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.
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.
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.
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.
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.
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.
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.
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"
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
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
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.