REG - Inland Homes PLC - Sale of Strategic Land Portfolio & Trading Update

Inland HomesAnnouncement

25/01/2023 07:00

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RNS Number : 7528N  Inland Homes PLC  25 January 2023

25 January 2023

 

Inland Homes plc

('Inland Homes' or the 'Group')

 

Sale of the Strategic Land Portfolio & Trading Update

 

Inland Homes plc (AIM: INL), the brownfield site developer, housebuilder and
regeneration specialist focused on the South and South East of England, today
announces the sale of the Group's strategic land portfolio and a trading
update for the year ended 30 September 2022.

Sale of the Strategic Land Portfolio

The Board has identified a number of non-core assets for disposal and intend
to conduct a sale process of the same over the next few months.  Further
updates will be provided in due course.

In light of recent government announcements strengthening green belt
restrictions, against the backdrop of an already challenging planning system,
a decision was made to dispose of Inland's greenfield "strategic land" option
portfolio consisting of 2,822 potential plots, of which 81% are located in the
green belt. An unconditional sale of this portfolio has been completed for a
consideration of £9.5m resulting in a profit of £3.5m.  There was no
associated debt relating to the portfolio so the consideration has increased
our cash balances by £9.5m.

As part of the sale, Inland has agreed to assist the purchaser with certain
planning and management services in consideration for further management fees
to be received in due course.

Within our land activity, the sale of the strategic options will enable Inland
to focus on its roots of enhancing the value of brownfield land through the
planning process.

Strategic Review

 

The Board have previously announced a strategic review of the business and
appointed Lazard & Co., Ltd to assist with the process. This process is
ongoing and a further announcement will be made about the strategic review by
the end of March 2023.

 

 

Trading Update

On 6 September 2022 the Group announced a Trading Update which cautioned that
the Group's financial performance for the second half of its financial year
was dependent on the completion of planned land sales and on the timing of
planning approvals to support those planned land sales. As a result, the Group
reported an anticipated loss before taxation of approximately £37.1 million
and a revised forecast for net assets at 30 September 2022 of approximately
£145.9 million.

Since then, the UK economic outlook for the UK housebuilding industry has
deteriorated. With rising interest rates, high inflation rates and the cost of
living crisis, which has adversely impacted the ability of first time buyers
to buy new homes, the future prospects for the industry have taken a turn for
the worse. In addition, sentiment in terms of market confidence and property
valuations have been adversely affected. That said, the demand for the Group's
land assets remains strong in a market where consented land in the South and
South East is in extremely limited supply.

 

Net debt

The Group had previously stated that its key target was to have net debt of
less than £100.0m by the end of last financial year. This objective has been
achieved and net debt at 30 September 2022 was £86.8m (30 September 2021:
£118.1m), comprising gross debt of £98.9m and cash and cash equivalents of
£12.1m (30 September 2021: gross debt of £130.2m with cash and cash
equivalents of £12.1m).   Since the year end net debt has increased, due to
our normal operating cycle to £100.0m, including the cash received for the
sale of the strategic land portfolio.  Having said that, the reduction of net
debt remains a core strategic aim of the Group and the disposal of other
non-core assets will continue to support this aim as relevant transactions are
completed.

Land portfolio

The Group ended at 30 September 2022 with a land portfolio of 8,578 plots that
presents opportunities in the short and medium term including 3,680 plots that
have planning consent or a resolution to grant planning consent. Inland Homes'
sites are in attractive and highly sought after locations. During the
financial year ended 30 September 2022, the Group achieved planning consent on
1,029 plots (2021: 1,831) and sold 237 plots (2021: 356 plots).

Recent announcements by the UK Government have led to a significant amount of
uncertainty about the planning system, which will further slow the progress
that could be made in converting credible land opportunities for development
and the enhancement of many local communities. As a result, a number of Local
Authorities have withdrawn or suspended their proposed Local Plans, thereby
putting strategic planning in a state of paralysis.

 

Asset management

At the year-end the Group had four active projects within its asset management
division having concluded two projects during the year. These have the
potential to deliver approximately 2,500 new homes.

During the year Inland Homes supported the investor group in its planning
application for the 36-acre site Cavalry Barracks in Hounslow, which achieved
a resolution to grant in October 2022 with the s106 agreement now expected to
be completed shortly. This site is one of the largest brownfield sites in
London, with an estimated gross development value circa £600m.

In preparing its results for the year ending 30 September 2022, the Group has
prudently recognised provisions for possible expected credit losses including
those on asset management schemes totalling £39.0m based on its assessment of
recoverability of amounts receivable in current market circumstances.  These
provisions could however reverse if market conditions improve before the
assets are realised.

Contract Income

There had been a substantial increase in the Group's partnership housing
contract income, driven by the demand from affordable housing providers and
build-to rent operators. Inland Homes continues to proactively work towards
improving its commercial delivery and operational efficiency as it delivers
its existing commitments to valued customers which run to 2025. As previously
reported, unforeseen costs, cost inflation and extended construction periods
will continue to suppress margins in this division for the next two financial
years, with provisions made for anticipated losses.

The Board have undertaken a further review of all remaining construction
projects and the latest available cost to complete information and details of
the completion dates of each project, some of which have been extended. We
have therefore increased the provisions on the Group's five separate projects
from £15.4m to £28.8m.

 

Housebuilding

The Group achieved fewer private home completions during the year than the
comparative period, 180 in aggregate (2021: 216), at an average selling price
of £304,000 (2021: £262,000), excluding those within joint ventures. The
weekly net reservation rate per active sales outlet was 0.89 for the year
(2021: 1.09).

The margins in this segment have also been affected by unforeseen costs, cost
inflation and extended construction periods partly due to delays in delivery
of materials and shortage of labour supply.

Cladding and fire safety position

The Group is a signatory to the Department for Levelling Up, Housing and
Communities Developer Pledge and is committed to removing cladding and
remediating fire safety issues in buildings over 11 metres where it has
minimal exposure. There was no financial impact of, or material provisioning
for, remedial works in the financial year ended 30 September 2022.

 

Expected result and Net Asset Value

As a result of the items referred to above, the expected loss before tax for
the year ending 30 September 2022 is now approximately £91.0m and the net
assets at the balance sheet date approximately £90.0m, which represents an
IFRS net asset value of approximately 40p per ordinary share, which excludes
any EPRA uplift.

The Group had already secured a waiver from one of its lenders in respect of
its revolving credit facility on the interest cover ratio covenant for the
three quarters ending 30 June 2023. With the revised provisioning, the
anticipated losses for the financial year and net assets at approximately
£90.0m, the Group is a going concern, but it does mean that the Group will
have breached the net assets and gearing covenants with one lender and the net
asset and quick asset ratio covenants for another lender, where the Group's
combined borrowings are currently £49.3m. These represent the only breaches
of financial covenants on any of the Group's borrowings and Inland Homes have
already had discussions with the lenders concerned to procure waivers for both
the existing and any forecast expected future covenant breaches for the two
lenders concerned. Whilst the Board believes that these waivers will be
forthcoming, they consider that if required, these borrowings can be
refinanced.

 

Group results for the year ended 30 September 2022

 

The Group's audit continues and it is expected that the Group's final results
will now be announced at the end of February 2023.

Simon Bennett, Chairman, commented:

"The Group has experienced an extremely disappointing year. However, we
continue to see good interest for our new homes and valuable consented land in
the South and South East of the UK"

 

Enquiries

Inland Homes plc:

Simon Bennett,
Chairman
Tel: 44 (0)1494 762450

Nishith Malde, Interim CEO

 

Lazard & Co., Ltd (Adviser to the
Group)
Tel: 44 (0)20 7187 2000

William Rucker

Louise
Campbell

 

Panmure Gordon (UK) Limited (NOMAD to the Group)             Tel:
44 (0)20 7886 2500

Dominic Morley / James Sinclair-Ford (Corporate Advisory)

Tom Scrivens (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 priorities and objectives are
met.

Inland Homes' 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 (http://www.hugghomes.co.uk)

Rosewood Housing - www.rosewoodhousing.co.uk
(http://www.rosewoodhousing.co.uk)

Lazard & Co., Limited, which is authorised and regulated in the United
Kingdom by the Financial Conduct Authority, is acting exclusively as financial
adviser to the Inland Homes plc and no one else in connection with the
strategic review referred to in this announcement and will not be responsible
to anyone other than Inland Homes plc for providing the protections afforded
to clients of Lazard & Co., Limited nor for providing advice in relation
to such strategic review or any other matters referred to in this
announcement. Neither Lazard & Co., Limited nor any of its affiliates owes
or accepts any duty, liability or responsibility whatsoever (whether direct or
indirect, whether in contract, in tort, under statute or otherwise) to any
person who is not a client of Lazard & Co., Limited in connection with
this announcement, any statement contained herein or otherwise.

 

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