REG - Inland Homes PLC - Final Results
RNS Number : 5097BInland Homes PLC31 January 202031 January 2020
Inland Homes plc
(the 'Company' or the 'Group')
Audited results for the 15-month period ended 30 September 2019
A year of major progress
Significant increase in value of land portfolio
Inland Homes plc (AIM: INL), a leading housebuilder, partnership housing developer and regeneration specialist, today announces its audited results for the 15-month period ended 30 September 2019.
Stephen Wicks, Chief Executive at Inland Homes, commented:
"This has been a period of major progress, with strong momentum across the Group. We now have our largest ever land bank, controlling more plots with planning-permission than at any other time, as well as seeing a continued expansion in the number of homes and partnership homes we are building.
"At Inland, we operate a simple and adaptable model focused on maximising the value of land: we acquire land, either directly or on behalf of investors, in areas of high demand in the South and South-East of England, add significant value by securing planning permissions and then generate further value through a mix of selling, building or providing turnkey solutions for partners.
"With the Group growing in scale and reputation, we now have all the elements in place to maximise the value of our owned and managed land portfolio in the short, medium and long term. Reflecting our confidence for the future, the Board is declaring a second interim dividend of 2.25p."
Financial highlights for the 15-month period*
· EPRA NAV up 13.2% to £233.9m (30 June 2018: £206.7m)
· EPRA NAV per share 113.69p per share (30 June 2018:102.28p)
· Revenue at £147.9m (30 June 2018: £147.4m)
· Gross profit at £32.5m (30 June 2018: £31.8m)
· Gross margin up to 22.0% (28 June 2018: 21.6%)
· Profit before taxation at £25.0m (30 June 2018: £19.3m)
· Net debt at £152.3m (30 June 2018: £79.7m), predominantly due to the increase in the land bank and work in progress; this is expected to fall as a number of realisations are achieved
· EPRA net gearing of 65.1% (30 June 2018: 38.6%)
· Second interim dividend of 2.25p per share, which together with the first interim dividend of 0.85p, makes a total dividend of 3.10p per share (30 June 2018: 2.20p)
*2018 data is for a 12-month period
Operational highlights:
· Further acquisitions of high-quality sites - total land holdings at record 7,796 plots (30 June 2018: 6,870) with an anticipated gross development value (GDV) of £2.4bn
· Planning consent achieved at Wilton Park and Cheshunt Lakeside to deliver more than 1,500 homes driving a creditable increase in EPRA NAV:
o Planning consent granted for Inland's flagship 100-acre site, Wilton Park, Beaconsfield, Buckinghamshire with an estimated GDV of £288m
o Planning consent granted for Inland's largest-ever scheme, Cheshunt Lakeside, Cheshunt, Hertfordshire, with an estimated GDV of £429m
· Planning submission on a further major scheme on behalf of landowner at Hillingdon Gardens, formerly known as Master Brewer Hotel, with potential to deliver more than 500 homes
· Private Housing: 202 completions (30 June 2018: 275) as expected, reflecting the significant number of large-scale apartment schemes currently under construction. Continued strong demand with 892 homes under construction and a forward orderbook of £39.3m
· Partnership Housing: Revenues from partnership housing increased by 422% to £62.6m (30 June 2018: £12.0m) Exceptionally strong demand from housing associations underpins continued strong growth with 921 homes currently under construction (30 June 2018: 220)
· Land sales: 577 plots sold excluding joint ventures (30 June 2018: 837 plots)
· Hugg Homes: The Group's temporary modular housing venture made good progress with 54 units now let, producing gross revenues of approximately £500,000 per annum and other projects in the pipeline
Enquiries:
Inland Homes plc:
Tel: +44 (0) 1494 762450
Stephen Wicks, Chief Executive
Nishith Malde, Finance Director
Gary Skinner, Managing Director
Panmure Gordon (UK) Limited
Tel: +44 (0) 20 7886 2500
Dominic Morley
Erik Anderson
Instinctif Partners
Tel: +44 (0) 20 7457 2020
Mark Garraway
James Gray
Notes to Editors:
Incorporated in the UK in 2005, Inland Homes plc is an AIM listed specialist housebuilder and brownfield developer, dedicated to achieving excellence in sustainability and design.
Inland Homes acquires brownfield land in the South and South-East of England principally for residentially led development schemes. The business then enhances the land value by obtaining planning permission, before building open market and affordable homes or selling surplus consented land to other developers to generate cash.
The Company is committed to extensive public and community consultation in order to ensure that, where possible, local community needs and objectives are met.
Inland's aim is to create sustainable communities and homes which set a benchmark for all future developments in the South and South East of England. The Company is always looking for brownfield sites without planning permission for future development.
For further information, please visit the Inland Homes website at www.inlandhomes.co.uk.
Hugg Homes - www.hugghomes.co.uk
Rosewood Housing - www.rosewoodhousing.co.uk
Chairman's Statement
Inland Homes plc "Inland Homes" has adopted a diversified and adaptable business model that is reaping rewards for our stakeholders. The Group is progressing on its growth trajectory and building momentum. We have developed a reputation as experts in identifying the right land opportunities and in having the skills to secure planning permission on what are primarily complex brownfield sites.
While this entrepreneurial outlook remains a key part of our culture, our evolving strategy and diversification now provide us with the flexibility to realise more value from the land bank. Our business plan includes the provision of planning and management services, the sale of land where we have achieved planning consent, as well as forward sales of homes and construction contracts.
Operations
We have continued to grow while investing in high-quality staff and systems, at the same time as improving the quality of our building work and increasing the satisfaction of our customers and partners.
Revenue for the period was £147.9m (year ended 30 June 2018: £147.4m), in line with the Directors' expectations, and the land bank sits at a record 7,796 plots, of which 2,956 (38%) have planning permission.
Achieving planning consent for our 100-acre flagship scheme, Wilton Park, Buckinghamshire, and for our largest-ever scheme, at Cheshunt Lakeside, Hertfordshire, are significant milestones and achievements for the Group, together adding consent for more than 1,500 homes. These two consents have led to a respectable increase in the EPRA value of the Group's assets and provide a significantly improved pipeline for our business activities.
The Group's flexible model enables it to maximise market opportunities. A growing part of the Group's business is now providing planning and management services to investors in the property sector. During the period management fees increased by 675% to £18.6m (year ended 30 June 2018: £2.4m). This activity is an attractive proposition to the Group, with significantly reduced equity and debt exposure and strong operating margins.
Results and dividend
The Group achieved profit before tax of £25.0m for the period (year ended 30 June 2018: £19.3m). The EPRA net asset value per share has increased, from 102.28p to 113.69p per share, while net asset value per share has increased from 70.46p to 78.84p.
Net gearing increased to 93.9% in the period (30 June 2018: 56.0%) due to the increase in the Group's land bank and work in progress. Net debt is expected to fall in the year ahead due to sales receipts from large-scale apartment developments, securing land by way of discount to market value options, acquiring sites within our land asset management activity and expanding the Group's partnership housing activity.
With a substantial number of highly sustainable sites suitable for rental housing, we expect to secure build-to-rent opportunities in the new financial year. As we evaluate this opportunity and consider the best way to develop the sites at Wilton Park and Cheshunt Lakeside, we continue to consider actively our funding options including equity and further joint ventures with a view to maximising returns for shareholders.
In recognition of the Group's continued growth and its planning consent achievements, the Board has declared the payment of a second interim dividend of 2.25p per share. This, together with the first interim dividend of 0.85p (2018: 0.65p) per share already paid, will make total dividends of 3.10p (2018: 2.20p) per share. As a result, there will be no proposed final dividend for the 15-month period ended 30 September 2019.
Governance
A key function of the Board is to ensure good corporate governance at all times. The Board is fully committed to upholding the principles of good governance as set out in its chosen governance code, the Quoted Companies Alliances (QCA) Corporate Governance Code, and you will see further details on how we achieve this in the pages that follow.
We were pleased to announce the appointment of Kat Worth (ACG) as Group Company Secretary, effective from 5 March 2019. Kat has held a number of roles within the public and private sectors and before joining Inland Homes was Group Company Secretary to a large housing association based in London. There, her remit included acting as the Lead Officer for the Remuneration and Nominations committees, ensuring compliance with the provisions of the UK Corporate Governance Code and the FRC's guidance on board effectiveness. With Inland Homes adopting the QCA Code in 2018, Kat is playing a valuable role in ensuring the Group's ongoing compliance with the Code's requirements. There were no changes to the Non-executive Board members during this period.
Market trends
The lack of suitable housing in our target markets continues to result in sustained demand for the houses and apartments we build. However, we need focused and positive dialogue between the Government and industry in the face of ongoing political and regulatory uncertainty.
If the Government is to achieve its goal of building 300,000 new homes a year by the mid-2020s, the planning process needs further attention. Housebuilders spend an enormous amount of time and money obtaining consents and on clearing reserved matters within an outline planning consent. An extension or alternative to the existing Help to Buy scheme, due to end in 2023, will also be essential to keep the market moving.
Outlook
Having secured planning consent at Wilton Park and Cheshunt Lakeside, with a record number of homes under construction (both for private sale and on behalf of partners) and increased market confidence following the general election, Inland Homes has all the components in place to deliver even more success and shareholder value in the year ahead.
We have some very lucrative land opportunities in the pipeline which we are seeking to acquire with a capital light structure, in which the bulk of the capital is provided by investors. This will increasingly be a strategic focus for the Group.
Terry Roydon
Chairman
30 January 2020
Chief Executive review
This year, Inland Homes reached new heights for our land acquisition, construction and partnership activities. In line with our strategic priorities, we now have our largest-ever land bank; we own more plots with planning permission than at any time before; and have continued our year-on-year increase in the number of homes and partnership homes we are building.
Additionally, our agile business model is enabling us to seize new market opportunities, with increased demand for our asset management services, where we use our expertise and skills to secure planning permission on behalf of third parties.
Year highlights
Land
The gross development value of our entire land bank is now £2.4bn and its size has grown from 6,870 plots to a record 7,796 plots; 2,956 with planning consent.
This reporting period we achieved two significant planning consent milestones, with permission granted for both our flagship 100-acre site at Wilton Park in Beaconsfield, Buckinghamshire and for our largest-ever development, at Cheshunt Lakeside in Cheshunt, Hertfordshire.
Wilton Park has an estimated gross development value of £288m. We have secured an initial consent for 304 new homes plus 46 retained Service Family Accommodation dwellings and 1,730sqm of commercial space. There is also a draft allocation for further development on the site which, if adopted, could provide a further 250 homes and 18,500sqm of commercial space.
The Cheshunt Lakeside masterplan for 1,725 homes and 19,000sqm of commercial space will be one of the largest brownfield developments in the south-east. The Group owns and controls 1,253 plots on this site, with as estimated gross development value of £429m.
Achieving these consents follows several years of extensive consultation and maintains our unbroken track record in obtaining planning approvals on complex brownfield sites. Together, these two sites deliver consent for more than 1,500 new homes and have resulted in a considerable increase to our EPRA value of the Group's assets.
Demand for consented housebuilding land remains strong, with 577 plots sold in the period.
Build and partner
With the self-build and partnership arms of our Group growing in scale and reputation, in line with our strategic priorities, we have key pieces in place to fully maximise the value of this land across the short, medium and long term.
We now have 1,813 homes under construction across 12 schemes, five of which are partnership schemes. In total, 921 of the homes under construction are being built on behalf of partners; a 319% increase on the previous reporting period.
Having in-house construction capability gives greater control over a project and our costs. We can buy materials and employ subcontractors directly, build higher quality homes more efficiently, and offer customers a first-class service. Since appointing Gary Skinner as Group Managing Director in 2016, we have invested extensively in systems and personnel, and this is now starting to pay off.
Strategy
Identifying the right land opportunities is still the key to our success. Our ability to identify, purchase and secure planning approvals on complex sites enables us to maximise each site's potential, whether that is by selling, building or partnership activities.
The uncertainty over Brexit has caused considerable caution with first-time buyers. However, there remains a shortage of housing across the UK, property values and demand in the south and southeast, where we operate, remain healthy, and we are already seeing increased market confidence following the General Election.
While the shortage of housing continues to underpin our overarching strategy, we have refined our strategic priorities to ensure we maximise current market opportunities and reduce risk as follows:
· Continue the key activity of identifying the right sites and securing planning;
· Increase the size of our strategic land bank where residential development is expected;
· Continue policy of selling appropriate plots when we have secured planning permission;
· Increase the number of homes built through partnership schemes; and
· Build private homes which meet the needs of the market.
Our strategic land bank of non-brownfield sites now makes up 3,523 of our 7,796 plots. These strategic sites have the potential for approximately 3,018 houses and 505 apartments. We hold these sites on 'discount to market value' options, which we are only required to exercise after we obtain planning consent, providing medium-term opportunities without significant capital investment. We will either sell these sites to other developers or feed them into our own growing housebuilding operations.
In line with our strategic priorities, we have also more than quadrupled our partnership activities this reporting period, to meet the exceptionally high demand from housing associations. These schemes reduce our exposure to any softening of the market. We realise an immediate cash injection from the land sale and recognise revenue and cash through monthly payments of certified work done for our customers. We see partnerships with housing associations and local authorities as our biggest growth opportunity.
Hugg Homes
Since launching last year, we have grown our temporary modular housing business, Hugg Homes, with 22 units tenanted in Southampton (six to Southampton Council) and 32 to Broxbourne Council. These 54 tenanted homes produce a gross rental income of about £500,000 a year.
Hugg Homes helps us realise additional value from land while it is going through the planning process. The modular units support local authorities and others in meeting short-term housing needs with a quality that ranks favorably against other options. With local authorities spending nearly £1bn a year on temporary accommodation in 2017-18, there is huge potential for market growth.
Rosewood Housing
Our subsidiary, Rosewood Housing, was registered as provider of social housing in August 2018. This reporting period we finalised its second deal, in September 2019, for the affordable housing at a new homes development in Tring.
Outlook
Our agile business model enables us to respond to the opportunities the market presents.
With the requirement for affordable homes being a priority for government and local authorities, there is exceptionally strong demand from housing associations for projects where we can provide both the land and construction service. With our track record of creating high-quality homes on time and budget, we are in a strong position to make the most of this increased demand. We are aiming to increase our share of this growing market and have created a land bank to achieve this objective.
We have some very lucrative land acquisition opportunities which we are seeking to engage in a 'capital light' structure, while our net borrowings reduce to improve our balance sheet. Specifically, we are now targeting pro-development London Boroughs, such as Barking and Dagenham, Waltham Forest and Hounslow. We believe we are in an excellent position to grow the partnership housing business significantly with the land bank we are creating.
In recent months and in the year ahead, our focus will be on acquiring land where we act as asset managers on behalf of third parties. We have a 100% success rate in securing planning consent on brownfield sites and have established a reputation for delivering on behalf of these stakeholders. This activity is light on our capital and at reduced risk to the Group while still providing enhanced financial contributions to Inland Homes. This reflects the expertise added by the Group in the management process.
With a substantial number of highly sustainable sites suitable for rental housing, we also expect to secure sales to build-to-rent operators in the current financial year. As we evaluate this opportunity and consider the best way to develop our sites at Wilton Park and Cheshunt Lakeside, we are actively exploring our funding options.
Stephen Wicks
Chief Executive Officer
30 January 2020
Group Finance Director's review
Key financial highlights:
· EPRA net assets: £233.9m as at 30 September 2019, a 13.2% increase from £206.7 million at 30 June 2018
· EPRA net assets per share as at 30 September 2019: 113.69p (30 June 2018: 102.28p)
· Revenue for the 15-month period to 30 September 2019: £147.9m (year to 30 June 2018: £147.4m)
· Profit before tax for the 15-month period to 30 September 2019: £25.0m (year to 30 June 2018: £19.3m)
· Net gearing as at 30 September 2019: 93.9% (30 June 2018: 56.0%)
· Net gearing on EPRA NAV basis as at 30 September 2019: 65.1% (30 June 2018: 38.6%)
· Second interim dividend for the 15-month period to 30 September 2019: 2.25p per share (year to 30 June 2018: final dividend 1.55p per share)
Introduction
On 6 June 2019, the Group changed its accounting reference date from 30 June to 30 September so that its reporting timetable was more closely aligned to value recognition and the operational cycles of the business. Consequently, the current period presented is 15 months and the comparative information is for 12 months throughout this report.
Over the past 15 months, the Group has made significant and tangible progress across its key performance segments which include its land activities, the provision of planning and management services to investors, private housebuilding and partnership housing activities.
During the 15-month period to 30 September 2019, the Group has continued to create substantial shareholder value from increasing its land portfolio and adding value through planning, as well as expanding both its private housebuilding and partnership housing programmes.
Operational performance
Revenue for the period to 30 September 2019 was £147.9m (year ended 30 June 2018: £147.4m). The small increase is due to lower revenues being generated from the sale of residential plots and a reduced number of private homes being completed during the period. This is due to the nature of our construction programme on a number of our large-scale apartment developments, where legal completions can only be achieved on handover of completed blocks.
The Group sold 532 plots excluding joint ventures (year ended 30 June 2018: 837 plots) for £29.2m (year ended 30 June 2018: £59.3m) and 130 private homes, excluding joint ventures and sale of reversionary freeholds (year ended 30 June 2018: 242 private homes) for £32.5m (year ended 30 June 2018: £70.2m).
The average selling price of our homes was £250,000 (year ended 30 June 2018: £293,000). The reduction is due to a change of mix of houses and apartments sold as well as the locations of the homes sold. Our net reservation rate per active outlet during the period was 0.73 (year ended 30 June 2018: 1.34).
The housing market has seen a marked improvement since the decisive outcome of the general election. Despite the nature of the eventual Brexit deal, the sales expectation indicators point towards a more upbeat trend in the housing market.
The Government's Help to Buy initiative continues to be a significant factor in the market with 65% (year ended 30 June 2018: 58%) of our homes sold (including joint ventures) using this scheme. Our forward sales of homes reserved and exchanged at 30 September 2019 amounted £26.0m. In addition, we have forward sold a hotel under construction at our development in Bournemouth for £13.3m.
Revenue from our partnership housing programme increased to £62.6m (year ended 30 June 2018: £12.0m). The Group has created a platform to use its land bank to grow this part of the business quite significantly as it balances exposure to market risk and provides regular cash flow, requires no debt and deploys a limited amount of equity.
A growing part of the Group's business is procuring sites and providing planning and management services to investors in the property sector. The Group typically enters into a planning and management services agreement with the investors which includes procuring the opportunity to acquire brownfield land, adding value by managing the planning process and proposing a disposal plan for the consented site. This activity enables Inland Homes to earn substantial fees with a significantly reduced injection of equity and debt exposure. This part of the business will generate significant operating margins for the Group as a result of the minimal direct costs attributable to this activity. It also assists in the expansion of our partnership housing activity as the land can be sold to housing associations with a construction contract for Inland Homes. Management fees increased to £18.6m (year ended 30 June 2018: £2.4m) during the period.
The Group's gross margin improved to 22.0% (year ended 30 June 2018: 21.6%) and its operating margin increased substantially to 22.1% from 15.9%, predominantly due to the sale of our beneficial interest in Cheshunt Lakeside Developments Limited (CLDL) explained further below. Profit before tax was £25.0m (year ended 30 June 2018: £19.3m).
Administrative expenses have increased from £9.4m to £15.7m and this predominantly reflects investment made in our staff, with the average number of employees increasing from 93 to 138, and total employee numbers increasing from 105 as at 30 June 2018 to 161 on 30 September 2019. As stated above, the expansion in our overhead base has set us up to meet our strategic growth objectives.
The Group had a put and call option arrangement to purchase its 50% joint venture partner's share in CLDL, a company that owns the former Tesco's headquarters site in Cheshunt, Hertfordshire. Certain conditions were attached to the option which needed to be met in order for either side of the option to be exercised. Taking into account the Group's present ability to exercise the option, the Group considered that together the 50% direct holding and the put and call option gave the Group control over the company from 6 June 2019, and consequently consolidated 100% of CLDL from this date. On 22 September 2019, the Group exercised its option and the related liability of £13.7m is included within other creditors as at the period end date and was settled on 25 October 2019. On 30 September 2019 the Group also entered into a contract with a third party to transfer its 50% beneficial interest in the company. The gain recognised on disposal was £12.6m.
Finance costs
The Group's finance costs comprise mainly of interest on land and development finance, non-utilisation fees, interest rolled up on the Zero Dividend Preference shares (ZDPs) and amortisation of arrangement fees. Interest on development funding is capitalised where required by IAS 23.
Total finance costs increased from £6.2m to £10.7m; a reflection of increased borrowings to fund the rise in work in progress from £136.2m to £192.4m and financing CLDL to repay £15m of the loan of £16.8m from our former joint venture partner. Interest on bank and non-bank borrowings amounted to £7.5m (year ended 30 June 2018: £4.4m), amortised loan arrangement and other fees was £1.7m (year ended 30 June 2018: £0.7m) and the finance cost relating to the ZDPs was £1.5m (year ended 30 June 2018: £1.1m).
The funding costs capitalised into work in progress was £1.3m (year ended 30 June 2018: £1.1m).
Taxation
The Group is domiciled in the United Kingdom and does not make use of any tax structure that is not domiciled in the United Kingdom.
The total tax charge of £0.4m combines a current taxation charge of £1.1m and a deferred tax credit of £0.7m and represents an effective rate of 1.6% of the profit before tax. The current corporation tax rate is 19% and the principal difference arises due to the gain on disposal of our 50% beneficial interest in CLDL being exempt from corporation tax, an over provision in prior periods and a deferred tax credit arising due to capital losses brought forward.
Earnings per share and dividends
Basic earnings per share increased to 11.79p (year ended 30 June 2018: 7.64p) signifying the increase in operating profit during the period. The weighted average number of shares in issue during the period was 205.3m (year ended 30 June 2018: 201.6m).
Based on the strong results for the period ended 30 September 2019, the Board has declared a second interim dividend of 2.25p per ordinary share. Together with the first interim dividend of 0.85p paid on 3 July 2019, this makes a total dividend of 3.10p for the period (year ended 30 June 2018: 2.20p). A final dividend for the period ended 30 September 2019 will not be proposed. The second interim dividend is expected to be paid on 12 June 2020 to those shareholders on the register at the close of business on 21 February 2020. The ex-dividend date is 20 February 2020.
Total shareholder return
Inland Homes plc's share price has increased 31.1% over the past 27 months (from 60.25p per share at 30 June 2017 to 79.00p per share at 30 September 2019) and 17.0% over the 15 months to 30 September 2019 (from 67.50p per share at 30 June 2018 to 79.00p per share at 30 September 2019). Combined with dividends paid during the period of 2.4p per share, the share price movement has resulted in a total shareholder return of 20.6% for the 15-month period to 30 September 2019.
This compares to a 19.4% fall in the FTSE AIM All Share index.
Balance sheet
Net assets at 30 September 2019 were £162.2m (30 June 2018: £142.4m), an increase of 13.9%, mainly due to retained earnings. This equates to net assets per share of 78.84p (30 June 2018: 75.3p). The EPRA net asset value per share at 30 September 2019 was 113.69p (30 June 2018: 102.28p). The EPRA NAV per share increased during the period due to the profit after tax for the period end the planning consents received for the Group's two major projects at Wilton Park in Beaconsfield, Buckinghamshire and Cheshunt Lakeside in Cheshunt, Hertfordshire.
Net asset value and net asset value per share (unaudited)
The calculation of EPRA net asset value is set out below:
Net asset value per share
At 30 September
2019
'000
Net asset value per share
At 30 June
2018
'000
Shares in issue Less shares held in:
- EBT
- Treasury
207,366
(1,627)
-
204,551
(1,627)
(825)
For use in basic measures
205,739
202,099
Dilutive effect of:
- share options
2,018
1,837
- deferred bonus shares
1,527
1,823
- growth shares
2,285
5,100
For use in diluted measures
211,569
210,859
£m
Undiluted p
Undiluted
p
At 30 September 2019
Net assets attributable to equity shareholders Adjustment for:
Revaluation of projects
Deferred tax on investment property revaluation
162.2
69.7
2.0
78.84
76.67
EPRA net asset value
Adjustment for:
Deferred tax on investment property revaluation Deferred tax on project revaluation
233.9
(2.0)
(11.8)
113.69
110.55
EPRA triple net asset value
220.1
106.98
104.03
At 30 June 2018
Net assets attributable to equity shareholders
142.4
70.46
67.53
Adjustment for:
Revaluation of projects
61.0
Deferred tax on investment property revaluation
3.3
EPRA net asset value
206.7
102.28
98.03
Adjustment for:
Deferred tax on investment property revaluation
(3.3)
Deferred tax on project revaluation
(11.6)
EPRA triple net asset value
191.8
94.91
90.97
The Directors are required to make an assessment of the fair value of its trading properties when determining EPRA NAV. For undeveloped sites (both owned and options) a residual valuation is carried out to determine the anticipated value of the site with planning. This is then subject to a discount ranging between 0% and 80% to reflect the planning prognosis of the relevant site.
There is not a ready market for sites where construction has commenced. The Directors have therefore assumed that fair value equates to carrying value for such sites unless the site is forecast to make a margin in excess of 16% in which case a fair value adjustment is made to demonstrate the residual land value uplift.
As at 30 September 2019, the Group's investment properties comprised principally of existing residential properties at Wilton Park. The Board intends to sell some these properties in the open market. Hence, £4.7m has been transferred to Assets Held for Sale within current assets and land valued at £6.3m has been transferred to work in progress.
Investment in joint ventures has increased from £0.4m to £8.0m, primarily due to the net effect of the deemed exercise of our call option to acquire our former joint venture partner's share in CLDL and the transfer of our 50% beneficial interest in the company as explained above. Similarly, other receivables due after more than one year of £21.8m have increased from £11.0m, predominantly as a result of the transfer of our 50% beneficial interest in CLDL on deferred terms.
Inventories are the most significant part of the Group's net assets and increased from £136.2m to £192.4m. This has been driven by the growth in the land bank from 6,870 plots to 7,796 plots as well as an increase in work in progress on large-scale apartment developments under construction.
The Group is owed £32.8m from CLDL which represents the major part of amounts due from joint ventures. The site at Cheshunt Lakeside secured planning consent for 1,253 residential plots and 52,797sqft of commercial and educational space during the period and the joint venture has commenced pre-construction works in preparation of the development of the site.
Net debt and borrowings
The Group funds its activities through a combination of equity and debt. Due to the increase in our land bank, work in progress and financing CLDL to repay £15.0m of our former joint venture partner's loan, net debt has risen to £152.3m, (year ended 30 June 2018: £79.7m) representing net gearing of 93.9% (year ended 30 June 2018: 56.0%). Net gearing based on EPRA net assets of £233.9m (year ended 30 June 2018: £206.7m) equates to 65.1% (year ended 30 June 2018: 38.6%). Our cash balances at 30 September 2019 stood at £10.9m (year ended 30 June 2018: £40.4m).
In March 2019, we agreed a revolving credit facility of £65.0m (including an accordion of
£20.0m) for a term of four years, secured against some of our developments under construction. As at the end of the period, we had drawn down £30.2m of this facility leaving potential headroom of £34.8m. In August 2018, we extended the maturity date of £18.4m ZDP shares by five years to 10 April 2024 and during the period ended 30 September 2019 we issued a further 3,987,000 ZDP shares raising a gross sum of £6.2m. The Group also has a secured revolving credit facility of £17.2m from a Fund to finance sites with and without planning consent. This facility, which was fully drawn at 30 September 2019, expires in August 2020 and having had discussions with the Fund, it is the Board's intention to renew the facility.
A revolving facility of £11.5m from Homes England is funding our development of 457 homes and 64,000sqft of commercial space at Chapel Riverside in Southampton. Phases one and two of this development have been completed with construction on phase three well underway. As at 30 September 2019, we had drawn down £7.3m of this facility.
A £24.0m revolving cash flow facility was in place to fund the construction of 239 homes at Lily's Walk in High Wycombe. During the period ended 30 September 2019, we completed the sale of 18 homes with forward sales of £6.7m at the development. £23.6m of the facility had been drawn down at the period end.
Of the Group's total borrowing facilities of £183.8m, 26% expire within one year from the balance sheet date.
In December 2019, the Group renewed a land facility of £26.75m secured against its site at Wilton Park in Beaconsfield for a period of 12 months with stepped reductions to suit our plans.
On 30 January 2020, the Group arranged a new debt facility to be available from May 2020 with a term of 12 months from drawdown. This gives the Group increased flexibility if required and safeguards the Group against any delays in land sales.
The Group remains within the development and corporate covenants stated within its borrowing facilities and maintains excellent relationships with its lenders.
The sale of the large-scale apartment developments as well as engaging in new land opportunities with partners; securing discount to market value options on strategic sites and expanding the partnership housing activity will lead to a reduction in the Group's net borrowings over the next 12 months. This will enable Inland Homes to grow with a reduced level of risk and less of its own equity being utilised.
Nishith Malde
Group Finance Director
30 January 2020
Group income statement
for the 15-month period ended 30 September 2019
Continuing operations
Note
Fifteen months to 30 September 2019
£m
Year ended
30 June
2018
£m
Revenue
Cost of sales
6
6
147.9
(115.4)
147.4
(115.6)
Gross profit
32.5
31.8
Administrative expenses
6
(15.7)
(9.4)
Gain on sale of subsidiary
20
-
0.1
Gain on sale of joint venture interest
20
12.6
-
Share of profit of joint ventures
20
2.0
1.0
Share of profit of associate
20
0.2
-
Revaluation of investment property
15
1.1
-
Operating profit
32.7
23.5
Finance cost - interest expense
10
(9.4)
(5.1)
Finance income - interest receivable and similar income
11
1.7
0.9
Profit before tax
25.0
19.3
Tax charge
12
(0.4)
(3.9)
Total profit for the period/ year
24.6
15.4
Other comprehensive income:
Revaluation of quoted investments
17
(0.4)
-
Total profit and comprehensive income for the period/ year
24.2
15.4
Earnings per share for profit attributable to the equity holders of the Company during the period/year
- basic
13
11.79p
7.64p
- diluted
13
11.47p
7.30p
The accompanying notes form part of this preliminary announcement.
Statements of financial position
Group
Company
Note
30 September 2019
£m
30 June
2018
£m
30 September
2019
£m
30 June
2018
£m
ASSETS
Non-current assets
Investment properties
15
49.3
52.8
-
-
Property, plant and equipment
16
6.3
1.3
-
-
Intangible assets
19
0.3
-
Investments in quoted companies
17
1.1
0.2
-
-
Investment in subsidiaries
20
-
-
12.5
12.5
Investment in joint ventures
20
8.0
0.4
-
-
Amounts due from joint ventures
20
1.0
1.0
-
-
Investment in associate
20
1.3
1.1
-
-
Amounts due from associate
20
-
3.0
-
-
Other receivables
23
21.8
11.0
-
-
Deferred tax
21
-
-
0.8
0.7
Total non-current assets
89.1
70.8
13.3
13.2
Current assets
Inventories
22
192.4
136.2
-
-
Trade and other receivables
23
45.4
30.4
40.2
37.1
Assets held for sale
18
4.7
-
-
-
Corporation tax
-
-
-
0.5
Amounts due from associate
20
3.3
2.8
-
-
Amounts due from joint ventures
20
34.8
19.0
-
-
Cash and cash equivalents
24
10.9
40.4
7.1
18.3
Total current assets
291.5
228.8
47.3
55.9
Total assets
380.6
299.6
60.6
69.1
EQUITY
Capital and reserves attributable to the Company's equity holders
Share capital
25
20.7
20.5
20.7
20.5
Share premium account
26
36.4
34.8
36.4
34.8
Employee benefit trust
26
(1.1)
(1.1)
(1.1)
(1.1)
Treasury reserve
26
-
(0.5)
-
(0.5)
Special reserve
26
1.1
6.1
1.1
6.1
Retained earnings
26
105.1
82.6
2.9
8.2
Total equity attributable to shareholders of the Company
162.2
142.4
60.0
68.0
LIABILITIES
Current liabilities
Bank loans and overdrafts
28
48.0
26.0
-
-
Zero Dividend Preference shares
-
18.4
-
-
Trade and other payables
27
47.7
24.9
0.6
1.1
Corporation tax
2.2
6.6
-
-
Other financial liabilities
30
4.1
3.7
-
-
Total current liabilities
102.0
79.6
0.6
1.1
Non-current liabilities
Bank loans
28
82.1
41.4
-
-
Other loans
28
7.2
34.3
-
-
Zero Dividend Preference shares
28
25.9
-
-
-
Deferred tax
21
1.2
1.9
-
-
Total non-current liabilities
116.4
77.6
-
-
Total equity and liabilities
380.6
299.6
60.6
69.1
Retained earnings for the Company includes a loss after tax for the period of £3.4m (year ended 30 June 2018: profit after tax of £7.5m).
The Company has taken advantage of the exemption allowed under Section 408 of the Companies Act 2006 and has not presented its own profit and loss account in this preliminary announcement.
Statements of changes in equity
for the 15-month period ended 30 September 2019
Share capital
Share premium
Employee Benefit
Trust
Special reserve
Treasury reserve
Retained earnings
Total
Group
Note
£m
£m
£m
£m
£m
£m
£m
At 30 June 2017
20.4
34.3
(1.1)
6.1
-
70.9
130.6
Total comprehensive income for the year
-
-
-
-
-
15.4
15.4
Transactions with owners:
Share-based payments
9
-
-
-
-
-
0.6
0.6
Dividend payment
14
-
-
-
-
-
(3.7)
(3.7)
Issue of ordinary shares
25
0.1
0.5
-
-
-
(0.6)
-
Purchase of own shares
25
-
-
-
-
(0.6)
-
(0.6)
Exercise of share options
25
-
-
-
-
0.1
-
0.1
At 30 June 2018
20.5
34.8
(1.1)
6.1
(0.5)
82.6
142.4
Transitional IFRS 15 adjustment
5
-
-
-
-
-
0.2
0.2
At 30 June 2018 - restated
20.5
34.8
(1.1)
6.1
(0.5)
82.8
142.6
Total profit for the period
-
-
-
-
-
24.6
24.6
Other comprehensive income
17
-
-
-
-
-
(0.4)
(0.4)
Transactions with owners:
Share-based payments
9
-
-
-
-
-
0.3
0.3
Dividend payment
14
-
-
-
(5.0)
-
-
(5.0)
Issue of ordinary shares
25
0.2
1.6
-
-
-
(1.8)
-
Purchase of own shares
25
-
-
-
-
(0.1)
-
(0.1)
Exercise of share options
25
-
-
-
-
0.6
(0.4)
0.2
At 30 September 2019
20.7
36.4
(1.1)
1.1
-
105.1
162.2
Company
At 30 June 2017
20.4
34.3
(1.1)
6.1
-
4.4
64.1
Total comprehensive income for the year
-
-
-
-
-
7.5
7.5
Transactions with owners:
Share-based payments
9
-
-
-
-
-
0.6
0.6
Dividend payment
14
-
-
-
-
-
(3.7)
(3.7)
Issue of ordinary shares
25
0.1
0.5
-
-
-
(0.6)
-
Purchase of own shares
25
-
-
-
-
(0.6)
-
(0.6)
Exercise of share options
25
-
-
-
-
0.1
-
0.1
At 30 June 2018
20.5
34.8
(1.1)
6.1
(0.5)
8.2
68.0
Total comprehensive loss for the period
-
-
-
-
-
(3.4)
(3.4)
Transactions with owners:
Share-based payments
9
-
-
-
-
-
0.3
0.3
Dividend payment
14
-
-
-
(5.0)
-
-
(5.0)
Issue of ordinary shares
25
0.2
1.6
-
-
-
(1.8)
-
Purchase of own shares
25
-
-
-
-
(0.1)
-
(0.1)
Exercise of share options
25
-
-
-
-
0.6
(0.4)
0.2
At 30 September 2019
20.7
36.4
(1.1)
1.1
-
2.9
60.0
The accompanying notes form part of this preliminary announcement.
Group statement of cash flows
for the 15-month period ended 30 September 2019
Note
Fifteen months to
30 September
2019
Year ended
30 June
2018
Cash flow from operating activities
Profit for the period/ year before tax
25.0
19.3
Adjustments for:
- depreciation
16
0.7
0.3
- share-based payments
8
0.3
0.8
- revaluation of investment property
15
(1.1)
-
- gain on disposal of subsidiary
-
(0.1)
- interest expense
10
9.4
5.1
- interest receivable and similar income
11
(1.7)
(0.9)
- gain on sale of joint venture interest
20
(12.6)
-
- IFRS 15 opening adjustment
0.2
-
- share of profit of joint ventures
20
(2.0)
(1.0)
- share of profits of associates
20
(0.2)
-
Corporation tax payments
(5.6)
(4.0)
Change in working capital:
- increase in inventories
(50.8)
(3.2)
- increase in trade and other receivables
(7.9)
(17.8)
- increase/(decrease) in trade and other payables
7.9
(12.8)
- increase in other financial liabilities
0.4
-
- increase in trading balance due to joint ventures
20
4.1
-
Net cash outflow from operating activities
(33.9)
(14.3)
Cash flow from investing activities
Interest received
11
1.0
0.8
Purchases of property, plant and equipment
16
(5.4)
(0.9)
Purchases of intangible assets
19
(0.3)
-
Purchases of investment property
(1.5)
(0.2)
Purchases of quoted investments
17
-
(0.2)
Proceeds from sale of subsidiary
-
13.4
Loans provided to joint ventures
20
(19.9)
(7.6)
Amounts repaid by joint ventures
-
5.9
Distribution of profits from joint venture
20
1.0
0.8
Amounts repaid by associate
20
2.6
-
Net cash (outflow)/inflow from investing activities
(22.5)
12.0
Cash flow from financing activities
Interest paid
(7.0)
(3.8)
Repayment of borrowings
(20.0)
(6.3)
New loans
52.6
30.6
Issue of zero dividend preference shares
6.2
-
Equity dividends paid to ordinary shareholders
14
(5.0)
(3.7)
Exercise of share options
0.1
-
Purchase of own shares
-
(0.6)
Net cash inflow from financing activities
26.9
16.2
Net (decrease)/increase in cash and cash equivalents
(29.5)
13.9
Net cash and cash equivalents at beginning of period/year
40.4
26.5
Net cash and cash equivalents at end of period/year
24
10.9
40.4
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