INL.L Regulatory News (INL)

17 July 2017

Inland Homes plc

Trading Update

Inland Homes plc (AIM: INL) ("Inland Homes", "the Group" or the "Company"), the leading brownfield regeneration specialist and housebuilder with a focus on the South and South East of England, provides the following update on trading ahead of its preliminary results for the 12 months ended 30 June 2017, which will be announced in September 2017.

Highlights

Stephen Wicks, CEO at Inland Homes, commented:

"Inland continues to build firm foundations for the future. A record £1.34 billion short term development pipeline; the creation of a highly experienced construction team which enables us to capitalise on partnership opportunities; and growing private housebuilding along with land sales has resulted in a dynamic, multi-faceted business model which will stand us in good stead for the future."

Overview

Inland Homes has had an extremely active and successful year, growing the business both financially and operationally. The Group's new in-house construction team has enabled us to increase our housebuilding and contracting operations significantly, providing more certainty over the timing of cash flows and profit recognition as well as better control over construction costs. This investment is now beginning to have a tangible positive effect, with the number of open market unit completions increasing in the period by 27.9% to 188 (2016: 147).

Revenues are expected to be approximately £90 million (2016: £102 million), with profit before tax in line with market expectations. This revenue figure excludes two land sales at Alperton, Greater London and Aylesbury, Buckinghamshire which will be shown as a gain on sale of subsidiary or joint venture, rather than flowing through revenue and gross margin. If these transactions had been direct land sales, revenue would have been in the region of £117 million. The year end cash balance increased by 56.3% to £26.1 million (2016: £16.7 million). Net debt has also increased to £68.4 million (2016: £54.6 million), reflecting our increased land holdings and work in progress. £43 million of our borrowings relates to the Group's 100 acre site at Wilton Park in Beaconsfield. The term of our borrowings has also lengthened, with 100% of Group borrowings now due in more than one year and over 50% due in more than 3 years.

Land: Active market for sales of plots delivering revenue

In the 12 months to 30 June 2017 the Group sold 780 residential plots (2016: 425 plots), the most notable being:

· 400 plots at a joint venture site in Aylesbury, Buckinghamshire for an aggregate of £22 million, with the Group's share being £11 million. We anticipate entering into an agreement to manage the development on behalf of the purchasers and expect to secure significant construction contracts to build out the consented development.

· 173 plots at Alperton, Greater London for £16 million as a sale of subsidiary;

· 58 plots at Beaumont Works in St Albans, Hertfordshire for £7.5 million to a major housebuilder;

· 57 plots at Witley Gardens in Southall, Greater London for £8.1 million to a Housing Association; and

· 28 units at Queensgate in Farnborough for £1.6 million, also to a Housing Association.

These sales demonstrate that the appetite for sites with good planning consents in the areas where we operate remains very strong, with Housing Associations amongst the most active purchasers.

The land bank now comprises 6,776 residential plots (2016 trading update: 6,681 plots), of which 2,105 plots (2016: 1,163 plots) have either planning consent or a resolution to grant planning consent pending the signing of a Section 106 agreement. The short term development pipeline of 4,606 plots owned or in joint ventures has a record GDV of £1.34 billion (2016 trading statement: £1.21 billion). Since 30 June 2017 we have purchased the interest that we did not already own in two Project Helix sites in High Wycombe consisting of 324 residential plots, from our joint venture partner.

Despite the challenges of the current planning system, including incidents where the recommendations of planning officers are not always adhered to and which is adding to the pressures of a severe shortage in the UK's housing supply, we have maintained our 100% success rate in securing planning consents and have achieved either full planning consents or resolutions to grant planning consent on 1,856 residential plots over the last financial year (2016: 1,096 plots). The vast majority of these have been achieved in the second half, and we will submit a planning application for 350 residential plots plus commercial space at our flagship Wilton Park site in Beaconsfield, Buckinghamshire shortly.

In addition, our longer term strategic land bank has the potential for approximately 2,170 residential plots (2016 trading update: 1,618 plots) across 405 acres (2016 trading update: 334 acres), including two new sites that are incorporated into Local Plans in Datchet, Berkshire and Cressing, Essex with the potential for a total of 220 homes. Planning applications for three sites from our strategic land bank, comprising approximately 214 plots across 19 acres on two sites in Buckinghamshire and one in Essex, will be submitted in the near term.

House sales: strong appetite for Inland products

The Group achieved the legal completion of 188 open market units (2016: 147 units) in the year to 30 June 2017, reflecting a year-on-year increase of 27.9%. These were sold at an average price of £306,000 (2016: £337,000), with 44% of these acquired by purchasers using the Government's Help to Buy initiative. The reduction in the average selling price is due to a shift in the sales mix, with more apartments than houses being sold this year. The average sales rate was 0.63 (2016: 0.70) units per outlet per week during the whole of the year. This slight decrease was due to a restricted number of outlets available in the first half of the year, with a strong second half delivering an average of 0.77 units sold per outlet per week as more developments were launched.

The positive momentum behind forward sales has continued into the period, with the value of the forward order book currently standing at £26.1 million (2016 trading update: £23.4 million). This includes 37 units which were recently exchanged at the successful launch of our Centre Square development in Lily's Walk, High Wycombe. All 37 units were purchased by investors at prices in line with budget.

Overall, we are finding that there remains strong demand for our product in the areas in which we operate.

We currently have 249 open market units under construction with a further 177 units to commence in August 2017.

Contracting: construction business has added additional revenue stream

Our enhanced construction capacity has recently enabled us to secure build contracts for our Inland Partnerships division which enables us to achieve additional profitability from a project, having sold the land to the parties concerned. Our current major construction projects are as follows:

· 136 units at Alperton, West London with a contract value of £29.5 million;

· 57 units at Witley Gardens in Southall for £8.4 million; and

· 28 units at Queensgate in Farnborough for £3.1 million.

Outlook

With a healthy land bank of 6,776 plots and a short term development pipeline with a GDV of £1.34 billion we are well placed to continue the growth in housebuilding and land sales that we have delivered over the last year. With house prices stabilising and the Government's Help to Buy scheme set to continue, demand for both our open market units and land remains at good levels. Balancing our unit and land sales with pre-sales to Housing Associations and PRS funds de-risks our business model and provides another important revenue stream, allowing a solid base for the future progression of the business.

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