme were:



As at

31 December

2022

£’000

As at

31 December

2021

£’000

Discount rate 4.90% p.a. 1.90% p.a.

Rate of pension increases 2.60% p.a. 2.70% p.a.

Rate of price inflation (RPI) 3.15% p.a. 3.35% p.a.

Rate of price inflation (CPI) 2.60% p.a. 2.75% p.a.

Rate of cash commutation 25.00% of

pension at

a rate of

£9:£1

25.00% of

pension at a

rate of

£9:£1

197

Financial Statements

Harworth Group plc: Annual Report and Financial Statements 2022

Notes to the financial statements

for the year ended 31 December 2022

24. Retirement benefit obligations continued



As at

31 December

2022

£’000

As at

31 December

2021

£’000

Life expectancy at age 65 for current pensioners (years)

Male 19.2 19.3

Female 22.5 22.6

Life expectancy at age 65 for future pensioners currently aged 45 (years)

Male 20.5 20.7

Female 24.2 24.2

The assumed pension increases depend on the period of service accrual (before April 1997:no increases, after 1997:in line with

statutory minimum increases based on consumer price inflation).

Defined benefit obligations

The amounts recognised in the Balance sheet are:



2022

£’000

2021

£’000

2020

£’000

2019

£’000

2018

£’000

Fair value of plan assets 1,989 2,747 2,537 2,313 2,249

Present value of funding obligations (2,103) (3,305) (3,505) (3,084) (2,711)

Net liability recognised in the Balance sheet (114) (558) (968) (771) (462)

The Blenkinsopp scheme does not own any shares in the Company.

The amounts recognised in the Consolidated Income Statement are:



Year ended

31 December

2022

£’000

Year ended

31 December

2021

£’000

Expenses (50) (48)

Interest cost (9) (12)

 (59) (60)

A further credit of £0.3m (2021:£0.3m) has been reflected in the Statement of Comprehensive Income in the year. This represents the

net effect of experience, and actuarial gains and losses on the scheme in the year.

Change in assets

As at

31 December

2022

£’000

As at

31 December

2021

£’000

Fair value of plan assets at the start of the year 2,747 2,537

Interest income 53 33

Actual (loss)/return on scheme assets excluding interest income (883) 126

Employer contributions 208 208

Expenses (86) (48)

Benefits paid (50) (109)

Fair value of plan assets at the end of the year 1,989 2,747

Plan assets, which are all quoted investments, are comprised as follows:

Analysis of plan assets (which are all quoted investments)

As at

31 December

2022

£’000

As at

31 December

2021

£’000

Gilts 1,284 1,781

Delegated solutions 663 926

Sterling liquidity fund – 15

Other 42 25

Total 1,989 2,747

198

Financial Statements

Harworth Group plc: Annual Report and Financial Statements 2022

24. Retirement benefit obligations continued

Change in defined benefit obligations

As at

31 December

2022

£’000

As at

31 December

2021

£’000

Present value of defined benefit obligations at the start of the year (3,305) (3,505)

Interest cost (62) (45)

Remeasurements:

– Gain arising from changes in demographic assumptions 16 10

– Loss arising from changes in experience (1) (12)

– Gain arising from changes in financial assumptions 1,163 138

Benefits paid 86 109

Present value of defined benefit obligation at the end of the year (2,103) (3,305)

Analysis of the movement of the Balance Sheet liability

As at

31 December

2022

£’000

As at

31 December

2021

£’000

At the start of the year (558) (968)

Total amounts recognised in the income statement (59) (60)

Employer contributions 208 208

Net actuarial gain recognised in the year 295 262

At the end of the year (114) (558)

The duration of the defined benefit obligation is c.16 years (2021: c.17 years).

Cumulative actuarial gains and losses recognised in equity

As at

31 December

2022

£’000

As at

31 December

2021

£’000

At the start of the year (687) (949)

Net actuarial gain in the year 295 262

At the end of the year (392) (687)

Experience gains and losses

Year ended

31 December

2022

£’000

Year ended

31 December

2021

£’000

Actual (loss)/return on scheme assets excluding interest income (883) 126

Remeasurements:

– Loss arising from changes in experience (1) (12)

– Gains arising from changes in financial assumptions 1,163 138

– Gains arising from changes in demographic assumptions 16 10

Net actuarial gain 295 262

Contributions are determined by a qualified actuary on the basis of a triennial valuation, using the projected credit unit method. Themost

recent valuation for the purpose of determining contributions was at 31 December 2018, which was agreed in March 2020 This showed

an estimated past service deficit of £1.2m.

199

Financial Statements

Harworth Group plc: Annual Report and Financial Statements 2022

Notes to the financial statements

for the year ended 31 December 2022

24. Retirement benefit obligations continued

The sensitivity of the defined benefit obligations to changes in the weighted principal assumptions is:



As at

31 December

2022

£’000

As at

31 December

2021

£’000

Change in discount rate by 0.5% (2021: 0.1%) (115) 56

Change in price inflation (and associated assumptions) by 0.5% (2021: 0.1%) 115 49

Increase in life expectancy by 1 year 75 150

The above sensitivity analyses are based on a change in an assumption while holding all other assumptions constant. In practice some

of the assumptions may be correlated. Due to a greater level of market volatility, the sensitivity of the change in discount rate and price

inflation has been calculated at 50bps for the current year in order to better reflect how markets could move over the short term. No

other changes have been made to the method and types of assumptions from those in the previous year.

The Scheme exposes the Group to actuarial risks such as: investment risk, interest rate risk and longevity risk.

• Investment risk: the present value of the defined benefit obligation is calculated using a discount rate determined by reference to

high quality corporate bond yields; if the return on Scheme assets is below this rate, it will create a deficit. The majority of the Scheme

investments are held within index-linked government bonds, cash/liquidity funds and delegated solutions.

• Interest rate risk: a decrease in the corporate bond interest rate will increase the liability but this would likely be partially offset by an

increase in the return on the Scheme’s debt investments.

• Longevity risk: the present value of the defined benefit obligation is calculated by reference to the best estimate of the mortality of Scheme

participants both during and after retirement. An increase in the life expectancy of the participants will increase the Scheme’s liability.

25. Share-based payments

During the year, there were five classes of equity-settled share incentive plans outstanding:

• Deferred Share Bonus Plan (DSBP). Under this scheme share options with a nil-cost exercise price are granted to eligible employees.

Vesting of the share options is subject to the achievement of a performance condition relating to Total Return and continued

employment.

• Long Term Incentive Plan (LTIP). Under this scheme share options with a nil-cost exercise price are granted to eligible employees.

Vesting of the share options is subject to the achievement of performance conditions relating to Total Return and Relative Total

Shareholder Return and continued employment. This scheme was discontinued in 2021.

• Restricted Share Plan (RSP). Under this scheme share options with a nil-cost exercise price are granted to eligible employees. Vesting

of the share options is subject to continued employment and the satisfaction of underpin conditions relating to Financial Health,

Underlying performance and Corporate Governance as detailed on page 129 of the Directors’ Remuneration Report.

• Save As You Earn (SAYE). Under this scheme eligible employees enter into a savings contract for a period of three years. Share

options are granted on commencement of the savings contract and are exercisable using the amount saved under the contract at the

time it terminates. Share options are granted at a discount of up to 20% of the market value of the shares at the time of invitation. The

exercise of the share options is subject to continued employment only.

• Share Incentive Plan (SIP). Under this scheme eligible employees are granted free shares which vest after three years subject to

continued employment only.

Share options granted under the DSBP, LTIP and RSP are exercisable no later than the tenth anniversary of the grant date. Share options

granted under the SAYE are exercisable for a six month period after the end of the three year savings period.

200

Financial Statements

Harworth Group plc: Annual Report and Financial Statements 2022

25. Share-based payments continued

The movements in the number of share options outstanding and their weighted average exercise prices are as follows:

Number of shares

Weighted average

exercise price

DSBP 2022 2021 2022 2021

Outstanding at beginning of the year 1,067 151,800 £0.00 £0.00

Granted during the year – – n/a n/a

Forfeited during the year (124) (136,469) £0.00 £0.00

Exercised during the year – (14,264) n/a £0.00

Outstanding at end of the year 943 1,067 £0.00 £0.00

Exercisable at end of the year 943 1,067 £0.00 £0.00

Weighted average remaining contractual life 5.26 years 6.26 years

Number of shares

Weighted average

exercise price

LTIP 2022 2021 2022 2021

Outstanding at beginning of the year – 456,101 £0.00 £0.00

Granted during the year – – n/a n/a

Forfeited during the year – (406,638) n/a £0.00

Exercised during the year – (49,463) n/a £0.00

Outstanding at end of the year – – n/a n/a

Exercisable at end of the year – – n/a n/a

Weighted average remaining contractual life – –

Number of shares

Weighted average

exercise price

RSP 2022 2021 2022 2021

Outstanding at beginning of the year 1,502,883 921,769 £0.00 £0.00

Granted during the year 1,096,516 664,339 n/a n/a

Forfeited during the year (186,650) (83,225) £0.00 £0.00

Exercised during the year – – n/a n/a

Outstanding at end of the year 2,412,749 1,502,883 n/a n/a

Exercisable at end of the year – – n/a n/a

Weighted average remaining contractual life 8.43 years 8.66 years  

Number of shares

Weighted average

exercise price

SAYE 2022 2021 2022 2021

Outstanding at beginning of the year 877,530 865,055 £0.82 £0.81

Granted during the year 161,916 175,063 £1.40 £1.02

Forfeited during the year (80,357) (109,377) £0.82 £0.79

Exercised during the year (64,707) (53,211) £1.04 £0.86

Outstanding at end of the year 894,382 877,530 £0.91 £0.82

Exercisable at end of year – – n/a n/a

Weighted average remaining contractual life 1.48 years 2.03 years  

Number of shares

Weighted average

exercise price

SIP 2022 2021 2022 2021

Outstanding at beginning of the year 147,845 101,310 £0.00 £0.00

Granted during the year 286,138 63,852 £0.00 £0.00

Forfeited during the year (1,214) (14,425) £0.00 £0.00

Exercised during the year – (2,892) n/a n/a

Outstanding at end of the year 432,769 147,845 £0.00 £0.00

The fair values of the share options granted under the RSP and SAYE during the year were determined using Black-Scholes valuation

methodology.

201

Financial Statements

Harworth Group plc: Annual Report and Financial Statements 2022

Notes to the financial statements

for the year ended 31 December 2022

25. Share-based payments continued

The significant inputs to the valuation models were as follows:

 RSP SAYE

Share price at date of grant £1.61 £1.65

Exercise price £0.00 £1.40

Dividend yield 0.01% 0.01%

Expected volatility 0.34% 0.35%

Risk free interest rate n/a 0.02%

Expected term 4.73 years 3.33 years

Weighted average fair value £1.38 £0.50

The expected volatility reflects the assumption that the historical volatility is indicative of future trends, which may not necessarily be the

actual outcome.

Awards under the 2019 SAYE Scheme were exercised in the year with a weighted average share price on exercise of £1.54.

The total charge for the year relating to employee share-based payment plans was £0.7m (2021: £0.5m), all of which related to equity-

settled share-based payment transactions.

26. Share capital

Issued, authorised and fully paid

Group and Company

As at

31 December

2022

£’000

As at

31 December

2021

£’000

At 1 January 32,272 32,253

Shares issued 33 19

At 31 December 32,305 32,272

Issued, authorised and fully paid – number of shares

Group and Company

As at

31 December

2022

As at

31 December

2021

At 1 January 322,724,566 322,530,807

Shares issued 326,558 193,759

At 31 December 323,051,124 322,724,566

Own shares held (438,439) (185,282)

At 31 December 322,612,685 322,539,284

There is only one class of share in issue: ordinary shares of 10 pence each. All shares carry equal rights to dividends, voting and return of

capital on a winding up of the Company, as set out in the Company’s Articles of Association.

The own shares held represent the number of shares held by the Employee Benefit Trust and Equiniti Share Plan Trustees Limited to

satisfy Deferred Share Bonus Plan, Restricted Share Plan and Share Incentive plan awards for Executive Directors, Senior Executives and

employees. For this purpose both Employee Benefit Trust and Equiniti Share Plan Trustees Limited are treated as an extension of the

Company.

27. Share premium account

Group and Company

As at

31 December

2022

£’000

As at

31 December

2021

£’000

At 1 January 24,627 24,567

Premium on shares issued 61 60

At 31 December 24,688 24,627

202

Financial Statements

Harworth Group plc: Annual Report and Financial Statements 2022

28. Commitments

At 31 December 2022 the Group had contractual commitments due under construction contracts of £0.6m (2021: £5.6m). Capital

commitments for the acquisition of property, plant and equipment are disclosed in Note 12. Future expenditure required to bring our

investment and development properties to their highest and best use are not considered to be capital commitments, however such

build costs for our investment properties are disclosed as a significant unobservable input in the valuation of Major Development

properties as set out in Note 14.

29. Operating leases

Future minimum lease receipts

At 31 December 2022 the Group had contracted with tenants for the following future minimum lease payments:



Group



As at

31 December

2022

£’000

As at

31 December

2021

£’000

Less than one year 17,733 17,220

Between one and two years 17,426 14,689

Between two and three years 15,057 13,100

Between three and four years 14,059 11,033

Between four and five years 12,861 10,200

More than five years 124,992 122,303

 202,128 188,545

As set out in Note 14 property rental income earned during the year was £19.9m (2021: £19.5m)

30. Related party transactions

Group

The Group carried out the following transactions with related parties during 2022. The following entities are related parties as a

consequence of shareholdings, joint venture arrangements and partners of such and/or common Directorships. All related party

transactions are clearly justified and beneficial to the Group, are undertaken on an arm’s-length basis on fully commercial terms and in the

normal course of business.

Peel Group

Year

ended/as at

31 December

2022

£000

Year

ended/as at

31 December

2021

£000

Sales

Disposal proceeds at Logistics North – 2,019

Additions

Reimbursement of technical due diligence – 91

Receivables

Deferred consideration for land at Logistics North – 200

Multiply Logistics North Holdings Limited & Multiply Logistics North Lp

Year

ended/as at

31 December

2022

£000

Year

ended/as at

31 December

2021

£000

Sales

Recharges of costs – 136

Asset management fee 145 271

Water charges 113 107

Receivables

Trade receivables – 66

203

Financial Statements

Harworth Group plc: Annual Report and Financial Statements 2022

Notes to the financial statements

for the year ended 31 December 2022

30. Related party transactions continued

Genuit Group (formerly Polypipe)

Year

ended/as at

31 December

2022

£000

Year ended/

as at 31

December

2021

£000

Sales

Rent 20 25

Receivables

Trade receivables 6 6

The Aire Valley Land LLP

Year

ended/as at

31 December

2022

£000

Year

ended/as at

31 December

2021

£000

Receivable 26 26

Crimea Land Mansfield LLP

Year

ended/as at

31 December

2022

£000

Year

ended/as at

31 December

2021

£000

Partner loan repayment – (30)

Receivable 9 –

Northern Gateway Development Vehicle LLP

Year

ended/as at

31 December

2022

£000

Year

ended/as at

31 December

2021

£000

Investment in the year 1,849 1,003

Receivable – 25

Investment Property Forum

Year

ended/as at

31 December

2022

£000

Year

ended/as at

31 December

2021

£000

Purchases 1 –

Banks Group*

Year

ended/as at

31 December

2022

£000

Year

ended/as at

31 December

2021

£000

Sales

Annual option sums – 5

Bates Regeneration Limited*

Year

ended/as at

31 December

2022

£000

Year

ended/as at

31 December

2021

£000

Shareholder loan repayment – (4)

* Banks Group and Bates Regeneration Limited ceased to be related parties in October 2021.

204

Financial Statements

Harworth Group plc: Annual Report and Financial Statements 2022

30. Related party transactions continued

Company

The Company carried out the following transactions with subsidiary undertakings.

Details of the Company’s intercompany balances and interest at 31 December 2022 are set out below:

Year ended/as at

31 December 2022

Year ended/as at

31 December 2021

Net interest

receivable/

(payable)

in the year

£’000

Net amounts

due from/(to)

£’000

Net interest

receivable/

(payable)

in the year

£’000

Net amounts

due from/(to)

£’000

EOS Inc. Limited 657 19,891 411 19,238

Harworth Estates Limited (219) (7,967) (64) (4,655)

Harworth Estates (Agricultural Land) Limited (62) (1,841) (33) (1,824)

Harworth Estates Investments Limited (366) (13,802) (166) (10,283)

Harworth Guarantee Co. Limited – – – –

Harworth Estates Overages Limited – 1 – 2

Harworth Estates Mines Property Limited 213 6,464 – 6,256

Harworth Estates Curtilage Limited 75 2,290 45 2,216

Harworth Estates Waverley Prince Limited (9) (336) (6) (265)

Harworth Estates Property Group Limited (290) (9,749) (108) (6,662)

Harworth Surface Water Management (North West) Limited (17) (529) (10) (510)

Coalfield Estates Limited – – – –

Harworth Estates Warwickshire Limited – 1 – 2

Harworth TRR Ltd (2) (249) – 13

Logistics North MC Limited – 1 – 2

POW Management Company Limited – (2) – (1)

Rossington Community Management Company Limited – (1) – (1)

Flass Lane Management Company Limited – (1) – (1)

Mapplewell Management Company Limited – (1) – (1)

Cadley Park Management Company Limited – (2) – (1)

Simpson Park Management Company Limited – (1) – (1)

Ansty Development Vehicle LLP 3 107 – 6

Harworth Surface Water Management (Bardon) Limited – 2 – –

 (17) (5,724) 69 3,530

Dividends received

During the year the Company received dividends of £nil (2021: £nil) from subsidiary undertakings.

31. Post balance sheet events

There are no post balance sheet events to disclose that have not been disclosed publicly by a regulatory news announcement.

205

Financial Statements

Harworth Group plc: Annual Report and Financial Statements 2022

Glossary of frequently used terms and abbreviations

2018 Code 2018 UK Corporate Governance Code

AGM Annual General Meeting

AHFS Assets held for sale

AMP Advanced Manufacturing Park

APM Alternative Performance Measure

BCP Business Continuity Plan

BREEAM Building Research Establishment Environmental Assessment Method

BTR Build to Rent

CDM Construction Design and Management

CEO Chief Executive

CFO Chief Financial Officer

CIO Chief Investment Officer

COO Chief Operating Officer

CPD Continuous Professional Development

DSBP Deferred Share Bonus Plan

EA Environment Agency

EAP Employee Assistance Programme

EBT Employee Benefit Trust

EPC Energy Performance Certificate

EPRA European Public Real Estate Association

ERV Estimated Rental Value

ESG Environmental, Social and Governance

EY Ernst & Young LLP

FRC Financial Reporting Council

GDPR General Data Protection Regulation

GHG Greenhouse gas emissions

GLC Group Leadership Committee

GRAM Group Risk and Assurance Map

GVA Gross Value Added

IPCC Intergovernmental Panel on Climate Change

KPI Key Performance Indicator

KWh Kilowatt hours

LEP Local Enterprise Partnership

LTIP Long-Term Incentive Plan

LTV Loan to portfolio value

MEES Minimum Energy Efficiency Standard

NAV Net Asset Value

NDV Net Disposal Value

NZC Net Zero Carbon

PEVG Profit Excluding Value Gains

PPA Planning Promotion Agreement

PSG People Steering Group

PV Photo-Voltaic

RCF Revolving Credit Facility

RCP Representative Concentration Pathway

RICS Royal Institution of Chartered Surveyors

RIDDOR Reporting of Injuries, Diseases and Dangerous Occurrences Regulations

RSP Restricted Share Plan

SAYE Save As You Earn

Senior Executive Comprises the CEO, CFO, COO, CIO and General Counsel.

SID Senior Independent Director

SIP Share Incentive Plan

SSSI Site of Special Scientific Interest

TCFD Task Force on Climate-Related Financial Disclosures

TSR Total Shareholder Return

UN SDGs United Nations Sustainable Development Goals

WAULT Weighted average unexpired lease term

206

Financial Statements

Harworth Group plc: Annual Report and Financial Statements 2022

Company information andinvestortimetable

Chair

Alastair Lyons

Chief Executive

Lynda Shillaw

Chief Financial Officer

Kitty Patmore

Non-Executive Directors

Angela Bromfield

Ruth Cooke

Lisa Scenna

Patrick O’Donnell Bourke

Marzia Zafar

Steven Underwood

Martyn Bowes

Company Secretary and

Registered Office

Christopher Birch

Advantage House

Poplar Way

Rotherham, S60 5TR

External Auditors

Ernst & Young LLP

2 St Peter’s Square

Manchester

M2 3EY

Solicitors

DLA Piper UK LLP

1 St Paul’s Place

Sheffield, S1 2JX

Brokers

Peel Hunt LLP

100 Liverpool Street

London, EC2M 2AT

Liberum Group Limited

Ropemaker Place

25 Ropemaker Street

London, EC2Y 9LY

Registrars

Equiniti Limited

Aspect House

Spencer Road

Lancing

West Sussex, BN99 6DA

Principal lenders

National Westminster Bank plc

3rd Floor

2 Whitehall Quay

Leeds, LS1 4HR

Santander UK plc

44 Merrion Street

Leeds, LS2 8JQ

HSBC UK Bank plc

1 Centenary Square

Birmingham, B1 1HQ

Company Registered Number

02649340

Share price information

The Company’s Ordinary Shares are traded

on the London Stock Exchange.

SEDOL number BYZJ7G4

ISIN number GB00BYZJ7G42

Reuters ticker HWG.L

Bloomberg ticker HWG:LN

LEI Code

213800R8JSSGK2KPFG21

Financial Calendar

Annual General Meeting 23 May 2023

The Bessemer Conference Room, AMP Technology Centre, Advanced Manufacturing Park,

Brunel Way, Catcliffe, Rotherham, S60 5WG.

The AGM will be webcast live. For further information, please see the Notice of AGM published at

www.harworthgroup.com/investors/annual-general-meeting

Interim Results Announcement 2023 September 2023

Interim Results to be published at www.harworthgroup.com/investors

Registrars

All administrative enquiries relating to shareholdings should, in the first instance, be directed to Equiniti, Aspect House, Spencer Road,

Lancing, West Sussex, BN99 6DA (telephone: +44 (0)371 384 2301) and should clearly state the registered shareholder’s name and

address.

Dividend mandate

Any shareholder wishing dividends to be paid directly into a bank or building society should contact the Registrars for a dividend

mandate form. Dividends paid in this way will be paid through the Bankers’ Automated Clearing System (‘BACS’).

Website

The Group has a website (www.harworthgroup.com) that gives further information on the Group.

207

Financial Statements

Harworth Group plc: Annual Report and Financial Statements 2022

Visit our website for the latest company news

www.harworthgroup.com

Harworth Group plc

Head Office

Advantage House

Poplar Way

Rotherham

S60 5TR

@harworthgroup

@HarworthGroup

harworthgroup