Harworth Group plc (UK6A.SG) Earnings Call Transcript & Summary

All right. Good morning, everybody, and thank you for joining us today at Harworth's Full Year Results presentation. Today, we'll cover the financial results and operational performance of the business for 2024. I'm Lynda Shillaw, Chief Executive, and I'm delighted to be presenting alongside Dougie Maudsley, who is our Interim Chief Financial Officer. Dougie is covering for Kitty Patmore, who is currently on maternity leave, and he'll be familiar to many of you from previous results presentations and Capital Markets Day, as he is also our Group Finance Director. I'm pleased to see so many familiar faces in the room today, and I'd like to extend a warm welcome to those who've joined us online too. So I'm delighted to say that we had a great year and the business continues to perform across the board. This is a real achievement against a market backdrop that remains pretty tricky with volatility and uncertainty continuing at the macro level. Our performance highlights the strength of our through-the-cycle business model, which is underpinned by the skill of the Harworth team, who create value through their management actions across planning, investment, development and sales. The result of these activities translates into a total accounting return of 9.1%. This puts us again amongst the leaders in the sector. EPRA NDV grew to GBP 719.5 million, up 8.5%, a 17.2p increase year-on-year to 222.3p per share. Our loan to value out-turned at 5.4% and net debt at GBP 46.7 million. We continue to maintain a low level of leverage compared to our peers and the market more broadly. And in this context, our total accounting return is even more impressive. Our liquidity position remains strong at GBP 192.4 million, providing the capital needed to deliver our strategy. And over the last 5 years, we've delivered an average total accounting return of 8.4% per annum, which is a 330 basis points outperformance against the MSCI or Property Index, which in the same period averaged 5.1% per annum, whilst maintaining prudent debt and strong liquidity, which is fundamental to our business model, and it enables us to generate both attractive and sustainable returns. A further testament to our hard work was entering the FTSE 250 in September last year, which was a significant milestone for the business. So 2024 saw us achieve a record year for total property sales of GBP 215.8 million, which is up 71% year-on-year, and this had 2 core components. During the year, we sold land capable of delivering 4.4 million square foot of industrial and logistics space in 2 landmark transactions; a GBP 53.4 million sale to Microsoft at Skelton Grange and a GBP 53.5 million sale to Frasers Group at Ansty with both transactions generating significant value and profitability for the group. We also sold an impressive 2,385 residential plots across a mix of tenures, which was a record number of plot sales to the business, and they were at prices broadly in line with December 2023 book values. This was 104% increase year-on-year, and it puts us on a run rate towards our target of 2,000 plot sales per annum, noting that the year-to-year mix of sales across the portfolios will vary. We remain focused on making progress into our 2030 and 2040 net zero carbon targets and saw a 17% reduction in carbon emissions, driven by the use of alternative fuels for direct plant operations and increased use of electric vehicles by staff. Now the next 3 slides, we're going to review the progress that we're making creating value and derisking our pipeline, and the progress that we're making against our strategic targets. In 2024, our planning and technical teams successfully delivered planning consents for 6.8 million square feet of space and secured 3.5 million square feet of allocations. Our consented pipeline now totals 8.4 million square feet, and we are targeting the delivery of around 4 million square feet with a GDV of GBP 0.6 billion between today and the end of 2027. This will be achieved through a combination of on-balance sheet development of assets to retain in our investment portfolio alongside some selective speculative development and a mix of build-to-suit for owner occupiers, service land sales and forward-funding agreements. And you can see that following the land sales at Ansty and Skelton and the acquisitions made during the year that we've got the potential in our land bank to develop 33.3 million square feet. The scale of our pipeline sustains our growth beyond our strategic plan, and there is significant underlying value to deliver as we progress the sites. The progress that we have made working our sites through planning has derisked over 2/3 of this pipeline. Our residential land bank is a key source of value and capital to fund the growth of the business. This portfolio is more mature in terms of site with planning consents. And through the year, we invested in servicing plots to drive sales, concluding 13 transactions in the year. At the end of 2024, we had over 31,000 plots in our pipeline, and of these, 14,000 during the planning system, which derisks 46% of our pipeline, and you can see that around 4,500 plots actually have a planning consent. This slide sets out our progress against our strategic targets against the 2020 baseline. And you can see from this that we're continuing to make progress against all of them. Our investment portfolio is now 45% modern Grade A. It's up from less than 10% in 2020. And we will continue to drive this forward as we develop assets from a wider number of our industrial and logistics sites in the remaining years of the plan. In terms of our direct development targets, in 2024, we were on site developing 377,000 square feet, which is an 89% increase from 2020. We're also on site with enabling works for 3.1 million square feet, opening up the next generation of sites that we'll start to develop in 2025 and through the remaining years of the plan. And we successfully accelerated residential land sales and grown our range of residential products, generating cash to maintain our prudent debt levels and invest in growing the business. And 2024 saw a 177% increase in plots sold on the 2020 baseline, and we are well on track to our 2,000 plots per annum average target. We continue to acquire or secure control of sites with great potential, and we maintained our 12- to 15-year land supply target, enabling us to continue to scale the business beyond 2027. The consistent progress that we're making against each of our strategic pillars underpins our ability to deliver against our 2 core targets, to grow our EPRA NDV to GBP 1 billion by the end of 2027 and our investment portfolio to GBP 900 million by the end of 2029. So we're going to come back with a deeper dive on how we'll continue to scale the business later in the presentation. Now we split our portfolio into 3 main subcategories: strategic land, major developments and the investment portfolio. Strategic land includes land without planning or land with planning secured but where work has not yet started. Major developments include land with planning and where we started work on site, and this can be land with infrastructure underway to develop service land, but it also includes where we're building industrial and logistics or delivering our mixed tenure products. Our investment portfolio includes completed industrial and logistics buildings and provides a source of rental income. And then we have a small portion, helpfully, named other, which is largely income generating and includes some natural resources and agricultural land and some land with the opportunity for future energy uses and natural capital. What I really want you to take away from this slide are the following: firstly, our gross property assets are valued at GBP 858.8 million, which is up 39% from December '20, a reflection of our management actions and the value that we are driving as we implement our strategy. Secondly, the green color on the donut on the left-hand side shows that over 63% of our portfolio by value is industrial and logistics. And by 2029, we expect this to be at 85%. And thirdly, the tables on the right-hand side show how we create value as we move strategic land through the planning process and into development. The Strategic Land portfolio is our secret weapon. And as you can see from our results that it is key to scaling the business and sustaining long-term through-the-cycle growth. And in this part of the portfolio, we drive the majority of value gains through land assembly and progressing the sites through the planning process. The charts on the right show the movements in the portfolio through 2024. And as you can see, acquisitions added a total of GBP 15.5 million of value and planning progress delivered a further GBP 40 million of value gains across the 2 land portfolios. The disposals during the year in the Industrial and Logistics portfolio reflect the main disposal of our Ansty site to Frasers Group following the receipt of planning approval for 3.5 million square feet. Key acquisitions in the Strategic Land portfolio during the year were for further land assembly at our Wingates site and our investment into our first residential strategic partnership on an allocated site at Grimsby West, which brought around 3,000 plots into the portfolio. Major developments are the sites which are undergoing infrastructure works to create service land or have direct development underway, some of which will be retained in our investment portfolio as we implement the strategy to move it to 100% Grade A. And as the charts on the right-hand side show, the valuation of these portfolios increased in 2024, largely driven by the GBP 82 million of development activity across both portfolios. So pulling out a couple of key transactions, you can see from the industrial and logistics chart, the disposal to Microsoft at the first phase of Skelton Grange, the works on site to enable the completion of phase 2 in the development spend number. And once concluded, this site is expected to deliver an IRR in excess of 40%. On the residential chart, you see Stewartby, which is a site with outline planning consent for 1,000 homes, making up the majority of the acquisitions number. The GBP 73.4 million of disposal reflects the plot sales made during the year. And the value gains in this part of the portfolio were underpinned by our sales activity, improving pricing as well as optimizing our master plans to support increased local housing requirements. The fundamentals of our investment portfolio remains strong, with it generating GBP 17.5 million of headline rents from a diverse range of sectors. It remains an important source of our funding and security to our lenders. And as we grow this portfolio to GBP 0.9 billion by the end of 2029, it will underpin increased recurring earnings and future dividend growth. The valuation chart shows that the key drivers of valuation growth were the acquisition of Catalyst and revaluation gains driven by management actions and improved rents. Like-for-like rents increased by 4.9%, adding GBP 0.7 million per annum of headline rental income. This was also at a 4.3% premium to December 2023 ERVs with renewals and rent reviews achieving an average of a 22% uplift to previous passing rents. The reversionary potential of the portfolio is around 19% against year-end ERVs and vacancy rates are 5.6%, which is 4.3% lower than 2023. And with that, I'll hand you over to Dougie.

Thank you, Lynda, and good morning, everyone. Lynda began by saying that Harworth has had a great year, and I'm delighted to say that this operational success has translated through to the group's financial performance. Starting with a look at our income statement and the underlying revenue table in the bottom left. Total property sales were GBP 215.8 million for the year. This was a material increase on 2023. Within this figure is the impact of record residential service land sales, the phase 1 sale at Skelton Grange to Microsoft and the sale of the Ansty Strategic land site to Fraser's Group. Revenue from income generation was slightly lower than 2023, reflecting the full year impact of previous sales of secondary investment property. Revenue from Grade A assets within the investment portfolio will increase in future years with the full year impact of the acquisition of Catalyst, the impact of completed vertical direct development and other letting and rent review activities. Development revenue includes build-to-suit development on behalf of an owner occupier and the start of development work at Skelton Grange for Microsoft. Together, this gives underlying revenue of GBP 257 million, which is 70% higher than 2023 and statutory revenue of GBP 181.6 million as reflected in the statutory income statement. Administrative expenses increased by GBP 5.8 million, and this was principally due to higher salary expenses from increased employee numbers to support the delivery of the strategy. We now have 138 people working across our sites across our 3 regions compared to 120 at the end of 2023. Other gains of GBP 78.1 million included increases in the fair value of investment properties driven primarily by management actions along with profits on sale of investment property. All these factors combined give us a profit after tax of GBP 57.2 million, an increase of over 50% compared to 2023. Turning to dividends. The Board has decided on a final dividend of 1.125p per share. This is a 10% increase on last year's dividend, and it has now increased by 10% for 8 consecutive years. Moving to the balance sheet. Our EPRA NDV per share increased by 8.4% to 222.3p, reflecting EPRA NDV of GBP 719.5 million. This keeps us on track to reach the GBP 1 billion target by the end of 2027. As noted, management actions, including planning progress and master plan optimization created significant value. And this increase is reflected in the increase in the value of property, of the value of the property portfolio at the year-end. Combined with the dividend paid during the year, the EPRA NDV increase led to a total accounting return of 9.1% for the year, which is a significant increase on the 5.1% achieved in 2023. Looking at funding and liquidity. Our financing strategy remains to be prudently geared. We have a target net loan to portfolio value of below 20% at year-end with a maximum of 25% during the year. At the 31st of December, our net loan to portfolio value was 5.4%, well within our target levels. The chart on this slide bridges the small increase in our net debt from GBP 36.4 million as at the end of 2023 to GBP 46.7 million at December '24. This increase reflects acquisition spend as well as development spend to progress works on our sites through the year, offset by the receipts from sales. The timing of cash receipts towards the end of December led to a high year-end cash balance with GBP 90 million of loans repaid in early January. The chart also shows the headroom afforded by our cash position and revolving credit facility with GBP 192.4 million of cash and available facilities at the year-end. Our main revolving credit facility runs until March 2027, with plenty of headroom to deliver our planned activities. We will continue to use site-specific direct development and infrastructure loans to support our growth alongside this. So in summary, this was another very strong set of results for the group. We continue to deliver growth in our net assets and EPRA NDV. We have a solid financial position with low loan-to-value, cash and available facilities, all of which will help us to progress our strategy. Having outlined the financial performance for the year, let us now turn to the future. I will talk through our target of scaling the investment portfolio, and Lynda will then talk through how we will achieve GBP 1 billion of EPRA NDV by the end of 2027. During 2024, we announced our increased focus on Industrial and logistics and our target to grow the investment portfolio to GBP 0.9 billion by the end of 2029. The investment portfolio plays an important role in the funding of the group, allowing the group to support debt, which is flexible to the seasonal nature of the group's funding requirements. As the investment portfolio grows, it will provide optionality for the group's funding, supporting the needs of the group as it continues to grow. The increased scale of the investment portfolio will also provide higher rental income, and this, in turn, will provide the opportunity to increase the income component of returns through higher dividends. This journey did not start in 2024. In 2021, we launched our strategy to increase direct development of industrial and logistics space and reposition the investment portfolio to modern Grade A. And as you can see from this slide, we have added over 900,000 square feet of Grade A assets into the portfolio since then, and 70% of this has been directly developed by Harworth on sites that we have enabled and promoted. In 2025, we will continue to add to this through increased direct development, and we are currently on site at Droitwich and the AMP. Both of these assets will transfer into the investment portfolio in 2025. And up to 500,000 square feet of further direct development can be started this year, subject to market conditions. You can see from the next slide, the impact of this on the portfolio as a whole. The proportion of Grade A assets in our investment portfolio has increased every year since 2020, mainly through completed direct development, supplemented this year by the acquisition of Catalyst. And since 2021, we have also sold secondary assets following completion of asset management activities realizing proceeds of GBP 81.7 million for reinvestment and further accelerating the evolution towards modern Grade A. You can also see that as we have improved the quality of the portfolio, we have driven higher average headline rents. The level of direct development will increase significantly in the outer years of the plan supporting the growth of the investment portfolio to GBP 0.9 billion by the end of 2029. I will now hand you back to Lynda.

Thanks, Dougie. So moving sites through the planning process is a key driver of value and returns. And our pipeline of sites with planning consents at 8.4 million square feet and 4,568 plots is a platform from which we will continue to grow the business to GBP 1 billion of EPRA NDV by the end of 2027. Our through-the-cycle business model underpins this platform and our focus on allocating capital alongside our specialist skill set to ensure to secure ownership and control of land, optimize master plans, secure outline and detailed planning consents and mitigate delivery risk by investing in infrastructure and securing power reservations as early as possible, create the opportunities to drive value and accelerate our sites. We're also focused on enhancing the value of our service land products where we have opportunities to tilt into higher-value uses such as data centers as our actions show at Skelton Grange with Microsoft. Our portfolio is in a great position to deliver into the market where there was a shortage of supply across our regions. Our master plans give us flexibility in the products that can be delivered from our sites. And with around 4 million square foot of development from our consented sites starting from 2025, we will begin to accelerate development as we move through the latter years of the plan. We anticipate that around 40% of the product that we deliver to 2027 will be held in our investment portfolio, so that's the dark blue box. And the remaining 60% or so the capacity being -- will be a mixture of build-to-suit, forward-funded and service land, which is in the gray box. But it's not just about building. In order to sustain the momentum in our pipeline, we will also be on site with enabling works for over 5 million square feet of products, the white box, which will provide the additional buildings to take our investment portfolio to GBP 900 million and feed into our growth beyond 2027. Our control of our land bank is a key strength. And as we develop and enable the sites, we will remain flexible and continue to support -- explore opportunities to create enhanced value and returns, capitalizing on market conditions. And you can see this in action in the type of transactions that we've completed at Skelton and estate in Kellingley over the last 3 years. The business is well positioned to continue to scale our industrial and logistics development pipeline and accelerate development. Since launching our strategy in 2021, we have delivered a compound annual growth rate of 8.7%, which adds up to a 39.5% EPRA NDV growth to the end of 2024. This has been delivered through a volatile economic environment, and it highlights the resilience of our through the market business model. We built the business and progressed to the next generation of our industrial and logistics site to the point where we now have an exciting runway to deliver significant volume development in the remaining 3 years of the plan. And we're targeting an 11.6% compound annual growth rate to take us to GBP 1 billion of EPRA NDV at the end of 2027, something that we are confident that we can achieve. In a pretty sticky market, Harworth has some real strengths and opportunities that propel us forward and enable us to keep driving growth. Our markets remain in structural undersupply and both wider planning and policy reform and the U.K.'s critical infrastructure and emerging industrial strategy supports our model. We have a large consented and well-located pipeline, which can deliver at scale into emerging regional strategies. Our products are aligned to investor and occupy demands in our regions, and there's material underlying value to be unlocked. And on this, our superpowers are our strategic land bank, our long-term approach and our specialist skills. We deliver all of this by recycling our capital to drive returns and growth and maintaining a strong balance sheet with prudent leverage. Our through-the-cycle business model provides resilience and enable sustainable growth in the business. We remain 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 we have a proven track record of delivering attractive returns through the cycle. So with that, I'd like to say a big thank you to the Harworth team who worked so hard to deliver such a great set of results for 2024, to all of you for taking the time to join us today, and we'll now turn to questions. We'll take them from those in the room first, and then, we'll move to the webcast if there are any questions. And if you're unable to sort of get your questions in, please reach out to us, and we'll be happy to come back to you offline. Thank you very much.

It's James Carswell from Peel Hunt. You mentioned in terms of the investment portfolio and build-out side of the development that it was slightly -- obviously dependent on market conditions. Just wondering what you're seeing today. Are you seeing a bit more kind of renewed confidence from occupiers in terms of signing leases? And clearly, the vacancy has come down quite considerably. I mean, does that give you the confidence to do more development speculatively? Or are you still looking largely for pre-lets?

It's sort of a mix of both, James, I mean, to sort of come to the first bit of the question. I mean, occupiers have never really gone away sort of over the last couple of years. It's just that transactions have been slower, sort of everybody stand that across the market to conclude. And what you're seeing is actually a move certainly towards prime stock and a lot more sort of secondary stock sort of coming into the market, but transactions have been happening. We take a view at a portfolio level across the geographies as to how much spec we're comfortable with from a risk and return perspective. So you've seen us build spec at Gateway 36. We built Bardon spec. We've got spec going on at the AMP, which is now pretty much sort of let up. We're building Droitwich spec. So at any point in time, we'll actually have -- sort of some of our balance sheet will be funding spec development in sort of where we think it's the right thing to do. But I think the part of the cycle we're in at the moment, it will be that combination of pre-lets and spec to sort of provide some balance. But let's say, we're sort of -- we're active with a significant number of conversations across sites because I think it goes to this point about we've got sites that can deliver product at scale. We've just enabled sort of over 1 million square foot at Chatterley, the platforms are created, we're ready to build. And there are sort of not a significant number of sites across the regions, but they're in that state of readiness basically.

You gave a bit more color in terms of the build-out of the investment portfolio. And I think, Lynda, you touched on the fact that as that grows -- the rental income grows, and therefore, you can potentially look to grow the dividend as well. Are you able to give any guidance, maybe as an interim step in terms of the rental income becoming such that it will cover the running costs in the dividend today? Or is that not the way you think about the kind of the cost base and the rental income?

It's not really the way we've thought about it.

No. I guess what you could say is that as we get to GBP 0.9 billion in the revenue, you're going to be talking about in the GBP 45 million to GBP 50 million range. So over time, it will increase, but we're not talking about it necessarily into the specifics.

Yes. I mean, the focus, I mean, again, just for context, we've been really successful in the growth that we've achieved over the last few years. And that's the 2 things because you can't deliver the sort of strategy that we've sort of laid out without increased funding. So when we refinanced the business at the beginning of 2022, we increased the sort of the RCF, but the other thing is people. And you can see actually, we've grown the resource in the team and continue to do so quite selectively, not at the same rate as we did in '21 into '22. But where we have been putting the resources, we've been putting it into development teams, the project management teams, the planning teams. And what you're seeing is the result of -- sort of having more people means we can get more sites moving, more planning applications moving. So that's what's driving the results.

Bjorn Zietsman from Panmure Liberum. Very strong total returns over the past 5 years, largely delivered without the use of significant leverage. Looking forward, you've mentioned the sort of 25% LTV. On the GBP 0.9 billion investment portfolio, how would you think about LTV specifically on that portfolio once you've reached that sort of level? And then a follow-up question just on labor, and obviously, there are targets to improve the planning process. Are you seeing any of that coming through on the ground?

Do you want to do funding? And I will do planning, my favorite subject.

Absolutely. So I guess at this point, we're not saying anything other than that we've got our 20% at year-end and 25% through the year. The -- as we grow that portfolio, it will provide different options for different types of debt and also more efficiently. So I think as it grows, we'll make those decisions, but we haven't made a specific decision on it yet.

And then on planning, so planning reform and everything that's happening is generally, I think, really positive for the sector. I think I say in the sort of -- in the [ RS ] it will take some time, but that's settled down. It's not a bill passed today, and it's immediately in action on the ground tomorrow. The point I would make is look at what we've delivered against the backdrop of probably some of the trickiest -- most dysfunctional sort of planning sort of rules and systems that we've probably had over the last 5 years, and the business has continued to deliver sort of really sort of strong total accounting return. So with a planning environment around us, that is more supportive, that's more friendly, that's encouraging development in the sectors that we're in, particularly. Sort of we've got great sites to deliver into that, and we're quite excited about what that could do for the business, basically.

Toby Thorrington from Equity Development. A couple of balance sheet questions, I think, if that's okay. 3 fairly chunky transactions announced in the last month of the year. Can you just give us a sense of whether there's any truing up to be done in the balance sheet in terms of additional cash coming in, obligations to go out, tax related, anything like that?

So I guess what you can see in the balance sheet is a number of things. That high level of residential sales, as sales to housebuilders normally include a level of deferred payments, so you'll see a higher level of trade receivables as a result of that. What that does do is it gives us good visibility for future cash receipts, and we maintain security on the sites, which gives us comfort over the credit risk as well. So that's one bit that you'll see.

Is that contingent on anything?

No. Second part you'll see in the trade in the payable side. You'll see an increase because we have a decent amount of that, that went out in January as a result of the year-end sales. And we've also, with the purchase of Stewartby, and that's another example where it's a GBP 30 million site, but we've agreed payment terms over 2 years. And, therefore, that's just allowing us to manage the capital efficiently on that.

Okay. I'll do the math myself. It sounds as though, obviously, loan-to-value very low. You helpfully mentioned that the RCF has substantially paid down in January as well as we probably expect. It sounds as though you're not going to be pushing the balance sheet very hard this year, possibly in the first half anyway. Can you give us some thoughts about how you expect the balance sheet to develop?

I think just on that point, and Dougie sort of can come back on how the balance sheet will develop. I mean, it's not just about sort of allocating expenditure to vertical development. The GBP 82 million that you saw sort of that we spent last year, a lot of that was infrastructure works. It was works to basically enable Chatterley so that we have like fully service site and we can -- and actually sort of create the platforms. It's the infrastructure that's needed to facilitate the residential plot sales. So in any year, we've got quite a significant amount. And as we do it -- as we work across more sites, sort of that increases of infrastructure works going on so that the sort of the direct development side, I said we're on site already with Droitwich -- sort of we're on site actually with some non-INL stuff, which is just the creation of community facilities and shopping areas sort of at Waverley. But as we move through this year, you'll start to see us actually sort of lean into the next bit of spec build that we'll do into the market because we think that's still right to sort of build some spec in the market that we're in. And as we secure pre-lets, you'll see it ramp up from there. So it's a funny year. I mean, '24 was like sort of a year where we all felt like we were walking through treacle for most of it. '25 has sort of started maybe a bit more optimistic, but it still feels a little bit like you're walking through treacle. So I think you'll see the activities sort of ramp up as we move into the second half.

Yes, absolutely. And it's normal for us to increase the level of debt through the middle of the year as we go out and design it through the earthwork season and our sales tend to be back-ended, which then brings it back down.

I mean, it is like -- so -- and in doing that, the real important and the key thing is the sales that come into the end of the year, take it back down and then we go again. So we literally are recycling capital as efficiently as we can from the proceeds that we generate into creating the sort of the next set of returns.

Okay. Just on a cash tax question. In a normal year, should cash tax be similar to the P&L or otherwise?

So in your -- in the P&L, the impact of the value gains means that the deferred tax is a significant portion of it. And then we have points of crystallization either on sales, but also when we transfer from investment to development property, we -- in the main, either -- we can choose to either pay the tax at that point or defer it until the sale.

Got you. Okay. And given all of the above, it sounds like considerations of refinancing the banking facilities, it's more likely to be towards the end of this year, maybe beginning of next year rather than any tearing rush to do it now.

Well, we don't need to refund until March '27, but we won't leave it late to refi. So it's something that we're looking at, at the moment. Anymore? Have we got any online? I'm looking at Juliana. No online?

We have one online question. Just about the residential land bank. And the question is just talking about the -- what percentage of our land bank is focused on residential development? And can we continue to build on that land bank?

Okay. So we're 63% industrial and logistics from the donut. And I think that means we must be about 30% -- low 30% on resi, so between residential Scotland and residential major developments. The strategy is to move industrial and logistics to be 85%, as we build out that investment portfolio alongside becoming active across far more of our industry and logistics site is to build that out to 85% by 2029. Residential is really important to us. So you'll see actually that we are just over 31,000 plots. So we've gone up in terms of the number of plots we brought into the portfolio this year. I think that's up about 17% from sort of memory -- 15%, sorry. So you'll see that we brought that in because that actually is a source of capital. So the residential land bank drives value. As we work sites through the planning system, you see that value gains, but then also, as we sort of bring sites forward for sale that actually throws cash offers to reinvest. So it's quite important that it will become over time a smaller proportion of a much bigger pie, is probably the way to think about it.

And just continuing on that, from [ Davie ], in terms of our residential product, can you talk a little bit about the demand for that? And have you seen a change in the tone from the major housebuilders?

So the demand for the service land products remains really strong. It's really resilient. I think I've said that virtually every time I've presented results. It's a derisked product for housebuilders, whether they are nationals, sort of like fill pipeline in their regions or regional housebuilders. And that held up really well actually as we've gone through this sort of last couple of years. We are sort of selling at sort of the -- in '24, they're out or ahead of December sort of '23, book values before any transaction costs, but in the main were ahead. And that demand hasn't gone away. I mean, we probably -- we now sort of transact with over 20 -- well over 20 sort of major and regional housebuilders. The bit that we've also seen that's really encouraging is like the -- we're on our third transaction now with Great Places, which is the affordable housing product that we're on site delivering with a housing contractor, sort of partner. And again, sort of we've got great traction across sort of that part of our product range, as we went through 2024. BTR is still a bit quiet. I think it's certainly single family, actually, but I think that's pretty much sort of sector-wide because that's about availability of stock and who can deliver in at scale. So it doesn't sort of -- it performs really well. And it's really important to us not just for cash, but because the level that we make those sales up proves our valuation. So that's really -- and we've continued to do that and drive values forward.

And just the last question. Can you talk about your view of the forward funding market for '25?

I think it will improve. It's probably the sort of simple answer to say. Look, I mean, as a sector, interest rates are really important to us. And even if yields stay where they were, actually, interest rates are still really, really important to us. So I think actually, as we sort of move through '25 and rates are still predicted to sort of come in, I think actually sort of that forward funding market will galvanize a bit. There is capital looking to deploy. So when I sort of talk to the people who's on the capital side of the sector, there is no shortage of capital looking to deploy. The challenge for anybody who wants to bring development forward using that capital is actually what they're prepared to pay, and we're not a forced seller. We're not a forced buyer. We're in a great position with a strong balance sheet, and we can actually fund a lot of what we're talking about from that balance sheet in the early years of the plan. And that's really what we focused on. Okay. We're done. Well, with that, thank you so much, everybody, and we'll draw it to a close. Thank you.

Thank you.