INL.L Regulatory News (INL)

1 February 2022

Inland Homes plc

("Inland Homes", "Group" or "Company")

Audited results for the year ended 30 September 2021

A year of tangible progress

Inland Homes plc (AIM: INL), the brownfield developer, housebuilder and regeneration specialist focused on the South and South East of England, today announces its audited results for the year ended 30 September 2021.

Stephen Wicks, Chief Executive at Inland Homes, commented:

"This was a year of tangible progress, with the Group ending the year strongly and trading in line with market expectations. We have achieved record revenue, delivered on our commitment to reduce net debt and have grown our asset management, partnership housing and private housebuilding divisions.

"These results are underpinned by the Group's attractive portfolio of brownfield and longer-term strategic land opportunities. Located across the South and South East of England, it is this valuable portfolio, together with our planning and housebuilding expertise, which drives demand from third-party investors, build to rent operators, registered providers and other housebuilders.

"We will use the flexibility in our unique business model in the year ahead to maximise this opportunity and will adapt as needed to changing market conditions. Reducing debt continues to be the Group's primary strategic objective. Growing both our 'capital-light' asset management and partnership housing divisions will support this objective and therefore will be a focus for the Group.

"The underlying strength of the housing market and the shortfall in new housing delivery will continue to support demand for the land we own and the homes we build. The Group is well placed to make further progress in the year ahead."

Financial performance

· Record revenue: £181.7m (30 September 2020: £124.0m)

· Profit before tax: £13.2m (30 September 2020: £3.4m)

· Net debt: 20.3% reduction to £118.1m (30 September 2020: £148.2m)

· EPRA net tangible assets: £246.4m (30 September 2020: £235.2m)

· EPRA net tangible assets per share: 107.84p (30 September 2020: 103.75p)

· Cash balances: £12.1m (30 September 2020: £15.7m of which £4.7m was restricted)

· Partnership housing forward order book: £164.7m (30 September 2020: £105.8m)

· Other revenue: £1.8m (30 September 2020: £2.3m), which includes letting income from investment properties and short-term rents from brownfield sites being processed through the planning system

Operational performance

· Extensive progress in delivering strategic planning consents: Resolution to grant or full consent granted for 1,831 new homes (30 September 2020:112), including 514 homes at Hillingdon Gardens, Hillingdon, 583 at Patchworks in Walthamstow and 700 at Gardiners Park Village, Basildon.

· Land portfolio: Decreased slightly to 10,055 plots (30 September 2020: 11,045) as the Group took advantage of the strong land market, with 601 plots sales during the year (including plots within the asset management division). Within the portfolio, 3,689 plots have consent (30 September 2020: 2,470).

· Estimated gross development value of land portfolio: Maintained at £3.0bn (30 September 2020: £3.1bn).

· Significant progress within the Group's asset management division: The Group has six projects with the potential to deliver approximately 3,300 new homes. Management fees earned on these projects during the year increased by 13.9% to £27.8m (30 September 2020: £24.4m).

· Homes under construction: 1,547 homes under construction (30 September 2020: 1,717) of which 1,257 are being built on behalf of affordable housing providers and Build to Rent operators (30 September 2020: 1,302).

· Private home sales: 216 private homes sold excluding sales in joint ventures (30 September 2020: 96) at an average selling price of £262,000 (30 September 2020: £240,000). A further 167 private homes sold (2020: 130) across sites held in joint venture. Excluding joint ventures, the weekly net reservation rate per active sales outlet was 1.09 for the year (2020: 0.65).

o Sales driven by high demand at The Wessex, Bournemouth where 64 of the 94 apartments were sold this year and at Meridian Waterside, Southampton, where 50 completions were achieved this year within the third phase of this 352-home development.

· Partnership housing: Growth of partnership housing division with two new partnership housing build contracts secured during the year worth £131.3m and increased turnover to £60.3m (30 September 2020: £51.8m).

· Environmental, Social and Governance: ESG framework developed, and Governance and Risk Committee created to coordinate and oversee activity at Board level.

· Hugg Homes: Resolution to grant planning permission for 48 units at Cheshunt Lakeside, Cheshunt.

· Rosewood Housing: Launch of nine Rosewood Housing shared ownership homes within the Randalls development in Uxbridge following completion in September 2021.

Cladding and fire safety

The Group makes no compromises on safety and the safety of its buildings and the people who live in them is its number one priority. In the wake of the Grenfell Tower tragedy, the Group proactively carried out a comprehensive review which confirmed that Aluminium Composite Material (ACM) cladding has not been used on any Inland home or building. This includes both the homes the Group has built and those where third parties have constructed the homes on its behalf. The Group is aware that some remedial work related to fire safety has been proposed at one historic development which is owned by a third party, and it is currently liaising with the property's managing agent and subcontractor to review what, if any, works are required.

Enquiries

This announcement contains inside information for the purposes of Article 7 of Regulation (EU) No 596/2014 as it forms part of UK domestic law by virtue of the European Union (Withdrawal) Act 2018 ("MAR").

Notes to Editors:

Incorporated in the UK in 2005, Inland Homes plc is an AIM-listed specialist housebuilder and brownfield developer, dedicated to achieving excellence in sustainability and design.

Inland Homes acquires brownfield land in the South and South East of England principally for residentially led development schemes. The business then enhances the land value by obtaining planning permission, before building open market and affordable homes or selling surplus consented land to other developers to generate cash.

The Company is committed to extensive public and community consultation in order to ensure that, where possible, local community needs and objectives are met.

Inland's aim is to create sustainable communities and homes which set a benchmark for all future developments in the South and South East of England. The Company is always looking for brownfield sites without planning permission for future development.

Environmental, Social and Governance credentials

Inland Homes is committed to ensuring its land, housebuilding and partnership housing activities leave a positive lasting legacy. As specialists in brownfield site regeneration the Group already has a proud history of adding lasting value through its expertise and experience in site remediation, which allows derelict and near derelict land to be regenerated and used for the construction of new homes.

Inland Homes takes its position as an industry leader extremely seriously and has developed its Environmental, Social and Governance (ESG) framework against the broader backdrop of an escalating global climate issue. The Group's ESG framework, which has been aligned to four of the UN Sustainable Development Goals, sets out our high-level commitments. Using this framework, we are now focused on developing a full ESG strategy. The strategy will identify clear goals and metrics to enable us to measure and report on our performance and success in this space.

For further information, please visit the Inland Homes website at: www.inlandhomesplc.com

Hugg Homes - www.hugghomes.co.uk

Rosewood Housing - www.rosewoodhousing.co.uk 

Inland Homes plc

Report and Accounts for the year ended 30 September 2021

Chairman's statement

Introduction

Inland Homes started the financial year with cautious optimism and finished the financial year strongly. The Group generates income from multiple sources and this flexibility enabled Inland Homes to move decisively and quickly to meet the challenges presented by both the COVID-19 pandemic and the changing market conditions.

It has been a year of tangible progress in the delivery of the Group's strategic objectives. One of the priorities has been to reduce net debt and I am therefore pleased to be able to report that the Group was successful in achieving a 20.3% reduction, whilst simultaneously extending the maturity of Inland Homes' borrowing facilities. Further progress has also been made in maximising the value of the Group's excellent land bank, growing the asset management division and sustaining the demand for Inland Homes' high-quality, affordably priced homes.

Financial and operational highlights

The heart of the Group's business is land, and both the land trading and asset management businesses performed well. Inland Homes delivered record revenue for the year ended 30 September 2021 of £181.7m (30 September 2020: £124.0m), an increase of 46.5% over the previous year. The Government has continued to support the UK housing market and, excluding joint ventures, the Group sold 216 new homes (30 September 2020: 96). The average selling price of our new homes increased to £262,000 (30 September 2020: £240,000), as buyers took advantage of the relaxation of the Stamp Duty Land Tax and the Help to Buy scheme.

The asset management business, which enables Inland Homes to leverage the expertise, experience and skills within the Group, has had another good year. The Group now has six projects with the potential to deliver approximately 3,300 new homes. Management fees earned on these projects during the year increased by 13.9% to £27.8m (30 September 2020: £24.4m) and delivered very healthy gross profits.

The Group continues to see increased demand from Build to Rent (BtR) operators, looking for a turn-key solution to their housing requirements. As a result, the contract income from our partnership housing activities, undertaken by Inland Partnerships, grew substantially, with turnover increasing by 16.4% to £60.3m (30 September 2020: £51.8m). Inland Partnerships also continued to win new contracts and its forward order book, including two build contracts at our site in Walthamstow worth £131.3m, increased by 55.7% to £164.7m (30 September 2020: £105.8m).

Buoyed by increased demand, the housebuilding division reported significantly increased turnover of £69.9m (30 September 2020: £23.8m), including the sale of a hotel earlier in the financial year for £13.3m. The margins of both the partnership housing and housebuilding divisions were adversely affected by unforeseen costs, cost inflation and extended construction periods and whilst the Group has taken a number of steps to remedy this situation, these factors will continue to affect margins in the current financial year. Since the financial year end, one of our subcontractors has gone into administration which has cost the Group approximately £0.3m.

As a result of the reduction in net debt, the Group's net interest costs have fallen to £7.8m (30 September 2020: £8.4m). The Group has continued to manage overheads effectively and administrative expenses have reduced by 40.5% to £7.5m (30 September 2020: £12.6m). The Group's profit before tax was substantially ahead of the previous financial year and amounted to £13.2m (30 September 2020: £3.4m). The Board does not intend to recommend a dividend (30 September 2020: nil).

Group net assets at 30 September 2021 increased to £183.0m (30 September 2020: £173.0m). Net asset value per ordinary share increased to 80.10p (30 September 2020: 76.31p) and the EPRA net tangible assets per ordinary share increased to 107.84p (30 September 2020: 103.75p).

Land portfolio

The strong sales performance of the Group is reflected in the estimated gross development value (GDV) of the land portfolio, which at 30 September 2021 is now £3.0bn (30 September 2020: £3.1bn).

This portfolio consists of an aggregate of 10,055 plots (30 September 2020: 11,045 plots), 3,689 of which now have planning consent (30 September 2020: 2,470 plots).

Inland Homes has a proud record of delivering planning consents and during the year, the Group achieved a resolution to grant planning or obtained full planning approval for 1,831 new homes (30 September 2020: 112 new homes). In October 2021, planning consent was achieved at the Group's Gardiners Park Village development in Basildon, following receipt of the resolution to grant planning permission, announced in May 2021. The estimated GDV of the site, which is being developed in conjunction with Homes England, is £200m and will include 700 new homes, commercial space, a new school and other community facilities.

Inland Homes has also recently obtained a resolution to grant planning permission, subject to the signing of a Section 106 agreement, for a mixed-use scheme of 380 new homes, including 103 affordable homes and commercial space in Dagenham Dock, Dagenham. This strategically important site in the Borough will provide a new gateway to the area and act as a catalyst for the regeneration of South Dagenham.

Work at the Group's flagship development at Wilton Park, Beaconsfield continues, with Phases 2 and 3, comprising 90 plots, having been sold during the year to the specialist, high-quality developer Bewley Homes. In addition, a total of 10 houses, which were originally acquired with the site and were formerly let to the Ministry of Defence service personnel, have been completely renovated and sold, for a total consideration of £6.7m.

At Cheshunt Lakeside, Cheshunt, construction of the first 195 homes on behalf of a local housing association is progressing well. The first homes will be handed over in the first half of 2022 and the remainder before the end of the calendar year. We received reserved matters approval for 22 homes and 350sqm of commercial space in Parcel 14, which forms part of Phase 1C, in March 2021 and for Phase 1B, comprising 205 homes, in June 2021. The 22 homes will be offered for private sale. We are at advanced negotiations with a major BtR fund for the development of the 205 homes within Phase 1B.

The Group also concluded the sale of a 105-bedroom hotel at the Wessex Hotel site in Bournemouth, pre let to Premier Inn, to Aviva for £13.3m. At 30 September 2021, 64 of the 94 apartments at the same site had been sold, realising in aggregate proceeds of £18.7m (30 September 2020: £nil).

The Group's nine-acre regeneration project on a former derelict brownfield site at Chapel Riverside, Southampton, will deliver, on a phased basis, 520 new one, two, and three-bedroom homes and 5,945sqm of commercial space. The site has required extensive remediation and civil engineering works. Between 1 October 2020 and 30 September 2021, 93 apartments were sold (including 24 units within a bulk sale), with sales proceeds of £20.7m (30 September 2020: £9.1m).

Asset management

Investors in projects within the Group's asset management division benefit from Inland Homes' expertise and experience in identifying and securing attractive, viable sites and achieving planning consent on these. The capital-light nature of this funding model, together with the management fees earned at various milestones of the project (including the successful gaining of planning permission), enable the Group to generate attractive and significant returns.

The asset management activity benefits Inland Homes in a number of ways: it optimises the planning expertise within the Group; it significantly reduces the capital investment and it enables Inland Homes to earn management fees as the various defined milestones are achieved. The capital required for these projects is sourced from external investors, who earn a priority return on the capital invested typically on a fixed coupon rate. One of the principal risks for the Group with these projects is delays to the anticipated timetable. Typically, these transactions are structured so that any debt incurred is generally non-recourse to the Group.

One of the Group's strategic aims was to grow this division, which now has six projects, the largest being the 36.7-acre site Cavalry Barracks in Hounslow, with an estimated GDV of £600m. Inland Homes has submitted a planning application and we currently understand that a decision on planning permission will be made in 2022.

During the year, the Group achieved planning consent for two projects within the asset management division: for 514 homes at Hillingdon Gardens, Hillingdon and 583 homes at Patchworks in Walthamstow.

The sale of 228 plots within the Walthamstow site to the charitable housing association, Newlon Housing Trust, for a consideration of £22.5m was announced in October 2021 and these houses will be built by the Group, the contract value being £42.4m. In addition, Inland Homes also arranged the disposal strategy for the sale of 355 residential plots (173 completed and 182 due to complete by September 2022) at the same site to London BTR Investments (London BTR), one of the leading providers of BtR housing. Inland Partnerships has secured the contract to build these homes, in what is the largest partnership housing contract secured by the Group to date, with a value of £88.9m.

Strategic objectives

The Group continues to deliver on its strategic objectives, namely: reducing net debt, optimising the returns from the land bank and maximising its value, growing the capital light asset management business and delivering high-quality homes which meet the market's needs. Inland Homes is well placed to deliver further progress on these strategic objectives and I look forward to reporting on this progress in the coming year.

Dividend

As referred to above, one of the key strategic aims for Inland Homes has been to reduce the Group's net debt. A significant step towards this objective has been achieved this year. Further reductions of Group net debt remains a priority and subject to the timing of the grant of planning permission(s), land sales and receipt of management fees receivable, we presently expect to report a further significant reduction in net debt in the coming financial year. The Board will look to resume the payment of dividends as soon as this strategic aim has been achieved.

Environmental, Social and Governance

Inland Homes is committed to ensuring that its land, housebuilding and partnership housing activities leave a positive and lasting legacy. As specialists in complex brownfield site regeneration, the Group has a proud history of adding value and applying its expertise in land remediation, to allow the Group to take derelict land and regenerate it into new, thriving and sustainable communities which people are proud to call home.

Inland has an excellent reputation in brownfield site regeneration and this year the Group has made a commitment to embed sustainability within all areas of the business. It has created an Environmental, Social and Governance (ESG) framework that sets high-level commitments and targets, including targets for achieving carbon net zero by 2050.

In recognition of the importance of ESG considerations and in line with our commitment to embed sustainability across all areas of the business, a Governance and Risk Committee has been created to provide a focal point for the coordination of risk management activity across the Group. The focus of this Committee is to ensure that Inland Homes maintains an appropriate level of risk in achieving its corporate objectives.

I look forward to reporting on the Group's progress in each of the three areas in the year ahead.

Engaging with our stakeholders

Stakeholder engagement is a critical part of the Board's role and the Board takes into account the views of stakeholders in determining its agenda. As the Government's COVID-19 restrictions were eased in the second half of the financial year, the Board was able to resume its normal site visits, holding productive meetings with stakeholders at a number of the Group's sites.

I have also made it my priority, in my first year as Chairman, to visit the Group's key construction sites on a regular basis and have enjoyed meeting with Inland Homes' Operational Board and staff, to gain further insight into the challenges and opportunities they face. The health and safety of our staff, customers, suppliers and subcontractors remains a key priority for the Group. Inland Homes is a flexible business and so are its staff. I would like to take this opportunity to thank them all for their support, hard work and commitment during the course of this financial year.

Our 2020 Annual General Meeting (AGM) was held virtually to ensure compliance with the Government's COVID-19 health restrictions in place at that time; however, we were keen to ensure that our shareholders had the opportunity to raise any questions ahead of the meeting. A designated email address allowed our shareholders to pose questions relating to the business to be transacted at the AGM. Each query was responded to on an individual basis. The arrangements for this year's AGM are set out below.

There is more information about how we engage with our stakeholders and how their priorities impact on the Board's decision-making in the Section 172 report.

AGM

I am pleased to be able to announce that our 2021 AGM will be held on 21 March 2022 at 11 am. We recognise the importance of engaging with investors face to face and will endeavour, if at all possible, to hold this AGM in person. However, a final decision will be made closer to the date, based on the Government's COVID-19 guidelines and any other public health restrictions in place at that time. The Notice of AGM will be sent to all shareholders in February 2022 and will provide further details.

Changes to the Board

In March 2021, we were pleased to welcome Carol Duncumb to the Board. An experienced Non-executive Director with a 35-year track record of brand-building experience across a range of consumer-related businesses, Carol brings a strong skillset and perspective to the Board.

Having been on the Board at Inland Homes since 2007, I was delighted to accept the position of Chairman of the Board in March 2021, replacing Terry Roydon who, after 14 years with the Group, decided not to seek re-election at the 2021 AGM. We would like to place on record our thanks to Terry for his contribution to the Group over the years.

The Board is committed to upholding the principles of good and sound governance as set out in the Quoted Companies Alliance (QCA) Corporate Governance Code, the Group's chosen Code.

Looking ahead

This has been a year of tangible progress for the Group in achieving its strategic objectives. We continue to work on initiatives to reduce net gearing, to crystallise value from our land bank and to drive returns for shareholders.

The Group is therefore maintaining its focus on reducing its net debt and supporting the growth of both the more capital-light asset management and partnership housing divisions to deliver sustainable long-term growth.

I look forward to seeing the Group build on its strong performance this year, in the year ahead.

Simon Bennett

Chairman

31 January 2022

Chief Executive's review

I am pleased to present our results for the year ended 30 September 2021 which set out how we are delivering on our strategy of maximising the value of our land bank and reducing the Group's net debt.

Land is at the heart of all that we do as a Group and these results reflect the resilience and flexibility of Inland's unique business model. We have responded well to the rapidly changing market conditions in the past year and our success is underpinned by a land portfolio which provides opportunities in the short, medium and long term.

Over the course of this financial year, we have witnessed sustained demand from investors, Build to Rent (BtR) operators, registered providers and housebuilders for our land, for the services the Group provides and the quality new homes we build for our customers. We are well positioned to make further progress in the year ahead.

Our performance

Optimising the returns from our valuable land portfolio

Inland Homes' valuable land portfolio is the foundation on which our success is built. We have a highly experienced and talented team, skilled in identifying and procuring attractive and viable land opportunities and in achieving planning consent.

The estimated gross development value (GDV) of the land portfolio now stands at £3.0bn (30 September 2020: £3.1bn) and consists of 10,055 plots (30 September 2020: 11,045 plots). Of these 3,689 have planning consent (30 September 2020: 2,470). A further 2,870 plots are within the Group's strategic land sites (30 September 2020: 2,795), the majority of which are held by way of discount to market value options. The slight reduction to the number of plots in the land bank this year is in line with the Group's strategy, which is focused on reducing net gearing and crystallising value from within the existing portfolio.

We have maintained our strong track record in delivering planning approvals, achieving a resolution to grant or full planning approval for 1,831 new homes during the period (30 September 2020: 112). This includes approval for 700 homes at Gardiners Park Village, Basildon, 583 homes at the former Homebase site in Walthamstow and 514 homes at Hillingdon Gardens, Hillingdon. The schemes at Walthamstow and Hillingdon are both projects within our asset management division.

The dismissal in December 2021 of the London Borough of Hillingdon's application to seek a judicial review of the Mayor of London's approval at Hillingdon Gardens cleared the final obstacle in the way of its development. Consent has taken over three years to be validated and has been extremely difficult to achieve. While it is very disappointing that it should be such a long and torturous process to develop on an allocated brownfield site in a highly sustainable location, we can now press ahead with delivery of these much-needed homes.

Planning consent at Gardiners Park Village, Basildon was granted in October 2021, following a resolution to grant earlier in the year. This 54-acre site will deliver up to 700 new homes, together with 25,000sqm of commercial space, a new school and other community facilities. The development is being delivered in partnership with Homes England and more than 30% of the new homes will provide much needed affordable housing for the local community. The estimated GDV of the site is in excess of £200m and construction of the first phase of 74 new homes is anticipated to commence in 2022.

The Group has also recently announced a resolution to grant planning permission, subject to the signing of a Section 106 agreement, for a mixed-use scheme including 380 new homes and commercial space in South Dagenham.

Grow the capital-light asset management division

Our asset management business continues to produce excellent results. This business enables the Group to leverage the expertise, experience and core competencies in brownfield site acquisition, remediation, planning and construction within the Group on behalf of external investors. The management fees earned on the active projects were significantly ahead of the comparative period and amounted to £27.8m (30 September 2020: £24.4m), with significant gross profits.

We now have six projects within our asset management division, which combined have the potential to deliver approximately 3,300 new homes. We received approval for 1,097 of these homes during the period and have submitted application for a further 2,199 homes. This includes an application for 1,629 homes on the former Ministry of Defence 36.7-acre Cavalry Barracks site in Hounslow, one of the largest brownfield sites in London with an estimated GDV of £600m. It is currently anticipated that a decision on planning permission will be made in 2022.

Having secured planning permission at the former Homebase in Walthamstow in April 2021, we were delighted to exchange contracts with London BTR Investment Holdings, one of the leading providers of Build to Rent (BtR) housing, for 355 homes within the site in June 2021. We secured the sale of the remaining 228 homes to the housing association Newlon Housing Trust in September 2021. The combined value of both these sales was £50.1m. The new homes on this site will be built by Inland Partnerships, with the contracts being valued at £88.9m and £42.4m respectively, the former being the largest partnership housing contract that the Group has secured to date. Following site demolition and other preparatory works, construction has just started on the project and we expect the works to be completed in 2025.

Maximise the value of land beyond planning consent

Our flexible business model enables us to maximise the value of land on receipt of planning consent. We then make a decision to sell, build or partner with others, based on our assessment of which activity will deliver the highest returns, subject to the overriding cash requirements of the Group.

As at 30 September 2021, the Group had 1,547 homes under construction (30 September 2020: 1,717). Of these, 1,257 are being built on behalf of affordable housing providers and BtR operators (30 September 2020: 1,302).

Land sales

At present, the market for consented land is particularly strong in the areas in which Inland Homes operates.

We continue to monetise the Group's flagship development at Wilton Park, Beaconsfield. During the year, a further 90 plots were sold, which form Phases 2 and 3 of the overall development, to the high-quality housebuilder Bewley Homes. I am pleased with the progress being made at Wilton Park and enjoyed visiting the Bewley show homes when they opened in January 2022.

Partnership housing

Our partners recognise the Group's ability to add value across all stages of a project and we continue to focus our efforts on growing this part of the Group's business, as it achieves both immediate land sales for the Group and regular revenue throughout the construction process thereafter. The Group continues to see growing demand from BtR operators, looking for turn-key solutions to growing their housing portfolios. As a result, our partnership housing division continues to grow from strength to strength, with the forward order book increasing now to a record £164.7m at the year end (30 September 2020: £105.8m). As outlined above, Inland Partnerships secured two build contracts at Walthamstow totalling £131.3m.

We have delivered on behalf of the Group's BtR partners this year, completing the first of our BtR contracts in March 2021, comprising 123 homes and amenity space at our Centre Square joint venture in High Wycombe. We will complete construction of the 85 units at Buckingham House, High Wycombe on behalf of a second BtR operator in the first half of 2022.

We are at advanced negotiations with another major BtR fund for the development of the next phase of 205 plots at the Group's joint venture development at Cheshunt Lakeside, Cheshunt where we have masterplan consent for 1,725 new homes, commercial space and other community amenities. The Group sold the first phase of this scheme to an affordable housing provider last year and is now constructing the 195 new homes on its behalf, with the first homes set to be delivered in June 2022 and the remainder before the end of the calendar year.

Since the year end, the Group has made further progress in partnership housing, announcing in November 2021 the forward sale of the final phase of the Group's development at Carters Quay, in Poole, to the Bournemouth, Christchurch and Poole (BCP) Council. This last phase of the development will provide 161 new homes and 750sqm of commercial space. The Group will build the new homes on behalf of BCP in a development with a contract value of £43.5m. The site is ready for construction and piling works are set to commence in April 2022, with build completion anticipated by the end of 2024.

The Carters Quay development is an example of Inland Homes' business model and skill set in action. The Group originally acquired the brownfield land site, formerly the Pilkington Tile Factory, and worked with BCP on a long-term basis to regenerate an old, unused industrial site, to create much needed new homes and commercial space. To date, Inland Homes has completed three phases of this development, which has already provided 165 new homes.

Private housebuilding

Revenue from our private housebuilding activity this year has been exceptionally strong, with revenue of £69.9m, including the £13.3m sale of the 105-bedroom hotel in Bournemouth, (30 September 2020: £23.8m). The Group achieved 216 private home completions (30 September 2020: 96) equating to a weekly net reservation rate per active sales outlet of 1.09 (30 September 2020: 0.65). The average selling price was £262,000 (30 September 2020: £240,000) and nearly half (45%) of all buyers were able to access the Government's Help to Buy product. Sales of a further 167 new homes (30 September 2020: 130) were achieved across our sites which are in joint ventures.

The temporary stamp duty holiday provided welcome support during the turbulent period of COVID-19 lockdowns and Government restrictions. I am pleased to report that since the scheme tapered off with effect from July 2021, the demand for our high-quality, award-winning homes has continued to be strong. During the year, we sold a significant number of new homes at the Group's developments at Chapel Riverside and Meridian Waterside in Southampton, new apartments at our Wessex Hotel site in Bournemouth and at Exclusive House, Maidenhead.

We were very pleased to win a number of prestigious industry awards during the reporting period, including 'Private Developer of the Year' at the First Time Buyer Readers' Awards, the WhatHouse? Gold Award for Best Regeneration scheme and 'Best UK Mixed Use Development' at the International Property Awards.

Our people

The health and safety of our staff, suppliers and subcontractors continues to be our primary focus for the Group. The team responded well to the difficulties posed by the COVID-19 pandemic and construction at almost all sites has continued throughout. Inland Homes has a talented, experienced and agile workforce and I would like to thank them all for their contributions to the business during this financial year.

Embedding sustainability within all areas of our business

Sustainability is a key focus for the Group. This year we have developed our Environmental, Social and Governance (ESG) framework, bringing together high-level commitments in each area, together with targets to reach carbon net zero as a core priority.

Our commitment is to embed sustainability within all areas of the Group's business. The Board is providing oversight and setting leadership of this through its Risk and Governance Committee and at an operational level, we have created cross-departmental working groups to develop the full ESG strategy.

Cladding and fire safety

We make no compromises on safety and the safety of our buildings and the people who live in them is our number one priority.

In the wake of the Grenfell Tower tragedy, we proactively carried out a comprehensive review which confirmed that Aluminium Composite Material (ACM) cladding has not been used on any Inland home or building. This includes both the homes we have built and those where third parties have constructed the homes on our behalf.

We are aware that some remedial work related to fire safety has been proposed at one historic development which is owned by a third party, and we are currently liaising with the property's managing agent and subcontractor to review what, if any, works are required.

Government policy

The Government committed £1.8bn in the 2021 Budget to support brownfield site regeneration. Building on brownfield land is the common-sense approach to alleviating the housing crisis and the funding, in principle, is welcome. Inland Homes has recognised the value of brownfield regeneration for many years and it is pleasing to see the Government come to the same conclusion.

However, funding without planning reform will not result in the country meeting its housing delivery targets. What is needed is a commitment to the promised overhaul of our archaic and overly complex planning system. Reports that the Government is considering watering down its proposed 'once in a lifetime' planning reform will, as a consequence, make it even harder to reach its own target of delivering 300,000 new homes a year by the mid-2020s.

Looking ahead

Our strategy of maximising the value of our land bank and reducing the Group's net borrowings will continue in the year ahead. While there are headwinds for the housebuilding sector to navigate, Inland Homes is well set to adapt to these challenges.

We will look to grow the Group's asset management and partnership housing businesses, where the demand from investors, affordable housing providers and BtR operators for our land, planning and build expertise remains strong.

The underlying strength of the housing market in the UK shows no signs of slowing down and without significant planning reform, housing demand will continue to exceed supply. This shortfall will continue to drive demand for the land we own and the new homes we build.

Stephen Wicks

Chief Executive Officer

31 January 2022

Group Finance Director's review

Introduction

Whilst COVID-19 had a disruptive effect on the first half of the year operationally, the underlying strength of the housing market and demand for the quality homes built by the Group held sway over the wider economic uncertainties. Following what was a period of record sales activity, in the second half of the year, and with the extension of the fiscal stimuli provided by the Government, the land market heated up. Demand for land and residential property in the South and South East, the areas in which the Group operates, continues to remain strong.

As a result, the Group has delivered on its commitment to reduce net debt and will continue to target further reductions. We have also successfully grown our asset management, partnership housing and housebuilding activities. Although the Group's share price continues to trade at a significant discount to its published net EPRA value per ordinary share, the focus on positive cash generation, when set alongside our operational achievements, will continue to drive value in the coming financial year.

Net debt and borrowings

The Board's key strategic objective was to reduce the Group's net debt. I am therefore pleased to report that the Group's net debt has reduced by £30.1m, some 20.3%, from £148.2m (30 September 2020) to £118.1m at the financial year end. This represents net gearing of 64.5% (30 September 2020: 85.7%) and net gearing based on EPRA net assets of £246.4m of 47.9% (30 September 2020: 63.0%).

Subsequent to the financial year end, there has been further debt reduction arising as a result of the advanced receipt of £8.3m from the contract for the forward sale of 161 homes in Poole.

Changes in performance measures for EPRA

In October 2019, the European Public Real Estate Association (EPRA) published new Best Practice Recommendations for financial disclosures by listed real estate companies. The Group supports standardised reporting to improve the quality and comparability of information for investors. The BPR introduced two new measures of net asset value: EPRA net tangible assets (NTA) and net disposal value (NDV). We have adopted these guidelines in the year ended 30 September 2021 and consider EPRA NTA to be the most relevant measure for our business. EPRA NTA will now be our primary measure of net asset value, replacing our previously reported EPRA net assets and EPRA net assets per share measures. We have also restated the EPRA NAV to EPRA NTA as of 30 September 2020 for comparative purposes, including the prior period adjustment as disclosed in Note 41.

Balance sheet

The Group's net assets have increased to £183.0m at 30 September 2021 (30 September 2020: £173.0m), mostly due to the retained profit after tax that the Group has reported for this financial year.

The EPRA NTA at 30 September 2021 increased to £246.4m (30 September 2020: £235.2m). Net asset value per ordinary share increased to 80.10p (30 September 2020: 76.31p) and EPRA NTA per ordinary share was 107.84p per share (30 September 2020: 103.75p). A reconciliation of EPRA tangible net asset value is set out below.

The Board is required to assess the fair value of the Group's sites held in current assets, when determining EPRA NTA. For undeveloped sites (both owned and controlled by way of options), a residual land valuation is carried out to determine the expected value of the site with planning consent. The valuation is then discounted by a factor of between 0% to 90% to reflect the probability of achieving planning permission.

There is not a ready market for sites where construction has commenced. The Directors have, therefore, assumed that fair value equates to the carrying value for such sites unless the site is forecast to make a gross margin of more than 16% (an industry standard benchmark), in which case a fair value adjustment is made to reflect the residual land value uplift.

The Group transferred further residential and commercial property from assets held for sale as it is intended that these will be held for long-term purposes. In addition, 18 residential properties at Wilton Park, Beaconsfield have been transferred from investment properties to inventories, as these properties are being demolished to make way for the construction of a link road, which the Group is required to construct under a legal agreement with the local authority. The balance of investment properties, amounting to £36.0m (2020: £43.5m), principally comprises the remaining existing residential properties at Wilton Park. In accordance with IFRS 16 Leases, the lease of our head office in Beaconsfield and a car have been capitalised and classified as right-of-use assets at £0.9m (2020: £1.2m), with a corresponding lease liability of £0.9m (2020: £1.2m) at the year-end.

Investment in joint ventures consists of the Group's four joint ventures, the most significant of which is our investment at Cheshunt, held through Cheshunt Lakeside Developments Limited (CLDL), which amounted to £4.2m (30 September 2020: £6.3m). In addition, there were amounts due from joint ventures, held as a non-current asset, being £32.7m (30 September 2020: £28.6m). Similarly, other receivables due after more than one year, of £22.0m (30 September 2020: £20.7m), represents the amount due from our joint venture partner in CLDL, which is secured by way of a charge over their share of profits from the development.

Inventories have reduced to £163.9m (30 September 2020: £173.6m), due to land sales and sales of residential property. Trade and other receivables due within one year have increased to £116.9m (30 September 2020: £60.9m), principally due to a significant increase in management fees accrued from our asset management activities. These fees will be received as the relevant sites are monetised.

As explained above, net debt at the year end was £118.1m (2020: £148.2m). Gross borrowings were £130.2m (30 September 2020: £163.9m) with cash balances of £12.1m (30 September 2020: £15.7m).

During the year, the Group repaid loan facilities with Homes England, which financed our development at Chapel Riverside in Southampton, and also repaid facilities from mainstream lenders which financed some of our land and housebuilding projects.

At the year end, the Group had drawn down £33.9m of our £65.0m revolving credit facility with HSBC (30 September 2020: £42.4m), leaving headroom for future housebuilding projects of £30.6m (30 September 2020: £22.6m). This facility expires in March 2023.

At the year end, the accrued liability to holders of Zero Dividend Preference (ZDP) shares was £32.0m (30 September 2020: £30.2m). The accrued liability is due to be repaid to the holders of ZDP shares in April 2024, unless extended with the agreement of the ZDP holders, before that date.

Operational performance

The Group's revenue for the year to 30 September 2021 has increased sharply to a record £181.7m (30 September 2020: £124.0m), boosted by the sales of 216 private homes (30 September 2020: 96) (excluding those via joint ventures) and bulk sales to BtR operators. The average selling price increased to £262,000 (30 September 2020: £240,000).

The Group's weekly net reservation rate per active sales outlet, excluding joint ventures, was 1.09 for the year (30 September 2020: 0.65), which underlined the strength of the market in the areas in which Inland Homes operates. Purchasers of 45% (30 September 2020: 56%) of our new homes made use of the Help to Buy scheme, excluding joint ventures. Our forward order book of homes reserved and exchanged as at the year end amounted to £33.4m (30 September 2020: £37.5m).

The total number of plots within our land bank decreased marginally, after the sale of 601 residential plots by the Group, including plots from within our asset management business.

The revenue from our partnership housing activity was £60.3m (30 September 2020: £51.8m) from contracts across six sites. As at 30 September 2021, the forward order book for partnership housing contract income was £164.7m (30 September 2020: £105.8m), with two new contracts secured during the year for total revenue of £131.3m. The Group's focus will continue to be in growing the partnership housing activity as it generally secures a land sale together with a forward income stream, providing a good balance to the Group's business model.

The Group's asset management division, which acts on behalf of property investors to procure sites and provide planning and management services, has six live projects (30 September 2020: six projects) in Greater London. During the financial year, the Group earned management fees of £27.8m (30 September 2020: £24.4m) from these contracts. The transactions are structured so that they require significantly reduced investment and working capital from Inland Homes and are also, generally, non-recourse to the Group. Once these sites receive planning consent, they are sold to Build to Rent (BtR) or other purchasers, which can often lead to a partnership housing contract for the Group.

Other revenue of £1.8m (30 September 2020: £2.3m) includes letting income from investment properties and short-term rents from brownfield sites being processed through the planning system.

Gross profit increased to £32.0m (30 September 2020: £22.0m) because of higher profits from land sales, management fees and private homes sold by the Group.

The gross profit margins of the Group's partnership housing and housebuilding businesses are currently unsatisfactory. As previously reported with the Interim Results for the six-months ended 31 March 2021, the Group became aware of approximately £3.5m of unforeseen additional costs relating to one housebuilding site and a single partnership housing contract. These costs were somewhat offset by £0.4m of additional revenue from higher selling prices achieved from the Group's housebuilding sites.

In common with many in the industry, the Group has also experienced mid-single digit cost inflation, some of which has been mitigated by higher than forecast selling price of its new homes. There are, however, recent signs that some of the more pronounced price rises over recent months are beginning to subside. The industry has also witnessed some ongoing constraints in the supply chain and intermittent labour shortages. These factors have also impacted gross margins during the year and will continue to have an impact in the current financial year.

The Group wrote off £0.5m work-in-progress relating to aborted land transactions (30 September 2020: £2.1m) and made provisions for £3.4m where future cost overruns are envisaged following detailed project reviews (30 September 2020: £0.1m). At 30 September 2021, the Group has contingency provisions of £3.1m (30 September 2020: £4.0m).

As a result, the Group has undertaken a number of measures to improve both operational efficiency and commercial delivery, with the objective of improving margins in the partnership housing and housebuilding businesses. The Group has moved to further standardise drawings and specifications in order to assist onsite construction efficiency and to deliver costs savings through design evolution and centralised procurement deals. Improvements have also been made to the Group's IT system, which has improved transparency and accountability in the project evaluation process. As a result of the steps taken and the planned ongoing work in this area, the Board currently expects to see some margin improvement in the coming financial year.

Consequently, gross margin reduced to 17.6% (30 September 2020: 17.7%) and operating margin increased to 11.6% (30 September 2020: 9.5%). A detailed analysis by operating segment is shown in Note 10 to the Financial Statements.

Administrative expenses have significantly decreased to £7.5m (30 September 2020: £12.6m), as the Group rationalised its operations into the six operating businesses. Administrative overheads comprise salary costs for the main Board (as disclosed in the Remuneration Report) and non-operational staff totalling £6.1m (30 September 2020: £8.7m), central overhead of £0.8m (30 September 2020: £4.4m) and depreciation of £1.1m (30 September 2020: £1.3m).

Net finance costs

Finance costs of £9.3m (30 September 2020: £9.5m) comprised principally of bank and other loan interest, amortisation of arrangement fees and exit fees, non-utilisation fees and interest rolled up on the Zero Dividend Preference shares (ZDPs). Finance income of £1.5m (30 September 2020: £1.1m) includes interest from joint ventures and associates, other interest receivable and notional interest income on long-term receivables. Finance costs were relatively high until near the end of the financial year, when the Group's borrowings fell as a result of the significant number of land and private home sales affected. Interest on development funding is capitalised as required by IAS 23. No interest was capitalised during the year (30 September 2020: £0.8m).

Taxation

The Group is domiciled in the United Kingdom and does not make use of any tax structure that is not domiciled in the United Kingdom.

The total tax charge of £3.6m combines a current taxation charge of £4.3m and a deferred tax credit of £0.7m and represents an effective rate of 27.3% of the profit before tax. The current corporation tax rate is 19% and the difference between the expected tax charge and the actual tax charge is mainly due to the interest accrued on the ZDPs, which are disallowed for tax purposes.

Prior year adjustment

The Group has a prior year adjustment in respect of deferred contingent consideration payments for the site at Wilton Park, Beaconsfield not being recognised in prior periods.

Site assembly occurred in 2010 when the Group entered into two land option contracts which committed to deferred contingent consideration payments on grant of a planning permission for the site over a period from the date of the planning consent. The two land option contracts also contained standard overage clauses which are triggered in certain future circumstances based on the actual delivery of housing for the site.

The Group did not recognise in 2019 the deferred contingent consideration payments on the grant of a planning permission. The liability of £6.0m was unconditionally triggered in September 2019 of which, £4.8m remains unpaid at 30 September 2021.

Earnings per share and dividends

Basic earnings per share increased to 4.21p per ordinary share (30 September 2020: 0.65p per ordinary share), reflecting the Group's improved retained profit after tax in this financial year.

Going Concern

In preparing the forecasts, the Directors have considered the continued adoption of stringent cash management procedures, market disruptions already brought about by COVID-

19, the possibility of future disruption in the Going Concern period, which could potentially be caused by COVID-19, and other risks and uncertainties, including credit risk and liquidity risk, the present and possible future economic climate, the current and possible future demand for land with planning consent and the state of the housing market in the geographic areas where the Group operates.

The Directors have performed detailed sensitivity analyses to test the Group's future liquidity and banking covenant compliance based on several scenarios.

The Directors have a reasonable expectation that the Group and parent Company have adequate resources to continue in operational existence for the foreseeable future. The Directors therefore consider it appropriate to prepare the Financial Statements on the Going Concern basis. Further details can be found in Note 2.

Outlook

We ended this financial year having achieved a significant reduction in the Group's net debt to £118.1m, whilst holding a land bank of 10,055 plots. We are well positioned to serve the private housebuilding and partnership housing sectors with land, asset management and construction services over the short, medium and long term.

Demand for housing in our market of the South and South East of England continues apace and in the Budget on 27 October 2021, the Government announced its desire to utilise Britain's brownfield land to help address the housing crisis, investing £1.8bn to deliver 160,000 new homes. Brownfield land is at the heart of Inland Homes' business and the Group is accordingly well placed to benefit from the Government's stated intention to unlock more brownfield sites.

The focus for the coming financial year continues to be the reduction in Group net debt and the improvement of margins in the partnership housing and housebuilding businesses. Externally, our award-winning new homes continue to delight customers and investors alike. The Group's land pipeline of brownfield and strategic sites located in the South and South East of England leaves the Group well placed to make further progress in the coming year.

Nish Malde

Group Finance Director

31 January 2022

Financial Statements

Group statement of comprehensive income

for the year ended 30 September 2021

The accompanying Notes form an integral part of these Financial Statements.

Group statements of financial position

at 30 September 2021

Company number: 5482990

The Financial Statements were approved and authorised for issue by the Board of Directors on 31 January 2022.

Stephen Wicks Nish Malde

Director Director

The accompanying Notes form an integral part of these Financial Statements.

Company statements of financial position

at 30 September 2021

Company number: 5482990

Retained earnings for the Company includes a profit after tax for the year of £12.8m (2020: profit after tax of £4.2m).

The Financial Statements were approved and authorised for issue by the Board of Directors on 31 January 2022.

Stephen Wicks Nish Malde

Director Director

The accompanying Notes form an integral part of these Financial Statements.

Statements of changes in equity

for the year ended 30 September 2021

The accompanying Notes form an integral part of these Financial Statements.

Group statement of cash flows

for the year ended 30 September 2021

The accompanying Notes form an integral part of these Financial Statements.

Notes to the financial statements

for the year/period ended 30 September 2021

1. Nature of operations and general information:

Inland Homes PLC ("Inland Homes", "The Group" or "Company") registered number 05482990, the ultimate Parent Company, is a public limited company incorporated and domiciled in England and Wales. The Company's shares are quoted on AIM, a market operated by the London Stock Exchange. The Group's registered office is located at Burnham Yard, London End, Beaconsfield, HP9 2JH.

The principal activities of Inland Homes are to acquire brownfield, mixed-use or residential land and to then seek achievement of planning consent for development. The Group also develops a number of plots for private sale and constructs partnership housing for registered providers. These activities are grouped into the following business segments:

• Land sales: The Group sells its own land assets, which have the benefit of planning permission, to third parties.

• Asset management fees: The Group engages as an asset manager to third-party landowners to provide land management and planning services.

• Contract income: The Group constructs private or affordable housing projects for a third-party landowner.

• House building: The Group constructs private or affordable housing units for sale to individuals or private investors.

• Rental income: The Group holds property assets for rental income purposes as cost mitigation in the short and medium term of site development.

• Investment properties: The Group holds property assets for rental income purposes for the long term.

• Central support: The Group's central support functions supporting all other segments.

At 30 September 2021, the Group, directly or indirectly, held interests in equity via holdings of ordinary shares of the following:

Inland Homes 2013 Limited is the only direct subsidiary of the Company and all others are indirect holdings.

All of the above entities are incorporated and domiciled in England and Wales, and are registered at the same registered office of the Company, with the exception of:

• Europa Park LLP and Gardiners Park LLP which are registered at Springfield Lodge, Colchester Road, Chelmsford, Essex, CM2 5PW

• Troy Homes Limited which is registered at 5 Technology Park, Colindeep Lane, Colindale, London, NW9 6BX

The joint ventures and associate listed above are accounted for using the equity method.

There are no restrictions on the ability of the Company or its subsidiaries to transfer cash or other assets to or from other entities in the Group.

Incorporation of subsidiaries

During the year ended 30 September 2021, the Group incorporated the following subsidiaries:

• Inland Lifestyle Limited on 9 February 2021

• Zenith Living (Barking) Limited on 15 February 2021

Acquisition of subsidiaries

During the year ended 30 September 2021, the Group acquired the following subsidiaries:

• Appletree Farm Cressing Limited on 9 October 2020

• Hitchin Properties Limited on 31 August 2021

• Aston Clinton Developments Limited on 31 August 2021

The Group acquired 50% of the share capital of Bucknalls Developments Limited on 30 September 2021, 50% of Dormant Company 09437864 Limited on 10 February 2021 and 50% of the share capital of West Drayton Developments Limited on 17 March 2021, previously joint ventures.

Disposals of subsidiaries

During the year ended 30 September 2021, the Group disposed of:

• Inland Commercial Property Limited on 9 January 2021. A loss of £4,000 arose on disposal.

• Zenith Living (Barking) Limited on 25 February 2021. No profit or loss arose on this disposal.

Liquidation of subsidiaries

During the year ended 30 September 2021, the Group liquidated the following subsidiaries:

• West Drayton Developments Limited on 22 June 2021

• Merrielands Crescent Dagenham LLP on 13 July 2021

• Inland Helix Limited on 16 July 2021

Investments in joint ventures

The Group holds the following interests in joint ventures:

• Centre Square Commercial Limited: In August 2020, High Wycombe Developments Limited incorporated this subsidiary to hold commercial property at a site in High Wycombe, Buckinghamshire for net rental income purposes and long-term capital gain. The results are consolidated by High Wycombe Developments Limited and are, therefore, included in these disclosures in Note 25.

• Centre Square Lifestyle Limited: In November 2019, High Wycombe Developments Limited incorporated this subsidiary to hold residential investment property at a site in High Wycombe, Buckinghamshire for net rental income purposes and long-term capital gain. The results are consolidated by High Wycombe Developments Limited and are, therefore, included in these disclosures in Note 25.

• Cheshunt Lakeside Developments Limited and Delamare Estate (Cheshunt) Limited: In April 2018, the Group entered into a joint venture whose purpose was to obtain planning permission and develop land at Cheshunt, Hertfordshire. Under the terms of the joint venture agreement, the Group has an obligation to fund 50% of the costs of the site and is entitled to receive 50% of the net returns and promote return by way of a performance payment.

• Europa Park LLP: In November 2016, the Group entered into a joint venture which acquired a site in Ipswich, Suffolk. The development completed in the six-month period ended 31 March 2021 and the entity exists to support the defects period of the completed development.

• Gardiners Park LLP: In November 2016, the Group entered a joint venture with Constable Homes Limited to develop a site in Basildon, Essex. The development completed in the six-month period ended 31 March 2021 and the entity exists to support the defects period of the completed development.

• High Wycombe Developments Limited: In December 2019, the Group entered into a joint venture to develop a site of private units in High Wycombe, Buckinghamshire. The development was completed in the year.

Investment in associate

The Group holds an interest in Troy Homes Limited. In October 2015, the Group acquired 25% of Troy Homes Limited, a premium housebuilder, and is entitled to 25% of the net returns.

2. Basis of preparation

The Group Financial Statements have been prepared under the historical cost convention, except for certain financial instruments and investment properties which are measured at fair value and in accordance with applicable international accounting standards in conformity with the requirements of the Companies Act 2006 and as issued by the International Accounting Standards Board. These Financial Statements have also been prepared in accordance with those parts of the Companies Act 2006 that are relevant to companies that prepare their financial statements in accordance with IFRS. The Parent Company Financial Statements have been prepared in accordance with FRS 101, Financial Reporting Standards Reduced Disclosure Framework.

The balance sheet heading relating to the Company's investments in subsidiaries has been amended to "Fixed assets" from "Non-current assets" to be consistent with the Company's presentation of its balance sheet in accordance with the balance sheet formats of the Companies Act 2006. Assets are classified in accordance with the definitions of fixed and current assets in the Companies Act instead of the presentation requirements of IAS 1 Presentation of Financial Statements.

The Consolidated Financial Statements present the results of the Group as if it formed a single entity. Intercompany transactions and balances between Group companies are eliminated in full.

The Consolidated Financial Statements are presented in GBP, which is also the Group and Parent Company's functional currency.

Disclosure exemptions adopted

In preparing the Financial Statements of the Parent Company, advantage has been taken of all disclosure exemptions conferred by FRS 101. The Parent Company Financial Statements do not include:

• a statement of cash flows;

• the effect of future accounting standards not yet adopted; and

• disclosure of related party transactions with other wholly owned members of the Group headed by Inland Homes plc.

In addition, and in accordance with FRS 101, further disclosure exemptions have been adopted because equivalent disclosures are included in the Consolidated Financial Statements of Inland Homes Plc. The Parent Company Financial Statements do not include certain disclosures in respect of:

• Financial Instruments (other than certain disclosures required as a result of recording financial instruments at fair value); and

• Fair value measurement (other than certain disclosures required as a result of recording financial instruments at fair value).

The Company has taken advantage of the exemption allowed under section 408 of the Companies Act 2006 and does not present its own profit and loss account in these Financial Statements.

Going concern

The Directors are required to assess the Group's ability to continue as a going concern for a period of at least the next twelve months.

The Group's going concern assessment considers its principal risks which are set out in the "Principal risks and uncertainties" section.

The Board has reviewed the performance of the Group for the current reporting period and prepared forecasts for a period covering fifteen months from the date of approval of this Annual report.

In preparing forecasts the Directors have considered the prevailing market conditions and current and known future disruptions brought about by COVID-19, alongside the other risks and uncertainties, including credit risk and liquidity risk, the present inflationary economic climate, the current and future forecast demand for land with planning consent and the current and expected future housing market conditions in the South and South East of England where the Group operates.

The Base Case forecast includes all known and anticipated cash inflows and confirms that the Group has sufficient working capital for the foreseeable future. The Group currently has forward residential home sales of £31.0m, which includes a large block sale to a third party scheduled to complete during the third quarter of the financial year ending 30 September 2022. Additionally, the Group has a forward partnership housing contract income order book of £186.8m. The Group, excluding joint ventures, currently has annualised residential and commercial rental income of c£1.5m.

The Directors have also assumed the continuation of stringent cash management procedures and debt reprofiling strategy, which have been in place since March 2020 and which saw reduction in net debt in the year ended 30 September 2021. The Directors have also assumed a continuation of this strategy in the period under review and expect net debt to reduce in the current year ending 30 September 2022.

These procedures have seen net debt decreased from £148.2m at 30 September 2020 to £118.1m at 30 September 2021.

The Group has done a considerable amount of work in successfully extending the time profile of its debt facilities. The undrawn debt facilities at 30 September 2021 were £33.9m. The main strategic objective of the Group in the current financial year remains the reduction of both net debt and net gearing.

This includes two loan facilities with the same lender amounting to £10.3m, of which £7.0m was repaid in November 2021 and £2.0m was repaid in December 2021. The remaining £1.3m has been extended to 31 December 2023. Three loan facilities amounting to £37.9m have been refinanced to 30 June 2023. The balance of remaining borrowing facilities falling due for repayment within one year represents amounts secured on residential unit sales which will be repaid in full as those residential sales complete. At the date of this report, the Group has borrowing facilities totalling £27.0m falling due for repayment within twelve months.

A revolving credit facility of £65.0m expires in March 2023 of which £29.8m is drawn down at the date of this report. The Directors intend to commence a dialogue with the lender during the current financial year to 30 September 2022 to further extend the existing facility. This existing lender has supported the Group since March 2019 and has supported numerous successful house building development sites since that date.

A second revolving credit facility of £14.9m has been extended to May 2022 with an agreement in principle from the lender to extend this further to May 2027, with an option for the Group to break at the end of three years. As demonstrated by the positive reprofiling changes made to the Group's debt, explained above, the Directors hold positive relationships with funders and have held constructive discussions with all existing and several other potential lenders.

At the date of this report there is no binding commitment to extend or refinance these RCF facilities beyond the dates referred to above but in view of the recent track record, the strength of the relationships, the availability of security for lenders and the number of options available, the Directors expect to be able to do so.

The Directors have performed detailed sensitivity analyses to test the Group's future liquidity and forecast banking covenant compliance based on several scenarios.

The Group has forecast planned land sales in the next twelve months as part of its normal course of business and as part of the Group's going concern review, the Directors have considered the impact of a delay of three months on each of these sales in isolation. They have also considered, again in isolation, a price reduction of 10% on all residential unit sales that are not in the hands of solicitors. Finally, the Group considered a delay in residential unit sales by three months. None of these individual scenarios leads to an issue with either the Group's liquidity or its debt covenants.

The Directors have also considered the following severe, but plausible downside scenario:

• Only residential unit sales that have exchanged or are currently with solicitors to exchange will complete as forecast and all residential units that are available for sale are delayed by three months; and

• All planned land sales and where applicable management fees, where contracts have not been exchanged at the date of this report are delayed by six months.

Under this severe, but plausible scenario the Group may have to consider using capital markets to raise additional debt or equity to generate additional liquidity for the Group to meet its obligations as they contractually fall due. The Group has in place an approved mandate to use capital markets without pre-emption to issue up to approximately 46 million shares and successfully raised £9.9m, before expenses, in May 2020. Additionally, under this severe, but plausible scenario, the postponement or deferral of completions would delay revenue and profit recognition under IFRS 15 'Revenue from Contracts with Customers' but means that the Group would still remain completely covenant compliant with all of its lenders. Based on those assumptions, the Group would remain able to meet its debts as they fell due.

The Strategy outlined above details our approach but, the Board is mindful that no one can forecast exactly how changing macroeconomic circumstances post pandemic will play out and how this may affect the Group, industry and the wider economy for the foreseeable future. In particular, future changes to government policy relating to the housing market could have implications for the Group as it would for many other businesses. Such a situation would require the Board to re-examine the Group's financial position at the time and if necessary, report any significant adverse changes.

At the time of approving the Annual Report and after making appropriate enquiries, the Directors consider that the Group has adequate resources to continue in operational existence for the foreseeable future. The Directors therefore consider it appropriate to prepare the financial statements on the going concern basis.

3. Changes in accounting policies

The principal accounting policies are described in Note 4 and are consistent with those applied in the Group's Financial Statements for the year ended 30 September 2021 and the year ended 30 September 2020, as amended to reflect the adoption of new standards, amendments and interpretations which became effective in the year as shown in Note 5.

4. Significant accounting policies

Basis of consolidation

The Group's Financial Statements consolidate the Financial Statements of the Company and all of its subsidiary undertakings drawn up to 30 September 2021. Where the Company has control over an investee, it is classified as a subsidiary. The Company controls an investee if all three of the following elements are present: power over the subsidiary; exposure, or rights to, the variable returns from its involvement with the subsidiary; and the ability to affect those returns through its power over the subsidiary. The Group obtains and exercises control through voting rights. Further information can be found in Notes 1 and 24.

Unrealised gains on transactions between the Group and its subsidiaries are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Amounts reported in the Financial Statements of subsidiaries have been adjusted where necessary to ensure consistency with the accounting policies adopted by the Group.

Acquisitions of subsidiaries are dealt with by the acquisition method. The method involves the recognition at fair value of all identifiable assets and liabilities, including contingent liabilities and non-controlling interests of the subsidiary, at the acquisition date, regardless of whether or not they were recorded in the Financial Statements of the subsidiary prior to acquisition. On initial recognition, the assets and liabilities of the subsidiary are included in the Group Statement of Financial Position at their fair values, which are also used as the basis for subsequent measurement in accordance with the Group accounting policies. Goodwill is stated after separating out identifiable intangible assets. Goodwill represents the excess of the fair value of the consideration transferred over the fair value of the Group's share of the identifiable net assets and non-controlling interests of the acquired subsidiary at the date of acquisition.

Business combinations

At the time of acquisition, the Group considers whether each acquisition represents the acquisition of a business or the acquisition of an asset. The Group accounts for an acquisition as a business combination where an integrated set of activities is acquired in addition to the property. Where such acquisitions are not judged to be the acquisition of a business, they are not treated as business combinations. Rather, the cost to acquire the corporate entity is allocated between the identifiable assets and liabilities of the entity based upon their relative fair values at the acquisition date. Accordingly, no goodwill or additional deferred tax arises.

Segmental reporting

The Group has a number of operating segments. In identifying these operating segments, management generally follows the Group's service lines representing its main activities. Each of these operating segments are managed separately.

In addition, corporate assets which are not directly attributable to the business activities of any operating segment are allocated to the central support segment. This primarily relates to the Group's headquarters.

Revenue

The Group has adopted IFRS 15 'Revenue from Contracts with Customers'. This establishes a principles-based approach for revenue recognition and is based on the concept of recognising revenue for obligations only when they are satisfied and the control of goods or services is transferred.

The standard is applicable to sales of land and sales of reversionary freehold, sales of residential units, property construction services and management fees from management of sites owned by third parties, but excludes rental income which is accounted for within the scope of IFRS 16 'Leases'.

To determine whether to recognise revenue, the Group follows a five-step process:

1. Identifying the contract with a customer

2. Identifying the performance obligations

3. Determining the transaction price

4. Allocating the transaction price to the performance obligations

5. Recognising revenue when/as performance obligations are satisfied

The Group often enters into transactions with multiple performance obligations. In these cases, the total transaction price for a contract is allocated amongst the various performance obligations based on their relative stand-alone selling prices. The transaction price for a contract excludes any amounts collected on behalf of third parties.

Revenue is recognised either at a point in time or over time, when (or as) the Group satisfies performance obligations by transferring the promised goods or services to its customers.

The Group recognises contract liabilities for consideration received in respect of unsatisfied performance obligations and reports these amounts as other payables in the Statement of Financial Position (Note 33). Similarly, if the Group satisfies a performance obligation before it receives the consideration, the Group recognises either a contract asset or receivable in the Statement of Financial Position, depending on whether something other than the passage of time is required before the consideration is due.

Revenue is measured by reference to the fair value of consideration received or receivable by the Group for goods supplied, excluding VAT and trade discounts.

Sales of land and sales of reversionary freeholds

Revenue from the sale of land and reversionary freeholds is recognised at a point in time on legal completion. In some instances, payment terms are deferred - such balances are discounted if deferred terms are more than one year.

Sales of residential units

Revenue from the sale of residential units is recognised at a point in time on legal completion.

Contract income

Contract income relates to where the Group is providing construction services to third parties, resulting in a completed developed property, on land that is not controlled by the Group during the development phase.

Revenue is recognised over time, with reference to the stage of completion of the contract. The stage of completion is determined using an input method that reflects the development cost incurred as a proportion of the total expected development cost, as it is considered proportionate to the satisfaction of the underlying performance obligation. These contracts are typically for a fixed cash consideration received on a monthly cycle over the course of the construction services contract.

Costs to obtain contracts

The Group recognises as an asset incremental cost incurred to obtain future build contracts where the costs would not have been incurred otherwise. A contract asset is amortised on a systematic basis proportionate to the amount of revenue recognised in an accounting period.

Management planning and land management services

For each planning and land management services contract there are a number of milestones, which vary from contract to contract, but in all cases include a planning and a disposal obligation. The Directors must exercise judgement over whether each milestone constitutes a distinct performance obligation. In doing so, they consider whether each milestone has a single commercial objective, whether any of the milestones are interdependent on any other milestone, and whether the service or goods being provided represents a single performance obligation. In determining the number of performance obligations, the Directors also consider the level of integration between the milestones.

Once the number of performance obligations has been determined, the Directors will exercise further judgement to allocate the consideration to each obligation, which is based on the stand-alone selling price of each performance obligation agreed by the customer. Once the Group considers that the outcome of the contract can be reliably estimated, then revenue and profit is recognised based on the proportion of the contract that is completed. There is also judgement in considering whether the obligations have been satisfied, and whether the revenue is recognised at a point in time or over time. This is assessed on a performance obligation by performance obligation basis. In general, the Directors have assessed that any management of construction obligations, if relevant, are satisfied over time, given that Inland Homes' work enhances an asset controlled by the customer. The planning and disposal obligations have been assessed to be recognised at a point in time. Refer to Note 9.

Overages

Any variable consideration on overages is estimated at the point of sale taking into consideration the time to recover overage amounts, as well as other factors which may give rise to variability. It is only recognised to the extent that it is highly probable that there will not be a significant reversal in the future and is reassessed throughout the duration of the sales contracts.

Golden brick income

Sales of land where title transfers prior to construction beginning (or at golden brick) are considered to be a distinct performance obligation.

Revenue from land sales is recognised at a point in time, being the completion of contracts usually achieved at golden brick. The separate construction element of the contract is recognised over time in accordance with the Group's policy above for construction contracts.

Shared ownership sales

Shared ownership is where initially a long lease on a property is granted through a sale to the occupier, in return for an initial payment (the First Tranche).

First Tranche sales are included within revenue and the related proportion of the cost of the asset recognised as cost of sales.

Shared ownership properties are split proportionately between Inventories and Investment Properties based on the current element relating to First Tranche sales. The split is made at the point of completion of the sale to the third party. The assumptions on which the First Tranche proportion has been based include, but are not limited to, matters such as the affordability of the shared ownership properties, local demand for shared ownership properties, and general experience of First Tranche shared ownership sales within the wider social housing sector. As at 30 September 2021, the average First Tranche sales percentage assumed for vacant shared ownership properties is 30%. If there is a change in percentage used, this will affect the proportion of inventory and investment property recognised with a higher assumed First Tranche sales percentage resulting in a higher inventory value and a lower investment property value.

Shared Owners have the right to acquire further tranches and any surplus or deficit on such subsequent sales are recognised in the Group Income Statement as a part disposal of investment properties.

Administrative expenses

Operating expenses are recognised in the Group Statement of Comprehensive Income upon utilisation of the service as it is received.

Employee benefits

Defined contribution retirement benefit scheme

The Group operates a defined contribution retirement benefit scheme pension and costs charged against operating profits are the contributions payable to the scheme in respect of the accounting period.

Equity-settled share-based payment

All share-based payment arrangements are recognised in the Group and Company Financial Statements. All goods and services received in exchange for the grant of any share-based payment are measured at their fair values using the Black-Scholes options pricing model for share options and the Monte Carlo simulation technique for LTIPs. Where employees are rewarded using share-based payments, the fair values of employees' services are determined indirectly by reference to the fair value of the instrument granted to the employee. This fair value is appraised at the grant date and excludes the impact of any non-market vesting conditions. The Black-Scholes model is used to value the share options because it relies on fixed inputs and the options do not have non-standard features. The Monte Carlo simulation is more suitable to value LTIPs as they depend on the share price changing over time and, therefore, have more complex vesting conditions than the share options.

All equity-settled share-based payments are ultimately recognised as an expense in the Group Income Statement with a corresponding credit to retained earnings.

If vesting periods or other non-market vesting conditions apply, the expense is allocated over the vesting period, based on the best available estimate of the number of share options or LTIPs expected to vest.

Estimates are subsequently revised if there is any indication that the number of share options or LTIPs expected to vest differs from previous estimates. Any cumulative adjustment prior to vesting is recognised in the current period. No adjustment is made to any expense recognised in prior periods if share options or LTIPs ultimately exercised are different to that estimated on vesting.

Upon exercise of the share options or LTIPs, the proceeds received net of attributed transaction costs are credited to share capital and, where appropriate, share premium.

Government grants - furlough

Grants for revenue expenditure are netted against the cost incurred by the Group. Where retention of a government grant is dependent on the Group satisfying certain criteria, it is initially recognised as deferred income. When the criteria for retention have been satisfied, the deferred income balance is released to the Consolidated Statement of Comprehensive Income.

Taxation

Tax expense recognised in the Group Statement of Comprehensive Income comprises the sum of current tax and deferred tax not recognised in other comprehensive income or directly in equity.

Current tax is the tax currently payable based on taxable profit for the period calculated using tax rates and laws substantively enacted at the reporting date.

Deferred income taxes are calculated using the liability method on temporary differences. Deferred tax is generally provided on the difference between the carrying amounts of assets and liabilities and their tax bases. However, deferred tax is not provided on the initial recognition of goodwill, nor on the initial recognition of an asset or liability unless the related transaction is a business combination or affects tax or accounting profit. Temporary differences include those associated with shares in subsidiaries and joint ventures unless reversal of these temporary differences can be controlled by the Group and it is probable that reversal will not occur in the foreseeable future. In addition, tax losses available to be carried forward, as well as other income tax credits to the Group, are assessed for recognition as deferred tax assets.

Deferred tax liabilities are provided in full, with no discounting. Deferred tax assets are recognised to the extent that it is probable that the underlying deductible temporary differences will be able to be offset against future taxable income. Current and deferred tax assets and liabilities are calculated at tax rates and laws that are expected to apply to their respective period of realisation, provided they are enacted or substantively enacted at the year-end date.

Changes in deferred tax assets or liabilities are recognised as a component of tax expense in the Group Income Statement, except where they relate to items that are recognised in other comprehensive income or directly in equity, in which case the related deferred tax is also recognised in other comprehensive income or equity respectively.

Investment property

Investment properties are those properties which are not occupied by the Group and which are held for long-term rental yields, capital appreciation or both.

Investment property also includes investment property under construction that will be developed for future use as investment property.

Investment properties are initially measured at cost, including related transaction costs. At each subsequent reporting date they are remeasured to their fair value. Movements in fair value are included in the Group Income Statement. Investment properties are valued by the Directors based on up-to-date market information.

Subsequent expenditure is capitalised to the asset's carrying value only where it is probable that the future economic benefits associated with the expenditure will flow to the Group.

Any gain or loss resulting from the sale of an investment property is immediately recognised in the Group Income Statement. An investment property is derecognised on disposal. When the Directors consider that the status of the property has changed to being a development property it is transferred to inventories. A property is transferred to inventories when management changes its intentions and there is evidence of the change in use, such as the cessation of future rental income, or the commencement of development with a view to sell. When a partial disposal or transfer is made, the proportion relating to the disposal or transfer is derecognised.

Property, plant and equipment

Property, plant and equipment is stated at cost, net of depreciation and any provision for impairment.

Disposal of assets

The gain or loss arising on the disposal of an asset is determined as the difference between the disposal proceeds and the carrying amount of the asset and is recognised in the Group Income Statement.

Depreciation

Depreciation is calculated to write down the cost less estimated residual value of all property, plant and equipment by the straight line method where it reflects the basis of consumption of the asset. The rates applicable are:

Fixtures and fittings - 20% to 25%

Office equipment - 25%

Motor vehicles - 25%

Modular housing - Over useful economic life estimated at 40 years

Material residual value estimates are reviewed as required, but at least annually.

Leased assets

The Group has applied IFRS 16 regarding the recognition of leased assets.

The Group as a lessee

For any new contracts entered into on or after 1 October 2019, the Group considers whether a contract is, or contains, a lease. A lease is defined as 'a contract, or part of a contract, that conveys the right to use an asset (the underlying asset) for a period of time in exchange for consideration'. To apply this definition, the Group assesses whether the contract meets three key evaluations, which are whether:

• The contract contains an identified asset, which is either explicitly identified in the contract or implicitly specified by being identified at the time the asset is made available to the Group

• The Group has the right to obtain substantially all of the economic benefits from use of the identified asset throughout the period of use, considering its rights within the defined scope of the contract

• The Group has the right to direct the use of the identified asset throughout the period of use. The Group assesses whether it has the right to direct 'how and for what purpose' the asset is used throughout the period of use.

At lease commencement date, the Group recognises a right-of-use asset and a lease liability on the balance sheet date. The right-of-use asset is measured at cost, which is made up of the initial measurement of the lease liability, any initial direct costs incurred by the Group, an estimate of any costs to dismantle and remove the asset at the end of the lease, and any lease payments made in advance of the lease commencement date (net of any incentives received).

The Group depreciates the right-of-use assets on a straight-line basis from the lease commencement date to the earlier of the end of the useful life of the right-of-use asset or the end of the lease term. The Group also assesses the right-of-use asset for impairment when such indicators exist.

At the commencement date, the Group measures the lease liability at the present value of the lease payments unpaid at that date, discounted using the interest rate implicit in the lease, if that rate is readily available, or the Group's incremental borrowing rate.

Lease payments included in the measurement of the lease liability are made up of fixed payments (including in substance fixed), variable payments based on an index or rate, amounts expected to be payable under a residual value guaranteed and payments arising from options reasonably certain to be exercised.

Subsequent to initial measurement, the liability will be reduced for payments made and increased for interest. It is remeasured to reflect any reassessment or modification, or if there are changes in in-substance fixed payments.

When the lease liability is remeasured, the corresponding adjustment is reflected in the right-of-use asset, or profit and loss if the right-of-use asset is already reduced to zero.

The Group has elected to account for short-term leases and leases of low-value assets using the practical expedients. Instead of recognising a right-of-use asset and lease liability, the payments in relation to these are recognised as an expense in the Statement of Comprehensive Income on a straight-line basis over the lease term. Right-of-use assets have been recognised as a non-current asset and lease liabilities have been included as a liability.

The Group as a lessor

In accordance with IFRS 16, as a lessor, the Group classifies its leases as either operating or finance leases.

A lease is classified as a finance lease if it transfers substantially all the risks and rewards incidental to ownership of the underlying asset, and is classified as an operating lease if it does not.

The Group earns rental income from operating leases of its investment properties. Rental income is recognised on a straight-line basis over the lease term.

Intangible assets

Intangible assets, comprising costs incurred in the development phase of new business models and associated set-up costs, are stated at cost less provisions for both amortisation and impairments. Development phase costs relating to new business models either separately acquired, or acquired as part of a business combination, are amortised over their estimated useful lives, generally not exceeding 20 years, using the straight-line basis, from the time they are available for use. The estimated useful lives for determining the amortisation charge considers the expected business model life. Asset lives are reviewed, and where appropriate adjusted, annually.

Research costs are recognised in the Income Statement as incurred.

The rates generally applicable are:

Enterprise Resource Planning system - 10%

Development costs - 25%

Website costs - 25%

Other computer software - 25%

Investment in subsidiaries (Company only)

Subsidiaries are entities in which the Company has control. Investments in subsidiaries are held in the Company's Statement of Financial Position at cost less impairment.

Joint ventures and associate

Joint ventures are entities in which the Group has shared control with another entity, established by contractual agreement. Where the Group has significant influence but not control or joint control over the financial and operating policy decisions of another entity, it is classified as an associate. Joint ventures and associates are initially recorded in the Group Statement of Financial Position at cost and are accounted for using the equity method. All subsequent changes to the share of interest in the equity of joint ventures and associates are recognised in the Group's carrying amount of the investment. Changes resulting from the profit or loss generated are recognised in the Group's carrying amount of the investment and in 'share of profit of joint ventures' for joint ventures and 'share of profit of associate' for associates in the Group Income Statement and, therefore, affect the net results of the Group.

These changes include subsequent depreciation, amortisation or impairment of the fair value adjustments of assets and liabilities. If the share of losses equals its investment, the Group does not recognise further losses, except to the extent that there are amounts receivable that may not be recovered or there are further commitments to provide funding. Both realised and unrealised gains on transactions between the Group and its joint ventures and associates are eliminated to the extent of the Group's investment in joint ventures and associates. Realised and unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. The accounting policies of the joint ventures and associates are consistent with those of the Group.

The Company's investments in joint ventures are held at cost less any impairment.

Inventories

Inventories consist of land and work in progress and are valued at the lower of cost and net realisable value. Cost includes the purchase of sites, the cost of infrastructure and construction works, and legal and professional fees incurred during development prior to sale. Net realisable value is estimated based upon the future expected selling price, less estimated costs of completion and estimated costs to sell.

Land options

The Group holds a number of land options that were bought for the potential to exercise the option and either develop the land or sell with planning permission. The land options are initially capitalised at cost and considered for any impairment indication annually. The impairment review includes consideration of the resale value of the option, likelihood of achieving planning consent and current recoverable value as determined by the Directors.

Financial assets

The Group classifies its financial assets into one of the categories discussed below, depending on the purpose for which the asset was acquired. The Group's accounting policy for each category is as follows:

Fair value through profit or loss

This category comprises amounts due from joint ventures (refer to Note 25) where the terms of the loan are inconsistent with a basic lending agreement and are, therefore, not solely payments of principal and interest. This balance is carried in the Statement of Financial Position at fair value with changes in fair value recognised in the Consolidated Statement of Comprehensive Income in the finance income or expense line. Other than amounts due from joint ventures, the Group does not have any assets held for trading nor does it voluntarily classify any financial assets as being at fair value through profit or loss.

Amortised cost

These assets arise principally from the provision of goods and services to customers (e.g. trade receivables), but also incorporate other types of financial assets where the objective is to hold these assets in order to collect contractual cash flows and the contractual cash flows are solely payments of principal and interest. They are initially recognised at fair value plus transaction costs that are directly attributable to their acquisition or issue, and are subsequently carried at amortised cost using the effective interest rate method, less provision for impairment.

Impairment provisions for current and non-current trade receivables are recognised based on the simplified approach within IFRS 9 using a provision matrix in the determination of the lifetime expected credit losses. During this process, the probability of the non-payment of the trade receivables is assessed. This probability is then multiplied by the amount of the expected loss arising from default to determine the lifetime expected credit loss for the trade receivables. On confirmation that the trade receivable will not be collectable, the gross carrying value of the asset is written off against the associated provision.

Impairment provisions for all other receivables are recognised based on a forward looking expected credit loss model. The methodology used to determine the amount of the provision is based on whether there has been a significant increase in credit risk since initial recognition of the financial asset. For those where the credit risk has not increased significantly since initial recognition of the financial asset, 12-month expected credit losses are recognised. For those for which credit risk has increased significantly, lifetime expected credit losses are recognised. For those that are determined to be credit impaired, lifetime expected credit losses along with interest income on a net basis are recognised.

The Group's financial assets measured at amortised cost comprise trade and other receivables, cash and cash equivalents and amounts due from joint ventures (other than those held at fair value through profit and loss) and associates in the Consolidated Statement of Financial Position.

Cash and cash equivalents comprise cash in hand and demand deposits, together with other short-term, highly liquid investments that are readily convertible into known amounts of cash and which are subject to an insignificant risk of changes in value.

Fair value through other comprehensive income

The Group has investments which are not accounted for as subsidiaries, associates or joint ventures. For those investments, the Group has made an irrevocable election to classify the investments at fair value through other comprehensive income rather than through profit or loss as the Group considers this measurement to be the most representative of the business model for these assets. They are carried at fair value with changes in fair value recognised in other comprehensive income and accumulated in the fair value through other comprehensive income reserve. Upon disposal, any balance within fair value through other comprehensive income reserve is reclassified directly to retained earnings and is not reclassified to profit or loss.

Dividends are recognised in profit or loss, unless the dividend clearly represents a recovery of part of the cost of the investment, in which case the full or partial amount of the dividend is recorded against the associated investments carrying amount.

Assets held for sale

Non-current assets are classified as held for sale when:

• they are available for immediate sale;

• management is committed to a plan to sell;

• it is unlikely that significant changes to the plan will be made or that the plan will be withdrawn;

• an active programme to locate a buyer has been initiated;

• the asset or disposal group is being marketed at a reasonable price in relation to its fair value; and

• a sale is expected to complete within 12 months from the date of classification.

Non-current assets classified as held for sale are measured at the lower of:

• their carrying amount immediately prior to being classified as held for sale in accordance with the Group's accounting policy; and

• fair value less costs of disposal.

Investment property is held at fair value.

Following their classification as held for sale, non-current assets are not depreciated.

The results of assets disposed during the year are included in the Consolidated Statement of Comprehensive Income in the appropriate segment, up to the date of disposal.

Financial liabilities

Financial liabilities are obligations to pay cash or other financial assets and are recognised when the Group becomes a party to the contractual provisions of the instrument.

All financial liabilities are initially recognised at fair value net of any transaction costs. Subsequently, they are recorded at amortised cost using the effective interest method, with interest-related charges recognised as an expense in finance cost in the Group Income Statement. Finance charges, including premiums payable on settlement or redemption and direct issue costs, are charged to the Group Income Statement on an accruals basis using the effective interest method and are added to the carrying amount of the instrument to the extent that they are not settled in the period in which they arise.

A financial liability is derecognised only when the obligation is extinguished, that is, when the obligation is discharged, cancelled or expires.

Borrowing costs

The Group capitalises borrowing costs directly attributable to the acquisition, construction or production of a qualifying asset as part of the cost of that asset where developments are considered to fall under the requirements of IAS 23, 'Borrowing Costs (Revised)'. Qualifying assets are those which are being constructed over a significant period of time, which the Group interprets to be over 12 months. The majority of the Group's sites involve the development of large volumes of properties in a repetitive manner. The Group, therefore, expenses borrowing costs relating to such developments in the period to which they relate through the income statement using the effective interest method which calculates the amortised cost of a financial asset and allocates the interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to the net carrying amount of the financial asset. Currently, the Group capitalises borrowing costs only in relation to the site at Wilton Park. Additionally, the Group's joint venture, Cheshunt Lakeside Developments Limited, also capitalises borrowing costs. These are the only sites where borrowing costs are directly attributable to the production of qualifying asset and where construction occurs over a significant period of time.

Deferred income

Deferred income is recognised where the Group receives cash from customers in advance of achieving the performance obligation under IFRS 15 'Revenue'. Deferred income arises in the contract income and housebuilding segments.

Guarantees

All guarantees are deemed to be insurance contracts. A financial guarantee is recognised where a contract requires the issuer to make specified payments to reimburse the holder for a loss it incurs because a specified debtor fails to make payment when due.

Share capital and other equity reserves

Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds.

Share premium represents amounts subscribed for share capital in excess of nominal value less directly attributable issue costs.

Employee benefit trust represents the purchase of the Company's own shares which are deducted from total equity until they are issued to employees under the Deferred Bonus Plan.

Special Reserve represents the capitalisation of the Parent Company's reserves to allow for the possibility of distributions in the future. A copy of this resolution is available from Companies House.

Treasury Reserve represents the purchase of the Company's own shares which are deducted from total equity until they are issued to employees under the share option plan.

Retained earnings represents cumulative net gains and losses recognised in the Group Income Statement together with other items such as dividends and share-based payments.

Employee Benefit Trust

The Directors consider that the Employee Benefit Trust (EBT) is under the de facto control of the Company as the trustees look to the Directors to determine how to dispense the assets. Therefore, the assets and liabilities of the EBT have been consolidated into the Group and Company Accounts. The EBT's investment in the Company's shares is eliminated on consolidation and shown as a deduction against equity. Any assets in the EBT will cease to be recognised in the Group Statement of Financial Position when those assets vest unconditionally in identified beneficiaries.

Dividends

Dividend distributions payable to equity shareholders are included in other short-term financial liabilities when the dividends are approved in a general meeting prior to the year-end date. Interim dividends are recognised when paid.

5. Adoption of new accounting standards

In the year ended 30 September 2021, the Group has adopted amendments and interpretations endorsed by the EU that were effective for the first time. These had no material impact on the Financial Statements.

New standards adopted during the year

The following standards, amendments and interpretations endorsed by the EU were effective for the first time for the Group's year ended 30 September 2021 and had no material impact on the Financial Statements.

• IFRS 3 'Definition of a Business' (Amendments to IFRS 3);

• IFRS 16 'Leases' COVID-19 Related Rent Concessions (Amendments to IFRS 16);

• Amendments to References to the Conceptual Framework in IFRS Standards; and

• IAS 1 and IAS 8 'Definition of Material' (Amendments to IAS 1 and IAS 8).

Standards in issue but not yet effective

The following new standards, amendments and interpretations to existing standards were in issue at the date of approval of these Financial Statements but are not yet effective for the current accounting year and have not been adopted early. Based on the Group's current circumstances, the Directors do not anticipate that their adoption in future periods will have a material impact on the Financial Statements of the Group, however, the impact of the standards in issue but not yet effective is currently being assessed by the Group.

• IFRS 9, IAS 38 and IFRS 7 'Interest Rate Benchmark Reform' (Amendments to IFRS 9, IAS 38 and IFRS 7);

• Classification of Liabilities as Current or Non-current (Amendments to IAS 1);

• Amendments to IFRS 3 'Business Combinations';

• Amendments to IAS 16 'Property, Plant and Equipment';

• Amendments to IAS 37 'Provisions, Contingent Liabilities and Contingent Assets';

• Reference to the Conceptual Framework (Amendments to IFRS 3);

• Disclosure of Accounting Policies (Amendments to IAS 1 and IFRS Practice Statement 2);

• Definition of Accounting Estimates (Amendments to IAS 8);

• Annual Improvements (2018-2020 Cycle) IFRS 1, IFRS 9, IAS 41 and Illustrative Examples accompanying IFRS 16; and

• IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16 Interest Rate Benchmark Return Reform - Phase 2 (Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16).

6. Significant judgements, key assumptions and estimates

The preparation of financial statements in accordance with IFRS requires the use of certain critical accounting estimates and judgements. It also requires management to exercise judgement in the process of applying the Group's accounting policies. The Group's significant accounting policies are stated in Note 4. Not all of these accounting policies require management to make difficult, subjective or complex judgements or estimates. Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. Although these estimates are based on management's best knowledge of the amount, event or actions, actual results may differ from those estimates. The following is intended to provide an understanding of the policies that management consider critical because of the level of complexity, judgement or estimation involved in their application and their impact on the Financial Statements.

Significant judgements

Revenue recognition (Note 9)

The Directors are required to exercise judgement in respect of revenue recognition for asset management fees (see below) and contract income, where estimates are involved in determining the proportion of costs. There is no judgement required for land sales, housebuilding, rental income nor investment properties revenue.

Overages

Estimates are involved when determining how much revenue to recognise in relation to variable consideration where Inland Homes is entitled to an overage in relation to future sales at a site sold by Inland Homes to a customer. When determining how much of the variable revenue to recognise at the point of sale, the Directors estimate the amount that they would expect to receive based on market evidence for current house prices. They then consider the risk of a significant reversal of this revenue in future periods and constrain it accordingly.

Land and house building sales margins

There are significant estimates involved in determining the appropriate profit margin to recognise on land and residential sales. Assumptions are required to be made as to future costs to complete and future sales prices to be achieved on the remaining units. The Directors use detailed project appraisals for each development to determine the appropriate profit margin to recognise; which forecasts the costs to complete on such developments and the anticipated sales prices; and which have been determined based on the type, specification and location of the property. The financial outturn in both the current year and prior period relating to land and housebuilding sales margins is disclosed in Note 10.

Management fee income

The Group recognises revenue in respect of management services equal to the amounts entitled. The management fee formula in the contract reflects progress at any given time of the satisfaction of the contract's underlying performance obligations, which involves judgement.

There were a number of material management service contracts that were either ongoing or commenced in the period. For each management service contract there are a number of milestones and obligations. The Directors had to make significant judgements for each contract based on:

• whether each milestone constituted a distinct performance obligation;

• whether the obligations have been satisfied;

• whether the revenue is recognised at a point in time or over time;

• whether the achievement of a successful planning outcome is highly probable in the context of the scheme; and

• whether it is highly probable the third-party asset with planning produces a suitable economic return for the Group to recover its management fee in full.

The Directors have a number of judgements to consider in recognising revenue from management service contracts which are if revenue:

• should be recognised over time or at a point in time. The Directors recognise management fee income when the customer benefits only once the obligation is met;

• meets all of the criteria to be recognised under IFRS 15; and

• is highly probable that a significant reversal will not occur. In making that decision, the Directors have to consider whether there is sufficient certainty that they will get planning permission and whether that permission will be for a scheme that generates sufficient value to ensure the Group recovers management services fees due.

The Directors were required to exercise judgement in respect of revenue recognition for the following contracts as set out below. For all of the following management contracts a key judgement is an assessment of the collectability of management fees on achieved planning and the eventual sale price of the site, which is based on the assessment of value of the land once planning is achieved.

The significant judgements made were in relation to the following contracts:

Hillingdon Gardens:

For the contract at Hillingdon Gardens, it was determined that there were a number of distinct performance obligations of which no further performance obligations were satisfied in the year to 30 September 2020 and of which three were satisfied in the year to 30 September 2021. The contract was entered into in the period to 30 September 2019 where five performance obligations were satisfied in the 15-month period. It was concluded that these were distinct on the basis the customer benefited from each of the milestones and that these milestones were considered separable in the context of the contract. Planning obligations are considered to be one milestone achieved when the grant of planning is awarded. The performance obligations recognised were considered satisfied in the period as control of the relating service was transferred to the customer before the year end. For the remaining performance obligations still to be satisfied, it was determined by the Directors that they will be recognised in future periods at a point in time, given they all meet the criteria to be recognised at a point in time.

Walthamstow:

For the contract at Walthamstow, it was determined that there were a number of distinct performance obligations of which three were satisfied in the year to 30 September 2020 and of which four were satisfied in the year to 30 September 2021.

The contract was entered into in January 2020. It was concluded that these were distinct on the basis that the customer benefits from each of the milestones as they are actioned. Planning obligations are considered to be one milestone achieved when the grant of planning is awarded. The performance obligations recognised were considered satisfied in the period as control of the related service was transferred to the customer before the year end. The contract is now complete.

Hounslow:

For the contract at Hounslow, it was determined that there were a number of distinct performance obligations of which one was satisfied in the year to 30 September 2020 and one in the year to 30 September 2021. The contract was entered into in August 2020. It was concluded that these were distinct on the basis that the customer benefits from each of the milestones as they are achieved. Planning obligations are considered to be one milestone achieved when the grant of planning is awarded. The performance obligations recognised were considered satisfied in the period as control of the related service was transferred to the customer before the year end.

For the remaining performance obligations still to be satisfied, it was determined by the Directors that they will be recognised in future periods at a point in time, given they all meet the criteria to be recognised at a point in time.

Discounting and deferred consideration

The Group has a number of deferred consideration receipts and payments which are generated from its activities in the land market. Where a receipt or payment is due within one year it is not discounted. Where a receipt or payment is due after more than one year it is discounted. The discount rate chosen is with reference to the underlying rate of return related to the deferred consideration.

Likelihood of achieving planning - inventories (Note 28)

The Group values inventories at the lower of cost and net realisable value. The net realisable value is based on the judgement of the probability that planning consent will be granted for each site. The Directors believe that, based on the Group's experience, planning consent will be given. If planning consent was not achieved then a provision may be required against inventories. The cost value is based on actual costs incurred at the date of signing the Financial Statements taking account of an estimation of costs to complete. The judgement of costs to complete is based on the Directors' experience and if actual plus projected costs are higher than net realisable value then a provision would be required against inventories. Inventories of £21.9m (2020: £3.3m) are held at net realisable value. A provision of £2.6m (2020: £2.1m) was recognised during the year.

Assets held for sale (Note 30)

At 30 September 2021, the Directors' intention is to sell some residential properties over the year ending 30 September 2022.

These assets have been classified as held for sale at their fair value. The Directors have made a judgement that the properties will sell within the next twelve months.

Timing and recoverability of repayment - amounts due from joint ventures and associate (Notes 25 and 26)

Certain amounts due from the joint ventures are contractually repayable on demand and the amounts due from the associate are repayable over the term of the underlying development. At each balance sheet date the Directors review the forecasts of the underlying developments and make a judgement as to the likely timing of the recoverability of each loan and whether they will be recovered within the normal operating cycle of the business. Amounts are then disclosed as either due in less than one year or greater than one year accordingly. The recoverability of receivables are dependent on the future profitability of land and development sales. The judgements involved are the same as outlined above for inventories.

Other financial liabilities (Note 36)

During the prior year, the Group transferred legal title of land to a third party with a contract that contains a put and call option and did not recognise any revenue. At 30 September 2021, the Group had a put and call option over the land with a third party that can be triggered in certain circumstances where planning is achieved or after a certain elapsed time period by either party.

There is significant judgement involved as to whether or not this transaction should be accounted for as revenue or as a financing arrangement on the initial transfer of legal title of the land and in determining whether the put and call option could be exercised, on what grounds and at what time. The Directors consider that it is highly probable either they or the third party will trigger the option in greater than one year and, therefore, under IFRS 15, have accounted for the options as an other financial liability and this relates to a financing agreement and not a land sale.

Key sources of estimation uncertainty

Cost of and net realisable value of inventories (Note 28)

In applying the Group's accounting policy for the valuation of inventories, the Directors are required to assess the expected selling price and costs to sell each of the plots or units that constitute the Group's land bank and work in progress. The uncertainty relates to both land and work in progress. Cost which requires estimation includes the cost of acquisition of sites, the cost of infrastructure and construction works, allocation of site wide costs and legal and professional fees incurred during development prior to sale. Estimation of the selling price is subject to significant inherent uncertainties, in particular the prediction of future trends in the market value of land. The critical judgement in respect of receipt of planning consent (see above) further increases the level of estimation uncertainty in this area.

Fair value of investment properties (Note 19)

The fair value of materially completed investment property is determined by independent valuation experts using the highest and best use method, subject to current leases and restrictions, as this has been assessed currently as the best use of these assets. Investment properties awaiting construction are valued by the Directors using an appraisal system; critical accounting estimates relate to the forecasts prepared in order to assess the carrying value. See Note 19 for information about valuation methodology and assumptions made.

Deferred consideration on transfer of beneficial interest in Cheshunt Lakeside Developments Limited (Notes 25 and 36)

The Group discounts deferred consideration payable or receivable using the discounted cash flow method; the Group considers the expected timing of payments and receipts and uses the third-party cost of debt capital as the most appropriate discount rate and these are considered to be significant estimates.

The Group sold its beneficial interest of 50% of Cheshunt Lakeside Developments Limited on deferred terms during the fifteen-month period ended 30 September 2019 and estimated a discount to present value calculated from the date of disposal. At 30 September 2021, this is shown as an other receivable of £22.0m (2020: £20.7m) disclosed in Note 29. Further details of Cheshunt Lakeside Developments Limited are provided in Note 25.

The impact of a change in the discount rates by one percent up on the receipt would be a reduction in the receivable of £0.8m and the impact of a change in the discount rates by one percent down on the receipt would be an increase in the receivable of £1.6m.

Management do not envisage a timing opportunity where the receipt of the receivable could be brought forward. The impact of a delay in receipt of 12 months, at the current discount rate, would be a reduction in the receivable of £0.7m.

7. Financial instruments

Financial risk management

The Group's activities expose it to a variety of financial risks: credit risk; liquidity risk; interest rate risk and price risk. The Group's overall risk management programmes focus on the unpredictability of financial markets and seek to minimise potential adverse effects on the Group's financial performance.

Risk management is carried out centrally under policies approved by the Board of Directors.

(a) Credit risk

The Group's significant concentrations of credit risk are its loans to joint ventures and the associate and deferred receipts on disposal of investment in subsidiaries and joint ventures and management fees, which are adequately covered by the underlying values of the assets within the joint ventures and associate or legal charges over the land within the vehicle disposed of or from where management fees are due. Further information can be found in Notes 24, 25, 26 and 29. It has policies in place to ensure that sales of products and services are made to customers with an appropriate credit history.

The Group's exposure to credit risk is limited to the carrying amount of financial assets recognised at the year-end date, as summarised below:

The Group's policy is to only deal with creditworthy counterparties. A creditworthy counterparty is defined by the Group as a counterparty that carries a minimal risk that the counterparty in a transaction cannot honour its obligation to the Group.

Counterparties are assessed on contract inception through externally available information where legal charges are not available over the underlying asset and are reviewed periodically to determine if there are any changes in creditworthiness or other circumstances that may bring the financial viability of the counterparty into some doubt.

All new contracting and management service contracts entered into are with reputable parties and are subject to acceptance procedures, which include detailed creditworthiness checks. This procedure ensures that collectability is probable (i.e. more likely than not), prior to commencement of the contract. In this regard, no instances have been identified in the past where the collectability of the sales consideration has been considered improbable at the time of contract commencement.

In any instance where part of the consideration is deferred, the Group endeavours to seek and secure a legal charge over underlying property assets held until such time that all elements of the deferred consideration have been fully received, at which point that legal charge is released.

The Group has assessed loans and advances due from joint ventures and associate and have concluded there is a minimal risk of default. Default is defined and assessed as a risk of missed payment of interest and/or principal or a failure to honour the financial terms in place between the Group and the joint ventures and associate in question.

The assessment of credit risk for amounts due from joint ventures are based on a consideration of known future cash flows which have been sensitised, based on the most likely, the worst case and mid-case scenarios. These cash flows are reviewed against what is due and expected to be paid and analysis made of whether this is sufficient to repay monies based on the financial terms in place between the Group and the joint ventures in question.

The assessment of credit risk for amount due from the associate are based on net valuations. The valuation of properties has been sensitised based on the most likely, the worst case and a mid-case scenario downturn in valuations. These valuations are reviewed against what is due and expected to be paid and analysis made of whether this is sufficient to repay monies based on the financial terms in place between the Group and associate in question.

Loans to joint ventures are secured via charge over either the underlying asset, the future dividends of, or the future profits generated by, the relevant entity based on the agreement between the joint venture or associate in question. The Group does not rely on this collateral in taking its position of reviewing and/or recognising an expected credit loss.

At the balance sheet date there are no financial assets that are credit impaired.

Management has determined there has not been a significant increase in credit risk on loans to subsidiaries from the Parent Company and loans to joint ventures and associate for the Group during the year ended 30 September 2021 or the year ended 30 September 2020.

Due to the short-term nature of trade and other receivables, the Group does not anticipate any material default and the Directors do not consider the macro economic environment conditions (inflation, exchange rates and property prices) to substantially change in the short term.

The vast majority of trade and other receivable balances relate to property transactions and are short term in nature. As a housing developer, the risk of not receiving settlement on sales or services are low and as such, no trade and other receivables are deemed credit impaired.

The Group's management considers that all the above financial assets for each of the reporting dates under review are of good credit quality. Further information on the concentration of credit risk can be found in Note 29.

Other forms of credit risk are for liquid funds and other short-term financial assets, but these are considered negligible, since the counterparties are reputable banks with high-quality credit ratings.

Credit ratings of the financial institutions holding the Group's cash deposits as at 30 September 2021 are shown below:

Aldermore Bank is privately owned so no credit rating is provided.

Credit ratings of the financial institutions holding the Group's cash deposits as at 30 September 2020 are shown below:

(b) Liquidity risk

Prudent liquidity risk management implies maintaining sufficient cash balances and ensuring availability of funding through an adequate amount of credit facilities. The Group aims to maintain flexibility in funding by keeping credit lines available. The Group also purchases property under deferred consideration arrangements.

See Note 32 for the maturity analysis of borrowings and details of the undrawn committed borrowing facilities at the year end.

(c) Interest rate risk

Interest rate risk is the risk that future cash flows of a financial instrument will fluctuate due to changes in interest rate.

The Group's interest rate risk arises from long-term borrowings. Borrowings issued at variable rates expose the Group to risk. Most of the Group's borrowings are at variable rates as outlined in the table in Note 32. The Group does not use hedging arrangements to limit the interest rate risk.

Market rate sensitivity analysis

The analysis below shows the sensitivity of the Group Income Statement and net assets to a 0.5% change in interest rate on the Group's financial instruments that are affected by market risk. These financial instruments consist solely of borrowings.

The interest rate risk profile of financial assets and liabilities of the Group at 30 September 2021 was as follows:

The interest rate risk profile of financial assets and liabilities of the Group at 30 September 2020 as restated was as follows:

The interest rate risk profile of financial assets and liabilities of the Group at 30 September 2019 as restated was as follows:

(d) Price risk

The Group's price risk arises from the market value of land and house prices. These are affected by credit availability, employment levels, interest rates, consumer confidence and the supply of land. Whilst it is not possible for the Group to fully mitigate such risks on a macroeconomic basis, the Group does focus its operations in areas that have a favourable supply/demand ratio and ensures that planning permissions gained are for units of the type and price point which are less easily affected by any downturns in the housing market. The Group enters into construction contracts with housing associations which involve the bulk, forward selling of residential units and has less risk than private house building.

Financial assets and liabilities

The carrying amounts presented in the Statement of Financial Position relate to the following categories:

Other assets - non-current includes investments, amounts due from associate in Note 26 and joint ventures shown in Note 25 and amounts shown as trade and other receivables in Note 29 due in more than one year.

Other assets - current includes amounts due from joint ventures and associate shown in Notes 25 and 26 and all amounts shown as trade and other receivables due in less than one year in Note 29, except prepayments of £0.6m (30 September 2020: £0.3m). Amounts due from Bucknalls Developments Limited is split between amortised cost and fair value through profit and loss.

Other liabilities - current includes purchase consideration of £4.8m (30 September 2020: £0.3m) shown in Note 36 and all amounts shown as trade and other payables in Note 33, except sales and social security taxes of £0.5m (30 September 2020: £0.5m). All amounts are non-interest bearing and are due within one year.

Other liabilities - non-current contains another financial arrangement of £7.6m (30 September 2020: £6.8m) at an implied rate of interest tied to the triggering of the put and call options in place. Refer to Note 6 for further details.

Borrowings consist of loans which attract interest at varying rates and there is a variety of fixed and variable rates (see table in Note 32). The ZDP shares are carried at their accrued value of 176.86p per share (30 September 2020: 167.83p). Their closing price on the main market of the London Stock Exchange on 30 September 2021 was 168.50p (30 September 2020: 156.00p). The ZDP shares attract an interest rate of between 4.96% and 5.49%. The interest rates disclosed for the ZDP preference shares were the rates disclosed before the changes in August 2018.

8. Capital management policies and procedures

The Group's objectives when managing capital are:

• to safeguard its ability to continue as a going concern;

• to ensure sufficient liquid resources are available to meet the funding requirement of its projects and to fund new projects where identified; and

• to provide returns for shareholders and benefits for other stakeholders.

This is achieved through ensuring sufficient bank and other facilities are in place; further details are given in Notes 31 and 32 to the Group Accounts. The Group monitors capital on the basis of the carrying amount of the equity less cash and cash equivalents as presented on the face of the Group Statement of Financial Position.

The movement in the capital to overall financing ratio is shown below. The target capital to overall financing ratio has been set by the Board at 40% and an outturn metric scoring higher than this amount is considered to be a good performance against the target. Further commentary on the level of borrowing, overall financing strategy and expected future direction is contained in the Group Finance Director's review.

The Group manages the capital structure and makes adjustments in light of changes in economic conditions and the risk characteristics of the underlying assets. In order to maintain or adjust the capital structure, the Group may adjust the level of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt.

Every quarter the Group must report to the ZDP shareholders that the covenants attached to the ZDP shares have not been breached. The most significant covenant is the asset cover which is calculated as adjusted gross assets: financial indebtedness. This covenant is monitored on a bi-monthly basis by the Board and has not been breached at any time. Further details can be found in the Inland ZDP Prospectus on the Company's website at: www.inlandhomesplc.com.

9. Revenue from contracts with customers

The Group has disaggregated revenue into various categories in the following tables which is intended to:

• Depict how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic date; and

• Enable users to understand the relationship with revenue segment information provided in Note 10.

All revenue is earned in the United Kingdom.

Included within 'Land sales' are land sales to housing associations which include construction works to 'Golden Brick'. Subsequent construction works to completion are included within 'Contract income'.

Included within 'Housebuilding' are the sales of reversionary freehold reversions and customers' extras that arise as a by-product of house building activity.

Rental income and investment properties income is not disclosed in the table above as these revenue sources do not fall under the IFRS 15 accounting standard.

During the year, transactions with two customers each accounted for more than 10% of revenue from contracts with customers. One customer was in the 'Land sales' segment (revenue of £20.2m) and one customer was in the 'Contract income' segment (revenue of £27.6m). During the prior year, transactions with three customers each accounted for more than 10% of revenue from contracts with customers. One customer was in the 'Land sales' segment (revenue of £20.2m) and two customers were in the 'Contract income' segment (revenue of £23.9m and £23.7m).

Contract assets and contract liabilities are included within the Group Statement of Financial Position. The timing of work performed and revenue recognised, billing profiles and cash collection results in trade receivables (amounts billed to date and unpaid), contract assets (unbilled amounts where revenue has been recognised) and contract liabilities (amounts relating to contracts where work is yet to be performed and the performance obligation achieved) being recognised on the Group Statement of Financial Position.

The reconciliation of the opening to closing contract balances is shown below:

Contract assets are recognised in prepayments and accrued income falling due in less than one year, and other receivables falling due in greater than one year (Note 29). Contract liabilities are recognised in accruals (Note 33).

10. Segmental information

In accordance with IFRS 8, information is disclosed to enable users of financial statements to evaluate the nature and financial effects of the business activities in which the Group engages.

In identifying its operating segments, management differentiates between land sales, housebuilding, contract income, rental income, hotel income, investments, investment properties, management fees and other income. These segments are based on the information reported to the Chief Operating Decision Makers (which in the Group's case is the Operating Board comprising the three Executive Directors and four senior managers) and represent the activities which generate significant revenues, profits and use of resources within the Group. These operating segments are monitored and strategic decisions are made on the basis of segment operating results. Note 1 provides further information relating to each segment.

During the year ended 30 September 2021, the Chief Decision Makers in the Group have opted to allocate administrative expenses to the sectors, rather than present under central support. The administrative expenses for the year ended 30 September 2021 have, therefore, been presented in this way. This represents a change from previous periods. The administrative expenses in the segmental analyses for the year ended 30 September 2020 and the fifteen-month period ended 30 September 2019 have not been updated with the new measurements.

Segmental analysis by activity