6 September 2022
Inland Homes plc
('Inland Homes' or the 'Group')
Retirement of CEO, strategic review and trading update
Retirement of CEO
Inland Homes plc (AIM: INL), the housebuilder, partnership housing developer and regeneration specialist focused on the South and South East of England, today announces that the Group's CEO, Stephen Wicks is to retire and will step down from the Board on 30 September 2022. Stephen will remain available to the business in an advisory capacity for a 12 month period from September 2022.
Simon Bennett, Chairman of Inland Homes said: "As a founder of Inland Homes, Stephen has made an enormous contribution to the Group. He has led the business from its inception, through the Global Financial Crisis and the Covid 19 pandemic, and I would like to thank Stephen for his unwavering commitment and dedication to the business and wish him every success in his retirement".
The Board has appointed Nish Malde, the Group's CFO to act as interim CEO alongside his role as CFO and are in the process of conducting a thorough search for a new CEO.
As specialists in brownfield land regeneration the Group has a proud history of creating lasting value through its expertise in adding value through the planning process which allows derelict land to be regenerated and used for the construction of new homes.
Inland Homes' core business continues to be land and the key aspects are as follows:
· the Group has an EPRA net tangible assets per ordinary share which is significantly above the level of the current share price
· the Group has a valuable land bank of over 8,800 plots located in the South and South-East of the UK
o of which 3,388 plots have planning consent or resolution to grant planning, and 2,122 plots have planning applications that are submitted but currently awaiting determination
· The Group has a significant land bank of strategic sites at various stages of maturity within the planning process comprising 3,325 plots
· the Group has a 100% successful track record of obtaining planning consents on brownfield sites and continues to make progress in delivering strategic planning consents
· the Gross Development Value of Inland Homes' land bank is in excess of £2.7 billion (31 March 2022: £2.8 billion, 30 September 2021: £3billion)
· demand for the Group's land has remained strong from housebuilders, Build to Rent operators, registered providers and independent third-party investors
· Inland Homes have a dedicated and highly experienced work force with an excellent range of sites and pipeline of opportunities
· the primary strategic objective for the Group has been to reduce the Group's net debt which has fallen from £148.2m at 30 September 2020 to less than £100m
· the Group's asset management business currently consists of 5 projects, being managed on behalf of third party investors, which when combined have the potential to deliver over 2,500 new homes
· 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.
The Board consider that Inland Homes with its attractive land portfolio and differentiated business model is well positioned to create significant shareholder value over time.
There is a drastic shortage of quality consented sites in the South & South East, exacerbated by a highly complex and unpredictable planning system which places considerable demands on developers. Housing delivery continues to lag significantly behind the Government's target of 300,000 homes per annum.
The Board is confident that with its track record in land trading and asset management, and with the further operational improvement plans it has in place for its construction activities, Inland Homes will make good progress in the coming year.
The significant and continual deterioration of the planning system has presented Inland Homes with challenges in predicting the timing of planning permissions and thus the realisation of asset values. Demand for consented land within the South East remains very strong despite rising interest rates and inflationary pressures.
The Board therefore believes that this is an appropriate time to conduct a strategic review of the business and have appointed Lazard & Co., Ltd to assist with this process..
In light of the present circumstances, the Board has determined that it would be inappropriate to continue the share buy-back programme that has been formally announced. The Board is therefore suspending the share buy-back programme until the strategic review has concluded.
The Group's interim statement, cautioned that the Group's financial performance for the second half and therefore the financial year, was dependent on the completion of planned land sales and on management's expectations regarding the timing of planning approvals to support the completion of planned land sales.
In the Land and Asset Management segments, two major schemes are currently experiencing previously unforeseen planning delays and therefore the expected timing of these land disposals has now also been revised. It should be noted that the Group recognises revenue and profit from the sale of land when legal completion takes place and title passes from seller to buyer. Delays in receipt of planning consents will inevitably delay the legal completion from the original planned date.
Planned land sales still to complete were expected to contribute over £75.0m of recognised revenue and significant profitability towards the Group, however there is now a question on the legal completion date which will determine the recognition point for the relevant financial year. Some or all of these land disposals will now slip into the next financial year ending 30 September 2023 however the sale of these assets will be reviewed in light of the Strategic Review which will be focused on maximising shareholder value.
In addition, the project margins in our contract income division which delivers partnership housing and our housebuilding division which focuses on self-delivery of land with planning consent have not been satisfactory for some time.
As a result, the Board commissioned an independent review of all construction projects still to complete to identify realistic cost estimates and improvements in operational processes and commercial controls. As previously reported, results for the first six months of this financial year were adversely affected by an additional £4.0m of expected costs to completion. Senior management changes to the construction division have been made and further provisions of £15.4m will be made in the second half of the year due to build cost inflation which is persisting at levels beyond that previously forecast in our cost estimates and design changes, making a total in aggregate of £19.4m for the financial year. It is also recognised that in common with the housebuilding industry, there remain inflationary pressures and supply chain issues in the broader marketplace. The Group has also reviewed various receivables and expects to make provisions of £4.7m for expected future credit losses based on current economic circumstances.
As a result of delays to legal completions of planned land sales, the provisions in contract income partnership housing contracts and further expected credit loss provisions noted above, the Group is expected to make an operating loss of approximately £29.3 million for the year ending 30 September 2022 and a loss before taxation of approximately £37.1 million. At this level of loss before taxation, the revised forecast position for net assets at 30 September 2022 is approximately £145.9 million which translates to an IFRS Net Asset Value of approximately 65 pence per ordinary share.
However, the Group has reached agreement in principle (subject to legal documentation) on a land sale, which if completed by 30 September 2022 would generate a profit of approximately £25 million. Provided this sale is completed by 30 September 2022 the Group is expected to make an operating loss of approximately £4.3 million and a loss before tax of approximately £12.1 million.
Net debt is expected to be remain under the £100.0m core strategic target set for the financial year. With the anticipated losses for the financial year the Group is a going concern but it does mean that the Group would breach the interest cover covenant with one of its lenders where the Group's borrowings are approximately £19.3m. These borrowings are by one of the Group's subsidiaries and have been guaranteed by Inland Homes plc. This represents the only expected breach of financial covenants on any of the Group's gross borrowings and Inland Homes have had positive discussions with the lender concerned to procure a waiver from this potential covenant breach. Whilst the Board are confident that this will be forthcoming, they are positive for the Group to be able to refinance these borrowings.
Inland Homes plc: Tel: 44 (0)1494 762450
Nishith Malde, Interim CEO
Lazard & Co., Ltd (Adviser to the Group) Tel: 44 (0)20 7187 2000
Panmure Gordon (UK) Limited (NOMAD to the Group) Tel: 44 (0)20 7886 2500
Dominic Morley / James Sinclair-Ford (Corporate Advisory)
Erik Anderson (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
Rosewood Housing - 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.