HARWORTH GROUP PLC

Creating value

through the cycle

Harworth Group plc

Annual Report and

Financial Statements 2023

Who we are

Harworth is one of the leading land and property

regeneration companies in the UK, owning and

managing over 14,000 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. Through this, we support new

homes, jobs and communities across the regions,

and deliver 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 may require remediation, 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.

Harworth is a long-term, through-

the-cycle business. We have an

extensive landbank and a highly

specialised team with the skillset

to look through near-term market

conditions, deliver large-scale

regeneration, and unlock the

inherent value of our sites.

We are delivering against our

ambitious strategy to become

a £1bn business by the end of

2027, while having a positive

lasting impact on our planet, our

communities, and our people.

Strategic Report

Harworth at a Glance IFC

2023 Highlights 01

2023 Year in review 02

Our portfolio 04

Our investment case 06

Chair's statement 08

Our business model 10

Our markets 12

Chief Executive’s review 14

Our strategy 18

Key performance indicators 24

Operational review 28

Financial review 31

Long-term viability statement 39

Section 172 statement 42

Effectively managing our risk 48

Task force on Climate-related

Financial Disclosures 61

SECR disclosure 68

The Harworth Way 70

Governance report

Governance at a glance 79

Chair’s introduction 80

Board of Directors 82

Statement of corporate

governance 86

Nomination Committee report 98

Audit Committee report 107

ESG Committee report 114

Directors’ remuneration report 116

Directors’ report 139

Statement of Directors’

responsibilities 144

Financial statements

Independent auditor’s

report to the members of

Harworth Group plc 147

Consolidated income statement 156

Consolidated statement of

comprehensive income 157

Consolidated balance sheet 158

Company balance sheet 159

Consolidated statement of

changes in equity 160

Company statement of

changes in equity 161

Consolidated statement of

cash flows 162

Company statement of cash flows 163

Notes to the financial statements 164

Supplementary information

Appendix 207

Glossary 212

Company information 213

2023 Highlights

Total Return* EPRA NDV per share* Operating profit

5.1% 205.1p £54.2m

2022: 0.1% 2022: 196.5p 2022: £44.5m

2322212019 2322212019

7. 8

3.0

0.1

24.6

5.1

2322212019

160.0

2322212019

155.6

196.5

197.6

205.1

2322212019

27. 8

2322212019

24.3

44.5

121.9

54.2

Industrial & logistics

pipeline (sq. ft)

Residential

pipeline (plots)

37.7m 27,19 0

2022: 35.0m 2022: 29,311

2322212019

27. 3

2322212019

24.4

35.0

28.2

37.7

2322212019

30,668

2322212019

29,596

29,311

30,804

27,190

Potential value to local

communities (‘GVA’)

Location based Scope 1,

Scope 2 and Scope 3

business travel emissions

(tCO

£4.8bn 802

2022: £4.6bn 2022: 1,054

2322212019

3.9

2322212019

3.5

4.6

4.1

4.8

2322212019

882

2322212019

2,353

1,054

1,118

802

* Harworth discloses both

statutory and alternative

performance measures

(‘APMs’). A full description

of these is set out in Note 2

to the financial statements

with a reconciliation

between statutory

measures and APMs set

out in the appendix to the

financial statements.

Harworth Group plc: Annual Report and Financial Statements 2023

Contents

2023 Year in review

Investment Portfolio sales

total £70m

The significant sales programme

was carried out as part of our

strategy to transition this part of the

portfolio to 100% modern Grade

A, by disposing of assets where

value has already been maximised

through asset management and

development initiatives, and

retaining the majority of the Grade A

units that we directly develop.

The sales comprised six assets and

all were completed at prices broadly

in line with book values before

transaction costs.

Strategic priorities:

Read more on pages 18 to 21

Published Net Zero Carbon

('NZC') Pathway Report

In 2022, we committed to

becoming operationally NZC by

2030 and NZC for all emissions

by 2040.

Our NZC Pathway Report outlines

for the first time the steps that the

Group will take to address the

challenges and opportunities that

decarbonisation brings. It provides

clear and practical guidance for

the business, and a framework

through which our progress can

be measured.

Opened new 50-acre country park

at Cadley Park Development

Officially named Coronation Park, the

space was developed by Harworth

in close partnership with South

Derbyshire District Council as well as

the National Forest, RSPB, Derbyshire

Wildlife Trust and the local community.

We opened a total of 71 acres of

managed green space in 2023.

April

January

July

South Yorkshire becomes the

UK's first Investment Zone

The new designation covers our

Advanced Manufacturing Park

(AMP) and Gateway 36 sites, further

enhancing their attractiveness

to occupiers and investors. The

zone will benefit from £80m

of government funding and is

expected to generate more than

£1.2bn of private investment and

support more than 8,000 jobs

across Sheffield, Rotherham,

Doncaster and Barnsley by 2030.

Strategic Report

Harworth Group plc: Annual Report and Financial Statements 2023

Planning secured for

800,000 sq. ft. Skelton

Grange industrial & logistics

development

The 50-acre site, to the south-east

of Leeds city centre, was formerly

the location of the Skelton Grange

Power Station and was acquired by

Harworth in 2014.

The approved plans would see the

development of up to five units, built

to Grade A specification, with the

incorporation of on-site renewable

energy and the highest standards of

environmental efficiency.

Alongside infrastructure upgrades,

the plans include a segregated cycle

and pedestrian path that is proposed

to connect to the Trans Pennine Trail

and Sustrans Route 67, as well as

tree and hedge planting and other

ecological enhancements.

This planning approval brought our

total consented industrial & logistics

pipeline to 6.1m sq. ft, representing

an estimated GDV of £0.8bn.

Strategic priorities:

Read more about our portfolio on

pages 28 to 30

A1(M)

M62

M25

M23

M69

M11

(

)

(

)

M40

M42

M50

A74

(

)

M74

M56

M180

M54

Leeds

Rotherham

Manchester

Rotherham

Sheeld

Liverpool

Birmingham

Leicester

Nottingham

Coventry

Portfolio overview

£768m

Natural Resources

& other

Industrial & logistics

Investment Portfolio:

£221m; 2.5m sq. ft

Major developments:

£136m; 4.6m sq. ft

Strategic land:

£106m; 33.1m sq. ft

Residential

Major developments:

£210m; 6,159 plots

Strategic Land:

£52m; 21,031 plots

Key residential developments

Site name Location Plots sold Plots consented or planned

Waverley Rotherham, South Yorkshire 2,528 3,038 consented

South East Coalville Coalville, Leicestershire 977 2,016 consented

Simpson Park Harworth, Nottinghamshire 629 1,615 consented

Pheasant Hill Park Doncaster, South Yorkshire 645 1,200 consented

Prince of Wales Pontefract, West Yorkshire 589 622 consented, a further 441 planned

Benthall Grange Ironbridge, Shropshire 110 1,000 consented

Moss Nook St Helens, Merseyside 256 900 consented

Thoresby Edwinstowe, Nottinghamshire 650 800 consented

Huyton Knowsley, Merseyside – 1,500 planned

Staveley Staveley, Derbyshire – 590 planned

Key industrial & logistics developments

Site name Location

Sold or developed

(sq. ft)

Space consented or planned

(sq. ft)

AMP Rotherham, South Yorkshire 1.7m 2.1m consented

Gateway 36 Barnsley, South Yorkshire 0.6m 1.3m consented

Chatterley Valley Stoke-on-Trent, Staffordshire – 1.2m consented

Wingates Bolton, Greater Manchester – 1.0m consented, a further 1.5m planned

Skelton Grange Leeds, West Yorkshire – 0.8m consented, a further 0.3m planned

N Yorkshire site North Yorkshire – 3.0m planned

Northern Gateway

Greater Manchester – 2.5m planned

Cinderhill Cinderhill, Derbyshire – 1.8m planned

Rothwell Rothwell, Northamptonshire – 1.8m planned

Junction 15 Northampton, Northamptonshire – 1.6m planned

Gascoigne Wood Sherburn-in-Elmet, N Yorkshire – 1.5m planned

Harworth's share of a Joint Venture, adjacent to the M62 and close to the M66, Northern Gateway is the core site of the Atom Valley Mayoral Development Zone.

A mix of freehold and optioned land

Key

Major Developments Strategic Land Harworth offices

Strategic Report

Harworth Group plc: Annual Report and Financial Statements 2023

Our investment case

Our unique attributes enable us to unlock the long-term

potential of our sites and we have consistently delivered

market leading returns through the cycle.

Unique skillset

We have unrivalled in-house expertise as

a specialist regenerator of large, complex

sites alongside a depth of experience

in acquisitions, remediation, planning,

development and placemaking.

Our insight and long-term approach mean

that we are able to unlock the potential

of challenging sites where others have

struggled or avoided them altogether.

Number of employees

(on 31 December 2023)

120

comprising experts in transactions,

planning, land remediation, engineering

and development, supported by central

functions and a highly experienced senior

management team.

Read more on pages 31 to 38

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

reconciliation between statutory measures and APMs set out in the appendix to the financial statements.

Harworth Group plc: Annual Report and Financial Statements 2023

07Strategic Report

Chair's statement

When I wrote my statement a year ago I

said that, “alongside the rest of the market,

planning what the business will achieve in

2023 has been as much an art as a science

given the prevailing uncertainty”. I went on

to say that “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 products in strong locations,

and 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.” And that is exactly what

Lynda Shillaw and her management team

have delivered over the past 12 months,

resulting in a creditably strong performance

of a Total Return

for the year of 5.1% against

an uncertain market backdrop.

I also said that over the long term all the

value created in the business will be due to

management actions and that has been fully

supported by how 2023 has turned out.

Underlying markets are little changed over

the year – industrial & logistics yields have

continued to increase but at a slower rate

following the material increase in the fourth

quarter of last year as interest rates increased

and this yield shift has been largely

offset by growth in market rent. Current

transactional evidence has underpinned

the value of our residential sites in which

we have continued to see strong interest

from housebuilders. The £29m increase in

EPRA NDV

during the year was, therefore,

primarily the result of the development

milestones our management have achieved:

obtaining planning consents; installing site

infrastructure; securing sales on residential

sites; evidencing site specific use value;

delivering practical completions; and

gaining letting commitments for commercial

development.

There are of course elements outside of our

control, planning being a case in point. It is

widely reported that the planning process

itself is lengthening as local authority

resource constraints bite, whilst the

backdrop of policy and political uncertainty

increasingly influences site specific planning

decisions. Value gains projected to be

delivered during the course of a particular

year may, therefore, end up being realised

in a subsequent period despite the best

endeavours of management. While our

team is highly adept at navigating these

challenges, the long-term nature of the

business makes relative progress against

our plans over the medium term a better

measure of the successful execution of

strategy than solely focussing on the

achievement of specific targets for a discrete

year. Having said this, we do continue to

outperform industry benchmarks, with our

Total Return

of 5.1% comparing favourably

to the MSCI All Property Return of -1.0%

in the year, as it did in the prior year when

our Total Return

was 0.1% but the MSCI All

Property Return was -8.5%.

Lynda’s Chief Executive’s Report sets

out what has been achieved during the

year against each element of the strategy

agreed by the Board in 2021 following

her appointment. As will be seen material

progress has been made in every area.

• With practical completion of 193,000

sq. ft of directly developed Grade

A commercial space, and £70.0m

sales of mature properties, 37% of our

investment portfolio is now Grade A, up

from 18% last year.

• Against the objective to broaden

our range of residential products

“ 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

Resilience through the cycle

Strategic Report

Harworth Group plc: Annual Report and Financial Statements 2023

we are working towards exchange

with partners interested in our BTR

land portfolio and have signed our

first deals for our affordable homes

developments. We have also launched

our pilot NZC homes development,

Coze Homes.

• Our development strategy aims to

maintain a 12 to 15-year forward pipeline

of sites at varying stages of planning and

development. Control of sizeable land

holdings was secured during the year,

the nature of the tenure across freehold,

option, and planning promotion

agreements being determined by

the degree of planning confidence,

development timescales, and what is

commercially optimal. In all we added

the potential for 1.8m sq. ft of industrial &

logistics space and 809 housing plots.

Within our ESG strategy we are this year

setting out in detail the framework of our

social strategy under our Communities

pillar, supplementing our Net Zero Carbon

Pathway that was published last year

under the Planet pillar. For every potential

development we assess its environmental

and social implications, very conscious of

the material impact of developments of the

scale we bring forward on both the natural

world and the wider communities of which

they will form a part. Our Communities

Framework sets out our approach to

regeneration and aligns as far as possible

with both industry and national guidance.

We are also gaining an increasingly detailed

insight into our carbon footprint having

made strong progress analysing our Scope

3 emissions, both those of our contractors

and suppliers that are upstream of our

developments and those downstream

businesses that are tenants within our

Investment Portfolio. We are working

with both upstream and downstream

stakeholders to reduce emissions along our

path to deliver our commitment to be NZC

for all emissions by 2040.

With falling inflation and the next move in

interest rates expected to be downwards,

it is good to see market interest increasing

in our sector and the Harworth share

price outperforming sector benchmarks

having gained 41% since its low point

in October 2023. That said, we remain

acutely conscious that we still stand at a

34% discount to NDV which is deeply

frustrating for all shareholders, the Board,

management, and employees alike. We

believe that, as the sector rerates, the

discount will continue to narrow: equally,

we recognise that the structure of our

shareholding and the resulting lack of

liquidity in our stock can be a barrier to entry

for investors wishing to deploy significant

capital. It is, therefore, the task of the Board

and management to make the investment

proposition as compelling as possible

by the quality of our delivery against our

strategic objectives and the effectiveness

with which we communicate what we do

and the successes we achieve. We maintain

a strong balance sheet with relatively low

gearing, significant available liquidity to take

advantage of opportunities developed by

our team, and no refinancing requirements

under our core facilities.

The multiple discrete stages at which we

realise value on our developments make

it inevitable that Harworth is managed as

a through-the-cycle business. Success at

each of these stages depends primarily on

one thing – people. Since becoming Chair

at Harworth I have consistently held that

Harworth is all about its people, their skills,

experience, and position in our sector. It

is they who see the strategic potential of

undeveloped land and create substance

from their vision through their master plan,

assessing the potential of the site given its

particular characteristics. It is they who turn

that master plan into an outline capable of

securing planning consent and negotiate

with planners and local communities how

best to meet their, and our, objectives. It

is they who have the relationships with

landowners, their agents, site finders and

housebuilders and negotiate the terms of

both site acquisitions and sales. It is they

who, as seasoned professionals, have the

connectivity developed across their careers

to ensure those entities with a possible

interest and their agents are fully aware of

a site’s potential, and who frequently work

over a long period to develop that interest

to the point of being willing to agree a

transaction that fully reflects the extent of

value that our work on bringing the site

forward has created.

We recognise fully that our people are

at the heart of our success, a primary

focus of Lynda and her team being the

recruitment and retention of the people

we need, designing policies and practices

that engage, motivate, and incentivise. In

turn, the Board recognises that effective

leadership of the development and

implementation of our strategy is key to

our success and we regard ourselves

fortunate to have a highly capable and

committed senior leadership team, the

retention of which we aim to ensure through

appropriate motivation and incentivisation.

Whilst there were no departures or new

faces within either our executive or non-

executive directors last year we shall be

saying goodbye at the end of this year to

Steven Underwood, our longest serving

non-executive director. Steven first joined the

board in August 2010 as the representative

director of Peel Group, one of our largest

shareholders, where he is currently Chief

Executive. Following the reduction of Peel

Group’s shareholding to below 25% in 2019,

we asked Steven to remain for a period

on the Board in a personal, rather than

representative, capacity given his depth of

understanding of real estate development

and the market in the north of England.

At December he will have served almost

14 and a half years on our Board, hence,

whilst offering himself for reappointment

at the forthcoming AGM, he will be doing

so on the basis that he will step down on

31 December 2024. He has been a great

colleague who has added considerable

value to our deliberations over a long period,

and his wise counsel will be missed.

Let me finish by conveying my grateful

thanks, and those of our Board, to everyone,

both inside and outside of Harworth, who

is part of, and has supported, our team in

achieving another strong year delivering the

operational milestones of our strategy. Our

success is totally dependent on, and derives

from, what you contribute – thank you.

Alastair Lyons

Chair

18 March 2024

* Harworth discloses both statutory and alternative

performance measures (‘APMs’). A full description of

these is set out in Note 2 to the financial statements

with a reconciliation between statutory measures

and APMs set out in the appendix to the financial

statements.

Strategic Report

Harworth Group plc: Annual Report and Financial Statements 2023

Remediation & infrastructure

Once planning permission has been obtained,

our in-house teams ensure completion of

land remediation works, construction of

necessary infrastructure such as roads, and

creation of development platforms for the site's

proposed use.

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.

Our business model

INPUTS

Our people

Significant expertise across our

central functions and regions.

Our landbank

Over 14,000 acres of

development potential.

Our key markets

A portfolio focused on the

residential and logistics sectors.

Strategic land Major developments

Read more about the case

study on pages 20 and 21

Suppliers

Strong partnerships based

on trust, fairness, and

shared values

Customers

Developing high quality

products and delivering on our

promises

Funders

An open dialogue, with regular

updates on our operational and

financial performance

Government

A trusted partner in delivering

homes, jobs and opportunities

across the regions

Asset management

We retain some of the Grade A

industrial & logistics units that we

directly develop and let these to

a diverse range of occupiers. This

generates a recurring income

and allows us to derive further

value from the high standards of

placemaking and environmental

specifications at our sites.

Placemaking

We invest in our sites alongside

plot sales and direct development,

to provide additional

infrastructure, amenities and green

spaces. This investment creates a

sense of community that improves

the wellbeing of residents and

those working there and enhances

the attractiveness and value of

our sites.

Plot sales & direct development

At our residential sites, we either sell serviced

plots to housebuilders or enter into forward-

funding agreements with selected partners to

deliver alternative tenures such as BTR homes and

affordable housing.

At our industrial & logistics sites, we sell serviced

land to developers and develop buildings

ourselves for occupiers and owners.

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

financial statements with a reconciliation between statutory measures and APMs set out in the appendix to the financial statements.

PLANET

PEOPLE

COMMUNITIES

PLANET

Strategic Report

Harworth Group plc: Annual Report and Financial Statements 2023

Our markets

Harworth’s focus markets of residential and industrial & logistics

both remain characterised by favourable supply and demand

dynamics, and are fundamental to delivering growth in

the UK economy.

Industrial & logistics

Demand for industrial & logistics in line

with historical levels

Following three record years for take-up

of industrial & logistics space, demand fell

to a total of 29.1m sq. ft across the market

in 2023. This was still 12% above the pre-

Covid average, signalling a normalisation

of demand levels across the market.

Demand continues to be driven by

structural factors, including the growth of

online retail, the need for nearshoring and

reshoring to ensure supply chain stability,

and a demand for more energy efficient

and sustainable space.

We continue to directly develop space that

meets the growing needs of occupiers,

while selling or refurbishing those assets

that fall below the criteria for Grade A.

Supply of industrial & logistics space

has risen, but remains constrained

The slow down in demand has resulted in

a sharp increase in supply, rising by 90%

in 2023 compared to the previous year,

and reflecting a vacancy rate of 7.15%.

The level of speculative completions has

meant that the total Grade A supply has

increased to 58% in total, the highest level

ever recorded. While no region has been

immune from rising supply, there remain

many markets that still have less than one

year of supply, including the West Midlands

and Yorkshire, where Harworth is highly

active.

Our regional focus means that many

of our markets are still significantly

undersupplied, which is supportive of

rents and levels of demand. Harworth will

continue to focus on regional markets,

and manage risk by ensuring a balance

between speculative, build-to-suit and pre-

let opportunities.

Investment volumes still above

pre-pandemic levels

Savills estimates that logistics investment

volumes totalled £3.1bn in 2023, below

the previous three years but still above

pre-pandemic levels. It was a year of two

halves, with a subdued market in the first

six months giving way to a busier second

half. Data from MSCI shows that the

industrial sector saw only slight growth in

capital values of 0.1% during the year as

rental growth of 7.6% was offset by 32bps

of average yield shift, albeit a significantly

better performance than the prior year

(which saw a -18.0% decline). Industrials

remained the only major real estate sector

to see capital value growth in 2023, with

the All Property Index falling -5.6% over

the year (an improvement from a -14.2%

decline in the prior year). As we enter

2024, there could be increasing activity

as a result of expectations of interest rate

reductions.

Harworth was active in the market

throughout the year, selling £70m of

Investment Portfolio assets at prices

broadly in line with book values before

transaction costs. We will continue to

directly develop space and transition our

portfolio to Grade A.

Take-up (m sp.)

H2 Pre-Covid average

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2020

Take-up of industrial & logistics space corrects to pre-Covid levels

2021

2022

2023

2019

Source: Savills

Years’ worth of supply

0.94

years

(West

Midlands)

0.77

years

(Yorkshire and

the North East)

1.13

years

(North

West)

Source: Savills.

Strategic Report

Harworth Group plc: Annual Report and Financial Statements 2023

Residential

Homebuyer demand began to stabilise

towards the end of 2023

For much of the year, homebuyer demand

remained subdued, as a result of high

mortgage rates, challenging affordability

and low consumer confidence. However,

sentiment improved in the final quarter of

the year, as the prospect of interest rate cuts

occurring earlier in 2024 than previously

expected led to falling mortgage rates.

This bolstering of demand in the later

months meant that UK house prices

declined by only -1.8% in 2023 according to

Nationwide, a less significant fall than many

had expected. This overall figure comprised

notable regional variances, with northern

England seeing a 1.8% reduction in house

prices, while southern England saw a 2.4%

decline. Yorkshire & the Humber, where

the majority of Harworth’s residential major

development sites are located, was the

best performing region in England, with an

annual reduction of just 0.5%.

A more selective approach to

acquisitions and development by

housebuilders

Reporting from housebuilders during

the year suggested a focus on reduced

construction volumes and a more selective

approach to land acquisitions. Despite

this, we saw good levels of demand from

a wide range of housebuilders during the

year, both national and regional, with many

of whom we have long-term relationships.

This underscores the differentiated nature of

our serviced and, therefore, de-risked land

product.

Another factor driving demand for our

product is the UK’s poorly performing

planning system, which is significantly

constraining the supply of consented land

across the market.

Alternative tenures remain significant

growth markets

The institutional BTR market has continued

to grow in 2023 despite the wider market

uncertainty, demonstrating the defensive

nature of the product and the acute

shortage of rental homes in the UK.

% major planning applications decided within 13-week statutory time limit

2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19 2019-20 2020-21 2021-22 2022-23

Planning decisions for major residential development sites (10+ homes)

4,000

6,000

6,500

7,000

4,500

5,000

5,500

2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19 2019-20 2020-21 2021-22 2022-23

Source: DLUHC. Periods run from 1 April until 31 March the following year.

BTR market in good health, with regional growth outpacing London

2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

2023

Source: BPF, Molior, Savills.

Number of BTR homes under construction ‘000

London Regions

Savills reports that investment volumes in

the sector totalled £4.5bn in 2023, the

second highest level on record after 2022,

when levels were only marginally higher.

The UK’s BTR stock now stands at over

92,000, representing growth of 11% in

the last 12 months, with regional markets

growing faster than London. Despite this,

only 11% of the built stock is single-family

and transactions remain focused on

multi-family, which have accounted for

around 60% of investment during 2023.

Rents in the sector continue to grow, but

challenges facing consumers highlight

the importance of providing affordable

products. Our single-family BTR and

affordable housing portfolios of sites are

particularly well-positioned to address the

acute supply imbalance.

Strategic Report

Harworth Group plc: Annual Report and Financial Statements 2023

Chief Executive’s review

Harworth delivered another strong performance in 2023

achieving sector-leading results ahead of the MSCI All

Property Index, while maintaining a low loan-to-value

just 4.7% and significant financial liquidity.

We continue to benefit from the unique

combination of our extensive landbank

and the application of our specialist skillset

to develop new market opportunities and

realise the highest value from each of our

sites. This saw us complete serviced land

and property sales at prices broadly in

line with book values before transaction

costs, achieve lettings ahead of estimated

rental values, and progress some exciting

acquisitions as we build our future pipeline

and continue to move sites through the

planning system.

Our markets

Harworth’s focus markets of residential and

industrial & logistics are characterised by

structural undersupply and are fundamental

to delivering growth in the UK economy.

Industrial & logistics

In the industrial & logistics sector, demand

continues to be driven by structural factors,

including the growth of online retail, the

need for nearshoring and reshoring to

ensure supply chain stability and a demand

for more energy efficient and sustainable

space. However, softer macroeconomic

conditions naturally resulted in occupiers

becoming more cautious, and so

negotiations in the occupational market

became more protracted and deals took

longer to complete. This translated into

more normalised levels of take-up across

the market in 2023, following three record

years, albeit Savills estimates that take-up

remains 12% above the pre-Covid average.

The lower levels of take-up seen in 2023

have resulted in an increase in supply and

higher vacancy rates across the market.

While no region has been completely

immune from rising supply, the three

regions of the UK that continue to have the

tightest supply are the East Midlands, West

Midlands and Yorkshire. These are the only

regions where there remains less than one

year’s worth of supply and are also where

the majority of our industrial & logistics

sites are located.

Savills estimates that logistics investment

volumes totalled £3.1bn in 2023, which

again, despite being below the levels

seen in the previous three record years,

were above pre-pandemic levels. These

transactions were weighted towards

“Despite the

unpredictability of the

last couple of years, I

am as excited about

what Harworth can do

as a business, and what

we can become, as the

day that I joined the

company.”

Lynda Shillaw

Chief Executive

Another strong

performance

Strategic Report

Harworth Group plc: Annual Report and Financial Statements 2023

the second half of the year, when the

macroeconomic backdrop improved. Data

from MSCI shows that the industrial sector

saw only slight growth in capital values of

0.1% during the year, a significantly better

performance than the prior year (which saw

a -18.0% decline), as rental growth of 7.6%

was offset by 32 bps of average yield shift.

Industrials remained the only major real

estate sector to see capital value growth in

2023, with capital values for the MSCI All

Property Index falling -5.6% over the year

(an improvement from a -14.2% decline in

the prior year).

Residential

For much of the year, homebuyer demand

remained subdued, as a result of high

mortgage rates, challenging affordability

and low consumer confidence. However,

sentiment improved in the final quarter of

the year, as the prospect of interest rate cuts

occurring earlier in 2024 than previously

expected began to impact mortgage rates

and buyers adjusted to the prospect of

higher rates for longer.

This bolstering of demand in the later

months meant that UK house prices

declined by only -1.8% in 2023 according

to Nationwide, a less significant fall than

many had expected. Within this was a

notable regional disparity, with northern

England seeing a 1.8% reduction in house

prices, while southern England saw a 2.4%

decline. Yorkshire & the Humber, where

many of Harworth’s mature residential major

development sites are located and which

continues to benefit from good homebuyer

affordability ratios, was the best performing

region in England, with an annual reduction

of just -0.5%.

Reporting from housebuilders suggested

a focus on reduced construction volumes

and a more selective approach to land

acquisitions. Despite this, we saw good

levels of demand throughout the year from a

wide range of housebuilders, both national

and regional, with many of whom we have

long-term relationships. This underscores

the differentiated nature of our serviced and,

therefore, de-risked land product.

The institutional BTR market continued to

grow in 2023 despite the wider market

uncertainty, demonstrating the defensive

nature of the product and the acute

shortage of rental homes in the UK. Savills

reports that investment volumes in the

sector totalled £4.5bn in 2023, the second

highest level on record after 2022, when

levels were only marginally higher. A recent

Cushman & Wakefield report predicted

the figure could rise to as much as £8bn

in 2024.

The UK’s BTR stock now stands at over

92,000, representing growth of 11% in

the last 12 months, with regional markets

growing faster than London. Despite this,

only 11% of the built stock is single-family

and transactions remain focused on multi-

family, which accounted for around 60% of

investment over the last 12 months. Rents in

the sector continue to grow, but challenges

facing consumers highlight the importance

of providing affordable products. Our single-

family BTR and affordable housing portfolios

of sites are particularly well-positioned to

address this acute supply imbalance.

In the investment markets, Savills data shows

that UK greenfield residential land values

declined -6.5% over the course of 2023,

albeit a number of indices point to declines

levelling off in the final quarter. Greenfield

residential land values remain more

resilient than those for urban land (which

have declined -8.4%) and again there are

significant regional variations, with land

values in the North of England and the East

Midlands remaining more robust due to a

resilient housing market, shortage of sites

and stronger competition.

We developed 193,000 sq. ft of

speculative space during the year, across

our Gateway 36 site in Barnsley and the

AMP in Rotherham.

Operational performance

Our strategy sets out a clear road map for our ambition to grow EPRA NDV* to £1bn by the end of 2027 and we remain confident

in achieving this goal. It aims to accelerate the delivery of our sites and achieve our NZC ambitions, drawing on our highly specialist

expertise and extensive land bank. The table below shows our progress to date against the four key growth drivers of this strategy.

Growth driver 2021 2022 Progress in 2023

Ambition by the end

of 2027

Increasing direct

development of industrial

& logistics stock

51,000 sq. ft

developed

432,000 sq.

ft developed

193,000 sq. ft developed during

the year and 208,000 sq. ft started

or ready to start in 2024. Enabling

works underway for 1.5m sq. ft of

further development.

800,000 sq. ft

completed on average

per annum

Accelerating sales and

broadening the range of

our residential products

1,411 plots sold 2,236 plots

sold

1,170 plots sold 2,000 plots sold on

average per annum

Scaling up through

land acquisitions and

promotion activities

Land supply of 12 to 15 years Maintained 12 to 15-year land

supply through acquisitions

representing 1.8m sq. ft and 809

plots

Maintain a land supply

of 12 to 15 years

Repositioning our

Investment Portfolio to

modern Grade A

11% Grade A at

year-end

18% Grade A

at year-end

37% Grade A at year-end 100% of the Investment

Portfolio to be Grade A

Strategic Report

Harworth Group plc: Annual Report and Financial Statements 2023

Chief Executive’s review continued

These are our two most mature industrial

& logistics sites and are highly sought-after

locations, having also benefitted from

becoming part of the UK’s first government-

designated Investment Zone this year, and

we are pleased with their letting progress to

date. As previously indicated, our focus for

2023 has been on securing pre-let and build-

to-suit direct development opportunities,

and we are now progressing three of these

at the AMP across a total of 187,000 sq. ft,

including the development of a new UK head

office for Danieli, one of the world’s largest

suppliers to the steel industry. In addition

to this, 21,000 sq. ft has commenced at

Olive Lane a new mixed-use heart of the

community at our Waverley development

with a medical centre, pharmacy,

convenience retail and leisure.

As we enter 2024, our focus will be on

completing construction currently underway

and starting new developments. At year-

end, enabling works were underway for

1.5m sq. ft of development, at Chatterley

Valley in Staffordshire, our Droitwich site

in Worcestershire, and the next phase of

Gateway 36 with works to commence

shortly at our Wingates site in Bolton. Vertical

developments that we expect to be on

site with this year plus recently completed

vacant space are expected to add £5.1m

annualised rent, of which £1.9m is already

let, exchanged or in heads of terms.

Against a challenging backdrop for

housebuilders, we completed 1,170

residential plot sales during the year,

transacting at prices that were broadly in

line with book values before transaction

costs. While the number of plots sold was

lower than the extraordinarily high level

seen in 2022, when we brought forward

transactions to take advantage of buoyant

market conditions, the average number of

plots sold across 2023 and 2022 was still

21% higher than the level seen in 2021. We

saw a wide range of housebuilders active in

the market during the year and completed

our first transactions with Homes by Honey

and Forge New Homes, bringing our total

housebuilders transacted with to date to

23 This figure demonstrates the depth of

demand for our de-risked serviced land

product, and the strong relationships with

housebuilders that our teams cultivate.

It has been a very busy year for our mixed

tenure team as we broadened the range

of residential products on offer across our

sites. We signed our first forward-funding

agreement with a registered provider, Great

Places, as part of our affordable housing

portfolio of sites, and signed a further

agreement with them after year end, for the

delivery of 155 homes in total, with several

other transactions in the pipeline. For our

single-family BTR product, timelines have

become protracted, owing mainly to delays

in receiving planning approvals. Having

said this, approvals are now in place for 45%

of sites and we are progressing towards

exchange with selected partners. Also of

note was the launch of our NZC homes

product, Coze Homes, which we will be

directly developing in small-scale trials across

two of our sites. This product has significant

potential not only to improve the vibrancy

of our communities and unlock challenging

development parcels, but to develop our

understanding of the technical requirements

of this relatively immature market.

Looking at land acquisitions and promotion,

we further strengthened our pipeline with

the addition of 1.8m sq. ft of industrial &

logistics space and 809 residential plots

during the year through a combination of

freehold acquisitions, option agreements

and Planning Promotion Agreements

('PPAs'). We also received planning

approvals for 397 residential units and 1.1m

sq. ft of industrial & logistics space, most

notably at our 0.8m sq. ft Skelton Grange

site in Leeds. Securing this approval on a

former power station site we acquired back

in 2014 demonstrates Harworth’s unique

skillset in identifying and acquiring complex

brownfield sites, devising a masterplan that

realises their potential, and then progressing

this through the planning system to unlock

value. This development will meet the

growing demand for high-specification and

well-connected Grade A industrial space

across West Yorkshire, in turn supporting

jobs and investment for the region.

Our ambition to transition the Investment

Portfolio to fully Grade A also took a major

step forward during the year, and now

stands at 37% Grade A, compared to

18% just a year ago. This was driven by a

significant sales programme of assets where

we had maximised value through asset

management or development initiatives, as

well as through our development and letting

of new space. Sales totalled £70.0m in the

year, and all were broadly in line with book

values before transaction costs - an excellent

result given the wider challenges in the

investment market during the first half of

the year in particular. Leasing activity added

£2.1m of annualised rent to the Investment

Portfolio during the year and was achieved

at significant premiums to estimated rental

values and previous passing rents.

Financial performance

Our management actions undertaken

on development sites to unlock high

value uses, alongside positive progress

on planning applications, were the key

driver of a 4.4% increase in EPRA NDV

during the year to 205.1p per share (2022:

196.5p). This resulted in a Total Return

for the year of 5.1% (2022: 0.1%), which

we consider to be a strong performance

given conditions in our markets for much

of the year. Statutory net asset value

was

£637.7m (2022: £602.7m).

Sales of serviced land and property, in

addition to income from rent, royalties and

fees, resulted in Group revenue of £72.4m

(2022: £166.7m). The reduction in the year

reflected reduced rental income following

our successful sales programme in the

Investment Portfolio and lower development

property sales resulting from us bringing

forward residential sales to 2022 to take

advantage of market conditions, as well as

the prior year figures including the £54m

sale of the Kellingley development site.

The Board is proposing a final dividend

of 1.022p per share, bringing the total

dividend per share for 2023 to 1.466p,

representing 10% underlying growth from

2022, in line with our dividend policy.

We continue to maintain a strong balance

sheet and financial position, with significant

available liquidity of £192.2m as at 31

December 2023 (31 December 2022:

£175.6m) and no refinancing requirement

under our core facilities until 2027. Our LTV

at year-end was 4.7% (31 December 2022:

6.6%), affording us a high degree of flexibility

and resilience as we pursue our strategy.

The Harworth Way

As a specialist regenerator and placemaker,

a commitment to our communities, our

people and our planet is at the heart of

everything we do. Critical to this is having a

lasting positive impact on the communities

we serve, supporting new homes, jobs

and infrastructure. The Harworth Way is our

framework for ensuring this happens.

During the year we published our NZC

pathway, outlining in detail for the first

time the steps that we will take to address

the challenges and opportunities that

decarbonisation brings for Harworth. It

provides clear and practical guidance for the

business, and a framework through which

Strategic Report

Harworth Group plc: Annual Report and Financial Statements 2023

progress can be measured as we move

towards our target to be operationally NZC

by 2030 and NZC for all emissions by 2040.

We have made great early progress, having

reduced our operational emissions by 24%

this year through the use of alternative fuels

in our site preparation works, procuring

green electricity and the increased use

of electric vehicles. We also began a

woodland planting scheme in Chevington

in Northumberland, which will significantly

boost our sequestration capabilities.

It has been a very active year in delivering

for our communities, and I was delighted

that we have been able to progress

several initiatives to deliver schools, green

space and other amenities across our

developments. We opened 71 acres of

managed green space, including a new

50-acre country park at our Cadley Park

development in Derbyshire, which benefits

from new purpose-built footpaths and

cycleways, a picnic area and community

orchard, as well as new habitats to protect

and promote local wildlife. We also

commenced construction of a new forest

school at South East Coalville as well as Olive

Lane, a mixed-use development comprising

convenience retail, restaurants and new

community spaces in the heart of Waverley.

Alongside this year’s Annual Report we will

be releasing our Communities Framework,

which explains our approach to delivering

social value through our regeneration

approach, both in the communities we

serve and in wider society. This approach

ranges from creating sustainable

communities, preserving heritage and

promoting healthier lifestyles through

to growing regional economies and

supporting jobs. This year we once again

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, and it

found that our portfolio has the potential

to deliver £4.8bn of GVA, support up to

76,500 jobs and generate up to £82m

in business rates, underscoring the huge

potential of our activities to benefit society.

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 our culture and the

engagement, wellbeing and diversity of our

people. During the year, we progressed a

wide-ranging transformation programme

that is designed to make sure that our

processes, systems and people skills keep

pace with the rapid growth of our business

as we work towards our £1bn ambition.

Our culture is formed by everyone at

Harworth. We know through employee

feedback that Harworth has a positive

culture. As we grow, we want to be proactive

in defining how it needs to evolve whilst

preserving all that is great about Harworth.

For this reason, during 2023 we reviewed

and started to refresh our vision, values, and

behavioural competency framework, which

will be embedded during 2024.

Another area of focus has been on individual

and professional development, which has led

to the creation of the ‘Harworth Academy’.

Under this banner, we have developed the

formal training and development options we

want to make available to our employees, in

alignment with their career experience and

history and role level and requirements. In

time, there may be minimum levels of “hard

and soft skills” training and development

which colleagues at varying stages of their

careers will need to pass through before

being considered ready for progression

and promotion.

Outlook

Macroeconomic conditions look set to

improve modestly in the year ahead,

with inflationary pressures easing and the

prospect of interest rate cuts from the

middle of the year. However, uncertainty

still remains for businesses and consumers,

and this is likely to weigh on sentiment for

some time to come. For the industrial &

logistics market, the structural drivers of

demand remain largely intact and supply in

our regions is relatively constrained: in the

year ahead we will continue to derisk our

development by focusing on pre-let and

build-to-suit opportunities and land parcel

sales. For residential, while affordability

challenges will weigh on house buyer

demand for some time yet, the supply

of development-ready land will remain

constrained, and we are confident that our

consented, de-risked serviced land will

appeal to a wide range of housebuilders. At

the same time, our increasingly diversified

range of residential products will provide us

with exposure to markets that continue to

grow regardless of where the cycle is.

Harworth is a long-term through-the-cycle

business – we have to be as a regenerator

of large, complex sites that may take a

decade or more to move from inception

to completion. Our self-propelled growth

strategy, underpinned by our significant

landbank and skillset in being able to unlock

value from it, is what sets Harworth apart.

Since 2021, when we stepped into our

strategy, we have not only been focused

on growing our business and accelerating

delivery across our sites, but have invested

in our planning teams to progress more

applications through the system, our

development teams to ramp up delivery and

our acquisitions teams to build our landbank.

As we move into year three of delivering

our strategy, we have pump primed the

consented capacity of our industrial &

logistics portfolio and have a consented

pipeline of 6.1m sq. ft that will deliver

c.£0.8bn of GDV by 2028, while also

creating the financial headroom to

crystallise this. We are also exploring other

use classes, including the development

of data centres and energy assets on our

industrial & logistics sites and senior living

opportunities on our residential sites.

Together these factors will ensure we

realise the full potential of our 37.7m sq ft

industrial & logistics portfolio, which has

an estimated gross development value of

c.£5bn, and our 27,190 plot residential

pipeline, while delivering for our people,

our planet and our communities.

Despite the unpredictability of the last

couple of years, which has delivered

more than a few curve balls for the real

estate sector, I am as excited about what

Harworth can do as a business, and what

we can become, as the day that I joined

the company. 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 strong

year of progress, and to our investors who

have continued to support what we do. Our

robust financial performance and operational

progress against a challenging market

backdrop are testament to the support,

dedication, determination, skills, and

teamwork that make us proudly Harworth.

Lynda Shillaw

Chief Executive

18 March 2024

* Harworth discloses both statutory and alternative

performance measures (‘APMs’). A full description of

these is set out in Note 2 to the financial statements

with a reconciliation between statutory measures

and APMs set out in the appendix to the financial

statements.

Strategic Report

Harworth Group plc: Annual Report and Financial Statements 2023

Our 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 the end of 2027.

Increasing direct development of

industrial & logistics space

We are an experienced developer, having built 2.2m

sq. ft of industrial & logistics space since 2015.

We have a significant industrial & logistics development

pipeline, with schemes spread across our regions, in

strong locations that are attractive to both investors

and occupiers.

What we are doing

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 the end

of 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 will be funded by a mixture of cash

generated from the Group, our banking facilities,

project debt, and the potential use of joint ventures.

Accelerating residential sales and

broadening our product range

Our residential landbank is significant and has the ability

to deliver around 27,000 housing units into the market.

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.

What we are doing

Our sites are well-suited to delivering institutional

quality mixed tenure products. In recent years we have

launched portfolios of land for the development of

single-family BTR, affordable housing products, and a

small-scale pilot of NZC homes.

Through a combination of increased plot sales for build-

to-sell products and the launch of new mixed tenure

products, our ambition is to achieve sales of around

2,000 plots on average per annum by the end of 2027.

1 2

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

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 markets

Organisational development and design

Availability of appropriate capital

NZC pathway

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

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

Commercial markets

Organisational development and design

Availability of appropriate capital

NZC pathway

Strategic Report

Harworth Group plc: Annual Report and Financial Statements 2023

Growing our landbank and land

promotion activities

Our extensive landbank underpins our ability to deliver

our strategy and our purpose.

We take a long-term view to replenishing our

landbank, with a focus on acquiring and assembling

land through a mixture of freeholds, options, and

PPAs, then applying our expertise to unlock value.

What we are doing

We aim to maintain a 12 to 15-year land supply at any

time, taking account of our annual direct development

volume and land parcel sales ambitions. Organic

growth of the pipeline will be supplemented by

developing key partnerships to assemble and deliver

large-scale regeneration schemes.

Controlling a large landbank with sites at various

stages in the development cycle allows us to enhance

and smooth returns as well as providing flexibility and

allowing us to manage risk.

Repositioning our Investment

Portfolio to modern Grade A

Our Investment Portfolio is integral to the way that we

fund our business, providing opportunities for capital

and income growth through asset management.

While historically comprising a number of acquired

secondary sites, the portfolio is increasingly focused

on Grade A space that we have developed.

What we are doing

We are retaining the majority of the industrial &

logistics 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 that meet the needs of modern occupiers,

with good access to infrastructure and proximity to

urban centres.

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

Commercial markets

Organisational development and design

Availability of appropriate capital

NZC pathway

Link to KPIs

Total Return

Net asset value

, EPRA NDV per share

and LTV

Total industrial & logistics pipeline

Total residential pipeline

Potential GVA

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

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

reconciliation between statutory measures and APMs set out in the appendix to the financial statements.

Strategic Report

Harworth Group plc: Annual Report and Financial Statements 2023

Our strategy in action

Transitioning the Investment Portfolio to 100% Grade A

Preston

Chorley

Widnes

Derby

Selby

Melton

Mowbray

Selling £70.0m of mature industrial & logistics assets

A key element of our growth strategy is to transition the Investment Portfolio to modern

Grade A, by refurbishing and redeveloping existing assets, by retaining more direct

development and by disposing of assets where value has already been maximised

through asset management and development initiatives. The sales of six mature

Investment Portfolio sites were completed during the year for headline sales proceeds

totalling £70.0m. These sales were all at prices broadly in line with book values before

selling costs, and helped to improve the specification of the remaining portfolio.

Disposal locations

94%

of disposed floorspace had

an EPC rating of C or lower

Strategic Report

Harworth Group plc: Annual Report and Financial Statements 2023

Our strategy in action

Transitioning the Investment Portfolio to 100% Grade A

Developing new Grade A space and progressing lettings

In January, we completed 110,000 sq. ft of new Grade A space at Gateway 36 in Barnsley,

as part of the development's second phase.

The units were built in line with Harworth’s commercial building specification, achieving

a rating of BREEAM “Very Good” and benefitting from the installation of solar PV

panels, with the ability for the occupier to increase this to full roof coverage. The wider

scheme includes 20 EV charging points, rainwater harvesting and a sustainable heating

and cooling system, as well as a building envelope design that is sympathetic to the

surrounding environment.

In January 2023, a unit was let on a 10-year lease to lifestyle fashion brand Lucy & Yak. In

early 2024, a second unit was let to retailer Dunelm, with a lease commencement date of

31 December 2023.

Preserving and promoting nature

At Gateway 36, we are working in close co-ordination with the local council to deliver

a minimum of 10% biodiversity net gain at the site. This will be delivered through onsite

habitat retention and enhancement, and off site provision, 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. Initiatives include the creation of new

ponds and wet woodlands as well as improvements to areas of existing neutral grasslands

and mixed scrub. These measures will bring several biodiversity benefits, and the site has

subsequently been identified as a Site of Special Scientific Interest.

Chris Renwick

Co-founder and CEO, Lucy & Yak

“ This is an exciting milestone for

Lucy and Yak Ltd as the company

continues its mission to build a

great business by being good

to people, communities and the

planet. Lucy was born and raised

in Barnsley where her family still

live. Moving into this space will

allow us to eventually provide

over 100 living wage jobs in the

local area, which is one of the

reasons we do what we do.”

12.8 acres

of land identified for

biodiversity enhancements

Strategic Report

Harworth Group plc: Annual Report and Financial Statements 2023

Our strategy in action

Accelerating residential sales and placemaking

South East Coalville is Harworth’s largest

residential major development in the

Midlands. The 250-acre site is situated

just two miles from Junction 22 of the

M1, and has an outline planning consent

for the creation of a sustainable new

community of more than 2,000 homes.

The development comprises two

distinct areas: Hugglescote Grange to

the north and Swinfen Vale to the south,

both named after surrounding villages.

Immediately to the south of the site is

Harworth’s Bardon Hill development,

providing 332,000 sq. ft modern Grade

A employment space.

To date, Harworth has sold land parcels

for the delivery of 977 homes to six

housebuilders and delivered new green

space including the planting of over

800 trees.

The next phase of the scheme will see

the development of 1,039 new homes,

as well as a local centre close to the

entrance to the site, where a school will

be located, opposite convenience retail

and other community amenities.

In September 2023, construction

works began for the new forest school

at the site, delivered with support

from North West Leicestershire District

Council and Leicestershire County

Council. Designed by award-winning

firm Lungfish Architects, the two-form

entry school is scheduled to open in

2024, providing 420 places. The new

school will make South East Coalville an

attractive place to live, supporting sales

of future land parcels.

Also in September, we opened a new

21-acre park comprising a riverside

corridor with amenity space and several

biodiversity enhancement features.

In December 2023, Harworth sold a

land parcel to Strata for the construction

of up to 184 homes.

Supporting new homes, amenities and green space

at South East Coalville, Leicestershire

2,016

homes to be delivered

Strategic Report

Harworth Group plc: Annual Report and Financial Statements 2023

Keith Merrie

North West Leicestershire District

Council Portfolio Holder for

Infrastructure

“ This part of North West

Leicestershire continues to see a

lot of growth and development

and I am delighted to see the

start of work to bring a new forest

school to benefit families and

residents in the area. Ensuring

infrastructure like roads and

schools is delivered for any new

settlement is vital to securing the

future of our towns and villages,

so I look forward to seeing the

next generation walk through

the school doors in September

2024.”

25.8

hectares of green

space in masterplan

30-40

jobs created by

new supermarket

housebuilders soon

to be on site

Creating sustainable

communities &

preserving heritage

The school at South East Coalville will

be built to a bespoke design based on

forest school principles. Originating in

Scandinavia, the forest school approach

promotes education through play and

activity while nurturing creativity through

self-activity and investigation. The buildings

are intended to complement the largely

residential nature of the site, with a

contemporary and unique feel that also

reflects the National Forest setting.

Opening of

the new

21-acre park.

Artist's impression

of the new forest

school.

Promoting

healthier

lifestyles

Creating

sustainable

communities &

preserving

heritage

Creating

inclusive

spaces

Holistic

travel

planning

Supporting

jobs

Growing

economies

Strategic Report

Harworth Group plc: Annual Report and Financial Statements 2023

Key performance indicators

Financial track record

Total Return

5.1%

0.1%

24.6%

3.0%

7.8%

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 2023

Our total return

of 5.1% was the result of a 4.4% increase in EPRA NDV

during the year,

as well as the payment of a 1.466p dividend.

Link to strategy:

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

205.1p

196.5p

197.5p

160.0p

155.6p

What we measure

A European Public Real Estate Association ('EPRA') metric that represents a net asset

valuation where development property is included at fair value rather than cost and

deferred tax, financial instruments and other adjustments as set out in Note 2 and the

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

Performance in 2023

The increase in valuations was driven by management actions to unlock high value uses

from sites and progress planning applications, against a challenging macroeconomic

backdrop.

Link to strategy:

Net asset value (£m)

6 37.7

602.7

578.0

488.7

463.8

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 2023

Net asset value

increased as a result of crystalising valuation gains through development

property sales during the year.

Link to strategy:

Net loan to portfolio value ('LTV')

4.7%

6.6%

3.4%

11.5%

12.1%

What we measure

Net debt

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

Performance in 2023

Our LTV

decreased during the year and remained well within our target of less than 20%

at year-end as we continued to manage carefully our levels of net debt.

Link to strategy:

Strategic Report

Harworth Group plc: Annual Report and Financial Statements 2023

Strategic track record

Number of plots sold

1,170

2,236

1,411

873

1,379

What we measure

The number of plots equivalent to land parcel sales to housebuilders or registered

providers during the year.

Performance in 2023

While the number of plots sold was a reduction from 2022, when we brought forward

transactions to take advantage of buoyant market conditions, the average number of

plots sold across 2023 and 2022 was still 21% higher than the level seen in 2021.

Link to strategy:

Total residential pipeline (plots)

27,190

29,311

30,804

30,668

29,596

What we measure

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

freehold land, options and PPAs.

Performance in 2023

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

maintain a 12 to 15-year land supply. The reduction was due to a successful year of plot

sales, which more than offset new plots added to the pipeline.

Link to strategy:

Strategy link key

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

Group targets

The Harworth Way

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

description of these is set out in Note 2 to the financial statements with a reconciliation

between statutory measures and APMs set out in the appendix to the financial statements.

Strategic Report

Harworth Group plc: Annual Report and Financial Statements 2023

Key performance indicators continued

Strategic track record

Industrials & logistics space directly developed (sq. ft)

193,000

432,000

51,000

27,000

What we measure

The amount of industrial & logistics space developed by Harworth, either speculatively

or on a build-to-suit basis for an end occupier or investor, achieving practical completion

during the year.

Performance in 2023

Our level of completed direct development reduced from the record amount seen in

2022 due to a focus on pre-let schemes in 2023, but we made significant progress with

construction starts and enabling works

Link to strategy:

Total industrial & logistics pipeline (sq. ft)

37.7 m

35.0m

28.2m

27.3m

24.4m

What we measure

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

landbank, including freehold land, options and PPAs.

Performance in 2023

Our industrial & logistics pipeline increased due to a number of freehold acquisitions

during the year

Link to strategy:

Proportion of Investment Portfolio that is Grade A

37%

18%

11%

Not measured

What we measure

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

A industrial & logistics space. 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 2023

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

due to a successful disposal programme of mature assets and the direct development of

new space which reached practical completion during the year.

Link to strategy:

Strategic Report

Harworth Group plc: Annual Report and Financial Statements 2023

Environmental, economic and social track record

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

4.8

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 2023

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:

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

802

1,054

1,118

882

2,353

What we measure

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

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

2022 have been restated to allow for a like-for-like comparison with 2023.

Performance in 2023

Our emissions decreased during the year, driven by the use of alternative fuels at our

Ironbridge site, and increased use of electric vehicles by staff.

Link to strategy:

Prior year figure has been restated

Employee pride

100%

97%

93%

90%

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 2023

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 & inclusion.

Link to strategy:

Strategy link key

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

Group targets

The Harworth Way

Strategic Report

Harworth Group plc: Annual Report and Financial Statements 2023

Operational Review

Industrial & Logistics Land

Portfolio

At 31 December 2023, the industrial

& logistics pipeline totalled 37.7m sq.

ft (31 December 2022: 35.0m sq. ft),

of which 6.1m sq. ft was consented

(31 December 2022: 5.4m sq. ft), and

10.1m sq. ft was in the planning system

awaiting determination (31 December

2022: 5.6m sq. ft). The pipeline was 57%

owned freehold, with the remaining 43%

controlled via options or PPAs.

Acquisitions and land assembly

During the year, freehold acquisitions

added 1.8m sq. ft to the pipeline.

These comprised:

• Parkside East, St Helens, Merseyside:

a 50-acre site with direct access to

Junction 22 of the M6, close to the M62

interchange. The site was allocated in

the recently adopted local plan and

forms part of a wider regeneration area,

supported by the council. Harworth is

developing a masterplan for up to 0.8m

sq. ft of employment space.

• Markham Moor, Nottinghamshire: a

29-acre site next to the A1, capable of

delivering 0.4m sq. ft of industrial &

logistics space.

• Additional land parcel acquisitions

as part of land assembly works at the

Group’s existing sites in Rothwell,

Northamptonshire and Skelton

Grange, Leeds.

Planning

During the year, planning approval was

secured for 1.1m sq. ft of industrial &

logistics space. This comprised:

• Skelton Grange, Leeds: an outline

planning consent to develop 0.8m sq.

ft of industrial & logistics space on a 50-

acre site adjacent to Junction 44 of the

M1. It was formerly the location of the

Skelton Grange Power Station and was

acquired by Harworth in 2014.

• Former Houghton Main Colliery site,

South Yorkshire: outline planning

consent for 0.2m sq. ft

• Bardon West, Leicestershire: outline

planning consent for 0.1m sq. ft of

space, adjacent to the Group’s existing

Bardon Hill site in Leicestershire.

We also have a significant number of sites

progressing through the planning process

to secure an allocation in a local plan. The

“allocation” of a site within a Local Plan

is an important step towards securing a

planning approval, as it signifies that a

development is acceptable in principle to

a local planning authority, and is therefore

also a significant valuation driver of sites

in the portfolio. During the period, a draft

allocation was secured for 0.5m sq. ft of

industrial & logistics space at our Bennerley

site in Nottinghamshire. Post year end, draft

allocations have also been secured for 1.6m

sq. ft of space at a site close to Junction 15

of the M1 in Northampton (under option),

and for 0.7m sq. ft at our mixed-use site at

Diseworth in the East Midlands (freehold

and part PPA).

Planning applications for 10.1m sq. ft of

industrial & logistics space are currently

progressing through the planning

system. The largest developments within

this comprise:

• Cinderhill, Derbyshire: Proposals for a

mixed-use development comprising 1.8m

sq. ft of high specification employment

space alongside 150 houses and a new

junction on the A38 trunk road.

• 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.

Plans have been submitted for 1.5m

sq. ft of rail-linked industrial & logistics

space at the site.

Direct development and placemaking

During the year, practical completion was

reached on two direct developments,

which were both delivered to Harworth’s

sustainable commercial building

specification, targeting EPC A and

BREEAM Excellent, with whole life carbon

assessments and renewable energy

provisions incorporated into the design:

• Gateway 36, Barnsley: 110,000 sq.

ft of speculative industrial & logistics

space completed, representing the start

of the development’s second phase.

One unit was let to lifestyle brand Lucy

& Yak following completion. A further

unit was let to Dunelm after year-end,

with a lease commencement date of 31

December 2023.

• AMP, Rotherham: 83,000 sq. ft of

speculative industrial & logistics

space was developed, marketed as

“R-Evolution 4”. The development

will build on the success of previous

similar R-Evolution phases at the AMP,

with an updated and enhanced design

which provides additional flexibility for

occupiers wishing to adapt the space

for manufacturing or warehousing.

This flexibility will ensure the scheme

appeals to a broad range of potential

occupiers, and we have already seen

significant interest in the space.

At year-end, a total of 187,000 sq. ft was

on site at the AMP, comprising two pre-let

units and one build-to-suit unit that will be

owned by its occupier. This underscores the

location’s popularity and the Group’s flexible

approach to development. In addition to this,

21,000 sq. ft has commenced at Olive Lane,

a new mixed-use heart of the communityat

our Waverley development with a medical

centre, pharmacy, convenience retail and

leisure.

During the year, the Group received

development management revenue totalling

£1.0m (2022: £4.2m) from build-to-suit

opportunities.

Land sales

Industrial & logistics land sales totalling

£11.5m (2022: £57.0m) were completed

during the year, at prices above or in

line with book values before transaction

costs, with the reduction from the prior

year being due to the £54.0m sale of the

Group’s Kellingley site completing in 2022.

These comprised: the sale of a land parcel

at South East Coalville for the development

of a supermarket; the sale of three land

parcels at Riverdale Park, Doncaster; and

the sale of land at the AMP to an occupier,

on which Harworth will be developing the

above-mentioned build-to-suit unit.

Strategic Report

Harworth Group plc: Annual Report and Financial Statements 2023

Residential Land Portfolio

At year-end, the residential pipeline had the

potential to deliver 27,190 housing plots

(31 December 2022: 29,311), of which

5,296 were consented (31 December

2022: 6,111), and 1,774 were in the

planning system awaiting determination (31

December 2022: 1,890). The pipeline was

49% owned freehold, with the remaining

51% subject to PPAs, options or overages.

Acquisitions and land assembly

During the year, a combination of freehold

acquisitions, options and PPAs added 809

residential plots to the pipeline. The majority

of this related to the signing of a PPA on

a parcel of land at Aughton, Rotherham,

capable of delivering up to 700 homes.

Harworth will work with local stakeholders

to bring forward a masterplan in advance of

submitting a planning application.

Planning

During the year, planning was approved

for 397 homes at Killamarsh in Derbyshire

comprising 297 freehold plots and 100

plots promoted via PPA. Post period end,

planning was approved for 500 homes

at Hale Gate Road in Liverpool, under a

PPA agreement, and a draft allocation was

secured for our mixed-use site Diseworth

in the East Midlands for 2,275 homes

(freehold and part PPA).

Consented

Awaiting

determination

2024 +

PPAs/Options

Freehold/JVs

Planning Status

Ownership

Plot sales

Completed residential land sales totalled

1,170 plots (2022: 2,236 plots), a decrease

from the exceptionally high level of sales

seen in the prior year, as the 2022 figure

was driven by expediting sales to take

advantage of robust housebuilder demand

at the time. The average number of plots

sold across 2023 and 2022 was still higher

than the level seen in 2021. Headline sales

totalled £52.1m and were completed at

prices broadly in line with book values

before transaction costs. The headline

sale prices ranged from £30k to £77k per

serviced plot (2022: £28k to £105k).

Sales were completed with six different

housebuilders, comprising national

and regional operators, and including

two housebuilders that the Group was

transacting with for the first time: Homes by

Honey and Forge New Homes. The largest

of the disposals was the whole of a site in

Killamarsh, Derbyshire, which was sold

jointly to both Harron Homes and Homes

by Honey. In the first half of 2023, an outline

planning consent was secured to develop

up to 397 family homes at the site.

The year also saw sales of land subject to

PPAs – arrangements whereby Harworth

receives a fee from a landowner for

securing a planning approval and plot sale

on their behalf – generating £0.8m in fees

(2022: £5.8m).

Residential products

One of the Group’s key strategic objectives

is broadening the range of its residential

products, and to date it has launched three

portfolios of sites to deliver on this:

• Single-family BTR portfolio:

approximately 1,000 single-family homes

across seven sites. The Group has

secured planning consents for 45% of

the plots to date

and is now progressing towards

exchange with selected investment and

delivery partners.

• Affordable housing portfolio:

approximately 550 homes across six

sites, that meet the National Planning

Policy Framework criteria for affordable

housing (social rents, affordable rents,

as well as a range of intermediate

rent and for-sale products, such as

the shared ownership scheme), to

be delivered via a forward-funding

agreement. Harworth signed its first

forward-funding agreement on part

of this portfolio in December, with

Great Places, for the development of

50 homes at its Riverdale Park site in

Doncaster, and after year-end signed

a further agreement with Great Places

for the development of 105 homes at

Simpson Park in Nottinghamshire.

• NZC homes (Coze Homes): a portfolio

of approximately 100 homes, which

will be directly developed by Harworth

as a small-scale pilot at its Prince of

Wales site in Pontefract and at Waverley.

The pilot is designed to deepen the

Group’s understanding of the technical

requirements of the still relatively

immature NZC homes market, which will

help to develop improved masterplans

for future developments that further

embed climate resilience and respond to

emerging regulatory and societal needs.

The Prince of Wales site has received

reserved matters planning consent and

construction is expected to begin shortly,

with Waverley following later in the year.

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. During

the year, several placemaking initiatives

were undertaken across the portfolio:

• South East Coalville, Leicestershire:

construction works began on a new

forest school. Designed by award-

winning Lungfish Architects, the

two-form entry school is scheduled to

open in 2024, providing 420 places.

The year also saw a land sale to Aldi for

the construction of a new supermarket

at the site, and the opening of a

21-acre park, comprising a riverside

corridor with amenity space and several

biodiversity enhancement features.

Strategic Report

Harworth Group plc: Annual Report and Financial Statements 2023

Operational Review continued

• Waverley, South Yorkshire: a new learn-

to-ride cycle track was opened, funded

jointly by Harworth and a £45,000 grant

from British Cycling’s “Places to Ride”

programme. The track sits at the heart of

Waverley, providing a safe, fun and traffic-

free environment for children to learn

to ride a bike and progress skills before

venturing onto the site’s connecting

cycle paths and roads. Planning was also

approved, and construction started on

site, for Olive Lane, a new mixed-use

heart of the community with a medical

centre, pharmacy and convenience retail

and leisure.

• Cadley Park, Derbyshire: a new 50-acre

country park was opened, having been

developed by Harworth working in

close partnership with South Derbyshire

District Council as well as the National

Forest, RSPB, Derbyshire Wildlife

Trust and the local community. The

park benefits from new purpose-built

footpaths and cycleways, a picnic area

and community orchard, as well as

new habitats to protect and promote

local wildlife. The site also features a

memorial pit wheel, commemorating

the site’s rich mining history.

Consented

Awaiting

determination

2024 +

PPAs/Options

Freehold/JVs

Planning Status

Ownership

As at 31 December 2023, the Investment

Portfolio comprised 11 sites covering

2.5m sq. ft (31 December 2022: 19 sites

covering 4.0m sq. ft). It delivered £14.1m

of annualised rent (31 December 2022:

£19.7m), equating to a gross yield of 6.3%

(31 December 2022: 7.0%) and a net

initial yield of 5.7% (31 December 2022:

6.2%). Annualised rent for the portfolio

decreased during the year by 28.4%, driven

by property sales which more than offset

the addition of new Grade A space to the

portfolio and a 13.2% like-for-like increase

in rents. Grade A space represented 37% of

the portfolio (31 December 2022: 18%).

During the year, 462,000 sq. ft of leasing

deals were completed, adding £2.1m (17%)

to annualised rent (2022: 722,000 sq. ft,

adding £2.1m). Lease renewals and regears

were completed on terms that on average

represented a 27% uplift to previous passing

rents, while new lettings were completed

on average at an 10% premium to ERVs.

Across the Investment Portfolio,

operational metrics remained robust. The

portfolio had a weighted average rent

of £5.75 per sq. ft (31 December 2022:

£4.69), rent collection currently stands at

98% for the year (2022: 99%). Vacancy

was 9.9% at year-end (31 December 2022:

8.3%), reduced to 1.2% when excluding

space completed in the preceding 12

months (31 December 2022: 2.7%).

Disposals

A key element of Harworth’s growth

strategy is to transition its Investment

Portfolio to modern Grade A. This is

being achieved by retaining more direct

development but also by disposing of

assets where value has been maximised

through asset management and

development initiatives.

The sales of six Investment Portfolio

sites were completed during the year,

for total consideration of £70.0m. After

year-end, the Group completed the sale

of a site in Flaxby Moor Industrial Estate,

Knaresborough, previously occupied by

Ilke Homes, for a headline sales price of

£13.3m. These sales were all at prices

broadly in line with book values before

transaction costs.

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 and battery storage.

As at 31 December 2023, the portfolio

generated £1.8m of annualised gross rent

(31 December 2022: £2.1m), reduced

following sales in 2022.

We continue to progress our energy

& natural capital strategy, 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 nature recovery on Natural Resources

sites. 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.

The Harworth Way

In 2022, the Group committed to

becoming NZC for Scope 1, Scope 2

and Scope 3 business travel emissions by

2030 and to being NZC for all emissions

by 2040. To meet these objectives, the

Group has developed a NZC pathway

and embedded NZC commitments into

a range of workstreams and targets to

guide the Group’s growth strategy in the

development of industrial & logistics and

residential sites.

Further information on The Harworth Way

and the Group’s NZC pathway can be

found within the 2023 Annual Report and

standalone NZC Pathway Progress Report

2023, which will both be published in

April 2024.

The Group will also be publishing its

Communities Framework in April 2024,

which outlines the steps it takes to embed

social value into its developments.

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.

Strategic Report

Harworth Group plc: Annual Report and Financial Statements 2023

Financial Review

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 2023 was 5.1% (2022:

0.1%). The Total Return

reflected a

strong performance, driven primarily

by management actions focused on

leveraging the unique attributes of each

of our development sites to create the

opportunities to unlock the use with the

greatest value. These focused actions,

alongside completing direct development,

and securing sales and asset management

initiatives across our Investment Portfolio

resulted in EPRA NDV

increasing by

4.4% during the year to 205.1p per share

(2022: 196.5p). Our 2023 performance

reflected continued progress against our

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

£72.4m (2022: £166.7m). The reduction

in the year reflected reduced rental

income following the successful sale of

properties from the Investment Portfolio

for £70m during the year, accounted for

in Other Gains, and lower Development

Property sales resulting from the

acceleration of residential land sales into

2022, capitalising on the then prevailing

favourable residential market conditions,

as well as the 2022 sale of the Kellingley

development site for £54.0m. Total

property sales

, which include proceeds

from the sales of investment properties,

assets held for sale and overages, totalled

£125.9m (2022: £138.5m). Rental income

collection has been consistently strong

and like for like income increased through

management actions, including lettings of

completed direct developments at Bardon

Hill and Gateway 36, and rent reviews. The

£72.4m of revenue also included PPA and

development management fees totalling

£1.7m (2022: £10m), the reduction year on

year was driven by project timelines and a

lower volume of managed developments

on site. Looking forward, the sales profile is

robust with 72.1% of 2024 budgeted sales

by value already completed, exchanged

or in heads of terms (budgeted sales

completed, exchanged or in heads of

terms at the same point in 2023: 71.9%).

The Investment Portfolio (£221.4m 2023

(£280.9m 2022)) will vary in size over time

as, in line with our strategy, we sell those

assets where we have completed our asset

management activity and where there is no

long-term opportunity in our portfolio, and

replace them through the new stock that we

build alongside our investment to upgrade

existing assets to Grade A.

“ Our Total Return

reflects a strong

performance,

driven primarily

by management

actions focused on

leveraging the unique

attributes of each of

our development

sites to create

opportunities to

unlock the use with

the greatest value.”

Kitty Patmore

Chief Financial Officer

Strategic Report

Harworth Group plc: Annual Report and Financial Statements 2023

Financial Review continued

This will mean that, at times, our overhead

costs will not be fully covered by income

from this portfolio as we reposition the

portfolio and build up new sources of

income from, for example, development

management fees. This is a dynamic that we

are now seeing this year; we anticipated this

when we set out our ambition to transition

the portfolio to Grade A, and our business

model and banking facilities provide the

flexibility required to execute this strategy

effectively.

BNP Paribas and Savills, our independent

valuers, completed a full valuation of

our portfolio as at 31 December 2023,

resulting in full-year revaluation gains

of £64.9m (2022: losses of £15.0m),

including the movement in the market

value of development properties. These

external independent valuations have

regard to conditions in the residential and

industrial & logistics markets as well as the

positive factors resulting from management

actions on our sites. Outside the valuation

movements, losses on sales were £6.8m

(2022: profits of £13.0m). Although sales

prices were in line with book values before

transaction costs overall, the loss was

driven by the impact of selling costs, the

recognition of deferred consideration at

present value as a result of higher interest

rates, and increased levels of estimated

future site-wide infrastructure costs

allocated to prior period sales, in particular

at our Waverley site where increased

costs were driven by a change in the site

masterplan. Overall, this led to total value

gains of £58.1m (2022: £2.0m losses).

The fair value of investment properties

increased by £71.4m (2022: £19.7m

decrease), which fed through to an

underlying operating profit of £54.2m

(2022: £44.5m) and profit after tax of

£38.0m (2022: £27.8m).

Over the year, the net asset value

of the

Group grew to £637.7m (31 December

2022: £602.7m). With EPRA adjustments

for development property valuations

included, EPRA NDV

at 31 December

2023 increased to £662.9m (31 December

2022: £633.8m) representing a per share

increase of 4.4% to 205.1p (31 December

2022: 196.5p).

The Group has declared a final dividend

of 1.022p per share, bringing the total

dividend per share for 2023 to 1.466p,

representing 10% underlying growth from

2022, in line with our dividend policy.

The Group remains well capitalised and,

at 31 December 2023, had available

liquidity of £192.2m (31 December 2022:

£175.6m). Net debt

was £36.4m (31

December 2022: £48.4m) resulting in

an LTV

at 31 December 2023 of 4.7%

(31 December 2022: 6.6%). At the same

date, 35% of the Group’s drawn debt was

subject to fixed rates (31 December 2022:

34%). We currently do not have interest

rate hedging in place against drawings

under our Revolving Credit Facility (RCF),

although this remains under review.

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, Share Incentive Plan and

Deferred Share Bonus awards).

• Value gains: the realised profits from the

sale 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 ('LTV'):

Group debt net of cash held expressed

as a percentage of portfolio value.

A full description of all non-statutory

measures is set out in Note 2 and

reconciliations between all statutory and

non-statutory measures are provided in

the appendix to the consolidated financial

statements. Our financial reporting is

aligned to our business units of Capital

Growth and Income Generation, with any

items that are not directly allocated to

specific business activities held centrally

and presented separately.

Strategic Report

Harworth Group plc: Annual Report and Financial Statements 2023

Income Statement

2023 2022

Capital

Growth

£m

Income

Generation

£m

Central

Overheads

£m

Total

£m

Capital

Growth

£m

Income

Generation

£m

Central

Overheads

£m

Total

£m

Revenue 49.0 23.4 – 72.4 135.4 31.3 – 166.7

Cost of sales (54.0) (6.0) – (60.1) (74.4) (8.9) – (83.3)

Gross profit (5.0) 17.4 – 12.4 61.0 22.4 – 83.4

Administrative expenses (5.1) (3.1) (19.2) (27.4) (4.1) (1.9) (16.1) (22.1)

Other gains/(losses) 65.2 4.3 – 69.4 17.8 (34.5) – (16.8)

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

Operating profit/(loss) 55.1 18.5 (19.3) 54.2 74.7 (14.0) (16.2) 44.5

Share of (loss)/profit of JVs 0.9 0.7 – 1.6 (4.3) (3.2) – (7.5)

Net interest credit/

(expense) 0.5 – (6.5) (6.0) 0.1 – (6.2) (6.1)

Profit/(loss) before tax 56.4 19.2 (25.8) 49.8 70.4 (17.2) (22.4) 30.9

Tax charge – – (11.9) (11.9) – – (3.0) (3.0)

Profit/(loss) after tax 56.4 19.2 (37.7) 38.0 70.4 (17.2) (25.4) 27.8

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

Revenue in the year was £72.4m (2022:

£166.7m), of which Capital Growth

contributed £49.0m (2022: £135.4m) and

Income Generation contributed £23.4m

(2022: £31.3m).

Capital Growth revenue, which primarily

relates to the sale of development

properties, decreased as a result of

accelerating sales to take advantage of

the positive residential market conditions

during the first three quarters of 2022,

coupled with the 2022 sale of the

Kellingley development site for £54.0m.

Capital Growth revenue also includes fees

from PPAs and build-to-suit development

management, together totalling £1.7m

(2022: £10.0m).

Revenue from Income Generation (the

Investment Portfolio, Natural Resources

and Agricultural Land) mainly comprises

property rental and royalty income. Revenue

of £23.4m (2022: £31.3m) was lower

than last year reflecting the successful sale

of certain investment properties during

the period for £70.0m. Like-for-like rental

income from the Investment Portfolio

increased by 13.2% during 2023 following

new lettings, lease re-gears and rent reviews

on our existing assets; when including the

letting of assets that practically completed

during the year, the increase achieved was

17.2%. This resulted in annualised rent

for the Investment Portfolio of £14.1m at

the year-end, (2022: £19.7m), as lettings

at the next phase of our Gateway 36

development, combined with lettings,

re-gears and rent reviews on existing

assets, were offset by income lost through

investment property sales during the year.

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

decreased to £60.1m (2022: £83.3m),

of which £47.3m related to the inventory

cost of development property sales (2022:

£67.7m). In the year, we saw an increase

in the net realisable value provision on

development properties of £4.3m (2022:

£2.4m decrease) following the valuation

process as at 31 December 2023.

Administrative expenses increased in the

year by £5.3m (2022: £2.9m increase).

This was due to higher salary expenses,

resulting from the full year impact of

increased employee numbers recruited

during 2022 as we stepped into our

strategy and set up key teams to deliver

future value creation, inflationary cost

pressures and costs incurred as part of

progressing strategic objectives.

Headcount was increased at a slower rate

during 2023. The nature of long-term

sites can mean that transactions, while

progressing, span an accounting year end,

resulting in the associated revenue not

always fitting neatly into a financial year.

The strong EPRA NDV

growth shows the

actions of the teams creating value as they

work on sites and progress transactions

to a conclusion. Administrative expenses

expressed as a percentage of operating

profit excluding administrative expenses

was broadly in line with the previous year at

34% (2022: 33%).

Other gains comprised a £71.1m

combined net increase (2022: £19.9m net

decrease) in the fair value of investment

properties and assets held for sale

(‘AHFS’) less the loss on sale of investment

properties, AHFS and overages of £1.7m

driven primarily by transaction costs (2022:

profit £3.2m).

Joint venture profits of £1.6m (2022: £7.5m

losses) were the result of an increase in the

property valuations at Gateway 45 and net

rental income at Multiply Logistics North.

Value gains/(losses) on a non-statutory

basis are outlined below.

Strategic Report

Harworth Group plc: Annual Report and Financial Statements 2023

Financial Review continued

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 full description and reconciliation between statutory and

non-statutory value gains can be found in Note 2 and the appendix to the consolidated financial statements.

£m

2023

2022

31 Dec

2023

31 Dec

2022

Category

Profit/

(loss) on

sale

Revaluation

gains/

(losses) Total

Profit/

(loss) on

sale

Revaluation

gains/

(losses) Total

Total

valuation

Total

valuation

Capital Growth

Residential Major

Developments Development (5.4) (9.0) (14.4) 11.6 2.2 13.8 210.5 228.1

Industrial &

logistics Major

Developments Mixed 0.1 43.1 43.2 (2.0) (3.4) (5.4) 136.0 68.2

Residential

Strategic

Land Investment (0.1) 6.1 6.0 0.4 39.8 40.2 51.6 51.4

Industrial

& logistics

Strategic Land Investment (0.1) 18.4 18.3 (0.2) (12.7) (12.9) 105.9 82.2

Income

Generation

Investment

Portfolio Investment (1.4) 6.2 4.8 – (41.0) (41.0) 221.5 280.9

Natural

Resources Investment 0.1 – 0.1 3.2 (0.2) 3.0 21.6 20.3

Agricultural

Land & other Investment – 0.1 0.1 – 0.3 0.3 21.1 5.7

Total (6.8) 64.9 58.1 13.0 (15.0) (2.0) 768.1 736.8

Notes: There are some minor differences on some totals due to roundings. Profit/(loss) on sale includes the impact of transaction fees incurred.

Loss on sale of £6.8m (2022: £13.0m profit) reflected sales broadly in line with book value before transaction costs, the impact of

discounting deferred consideration at present value as a result of higher interest rates, and retentions not recognised on completion,

coupled with higher levels of estimated future site-wide infrastructure costs allocated to prior period sales, in particular at our Waverley

site where increased costs were driven by a change in the site masterplan. Revaluation gains

were £64.9m (2022: 15.0m losses) and are

outlined in the table below.

2023

£m

2022

£m

Increase/(decrease) in fair value of investment properties 71.4 (19.7)

(Decrease) in value of assets held for sale (0.3) (0.2)

Movement in net realisable value provision on development properties (6.2) (2.0)

Contribution to statutory operating profit 64.9 (22.0)

Share of profit/(loss) of joint ventures 1.6 (7.5)

Unrealised (losses)/gains on development properties and overages

(1.6) 14.5

Total non-statutory revaluation gains/(losses)

64.9 (15.0)

There are minor differences on some totals due to roundings.

Strategic Report

Harworth Group plc: Annual Report and Financial Statements 2023

The principal revaluation gains and losses

across the divisions reflected the following:

• Industrial & logistics:

– Across Major Developments and

Strategic Land, there were value

gains relating to planning progress

and unlocking high value uses at

Skelton Grange, Ansty, Bennerley

and Wingates.

– The industrials & logistics market saw

transaction volumes fall back in line

with the pre-Covid average. MSCI

reported 0.1% capital value growth

which was driven by rental growth

of 7.6% offset by 32bps average

outward yield shift.

– 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.

– 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 50 bps to 5.7% from

6.2% as at 31 December 2022.

• Residential:

– The residential market saw house

prices decline 1.8% over the year.

Housebuilders reported that they

were scaling back land acquisitions

although, with a planning system

which continues to be slow, short

term and serviced land remained

in demand.

– Residential land sales on our Major

Development sites continued

to demonstrate demand for our

serviced land product and

underpin valuations.

– Costs increased during the year and

this was reflected in forward cost

plans on Major Development sites.

• Natural Resources: valuations remained

broadly stable with minor valuation

declines 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 2023 was £14.1m

(31 December 2022: £9.8m). This

provision is held to reduce the value of nine

(31 December 2022: 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 2023. 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 revenue from property sales

in the year of £125.9m (2022: £138.5m), achieving a total overall loss on sale of £6.8m

(2022: profit £13.0m). Revenue from sales comprised residential plot sales of £44.1m (2022: £69.5m), industrial & logistics land sales

of £11.5m (2022: £57.0m), sales of investment portfolio properties of £70.0m (2022: £12.0m) and receipt of overages of £0.3m

(2022: £nil).

Cash proceeds from sales in the year were £132.0m (2022: £131.2m) as shown in the table below:

2023

£m

2022

£m

Total property sales

125.9 138.5

Less deferred consideration on sales in the year (21.9) (28.5)

Add receipt of deferred consideration from sales in prior years 28.0 21.2

Total cash proceeds 132.0 131.2

Tax

The income statement charge for taxation for the year was £11.8m (2022: £3.0m), which comprised a current year tax charge of £5.8m

(2022: £21.8m charge) and a deferred tax charge of £6.0m (2022: £18.7m credit).

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 increase in deferred tax

largely relates to unrealised gains on investment properties. The deferred tax balance has been calculated based on the rate expected to

apply on the date the liability is crystallised.

At 31 December 2023, the Group had deferred tax liabilities of £30.6m (31 December 2022: £25.9m) and deferred tax assets of £0.5m

(31 December 2022: £1.8m). The net deferred tax liability was £30.1m (31 December 2022: £24.1m).

Strategic Report

Harworth Group plc: Annual Report and Financial Statements 2023

Financial Review continued

Basic earnings per share and dividends

Basic earnings per share for the year increased to 11.8p (2022:

8.6p) reflecting the increase in the valuation of investment

properties in 2023, compared to a reduction in 2022, offset by

lower development property sales having taken advantage of

market conditions in the first three quarters of 2022, coupled with

reduced rental income following the successful sale of investment

property during 2023.

In addition to the interim dividend of 0.444p, the Board has

declared a final dividend of 1.022p (2022: 0.929p) per share to

be paid, bringing the total dividend for the year to 1.466p (2022:

1.333p) per share. The recommended 2023 final dividend and

2023 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 2023, the balance sheet value of all our

development properties was £250.0m (2022: £205.0m) and their

independent valuation by BNP Paribas was £274.0m, reflecting

a £24.0m 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

2023

£m

31 Dec

2022

£m

Properties

734.8 695.4

Cash 27.2 11.6

Trade and other receivables 48.6 60.7

Other assets 13.8 11.8

Total assets

824.4 779.5

Gross borrowings

(63.6) (60.0)

Deferred tax liability

(30.1) (24.1)

Derivative financial instruments

– –

Other liabilities

(93.0) (92.7)

Statutory net assets

637.7 602.7

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

25.2 31.2

EPRA NDV

662.9 633.8

Number of shares in issue less Employee Benefit Trust & Equiniti Share Plan Trustees Limited-held shares

323,154,373 322,612,685

EPRA NDV per share

205.1p 196.5p

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

Strategic Report

Harworth Group plc: Annual Report and Financial Statements 2023

EPRA NDV

at 31 December 2023 was £662.9m (31 December 2022: £633.8m), which includes the mark to market adjustment on

the value of the development properties and overages. The total Portfolio Value

at 31 December 2023 was £768.2m, an increase of

£31.4m from 31 December 2022 (£736.8m). The Group’s share of gains from joint ventures of £1.6m (2022: £7.5m losses) resulted

in investments in joint ventures increasing to £30.7m (31 December 2022: £29.8m). Trade and other receivables include deferred

consideration on sales as set out previously. At 31 December 2023, deferred consideration of £28.1m (31 December 2022: £34.6m)

was outstanding, of which 56.1% is due within one year.

The table below sets out our top 10 sites by value, which represent 51% of our total portfolio, split according to their categorisation,

including currently consented residential plots and commercial space:

Site Site type

Categorisation in

balance sheet Region Progress to date

Benthall Grange,

Ironbridge

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

sold representing 110 units

Skelton Grange Major Development Development Yorkshire & Central 0.8m sq ft of industrial & logistics

space consented, 0.3m sq. ft awaiting

determination

South East

Coalville

Major Development Development Midlands 2,016 residential units consented, land

sold representing 977 units

Bardon Hill Investment Portfolio Investment Midlands Fully let

Nufarm Investment Portfolio Investment Yorkshire & Central –

Waverley AMP Investment Portfolio Investment Yorkshire & Central 2.1m sq. ft of industrial & logistics space

consented, 1.7m built or sold

Ansty

Strategic Land Investment Midlands Proposed industrial & logistics site,

planning now submitted

Knowsley Investment Portfolio Investment North West –

Wingates Major Development Development North West Up to 1.0m sq. ft of industrial & logistics

space consented and a further 1.5m sq.

ft planned. Enabling works to commence

shortly.

Simpson Park Major Development Development Yorkshire & Central 1,615 residential units consented, land

sold representing 629 units

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

Financing 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 2023 providing total property sales broadly in line with 2022.

To deliver its strategic plan, the Group has adopted a target LTV at year-end of below 20%, with a maximum of 25% in-year. As a

principle, the Group seeks 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 enters into development and infrastructure loans alongside its RCF to support its growth strategy.

Debt facilities

The Group has a £200m RCF, together with a £40m uncommitted accordion option, which was entered into in 2022. The RCF is

provided by NatWest, Santander and HSBC and is aligned to the Group’s strategy, providing significant liquidity and flexibility to enable

us to pursue our strategic objectives. The interest rate on the RCF is based on a loan-to-value ratchet mechanism with a margin payable

above SONIA in the range of 2.25% to 2.50%. The Group has no refinancing requirements under its core facilities 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 industrial & logistics units.

Strategic Report

Harworth Group plc: Annual Report and Financial Statements 2023

Financial Review continued

The Group had borrowings and loans of £63.6m at 31 December 2023 (2022: £60.0m), being the RCF drawn balance (net of

capitalised loan fees) of £33.8m (2022: £34.6m) and infrastructure or direct development loans (net of capitalised loan fees) of £29.7m

(2022: £25.4m).The Group's cash balances at 31 December 2023 were £27.2m (2022: £11.6m) reflecting sales activity during

December 2023. The resulting net debt

was £36.4m (2022: £48.4m).

Net debt

decreased 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:

2023

£m

2022

£m

Opening net debt

as at 1 January (48.4) (25.7)

Cash inflow from operations 17.4 58.9

Property expenditure and acquisitions (54.9) (66.6)

Disposal of investment property, AHFS and overages 69.6 14.2

Investments in joint ventures 0.7 (1.2)

Interest and loan arrangement fees (4.5) (6.0)

Dividends paid (4.4) (4.0)

Tax paid (10.2) (17.7)

Other cash and non-cash movements (1.7) (0.3)

Closing net debt

as at 31 December (36.4) (48.4)

The weighted average cost of debt, using an end of month average 2023 balance and 31 December 2023 rates, was 6.88% with a 0.9%

non-utilisation fee on undrawn RCF amounts (2022: 5.52% with a 0.9% non-utilisation fee). The weighted average term of drawn debt is

now 2.2 years (31 December 2022: 3.2 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 2023, 35% (31 December 2022: 34%) of the Group’s drawn debt, reflecting

62% (31 December 2022: 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 2023, the Group’s gross LTV

was 8.3% (31 December 2022: 8.1%) and its net LTV

was 4.7% (31 December 2022:

6.6%). If gearing is assessed against the value of the core income generation portfolio (the Investment Portfolio and Natural Resources

portfolio) only, this equates to a gross loan to core income generation portfolio value

of 27.9% (31 December 2022: 26.1%) and a net

loan to core income generation portfolio value

of 15.9% (31 December 2022: 21.0%). 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 2023, undrawn capacity under the RCF was £165m (31 December 2022: £164.0m). Going forwards the RCF,

alongside selected use of development and infrastructure loans where appropriate, will continue to provide the Group with sufficient

liquidity to execute our growth strategy.

Kitty Patmore

Chief Financial Officer

18 March 2024

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

reconciliation between statutory measures and APMs set out in the appendix to the financial statements.

Strategic Report

Harworth Group plc: Annual Report and Financial Statements 2023

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 at

pages 144 to 145).

The Board conducted a review for a

period of five years ending 31 December

2028. 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 focusses 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 fifteen 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 2028;

• rental income from income-producing

industrial properties which, at 31

December 2023, had a vacancy rate

of 9.9% at year-end (reduced to 1.2%

when excluding space completed in the

preceding 12 months), a WAULT of 12.9

years and a rent collection of 98%; and

• development and investment

management, planning promotion

and investment fees.

Regular income from the income-

producing portfolio with low vacancy

rates helps 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 (through master-

planning and planning promotion). While

the market as a whole has been impacted

by higher interest rates and low growth

over 2023, the residential market has a

fundamental insufficient supply of housing

and sales continued during 2023. Over

this time, the industrial & logistics market

has seen resilient occupier demand and

increasing rents. Having teams in Yorkshire,

the Midlands and North-West balances the

Group's exposure to any one region.

Net debt

at year end of £36.4m

represented a 4.7% net loan to portfolio

value

. The Group has a £200m RCF in

place with a £40m uncommitted accordion

option, provided by NatWest, Santander

and HSBC; this facility provides funding

with which to execute the Group’s strategy

alongside site-specific loans. The RCF is

assumed to be increased to £300m on

similar terms when it matures in 2027,

reflecting the anticipated growth in the

assets and activities of the Group towards

the end of the five-year period.

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

macro-economic environment as well as

the strategic progress of the Group. The

principal risks and uncertainties that the

Board considers could impair solvency

and liquidity relate to: market assumptions;

income generation variability; and planning

promotion risk. Principally, these fall within

the Markets, Project Delivery, Finance,

Sustainability and People sub-categories of

risk identified in the Effectively managing

our risks section of this Report on

pages 50 to 60.

Assessment of long-term prospects

and sensitivities

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

also incorporates 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 below. Throughout the strategic plan

period, 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

as well as the Group's headroom over its

facilities could be impacted temporarily,

the long-term business model is expected

to continue to deliver the Group’s Purpose

in a sustainable manner.

Strategic Report

Harworth Group plc: Annual Report and Financial Statements 2023

Risk Scenario Mitigation and Further Analysis

Markets:

Residential

and

commercial

markets

• A downturn in industrial & logistics and/or

residential market conditions could lead to a fall

in property values or reduced sales.

• Notwithstanding strong rent collection, 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

Group's three core regions and properties are

diversified across the residential and industrial

& logistics sectors, both of which, have strong

underlying demand fundamentals. This helps to

mitigate the impact of market movements.

• Pursuant to our strategy, we are working to

mitigate any 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 pre-let or forward funding agreements

where appropriate.

• The Group works closely with tenants in its

Investment Portfolio on payment terms that

support both parties to continue to actively

manage rent collection.

• If necessary, 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

within 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. Adequate headroom

on financial covenants is projected throughout the

five-year period.

• The RCF agreed in 2022 provides a £200m facility

with no major refinancing deadline ahead of when

the RCF expires in 2027.

• The RCF is supplemented by project specific

funding where relevant, with current loans expiring

in 2024 to be repaid using RCF headroom. We

continue to pursue and unlock grant funding and

site specific loans where required.

• The Group continues to actively review the risk

of interest rate increases, projected drawn debt

and hedging requirements, with 35% of the

Group’s drawn debt balance at 31 December

2023 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.

Long-term Viability Statement continued

Strategic Report

Harworth Group plc: Annual Report and Financial Statements 2023

Sustainability:

Managing climate

change transition

• Failure to manage transitional risks associated

with climate change covering both operational

activity and reporting.

• Potential 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 114 to 115).

• A Non-Executive Director with a strong

background in sustainability was appointed to

the board in 2022.

• All buildings delivered in 2023 met our NZC

Pathway targets for embodied emissions and

operational energy use in commercial buildings,

allowing the Group to mitigate its Scope 3

emissions.

• Development of an Energy and Natural Capital

strategy, which includes opportunities for carbon

sequestration, biodiversity net gain, carbon

trading and use of renewable energy.

• Continued transition of our Investment Portfolio

towards modern grade A including all tenants in

2023 were offered green leases.

• We have undertaken initial high level scenario

modelling covering NZC pathway and

transition risks.

Planning • 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.

• 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

Other risks

including project

delivery and

organisational

development

and design

• 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.

• 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 27.

Viability statement

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.

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

reconciliation between statutory measures and APMs set out in the appendix to the financial statements.

Strategic Report

Harworth Group plc: Annual Report and Financial Statements 2023

Section S172 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 2023.

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 matters of statutory compliance: doing so effectively is key to delivering against our

Purpose and to drive long-term sustainable growth.

As we are constantly interacting with a wide range of stakeholders, the appraisal of stakeholder impact is embedded into Board project

appraisals via our Underwriting Approval process. Our Underwriting Proposal templates presented to the Board focus discussion on:

• how each new 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; and

• the impact of each project on our external stakeholder groups including a review of risks and opportunities.

The Board’s regard to these matters in its discussions and decision making is fundamental to Harworth achieving its Purpose to transform

land and property into sustainable places where people want to live and work.

Our People

Why we engage How we engage

Our 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 held biennially. The Board also undertakes an annual review of

our employee survey results and of 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 2023

• 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

ongoing review, particularly as the business grows. The Board, Remuneration

Committee and Nomination Committee receive various updates from the

Group Resources and Transformation Director whose responsibility it is to

evolve the people strategy. Projects undertaken during the year and supported

by the Board include:

• A new Talent and Learning & Development Strategy: the “Harworth

Academy”, which supports professional development for roles at all levels.

• Introduction of a new employee Reward Policy further developing our

transparent and fair approach to pay.

• A detailed review of the Harworth culture, which was heavily informed by

feedback from colleagues across all areas of the business and will result in a

refresh of our Harworth values to be embedded during 2024.

We continued to support the extended application of our employee share

plans to facilitate share ownership across the workforce allowing employees to

share in the future success of Harworth.

Conscious of the cost-of-living crisis and its disproportionate impact on lower-

income households, the Remuneration Committee approved variable salary

increases relative to role seniority which took effect from January 2023, with

employees on lower salaries receiving a proportionately higher increase.

Strategic Report

Harworth Group plc: Annual Report and Financial Statements 2023

Investors

Why we engage How we engage

To (i) build market appetite for our shares by

explaining our strategy to, and understanding

the views of, existing and prospective

shareholders, and (ii) report in a fair, balanced and

understandable manner on our operational and

financial performance and on the market outlook,

in order to allow investors to make informed

investment decisions. Without the trust and long-

term support of our shareholders, our business and

the delivery of our Purpose are not sustainable.

Each year, the Board reviews and approves an investor relations plan for the

year ahead.

The interim results, Annual Report and other regulatory announcements,

together with the www.harworthgroup.com website, are the Company’s

principal means of communication with all shareholders during the year. The

results and Annual Report are reviewed in detail by the Board to ensure they

articulate clearly and effectively both the company’s strategy and the progress

it achieves in delivering its strategic objectives.

Management meets regularly with existing and prospective investors, and with

brokers and analysts, including after publication of the Company’s full-year and

interim results. The Chair also meets periodically with our largest shareholders.

So too does our Senior Independent Director if material changes to Executive

remuneration are proposed.

We provide business updates regularly via trading statements, investor

presentations and regulatory releases including on material operational

milestones such as significant site acquisitions and disposals and progress in

obtaining planning consents.

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 2023

• Long-term returns.

• A business that considers and delivers a

positive environmental and societal impact.

• An effective governance framework to support

the successful delivery of our strategy.

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

further enhanced our financial and operational disclosures both in our Annual

Report and our regulatory releases.

We hosted investors and analysts on several site visits during the year and

at a Capital Markets Day in June 2023, which comprised a presentation

by members of the management team and a tour of both residential and

commercial sites in the Yorkshire & Central region.

Our Chief Executive and Chief Financial Officer held two live presentations

via the Investor Meet Company platform, which was open to all existing

shareholders and potential investors but particularly targeted at our retail

investors, giving them the opportunity to submit questions before and during

the event.

Strategic Report

Harworth Group plc: Annual Report and Financial Statements 2023

Section S172 Statement continued

Communities

Why we engage How we engage

By understanding the characteristics people want

in the communities where they live and work, we

are able to 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 Communities 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 2023

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.

• We have taken steps to broaden the range of products on our residential

sites by: continuing to progress our single-family BTR portfolio; launching

an affordable housing portfolio; and initiating a pilot programme for the

construction of Net Zero Carbon homes. This allows us to enhance the

vibrancy and diversity of our residential sites.

• The ESG Committee reviewed the evolution of Harworth’s sustainability

framework, with a focus on the “Communities” pillar of the Harworth Way.

Our Communities Framework will be published alongside this Annual

Report. See further on pages 74 and 75.

• We opened a new 50-acre country park at Cadley Park in Derbyshire,

providing recreational space and wildlife habitats at this 600-home

development. The park was developed by Harworth in close partnership

with South Derbyshire District Council, National Forest, RSPB, Derbyshire

Wildlife Trust and the local community.

• At Waverley, we agreed with NHS South Yorkshire Integrated Care

Board the design and specification for a new medical centre, and

secured a revised planning permission for our Olive Lane local centre,

which, alongside the medical centre, will comprise cafes, restaurants,

and shops. These will be important community assets for residents and

visitors to Waverley. Site preparation began in late 2023 with construction

commencing in January 2024. We are planning for Olive Lane to be

constructed by the end of 2024.

• At South East Coalville, construction of a new forest school is underway,

to be delivered in partnership with North West Leicestershire District

Council and Leicestershire County Council. The school will be built to a

bespoke design based on forest school principles, promoting education

through play and activity while nurturing creativity through self-activity and

investigation. The school is set to benefit the more than 1,000 residents

soon to be living on site and also those living in the wider area.

Strategic Report

Harworth Group plc: Annual Report and Financial Statements 2023

Customers

Why we engage How we engage

Our principal customers are: housebuilders, or in

the case of mixed tenure products investors and/

or registered providers; commercial developers;

and occupiers. As a master developer, we want

to ensure there is long-term demand for our

developments, to achieve which we need to

understand what our customers are looking for

when they assess development opportunities.

We engage with housebuilders and commercial developers to 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 their appetite for pre-let commitments and work in

partnership with occupiers who engage us for build-to-suit development.

As we progress our mixed tenure projects, including our Build-to-Rent and

Affordable Housing portfolios, we are engaging with selected investment

partners about portfolio specific and long-term forward funding and investment

opportunities.

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 2023

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. As at 31 December 2023, 37% of

the Investment Portfolio comprised Grade A properties (31 December 2022:

18%).

To support and align our sustainability aspirations with those of our tenants:

• We continued to work with some tenants directly, and others via our

managing agents, to understand the carbon emissions from their operations

on our premises.

• All new leases offered to existing and new tenants were on “green” lease

terms.

• We switched energy procurement for our Investment Portfolio to a new

renewable energy tariff.

• We worked with prospective occupiers of our new developments to offer

tailored renewable energy provision, via solar panels supported in some

cases by battery storage.

We continue to engage closely with our occupiers to ensure that payment

terms support both parties. In June 2023, Ilke Homes, the tenant of a site in

Flaxby Moor Industrial Estate, entered administration. We had engaged closely

with this tenant over preceding months, which ensured that we were alive to

its financial position and could react quickly to its insolvency. The site has since

been sold in line with book value.

Strategic Report

Harworth Group plc: Annual Report and Financial Statements 2023

Section S172 Statement continued

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 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 2023

A long-term partnership with Harworth in which

they are treated fairly, maintain good visibility

of our future requirements, and receive timely

payment, whilst contributing to Harworth’s

success.

During 2022 and 2023, we undertook a detailed review of our procurement

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

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

transitioning, which will further enhance development project procurement

and broaden existing good practice to other forms of procurement.

Ahead of the delivery of each of the BTR and affordable housing portfolios and

the Net Zero Carbon homes pilot, the Board undertook a review of delivery risk

including the counterparty due diligence undertaken by the management team

on all delivery partners.

During the year, we have engaged with suppliers to understand carbon

emissions arising from our major construction contracts allowing the Group to

report on a wider set of Scope 3 emissions.

During the year, the main contractor on our Chatterley Valley enabling works

contract entered administration. Where possible, we engaged with some of

its sub-contractors to retain their services, and benefitted from relationships

with our project delivery partners and relationships in the wider construction

industry to appoint suitable alternative contractors, mitigating, as far as

possible, the adverse impact on delivery cost and timetable.

Funders

Why we engage How we engage

We need external capital to fund the Group’s

activities, long-term projects and efficient growth.

We schedule relationship meetings with our senior lenders every six months

but have a regular dialogue with them throughout the year, including quarterly

all parties meetings.

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.

Their key interests How do we respond? Examples of actions taken in 2023

A profitable secure lending relationship with

open dialogue, regular updates and assurance

about our operational and financial performance

together with delivery against all our contractual

obligations.

Good levels of interest were expressed in our Affordable Housing 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.

Strategic Report

Harworth Group plc: Annual Report and Financial Statements 2023

Government

Why we engage How we engage

Harworth has an important part to play in

supporting some of the Government's main

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 2023

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 continued to be important

factors that inform our project appraisals.

During the year we developed a Harworth publication which proposes policy

reforms aimed at establishing a more supportive business environment that

encourages development and broader regional economic growth. We are

planning an extensive engagement programme around its launch inviting

key public sector and central government stakeholders across the political

spectrum to discuss whether solutions can be embedded as part of any

legislative revisions to existing policies. These discussions enhance and

complement our ongoing wider stakeholder engagement plans.

Strategic Report

Harworth Group plc: Annual Report and Financial Statements 2023

Effectively Managing Our Risk

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 transform land and property into sustainable places where

people want to live and work.

In this section we explain how the Board has been assured, and is satisfied, 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 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 accountabilities 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 a framework in place to respond effectively to changes in risk

profile, whilst at the same time making the most of our opportunities. Our insurance programme also plays an important role where we

are unable to eliminate certain risks.

Risk framework

INFORMING

REPORTING

The Board

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

for monitoring the risk profile of the business, and ensuring that measures and

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

principal and emerging risks.

Audit Committee

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

responsible for reviewing the appropriateness and effectiveness of risk management

activities and internal control processes.

Group Leadership Committee (‘GLC’)

The GLC has responsibility for identifying operational risks, implementing and

monitoring risk responses and ensuring the effectiveness of key controls. A risk

workshop is hosted at each GLC meeting 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 risk owners and managed on

a day-to-day basis by risk champions from each function across the business, and now

supported by our enterprise risk function, which was established at the start of 2024.

During the year we used our Group Risk and Assurance Map (‘GRAM’) to monitor

and report on risks - see more on the following page. Since the establishment of our

enterprise risk function, we are working on transitioning from the GRAM to a Risk and

Control Matrix.

Internal audit

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.

At the start of 2023, a new Head of

Internal Audit joined the business

(now Head of Audit and Assurance

following the formation of our

enterprise risk function at the

start of 2024) who is responsible

for designing and delivering a

36-month rolling internal audit

programme, with support from a

co-sourced partner. In March 2023,

the Audit Committee approved the

2023 internal audit programme.

The findings and recommendations

from these audits were reported

to the Committee throughout the

year. The Committee also reviews

annually the effectiveness of the

internal audit function. See further

in the Audit Committee Report on

page 113.

Strategic Report

Harworth Group plc: Annual Report and Financial Statements 2023

Group Risk and Assurance Map

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 and monitor

the alignment (or misalignment) of risk

appetite and risk profile;

• 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 informs

the 36-month rolling internal audit

programme (see page 113 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 internal controls systems, including all material financial, operational

and compliance controls, are effective.

The risk management system and internal audit programme pursuant to which, throughout the year, risks are monitored and managed,

and assurance is gained as to the effectiveness of internal controls, is summarised below:

Risk review framework: annual cycle

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

Audit Committee 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).

Audit Committee

review of internal

audit programme

and review of

eﬀectiveness of

the internal audit

function

Biannual

Board review

of principal

and

emerging

risks and risk

appetite

Biannual

Board review

of principal

and

emerging

risks and risk

appetite

Continuous review of all risks by risk owners and risk champions with support from the enterprise risk function

Delivery of internal audit programme, with real-time circulation of reports to the Audit Committee

GLC risk

workshop

GLC risk

workshop

GLC risk

workshop

The profile of the principal risks is reported to the Board at each Board meeting, with the Board undertaking a detailed review biannually (or at any time if there are significant

movements in the risk profile).

Strategic Report

Harworth Group plc: Annual Report and Financial Statements 2023

Effectively Managing Our Risk continued

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 at each meeting, and the Board

undertakes a detailed assessment every

six months, the most recent being in

November 2023.

In 2021, the Board identified through a

series of workshops a refreshed set of

principal risks, informed by the Company’s

strategy developed that year. During 2023,

the Board continued to review principal

risks, especially in the context of the

challenging and uncertain macroeconomic

and geopolitical environment which

persisted throughout the year. At the time

of writing, and looking ahead, the Board

anticipates national and global economic

and political uncertainty to remain elevated

requiring it to continue to manage the

Group’s principal risks against an uncertain

backdrop.

Outlined below are the changes that

have been made since reporting on

our principal risks in the 2022 Annual

Report. See pages 52 to 60 for a detailed

explanation of each principal risk.

Risk What has changed during the period

Availability of and

competition for

strategic sites

The Board determined the status of this risk to have reduced from “high” to “medium” as uncertain

market conditions have constrained the appetite of capital for long-term strategic sites, moderating

the level of competition for land. At the same time, our strong balance sheet and existing pipeline of

opportunities enable us to continue to grow our strategic land portfolio in a selective manner.

Power infrastructure

capacity

The Board identified a new principal risk reflecting the challenges in securing adequate power capacity

for development sites creating uncertainty in the cost and programme for development. This new risk

has a “medium” residual risk status.

Development

supply chain

The previous “Supply chain cost inflation and constraints” risk has been expanded to incorporate

all risks associated with management of the development supply chain combining supply chain

counterparty risk, including the risk of insolvencies, as well as inflation risk. Whilst inflation risk has

reduced, the Board considers that the overall development supply chain risk is trending higher due to

the increasing risk of contractor insolvency in challenging market conditions.

Counterparties:

investment partners

and service providers

The previous “Supply chain and delivery partner management (counter-party risk)” has been reframed

to focus on the risk of increased exposure to investment partners as well as counterparty risks amongst

our critical service providers (beyond those in our development supply chain). This risk, as amended,

has a “medium” residual risk status.

Planning Whilst the planning risk profiles of individual projects differ, the Board continues to consider that, overall,

the residual risk status of our planning risk remains “high” reflecting both current planning policy and local

authority resourcing headwinds. However, the Board considers that this risk is no longer trending higher.

There are signs of positive changes in planning policy over the medium term, regardless of the outcome of

the next General Election. In the meantime, Harworth continues to make progress through management

actions.

Residential and

commercial markets

Given prevailing economic headwinds at the half-year, the Board highlighted in the Company’s interim

results announcement that this risk could trend higher during the second half of the year. Conditions

have since stabilised in Harworth’s core markets with an improving outlook. Inflationary pressures are

easing such that there is an expectation of interest rate cuts from the middle of the year, which should

lead to a softening of gilt yields and reduction in mortgage rates. In the industrial & logistics sector,

robust rental growth has mitigated the impact of softening yields which are expected to stabilise with

clarity on interest rates. In the residential sector, house prices have risen moderately in recent months

and improving sales rates have led housebuilders to express optimism about the outlook for the sector.

Given this improved outlook, the Board determined that the “residential and commercial markets” risk

has reduced to “medium”. However, as uncertainty remains for businesses and consumers, not least

from a volatile geo-political backdrop, the Board will continue to monitor the status of this risk very

closely.

Strategic Report

Harworth Group plc: Annual Report and Financial Statements 2023

Very high

High

Medium

Low

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

Group Targets

The Harworth Way

The risk heat map below illustrates the status of our principal risks at the date of this report, both before and after mitigating actions.

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

on and mitigate our principal risks

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. Development supply chain

4. Counterparties: investment

partners and service providers

5. Power infrastructure capacity

6. Statutory costs of development

Markets

7. Residential and commercial

markets

People

8. Organisational development

and design

Finance

9. Availability of appropriate capital

Safety and Compliance

10. Health and safety

Sustainability

11. Net Zero Carbon pathway

Systems and Information

Resources

12. Cyber security

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).

1 4

Strategic Report

Harworth Group plc: Annual Report and Financial Statements 2023

Effectively Managing Our Risk continued

Risk 1 Commentary

Availability of and

competition for strategic

sites

Competition for acquisitions remains a key risk as acquiring (or otherwise securing an interest

in) new sites underpins the third pillar of our strategy: “Growing our strategic land portfolio and

land promotion activities”. During the year the Board determined the status of this risk to have

reduced to "medium" as uncertain market conditions have constrained the appetite of capital

for long-term strategic sites, moderating the level of competition for land. At the same time, the

Group has a robust pipeline of industrial & logistics and residential land (37.7m sq. ft of industrial

& logistics space and 27,190 housing plots at 31 December 2023), as well as a strong balance

sheet, enabling us to continue to grow our strategic land portfolio in a selective manner.

Description Mitigation Additional measures planned for 2024

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 and a Group-wide acquisitions tracker.

• 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 land assembly opportunities.

• Leveraging better our relationships

with local authorities and agents.

• Deploying alternative structures to

support land assembly, including via

strategic partnerships.

Current residual risk status

MEDIUM

Change in residual risk in the year

Link to strategy

Risk 2 Commentary

Planning Planning remains challenging due to a combination of factors including: Central Government

policy (the updated National Planning Policy Framework ('NPPF')); inertia pending a General

Election; and LPA under-resourcing. The determination of planning applications on certain

sites has been slower, and we have also seen local plan processes paused or suspended and

local planning committees refuse to adopt plans. At the same time, the short-term horizon

looks unfavourable with mandatory Biodiversity Net Gain ('BNG') requirements needing to be

implemented from January 2024, the updated NPPF (which poses potential long-term headwinds

for planning promotion), and introduction of the infrastructure levy (the practical application of

which remains unclear). That said, there are signs of positive changes in planning policy over

the medium term, regardless of the outcome of the next General Election. In the meantime, and

longer-term, Harworth remains well positioned with our large strategic landbank.

Description Mitigation Additional measures planned for 2024

Planning promotion risk

including uncertainty around

local and national changes to

planning regime with adverse

effects on promotion activity

and/or financial returns.

• We review greenbelt exposure at a portfolio level at

every Investment Committee and Board meeting.

• Project underwriting proposals include detailed

planning strategies (including competing sites

analysis and BNG considerations), informed by

project stakeholder mapping, which continue to

be monitored via site project plans.

• Local political advisers are appointed on

individual sites, where appropriate.

• Group strategic stakeholder mapping.

• We respond to consultations on emerging planning

policy, both in a solus capacity and via representative

groups, such as the British Property Federation.

• 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 Report

Harworth Group plc: Annual Report and Financial Statements 2023

Risk 3 Commentary

Development supply chain The previous "Supply chain cost inflation and constraints" risk has been expanded to incorporate

all risks associated with management of the development supply chain - combining supply

chain counterparty risk, including the risk of insolvencies, as well as inflation risk. Cost inflation

in the supply chain had been identified as a distinct principal risk reflecting a persistently high

inflationary environment following the Covid pandemic, but this risk is subsiding, and the

cancellation of the HS2 Northern Leg has the potential for more capacity to become available

in the contracting market helping further to regularise costs. However, macroeconomic

conditions have led to a materially increased prevalence of construction sector insolvencies.

The Board considers that this expanded risk is trending higher due to the increased potential for

insolvencies in our supply chain, and it, therefore, continues to be the subject of intensive scrutiny

and management.

Description Mitigation Additional measures planned for 2024

Exposure to development

supply chain leading to greater

exposure to pricing pressures

and labour constraints, and risk

of disputes with and/or default

by and/or insolvency of supply

chain partners.

• Our procurement approach is considered early in

project planning.

• We undertake rigorous tender processes.

• Cost plans are monitored closely, updated in

valuations and adjustments made regularly to

reflect pricing movements.

• Due diligence on contractors – screening of

contractors ahead of appointment together

with ongoing Group-wide review of contractor

“concentration risk” and financial health. To this

end, we utilise market intelligence regarding

contractors’ commitments and workload.

• Performance bonds sought to support all major

contracts.

• External review of contractor insurance packages

for every direct development project.

• We have established a suite of legal precedents

to promote consistency in land remediation and

direct development procurement.

• We have undertaken a

comprehensive review of

procurement and continue to

transition to a new operating model,

which will include tiering of the

supply chain and more intensive

relationship management of, and due

diligence on, strategic suppliers.

Current residual risk status

MEDIUM

Change in residual risk since

reformulation at the half-year

Link to strategy

Strategic Report

Harworth Group plc: Annual Report and Financial Statements 2023

Effectively Managing Our Risk continued

Risk 4 Commentary

Counterparties: investment

partners and service

providers

We face increased exposure to investment partners (JVs, forward funders, strategic investors) as

we continue to grow and develop our sites, seeking opportunities with partners in connection

with land assembly, direct development and delivery of alternative residential products. Our

governance and ways of working continue to mature to counter this increased exposure. In the

near term, a difficult economic climate also increases the risk of insolvencies amongst these

counterparties, which continues to be monitored closely. Separately, supply chain tiering, which

forms part of our transition to a new procurement operating model, will help to identify the critical

dependencies amongst our service providers (beyond those in our project delivery supply chain)

which could increase our vulnerability to disputes with and/or defaults by and/or insolvencies of

those providers.

Description Mitigation Additional measures planned for 2024

Increase in exposure to

investment partners and critical

dependencies on certain service

providers, leading to increased

risk from disputes with and/or

default by and/or insolvency of

these counterparties.

• A consistent process is followed for selecting and

“onboarding” counterparties.

• Project underwriting proposals include

detailed consideration of counterparty risk,

where appropriate. Due diligence to support

the appraisal of credit counterparty risk, and

counterparties' ability to meet their financial

commitments, is particularly rigorous for new

investment partners.

• Development of relationships with counterparties

and ongoing assessment of their delivery of

obligations.

• The comprehensive review of

procurement and transition to a new

operating model will make more

effective the way we engage with

service providers.

• Implementation of an enhanced

relationship management regime for

existing JV partners.

Current residual risk status

MEDIUM

Change in residual risk since

formulation at the half-year

Link to strategy

Strategic Report

Harworth Group plc: Annual Report and Financial Statements 2023

Risk 5 Commentary

Power infrastructure

capacity

There are increasing challenges in securing power for our development sites bringing uncertainty

and the risk of increasing costs and delay. The current system for securing power capacity, in which

applications are made to Distribution Network Operators (DNOs), results in the formation of

queues for available power capacity, meaning there can be a long wait for infrastructure upgrades

and/or for third parties to relinquish capacity they have secured but no longer need. In addition,

it is not uncommon for the National Grid ESO (NGESO) to amend or withdraw offers. In some

cases, NGESO is altogether unable to provide a cost or programme for upgrades. Following

NGESO’s consultation on the connections’ application process and final recommendations

report published in December 2023, we will continue to monitor and plan for implementation of

the reformed process which will represent a welcome transition to a “first ready, first connected”

approach. Should the application regime successfully change in this way, currently expected to be

implemented in January 2025, we expect the status of this risk to reduce.

Description Mitigation Additional measures planned for 2024

Challenges in securing power

for our sites resulting in

potential for adverse impact

and uncertainty as to cost and

programme for development.

• Analysis of power capacity and upgrade potential

and timing as part of acquisition underwrite.

• Early engagement with DNOs and NGESO

to identify availability of power capacity,

formulate procurement strategy, and seek earlier

connection offers.

• Entry into reservation commitments to secure

Harworth’s position, where appropriate.

• Continuing to monitor the proposed

changes to and implementation of

the reformed connections system,

and future application requirements.

Current residual risk status

MEDIUM

Change in residual risk since

formulation at the half-year

Link to strategy

Risk 6 Commentary

Statutory costs of

development

It is the current government’s settled policy to increase public financial gain by taking a larger

proportion of land value uplift derived from planning consents. Legislative measures to achieve

this aim include: the residential property developer tax, albeit this has already been implemented

with no tangible effect noticed on pricing of land sold to housebuilders; the Building Safety Levy,

which is not yet implemented but does not seem to be high on the agenda when we engage

with housebuilders; and the Infrastructure Levy, to be implemented via the Levelling Up and

Regeneration Act, but the practical implementation of which remains unclear. The Labour Party

has indicated that it would abandon some of these measures if it were to win the next General

Election.

Description Mitigation Additional measures planned for 2024

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.

• Responding to emerging policy both on a solus

basis and through key stakeholder groups.

• None planned.

Current residual risk status

MEDIUM

Change in residual risk in the year

Link to strategy

Strategic Report

Harworth Group plc: Annual Report and Financial Statements 2023

Effectively Managing Our Risk continued

Risk 7 Commentary

Residential and

commercial markets

As conditions have stabilised in Harworth’s core markets with an improving outlook, the

Board have assessed this risk to have reduced to a “medium” residual risk status. However, as

uncertainty remains for businesses and consumers, which is likely to weigh on sentiment for some

time to come, the Board will continue to monitor the status of this risk very closely.

Notwithstanding market headwinds, Harworth’s core markets of industrial & logistics and

residential have continued to be resilient as they remain key drivers of economic growth.

This, coupled with the scale and mix of our portfolio and our ability to create value through

management actions, means that the Group is well positioned to mitigate and adapt to changes

in the external environment. For the industrial & logistics market, the structural drivers of demand

remain largely intact and supply in our regions is relatively constrained. For residential, we expect

that, even as interest rates ease, affordability challenges will still impact house buyer demand

in some parts of the country. However, the supply of development-ready land will remain

constrained, and we are confident that our consented, de-risked serviced land will appeal to a

wide range of buyers. At the same time, our increasingly diversified range of residential products

will provide us with exposure to markets that continue to grow regardless of where the cycle is.

Description Mitigation Additional measures planned for 2024

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.

• Regular review of site project plans by our delivery

teams and the Investment Committee, informed

by prevailing market conditions.

• Management actions to drive value and adapt to

prevailing market conditions - for example, during

2023 we continued to pursue mixed tenure

strategies, and did not start any new speculative

direct development projects.

• Continue to implement the strategy

taking account of existing market

conditions. For example, we will

continue to accelerate serviced

land sales where we see regional

market opportunities, press ahead

with our mixed tenure products, and

mitigate our exposure to market risk

by focusing on build-to-suit vertical

development opportunities and land

parcel sales.

Current residual risk status

MEDIUM

Change in residual risk in the year

Link to strategy

Strategic Report

Harworth Group plc: Annual Report and Financial Statements 2023

Risk 8 Commentary

Organisational

development and

design

Following a period of rapid growth in employee numbers, the Board recognised 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) was critical as the Group continued to evolve and grow. During the year, we

made good progress in establishing that structured approach, examples of which are identified

in the mitigation activities below. Our organisational design and development will be subject to

continuous evolution. It will likely remain a principal risk in the medium-term, during which time

that evolution will be more intensive, to support the marked changes in pace and scale of our

activities required by our strategy.

Description Mitigation Additional measures planned for 2024

Misalignment of culture,

capability, systems and/or

controls with what the business

requires to deliver the strategy.

• Implementation of people strategy to

complement our business strategy, focusing on

the number and nature of resources required to fill

skills gaps as well as numbers gaps.

• During the year, progress has been made in the

focus areas below:

• Review of Harworth’s culture

• Reward project (pay & benefits)

• Development of a new Talent and Learning &

Development strategy: the “Harworth Academy”

• Continue to implement the "People

and Enabling Excellence Strategy",

focusing on culture, workplace and

the next phase of the reward project.

Current residual risk status

MEDIUM

Change in residual risk in the year

Link to strategy

Risk 9 Commentary

Availability of

appropriate capital

The increase in pace and scale of activity under our strategy in turn has the potential to require

additional capital. The £200m RCF signed in early 2022, supplemented by project specific

funding where appropriate, currently supports the funding needs of the business. Headroom

is projected to remain on all LTV covenants and could withstand a material fall in valuations.

The interest rate risk is plateauing as interest rates are expected to have peaked. However, to

leverage our growing development pipeline we are likely to need to supplement the RCF with

additional capital in future years. The Board recognises it could be challenging, given current

market uncertainty, to raise additional equity to fund accelerated development, and therefore

management is actively reviewing other potential sources of funding.

Description Mitigation Additional measures planned for 2024

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.

• Improvements to longer-term financial

forecasting.

• 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

and review additional funding options.

• Continue to identify scheme specific

and grant funding.

• Progress the review of capital

structure funding options.

Current residual risk status

MEDIUM

Change in residual risk in the year

Link to strategy

Strategic Report

Harworth Group plc: Annual Report and Financial Statements 2023

Effectively Managing Our Risk continued

Risk 10 Commentary

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

importance to us. 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 management of health and safety on our

horizontal and vertical development projects, and 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.

We have a long-established Environment, Health & Safety ('EHS') function with a focused remit on

health and safety and environmental policy, advice and assurance.

Description Mitigation Additional measures planned for 2024

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.

• During the year we transitioned the SHEMS to

a new cloud-based platform which facilitates

reporting of site incidents and risk assessments

including real-time reporting via a mobile

application.

• The EHS team undertakes a rigorous site

inspection assurance regime.

• We have a panel of EHS consultants who support

our project delivery, and have undertaken

a project to improve engagement with and

management of these consultants.

• EHS Committee meetings are held quarterly and

attended by the Executive and senior management

from all delivery functions. These are supplemented

by a programme of attendance by EHS team

members at delivery team operational meetings.

• 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.

• EHS reports are made to the Executive and Board

monthly. The Head of EHS provides a detailed

update to the Board annually.

• Continuous review of improvements

to EHS reporting supported by the

cloud-based platform.

• Improvements to the management

of first line and second line assurance

site inspections.

Current residual risk status

LOW

Change in residual risk in the year

Link to strategy

Strategic Report

Harworth Group plc: Annual Report and Financial Statements 2023

Risk 11 Commentary

Net Zero Carbon (‘NZC’)

pathway

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, BNG and social value measures. In April

2023, we published our first NZC Pathway report and will publish a NZC Pathway Progress

Report for 2023 alongside this Annual Report, as well as our Communities Framework. We

consider it crucial that, in delivering on NZC, our approach is authentic, understandable and

deliverable.

Description Mitigation Additional measures planned for 2024

Failure to develop, manage and

meet our NZC commitments

and/or NZC regulations,

resulting in financial loss,

reduced availability of funding

and/or reputational damage.

• Development of The Harworth Way and

NZC Pathway with targets identified (see pages

70 to 77).

• Continued transition of our Investment Portfolio to

100% modern Grade A.

• Improvements to the capture and analysis of

environmental data (including from our supply

chain and tenants) with measures in place for

verification of the same.

• Initiation of a pilot for the construction of our NZC

homes product, Coze Homes.

• New leases offered to existing and new tenants

are on “green” lease terms.

• We switched energy procurement for our

Investment Portfolio to a new renewable

energy tariff.

• We work with prospective occupiers of our new

developments to offer tailored renewable energy

provision.

• Project appraisals include better sustainability

analysis.

• Development of Harworth’s commercial and

residential building specifications.

• We are a member of the UK Green Building

Council, which facilitates sharing of knowledge

and best practice.

• Continue to improve the capture and

analysis of environmental data.

• Continued development of a carbon

accounting system, including

appropriate accreditation.

• Continued development of an

Energy and Natural Capital strategy.

Current residual risk status

MEDIUM

Change in residual risk in the year

Link to strategy

Strategic Report

Harworth Group plc: Annual Report and Financial Statements 2023

Risk 12 Commentary

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

at risk. We have robust strategic and technical measures in place to monitor and mitigate this risk.

Our last biennial penetration test (H2 2022) found Harworth to be in a strong position, and we

undertake rolling vulnerability scanning which provides real-time assurance. Updates on cyber

security risk and mitigations are provided to the Audit Committee biannually.

Description Mitigation Additional measures planned for 2024

Successful cyber-attack

jeopardising business continuity.

• The Business Continuity Plan.

• We have an external provider for IT support,

which remains vigilant to the evolving cyber

security backdrop, and is supported by a retained

cyber security specialist.

• 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 Business

Continuity Plan.

Current residual risk status

LOW

Change in residual risk in the year

Link to strategy

Effectively Managing Our Risk continued

Strategic Report

Harworth Group plc: Annual Report and Financial Statements 2023

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 provide 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 are working towards

a 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. We expect to address data

limitations in the near term as Harworth

invests in systems and resourcing to

capture more data.

• Metrics & Targets: Further significant

progress has been made over the year

in measuring our Scope 3 greenhouse

gas emissions including a wide range

of emissions reliant on the disclosure of

data to us by suppliers and customers.

Scope 3 emissions reporting for 2023,

as published in our NZC Pathway

Progress Report 2023, covers a

significant proportion of our overall

Scope 3 emissions, including emissions

data from our major construction

contracts and from energy use within

our Investment Portfolio for the first

time. There remains some work to be

done over the course of 2024 to further

widen this data set, as outlined our NZC

Pathway Progress Report.

Further information on The Harworth Way

and the Group’s NZC pathway can be

found on pages 70 to 77 of this Annual

Report, and Harworth’s standalone

NZC Pathway Progress Report, which is

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 68 and 69.

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 project appraisal

framework continues to evolve, and as

of 2023 new project proposals require

commentary in respect of the Focus Impact

Areas of The Harworth Way and specifically

the requirements of Harworth’s NZC

pathway. The Board also considers climate-

related risks and impacts when assessing

business plans, major capital expenditures,

acquisitions and sales.

Ongoing oversight of climate-related

issues is carried out by our ESG

Committee, a sub committee of the Board,

which is chaired by Angela Bromfield and

comprises the Chair of the Board, Chief

Executive, Chief Financial Officer and

Non-Executive Directors Martyn Bowes

and Marzia Zafar, and is 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-based risks

and opportunities.

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 guide its decisions

in formulating strategy and ongoing risk

management. During the year, the ESG

Committee reviewed and recommended for

approval to the Remuneration Committee

certain 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 sustainability team, which

was established in 2022 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 Report

Harworth Group plc: Annual Report and Financial Statements 2023

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 Environment, Health & Safety

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 in line

with The Harworth Way. 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,

3Ci (the Cities Commission for Climate

Investment) 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 the end of 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 as well as our business activity.

Given the complex nature of our sites, a

qualitative review has been undertaken

considering the type and condition of our

portfolio assets and their location. This is

followed by a detailed discussion held with

ESG Committee to consider the potential

impacts, financial, strategic, operational

and reputational on the Group. We have

also considered the mitigation measures

that we currently and could potentially

implement, which have informed our

risk assessment outlined on page 59.

In addition, through the planning and

delivery phases, all developments follow

the regulatory and legislative requirements

for assessing and implementing measures

to mitigate climate change. 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

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

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

Task Force on Climate-Related

Financial Disclosures

continued

Strategic Report

Harworth Group plc: Annual Report and Financial Statements 2023

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 the

end of 2027. This year we completed (‘CRREM’) Carbon Risk Real

Estate Monitor assessments for the majority of our Investment

Portfolio and we are developing 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 and

changes to policy 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: There could be challenges in acquiring the materials

and equipment needed, and gaining access to the required

power capacity, to manage our transition in a timely and cost-

effective way, due to significant demand across the market and

constrained supply chains.

We will continue to monitor the market, while undertaking

rigorous tender processes and utilise market intelligence regarding

supplies of such materials or equipment. By taking action ahead of

regulatory deadlines we will potentially avoid procurement during

peak times of demand and constrained supply.

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 requirements,

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.

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.

Harworth continues to enhance its environmental reporting,

and our NZC pathway provides a framework for measuring

progress against our objectives. We are engaging closely with

investors, other stakeholders and industry bodies to ensure

our environmental reporting continues to evolve and meet

expectations.

Reputation: Communities that are impacted by climate-related

events such as flooding on or close to our developments may

perceive the Group to be contributing to, or not doing enough

to mitigate, any impacts.

We will continue to monitor the potential impact of climate-related

events at our sites and the surrounding area and engage with local

authorities and community groups to ensure they understand

Harworth’s role and responsibilities.

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.

Our planning permissions and development designs incorporate

a range of climate risk mitigation measures, meeting all regulatory

and legislative requirements. For example through developing

sustainable urban drainage systems (‘SUDS’) and sustainable

cooling and heating systems for industrial units which will provide

resilience for increases in global temperature. We maintain a flood

risk register for all sites and undertake a flood risk assessment as part

of the planning and design process.

Strategic Report

Harworth Group plc: Annual Report and Financial Statements 2023

Task Force on Climate-Related

Financial Disclosures

continued

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. Harworth has committed that all its new commercial

developments will be NZC in construction and operation by 2030.

Resilience: Our commercial building specification for new

direct development will deliver future-proofed assets that will

provide resilience with lower energy use intensity, emissions

and transition costs in the future. Our use of SUDS will help to

mitigate flood risk damage on our properties. Across our sites we

promote public transport use, create cycle paths and walkways

to encourage residents to reduce car use and we undertake

biodiversity improvements to improve the environment.

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 as part of our commercial build specification

alongside greater energy efficiency across our developments,

we can improve energy security, reducing emissions whilst

mitigating the impact of energy price rises and volatility. We have

completed whole life carbon assessments on our Investment

Portfolio assets which will inform better our asset management

plans to upgrade assets providing resilience.

Our Energy & Natural Capital strategy aims to leverage energy

generation and storage opportunities across our portfolio. We

continue to review the portfolio 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 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.

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 taxes may increase the costs of remediating and preparing strategic land sites, due to the amount of energy

required. This could impact the viability or profitability of progressing some sites through the planning system, and, therefore, the

valuation of our land bank.

Strategic Report

Harworth Group plc: Annual Report and Financial Statements 2023

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 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.

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 our

sites in these areas. 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.

Strategic Report

Harworth Group plc: Annual Report and Financial Statements 2023

Task Force on Climate-Related

Financial Disclosures

continued

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)

2°C scenario

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 continuing to update

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 adaptation.

Impact of a 4°C scenario

As physical risks could be significantly

higher, the demand for future-proofed

buildings and updated design of

developments with energy efficient

technology is likely to be greater, meaning

we could realise land value increases

sooner than in a 2°C scenario.

Conclusions of risks and

opportunities analysis

Our assessment of climate risks and

opportunities in the short, medium

and long-term, using different global

temperature rise scenarios, has concluded

that, based on information currently

available, the Group’s strategy is set up

well to manage risks, mitigate impacts

on the business, strategy and financial

planning, and enhance the business as

opportunities arise. Although the impact

could be high under certain scenarios,

our approach to masterplanning our sites

and development will allow us to reflect

changing environmental conditions and

underpins the resilience of the business

model to climate-related risks.

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 48.

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 responses) 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

2025 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 commercial

building specification: 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

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 48 to 60.

Strategic Report

Harworth Group plc: Annual Report and Financial Statements 2023

Metrics & targets

Metrics used to assess climate-related risks and opportunities

Current metrics used 2023 2022 Target

Transition

risks

GHG emissions data: Scope 1, Scope 2 and most

categories of Scope 3 emissions

GHG emissions data can be found in our Streamlined Energy

and Carbon Reporting disclosure on pages 68 and 69.

% Investment Portfolio that is EPC Grade C

or above

75% 66% 100% by 2027

Proportion of commercial building space

developed in the year incorporating renewable

energy provision

100% –

(1)

100% each year

Proportion of energy consumed by Harworth

operations

(2)

that is generated from renewable

sources

70% –

(1)

100% by 2025

Proportion of Group targets for our annual bonus

scheme for all employees relating to ESG factors

10% 10% n/a

Score achieved for the ESG element of our

Group targets

100% 90% At least 50%

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

(3)

year-end

37%

(4)

18% 100% by 2027

Acreage of Harworth-owned land used for

sequestration or offsetting

120 acres 0 acres 200 acres

Not measured in 2022.

Scope 2 emissions, including consumption at company offices, landlord controlled areas of leased assets, vacant units, infrastructure, other Harworth assets and electricity

used to charge EVs.

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.

Excludes a site in Flaxby, North Yorkshire, which was previously occupied by Ilke Homes, as this was sold shortly after year-end

Further details on the methodologies used to calculate NZC targets are set out in our NZC Pathway Progress Report and methodology

statement. Group targets and scores are set out in the Directors’ Remuneration Report.

Additional metrics currently being explored from 2024

Transition risks:

• Data on remaining categories of Scope

3 emissions

• Cost of offsetting and kg CO

offset

per annum

Physical risks:

• Spending on infrastructure projects

that will reduce risks of physical climate

impacts at sites

Opportunities:

• Reduced energy use from improved

energy efficiency and sourcing

• % 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 NZC by 2030

for our current SECR Operational Boundary

for Scope 1, 2 and selected Scope 3

emissions, and to reaching NZC by 2040

for all emissions. More information can be

found in our NZC Pathway Progress Report

2023, which is published alongside our

Annual Report.

Strategic Report

Harworth Group plc: Annual Report and Financial Statements 2023

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.

The GHG emissions data below relate to the year ended 31 December 2023. Emissions data from the year ended 31

December 2022 are also provided for comparison.

Unless otherwise stated, our emissions

data is 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

2023. We follow 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 they are not

deemed to be within our operational

control, but we disclose these in the Net

Zero Carbon Pathway Progress Report

2023 where we have also published an

extensive methodology which outlines

our approach to carbon reporting. As

Harworth's operations are wholly based

in the UK, 100% of our reported energy

consumption and emissions relate to

the UK.

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 (2022) as well

as the current year. As a result, we have

restated the prior year figures to allow

a year-on-year comparison. Notable

improvements to our reporting include

the inclusion of Water Treatment, Public

Transport (2023 only) and the use of AIB

UK Residual Grid Factors to calculate

Market Based emissions and renewable

energy exports. More information on our

approach can be found in the Net Zero

Carbon Pathway Progress Report 2023.

Streamlined Energy & Carbon

Reporting ('SECR') disclosure

Progress in 2023:

Total Scope 1 Scope 2 Scope 3

• Overall reduction in

Location Based emissions

of -24% and Market based

of -33% in 2023.

• Overall reduction in Total

Scope 1 & 2 kWh of -19%

year on year.

• We have undertaken

CRREM assessments across

our portfolio in order to

better understand the

energy efficiency of our

buildings.

• Significant reduction in site

fuel emissions driven by the

use of alternative fuels at

our Ironbridge site.

• Commencement of our

transition from diesel to

electric leased vehicles and

the associated impact on

Leased Vehicle emissions.

• We have began to

transition our electricity

procurement to REGO

backed green electricity,

thus reducing our market

based emissions, and will

continue this approach

in 2024.

• Electric vehicles' share of

expensed personal vehicle

travel increased from 7% to

15% year-on-year as a result

of our onsite EV chargers

and use of the electric

vehicle salary sacrifice

scheme. Despite an increase

in staff headcount year-on-

year, our business travel

emissions from personal

vehicles remained flat.

• Expansion of reporting to

include Water Treatment

and Business Travel - Public

Transport.

Strategic Report

Harworth Group plc: Annual Report and Financial Statements 2023

Greenhouse Gas Emissions (tCO

2023 2022

Scope 1 Site Fuel¹ 70 317

Natural Gas² 80 85

Leased Vehicles³ 12 18

Total 161 419

Scope 2

Location Based 470 468

Market Based 651 884

Total Scopes 1 & 2 Location Based 631 887

Market Based 813 1,303

Selected Scope 3 Business Travel

* 116 111

Homeworking

27 26

Waste Disposal

2 2

Water Supply 13 10

Water Treatment 14 18

Total 171 167

Total Emissions Location Based 802 1,054

Market Based 984 1,470

Renewable Energy Exported to the National Grid

-5 -5

Total Net Emissions Location Based 797 1,049

Market Based 978 1,464

Energy Consumption (kWh)

Scope 1 1,174,929 1,824,142

Scope 2 2,268,274 2,420,315

Total Scopes 1 & 2 3,443,203 4,244,457

Revenue Intensity Ratio

Total Location Based Scopes 1 & 2: tCO

e / £m Rev 8.71 5.32

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

Includes consumption at company offices, landlord controlled areas of leased assets, vacant units, and other Harworth assets.

Fuel used in vehicles leased by Harworth.

Includes consumption at company offices, landlord controlled areas of leased assets, vacant units, infrastructure, other Harworth assets and electricity used to charge EVs.

Includes business travel in all employee-owned vehicles and public transport (2023 only). Where possible we have used vehicle specific CO

e emission factors to increase

accuracy of reporting. Business Travel does not include employee commuting to principal place of work.

Working hours from home for all employees.

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

Energy produced and exported to the national grid by the solar PV panels at Harworth's head office, Advantage House.

* Includes 5.5tCO

e of Public Transport not included in 2022 figures.

Strategic Report

Harworth Group plc: Annual Report and Financial Statements 2023

PLANET

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.

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.

Governance

Read more on

pages 74 and 75

Strategic Report

Harworth Group plc: Annual Report and Financial Statements 2023

The Harworth Way 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.

PEOPLE

FOCUS IMPACT AREAS

Promoting

engagement

& happiness

Prioritising

health &

safety

Wellbeing

Being socially

responsible

Employee

experience

Culture

PLANET

FOCUS IMPACT AREAS

Improving

energy

eciency in

our Investment

Portfolio

Driving building

eciency &

integrating

energy into

development

Developing

responsibly

& building

in climate

reslience

Protecting &

promoting

biodiversity

Net Zero

Carbon

pathway

Circular

economy &

whole life

carbon

COMMUNITIES

FOCUS IMPACT AREAS

Promoting

healthier

lifestyles

Creating

sustainable

communities &

preserving

heritage

Creating

inclusive

spaces

Holistic

travel

planning

Supporting

jobs

Growing

economies

THE HARWORTH WAY PILLARS FOCUS IMPACT AREAS BUILDING BLOCKS OUTPUTS

Investment portfolio review model

Energy process

Planning template

Competitor analysis

Building specification

Solar delivery model & process

Green lease terms

Appraisal tools

Whole life carbon assessment

Occupier guides

Minimising environmental

impact, building in climate

resilience and promoting

biodiversity

PLANET

Driving building

eﬃciency & integrating

energy into development

Improving energy

eﬃciency in our

Investment Portfolio

Circular economy &

whole life carbon

Developing responsibly

& building in climate

resilience

Protecting

& promoting

biodiversity

Net Zero

Carbon

pathway

Driving building

eﬃciency & integrating

energy into development

Whole life

carbon

assessment

Commercial

building solar

strategy

Building regulations

review & commercial

building specification

Green lease

terms & occupier

guides

Development

energy

strategies

Sustainability

planning stage

framework

PLANET

PEOPLE

COMMUNITIES

PLANET

Delivering for our planet, communities and people

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 to the right.

Strategic Report

Harworth Group plc: Annual Report and Financial Statements 2023

The Harworth Way continued

Planet

We aim to minimise our environmental

impact whilst promoting climate resilience

and biodiversity through our development

and regeneration activities. Applying 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 focusing on building efficiency and

integrating renewable energy into our developments.

We also 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.

FOCUS IMPACT AREAS

Minimising environmental

impact, building in climate

resilience and promoting

biodiversity

PLANET

11 11

Driving building

eciency & integrating

energy into development

The delivery of energy ecient,

resilient buildings that meet occupiers’

demands today and in the future

Improving energy

eciency 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 NZC

commitments for Scope 1, 2 and

3 business travel by 2030 and all

emissions by 2040

For more details on progress with our

NZC Pathway, please refer to our NZC

Pathway Progress Report for 2023.

Strategic Report

Harworth Group plc: Annual Report and Financial Statements 2023

Improving

energy

eciency in

our Investment

Portfolio

Driving building

eciency &

integrating

energy into

development

Developing

responsibly

& building

in climate

reslience

Protecting &

promoting

biodiversity

Net Zero

Carbon

pathway

Circular

economy &

whole life

carbon

During the year we continued to incorporate

renewable energy into our industrial & logistics

buildings through the provision of rooftop solar

panels. We have worked with occupiers to build in

flexibility for future expansion of the systems through

additional panels and battery storage capability.

In total in 2023 we provided rooftop solar at 13

buildings across three sites, amounting to 1,420KWp

of power from 6,900 square metres of solar panels.

There is the potential to expand this system to cover

over 38,000 square metres, and we will explore

these opportunities further with occupiers.

Also during the year, we rolled out comprehensive

green lease and power provision agreements to

all new occupiers, which commit both Harworth

as owner as well as the occupier, to share data and

undertake specific responsibilities to monitor and

reduce carbon emissions.

Improving

energy

eciency in

our Investment

Portfolio

Driving building

eciency &

integrating

energy into

development

Developing

responsibly

& building

in climate

reslience

Protecting &

promoting

biodiversity

Net Zero

Carbon

pathway

Circular

economy &

whole life

carbon

During the year we undertook a site review of all

physical assets, the activities of our occupiers and a

technical analysis within our Investment Portfolio.

This review included a Carbon Risk Real Estate

Monitor (‘CRREM’) assessment of the emissions

performance of each physical asset in the portfolio

against the 1.5°C pathway for emissions reduction,

based on the UK Government's 2050 NZC

target date.

The outcome of the process will form the basis of an

asset-by-asset plan that baselines emissions based

on energy use, occupancy and the current physical

nature of the building.

By mapping the emissions performance against the

1.5°C pathway, we can determine the individual

measures required to improve emissions to meet this

target by 2050.

Improving

energy

eciency in

our Investment

Portfolio

Driving building

eciency &

integrating

energy into

development

Developing

responsibly

& building

in climate

reslience

Protecting &

promoting

biodiversity

Net Zero

Carbon

pathway

Circular

economy &

whole life

carbon

As part of our commitment to be operationally NZC

by 2030 we have implemented a range of measures

that have led to an overall reduction in emissions by

24% from 1,054 tCO

e to 802 tCO

Alternative fuels: the transfer of our pulverised fuel

ash ('PFA') recovery plant at Ironbridge from diesel

to hydrogenated vegetable oil ('HVO'), leading to

a 69% equivalent reduction in emissions for the site

operations.

Electric vehicle uptake: an increase in electric vehicle

use from 6% to 14% of our total business travel over the

course of the year, and a decrease in diesel vehicle use

from 49% to 37%. These factors combined led to an

overall 2% reduction in business travel emissions year

on year against the backdrop of a slight increase in

staff numbers.

More information can be found in the SECR

disclosure on pages 68 and 69.

Improving

energy

eciency in

our Investment

Portfolio

Driving building

eciency &

integrating

energy into

development

Developing

responsibly

& building

in climate

reslience

Protecting &

promoting

biodiversity

Net Zero

Carbon

pathway

Circular

economy &

whole life

carbon

Case study: Simpson Park

At our Simpson Park site in Nottinghamshire, we

are taking a holistic approach to material re-use

and applying circular-economy principles in the

regeneration of the former Harworth Colliery into a

new community of up to 1,300 homes.

We have an objective of complete material re-use for

the project, achieved through:

• 100% re-use of 300,000 square metres of soil

during earthworks

• leaving development platforms 600mm below

finished floor level to minimise the volume of

housebuilder waste materials

• storing housebuilder waste materials from

earlier phases to be used in the earthworks for

subsequent phases

• the use in landscaping of soil deemed unsuitable

for engineered fill

• the use by the contractor of solar energy, a smart

generator/battery storage system, and a small

wind turbine during construction

• the use of an electric hybrid crusher and recovery

and segregation of below slab stone for use in the

site’s roads, meaning significant savings in carbon

emissions compared to the purchase and delivery

of new material to the site.

Strategic Report

Harworth Group plc: Annual Report and Financial Statements 2023

The Harworth Way continued

Communities

We aim to create, strengthen and support

communities through the regeneration

and development of our sites, both today

and in the future. Our activities not only

benefit the new communities we create

but existing ones across our regions.

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.

FOCUS IMPACT AREAS

Creating, strengthening and

supporting the communities

we create and work within

both today and in the future

COMMUNITIES

Growing economies

Measuring our regeneration impact on

deprivation and the positive economic

ripple effect through our supply chain,

occupiers and wider stakeholders

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

aer development

Creating sustainable communities

& preserving heritage

Incorporating integrated neighbourhood

principles alongside a mixture of tenure within

our new developments, whilst driving catalytic

impacts and integration beyond our

development boundaries

Supporting jobs

Economic and social value

assessments, forecasting the

local and regional economic

and social impacts for

each 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

For more details please read our

separate Communities Framework

Strategic Report

Harworth Group plc: Annual Report and Financial Statements 2023

Promoting

healthier

lifestyles

Creating

sustainable

communities &

preserving

heritage

Creating

inclusive

spaces

Holistic

travel

planning

Supporting

jobs

Growing

economies

Promoting

healthier

lifestyles

Creating

sustainable

communities &

preserving

heritage

Creating

inclusive

spaces

Holistic

travel

planning

Supporting

jobs

Growing

economies

We are committed to ensuring our developments have a

positive economic and social impact through supporting

jobs, investment and innovation throughout our regions.

2023 saw us complete or commence construction

of 380,000 sq. ft of employment space supporting

thousands of high-skill jobs, as well as starting construction

of Olive Lane, a new convenience retail and leisure

destination at Waverley and a new school at South East

Coalville, supporting further jobs in the services and

construction sectors.

As in previous years, we 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.

Our portfolio has the potential to:

support up to

76,500

jobs

(2022: 73,000)

deliver

£4.8bn

Gross Value Added

(2022: £4.6bn)

generate up to

£85.2m

in business rates

(2022: £82.3m)

deliver up to

£54.8m

in council tax receipts

(2022: £56.1m)

Promoting

healthier

lifestyles

Creating

sustainable

communities &

preserving

heritage

Creating

inclusive

spaces

Holistic

travel

planning

Supporting

jobs

Growing

economies

At our Riverdale Park development in Doncaster, we

worked with Mosodi to develop a holistic travel plan

to help residents to travel sustainably and conveniently

within the local area and beyond. This included

providing resident travel packs that were delivered to

each home at the development, offering one-to-one

travel advice and discounts on public transport.

We also established links with Enterprise Car Club

as well as local cycle and running retailers. At a local

authority level, we met regularly and established strong

relationships with Doncaster Council and Travel South

Yorkshire, to improve bus connections to the site.

Promoting

healthier

lifestyles

Creating

sustainable

communities &

preserving

heritage

Creating

inclusive

spaces

Holistic

travel

planning

Supporting

jobs

Growing

economies

Case study: Waverley:

Learn-to-ride cycle track

In September, we opened a new learn-to-ride cycle

track at our Waverley development in Rotherham,

with a ribbon cutting by triple Olympic champion Ed

Clancy, who grew up in the area and serves as Active

Travel Commissioner for the South Yorkshire Mayoral

Combined Authority. The project was jointly funded by

Harworth and a £45,000 grant from Places to Ride, a

partnership between British Cycling, the Department

for Digital, Culture, Media & Sport ('DCMS') and Sport

England.

The learn-to-ride cycle track sits at the heart of the

Waverley site, providing a safe, fun and traffic-free

environment for children to learn to ride a bike and

progress skills before venturing onto Waverley’s

connecting cycle paths and roads. It will eventually form

part of Highwall Park, a planned 1.5km green space

connecting the AMP to the Waverley lakes. Harworth

sponsored a series of free workshops at the track during

the October 2023 half term. Facilitated by Tuff Riders,

the workshops included expert guidance from certified

instructors, tailored sessions for all skill levels and exciting

activities designed to boost confidence and develop

essential bike handling skills.

Strategic Report

Harworth Group plc: Annual Report and Financial Statements 2023

The Harworth Way continued

People

We aim to be an employer of choice,

creating an inclusive, diverse, and

empowered workplace culture in which

our people can realise their full potential.

Central to this is employee wellbeing and

ensuring our people remain inspired,

engaged and motivated.

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.

FOCUS IMPACT AREAS

We create an inclusive,

supportive and empowered

workplace culture in which people

can develop and fulfil their potential

PEOPLE

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

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

Promoting engagement

& happiness

Providing workplace conditions

that are fully aligned with the

needs of our people,

demonstrating a positive, causal

link between being happy and

high performance

Strategic Report

Harworth Group plc: Annual Report and Financial Statements 2023

Prioritising

health &

safety

Promoting

engagement

& happiness

Being socially

responsible

WellbeingEmployee

experience

Culture

Our culture is formed by everyone at Harworth. We

know through employee feedback that Harworth has a

positive culture, and we are aware that as we grow, we

want to be proactive in defining how it needs to evolve

whilst preserving all that is great about the business.

For this reason, during 2023 we reviewed and

started to refresh our vision, values, and behavioural

competency framework, which will be embedded

throughout 2024.

The first stage of the project “Insight Phase” was

completed in 2023 and concluded that there are many

widely shared deep-rooted behaviours within Harworth

that are helpful and uniquely special which we need

to hold onto in the future. This can be summarised

as: being proud of our purpose; a deep internal

commitment to Harworth; and our success being

built on collaboration between teams. We will ensure

that these principles are embedded into our new

framework.

Prioritising

health &

safety

Promoting

engagement

& happiness

Being socially

responsible

WellbeingEmployee

experience

Culture

We are committed to supporting local charities and

community groups, and make it as easy as possible for

staff to volunteer and fundraise for causes that matter to

them. During the year we donated £33,000 and our

staff volunteered for 241 hours to support:

In 2024, we will be reviewing our charity policy to

make it even easier for staff to support charities that are

personal to them. As part of this, we will be reviewing

our policies around taking time off for volunteering as

well as refreshing our internal communications around

charity work to make it more prominent and inspiring for

colleagues.

Our newly formed placemaking team will help to further

strengthen the community events and activities that

we offer across our development sites, which includes

working more closely with local schools and community

groups.

charities

community initiatives

charity events

local clubs

Prioritising

health &

safety

Promoting

engagement

& happiness

Being socially

responsible

WellbeingEmployee

experience

Culture

Prioritising

health &

safety

Promoting

engagement

& happiness

Being socially

responsible

Wellbeing

Employee

experience

Culture

Our Environment, Health & Safety ('EHS') team ensures

that health & safety is embedded into all our activities.

During the year mandatory health and safety training

was delivered to all employees in the form of half-day

interactive training sessions, which included training on

mental and physical wellbeing.

We have a panel of four EHS consultants that advise

across our portfolio. These consultants focus on EHS at

our Major Development sites, including management

of consortium meetings between Harworth and its

stakeholders, such as contractors and local authorities.

There was one accident involving Harworth personnel

during the year, which was a road traffic incident.

There were no accidents involving a contractor under

Harworth supervision.

Where we have appointed a Principal Contractor under

the Construction Design and Management regulations,

it and its sub-contractors take responsibility for health

& safety whilst works are ongoing, but we continue to

monitor health & safety via our consultants or Project

Managers. There were no RIDDOR accidents on an area

of our site for which our contractor had responsibility for

health & safety.

During the year, Harworth migrated to a cloud-based

reporting system for inputting, actioning and monitoring

events across our sites. This system is also used for

inputting and actioning EHS audits and inspections.

During the year, we trained further Mental Health First

Aiders and also held financial wellbeing workshops

tailored to different career life stages, as well as

introduced a monthly Wellbeing Bulletin.

The Strategic Report has been approved by the Board of Directors and signed on its behalf by:

Chris Birch

General Counsel and Company Secretary

18 March 2024

Strategic Report

Harworth Group plc: Annual Report and Financial Statements 2023

Governance

Report

Contents

Chair’s introduction 80

Board of Directors and

Company Secretary 82

Statement of corporate governance 86

Nomination Committee report 98

Audit Committee report 107

ESG Committee report 114

Directors’ remuneration report 116

Directors’ report 139

Statement of Directors’ responsibilities 144

Harworth Group plc: Annual Report and Financial Statements 2023

Governance at a glance

A snapshot of our leadership and the Board’s focus in 2023

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.

0–3 years 1

3–6 years 7

6+ years 2

Female 6

Male 4

Chair 1

Executive Directors 2

Independent Non-

Executive Directors 5

Non-Executive Directors 2

Tenure

Gender diversity

Board composition

statistics

Independence

How the Board spent its time this year

Board and Committee meetings

Name Board Rem Co Audit Co Nom Co ESG Co

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

Lynda Shillaw 10/10 1/1 4/4

Kitty Patmore 10/10 4/4

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

Marzia Zafar 8/10 3/4

Steven Underwood 10/10

Martyn Bowes 9/10 4/4

There were 10 scheduled Board meetings, including the Strategy Day, during 2023. There were also Board calls to sign off the

2022 full-year results, and to approve certain transactions, which are not reflected in the table above.

15%

10%

15%

10%

15%

20%

Operations and governance

The Board supported changes to the

framework of operational delegated

authorities, and, in accordance with

the Board Reserved Matters Policy,

appraised underwriting proposals for

all new sites and direct development

projects.

People and culture

The Board received regular feedback

from the Chief Executive on people

matters, it reviewed talent management

and people development plans,

and undertook Board/employee

engagement activities.

Strategy

The Board reviewed progress against

the strategic objectives and engaged

with management in the further

development of the Company’s strategy

during the annual Strategy Day.

Financial

The Board approved the 2022

full-year and 2023 interim results

announcements and the 2023 budget.

The Board monitored performance

against this budget throughout the year,

including periodic reforecasts, and

reviewed a draft budget for 2024.

Stakeholder engagement

(excluding people)

The Board engaged with the evolution

of the stakeholder engagement

strategy, with a particular focus on local

and central Government stakeholders.

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.

Risk management

The Board participated in two risk

workshops, which identified changes

in the profile of our principal risks, and

monitored the status of these risks

throughout the year.

Sustainability

Sustainability is a key consideration in

all underwriting proposals. The Board

also received an annual update from the

Director of Sustainability.

Harworth Group plc: Annual Report and Financial Statements 2023

Governance Report

Chair's introduction

Dear shareholder,

On behalf of the Board, I am pleased

to present this year’s Corporate

Governance Report.

Having agreed the strategy proposed

by Lynda Shillaw in 2021, following

her appointment as Chief Executive in

November 2020, the Board has, over the

past year, maintained its oversight of the

progress being achieved by the Company

towards achieving its strategic objectives,

notably to grow Harworth to £1bn of EPRA

NDV

by the end of 2027. Through the

management reports to the Board and the

detailed scrutiny undertaken by the Board

committees, the Board sought to uphold

high standards of corporate governance

and ensure that the Company meets its legal

and regulatory obligations. The Company

made notable progress in the key areas

outlined below, notwithstanding that a

challenging and uncertain macroeconomic

and geo-political environment persisted

throughout the year. The Board remains

confident that, with the support of an

established and effective corporate

governance structure, the business is well

placed to navigate challenges and capitalise

on opportunities through the property cycle

in pursuit of its strategic objectives.

The areas identified below are developed in

more detail in the Strategic Report (pages 01

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, our

Executive team 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. The Board

endorsed, and during the period has

supported, this change, following due

consideration and discussion, by agreeing

the following operational decisions:

• To complete several acquisitions to

grow our strategic landbank.

• To commence a combination of build

to sell, pre-let and speculative direct

development projects, to unlock

additional value from our industrial &

logistics pipeline, while maintaining a

measured exposure to development

and letting risk.

• To launch an affordable housing

portfolio of sites to diversify the range

of products we offer on our residential

development sites.

• To progress our single-family Build-to-

Rent ('BTR') initiative.

• To launch a pilot, on certain sites, for

the construction of our NZC homes

product, Coze Homes.

• To sell certain of the secondary assets

within our Investment Portfolio as we

reposition the portfolio to modern

Grade A.

Sustainability

Harworth’s commitment to sustainability is

embedded in the Group’s culture, strategy

and operations as we continue to focus

on making a lasting positive impact on the

planet and the communities in which we

operate. Our longstanding approach was

first articulated as The Harworth Way in

2019, and, in 2021, we established our ESG

Committee and introduced an ESG measure

into the Group targets for our annual

bonus scheme for all employees. In 2022,

we appointed Harworth’s first Director of

Sustainability, and, in April

2023, we published our Net Zero

Carbon Pathway.

During the period, several elements of the

Harworth Way have evolved. These include

the growing maturity of the “Planet” pillar

and the expansion of the “Communities”

pillar. See further on pages 70 to 77, and

see also the NZC Pathway Progress Report

for 2023 and Communities Framework,

which have both been published alongside

this Annual Report and can be found on the

Company’s website.

“ The Board remains confident that, with the support of an established and

effective corporate governance structure, the business is well placed to

navigate challenges and capitalise on opportunities through the property

cycle in pursuit of its strategic objectives.”

Alastair Lyons

Chair

Governance Report

Harworth Group plc: Annual Report and Financial Statements 2023

Risk and assurance

During the year, the Board participated

in two risk workshops, which identified

changes in the profile of our principal risks,

and continued to monitor the status of these

risks. The Board remains confident in the

resilience of Harworth’s business model,

financial position, and risk management

systems. A detailed explanation of those

systems, the principal risks and uncertainties

affecting the Group including the changes

alluded to above, and the steps we are

taking to mitigate these risks, can be found

on pages 48 to 60.

An internal audit function was established

at the start of 2023 to reduce our reliance

on external review of the effectiveness of

our internal controls and an internal audit

plan was followed by this new function

in 2023. A detailed plan for 2024 and

outline plans for 2025 and 2026 have

been agreed with the Audit Committee,

and we have transitioned to a new co-

source internal audit partner, RSM, to

support delivery of the same. At the start

of 2024, we further strengthened our risk

management resources by recruiting an

Enterprise Risk Manager. She will perform a

second-line assurance role supporting our

risk owners in identifying and appraising

operational risks; setting risk appetite;

developing operational and compliance

controls; and designing risk reporting.

This new role will also support the Board

in its ongoing assessment of principal

risks. The establishment of internal audit

and enterprise risk functions over the

last 12 months has formed part of our

preparation for the implementation of

planned governmental audit and corporate

governance reforms, but also represent

important milestones for the business,

reflecting the increasing maturity of our

governance. See further details in the Audit

Committee Report on pages 112 and 113.

People, remuneration, and culture

Employee engagement is always high

on the Board’s agenda, with the Board

undertaking regional and site visits,

joining employees for informal lunches

and dinners, and continuing to receive

feedback from the Chief Executive on

matters affecting our people at each Board

meeting. We also hold an Employee AGM

biennially, with the next one taking place at

the end of April 2024.

At the start of the year, the Board was acutely

aware of the cost-of-living crisis and sought

to provide support to those employees for

whom the burden was most challenging.

Having made a one-off non-contractual

payment of £2,000 in December 2022 to

all employees (excluding the Executive),

in Q1 2023 the Remuneration Committee

approved variable salary increases relative

to role seniority, with employees on lower

salaries receiving proportionately higher

increases. The Committee also continued

to support the extended application of

both the all-employee Share Incentive Plan

and the discretionary Restricted Share Plan,

to promote share ownership throughout

the workforce, aligning the interests of

employees and shareholders, while also

allowing employees to share in the future

success of Harworth. Furthermore, the

Committee endorsed the development

of a new employee Reward Policy, which

was implemented in Q4 2023. This

Reward Policy formalises our approach to

all aspects of pay and benefits, providing a

transparent framework for the application of

the Remuneration Policy, which is cascaded

throughout the business.

During 2023, and into the first half of

2024, we have undertaken a full in-depth

cultural review with the aim of continuing

the positive evolution of our culture and

its alignment with the business strategy,

while ensuring we continue to provide an

outstanding employee experience. This

review has sought input from colleagues

across all areas of the business and will result

in a refresh of our Harworth Group values,

which will be embedded during 2024. We

will report on the culture review process and

outputs in the 2024 Annual Report.

Board composition

The Nomination Committee regularly

reviews the composition of the Board and

its Committees. In 2023 the Committee

concluded that the composition of the

Board was appropriately balanced, and,

on the recommendation of the Committee,

the Board proposes the re-election of all

Directors at the 2024 AGM.

Steven Underwood joined the Board

on 2 August 2010 and was formerly a

representative Director of the Peel Group,

a material shareholder of the Company.

Following the reduction of Peel Group’s

shareholding, Steven has remained

on the Board in a personal, rather than

representative, capacity enabling the

Company to continue to benefit from

his extensive experience in real estate

development in the north of England.

Steven has been proposed for re-election

at the 2024 AGM but will stand down with

effect from 31 December 2024, given that

by then he will have served almost 14 ½

years as a Director. During the second half

of 2024, the Nomination Committee will

recruit another Non-Executive Director

to maintain an appropriate mix of skills,

experience and knowledge on the Board

once Steven has retired. When made,

such an appointment will be announced in

accordance with Listing Rule 9.6.11.

Board performance review

I led an internal review of the Board’s

effectiveness in Q4 2022 and an action

plan to implement recommendations was

agreed by the Board in early 2023. The

progress on these recommendations is

summarised in the Statement of Corporate

Governance on pages 96 and 97. Following

this latest internal review, the Board agreed

that the review process would be most

effective if undertaken following each Board

Strategy Day. As the 2023 Strategy Day

took place shortly after the outcomes of

the 2022 evaluation were reviewed by the

Board, it was agreed that the next internal

review would take place following the 2024

Strategy Day. The outcomes from this review

will be reported in the 2024 Annual Report.

Annual General Meeting

Our AGM will be held at 2:30pm on

Monday 20 May 2024 at The Brearley

Room, AMP Technology Centre, Advanced

Manufacturing Park, Brunel Way, Waverley,

Rotherham, S60 5WG. I along with the

Chief Executive, Chief Financial Officer

and Company Secretary will be at this

location in person, with our other Directors

joining online. I very much look forward to

welcoming shareholders to the meeting.

Alastair Lyons

Chair

18 March 2024

* Harworth discloses both statutory and alternative

performance measures (‘APMs’). A full description of

these is set out in Note 2 to the financial statements with

a reconciliation between statutory measures and APMs

set out in the appendix to the financial statements.

Harworth Group plc: Annual Report and Financial Statements 2023

Governance Report

Board of Directors

Alastair Lyons

Chair

Date of appointment

07/03/2018

Length of service

6 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

Chair of Vitality UK.

Lynda Shillaw

Chief Executive

Date of appointment

01/11/2020

Length of service

3 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 was a Non-Executive Director of

The Crown Estate from 2018 until 2021,

and a Non-Executive Director of Vivid

Housing Association from 2017 to 2023.

She currently chairs the BPF Regional Policy

Committee.

External appointments

None.

Katerina (Kitty) Patmore

Chief Financial Officer

Date of appointment

01/10/2019

Length of service

4 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 and since July

2023 she has chaired its Audit Committee.

External appointments

Non-Executive Director of LondonMetric

Property plc.

Governance Report

Harworth Group plc: Annual Report and Financial Statements 2023

Angela Bromfield

Senior Independent Director

Date of appointment

01/04/2019

Length of service

5 years

Independent

Yes

Committee Membership

(Chair)

Skills and Experience

Angela is a Non-Executive Director

at Marshalls plc, where she chairs

the Remuneration Committee, is the

designated employee engagement NED,

and is a member of the ESG, Nomination

and Audit Committees. Angela is also a

Non-Executive Director at C&C Group

plc, where she chairs the Remuneration

Committee and is a member of the

Nomination Committee. Between 2016

and 2022, Angela was a Non-Executive

Director at Churchill China plc.

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 Tarmac Group, Premier

Farnell plc and ICI plc.

External appointments

Non-Executive Director of Marshalls plc

and of C&C Group plc.

Patrick O’Donnell Bourke

Non-Executive Director

Date of appointment

03/11/2020

Length of service

3 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. Non-Executive

Director of Pantheon Infrastructure plc.

Ruth Cooke

Non-Executive Director

Date of appointment

19/03/2019

Length of service

5 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.

In September 2023, she was appointed

a Non-Executive Director of the National

Housing Federation. She is also an

Associate of the Institute of Chartered

Accountants and a corporate treasurer.

External appointments

Chief Executive of GreenSquareAccord.

Non-Executive Director of the National

Housing Federation.

Key

Nomination Committee

ESG Committee

Audit Committee

Remuneration Committee

Disclosure Committee

Harworth Group plc: Annual Report and Financial Statements 2023

Governance Report

Board of Directors continued

Lisa Scenna

Non-Executive Director

Date of appointment

01/09/2020

Length of service

3 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. In March 2023, Lisa was

appointed as a Board member of one

of Dexus’s fund management platforms

(based in Australia), and in May 2023

she was appointed a Non-Executive

Director of Gore Street Energy Storage

Fund plc, where she is a member of the

Audit, Remuneration, Nomination and

Management Engagement Committees.

Lisa has over 30 years’ experience working

at executive level in large multinational

corporations, with a strong background

in real estate development and asset

management.

External appointments

Non-Executive Director of Genuit Group

plc and of Gore Street Energy Storage

Fund plc. Non-Executive Director of

Cromwell Property Group (listed in

Australia). Board member of one of

Dexus’s fund management platforms

(based in Australia).

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

9 years 1 month (11 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

1 year 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.

Governance Report

Harworth Group plc: Annual Report and Financial Statements 2023

Steven Underwood

Non-Executive Director

Date of appointment

02/08/2010

Length of service

13 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

7 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

ESG Committee

Audit Committee

Remuneration Committee

Disclosure Committee

Harworth Group plc: Annual Report and Financial Statements 2023

Governance Report

Statement of corporate governance

The UK Corporate Governance Code

In January 2024, the FRC published a revised version of the UK Corporate Governance Code, which will apply to Harworth from

1 January 2025. In the meantime, the Company is subject to the 2018 UK Corporate Governance Code (the 'Code'). The Code

can be found on the Financial Reporting Council’s website at www.frc.org.uk. The Board confirms that, throughout the year ended

31 December 2023, the Company complied with the principles and provisions set out in the Code.

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

Code What did we focus on in 2023? How did it support our strategy? See further

Board

Leadership

and Company

Purpose

The Board continued to review progress

made by the Executive team in delivering

against the four pillars of our growth

strategy, our aim being to grow Harworth to

£1bn of EPRA NDV*, notwithstanding the

backdrop of a persistently challenging and

uncertain macroeconomic and geopolitical

environment.

The Board reviewed and contributed

to the development of further elements

of the strategy for Harworth’s long-term

growth and success. These focused on

key acquisitions to grow the pipeline, the

delivery of our mixed tenure products,

the transition of our Investment Portfolio

to Grade A via sales and development,

the formulation of our Net Zero Carbon

Pathway, and the ongoing progression of

our people strategy.

Statement of

Corporate

Governance,

pages 87 to 92

Division of

Responsibilities

We reviewed our delegated authorities

framework with some changes to the Board

Reserved Matters Policy and Operational

Approvals Policy, enabling effective decision

making at appropriate levels. These revisions

allow the Board to focus more of its time on

strategic discussion and debate and increase

the ability of executive management to

respond as matters arise in a rapidly changing

external environment.

More time is afforded for the Board to

review the potential impact of market

developments on, and the consequent

potential need for changes to, our strategy,

and on material strategic transactions.

Statement of

Corporate

Governance,

pages 92 to 95

Composition,

Succession and

Evaluation

An internal review of the Board’s effectiveness

was undertaken in late 2022, with a number

of recommendations adopted during the

year.

The recommendations adopted by the

Board will help enhance its performance

in supporting the implementation of the

strategy.

Statement of

Corporate

Governance,

pages 96 to 97

Audit, Risk

and Internal

Control

The Board continued to monitor closely the

Group’s principal risks as challenging market

conditions persisted throughout the year. The

Board identified a new principal risk (power

infrastructure capacity) and made some

changes to the profile of existing principal

risks.

An internal audit function was established at

the start of 2023 to reduce reliance on external

review of the effectiveness of internal controls.

An internal audit programme, approved by

the Audit Committee, was delivered to plan in

2023. In a further sign of the growing maturity

of our governance, the Board supported the

recruitment of an Enterprise Risk Manager who

joined the business in January 2024 and will

perform a “second line” assurance role.

The Board monitors a principal risks

dashboard at each Board meeting, and

undertakes a full review of principal risks

biannually, to ensure risks are managed

effectively, and opportunities are identified,

in pursuit of our strategic objectives.

The establishment of internal audit and

enterprise risk functions provide enhanced

assurance around our risk management

and internal control systems to support the

effective delivery of the strategy.

Audit

Committee

Report,

pages 107 to

113

Strategic

Report:

Effectively

managing

our risk,

pages 48 to 60

Governance Report

Harworth Group plc: Annual Report and Financial Statements 2023

Code What did we focus on in 2023? How did it support our strategy? See further

Remuneration The Remuneration Committee continued to

review Executive remuneration in accordance

with the Remuneration Policy approved at

the 2022 AGM. As part of its review of wider

workforce remuneration, the Committee:

• supported a proportionately higher salary

increase for employees on lower salaries

in response to the cost-of-living crisis in

early 2023;

• supported the development of a new

employee Reward Policy; and

• continued to support the extended

application of the Share Incentive Plan and

Restricted Share Plan.

Remuneration policies, practices and

decisions are designed to support

the strategy and promote long-

term sustainable success. Executive

remuneration is aligned with strategic

objectives and cascaded through the

business to recruit, motivate, and retain

our people to deliver successfully against

the strategy and to align the interests of

employees and shareholders.

Strategic

Report: People,

pages 76 and

Directors’

Remuneration

Report,

pages 116 to

138

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. In September 2021, we unveiled our strategy to grow Harworth to £1bn of

EPRA NDV

, and during 2023 the Board continued to oversee the progress made by the business, under the leadership of the Executive

team, in delivering against this growth strategy.

This strategy has required material shifts in the pace and scale of what we do, leveraging our specialist expertise to optimise the

development of our significant 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 Board-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 presented to the Board on a rolling basis and the Chief Executive, Chief

Financial Officer, Chief Operating Officer, Chief Investment Officer and General Counsel/Company Secretary give operational and

financial updates at each Board meeting, which they all attend.

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

reconciliation between statutory measures and APMs set out in the appendix to the financial statements.

Harworth Group plc: Annual Report and Financial Statements 2023

Governance Report

Key Board activities in 2023

Key activities and

discussions Outcomes Future priorities

Stakeholders

considered

Operational

decisions in

support of

the strategy

The Board approved:

• the launch of an

affordable housing

portfolio of sites

• the launch of a pilot

for the construction of

NZC homes

• several acquisitions

and land assembly

initiatives

• sales of certain

secondary assets

within the Investment

Portfolio.

The Board also held a

Strategy Day in June 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

• 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

42 to 47).

Sustainability • The ESG Committee

reviewed the evolution

of the Harworth Way,

with a focus on the

“Communities” pillar.

• The Committee

also oversaw the

methodology for the

capture, calculation

and reporting of

carbon emissions data.

• Following the

publication of the

NZC Pathway in

April 2023, the ESG

Committee reviewed

progress against the

commitments made in

the Pathway.

• The Board received

training on Biodiversity

Net Gain.

• Both the NZC Pathway

Progress Report for

2023 and Communities

Framework are being

published alongside this

Annual Report and can be

found on the Company’s

website.

• Continue to ensure

alignment between

our sustainability

commitments and the

Group strategy.

• Review progress

against our Pathway to

transition our business

and portfolio to NZC.

• Continue to oversee

evolution of our ESG

data collection and

reporting and seek

external assurance

of our sustainability

reporting processes.

Our people

Communities

Investors

Statement of corporate governance

continued

Governance Report

Harworth Group plc: Annual Report and Financial Statements 2023

Key activities and

discussions Outcomes Future priorities

Stakeholders

considered

Risk and

assurance

• The Board undertook

two principal risks

workshops.

• The Audit Committee

approved the

2023 internal audit

programme to be

carried out by the

newly established

internal audit function

and monitored delivery

of the programme and

the implementation

of recommendations

and actions from

each audit.

• The Board supported

the recruitment of

an Enterprise Risk

Manager, who joined

the business in

January 2024.

• The Board identified a new

principal risk reflecting

the challenges in securing

adequate power capacity

for development sites. The

Board also reframed two

existing principal risks and

adjusted some residual

risk scores taking account

of mitigating activity – see

further in the “Effectively

managing our risk” section

on pages 48 to 60.

• The Enterprise Risk

Manager will perform a

“second-line” assurance

role, but will also support

the Board in its ongoing

assessment of principal

risks.

• The Audit Committee

reviewed the effectiveness

of the internal audit function

and considered it had

added significant value in

providing assurance on the

effectiveness of the controls

audited during the year.

• 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 continue to

review outputs from

the internal audit

programme, supporting

its assessment of the

effectiveness of internal

controls.

• Continued evolution of

the risk management

system following the

establishment of the

enterprise risk function.

Our principal risks

take account of all

stakeholders as

set out in our s.172

Statement (pages

42 to 47).

People

strategy,

including

remuneration

• The Board met and

engaged with staff

in various formats,

including employee

lunches, site visits,

regional team dinners,

and office visits.

• The Board endorsed

the implementation

of a new Talent

and Learning &

Development strategy.

• The Remuneration

Committee endorsed

the development of a

new employee Reward

Policy.

• The Board’s engagement

with Harworth’s people

was especially important

this year given the external

uncertainty affecting

employees created by

the macroeconomic

environment.

• The Board champions the

development of initiatives

that support employees

in respect of pay and

benefits and learning and

development.

• The Board will continue

to be engaged with

the people strategy

and to optimise its

informal engagement

with employees

to understand the

prevailing culture,

and their thinking and

concerns.

• The biennial Employee

AGM is being held in

April 2024, providing

an opportunity for the

Board to engage with

the whole business.

• A Remuneration Policy

review will take place

during H2 2024 with

the new policy to be

tabled for shareholder

approval at the

2025 AGM.

Our people

Harworth Group plc: Annual Report and Financial Statements 2023

Governance Report

Key areas of Board focus in 2024

Continued oversight of

implementation of our strategy,

ensuring the financial and

operational performance of the

business remains strong

Oversight of progress against

Harworth’s NZC Pathway and

Communities Framework, including

review of targets

Recruitment process to be

undertaken by the Nomination

Committee, and recommendation

made to the Board, for the

appointment of a Non-Executive

Director following the retirement of

Steven Underwood

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

Internal Board effectiveness review

Culture and workforce engagement – One Harworth

Our “One Harworth” culture,

underpinned by the Harworth values

outlined on the next page, encourages

a collaborative one team approach

in achieving our strategy to grow

Harworth to £1bn of EPRA NDV

The Board seeks to promote the One

Harworth approach in its engagement with

our people with a view to understanding

and assessing the culture of the business. It

does this in the following ways:

• Meeting and engaging with staff in

various formats, including employee

lunches, site visits, regional and central

function team dinners, office visits

and the biennial Employee AGM. Not

only are these opportunities for the

Board to gain an insight into the 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, based on the annual employee

survey results.

• 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 Executive the motivations for,

and impact of, those departures.

• Access to the staff newsletter, which

provides information on the issues,

topics and activities that are important

to all our people on a day-to-day basis

and are critical to the positive evolution

of our culture through consistent,

frequent communication. This includes

our monthly focus on wellbeing, a CEO

update, operational highlights and

achievements and a monthly “spotlight”

topic.

• We have a well-established speak

up and whistleblowing process that

facilitates colleagues’ ability to raise

matters of concern more formally, and in

confidence, should they wish. The Audit

Committee reviews speak up reports

and the process is outlined in the Audit

Committee Report on page 113.

The Harworth values are the principles

our employees consider most important

when we go about our business. They

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 stimulating

innovation, and by encouraging employees

to “do the right thing”.

Statement of corporate governance

continued

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

reconciliation between statutory measures and APMs set out in the appendix to the financial statements.

Governance Report

Harworth Group plc: Annual Report and Financial Statements 2023

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,

the Board supported a new Talent and

Learning & Development Strategy – the

“Harworth Academy” – which supports

professional development for roles at

all levels and seeks to drive a skilled and

engaged workforce.

The Group also promotes strong

partnerships with its external stakeholders

based on shared values and objectives,

as set out in the Section 172 Statement on

pages 42 to 47.

Culture in action:

A key driver of the Group’s strategy is to

broaden our range of residential products.

During the year we made progress on the

following:

• Our single-family BTR portfolio of sites

• The launch of an affordable housing

portfolio of sites

• The launch of a pilot for the construction

of our NZC homes product, Coze

Homes

By diversifying the range of products on

our residential development sites, we are

increasing the types of homes available

in the communities we help to shape

while helping to address the acute supply

imbalance of new homes, as well as

accelerating the development of our sites.

Culture in action:

Conscious of the disproportionate

impact of the cost-of-living crisis on

low-income households in early 2023,

the Remuneration Committee supported

variable salary increases relative to role

seniority, with employees on lower

salaries receiving a proportionately higher

increase.

This approach was in response to the high

inflation at the start of the year, which has

since abated. In its review of pay awards

in December 2023, the Committee

approved a uniform rate of increase across

all roles.

Cultural review

During 2023 and into the first half of

2024, we have undertaken an in-depth

cultural review with the aim of continuing

the positive evolution of our culture and

its alignment with our business strategy,

while ensuring we continue to provide an

outstanding employee experience in order

to attract and retain the best talent. This

review has sought input from colleagues

across all areas of the business and will

result in a refresh of our Harworth values,

which will be embedded during the course

of 2024. We will report on the culture

review process and outputs in the 2024

Annual Report.

Stakeholders

Our Strategic Report outlines on pages

42 to 47 how we engage with our key

stakeholders and how the Board complies

with its obligations under Section 172(1)

of the Companies Act.

Board independence

Conflicts of interest

Each Director must 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

conflicts of interest arise, the relevant

Director may not receive Board papers

and may be excluded from discussions,

depending upon the nature and materiality

of the conflict, and would be excluded

from voting on the relevant subject matter.

Martyn Bowes is a Board representative

of the Pension Protection Fund and the

Board has approved any actual or potential

conflicts of interest that arise as a result.

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.

During the year, two acquisitions were

proposed where Peel Group owned, or

held an investment in, competing sites.

These 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 these matters.

Harworth Group plc: Annual Report and Financial Statements 2023

Governance Report

Statement of corporate governance

continued

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 an additional

external responsibility, 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 102.

Effectiveness of Directors

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 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 Environment, Health

& Safety 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 Secretarial

Team which 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 Assistant

Company Secretary;

• external advisers host CPD workshops

for the Board and Committees. In

2023 this included a briefing on

Biodiversity Net Gain, and, for the Audit

Committee, a series of briefings on the

Government’s proposals for audit and

governance reforms;

• the Company Secretary provides

written and verbal updates to the Board

and its Committees, as appropriate, on

governance and regulatory changes;

• Directors are made aware of, and have

the opportunity to attend, external CPD

updates; and

• the Company Secretary shares with the

Board a “horizon scanning tracker”,

which is prepared quarterly by our

in-house legal team, principally for the

Group Leadership Committee, and

identifies forthcoming and anticipated

legal changes which will or may impact

Harworth’s activities.

Division of responsibilities

There is a clear division of responsibilities

between the Board, its Committees, and

senior management at an operational

level. During the period, we reviewed

our delegated authorities framework

and made some revisions 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. Our

governance framework aims to support the

Board in focusing on strategic proposals,

while also giving it oversight of major

operational projects that affect the long-

term success of the business.

The delegated authorities framework

is subject to annual review, 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:

www.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

Executive, the Corporate Governance

Committee, Investment Committee and

Group Leadership Committee to support

her in implementing the strategy. The

Executive comprises the Chief Executive,

Chief Financial Officer, Chief Operating

Officer, Chief Investment Officer and

General Counsel/Company Secretary.

The key responsibilities of the Board,

Committees, and individual roles are

summarised over the next three pages.

Governance Report

Harworth Group plc: Annual Report and Financial Statements 2023

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 function

and 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.

• Oversight of cyber and information

security.

• Oversight of the annual renewal of the

insurance programme.

See pages 107 to 113 for the full report

Remuneration Committee

• Determines and proposes to 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 other members of the

Executive team.

• Monitors performance against bonus

targets and long-term incentive

underpins.

• Reviews workforce remuneration and

related policies, and the alignment of

Executive incentives and rewards with

that of the wider workforce.

See pages 116 to 138 for the full report

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 Executive team.

• Leads the process for Board

appointments.

• Oversight of progress in improving

diversity across the business.

See pages 98 to 106 for the full report

ESG Committee

• Oversees the Group’s Sustainability

Framework, including targets and KPIs.

• Oversees the development of the NZC

Pathway, including targets and KPIs.

• Reviews sustainability policies, processes

and initiatives, and the measurement of

progress towards sustainability targets.

• Oversees the processes for gathering

data for ESG measures.

• 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 114 and 115 for the full report.

Disclosure Committee

• Ensures compliance with disclosure

obligations under the UK Market

Abuse Regulation and the FCA’s Listing

Rules and Disclosure Guidance and

Transparency Rules.

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, determination

of risk appetite for, 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 and

dividends.

• Approval of underwriting

proposals for all new sites, direct

developments and development

management engagements.

• Approval of Board appointments;

external appointments of

Directors and the Executive team.

• New or material changes to senior

debt facilities.

• Oversight of the people strategy.

• Oversight of health and safety for

all sites and projects.

Board and Board Committees

Harworth Group plc: Annual Report and Financial Statements 2023

Governance Report

Management Committees

The Chief Executive has established the following Management Committees to support her in discharging the authority delegated

to her by the Board:

Executive

• Supports the Chief Executive in the day to day running of the business and the formulation and implementation of the strategy.

• Consulted on strategic and operational matters that have been delegated to the Chief Executive pursuant to the Board

Reserved Matters Policy.

• Reviews the performance of the business against agreed operational and financial KPIs.

Investment Committee

• Delegated authority for material development and

investment activities.

• Reviews all material projects and material departures

from project plans including matters reserved for the

Board before they are presented, where appropriate, for

approval.

• Consulted on strategy, budgeting, people matters,

transformation projects and sustainability initiatives.

Group Leadership Committee

• 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.

• Monitors the risk profile of the business.

Corporate Governance Committee

• Responsible for certain decisions of a material nature

relating predominantly to resourcing and transformation,

including reward, recruitment, organisation design and

transformation projects.

• Monitors certain matters relating to resourcing and

transformation, including the learning and development

programme and succession plans.

Environment, Health, and Safety (EHS) Committee

• Senior leaders from across the business meet quarterly,

and at short notice if required, with a strategic focus

on EHS data (trends and areas of concern); significant

incidents; internal EHS projects/initiatives, and external

EHS matters (legislative horizon scanning, industry

trends and/or intelligence).

Statement of corporate governance

continued

Responsibilities of the Board and Executive

Alastair Lyons

Chair

• 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 Company has the appropriate leadership to achieve its 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 the establishment and maintenance of an appropriate structure of governance to meet the Company’s legal and regulatory obligations

and ensure effective management in the interests of shareholders.

• 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.

Governance Report

Harworth Group plc: Annual Report and Financial Statements 2023

Lynda Shillaw

Chief Executive

Kitty Paltmore

Chief Financial Officer (‘CFO’)

• 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 and

for the recruitment and retention of an appropriately skilled and

experienced management team.

• Oversight of operational risk management, including health and

safety and system of internal controls.

• Responsible for the formulation and implementation of Harworth’s

people strategy and for effective internal communications.

• Responsible for Harworth’s relationships with both actual and potential

shareholders 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 as appropriate.

• 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.

Andrew Blackshaw

Chief Operating Officer (‘COO’)

Jonathan Haigh

Chief Investment Officer (‘CIO’)

• 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.

• 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 the management of our Investment Portfolio in

accordance with our strategy, including strategic disposals and the

incorporation 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

central teams work effectively alongside our finance and regional

teams.

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

process.

Angela Bromfield

Senior Independent Director ('SID')

Chris Birch

General Counsel and Company Secretary

• Provides a sounding board for the Chair.

• Acts, where appropriate, as an interlocutor between the Chair and

other 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 the provision of secretarial resource to

Board Committees.

• Ensures that all Board reserved matters are referred to the Board for

review and approval.

• Advises on regulatory compliance and corporate governance.

• Responsible for the preparation of Board and Committee agendas

and the collation and distribution of papers.

• Leads on arranging inductions for, and CPD of, Directors.

• Responsible for governance, both at Board and operational levels,

including non-financial internal controls, systems and processes,

and responsible for risk management.

• Leads the Legal, Governance, Audit and Assurance, and EHS

teams.

Harworth Group plc: Annual Report and Financial Statements 2023

Governance Report

Composition, succession

and evaluation

Composition and succession

The Nomination Committee regularly

reviews the composition of the Board and

its Committees. In 2023 the Committee

concluded that the composition of the

Board was appropriately balanced, and,

on the recommendation of the Committee,

the Board proposes the re-election of all

Directors at the 2024 AGM.

Steven Underwood joined the Board

on 2 August 2010 and was formerly a

representative Director of the Peel Group,

a material shareholder of the Company.

Following the reduction of Peel Group’s

shareholding, Steven has remained

on the Board in a personal, rather than

representative, capacity. Steven has been

proposed for re-election at the 2024 AGM

but will stand down with effect from 31

December 2024, , given that by then he

will have served almost 14 ½ years as a

Director. During the second half of 2024,

the Nomination Committee will recruit

another Non-Executive Director to maintain

an appropriate mix of skills, experience and

knowledge on the Board once Steven has

retired. When made, such an appointment

will be announced in accordance with

Listing Rule 9.6.11.

Board performance reiew

The Board undertakes annual reviews 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 Code for FTSE 350 companies.

The most recent external Board

performance review was undertaken in the

final quarter of 2021 and information about

this review is included in the 2021 Annual

Report on pages 98 and 99.

In the final quarter of 2022, the Chair

conducted an internal review of the

Board, its Committees and individual

Directors. This took the form of an online

questionnaire completed by all Directors

and the Executive. The responses were

collated to inform one-to-one meetings

between the Chair and each Director

and member of the Executive. The

findings were reported to the Board

in January 2023, where it discussed a

range of possible actions to enhance

its effectiveness, and in April 2023 the

Executive reported back to the Board the

priority actions it intended to take forward

during the year. Below is a summary of the

agreed actions from the review and the

progress on them during 2023:

Theme Actions agreed Outcomes

Strategic focus Reduce presentation of and

discussion about operational

detail that is not essential for the

Board to make its decisions, whilst

increasing time available at Board

meetings for strategic discussions.

• Additional time has been allocated to the Chief Executive’s update at

Board meetings for a wider discussion about strategic matters.

• The Finance Board report is largely taken as read with the focus of Board

discussion being on material changes in forecast balance sheet and

profit metrics.

• Operational detail in the COO and CIO report has been reduced to

focus instead on market trends, material transactions, and KPIs.

• Changes have been made to the underwriting proposal template

to avoid presentation of operational detail that is not material to the

decision in question.

• The Strategy Day commences with a session on strategic trends, which

informs subsequent workshops.

Committee

effectiveness

It was agreed that, to avoid

duplication between the ESG

and Audit Committees, the ESG

Committee would have primary

oversight over sustainability

reporting.

• This was implemented in Q1 2023 for the 2022 Annual Report process.

The ESG Committee is responsible for reviewing and seeking assurance

on the Annual Report sections relating to the Harworth Way, TCFD and

SECR reporting. It then makes a recommendation to the Audit Committee

to inform the latter's wider review of whether the Annual Report, when

read as a whole, is fair, balanced and understandable, and provides the

necessary information for shareholders to assess the Group’s position,

performance, business model, strategy

and prospects.

• Furthermore, it is the ESG Committee that reviews and seeks assurance

on other forms of sustainability reporting, such as the NZC Pathway and

Communities Framework, before recommending the same to the Board

for approval ahead of publication.

Statement of corporate governance

continued

Governance Report

Harworth Group plc: Annual Report and Financial Statements 2023

Theme Actions agreed Outcomes

Engagement

with

stakeholders

Seek opportunities for the Board

to have increased interaction with

external stakeholders.

• The Board were hosted by a vendor landowner as part of a site visit

to a recently acquired site, who provided insight into his reasons for

selecting Harworth as the preferred delivery partner.

• In January 2024, the Board received an update from Harworth’s brokers.

• The Executive keeps under review opportunities for the Board to

engage with senior leaders in local Government.

Non-financial

KPIs

Agree, design, and implement

a series of primarily non-financial

key performance measures of

Harworth’s strategic delivery.

A set of key non-financial KPIs have been identified and is being reported

on; these continue to be tailored over time.

Following the 2022 internal review, the

Board agreed that the evaluation process

would be most effective if undertaken

following each Board Strategy Day. As

the 2023 Strategy Day took place shortly

after the outcomes of the 2022 evaluation

were reviewed by the Board, it was agreed

that the next internal review would take

place following the 2024 Strategy Day

(scheduled for June 2024). The outcomes

from this review will be reported in the

2024 Annual Report.

An evaluation of the Chair’s performance

is led by the SID alongside each internal

Board effectiveness review. Angela

Bromfield met with other Non-Executive

Directors and the Executive in early

2023 to review the Chair’s performance.

Following that review, she considered and

discussed with the Chair the comments

and feedback received and confirmed

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

Executive twice a year. Similar appraisals

are undertaken by 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.

The 2024 AGM will be held at 2:30pm

on Monday 20 May 2024 at The Brearley

Room, AMP Technology Centre, Advanced

Manufacturing Park, Brunel Way, Waverley,

Rotherham, S60 5WG. Along with the

Chief Executive, Chief Financial Officer

and Company Secretary, I will be at this

location in person, with our other Directors

joining online. The Board encourages

shareholders to attend, participate and

exercise their right to vote at the AGM.

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.

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 elect 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 213).

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.

3. Via the CREST or Proxymity system for

those that are users of either platform.

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.

There have been no material votes against

recommended resolutions at recent

AGMs. Wherever practicable, the Board

seeks to ensure that shareholder views

are 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 Code.

This Statement of Corporate Governance

was approved on behalf of the Board by:

Alastair Lyons

Chair

18 March 2024

Harworth Group plc: Annual Report and Financial Statements 2023

Governance Report

Dear shareholder,

This report sets out the activities of the

Nomination Committee during 2023

and its priorities for 2024, 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 re-approved during the year,

are available on the Company’s website:

www.harworthgroup.com/investors/

governance/ . Throughout 2023 the

Committee acted in accordance with the

principles of, and fulfilled its obligations

under, the Code.

Membership and meetings

There were no changes to Committee

membership during the period. The

Committee held one scheduled meeting

during the period to review succession and

development planning for the Board and

Executive and to review the effectiveness of

the initiatives in place to improve diversity

throughout the business.

Committee members

Alastair Lyons (Chair)

Angela Bromfield

Ruth Cooke

Lynda Shillaw

Membership and attendance at meetings in 2023 are shown below:

Independent

Committee

tenure at

31 December

2023

Scheduled

meetings

attended/eligible

to attend

Alastair Lyons Chair Yes 5 years

10 months

1/1

Angela Bromfield Member Yes 4 years 1/1

Lynda Shillaw Member No 3 years

2 months

1/1

Ruth Cooke Member Yes 1 year

11 months

1/1

Nomination Committee

Report

Governance Report

Harworth Group plc: Annual Report and Financial Statements 2023

The Committee’s key activities in 2023

The key activities of the Committee during 2023 are shown below:

Board composition and succession Diversity External appointments

Review of Board and Committee composition

Review of succession plans for the Board and 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 Lisa Scenna, Angela Bromfield, Kitty Patmore and Ruth Cooke

The Committee’s priorities for 2024

• Recruitment of successor for Steven Underwood

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

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

Board and Committee composition and succession planning

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 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

Board evaluations. Having regard to these

considerations, the Committee considers

that the composition of the Board is

appropriately balanced.

All Directors are proposed for re-election

at the 2024 AGM, but Steven Underwood

will stand down as a Non-Executive Director

with effect from 31 December 2024, as he

will by then have served as a Director for

almost 14 ½ years. During the second half

of 2024, the Committee will lead a process

to select a new Non-Executive Director

from a real estate development background

and preferably with an understanding of

the north of England property markets,

to maintain an appropriate mix of skills,

experience and knowledge on the Board

once Steven has retired.

The Board remains mindful of the benefits

afforded by diversity, in its widest sense,

both in the boardroom and across the

business. We are proud of the gender

balance we have achieved on the Board,

and the steps we have taken to improve

ethnic minority representation. We continue

to consider opportunities to improve Board

diversity to enhance the effectiveness of

Board discussion, analysis and decisions.

Harworth confirms that, as at 31 December 2023, it met the Board diversity targets prescribed by Listing Rules 9.8.6R(9) and

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.

Harworth Group plc: Annual Report and Financial Statements 2023

Governance Report

Nomination Committee Report continued

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

2023 is set out in the tables below. For this purpose, “executive management” refers to our “Executive” team and comprises the Chief

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

Gender identity 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 Executive team, 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.

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.

100

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Harworth Group plc: Annual Report and Financial Statements 2023

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 One Director

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

material shareholding and is not, therefore, considered independent.

Membership of our Committees complies with the 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 138.

Board succession

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

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

2023

Harworth Group plc: Annual Report and Financial Statements 2023

101

Governance Report

Nomination Committee Report continued

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 2023, the Committee reviewed the

following proposed appointments of:

• Lisa Scenna as a Non-Executive Director

of Gore Street Energy Storage Fund plc;

• Angela Bromfield as a Non-Executive

Director and remuneration committee

chair of C&C Group plc;

• Kitty Patmore as audit committee chair

at LondonMetric plc; and

• Ruth Cooke as a Non-Executive Director

of the National Housing Federation.

The above appointments were

recommended to, and approved by,

the Board.

Executive

Succession plans are in place for each

member of the 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

Executive (at the date of this report) is

shown below.

Age

30-40 years 1

41-50 years 2

51-60 years 2

Tenure

1–5 years 4

5–10 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 2023 and in previous years is set out

on the following page. The Company’s

Equity, Diversity and Inclusion ('ED&I')

Policy (adopted in 2022) formalises

our commitment to making Harworth a

diverse and inclusive organisation. 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 to

achieving our strategy and the delivery of

long-term sustainable success.

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Harworth Group plc: Annual Report and Financial Statements 2023

We have published our gender pay gap statistics since 2017

despite 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 2023

below, alongside the comparative results for 2022.

Gender pay gap analysis

In each case the reference point is 31 December.

Proportion of men and women in each quartile band

Males Females

Lower quartile 2023 34% 66%

2022 41% 59%

Lower middle 2023 57% 43%

2022 62% 38%

Upper middle 2023 69% 31%

2022 62% 38%

Upper quartile 2023 83% 17%

2022 83% 17%

Gender pay gap reporting 2023 2022

Mean gender pay gap 20% 18%

Median gender pay gap 38% 27%

Mean bonus gender pay gap 0% 24%

Median bonus gender pay gap 70% 69%

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.

Our commitment to gender representation at the most senior

level is championed through our two female Executive Directors,

with the significant reduction in our mean bonus gender pay gap

measure reflecting of the bonus payments made to Lynda Shillaw

and Kitty Patmore during the year – see further in the Directors’

Remuneration Report. However, an increase in the proportion of

female employees in the lower quartile and lower middle bands

and a decrease in the upper middle band has driven the increase

in our mean and median gender pay gap measures. This highlights

that, notwithstanding 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 workforce with

a focus on the wider senior leadership team.

Harworth Group plc: Annual Report and Financial Statements 2023

103

Governance Report

Nomination Committee Report continued

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 2023

• Diversity is an active and important consideration in the

Committee’s succession plans for the Board and 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.

• Adoption of a new ED&I Policy in 2022, which had a wider

remit than the previous Diversity and Equal Opportunities

Policy (adopted in 2018), with the objective of increasing

emphasis on inclusivity and culture.

• 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 new Menopause Policy was introduced in 2022

recognising an employer’s role to support sensitively this

potentially distressing life stage. We also have a certified

menopause champion.

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

reduced number of days or reduced hours every day.

• We provide a wide range of options for time off, paid and

unpaid, which allows employees to personalise and manage

their work/life balance, and we have found these measures to

be in line with, or above, market median.

• The Board supported a new Talent and Learning &

Development Strategy – the “Harworth Academy” – which

supports professional development for roles at all levels. This

is also designed to create strong internal succession wherever

appropriate.

• We undertook a reward project during the year and

introduced a new Reward Policy reflecting a transparent and

fair approach to pay and promotion.

• We have continued to extend our reach into different talent

pools by providing apprenticeship schemes and internship

placements. We have also partnered with local schools,

academies, colleges, universities, and other organisations in

the communities that we serve, taking part in careers events

and providing other support.

• We have redesigned our recruitment, interview and

onboarding processes to ensure we are attracting and

retaining employees in a way that appeals to a diverse

population and promotes an inclusive culture.

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Assessing the diversity of our workforce

For consistency, where comparisons are given between 2022 and 2023, in each case the position reflected is at 31 December.

At 31 December 2023, the total headcount was 120 employees.

Although the gender and ethnic diversity balance of the Board and Executive is set out on page 100, it is displayed again below in the

context of the whole workforce.

Board

Executive

Investment

Committee

Group

Leadership

Committee

Wider

workforce

Gender

balance

Gender

balance

Gender

balance

Gender

balance

Gender

balance

2022 2023

Female 6 6

Male 4 4

2022 2023

Female 2 2

Male 3 3

2022 2023

Female 2 2

Male 10 12

2022 2023

Female 6 5

Male 17 19

2022 2023

Female 38 43

Male 55 53

Ethnic diversity

balance

Ethnic diversity

balance

Ethnic diversity

balance

Ethnic diversity

balance

Ethnic diversity

balance

2022 2023

White 9 9

Ethnic 1 1

Minority

2022 2023

White 5 5

Ethnic - -

Minority

2022 2023

White 11 13

Ethnic 1 1

Minority

2022 2023

White 21 22

Ethnic 2 2

Minority

2022 2023

White 85 88

Ethnic 8 8

Minority

Excludes the Group Leadership Committee.

Harworth Group plc: Annual Report and Financial Statements 2023

105

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

We are mindful that, while 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. Following the

appointment of a new Group Resources

and Transformation Director in 2022, who

has responsibility for the People Strategy,

and the Committee’s continued focus

on diversity and inclusion, we hope to

improve the figures year on year.

It is important to stress that, while 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 20 May 2024. Steven

Underwood is proposed for re-election

at the 2024 AGM, but, as outlined earlier

in this report, he will stand down as a

Non-Executive Director with effect from 31

December 2024.

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

18 March 2024

Nomination Committee Report

continued

106

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Harworth Group plc: Annual Report and Financial Statements 2023

Committee members

Patrick O’Donnell Bourke (Chair)

Ruth Cooke

Lisa Scenna

Audit Committee Report

Dear shareholder,

I am pleased to report to shareholders on

the work of the Audit Committee during

the year ended 31 December 2023.

The report sets out the Committee’s

responsibilities and highlights its activities

during 2023 and its priorities for 2024.

The Committee’s terms of reference,

which were re-approved during the year,

are available on the Company’s website:

www.harworthgroup.com/investors/

governance/. Throughout 2023 the

Committee acted in accordance with the

principles of, and fulfilled its obligations

under, the 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

and 84. The Board is satisfied that I have

recent and relevant financial experience.

I am also Chair of the Audit & Risk

Committee of Pantheon Infrastructure PLC,

an investment trust focused on international

infrastructure assets. I was previously Chair

of the Audit & 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 Audit

and Assurance are also invited to attend,

as appropriate. The Head of Audit and

Assurance has direct access to me as Chair

of 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.

Harworth Group plc: Annual Report and Financial Statements 2023

107

Governance Report

Audit Committee Report continued

Key

Financial reporting

External audit

Internal audit

Risk management and internal controls

Governance

November

2023 interim results de-brief and review of external auditor’s

appointment and fees (without external auditor present)

Planning for 2023 external audit

Appointment of valuers for year-end valuations

2024 insurance programme renewal

Internal audit update, including approval of 2024 internal audit plan

and of change to internal audit co-source partner

Annual assessment of the effectiveness of the internal audit function

(without Head of Audit and Assurance present)

Report on audit of subsidiary management companies

Review of auditor appointment of subsidiary management companies

Cyber and information security update

Procurement transformation update

Annual review of Committee’s terms of reference

Update on the audit and corporate governance reforms following

Government and FRC announcements

September

Feedback from external auditor (without management

present)

Review of 2023 half-year valuations

Going concern analysis

Review of movements in provisions at the half year

External auditor’s report on 2023 interim results and

2023 full-year audit strategy

2023 interim results and recommendation to the Board

Update on valuer appointment following re-tender

exercise for Investment Portfolio

Review of operational risks and controls, including

proposals for establishing enterprise risk function

Internal audit update

Update on preparatory work for the audit and corporate

governance reforms

External briefing on proposals for resilience statement

June

2022 audit de-brief and review of external auditor’s appointment

(without external auditor present)

Areas of focus for 2023 interim results

Annual review of appointments of valuers

Annual review of the Group’s tax strategy and policy

Internal audit update

Cyber and information security update

Approval of revisions to Gifts & Entertainment Policy

Briefing on proposed changes to the Corporate Governance Code

March

Updated going concern analysis

External audit of 2022 accounts

2022 results and recommendation to the Board

2022 Annual Report and Financial Statements

Internal audit update, including final 2023 internal

audit plan

February

Review of 2022 year-end valuations

Initial review of going concern analysis

Review of movements in year-end provisions

Review of draft of 2022 results RNS

Review of draft of 2022 Annual Report and Financial Statements

Internal audit update, including draft 2023 internal audit plan

Effectiveness of risk management and internal controls

Review of procedures for detection of fraud and prevention of bribery

Review of Business Continuity Plan ('BCP') and results of desktop test

The key activities of the Committee during 2023 and its priorities for 2024 are shown below:

The Committee’s priorities for 2024

• Review reporting of 2023 full-year

results and 2024 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').

• Oversee the establishment of the new

enterprise risk function and continue

to monitor the effectiveness of the risk

management system.

• Oversee the internal audit function,

approve internal audit plan, and monitor

the effectiveness of internal controls via

updates from internal audit function.

• Continue to oversee any preparatory

work for the government’s audit and

corporate governance reforms.

• Review the appointment of the Group’s

valuers.

• Oversee the 2025 insurance

programme renewal.

• Monitor the maturity of the Group’s

cyber and information security systems.

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Harworth Group plc: Annual Report and Financial Statements 2023

During 2023, there were five scheduled meetings of the Committee. Attendance at meetings in 2023 is shown below:

Independent

Committee tenure at

31 December

2023

Scheduled meetings

attended/eligible

to attend

Patrick O’Donnell Bourke Chair Yes 3 years 2 months 5/5

Ruth Cooke Member Yes 4 years 10 months 5/5

Lisa Scenna Member Yes 3 years 2 months 5/5

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. These

include 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 2023 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.

Harworth Group plc: Annual Report and Financial Statements 2023

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Governance Report

Audit Committee Report continued

The Committee also reviews drafts of the

interim and Annual Reports in advance of

their publication and comments thereon.

The ESG Committee reviews and seeks

assurance on disclosures relating to climate

change, including for SECR and TCFD

reporting. Subject to that review, the ESG

Committee recommends the adoption of

those disclosures to the Audit Committee,

and this endorsement is incorporated into

the Audit Committee’s recommendation

to the Board to approve publication of the

Annual Report.

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 2023

results the Committee noted (i) the reviews

undertaken during the 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 internal controls system (see

page 112), it considered, concluded,

and recommended to the Board that

the disclosures in, and the process and

controls underlying the production of,

the 2023 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 144.

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Significant reporting

issues considered by the

Committee for the

2023 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. where relevant, the expected

timing and/or outcome of planning

submissions;

d. future rental amounts and financial

stability of tenants;

e. future rental yields;

f. applicability and availability of

comparable sales evidence;

g. anticipated risk of delivery of a site’s

masterplan;

h. costs to bring sites forward for sale or

development; and

i. where transactions are agreed or

close to being agreed, the probability

of conditions to completion being

satisfied.

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.

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. The Committee also challenged

management on the key assumptions

underlying certain asset valuations. In its

review, the Committee noted the current

uncertainty given the 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 39 to 41) and

the Statement of Directors’ Responsibilities

(pages 144 to 145), and also in the Notes

to the Financial Statements (page 164).

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 and/or challenged 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. A full description of

these is set out in Note 2 to the financial

statements with a reconciliation between

statutory measures and APMs set out in the

appendix to the financial statements.

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 2023 at the

same time as the Committee reviewed the

effectiveness of the 2022 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 2023 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 analysis on the next page);

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 2024.

Harworth Group plc: Annual Report and Financial Statements 2023

111

Governance Report

Audit Committee Report continued

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 incurred in 2023 is

shown below.

• 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.

Analysis of audit and non-audit fees

Year ended

31 December

2023

£’000

Year ended

31 December

2022

£’000

Audit fees

Fees payable to the external auditor and its associates for

the audit of:

The Company and the consolidated financial statements 380 330

The Company’s subsidiaries pursuant

to legislation

40 42

Non-audit fees

Other assurance services

189 –

609 372

Audit related services supporting a site-specific project (pre-approved by the Audit Committee).

Risk management and internal controls

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” section on

pages 48 to 60.

The Committee assesses the effectiveness

of the Group’s risk management and

internal controls framework biannually. As

part of this assessment, the Committee

receives a summary from the Group

Risk and Assurance Map ('GRAM'), the

operational tool used to monitor the

Group’s principal and operational risks.

In its review, the Committee focuses on:

the status of each risk both in absolute

terms and relative to risk appetite; and the

measures management have implemented

and/or are planning to implement to

mitigate each risk.

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 audits carried out during

the year and data on key risk indicators.

At the start of 2024, the Company

recruited an Enterprise Risk Manager and

established, for the first time, a dedicated

enterprise risk function. This function

will perform a “2

line” assurance role:

supporting risk owners in identifying and

measuring operational risks, setting risk

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Harworth Group plc: Annual Report and Financial Statements 2023

appetite, and designing internal controls.

This additional resource forms part of

the Company’s preparatory work for the

implementation of the government’s

audit and corporate governance reforms,

which are expected to focus on enhanced

internal controls measures.

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 49.

Internal audit

At the start of 2023, the Company

recruited its first Head of Internal Audit

(now Head of Audit and Assurance

following the formation of the enterprise

risk function referred to above), who is

responsible for designing and delivering a

36-month rolling internal audit programme

with support from a co-sourced partner

(KPMG during 2023). This role has a

dotted reporting line to me as Chair

of the Committee. In March 2023, the

Committee approved the 2023 internal

audit programme, which included audits

of: the acquisitions due diligence process;

compliance with planning obligations;

supplier payments; information security

and data management; BCP testing; loan

covenant compliance; a development

project based in the Yorkshire and Central

region; together with certain advisory

assignments.

The findings and recommendations

from these audits were reported to the

Committee throughout the year. 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 November 2023 the Committee

reviewed the effectiveness of the internal

audit function, without the Head of

Audit and Assurance being present,

and informed by feedback from the

management team, wider business,

and external auditors. The Committee

concluded that, under the stewardship

of the Head of Audit and Assurance, the

scope and quality of internal controls

assurance had improved markedly in

the first year following establishment of

the function. At the same meeting, the

Committee approved a detailed internal

audit plan for 2024 and an outline plan for

2025 and 2026. The audit programme

will however remain flexible to changing

assurance needs during the year and the

outputs from internal audit activity will

continue to be reported to the Committee

in real time.

In late 2023, management undertook

a tender process for the internal audit

co-source partner. The Committee

reviewed and accepted management’s

recommendation to appoint RSM as co-

source partner in place of KPMG.

Business continuity

The Group’s BCP was reviewed 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. The Committee will continue to

review the BCP annually.

Insurance

The Committee had oversight of the

2024 insurance programme renewal,

challenging management both on the

overall programme and on individual

aspects of certain policies. The scope

of the insurance programme remained

largely unchanged, and the Committee

was pleased to see that the overall cost

reduced by c.10%.

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. In 2022, the

Committee 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 internal reporting mechanisms.

There were no incidents of whistleblowing,

or reports made to the Speak Up platform,

during 2023.

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 2023 Modern Slavery

Statement can be found on our website

at www.harworthgroup.com/investors/

governance/, together with 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

18 March 2024

Harworth Group plc: Annual Report and Financial Statements 2023

113

Governance Report

ESG Committee Report

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 2023. This

report sets out the Committee’s activities

during the year and its priorities for 2024.

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.

The ESG Committee was established to

provide oversight of, and guidance on,

the Group’s sustainability framework,

practices and reporting. During the period,

the Committee oversaw the evolution of

several elements of the Harworth Way.

This included the growing maturity of

the “Planet” pillar and the expansion of

the “Communities” pillar. See further on

pages 70 to 77, and see also the NZC

Pathway Progress Report for 2023 and

Communities Framework which have

both been published alongside this

Annual Report and can be found on the

Company’s website.

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: www.harworthgroup.com/

investors/governance/.

Committee members

Angela Bromfield (Chair)

Alastair

Lyons

Martyn

Bowes

Marzia

Zafar

Lynda

Shillaw

Kitty

Patmore

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Harworth Group plc: Annual Report and Financial Statements 2023

Membership and meetings

I chair the Committee, and its other members are Alastair Lyons, Lynda Shillaw, Kitty

Patmore, Martyn Bowes and Marzia Zafar.

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

2023

Meetings

attended/

eligible

to attend

Angela Bromfield Chair Yes 2 years 9 months 4/4

Alastair Lyons Member Yes 2 years 9 months 4/4

Martyn Bowes Member No 2 years 9 months 4/4

Lynda Shillaw Member No 2 years 9 months 4/4

Kitty Patmore Member No 2 years 9 months 4/4

Marzia Zafar Member Yes 1 year 7 months 3/4

2023 key activities

During the year, the Committee:

• Oversaw the continued development of

the Harworth Way, with a focus on the

“Communities” pillar and development

of a methodology for social value

assessment. We have published our

Communities Framework alongside this

Annual Report which can be found on

the Company’s website. See further on

pages 70 to 77.

• Approved the publication of Harworth’s

first NZC Pathway Report in April 2023,

following the commitment we made

in 2021 to reach NZC on Scope 1,

Scope 2 and some Scope 3 emissions

by 2030, and on the balance of

Scope 3 emissions by 2040. The NZC

Pathway sets defined targets, and the

Committee reviewed progress against

the commitments made in the Pathway.

The NZC Pathway Progress Report for

2023, which includes disclosure of

a wider range of Scope 3 emissions

from our master developer process,

has been published alongside this

Annual Report and can be found on the

Company’s website.

• Oversaw the development of the

methodology for the capture,

calculation and reporting of carbon

emissions data. An explanation of this

methodology is detailed in the NZC

Pathway Progress Report for 2023.

• Reviewed investor feedback and

comments on ESG following the 2022

year-end and 2023 interim results

announcements.

• Reviewed and recommended

for approval to the Remuneration

Committee the ESG metrics and targets

to be incorporated into the 2023 annual

bonus scheme for all employees.

• Reviewed and recommended for

approval to the Audit Committee the

Group’s sustainability disclosures in the

2022 Annual Report and 2023 interim

results announcement.

2024 priorities

The Committee’s priorities for 2024

include working with the Executive,

Director of Sustainability and wider

business to:

• Review external verification of

the carbon emissions reporting

methodology.

• 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.

• Continue to review the effectiveness

of the implementation of the Harworth

Way principles as part of day-to-day

operations.

• Monitor progress against the NZC

Pathway and Communities Framework.

• Oversee preparation for a CDP

submission to enhance further our

reporting of environmental data.

• Continue to develop 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

18 March 2024

Harworth Group plc: Annual Report and Financial Statements 2023

115

Governance Report

Committee members

Angela Bromfield (Chair)

Alastair Lyons

Lisa Scenna

Directors’ Remuneration Report

Dear Shareholder,

On behalf of the Board, I am pleased

to present the Directors’ Remuneration

Report for the year ended 31 December

2023, describing how we implemented

our Remuneration Policy (the ‘Policy’) in

2023 and how we intend to apply the

Policy in 2024.

Our Policy was approved by shareholders

at the 2022 AGM. A summary of the

Policy is provided within this Report on

pages 121 to 125. A copy of the complete

Policy can be found on our website at:

https://harworthgroup.com/investors/

governance/.

Performance outcomes

for 2023

Harworth delivered another strong

performance in 2023 producing sector

leading results ahead of the MSCI All

Property Index. The unique combination

of the Group’s extensive landbank and

the application of our specialist skillset to

develop new market opportunities and

realise the highest value from each of our

sites saw serviced land and property sales

completed at prices broadly in line with, or

ahead of, book values before transaction

costs, lettings achieved ahead of estimated

rental values, some exciting acquisitions for

our future pipeline and the progression of

sites through the planning system.

Management actions to unlock high value

uses from sites and progress planning

applications resulted in EPRA NDV

per

share growth of 4.4% to 205.1p, which led

to a Total Return

of 5.1%.

The Committee’s

priorities for 2024

• Operation of 2024 annual

bonus, including setting targets

to ensure Executive Directors

and the wider workforce are

incentivised to deliver against

financial KPIs and strategic

priorities

• Grant of 2024 Restricted Share

Plan awards

• Approve grant of options

for SAYE scheme and Share

Incentive Plan awards

• Review of our Remuneration

Policy for the Executive Directors

and wider Executive team

So far in 2024, there are signs of optimism

in the macro environment and our key

markets remain characterised by structural

undersupply. This, combined with our

long-term through-the-cycle approach and

strong financial position means we are well

positioned to take the management actions

that will generate further value gains from

our portfolio in the year ahead and beyond.

Lynda Shillaw’s and Kitty Patmore’s bonus

opportunity for 2023 were 150% and

125% of salary respectively based on a

combination of financial measures (50% of

the opportunity), strategic measures (25%

of the opportunity), ESG measures (10% of

the opportunity) and personal objectives

(15% of the opportunity).

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Harworth Group plc: Annual Report and Financial Statements 2023

Taking into account performance against

these measures, the Committee approved

a bonus outcome equal to 75.2% of

maximum (which equates to 112.8% and

94% of salary for Lynda Shillaw and Kitty

Patmore respectively). Full details are set

out on pages 129 to 133.

The Committee believes that the level

of bonus outcome is appropriate in the

context of the shareholder experience and

positive management actions that created

value during the year.

The average bonus outcome for

eligible employees (excluding the

Executive Directors) was 79.8% of their

maximum entitlement.

Reward for the wider

workforce

All our people contribute to the achievement

of the Group’s long-term success. When,

therefore, making decisions in respect of

the Executive Directors, the Committee

considers the reward arrangements for, and

views of, the wider workforce.

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. 62% of

employees were granted a Restricted

Share Plan (‘RSP’) award in 2023.

We continue to offer Free Shares under

the all-employee Share Incentive Plan,

awarding all eligible employees £3,600 of

Free Shares in 2023, being the maximum

amounted permitted under UK tax

legislation, and we have also continued

offers of Partnership and Matching

Shares for eligible employees. Subject

to affordability, we intend to continue to

award Free Shares to eligible employees

on an annual basis at the maximum

amount permitted, and continue to offer

Partnership and Matching Shares.

During the year the executive team carried

out a Group-wide review of pay and benefits

and consequently introduced a new reward

policy that reflects market practice and

is well aligned with Harworth’s strategy

and values. This framework provides

a transparent and fair structure for the

operational application of the Remuneration

Policy across the wider workforce. As a

result of this review, the level of some roles

within the organisation were reviewed,

and as a result the base salary of some

were adjusted to reflect scope of role and

desired market positioning. The average

salary increase across the wider workforce

is 5% (effective 1 January 2024), with some

colleagues receiving more than this to

reflect the role levelling exercise above.

The Company holds an Employee AGM

biennially 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. The next such meeting will

take place at the end of April this year.

Implementation of the

Policy for 2024

Base salary

Following her appointment as Chief

Executive in November 2020, Lynda

Shillaw proposed, and the Board endorsed

an ambitious new strategy for the Group

which was well received by shareholders.

Despite the challenging macro

environment, the business has continued

to make strong progress towards the

strategic goal of becoming a £1bn business

by the end of 2027, itself a testament to

Lynda Shillaw’s leadership and the quality

of the senior team that she has assembled.

Our growth strategy is set out on pages

18 and 19. Harworth’s management team,

led by Lynda Shillaw, has made significant

operational progress against the four pillars

of our strategy since it was announced. In

particular, we have:

• either completed or are underway with

the direct development of 812,000 sq.

ft of commercial space;

• launched BTR, Affordable Homes and

NZC residential products;

• added 12.6m sq. ft of industrial &

logistics space and 5,082 residential

plots to the strategic land portfolio; and

• repositioned the investment portfolio to

37% Grade A from 9% in 2020.

The Group’s EPRA NDV

has increased

from circa £516m (160.0p per share) in

2020 to circa £663m (205.1p per share)

in 2023, representing growth of around

28% notwithstanding the challenging and

uncertain market backdrop which persisted

for much of that period.

The Group has performed strongly relative

to peers over the last three years under

Lynda Shillaw’s tenure as Chief Executive.

Harworth’s Total Shareholder Return over

the three-year period ended 31 December

2023 was 13% compared to -8% for the FTSE

All Share Real Estate Index. Harworth’s Total

Return

in 2021 (24.6%), 2022 (0.1%) and

2023 (5.1%) significantly exceeded MSCI All

Property Index 12-month returns of 16.5% in

2021, -9.1% in 2022 and -0.1% in 2023.

Compared with the business when Lynda

joined, Harworth has increased in size

and complexity and is now a multi-faceted

business having a significantly broader

footprint within the real estate sector.

Alongside this, under her leadership, the

Group has developed a strong balance

sheet position and the specialist skillsets

required to maximise the significant value

embedded in all our sites. The Group’s

financial and operational resilience has

been evident in the quality of opportunities

it brings to market and the results

delivered. The increased breadth of its

capabilities that result from implementing

its strategy position it well to realise the

full potential of its pipeline, tackling the

ongoing uncertainties presented by the

market and capitalising on opportunities

the business environment may present.

Lynda Shillaw’s salary was set at £400,000

on appointment. Given it was Lynda’s

first role as a PLC director, her salary

was positioned towards the lower end

of the market competitive range in line

with shareholder guidance and best

practice. Since appointment, her salary

has increased on average by circa 5% per

annum (current salary of £442,680), which

is below the level of the average increases

awarded to the workforce over that

period. As highlighted above, the scale

and complexity of Harworth’s business has

increased significantly during her tenure

and, as a result, it is clear to the Committee

that Lynda Shillaw’s salary is materially

Harworth Group plc: Annual Report and Financial Statements 2023

117

Governance Report

below our desired positioning for a Chief

Executive of her calibre.

The Committee uses benchmarking

data with caution. However, to provide

a sense-check on salary positioning, the

Committee commissioned a benchmarking

exercise towards the end of 2023 to

compare Lynda Shillaw’s salary against two

relevant peer groups:

• Companies listed on the London Stock

Exchange (excluding financial services

companies) with a market capitalisation

ranging from £220m to £520m.

• Real Estate companies listed on the

London Stock Exchange with a market

capitalisation of less than £600m (CLS,

Empiric Student Property, Helical,

Henry Boot and New River).

This exercise demonstrated that Lynda

Shillaw’s salary is currently positioned

below the lower quartile of the pan-

sectoral peer group of equivalent market

capitalisation and towards the lower end of

the real estate peer group identified for the

benchmarking exercise.

In the view of the Committee and supported

by the wider Board, Lynda Shillaw has

performed strongly since her appointment,

and given the positioning against peers

of her current salary (and consequently

her total target compensation), the

Committee considers it both appropriate

and necessary to increase her salary so that

it is competitively positioned against the

market, and fairly reflects her experience,

performance, and stature in the real estate

sector. Therefore, after careful reflection,

and consulting with the Group’s major

shareholders, the Committee determined

that Lynda Shillaw’s salary should be

increased from £442,680 to £525,000 with

effect from 1 January 2024. Following this

increase, Lynda Shillaw’s base salary and

total target compensation opportunity will

be positioned around the median of the

market capitalisation peer group and within

the range of the real estate peer group.

In line with the Remuneration Policy, the

Committee considers base salary increases

annually, and it felt that now was the right

time to review Lynda’s base salary to reflect

her contribution and performance and

her experience as the Chief Executive of a

public listed business. The Committee is also

cognisant of the impact of salary increases on

total compensation opportunity. Following

the salary increase, the Committee considers

the total remuneration opportunity for Lynda

Shillaw to be modestly positioned against

the market.

In line with investor guidance, the

Committee considered whether it would

be appropriate to phase the salary increase

over two years but concluded that making

a single adjustment was more appropriate,

given that the increase had been delayed

until such a point at which performance

had been demonstrably evidenced (as

illustrated above) and the gap to market is

both current and material.

Kitty Patmore’s salary was increased from

£325,000 to £341,775 (5% increase) with

effect from 1 January 2024. This was in line

with the average increase (in % of salary

terms) awarded to the wider workforce.

Performance related annual bonus

Lynda Shillaw’s and Kitty Patmore’s bonus

opportunity for 2024 is equal to 150% and

125% of salary respectively. 50% of the

bonus opportunity will be based on financial

measures (Total Return

, Acquisitions and

Capital Management), 20% on strategic

measures (based on residential, commercial,

and energy & natural capital strategic delivery

targets for 2024), 10% on ESG measures

and 20% on personal objectives. In line with

recent years, the Committee considers that a

50:50 weighting between financial and non-

financial measures incentivises the Executive

Directors appropriately to deliver against

annual financial, strategic and ESG priorities

which support the long-term growth of

the business.

Performance targets are considered to be

commercially sensitive at this point in the

year, and they will be fully disclosed in the

2024 Annual Remuneration Report.

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 current 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 29

February 2024 (£1.295) this means that the

face value of the 2024 RSP awards at grant

is expected to be 28% lower compared

to if the number of shares was determined

based on the share price at grant.

Time horizons as regards vesting and holding

periods and performance underpins are the

same as the 2023 RSP awards. See pages

124 and 125 for further details.

Chair and Non-Executive Directors

The Chair’s and Non-Executive Directors’

base fees and additional fees for acting

as SID and chairing committees were also

increased by 5% in line with the general

workforce with effect from 1 January 2024.

Remuneration Policy review

The current Policy was approved by

shareholders at the 2022 AGM and is in

the third year of its three year term. During

H2 2024, the Committee will undertake

a comprehensive review of the Policy

and incentive structure for the Executive

Directors and wider Executive team.

The Committee will consult with our

major shareholders on any proposed

material changes.

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

2023 financial year and consider that the

remuneration received by the Executive

Directors was, and that proposed for 2024

is, appropriate, taking in the round the

Group’s performance during 2023 and

their personal performance.

Angela Bromfield

Chair of the Remuneration Committee

18 March 2024

Directors’ Remuneration Report continued

118

Governance Report

Harworth Group plc: Annual Report and Financial Statements 2023

Annual Remuneration Report

This part of the Directors’ Remuneration Report describes how we implemented our Policy in 2023 and how we intend to apply the

Policy in 2024. Our Policy was approved by shareholders at the 2022 AGM. A summary is provided on pages 121 to 125, and a copy of

the complete Policy can be found on our website at: www.harworthgroup.com/investors/governance/.

The Annual Remuneration Report will be subject to an advisory vote by shareholders at the 2024 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 wider Executive team. The Policy is designed to support the Group’s strategy and

help attract, retain, and incentivise an 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

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 Executive team set the standards for behaviour and conduct across the Group.

Bonus awards are focussed 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 126.

Harworth Group plc: Annual Report and Financial Statements 2023

119

Governance Report

Committee membership and attendance

Membership and attendance at meetings in 2023 are shown below:

Independent

Committee

tenure at

31 December

2023

Meetings

attended/

eligible

to attend

Angela Bromfield Chair Yes 4 years 9 months 4/4

Alastair Lyons Member Yes 5 years 10 months 4/4

Lisa Scenna Member Yes 3 years 4 months 4/4

During the year, the Committee held four scheduled meetings. The key activities of the Committee during 2023 are shown below:

January Review 2023 bonus measures and targets

Approval to grant SAYE awards following the announcement of the 2023 interim results

February Approve 2023 bonus measures and targets

Assessment of 2022 bonus outcomes for Executive team (in the context of bonus outcomes for wider workforce)

Assessment of the vesting of the second tranche of the 2019 RSP awards and first tranche of the 2020 RSP awards

Approval of 2023 salary increases for Executive team (in the context of salary increases for wider workforce)

Approval of 2023 RSP awards

Approval of 2023 SIP awards

October Update on performance against 2023 bonus measures and targets

Review of the new employee Reward Policy (which provides a framework for the operational application of the

Remuneration Policy across the wider workforce)

Market update on remuneration trends and corporate governance developments

Review Committee Terms of Reference

Review effectiveness of Committee advisers

December Review draft 2024 bonus measures and targets

Approval of 2024 salary increases for Executive team (in the context of salary increases for wider workforce) to

be effective 1 January 2024

2023 new joiner RSP awards were also granted following the announcement of the 2023 interim results and approval was granted by the Committee via email prior to grant

of the awards.

The Committee’s terms of reference, which were reviewed during the period and re-approved with no changes, are aligned with

the Code, and are available on the Company’s website: www.harworthgroup.com/investors/governance/. Throughout 2023 the

Committee acted in accordance with the principles of, and fulfilled its obligations under, the Code.

Directors’ Remuneration Report continued

120

Governance Report

Harworth Group plc: Annual Report and Financial Statements 2023

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 2023.

Deloitte’s fees in relation to remuneration

advice provided to the Committee during

2023 were £24,450 plus VAT, charged

on a time and expenses basis. Deloitte

also provided advice to the Group during

2023 in relation to corporate tax, pensions

and share plans. The Committee did not

consider that these engagements impaired

Deloitte’s independence.

Shareholding voting and engagement

The table below shows the results of votes at the Harworth Group plc Annual General Meetings on: (1) 23 May 2023 on the resolution

relating to the approval of the Annual Remuneration Report; and (2) 24 May 2022 on the resolution relating to the approval of the

Remuneration Policy.

Votes

For

For as a

percentage

of votes cast Against

Against as a

percentage

of votes cast Withheld

Approval of Annual Remuneration Report 271,452,473 99.25 2,061,712 0.75 219,860

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 and will continue to monitor trends and developments in corporate

governance, market practice and shareholder views to ensure the structure of the executive remuneration remains appropriate.

Summary of the Policy and how it will be implemented in 2024

Executive Directors

Element

Operation and

performance metrics Opportunity Implementation for 2024

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’s salary was

increased from £442,680 to

£525,000 (18.6%) with effect from

1 January 2024. Rationale for the

increase is set out on pages 117

to 118.

Kitty Patmore’s salary was

increased from £325,500 to

£341,775 (5%) with effect from 1

January 2024. This was in line with

the average increase (in % of salary

terms) for the wider workforce.

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.

Harworth Group plc: Annual Report and Financial Statements 2023

121

Governance Report

Element

Operation and

performance metrics Opportunity Implementation for 2024

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

vary 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.

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), 20% based

on strategic measures, 10% based

on ESG measures and 20% based

on personal objectives. See note 2

on page 124.

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.

Dividend equivalents will be paid

on shares awarded during the

deferred period, payable in shares.

Directors’ Remuneration Report continued

122

Governance Report

Harworth Group plc: Annual Report and Financial Statements 2023

Element

Operation and

performance metrics Opportunity Implementation for 2024

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”);

• 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

220,341 and 143,442 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 specific 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 125.

Share Incentive

Plan and Save As

You Earn scheme

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.

Harworth Group plc: Annual Report and Financial Statements 2023

123

Governance Report

Element

Operation and

performance metrics Opportunity Implementation for 2024

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 2023, Lynda

Shillaw and Kitty Patmore held

shares equal to 141% and 121% of

salary respectively (based on the

mid-market closing share price on

29 December 2023 (£1.215)).

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.

Note 2: annual bonus performance measures

Measure

Weighting (% of

bonus opportunity)

Financial measures 50%

Based on Total Return

, Acquisitions and Capital Management

Strategic measures

Based on residential, commercial and energy and natural capital strategic delivery targets for 2024 20%

ESG measures 10%

Personal objectives 20%

Total 100%

The Committee will also have discretion, both positive and negative, to amend the bonus outcome if it is not reflective of underlying financial

and operational performance, or of the experience of shareholders or employees.

Directors’ Remuneration Report continued

124

Governance Report

Harworth Group plc: Annual Report and Financial Statements 2023

The prevailing macro-economic and geopolitical uncertainty makes it increasingly challenging to forecast how markets and property

valuations may move during 2024. Through the annual bonus, we want to reward the effectiveness of management in acting positively to

create value. Therefore, the Committee has reserved discretion 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 2024, being the basis on

which bonus targets are set. There would be full disclosure in the 2024 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 2024 Annual

Remuneration Report.

Note 3: RSP award underpins

Performance

underpin Not met if there is:

Financial

health

A breach of financial covenants in the Group’s principal banking facilities.

Underlying

performance

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

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.

Harworth Group plc: Annual Report and Financial Statements 2023

125

Governance Report

Directors’ Remuneration Report continued

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 2024. The annual bonus and RSP

awards are based on the level of maximum opportunities applied in 2024 (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%

47%

43%

22%

17%

23%

£600,003

£1,279,095

£1,672,845

£1,815,515

100% 50% 40% 36%

27%

42%

38%

23%

19%

25%

£405,339

£804,705

£1,018,315

£1,111,193

£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

£2,000,000

£1,750,000

Base salary, benefits and pensions

Kitty Patmore

Lynda Shillaw

Annual Bonus

RSP

£1,500,000

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 2024 are set out

on page 121, benefits are based on the value of such benefits in 2023 which are taken from the single total figure remuneration table on

page 128.

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 220,341 and 143,442 shares respectively. For the purposes of the charts, the grant date face

value of the RSP awards has been calculated using the mid-market closing share price on 29 February 2024 (£1.295) (a proxy for the

share price at the time the 2024 RSP awards will be granted). Based on this share price, the grant date face value of the 2024 RSP awards

is circa 28% lower compared to if the number of shares was determined based on the share price at grant.

126

Governance Report

Harworth Group plc: Annual Report and Financial Statements 2023

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 SID

and Chairing Committees were

increased by 5% in line with the

general workforce with effect

from 1 January 2024.

Fees from 1 January 2024:

• Chair fee: £188,715

• Non-Executive Director fee:

£53,076

• Additional fee for acting

as Senior Independent

Director: £9,371

• Additional fee for Chairing

the Remuneration

Committee or Audit

Committee: £9,371

• Additional fee for Chairing

the ESG Committee: £6,615

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 2025

A. Bromfield 19 February 2019 1 April 2019 1 April 2025

R. Cooke 27 February 2019 19 March 2019 19 March 2025

L. Scenna 29 June 2020 1 September 2020 1 September 2024

P. O’Donnell Bourke 2 November 2020 3 November 2020 3 November 2024

M. Zafar 31 May 2022 1 June 2022 1 June 2024

M. Bowes

1 March 2015 24 March 2015 24 March 2025

S. Underwood

9 December 2019 2 August 2010 1 January 2025

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. Steven will step down from the Board on 31

December 2024.

Harworth Group plc: Annual Report and Financial Statements 2023

127

Governance Report

Directors’ Remuneration Report continued

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 2023

with a comparison to the previous year.

L. Shillaw K. Patmore

2023 2022 2023 2022

Fixed pay

Salary £442,680 £421,600 £325,500 £310,000

Taxable benefits

£22,503 £16,121 £29,386

£10,000

Pension benefit

£44,268 £42,160 £32,550 £31,000

Subtotal £509,451 £479,881 £387,436 £351,000

Variable pay

Single-year variable £499,011 £329,375 £305,767 £193,750

Multi-year variable

£55,903 – £69,234 £35,7375

Other

£7,200 £6,000 £11,080 £6,000

Subtotal £562,114 £335,375 £386,081 £235,487

Total £1,071,565 £815,256 £773,517 £586,487

Taxable benefits consist of car allowance and private medical cover car allowance, private medical cover, and the use of a chauffeur service, which began in 2023, for

business travel and commuting. Other benefits include life insurance.

The taxable benefits for Kitty Patmore for 2023 include reimbursement for in-year private medical cover. Kitty also received £5,117 as a reimbursement for private medical

cover for the period from her appointment to 31 December 2022, which the Company had previously omitted to reimburse due to an administrative oversight, and is not

included in the 2023 taxable benefits figure cited above.

Kitty Patmore participated in the Company’s defined contribution scheme until May 2023, in relation to which the Company contributed 10% of salary. From June 2023, Kitty

Patmore received a pension allowance equivalent to 10% of salary. Lynda Shillaw received a pension allowance equivalent to 10% of salary.

Multi-year variable values for 2023 relate to the vesting of the second tranche of the RSP awards granted in 2020 (which Kitty Patmore participated in) and first tranche of RSP

awards granted in 2021 (which Lynda Shillaw and Kitty Patmore participated in). Multi-year variable values for 2022 relate to the vesting of the first tranche of the RSP awards

granted in 2020 (which Kitty Patmore participated in).

Other includes Free Shares and Matching Shares awarded to Lynda Shillaw and Kitty Patmore during 2022 and 2023 under the all-employee Share Incentive Plan and

options granted during 2023 to Kitty Patmore 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.

In the 2022 Directors’ Remuneration Report the value of the first tranche of the 2020 RSP award which vested on 21 March 2023 was estimated by reference to the average

mid-market closing share price for the three-month period ended 31 December 2022 (£1.07). The value has been updated in the table to reflect the mid-market closing

share price on the vesting date (£1.115). The share price at the grant date of the 2020 RSP award (£1.04 based on the mid-marking closing share price on the trading day

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 2023

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

2023 2022 2023 2022 2023 2022 2023 2022

A. Lyons £179,729 £171,170 – – – – £179,729 £171,170

M. Bowes £50,549 £48,141 – – – – £50,549 £48,141

A. Bromfield £50,549 £48,141 £15,225 £14,500 £8,925 £8,500 £74,699 £71,141

R. Cooke £50,549 £48,141 – – – – £50,549 £48,141

S. Underwood £50,549 £48,141 – – – – £50,549 £48,141

L. Scenna £50,549 £48,141 – – – – £50,549 £48,141

P. O’Donnell Bourke £50,549 £48,141 £8,925 £8,500 – – £59,474 £56,641

M. Zafar

£50,549 £28,083 – – – – £50,549 £28,083

Appointed as Non-Executive Director with effect from 1 June 2022.

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Harworth Group plc: Annual Report and Financial Statements 2023

Incentive outcomes for year ended 31 December 2023 (audited)

Annual bonus

Lynda Shillaw’s and Kitty Patmore’s bonus opportunity for 2023 were equal to 150% and 125% 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 2023 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

during 2023

50% (6.3)% (3.7)% (1.1)% 5.1% 50%

Acquisitions

Capital deployed on acquisitions

during 2023

30% £28.6m £49.8m £59.4m £15.5m

Capital management

4, 5

Reflects focus on utilising capital on activities

which deliver most value and complete sales,

whilst maintaining cost control and ensuring

compliance with the covenants in the

Revolving Credit Facility

20% £10.0m £30.8m £34.6m £25.1m 7.8%

Total vesting on financial performance element 50% weighting of total bonus opportunity 57.8%

Broadly straight-line vesting occurs between defined levels of performance

10% of maximum opportunity vests at threshold.

50% of maximum opportunity vests at target.

Whilst a land supply of 12 – 15 years was maintained, and the pipeline of acquisitions was strong as the business entered 2024, capital employed during 2023 did not meet

threshold and, as such, a strict scoring of this financial measure resulted in a nil vesting outcome.

Capital management targets and performance take into account a Board approved decision to defer the sale of a site in Flaxby to 2024 to benefit from more favourable

treatment for the purposes of performance against the financial covenants in the revolving credit facility.

Capital management across the Group remains strong, evidenced by the very low net loan to portfolio value

(4.7%) and the above market Total Return

. During 2023,

the profit generated from completed sales was ahead of budget, but sales of the first phase of the build to rent portfolio could not be completed due to planning delays.

This meant that actual performance did not benefit from the forecast profit on those delayed sales and, as such, did not meet target or maximum. Management agreed a

favourable amendment to the Interest Cover Ratio covenant in the revolving credit facility which has created additional headroom in performance against that covenant and

improved the financial health of the Group through its access to debt facilities. Whilst the Committee was mindful that this was a key contribution towards the Group’s capital

management performance, it chose not to exercise discretion to adjust the scoring of performance against the target.

Harworth Group plc: Annual Report and Financial Statements 2023

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Directors’ Remuneration Report continued

Strategic measures (25% of total bonus opportunity)

Strategic

measures

Weighting

(% of

strategic

element)

Baseline

Stretch

Actual performance

Vesting

outcome

Expand Mixed Tenure products:

Launch affordable

housing

50%

Design of products

completed, successful

launch of 144 units,

investor ‘acceptable’ and

delivery partner selected

Sale of at least 229 units Baseline target achieved

together with sale of

significant number of units

which was only marginally

short of stretch

Additionally, the team had

progressed into legals the

sale of units substantially in

excess of the stretch target

45%

Develop Build-to-

Rent portfolio

Investment partner

selected and contracts

exchanged by

31 December 2023

At least 500 units

contracted

Investment partner selected

and contracts exchanged by

30 September 2023

At least 625 units contracted

Planning approvals

received for 298 units and

progress made towards

exchange of contracts with

selected partners

Increase scale of direct developments:

Development

delivery

50%

Practical completion of

selected developments

Baseline plus a

substantive start on

vertical development

on another site

Stretch target achieved

40%

Lettings achieved 50% of in-year practical

completions exchanged

or completed and/

or a pre-let for future

development site

exchanged or completed

at a similar scale

75% 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

Development

Pipeline

Site specific works

enabling 1,100,000 sq. ft

development on timetable

and cost

Site specific

planning

application sufficiently

progressed to enable

submission by

31 March 2024

Baseline plus one or

more of:

A pre-let or sale for future

sites of units comprising at

least 150,000 sq. ft

Commencement of

works enabling 500,000 sq.

ft development

Achieved pre-let or sale

for future sites of units

and commencement

of works to enable

development in excess of

stretch target. However,

these achievements did

not impact the vesting

outcome as baseline target

was not achieved

Total vesting on strategic element 25% weighting of total bonus opportunity 85%

During 2023 a strategic decision was made by the Board to change the disposal strategy from certain affordable housing and Build-to-Rent sales to commercial land sales at

selected sites. The Committee therefore agreed that performance would be based on the remaining affordable housing and Build-to-Rent units only.

Identity of site is commercially sensitive

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Harworth Group plc: Annual Report and Financial Statements 2023

ESG performance outcome (10% of total bonus opportunity)

ESG

measures

Weighting

(% of ESG

element)

Baseline

Stretch

Actual performance

Vesting

outcome

Woodland

planting scheme

20% Completion of planning

grant stages 1 and 2, site

surveys, bird/habitat

surveys, and full design

EWCO application

submitted, WCC

registration completed,

and ground preparation

commenced

All elements achieved in

full

20%

Investment

Portfolio energy

procurement

20% Renew the Harworth

Group electricity contract

for the multi-let sites and

void units to a renewable

sustainable source

Incorporate solar and

monitoring of energy

produced within new

build developments

Reduce Scope 2 emissions

of the investment portfolio

below the baseline set in

2022

Enter PPAs with at least

50% of tenants who lease

‘develop to hold’ new

build assets with

renewable energy

generated from

roof-top solar

All elements achieved in

full

20%

Progress against

Net Zero Carbon

Home Pilot

20% Design of products

completed, delivery

and monitoring partners

selected

Scheme is on site in

H2 2023

All elements achieved in

full

20%

Report our Scope 3

emissions for 2023

40% Commit to appropriate

accreditation through

CDP, SBTi or a similar

body

Scope 3 emission reporting

enhanced beyond 2022

Scope 3 reporting

All elements achieved in

full

40%

Total vesting on ESG element 10% weighting of total bonus opportunity 100%

Harworth Group plc: Annual Report and Financial Statements 2023

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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

Leadership and

Stakeholder

67% Develop Harworth’s external

brand through building

relationships with key

political stakeholder groups

and industry groups

Review the structure of the

business and identify options

available to the Board to

ensure that the business

protects shareholder value

throughout the market

downturn and is well placed

to take advantage of future

growth opportunities

Continued to build networks and relationships

with key political stakeholder groups and industry

groups to unlock and progress site development

opportunities and to protect and enhance Harworth’s

commercial position to support the delivery of the

strategy.

Scaled-up Harworth’s participation in the 2023 UK

REiiF, further elevating Harworth’s brand profile.

Chairs or sits on the Board of various industry groups

and contributed to thought leadership articles,

further enhancing Haworth’s reputation and market

eminence.

Materials were produced for the Board Strategy Day

following a detailed analysis of the business structure.

This information informed the development of the

current strategy.

67%

Culture &

Engagement

33% Drive the development of

the Harworth Culture

Sponsor and oversee the

culture

review project

Significant progress was made during the year in

respect of Culture & Engagement. Highlights include:

• Led on a detailed cultural review, which sought

input from all areas of the business and will result in

a refresh of the Harworth Group values.

• Established metrics for measuring progress against

embedding the Harworth Culture.

• Enhanced employee value proposition launched

in 2023, including in respect of reward, learning

and development, and ways of working. Identified

opportunities to further enhance the employee

value proposition during 2024.

Significant work undertaken to support ambition of

securing Investors in People (Silver) Accreditation

during 2024

33%

Total vesting on personal element 15% weighting of total bonus opportunity 100%

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Harworth Group plc: Annual Report and Financial Statements 2023

Kitty Patmore

Personal

objectives

Weighting

(% of

personal

element)

Objective

Actual performance

Vesting

outcome

Leadership and

Stakeholder

33.3% Establish how to position

Harworth best with investors

Identify opportunities for

positioning Harworth as

an ESG public markets

investment and raise the

visibility of the Group in

this arena

Engagement with third party advisors to develop

Harworth’s disclosures and brand. Improvements

made to internal data collection and modelling

capabilities to further enhance disclosures.

Improvements to ESG disclosures to support the focus

on ESG at the Capital Markets Day.

33.3%

Financial Health 33.3% Review the funding structure

of the Group and present a

strategy to the Board

covering acquisition and

development pipeline

funding and refinancing

options

Build relationships with

potential funders and

establish Harworth as a

development partner

of scale

Secure, or have agreed in

principle for execution, any

sources of funding required

for 2024 development

Detailed review of funding structures undertaken to

identify potential sources of capital, and significant

improvements made to modelling capabilities.

Continued to build relationships with potential

funders.

Requisite funding lined up for 2024.

33.3%

Culture &

Engagement

33.3% Sponsor and oversee the

formulation, communication,

and implementation of a

reward policy for the wider

workforce

Executive lead on reward project resulting in: new

job descriptions across the business; development

of a role levelling matrix; Group-wide external

benchmarking of pay and benefits; development of a

reward policy and supporting policies; and effective

launch of reward project outputs to all employees.

33.3%

Total vesting on personal element 15% weighting of total bonus opportunity 100%

Overall bonus outcomes

Financial Strategic ESG Personal

Overall bonus

outcome

Executive

Director Weighting Vesting Weighting Vesting Weighting Vesting Weighting Vesting

% of

bonus

% of

bonus

L. Shillaw 50% 28.9% 25% 21.3% 10% 10% 15% 15% 75.2% 112.8%

K. Patmore 50% 28.9% 25% 21.3% 10% 10% 15% 15% 75.2% 94%

In accordance with the Policy, 33% of Lynda Shillaw’s earned bonus and 20% of Kitty Patmore’s earned bonus will be deferred into shares

for two years.

Harworth Group plc: Annual Report and Financial Statements 2023

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Directors’ Remuneration Report continued

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 in 2020 given the date of

grant preceded her joining the business.

RSP awards were granted to Lynda Shillaw and Kitty Patmore at 50% of salary in 2021.

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 awards are subject to the specific performance underpins identified in note 3 to the Policy summary (see page 125). 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 geo-political uncertainty.

The second tranche of the 2020 RSP award granted to Kitty Patmore and the first tranche of the 2021 RSP awards granted to Lynda

Shillaw and Kitty Patmore vested in full on 21 March 2024. The vested shares under the second tranche of the 2020 RSP Award will

be subject to a holding period until March 2025. The vested shares under the first tranche of the 2021 RSP Awards will be subject to a

holding period until March 2026.

2020 RSP awards

Executive Director Number of shares granted under tranche 2

Number of shares vesting

under tranche 2 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 2023 (£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 at vesting is

attributable to growth in share price between grant and vesting.

2021 RSP awards

Executive Director Number of shares granted under tranche 1

Number of shares vesting

under tranche 1 Face value at vesting

1,2

L. Shillaw 52,246 52,246 £55,903

K. Patmore 32,654 32,654 £34,940

Face value based on the average mid-market closing share price for the three-month period ended 31 December 2023 (£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 (£1.276 based on the average mid-marking closing share price on the five trading days immediately preceding the date of

grant on 6 April 2021) is greater than the above mentioned share price used to calculate the face value of the shares at vesting. Therefore, none of the face value at vesting is

attributable to growth in share price between grant and vesting.

Performance against underpins

The RSP awards were subject to the three performance underpins related to financial health, underlying performance and corporate

governance as identified in note 3 to the Policy summary (see page 125). The Committee assessed that the underpins were fully met.

Harworth’s Total Shareholder Return outperformed the FTSE All Share Real Estate over the respective vesting periods.

Restricted Share Plan awards granted in 2023 (audited)

RSP awards were granted to Lynda Shillaw and Kitty Patmore on 17 April 2023 as follows:

Executive Director Type of award Date of grant

Number of shares

subject to award

Face value

of grant

L. Shillaw RSP award Nil-Cost Option 17 April 2023 185,791 £211,059

K. Patmore RSP award Nil-Cost Option 17 April 2023 136,611 £155,190

Face value based on the average mid-market closing share price for the five trading days immediately following the annual results for 2022 (£1.136).

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.

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Harworth Group plc: Annual Report and Financial Statements 2023

The RSP awards are subject to the three performance underpins related to financial health, underlying performance and corporate

governance as identified in note 3 to the Policy summary (see page 125). 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.

Deferred share bonus awards granted in 2023 (audited)

In accordance with the Policy, Lynda Shillaw was required to defer 20% of her earned 2022 bonus into shares for two years. Accordingly,

Lynda Shillaw was granted a deferred share bonus award on 22 March 2023 which vests on 21 February 2025

Executive Director Type of award Date of grant

Number of shares

subject to award Face value

L. Shillaw DBP Nil-Cost Option 22 March 2023 57,988 £65,875

The Committee approved Lynda Shillaw’s bonus award in respect of 2022 on 21 February 2023, hence the deferred share bonus award vests on 21 February 2025.

Face value based on the average mid-market closing share price for the five trading days immediately following the annual results for 2022 (£1.136).

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

2022 and 2023

% 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

Salary

& fees Benefits Bonus

Executive Directors

L. Shillaw

5% 14.6% 51.5% 5.4% 3.8% -9% n/a n/a n/a n/a n/a n/a

K. Patmore

5% 51.0% 57.8% 24.0% 17.1% -14.4% 25% 0% 122.3% n/a n/a n/a

Non-Executive Directors

A. Lyons 5% – – 5.4% – – 1.5% – – 0% – –

M. Bowes 5% – – 5.4% – – 1.5% – – 0% – –

A. Bromfield

5% – – 16.8% – – 28% – – n/a – –

R. Cooke

5% – – 5.4% – – 1.5% – – n/a – –

S. Underwood 5% – – 5.4% – – 1.5% – – 0% – –

L. Scenna

5% – – 5.4% – – n/a – – n/a – –

P. O’Donnell Bourke

5% – – 6.3% – – n/a – – n/a – –

M. Zafar

n/a – – n/a – – n/a – – n/a – –

Average employee

(Company)

6.3% 3.6% 5.8% 19.4% 10.0% 9.5% 13.3% 6.5% 157.4% 7% 34% 14%

Average employee

(Group) 3.1% -12% 5% 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.

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 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 Executive team) during 2022 to provide some support during the “cost of living

crisis”. This payment is included within the 2022 benefits figure. There have been no recent 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.

Harworth Group plc: Annual Report and Financial Statements 2023

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Directors’ Remuneration Report continued

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 to 31 December 2023.

Year ended 25th percentile pay ratio Median pay ratio 75th percentile pay ratio

31 December 2023 16:1 12:1 8:1

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 2023

Total pay and benefits £1,065,277 £66,265 £87,188 £128,102

Salary £442,680 £42,520 £61,600 £87,999

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 128.

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. With the

exception that the vesting of awards under the RSP are omitted from the employee calculations.

Relative importance of spend on pay

Total employee pay expenditure Distribution to shareholders

2023 2022 % change 2023 2022 % change

£17.67m £13.69m 29.1% £4.7m £4.3m 10%

Total employee pay in the year reflected the full year impact of increased employee numbers recruited during 2022 and further

employees who joined the company in 2023, albeit headcount was increased at a slower rate than the preceding year, with the average

number of employees rising from 113 to 121.

Total dividends declared for 2023 were 1.466p per share (2022: 1.333p per share), resulting in total dividends of £4.7m (2022: £4.3m).

The percentage change is shown on a per share basis.

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 2023. 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.

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Harworth Group plc: Annual Report and Financial Statements 2023

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 2023:

£75

£100

£125

£150

£175

£200

£225

£275

£250

Total Shareholder Return (rebased to £100)

Harworth

FTSE Small Cap

Source: Refinitive 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

Mar-23

Jun-23

Sep-23

Dec-23

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

2023 L. Shillaw £1,072 75.2% 100%

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

Vesting of the first tranche of the 2021 RSP award.

Excludes vesting of Harworth Estates Long-Term Incentive Plan award as this was a one-off scheme put in place by HEPGL in 2013.

Harworth Group plc: Annual Report and Financial Statements 2023

137

Governance Report

Directors’ Remuneration Report continued

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 2023.

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 third tranche of the 2019 RSP award vested in full (41,179 shares) in March 2024.

Two-thirds of the second tranche of the 2020 RSP award vested (34,722 shares) in March 2024. 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 2023. 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 29 December 2023 of £1.215.

Shares held Options held

Beneficially

owned

Unvested &

not subject to

performance

Unvested &

subject to

performance

Vested and

subject to

holding period

(unexercised)

Unvested and

not subject to

performance

Shareholding

requirement

% salary

Current

shareholding

% salary

Requirement

met?

L. Shillaw 198,454 10,997 519,474 – 75,583 200% 141% No

K. Patmore 69,097 10,997 428,782 32,051 22,430 200% 121% No

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 share awards and matching share awards under the Share Incentive Plan.

Nil-cost options granted under the RSP that remain unvested as at 31 December 2023.

Nil-cost options granted under the RSP that have vested but remain subject to a holding period as at 31 December 2023.

Options granted under the Save As You Earn scheme, and deferred share bonus awards granted in 2023.

As at 18 March 2024, shares held by Lynda Shillaw and Kitty Patmore were 210,486 and 81,129 respectively, as a result of partnership

shares and matching shares awarded under the Share Incentive Plan. There have been no further changes to the holdings listed above

between 31 December 2023 and 18 March 2024.

Angela Bromfield

Chair of the Remuneration Committee

18 March 2024

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

reconciliation between statutory measures and APMs set out in the appendix to the financial statements.

138

Governance Report

Harworth Group plc: Annual Report and Financial Statements 2023

Directors’ Report

Introduction

The Directors present their report and the audited consolidated financial statements for the year ended 31 December 2023.

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, pages 111 to 112

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 138

Directors’ remuneration Directors’ Remuneration Report, pages 116 to 138

Disclosure of information to auditors Statement of Directors’ Responsibilities, page 145

Diversity Nomination Committee Report, pages 102 to 106

Employee numbers Nomination Committee Report, page 105

Employee engagement Statement of Corporate Governance, page 90

Employees with disabilities Nomination Committee Report, page 106

Employee share schemes Directors’ Remuneration Report, page 117

Future developments of the business Strategic Report, page 17

Going concern Statement of Directors’ Responsibilities, pages 144 to 145

Greenhouse gas emissions Strategic Report, pages 68 and 69

Post balance sheet events Financial Statements, Note 31, page 206

Risk management and internal controls Strategic Report, pages 48 to 60

Audit Committee Report, pages 112 to 113

Stakeholders, including regard to the need to foster

relationships with suppliers, customers and others

Section 172 Statement, pages 42 to 47

Significant related party transactions Financial statements, Note 30, pages 205 to 206

Viability Statement Strategic Report, pages 39 to 41

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.

Harworth Group plc: Annual Report and Financial Statements 2023

139

Governance Report

* Harworth discloses both statutory and alternative

performance measures (‘APMs’). A full description of

these is set out in Note 2 to the financial statements

with a reconciliation between statutory measures

and APMs set out in the appendix to the financial

statements.

Financial results and dividends

The Group’s profit before taxation for

the financial year ended 31 December

2023 was £49.8m (2022: £30.9m). The

net assets attributable to shareholders of

the Group increased to £637.7m (2022:

£602.7m) over the financial year. During

the year, the Group’s EPRA NDV* per

share increased by 4.4% to 205.1p (2022:

196.5p).

The Board is recommending a final

dividend of 1.022 pence per share, which,

together with the interim dividend of

0.444 pence per share paid in October

2023, makes a combined dividend of

1.466 pence (2022: 1.333 pence) per

share. Payment of the final dividend, if

approved at the 2024 AGM, will be made

on 24 May 2024 to shareholders on the

2024. The ex-dividend date will be 25

April 2024. The dividend paid in the year

to 31 December 2023 was 1.373 pence

(2022: 1.249 pence) per share, comprising

the 2022 final dividend of 0.929 pence per

share and the interim dividend of 0.444

pence per share for 2023.

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 203. 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 2024

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

2023 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 2024 AGM and a

resolution will be proposed for its renewal.

Directors’ Report continued

140

Governance Report

Harworth Group plc: Annual Report and Financial Statements 2023

The Company’s issued share capital as at 31 December 2022 was 323,051,124 ordinary shares of 10 pence each. During 2023 the

issued share capital was increased as follows:

Date (2023) Description

Number of

shares issued

Price (discount if

applicable)

16 January Grant of SIP Matching Shares 5,712 Nil consideration

15 February Grant of SIP Matching Shares 10,194 Nil consideration

15 March Grant of SIP Matching Shares 4,794 Nil consideration

17 April Grant of SIP Matching Shares 10,788 Nil consideration

12 May Grant of SIP Free Shares 345,912 Nil consideration

15 May Grant of SIP Matching Shares 6,278 Nil consideration

15 June Grant of SIP Matching Shares 15,026 Nil consideration

17 July Grant of SIP Matching Shares 14,092 Nil consideration

01 August Exercise of SAYE options 132,743 £0.739 (34.6%)

15 August Grant of SIP Matching Shares 16,290 Nil consideration

23 August Exercise of SAYE options 123,975 £0.739 (31.9%)

15 September Grant of SIP Matching Shares 20,168 Nil consideration

20 September Exercise of SAYE options 18,267 £0.739 (30.6%)

04 October Exercise of SAYE options 183,892 £0.739 (27.6%)

16 October Grant of SIP Matching Shares 13,292 Nil consideration

18 October Exercise of SAYE options 58,455 £0.739 (24.6%)

15 November Grant of SIP Matching Shares 14,356 Nil consideration

29 November Exercise of SAYE options 24,356 £0.739 (33.4%)

15 December Grant of SIP Matching Shares 14,358 Nil consideration

As such, as at 31 December 2023, the Company’s issued share capital was 324,084,072 ordinary shares of 10 pence each.

Since 31 December 2023, the Company’s issued share capital has increased to 324,116,609 ordinary shares of 10p each, as follows:

Date (2024) Description

Number of

shares issued

Price (discount if

applicable)

03 January Exercise of SAYE options 14,614 £0.739 (40.6%)

24 January Exercise of SAYE options 7,307 £0.739 (43.8%)

15 February Grant of SIP Matching Shares 9,764 Nil consideration

15 March Grant of SIP Matching Shares 852 Nil consideration

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 2023 AGM, the shareholders gave authority to

the Directors to disapply 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 2023 AGM. The Directors propose to renew this authority at the

2024 AGM.

Harworth Group plc: Annual Report and Financial Statements 2023

141

Governance Report

Directors’ Report continued

Purchase of the Company’s own shares

The Company has authority under a

shareholders’ resolution passed at the

2023 AGM to purchase up to 32,307,182

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 2024 AGM. No shares have been

purchased by the Company under this

authority. A special resolution will be

proposed at the 2024 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 2023

and up to the date of this Report are:

Non-Executive Chair

Alastair Lyons

Executive Directors

Lynda Shillaw (Chief Executive)

Katerina Patmore (Chief Financial Officer)

Independent Non-Executive Directors

Angela Bromfield (Senior Independent

Director)

Ruth Cooke

Lisa Scenna

Patrick O’Donnell Bourke

Marzia Zafar

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 127 and 138 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 2024 AGM.

In accordance with the UK Corporate

Governance Code, all Directors will

offer themselves for re-election at the

2024 AGM, but Steven Underwood

will step down from the Board on 31

December 2024.

Save as set out on page 91 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 to minimise any potential

adverse effects of its performance on the

Group’s financial health. 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 and senior

executives 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 2023.

Charitable and political donations

The Group made charitable donations

during 2023 in the aggregate sum of

£33,047 (2022: £34,330).

No political donations were made

during the year (2022: £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 2023 AGM for certain

political donations and expenditure,

subject to financial limits, and will seek to

renew this authority at the 2024 AGM.

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, including deferred bonus

awards granted to Executive Directors.

Shares issued pursuant to Share Incentive

Plan awards are held by Equiniti Share Plan

Trustees Limited pending maturity. At

31 December 2023, the EBT held 63,657

(2022: 5,669) ordinary shares of 10 pence

each in the Company and Equiniti Share

Plan Trustees Limited held 1,017,580

(2022: 470,376) ordinary shares of 10

pence each in the Company, being in

aggregate 1,081,237 (2022: 476,045)

shares, which represent 0.33% of the

Company’s issued share capital as of

31 December 2023. The EBT has waived

its right to receive dividends on shares that

it holds beneficially in respect of awards

that have not vested.

The number of shares held by Equiniti Share Plan

Trustees Limited is higher than the number of the

Company's own shares held as stated in Note 26 of

the Financial Statements due to Partnership shares

held under the SIP.

Amendment of Articles of Association

The Articles of Association may be

amended by special resolution of the

shareholders.

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Harworth Group plc: Annual Report and Financial Statements 2023

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 2023 AGM. The Directors are

proposing to seek renewal of that authority

at the 2024 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

Percentage

of total

voting rights

London and Amsterdam Trust Company 85,100,257 26.26%

Pension Protection Fund 73,966,672 22.82%

Goodweather Holdings Limited

65,660,000 20.26%

Schroder Investment Management 11,564,033 3.57%

Janus Henderson Investors 10,765,696 3.32%

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 RCF 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 2023 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

18 March 2024

Harworth Group plc: Annual Report and Financial Statements 2023

143

Governance Report

Statement of Directors’

Responsibilities

The Directors are responsible for

preparing the Annual Report and the

Financial Statements in accordance

with applicable United Kingdom law

and regulations.

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 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 2025 which has been selected as it

can be projected with a good degree of

expected accuracy.

A key focus of the assessment of going

concern is the management of liquidity

and compliance with borrowing facilities

for the period to June 2025. In 2022, a

five year £200m RCF was agreed with

HSBC joining as a new lender in addition

to lenders NatWest and Santander. The

RCF is aligned to the Group's strategy

and provides significant liquidity and

flexibility to enable it to pursue its strategic

objectives. The 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 £192.2m as at 31 December 2023.

144

Governance Report

Harworth Group plc: Annual Report and Financial Statements 2023

The Group benefits from diversification

across its Capital Growth and Income

Generation businesses including its

industrial and renewable energy property

portfolio. Taking into account the

independent valuation by BNP Paribas and

Savills, the Group net LTV

remains low at

4.7%, 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 2023.

In addition to a base cashflow 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

in 2023 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; and

4. increases in interest rates, impacting the

cost of the Group's borrowings.

A scenario was also run which

demonstrated that very severe loss of

revenue, valuation reductions and interest

cost increases would be required to breach

cashflow and banking covenants. The

Directors consider this very severe scenario

to be remote. 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.

Under each downside scenario, for the

going concern period to June 2025,

the Group expects to continue to have

sufficient liquidity 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 liquidity 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

18 March 2024

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

reconciliation between statutory measures and APMs set out in the appendix to the financial statements.

Harworth Group plc: Annual Report and Financial Statements 2023

145

Governance Report

Financial

Statements

Contents

Independent auditor’s report to the members of

Harworth Group plc 147

Consolidated income statement 156

Consolidated statement of comprehensive income 157

Consolidated balance sheet 158

Company balance sheet 159

Consolidated statement of changes in equity 160

Company statement of changes in equity 161

Consolidated statement of cash flows 162

Company statement of cash flows 163

Notes to the financial statements 164

Harworth Group plc: Annual Report and Financial Statements 2023

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 2023 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 2023 which comprise:

Group Parent company

Consolidated balance sheet as at 31 December 2023 Balance sheet as at 31 December 2023

Consolidated income statement for the year then ended Statement of changes in equity for the year then ended

Consolidated statement of comprehensive income for the

year then ended

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 material

accounting policy information

Consolidated statement of cash flows for the year then ended

Related notes 1 to 31 to the financial statements, including material

accounting policy information

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.

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 2025. 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 property sales, significant development spend, decline in

land and investment property values, and an increase in overheads and interest rates. In this scenario the Group continues to have

sufficient cash reserves and headroom on lending facilities and associated covenants

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Harworth Group plc: Annual Report and Financial Statements 2023

• testing the assumptions included in each modelled scenario for the cash forecasts and covenant calculations, considering the impact

of challenging macro-economic environment on forecasted property sales, property values, overheads, and interest cost. 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;

• performing our own independent sensitivity analysis to assess the impact of changes in key assumptions, including forecasted

property sales;

• 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 2025.

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 one full scope reporting

component, being the group as a whole.

• We performed full audit procedures on 100% of the Group’s Total Assets, the Group’s Profit

before tax and the Group’s Revenue.

Key audit matters • Valuation of Investment Property and Assets held for sale

• Carrying value of Development Property

• Revenue recognition

Materiality • Overall group materiality of £8.3m which represents 1% of total assets.

• Specific group materiality of £1.3m which equates to 20% of performance materiality

Independent auditor’s report to the

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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, the potential impact of climate change and other factors when assessing the level of work to be performed

at each company.

During the year, we changed our approach to scoping and defined the group as one full scope reporting component, whereas in the

prior year, we considered each of the 40 legal entities as individual reporting components. Of these, 5 were designated as full scope,

6 as specific scope and 29 review scope.

The reporting components where we performed audit procedures accounted for 100% (2022: 100%) of the Group’s Total Assets,

100% (2022: 100%) of the Group’s Profit before tax and 100% (2022: 99%) of the Group’s Revenue.

All audit work performed for the purposes of the audit was undertaken by the Group audit team.

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, these are

explained on pages 61 to 67 in the required Task Force On Climate Related Financial Disclosures and on page 59 in the principal risks

and uncertainties. They have also explained their climate commitments on pages 72 and 73. 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 accounting policies (note 1) its articulation of how climate change has been reflected in the financial

statements. There are no significant judgements or estimates relating to climate change in the notes to 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, the effects of material climate risks disclosed

on page 41 and the significant judgements and estimates disclosed in note 1 and whether these have been appropriately reflected in the

valuation of 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.

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.

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Financial Statements

Risk Our response to the risk

Key observations communicated

to the Audit Committee

Valuation of Investment Property and

Assets held for sale (2023: £433.9m,

2022: £460.2m)

Refer to the Audit Committee Report

(page 111); Accounting policies (note 1);

and Note 14 of the Consolidated Financial

Statements (pages 182-186)

At 31 December 2023 Investment

property held a value of £433.9m

(2022: £400.4m), with a valuation gain

of £71.3m (2022: £19.7m loss) reported

in the year. Investment properties

designated as assets held for sale held a

value of £18.8m (2022: £59.8m)

Management use an independent

external valuer to assist them in calculating

the property valuations. There are 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 fair 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.

Assessing the appropriateness of the valuations, with

the assistance of our EY Valuations specialists, through:

• Assessing the competence and objectivity of the

external valuer and 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 sites, 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.

Using this information in order to calculate an

independent valuation range for each sampled site

and assessing whether management’s valuation falls

within this range;

• 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);

• For a sample of sites under construction, we tested

a sample of costs incurred to third party invoices

to ensure they had been accounted for correctly

and coded to the correct project. We validated

cost to complete assumptions to third party

surveyor reports and also held a discussion with

management and third party surveyors to assess the

appropriateness of climate related costs included

and corroborated their inclusion to the surveyor

reports obtained;

• Considering the location of a sample of sites

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; and

• Confirming the classification of sites is appropriate.

We performed the above audit procedures over

this risk area at a Group level covering 100% of the

risk amount.

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

Independent auditor’s report to the

members of Harworth Group Plc

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Risk Our response to the risk

Key observations communicated

to the Audit Committee

Carrying value of Development

Property (2023: £250.0m,

2022: £205.0m)

Refer to the Audit Committee Report

(page 111); Accounting policies (note 1);

and Note 16 of the Consolidated Financial

Statements (pages 164-171 and 190-191)

Development property has a book value

of £250m (2022: £205m) at

31 December 2023. 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 bonuses include a

significant proportion based on NDV

and therefore there 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.

In addition, we then compared the valuation to the

carrying value to assess the appropriateness of the NRV

provision recorded.

We performed the above audit procedures over

this risk area at a Group level covering 100% of the

risk amount.

Based on the work performed, we

consider that the external valuers’

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 valuers’

significant assumptions used in developing

the estimate as at the balance sheet date.

We consider that the carrying value of

development properties held as at the

balance sheet date is appropriate.

Revenue recognition – manual

adjustments and cut-off (2023:

£72.4m, 2022: £166.7m)

Refer to the Accounting policies (note 1);

and Note 3 of the Consolidated

Financial Statements (pages 173-176)

Revenue for the year ended 31 December

2023 is £72.4m, made up of £46.7m from

the Sale of Development Property, £23.4m

from Income Generation activities and

£2.3m from Other Revenue activities.

There is a risk that management could

override controls impacting on the

amount of revenue recorded in the

period. This could be achieved either via

posting journal entries that fall outside

of the standard flow of transactions (all

streams) or recognising property sales in

the incorrect year.

Our approach included:

• Performing walkthroughs to understand the key

processes and identify key controls.

• Testing material journals posted to revenue (all

streams) that do not follow our expected flow

of transactions for that stream or that have been

posted as part of the consolidation/financial

close process. For each, we have corroborated

to supporting documentation to confirm there is

a valid business rationale.

Development Property Sales:

• Testing all material property disposals to confirm

revenue recognised in the year is in line with the

contract terms and completion date.

• Testing all material January 2024 disposals

to confirm revenue should be recorded post

year end.

We performed the above audit procedures over this

risk area at a Group level covering 100% of the risk

amount.

Based on our audit procedures we

have concluded that revenue has been

recognised appropriately and that there

was no evidence of management bias.

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Financial Statements

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 £8.3 million (2022: £7.8 million), which is 1% (2022: 1%) of total assets. We believe that

total assets provide us with 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.

We determined materiality for the Parent Company to be £2.1 million (2022: £2.4 million), which is 1% (2022: 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 related to the income generation segment of the business, a misstatement of less than overall

materiality for the financial statements could influence the economic decisions of users. We determined specific materiality for these

areas to be £1.3m which equates to 20% of performance materiality based on the quantum of these account balances.

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% (2022: 75%) of our planning materiality, namely £6.3m (2022: £5.9m). We have set performance

materiality at this being our fourth 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

(2022: £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 1 to 145, 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.

Independent auditor’s report to the

members of Harworth Group Plc

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Harworth Group plc: Annual Report and Financial Statements 2023

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

• the strategic report and the directors’ report have been prepared in accordance with applicable legal requirements.

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.

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.

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 144 and 145;

• 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 39;

• 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 144 and 145;

• Directors’ statement on fair, balanced and understandable set out on page 144;

• Board’s confirmation that it has carried out a robust assessment of the emerging and principal risks set out on page 50 to 60;

• The section of the annual report that describes the review of effectiveness of risk management and internal control systems set out on

page 112 and 113; and;

• The section describing the work of the audit committee set out on page 107 to 113.

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Financial Statements

Independent auditor’s report to the

members of Harworth Group Plc

Responsibilities of directors

As explained more fully in the directors’ responsibilities statement set out on page 144 and 145, 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 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 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 2018.

A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council’s website

at https://www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.

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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 ended 31 December 2020 and subsequent financial periods.

The period of total uninterrupted engagement including previous renewals and reappointments is four years, covering the years

ended 31 December 2020 to 31 December 2023.

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

18 March 2024

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Harworth Group plc: Annual Report and Financial Statements 2023

Financial Statements

Consolidated income statement

for the year ended 31 December 2023

Note

Year ended

31 December

2023

£’000

Year ended

31 December

2022

£’000

Revenue 3 72,427 166,685

Cost of sales 3 (60,077) (83,292)

Gross profit 3 12,350 83,393

Administrative expenses 3 (27,435) (22,090)

Other gains/(losses) 3 69,426 (16,761)

Other operating expense 3 (112) (56)

Operating profit 3 54,229 44,486

Finance costs 6 (6,421) (6,367)

Finance income 6 445 227

Share of profit/(loss) of joint ventures 15 1,554 (7,487)

Profit before tax 49,807 30,859

Tax charge 8 (11,851) (3,021)

Profit for the year 37,956 27,838

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 11.8 8.6

Diluted earnings per share 11 11.5 8.5

The Notes on pages 164 to 206 are an integral part of the consolidated financial statements.

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Harworth Group plc: Annual Report and Financial Statements 2023

Consolidated statement of

comprehensive income

for the year ended 31 December 2023

Note

Year ended

31 December

2023

£’000

Year ended

31 December

2022

£’000

Profit for the financial year 37,956 27,838

Other comprehensive (expense)/income – items that will not be reclassified to profit or loss:

Net actuarial (loss)/gain in Blenkinsopp Pension scheme 24 (10) 295

Revaluation of Group occupied property (167) (133)

Deferred tax on other comprehensive income/(expense) items 8 3 (101)

Other comprehensive income – items that may be reclassified to profit or loss:

Fair value of financial instruments 22 – 156

Total other comprehensive (expense)/income (174)

217

Total comprehensive income for the year 37,782 28,055

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Harworth Group plc: Annual Report and Financial Statements 2023

Financial Statements

Consolidated balance sheet

as at 31 December 2023

Note

As at

31 December

2023

£’000

As at

31 December

2022

£’000

ASSETS

Non-current assets

Property, plant and equipment 12 1,670 600

Right of use assets 13 512 254

Trade and other receivables 17 11,296 4,013

Investment properties 14 433,942 400,363

Investments in joint ventures 15 30,722 29,828

478,142 435,058

Current assets

Inventories 16 263,073 216,393

Trade and other receivables 17 37,289 56,658

Assets held for sale 18 18,752 59,790

Cash 19 27,182 11,583

346,296 344,424

Total assets 824,438 779,482

LIABILITIES

Current liabilities

Borrowings 20 (29,744) (3,067)

Trade and other payables 21 (88,087) (82,499)

Lease liability 13 (158) (82)

Current tax liabilities 8 (2,643) (7,013)

(120,632) (92,661)

Non-current assets 225,664 251,763

Non-current liabilities

Borrowings 20 (33,830) (56,911)

Trade and other payables 21 (1,757) (2,819)

Lease liability 13 (397) (172)

Deferred income tax liabilities 8 (30,089) (24,141)

Retirement benefit obligations 24 (11) (114)

(66,084) (84,157)

Total liabilities (186,716) (176,818)

Net assets 637,722 602,664

SHAREHOLDERS’ EQUITY

Called up share capital 26 32,408 32,305

Share premium account 27 25,034 24,688

Fair value reserve 225,177 174,520

Capital redemption reserve 257 257

Merger reserve 45,667 45,667

Investment in own shares (99) (50)

Retained earnings 271,322 297,439

Current year profit 37,956 27,838

Total shareholders’ equity 637,722 602,664

The financial statements on pages 156 to 206 were approved by the Board of Directors on 18 March 2024 and were signed on its behalf by:

Lynda Shillaw

Chief Executive

Company Registered Number 02649340

Katerina Patmore

Chief Financial Officer

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Harworth Group plc: Annual Report and Financial Statements 2023

Company balance sheet

as at 31 December 2023

ASSETS Note

As at

31 December

2023

£’000

As at

31 December

2022

£’000

Non-current assets

Investment in subsidiaries 15 210,844 209,864

Trade and other receivables 17 23,337 28,647

Retirement reimbursement asset 24 11 114

Deferred income tax assets 8 143 112

234,335 238,737

Current assets

Trade and other receivables 17 302 297

Current tax asset 8 – 480

Cash 19 90 1,433

392 2,210

Total assets 234,727 240,947

LIABILITIES

Current liabilities

Trade and other payables 21 (41,478) (36,347)

Current tax liabilities 8 (849) –

(42,327) (36,347)

Net current liabilities (41,935) (34,137)

Non-current liabilities

Retirement benefit obligations 24 (11) (114)

(11) (114)

Total liabilities (42,338) (36,461)

Net assets 192,389 204,486

SHAREHOLDERS’ EQUITY

Called up share capital 26 32,408 32,305

Share premium account 27 25,034 24,688

Capital redemption reserve 257 257

Merger reserve 45,667 45,667

Investment in own shares (99) (50)

Retained earnings 98,444 108,001

Current year loss 9 (9,322) (6,382)

Total shareholders’ equity 192,389 204,486

The financial statements on pages 156 to 206 were approved by the Board of Directors on 18 March 2024 and were signed on its behalf by:

Lynda Shillaw

Chief Executive

Company Registered Number 02649340

Katerina Patmore

Chief Financial Officer

159

Harworth Group plc: Annual Report and Financial Statements 2023

Financial Statements

Note

Called

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 2022 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

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

Profit for the financial year – – – – – – 37,956 37,956

Fair value gains on

investment property – – – 76,744 – – (76,744) –

Transfer of unrealised gains

on disposal of investment

property – – – (25,920) – – 25,920 –

Other comprehensive

(expense)/income:

Actuarial loss in Blenkinsopp

pension scheme 24 – – – – – – (10) (10)

Revaluation of group

occupied property – – – (167) – – – (167)

Deferred tax on other

comprehensive

expense items 8 – – – – – – 3 3

– – – 50,657 – – (12,875) 37,782

Transactions with owners:

Purchase of own shares – – – – – (49) – (49)

Share-based payments – – – – – – 1,314 1,314

Dividends paid 10 – – – – – – (4,438) (4,438)

Share issue 26, 27 103 346 – – – – – 449

Balance at

31 December 2023 32,408 25,034 45,667 225,177 257 (99) 309,278 637,722

Consolidated statement

of changes in equity

for the year ended 31 December 2023

160

Financial Statements

Harworth Group plc: Annual Report and Financial Statements 2023

Company statement of

changes in equity

for the year ended 31 December 2023

Note

Called

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 2022 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

Loss for the financial year – – – – – (9,322) (9,322)

Actuarial loss in Blenkinsopp

pension scheme 24 – – – – – (10) (10)

Deferred tax on other

comprehensive expense items – – – – – 3 3

Total comprehensive expense

for the year ended

31 December 2023 – – – – – (9,329) (9,329)

Transactions with owners:

Purchase of own shares – – – – (49) – (49)

Share-based payments – – – – – 1,270 1,270

Dividend paid 10 – – – – – (4,438) (4,438)

Share issue 26,27 103 346 – – – – 449

Balance at 31 December 2023 32,408 25,034 45,667 257 (99) 89,122 192,389

161

Harworth Group plc: Annual Report and Financial Statements 2023

Financial Statements

Consolidated statement of cash flows

for the year ended 31 December 2023

Note

As at

31 December

2023

£’000

As at

31 December

2022

£’000

Cash flows from operating activities

Profit before tax for the financial year 49,807 30,859

Net finance costs 6 5,976 6,140

Other (gains)/losses 3 (69,426) 16,761

Share of (profit)/loss of joint ventures (including impairment) 15 (1,554) 7,487

Share-based transactions

25 1,404 728

Depreciation of property, plant and equipment and right of use assets 12,13 282 152

Pension contributions in excess of charge 24 (113) (149)

Operating cash (outflows)/inflows before movements in working capital (13,624) 61,978

Decrease in inventories 5,186 16,502

Decrease/(increase) in receivables 18,868 (6,482)

Increase/(decrease) in payables 6,937 (13,137)

Cash generated from operations 17,367 58,861

Interest paid (4,302) (3,998)

Corporation tax paid (10,212) (17,702)

Cash generated from operating activities 2,853 37,161

Cash flows from investing activities

Interest received 445 227

Investment in joint ventures (250) (1,849)

Distribution from joint ventures 911 665

Net proceeds from disposal of investment properties, AHFS and overages 69,568 14,232

Property acquisitions (19,046) (13,445)

Expenditure on investment properties and AHFS (35,808) (53,107)

Expenditure on property, plant and equipment (396) (110)

Cash generated from/(used in) investing activities 15,424 (53,387)

Cash flows from financing activities

Net proceeds from issue of ordinary shares 400 67

Proceeds from other loans 5,939 19,850

Repayment of other loans (3,299) –

Proceeds from bank loans 45,000 154,000

Repayment of bank loans (46,000) (152,000)

Loan arrangement fees paid (162) (2,022)

Payment in respect of leases (118) (91)

Dividends paid 10 (4,438) (4,032)

Cash (used in)/generated from financing activities (2,678) 15,772

Increase / (decrease) in cash 15,599 (454)

Cash at 1 January 11,583 12,037

Increase / (decrease) in cash 15,599 (454)

Cash at 31 December 27,182 11,583

Share-based transactions reflect the non-cash expenses relating to share-based payments included within the income statement.

162

Financial Statements

Harworth Group plc: Annual Report and Financial Statements 2023

Company statement of cash flows

for the year ended 31 December 2023

Year ended

31 December

2023

£’000

Year ended

31 December

2022

£’000

Cash flows from operating activities

Loss before tax for the financial year (8,010) (6,358)

Net interest receivable 668 17

Share-based transactions

278 165

Pension contributions in excess of charge, net of movement in reimbursement asset (10) 295

Operating cash outflows before movements in working capital (7,074) (5,881)

Increase in receivables (5) (1,193)

Increase in payables 1,069 10,060

Cash (used in)/generated from operations (6,010) 2,986

Interest paid (2,256) (965)

Corporation tax paid – (480)

Cash (used in)/generated from operating activities (8,266) 1,541

Cash flows from investing activities

Interest received 1,588 948

Cash generated from investing activities 1,588 948

Cash flows from financing activities

Increase in intercompany loans receivable 5,310 –

Decrease in intercompany loans payable 4,063 –

Net proceeds from issue of ordinary shares 400 67

Dividends paid (4,438) (4,032)

Cash generated from/(used in) financing activities 5,335 (3,965)

Decrease in cash (1,343) (1,476)

Cash at 1 January 1,433 2,909

Decrease in cash (1,343) (1,476)

Cash at 31 December 90 1,433

Share-based transactions reflect the non-cash expenses relating to share-based payments included within the income statement

163

Harworth Group plc: Annual Report and Financial Statements 2023

Financial Statements

Notes to the financial statements

for the year ended 31 December 2023

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 2023 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 consolidated financial statements are presented in pound sterling and all values are rounded to the nearest thousand

(£’000), except when otherwise indicated.

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 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 “Effectively

Managing Our Risk” statement starting on page 50. 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 2025 which has been selected as it can be projected with a good degree of expected accuracy.

A key focus of the assessment of going concern is the management of liquidity and compliance with borrowing facilities for the period

to June 2025. In 2022, a five year £200m RCF was agreed with HSBC joining as a new lender in addition to lenders NatWest and

Santander. The RCF is aligned to the Group’s strategy and provides significant liquidity and flexibility to enable it to pursue its strategic

objectives. The 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 £192.2m as at 31 December 2023.

The Group benefits from diversification across its Capital Growth and Income Generation businesses including its industrial and

renewable energy property portfolio. Taking into account the independent valuation by BNP Paribas and Savills, the Group net LTV

remains low at 4.7%, 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 2023.

In addition to a base cashflow 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, 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 and 4) increases in interest rates,

impacting the cost of the Group’s borrowings.

A scenario was also run which demonstrated that very severe loss of revenue, valuation reductions and interest cost increases would

be required to breach cashflow and banking covenants. The Directors consider this very severe scenario to be remote. 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.

164

Financial Statements

Harworth Group plc: Annual Report and Financial Statements 2023

1. Accounting policies continued

Under each downside scenario, for the going concern period to June 2025, the Group expects to continue to have sufficient liquidity

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 liquidity 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 2023. None of these have had 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 2024 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, promotion fees and overages 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, promotion fees and overages is 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.

Service charge income is recognised as revenue in the period to which it relates.

Sales 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. Where sale contracts contain specific

performance obligations, the contract price is apportioned to the obligations and the revenue is recognised as the obligations are

satisfied in accordance with IFRS 15. Any deferred consideration is discounted to present value with the discount being unwound to the

consolidated income statement as finance income.

165

Harworth Group plc: Annual Report and Financial Statements 2023

Financial Statements

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 and planning promotion agreements.

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 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.

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.

Notes to the financial statements continued

for the year ended 31 December 2023

166

Financial Statements

Harworth Group plc: Annual Report and Financial Statements 2023

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.

167

Harworth Group plc: Annual Report and Financial Statements 2023

Financial Statements

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

The Group’s only defined benefit pension liability is in respect of the Blenkinsopp Section of the Industry-Wide Mineworkers Pension Scheme.

During the years to 31 December 2023 and 31 December 2022 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.

Notes to the financial statements continued

for the year ended 31 December 2023

168

Financial Statements

Harworth Group plc: Annual Report and Financial Statements 2023

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.

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Financial Statements

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 differences and all deductible temporary differences, the carry forward of unused tax

credits and any unused tax losses, with certain limited exceptions:

• Deferred tax liability is not recognised when it arises from the initial recognition of goodwill or an asset or liability in a transaction that

is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss and

does not give rise to equal taxable and deductible temporary differences; and

Notes to the financial statements continued

for the year ended 31 December 2023

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1. Accounting policies continued

• Deferred tax assets are recognised to the extent that it is probable that taxable profit will be available against which the deductible

temporary differences, and the carry forward of unused tax credits and unused tax losses can be utilised, except when the deferred

tax asset relating to the deductible temporary difference arises from the initial recognition of an asset or liability in a transaction that is

not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss and does

not give rise to equal taxable and deductible temporary differences; and

• In respect of taxable or deductible temporary differences associated with investments in subsidiaries and joint ventures, deferred

tax liability is not recognised when the timing of the reversal of the temporary differences can be controlled and it is probable that

the temporary differences will not reverse in the foreseeable future while deferred tax asset is not recognised when the timing of

the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the

foreseeable future.

Deferred tax is calculated at the tax rates that are expected to apply in the years in which temporary 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.

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Financial Statements

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 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.

The derivations of our APMs and their purpose

The primary differences between IFRS statutory amounts and the APMs used by Harworth are as follows:

1. Capturing all sources of value creation – Under IFRS, the revaluation movement in development properties 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

Set out in the appendix to these financial statements is a reconciliation of the statutory measures to the APMs for the current reporting

period and its comparative.

Notes to the financial statements continued

for the year ended 31 December 2023

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3. Segmental Information

Segmental Income Statement

31 December 2023

Capital Growth Sale of Other Development Property Income Properties Activities Generation Central Total £’000£’000 £’000£’000£’000(1)Revenue46,731 2,286 23,410 – 72,427Cost of sales (51,709) (2,340) (6,028) – (60,077)(2)Gross (loss)/profit(4,978) (54) 17,382 – 12,350Administrative expenses – (5,062) (3,147) (19,226) (27,435)(3)Other gains – 65,066 4,360 – 69,426Other operating expense – – – (112) (112)Operating (loss)/profit (4,978) 59,950 18,595 (19,338) 54,229Finance costs – – – (6,421) (6,421)Finance income – 438 7 – 445Share of profit of joint ventures – 892 662 – 1,554(Loss)/profit before tax (4,978) 61,280 19,264 (25,759) 49,807

(1) Revenue Revenue is analysed as follows:Sale of development properties 46,731 – – – 46,731Revenue from PPAs – 776 – – 776Build –to –suit development revenue – 956 – – 956Rent, service charge and royalties revenue – 340 22,657 – 22,997Other revenue – 214 753 – 96746,731 2,286 23,410 – 72,427

(2) Gross (loss)/profitGross (loss)/profit is analysed as follows:Gross (loss)/profit excluding sales of development properties – (54) 17,382 – 17,328Gross loss on sale of development properties* (618) – – – (618)Net realisable value provision on development properties (7,442) – – – (7,442)Release of previous net realisable value provision on development properties 1,213 – – – 1,213Release of previous net realisable value provision on disposal of development properties 1,869 – – – 1,869(4,978) (54) 17,382 – 12,350

(3) Other gains/(losses)Other gains/(losses) are analysed as follows:Increase in fair value of investment properties – 65,584 5,788 – 71,372Decrease in the fair value of AHFS – (114) (158) – (272)Loss on sale of investment properties – (588) (365) – (953)Loss on sale of AHFS – (134) (1,006) – (1,140)Profit on sale of overages – 318 101 – 419 – 65,066 4,360 – 69,426

*Gross loss on sale of development properties includes a reduction of £2.0m (2022: £0.4m) relating to the discounting of deferred consideration receivable.

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Financial Statements

3. Segmental Information continued

Segmental Balance Sheet

31 December 2023

Capital Income Growth Generation Central Total £’000£’000£’000£’000Non–current assetsProperty, plant and equipment – – 1,670 1,670Right of use assets – – 512 512Other receivables 11,296 – – 11,296Investment properties 199,216 234,726 – 433,942Investments in joint ventures 17,604 13,118 – 30,722 228,116 247,844 2,182 478,142Current assetsInventories 263,073 – – 263,073Trade and other receivables 23,967 11,300 2,022 37,289AHFS 3,764 14,988 – 18,752Cash – – 27,182 27,182290,804 26,288 29,204 346,296Total assets 518,920 274,132 31,386 824,438

Financial liabilities and derivative financial instruments are not allocated to the reporting segments as they are managed and measured

at a Group level.

Notes to the financial statements continued

for the year ended 31 December 2023

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3. Segmental Information continued

Segmental Income Statement

31 December 2022

Capital Growth Sale of Other Development Property Income Properties Activities Generation Central Total £’000£’000 £’000£’000£’000(1)Revenue124,956 10,478 31,251 – 166,685Cost of sales (68,099) (6,305) (8,888) – (83,292)(2)Gross profit56,857 4,173 22,363 – 83,393Administrative expenses – (4,123) (1,877) (16,090) (22,090)(3)Other gains/(losses) – 17,788 (34,549) – (16,761)Other operating expense – – – (56) (56)Operating profit/(loss) 56,857 17,838 (14,063) (16,146) 44,486Finance costs – (168) – (6,199) (6,367)Finance income – 227 – – 227Share of profit 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 – 28,577Revenue from coal fines – – 2,113 – 2,113 Other revenue – 27 987 – 1,014124,956 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 – – – 57,252Net realisable value provision on development properties (7,074) – – – (7,074)Reversal of previous net realisable value provision on development properties 5,030 – – – 5,030Release 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)

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Financial Statements

3. Segmental Information continued

Segmental Balance Sheet

31 December 2022

Capital Income Growth Generation Central Total £’000£’000£’000£’000Non-current assetsProperty, plant and equipment – – 600 600Right of use assets – – 254 254Other receivables 4,013 – – 4,013Investment properties 164,533 235,830 – 400,363Investments in joint ventures 16,462 13,366 – 29,828 185,008 249,196 854 435,058Current assetsInventories 216,393 – – 216,393Trade and other receivables 41,287 14,913 458 56,658AHFS 2,627 57,163 – 59,790Cash – – 11,583 11,583 260,307 72,076 12,041 344,424Total 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.

4. Operating profit

Year ended Year ended 31 December 31 December 2023 2022 Note£’000 £’000 Operating profit before tax is stated after charging:Net realisable value provision on development properties 16 4,360 395Staff costs 5 17,670 13,690Depreciation of property, plant and equipment and right of use assets 12, 13 282 152

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 Year ended Year ended Year ended 31 December 31 December 31 December 31 December 2023 2022 2023 2022 Number Number Number Number Management and administration 121 107 3 3

Notes to the financial statements continued

for the year ended 31 December 2023

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5. Employee information continued

Remuneration details of these persons were as follows:

Group Company Year ended Year ended Year ended Year ended 31 December 31 December 31 December 31 December 2023 2022 2023 2022 £’000 £’000 £’000 £’000 Wages and salaries 13,768 10,825 3,087 1,399Share-based payment expense 1,404 703 301 157Social security costs 1,603 1,383 407 278Post employment benefits 895 779 33 50 17,670 13,690 3,828 1,884

Key management remuneration relates to the members of the Investment Committee:

Group Year ended Year ended 31 December 31 December 2023 2022 £’000 £’000 Short term employee benefits 5,364 4,514Post employment benefits 218 213Share-based payment expense 775 490 6,357 5,217

Detailed information relating to Directors’ remuneration is disclosed in the Directors’ remuneration report on pages 116 to 138 and forms

part of these financial statements.

6. Finance costs and finance income

Year endedYear ended31 December31 December20232022£’000£’000Total finance income 445 227Finance costs– Bank interest (2,778) (2,206)– Facility fees (1,524) (1,791)– Amortisation of up-front fees (671) (685)– Acceleration of amortisation of up-front fees following extinguishment of previous RCF – (599)– Other interest (1,448) (1,086)Total finance costs (6,421) (6,367)Net finance costs (5,976) (6,140)

During the year no interest has been capitalised in investment or development properties (2022: £nil).

In March 2022 the Group entered into a new RCF 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 previous facility.

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Financial Statements

7. Auditors’ remuneration

Year ended Year ended 31 December 31 December 2023 2022 £’000 £’000 Fees payable to the Company’s auditors and its associates for the audit of the Company and the consolidated financial statements 380 330Fees payable to the Company’s auditors and its associates for other services:– The audit of the Company’s subsidiaries pursuant to legislation 40 42– Other assurance services 189 – 609 372

8. Tax

Year ended Year ended 31 December 31 December 2023 2022 Analysis of tax (charge)/credit in the year £’000 £’000 Current tax Current year (6,749) (21,650)Adjustment in respect of prior periods 907 (118)Total current tax charge (5,842) (21,768)

Deferred tax

Current year (4,779) 13,504Adjustment in respect of prior periods (987) 409Difference between current tax rate and rate of deferred tax (243) 4,834Total deferred tax (charge)/credit (6,009) 18,747Tax charge (11,851) (3,021)

Other comprehensive income items Deferred tax - current year 3 (101)Total 3 (101)

The tax charge for the year is higher (2022: lower) than the standard rate of corporation tax in the UK of 23.5% (2022: 19%).

The differences are explained below:

Year ended Year ended 31 December 31 December 2023 2022 £’000 £’000 Profit before tax 49,807 30,859Profit before tax multiplied by rate of corporation tax in the UK of 23.5% (2022: 19%) (11,705) (5,863)Effects of:Adjustments in respect of prior periods – deferred taxation (987) 409Adjustments in respect of prior periods – current taxation 907 (118)Expenses not deducted for tax purposes (542) (127)Revaluation gains/(losses) 252 (755)Share of profit/(loss) of joint ventures 365 (1,423)Difference between current tax rate and rate of deferred tax (243) 4,834Share options 102 22Total tax charge (11,851) (3,021)

Notes to the financial statements continued

for the year ended 31 December 2023

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8. Tax continued

The difference between current tax rate and rate of deferred tax of £0.2m (2022: £4.8m) relates to the unwinding of balances previously

recognised at 25% and the reduction of the deferred tax liabilities recognised at 25% as a result of in year movements.

At 31 December 2023, the Group had a current tax liability of £2.6m (2022: £7.0m).

The Company has recognised a current tax liability in 2023 of £0.8m (2022: asset £0.5m).

Deferred tax

The following is the analysis of deferred tax liabilities presented in the consolidated balance sheet:

As at As at 31 December 31 December 2023 2022 £’000 £’000 Deferred tax assets 503 1,839Deferred tax liabilities (30,592) (25,980) (30,089) (24,141)

The movements on the deferred income tax account were as follows:

Other Investment Tax Temporary Properties Losses Differences Total £’000 £’000 £’000 £’000 At 1 January 2022 (46,988) 2,558 1,783 (42,647)Recognised in the consolidated income statement 21,008 (2,558) 297 18,747Recognised in the consolidated statement of comprehensive income – – (101) (101)Recognised in the consolidated statement of equity – – (140) (140)At 31 December 2022 and 1 January 2023 (25,980) – 1,839 (24,141)Recognised in the consolidated income statement (4,612) – (1,397) (6,009)Recognised in the consolidated statement of comprehensive income – – 3 3Recognised in the consolidated statement of equity – – 58 58At 31 December 2023 (30,592) – 503 (30,089)

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 25% rate (2022: mixture of 25% and a blended rate) as appropriate.

Deferred tax assets and liabilities are offset when there is a legally enforceable 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 £7.7m at 31 December 2023 (2022: £8.1m) have not been recognised owing to the uncertainty as to their recoverability.

The Company has recognised a deferred tax asset in 2023 of £0.1m (2022: £0.1m).

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 £9.3m (2022: £6.4m)

and the total comprehensive expense for the financial year was £9.3m (2022: £6.2m). The distributable reserves of the Company

are £89.1m (2022: £101.6m).

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Financial Statements

10. Dividends

Year ended Year ended 31 December 31 December 2023 2022 £’000 £’000 Interim dividend of 0.444p per share for the six months ended 30 June 2023 1,437 –Full year dividend of 0.929p per share for the year ended 31 December 2022 3,001 –Interim dividend of 0.404p per share for the six months ended 30 June 2022 – 1,305Final dividend of 0.845p per share for the year ended 31 December 2021 – 2,7274,438 4,032

The Board has declared a final dividend to be paid of 1.022p (2022: 0.929p) per share, bringing the total dividend for the year to

1.466p (2022: 1.333p). The recommended 2023 final dividend and 2023 total dividend represent a 10% increase in line with the

Group’s policy.

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 Year ended 31 December 31 December 20232022Profit from continuing operations attributable to owners of the Company (£’000) 37,956 27,838Weighted average number of shares used for basic earnings per share calculation 322,767,356 322,571,783Basic earnings per share (pence) 11.8 8.6Weighted average number of shares used for diluted earnings per share calculation 328,653,655 326,317,353Diluted earnings per share (pence) 11.5 8.5

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 awards and options that are dilutive.

Notes to the financial statements continued

for the year ended 31 December 2023

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12. Property, plant and equipment

Land and Office Group Buildings Equipment Total Cost or fair value £’000 £’000 £’000 As at 1 January 2022 635 525 1,160Additions – 110 110Decrease in fair value (133) – (133)As at 31 December 2022 and 1 January 2023 502 635 1,137Additions at cost – 396 396Transfers from investment property 967 – 967Decrease in fair value (169) – (169)As at 31 December 2023 1,300 1,031 2,331Depreciation As at 1 January 2022 – (479) (479)Depreciation charge – (58) (58)As at 31 December 2022 and 1 January 2023 – (537) (537)Depreciation charge – (124) (124)As at 31 December 2023 – (661) (661)Net book value Net book value at 31 December 2023 1,300 370 1,670Net book value at 31 December 2022 502 98 600

At 31 December 2023, the Group had not entered into any contractual commitments for the acquisitions of property, plant and

equipment (2022: £nil).

13. Right of use assets

As at As at 31 December 31 December Group 2023 2022 Right of use assets £’000 £’000 Buildings 466 229Vehicles 46 25 512 254Lease liabilitiesCurrent 158 82Non-current 397 172 555 254

As at As at 31 December 31 December Group 2023 2022 Depreciation charge of right of use assets£’000 £’000 Buildings 143 77Vehicles 15 17 158 94

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.

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Financial Statements

13. Right of use assets continued

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.

14. Investment properties

Investment properties at 31 December 2023 and 31 December 2022 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 Natural Investment Major Strategic Land Resources Portfolio Developments Land Total £’000 £’000 £’000 £’000 £’000 £’000At 1 January 2022 5,412 30,551 259,726 45,483 137,183 478,355Direct acquisitions – – – – 11,863 11,863 Subsequent expenditure – 12 2,822 40,928 9,344 53,106 Disposals – (860) – – – (860)Increase/(decrease) 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 44,244 120,292 400,363Direct acquisitions 655 – – – 15,829 16,484Subsequent expenditure 45 1,350 677 22,104 11,558 35,734Disposals – – (11,136) (788) (7,041) (18,965)Increase in fair value 116 89 5,583 3,196 62,388 71,372Transfers between divisions – – 18,551 (10,416) (8,135) –Transfers to development properties – – – – (51,865) (51,865)Transfers to property, plant and equipment – – (967) – – (967)Transfer to AHFS – (1,264) (14,800) – (2,150) (18,214)At 31 December 2023 6,510 19,901 208,315 58,340 140,876 433,942

Subsequent expenditure is recorded net of government grant receipts of £1.6m (2022: £0.9m).

Included within investment properties (agricultural land) is a provision of £0.2m (2022: £0.2m) relating to the restoration liability on sites

formerly rented to mining tenants. This provision is treated as a reduction of the individual property valuations.

Notes to the financial statements continued

for the year ended 31 December 2023

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14. Investment properties continued

During the year no development property was re-categorised as investment property to reflect a change in use (2022: £5.4m).

During the year £51.9m of investment property was re-categorised to development properties (2022: £60.5m). During the year £1.0m

of investment property was re-categorised as land and buildings (2022: £nil). Properties that have obtained planning permission and

where development with a view to sale has commenced are held as development properties in inventories. Until sites receive planning

permission and their future use has been determined, Harworth’s 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.

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 Major Natural Investment Strategic LandDevelopmentsResources Portfolio Land Total £’000 £’000 £’000 £’000 £’000 £’000Investment properties 6,510 19,901 208,315 58,340 140,876 433,942Properties included within AHFS (note 18) – 1,738 13,250 – 3,764 18,752Total properties (excluding development properties) 6,510 21,639 221,565 58,340 144,640 452,694

As at As at 31 December 31 December 2023 2022 £’000 £’000 Market value as estimated by the external valuer 461,288 470,150Capital incentives and rent-free periods included within other receivables (5,149) (5,853)Contingent interest in adjoining land included within external valuations (4,118) (3,848)Other adjustments 673 (296)Fair value for financial purposes 452,694 460,153

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.

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14. Investment properties continued

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 2023 (2022: none).

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 As at 31 December 31 December 2023 2022 £’000£’000Market value (£’000) 226,650 272,850 Aggregate ERV (£’000) 16,187 20,388 Equivalent rental yield % 7.2 7.8

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.

Notes to the financial statements continued

for the year ended 31 December 2023

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14. Investment properties continued

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 2023:

2023 2022Increase in Decrease in Increase in Decrease in Sensitivity Sensitivity Sensitivity Sensitivity Value Value Value Value £’000£’000£’000£’000Change in net income by 5% 11,427 (11,427) 13,568 (13,568)Change in portfolio net initial yield by 50 basis points (24,109) 28,653 (24,934) 25,980

The property rental income earned by the Group from its occupied investment property, all of which is leased out under operating leases

amounted to £17.5m (2022: £19.9m). Direct operating expenses arising on investment property generating rental income in the year

amounted to £5.4m (2022: £6.4m).

The RCF and other loans are secured by way of fixed equitable charges over investment and development properties.

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 2023 As at 31 December 2022Market Sales Profit Market Profit value price Build cost Margin value Sales price Build cost Margin (£’000)per sq. ftper sq. ft%(£’000)per sq. ftper sq. ft%Major developments 57,554 £131-£147 £69-£75 15% 43,941 £125-£138 £67-£93 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 2023:

2023 2022Increase in Decrease in Increase in Decrease in Sensitivity Sensitivity Sensitivity Sensitivity Value Value Value Value £’000£’000£’000£’000Change in sales price of 5% 8,649 (8,745) 7,999 (6,439) Change in build cost of 5% (6,224) 6,036 (4,266) 5,826

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Financial Statements

14. Investment properties continued

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 2023 As at 31 December 2022Agricultural Natural Strategic Agricultural Natural Strategic Land Resources Land Land Resources Land £’000£’000£’000£’000£’000£’000Market value 6,653 21,639 148,792 5,845 20,706 126,808Weighted Average Land value per acre 3 19 75 3 21 68

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 2023:

2023 2022Increase in Decrease in Increase in Decrease in Sensitivity Sensitivity Sensitivity Sensitivity Value Value Value Value Change in land value per acre by 5%£’000£’000£’000£’000Agricultural Land 333 (333) 292 (292)Natural Resources 1,082 (1,082) 1,035 (1,035)Strategic Land 7,440 (7,440) 6,340 (6,340)

15. Investments

Investment in subsidiaries (Company balance sheet)

As at As at 31 December 31 December 2023 2022 £’000£’000 Cost and net book amount: At 1 January 209,864 209,300 Grant of equity instruments to employees of subsidiaries 980 564 At 31 December 210,844 209,864

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.

Notes to the financial statements continued

for the year ended 31 December 2023

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15. Investments continued

The Company held investments in the following subsidiaries as at 31 December 2023:

Proportion of nominal value of Held issued share directly or capital indirectly Description of held by the by the Company name Activityshares heldCompany %CompanyHarworth Estates Property Group Limited Trading Ordinary 100 DirectCadley Park Management Company Limited Trading Ordinary 100 IndirectCutacre Country Park Management Company Limited Trading Ordinary 100 IndirectEOS Inc Limited Trading Ordinary 100 IndirectHarworth Estates (Agricultural Land) Limited Trading Ordinary 100 IndirectHarworth Estates (Waverley Prince) Limited Trading Ordinary 100 IndirectHarworth Estates Curtilage Limited Trading Ordinary 100 IndirectHarworth Estates Investments Limited Trading Ordinary 100 IndirectHarworth Estates Limited Trading Ordinary 100 IndirectHarworth Estates Mines Property Limited Trading Ordinary 100 IndirectHarworth Estates Overage Limited Trading Ordinary 100 IndirectHarworth Estates Residential Development Limited Trading Ordinary 100 IndirectHarworth Estates Warwickshire Limited Trading Ordinary 100 IndirectHarworth Surface Water Management (Bardon) Limited Trading Ordinary 100 IndirectHarworth Surface Water Management (North West) Limited Trading Ordinary 100 IndirectHarworth TRR Limited Trading Ordinary 100 IndirectLogistics North MC Limited Trading Ordinary 10.86 IndirectThoresby Vale Management Company Limited Trading Ordinary 100 IndirectHarworth Estates Northumberland Woodland Limited Trading Ordinary 100 IndirectCoze Homes Limited Trading Ordinary 100 Indirect Olive Lane Management Company Limited Trading Ordinary 100 IndirectFlass Lane Management Company Limited Trading Limited by guarantee 100 IndirectMapplewell Management Company Limited Trading Limited by guarantee 100 IndirectPOW Management Company Limited Trading Limited by guarantee 100 IndirectRiverdale Park Management Company Limited Trading Limited by guarantee 100 IndirectRossington Community Management Company Limited Trading Limited by guarantee 100 IndirectSimpson Park Management Company Limited Trading Limited by guarantee 100 IndirectSouth East Coalville Management Company Limited Trading Limited by guarantee 100 IndirectWaverley Community Management Company Limited Trading Limited by guarantee 100 IndirectAnsty Development Vehicle LLP Trading Partnership 100 IndirectGrimsby West LLP Trading Partnership 100 IndirectHarworth PV Limited Non-trading Ordinary 100 IndirectHarworth Regeneration Limited Non-trading Ordinary 100 IndirectHarworth Services Limited Non-trading Ordinary 100 IndirectHarworth Estates No 2 Limited Non-trading Ordinary 100 IndirectHarworth No 1 Limited Dormant Ordinary 100 IndirectBenthall Grange (Ironbridge) Management Company Limited Dormant Limited by guarantee 100 IndirectMoss Nook (St Helens) Management Company Limited Dormant Limited by guarantee 100 Indirect

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.

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Financial Statements

15. Investments continued

The following entities were incorporated during the year:

– Harworth Estates Northumberland Woodland Limited on 10 January 2023

– Coze Homes Limited on 11 August 2023

– Olive Lane Management Company Limited on 26 October 2023

– Grimsby West LLP on 6 December 2023

The following entities were dissolved in January 2023:

• Coalfield Estates Limited

• Harworth Guarantee Co. Limited

• Harworth Estates Group Limited

• Harworth No.3 Limited

Investment in joint ventures

Year ended Year ended 31 December 31 December 2023 2022 £’000£’000 At 1 January 29,828 36,131 Investments in joint ventures 250 1,849 Distributions from joint ventures (910) (665) Share of profits/(losses) of joint ventures 1,554 (7,487) At 31 December 30,722 29,828

The Group holds investments in the following joint ventures as at 31 December 2023:

Proportion of nominal value of issued share Description capital held by Company name Activityof shares heldthe Group %Multiply Logistics North Holdings Limited Trading Ordinary 20Multiply Logistics North LP Trading Partnership 20Crimea Land Mansfield LLP Trading Partnership 50Northern Gateway Development Vehicle LLP Trading Partnership 50The 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.

Notes to the financial statements continued

for the year ended 31 December 2023

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15. Investments continued

Aggregate information of the Group’s share of assets, liabilities and results of joint ventures, that are individually material is:

The Aire Valley Land LLPAs at As at 31 December 31 December 2023 2022 £’000£’000Investment property 26,000 26,350Current assets 2,339 306Total assets 28,339 26,656Current liabilities (38) (180)Equity 28,301 26,476Group’s share in equity (50%) 14,151 13,238Group’s carrying amount of the investment 14,151 13,238

Included within current assets are cash and cash equivalents of £2.3m (2022: £0.2m)

Multiply Logistics North LPAs at As at 31 December 31 December 2023 2022 £’000£’000Investment property 63,245 62,840Current assets 3,356 5,495Total assets 66,601 68,335Current liabilities (1,011) (1,505)Equity 65,590 66,830Group’s share in equity (20%) 13,118 13,366Group’s carrying amount of the investment 13,118 13,366

Included within current assets are cash and cash equivalents of £0.7m (2022: £2.0m). Included within current liabilities are accruals and

deferred income of £0.9m (2022: £0.9m) and other taxes payable of £0.4m (2022: £0.5m)

The Aire Valley Land LLPAs at As at 31 December 31 December 2023 2022 £’000£’000Revenue – 60Current assets (11) (7)Gross (loss)/profit (11) 53Administrative expenses (9) (11)Other gains/(losses) 1,845 (8,650)Profit/(loss) for the year 1,825 (8,608)Group's share of profit/(loss) for the year (50%) 913 (4,304)

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Financial Statements

Notes to the financial statements continued

for the year ended 31 December 2023

15. Investments continued

Multiply Logistics North LPAs at As at 31 December 31 December 2023 2022 £’000£’000Revenue 3,600 3,880Current assets (590) (125)Gross profit 3,010 3,755Administrative expenses (100) (160)Other gains/(losses) 400 (19,450)Profit/(loss) for the year 3,310 (15,855)Group's share of profit/(loss) for the year (20%) 662 (3,171)

Aggregate information of the Group’s share of assets, liabilities and results of joint ventures, that are not individually material is:

As at As at 31 December 31 December 2023 2022 £’000£’000Current assets 7,701 7,088Total assets 7,701 7,088Current liabilities (795) (640)Equity 6,906 6,448Group share in equity (50%) 3,453 3,224Group’s carrying amount of the investment 3,453 3,224Loss for the year (41) (23)Group’s share of losses for the year (50%) (21) (12)

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 As at 31 December 31 December 2023 2022 £’000£’000Development properties 250,024 204,952Planning promotion agreements 3,805 2,994Options 9,244 8,447 263,073 216,393

The total cost of inventory recognised as an expense within cost of sales in the year is £52.7m (2022: £68.4m) and comprising:

£47.3m (2022: £67.7m) relating to the sale of development properties; a net realisable value charge of £4.3m (2022: £0.4m) against

development properties; a charge of £1.1m (2022: £0.1m) in relation to planning promotion agreements; and a charge of £nil (2022:

£0.2m) relating to finished goods stocks.

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16. Inventories continued

The movement in development properties was as follows:

Year ended Year ended 31 December 31 December 2023 2022 £’000£’000At 1 January 204,952 172,701Subsequent expenditure 32,417 35,430Disposals (34,850) (57,857)Net realisable value charge (4,360) (395)Transfers from investment properties 51,865 55,073At 31 December 250,024 204,952

Subsequent expenditure is recorded net of government grant receipts of £1.2m (2022: £2.7m).

The movement in net realisable value provision was as follows:

Year ended Year ended 31 December 31 December 2023 2022 £’000£’000At 1 January 9,776 12,154Charge for the year 7,442 7,074Released on disposals (1,213) (5,030)Reversal of previous net realisable value provision (1,869) (1,649)Released on transfer to investment property – (2,773)At 31 December 14,136 9,776

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 As at As at As at As at 31 December 31 December 31 December 31 December 2023 2022 2023 2022 Current£’000£’000£’000£’000Trade receivables 16,933 31,566 – –Less: provision for impairment of trade receivables (9) (28) – –Net trade receivables 16,924 31,538 – –Other receivables 17,019 22,379 111 144Prepayments 1,965 1,062 55 43Accrued income 1,381 1,679 – –Amounts owed by subsidiary undertakings (note 30) – – 136 110 37,289 56,658 302 297Non–currentTrade receivables 10,336 3,119 – –Other receivables 960 894 – –Amounts owed by subsidiary undertakings (note 30) – – 23,337 28,647 11,296 4,013 23,337 28,647

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Financial Statements

17. Trade and other receivables continued

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 £15.7m (2022: £31.4m) of deferred consideration on the sale of investment and development property.

The non-current trade receivable of £12.3m (2022: £3.1m) relates to deferred consideration on the sale of development properties due

in more than one year.

The cash movement in respect of deferred consideration as reflected in the Consolidated Statement of Cash Flows is a net deduction to

proceeds from sale of investment properties of £6.7m (2022: net increase £1.0m).

Other receivables include debtors from agent managed properties of £3.7m (2022: £7.3m), right of return assets of £2.3m (2022: £nil)

and rent-free and capital incentives of £5.2m (2022: £5.9m).

The maximum exposure to credit risk at the reporting date is the carrying value of each class of receivables as disclosed in note 22.

A charge is retained on deferred consideration related to land sales. No other security or collateral is held by the Group or the Company.

The amounts owed to the Company by subsidiary undertakings are repayable on demand. Interest is payable at SONIA + 2%

(2022: SONIA + 2%).

Group

Movements on the Group provisions for impairment of trade receivables are as follows:

Year ended Year ended 31 December 31 December 2023 2022 £’000£’000At the beginning of the year (28) (27)Released/(provided for) in the year 19 (1)At the end of the year (9) (28)

Trade receivables can be analysed as follows:

As at As at 31 December 31 December 2023 2022 £’000£’000Amounts receivable not past due 16,828 31,489Amounts receivable past due but not impaired 96 49Amounts receivable impaired (gross) 9 28Less impairment (9) (28) 16,924 31,538

Ageing of past due but not impaired trade receivables:

As at As at 31 December 31 December 2023 2022 £’000£’00031- 60 days 1 361- 90 days – –91- 120 days 95 46 96 49

Notes to the financial statements continued

for the year ended 31 December 2023

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17. Trade and other receivables continued

Ageing of impaired trade receivables:

As at As at 31 December 31 December 2023 2022 £’000£’00091- 120 days 9 28120+ days – – 9 28

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.

Year ended Year ended 31 December 31 December 2023 2022 £’000£’000At 1 January 59,790 1,925Transferred from investment properties 18,214 67,303Subsequent expenditure 74 1Decrease in fair value (272) (199)Disposals (59,054) (9,240)At 31 December 18,752 59,790

19. CashGroup CompanyAs at As at As at As at 31 December 31 December 31 December 31 December 2023 2022 2023 2022 £’000£’000£’000£’000Cash 27,182 11,583 90 1,433

20. Borrowings

As at As at 31 December 31 December 2023 2022 £’000£’000Current:Secured – infrastructure and direct development loans (29,744) (3,067) (29,744) (3,067)Non-current:Secured – bank loan (33,830) (34,558)Secured – infrastructure and direct development loans – (22,353) (33,830) (56,911)Total borrowings (63,574) (59,978)

Loans are stated after deduction of unamortised borrowing costs of £1.5m (2022: £2.0m).

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Financial Statements

20. Borrowings continued

As at As at 31 December 31 December 2023 2022 £’000£’000Infrastructure and direct development loansSouth Yorkshire Pension Fund/ Scrudf Limited Partnership Rotherham AMP (584) –Scrudf Limited Partnership Gateway 36 (6,850) (1,413)Merseyside Pension Fund Bardon Hill (22,310) (20,940)North West Evergreen Limited Partnership Logistics North – (3,067)Total infrastructure and direct development loans (29,744) (25,420)Bank loan (33,830) (34,558)Total borrowings (63,574) (59,978)

The bank borrowings are part of a £200m (2022: £200m) revolving credit facility (‘RCF’) with a £40m uncommitted accordion option,

provided by NatWest, Santander and HSBC. The RCF is repayable on 4 March 2027 at the end of the five-year term.

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 and direct development loans are provided by public and private bodies in order to promote the development of

major sites or assist with vertical direct development. 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.

21. Trade and other payables

Group Company As at As at As at As at 31 December 31 December 31 December 31 December 2023 2022 2023 2022 Current£’000£’000£’000£’000Trade payables 759 2,361 7 28Amounts owed to subsidiary undertakings (note 30) – – 38,544 34,481Taxation and social security 6,178 513 105 98Other creditors 5,142 6,611 224 187Accruals 71,814 65,338 2,598 1,553Deferred income 4,194 7,676 – – 88,087 82,499 41,478 36,347

The amounts owed by the Company to subsidiary undertakings are repayable on demand. Interest is payable at SONIA + 2%

(2022: SONIA + 2%).

Group Company As at As at As at As at 31 December 31 December 31 December 31 December 2023 2022 2023 2022 £’000£’000£’000£’000Amounts in accruals relating to parcels of land that have been sold but where infrastructure costs are yet to be incurred 54,163 48,595 – –Amounts in accruals relating to deferred payments for investment property acquisitions – 2,561 – –

Deferred income includes £3.1m (2022: £4.1m) in relation to rental income.

Notes to the financial statements continued

for the year ended 31 December 2023

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21. Trade and other payables continued

Non-current liabilities

Group Company As at As at As at As at 31 December 31 December 31 December 31 December 2023 2022 2023 2022 £’000£’000£’000£’000Other creditors 947 1,925 – –Deferred income 810 894 – –1,757 2,819 – –

22. Financial Instruments and derivatives

Until March 2022, the Group was party to a £45m fixed rate interest swap at an all-in cost of 1.184% (including fees) on top of the existing

2.35% margin under the previous RCF. The interest rate swap was ended when the Group entered into the new RCF in 2022.

The fair value of the interest rate swap at 31 December 2023 was £nil (2022: a liability of £nil).

The following gain was recognised in the other comprehensive income statement in relation to the interest rate swap:

As at As at 31 December 31 December 2023 2022 £’000£’000Gain on interest rate swap – cash flow hedge – 156

The Group’s principal financial instruments include trade and other receivables, cash, interest bearing borrowings and trade and

other payables.

Other financial assets and liabilities

As at 31 December 2023 As at 31 December 2022Book value Fair value Book value Fair value Group£’000£’000£’000£’000Financial assets held at amortised costCash 27,182 27,182 11,583 11,583 Trade and other receivables 45,239 45,239 57,930 57,930 Financial liabilities held at amortised costBank and other borrowings 63,574 63,574 59,978 59,978 Trade and other payables 78,662 78,662 76,235 76,235

As at 31 December 2023 As at 31 December 2022Book value Fair value Book value Fair value Company£’000£’000£’000£’000Financial assets held at amortised costCash 90 90 1,433 1,433 Trade and other receivables 23,584 23,584 28,901 28,901 Financial liabilities held at amortised costTrade and other payables 41,373 41,373 36,249 36,249

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.

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Financial Statements

22. Financial Instruments and derivatives continued

Changes in liabilities arising from financing activities

Year ended Year ended 31 December 31 December 2023 2022 £’000£’000Borrowings at start of year 59,978 37,781Repayments (49,299) (152,000)Drawdowns 50,939 173,850Interest expense 4,225 3,292Interest paid (2,778) (2,206)Borrowing costs (162) (2,022)Amortisation of capitalised borrowing costs 671 1,283Borrowings at end of year 63,574 59,978

Year ended Year ended 31 December 31 December 2023 2022 £’000£’000Leases at start of year 254 94Additions 392 251Payments in respect of leases (91) (91)Leases at end of year 555 254

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 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.

At the year end, the Group’s RCF had an all in funding rate of 7.45% (2022: 5.32%). The Group also has three (2022: three) infrastructure

loans with an all in funding rate of between 5.75% and 7.29% (2022: between 2.2% and 5.9%), of these one loan (2022: one) has a fixed

rate of interest. Based on the amounts drawn down at 31 December 2023, if the variable interest rate changed by 50bps, the annual

interest cost would increase or decrease by £0.3m.

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 2023 of £36.4m (2022: £48.4m). The Group generated cash from operating activities and

investing activities for the year of £18.3m (2022: cash used of £16.2m).

Notes to the financial statements continued

for the year ended 31 December 2023

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23. Financial risk management continued

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.

Net carrying amount of Total financial contractual Less than Between Between liabilities cashflow 1 year 1 and 2 years 2 and 5 years £’000£’000£’000£’000£’000At 31 December 2023Trade and other payables 78,662 78,662 77,715 57 890Lease liability 455 455 158 150 247Bank and other borrowings including interest payable 63,574 78,571 35,454 4,128 38,989At 31 December 2022Trade and other payables 76,235 76,235 74,310 1,925 –Lease liability 254 254 82 63 109Bank and other borrowings including interest payable 59,978 59,978 3,067 22,353 34,558

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.

The Group monitors capital on the basis of net debt to equity. Net debt is total debt less cash and at 31 December 2023 this was

£36.4m (2022: £48.4m).

The Group has in place a £200m (2022: £200m) RCF, with a £40m accordion (2022: £40m) as discussed in Note 20. The facility is

provided by NatWest, Santander and HSBC. The RCF is repayable in March 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.

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Financial Statements

Notes to the financial statements continued

for the year ended 31 December 2023

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 £0.9m (2022: £0.8m) . 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 the 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 was:

Group CompanyAs at As at As at As at 31 December 31 December 31 December 31 December 2023 2022 2023 2022 £’000£’000£’000£’000Relating to continuing activitiesBlenkinsopp 11 114 11 114

Contributions to the Blenkinsopp scheme of £0.2m were made by the Group during 2023 (2022: £0.2m). It is expected that

contributions of a similar amount will be paid in 2024. At 31 December 2023, no contributions remained unpaid (2022: £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 As at 31 December 31 December 2023 2022 £’000£’000Discount rate 4.60% p.a. 4.90% p.a.Rate of pension increases 2.50% p.a. 2.60% p.a.Rate of price inflation (RPI) 3.00% p.a. 3.15% p.a.Rate of price inflation (CPI) 2.50% p.a. 2.60% p.a.25% of pension at 25% of pension at a Rate of cash commutationa rate of £9:£1rate of £9:£1

As at As at 31 December 31 December 2023 2022 £’000£’000Life expectancy at age 65 for current pensioners (years) Male 18.2 19.2Female 21.6 22.5

Life expectancy at age 65 for future pensioners currently aged 45 (years)

Male 19.1 20.5Female 22.8 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).

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24. Retirement benefit obligations continued

Defined benefit obligations

The amounts recognised in the Balance sheet are:

2023 2022 2021 2020 2019 £’000 £’000 £’000 £’000 £’000Fair value of plan assets 2,124 1,989 2,747 2,537 2,313 Present value of funding obligations (2,135) (2,103) (3,305) (3,505) (3,084)Net liability recognised in the Balance sheet (11) (114) (558) (968) (771)

The Blenkinsopp scheme does not own any shares in the Company.

The amounts recognised in the Consolidated Income Statement are:

Year ended Year ended 31 December 31 December 2023 2022 £’000£’000Expenses (109) (50)Interest cost (3) (9) (112) (59)

A further credit of £0.0m (2022: £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.

Year ended Year ended 31 December 31 December 2023 2022 Change in assets£’000£’000Fair value of plan assets at the start of the year 1,989 2,747Interest income 98 53Actual return/(loss) on scheme assets excluding interest income 20 (883)Employer contributions 225 208Expenses (109) (86)Benefits paid (99) (50)Fair value of plan assets at the end of the year 2,124 1,989

Plan assets, which are all quoted investments, are comprised as follows:

As at As at 31 December 31 December 2023 2022 Analysis of plan assets (which are all quoted investments)£’000£’000Gilts 332 1,284Liability driven investments 1,155 –Delegated solutions – 663Sterling liquidity fund 442 –Other 195 42Total 2,124 1,989

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Financial Statements

Notes to the financial statements continued

for the year ended 31 December 2023

24. Retirement benefit obligations continued

Year ended Year ended 31 December 31 December 2023 2022 Change in defined benefit obligations£’000£’000Present value of defined benefit obligations at the start of the year (2,103) (3,305)Interest cost (101) (62)Remeasurements:– Gain arising from changes in demographic assumptions 80 16– Loss arising from changes in experience (57) (1)– Gain arising from changes in financial assumptions (53) 1,163Benefits paid 99 86Present value of defined benefit obligation at the end of the year (2,135) (2,103)

Year ended Year ended 31 December 31 December 2023 2022 Analysis of the movement of the Balance Sheet liability£’000£’000At the start of the year (114) (558)Total amounts recognised in the income statement (112) (59)Employer contributions 225 208Net actuarial (loss)/gain recognised in the year (10) 295At the end of the year (11) (114)

The duration of the defined benefit obligation is c.15 years (2022: c.16 years).

Year ended Year ended 31 December 31 December 2023 2022 Cumulative actuarial gains and losses recognised in equity£’000£’000At the start of the year (392) (687)Net actuarial (loss)/gain in the year (10) 295At the end of the year (402) (392)

Year ended Year ended 31 December 31 December 2023 2022 Experience gains and losses£’000£’000Actual return/(loss) on scheme assets excluding interest income 20 (883)Remeasurements:– Loss arising from changes in experience (57) (1)– (Loss)/gains arising from changes in financial assumptions (53) 1,163– Gains arising from changes in demographic assumptions 80 16Net actuarial (loss)/gain (10) 295

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 2021, which was agreed in March 2023. This showed

an estimated past service deficit of £0.7m.

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24. Retirement benefit obligations continued

The sensitivity of the defined benefit obligations to changes in the weighted principal assumptions is:

As at As at 31 December 31 December 2023 2022 £’000£’000Change in discount rate by 0.5% (2022: 0.5%) (129) (115)Change in price inflation (and associated assumptions) by 0.5% (2022: 0.5%) 97 115Increase in life expectancy by 1 year 79 75

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. No 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.

• Deferred Bonus Plan (DBP). 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.

• 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 125 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, DBP 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.

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Financial Statements

Notes to the financial statements continued

for the year ended 31 December 2023

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 priceDSBP 2023 2022 2023 2022Outstanding at beginning of the year 943 1,067 £0.00 £0.00Granted during the year – – n/a n/aForfeited during the year – (124) n/a £0.00Exercised during the year – – n/a n/aOutstanding at end of the year 943 943 £0.00 £0.00Exercisable at end of the year 943 943 £0.00 £0.00Weighted average remaining contractual life 4.3 years 5.3 years

Number of shares Weighted average exercise priceDBP 2023 2022 2023 2022Outstanding at beginning of the year – – n/a n/aGranted during the year 57,988 – £0.00 n/aForfeited during the year – – n/a n/aExercised during the year – – n/a n/aOutstanding at end of the year 57,988 – £0.00 n/aExercisable at end of the year – – n/a n/aWeighted average remaining contractual life 9.2 years n/a

Number of shares Weighted average exercise priceRSP 2023 2022 2023 2022Outstanding at beginning of the year 2,412,749 1,502,883 £0.00 £0.00Granted during the year 1,396,752 1,096,516 £0.00 n/aForfeited during the year (46,971) (186,650) £0.00 £0.00Exercised during the year – – n/a n/aOutstanding at end of the year 3,762,530 2,412,749 £0.00 n/aExercisable at end of the year – – n/a n/aWeighted average remaining contractual life 8.1 years 8.4 years

Number of shares Weighted average exercise priceSAYE 2023 2022 2023 2022Outstanding at beginning of the year 894,382 877,530 £0.91 £0.82Granted during the year 1,034,244 161,916 £1.00 £1.40Forfeited during the year (192,868) (80,357) £1.26 £0.82Exercised during the year (541,688) (64,707) £0.74 £1.04Outstanding at end of the year 1,194,070 894,382 £1.04 £0.91Exercisable at end of year 21,921 – £0.74 n/aWeighted average remaining contractual life 2.1 years 1.5 years

Number of shares Weighted average exercise priceSIP 2023 2022 2023 2022Outstanding at beginning of the year 432,769 147,845 £0.00 £0.00Granted during the year 538,078 286,138 £0.00 £0.00Forfeited during the year (62,967) (1,214) £0.00 £0.00Released during the year (17,137) – £0.00 n/aOutstanding at end of the year 890,743 432,769 £0.00 £0.00

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25. Share-based payments continued

The fair values of the share options granted under the RSP and SAYE during the year were determined using Black-Scholes

valuation methodology. The fair value of shares awarded granted under the DBP and SIP schemes in the year was the share price

at the date of grant.

The significant inputs to the valuation models were as follows:

RSP SAYEShare price at date of grant £1.17 £1.00Exercise price £0.00 £0.83Dividend yield 1.14% 1.37%Expected volatility 35% 37%Risk free interest rate n/a 4.43%Expected term 4.91 years 3.32 yearsWeighted average fair value £0.98 £0.36

For the DBP and SIP schemes the fair values of the awards are equal to the share price at the date the awards are granted.

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 2020 SAYE Scheme were exercised in the year with a weighted average share price on exercise of £1.06.

The total charge for the year relating to employee share based payment plans was £1.4m (2022: £0.7m), all of which related to

equity-settled share based payment transactions.

26. Share capital

Issued, authorised and fully paid

As at As at 31 December 31 December 2023 2022 Group and Company£’000£’000At 1 January 32,305 32,272Shares issued 103 33At 31 December 32,408 32,305

Issued, authorised and fully paid – number of shares

Year ended Year ended 31 December 31 December Group and Company 20232022At 1 January 323,051,124 322,724,566Shares issued 1,032,948 326,558At 31 December 324,084,072 323,051,124Own shares held (929,699) (438,439)At 31 December 323,154,373 322,612,685

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.

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Financial Statements

27. Share premium account

Year ended Year ended 31 December 31 December 2023 2022 Group and Company £’000£’000At 1 January 24,688 24,627Premium on shares issued 346 61At 31 December 25,034 24,688

28. Commitments

At 31 December 2023 the Group had contractual commitments due under construction contracts of £21.2m (2022: £0.6m). Capital

commitments for the acquisition of property, plant and equipment are disclosed in note 12. Future expenditure required to bring

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 2023 the Group had contracted with tenants for the following future minimum lease payments:

GroupAs at As at 31 December 31 December 2023 2022 £’000£’000Less than one year 15,527 17,733Between one and two years 13,506 17,426Between two and three years 12,206 15,057Between three and four years 11,850 14,059Between four and five years 9,615 12,861More than five years 108,973 124,992 171,677 202,128

As set out in note 14 property rental income earned during the year was £17.3m (2022: £19.9m)

Notes to the financial statements continued

for the year ended 31 December 2023

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30. Related party transactions

Group

The Group carried out the following transactions with related parties during 2023. 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.

Year ended/ Year ended/ as at as at 31 December 31 December 2023 2022 £000£000MULTIPLY LOGISTICS NORTH HOLDINGS LIMITED & MULTIPLY LOGISTICS NORTH LPSalesRecharges of costs 281 –Asset management fee 100 145 Water charges 146 113 PurchasesRecharge of costs 1 –ReceivablesOther receivables 5 – Trade receivables 281 – GENUIT GROUP (FORMERLY POLYPIPE)SalesRent 10 20 Development property disposal 1,680 – ReceivablesTrade receivables – 6THE AIRE VALLEY LAND LLPReceivables 26 26CRIMEA LAND MANSFIELD LLPReceivables 9 9NORTHERN GATEWAY DEVELOPMENT VEHICLE LLPPartner loan made during the year – 1,849 Investment made during the year 250 –INVESTMENT PROPERTY FORUMPurchases 5 1

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Financial Statements

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 2023 are set out below:

Year ended/as at Year ended/as at 31 December 202331 December 2022Net interest Net interest receivable/ receivable/ (payable) Net amounts (payable) Net amounts in the year due from/(to) in the year due from/(to) £’000£’000£’000£’000EOS Inc. Limited 1,039 15,232 657 19,891 Harworth Estates Limited (495) (9,020) (219) (7,967)Harworth Estates (Agricultural Land) Limited (122) (1,953) (62) (1,841)Harworth Estates Investments Limited (919) (15,716) (366) (13,802)Harworth Guarantee Co. Limited – – – – Harworth Estates Overages Limited – 3 – 1 Harworth Estates Mines Property Limited 391 5,661 213 6,464 Harworth Estates Curtilage Limited 151 2,444 75 2,290 Harworth Estates Waverley Prince Limited (22) (351) (9) (336)Harworth Estates Property Group Limited (646) (10,680) (290) (9,749)Harworth Surface Water Management (North West) Limited (35) (562) (17) (529)Coalfield Estates Limited – – – – Harworth Estates Warwickshire Limited – 3 – 1 Harworth TRR Ltd (17) (256) (2) (249)Logistics North MC Limited – 3 – 1 POW Management Company Limited – (2) – (2)Rossington Community Management Company Limited – – – (1)Flass Lane Management Company Limited – (1) – (1)Mapplewell Management Company Limited – – – (1)Cadley Park Management Company Limited – (2) – (2)Simpson Park Management Company Limited – (1) – (1)Ansty Development Vehicle LLP 7 121 3 107 Harworth Surface Water Management (Bardon) Limited – 3 – 2 Harworth Estates Residential Development Limited – 3 – – (668) (15,071) (17) (5,724)

Dividends received

During the year the Company received dividends of £nil (2022: £nil) from subsidiary undertakings.

31. Post balance sheet events

In January 2024 the Group disposed of the investment portfolio asset Flaxby Moor Industrial Estate, Knaresborough for proceeds of

£13.3m. This property was included within assets held for sale at the year end.

Notes to the financial statements continued

for the year ended 31 December 2023

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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 2023EPRA NDV EPRA NTA EPRA NRV £’000£’000£’000Net assets 637,722 637,722 637,722Cumulative unrealised gains on development properties 24,083 24,083 24,083Cumulative unrealised gains on overages 9,400 9,400 9,400Deferred tax liabilities (IFRS) – 30,089 30,089Notional deferred tax on unrealised gains (8,342) – –Deferred tax liabilities @ 50% – (19,216) –Purchaser costs – – 52,528 662,863 682,078 753,822Number of shares used for per share calculations 323,154,373 323,154,373 323,154,373Per share (pence) 205.1 211.1 233.3

31 December 2022EPRA NDV EPRA NTA EPRA NRV £’000£’000£’000Net assets 602,664 602,664 602,664 Cumulative unrealised gains on development properties 33,852 33,852 33,852 Cumulative unrealised gains on overages 7,500 7,500 7,500Deferred tax liabilities (IFRS) – 24,141 24,141 Notional deferred tax on unrealised gains (10,171) – – Deferred tax liabilities @ 50% – (17,156) – Purchaser costs – – 46,307 633,845 651,001 714,464 Number of shares used for per share calculations 322,612,685 322,612,685 322,612,685Per share (pence) 196.5 201.8 221.5

Appendix

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Supplementary Information

1) Reconciliation to statutory measures

Year ended Year ended 31 December 31 December 2023 2022 a. Revaluation gains/(losses) Note£’000£’000 Increase/(decrease) in fair value of investment properties 3 71,372 (19,725)Decrease in fair value of AHFS 3 (272) (199)Share of profit/(loss) of joint ventures 3 1,554 (7,487)Net realisable value provision on development properties 3 (7,442) (7,074)Reversal of previous net realisable value provision on development properties 3 1,213 5,030Amounts derived from statutory reporting 66,425 (29,455)Unrealised (losses)/gains on development properties (3,708) 10,493Unrealised gains on overages 2,209 4,003Revaluation gains/(losses) 64,926 (14,959)

b. (Loss)/profit on sale(Loss)/profit on sale of investment properties 3 (953) 923(Loss)/profit on sale of AHFS 3 (1,140) 2,071(Loss)/profit on sale of development properties 3 (618) 57,252Release of net realisable value provision on disposal of development properties 3 1,869 1,649Profit on sale of overages 3 419 169Amounts derived from statutory reporting (423) 62,064Less previously unrealised gains on development properties released on sale (6,061) (49,093)Less previously unrealised gains overages released on sale (309) –(Loss)/profit on sale (6,793) 12,971

c. Value gains/(losses)Revaluation gains/(losses) 64,926 (14,959)(Loss)/profit on sale (6,793) 12,971Value gains/(losses) 58,133 (1,988)

d. Total property salesRevenue 72,427 166,685Less revenue from other property activities 3 (2,286) (10,478)Less revenue from income generation activities 3 (23,410) (31,251)Add proceeds from sales of investment properties, AHFS and overages 79,166 13,550Total property sales 125,897 138,506

e. Operating profit contributing to growth in EPRA NDVOperating profit 54,229 44,486Share of profit/(loss) of joint ventures 15 1,554 (7,487)Unrealised (losses)/gains on development properties (3,708) 10,493Unrealised gains on overages 2,209 4,003Less previously unrealised gains on development properties released on sale (6,061) (49,093)Less previously unrealised gains on overages released on sale (309) –Operating profit contributing to growth in EPRA NDV 47,914 2,402

Appendix continued

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Supplementary Information

1) Reconciliation to statutory measures continued

As at As at 31 December 31 December 2023 2022 f. Portfolio value Note £’000 £’000 Land and buildings (included within property, plant and equipment) 1,300 500Investment properties 14 433,942 400,363Investments in joint ventures 15 30,722 29,828AHFS 18 18,752 59,790Development properties (included within inventories) 16 250,024 204,952Amounts derived from statutory reporting 734,740 695,433Cumulative unrealised gains on development properties as at year end 24,083 33,852Cumulative unrealised gains on overages as at year end 9,400 7,500Portfolio value 768,223 736,785

g. Net debtGross borrowings 20 (63,574) (59,978)Cash 27,182 11,583Net debt (36,392) (48,395)

h. Net loan to portfolio value (%)Net debt (36,392) (48,395)Portfolio value 768,223 736,785Net loan to portfolio value (%) 4.7% 6.6%

i. Net loan to core income generation portfolio value (%)Net debt (36,392) (48,395)Core income generation portfolio value (investment portfolio and natural resources) 14 228,216 230,133Net loan to core income generation portfolio value (%) 15.9% 21.0%

j. Gross loan to portfolio value (%)Gross borrowings 20 (63,574) (59,978)Portfolio value 768,223 736,785Gross loan to portfolio value (%) 8.3% 8.1%

k. Gross loan to core income generation portfolio value (%)Gross borrowings 20 (63,574) (59,978)Core income generation portfolio value (investment portfolio and natural resources) 14 228,216 230,133Gross loan to core income generation portfolio value (%) 27.9% 26.1%

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Harworth Group plc: Annual Report and Financial Statements 2023

Supplementary Information

1) Reconciliation to statutory measures continued

l. Number of shares used for per share calculationsNumber of shares in issue 26 324,084,072 323,051,124Less Employee Benefit Trust and Equiniti Share Plan Trustees Limited held shares (own shares) 26 (929,699) (438,439)Number of shares used for per share calculations 26 323,154,373 322,612,685

m. Net Asset Value (NAV) per shareNAV £’000 637,722 602,664Number of shares used for per share calculations 26 323,154,373 322,612,685NAV per share (p) 197.3 186.8

2) Reconciliation to EPRA measures

As at As at 31 December 31 December 2023 2022 a. EPRA NDV Note£’000 £’000 Net assets 637,722 602,664Cumulative unrealised gains on development properties 24,083 33,852Cumulative unrealised gains on overages 9,400 7,500Notional deferred tax on unrealised gains (8,342) (10,171)EPRA NDV 662,863 633,845

Harworth calculates EPRA NDV per share and total asset return on an undiluted basis.

b. EPRA NDV per share (p)EPRA NDV £’000 662,863 633,845Number of shares used for per share calculations 26 323,154,373 322,612,685EPRA NDV per share (p) 205.1 196.5

EPRA NDV growth and total returnOpening EPRA NDV/share (p) 196.5 197.6Closing EPRA NDV/share (p) 205.1 196.5Movement in the year (p) 8.6 (1.1)EPRA NDV growth 4.4% (0.6%)Dividends paid per share (p) 1.4 1.2Total return per share (p) 10.0 0.1Total return as a percentage of opening EPRA NDV per share 5.1% 0.1%

Appendix continued

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Harworth Group plc: Annual Report and Financial Statements 2023

Supplementary Information

2) Reconciliation to EPRA measures continued

To help retain and incentivise a management team with the requisite skills, knowledge and experience to deliver strong, long-term,

sustainable growth for shareholders Harworth runs a number of share schemes for employees. The dilutive impact of these on the

number of shares at 31 December is set out below:

Number of shares used for per share calculation 323,154,373 322,612,685Outstanding share options and shares held in trust under employee share schemes 5,223,777 3,193,351Number of diluted shares used for per share calculations 328,378,150 325,806,036

Diluted EPRA NDV per share, Diluted NDV Growth and Total Return as a percentage of opening diluted EPRA NDV per share are set

out below:

c. Diluted EPRA NDV per share (p)EPRA NDV £’000 662,863 633,845Number of diluted shares used for per share calculations 328,378,150 325,806,036Diluted EPRA NDV per share (p) 201.9 194.5Diluted EPRA NDV growth and total returnOpening diluted EPRA NDV/share (p) 194.5 196.2Closing diluted EPRA NDV/share (p) 201.9 194.5Movement in the year (p) 7.4 (1.7)Diluted EPRA NDV growth 3.8% (0.9%)Dividends paid per share (p) 1.4 1.2Total diluted return per share (p) 8.8 (0.5)Total return as a percentage of opening diluted EPRA NDV per share 4.5% (0.2%)

d. Net loan to EPRA NDVNet debt (36,392) (48,395)EPRA NDV 662,863 633,845Net loan to EPRA NDV 5.5% 7.6%

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Harworth Group plc: Annual Report and Financial Statements 2023

Supplementary Information

Glossary of frequently used

terms and abbreviations

AGM Annual General Meeting

AHFS Assets held for sale

AMP Advanced Manufacturing Park

APM Alternative Performance Measure

BCP Business Continuity Plan

BNG Biodiversity Net Gain

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

Code 2018 UK Corporate Governance Code

COO Chief Operating Officer

CPD Continuous Professional Development

CRREM Carbon Risk Real Estate Monitor

DNO Distribution Network Operator

EBT Employee Benefit Trust

ED&I Equity, Diversity and Inclusion

EHS Environment, Health & Safety

EPC Energy Performance Certificate

EPRA European Public Real Estate Association

ERV Estimated Rental Value

ESG Environmental, Social and Governance

the Executive Comprises the CEO, CFO, COO, CIO and General Counsel/Company Secretary

EY Ernst & Young LLP

FCA Financial Conduct Authority

FRC Financial Reporting Council

GHG Greenhouse gas

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

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

the Policy The Directors’ Remuneration Policy applicable for the three years from 2022

which was approved by shareholders at the 2022 AGM

PPA Planning Promotion Agreement

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

SID Senior Independent Director

SIP Share Incentive Plan

SUDs Sustainable urban drainage systems

TCFD Task Force on Climate-Related Financial Disclosures

TSR Total Shareholder Return

UN SDGs United Nations Sustainable Development Goals

212

Harworth Group plc: Annual Report and Financial Statements 2023

Supplementary Information

The production of this report supports the work of the Woodland Trust, the

UK’s leading woodland conservation charity. Each tree planted will grow

into a vital carbon store, helping to reduce environmental impact as well as

creating natural havens for wildlife and people.

Company information

and investor timetable

Non-Executive 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

1 Bridgewater Place

Water Lane

Leeds, LS11 5QR

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

58/60 Briggate

Leeds, LS1 6AS

HSBC UK Bank plc

1 Centenary Square

Birmingham, B1 1HQ

Company Registered Number

02649340

Share price information

The Company’s Ordinary Shares are traded

on the London Stock Exchange.

SEDOL number BYZJ7G4

ISIN number GB00BYZJ7G42

Reuters ticker HWG.L

Bloomberg ticker HWG:LN

LEI Code

213800R8JSSGK2KPFG21

Financial Calendar

Annual General Meeting

The Brearley Room, AMP Technology Centre, Advanced Manufacturing Park, 20 May 2024

Brunel Way, Catcliffe, Rotherham, S60 5WG.

Interim Results Announcement 2024

Interim Results to be published at www.harworthgroup.com/investors September 2024

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.

Harworth Group plc: Annual Report and Financial Statements 2023

Supplementary Information

213

Harworth Group plc

Head Office

Advantage House

Poplar Way

Rotherham

S60 5TR

@harworthgroup

@HarworthGroup

harworthgroup

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