REG - Inland ZDP PLC Inland Homes PLC - Annual Financial Report
31/01/2023 18:15
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RNS Number : 4849O Inland ZDP PLC 31 January 2023
Inland ZDP PLC
31 January 2023
INLAND ZDP PLC
AUDITED RESULTS FOR YEAR ENDED 30 SEPTEMBER 2022
KEY POINTS
The board of Inland ZDP PLC (the "Company") announces the results for the year
ended 30 September 2023 and the publication of its annual report.
The Company is a specialist funding vehicle only and has no business,
operations or employees of its own. It has issued 18,101,857 zero dividend
shares ("ZDP shares") at various prices between 20 December 2012 and 19
November 2019, raising £22.28m cash which has been lent to its holding
company, Inland Homes plc ("Inland").
ZDP shares are Listed and traded on the Main Market of the London Stock
Exchange and are due to be redeemed for 201.4p cash per ZDP share (£36.45m in
total) on 10 April 2024, when the Company will be liquidated unless proposals
to extend its life have been approved by holders of all its classes of shares.
The Inland Homes group (the "Group") has an extensive network of relationships
which enable it to identify potentially attractive, primarily brownfield,
residential and mixed-use property development opportunities and has an
outstanding 100% track record in successfully achieving planning consents on
its brownfield sites.
Initially the Group sold most of its consented plots to major housebuilders,
but in recent years, its business model has changed to include construction
activity, selling completed homes or selling plots to BTR (Build to Rent)
operators and housing associations with construction contracts.
The Group has relationships with investors with whom it can develop sites
through separately funded joint ventures or source or generate fees for
managing developments funded by the investors. During recent years, a higher
proportion of its projects have been pursued on an asset management basis
resulting in significant reductions in the Group's borrowing requirements as
owned sites and completed homes are sold.
The Company is reliant on Inland's ability to finance the redemption of the
ZDP shares on 10 April 2024. Although the Group announced anticipated losses
of approximately £91m for the year to 30 September 2022, it continues (with
some short term fluctuations) to realise cash and reduce debt as a result of
adopting a less cash intensive business model whereby developments are
promoted and managed by the Group on behalf of others who fund them (asset
management projects) or developed in joint ventures with their own financing
arrangements.
On 25 January 2023, Inland Homes PLC announced that it is seeking waivers of
covenant breaches from two lenders owed a combined £49.3m; stating that:
Whilst the board believes that these waivers will be forthcoming, they
consider that if required, these borrowings can be refinanced. Positive
discussions are progressing with the lenders to procure the waivers. The
financial statements do not include the adjustments that would result if the
Company were unable to continue as a going concern. At the time of approving
the financial statements and after making the appropriate enquiries, the
Directors have a reasonable expectation that the Company has adequate
resources to continue in operational existence for the foreseeable future.
As the recoverability of the intercompany receivable in April 2024 and by
association the Company's ability to meet its repayment obligations in April
2024 is dependent on the Group continuing in operation as a going concern
these matters indicate the existence of a material uncertainty which may cast
significant doubt on the Company's ability to continue as a going concern.
The Directors therefore consider it appropriate to prepare the financial
statements on the going concern basis. The auditors' report on the accounts
for the year ended 30 September 2022, which contains a statement of material
uncertainty relating to the going concern basis of preparation, is
unqualified.
Additionally, the Group has budgeted and forecast completion of both planned
land sales in the course of the next twelve months as part of its normal
course of business alongside forecasting expected legal completions of house
sales and commercial units which underpin it to continue trading as a going
concern. The payment of the Final Capital Entitlement to ZDP Shareholders is
expected to be funded through a combination of surplus operating cash and
refinancing. If the former is available prior to 10 April 2024, it could be
used to buy ZDP Shares in the market.
The Company's constitution and arrangements with Inland contain commitments to
pledge Assets with a book value of at least 120% of the accrued amount due to
ZDP Shareholders, less any Pledged Cash (which was satisfied at 30 September
2022); and to satisfy an Asset Cover covenant whereby Assets (broadly tangible
assets less trade creditors) divided by Financial Indebtedness (including the
Final Capital Entitlement of the ZDP Shares) exceed 1.8. The Group's annual
results for the year to 30 September 2022 are expected to be announced at the
end of February 2023 following completion of the audit. As the Asset Cover
of the ZDP Shares is derived from the Group's consolidated financial
statements, the following cover ratio is subject to adjustment. If any such
adjustment is material the updated cover ratio will be announced. As at 30
September 2022 the Cover Ratio was 2.44 (30 September 2021 2.54).
Enquiries:
Inland ZDP PLC
Nishith Malde FCA Tel: 01494 762450
INLAND ZDP PLC
AUDITED RESULTS FOR YEAR ENDED 30 SEPTEMBER 2022
Strategic report
The Company and the Group
The Company is a specialist funding vehicle only and has no business,
operations or employees of its own. It has issued 18,101,857 zero dividend
shares ("ZDP shares") at various prices between 20 December 2012 and 19
November 2019, raising £22.28m cash which has been lent to its holding
company, Inland Homes plc ("Inland").
ZDP shares are Listed and traded on the Main Market of the London Stock
Exchange and are due to be redeemed for 201.4p cash per ZDP share (£36.45m in
total) on 10 April 2024, when the Company will be liquidated unless proposals
to extend its life have been approved by holders of all its classes of shares.
The Inland Homes group (the "Group") has an extensive network of relationships
which enable it to identify potentially attractive, primarily brownfield,
residential and mixed-use property development opportunities and has an
outstanding 100% track record in successfully achieving planning consents on
its brownfield sites.
Initially the Group sold most of its consented plots to major housebuilders,
but in recent years, its business model has changed to include construction
activity, selling completed homes or selling plots to BTR (Build to Rent)
operators and housing associations with construction contracts.
The Group has relationships with investors with whom it can develop sites
through separately funded joint ventures or source or generate fees for
managing developments funded by the investors. During recent years, a higher
proportion of its projects have been pursued on an asset management basis
resulting in significant reductions in the Group's borrowing requirements as
owned sites and completed homes are sold.
The Company's participation in the Group's funding arrangements
The Group has a range of borrowing arrangements, including the loan from the
Company, with the following aims:
· spreading maturity dates over time, reducing the impact of
refinancings falling due when fluctuating credit market conditions are
difficult;
· avoiding excessive dependence on any single lender;
· achieving a balance between fixed and floating interest rates;
· ensuring that the security arrangements and covenants applicable to
individual loans are mutually compatible.
Inland Homes plc has entered into contractual commitments to the Company and
is obliged to meet all the Company's costs and expenses, grant and maintain
first charge security to the Company over tangible assets with a book value of
120% of the accrued value of the ZDP shares, less Pledged Cash; and abide by
asset cover covenants which are tested quarterly. Under the Contribution
Agreement, Inland is obliged to ensure that the Company has sufficient cash to
pay the Final Capital Entitlement (201.4p per ZDP share) on the redemption
date.
Principal risks and uncertainty and risk management
The Board believes that the principal risk faced by the Company is the credit
risk associated with the loan made to Inland.
The specific risks faced by Inland, which may impact the credit risk the
Company has with the loan made to Inland, are included within its financial
statements. These principally comprise: adverse economic conditions affecting
the housing market and the propensity of people to buy homes; adverse changes
to government policy and planning regulations; failure to effectively manage
major projects to industry standard margins; the inability to retain or source
high calibre and experienced staff; solvency and difficulty in procuring
borrowing facilities at competitive rates and maintain sufficient cash
headroom; access to site labour and materials; inability to source and develop
suitable land at the appropriate cost and quantity; health and safety risks;
cyber and business continuity risks; climate-related risk and the risk of a
major incident impacting the UK (e.g. pandemic).
The Directors of the Company are also directors of other companies in the
Inland Group and are therefore in a position to assess the recoverability of
amounts due from Inland.
The Company is also exposed to risks in relation to its financial
instruments. Further details of these risks and the way in which they are
managed are contained in note 9 of the financial statements.
The Company is reliant on Inland's ability to finance the redemption of the
ZDP shares on 10 April 2024. Although the Group announced significant
expected losses for the year to 30 September 2022, it continues (with some
short term fluctuations) to realise cash and reduce debt as a result of
adopting a less cash intensive business model whereby developments are
promoted and managed by the Group on behalf of others who fund them (asset
management projects) or developed in joint ventures with their own financing
arrangements.
On 25 January 2023, Inland Homes PLC announced that it is seeking waivers of
covenant breaches from two lenders owed a combined £49.3m; stating that:
Whilst the board believes that these waivers will be forthcoming, they
consider that if required, these borrowings can be refinanced. Positive
discussions are progressing with the lenders to procure the waivers. This
material uncertainty is reflected in the basis of preparation of the financial
statements and the audit report. See the Chairman's statement for further
comment about this risk.
Risk and description Consequences of risk Existing mitigations and internal controls
Counterparty loan risk • Severe impact on cash flow • Regular review at Board level of detailed cash flow forecasts which are
subject to sensitivity analysis
A decline in the creditworthiness of Inland could lead to an inability to
repay the loan made by the Company.
· Fees and penalty interest rates may become payable to lenders in respect of
any breach and, if breaches are not waived, a need to refinance the relevant · Inland seeks to maintain good relationships with its lenders and seeks to
borrowings may arise obtain waivers of any anticipated or actual covenant breaches at the earliest
opportunity.
Asset value risk · Potential delays in recovering value for the Company if Inland becomes · If any other party institutes insolvency proceedings against any Inland
insolvent and potential shortfall in the amounts recovered Group company holding a Pledged Asset or gives notice of an intention to do
The realisable value of the Group's assets, including assets pledged to the
so, the Company has the right to enforce its security over certain Pledged
Company, could be difficult to realise rapidly in a forced sale situation and Assets and take steps to realise them in an orderly manner over time to
achieve prices which are significantly below the prices achievable in the
maximise recovery. The recoverability of amounts due from joint venture
ordinary course of business. · In the case of Pledged Assets which comprise amounts due from property companies may be subject to satisfying claims of that company's other lenders.
joint ventures, there could be delays while the relevant joint venture company
realises cash from its property development activity or is able to refinance
its borrowings to repay the Company, with a risk of a potential shortfall in
the amounts recovered.
Key performance indicators
The key performance indicators used by the Board to measure the Company's
success are the asset cover (which is calculated on a Group basis, described
in more detail in the chairman's statement, but broadly comprises tangible
gross assets at book value less trade creditors and deferred consideration
liabilities for land purchases up to 60 per cent. of the total consideration;
divided by Financial Indebtedness, which includes the ZDP Final Redemption
Liability, borrowings repayable prior to 10 October 2024 and deferred
consideration in excess of 60% of the total consideration payable for land),
the asset value per ZDP share, the accrued capital entitlement and the price
of the ZDP shares.
The Group's annual results for the year to 30 September 2022 are expected to
be announced at the end of February 2023 following completion of the audit.
As the Asset Cover of the ZDP Shares is derived from the Group's consolidated
financial statements, the figures below are subject to adjustment. If any
such adjustment is material the updated cover ratio will be announced.
30 September 2022 30 September
2021
Asset cover 2.44 2.54
Asset value per ZDP share 186.19p 176.86p
Accrued capital entitlement per ZDP share 185.62p 175.96p
ZDP share price 174.00p 168.50p
The asset value and the accrued capital entitlement will continue to increase
as the repayment date approaches. The book value of ZDP shares in the
financial statements is derived from the various issue prices using the
effective interest method, whereas the accrued capital entitlement is based on
the initial issue price (100p) and its accrual at 7.3% per annum from the
initial issue date (12 December 2012) to 148.8p on 13 August 2013, when an
extension of the redemption date was approved, subsequently accruing at 5.5%
to 10 April 2024. The redemption price 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.
The ZDP share price increased by 4% to 181p during the first half of the
financial year and remained at that level for the following five months.
During September 2022 the ZDP share price dropped to a low point of 171.5p in
the context of an announcement by Inland of poorer performance than the market
had been expecting for the year to 30 September 2022 and a possible breach of
a banking covenant. Having recovered a little in the interim, the ZDP Share
price dropped to a closing price of 121p when Inland announced losses and
breaches of loan covenants on 25 January 2023.
Chairman's statement
I am pleased to present the Company's annual report and financial statements
for the year ended 30 September 2022.
The Company is a wholly owned subsidiary of Inland Homes 2013 Limited which is
a wholly owned subsidiary of Inland Homes plc ("Inland") and was established
solely for the purpose of issuing ZDP shares and lending the proceeds to
Inland.
The financial statements have been produced on a going concern basis, on the
assumption that the breaches by the Group of loan covenants can be remedied by
agreeing the terms of waivers with the relevant lenders or refinancing their
debt. If neither is achieved, the going concern basis would no longer be
appropriate and many of the Group's asset values could be seriously impaired,
including the value of the Pledged Assets, the most significant of which is a
loan to a property joint venture the value of which could be significantly
reduced if Inland became insolvent.
Accordingly the ZDP Share price is likely to be influenced by Inland's
announcements relating to the above, whether upwards on remedying the covenant
breaches or downwards if that is not achieved.
The original loan and contribution agreements between the Company and Inland
contain certain protections for the Company which are intended to benefit its
ZDP shareholders. These include first charges over pledged assets and pledged
cash in a charged bank account. The pledged assets (currently primarily
interests in a property development joint venture) must have a book value of
at least 120% of the accrued value of the ZDP shares net of the pledged cash.
As at 30 September 2022, the accrued amount due to ZDP shareholders was
£33,601,021 (30 September 2021: £31,852,736), the pledged cash was
£4,245,826 (30 September 2021: £7,327,479) and the pledged assets had a book
value of £38,994,874 (30 September 2021: £36,962,175), thereby satisfying
this requirement.
The loan agreement also contains a covenant relating to asset cover, which is
shown below as at 30 September 2022. The definitions of Assets and Financial
Indebtedness, which apply to the Group as a whole, are set out in the
prospectus published in connection with the issue of the ZDP shares amended as
shown in the Continuation Circular dated 19 July 2018 which is available at
https://www.inlandhomesplc.com/media/2014/inland-zdp-plc-continuation-circular.pdf
(https://www.inlandhomesplc.com/media/2014/inland-zdp-plc-continuation-circular.pdf)
. The definition of Financial Indebtedness excludes indebtedness which falls
due more than 6 months after the final ZDP Repayment Date of 10 April 2024.
Asset cover:
As explained in the Strategic Report above, the Asset cover ratio as at 30
September 2022 is subject to adjustment:
Assets / Financial Indebtedness plus ZDP Final Redemption Liability = 2.4
times cover (30 September 2021: 2.5 times cover).
The asset cover should be at least 1.8 times, so this covenant, which is
tested quarterly, was satisfied at 30 September 2022. It has been satisfied
on all testing dates since the initial issue of ZDP Shares.
The return to maturity of a ZDP Share based on the mid market closing price as
at 30 January 2023 (132p) was 42.5 per cent.
The Board believes that the use of book values for security and asset cover
covenants is generally conservative on a going concern basis, because a
proportion of the group's assets are properties for which planning consents
are sought. The planning process takes time and any progress towards reaching
the stage when building can commence is not reflected in an increase in the
book values beyond the costs attributable to the relevant sites, whereas any
diminution in value is reflected by way of impairment provisions, such that
planning gains are not generally recognised in Inland's financial statements
until sales are contracted. If the covenant ratios were to be calculated by
reference to the market values of the assets, the cover would be higher.
However, forced sale values could be significantly lower.
The Hurdle Rate by which the consolidated values of the Group's Assets would
need to decrease before 10 April 2024, if Inland's Assets are to remain
sufficient to cover the Final Capital Entitlement and its net debt (calculated
from book values as at 30 September 2022, but excluding intangible assets) is
-46.3%.
The Group has adopted a less capital intensive business model over recent
years. New developments are primarily funded by asset management clients
(who buy the sites and pay fees to the Group for managing their planning and
development) or by independently financed joint ventures. This business
model has resulted in significant repayment of debt as the Group's owned
development sites and completed homes were sold. This process is ongoing and,
notwithstanding the losses incurred by the Group in the year to 30 September
2022, the Group's plan is to continue to generate cash as the redemption date
of the ZDP shares in April 2024 draws nearer. The payment of the Final
Capital Entitlement to ZDP Shareholders is expected to be funded through a
combination of surplus operating cash and refinancing. If the former is
available prior to 10 April 2024, it could be used to buy ZDP Shares in the
market.
Stephen Wicks and Gary Skinner resigned from the Company's Board when they
left the Group and Desmond Wicks has been appointed as a director. Stephen
Wicks was a joint founder of Inland and had been chief executive of the Group
since its inception. He remains a consultant to the Group until 30 September
2023. Gary Skinner was managing director of the Group. I thank them for
their service to the Company and welcome Desmond Wicks to the Board.
Nishith Malde
Chairman
31 January 2023
Financial statements
STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 30 SEPTEMBER 2022
Year Year
ended
ended
30 September 2022 30 September
2021
Continuing operations Note £000 £000
Revenue
Interest income 2 1,689 1,635
Total income 1,689 1,635
Expenditure
Expenses 3 - -
Total expenditure - -
Profit before finance costs and taxation 1,689 1,635
Finance costs 4 (1,689) (1,635)
Profit before tax -
Income tax 5 - -
Result for the year and total comprehensive income - -
Earnings per share for result attributable to the equity holders of the 6 0.0p 0.0p
company during the year
The accompanying accounting policies and notes form an integral part of these
financial statements.
STATEMENT OF FINANCIAL POSITION
AS AT 30 SEPTEMBER 2022
30 September 2022 30 September
2021
Notes £000 £000
Non-current assets
Intercompany receivable 9,11 33,754 32,065
33,754 32,065
Non-current liabilities
Zero Dividend Preference Shares 7 (33,704) (32,015)
(33,704) (32,015)
Net assets 50 50
Equity
Ordinary share capital 8 50 50
Total equity 50 50
The accompanying accounting policies and notes form an integral part of these
financial statements.
STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 SEPTEMBER 2022
Share
capital Total
£000 £000
At 1 October 2020 50 50
Result and total comprehensive income for the year - -
At 30 September 2021 50 50
Result and total comprehensive income for the year - -
At 30 September 2022 50 50
The accompanying accounting policies and notes form an integral part of these
financial statements.
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 30 SEPTEMBER 2022
Year ended Year ended
30 September 2022 30 September 2021
£000 £000
Cash flow from operating activities
Profit for the year / period before tax - -
Adjustments for:
- interest expense 1,689 1,635
- interest and similar income (1,689) (1,635)
Net cash flow from operating activities - -
Net increase in cash and cash equivalents - -
Net cash and cash equivalents at beginning of the year
- -
Net cash and cash equivalents at the end of the year
- -
The accompanying accounting policies and notes form an integral part of these
financial statements.
NOTES TO THE FINANCIAL STATEMENTS
1 Accounting policies
The principal accounting policies adopted in the
preparation of the financial statements are set out below.
1.1 Basis of preparation
The financial statements have been prepared in accordance
with the Companies Act 2006 and UK adopted International Accounting Standards
in conformity with the requirements of the Companies Act 2006. The principal
accounting policies adopted by the Company are set out below.
The financial statements are prepared in sterling, which is the functional
currency of the Company. Monetary amounts in these financial statements are
rounded to the nearest £'000.
These accounting policies comply with each accounting standard that is
mandatory for accounting year ended 30 September 2022.
At the date of approval of these financial statements, certain new standards,
amendments and interpretations to existing standards have been published by
the IASB but are not yet effective and have not been adopted early by the
Company.
Management anticipates that all of the relevant pronouncements will be adopted
in the Company's accounting policies for the first period beginning after the
effective date of the pronouncement. Information on new standards,
amendments and interpretations that are expected to be relevant to the
Company's financial statements is provided below.
Certain other new standards and interpretations have been issued but are not
expected to have a material impact on the Company's financial statements.
The Company's business activities principal risks and uncertainty, and risk
management are set out in the strategic report. The Company is reliant on the
ability of Inland Homes plc to continue as a going concern as detailed in the
strategic report. Further disclosures regarding the Company's financial
instruments and exposure to credit and liquidity risk are set out in note 9 of
the Financial Statements.
Given the dependency on Inland Homes plc, details regarding their going
concern assumptions are given below.
Going concern
The Directors are required to assess the Company's ability to continue as a
going concern for a period of at least the next twelve months however, having
regard to the fact that the Company has 18,101,857 ZDP shares in issue as at
30 September 2022 which are due for repayment on 10 April 2024, the assessment
considers the ability of the Company to remain a going concern up to the date
that the shares fall due for repayment.
The going concern assessment considers the Company's principal risks and the
ability to operate within the financial covenants of the ZDP shares. The ZDP
shares and associated loan documentation impose a number of covenants that
must be complied with which are discussed within the Chairman's Statement. As
at 30 September 2022 the Company is compliant with all covenants and there are
no forecast covenant breaches in the going concern period.
In addition as Inland Homes plc ("the Group") is responsible for all the
Company's liabilities including its obligations to ZDP Shareholders, pursuant
to the Loan Note and Contribution Agreement, the Directors have due regard to
the financial position of the Group as at the date of approving these
accounts. The Group has recently announced anticipated losses of approximately
£91m for the financial year ended 30 September 2022 and that it is in breach
of certain borrowing covenants with two separate lenders. The Group's Board
believes that these waivers will be forthcoming, and the Group has received
written notification that one of the lenders' credit teams have approved the
waivers. However, at the date of this report neither lender has contractually
waived these covenant breaches. Should the waivers not be obtained, the
Directors understand the Group would aim to refinance the £49.3m debt. As the
recoverability of the intercompany receivable in April 2024 and by association
the Company's ability to meet its repayment obligations in April 2024 is
dependent on the Group continuing in operation as a going concern these
matters indicate the existence of a material uncertainty which may cast
significant doubt on the Company's ability to continue as a going concern.
The financial statements do not include the adjustments that would result if
the Company were unable to continue as a going concern. At the time of
approving these financial statements and after making the appropriate
enquiries, the Directors have a reasonable expectation that the Company has
adequate resources to continue in operational existence for the foreseeable
future. The Directors therefore consider it appropriate to prepare the
financial statements on the going concern basis.
1.2 Income
Finance income is calculated on the amount lent to Inland and represents the
difference between the amounts advanced (which was equal to the proceeds on
the issue of zero dividend preference shares) and the final amounts due (which
is equal to the liability payable on redemption of the zero dividend
preference shares). It is recognised as revenue as interest income over the
term of the zero dividend preference shares using the effective interest
method.
1.3 Expenses
All expenses are borne by the Company's parent company, Inland Homes 2013
Limited.
1.4 Zero dividend preference shares
Zero dividend preference shares are recognised as liabilities in the Statement
of Financial Position in accordance with IFRS 9: Financial Instruments.
After initial recognition, these liabilities are measured at amortised cost,
which represents the initial proceeds of the issuance plus the accrued
interest based on the effective interest method to 30 September 2022.
1.5 Intercompany receivable
Intercompany receivables are recognised as assets in the Statement of
Financial Position in accordance with IFRS 9: Financial Instruments. After
initial recognition they are measured at amortised cost which represents the
initial loan plus the accrued interest receivable at the reporting date.
Directors have assessed intercompany receivables to meet the requirements
under the business model test and SPPI test. The objective of the business
model is to hold financial assets to collect their contractual cash flows. The
cash flows are solely payments of principal and interest on the principal
amounts outstanding.
The Company applies the general approach to providing for expected credit
losses prescribed by IFRS 9 for intercompany receivables. The expected credit
loss provision in the current year and prior period have been assessed as
£nil.
Pursuant to a loan agreement between the Company and Inland, the Company has
lent Inland the gross proceeds of its placings. This loan is on terms
requiring its repayment by Inland to the Company on the ZDP shares repayment
date when the company must be wound up.
1.6 Finance costs
Finance costs are calculated as the difference between the proceeds on the
issue of zero dividend preference shares and the final liability and are
charged as finance costs over the term of the life of these shares using the
effective interest method.
1.7 Taxation
The charge for taxation is based on the taxable profits for the year. 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.
1.8 Equity
An equity instrument is a contract which evidences a residual interest in the
assets after deducting all liabilities. Equity comprises 'Share capital',
which represents the nominal value of equity shares.
1.9 Key assumptions
Judgements used in preparing the financial statements are continually
evaluated and are based on historical experience and other factors, including
expectations of future events that are believed reasonable.
Judgement is required in assessing the recoverability of the intercompany
receivable. Recoverability is underpinned by the profitability of Inland's
development and strategic land sites, notwithstanding the losses incurred in
relation to construction activity in addition to which the guarantee from
Inland in the Contribution Agreement and the first charge security over
Pledged Assets enhance the prospect of recovery in the event of Inland
becoming insolvent.
1.10 Segment information
In accordance with IFRS 8, information is disclosed to enable the users of
financial statements to evaluate the nature and financial effects of the
business activities in which the Company engages. The Board has identified
that the sole operating segment is to lend the proceeds of share issues to
Inland and provide the final capital entitlement of the Company's ZDP shares
to the holders of the ZDP shares at the final repayment date of 10 April
2024. Consequently, all information presented in these financial statements
relate to that segment.
2 Interest income
Year ended 30 September 2022 30 September 2021
£000 £000
Interest income from group undertakings 1,689 1,635
3 Expenses
Administration expenses of £nil were suffered during the year (period ended
30 September 2021: £nil). All administration expenses during the year,
including auditors' remuneration of £30,000 (2021 £25,000), were borne by
the ultimate parent Company, Inland Homes plc and have not been recharged to
the Company. The directors received no remuneration for their services in
relation to Inland ZDP PLC. Further disclosures with regards to the auditors'
remuneration can be found in the group financial statements.
There were no employees other than directors in the current year or the prior
year.
4 Finance costs
Year ended 30 September 2022 30 September 2021
£000 £000
ZDP share finance costs 1,689 1,635
5 Taxation
Year ended 30 September 2022 30 September 2021
£000 £000
Result before tax - -
Result on ordinary activities multiplied by the standard
rate of corporation tax in the UK of 25.00% (2021: 19.00%)
ZDP share interest costs disallowed - -
Group relief 422 310
(422) (310)
Tax charge - -
6 Earnings per ordinary share
The calculation of earnings per share is based on a result after tax figure
for the year of £nil (year ended 30 September 2021: £nil) and the weighted
average number of 50,000 ordinary shares in issue during the year. The basic
and diluted earnings per share are the same.
7 Zero dividend preference shares
Year ended 30 September 30 September 30 30
2022 2022 September September
2021 2021
No. £000 No. £000
ZDP shares
Opening ZDP shares 18,101,857 32,015 18,101,857 30,235
Issue costs adjustment - - - 145
ZDP share interest cost - 1,689 - 1,635
18,101,857 33,704 18,101,857 32,015
During the year ended 30 September 2021 certain ZDP Share issue costs included
in the book value brought forward were charged to the intercompany account
between the Company and Inland because they were borne by Inland under the
Contribution Agreement.
8 Ordinary share capital
Authorised/called up/allotted/fully paid
At 30 At 30 September At 30 September At 30 September
September 2022 2021 2021
2022
No. £000 No. £000
Opening ordinary shares 50,000 50 50,000 50
Issued during the year - - - -
50,000 issued ordinary shares of £1 each 50,000 50 50,000 50
All ordinary shares are owned by the Company's parent Company, Inland Homes
2013 Limited.
Each ordinary share is entitled to one vote at a general meeting.
In addition to receiving any income distributed by way of dividend, the
ordinary shareholders will be entitled to all surplus assets after payment of
all debts, including the ZDP shares.
9 Financial instruments
The Company's financial instruments comprise fixed interest creditors
classified as financial liabilities at amortised cost and financial assets
classified as amortised cost.
The main risks arising from the Company's financial instruments are liquidity
risk and funding risk and credit risk.
Liquidity and funding risk
This is the risk that the Company will encounter difficulty in meeting
obligations associated with financial liabilities.
Liquidity risk is considered to be significant as the Company is reliant upon
repayment from its ultimate parent Company. The parent Company manages
liquidity risk by maintaining sufficient cash balances and ensuring
availability of funding through an adequate amount of credit facilities. The
parent Company aims to maintain flexibility in funding by keeping credit lines
available.
Contractual maturity analysis for financial liabilities
At 30 September 2022 At 30 September 2021
£000 £000
ZDP shares final redemption figure ZDP shares final redemption figure
Less than one year - -
More than one year and less than five years 36,457 36,457
Over five years - -
36,457 36,457
Credit risk
This is the risk that a counterparty to a financial instrument will fail to
discharge an obligation or commitment that it has entered with the Company.
Credit risk is managed by way of a security over the loan. The security
relates to pledged tangible assets (such as property and interests in property
development joint ventures) and pledged cash in a charged bank account.
At the reporting date, the Company's financial assets exposed to credit risk
amounted to the following:
Amortised Cost
At 30 September 2022 2021
£000 £000
Amounts due from ultimate parent company 33,754 32,065
The directors consider the carrying amounts to be a reasonable approximation
of fair value.
The Company applies the general approach to providing for expected credit
losses prescribed by IFRS 9 for amounts due from ultimate parent Company.
There were no expected credit loss provisions in the current year and prior
period. The security that is pledged is more than sufficient to cover the
amounts due. The Directors have assessed a possible downturn in the value of
the pledged assets by 10% (being a reduction of £4.21m) and following that
assessment no credit loss, as defined by IFRS 9, would arise.
The following table presents the fair value of financial liabilities that are
carried at amortised cost in the Statement of Financial Position in accordance
with the fair value hierarchy. This hierarchy groups financial liabilities
into three levels based on the significance of inputs used in measuring the
fair value of the financial liabilities. The fair value hierarchy has the
following levels:
● Level 1: quoted prices (unadjusted) in active markets for identical
liabilities;
● Level 2: inputs other than quoted prices included within Level 1
that are observable for the liability, either directly (i.e., as prices) or
indirectly (i.e. derived from prices); and
● Level 3: inputs for the liability that are not based on observable
market data (unobservable inputs).
The level within which the financial liability is classified is determined
based on the lowest level of significant input to the fair value measurement.
If the financial liabilities were measured at fair value in the Group
Statement of Financial Position, they would be grouped into the fair value
hierarchy as follows:
Level 1 Level 2 Level 3 Total
£000 £000 £000 £000
Net fair value at 1 October 2021 30,502 - - 30,502
Fair value movements during the year 995 - - 995
Net fair value at 30 September 2022 31,497 - - 30,502
Level 1 Level 2 Level 3 Total
£000 £000 £000 £000
Net fair value at 1 October 2020 28,239 - - 28,239
Fair value movements during the year 2,263 - - 2,263
Net fair value at 30 September 2021 30,502 - - 30,502
The ZDP shares are carried at their accrued value using the effective interest
method of 186.19p per share (30 September 2021: 176.86p) however their closing
price on the main market of the London Stock Exchange on 30 September 2022 was
174.0p (30 September 2021: 168.5p).
10 Capital management policies and procedures
The Company's objectives when managing capital are:
● to safeguard its ability to continue as a going concern; and
● to ensure sufficient liquid resources are available to meet the
funding requirement of its ZDP shareholders.
The directors consider that the capital management policies and procedures of
the ultimate parent company will enable the Company to meet its objectives.
Further details of the policies and procedures of Inland can be found within
its financial statements and include a target capital to overall financing
ratio of over 40%.
The capital of the Company comprises 1,860,186 (ordinary shares and ZDP
preference shares) and the nominal value of these amounted to £50,000 and
£1,810,186 respectively.
11 Related party transactions
The loan to Inland is repayable along with all accrued interest, together with
a contribution for such amount that will result in the Company having
sufficient cash funds to satisfy the then current, or as the case may be,
final capital entitlement of the ZDP shares on the ZDP repayment date or
immediately upon an event of default. At 30 September 2022, the total amount
due from the ultimate parent Company was £33,754,000 (30 September 2021:
£32,065,000).
12 Ultimate controlling party
The directors regard Inland Homes plc as the ultimate parent and
controlling party.
13 Holding company
The Company is a wholly owned subsidiary of Inland Homes 2013 Limited which is
a wholly owned subsidiary of Inland Homes plc, a quoted company whose shares
are traded on the AIM market of the London Stock Exchange. Copies of its
annual report for the year ended 30 September 2022 will be available to view
on Inland's website (www.inlandhomesplc.com (http://www.inlandhomesplc.com) )
following their publication at the end of February 2023.
Responsibility and audit
The Directors are the persons responsible for the full annual report and
financial statements.
Each of the Directors confirms that to the best of his knowledge:
· the financial statements, prepared in accordance with IFRS as adopted
by the European Union, give a true and fair view of the assets, liabilities,
financial position and profit or loss of the Company; and
· the Strategic Report and the Report of the Directors includes a fair
review of the development and performance of the business and the position of
the Company together with a description of the principal risks and
uncertainties it faces.
The statutory financial statements have been audited by PricewaterhouseCoopers
LLP and their report was unqualified, containing a statement of material
uncertainty relating to the going concern basis of preparation.
Publication of non-statutory accounts
The financial information for the years ended 30 September 2021 and 2022 in
this announcement does not constitute the company's statutory accounts for
those years.
Statutory accounts for the year ended 30 September 2021 have been delivered to
the Registrar of Companies. The statutory accounts for the year ended 30
September 2022 will be delivered to the registrar of companies in due course.
The auditors' reports on the accounts for 30 September 2022 and 30 September
2021 were unqualified, and did not contain a statement under 498(2) or 498(3)
of the Companies Act 2006. The auditors' report on the accounts for the year
ended 30 September 2022 contains a statement of material uncertainty relating
to the going concern basis of preparation. The auditors' report for the year
ended 30 September 2021 did not draw attention to any matters by way of
emphasis.
A copy of the annual report will shortly be submitted to the National Storage
Mechanism and will be available for inspection at
https://data.fca.org.uk/#/nsm/nationalstoragemechanism and at the Company's
website:
http://www.inlandhomesplc.com/investors/inland-zdp/zdp-documents-and-accounts/
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