Last checked at 30 Jun 2022 07:00
INLAND ZDP PLC
Half-yearly report
for the six months ended 31 March 2022
The half-yearly report can be accessed via the Inland ZDP PLC pages on the Inland Homes PLC ('Inland') website at http://inlandhomesplc.com/investors/inland-zdp/ or by contacting the Company Secretary on 01494 762450.
COMPANY SUMMARY
Background
Inland ZDP PLC ('INLZ' or the 'Company') was incorporated on 22 November 2012 as a wholly owned subsidiary of Inland.
INLZ was formed especially for the issuing of Zero Dividend Preference Shares ('ZDP' Shares). It has raised a total of £22.28m through a series of placings of ZDP Shares, which are listed on the UK Official List and admitted to trading on the London Stock Exchange. There are 18,101,857 ZDP Shares in issue, none of which were issued during the half year period to 31 March 2022.
Pursuant to a loan agreement between INLZ and Inland, INLZ has lent the proceeds received from all the ZDP Share issues to Inland. The loan is non-interest bearing and is repayable three business days before the ZDP Share redemption date or, if required by INLZ, at any time prior to that date in order to repay the ZDP Share entitlement. The funds raised form part of the Inland Group's financing arrangements for its property development business.
A contribution agreement between INLZ and Inland has also been made whereby Inland undertakes to contribute such funds as would ensure that INLZ will have in aggregate sufficient assets on the final redemption date to satisfy the final capital entitlement of the ZDP Shares.
On 13 August 2018 several changes to the rights of ZDP Shares and the underlying loan documentation were effected extending the ZDP Shares a Final Redemption Date from 10 April 2019 to 10 April 2024 and increasing the Final Capital Entitlement from 155.9p to 201.4 pence. The annual accrual rate of return from 20 December 2012 to 13 August 2018 was 7.3% and is 5.49% for the period from 13 August 2018 to 10 April 2024, being a rate of return of 6.39% per annum to 10 April 2024 on the original issue price of 100p on 20 December 2020.
INTERIM MANAGEMENT REPORT
The Company was incorporated solely to issue ZDP Shares and has never traded.
Certain earlier results statements showed the accrued value calculated at 7.3% on the initial issue price to 13 August 2018 and subsequently accruing at 5.49%. The accrued Capital Entitlement shown below based on the original issue price of 100p per ZDP Share on 20 December 2012 as increased over its life to the Final Capital Entitlement of 201.4 pence per ZDP Share payable on 10 April 2024. This represents an accrual rate of 6.39% per annum.
31 Mar 2022 | 30 Sept 2021 | |
Accrued capital entitlement per ZDP Share ZDP Share price as at the accounts date | 177.6p 181.0p | 172.2 168.5p |
The accounting book value of the ZDP Shares differs from the accrued Capital Entitlement, because ZDP Shares have been issued at various prices and redemption yields and each tranche is booked at its individual issue price and the liability accrued using the effective interest method over its life to the Final Capital Entitlement. As at 31 March 2022 the accounting book value was 181.6p per ZDP Share. The accrued capital entitlement is based on the initial issue price (100p) and its accrual over time to the redemption price and is not affected by the prices of subsequent issues. As at the repayment date, the book value and accrued capital entitlement will be equal to one another.
I am pleased to report that as at 31 March 2022, Inland had complied with all its covenants under the Loan Note, Contribution Agreement and related security documentation.
The key performance indicators used by the board to measure the Company's success are the accrued capital entitlement, the market price of the ZDP Shares (shown above) and the cover ratio.
The asset value and the accrued capital entitlement will continue to increase as the repayment date approaches.
The Cover Ratio as at 31 March 2022 was 2.77 times, calculated from book values as set out below.
Financial Indebtedness for cover ratio purposes is stated net of cash balances and excludes liabilities falling due after 10 October 2024, being six months after the redemption date of the ZDP Shares.
Capital Entitlement, Assets, Financial Indebtedness and Cover Ratio have been determined as set out in the Prospectus published by Inland ZDP PLC on 14 December 2012, as amended (in the case of the Capital Entitlement) as described in the circular dated 19 July 2018, both of which are available at: http://inlandhomesplc.com/investors/inland-zdp/zdp-reports-and-presentations/.
The amounts shown in the cover ratio calculation below are in accordance with the relevant documentation, which differs in some respects from the amounts shown in the Inland Consolidated Financial Statements. For example, unsecured borrowings falling due more than six months after the redemption date of the ZDP Shares are excluded from "Net debt" for cover ratio purposes. The Hurdle Rates are calculated from the Book values and EPRA values as shown in Inland's interim financial statements, but excluding intangible assets.
Book values | EPRA values | ||
£'000 | £'000 | ||
Assets less creditors (exc cash and debt) | A | 281,174 | 343,374 |
Net debt (exc ZDP Share liability) | 62,406 | 62,406 | |
ZDP Final Capital Entitlement | 36,457 | 36,457 | |
Financial indebtedness | B | 98,863 | 98,863 |
Cover ratio | A/B | 2.8 | 3.5 |
Hurdle Rate to pay the Final Capital Entitlement* | -38.9% | -44.8% | |
Hurdle Rate to recover the market price of a ZDP Share** | -44.1% | -50.2% | |
Rate of return to maturity based on the market price of a ZDP Share**
| 6.18% | ||
* being the period from 31 March 2022 to 10 April 2024, based on the Assets and Financial Indebtedness as at 31 March 2022
** being the period from 29 June 2022, being the latest practicable date prior to the publication of this interim report to 10 April 2024 based on a share price of 181p, being the closing price of a ZDP Share on 29 June 2022.
Nishith Malde FCA
Chairman, Inland ZDP PLC
Registered in England No: 8303612 29 June 2022
PRINCIPAL RISKS
The principal risks facing the Company are substantially unchanged since the date of the Company's Annual Report for the period ended 30 September 2021 and continue to relate to the risk of Inland Homes plc being unable to satisfy its obligations to INLZ under the Loan Agreement and Contribution Agreement. These comprise liquidity risk, and credit risk as set out in note 9 of the Inland ZDP PLC's Annual Report for the year ended 30 September 2021.
In addition, and due to the Company's dependence on Inland Homes plc to repay the loan and provide a contribution to meet the capital entitlement of the ZDP Shareholders, certain other risks faced by the Inland Group are considered to apply to INLZ as set out in the Prospectus published by INLZ on 14 December 2012. These comprise operational risks (eg planning and environmental) which may be specific to individual sites and risks associated with the housebuilding sector (such as falling house prices or variations in the availability of credit for buyers). The Prospectus may be found at http://inlandhomesplc.com/investors/inland-zdp/zdp-reports-and-presentations/. The risks facing the Inland Group, which evolve over time, are summarised in the annual and interim reports published by Inland Homes PLC which are available at https://www.inlandhomesplc.com/reports-presentations-and-news/reports-and-presentations/.
The Company's directors recognise that the above risks to Inland Homes plc could have an adverse impact on its ability to fulfill its obligations to the Company including funding the Final Capital Entitlement of the ZDP Shares on 10 April 2024. The risk of any loss to ZDP Shareholders in such circumstances is mitigated by cash and tangible assets legally pledged to the Company with no prior charges over the pledged assets.
The Inland board has given priority to reducing the Inland Group's borrowings, reducing net debt by 19% between 30 September 2021 and 31 March 2022. This enables the Inland Group to take advantage of opportunities to refinance its ongoing indebtedness on improved terms and enhances its ability to finance the redemption of ZDP Shares when due on 10 April 2024, if no extension is proposed and approved at the relevant general and class meetings.
DIRECTORATE
Gary Skinner stepped down from the Company's Board following the termination of his employment with Inland Homes PLC on 5 April 2022.
RESPONSIBILITY STATEMENT OF THE DIRECTORS IN RESPECT OF THE HALF-YEARLY REPORT
We confirm that to the best of our knowledge:
• the condensed set of financial statements has been prepared in compliance with the IAS34 'Interim Financial Reporting' and gives a true and fair view of the assets, liabilities and financial position of the Company; and
• the interim management report and notes to the half-yearly report include a fair view of the information required by:
(a) DTR 4.2.7R of the Disclosure and Transparency Rules, being an indication of the important events that have occurred during the first six months of the financial year and their impact on the condensed set of financial statements; and a description of the principal risks and uncertainties for the remaining six months of the year; and
(b) DTR 4.2.8R of the Disclosure and Transparency Rules, being related party transactions that have taken place in the first six months of the current financial year and that have materially affected the financial position or performance of the Company during that period; and any changes in the related party transactions described in the last Annual Report that could do so.
This half-yearly report was approved by the Board of Directors on 29 June 2022 and the above responsibility statement was signed on its behalf by Nishith Malde, Chairman.
STATEMENT OF COMPREHENSIVE INCOME
for the six months ended 31 March 2022
6 months ended | 6 months ended | Year ended | ||
31 March 2022 | 31 March 2021 | 30 September 2021 | ||
(unaudited) | (unaudited) | (audited) | ||
Continuing operations | Note | £000 | £000 | £000 |
Revenue |
| |||
Interest income | 848 | 805 | 1,635 | |
Total income | 848 | 805 | 1,635 | |
| ||||
Expenditure |
| |||
Expenses | - | - | - | |
Total expenditure | - | - | - | |
Profit before finance costs and taxation | 848 | 805 | 1,635 | |
| ||||
Finance costs | (848) | (805) | (1,635) | |
Profit before tax | - | - | - | |
Income tax | 2 | - | - | - |
Profit and total comprehensive income | - | - | - |
The total column of this statement is the statement of comprehensive income of the Company, prepared in accordance with International Financial Reporting Standards ('IFRS'), as adopted by the EU.
All items in the above statement derive from continuing operations.
STATEMENT OF FINANCIAL POSITION
as at 31 March 2022
As at | As at | As at | ||
31 March 2022 | 31 March 2021 | 30 September 2021 | ||
(unaudited) | (unaudited) | (audited) | ||
Note | £000 | £000 | £000 | |
|
| |||
Non-current assets |
| |||
Intercompany receivable | - | - | - | |
Current assets | - | - | - | |
Intercompany receivable | 32,914 | 31,235 | 32.065 | |
| 32,914 | 31,235 | 32,065 | |
Creditors: amounts falling due after more than one year |
| |||
Zero Dividend Preference Shares | (32,864) | (31,185) | (32,015) | |
(32,864) | (31,185) | (32,015) | ||
Net assets | 50 | 50 | 50 | |
|
| |||
Equity |
| |||
Ordinary share capital | 50 | 50 | 50 | |
Revenue reserve | - | - | - | |
Shareholders' funds | 50 | 50 | 50 |
STATEMENT OF CASHFLOWS
for the six months ended 31 March 2021
6 months ended | 6 months ended | Year to | |
31 March 2022 | 31 March 2021 | 30 September 2021 | |
(unaudited) | (unaudited) | (audited) | |
£000 | £000 | £000 | |
Cash flow from operating activities |
|
| |
Profit for the period before tax | - | - | - |
Adjustments for: |
| ||
- interest expense | 848 | 805 | 1,635 |
- interest and similar income | (848) | (805) | (1,635) |
Net cash flow from operating activities | - | - | - |
Cash flow from investing activities |
| ||
Loan to ultimate parent company | - | - | - |
Net cash outflow from investing activities | - | - | - |
Cash flow from financing activities |
| ||
Proceeds on issue of ZDP Shares | - | - | - |
Net cash inflow from financing activities | - | - | - |
Net increase in cash and cash equivalents | - | - | - |
Net cash and cash equivalents at beginning of period | - | - | - |
Net cash and cash equivalents at the end of period | - | - | - |
NOTES TO THE HALF-YEARLY REPORT
for the six months ended 31 March 2022
1. General information
The financial information contained in this half-yearly report does not constitute statutory financial statements as defined in Section 434 of the Companies Act 2006. The statutory financial statements for the fifteen-month period ended 30 September 2019, which contained an unqualified auditors' report, have been lodged with the Registrar of Companies and did not contain a statement required under the Companies Act 2006. These statutory financial statements were prepared under International Financial Reporting Standards.
The financial information of the Company for the six-month period ended 31 March 2022 has also been consolidated into the results of Inland for the six months ended 31 March 2022.
This half-yearly report has not been audited or reviewed by the Company's Auditors.
This half-yearly report has been prepared using accounting policies set out in note 1 of the Company's audited financial statements for the year ended 30 September 2021.
2. Taxation
The charge for taxation is based on the taxable profits for the period. Taxable profit differs from profit before tax as reported in the Statement of Comprehensive Income because it excludes items of income or expenses that are never taxable or deductible. The Company's liability for tax is calculated using rates that have been enacted or substantively enacted by the reporting date.
3. Going concern
The Company will fulfil its obligations to ZDP Shareholders through the Contribution Agreement it has with Inland. The contribution from Inland will provide the funds to pay the Capital Entitlement of the ZDP Shareholders when it falls due. The main risk the Company faces is, therefore, that Inland would not have sufficient assets to repay the loan and to make a contribution to fulfil the amount of the Capital Entitlement due to ZDP Shareholders. Covenants are in place between Inland and the Company, which ensure that Inland will not undertake certain actions in relation to both itself and the Company.
All operating expenses of the Company are borne by Inland.
Due to the Company's dependence on Inland to repay the loan and provide a contribution to meet the Capital Entitlement of the ZDP Shareholders, other risks faced by the Company are considered to be the same as for Inland. Please see the paragraph headed Principal Risks above for further information.
During what is a period of geopolitical and economic uncertainty principally due to the ongoing conflict in Ukraine, the Inland 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.
The Inland Homes plc Board has reviewed the performance of the Group for the current reporting period and 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 of the Company have considered the financial resources of the Inland Group and believe that Inland will have sufficient resources to continue in operational existence for the foreseeable future. Accordingly, they have prepared this half-yearly report on the going concern basis. The Inland Homes plc interim statement for the six months to 31 March 2022 contains further information.
4. Related party transactions
The loan to Inland Homes PLC is interest free and is repayable on the ZDP repayment date (see corporate summary above) or immediately upon an event of default. At 31 March 2022, the loan to the ultimate parent company was £32,913,571 (2021: £31,235,166).
Sources of further information:
The Company's ZDP Shares are standard listed and are traded on the Main Market of the London Stock Exchange.
The Company's ZDP Asset Cover is released via the London Stock Exchange's Regulatory News Service on a quarterly basis.
Information about the Company and Inland can be obtained on the Inland Group's website: www.inlandhomesplc.com.
Registrar enquiries:
The register for the ZDP Shares is maintained by Link Registrars Limited. In the event of queries regarding your holding, please contact the Registrar on 03716 640300. Changes of name and/or address must be notified in writing to the Registrar.
Neither the contents of Inland's website nor the contents of any website accessible from hyperlinks on this announcement (or any other website) is incorporated into, or forms part of, this announcement.