TIDMINL
RNS Number : 7528N
Inland Homes PLC
25 January 2023
25 January 2023
Inland Homes plc
('Inland Homes' or the 'Group')
Sale of the Strategic Land Portfolio & Trading Update
Inland Homes plc (AIM: INL), the brownfield site developer,
housebuilder and regeneration specialist focused on the South and
South East of England, today announces the sale of the Group's
strategic land portfolio and a trading update for the year ended 30
September 2022.
Sale of the Strategic Land Portfolio
The Board has identified a number of non-core assets for
disposal and intend to conduct a sale process of the same over the
next few months. Further updates will be provided in due
course.
In light of recent government announcements strengthening green
belt restrictions, against the backdrop of an already challenging
planning system, a decision was made to dispose of Inland's
greenfield "strategic land" option portfolio consisting of 2,822
potential plots, of which 81% are located in the green belt. An
unconditional sale of this portfolio has been completed for a
consideration of GBP9.5m resulting in a profit of GBP3.5m. There
was no associated debt relating to the portfolio so the
consideration has increased our cash balances by GBP9.5m.
As part of the sale, Inland has agreed to assist the purchaser
with certain planning and management services in consideration for
further management fees to be received in due course.
Within our land activity, the sale of the strategic options will
enable Inland to focus on its roots of enhancing the value of
brownfield land through the planning process.
Strategic Review
The Board have previously announced a strategic review of the
business and appointed Lazard & Co., Ltd to assist with the
process. This process is ongoing and a further announcement will be
made about the strategic review by the end of March 2023.
Trading Update
On 6 September 2022 the Group announced a Trading Update which
cautioned that the Group's financial performance for the second
half of its financial year was dependent on the completion of
planned land sales and on the timing of planning approvals to
support those planned land sales. As a result, the Group reported
an anticipated loss before taxation of approximately GBP37.1
million and a revised forecast for net assets at 30 September 2022
of approximately GBP145.9 million.
Since then, the UK economic outlook for the UK housebuilding
industry has deteriorated. With rising interest rates, high
inflation rates and the cost of living crisis, which has adversely
impacted the ability of first time buyers to buy new homes, the
future prospects for the industry have taken a turn for the worse.
In addition, sentiment in terms of market confidence and property
valuations have been adversely affected. That said, the demand for
the Group's land assets remains strong in a market where consented
land in the South and South East is in extremely limited
supply.
Net debt
The Group had previously stated that its key target was to have
net debt of less than GBP100.0m by the end of last financial year.
This objective has been achieved and net debt at 30 September 2022
was GBP86.8m (30 September 2021: GBP118.1m), comprising gross debt
of GBP98.9m and cash and cash equivalents of GBP12.1m (30 September
2021: gross debt of GBP130.2m with cash and cash equivalents of
GBP12.1m). Since the year end net debt has increased, due to our
normal operating cycle to GBP100.0m, including the cash received
for the sale of the strategic land portfolio. Having said that, the
reduction of net debt remains a core strategic aim of the Group and
the disposal of other non-core assets will continue to support this
aim as relevant transactions are completed.
Land portfolio
The Group ended at 30 September 2022 with a land portfolio of
8,578 plots that presents opportunities in the short and medium
term including 3,680 plots that have planning consent or a
resolution to grant planning consent. Inland Homes' sites are in
attractive and highly sought after locations. During the financial
year ended 30 September 2022, the Group achieved planning consent
on 1,029 plots (2021: 1,831) and sold 237 plots (2021: 356
plots).
Recent announcements by the UK Government have led to a
significant amount of uncertainty about the planning system, which
will further slow the progress that could be made in converting
credible land opportunities for development and the enhancement of
many local communities. As a result, a number of Local Authorities
have withdrawn or suspended their proposed Local Plans, thereby
putting strategic planning in a state of paralysis.
Asset management
At the year-end the Group had four active projects within its
asset management division having concluded two projects during the
year. These have the potential to deliver approximately 2,500 new
homes.
During the year Inland Homes supported the investor group in its
planning application for the 36-acre site Cavalry Barracks in
Hounslow, which achieved a resolution to grant in October 2022 with
the s106 agreement now expected to be completed shortly. This site
is one of the largest brownfield sites in London, with an estimated
gross development value circa GBP600m.
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
GBP39.0m based on its assessment of recoverability of amounts
receivable in current market circumstances. These provisions could
however reverse if market conditions improve before the assets are
realised.
Contract Income
There had been a substantial increase in the Group's partnership
housing contract income, driven by the demand from affordable
housing providers and build-to rent operators. Inland Homes
continues to proactively work towards improving its commercial
delivery and operational efficiency as it delivers its existing
commitments to valued customers which run to 2025. As previously
reported, unforeseen costs, cost inflation and extended
construction periods will continue to suppress margins in this
division for the next two financial years, with provisions made for
anticipated losses.
The Board have undertaken a further review of all remaining
construction projects and the latest available cost to complete
information and details of the completion dates of each project,
some of which have been extended. We have therefore increased the
provisions on the Group's five separate projects from GBP15.4m to
GBP28.8m.
Housebuilding
The Group achieved fewer private home completions during the
year than the comparative period, 180 in aggregate (2021: 216), at
an average selling price of GBP304,000 (2021: GBP262,000),
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 GBP91.0m and the net assets at the balance sheet date
approximately GBP90.0m, 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 GBP90.0m, 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 GBP49.3m. These represent the
only breaches of financial covenants on any of the Group's
borrowings and Inland Homes have already had discussions with the
lenders concerned to procure waivers for both the existing and any
forecast expected future covenant breaches for the two lenders
concerned. Whilst the Board believes that these waivers will be
forthcoming, they consider that if required, these borrowings can
be refinanced.
Group results for the year ended 30 September 2022
The Group's audit continues and it is expected that the Group's
final results will now be announced at the end of February
2023.
Simon Bennett, Chairman, commented:
"The Group has experienced an extremely disappointing year.
However, we continue to see good interest for our new homes and
valuable consented land in the South and South East of the UK"
Enquiries
Inland Homes plc:
Simon Bennett, Chairman Tel: 44 (0)1494 762450
Nishith Malde, Interim CEO
Lazard & Co., Ltd (Adviser to the Group) Tel: 44 (0)20 7187
2000
William Rucker
Louise Campbell
Panmure Gordon (UK) Limited (NOMAD to the Group) Tel: 44 (0)20 7886 2500
Dominic Morley / James Sinclair-Ford (Corporate Advisory)
Tom Scrivens (Corporate Broking)
The information contained in this Announcement is deemed by the
Group to constitute inside information as stipulated under the
Market Abuse Regulations (Regulation 596/2014), as it forms part of
domestic law by virtue of the European Union (Withdrawal) Act 2018
("MAR").
Notes to Editors:
Incorporated in the UK in 2005, Inland Homes plc is an
AIM-listed specialist housebuilder and brownfield developer,
dedicated to achieving excellence in sustainability and design.
Inland Homes acquires brownfield land in the South and South
East of England principally for residentially led development
schemes. The business then enhances the land value by obtaining
planning permission, before building open market and affordable
homes or selling surplus consented land to other developers to
generate cash.
The Group is committed to extensive public and community
consultation in order to ensure that, where possible, local
community priorities and objectives are met.
Inland Homes' aim is to create sustainable communities and homes
which set a benchmark for all future developments in the South and
South East of England. The Group is always looking for brownfield
sites without planning permission for future development.
Environmental, Social and Governance credentials
Inland Homes is committed to ensuring its land, housebuilding
and partnership housing activities leave a positive lasting legacy.
As specialists in brownfield site regeneration the Group already
has a proud history of adding lasting value through its expertise
and experience in site remediation, which allows derelict and near
derelict land to be regenerated and used for the construction of
new homes.
Inland Homes takes its position as an industry leader extremely
seriously and has developed its Environmental, Social and
Governance (ESG) framework against the broader backdrop of an
escalating global climate issue. The Group's ESG framework, which
has been aligned to four of the UN Sustainable Development Goals,
sets out our high-level commitments. Using this framework, we are
now focused on developing a full ESG strategy. The strategy will
identify clear goals and metrics to enable us to measure and report
on our performance and success in this space.
For further information, please visit the Inland Homes website
at: www.inlandhomesplc.com
Hugg Homes - www.hugghomes.co.uk
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.
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END
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