INL.L Regulatory News (INL)

28 March 2018

Inland Homes Plc

(the 'Company' or the 'Group')

Interim results for the six months ended 31 December 2017

 Continued scaling of housebuilding business and demand for consented plots driving strong financial performance

Inland Homes Plc (AIM: INL), the leading brownfield regeneration specialist and housebuilder with a focus on the South and South East of England, today announces its interim results for the six months to 31 December 2017.

Highlights

· 13.6% increase in Net Asset Value to £134.7 million (2016 restated: £118.6 million)

· EPRA NAV up 5.2% to 92.78p (2016 restated: 88.16p)

· Adjusted EPRA NAV up 5.7% to 97.63p (2016 restated: 92.34p)

· Profit before tax of £5.37 million (2016 restated: £4.95 million)

· 30% increase in interim dividend to 0.65p (2016: 0.5p) per share.

Investment in in-house construction operations delivering diversified revenue streams and record output

· Sale of 338 residential plots and completion of the sale of 96 private homes, at an average sales price of £322,000 (FY 2016: £306,000), generating profits of £7.4 million (2016: £5.7 million) and an 87.9% increase in revenues to £61.2 million (2016: £32.6 million)

· Current forward order book of £38.9 million (2016: £31.8 million)

· A record 560 private homes under construction with an anticipated gross development value of £144.4 million

· Construction contracts in place to deliver 220 homes across three sites for the increasingly important partnership housing business, Inland Partnerships, with a total contract value of over £43 million

· Construction underway at major schemes:

o 239 private homes at Lily's Walk and 40 private homes at Castle House, both in High Wycombe, achieving forward sales of £5.5 million and £5.0 million respectively

o Development of the first phase of 72 homes at Chapel Riverside

· Expansion of the land bank to 7,372 plots (2016: 7,151), with an anticipated gross development value in excess of £2.2 billion, including 2,218 plots with planning consent (2016: 2,440), demonstrating Inland's ongoing market-leading planning and remediation expertise:

o Outline planning application submitted for 350 homes at flagship 100 acre site at Wilton Park in Beaconsfield

o Post-period end (March 28) planning application submitted for 1,853 homes and in excess of 18,000 sqm of commercial space at Cheshunt Lakeside, a major South East UK regeneration scheme.

Supportive government measures, strong buyer demand and favorable macro-factors underpinning market buoyancy

· Government initiatives, notably Help to Buy, maintaining demand from buyers for our homes in South and South East England, with sales rates being sustained at good levels given our price point

· Housing associations and other residential landlords such as PRS funds or Local Authorities increasingly targeting residential investment and development through strategic partnerships.

Stephen Wicks, Chief Executive at Inland Homes, commented:

"This is an encouraging set of results, delivering NAV, profit and revenue growth, and ultimately validating the significant investment we have made in our housebuilding operations over the past twelve plus months. We expect further benefits to be seen as we improve the gross margin on our new developments and continue to bring in sector specialists to support our ambitious growth targets. Furthermore, our ability to deliver a high quality, turnkey offering is allowing us to identify and partner with a range of different stakeholders via our increasingly important Inland Partnerships business, as well as through Joint Ventures.

"Despite some near term headwinds, the overall outlook for the sector remains favorable, especially at the price point at which we operate, and as a business we believe we are in a strong position to continue delivering long term value for our shareholders."

Enquiries:

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 of England. The Company is always looking for brownfield sites without planning permission for future development.

For further information, please visit the Inland Homes website at www.inlandhomes.co.uk.

Chairman's statement

This has been an encouraging first half, as we continue to scale up our housebuilding operations and expand our partnership housing division, where we deliver homes for housing associations and other residential landlords such as PRS funds or Local Authorities. As the number of homes we build in-house continues to grow, there will be a rebalancing of our income streams with less reliance on land sales to other housebuilders and a growing focus on disposals to buyers from whom we can then secure the build package.

REULTS AND PERFORMANCE

Revenue for the period increased by 87.9% to £61.2 million (2016: £32.6 million) derived predominantly from the sale of 338 building plots (2016: 177 plots) generating revenues of £20.3 million and completion of the sale of 96 private homes (2016: 87 private homes) resulting in revenues of £31.0 million (2016: £27.5 million). The average sales price of our residential units was £322,000 (2016: £319,000), remaining firmly in a part of the market that continues to see strong demand driven by the government initiatives to help first time buyers get onto the housing ladder- 61% of our private sales used the Help to Buy scheme.

Our current forward order book for the sale of private homes stands at £38.9million (2016: £31.8 million) with 70 homes reserved since 1 January 2018.

We have invested heavily in our construction division and believe we have recruited some of the best people in the sector. This expertise is now enabling us to build the majority of our homes utilising the resource of our "in house" team and the benefits of this are starting to come through. Whilst our housebuilding margins are still lower than the sector average, primarily as a legacy of our former reliance on main contractors to build our homes, we expect to see material improvements in gross margin on new developments. It also provides the platform for our partnership housing business where we are currently on three sites delivering 220 homes with total contract values of over £43 million. Contract income for the period was £5.2 million (2016: £1.8 million) and we are in advanced discussions with a view to securing further partnership contracts during the remainder of this financial year.

During the period we commenced the construction of 239 private homes at Lily's Walk and 40 private homes at Castle House, both in High Wycombe, achieving forward sales of £5.5 million and £5.0 million respectively. We also commenced development of the first phase of 72 homes at Chapel Riverside, where we have a Development Agreement with Southampton City Council to build 457 new homes and 60,000 sq ft of commercial space. We have secured a development facility of £11.5 million from the Homes and Communities Agency for this project.

At the half year end we had 560 private homes under construction with an anticipated gross development value of £144.4 million and a further 220 homes for partnership housing with future contract income of £37.6 million.

Construction of 43 homes at our joint venture project in Gardiners Lane, Basildon is well advanced with 22 of the 30 private homes sold as at 31 December 2017 realising a sum of £8.4 million. We have two more joint venture developments at Europa Way, Ipswich and Bucknalls Lane, Garston with anticipated revenues of £45.0 million with work beginning on these sites imminently.

The Group achieved a profit before tax and before revaluation of investment properties of £5.37 million (2016 restated: £4.95 million.

The EPRA net asset value and the adjusted EPRA net asset value of the Group at 31 December 2017 were 92.78p (2016 restated: 88.16p) and 97.63p (2016 restated: 92.34p) per ordinary share respectively and have been determined as follows:

*EPRA NAV adjusted to exclude the dilutive effect of the options, deferred bonus shares and Growth Shares.

LAND PORTFOLIO AND PLANNING

We continue to expand our high-quality land portfolio that now has a development pipeline of 7,372 homes with an anticipated gross development value in excess of £2.2 billion.

The outline planning application for 350 homes at our flagship 100 acre site at Wilton Park in Beaconsfield was submitted in September 2017. We are continuing our negotiations with the local authority which are progressing very well. The site is producing gross annual rental income of £1.6 million via residential and commercial lettings.

The Group has also exchanged contracts to acquire additional land at Cheshunt Lakeside, Hertfordshire where our joint venture either owns or controls 1,317 plots. Representing Inland's largest development to date, the outline masterplan planning application for 1,853 plots and 18,000 sqm of commercial and retail space has been submitted and we are excited about the huge potential of this regeneration scheme.

The current land bank comprises as follows:

We currently have planning applications submitted on 2,312 plots across five sites and are in pre-application talks with planning authorities on six strategic sites for 451 plots and planning applications are expected to be submitted shortly on all these sites. The Group continues to focus on strategic land and has successfully secured options over 29 sites for approximately 2,750 plots.

DIVIDEND

Reflecting the Group's progress, the Board is pleased to have increased the interim dividend by 30% to 0.65p (2016: 0.5p) per share. The dividend will be paid on 29 June 2018 to shareholders on the register at the close of business on 8 June 2018. The ex-dividend date is 7 June 2018.

OUR PEOPLE

The Inland team is a vital cog in the delivery of our ambitious growth plans. I should like to thank all members of staff for their efforts in integrating within their respective teams and across the various disciplines during the expansion of our construction division. I should also like to take this opportunity to thank Paul Brett, our Land Director who has decided to leave the Group with effect from 16 April 2018, for his part in the growth of the Company since its incorporation. I am pleased that Paul will continue to work for the Group as a consultant, particularly in relation to the ongoing planning application processes at our key sites at Wilton Park and Cheshunt Lakeside.

OUTLOOK

With the Government committed to building 300,000 new homes per annum in the UK, there are several measures in place supporting the housebuilding sector in the drive to deliver more homes, particularly at the price point at which we operate. Whilst the sector continues to be hindered by local planning difficulties and higher construction costs, we are optimistic that overall conditions for housebuilders to meet the demand for new homes will continue to be largely favourable.

With our lower priced high-quality homes and strengthening construction capability, together with a significant land bank, Inland is in a strong position to capitalise on the current favourable market conditions. We have identified and are delivering on clear operational priorities for 2018 that will transform the business and have made positive progress towards achieving this.

Terry Roydon

Chairman

Group income statement

for the six months ended 31 December 2017

Group statement of financial position

at 31 December 2017

Group statement of changes in equity

for the six months ended 31 December 2017

Group statement of cash flows 

for the six months ended 31 December 2017

Notes to the half-yearly financial report

for the six months ended 31 December 2017

1. Nature of operations and general information

The principal activity of the Company and its subsidiaries (together called the Group) is to acquire residential and mixed use sites and seek planning consent for development. The Group also develops a number of plots for private sale.

Inland Homes plc is the Group's ultimate parent company. It is incorporated and domiciled in Great Britain. The address of Inland Homes plc's registered office, which is also its principal place of business, is Decimal Place, Chiltern Avenue, Amersham, Buckinghamshire HP6 5FG.

Inland Homes plc's shares are quoted on AIM, a market operated by the London Stock Exchange. This consolidated half-yearly financial report has been approved for issue by the Board of Directors on 27 March 2018.

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 June 2017 have been filed with the Registrar of Companies and are available at www.inlandhomes.co.uk. The auditor's report on those financial statements was unqualified and did not contain any statement under Section 498(2) or Section 498(3) of the Companies Act 2006.

2. Basis of preparation

This consolidated half-yearly financial report has been prepared in accordance with International Accounting Standard (IAS) 34 Interim Financial Reporting.

The consolidated half-yearly financial report should be read in conjunction with the annual financial statements for the year ended 30 June 2017, 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.

3. Accounting policies

The accounting policies applied are consistent with those of the annual financial statements for the year ended 30 June 2017.

4. Going concern

The Board has reviewed the performance for the current period and forecasts for the future period together with the available financial resources. It has also considered the risks and uncertainties, including credit risk and liquidity. The Directors have considered the present economic climate, the state of the housing market and the current demand for land with planning consent. The Group has continued to see an increase in demand for consented land in the areas in which it operates. The Group has significant forward sales of residential units and is in discussions for the sale of some of the land within its projects and expects to make sufficient disposals in the foreseeable future to ensure it has adequate working capital for its requirements. The Directors are satisfied that the Group will generate sufficient cash to meet its liabilities as and when they fall due for a period of 12 months from signing this half-yearly financial report. The Directors therefore consider it appropriate to prepare the financial statements on the going concern basis.

5. Critical accounting estimates and judgements

Estimates and judgements are continually evaluated and are based on historic experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

Critical accounting estimates

The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, rarely equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are outlined below.

(a) Valuation of inventories

In applying the Group's policy for inventories the Directors are required to determine the net realisable value of inventories by assessing the expected selling price and costs to sell each of the plots or units that constitute the Group's land bank and work in progress. Cost includes the cost of acquisition of sites, the cost of infrastructure and construction works, and legal and professional fees incurred during development prior to sale. Estimation of the selling price is subject to significant inherent uncertainties, in particular the prediction of future trends in the market value of land.

Whilst the Directors exercise due care and attention to make reasonable estimates, taking into account all available information in estimating the future selling price, the estimates will, in all likelihood, differ from the actual selling prices achieved in future periods and these differences may, in certain circumstances, be very significant. The critical judgement in respect of receipt of planning consent (see below) further increases the level of estimation uncertainty in this area.

(b) Income taxes (note 7)

The Group recognises tax/deferred tax assets and liabilities for anticipated tax based on estimates of when the tax/deferred tax will be paid or recovered. When the final outcome of these matters is different from the amounts initially recorded, such differences impact the period in which the determination is made. Critical accounting estimates relate to the profit forecasts used to determine the extent to which deferred tax assets are recognised from available losses and the period over which they are estimated.

(c) Fair value of investment properties (note 9)

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

(d) Discounting on deferred consideration of inventories and acquisition of shares

The Group discounts deferred consideration using the discounted cash flow method; the Group considers that the cost of debt capital is the most appropriate discount rate and this is a significant estimate.

Critical judgements in applying the entity's accounting policies

Inventories

The Group values inventories at the lower of cost and net realisable value. The net realisable value is based on the judgement of the probability that planning consent will be granted for each site. The Group believes that, based on the Directors' experience, planning consent will be given. If planning consent was not achieved, then a provision may be required against inventories.

Capitalisation of borrowing costs

The Group capitalises borrowing costs where there is a qualifying asset. The Directors must assess each site held within inventories each year in order to judge whether or not the site is a qualifying asset. In prior years all borrowing costs were expensed to the Group Income Statement however this year the Wilton Park Development and the Cheshunt joint venture were, in the opinion of the Directors, judged to be qualifying assets in line with the requirements of IAS 23 Borrowing Costs. This is due to the long term, complex nature of these developments which will take several years before parts of these site can be sold or developed. For other sites the Group expenses borrowing costs due to the quantity and repetitive nature of the process adopted. In many cases such developments may take longer than 12 months.The Directors are therefore required to exercise judgement as to whether or not a site represents a qualifying asset.  

Investment in joint ventures

The Group's joint venture investment in Project Helix Holdco Limited (Project Helix) is not in equal share (the Group owns 20% of the share capital of Project Helix) however the Group has joint control over the activities of the company with the other parties due to its entitlement to veto any decisions. In addition, the Group and the other parties to the agreement only have rights to the net assets of the company through the terms of the contractual arrangements. Within Project Helix there is a ratchet mechanism which depends on the amount of profit each development contributes to the joint venture. Therefore, this entity is classified as a joint venture and is accounted for using the equity method.

The Group's joint venture investments in Bucknalls Developments Limited (Bucknalls), Gardiners Park LLP (Gardiners Park), Europa Park LLP and Cheshunt Lakeside Developments Limited (Cheshunt) are 50/50 joint ventures and the Group has joint control over the activities of the companies with the other parties and has an entitlement to veto any decisions. The Group and the other parties to the agreements only have rights to the net assets of these companies through the terms of the contractual arrangements. Within these joint ventures the Group is entitled to 50% of the net assets. Therefore, these entities are classified as joint ventures and are accounted for using the equity method.

Investment in associates

The Group has a 25% investment in Troy Homes Limited. It has significant influence over that entity but does not have joint control. Therefore the investment is classified as an associate and is accounted for using the equity method.

6. Income and segmental analysis

The Group generates income by way of land sales. It also generates income from housebuilding, contracting, rental income, hotel income, investments, investment properties and management fees. These operating segments are monitored and strategic decisions are made on the basis of segment operating results. The segmental analysis of operations is as follows:

Segmental analysis by activity