Just before we start, I can't actually sort of see this properly, so I don't know if, I don't know if I've shrunk or that's it. Perfect. That works. Technical issues. Okay, we're good to go, yeah? Okay, good morning, everybody, and thank you for joining us today for Harworth's Half Year Results Presentation. Today, we'll cover the results and operational performance for the first six months of 2024 . But first, some introductions for those of you who don't know us. I'm Lynda Shillaw, Chief Executive of Harworth, and I'm delighted to be presenting today alongside Kitty Patmore, our Chief Financial Officer. It's great to see so many familiar faces in the room, and I'd like to extend a warm welcome to all of those who've joined us online, too.
It's been a really exciting six months for us here at Harworth, and I look forward to updating you on our progress in the first half. This slide shows the agenda for the morning, and I'll start with an overview of our first half performance, briefly cover the financial and operational results, and the progress that we continue to make against our strategic pillars, and I'll talk more about how our growth strategy has evolved. I'll then provide further details on our portfolio and the progress made in each segment in driving value creation in the first half, and then I'll hand over to Kitty to dive into the detail of the financial results. Before I talk a little bit more about our path to GBP 1 billion of EPRA NDV and our outlook for scaling the business beyond that.
We'll both then look forward to taking your questions at the end, and we're gonna take them from the room first, and then if we have time, we'll read out questions that come in from the webcast. Firstly, to the strategic update and to the highlights from the first half. I'll start by saying that Kitty and I are really pleased with the progress that the business is making in delivering our strategy and the underlying growth that our teams have delivered in the context of what's been a pretty static market. Working across from the top left, in half one, we saw our EPRA NDV increase to GBP 687 million, resulting in a 3.5% growth in EPRA NDV per share to GBP 2.12 .
We continued to deliver strong returns, achieving a total return of 4% for the first half, and we ended with a net loan to portfolio value of just 9%, which, while it's higher than the year-end, is still one of the lowest in the sector, but it reflects our development spend to mid-year. In the bottom left, you can see that we also continued to enhance our profitability and made an operating profit of GBP 21.1 million, which is significantly higher than the same period last year, and it's been driven in part by higher valuation uplifts, reflecting increased land sales, revenue from development management, and valuation gains on investment properties. We also made significant progress on planning approvals, achieving consents on 3.3 million sq ft of industrial and logistics space in the year to date, + 685 residential plots.
It's been a good year for planning, so I'll come back, to on the next slide, but these planning approvals ultimately increase our consented pipeline, and finally, as I'm sure many of you will recall, in June, we exchanged contracts on a conditional 47-acre land sale with Microsoft at our Skelton Grange site. It's our largest sale to date, and although there is still a lot of work to do, we've made a start on site, and we look forward to completing the transaction over the next two years and delivering the site to Microsoft. The next slide looks in more detail at the operational progress we have made so far this year, and as you can see, we've got a lot going on, so I'll just pick out some of the key figures here. Again, working across the top of the slide from the left.
We achieved value gains of GBP 47 million across our portfolio, significantly higher than the GBP 7.5 million achieved in the same period last year. This highlights the impact of our operational progress on planning across our sites and the high volume of sales achieved so far this year. Our serviced land sales by value are 67% higher than the first half average since launching the strategy, and in total, we are currently at 145% of our budgeted sales, which includes that landmark Microsoft land deal, and that's ahead of our usual position at this time of the year. As I mentioned in the June update, we intend to reinvest the proceeds from these land sales into our industrial and logistics direct development program, but I'll come on to that when we talk about the evolution of our growth strategy.
Turning to planning progress on the bottom left, we've had a strong first half on the planning front, with some of our longer waits of planning approvals getting over the line. With planning consents during the period of 1.8 million sq ft of industrial and logistics space and 500 residential plots, and post-period end, we also received outline consent on an additional 1.5 million sq ft of industrial and logistics space at our Cinderhill site and a further 185 residential plots. As a result of these planning consents, our consented industrial and logistics pipeline has increased to 8.1 million sq ft as at June and will be higher, including the approval received at Cinderhill post-period end.
Of this pipeline, we expect to deliver 5.7 million sq ft by the end of 2027, which we estimate will result in GBP 800 million of gross development value. All of our industrial and logistics development underway is certified EPC A and BREEAM Excellent, supporting our transition to 100% Grade A across our investment portfolio, as we expect to retain more of our directly developed property. Looking then at the total returns, on this slide, you can see that we've continued to deliver positive total returns for the last four years, outperforming the broader real estate market, and our total returns have continued to grow in the first half of 2024.
Next slide, please. We talked in June about how we've undertaken review of our strategy now that we are at the halfway point. Our aim is to ensure that we continue to optimize growth and returns, and we still expect to meet our 2027 targets, but this evolution should provide more detail on our journey to GBP 1 billion of EPRA NDV by the end of 2027 and look beyond that to 2029 , given our confidence in the near-term targets. Our strategic pillars remain appropriate as the key drivers of growth, and so if we take each one of these in turn. For industrial and logistics directed development, we continue to target 800,000 sq ft of development on average by 2027 .
The status of our sites, the timing of achieving planning, and requirements for infrastructure have always meant that this would involve increasing development levels between now and 2027 , as we've seen the planning consents on the next generation of industrial and logistics sites come through. We're making good progress, and we now have eight key sites that we'll be delivering over the next few years. We will continue to use a variety of funding structures to deliver this product, but we expect to deliver more on balance sheet to support the growth in the investment portfolio. For our residential sites, we simply still expect to continue with our plans to accelerate land sales while driving returns, and the proceeds from those sales will ultimately provide funding for the industrial and logistics development pipeline.
Now, our land bank is fundamental to our strategy, and we will continue to maintain our strategic land pipeline through selective acquisitions, including strategic partnerships and capital-light structures, 'cause this is what allows us to meet, to scale and to meet our growth ambitions, and given our intention to ramp up industrial logistics, direct developments, and grow the investment portfolio, we would expect strategic land to reduce as a proportion of our total portfolio over time, and by 2029 , we expect 85% of our total land and property portfolio to be industrial and logistics, and I'll talk a little bit more about the momentum in the industrial logistics pipeline over the next few slides.
Finally, to the fourth pillar, as well as repositioning our core investment portfolio to 100% Grade A by the end of 2027, we're also targeting growing this portfolio to GBP 0.9 billion by the end of 2029. And growth in this portfolio will be driven largely by the increased direct development and retention of commercial buildings, but will also be supplemented by selective acquisitions that both enable us to manage the growth trajectory, but also the transition to 100% Grade A in this portfolio. The growth in recurring rental income from a larger income portfolio is expected to allow us to grow our dividend profile, and we don't expect these increased dividends to negatively impact our growth levels or returns, but it will allow greater income components of returns alongside capital growth from our land and development portfolio.
So now I want to spend a little bit of time talking through what's been happening in our land and property portfolio. Most of you will already be familiar with this slide and how we create value, but given our recent announcement on the evolution of the strategy, I thought it might be helpful to take the opportunity to just explore it a little bit further. So starting with the land and property portfolio overview, we split it into three main subcategories: strategic land, major developments, and the investment portfolio. Strategic land includes land without planning or land with planning secured, but where we have not yet started work. Major developments land includes land with planning and where we have started work on site.
This can be land with infrastructure underway to develop serviced land, but it also includes where we're building industrial and logistics units or delivering our mixed tenure products. Investment portfolio includes completed industrial and logistics buildings and provides a source of rental income. We have a really small portion here, which we've called Other, really helpfully. This is largely income generating, and it includes some natural resources and agricultural land, and some land with the opportunity for future energy and natural capital uses. On the right-hand side, you can see the value generated as land moves through the development cycle. For example, the average value of our industrial logistics strategic land without the planning consent is around GBP 7/sq ft. Once that strategic land has a planning consent, the average value increases to GBP 15/sq ft.
As we start to work on the site, it shifts into the major development part of the portfolio, which is held to an average of GBP 30/sq ft. Although on this one, it's important to note that depending on the mix of the sites and the stage of each site, the value in this particular part of the portfolio can vary, and at the top end, it sits at around GBP 60/sq ft, which is significantly above the GBP 30/sq ft average. But this part of the portfolio has a number, as you've seen with these big consents coming through, of sites that have recently received a planning permission and are at the beginning of their development journey with value creation to come.
And then lastly, the Grade A properties in our investment portfolio, most of which have been, we've built ourselves, are held at GBP 138/sq ft, which is an increase from GBP 130/sq ft at year-end. Similar processes followed on the residential portfolio, with values increasing from GBP 7,000 a plot, up to the point of serviced land, where the average sales price in the first half was GBP 57,000 a plot. And again, in any year, the mix of sites sold can vary this average. So for example, at the top end of this year to date, has been around GBP 100,000 a plot. In the next few slides, we show the impact to support portfolio level of our activities in the half year.
The strategic land portfolio concentrates on how we create value through securing planning permissions. And you can see in the left-hand graphic, the stages that a site will progress through on its journey to consented land, a process that we manage end to end within our teams at Harworth. So the site moves through the pre-planning to draft allocation before receiving an allocation. The allocation of a site is a key milestone in the process because it means our proposal has been allocated within a local plan, but it's also the key point from which the value of a site begins to increase as we work it through to concluding with the planning consent. And the charts on the right show the movements in the portfolio in the first half of 2024, with these portfolios all increasing in value.
So you can see the GBP 18.8 million increase in revaluation on the industrial logistics land and the GBP 3.5 million increase in revaluation on the residential land. And these reflect the progress in planning as the sites move through the stages from draft allocation to consented in the period, and most notably at Gascoigne Wood, where we received planning for 1.5 million sq ft of industrial logistics space on a brownfield land site in Yorkshire. So you've got major developments, similar format. You know, major developments are our sites which are undergoing infrastructure works to create serviced land, or they have direct developments underway. Charts on the right-hand side show that the valuations of these portfolios increased in the first half of the year, with development spend on sites of GBP 31.8 million, driving a combined revaluation gain of GBP 16 million.
The major activity in the period driving value on these sites has been the progress on sites bringing forwards development and land sales, including the conditional sale at Skelton Grange to Microsoft. Just a reminder, this site was originally purchased for around GBP 3 million in 2014, and upon completion, the scheme is expected to deliver an IRR in excess of 40%. We gave a lot of detail on that in the announcement at the time, but we'll explore the Skelton site in more detail at our up-and-coming Capital Markets Day . We have had residential land sales of 489 plots in the year to date, demonstrating continued demand from the house builders. Our first half serviced land sales are 67% of the first half average since launching the strategy, as mentioned earlier. We've got good visibility on exceeding our budgeted sales for the year, which provides an important indication of serviced land values.
Now, our next generation of industrial logistics sites, so this is the exciting slide that we've been building to for the last three and a half years, are starting to come through now, with planning progress year to date, resulting in Gascoigne Wood and Cinderhill joining our near-term pipeline. We'll be starting on our on-site works on these locations in the coming months, while infrastructure works are currently underway at Chatterley, Wingates, and Skelton. At the half year in total, there was 2.2 million sq ft of enabling works underway, with 0.6 million of direct developments on site or due to start shortly.
We've now got eight major sites coming live for development over the last eighteen months, and this demonstrates a real momentum in the industrial logistics pipeline, which will feed our capital growth and the building of our larger investment portfolio. In total, there is the potential for over GBP 1 billion of GDV to completion from these eight sites, and we have a strong pipeline of the next wave of sites to follow these. And the final slide before I hand you over to Kitty is the investment portfolio, where we saw a like-for-like increase of 2.4% annualized rental income, and the table in the bottom left shows the value gains achieved from revaluations of GBP 8.2 million as a result of management actions and increasing market rents. As you can see from the operational metrics, the quality of this portfolio remains high.
We have a weighted average unexpired lease term of around 12 years. Average rent per sq ft has improved, and vacancy rates remain low. The net initial yield has increased slightly as a result of lettings in the period, and the net equivalent yield continues to demonstrate the reversion potential in this portfolio. Our intention remains to be 100% Grade A on the core portfolio by the end of 2027, which we will achieve by bringing through more directly developed Grade A properties, as well as selective acquisitions that enable us to dispose of secondary or non-Grade A assets.
And with that, I'll hand you over to Kitty to explore the financial results in more detail. Over to you, Kitty. Thank you.
Just a quick exit. Thanks, Lynda, and good morning, everybody. It's been a busy first half for Harworth, and we've achieved a lot operationally and made great progress against our strategic objectives, so starting with our income statement. On the bottom left-hand side, you can see total property sales in the half were GBP 41.7 million , slightly lower than the first half of 2023, but in this half, it was driven by residential serviced land sales, which results in a higher statutory revenue number. Revenue from our income generation portfolio was lower during the half, reflecting the successful sale of properties from the investment portfolio in 2023, and combined with revenue generated from the rest of the income generation segment and development management, this gave us underlying revenue of GBP 59 million and statutory revenue of GBP 41.3 million .
Looking forward, as Lynda has said, 145% of budgeted sales for the year are either completed, exchanged, or in heads of terms, which is well ahead of our usual profile at this time of year. Administrative expenses increased by GBP 2.5 million from the same period last year. This is principally due again to higher salary expenses, cost inflation, and progressing strategic objectives. Increases in the fair value of assets held for sale and investment properties through the revaluation exercise resulted in other gains increasing to GBP 30.7 million. And all these factors combined gave us a profit after tax of GBP 14.7 million, an increase of over 100% on the same period last year.
Finally, the board has decided on an interim dividend of GBP 0.489 per share. This represents a 10% increase on last year's dividend, which has now increased by 10% for the eighth consecutive year. Turning to the balance sheet. Our EPRA NDV per share increased by 3.5% during the half year to GBP 2.123 , representing EPRA NDV of GBP 687 million , and keeping us on track to reach the GBP 1 billion target by the end of 2027. This growth was driven by valuation gains generated primarily by management actions, focused on the leveraging of unique attributes of each of our development sites, as Lynda has spoken about, to create the opportunities to unlock the use with the greatest value, including planning progress and demand for our residential and commercial serviced land.
Net debt as at thirtieth of June was GBP 80.5 million, higher than at the year-end, but in line with our profile of seasonal spend on sites, and as usual, we would expect this to reduce by year-end with the completion of sales. Combined with the dividend, the EPRA NDV increase led to a positive total return of 4% during the period, a significant increase from the 0.1% seen in half one, 2023. On funding, our financing strategy remains to be prudently geared, with a target net loan to portfolio value at year end of below 20% and a maximum of 25% during the year. At June, our net loan to value is 9.8%, well within our target levels.
Our main revolving credit facility runs until 2027, with plenty of headroom, and we will continue to use site-specific direct development and infrastructure loans to support our growth going forwards alongside this. The chart on this slide bridges the increase in our net debt position from GBP 36.4 million at the end of 2023 to GBP 80.5 million as at June 2024. The main driver of this increase is development spend, as we progress works on our sites to drive value and in advance of year-end sales, as well as movement in deferred consideration related to serviced land sales, which you can see in the cash and working capital used in operations bar. These increases are offset in part by sales proceeds that were received during the period.
This chart also shows the headroom afforded by our cash position and revolving credit facility, and we have GBP 154 million of cash and available facilities at the half year. So in summary, this is another strong set of financial results for the group. We continue to deliver growth in our net assets, net per NDV, and have a solid financial position, low loan to value, cash and available facilities with no major refinancing requirements until 2027, all which will help us progress our strategy.
I'll now hand you back across to Lynda to cover the outlook and our roadmap to a billion.
Thanks, Kitty. We're nearly there. So before we take questions, I'm just gonna spend the next few minutes summarizing our progress, and provide a view on the outlook for our sectors and what we think that means for Harworth. So this slide looks at the journey to GBP 1 billion of EPRA NDV, and we remain confident that we'll reach that target by the end of 2027 . The building blocks to get there are our four strategic pillars that I talked through earlier, and our NDV growth comes from moving land through the planning and development cycles to create value from revaluation gains and the creation of investment properties.
The land sales we make throughout the year generate cash and crystallize profits, and we reinvest those proceeds to fund increased development, and we will refill the pipeline with selective acquisitions of strategic land that will form the next generation of sites to come through the cycle. If you look at the growth needed to reach GBP 1 billion, that's around 46% in three and a half years, and it does feel like a big number, but actually, when you compare that to the growth that we've seen over the last three and a half years, we believe this is really achievable, especially if you consider the macro environment that we've been operating in. We've proved our business model works so far, and we expect to continue doing more of the same as we scale the business over the next few years. So we turn to the outlook.
There's a lot going on, not just at Harworth, but elsewhere, and the election of a new government has brought a sense of stability to the markets, and its focus on growth, housing delivery, and supporting policy reforms are generally positive to the real estate sector, but there is much to do. Falling inflation and the initial interest rate cut, with an expectation of more to follow, is driving more confidence in the economic fundamentals that drive investment and tenant demand. Real estate key market indicators were stable through half one, and there's an expectation of further rate cuts feeding into tighter yields.
For the first time in nearly a decade, all main MSCI indices are showing year-on-year rental growth, adding to the sense that the real estate sector in the U.K. is set to come out of the trough, which is in turn working up investor interest in the sector. The structural undersupply that we've seen in previous periods in both the industrial logistics and residential markets has continued, and we've seen relatively stable markets in half one, with pricing holding firm and rents continuing to increase. However, on the downside, wages and construction cost inflation is proving sticky, and the real estate sector is not alone in an ongoing skill shortage, which is something that cannot be fixed overnight as volumes, as expected, begin to normalize through 2025.
And also, increased investor and occupier confidence is tempered by the extent of the public finance deficit and the concerns that overtaxing and reduced spending could slow the recovery. Now, all of that said, you know, Harworth is a through-the-cycle business. I think I tell you this every time I stand up, and we are well seasoned in adapting to changes in both markets and the policy environments. And as we've again shown, we've got a strong track record of delivery and consistent outperformance through some really challenging periods in recent years, where we've held flat or increased our EPRA NDV year on year. In the absence of market tailwinds, this is all down to management actions and the skill of our people, and the business is in really good shape.
We've got a strong balance sheet, we've got low LTV, and at the half year, 8.1 million of consented industrial and logistics land, which will propel our growth through to 2027 and beyond. We are confident in achieving our strategic targets of GBP 1 billion of EPRA NDV in 2027 and a GBP 900 million investment portfolio by the end of 2029. And with that, I'd like to say a big thank you to you for taking the time to join us today. I'd like to thank my team, I know a lot of them watch these broadcasts, for all their hard work in the year to date, and we'll take questions from the room first before taking any questions from the webcast.
If we're unable to get to your questions today, just reach out to us and we'll be happy to sort pick stuff up offline. Thank you very much. Thank you.
Hi, good morning. Bjorn Zietsman from Panmure Liberum. Just two questions, please. The first is just around the revaluation uplift. Are there any sort of single revaluation movements that have significantly impacted the GBP 47 million? And in particular, I'm referring to the Skelton Grange sale to Microsoft. Or is the positive revaluation more general?
So, as we talked about, we completed, we exchanged conditionally a large sale to Microsoft, which was in place just before the half year. The way that the valuations work with a big sale like that is obviously there's a risk associated with delivering that sale. We did receive a bit of an uplift at half year, but certainly, sort of, it was not sort of all of the uplift that you see. It was just a component of that. And personally, one of the things that I find really pleasing is actually we saw lots of valuation uplifts of not dissimilar sizes across sort of the rest of the portfolio. So it really does demonstrate some really consistent progress in revaluation and sites moving forwards.
I think a key feature that Lynda sort of talked about, in terms of the operational progress that we did see coming through at the half year, was really that planning progress side. So not only did we get sort of the consents through for some big schemes like Gascoigne Wood, so just prior to the half year, we also saw a number of sites move through that planning stage to secure a draft allocation or an allocation, which really sort of moves them forward and de-risks the delivery of receiving planning on those sites. So that was also a feature that we saw in another number of places.
And then the fact that we've got sort of really strong serviced land sales in the rest of the portfolio outside of Skelton also helped contribute to the sites delivering sort of value gains on those too. So it was really nice to see it in the round, rather than just being dominated by one particular sale.
There's the follow-on question. Considering the strong start to the second half, the 1.5 million sq ft that, where you have secured planning permission on the 1.8 million sq ft in the first half, does that mean we're off to an accelerated start in H2? And do you think we could see a stronger H2 on H1?
Oh, that's a nasty question. I think, you know, as you've-- many of you have been on the journey with us over the last sort of three and a half years, and planning does take quite a long time, so you know, sort of we were really, part of our strategy at the beginning was to put extra resource into our planning teams to actually sort of not just get more schemes into the system, but actually they're quite hard work to work through, and what you're seeing is basically, you know, the fruits of the sort of last three and a half years of work coming through. These sites are, you know, generally sort of challenging, you know, not any of them I can think of are massively straightforward.
We start with site clearance works, we move into phased infrastructure works as we bring them forward for development. But the great position we've got ourselves into is, if I was sitting here three and a half years ago, we probably only got two or three sites that, you know, we'd got open, and one of those was Bardon, which we were in and out of, you know, sort of in 18 months. You know, actually, as I'm sitting here today, we've got, you know, sort of seven sites, you know, only eight sites, actually, one of them, Droitwich, is a single sort of building, where basically, you know, we're gonna sort of see us develop those actually as we go sort of through to the end of 2027 and beyond.
So they're all at different stages, but the focus has been getting that hopper for production sites big enough to enable us to drive the momentum, and we're really focused now on kicking on with all of those sites into, you know, this is an improving market. But, you know, there are some caveats around the sort of investor sentiment and occupier sentiment that I alluded to, you know, sort of at the end of the presentation. But we're set to sort of go, and if we can secure and drive more prelets from the sites, open up more investment opportunities, we will go as fast as we possibly can. But at the moment, I think we're just starting, we're starting from a great place to kick into that second half of the plan.
Very clear. Thank you.
Hi. Sorry, excuse me. It's Andrea Collins from Davy here. So I've just kind of three questions, if that's okay. The first one, I guess, it's our first time formally talking to you since you've announced the growth ambitions for the industrial logistics side of the portfolio, and specifically growing the investment portfolio to GBP 0.9 billion. I guess, could you kind of talk through the decision-making or the rationale behind that decision? And kind of very much kind of zooming in on the investment portfolio. I guess then in line with that, I guess, in terms of the debt profile of the business, and as you kind of increase your direct development over the next few years, do we expect you to kind of reach that 20% LTV value, or what are your expectations behind that?
And then just the last thing is just on something you mentioned, Lynda, in terms of the skills shortages. So I guess as you're increasing direct development, is there any way that you can protect yourself in maintaining, you know, staff to kind of help you and assist in getting to that 2029 value?
Okay, so I'll start. Kitty will sort of probably add to what I forget to say on the first one, and then do the second one. And then I'll come back on the last one, if that's okay. So in terms of the shift, I mean, sort of, I think the pipeline says it all, quite frankly. You know, we have scaled that industrial and logistics pipeline, you know, to a far greater extent than we've scaled the residential pipeline. That's sat probably at around high 20s, low 30,000 sort of units.
It's massively important to us because it throws the cash off, you know, sort of that we need to sort of invest in the business, and we just see a massive opportunity to develop more of that investment sort of pipeline ourselves, retain it on balance sheet, drive an income component for investors. I mean, we couldn't have done what what we talked about in June, three and a half years ago. I think I said that at the time, you know, we didn't have enough sites open and ready for production, and we would have just been buying and producing stock to do it, which, as you know, Harworth's model is we drive the sort of returns by walking sites through the sort of through the planning and development process.
And we see an opportunity in a world, really, you know, if you think about interest rates. They're not going back to zero, sort of, anytime soon, possibly not many of our careers, actually. And if they do, there's been a big economic issue, again, probably, so actually making sure that we can drive, you know, an income component in our stock as the business grows, a higher income component for investors alongside that capital growth, we think actually sort of makes it quite an exciting proposition. And, you know, sort of the great thing with Harworth is, you know, sort of, it's not just about the income, it's actually about that capital growth piece, and we've got a land bank in spades that will actually deliver into that as well.
So, Andrea, if you look at where the land bank's leading us, you know, we would either have just been churning out serviced land into industrial logistics, or we can build it, retain it, and, and drive it an income component's return for investors.
No, I think that's absolutely right. I think on the funding side, one of the things that we spend a lot of time thinking about Harworth is sort of how we can generate sort of a self-funded model. It's something that you see, I bore you all every time sort of talking about cash in, cash out, and hoping to balance it over the course of the year, and that continues to be sort of the case really with this strategy going forward. So we've spent quite a lot of time looking at how we can fund greater levels of development by using sort of the processes that we already have in place.
So all of that acceleration of sort of land sales, for example, sort of churning the capital through, will continue to be that foundation of how we fund. We will use our leverage a little bit more. It has been sort of quite low the last couple of years. That's been partly deliberate. We sit on a really big land portfolio, we never sort of want to push that sort of too much, in particular, when there's sort of uncertain sort of macro times around as well, and we've really focused on conserving that balance sheet. But the great news is we've got the headroom to go further, so we'll lean into that, which will see us, Andrea, sort of go, sort of increase the leverage up a little bit.
At the moment, we don't see that changing really around that 20% sort of year-end position. I think you might see a bit more fluctuations over the course of the year and coming back down, but certainly, we're doing sort of a bigger sort of development pipeline that's not anticipated to be associated with sort of much higher leverage or anything like that. It's just taking the foundations of what we do already and then using sort of the headroom that we've got at the moment.
And then on the skills shortage point, I mean, it is a real issue. It's a real issue across our industry, and I would be surprised if any other chief exec from our sector would say anything different. We've been really successful in hiring and scaling up the team over the last three and a half years. I mentioned earlier that to sort of increase the volume of planning applications in the system, but also the management that needs to sort of work them through. We've increased our planning resource, we've increased our acquisitions resource, project management, direct development, technical support, building an origination team, you know, to sort of start to sort of work with occupiers to support that ramping up and secure the pre-lets that we need. But actually, it's gone into the head office teams through legal and finance.
So we've seen a scaling up across the business to actually create that real platform for growth. So how do you keep them? I mean, you've got to be, you've got to be a great place for people to work. You know, they've got to perceive that as a company, and for me, actually, you know, sort of one of my biggest ambitions for Harworth is to be seen as the company to work for and the company to work with. You know, so we spend a lot of time focused on that. We've done a lot of work on culture, on behaviors. We've done a lot of work around reward and incentives, and actually, sort of benefits that we offer our team. And, you know, real focus on being an exciting place to work and where people can start to build their careers.
You know, you go back again three and a half years, if your portfolio is the size it's then, it's really hard to, you know, sort of to build a career. If you've got a company that's growing, you build your career as the company grows. So, our people are hugely important. As I said at the end, you know, sort of, we wouldn't have got this far, you know, sort of without the skills, the dedication, the hard work that they put in, and we spend a lot of time focused on them. They're pretty front and center of our minds in terms of making sure we've got the right people in the team, and they're motivated and incentivized to deliver. James?
Morning, James Carswell from Peel Hunt. Lots of companies are talking about data centers, and rather than talking about it, you just got on and done what it looks like a very possible deal. The portfolio is pretty big. I'm just wondering if there are any other opportunities, and I'm sure you're kind of looking over the sites and trying to work out what could be applicable. But, I mean, should we assume this is a bit of a one-off, or do you think there could be more deals? And following that Microsoft transaction, have you had any other operators kind of coming to speak to you about other potential sites?
So one component of our team has got now very deep data center and data center market skill set, in terms of delivering that transaction. The Microsoft transaction is unusual in terms of it's a hyperscaler, actually, and I think I said when we talked about this in June, that, you know, not every deal will be a hyperscaler deal. We have the same sort of team who've done that deal, have been working through, with others in the business, our portfolio. We think there is other opportunity in the portfolio.
I think you'd be surprised if I said not, because basically, you know, sort of if you think about the nature and the history of some of our sites, but when it comes to delivering data centers, more than anything else, I mean, power and power capacity and availability in the network is actually sort of is one of the biggest challenges. So we think there are other opportunities. We are actively talking to the market, and we have been actually sort of all the way through since we, you know, since the point that we realized that there was a real data center opportunity at Skelton, actually. So, you know, it is a case of. Our job is simple when it comes to a big industrial and logistics site.
It's about optimizing the value of that site and getting it moving, and Skelton is, hopefully, many of you can make the Capital Markets Day , but Skelton is almost like a textbook case, and actually, we did a lot of other things on Skelton before we got to Microsoft, and there is some more to come, and I think actually, you know, sort of that's where the team's focus is, on actually building the right master plan. You know, so doing the right deals up front at the beginning and continuing to evolve, you know, what we can do from the site as we go forward. But yeah, I mean, there are other potential sites that could deliver into it, and we are continuing to talk to that market.
Great, thanks. And then maybe a second slight follow-on on the move towards more kind of investment assets and, you know, you covered the balance sheet kind of impact. But in terms of the P&L and I guess in particular, the dividends, I mean, at the moment, the dividend increase is roughly 10%, or 10% per annum. Do you think at some point there'll be a, you know, a bit of a review into the policy and whether that should be linked to rent or earnings or, or some kind of other metric? And just wondering in terms of the timeframe, I mean, is that years away or is that gonna potentially be sooner?
Yeah, I think, so absolutely, it, it's sort of as Lynda sort of talked about, one of the reasons for, for shifting sort of more to a bigger industrial logistics portfolio, with that rental income sort of stream, is, is to be able to sort of consider the, the dividend and, and the income component of, of returns for shareholders. I think so in, in the long run, where we want to get to is really that sort of being tied to that rental income line, then you've got that recurring piece. We can look at sort of covered earnings and, and sort of review the, the dividend on that basis. That's been discussed with board and, and absolutely sort of launched as, as part of the strategy.
So the main sort of step of it, really, James, will be tied to that growth in the industrial and logistics portfolio. I think we flagged by the end of sort of 2027, across the industrial and logistics side, we expect to deliver sort of GBP 800 million of gross development value. Some of that will be for us, some of that will be for third parties. But really, that accelerating direct development programme over the next couple of years, completing those sites and then building the investment portfolio, getting to that GBP 900 million by 2029, will give us the latitude to do that. So it's something that we keep sort of reviewing.
We'll continue to sort of review over all of that time period, but yeah, expect to see that sort of ramp up as the rental income and earnings components step up as a business.
Thanks.
Morning, Toby Thorrington from Equity Development. Two from me, please. Wonder how you describe the current sort of land acquisition market temperature, and how that's changed maybe over the last 12 months, if you, if you're active in that area at the moment?
Yeah, I mean, we continue, and I suppose in some ways it's where we start in the sort of, in the land acquisition space. You know, we're not looking for sites the front of our sort of pipeline that have a consent. We'll buy them if we can find great value and an opportunity. You know, we always would. Why, why wouldn't we? But we start quite a long way back. And when you start quite a long way back, site assembly does take quite a lot of time, so we are, we'll see land deals come through this year, that we've probably been working on for 18 to 24 months in the run-up to it. So the land market is still active. We are finding opportunities.
We're finding opportunities, I would say, you know, in residential as well as industrial and logistics. It has been quiet. I mean, it has been probably quieter in the first half, you know, sort of in terms of like, you know, sort of product coming into the market. But actually, you know, sort of, I would say, because of the sort of timeline on which we assemble land, a quiet first half, it's like a one swallow doesn't make a summer issue for Harworth. And we've got some really big strategic sites where the land assembly is continuing. You know, we bought land to add during the first half, to add to some of the sites we already have. We're going through the process of exercising options on some of the sites that we have.
We're going through the stage of putting new options, PPAs, freehold combos together on some sites for the future. So yeah, and I think the land market and land values have held up really well. We've also seen some great opportunities to buy, you know, sort of, sites that have, that do have an allocation or a consent as well, actually.
Yeah.
I was sort of interested as well as to what were the pricing expectations changing in the sector on the construction side anyway? The house builders seem to be back in the market and have been for eighteen months. So just wondering on sort of price expectation and competition and those kind of things.
In terms of what we're selling, you know, sort of we're seeing really healthy levels of interest. In fact, on some sites, we're seeing above average levels of interest and we've got both the major house builders back in the market for some of those sites, and sort of new players to the market as well.
We've seen in some of the sectors, so I mean, again, you know, you'll see probably in, in the sort of, the BTR sort of and affordable side, you know, the institutional investors are starting to step back into that space again, and again, we've seen that. So in terms of what we sell, you know, our serviced, remediated land product with a consent is actually sort of, you know, that's always held up actually, as we've gone through the cycle. That's what underpins, you know, sort of, a lot of our sort of residential valuations. So we are seeing sites that are, say, really actively bid for, and we're achieving, you know, sort of at or above book valuations.
Thank you. And the second one? I think it's the second one. Given the recent announcement by Barratt Developments, Homes England, you know, better news, post change of government, that kind of thing, are you seeing, sort of having more conversations or seeing more alliances being formed, shifting partnerships? Is that an opportunity or a potential threat?
I think it's really early days, and, I mean, I've been around a long time, so this is gonna make me sound really old. The really important thing about Harworth is we're through the cycle, we're through governments, we're through policy. To be honest, if you ask me, I don't think it's. I think the policy reform around planning, you know, sort of there's some real positives in that. There are some sort of things that people probably don't like as much, but you can never get everything you want.
So, you know, it's a balance, and I think it's then how you work with your local authority stakeholders to bring sites forward. There's a real difference in affordability between London and the South East and the North. I mean, you know, on our regional sites, most of what's built is affordable today. You know, so actually, yeah, you know, sort of working through all of that as the new policy comes into play is part of what we do. But, you know, sort of we just work through very long cycles, and we've seen probably all shapes and sizes and changes during our careers.
And I think, actually, what we're showing with Harworth, you know, with the results we've managed to deliver over the last three and a half years, is a business that can work through not just, like, political cycles, but also through some quite challenging economic cycles as well and take it successfully. So, I think there'll be some positives, I think there'll be some things we don't like, but quite frankly, we've got a great land bank, and we're just gonna push on.
I think is that we talk a lot about the consented industrial and logistics land, but actually we've got a really big portfolio of consented r esidential land as well, so 5,000 sort of odd units. And I think there's real value within that as well. You know, that's already got consent. It's ready to go. We've got the funding sort of to already do sort of the remaining sort of infrastructure works to take it to that serviced land point. And as you said, sort of house builders have got that demand to buy it, too.
I think, to be honest, to achieve what the government is trying to achieve, particularly on housing, they're gonna get not lots of different ways of doing it. You know, there won't be a one single way of doing it. It's gonna be lots of different buckets if they're gonna drive, you know, those housing numbers through.
Thank you.
Are we done in the room? So have we got any questions online?
Thank you. Our first question from the webcast comes from Matthew Saperia at Peel Hunt: "Thanks for the excellent presentation. How will you balance the opportunity to scale up the development of prime industrial and logistics assets with the possible acquisition of standing assets?
Right.
Oh, that's great.
Great. At least he told us he was gonna dial in, so we know you're there, Matt. Thank you.
Thanks, Matt. It always is a bit of a balance. So I suppose what's going through our minds at any one time, we want. We own sort of, you know, 8 million sq ft now of consented industrial and logistics land, actually sort of higher if we were to add Cinderhill on top of that post sort of year-end. The attractiveness of working through the development sites is it allows us not only to benefit from the rental income at the end, but to crystallize on the development profit going through. That said, you know, we're always conscious we run a portfolio. We don't want too much concentration in any particular one location.
We don't want any too much concentration in any one sort of building, and we need to manage the risk profile of the business as much as we need to manage the returns. So I think we have a really exciting sort of opportunity really to build sort of out of the existing portfolio, but we're not going to do that just by going sort of completely gung ho, doing absolutely everything and not having an eye on sort of the risk that's involved. So then where we can see sort of real value in buying existing standing stock assets is if we feel that we can buy something that's opportunistic, gives us the opportunity to drive value growth and continue to enhance that portfolio.
And what it might enable us to do is to actually look at the makeup of the existing investment portfolio and perhaps to sell out of some of the assets, like a bit like we did last year, where we've completed our asset management plans, and we can't see that additional value sort of going forward. So it enables us maybe to recycle that alongside sort of doing some of the development ourselves as well. So I think it's taking that holistic sort of picture, making sure that we can deliver the returns to shareholders, but also that we're balancing that portfolio risk, too. That. Is that all right?
Yeah.
Yeah.
And another couple from the webcast: "How do you decide on whether to build on balance sheet or use capital-light structures? And what demand do you see for forward funding opportunities, and how does the returns profile differ?
So in terms of sort of building on balance sheet versus capital light, some of that is that portfolio risk piece as well. So typically, we would build sort of units on site that were slightly sort of smaller. So we typically sort of built sort of under 200,000 sq ft on site as individual buildings on balance sheet. The largest sort of being the Bardon Hill development to date, which was about sort of 330,000 sq ft across a number of different units. That enables us to manage sort of exposure sort of within the group.
Where buildings get bigger, we probably look for a partner, but we'll always consider if there's opportunities, if they're pre-lets, if they're de-risked, then we might sort of stretch that a little bit further, so it's all about managing. Whenever we've got sort of a really big sort of development site, what we want to do is to move through it relatively quickly, but if we did that all on balance sheet, that might stretch the balance sheet of the business too far, so that's where we would look at bringing in sort of partners to help us to deliver it, and we've done it really successfully in the past.
If you look at Logistics North, for example, in the North West in Bolton, that's at 4 million sq ft, and we delivered that under a whole variety of different structures: some stuff on balance sheet, some stuff in JV, and stuff with forward funding sort of partners as well, and some things with land sales, where we would sort of sell to somebody else to build on top. So that's very much sort of a model that we're used to, and I think when you run really big sites, you have to use that sort of structure to deliver it.
Yeah, and I think the mix, both in terms of sort of where we are today, you know, as Kitty said, likes tend to be sort of 200,000 sq ft that we build to sort of hold, and we focus on building on balance sheet. But actually, you know, sort of as the investment portfolio scales and the business scales, we'll continue to review those metrics because that's a really logical, you know, sort of and sensible thing for us to do.
Absolutely.
Yeah.
Forward funding market, I think, is really tricky at the moment, to be honest. I think just when we look at sort of where yields are, sort of costs, et cetera, I think the market is being much more driven at the moment by sort of pre-lets or in some instances, there's good opportunity for speculative development as well. I think forward funding is harder, but I think sort of as we've talked about with stability of markets and maybe sort of a little bit of move on sort of interest rates, it feels like there's a lot of investment sort of waiting and interested in the market.
So we do anticipate that will be something that will return and will be a component, but it's quite challenging sort of at the moment to make all of the numbers stack up for that.
Nothing further from the webcast, so, Lynda, I'll hand back to you for closing remarks.
Okay. In which case, thank you all for joining us. Thank you for your questions. As I said, if there's anything that you haven't asked or occurs to you afterwards, you know, get in touch, and we'll try and sort of pick it up offline. Thank you for your time, everybody. Thank you.