For a group worth just under £300m, Harworth (HWG) possesses a simply enormous asset: 27,000 acres of former coalfield and brownfield land, across 200 sites in the North of England and the Midlands. The potential value of this land bank was underlined in February, when Harworth published its first set of full-year results as a listed company. Those numbers not only detailed a 15 per cent uplift in underlying net asset value (NAV) in the 12 months to December 2015, but demonstrated management's eye for a deal through the £44.2m profit booked on a major acquisition. However, a fall in the share price since then has brought the stock below that NAV figure, which we think is unwarranted.
- Free from industrial past
- Enormous land bank
- Discount to NAV
- Solid demand for residential and small commercial buildings
- Token dividend
- Pension fund selling pressure
The group's shift into property, and specifically hauling land through the residential and commercial planning process to sell on to builders, was an arduous journey. Until 2012, Harworth, then known as UK Coal, was the parent company of the country's largest coal miner. After several complex corporate restructurings, and a deal that saw Harworth acquire the 75 per cent of the property portfolio it didn't own, the group is almost entirely free of its industrial legacy and concentrated on a sector actually worth investing in.