Profit of Harworth surges with escalating revenues - is it worth investing?
In a significant move to address the housing crisis in the UK, the current government has announced a major initiative to build up to 40,000 new homes on surplus railway brownfield land over the next decade. This forms part of the government’s wider commitment to deliver 1.5 million new homes by 2029, with as many as 1.2 million homes planned on brownfield sites [1][3][5].
A New Development Company: Platform4
At the heart of this initiative is Platform4, a newly established development company created by merging previously separate entities (London and Continental Railways Ltd and Network Rail’s Property Team) [1][3]. Platform4 aims to unlock and efficiently develop surplus rail land into thriving mixed-use communities with homes, green spaces, shops, and hotels. This will help deliver up to 40,000 homes mainly in urban centers including Manchester, Newcastle, Nottingham, and Cambridge over ten years, with 15,000 homes expected in the next 5 years [1][3].
Funding and Regeneration
The government has approved specific funding packages to support this initiative. For instance, a £120 million boost for Newcastle’s Forth Yards brownfield site will enable remediation and infrastructure work to overcome long-standing barriers to development [2]. This underscores a brownfield-first approach, prioritizing previously used land to increase housing supply while regenerating neglected urban areas and driving local economic growth.
Transport-Led Development
The approach centers on sustainable urban regeneration, placing new neighborhoods around transport hubs to encourage public transit use and unlock economic growth through improved infrastructure and job creation. The £1 billion development programme is expected to attract over £350 million in private investment and create thousands of jobs in construction and community development [1][3].
Sustainability and Design
Alongside quantity, there is a strong emphasis on creating sustainable, well-designed, low-energy homes to ensure long-term livability and environmental responsibility on brownfield sites, which often require thoughtful remediation and regeneration planning [4].
A Boost for Brownfield Developers
This government initiative is expected to increase the demand for brownfield development, potentially benefiting companies like Harworth, a UK-based company specializing in developing "brownfield" sites [6]. Harworth controls approximately 14,000 acres of brownfield land across around 100 sites in the north of England and the Midlands [7]. The company has a strong pipeline of projects for developing brownfield sites and maintains reasonable profit margins, with a return on capital employed of just under 10% [8].
Recent strong trading updates indicate an upward trajectory for Harworth, with revenue expected to rise by over 50% this year and by a further 30% the year after [9]. The shares of Harworth are trading above their 50-day and 300-day moving averages, and a suggested entry point for a long position in Harworth shares is at the current price of 190p, with a stop loss at 120p [10].
In conclusion, the UK government's ambitious brownfield development programme is set to convert surplus public railway land and other previously developed urban sites into high-quality housing and mixed-use neighborhoods, supporting first-time buyers and economic regeneration as part of its wider 1.5 million home target by 2029 [1][2][3][5]. This initiative is expected to provide a significant boost for companies like Harworth, which specialize in developing brownfield sites.
[1] https://www.gov.uk/government/news/40000-new-homes-to-be-built-on-surplus-railway-land [2] https://www.gov.uk/government/news/120-million-boost-for-newcastle-s-forth-yards-brownfield-site [3] https://www.gov.uk/government/publications/platform4-development-company-prospectus [4] https://www.gov.uk/government/publications/sustainable-housing-design-code [5] https://www.gov.uk/government/news/up-to-1-5-million-new-homes-to-be-built-by-2029 [6] https://www.harworthgroup.co.uk/ [7] https://www.harworthgroup.co.uk/our-land/ [8] https://www.harworthgroup.co.uk/investors/results-centre/ [9] https://www.harworthgroup.co.uk/investors/results-centre/trading-update-2021/ [10] https://www.harworthgroup.co.uk/investors/results-centre/interim-results-2021/
Property investments in the real-estate sector, particularly in brownfield sites, could be a promising opportunity due to the UK government's inauguration of Platform4, a development company focused on developing surplus rail land into thriving mixed-use communities. This initiative plans to deliver up to 40,000 homes over the next decade, with a substantial portion expected in the next 5 years.
Financing for this initiative includes specific funding packages, such as a £120 million boost for Newcastle’s Forth Yards brownfield site, which will stimulate remediation and infrastructure work and increase demand for brownfield development companies like Harworth, a UK-based company specializing in brownfield site development.
