REG - Inland ZDP PLC Inland Homes PLC - Inland ZDP PLC Half-year Report
30/06/2023 10:15
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RNS Number : 5539E Inland ZDP PLC 30 June 2023
INLAND ZDP PLC
Half-yearly report
for the six months ended 31 March 2023
The half-yearly report can be accessed via the Inland ZDP PLC pages on the
Inland Homes PLC ('Inland' or 'Group') website at
http://inlandhomesplc.com/investors/inland-zdp/
(http://inlandhomesplc.com/investors/inland-zdp/) or by contacting the Company
Secretary on 01494 762450.
COMPANY SUMMARY
Background
Inland ZDP PLC ('INLZ' or the 'Company') was incorporated on 22 November 2012
as a wholly owned subsidiary of Inland.
INLZ was formed especially for the issuing of Zero Dividend Preference Shares
('ZDP' Shares). It has raised a total of £22.28m through a series of placings
of ZDP Shares, which are listed on the UK Official List and admitted to
trading on the London Stock Exchange. There are 18,101,857 ZDP Shares in
issue, none of which were issued during the half year period to 31 March 2023.
Pursuant to a loan agreement between INLZ and Inland, INLZ has lent the
proceeds received from all the ZDP Share issues to Inland. The loan is
non-interest bearing and is repayable on the ZDP Share redemption date or, if
required in certain circumstances by INLZ, at any time prior to that date in
order to repay the ZDP Share entitlement. The funds raised form part of the
Inland Group's financing arrangements for its property development business.
A contribution agreement between INLZ and Inland has also been made whereby
Inland undertakes to contribute such funds as would ensure that INLZ will have
in aggregate sufficient assets on the final redemption date to satisfy the
final capital entitlement of the ZDP Shares.
On 13 August 2018 several changes to the rights of ZDP Shares and the
underlying loan documentation were made extending the ZDP Shares a Final
Redemption Date from 10 April 2019 to 10 April 2024 and increasing the Final
Capital Entitlement from 155.9p to 201.4 pence. The annual accrual rate of
return from 20 December 2012 to 13 August 2018 was 7.3% and is 5.49% for the
period from 13 August 2018 to 10 April 2024, being a rate of return of 6.39%
per annum to 10 April 2024 on the original issue price of 100p on 20 December
2012.
INTERIM MANAGEMENT REPORT
The Company was incorporated solely to issue ZDP Shares and has never traded.
Covenant compliance
I am pleased to report that as at 31 March 2022, Inland had complied with all
its covenants under the Loan Note, Contribution Agreement and related security
documentation. These covenants are based on asset cover and security.
Asset cover
The Asset cover is the key performance indicator used by the Board to measure
the Company's success. This is calculated on a Group basis, broadly
comprising 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 - "Assets"; 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 Group's annual results for the year to 30 September 2022 and subsequent
interim results to 31 March 2023 have been delayed pending the completion of
additional requirements by the non-executive directors of Inland and the
auditors. 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.
The amounts shown in the cover ratio calculation below are in accordance with
the relevant documentation, which differs in some respects from the amounts
shown in the Inland Consolidated Financial Statements. For example,
unsecured borrowings falling due more than six months after the redemption
date of the ZDP Shares are excluded from "Net debt" for cover ratio
purposes. The Hurdle Rates are calculated from the Book values as shown in
Inland's interim financial statements, but] excluding intangible assets.
Book values
£'000
Assets less creditors (exc cash and debt) A 213,245
Net debt (exc ZDP Share liability) 68,827
ZDP Final Capital Entitlement 36,457
Financial indebtedness B 105,284
Cover ratio A/B 2.03
Hurdle Rate to pay the Final Capital Entitlement* -49.6%
Hurdle Rate to recover the market price of a ZDP Share** -68.7%
Rate of return to maturity based on the market price of a ZDP Share** 162%
* being the period from 31 March 2023 to 10 April 2024, based on the Assets
and Financial Indebtedness as at 31 March 2023
** being the period from 29 June 2023, being the latest practicable date prior
to the publication of this interim report to 10 April 2024 based on a share
price of 95p, being the closing price of a ZDP Share on 29 June 2023 and based
on the Assets and Financial Indebtedness as at 31 March 2023.
Security cover
Inland ZDP PLC ("ZDPCo") has the benefit of first legal charges granted by
members of the Inland Homes Group over specific pledged assets and pledged
cash. The book value of the Pledged Assets has to be 120% of the accrued
liability to ZDP Shareholders net of any Pledged Cash.
At 31 March 2023, the accrued value of the ZDP shares was £34,508,684 (190.6
pence per ZDP share) and the balance in the pledged bank account (the Pledged
Cash) was £2,226,091, leaving a net £32,282,5938 to be supported by Pledged
Assets with a book value of at least £38,739,112. As at 31 March 2023, the
Pledged Assets had a combined book value of £42,536,486, satisfying this
requirement.
Pledged Assets
Any assets (other than intangible assets) may be pledged to ZDPCo by companies
in the Inland Homes Group. Inland Homes PLC can substitute one asset for
another at any time, provided the book value of all Pledged Assets exceeds
120% of the accrued Capital Entitlement less any Pledged Cash. The security
covenant is tested quarterly and Inland has 90 days to remedy any shortfall
(ie pledge additional assets as security or buy in ZDP shares to reduce the
accrued Capital Entitlement). The values used for the security covenant are
the book values of the Pledged Assets.
The book values represent historical cost less any impairment provisions.
However, as noted in the ZDPCo annual report, the value of assets (such as a
partially completed development project) in a liquidation scenario could be
significantly lower than any book value based on the Group being a 'going
concern'.
The main asset pledged to ZDPCo is the Group's loan to Cheshunt Lakeside
Developments Ltd ("CLDL"). However, with the increase in the accrued Capital
Entitlement over time, 79 modular homes were pledged to ZDPCo in anticipation
of the 31 March 2023 security covenant. These homes are bespoke, modular
housing units which can be moved from one site to another. Located on dormant
land going through the planning process, the modular homes generate additional
cashflow for the Inland Group while offering a high-quality, cost-effective
solution to local authorities and others in meeting short-term housing needs.
Cheshunt Lakeside Developments Ltd
CLDL is a joint venture company owned by Inland Group (50%) and a third party
investor (50%). Inland is entitled to performance fees under a promote
agreement as well as its 50% profit share. A loan account balance due from
CLDL to Inland is Pledged to ZDPCo. As at 31 March 2023 this amounted to
£35,875,551 (30 September 2022: £37,792,479).
The 30 acre Cheshunt Lakeside development site was formerly a Tesco
headquarters and supermarket and is being developed in line with an approved
masterplan. Planning permission took three years of close consultation with
the local Council and community and was granted in June 2019, with the terms
of the Section 106 agreement agreed promptly and signed in August 2019.
The Cheshunt Lakeside original masterplan and outline planning consent was for
a new "urban village" comprising 1,725 homes, 19,000 sqm of commercial space
together with the provision for a new primary school. Inland Homes, together
with its equal joint venture partner, owned 1,253 residential plots and 4,905
sqm of commercial and educational space within the masterplan area. Inland
Homes is the lead developer on the broader masterplan, which it is working
with the council to deliver.
Since gaining the original planning consent Inland Homes has achieved reserved
matters consent on three phases of development selling all 422 plots. On 9
March 2023 Inland announced that CLDL had received a resolution to grant
detailed consent for a further phase of development at Cheshunt Lakeside,
Hertfordshire increasing the outline consent with a further 51 homes on the
site, subject to the Section 106 Agreement being varied. The resolution to
grant detailed consent for this phase delivers a total of 425 homes including
the 51 extra homes added to the development masterplan, as such the masterplan
will now deliver 1,776 new homes overall, of which 904 882 are owned by Inland
and its joint venture partner, after the previous phase sales. This next
phase of development will also deliver the new local centre for the
development including 2,400 sqm of commercial space, a landscaped public
square and key highways infrastructure.
CLDL has loan facilities from Paragon Bank and Homes England as well as the
loan from Inland Ltd. The land loans are being repaid as land sales occur.
The loan from Inland Ltd fluctuates with ongoing cash requirements.
The recoverability of Inland's loan to CLDL as at 30 September 2022 has been
assessed by reference to forecasted cash flows regarding the development of
the site and no impairment provisions were found to be required.
Accrued capital entitlement and ZDP Share price
31 Mar 2023 30 Sept 2022
Accrued capital entitlement per ZDP Share 190.6p 176.0p
ZDP Share price as at the accounts date 100.0p 174.0p
Accrued capital entitlement
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 shown above
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 accrued Capital Entitlement can also be calculated from the original issue
price of 100p per ZDP Share on 20 December 2012 at an even rate of 6.39% over
its life to the Final Capital Entitlement of 201.4 pence per ZDP Share payable
on 10 April 2024. On this basis the accrued capital entitlement as at 31
March 2023 was 189.0p.
Capital Entitlement, Assets, Financial Indebtedness and Cover Ratio have been
determined as set out in the Prospectus published by Inland ZDP PLC on 14
December 2012, as amended (in the case of the Capital Entitlement) as
described in the circular dated 19 July 2018, both of which are available at:
http://inlandhomesplc.com/investors/inland-zdp/zdp-reports-and-presentations/
(http://inlandhomesplc.com/investors/inland-zdp/zdp-reports-and-presentations/)
.
ZDP Share price reduction
ZDPCo has lent the proceeds of ZDP share issues to Inland Homes PLC for use in
its Group's business and is reliant on the Inland Homes Group's ability to
transfer cash to fund the redemption of the ZDP Shares on 10 April 2024. The
market price of ZDP shares has been affected by announcements by Inland Homes
of significant provisions for actual and expected losses on a few development
projects and construction contracts, bank covenant breaches and the
resignations of several directors. The reconstituted board is reviewing the
business of the Inland Group (including certain related party issues and other
relevant matters) and the non-executive directors of Inland Homes plc have
engaged FRP Advisory Limited to undertake an independent review of these
issues. The foregoing has resulted in delays in finalising the Group's annual
report for the year to 30 September 2022 and the suspension of dealings in
Inland's ordinary shares on AIM.
These factors and concerns about the Group's ability to fund the redemption of
the ZDP shares in April 2024 led to a significant reduction and increased
volatility in the market price of ZDP shares. On 29 June 2023, the mid
market closing price of a ZDP share was 95 pence, representing an annualised
rate of return of 161.6 % to 10 April 2024.
Funding the redemption of ZDP Shares
The Inland Homes Group generates cash from selling sites and completed
residential and commercial units as part of its normal business activities.
It has adopted a less capital intensive business model over recent years,
pursuing major new developments as either asset management projects (funded by
third parties with Inland receiving fees for services and performance),
partnership housing or joint ventures. Thus much of the cash realised on
sales of development sites and homes owned by Inland Homes Group is not needed
for re-investment in further projects and can be applied to reduce borrowings
and for working capital. This led to a reduction of net debt from £152.3m
as at 30 September 2019 to £86.8m as at 30 September 2022. The Inland
Group's net debt was £103.4m as at 31 March 2023.
The Inland Homes Group does not seek to time specific asset sales to match
individual loan maturity dates in order to avoid being pushed into a forced
sale position by the buyers of assets.
The Group's borrowing policy is to have facilities with compatible covenants
from a range of sources, mostly with certain subsidiaries. The Group can
seek new term facilities to refinance those which mature.
Inland Homes has a business plan for managing its cash flows and meeting its
obligations to ZDP shareholders, retaining flexibility to adapt to
circumstances rather committing to a fixed source of repayment.
Nishith Malde FCA
Chairman, Inland ZDP PLC
Registered in England No: 8303612
30 June 2023
PRINCIPAL RISKS
The principal risks facing the Company are substantially unchanged since the
date of the Company's Annual Report for the period ended 30 September 2022 and
continue to relate to the risk of Inland Homes plc being unable to satisfy its
obligations to INLZ under the Loan Agreement and Contribution Agreement.
In addition, and due to the Company's dependence on Inland Homes plc to repay
the loan and provide a contribution to meet the capital entitlement of the ZDP
Shareholders, certain other risks faced by the Inland Group are considered to
apply to INLZ as set out in the Prospectus published by INLZ on 14 December
2012. These comprise operational risks (eg planning and environmental) which
may be specific to individual sites and risks associated with the
housebuilding sector (such as falling house prices or variations in the
availability of credit for buyers). The Prospectus may be found at
http://inlandhomesplc.com/investors/inland-zdp/zdp-reports-and-presentations/
(http://inlandhomesplc.com/investors/inland-zdp/zdp-reports-and-presentations/)
. The risks facing the Inland Group, which evolve over time, are summarised
in the annual and interim reports published by Inland Homes PLC which are
available at
https://www.inlandhomesplc.com/reports-presentations-and-news/reports-and-presentations/.
RESPONSIBILITY STATEMENT OF THE DIRECTORS IN RESPECT OF THE HALF-YEARLY REPORT
We confirm that to the best of our knowledge:
• the condensed set of financial statements has been
prepared in compliance with the IAS34 'Interim Financial Reporting' and gives
a true and fair view of the assets, liabilities and financial position of the
Company; and
• the interim management report and notes to the
half-yearly report include a fair view of the information required by:
(a) DTR 4.2.7R of the Disclosure and Transparency Rules, being an
indication of the important events that have occurred during the first six
months of the financial year and their impact on the condensed set of
financial statements; and a description of the principal risks and
uncertainties for the remaining six months of the year; and
(b) DTR 4.2.8R of the Disclosure and Transparency Rules, being
related party transactions that have taken place in the first six months of
the current financial year and that have materially affected the financial
position or performance of the Company during that period; and any changes in
the related party transactions described in the last Annual Report that could
do so.
This half-yearly report was approved by the Board of Directors on 30 June 2023
and the above responsibility statement was signed on its behalf by Nishith
Malde, Chairman.
STATEMENT OF COMPREHENSIVE INCOME
for the six months ended 31 March 2023
6 months ended 6 months ended Year ended
31 March 2023 31 March 2022 30 September 2022
(unaudited) (unaudited) (audited)
Continuing operations Note £000 £000 £000
Revenue
Interest income 876 848 1,689
Total income 876 848 1,689
Expenditure
Expenses - - -
Total expenditure - - -
Profit before finance costs and taxation 876 848 1,689
Finance costs (876) (848) (1,689)
Profit before tax - - -
Income tax 2 - - -
Profit and total comprehensive income - - -
The total column of this statement is the statement of comprehensive income of
the Company, prepared in accordance with International Financial Reporting
Standards ('IFRS'), as adopted by the EU.
All items in the above statement derive from continuing operations.
STATEMENT OF FINANCIAL POSITION
as at 31 March 2023
As at As at As at
31 March 2023 31 March 2022 30 September 2022
(unaudited) (unaudited) (audited)
Note £000 £000 £000
Non-current assets
Intercompany receivable - - -
- - -
Current assets
Intercompany receivable 34,630 32,914 33,754
34,630 32,914 33,754
Creditors: amounts falling due within one year
Zero Dividend Preference Shares (34,580) -
Net current assets 50 32,914 33,754
Creditors: amounts falling due in more than one year
Zero dividend Preference Shares
- (32,864) (33,704)
Net assets 50 50 50
Equity
Ordinary share capital 50 50 50
Revenue reserve - - -
Shareholders' funds 50 50 50
STATEMENT OF CASHFLOWS
for the six months ended 31 March 2023
6 months ended 6 months ended Year to
31 March 2023 31 March 2022 30 September 2022
(unaudited) (unaudited) (audited)
£000 £000 £000
Cash flow from operating activities
Profit for the period before tax - - -
Adjustments for:
- interest expense 876 848 1,689
- interest and similar income (876) (848) (1,689)
Net cash flow from operating activities - - -
Cash flow from investing activities
Loan to ultimate parent company - - -
Net cash outflow from investing activities - - -
Cash flow from financing activities
Proceeds on issue of ZDP Shares - - -
Net cash inflow from financing activities - - -
Net increase in cash and cash equivalents - - -
Net cash and cash equivalents at beginning of period - - -
Net cash and cash equivalents at the end of period - - -
NOTES TO THE HALF-YEARLY REPORT
for the six months ended 31 March 2023
1. General information
The financial information contained in this half-yearly report does not
constitute statutory financial statements as defined in Section 434 of the
Companies Act 2006. The statutory financial statements for the year ended 30
September 2022, which contained an unqualified auditors' report, have been
lodged with the Registrar of Companies and did not contain a statement
required under the Companies Act 2006. These statutory financial statements
were prepared under International Financial Reporting Standards.
The financial information of the Company for the six-month period ended 31
March 2023 will be consolidated into the results of Inland for the six months
ended 31 March 2023.
This half-yearly report has not been audited or reviewed by the Company's
Auditors.
This half-yearly report has been prepared using accounting policies set out in
note 1 of the Company's audited financial statements for the year ended 30
September 2022.
2. Taxation
The charge for taxation, if any, is based on the taxable profits for the
period. Taxable profit differs from profit before tax as reported in the
Statement of Comprehensive Income because it excludes items of income or
expenses that are never taxable or deductible. The Company's liability for tax
is calculated using rates that have been enacted or substantively enacted by
the reporting date.
3. Going concern
The Directors are required to assess the Company's ability to continue as a
going concern up to the date that the ZDP shares fall due for repayment on 10
April 2024.
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 31 March 2023 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 announced significant provisions for actual and expected losses
on a few development projects and construction contracts. The Directors
understand that as part of its normal course of business the Group has
budgeted and forecast completion of planned land, housing and commercial unit
sales in order to remain a going concern. 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.
4. Related party transactions
The loan to Inland Homes PLC is interest free and is repayable on the ZDP
repayment date (see corporate summary above) or immediately upon an event of
default. At 31 March 2023, the loan to the ultimate parent company was
£34,629,557 (2022: £32,913,571).
FURTHER INFORMATION
The Company's ZDP Shares are standard listed and are traded on the Main Market
of the London Stock Exchange.
The Company's ZDP Asset Cover is released via the London Stock Exchange's
Regulatory News Service on a quarterly basis.
Information about the Company and Inland can be obtained on the Inland Group's
website: www.inlandhomesplc.com.
REGISTRAR ENQUIRIES
The register for the ZDP Shares is maintained by Link Registrars Limited. In
the event of queries regarding your holding, please contact the Registrar on
03716 640300. Changes of name and/or address must be notified in writing to
the Registrar.
Neither the contents of Inland's website nor the contents of any website
accessible from hyperlinks on this announcement (or any other website) is
incorporated into, or forms part of, this announcement.
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