Property firm Harworth Group saw a dramatic fall in operating profits last year and its chair has talked of a material downturn in the market.
Despite revenues growing to £166m, up from £109m, the Rotherham-based land and regeneration specialist reported underlying operating profits of just £44.5m last year, down from £121.9m the year before. Revenue was boosted by the sale of development property including its flagship Kellingley development - on the site of the UK's last deep coal mine - for £54m, as well as residential land at its Waverley regeneration site.
Announcing its full year 2022 results to investors, Harworth said there had been a significant swing in the value of its investment properties assets held for sale, which decreased by £19m compared with an £85m increase the year before. The firm also said it was impacted by £7.5m losses thanks to a changing industrial and logistics market across its Multiply Logistics North and Aire Valley Land joint venture sites.
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A "record breaking" first half for the industrial and logistics market had given way to a weaker second half which affected Harworth's development sites, its strategic land portfolio and its investment properties. Construction costs were also said to have increased during the year.
Harworth chair Alistair Lyons said it was clear the market had changed for the worse in the six months since Harworth last reported, but said the group had the financial muscle to hold assets where it believed prices falls were unwarranted.
Lynda Shillaw, chief executive of Harworth, said: "We continued to make significant operational progress during the year, delivering increased levels of direct development, accelerated land sales and targeted acquisitions in line with our strategy to become a £1bn business by 2027. We ended the year in a strong financial position, with a low LTV and significant available liquidity.
"Following a significant increase in valuations during the first half, we saw market-driven outward yield shifts across our investment portfolio and more mature industrial and logistics development sites during the second half. Over the course of the year, our management actions have largely offset market movements, and resulted in our valuations, and therefore EPRA net disposal value, remaining broadly flat year-on-year.
"At this early stage in the year we remain cautious about the economic backdrop for 2023. While there have been some recent positive indicators, uncertainty is likely to remain in our markets until interest rates reach their peak, and inflation falls back to manageable levels, creating the conditions for growth and improved investor confidence. Against this backdrop, our focus markets of residential and industrial and logistics continue to be drivers of economic growth and have robust fundamentals, while there remains an acute shortage of high-quality consented land."
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