Harworth Group Plc

Harworth Group Plc (LON: HWG) is a real estate investment & services company engaged in the business of transforming former coalfield and brownfield land into low carbon energy projects, new residential development projects and employment areas.

Share Issue
On 7^th April 2020, Harworth Group announced the allotment of new 266,050 shares at 10 pence per share as a part Long Term Incentive Plan of the company.

Financial Highlights – Financial Year 2019 (31^st December 2019, GBP, million)

(Source: Annual Report, Company Website)
 
For the financial year ending 31^st December 2019, the group’s total return declined to 7.8 per cent from 13.3 per cent in FY2018, and EPRA NNNAV growth per share also declined to 7.2 per cent in FY2019. The group’s value gains stood at GBP 44 million in the financial year 2019 versus GBP 51.3 million in the financial year 2018. The operating profit declined to GBP 24.3 million in FY2019  versus an operating profit of GBP 33 million in the financial year 2018. The group’s profit (excluding value gains) reduced to GBP 3.5 million in the financial year 2019  from GBP 9.8 million in FY2018. The net asset value for the period increased from GBP 441.9 million in FY2018 to GBP 463.8 million in FY2019. The basic earnings per share stood at 7.9 pence in FY2019 versus 10.6 pence in FY2018. The group’s dividend per share stood at 1 pence in the financial year 2019 versus 0.9 pence in FY2018. The group’s net debt increased to GBP 70.9 million for the period.

Share Price Performance

Daily Chart as of April7^th, 2020, after the market close (Source: Thomson Reuters)

Harworth Group Plcshares were trading at GBX 95.00 at the time of writing after the market close on 7^th April 2020. Stock's 52 weeks High is GBX 160.22 and Low is GBX 83.66.

Valuation Methodology

*Peers: Workspace Group Plc, Yew Grove REIT Plc, Solon Eiendom ASA and Realites SA.

Key Risks
The challenging market conditions will have a negative impact on company, which would affect the sales revenue. Current political uncertainty could dampen the financial performance of the company.

Conclusion
The group has shown a decline in financial performance in the financial year 2019. Although the top-line performance improved,while the bottom-line performance has declined with an increase in the net debt for the period. The group expect lower returns in the near term period as the group is looking to acquire strategic land sites since 2015 as a part of long-term performance. The group has a decent pipeline for future developments, and current sites are also helping the group with growth in the portfolio. The regional markets in which the company operates are stable and are supported by low prices, the requirement of new commercial space and the need for engineered land for shelter. With the outbreak of Covid-19, many countries have imposed restrictions on travel and resulted in a sharp fall in the stock markets globally. Due to the outbreak, all the construction activities are on hold and will resume once the situation stabilises, which will impact the group’s financial and operational performance.

Therefore, based on the above rationale and uncertainties in near-term due to Covid-19 pandemic, we have given a “Watch” recommendation at the closing price of GBX 95.00 (as on 7^th April 2020), while we look for any upcoming catalysts in the near term.

Foxtons Group Plc

Foxtons Group Plc (LON: FOXT) is one of the estate agencies based in London, UK. The major area of operations is Sales, Lettings, and Mortgage broking.

The group will announce its interim results in July 2020.

Covid-19 Update
On 20^th March 2020, Foxtons Group released an update on the impact of coronavirus outbreak on the performance of the business. The group’s business performance remained in line with the management’s expectations for the first 11 weeks of the financial year 2020. The measures taken by the UK government has resulted in the weakened economic outlook, and it is too early to quantify the impact of Covid-19 pandemic. The group expect outbreak will materially impact the trading in the next coming months until the situation improves. The company has a strong balance sheet and position with revolving credit facility of GBP 5 million and a cash balance of GBP 21 million. The group is evaluating all the needed actions to preserve long term capacity and cash of the business.

Share Price Performance

Daily Chart as of April7^th, 2020, after the market close (Source: Thomson Reuters)

Foxtons Group Plc shares were trading at GBX 45.60 at the time of writing after the market close on 7^th April 2020. Stock's 52 weeks High is GBX 98.00 and Low is GBX 27.00.

Key Risks
Finding or selling a property has become more challenging, while landlords are facing rising legal risks through tougher regulation. Tenant fee ban will impact the profitability of the company.

Conclusion
During the financial year 2019, the company’s financial performance was weak, and the London sales market is expected to deteriorate further. The company anticipate structural issues such as there is room for a substantial increase in consumer confidence, and affordability and stamp duty to hold back sales volumes. During 2019, the sales transactions have fallen, and the company has a negative impact of the market conditions, which would affect the sales revenue. Current political uncertainty could dampen the financial performance of the company.With the outbreak of Covid-19, many countries have imposed restrictions on travel and resulted in a sharp fall in the stock markets globally. The group expect outbreak will materially impact the trading in the next coming months until the situation improves.

Based on the factors as highlighted above, we have given an “Avoid” recommendation at the closing price of GBX 45.60 (as on 7^th April 2020).

*All forecasted figures and Peers information has been taken from Thomson Reuters.

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