INL.L Regulatory News (INL)

30 June 2021

Inland Homes plc

('Inland Homes' or the 'Group')

Interim Results for the six-month period ended 31 March 2021

DELIVERING ON THE GROUP'S STRATEGIC OBJECTIVES

Inland Homes plc (AIM: INL), the housebuilder, partnership housing developer and regeneration specialist, today announces its interim results for the six-month period ended 31 March 2021.

Stephen Wicks, Chief Executive at Inland Homes, commented:

"One of our key objectives is to continue the progress we are making on the reduction of our net debt. Solid progress has been made in the first half and we expect this process to continue through to the year end.

"We continue to see increased demand for our quality land assets and planning expertise in the asset management division from investors, developers, Build to Rent operators and housing associations. During the reporting period, we secured planning on the Hillingdon and Walthamstow schemes within this division, which combined, will deliver 1,097 new homes. The asset management division remains an area of focus for the business. The capital light nature of this work is geared to positive cash generation and we expect to see further growth.

"I would like to thank all our employees for their continued hard work and ability to adapt to the continually changing external environment. There is still a fundamental shortage of new homes, while demand for consented land with planning permission and affordable housing in the South and South East of England remains strong."

Highlights

Inland Homes continues to deliver on its key strategic objectives, namely: the reduction of net debt, optimising the returns from our valuable land bank, growing the capital light asset management business, maximising the value of the land we own with planning consent and delivering much needed new homes.

• Gross development value of the Group's portfolio was up by 3.2% at £3.2bn (30 September 2020: £3.1bn).

• Land bank at 31 March 2021 totalled 10,573 plots (30 September 2020: 11,045 plots, 31 March 2021: 9,143), a 4.3% decline from the year end.

• Excluding joint ventures, the Group sold 101 private homes (30 September 2020: 96, 31 March 2020: 56) and a hotel, realising £39.0m (30 September 2020: £23.8m, 31 March 2020: £13.8m) during the period. The average selling price of these homes was £254,000 (30 September 2020: £287,000, 31 March 2020: £241,000).

• The Group's capital light asset management division continues to show strong growth and at 31 March 2021 is engaged on six projects, which have the potential for more than 3,275 new homes (30 September 2020: 3,181).

• A resolution to grant planning permission for 583 units was achieved on the former Homebase site in Walthamstow, with detailed planning consent granted in April 2021. Contracts have been exchanged to sell 355 private units for a total consideration of £116m, including a build contract of £88.5m awarded to Inland Partnerships.

• The Group's joint venture, High Wycombe Developments Limited, completed the planned block sale to Build to Rent operator PGIM.

• Cash and cash equivalents increased by 78% since year end to £28.0m (30 September 2020: £15.7m; 31 March 2020: £17.8m) which includes restricted cash of £13.8m (30 September 2020: £4.7m, 31 March 2020 £1.2m).

• Net debt at 31 March 2021 was £132.9m representing a 10% reduction since the year end (30 September 2020: £148.2m, 31 March 2020: £152.3m). In addition, at 31 March 2021 the Group has further undrawn bank facilities of £39.2m (30 September 2020: £45.8m, 31 March 2020: £27.7m).

• Net gearing at 31 March 2021 was 79.1% (31 March 2020: 96.2%), a reduction of has decreased by 6.4% as at 31 March 2021 and was 79.1% (31 March 2020: 96.2%), compared to the previous year end at 30 September 2020, when net gearing was 85.5%.

• Revenue up 31% at £78.0m for the six months ended 31 March 2021(31 March 2020: £59.6m), including £13.2m for the sale of a 105-bedroom hotel in Bournemouth, pre let to Premier Inn, at the Group's Wessex site.

• The loss before taxation amounted of £5.8m (30 September 2020: profit before taxation of £3.7m, 31 March 2020: loss before taxation £7.2m).

Financial and operational

The results for the six-month period were adversely affected by timing of activity and two non-recurring items.

First, a £4.5m asset management fee relating to planning consent at Walthamstow which had been forecast to be received in the first half of the financial year, was achieved in mid-April 2021. Additionally, the Group was made aware of previously unforeseen and additional costs of approximately £3.2m relating to one housebuilding site and one partnership housing contract income contract. This negative impact was partly offset by £1.0m of additional housebuilding revenues at two other housebuilding sites where achieved prices exceeded budget.

Notwithstanding these items and based on management's current expectations regarding the timing of planning applications on certain sites and planned sales completions, the financial outlook for the Group for this financial year remains unchanged. 

There was a decline in the EPRA undiluted NAV per share to 97.80p (30 September 2020: 103.96p, 31 March 2020: 109.30p) due to market valuation fluctuations in the underlying land portfolio of £8.3m.

The Group exchanged contracts to sell a further 53 plots for £14.0m at its flagship development at Wilton Park, Beaconsfield which is scheduled to complete in September 2021. The Group released the first of the existing homes at Wilton Park that were acquired with the site in 2008. These houses, originally let to the Ministry of Defence service personnel, have been substantially renovated and reconfigured. Five of the properties were reserved at 31 March 2021 and subsequently at the date of this report, eight completions have been achieved, for a total consideration of £5.2m.

During the period, the Group submitted planning applications for 1,893 homes and received outline or detailed approval for 666 new homes and 5,985 square feet of commercial space. Planning applications submitted include an application for a residentially led mixed-use scheme with 1,629 homes on the 36-acre Cavalry Barracks site in Hounslow, one of the largest brownfield sites in London with an estimated gross development value of £600m.

Following receipt of planning consent for 583 units on the former Homebase site in Walthamstow in April 2021, contracts have been exchanged to sell 355 private units for a total consideration of £116m, including a build contract of £88.5m awarded to Inland Partnerships. This is Inland Partnership's largest award to date and takes the partnership housing contract income forward order book to £139.9m. Inland Partnerships is additionally at an advanced stage of negotiations with a major G15 housing association to deliver the remaining homes on this important inner-city site.

A resolution to grant planning permission for 700 new homes, including 220 affordable houses and 25,000 square feet of commercial space was obtained at Gardiners Park Village in Basildon in conjunction with Homes England in May 2021.

Outline planning consent for 205 new homes on Parcel 1b and a detailed planning consent for 22 new homes, commercial space and community facilities on Parcel 14 have been received at the Group's joint venture development at Cheshunt.

The Group won the WhatHouse? 2020 Gold award in the Best Regeneration Scheme category for its sought-after Chapel Riverside scheme in Southampton.

Hugg Homes was the winner of the 'Innovator of the Year: Housing Delivery' at the UK Housing Awards demonstrating the Group's commitment to socially affordable housing solutions for all.

Enquiries

Inland Homes plc: Tel: 44 (0)1494 762450

Stephen Wicks, Chief Executive

Nishith Malde, Finance Director

Gary Skinner, Managing Director

Panmure Gordon (UK) Limited Tel: 44 (0)20 7886 2500

Dominic Morley

Erik Anderson

Instinctif Partners Tel: 44 (0)20 7457 2020

Tim McCall

Rosie Driscoll

Galyna Kulachek

The information contained in this Announcement is deemed by the Company to constitute inside information as stipulated under the Market Abuse Regulations (Regulation 596/2014), as it forms part of 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.

As a responsible business and against the broader backdrop of an escalating global climate issue, Inland Homes has developed its Environmental, Social and Governance (ESG) framework. 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

CHAIRMAN'S STATEMENT

Introduction

This is my first statement to shareholders, having become Chairman in March 2021. Despite the global COVID-19 pandemic and the headwinds in the housebuilding sector, the Group started this financial year with cautious optimism. Inland Homes has a flexible business model and generates income from multiple sources, which allows it to adapt to reflect changing market circumstances.

In light of the current market conditions, the Group's key strategic priorities remain: the reduction of net debt, optimising the returns from our valuable land bank, growing the capital light asset management business, maximising the value of the land we own with planning consent and delivering homes which meet the market's needs in the most cost-effective way.

The health and safety of our staff, colleagues, customers and suppliers remains our upmost priority. Inland Homes is an agile business and has risen to the challenges created by the COVID-19 pandemic, buoyed by strong demand for housing in the first six months. I would like to personally thank all our staff for all their continued hard work and support.

Delivering on the Group's strategic objectives 

Reduction of net debt

One of the key strategic priorities of the Group is the reduction of net debt. Following the start of the COVID-19 pandemic, the Group quickly took several decisive measures designed to reduce costs and preserve cash. Most of these measures remain in place and have proved highly effective. Cash and cash equivalents have increased by 78% since the year end to £28.0m (30 September 2020: £15.7m; 31 March 2020: £17.8m), which includes restricted cash of £13.8m (30 September 2020: £4.7m, 31 March 2020: £1.2m) held on behalf of Homes England.

Additionally, the Group has completed a considerable amount of work in successfully extending the maturity of its debt facilities. Net debt at 31 March 2021 was £132.9m representing a 10% reduction since the year end (30 September 2020: £148.2m, 31 March 2020: £152.3m). Net gearing at 31 March 2021 was 79.1% (31 March 2020: 96.2%) compared to the previous year end at 30 September 2020, when net gearing was 85.6%. In addition, at 31 March 2021 the Group has further undrawn bank facilities of £39.2m (30 September 2020: £45.8m, 31 March 2020: £27.7m).

Optimising the returns from the Group's valuable land bank

Inland Homes' valuable land bank is the foundation of the Group's business. Inland Homes looks to achieve a balanced return from its land bank. Short and medium-term returns are achieved by the sale of plots with planning consent or the sale of whole consented sites and partnership housing contracts with local authorities and Build to Rent (BtR) investors. Longer-term returns are delivered from the Group's strategic land bank, where plots are usually controlled by way of a discount to market value option.

At 31 March 2021, the gross development value of the Group's portfolio was £3.2bn (30 September 2020: £3.1bn).

In a strong land market, the Group will look to selectively optimise the returns from its existing land bank in the coming months, where attractive returns can be made.

Growing the capital light asset management business

At the heart of Inland Homes' business is finding brownfield sites, obtaining planning consent, remediating the land where necessary, installing the infrastructure and then either developing the site ourselves or selling it on to a third party. In recent years we have been expanding our asset management division, where typically much of the capital for the project is found from external investors. The Group enters into a planning and management services agreement which typically requires the procurement of a relevant site, obtains planning consent using our considerable experience in this field, and proposes a plan for the disposal of the site once planning permission has been obtained.

Our asset management division benefits the Group in three principal ways: it optimises the Group's land and planning expertise, it significantly reduces the capital investment required and it enables Inland Homes to earn management fees as the various milestones of the project are achieved. As the projects are capital light (where our skills and expertise are the service), the schemes can generate significant and attractive returns.

Typically, these transactions are structured so that any debt incurred is generally non-recourse to the Group and on the sale of a site with planning consent, a partnership housing contract may be secured by Inland Homes for the construction of the homes. 

At 31 March 2021, we currently have six active projects that have the potential for more than 3,275 new homes (30 September 2020: 3,100). In the first half of the year, the Group submitted a planning application for 1,629 homes at Cavalry Barracks, Hounslow and received outline planning consent for 583 homes at the former Homebase store in Walthamstow. Detailed planning consent was achieved in April 2021 at Walthamstow and in line with the asset management model outlined above, contracts have now been exchanged for the private units within this site, for a total consideration of £116m.

Maximising the value of the land we own with planning consent

The decision to sell, develop or partner with third parties is based on a site-by-site assessment of which activity will deliver the best returns, subject to the overriding cash requirements of the Group.

The total number of land bank plots at 31 March 2021 was 10,573 (30 September 2020: 11,045), which represents a marginal decline from the year end but nevertheless represents a strong land bank position.

The Group's land bank consists of plots with planning permission amounting to 2,886 (30 September 2020: 2,470), plots where planning has been submitted amounting to 3,535 (30 September 2020: 1,819), plots where planning has yet to be submitted amounting to 1,385 (30 September 2020: 3,961) and strategic land bank plots amounting to 2,767 (30 September 2020: 2,795).

Deliver homes which meet the market's needs 

Inland Homes designs and builds new homes that are targeted at the first-time buyer. The Group's credentials as a high-quality housebuilder are evidenced by the number of award-winning developments. In line with customer demand, the priority for the Group remains the construction of houses, rather than apartments, for private sale. 

During the period, the underlying residential housing market has been strong as a result of a number of factors, including the plentiful supply of mortgages with low interest rates, the extension of the stamp duty holiday until June 2021 and the shortage of supply, which was exacerbated by the COVID-19 pandemic.

Against this economic backdrop, excluding joint ventures, the Group sold 101 private homes (30 September 2020: 96, 31 March 2020: 56) and a hotel, realising in aggregate £39.0m (30 September 2020: £23.8m, 31 March 2020: £13.8m) during the period. The average selling price of these homes was £254,000 (30 September 2020: £287,000, 31 March 2020: £241,000), with 51.5% of these sales making use of the Help to Buy scheme (31 March 2020: 48%). The Group's net private reservation rate per active sales outlet was 0.68 (31 March 2020: 0.71) unit.

Land portfolio

In the first half of the Group's financial year, Inland Homes submitted planning applications for 1,893 homes and received outline or detailed approval for 666 new homes and 5,985 square feet of commercial space. A resolution to grant planning permission, subject to the signing of a Section 106 agreement, for 700 new homes, including 220 affordable houses and 25,000 square feet of commercial space at Gardiners Park Village in Basildon was received in May 2021.

The planning application for the 54-acre Gardiners Park Village site was submitted in conjunction with Homes England, which has a majority interest in the site and with whom the Group has been working since April 2020. In addition to the commercial space, the development will also provide a site for a new school and sporting facilities. The land for this development will be acquired over a five-year period and the gross development value for the site is estimated to be around £200m.

Inland Homes' flagship development at Wilton Park, Beaconsfield is set to provide 304 new homes, and related community facilities. In September 2020, we completed the sale of 94 plots to Bewley Homes, a specialist high quality residential developer. This sale is part of phase I and II of the overall project, which comprises 147 new homes, including 40 affordable homes.

At the start of the period under review, the Group released for sale the first of the existing homes at Wilton Park that were acquired with the site. These houses, which were originally let to Ministry of Defence service personnel, have been substantially renovated and reconfigured, to include new open plan living areas and contemporary kitchens and bathrooms. Five of the properties were reserved at 31 March 2021 and subsequently at the date of this report, eight completions have been achieved, for a total consideration of £5.2m.

Inland Homes is working with Broxbourne Borough Council and others to transform the Group's joint venture development at Cheshunt Lakeside, Cheshunt. Planning permission has been agreed and the plans will transform the site, with 1,725 new homes, new business space and other community amenities, including a new primary school. Phase I of the scheme was sold to a local housing association in June 2020, with the Group being awarded the associated contract to construct 195 apartments. Construction commenced in October 2020 and is progressing well.

A resolution to grant detailed planning consent for Parcel 1b for 205 new homes and a detailed planning consent for Parcel 14 for 22 new homes, commercial space and community facilities have been received. Discussions are underway with a number of interested parties who have expressed an interest in the site for partnership housing.

The Group also concluded the sale of a 105-bedroom hotel at the Group's Wessex Hotel site in Bournemouth, pre let to Premier Inn, to Aviva for £13.2m. The construction is the first hotel built by Inland Homes. At the same site, the Group is also constructing 94 apartments with construction due to be completed shortly. The development is within a renowned seaside destination and to date sales have been very promising, with 12 apartments sold at 31 March 2021 and 26 at the date of this report.

Inland Homes was delighted to win the WhatHouse? 2020 Gold award in the Best Regeneration Scheme category for its sought-after Chapel Riverside scheme in Southampton. This nine-acre regeneration project on a former derelict brownfield site will deliver, on a phased basis, 520 new one, two, and three-bedroom homes and 64,000 square feet of commercial space. The site has required extensive remediation and civil engineering works including the demolition of disused buildings, ground decontamination and the sinking of a 25m diameter water tank below ground level. The level of the site has been raised and the first 210m section of the sea wall to protect the city from flooding has been completed. Within the current phase, of the 108 apartments constructed to date, I am pleased to report that 68 were sold at 31 March 2021 and 88 at the date of this report, with a further 18 reserved for sale.

In May 2021, the Group also fully repaid Homes England who had provided the development finance for the Chapel Riverside scheme.

Asset management

Since the start of the financial year, the Group's asset management business has continued to show strong growth.

Having secured planning consent in April 2021 for 583 units on the former Homebase store in Walthamstow, we are delighted to announce that contracts have been exchanged with London BTR Investment Holdings to sell 355 private units for a total consideration of £116m. This includes a £88.5m build contract awarded to Inland Partnerships.

The Group has also submitted a planning application for a residentially led mixed-use scheme for 1,629 homes on the 36-acre site Cavalry Barracks site in Hounslow. This site represents one of the largest brownfield sites in London, with an estimated gross development value of £600m. The Group currently anticipates that planning permission will be granted on this site during the first half of our next financial year.

The Hillingdon Gardens scheme at the former Master Brewer site in Hillingdon has been the cause of much frustration. Inland Homes' scheme will transform the currently derelict former commercial site into a residentially led mixed-use neighbourhood with a network of pedestrianised areas, landscaped public squares and additional green spaces.

Previously, the Group had submitted a planning application for 514 much needed new homes on this site, including 182 affordable homes. The Secretary of State resolved that the application could be determined at local level by the Greater London Authority and planning consent was granted in April 2021.

Subsequently, the London Borough of Hillingdon has sought a judicial review of this decision. The legal advice the Group has received indicates that the claim has no merit, but the timeline for resolution of this issue is outside of the Group's control. The Group will provide an update in due course.

The Group also has two further sites in Barking and Dagenham and planning applications for 364 new homes on these two sites have recently been submitted.

Partnership housing contract income 

The Group continues to see increasing demand from affordable housing providers and BtR operators for partnership housing. The advantage for Inland Homes is that the Group can recognise a return from the land sale and make returns and generate cash flow from the associated build contract over the medium term.

At 31 March 2021, contracting income is substantially ahead of the comparative period last year. The number of partnership homes under construction amounted to 946 (30 September 2020: 1,302 homes).

The Group has a build contract with Clarion Housing Group for the construction of 325 residential units at its site in Merrielands, Dagenham. The development of this four-acre site, originally part of the Ford car plant, will provide more than 16,000 square feet of commercial space and other associated amenity areas.

Additionally, as referred to above, the Group has just exchanged a £88.5m build contract with a BtR operator for the construction of 355 private homes at the former Homebase store in Walthamstow. Construction of the homes is set to commence in September 2021, with build completion anticipated in 2025. This is Inland Partnerships largest award to date and takes the partnership housing contract income forward order book to £139.9m. In addition, Inland Partnerships is at an advanced stage of negotiations with a major G15 housing association to deliver the remaining homes on this important inner-city site.

The Group continues to seek partnership housing contract income contracts, which provide an exit for land disposals with the added advantage of an ongoing construction contract. The Group is proactively working to improve its commercial delivery and operational efficiency to drive up gross margins in this business. However, unforeseen build costs along with extended construction periods

 in the first six months of the year that are expected to continue on certain sites, will continue to affect the margins in this division.

Group results

Income statement

Revenue for the six months, including £13.2m for the sales completion of the hotel in Bournemouth, was up 31% on the same time last year at £78.0m (30 September 2020: £124.0m, 31 March 2020: £59.6m). Partnership housing contracting income was down 19% to £28.5m (30 September 2020: £51.8m 31 March 2020: £35.3m). The Group has benefitted from the underlying strength of the residential housebuilding sector and housebuilding income was up 183% at £39.0m (30 September 2020: £23.8m, 31 March 2020: £13.8m), primarily as a result of sales made at the Group's developments at Chapel Riverside, Southampton and the Wessex Hotel site in Bournemouth.

The Group's management fees from asset management are recognised once the Group has achieved the milestones set out in each individual contract. It is entirely usual for the Group to earn a fee on specific performance, including the successful gaining of planning permission. These results were affected by the timing of planning permission achieved in our asset management business at Walthamstow, which had originally been anticipated during the six-month period covered by these interim results. Timing of such decisions is clearly not in Inland Homes' hands and the planning permission on this development was not received until April 2021. As a result, the £4.5m management fee relating to this will not be recognised until the second half of the financial year.

Additionally, the Group was made aware of previously unforeseen and additional costs of approximately £3.2m relating to one housebuilding site and a partnership housing contract. This was partially offset by £1.0m of additional forecast revenues, resulting from strong demand at two of the Group's housebuilding sites.

During the period, the Group experienced some direct materials cost inflation, which have put further pressure on the Group's margins. The Group's gross profit margins on its contract income and housebuilding are currently unsatisfactory and the Board has carried out a thorough investigation and tightened commercial review procedures to rectify this issue. As a result of the steps taken, the Board would expect to see margin improvement over the next two financial years.

At 31 March 2021, the project teams hold project contingencies within their budgets totalling £3.3m (30 September 2020: £4.0m).

As a consequence of these factors, total gross profit was 27% lower at £3.5m (31 March 2020: £4.9m). Overheads reflect the cost cutting and other measures taken by the Board in response to the COVID-19 pandemic and were significantly lower at £4.1m (31 March 2020: £7.6m) due to the strategic streamlining of overheads undertaken during 2020. The interest cost amounted to £4.8m (31 March 2020: £4.5m). The loss before taxation was an improvement on the comparable period and amounted to £5.8m (31 March 2020: loss before taxation £7.2m). No interim dividend is proposed.

The basic loss per share for the six months ended 31 March 2021 was lower at 2.50p (31 March 2020: Loss 3.20p).

Net assets and EPRA

Net assets at 31 March 2021 have increased to £168.0m (31 March 2020: £156m) when compared with last year due to the placing of new shares in May 2020, but decreased against the prior year end (30 September 2020: £173.3m) due to the trading loss. The net assets per share shows a small decline at 73.6p (31 March 2020: 75.8p per share) when compared with the previous period (30 September 2020: 76.5p per share).

There was a decline in the EPRA undiluted net asset per share at 31 March 2021 which was 97.66p (30 September 2020: 103.6p per share). The principal reason for this, was the loss in value attributable to one of the Group's properties, which falls under the governance of a local council, who recently withdrew their five-year local plan in light of the Government's White Paper for Planning for the Future and the unprecedented impact of the COVID-19 pandemic.

Non-current assets

The Group's investment properties principally comprise the existing residential properties at Wilton Park and the Group's development site in Poole, Dorset. At 31 March 2021, these showed an increase to £49.5m (30 September 2020: £43.5m) due to the commencement of construction on an investment property and a transfer from inventories of assets that the Group plans to hold for the long term. Other receivables of £23.7m (30 September 2020: £22.3m) include £19.9m of deferred consideration due on the sale of our 50% interest in the company that owns the site at Cheshunt, which will be repaid as the development progresses out of dividends distributed by the joint venture.

Inventories, trade and other receivables

Inventories reduced over the period and at 31 March 2021 were £159m (30 September 2020: £173.6m), reflecting the slight reduction in the land bank and the strong demand from buyers for Inland Homes properties. Trade and other receivables increased to £73.4m (30 September 2020: £60.9m), principally as a result of increased management fees due to the Group from the asset management business. 

Cash and net debt

One of the Group's key strategic aims is the reduction of net gearing and it is, therefore, gratifying to note that cash and cash equivalents have increased by 78% since the year end to £28.0m (30 September 2020: £15.7m), which includes restricted cash of £13.8m (30 September 2020: £4.7m) held on behalf of Homes England.

At the beginning of this financial period, the Group triggered the accordion part of its revolving credit facility with HSBC. This takes the available facility from £45m to £65m. This facility provides the Group's housebuilding activity with balance and flexibility as the proceeds of sales from Inland Homes' sites are used to repay the facility and the facility is used to fund the ongoing housebuilding programme.

The Group has completed a considerable amount of work in successfully extending the maturity of its other debt facilities. As at 31 March 2021, gross debt was £160.9m (30 September 2020: £163.9m) and of this approximately £41m (31 March 2020: £59m) was due for repayment within 12 months compared to £70m at 30 September 2020. In addition, at 31 March 2021 the Group has further undrawn bank facilities of £39.2m (30 September 2020: £45.8m).

Net debt at 31 March 2021 was £132.9m representing a 10% reduction since the year end (30 September 2020: £148.2m). Net gearing at 31 March 2021 was 79.1% (31 March 2020: 96.2%) compared to 85.6% as at 30 September 2020.

Assets held for resale

The assets held for resale at 31 March 2021 amounted to £11.1m (30 September 2020: £12.5m) and represent some of the existing residential properties at Wilton Park, which are being refurbished for sale and another commercial property.

Other financial liabilities

Other financial liabilities at 31 March 2021 of £11.1m (30 September 2020: £Nil) reflects deferred land consideration amounts, which are expected to be paid within one year.

Dividends

One of the key strategic aims of the Group is the reduction of net gearing and the Board will look to resume the payment of dividends as soon as possible after this objective has been achieved.

Forward order book

The Group currently has forward residential home sales of £39.1m, which includes a large block sale to a third party scheduled to complete during second quarter of the financial year ending 30 September 2022. Additionally, the Group has a forward partnership housing contract income order book of £139.9m, with a further construction contract totalling £41.9m at a very advanced stage, which is expected to be signed shortly. The Group has previously contracted to sell a parcel of land for £14.0m (including infrastructure works), subject to certain conditions being fulfilled and is on track to satisfy these conditions as planned. 

Board

There were a number of changes to the Board during the period. Carol Duncumb joined the Board in January 2021 and I became the new Chairman of Inland Homes in March 2021. There have also been some consequential changes to the Board Committees, with Carol becoming Chair of the Remuneration Committee and our fellow Non-executive Director Brian Johnson becoming a member of the Audit Committee, which I am now chairing.

The Board remains committed to upholding the good governance principles as set out in the Quoted Companies Alliance (QCA) Corporate Governance Code.

Environmental, Social and Governance

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

As a responsible business and against the broader backdrop of an escalating global climate issue, Inland Homes has developed its Environmental, Social and Governance (ESG) framework. 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.

Going concern

The Board is also 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 and the planned withdrawal of the furlough scheme 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 Interim 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 have performed a detailed sensitivity analysis to test the Group's liquidity and forecast banking covenants based on several scenarios. The Directors have also considered a severe, but plausible downside scenario. Under this scenario, further details of which are set out in Note 2, 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 Directors therefore consider it appropriate to prepare the financial statements on the Going Concern basis.

Outlook

The Group's main strategic objective remains the reduction of net debt and it is actively working on a number of initiatives to crystalise profit from its valuable land bank. The Group has a number of ongoing construction projects which will generate further cashflow. In addition, we would expect to see further growth from the Group's asset management and partnership housing businesses.

In the absence of any unforeseen circumstances therefore, based on management's current expectations regarding the timing of planning applications on certain sites and planned sales completions, the financial outlook for the Group for this financial year remains unchanged. 

As the economy emerges from the COVID-19 pandemic, there can be no certainty as to what the longer-term repercussions will be. Furthermore, the housebuilding industry and the economy as a whole are facing some headwinds, including quite significant cost inflation on certain products, the unwinding of the Government's furlough scheme and the possible increase in unemployment numbers.

However, the fundamental shortage of quality new homes in the South and South East of England remains. The market for consented land with planning permission and the demand for houses built by Inland Homes remains strong and I look forward to reporting on the further progress made during the second half of our financial year.

Simon Bennett

Chairman

APPENDIX

Principal risks and uncertainties

The Group's going concern assessment considers its principal risks which were previously set out in the "Principal risks and uncertainties" section within its Annual Report for the year ended 30 September 2020. The Directors have reassessed these key risks and consider that they all remain the same with the exception of Risk C "Adverse Government policy and planning regulation" which the Directors now consider as a "High" risk due to the recent experiences that Group has encountered in the six-month period to 31 March 2021 and up to and including the date of this report.

The following table outlines our principal risks and sets out how these key risks are managed:

Group statement of comprehensive income

for the six-month period ended 31 March 2021

The accompanying notes form an integral part of this half-year report.

Group statement of financial position

at 31 March 2021

The accompanying notes form an integral part of this half-year report.

Group statement of changes in equity

for the six-month period ended 31 March 2021

The accompanying notes form an integral part of this half-year report.

Group statement of cash flows

for the six-month period ended 31 March 2021

The accompanying notes form an integral part of this half-year report.

Notes to the half-year financial report

for the six-month period ended 31 March 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 to third parties which have the benefit of planning permission.

• 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 leases property assets for rental income purposes in the short and medium term whilst sites are taken through the planning process or being developed.

• 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 31 March 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 other are indirect holdings.

All of the above entities are incorporated and domiciled in England and Wales, with the 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

− Inland Helix Limited which is registered at 2nd Floor, Regis House, 45 King William Street, London, EC4R 9AN

− Troy Homes Limited which is registered at 5 Technology Park, Colindeep Land, 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.

Additions of subsidiaries

During the six-month period ended 31 March 2021, the Group acquired the following:

• Appletree Farm Cressing Limited

• 50% of the share capital of Dormant Company 09437864 Limited (formerly 10 Ant South Limited)

• 75% of the share capital of West Drayton Developments Limited

Disposal of subsidiaries

During the six-month period ended 31 March 2021, the Group incorporated and disposed of Zenith Living (Barking) Limited. No profit or loss arose on this disposal.

The Group also disposed of Inland Commercial Property Limited. No profit or loss arose on this disposal.

Investments in joint ventures

The Group holds the following interests in joint ventures:

• Bucknalls Developments Limited: In December 2015, the Group entered into a joint venture with two individuals to purchase land, obtain planning permission and develop the homes in Garston, Hertfordshire. The development completed in the year ended 30 September 2020 and the entity exists to support the defects period of the completed development.

• 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.

• 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.

• 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 a 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 is scheduled to complete during the year ending 30 September 2021.

Investments 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

Neither the financial information for the six-month period to 31 March 2021 nor the six-month period to 31 March 2020 was subject to an audit.

The financial information set out in this half-yearly financial report does not constitute statutory accounts as defined in Sections 434(3) and 435(3) of the Companies Act 2006. The Group's statutory financial statements for the year ended 30 September 2020 have been filed with the Registrar of Companies and are available at www.inlandhomesplc.com. The Auditor's report on those financial statements was unqualified, did not draw attention to any matters by way of an emphasis of matter and did not contain any statement under Section 498 of the Companies Act 2006.

The financial information in these condensed consolidated financial statements is that of the holding company and all of its subsidiaries together with the Group's share of its joint ventures and associate. It has been prepared in accordance with International Accounting Standard (IAS) 34 Interim Financial Reporting and should be read in conjunction with the report and accounts for the year ended 30 September 2020, which have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union and as issued by the International Accounting Standards Board.

The accounting policies adopted in this financial report are consistent with those adopted by the Group in the year ended 30 September 2020 and have been consistently applied in the six-month period to 31 March 2021. Full details of the Group's accounting policies can be found on pages 84 to 89 of the Group's statutory financial statements for the year ended 30 September 2020.

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 were previously set out in the "Principal risks and uncertainties" section on pages 38 to 41 of its Annual Report for the year ended 30 September 2020, which was signed on 5 February 2021. The Directors have reassessed these key risks and consider that they all remain the same with the exception of Risk C "Adverse Government policy and planning regulation" which the Directors now consider as a "High" risk due to the recent experiences that Group has encountered in the six-month period to 31 March 2021 and up to and including the date of this report.

The Board has reviewed the performance of the Group for the current reporting period and prepared forecasts for a period covering twelve months from the date of approval of this half-year 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 £39.1m, which includes a large block sale to a third party scheduled to complete during the second quarter of the financial year ending 30 September 2022. Additionally, the Group has a forward partnership housing contract income order book of £139.9m with further construction contracts totalling £41.9m at a very advance stage and expected to be signed in July 2021. The Group has previously contracted to sell a parcel of land for £14.0m (including infrastructure works) subject to certain conditions being fulfilled and is on track to satisfy these conditions as planned. The Group, excluding joint ventures, currently has annualised residential and commercial rental income of c£1.7m.

The Directors have also assumed the continuation of stringent cash management procedures and debt reprofiling strategy, which have been in place since March 2020.

These procedures have seen cash and cash equivalents, including restricted cash, increase to £28.0m at 31 March 2021 (£17.8m at 31 March 2020) from £15.7m at 30 September 2020.

The Group has done a considerable amount of work in successfully extending the time profile of its debt facilities and as at 31 March 2021 gross debt due within twelve months as a proportion of total gross debt was 25.6% (36.0% at 31 March 2020) and compared to 42.6% at 30 September 2020. The undrawn debt facilities at 31 March 2021 were £39.2m. The main strategic objective of the Group in the current financial year remains the reduction of both net debt and gearing.

At the date of this report, the Group has borrowing facilities totalling £64.6m falling due for repayment within twelve months. Two loan facilities amounting to £10.3m fall due for planned repayment by 31 December 2021 and three loan facilities amounting to £37.9m are due for planned repayment by 30 April 2022. £13.0m of these three loan facilities is expected to be repaid from the previously contracted sale of land noted above which will reduce this to £24.9m. 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.

A revolving credit facility of £12.3m expires on 17 December 2021 and the Directors have agreed terms to renew the facility for a further period of five years from the date of renewal which is expected to be completed in the short term.

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 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 shortly.

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 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' and mean that the Group would require a relaxation of an interest cover covenant from one 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 and the planned withdrawal of the furlough scheme 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 half-year 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 accounting policies adopted in this financial report are consistent with those adopted by the Group in the year ended 30 September 2020 and have been consistently applied in the six-month period to 31 March 2021. Full details of the Group's accounting policies can be found on pages 84 to 89 of the Group's statutory financial statements for the year ended 30 September 2020.

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 standards in issue but not yet effective is currently being assessed by the Group.

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

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

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

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

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

• IAS 1 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*;

• 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)*

*Standards and amendments not yet endorsed by the EU.

4. Adoption of new accounting standards

In the six-month period ended 31 March 2021, the Group has not adopted any new accounting standards. Details of the Group's accounting policies are found in note 2.

5. 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 21 and 22 to the half-year report. 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.

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.

Other financial liabilities consist of borrowings of £7.2m (30 September 2020: £6.8m) and £7.5m (30 September 2020: £nil) of deferred land creditors. Deferred land creditors are not considered as part of the Group's capital management policy.

6. 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 7.

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 'House building' 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.

7. Segmental information

In accordance with IFRS 8 'Operating Segments', 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 and provide the appropriate analysis of the disaggregation of revenues by IFRS 15 'Revenue from Contracts with Customers'.

In identifying its operating segments, management differentiates between land sales, asset management fees, contract income, house building, rental income, investment properties and central support. These segments are based on the information reported to the Chief Executive Officer 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.

Segmental analysis by activity