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Insider: buy property, sell fashion

Chiefs at this regeneration firm are filling their boots, but this Next boss is trousering a fortune.

2nd November 2020 10:00

Graeme Evans from interactive investor

Chiefs at this regeneration firm are filling their boots, but this Next boss is trousering a fortune.

A property portfolio of “beds and sheds” has been backed by directors of northern England regeneration firm Harworth (LSE:HWG) to weather the region's tightening Covid-19 restrictions.

The £50,000 worth of Harworth shares bought by chairman Alastair Lyons on Wednesday was one of two boardroom purchases made in the past week. New chief executive Lynda Shillaw also bought stock prior to taking the helm yesterday.

The directors have bought at prices between 90p and 95p, which is largely where Harworth has been stuck on London's main market since falling from 150p in the earlier pandemic sell-off.

It trades at a hefty discount to net asset value per share of 142.2p in October's half-year results, when Harworth kept the decline in its valuation to 4.75% despite Covid-19 disruption.

Howarth's income portfolio of largely modern industrial properties performed “dependably” in the period after collecting 95% of income for the March and June quarters.

Housebuilders are also back on sites after a short hiatus in April, with reported demand for the homes on Harworth developments now ahead of their equivalent 2019 levels.

This resilience and longer-term confidence in the company's business model led Harworth to resume dividends with an interim award of 0.334p, up 10% on the 2019 payment. It remains committed to an increased payment for 2020 to make up for the withdrawal of 0.7p a share in April. 

Outgoing CEO Owen Michaelson said residential and commercial land — beds and sheds — had demonstrated their appeal in the company's North of England and Midlands heartland, particularly with e-tailing and a lack of supply driving industrial property.

He added:

"The Government's priority to 'build build build' and to level up the national economy in support of the regions, backed by sensible proposed planning reforms and significant regional infrastructure investment, remains an important underpin.”

Harworth boasts a portfolio of 18,000 acres of land on more than 100 sites, with flagship regeneration sites including Waverley in Rotherham and Logistics North in Bolton. Redrow (LSE:RDW) recently became the 16th housebuilder to which the company has sold engineered land in the past six years when it bought the first phase of a development at Hugglescote Grange, Coalville.

Applications for about 2.4m sq. ft of commercial space and 2,391 residential plots were in the planning system at the end of June, including a scheme for the former Ironbridge Power Station involving 1,000 homes, employment space and leisure uses.

And with £63.3 million of financial headroom and a modest loan-to-value of 12.4%, Michaelson said he left Harworth in “excellent health”.

Analysts at Goodbody agree that the company looks to be well-positioned, with considerable capacity to deliver value and income growth when normality returns. They added:

“With confidence returning to the housing market and a resolutely robust industrial investment and occupier market, we look towards the second half of the year with increased optimism.”

Former Admiral and Serco chairman Lyons followed up his purchase of £100,000 worth of Harworth shares in June with £50,000 of stock last week. General counsel and company secretary Chris Birch also acquired 11,000 shares at 91p on Tuesday, while Shillaw bought £20,000 worth on Thursday.

She was previously property director at Town Centre Securities, where she led the management of its land and property and its development pipeline. Before that she was divisional CEO of property at the Manchester Airports Group.

Next director sells while shares still in fashion

Next (LSE:NXT) merchandise and operations director Richard Papp has sold some of his shares in the fashion retailer following the company's latest upgrade to profit forecasts. He raised £730,000 on Wednesday from selling at a price of 6,203p, while a person connected to Papp contributed another £52,730 from a separate sale.

Earlier in the day, Next increased its projection for full-year profits to £365 million, having only recently raised the figure from £195 million to £300 million. Online business continues to be the jewel in the crown, with a spike in full price sales of 23% in the third quarter meaning the year-to-date number is now 1% ahead of the figure for last year. 

Even so, the revised profits guidance remains far from the previous year's number of £728 million and there's huge uncertainty facing the retail estate ahead of the Christmas period.

Shares ended last week at 5,840p after being caught in the wider market sell-off, but are still sharply higher than the 3,390p seen at the start of April.

Papp joined the company back in 1991 and, after working his way through the ranks, is now responsible for merchandising, product systems, the international franchise, and its clearance operations.

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