INL.L Regulatory News (INL)

30 June 2022

INLAND HOMES plc

('Inland Homes' or the 'Group')

INTERIM RESULTS FOR THE SIX-MONTH PERIOD ENDED 31 MARCH 2022

FURTHER SIGNIFICANT REDUCTION IN THE GROUP'S NET DEBT

Inland Homes plc (AIM: INL), the housebuilder, partnership housing developer and regeneration specialist focused on the South and South East of England, today announces its interim results for the six-month period ended 31 March 2022.

Stephen Wicks, Chief Executive at Inland Homes, commented:

"The Group has made further progress in delivering its key strategic priority, achieving its year-end target of reducing net debt to below £100m within the first six months of the reporting period.

"Our valuable land portfolio and expertise in securing planning consent on these sites is enabling us to maximise the opportunities presented by the strong land market and the wider-market undersupply of new homes. We continue to see high demand from affordable housing providers, Build to Rent operators and other housebuilders for our high-quality land assets and build capability.  

"Our asset management segment also continues to perform well, with planning permission granted at two schemes during the period and a determination of our planning application for 1,525 homes at Cavalry Barracks in Hounslow anticipated before the end of the calendar year.

"While the UK housebuilding industry is facing some headwinds in the short term, we believe there is a drastic shortage of consented sites in the South and South East that is exacerbated by a highly complex planning system which places high demands on developers. Resultantly, the Group, with its valuable land portfolio, is well placed to continue to make further significant progress on its strategic objectives in the second half of the year."

Financial performance

This set of results demonstrates that Inland Homes continues to deliver on its key strategic objective, namely, the reduction of Group net debt, with another significant decrease.

Financial performance highlights include:

• Net debt: a further significant reduction by 19% to £96.2m (30 September 2021: £118.1m; 31 March 2021: £132.9m)

• Cash balances: £27.5m (30 September 2021: £12.1m; 31 March 2021: £28.0m)

• Net gearing: 55.1% (30 September 2021: 64.5%; 31 March 2021: 79.1%)

• EPRA net tangible assets: £236.7m (30 September 2021: £246.4m; 31 March 2021: £222.0m)

• EPRA net tangible assets per ordinary share: 103.60p (30 September 2021: 107.84p; 31 March 2021: 97.29p)

• Increased revenue: £80.5m (31 March 2021: £78.0m)

• Result for the period: the loss before taxation amounted of £8.2m (31 March 2021: loss before taxation £5.8m), after accounting for an additional £4.0m of expected costs to complete on one of the Group's partnership housing contracts

• Outlook: notwithstanding the loss incurred for the first six months of the financial year, based on management's current expectations regarding the timing of planning applications and the completion of planned land sales, the financial outlook for the Group for the financial year remains unchanged

Operational performance

Land trading and asset management divisions continued to perform well:

• Land portfolio: now comprises 9,161 plots (30 September 2021: 10,055 plots; 31 March 2021: 10,573 plots).

• Estimated gross development value of the land portfolio: £2.8bn (30 September 2021: £3.0bn; 31 March 2021: £3.2bn).

• Asset management division: now has five projects under management, which when combined have the potential to deliver approximately 2,600 new homes.

• Partnership housing:  the number of new homes under construction amounts to 1,031 (30 September 2021: 1,257 new homes; 31 March 2021: 946 new homes) and the forward order book amounts to £201.1m (30 September 2021: £164.7m; 31 March 2021: £139.9m).

• Private housebuilding: excluding joint ventures, 81 new homes were sold (30 September 2021: 216 new homes, 31 March 2021: 101 new homes). The average selling price of these new homes was £263,000 (30 September 2021: £262,000; 31 March 2021: £254,000).

· Environmental, Social and Governance: ESG strategy continues to evolve, with the views of our stakeholders being of utmost importance in defining our key priorities and targets. With this in mind, the Group is carrying out a materiality assessment, the results from which will be used to develop the full ESG strategy.

• Cladding and fire safety: Inland Homes is a signatory to the Department for Levelling Up, Housing and Communities Developer Pledge which sets out the industry's commitments to removing cladding and remediating fire safety issues in buildings over 11 metres. We are assessing what, if any, works are required in line with the commitments made within the Pledge and a further update will be provided.

Enquiries

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

Stephen Wicks, Chief Executive

Nishith Malde, Finance Director

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

Dominic Morley / James Sinclair-Ford (Corporate Advisory)

Erik Anderson (Corporate Broking)

The information contained in this Announcement is deemed by the Group 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 Group 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 Group 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 for the six-month period ended 31 March 2022

Chairman's statement

Introduction

Inland Homes is committed to ensuring that the new homes it builds leave a lasting legacy. The Group designs and builds new homes that are targeted at the first-time buyer and first-time mover market. The Group's credentials as a high-quality housebuilder are evidenced by the number of Inland Homes' award-winning developments. The underlying housing market has been strong and the Group finished the last financial year strongly, as demand for the new homes it builds remained vibrant. The Group generates income from multiple sources and in this financial period the land trading and asset management divisions continued to perform well.

The Group's primary objective continues to be to make progress in reducing the Group's net debt. I am therefore pleased to report that as at 31 March 2022, net debt stood at £96.2m (30 September 2021: £118.1m; 31 March 2021: £132.9m), a reduction of 19% since the last financial year end.

The key metric in measuring the value of the Group continues to be the EPRA net tangible asset (EPRA NTA) value per ordinary share. Largely as a result of the losses recorded in the first half of this financial year, the EPRA NTA per ordinary share has decreased to 103.60p (30 September 2021: 107.84p; 31 March 2021: 97.29p).

Financial and operational

Reduction of net debt

The key strategic priority for the Group is the reduction in net debt. This has gone hand in hand with successfully extending the maturity of the Group's debt facilities and reprofiling its existing debt on more favourable terms.

Net gearing as at 31 March 2022 had been significantly reduced to 55.1% (30 September 2021: 64.5%; 31 March 2021: 79.1%). In addition, as at 31 March 2022 the Group had further undrawn loan facilities of £33.3m (30 September 2021: £33.9m; 31 March 2021: £39.2m).

Land bank

At the heart of Inland Homes' business is its valuable land bank. The Group specialises in finding brownfield sites, obtaining the relevant planning consent, remediating the land where necessary, installing the infrastructure and then either developing the consented sites or selling them to other housebuilders. The Group looks to derive a balanced return from its land bank. Short and medium-term returns are achieved from the sale of plots with planning consent or the sale of whole consented sites, with partnership housing contracts to housing associations and Build to Rent (BtR) investors. Longer-term returns are derived from the Group's strategic land bank, where plots are controlled by way of options which are usually at a discount to their open market value.

The land market in the areas where the Group operates continues to be strong. The Group's land and asset management segments both performed well during this financial period. The Group achieved revenue of £16.4m (30 September 2021: £21.9m; 31 March 2021: £0.6m) from land sales during the first six months of the financial year and this part of the business made a profit before tax of £3.6m (30 September 2021: £1.1m; 31 March 2021: loss £2.1m).

In November 2021, Inland Homes sold the last phase of its successful Carters Quay development in Poole to the local council by way of a partnership contract. This development is a good example of the Group's business model. Originally, Inland Homes acquired a brownfield site which was formerly a tile factory. Working with the local council on a long-term basis to create much needed new homes and commercial space, three phases have been successfully developed, providing 165 new homes. The Group sold the final phase, comprising 161 new homes and commercial space, for £43.5m, of which an advance payment of £8.25m has been received. The construction contract to build these further new homes will be completed over the next three years.

The other key disposal during the period was a sale of a further phase at the Group's development at Gardiners Park Village in Basildon, for a consideration of £9.5m. The scheme is being delivered in conjunction with Homes England, with Inland Homes acting as the masterplan developer. The Group achieved a resolution to grant planning permission on this site in April 2021 for a residentially led, mixed use scheme for up to 700 new homes and 25,000sqm of commercial space.

In March 2022, our joint venture at Cheshunt Lakeside, Cheshunt secured the sale of 205 plots within Phase 1B to the leading BtR operator, London BTR Investments (London BTR). Planning consent for a new urban village at Cheshunt Lakeside was achieved in 2019, with approval granted for 1,725 new homes, as well as significant commercial space and associated infrastructure. The sale of Phase 1B includes a build contract for the delivery of the 205 private homes and the combined land and build value is £56.4m. This is the Group's second contract with London BTR, following commencement of construction of 355 private homes at the former Homebase store in Walthamstow.

The Group now has 1,031 new homes under construction on behalf of its partners.

The estimated gross development value (GDV) of the Group's land portfolio is approximately £2.8bn (30 September 2021: £3.0bn; 31 March 2021: £3.2bn).

This portfolio comprises 9,161 plots (30 September 2021: 10,055 plots; 31 March 2021: 10,573 plots), with sites located across the South and South East of England where demand for new homes continues to be strong. Of these plots, 3,336 have planning permission (30 September 2021: 3,689 plots; 31 March 2021: 2,886 plots).

Major planning permissions

The Group has a proud record of securing planning permission on its portfolio of sites. Inland Homes' land and planning teams are highly skilled and have the experience, expertise and tenacity needed to progress these sites through the planning system.

In October 2021, having worked closely with the local authority in developing its plans for the site, we were delighted to announce the receipt of planning permission, subject to the signing of a Section 106 agreement, for a residentially led, mixed-use scheme of 380 homes plus 930sqm of flexible commercial space at Dagenham Dock, Dagenham. This development will provide a new gateway to the area and will act as a catalyst for the regeneration of South Dagenham.

Major planning permissions have also been secured at the Group's developments at the old Telephone Exchange at Staines and Thames Road, Barking. We were also delighted to receive confirmation in January 2022 that the High Court had quashed the appeal made by the local council to seek a judicial review of the Mayor of London's decision to approve plans for the Group's Master Brewer site in Hillingdon. Further details on these sites are set out below.

The strategic land portfolio

In recent years the Group has been focused on growing its strategic land portfolio and nearly one third of its land bank is now strategic. Land within the strategic portfolio is usually held by way of an option, usually at a discount to open market value, which therefore requires a lower capital investment.

During the period under review, within the strategic land portfolio, a resolution to grant planning permission was achieved for 50 residential plots at the Group's site in Glynswood, High Wycombe. Additionally, a site controlled by the Group in Datchet has received an allocation for 80 residential plots, following promotion through the local plan process.

Inland Homes also expects to submit planning applications for approximately 375 residential plots across four strategic sites in West Sussex, Buckinghamshire and Hertfordshire by the end of this financial year.

Asset management

The asset management activities of the Group benefits Inland Homes in a number of different ways: it optimises the planning expertise within the Group, it significantly reduces the capital investment required and it enables the Group to earn management fees as the various defined performance obligations are met. The capital required for these projects is sourced from external investors, who earn a priority return on the capital they have invested, typically at a fixed coupon rate. The principal risk to the Group on these projects is delays to the anticipated timetable to achieve all the performance obligations. Typically with these transactions, any debt incurred is generally non-recourse to the Group.

The Group currently has five projects within this area of the business which, when combined, have the potential to deliver approximately 2,600 new homes. This division performed well during the period under review, with revenues of £7.8m (30 September 2021: £27.8m; 31 March 2021: £8.9m) and a pre-tax profit of £1.8m (30 September 2021: £21.6m; 31 March 2021: £1.8m).

The largest of these projects is the Group's development at its 36-acre site at Cavalry Barracks in Hounslow. The site is one of the largest brownfield sites in London with an estimated gross development value of £600m. We anticipate decisions on our planning applications for 1,525 homes at Cavalry Barracks in Hounslow and a second scheme in Barking for 233 new homes before the end of the calendar year.

In January 2022, the High Court quashed the appeal made by the local council to seek a judicial review of the Mayor of London's decision to approve plans for 514 much needed new homes on the Group's Master Brewer site in Hillingdon. The Group's plans for the site will transform a derelict former commercial site creating a residentially led, mixed-use neighbourhood, with a network of pedestrianised areas, landscaped public squares and extensive green spaces. The Group continues to evaluate the options for this site.

Also included within fees generated are those earned from the sale of the former Telephone Exchange in Staines to a private housebuilder, following the granting of planning consent for 206 new homes on this site in January 2022. The Group has also secured planning permission for a residentially led, mixed-use scheme of 131 new homes and 2,000sqm of commercial space at its site in Thames Road, Barking.

Partnership housing contract income

The Group continues to see increasing demand from affordable housing providers and BtR operators for partnership housing projects. Our partners recognise Inland Homes' ability to add value across all stages of these projects. One of the advantages of Inland Homes' flexible business model is that it allows the Group to book a profit on the land it sells and to make returns and generate cashflow from the resulting build contract over the medium term.

As at 31 March 2022, revenue from partnership housing contract income amounted to £33.5m (30 September 2021: £60.3m; 31 March 2021: £28.5m). The number of partnership new homes under construction now amounts to 1,031 (30 September 2021: 1,257 new homes; 31 March 2021: 946 new homes), with a forward order book of £201.1m (30 September 2021: £164.7m; 31 March 2021: £139.9m).

Contracts won include the final phase of the Carters Quay development in Poole from the local council and Phase 1B Cheshunt Lakeside, Cheshunt from a leading BtR operator, as referred to above.

The margins in the partnership housing contract income and the housebuilding division have not been satisfactory for some time. As a result, the Board commissioned an independent review of all projects under construction to identify areas for improvement. A number of recommendations were made and the Group has commenced changes in processes and controls to drive greater cost control.

Regrettably, results during the period have been adversely impacted and an additional £4.0m of expected costs to complete has been provided for on one of the Group's partnership housing contracts. Notwithstanding the loss incurred for the first six months of the financial year, based on management's current expectations regarding the timing of planning applications and the completion of planned land sales, the financial outlook for the Group for the financial year remains unchanged.

On 6 May 2022, the Group was informed by DCB (Kent) Limited (DCB), the main subcontractor for our development in Alperton known as Afrex House, that they were being placed into administration. The Group has a full parent company guarantee from Kinovo PLC (Kinovo), who is currently establishing the impact of the administration of DCB. Kinovo has reported that it remains in discussions with the joint administrators of DCB in relation to the construction projects of DCB that are subject to parent company guarantees from Kinovo. The Group currently expects that the performance of DCB's obligations will be met in full by Kinovo and accordingly, no additional financial provision has been made in these accounts to cover DCB's lack of performance.

It is also recognised, and in common with the wider industry, that there are increased build costs due to cost inflation pressures and supply chain challenges in the broader marketplace. These will continue to put pressure on partnership contract margins in the second half of the financial year and the following year. The Group updated its Principal Risks in 2021 to include supply chain and labour market pressures and the work to establish effective mitigation strategies to prevent this risk impacting on our delivery programme is ongoing and is being closely monitored by the Governance and Risk Committee on behalf of the Board.

Private housebuilding

In the light of hybrid working practices and preference for this choice of accommodation, together with rising interest rates, the stricter lending criteria for mortgage lenders and its likely impact on the Group's target market, the Group took the strategic decision to focus its operations on building new houses rather than apartments for open market sales. As a result of these factors and as a natural consequence of where the Group's projects are in their life cycle, revenue from housebuilding sales was lower at £21.9m than for the comparative period (30 September 2021: £69.9m; 31 March 2021: £39.0m).

During the period, excluding joint ventures, sales of new homes were recorded at Meridian Waterside in Southampton, Exclusive House in Maidenhead and The Wessex in Bournemouth, with homes at our latest development, Templar Green in Cressing released to market in early 2022. The Group sold, excluding joint ventures, 81 new homes during the first six months of the financial year (30 September 2021: 216; 31 March 2021: 101) and currently has 267 new homes under construction for private sale (30 September 2021: 290; 31 March 2021: 305).

The average selling price of the homes sold was £263,000 (30 September 2021: £262,000; 31 March 2020: £254,000), with 44.8% of buyers making use of the Help to Buy scheme (31 March 2021: 51.5%). The Group's net reservation rate per active sales outlet was 0.81 unit (31 March 2021: 0.68 unit). The Group has applied to join the Deposit Unlock Scheme, which will effectively replace the government's Help to Buy initiative, to assist with future sales programmes.

Group results

Income statement

Revenue for the six months increased marginally compared to the comparative period last year at £80.5m (30 September 2021: £181.7m; 31 March 2021: £78.0m). Of this revenue, £16.4m was generated from land sales, £7.8m from asset management fees, £33.5m from partnership housing contract income and £21.9m from private housebuilding.

The change in the revenue generated from each of the income streams reflects the strength of Inland's flexible business model, highlighting how activity can be refocused in response to changes in market opportunities and business need. As noted above, in the current market, Inland's high quality land assets are in strong demand and we plan to take advantage of this in the second half of the Group's financial year through targeted land sales.

With the Group's commitment to reducing overall net debt, prioritising the capital-light asset management activity - where fees are recognised once the Group achieves the milestones set out in each individual contract - also makes commercial sense.

The Group's gross profit margins on its contract income and housebuilding continue to be unsatisfactory. Whilst tightened commercial review procedures are being embedded within the business, an isolated subcontractor issue at one contract income site has resulted in a gross loss of £6.3m in this division.

As a result, the Group reports an overall loss before tax of £8.2m (31 March 2021: £5.8m loss before tax). The basic loss per share for the six months ended 31 March 2022 increased to 3.68p (31 March 2021: 2.50p).

Cash and net debt

It is extremely pleasing to be able to report that the Group delivered on its year-end target of reducing net debt to below £100m within the first six months of the reporting period. As at 31 March 2022, net debt was £96.2m, a 19% reduction since 30 September 2021. Cash balances have been maintained at £27.5m (30 September 2021: £12.1m; 31 March 2021: £28.0m).

In parallel with lowering overall net debt, the Group has been focused on reprofiling its existing debt on more favourable terms. This includes the refinancing in December 2021, through our joint venture Cheshunt Lakeside Developments Ltd (CLDL), of facilities at Cheshunt Lakeside, Cheshunt. CLDL has procured a mezzanine loan facility of £14.25m with Homes England on considerably more favourable terms than the previous facility, together with a £7.4m infrastructure facility and an additional interest and fees roll-up facility of £2.85m. The facility is available to 21 March 2024, with repayment due by 31 December 2026.

CLDL has also increased the existing facility with Paragon Development Finance (Paragon) by £1.75m, with repayment due by 30 June 2023.

The refinancing with Homes England will reduce CLDL's funding costs significantly. Further savings will be achieved on repayment in full of the Paragon facility, when the margin charged by Homes England will reduce significantly.

Net assets and EPRA NTA

Net assets at 31 March 2022 have increased to £174.6m (31 March 2021: £168.0m) when compared with last year, but decreased against the prior year end (30 September 2021: £183.0m) principally due to the trading loss recorded in the period under review. The undiluted EPRA net tangible asset per share at 31 March 2022 was 103.60p (30 September 2021: 107.84p per share; 31 March 2021: 97.29p per share). The principal reason for the reduction was as a result of the losses recorded in the first half of this financial year.

Non-current assets

The Group's investment properties principally comprise the existing residential properties at Wilton Park, the portfolio of affordable housing operated under our Rosewood brand name and apartments in our development at Meridian, Southampton. At 31 March 2022, these showed an increase to £36.6m (30 September 2021: £36.0m).

Other receivables of £36.7m (30 September 2021: £36.3m) include £22.6m 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 reduced significantly over the period and as at 31 March 2022 were £135.9m (30 September 2021: £163.9m), reflecting the slight reduction in the land bank, the sale of residential homes and the planned reduction of apartments for private sale. Trade and other receivables decreased to £81.9m (30 September 2021: £116.9m), principally as a result of the timing of receipts from contract income and asset management contracts.

Assets held for sale

The assets held for sale at 31 March 2022 amounted to £1.5m (30 September 2021: £1.4m) and principally represent some of the existing residential properties at Wilton Park, which are being refurbished for sale.

Other financial liabilities

Other financial liabilities at 31 March 2022 of £5.9m (30 September 2021: £16.0m) reflects purchase consideration on inventories.

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.

Board change

There were no changes to the Board during the reporting period. On 5 April 2022, Group Managing Director Gary Skinner's employment with the Group was terminated with immediate effect and he has accordingly stepped down from the Board.

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 (ESG)

The Group's ESG framework continues to evolve. Inland Homes is committed to embed sustainability within all areas of the Group's operations. The Board provides oversight through the Risk and Governance Committee and at an operational level, a number of working groups have been established to ensure that the ESG strategy is delivered across the Group.

The views of our stakeholders are of utmost importance in defining our key priorities and targets. With this in mind, the Group is carrying out a materiality assessment, the results from which will be used to develop the full ESG strategy.

Cladding and fire safety

Inland Homes is a signatory to the Department for Levelling Up, Housing and Communities Developer Pledge which sets out the industry's commitments to removing cladding and remediating fire safety issues in buildings over 11 metres. We are assessing what, if any, works are required in line with the commitments made within the Pledge and a further update will be provided.

Engaging with our stakeholders

Engagement with our stakeholders is a critical part of the Board's agenda and the Board takes into account the views of its stakeholders when setting the agenda for Inland Homes. In March 2022, Inland Homes held its Annual General Meeting and I particularly enjoyed the opportunity to meet with shareholders on a face-to-face basis.

Going concern

During what is a period of geopolitical and economic uncertainty principally due to the ongoing conflict in Ukraine, the Board is also mindful that no one can forecast exactly how changing macroeconomic circumstances post the COVID-19 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 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, 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

Much has changed with regard to the economic outlook in the UK. With rising inflation and interest rates and the likelihood of a recession strengthening, predicting the future has become challenging. There is little doubt that the UK housebuilding industry in general will face some headwinds in the short term. That said, the demand for prime land in the South and South East, where the Group operates, remains strong. The Group's high-quality land portfolio means that Inland Homes is well positioned to optimise returns through targeted land sales.

Building on what has been delivered in the first half of the Group's financial year, the focus for the second half continues to be the reduction in the Group's net debt. The progress being made on this front is pleasing to see and I would like to take this opportunity to thank all staff within the Group for their continued support and commitment to the business over the period.

Notwithstanding the loss incurred for the first six months of the financial year, based on management's current expectations regarding the timing of planning applications and the completion of planned land sales, the financial outlook for the Group for the financial year remains unchanged.

Our principal risks

Principal risks and uncertainties

The Group's going concern assessment considers its principal risks which were previously set out in the 'Our Principal Risks' section within its Annual Report for the year ended 30 September 2021. The Group updated its Principal Risks in 2021 to include supply chain and labour market pressures. The work to establish effective mitigation strategies to prevent this risk impacting on our delivery programme is ongoing and is being closely monitored by the Governance and Risk Committee on behalf of the Board.

Below are the principal risks as at 31 March 2022.

Group statement of comprehensive income

for the six-month period ended 31 March 2022

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

Group statement of financial position

at 31 March 2022

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 2022

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 2022

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 2022

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 31 March 2022, 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, and registered office of the Company, with the exception:

− 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

− Nevendon Sports Centre Limited which is registered at PO Box 10680, 18 Deeley Close, Watnall, Nottingham NG16 1FY

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 2022, the Group acquired Nevendon Sports Centre Limited and its joint venture, Cheshunt Lakeside Developments Limited, incorporated Emira Developments Limited.

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 16.

• 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 16.

• Cheshunt Lakeside Developments Limited, Delamare Estate (Cheshunt) Limited and Emira Developments 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.

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 2022 nor the six-month period to 31 March 2021 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 2021 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 2021, 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 2021 and have been consistently applied in the six-month period to 31 March 2022. Full details of the Group's accounting policies can be found on pages 104 to 109 of the Group's statutory financial statements for the year ended 30 September 2021.

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 12 months.

The Group's going concern assessment considers its principal risks which are set out in the 'Principal risks and uncertainties' section of the half-year report for the six months ended 31 March 2022.

The Board has reviewed the performance of the Group for the current reporting period and prepared forecasts for a period covering 15 months from the date of approval of the 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 £27.7m, which includes a large block sale to a third party scheduled to complete during the fourth quarter of the financial year ending 30 September 2022. Additionally, the Group has a forward partnership housing contract income order book of £201.1m. 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 half-year ended 31 March 2022. 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 £118.1m at 30 September 2021 to £96.2m at 31 March 2022.

At the date of this report, the Group has borrowing facilities totalling £48.6m falling due for repayment within twelve months.

The Group has done a considerable amount of work in successfully extending the time profile of its debt facilities. The undrawn debt facilities at 31 March 2022 were £33.3m. The main strategic objective of the Group in the current financial year remains the reduction of both net debt and net gearing.

Included in facilities expiring in the going concern period is a loan facility with a lender amounting to £3.9m, which is due to be repaid in September 2022 upon receipt of a contractually due sum from a third party.

A revolving credit facility of £65.0m expires in March 2023 of which £30.7m is drawn down at the date of this report. The Directors are already in dialogue with the lender to further extend the existing facility. This existing lender has supported the Group since March 2019 and has supported numerous successful house building developments since that date.

A second revolving credit facility of £12.8m has been extended to September 2022 with an agreement in principle from the lender to extend this further to September 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 borrowing facilities, 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 analysis 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 six months on each of these sales in isolation. They have also considered, again in isolation, a delay of three months of all residential unit sales that are not in the hands of solicitors. Neither of these individual scenarios leads to an issue with the Group's liquidity but the delay of all land sales by six months leads to a breach of the interest cover ratio in the September 2022 and December 2022 quarters in the Group's main RCF facility. The breach of the interest cover ratio would be remedied by applying for a waiver from the lender. A waiver has been issued in the past and the Directors are confident that it would be issued again based on the relationship with the lender.

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' and this means that the Group would be in breach of the interest cover ratio in the September 2022 and December 2022 quarters in respect of the Group's main RCF facility for which a waiver would be applied for from the lender. 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 the current 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 half-year 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 2021 and have been consistently applied in the six-month period to 31 March 2022. Full details of the Group's accounting policies can be found on pages 104 to 109 of the Group's statutory financial statements for the year ended 30 September 2021.

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

• 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

• Amendments to IFRS 1 and IAS 12 Deferred Tax related to Assets Liabilities arising from a Single Transaction (Amendments to IFRS 1 and IAS 12).

4. Adoption of new accounting standards

In the six-month period ended 31 March 2022, the Group has adopted amendments and interpretations that were effective for the first time. These had no material impact on the Financial Statements.

Details of the Group's accounting policies are found in note 2 in its Annual Report for the year ended 30 September 2021.

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 Group's website at www.inlandhomesplc.com.

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