Inland
homes
Inland
ANNUAL
homes
REPORT
2016
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CREATIVE THINKING IN
BROWNFIELD DEVELOPMENT
Annual Report and Accounts
for the year ended 30 June 2016
Stock Code: INL
25010 24 October 2016 8:58 AM Proof One
Welcome to Inland Homes plc
As a leading brownfield regeneration specialist, we focus on buying brownfield
sites and enhancing their value through obtaining planning permissions for
residential and mixed use developments.
Sustainability is at the heart of everything we do.
Why Invest
in Inland Homes plc
• Strong management team
• Adding value throughout the
development process
• Diverse land portfolio in the South and
South East of England
• Unrealised value within the land bank as a
result of planning permissions
UNLOCKING POTENTIAL,
CREATING COMMUNITIES,
DELIVERING VALUE
Case Studies
Chapel Riverside, Southampton
See page 20
Garston Joint Venture
See page 22
Meridian Waterside, Southampton
See page 24
Cover: Artist’s impression of proposed Chapel
Riverside development, Southampton
25010 24 October 2016 8:58 AM Proof One
ANNUAL REPORT AND ACCOUNTS 2016 Inland Homes plc
Annual Report and Accounts for the year ended 30 June 2016
www.inlandhomes.co.uk
Our Agile Business Model,
see page 17
Our Strategy,
see page 27
Signposting icons
Read more content
within the report
Read more online at
www.inlandhomes.co.uk
Investor website
We maintain a corporate website at www.inlandhomes.co.uk
containing a wide range of information of interest to institutional
and private investors including:
• Latest news and press releases
• Annual reports and investor presentations
Contents
Overview
Who We Are
Land Portfolio
Financial Highlights
Operational Highlights
Chairman’s Statement
Strategic Report
Our Marketplace
Our Agile Business Model
Case Study — Chapel Riverside, Southampton
Case Study — Garston Joint Venture
Case Study — Meridian Waterside, Southampton
Our Strategy
Our KPIs
Chief Executive’s Review
Finance Director’s Review
Risk Management
Risks
Sustainability
Governance
Board of Directors
Senior Management
Our Governance
Directors’ Remuneration Report
Directors’ Report
Financials
Independent Auditor’s Report
Group Income Statement
Group & Company Statement of
Financial Position
Group Statement of Changes in Equity
Company Statement of Changes in Equity
Group Statement of Cash Flows
Notes to the Group & Company
Financial Statements
02
03
04
04
06
12
17
20
22
24
27
28
32
37
42
43
44
50
52
54
56
60
64
65
66
67
68
69
70
Shareholder Information
Advisers and Company Information
105
25010 24 October 2016 10:23 AM Proof One
Who We Are
Inland Homes is an established land
regeneration business, focused on
developing sites in southern England
for residential and mixed use projects.
Our foundations have been built on
a proactive and decisive approach to
identifying the right land opportunities,
and our ability to navigate the complex
planning system and maximise the
potential of the final development.
Our versatile structure, relatively small
team, local insight and opportunistic
approach gives us a competitive
advantage, ensuring we can react fast to
secure the sites we want at a price that
provides healthy returns. Once secured,
our knowledge of and relationships
with local authorities, and the wealth of
experience in our land team, means that
we are able to secure planning consent
for the sites we own and manage.
Our ambitious developments, combining
style, comfort and sustainability for
a wide social demographic, deliver
appropriate rewards for our business,
our stakeholders, our shareholders and
the local community.
Increasingly, we are utilising our own
land bank to grow our housebuilding
operations and this growth will continue
to optimise our revenue profile.
SUSTAINABILITY
AT THE HEART OF
EVERYTHING WE DO
Read about our Sustainability
on pages 44 to 47
Read about our Agile Business
Model on pages 17 to 19
Artist’s impression of
Chapel Riverside,
Southampton
02
25010 24 October 2016 10:23 AM Proof One
ANNUAL REPORT AND ACCOUNTS 2016 Land Portfolio
The land portfolio consists of 6,681
plots with the vast majority in the South
and South East of England. The size of
the sites ranges from under 50 plots to
over 500 plots. Our portfolio consists
of both brownfield and strategic sites.
The strategic land element has grown
considerably over the past year, from
virtually no sites in June 2015 to 17 sites
in June 2016, covering over 330 acres
with the potential for 1,600 residential
plots. The addition of strategic land to
the portfolio opens up short to medium
term opportunities that are significantly
less capital intensive and provide
opportunities to us that would not be
available to us from solely dealing with
brownfield land. Our core focus has
always been, and will continue to be,
acquiring and developing brownfield
sites.
Read about our land bank within the
Chief Executive’s Review on pages 32 to 36
Key
SITES UNDER CONSTRUCTION
OTHER INLAND SITES
BIRMINGHAM
LEIGHTON BUZZARD
LITTLE CHALFONT
IPSWICH
CHESHAM
AYLESBURY
HYDE HEATH
AMERSHAM
HAZLEMERE
HOLMER GREEN
HIGH WYCOMBE & LOUDWATER
WOOBURN GREEN
BEACONSFIELD
GARSTON
COLCHESTER FRATING
FULMER
ST ALBANS
TIPTREE
BOREHAM
CHELMSFORD
CHESHUNT
UXBRIDGE
ALPERTON
BILLERICAY
BASILDON
IVER
WEST DRAYTON
FARNBOROUGH
SOUTHAMPTON
SOUTHALL
ASHFORD
STAINES
BASINGSTOKE
BOURNEMOUTH
POOLE
SITES UNDER CONSTRUCTION
OTHER INLAND SITES
25010 24 October 2016 10:23 AM Proof One
03
Inland Homes plc Annual Report and Accounts for the year ended 30 June 2016 www.inlandhomes.co.ukOVERVIEW Financial Highlights
Revenue
£101.9m
2015: £114.2m
Basic earnings per share
14.23p
2015: 14.67p
Profit before tax
£32.9m
2015: £34.0m
£114.2m
£101.9m
14.67p
14.23p
£34.0m
£32.9m
£58.9m
£31.1m
£6.1m
3.46p
1.98p
0.41p
£9.6m
£5.2m
£1.6m
2012
2013
2014
2015
2016
2012
2013
2014
2015
2016
2012
2013
2014
2015
2016
• Revenue from housebuilding of £51.5 million (2015:
£66.1 million) with the decline attributable to the
deferral of 23 completions to the 2017 financial year
and a bulk sale of 59 units in the prior period
• 165% increase in rental income to £2.1 million (2015:
£0.8 million) leveraging income opportunities across
the portfolio
• 30% increase in net asset value to £116 million,
reflecting £18 million revaluation surplus on investment
properties
• Group revenue for the year of £101.9 million (2015:
£114.2 million) and Profit Before Tax of £32.9 million
(2015: £34.0 million)
Operational Highlights
Private housing units sold
Residential land plots sold
Land bank plots
147
2015: 248
425
2015: 440
6,681
2015: 5,176
248
451
440
425
147
6,681
5,176
3,734
183
169
1,942
2,306
114
55
9
2012
2013
2014
2015
2016
2012
2013
2014
2015
2016
2012
2013
2014
2015
2016
• Significant expansion of land bank to a record 6,681 plots
(2015: 5,176), including 17 sites under option providing
control over 330 acres of strategic land with the potential
for over 1,600 residential plots
• Strategic appointment of new Managing Director of Inland
Limited, Gary Skinner, responsible for Group construction
activity and project delivery, enabling better control, greater
certainty and cost competitiveness for housebuilding operations
• Disposal of 425 plots across 8 sites during the year, for a
total consideration of £43.3 million (2015: £39.6 million)
• 147 private homes sold at an average price of £337,000 (2015:
£264,000), with a further 321 currently under construction
• Gross margin from the sale of private homes consistent
• First major joint venture with a local authority with
Southampton City Council appointing Inland as development
partner on an 8.9 acre site, with the potential for over 450
residential units and a gross development value of over
£100 million
at 21.9% (2015: 20.9%)
04
25010 24 October 2016 10:23 AM Proof One
ANNUAL REPORT AND ACCOUNTS 2016 Adjusted EPRA net asset value
per share
91.54p
2015: 43.92p*
Year end cash balances
Dividend per share
£16.7m
2015: £21.4m
1.30p
2015: 1.00p
91.54p
£21.4m
£16.7m
£12.2m
£11.1m
27.0p*
28.0p*
29.63p*
43.92p*
1.30p
1.00p
0.60p
0.27p
£0.6m
0.067p
2012
2013
2014
2015
2016
2012
2013
2014
2015
2016
2012
2013
2014
2015
2016
* The Group adopted the performance measures of the European Public Real Estate Association (EPRA) from December 2015, therefore prior year
comparatives consist of net asset value only, without the uplift of the underlying asset value.
• Following the adoption of EPRA performance measures
to fully reflect unrealised value within the Group’s land
bank, the EPRA net asset value is:
• Strong balance sheet with cash balances of £16.7 million
(2015: £21.4 million) and net borrowings of £54.6 million
(2015: £34.9 million) at the year end
EPRA NAV
Adjusted EPRA NAV
30 June
2016
86.63p
91.54p
31 December
2015
79.85p
84.38p
• 29% increase in proposed final dividend to 0.9p per
share reflecting robust underlying performance and
confidence in outlook
Plots with planning permission &
resolution to grant planning consent
1,163
2015: 1,200
Plots without planning permission
Current annual rental income
5,518
2015: 3,976
£2.6m
2015: £1.1m
1,215
1,318
1,200
1,163
1,057
5,518
3,976
£2.6m
2,306
2,416
1,942
£1.1m
£0.6m
£0.3m
£0.3m
2012
2013
2014
2015
2016
2012
2013
2014
2015
2016
2012
2013
2014
2015
2016
• Key development projects all progressing well, including
Wilton Park, Beaconsfield and Meridian Waterside
Southampton, the Group’s first full self-delivery project
• Acquisition of substantial regeneration project in Cheshunt,
Hertfordshire, comprising a 13 acre site, completed since
the year end in a joint venture
• Track record of success in securing planning consents
maintained at 100%
• House sales continuing at normal rate post referendum,
particularly at Inland’s price point and geographic focus
• Forward sales remain strong, totalling £22.5 million (2015:
£31.1 million) as of the date of this announcement
• Fundamentals of the housing market and Government
initiatives, including Help to Buy, are supportive of Inland’s
strategy and are contributing to the positive outlook being
maintained by the management and Board
See our Key Performance Indicator
on page 28
05
25010 24 October 2016 10:23 AM Proof One
Inland Homes plc Annual Report and Accounts for the year ended 30 June 2016 www.inlandhomes.co.ukOVERVIEW Chairman’s Statement
revaluation surplus on our investment
properties of £18.0 million (2015: £14.5
million) which contributed to a 30%
increase in net asset value to £116.0
million (2015: £88.8 million).
As signalled in our 2015 Annual Report
and Accounts, the Board has adopted the
performance measures of the European
Public Real Estate Association (EPRA), in
common with most UK listed companies
in the real estate market. The EPRA net
asset value reflects the unrealised value
within projects, created by the increasing
value of our land bank as we go through
the different stages involved with the
planning process and gives a more
up to date representation of our key
assets. The EPRA net asset value and
the adjusted EPRA net asset value of the
Group at 30 June 2016 was 86.63p and
91.54p per ordinary share respectively
and has been determined as follows:
The appointment of Gary Skinner as
Managing Director of Inland Limited,
our main operating subsidiary, in
February 2016 has added additional
expertise to the management team and
was an important step in our strategic
decision to develop our in-house
capability to “self-deliver” our homes,
rather than engaging external main
contractors on our schemes. This will
enable the Group to have greater control
and more certainty over delivery, as
well as allowing our homes to be built
more competitively. Gary was previously
Director of Operations at Wilmott
Dixon, a major contractor, where he
was responsible for the delivery of over
800 homes per annum, and his impact
at Inland is already delivering tangible
benefits to the business.
Operationally, the geographic focus of
the Group continues to be in the South
East of England and the outer London
Boroughs, where there is a shortage of
an adequate, sustainable supply of land
with planning consent and also of homes
within an affordable price bracket. The
Group has delivered another set of
robust annual results, with turnover for
the year at £101.9 million (2015: £114.2
million) and profit before tax at £32.9
million (2015: £34.0 million), including a
Terry Roydon
Non-executive Chairman
Operationally and strategically, this
has been yet another significant year
for Inland Homes, which now has a
strengthened management team, has
progressed on a number of important
projects and has entered the new
financial year with a sound balance
sheet. A great deal of effort has been
focused on developing a platform for the
future expansion of the business and
I am confident that shareholders will
begin to see the fruits of this labour in
the near future.
Shares in issue (000)
Dilutive effect of options (000)
Dilutive effect of deferred bonus shares (000)
Dilutive effect of growth shares (000)
* EPRA NAV adjusted to exclude the dilutive effect of the options, deferred bonus shares and Growth Shares.
Current net asset value
Unrealised value within projects
Reverse deferred tax liability on investment property
EPRA net asset value
Deferred tax on uplift at 19%
EPRA net asset value after deferred tax
£000
116,032
67,896
787
184,715
Pence
per share
54.42p
31.84p
0.37p
86.63p
(6.05)p
80.58p
EPRA
201,779
2,413
1,027
8,000
213,219
£000
116,032
67,896
787
184,715
Adjusted
EPRA*
201,779
–
–
–
201,779
Pence
per share
57.50p
33.65p
0.39p
91.54p
(6.39)p
85.15p
06
25010 24 October 2016 10:23 AM Proof One
ANNUAL REPORT AND ACCOUNTS 2016 “
A great deal of effort has been
focused on developing a platform
for the future expansion of the
business and I am confident that
shareholders will begin to see
the fruits of this labour in the
near future.”
St. John’s, Chelmsford
25010 24 October 2016 10:23 AM Proof One
Chairman’s Statement continued
Our financial performance was affected
by a contractor engaged by Inland
Homes running into financial difficulties,
resulting in the delay of 23 legal
completions, the proceeds from which
will now fall into the year ending 30 June
2017. The actions taken to strengthen
our in-house construction team meant
that the Group was able to quickly take
full control of the relevant sites and
all of the related construction activity,
which significantly limited the downside
suffered by the Group.
During the year, Inland Homes sold
168 homes (2015: 287) (including 21
for Housing Association equivalent
units (2015: 39)) at an average price of
£337,000 (2015: £264,000) per private
unit. Fewer homes were sold this year
compared to last year, partly caused
by delays in finishing the 23 units
referred to above and partly because
the previous year’s sales numbers were
flattered by a bulk sale of 59 units.
Inland Homes currently has 321 units
under construction across 10 sites,
which demonstrates the momentum
driving this part of the Group’s activities.
The timing of these projects together
with planned land sales are such that
a major part of our profitability will be
realised in the second half of our current
financial year. Figures for the forward
sales of homes, where units have been
reserved or where contracts have been
exchanged, remain strong and currently
total £22.5 million.
As an expert in the regeneration of
challenging brownfield sites that other
housebuilders are unwilling to take on,
the Group’s position remains strong. The
Group sold 425 (2015: 440) consented
plots to other housebuilders in the year,
demonstrating the continued market
appetite for these opportunities.
Including strategic land, I am pleased
to report the entire land bank has
increased by 29% to a record 6,681 plots
(2015: 5,176), a significant achievement
by any measure and putting us in a
good position to capitalise on these
opportunities in the medium to long
term.
Our rental income for the year
increased by 165% to £2.1 million
(2015: £0.8 million). Further increases
are anticipated in the year to come as
we continue to intensively manage our
commercial and residential portfolio, and
effectively exploit the short term rental
opportunities (such as car parking or the
use of our sites by production companies
for filming) provided by our brownfield
sites as they are navigated through the
planning process.
Worthy of comment is the significant
increase in the size of our strategic land
bank (sites which are next to existing
settlements and are highly likely to get
zoned for development because the
local authority is short of a five year land
supply). From virtually no such holdings
18 months ago, we now have 17 options,
delivering control over 330 acres,
which offer the potential for over 1,600
residential plots.
The Group’s balance sheet has been
strengthened during the period, with
cash balances of £16.7 million (2015:
£21.4 million) at the year end and
net borrowings (defined as loans and
the accrued ZDP liability less cash)
amounting to £54.6 million (2015: £34.9
million). Borrowings have increased post
year end due to continuing investment
in land opportunities and a further
increase in work in progress due to
the momentum in our housebuilding
activities.
Given the robust underlying performance
of the Group, I’m pleased to report that
the Board is proposing to increase the
final dividend by 28.6% from 0.7p to
0.9p per share, subject to shareholder
approval at the upcoming AGM, which is
to be held on 1 December 2016. Together
with the interim dividend of 0.4p per share
paid in May 2016, this brings the total
dividend for the year to 1.3p, an increase
of 30%. The final dividend will be paid to
shareholders on 27 January 2017.
Artist’s impression of proposed Randalls
development in Uxbridge, Middlesex
08
25010 24 October 2016 10:23 AM Proof One
ANNUAL REPORT AND ACCOUNTS 2016 “
Including strategic land, I am pleased to report the
entire land bank has increased by 29% to a record
6,681 plots.”
The dividend increase is indicative of
our confidence in the business and our
strategic position in the market going
forward. It remains too soon to judge
with any confidence the effect that the
result of the EU Referendum will have
on the new homes market. However, the
market fundamentals remain strong,
supported by long term unfulfilled
demand. To date, interest in our well-
located, lower cost, quality homes has
remained largely unaffected by the Brexit
decision.
Finally, I should like to extend my thanks
once again to our small, but highly
skilled and highly motivated team for
their continued hard work in building a
strong and effective Company in Inland
Homes.
Terry Roydon
Non-Executive Chairman
13 October 2016
Artist’s impression of proposed Abbey Wharf
development in Alperton, Middlesex
25010 24 October 2016 10:23 AM Proof One
09
Inland Homes plc Annual Report and Accounts for the year ended 30 June 2016 www.inlandhomes.co.ukOVERVIEW St, Johns, Chelmsford
25010 24 October 2016 10:23 AM Proof One
STRATEGIC
REPORT
Our Marketplace
Our Agile Business Model
Case Study — Chapel Riverside, Southampton
Case Study — Garston Joint Venture
Case Study — Meridian Waterside, Southampton
Our Strategy
Our KPIs
Chief Executive’s Review
Finance Director’s Review
Risk Management
Risks
Sustainability
12
17
20
22
24
27
28
32
37
42
43
44
25010 24 October 2016 10:23 AM Proof One
Our Marketplace
Competitive landscape
• Inland Homes has positioned itself typically at the first
Key differentiators of Inland Homes
• Inland Homes has a large and growing land bank of 6,681
and second time buyer end of the housing market where
demand is very strong and has been largely unaffected by
recent changes in Stamp Duty Land Tax.
• Our land bank is predominantly in the South and South East
of England where demand for housing is the strongest. We
promote substantial sites through the planning process and
obtain planning consents that would suit housebuilders to
commence on site shortly after acquiring it.
• The demand for housing in our place of operation
significantly outstrips supply and has resulted in house price
inflation, although we are seeing signs that this is slowing.
plots, of which 1,163 have planning consent or a resolution
to grant planning consent. The land is predominantly in the
South and South East of England where there is continued
strong demand from private housebuilders and Registered
Providers of affordable homes.
• Inland Homes has a clear and agile business model giving
us the flexibility to realise value in the land bank through
consented plot sales, sales to Registered Providers,
housebuilding or rental income from investment property.
• Our highly experienced management and specialist
development teams have worked together for a long time,
enabling the successful identification, securing of suitable land
and maximising each project’s potential. Our planning team,
which has over 50 years combined experience, has a long track
record of securing planning permissions across all our sites.
UK economic/macroeconomic
conditions
Over the past 5 years the UK economy has steadily
improved:
• We have seen a significant population growth
• Unemployment rates have dropped by 40%
• Interest rates and inflation have remained very low
• House prices have continued to rise
Business and consumer confidence since the EU
referendum has begun to recover on the back of an
accommodative monetary policy and a stable jobs
market. Uncertainty is likely to continue but the Bank
of England will continue its policy to soften the impact
and economists continue to forecast growth in 2016
and 2017.
Implications for Inland Homes
• Growing populations have an increased housing
need which benefits both the Group’s land trading
and housebuilding operations as well as its
residential lettings.
• Low unemployment combined with low interest
rates allow more people to access the housing
ladder, which again benefits the Group’s entire
business.
• House price increases directly affect the Group’s
housebuilding operations but also drives up the
value of consented land and is a result of the lack
of supply, demonstrating the longer term demand
for new housing.
Carter’s Quay,
Poole, Dorset
12
Artist’s impression of former
Brooklands College campus,
Ashford, Middlesex
25010 24 October 2016 10:23 AM Proof One
ANNUAL REPORT AND ACCOUNTS 2016 Growth in construction costs
The shortage of skilled labour has been a significant
factor in driving recent housebuilding cost inflation
and is widely acknowledged as the greatest
constraint to increasing the UK housing supply other
than the planning system. A survey by the Royal
Institute of Chartered Surveyors (RICS) showed that
construction wages rose by 6% in 2015, well ahead
of the 2% UK average, with bricklayers and quantity
surveyors being the most in demand.
Materials cost inflation has flattened following a
period of sustained increases from 2009, however
these are expected to rise by 3.5% - 4.0% per annum
due to the weakness in sterling.
Implications for Inland Homes
• Rising costs in relation to materials will impact on
housebuilding profit margins and we have begun
to buy materials directly from suppliers rather
than via main contractors in order to ensure we
are obtaining the best value as well as derive
further savings by becoming a bulk purchaser.
• The skills shortage and resulting wage increases
will also impact on the Group’s profit and we
have therefore invested in our own housebuilding
expertise as part of a deliberate strategy aimed
at addressing the growth in construction costs as
well as being part of an expansion programme.
Constraints on UK housing supply
The planning system
39.20%
Enough skilled people
22.80%
Not enough housebuilding
companies - SMEs
Other
13.90%
11.40%
Over regulation
7.20%
NIMBYs
3.80%
Materials supply
1.70%
National skills shortages
Source: Housebuilder Magazine and
UK Construction Week
% reporting “yes”
RICS Skills Shortages Average (LHS)
000’s
Construction Unfilled Vacancies (RHS)
60
50
40
30
20
10
0
2002
2004
2006
2008
2010
2012
2014
Source: RICS, ONS
Building material costs
100
80
60
40
20
0
-20
-40
-60
Annual % change
Annual % change
Industrial Materials Index (LHS)
BIS All Work Price Index (RHS)
2007
2008
2009
2010
2011
2012
2013
2014
2015
Source: IMF, BIS
Artist’s impression of proposed Abbey Wharf
development in Alperton, Middlesex
25010 24 October 2016 10:23 AM Proof One
33
28
23
18
13
8
12
10
8
6
4
2
0
-2
-4
-6
13
Inland Homes plc Annual Report and Accounts for the year ended 30 June 2016 www.inlandhomes.co.ukSTRATEGIC REPORT Our Marketplace continued
Demand for housing
There exists a structural undersupply of housing nationally and in particular
in the South East. There is an estimated requirement of 250,000 homes per
annum. Government policies may help to stabilise house price growth but
are unlikely to increase supply significantly, leaving an expected shortfall of
100,000 homes per annum.
Government initiatives
Demand
• Help to buy – facilitates deposits as low as 5% through an equity loan
scheme and represents 32% of Inland’s unit sales
• Help to buy ISA – government contribution of up to 25% of monthly cash
savings (up to £50 per month)
• Lifetime ISA – 25% government contribution to savings (up to £4,000)
• Restrictions on pension savings by higher earners – lifetime allowance
cut from £1.25 million to £1 million so buy to let provides an alternative
investment option despite an increase in buy to let levies
• Starter homes – imposed 20% discount for first time buyers in exchange
for reduced requirement for affordable housing
Supply
• Planning reform – focus on reducing the time planning applications
spend with decision makers. A ‘delivery test’ is being introduced to
ensure delivery of local homes within a reasonable timeframe.
• Permitted conversion of offices to residential – permanent extension of
permitted development rights from April 2016.
• Relaxation of building constraints on green belt land – permitted
allocation of appropriate small-scale sites in the green belt specifically
for Starter Homes, designed for young families.
• Government to provide £5bn to stimulate housebuilding projects – £2
billion to accelerate construction for homes on publicly owned land, £1
billion of short term loans to small housebuilders and £2 billion of long
term funding for infrastructure to deliver up to 200,000 homes.
• Local Authority land release – unlocking large housing sites
Implications for Inland Homes
• This chronic undersupply underpins our sustainable business model for
housebuilding, land trading and lettings operations.
• We ensure that we are aware of and in a position to take full advantage of
Government initiatives which increase demand, such as Help to Buy and
Starter Homes – Inland Homes received a resolution to grant planning
permission on one of the first Starter Homes schemes in the country at
our development in Poole, Dorset.
• Similarly, we participate in initiatives to ease supply by purchasing office
buildings to convert to residential; by taking part in the Government’s
consultation on planning reform and being in constant dialogue with
Local Authorities to ensure we are considered when large parcels of land
are to be released for housing – this strategy led to our involvement with
Southampton City Council on our Chapel Riverside project.
14
25010 24 October 2016 10:23 AM Proof One
Artist’s impression of proposed Randalls
development in Uxbridge, Middlesex
ANNUAL REPORT AND ACCOUNTS 2016 Gap between households and housebuilding
Private sector
Housing association
Local authority
New households
300
250
200
150
100
50
0
1972
1982
1992
2002
2012
Source: Parliament, uk
UK Housing demand gap
East Midlands
East of England
London
North East
North West
South East
South West
East Midlands
Yorkshire and the Humber
0
20,000
40,000
60,000
80,000
10,0000
15,0000
Estimated annual demand
Competition
Gap
Source: House of Commons Library, Housing need and demand (England)
Seasonally adjusted trends
60,000
50,000
40,000
30,000
20,000
10,000
0
4
0
-
3
0
0
2
Completions
Starts
5
0
-
4
0
0
2
6
0
-
5
0
0
2
7
0
-
6
0
0
2
8
0
-
7
0
0
2
9
0
-
8
0
0
2
0
1
-
9
0
0
2
1
1
-
0
1
0
2
2
1
-
1
1
0
2
3
1
-
2
1
0
2
4
1
-
3
1
0
2
5
1
-
4
1
0
2
6
1
-
5
1
0
2
7
1
-
6
1
0
2
Source: ONS
House prices to 30 September 2016
12.0
10.0
8.0
6.0
4.0
2.0
0.0
-2.0
-4.0
t
p
e
S
t
c
O
v
o
N
c
e
D
n
a
J
b
e
F
r
a
M
r
p
A
y
a
M
e
n
u
J
y
l
u
J
g
u
A
t
p
e
S
Quarterly annual % change
3 month on 3 month % change
Monthly % change
Sources: Halifax, Markit
15
25010 24 October 2016 10:23 AM Proof One
Inland Homes plc Annual Report and Accounts for the year ended 30 June 2016 www.inlandhomes.co.ukSTRATEGIC REPORT
Alexandra Gardens,
Iver, Buckinghamshire
25010 24 October 2016 10:23 AM Proof One
Our Agile Business Model
Revenue released
for future land
portfolio development
or housebuilding
projects, and
returns to
shareholders
DELIVERY TO CUSTOMERS
HOMEOWNERS
DEVELOPERS
• Part or all of the site
can be developed by
Inland in partnership
with contractors
• Part or all of sites
can be sold to
developers
Longer term cash
generation
Short to medium
term cash generation
The agility of the Inland approach
means either or a combination of the
above can be pursued in response
to market conditions and cash flow
requirements
DEVELOP LAND PORTFOLIO
Identify opportunities
Select acquisitions
Purchase of strategic sites with future potential
•
•
•
• Joint ventures
Enabled by long term
relationships with agents and sellers
Pipeline of
opportunities of
different sizes and
timescales
VALUE ADDED TO LAND
• Prudent timing
• Consulting regulators and communities
• Achieving valuable planning permission
Inland’s experienced team have an in-depth
knowledge of processes and stellar track
record of securing planning
Maintaining a
balanced portfolio of
land and cash, and a
sustainable stream
of opportunities
Rigorous assessment
of market conditions
and Inland’s need for
cash release in the
short, medium and
longer terms
The key to our agile business model is balancing resources, both land and cash, to
enable regular land purchases and a constantly developing land bank. This feeds
opportunities to the planning team who begin the value adding process by securing
important planning permissions. The asset can then be monetised in several
different ways: selling the land with planning permission, selling a proportion of the
plots to developers, or utilising our housebuilding capabilities and selling houses
directly to homeowners. Each of these processes is underpinned by an ongoing dual
assessment — of the market conditions and customer demands, and our own cash
and opportunity flow. The continual decision making and plan refining process based
on these considerations means that Inland not only produce highly sought after
homes and developments, but deftly balance their assets and cash, maintaining a
responsive forward-looking financial strategy.
Income generating
opportunities at Cheshunt,
Hertfordshire
Assessment of
Market Conditions
The planning teams undertake thorough
research into sites before, during and
after purchase, to establish the factors
at play, from local authority restrictions
or demands on the site and community
pressures, to the nature of the
landscape and its surrounding areas.
Before an application is submitted,
extensive consultation is undertaken
with planning bodies to establish the
parameters for a project. Our in-depth
knowledge and experience as well
as research into the specific area
ensures that the proposed project is
not only likely to be supported by the
local council, but that there is high
demand for the resultant properties
and the project will be profitable.
External consultants are used to advise
on a range of aspects of the project,
including sustainability, and once a
plan is drawn up we continue to refine
and adjust it based on the constant
monitoring of local and market forces.
As a result, we have a stellar track
record of achieving planning permission
even on the most difficult sites, and the
resulting developments are tailor-made
for the local community, completely
transforming brownfield land into
attractive homes and landscapes.
Holistic Assessment
of Our Portfolio
When it comes to deciding on whether to
sell the site with planning to developers
or undertake the build internally, we
assess influencing factors such as
costs, timescales and location to decide
on the most appropriate route to take.
Considering the financing of a project
build is critical to this decision making
process, and we crucially assess this
not only on a project basis, but in
terms of how it will affect the cash
flow of the Group as a whole. Inland
procures funding from a number of
sources, including joint ventures and
loan finance. However, a major source
of funding is using our own equity, and
a holistic decision has to be made on
whether certain consented sites should
be realised into cash to finance future
projects and overheads. The inbuilt
flexibility and agility of this model allows
us to operate sustainably, and undertake
projects which deliver sound returns for
our shareholders.
17
25010 24 October 2016 10:23 AM Proof One
Inland Homes plc Annual Report and Accounts for the year ended 30 June 2016 www.inlandhomes.co.ukSTRATEGIC REPORT
Our Agile Business Model continued
Revenue is principally generated from sale of homes, land and rental income.
Large projects usually require a mixed use scheme, where Inland Homes
will develop the commercial plots. We retain these commercial assets, which
generates a continuous annual income that contributes towards covering our
overheads.
RETURN VALUE TO
SHAREHOLDERS
ADDING VALUE AND CREATING VALUE RIGHT THROUGH THE CHAIN
REINVEST
Identify Land
Our local insight and established
relationships with vendors and public
sector bodies mean that we are aware
of opportunities to increase our land
bank.
Achieve Planning Permission
Once a site is acquired, extensive
research and stakeholder consultations
continue to prepare our bids for
planning permission. Our record of
achieving planning permissions on
sites is second to none.
Acquire Land
Our financing resources and strong
reputation as being trustworthy and
reliable mean that we can act quickly to
secure promising sites. Sites acquired
can often deliver short term returns.
This revenue can be generated from
a number of sources, such as sale of
surplus assets, rent from tenants, car
parking and the sites being utilised
as filming locations. The tenants that
are already present on the site may
become long-term sources of revenue
if they remain on the site during and
after the development process.
18
25010 24 October 2016 10:23 AM Proof One
SHORT TERM
RETURNS
MEDIUM TERM
RETURNS
LONG TERM
RETURNS
ANNUAL REPORT AND ACCOUNTS 2016 RETURN VALUE TO
SHAREHOLDERS
ADDING VALUE AND CREATING VALUE RIGHT THROUGH THE CHAIN
REINVEST
Value to Homeowners
We are proud of the developments we plan and
design, and are always looking to create communities
attractive to future residents. Delivering on our
commitment to quality and comfort, developed sites
feature open spaces, play areas and immaculate
landscaping to suit the needs of a variety of people.
Value to Developers
As housebuilders ourselves, we know how to meet
the needs of potential developers in order for them
to be able to begin building soon after acquiring
the site from us. We ensure that any potential
barriers to development are dealt with and that the
planning permission is for the right housing mix and
development size to maximise the potential value of
the site.
When selling a portion of a site to a developer, they
receive additional benefits. We co-ordinate with them
over branding to ensure that the look and feel of their
homes is in keeping with the development as a whole.
We will install all of the infrastructure for the site, such
as drainage, providing a platform for them to begin
their development.
SHORT TERM
RETURNS
MEDIUM TERM
RETURNS
LONG TERM
RETURNS
Sell Land with Planning
Permission to Developers
Once consent is achieved, we have the
opportunity to sell the whole site with
planning permission to developers or
housing associations for a short term
return.
Sell Part of the Site
By selling a portion of a site while carrying
out infrastructure works and housebuilding
on other parts, we deliver revenue in the
medium term.
Develop the Whole Site
Building a whole development takes longer
but maximises the revenue a site can
deliver over the long term. Historically,
the construction element of development
projects would always be undertaken by
principal contractors. We are now focused
on developing the capability to self-deliver
new homes.
Read about our Strategy on
pages 26 to 27
Read about our case study on Meridian Waterside,
Southampton on pages 24 to 25
25010 24 October 2016 10:23 AM Proof One
19
Inland Homes plc Annual Report and Accounts for the year ended 30 June 2016 www.inlandhomes.co.ukSTRATEGIC REPORT Case Study – Chapel Riverside, Southampton
Chapel Riverside is strategically
important to Inland Homes as it is
the first site on which we are working
with a local authority as a development
partner. This development is one of
Southampton City Council’s major
regeneration sites across the city.
The opportunity to bid for the Chapel
Riverside site resulted from the
relationship we built with Southampton
City Council through the Meridian
Waterside project. We were able to
demonstrate our creative approach
Read about Sustainability
on page 44
and expertise and show that we
would make a reliable, trustworthy
development partner. We signed a
development agreement for Chapel
Riverside in October 2015 and expect
to secure planning permission within
the next year. It will be a mixed use
development comprising up to 450
residential units and marine-based
commercial space with an expected
gross development value of over £100
million.
A number of challenges have arisen on this
project that we have worked in collaboration
with Southampton City Council to solve.
The previous use for this site was as the
council’s waste and recycling centre. A
legacy from this is the presence of a large
storm water settlement tank in the middle
of the site. We are working closely with
Southern Water and the council to come
up with a solution for its removal which will
unlock the ability for us to develop the site
more readily.
20
25010 24 October 2016 10:23 AM Proof One
ANNUAL REPORT AND ACCOUNTS 2016 We undertake careful consideration
of the requirements of the community
when planning developments and
this project is no exception. A number
of benefits will be delivered to the
community on completion. Currently
the area fronting the River Itchen is
all in private ownership however the
waterfront will become accessible to
the general public through the inclusion
of a riverside walkway and parks in our
development. Additionally, we will build
300 metres of river flood defences.
The work on this project has
strengthened our relationship
with Southampton City Council by
demonstrating our creative approach to
solving issues and our commitment to
creating developments that both serve
the needs of future residents and the
wider community. We believe that this
will lead to further opportunities with
Southampton City Council and potentially
also with other local authorities across
the country.
Expected gross
development value of over
£100 million
Up to 450
residential units
Working with a local
authority as a development
partner
25010 24 October 2016 10:23 AM Proof One
21
Inland Homes plc Annual Report and Accounts for the year ended 30 June 2016 www.inlandhomes.co.ukSTRATEGIC REPORT Case Study – Garston Joint Venture
8 acre
greenfield site
Allocated
for 100
homes by the local
authority
Read about our Agile Business Model
on pages 17 to 19
Joint ventures are an attractive
proposition for us as it means that we
do not need to supply all the capital
required for the purchase of sites. This
reduces the level of risk associated with
developing the site. Participating in joint
ventures allows us to be involved in a
greater number of opportunities at any
one time and also diversifies risk.
In Garston, Hertfordshire, we have a 50-
50 joint venture with a private landowner
on an 8 acre greenfield site. The site
is currently being used as a grazing
field for horses and has been allocated
for 100 homes by the local authority.
We have recently submited a planning
application. The proposed development
will comprise 2, 3 and 4 bedroom houses
and apartments with first time buyers
as the target market. A separate joint
venture company has been established
with the board formed from both the
landowner and Inland Homes. Inland
manage the entire development process,
from gaining planning permission to
construction,marketing and sales for
which we will charge the joint venture
company a management fee for this
service, which will cover some of our
overheads.
Inland will provide significant added
value for the landowner in this joint
venture. They benefit from our planning
expertise as we can secure a planning
permission that will get the maximum
value possible out of the land. We were
able to unconditionally purchase the site
for development, which differentiates
us from other developers who buy
sites subject to planning. The lack
of conditionality made our offer very
attractive to the landowners. By forming
the joint venture with us, they are able
to maximise their return and are able
to extract some cash up front. They
will receive half of the profit generated
from the sale of homes, which is far
greater than the return they would have
made from selling the site to us without
planning permission.
The Local Authority has allocated the
site for development in 2026. Our due
diligence has identified that the local
authority is significantly short on its
housing supply numbers. Our task is
to demonstrate to the Local Authority
that bringing this site forward for
development at an earlier date will
deliver them much needed housing and
this will result in a much earlier return
on investment for us.
22
25010 24 October 2016 10:23 AM Proof One
ANNUAL REPORT AND ACCOUNTS 2016 25010 24 October 2016 10:23 AM Proof One
Case Study – Meridian Waterside, Southampton
Meridian Waterside is a key priority site
in Southampton City Council’s major
regeneration programme. The most
recent use for the site was as the former
Meridian TV studios. It has a waterside
location fronting the River Itchen and
the design required careful planning
with extensive consultation with the city
council. The plans for the development
include infrastructure works that
contribute to part of a new flood defence
system the city is building along the
water front. The development will deliver
351 homes and retail space.
It is the first site on which we will self-
deliver the residential and commercial
units on the development. Previously,
we would have worked with a principal
contractor, who would take on the
responsibility of construction for the
entire project. We are taking on the
role of managing the construction on
this site, which has meant recruiting
people with sound expertise in this area,
developing policies and procedures and
establishing a supply chain of sub-
contractors. The team of Inland Homes
employees on site consists of a project
manager, who oversees a site manager,
a technical manager and a site surveyor.
We are building up a capability to self-
deliver on other sites too.
Self-delivery allows Inland Homes to
have more control over projects. This
means that we can forecast more
accurately when completions will take
place and be more reactive to the market
environment. The overall project will be
more cost-effective as we are removing
a principal contractor’s profit margin
and overheads from the cost of the
construction. A disadvantage of self-
24
25010 24 October 2016 10:23 AM Proof One
ANNUAL REPORT AND ACCOUNTS 2016 delivery is that Inland Homes is taking on
the risk that would have previously been
passed onto the principal contractor.
To manage this, we have allowed in an
element of contingency in the budget for
potential risks.
Self-delivery means there is more
joined-up thinking within the business.
We can ensure that the approach to
construction reflects the needs of
our sales and marketing team. The
recruitment of people with experienced
construction expertise means that
the designs developed as part of the
planning process will be challenged
from a construction perspective, which
makes sure that the development works
both aesthetically and practically. With
the build team now in-house, the sales
team are also better supported. It is far
easier for the sales team to liaise with
an internal construction team on various
minute details relating to developments
under construction than with a principal
contractor.
351 homes
and retail space
First site on which we will
self-deliver the residential
and commercial units
25010 24 October 2016 10:23 AM Proof One
25
Inland Homes plc Annual Report and Accounts for the year ended 30 June 2016 www.inlandhomes.co.ukSTRATEGIC REPORT Inland’s clear strategy has delivered
growth and a number of outstanding
projects over the last year. We have
maintained existing relationships and
developed new ones, and refined our
housebuilding capabilities so that
we continue to compete with other
housebuilders. However, we have still
retained the essence of what makes us
unique.
Artist’s impression of proposed Chapel Riverside
development, Southampton
25010 24 October 2016 10:23 AM Proof One
Our Strategy
Strategic goal
Description
Progress over past year
1
Increase the size of our
land bank year on year
Purchases range from sites ready for
immediate development, to tactical
acquisitions of sites which open up the
potential of neighbouring land, to areas
which will become key housebuilding terrain
in the future. All of these purchases are
funded by our careful financial strategy,
which balances loan finance, joint venture
funding and cash released by sales of other
sites and completed residential units.
As our planning team adds value to land
through achieving planning permission,
we are able to make attractive short term
margins through land sales to developers.
In this strong housebuilding climate there
is high demand for quality land, so our
strategy means that we are well poised to
take advantage of this and generate strong
revenue streams and cash flow to feed back
into our land buying programme.
• 29% increase in land bank plots
since the last annual report
• Planning permission or resolution
to grant planning permission
obtained on 544 plots since the
last annual report
• 425 plots with planning
permission sold during the
financial year
• 1,163 plots with planning
permission remaining in land bank
• Applications for planning
permission submitted on a
further 1,446 plots
Having proved our credentials as a
quality housebuilder with award-winning
developments such as Drayton Garden
Village and Carter’s Quay, we continue to
build momentum and develop our quality
portfolio. Our housebuilding capabilities
have bolstered our reputation and attracted
some significant partnerships, for example
the project in Chapel Riverside,
Southampton.
• Investment in staff to increase
the level of construction expertise
within the Group
• Appointment of Gary Skinner
as Managing Director of Inland
Limited to lead the expansion of
housebuilding
• We have 321 residential units
under construction across 10 sites
Continue the core
activity of plot sales
to other developers to
generate cash to fund
our operations
Maximise the value
from our land bank
by expanding our
housebuilding
programme
2
3
4
Maintain borrowings
at a manageable level
through a strong focus
on cash management
and vendor financing
Our varied range of financing options
gives us flexibility. Our business plan
includes the sale of consented land, which
we can tailor to our cash flow requirements.
Additionally, we have an increasing bank
of properties, which are providing a steady
stream of rental income and cash that
contributes to our overheads.
• Gearing at 47.0%
• Current annual rent £2.6m
• Cash balances of £16.7m
• Forward sales of £22.5m
• Deferred consideration of £22.4m
See our Key Performance
Indicators on page 28
Read about our Risks
on page 43
25010 24 October 2016 10:23 AM Proof One
27
Inland Homes plc Annual Report and Accounts for the year ended 30 June 2016 www.inlandhomes.co.ukSTRATEGIC REPORT
Our KPIs
Financial
KPI
Strategic focus
Performance
Chart
Revenue
Revenue from housebuilding
activities is expected to increase
significantly and this will be
supplemented by land sales.
During the year the number of
completions of private homes
decreased due to a bulk sale of
59 units in the prior year and the
failure of a contractor caused the
delay of 23 units.
Profit before
tax
The Board’s expectation is to
continue to build on the recurring
profitability achieved over the last
two years and will seek to secure
this by the planned expansion
of housebuilding and the sale of
consented building plots.
Demand for consented land was
once again strong during the year
and this resulted in several highly
profitable land sales, however
the failure of a contractor has
impacted on profitability, as
disclosed elsewhere.
2016
2015
2014
2013
2012
2016
2015
2014
2013
£58.9m
£31.1m*
£6.1m*
£9.6m
£5.2m*
2012
£1.6m*
Adjusted
EPRA net
asset value
per share
The value added to the land
bank by the planning process
will continue to be the Group’s
key focus. Further value will be
extracted from the land bank
through housebuilding. Details
can be found in the Chairman’s
Statement on page 06.
Dividend per
share
It is the Group’s intention to
progressively increase the
dividend annually as profits rise.
Robust recurring profits and
a revaluation of investment
properties have caused a
significant increase in net asset
value per share. The use of the
adjusted EPRA net asset value
measurement exposes how much
‘hidden’ value is held within
inventories.
2016
2015
2014
2013
2012
The Group paid an interim
dividend of 0.4p per share in May
2016 and has proposed a final
dividend of 0.9p per share payable
in January 2017.
2016
2015
2014
2013
2012
0.067p
43.92p†
29.63p†
28.0p* †
27.0p* †
0.60p
0.27p
Basic
earnings per
share
The increase in profitability
mentioned above will have a
proportional impact on earnings
per share which should continue
to improve.
This has been strong during the
year due to the revaluation of
investment properties. 8.9p per
share relates to the revaluation of
the 86 existing houses at Wilton
Park, Beaconsfield.
2016
2015
2014
2013
3.46p
1.98p*
2012
0.41p*
£101.9m
£114.2m
£32.9m
£34.0m
91.54p
1.30p
1.00p
14.23p
14.67p
Net gearing‡
The Group is keen to maintain
gearing at a reasonable level,
taking into account the net asset
value.
Net gearing has increased from
39.2% to 47.0% in line with
management’s expectations
as a result of the increase in
inventories and investments in
joint ventures.
2016
2015
2014
2013
2012
6.7%*
13.0%*
47.0%
39.2%
66.9%
28
25010 24 October 2016 10:23 AM Proof One
ANNUAL REPORT AND ACCOUNTS 2016 Non-financial
KPI
Strategic focus
Performance
Chart
Number of
plots with or
without
planning
consent
The Group’s target is to have a
land bank of approximately 10,000
residential plots in the medium
term.
The land bank now stands at
a record level of 6,681 plots,
including 1,163 plots with
planning permission or resolution
to grant planning permission.
2016
1,163
5,518
6,681
2015
1,200
3,976
5,176
2014
1,318
2,416
3,734
2013
1,249
1,057
2,306
2012
727 1,215
1,942
Without planning
With planning
Total
residential
plots sold
The Group’s objective is to sell
consented plots that are unlikely
to be developed by Inland Homes
to realise profits and to raise
working capital.
There was a strong demand
for consented plots from
housebuilders during the year
so a substantial number of plots
were sold.
Residential
home sales
The Group expects to sell a larger
number of residential units in the
year to June 2017 and the plan
is to increase this target over the
medium term to approximately
500 units.
The Group sold 147 private
residential units during the year,
which was well below the previous
year. This was due to a bulk sale
of 59 units in the prior year and
the impact of a failed contractor.
Planning
permissions
gained during
the year
The core activity of the Group is
to acquire sites without planning
consent and to secure consent on
the majority of them within two
years from purchase.
The Group gained planning
permission or a resolution to
grant planning permission on 544
plots since the publication of the
last annual report.
Average
number of
employees
The average number of
employees to rise only modestly
as the volume of housebuilding
increases.
Due to the increase in
housebuilding activities the
average number of employees
increased during the year.
2016
2015
2014
2013
2012
2016
2015
2014
2013
2012
9
2016
2015
2014
2013
2012
2016
2015
2014
2013
2012
425
440
451
248
147
169
183
114
55
544
885
378
496
283
33
29
24
14
13
*
†
Due to the introduction of IFRS 10 the Group has consolidated the results of DGVL for the years ending 30 June 2016, 2015 and 2014. Prior years were accounted
for under IAS 27 and SIC 12 and these standards did not require the consolidation of DGVL.
The Group adopted the performance measures of the European Public Real Estate Association (EPRA) from December 2015, therefore prior year comparatives
consist of net asset value only, without the uplift of the underlying asset value. Further details on the EPRA net asset value can be found in the Chairman’s
Statement on page 6.
‡ Net gearing is defined as loans and accrued ZDP liability less cash as a proportion of net asset value.
Read our Strategy on
pages 26 to 27
25010 24 October 2016 10:23 AM Proof One
29
Inland Homes plc Annual Report and Accounts for the year ended 30 June 2016 www.inlandhomes.co.ukSTRATEGIC REPORT Brooklands College,
Ashford
10 acre site
366 units plus
commercial space
Artist’s impression of proposed development at former
Brooklands College campus, Ashford, Middlesex
25010 24 October 2016 10:23 AM Proof One
25010 24 October 2016 10:23 AM Proof One
Chief Executive’s Review
The core value enhancing skill at Inland
is in its land acquisition and planning
strategy, supported by a team of people
that has worked together for many years
and which has a long track record of
success in securing planning consents.
The land team is led by Paul Brett,
the Group Land Director, with whom
I have worked for over 20 years, who
is ably supported by Des Wicks, our
Senior Land Manager, Mark Gilpin, our
Planning Director, and a small group of
support staff within the team. As a land
man by background, I am also involved
with a number of key transactions. This
part of the business has successfully
procured planning consents for 544 plots
since the publication of our previous
year’s results and puts us in a strong
position to achieve our future house
building target.
The land bank currently stands at
a record 6,681 plots (2015: 5,176),
demonstrating the momentum behind
this part of the business following
substantial plot and house sales. The
status of the land portfolio is as follows:
I am pleased to report on a year of
considerable progress for Inland with the
business achieving 31% growth in net
assets per share to 57.50p (2015: 43.92p)
and a profit before tax of £32.9 million
(2015: £34.0 million). The underlying
value of our inventories is significantly
higher than the book values and this is
demonstrated by the EPRA net asset
value per share of 86.63p per share and
the adjusted net asset value per share of
91.54p at 30 June 2016, further details
of which can be found in the Chairman’s
Statement on page 6.
As reported in the Chairman’s
statement, the Group sold 425 building
plots to other housebuilders and
completed the sale of 147 (2015: 248)
private homes in the year at an average
price of £337,000 compared with
£264,000 last year. In addition, the Group
sold 21 equivalent affordable housing
units (2015: 39).
Although the unit completions were
lower than last year, due largely to
the contractor issues outlined by our
Chairman, the ongoing strategy and
underlying trend is to increase annually
towards our interim target of 500 home
completions per annum. We currently
have 321 homes under construction
with a significant number being “self-
delivered” by our in-house team. This
part of the business was bolstered
during the year with the appointment
of Gary Skinner as Managing Director
of Inland Limited, with specific
responsibility to substantially increase
our housebuilding activities.
Plots with
planning
consent or
resolution
to grant
planning
consent
321
727
26
40
49
–
–
1,163
Plots without
planning
consent
–
1,124
2,389
200
200
1,563
42
5,518
Total
plots
321
1,851
2,415
240
249
1,563
42
6,681
Owned under construction
Owned or contracted
Managed or held within joint ventures
Joint ventures terms agreed
Plots controlled or terms agreed
Strategic land controlled
Strategic land terms agreed
TOTAL PLOTS
25010 24 October 2016 10:23 AM Proof One
Stephen Wicks
Chief Executive Officer
Land bank status
Without planning
With planning
6,681
5,518
5,176
3,976
2,306
1,057
1,249
1,942
1,215
727
3,734
2,416
1,318
1,200
1,163
2012
2013
2014
2015
2016
Planning status of plots
in land bank
1,446
1,349
1,014
1,709
Strategic
To be progressed
Pre-application
discussions
Planning applications
submitted
32
ANNUAL REPORT AND ACCOUNTS 2016 “
The ongoing strategy
and underlying trend
is to increase annually
towards our interim
target of 500 home
completions per
annum.”
Carter’s Quay,
Poole, Dorset
We are seeing increasing interest in our
land bank from Registered Providers
(“RPs”) of affordable housing who are
considerably increasing their production
of homes, in light of the growing
realisation that the private sector is
unable to deliver the volume of new
affordable homes required in the UK.
We are also observing a high level of
enquiries for land from Private Rented
Sector Funds, another growth area that
we hope to benefit from.
Operations – key projects
Wilton park, Beaconsfield,
Buckinghamshire
I described this site last year as our
“jewel in the crown” and this continues
to be the case. The site sits in a parkland
setting of over 100 acres close to
Beaconsfield Old Town. Currently the
site is allocated for 350 homes together
with commercial space.
The first section of the access road
from the Pyebush roundabout is nearly
complete. Landscaping with mature
tree planting is ongoing to create the
gateway to this magnificent development
opportunity.
We expect to make a formal planning
application in this calendar year, with a
view to starting work in mid-2017.
25010 24 October 2016 10:23 AM Proof One
33
Inland Homes plc Annual Report and Accounts for the year ended 30 June 2016 www.inlandhomes.co.ukSTRATEGIC REPORT Chapel Riverside, Southampton
This project is our first major joint
venture with a Local Authority
(Southampton City Council).
In what is a challenging waterside
brownfield regeneration, our planning
team has come up with a creative
approach that aims to secure consent
for over 450 homes in addition to 59,000
sq ft of commercial space. We expect a
gross development value of over £100
million from this project.
We hope this partnership will be the first
of many with Local Authorities, many
of whom do not have the expertise that
we can offer, and we are directing our
management team to make this an area
of focus.
Strategic land portfolio
About 18 months ago, reflecting the
intense pressure that Local Authorities
are under to allocate more land for
development, we made a decision to
supplement our brownfield land portfolio
with a number of strategic options over
greenfield land that adjoins existing
built up areas where there are distinct
possibilities of that land being released
in the future for housing.
This strategic decision has proved to
be exceptionally successful with 17
option agreements now in place. These
options give Inland the right to acquire
the site at a discount to market value
(typically 20%) once the site achieves
planning permission. Most of the options
run for at least 10 years and provide
control over 330 acres of land (mainly in
Buckinghamshire) with the scope for the
delivery of circa 1,600 homes.
A number of these sites have already
been identified for potential housing in
Local Authority Plans.
Chief Executive’s Review continued
Meridian Waterside, Southampton
This scheme is the regeneration of the
former ITV Meridian Studios, a complex
brownfield site in a rundown part of
Southampton.
We have recently launched the sale
of the first phase of 54 homes and a
4,250 sq ft retail unit and achieved 7
reservations over the opening weekend.
The completed development will
comprise over 350 homes. This is the
first project we are self-delivering
without using a main contractor.
The construction is on programme and
within budget and we are expecting to
commence the build out of Phase 2 for
42 units in November 2016. There is a
very strong initial interest from potential
buyers with prices starting from
£140,000.
Brooklands College, Ashford,
Middlesex
This is a 10 acre site in the centre of
town where we expect to receive a
resolution to grant planning permission
for 366 units plus commercial space in
the near future. The land is held in our
joint venture with CPC Group Limited.
Lily’s Walk, High Wycombe,
Buckinghamshire
This former gas holder site is in the
town centre and where a planning
permission for 239 units and 16,000
sq ft of commercial space is expected
imminently. This site is also held in our
joint venture with CPC Group Limited,
which has now also purchased the
adjoining land which provides the scope
for a further 85 residential units.
Lily’s Walk, High Wycombe,
Buckinghamshire
Read the case study on Meridian Waterside,
Southampton on pages 24 and 25
Read the case study on Chapel Riverside,
Southampton on pages 20 and 21
34
25010 24 October 2016 10:23 AM Proof One
ANNUAL REPORT AND ACCOUNTS 2016 Recently opened Co-op neighbourhood supermarket at
former RAF Stanbridge in Leighton Buzzard. Built and
retained as an investment property by Inland Homes.
Investment income
As part of our brownfield land and
property acquisitions, we often “inherit”
existing tenants and have the scope
to generate short term rental income
through lettings to operators for things
such as short term car parking income,
film production and storage. We have also
retained 86 existing houses at our Wilton
Park development, the bulk of which are
let on assured shorthold tenancies.
The Group is also seeking new
development opportunities within the
mixed use schemes. We have two
neighbourhood supermarkets which we
have retained and are let to Sainsbury’s
and the Co-Op, with another under
construction at our Meridian site in
Southampton.
The intensification of our commercial
rental activities has resulted in current
rental income of over £2.6 million per
annum. We expect this rental income
to continue to rise and provide a good
contribution to overheads and funding
costs.
Brexit
Despite the hysteria leading up to the
referendum, the housing market has
emerged relatively unscathed from
the turmoil that surrounded the UK’s
decision to leave the EU, although it is
still early days.
However, the fact remains that there
is a long term underlying demand for
new homes particularly at the fairly low
average price point that Inland operates
at and on sites which are well located in
Southern England.
25010 24 October 2016 10:23 AM Proof One
35
Inland Homes plc Annual Report and Accounts for the year ended 30 June 2016 www.inlandhomes.co.ukSTRATEGIC REPORT Chief Executive’s Review continued
Carter’s Quay,
Poole, Dorset
Summary & outlook
Demand for residential land in our
well located portfolio from third party
housebuilders is steady, with a number
of new land sales agreed post year end.
Inland Homes is continuing to extract
maximum short term value from its land
bank via income producing opportunities
as well as the development of new
commercial opportunities by virtue of its
mixed use developments.
Focused investment is being made in
new personnel so that the Group is well
resourced to deliver on its growth plans.
Our staff headcount is now 53 compared
with 31 at the date of signing the last
Annual Report.
We have a medium term target of achieving
500 home completions per annum and
having repositioned the business to have
less reliance on main contractors, are
confident this will be achieved.
The underlying net asset value of the
Group has increased substantially
year on year. Our small skilled team of
professionals are focused on creating
maximum value from our excellent and
well located portfolio.
Inland is on track to deliver further
considerable growth for its shareholders.
The fundamentals of the housing market
particularly at our low cost end of the
sector remain strong and are well
supported by Government initiatives.
We are very positive about our business
model going forward.
Stephen Wicks
Chief Executive Officer
13 October 2016
36
25010 24 October 2016 10:23 AM Proof One
ANNUAL REPORT AND ACCOUNTS 2016 Finance Director’s Review
Nishith Malde
Group Finance Director
Revenue by segment
2%
2%
3%
42%
51%
Land sales
Housebuilding
Contract
Rental and other
Hotel
£101.9m
Revenue
£32.9m
Profit before tax
“
We have adopted the performance measures
of the European Public Real Estate Association
(“EPRA”), which enables us to fully reflect the
unrealised value that has been created within our
substantial land bank. The EPRA net asset value
per share at 30 June 2016 was 86.63p and the
adjusted EPRA net asset value was 91.54p
per share.”
Inland Homes has delivered another year
of strong progress, both strategically and
operationally. Against a record prior year,
profit before tax was £32.9 million (2015:
£34.0 million), and includes revaluation
gains of £18.0 million (2015: £14.5
million). This has been achieved despite a
delay in 23 unit completions following the
failure of a third party contractor, which
resulted in an increase in cost provisions
to complete the affected projects.
We have adopted the performance
measures of the European Public Real
Estate Association (“EPRA”), which
enables us to fully reflect the unrealised
value that has been created within our
substantial land bank. The EPRA net
asset value per share at 30 June 2016
was 86.63p and the adjusted EPRA
net asset value was 91.54p per share,
further details of which can be found in
the Chairman’s Statement on page 6.
Group income statement
Inland Homes delivered 147 (2015: 248)
private unit completions during the financial
year, generating revenues of £51.5 million
(2015: £66.1 million), and sold 425 (2015:
440) consented residential building plots,
realising £43.3 million (2015: £39.6 million).
Gross profit from private unit completions
was £11.3 million (2015: £13.8 million)
and from the sale of consented residential
building plots was £17.1 million (2015: £17.0
million). Total revenues decreased by 10.8%
over the previous period to £101.9 million
(2015: £114.2 million). This was partly due
to the normal course of housebuilding
project cycles and the completion of our
development, West Plaza in Ashford,
Middlesex, in the previous year where
there was a bulk sale of 59 units. Revenues
were also affected by the delay of 23 units
following the failure of a main contractor
engaged on three of our sites, however,
these 23 units will be realised in the current
period, albeit with much lower margins
due to increased costs. The average selling
price of Inland Homes’ private residential
units was £337,000 (2015: £264,000), the
increase being the result of both a change
in the mix between houses and apartments
sold, as well as regional house price growth
during the period.
Gross profit has decreased by 14.0% to
£29.6 million (2015: £34.4 million) and
gross margin reduced to 29.0% from
30.1%. The margin on private unit sales
improved slightly to 21.9% (2015: 20.9%).
Provisions of £1.1 million were made in
respect of costs to complete on two of
the three sites under construction where
the main contractor failed.
The strategic focus on developing our
in-house construction capabilities and
the self-delivery of our products has
naturally meant an increase in staff
numbers and, therefore, administrative
overheads have risen from £6.0 million
to £6.3 million. It is expected, however,
that this will result in cost savings and
reduce the risk around project delivery
over the medium to long term as the
Group’s activities continue to expand.
There was a further revaluation gain
of £18.0 million (2015: £14.5 million) to
investment properties, which relates
principally to the 86 existing residential
properties at Wilton Park, Beaconsfield
where the current annual rent roll is £0.9
million as they are now unencumbered.
37
25010 24 October 2016 10:23 AM Proof One
Inland Homes plc Annual Report and Accounts for the year ended 30 June 2016 www.inlandhomes.co.ukSTRATEGIC REPORT Finance Director’s Review continued
Gross profit by segment
6%
(2%)
37%
55%
Land sales
Housebuilding
Contract
Rental and other
Investment property
2%
10%
88%
Residential
Commercial
Developmental land
Asset by segment
0%
9%
43%
21%
7%
0%
20%
Land
Housebuilding
Contract
Investments
Investment properties
Other
Hotel
38
In November 2015, one of the Group’s
subsidiaries entered into a £20.0
million revolving credit facility with
Barclays Bank to fund the majority
of its housebuilding activities, which
were previously financed via individual
development loans. The facility expires
on 31 October 2019 and has contributed
towards a reduction in our net finance
costs to £6.9 million (2015: £8.2 million).
The facility includes standard net asset
based covenants as well as site specific
covenants. It is also worth noting that
last year the Group incurred a one-
off cost of approximately £1.0 million
in finance fees for the arrangement
of the joint venture with CPC Group
Limited, which has not repeated during
the financial year ended 30 June 2016.
Interest cover, expressed as the ratio of
operating profit (excluding revaluation
gains) to net interest (excluding notional
interest on deferred consideration) was
4.1 times (2015: 4.0). The Group has not
capitalised any interest charges.
As announced on 19 November 2015,
Inland Homes committed a £1.0 million
investment in return for a 25% stake in
a newly formed, premium housebuilding
company, Troy Homes Limited. The
Group has since committed to invest
a further £250,000 of equity. As was
expected for a business in its infancy,
Troy Homes incurred a loss of £553,000
during its first 10 months of trading to
30 June 2016. Inland Homes’ share of
this loss, representing £138,000, has
been recognised within the share of
losses of associate companies.
Adjusted EPRA net asset value
Taxation
The total tax charge of £3.5 million
represents 10.8% of the profit before tax.
The effective corporation tax rate for the
financial year is 20% and the principal
difference relates to the recognition
of capital losses against revaluation
surpluses on investment properties
resulting in no deferred tax charge on
the surplus.
Earnings per share
and dividends
Basic earnings per share decreased by
3% to 14.23p (2015: 14.67p) per share
while basic earnings per share (excluding
revaluation gains) were 5.31p (2015:
7.49p). The Company paid an interim
dividend of 0.4p (2015: 0.3p) per share
on 31 May 2016 and the Board has
recommended a final dividend of 0.9p
(2015: 0.7p) per share, increasing the
total dividend for the year by 30% to 1.3p
(2015: 1.0p) per share. The proposed final
dividend will be payable on 27 January
2017, subject to shareholders’ approval,
to shareholders on the register at the
close of business on 30 December 2016.
Group balance sheet and
financial position
On 30 June 2016 the Group acquired
all of the issued share capital of Bucks
Developments Limited, the holding
company of Wilton Park Developments
Limited. As a result, the Group now
has 86 existing residential properties
at Wilton Park, Beaconsfield which
are held as investment properties.
These properties were professionally
67.9
184.7
18.0
(0.8)
(1.1)
(6.3)
(7.1)
(3.5)
(2.8)
1.2
11.3
1.7
17.1
89.1
200
180
160
140
120
100
80
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40
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25010 24 October 2016 10:23 AM Proof One
ANNUAL REPORT AND ACCOUNTS 2016
valued at the year end at £45.4 million,
reflecting a gain of £17.9 million. The
majority of these properties are let
on assured shorthold tenancies and
currently generate annual rental income
of £0.9 million. The Group’s investment
properties, comprising predominantly
the 86 existing residential properties and
commercial units developed by us along
with other real estate acquired through
land purchases, such as the property at
Hamworthy, Poole, generated £642,000
of rental income in the year.
Investment in and loans to joint ventures
have increased by 140% to £11.3 million
(2015: £4.7 million). During the year
the Group entered into a 50:50 joint
venture with a land owner of a site in
Garston, Hertfordshire, investing £2.7
million. On 30 June 2016, the Group also
entered into a 50:50 joint venture (Inland
(Stonegate) Limited) with a third party.
The joint venture exchanged contracts
to purchase a site of approximately
13 acres, which includes the former
headquarters of Tesco plc in Cheshunt,
Hertfordshire. The purchase of this site
was completed in August 2016. The
Group’s investment in and loans to this
joint venture were £1.0 million at the
balance sheet date. In addition to these
investments, the Group contributed
£2.6 million towards its share of the
additional investments in a joint venture
platform with CPC Group Limited and
£0.3 million in the joint venture with
Europa Capital.
As at 30 June 2016, the investment in
and loans to associate company Troy
Homes amounted to £1.0 million after
deducting the Group’s share of its losses.
The Group’s current commitment to
invest in the share capital of Troy Homes
is £1.25 million, of which £250,000 has
been called and paid up. In addition, at
the date of the signing of the financial
statements, the Group has committed
to provide loan notes of £3.0 million,
of which £0.9 million has been drawn
down. The loan notes attract a rate of
interest of 8% per annum. Amounts
owed by associates of £3.4 million is in
respect of two sites sold to Troy Homes
as disclosed in note 13 to the financial
statements.
Cash flow movements
70
60
50
40
30
20
10
0
21.4
5
1
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n
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42.9
(28.4)
32.9
(9.9)
(2.2)
(18.9)
(5.2)
(2.8)
(1.0)
(0.8)
(6.0)
(4.5)
(0.8)
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O
In support of the growth strategy we
have for the business, the Group has
continued to invest in both land and
work in progress, with inventories
increasing from £121.0 million to £146.8
million. This excludes any land or work
in progress within joint ventures.
The cash balances at the year-end
amounted to £16.7 million (2015: £21.4
million) and net borrowings (loans
and ZDP liability less cash) were
£54.6 million (2015: £34.9 million)
representing net gearing of 47.0% (2015:
39.2%) on net assets of £116.0 million
(2015: £89.0 million) or 29.5% on EPRA
net assets of £184.7 million. Net gearing
is defined as loans and accrued ZDP
liability less cash as a proportion of net
asset value or EPRA net asset value.
Since the year end, the Group has
secured a four-year revolving credit
facility with a fund for up to £25.0
million to acquire land without planning
permission, as well as a committed
facility of £27.0 million with Secure
Trust Bank, which has a five-year term.
This has been fully drawn down and will
result in an annual saving in funding
costs of approximately £1.0 million.
At 30 June 2016 other financial
liabilities of £22.4 million, includes
£15.0 million that relates to the
deferred consideration on Wilton Park,
Beaconsfield due in May 2017. This sum
is secured by way of a charge over part
of this site which was professionally
valued at £18.8 million. The remaining
balance of land creditors relates to
three further sites, all of which were
settled in full by the date these financial
statements were signed.
During the year, the Group raised a
further £1.3 million by issuing 1,028,400
Zero Dividend Preference Shares. The
total accrued liability as at 30 June 2016
amounted to £14.6 million. These shares
are governed by various covenants and
are due for repayment on 10 April 2019.
Nishith Malde
Finance Director
13 October 2016
39
25010 24 October 2016 10:23 AM Proof One
Inland Homes plc Annual Report and Accounts for the year ended 30 June 2016 www.inlandhomes.co.ukSTRATEGIC REPORT
25010 24 October 2016 10:23 AM Proof One
“
Chapel Riverside is strategically important
to Inland Homes as it is the first site
on which we are working with a local
authority as a development partner.”
Chapel Riverside, Southampton
25010 24 October 2016 10:23 AM Proof One
Risk Management
Risk management framework
The Executive Directors are heavily
involved in the day-to-day running of
the business. Risks are discussed on a
daily basis as part of decision making
on projects. This regular consideration
of risks allows management to respond
quickly to changes in circumstances.
The Executive Directors set criteria
in a range of areas for the Senior
Management to report back on:
legal, sales and marketing, planning,
environmental, construction and
financial. Senior Management carry out
their due diligence on these aspects for
each site. This frequently involves the
engagement of external consultants,
such as planning consultants, who
use their specialist knowledge and
outside perspective to challenge our
assumptions and ensure that we have
a full understanding of the site and
its market. From assessing all the
information in the reports from Senior
Management, Executive Directors can
determine the risks present for each
site, which informs their decision-
making.
While the Executive Directors have
some autonomy, full Board approval is
required for certain actions, such as the
acquisition of land over a set value. The
Non-Executive Directors challenge the
Executive Directors to ensure that the
level of risk being taken is appropriate.
The Audit Committee support the
Board in ensuring that the financial
performance of the Group is properly
reported and monitored. The Audit
Committee work closely with external
auditors to do this. The auditors produce
reports on the control environment and
financial statements, which are reviewed
by the Audit Committee.
Exit of the United Kingdom from the
European Union
On 23 June 2016, the United Kingdom had a referendum in
which the public voted to leave the European Union.
Potential impact
The housing market has emerged relatively unscathed after
the hysteria that was created prior to the referendum if the
UK decided to vote to leave the European Union. There is
still uncertainty within the UK economy and it is too early to
confirm the impact of the departure. However, the long term
underlying demand for new homes is very strong and the
government has stated that it will be supporting the housing
market with relevant initiatives.
42
25010 24 October 2016 10:23 AM Proof One
ANNUAL REPORT AND ACCOUNTS 2016 Risks
Risk and description
Potential impact
Strategy/mitigation
Land
The inability to source, acquire,
promote and dispose of land
The Group would not be able to generate
profit and cash flow for the longer term
May have a detrimental effect on the
financial position of the Group
The Group has an experienced management
team with a strong track record in the
industry which mitigates this risk
Planning
Increased complexity and delay in
the planning process
The adoption of the community
infrastructure levy by local
authorities
Market
A severe fall in the housing
market in the regions in which the
group chooses to operate
Personnel
Loss of/inability to source high
calibre, experienced staff
May impede sales and thus affect the rate
of growth of the business
May have a detrimental effect on the supply
and pricing of land being marketed by
landowners
The Group undertakes extensive pre-
acquisition due diligence on planning,
technical and environmental issues together
with acquiring housing sites identified in
councils’ Local Plans
Inability to realise maximum value in a
timely fashion
Adverse effect on land values
Adverse effect on the timing of sales
The Group ensures that its sites are in good
locations thus providing some protection
against any downturn in the market
The Group would have difficulty growing
the business in the highly competitive
markets in which it operates
The Group maintains good morale in the
workplace and sets remuneration packages
at attractive levels
Interest rates
Significant upward changes in
interest rates
May affect residential land prices as a result
of the demand or prices achieved for homes,
which may in turn result in impairment of
the Group’s inventories
The Group mitigates any adverse exposure
to interest rate changes by controlling its
gearing and, if necessary, by using hedging
instruments
Would lead to increased borrowing costs and
thus have a detrimental effect on profit
The Group offers a high level of sales
support to customers and this includes
assistance with obtaining mortgages at a
suitable interest rate
Environmental
Unexpected contamination being
found on a site
Unexpected liabilities in respect of
decontamination works or fines for
environmental pollution could affect the
financial outcome of a project and reputation
of the Group
The assessment of environmental risk is
an important element of the due diligence
undertaken when buying land. The Group
uses reputable environmental consultancy
firms to assist in this area
Regulation
Changes in legislation,
government regulations, planning
policies and guidelines
May have a detrimental effect on the
Group’s business
The Group keeps abreast of potential
changes in these areas and wherever
possible allows for these in appraising its
projects
May adversely impact margins on
housebuilding and working capital of the
Group
The Group tries to build strong relationships
with principal contractors and projects are
reviewed frequently in order to mitigate
these risks
May have an adverse effect on the Group’s
progress
The Group continues to seek finance from
alternative lending sources to improve its
liquidity
Construction
• Cost overruns
• Material shortages
• Delays
Finance
The availability of loan finance for
land acquisition
Read about our Strategy on
pages 26 and 27
25010 24 October 2016 10:23 AM Proof One
43
Inland Homes plc Annual Report and Accounts for the year ended 30 June 2016 www.inlandhomes.co.ukSTRATEGIC REPORT Sustainability
SUSTAINABILITY
AT THE HEART OF
EVERYTHING WE DO
At Inland, ensuring sustainable
operations and development is
of paramount importance. Our
caring attitude to our colleagues,
partners and the communities and
environments in which we work
means we strive to function in a
way that is best for everyone. Our
key values of integrity, openness
and trust dictate our interactions
with each of our major stakeholder
groups:
• communities
• homeowners
• developers
• colleagues
• local and national government
• the environment
The value we place on meeting the
needs of each of our stakeholder
groups intuitively informs all of
our policies. With sustainability at
the heart of everything we do, the
following six areas describe our
main focuses, and include many of
our achievements.
Community
Care for the community permeates all our activities, and our core focus of transforming potentially contaminated land into
desirable family homes and community spaces is always undertaken with the needs of future residents and neighbours firmly
in mind. When we acquire a site and are going through the planning process, we carry out public consultations. This allows us
to develop an understanding of what stakeholders in the community expect from the development prior to formal submission
of the planning application. These consultations with communities anticipate the wider needs of the homeowners, with green
spaces, care homes, shops and communal facilities included to make sure
our developments improve the neighbourhood. We put a significant amount of
effort into ensuring that a development looks attractive through hard and soft
landscaping of the site.
Inland as a company goes above and beyond to support local communities
in our developments and this attitude is reflected in our team. A team of
19 colleagues and family members participated in the 5k ‘Colour Obstacle
Rush’ race, raising more than £25,000 for three charities – ForCrohns, NeST
(Nephrotic Syndrome Trust) and Sightsavers. Inland also donated £3,000 to
the London Taxi Driver’s Fund for Underprivileged Children. This enabled the
charity to hold a “taxi safari”, which involved a convoy of over 100 London taxis
driving around 250 children through the safari at Wooburn Safari Park.
Inland staff presenting money
raised by undertaking ‘Colour
Obstacle Rush’
44
25010 24 October 2016 10:23 AM Proof One
ANNUAL REPORT AND ACCOUNTS 2016 level. There have been no significant Health and Safety
incidents during the year.
When we decided to begin self-delivering some of our projects,
we established policies and procedures that were compliant
with the Health and Safety regulations. These formed the basis
of a training programme across the site teams to ensure that
they were clear on the standards required to comply with the
regulations.
Last year the Construction (Design and Management)
Regulations 2015 were released, formalising the need
to consider, anticipate and respond to Health and Safety
issues from the earliest stage of planning a project. The
lead designer on a project takes on the responsibility of
ensuring that the design of the building complies with these
regulations. In every design meeting, the CDM regulations
are observed.
Supply Chain
With the move to self-delivery, there are now two different
facets to our supply chain - principal contractors who will
carry out all the construction work on a site and the wider
supply chain of sub-contractors that we use on the self-
delivery sites. We have developed good relationships with
our principal contractors through offering them steady,
consistent amounts of work. Some of these principal
contractors have won awards this year at the LABC and
NHBC awards, demonstrating the quality of work that they
deliver for us. For the self-delivery sites, we are focused on
developing relationships with the supply chain, in order to
generate a solid base of sub-contractors that we can use
going forward. We aim to use local labour wherever possible.
We carry out due diligence on our contractors to ensure
that they are able to carry out the work that we require
from them.
A challenge for our principal contractors is the lack of
labour within the industry. To counter this, we are using new
methods of construction that allow for offsite manufacture,
which will reduce the amount of labour required to
manufacture on site. One example is the use of lightweight
steel frame construction on some of our projects, which
allows us to build a house a lot quicker than with traditional
block work and means that we are not reliant on bricklayers.
Customers
Ensuring customers have a positive experience throughout
their interaction with us increases the likelihood of recurring
project partnerships with developers, and repeat custom
or recommendations from homeowners. Our strong
reputation for quality, reliability and delivery leads to many
opportunities, for example, land vendors trust Inland to
honour promises and offer sales opportunities, while council
and community groups seriously consider our bids knowing
we have the capability to transform difficult sites. Our
customer care system ensures that in the unlikely case that
a customer is dissatisfied, we are able to quickly deal with
the issue. Our process means that our contractors deal with
customer enquiries and complaints reasonably promptly. Our
Customer Care Manager monitors this communication to
ensure that our contractors are fulfilling their obligation to
fix any customer issues. In the event that our contractors fail
to deliver the appropriate response, we would deal with the
problem directly.
The relationship with homeowners also continues after the
sale of a house, with close monitoring and support provided,
and customer feedback used to improve future projects.
Customer feedback has been used to improve the design
of our homes, with the layout of certain rooms (for example
the bathroom) changing to better suit the needs of our
customers.
The principles of lifetime homes are incorporated into all
of our developments, which means that our homes are
designed to be easily adaptable for lifetime use at minimal
cost. If a resident has reduced mobility due to a disability or
old age, the home could be adapted for their needs without
major renovation work. A large range of features have to be
considered in the design, including the widths of corridors
and doors and the size of rooms. The downstairs bathroom
could be adapted to become a wet room if it were required
and the living room could easily have a lift to the master
bedroom added to it.
Health and Safety
We ensure that our projects carried out by principal
contractors and our own self-delivered projects adhere to the
required standards of Health and Safety. We do this through
having Health and Safety consultants visit our sites and our
contractors, who then report back to us on their findings. If
there are any issues in the standard of Health and Safety on
a site, a development director will intervene and ensure that
the working practices on the site are returned to a satisfactory
25010 24 October 2016 10:23 AM Proof One
45
Inland Homes plc Annual Report and Accounts for the year ended 30 June 2016 www.inlandhomes.co.ukSTRATEGIC REPORT Sustainability continued
Sustainable Homes
Planning the sustainability of
developments begins at the earliest
stages of a project, when potential sites
are assessed — for example, considering
what materials are present on the site and
if these could be reused in construction.
Throughout the planning of the
infrastructure, buildings, and construction
strategies, sustainability is a core focus,
and decisions are taken which make both
financial and ecological sense. On larger
projects we have the scope to undertake
ambitious sustainable projects, such as
installing energy centres, and all of our
projects use a range of environmentally
friendly materials and construction
methods.
As we are now self-delivering some of our
projects, we will have a greater control over
sustainability on those sites. At all of our
self-delivery sites, we avoid using mixed
use skips so that we can segregate waste.
This means that it is easier for the waste
to be recycled, reducing the amount that
goes to landfill. We are trying to reduce
our carbon dioxide emissions through a
number of initiatives, such as having eco-
friendly site accommodation and ensuring
that we are always using electricity from
the main grid supply, rather than using a
generator.
Our efforts to achieve sustainable builds
have been recognised in a number of
recent awards. We won ‘Regeneration
Project of the Year’ for Carter’s Quay at
the South Coast Property Awards 2016.
This award “recognises the innovative
use of brownfield sites as well as
strong architectural design and the
developer’s approach to environmental
issues”. The judges of the award take
into consideration how the particular
area has been revitalised for those who
live there. We were also shortlisted for
‘Regeneration Project of the Year’ for
Lily’s Walk High Wycombe, at the Thames
Valley Property Awards 2016 and ‘Best
low or zero carbon initiative’ at the
Housebuilder Awards 2016.
46
Our People
We pride ourselves on our open, supportive and caring culture. We develop and
encourage our colleagues by offering them responsibility, stimulating teamwork and
the opportunity to learn both from others in the Company and through qualifications
and courses. The warmth of atmosphere and pride individuals take in working for
Inland is what encourages people to stay with us and ensure that our team remains
strong into the future.
We are very passionate about bringing young people into the industry. It is vital that
we do this as there is a general shortage of labour across all roles within the property
industry and we need to ensure that there will be a new generation of workers. We offer
work experience for students, which has the potential to lead to a job offer. In some
construction contracts, we specify that our contractors must employ apprentices from
the local area.
it. Inland are financially supporting
me with this qualification and they are
happy to do so for any employee who
wants to study something related to
their job.
I am a very inquisitive person and
want to understand all the aspects of
the company, not just what I need to
know to do my job. I like to question
and challenge why things are done
as they are in the company. This kind
of attitude is actively encouraged at
Inland Homes. Any of the Executive
Directors are very happy to explain
anything I am keen to understand.
As a result, I am able to continually
increase my knowledge at work. The
more I know, the less other people
have to do. I think this approach is
a big part of why I have been able to
progress as I have done within the
company.
I strongly feel that Inland is a family.
Inland has been very supportive of me
throughout my career here.
Rob Williams
Commercial Accountant
I have been promoted multiple times
over my five year career with Inland.
I started as an Accounts Assistant,
which was a data entry role, and now
I work as a Commercial Accountant.
My career development has been
made possible by the training and
qualifications I have completed. I
am currently studying for the ACCA
qualification. As I have progressed in
the course, the level of responsibility
involved in my job and the complexity
of my work has increased alongside
25010 24 October 2016 10:23 AM Proof One
ANNUAL REPORT AND ACCOUNTS 2016 Sebastian Adams
Graduate Land Buyer
I studied Real Estate at university. In the
summer between the second and third
years of my degree, I completed a one
month internship at Inland Homes. During
this internship, I was given responsibility
and gained a good understanding of what
the business does. This experience made
me confident that a job at Inland Homes
would fit in with my career ambitions.
As a result of the internship, I was offered
a graduate role. My day to day work
as a Land Buyer involves visiting and
assessing the suitability of sites. I am
getting exposure to all elements of the
business, such as planning, design and
the development process, so that I can
understand how my role fits into the wider
picture.
Inland took time to understand my needs
and aims for my development and used
this to shape the graduate role to suit me.
I want to become a qualified Chartered
Surveyor with the RICS (Royal Institution
of Chartered Surveyors) and Inland
were happy to facilitate that. In addition,
they have set up numerous days for me
to speak to lawyers about issues and
constraints involved with buying land. The
training I have received has been brilliant.
I see great potential for progressing my
career with Inland.
Awards
2015
Won:
Thames Valley Propery
Awards
— Housebuilder of the Year
Commended:
Evening Standard
— Homes & Property
– Best Regeneration
– Drayton Garden Village
Sunday Times
— Development of the
Year – Carter’s Quay
Shortlisted:
WhatHouse?
— Best Brownfield, Best
House, Best Apartment,
Best Mixed Use, Best
Medium Housebuilder
2016
Won:
South Coast Property Awards
2016
— Housebuilder of the Year
— Best Regeneration Project
Shortlisted:
Housebuilder Awards 2016
— Best low or zero carbon
initiative
South Coast Property
Awards 2016
— Development of the Year
Thames Valley
Property Awards
— Housebuilder of the Year
— Development of the Year
— Regeneration Project of
the Year
25010 24 October 2016 10:23 AM Proof One
47
Inland Homes plc Annual Report and Accounts for the year ended 30 June 2016 www.inlandhomes.co.ukSTRATEGIC REPORT St Johns, Chelmsford
25010 24 October 2016 10:23 AM Proof One
GOVERNANCE
Board of Directors
Senior Management
Our Governance
Directors’ Remuneration Report
Directors’ Report
50
52
54
56
60
25010 24 October 2016 10:23 AM Proof One
Board of Directors
Board Composition
The Group is managed through its Board
of Directors. The Board comprises the
Non-Executive Chairman, one other
Non-Executive Director, the Chief
Executive, Group Finance Director and
the Land Director. The Board’s main
roles are to approve and review the
Group’s strategic objectives and to
ensure that the necessary financial and
other resources are made available to
enable it to meet these objectives.
Specific responsibilities reserved to the
Board include: setting Group strategy;
reviewing operational and financial
performance; approving certain land
acquisitions; approving appointments
to the Board; and approving policies
relating to Directors’ remuneration.
In addition, the Board reviews the risk
profile of the Group and ensures that an
adequate system of internal control is in
place.
The roles of the Chairman and the Chief
Executive are separate. The Chairman
meets the Chief Executive and the other
Non-Executive Director separately as
and when required to discuss matters of
the Board.
One-third of the Directors retire annually
by rotation in accordance with the
Company’s Articles of Association and
this enables the shareholders to decide
on the election of their Company’s
Board.
A
R
Terry Roydon Non-executive Chairman
Stephen Wicks Chief Executive
Appointment to the Board
March 2007
Appointment to the Board
June 2005
Skills he brings to the Board
He has worked in the construction and
housebuilding sector all of his working
life and has extensive experience in the
acquisition of large-scale development
opportunities
Previous experience
• Founding shareholder and Chief
Executive of Country & Metropolitan
plc, which floated on the main market
of the London Stock Exchange
in December 1999 with a market
capitalisation of £6.9m
• He directed the growth of Country &
Metropolitan plc until its disposal in
April 2005 to Gladedale Holdings plc
for approximately £72m
External appointments
Member of the board of AIM quoted
Energiser Investments plc
Skills he brings to the Board
He has extensive managerial, practical
and political experience of the property
sector obtained over a 40 year career
Previous experience
• Chief Executive of Prowting plc, a
UK housebuilder he led to flotation
in 1988 and which was purchased by
Westbury plc for £140m in June 2002
• Non-executive Director of LSE quoted
Country & Metropolitan plc
• Non-executive Director of Gladedale
Holdings plc
• President of the Home Builders
Federation
• Holds a BSc in Estate Management
and an MBA
External appointments
• Consultant and member of the Board
of Dom Development S.A., a major
quoted Polish residential developer
• Non-executive Director of AIM quoted
Kimberly Resources NV
• Non-executive Director of Larkfleet
Holdings Limited
• President of the European Union of
Housebuilders and Developers
Committee membership
Audit Committee member
Remuneration Committee member
A
R
50
25010 24 October 2016 10:23 AM Proof One
2016ANNUAL REPORT AND ACCOUNTS A
R
Nishith Malde Group Finance Director
Paul Brett Land Director
Simon Bennett Non-executive Director
Appointment to the Board
June 2005
Appointment to the Board
October 2011
Appointment to the Board
March 2007
Skills he brings to the Board
He has over 25 years’ experience in the
property sector with wide professional
knowledge and understanding of both
listed and unlisted companies
Previous experience
• After graduating from the London
School of Economics, qualified as a
Chartered Accountant with KPMG
in 1985 where he advised owner-
managed businesses
• Finance Director and Company
Secretary of Country & Metropolitan
plc where he was actively involved in
the preparation for the flotation of
the company in December 1999 and
its further development until it was
acquired by Gladedale Holdings plc in
April 2005
External appointments
• Member of the board of AIM quoted
Energiser Investments plc
Skills he brings to the Board
He has worked in the land and planning
sector all of his working life and has
considerable knowledge of local
and national planning policies. He is
particularly skilled in the delivery of
complex land acquisitions
Previous experience
• Land Director of the Southern Region
of Country & Metropolitan plc for ten
years during which time it floated onto
the main market of the London Stock
Exchange
Skills he brings to the Board
He has over 30 years of investment
banking experience and of providing
corporate finance and broking advice to
growing companies
Previous experience
• Qualified as a Chartered Accountant
in 1981
• Head of Corporate Finance and Head
of the Mid and Small Caps team at
Credit Lyonnais Securities
• Head of Corporate Broking at Fairfax
IS plc
• Contributed to the growth of the
• Head of Corporate Broking at Sanlam
Southern Region and its land bank,
until its disposal to Gladedale
Holdings plc in April 2005
Securities
External appointments
• He established Incremental Capital
LLP in 2004 to provide corporate
finance advice to mid and small cap
companies
• Chairman of the Grown Up Chocolate
Company
• Partner at Glenmill Partners
25010 24 October 2016 10:23 AM Proof One
51
Inland Homes plc Annual Report and Accounts for the year ended 30 June 2016 www.inlandhomes.co.ukGOVERNANCE Senior Management
Time with Group
6 months
Skills he brings to the Group
He has worked in the housebuilding
sector for over 30 years and has a track
record of successfully delivering all types
of housing schemes
Previous experience
• 13 years with McLean Homes/George
Wimpey
• Production Director George Wimpey
• 9 years as Willmott Dixon Director of
Operations
• Experience in main contracting and
private developments
Time with Group
6 years
Skills he brings to the Group
He has over 25 years’ experience
of master planning and public
consultations for residential,
commercial, retail and industrial
projects
Previous experience
• BArch graduate from the University
of Bath
• Member of RIBA
• Design and Technical Director at St
James Homes (part of Berkeley Group
Holdings plc)
• Design and Planning Director at
Fairview New Homes
• Land, Design & Planning Director at
Howarth Homes plc
Time with Group
5 years
Skills she brings to the Group
She brings a wealth of experience having
worked in the housebuilding industry
most of her working life with well-
rounded expertise in all aspects of her
discipline
Previous experience
• Worked with board of Country &
Metropolitan plc through to the
acquisition by Gladedale as Sales &
Marketing Director
• Regional Sales & Marketing Director
at Gladedale plc
• Head of Sales & Marketing at
Prowting Homes Central
Time with Group
6 months
Skills he brings to the Group
He has worked in the Construction and
Housebuilding sector for over 30 years
and has extensive knowledge of all
commercial and contractual controls
Previous experience
• Qualified as a Chartered Surveyor in
1988
• Director of Surveying at Balfour
Beatty
• Commercial Manager at Willmott
Dixon, Galliford Try and Bouygues
25010 24 October 2016 10:23 AM Proof One
Gary Skinner Managing Director,
Inland Limited
Mark Gilpin Planning Director
Vicki Noon Sales & Marketing Director
David Parsons Commercial Director
52
2016ANNUAL REPORT AND ACCOUNTS Melanie Hyland Financial Operations Director
Time with Group
7 years
Skills she brings to the Group
She has worked in the housebuilding
sector for over 13 years and has
extensive knowledge of statutory
reporting, forecasting and securing
funding
Previous experience
• Qualified as a Chartered Certified
Accountant in 2007
• Joined the Group as Financial
Controller
• Divisional Finance Manager at Barratt
Developments plc
• Financial Accountant and Senior
Management Accountant at St James
Urban Living (part of Berkeley Group
Holdings plc)
Time with Group
9 years
Skills he brings to the Group
Pedro has a wide-ranging knowledge
of the construction, health & safety,
technical, land and planning aspects of
the business
Previous experience
• Land Management graduate from the
University of Reading
Pedro Longras Development Director
Des Wicks Senior Land Manager
Previous experience
• Joined the Group as a Trainee Land
Buyer
Time with Group
9 years
Skills he brings to the Group
He has worked at Inland Homes since
leaving full-time education and has
developed an expertise in identifying and
acquiring brownfield sites, negotiating
on both purchases and disposals of land.
Specialises in complex land assemblies
using considerable negotiation skills in
order to obtain valuable and attractive
terms
25010 24 October 2016 10:23 AM Proof One
53
Inland Homes plc Annual Report and Accounts for the year ended 30 June 2016 www.inlandhomes.co.ukGOVERNANCE Our Governance
Chairman
Key Responsibilities
• Running the Board effectively
• Presides over Board meetings in a manner that encourages openness and participation
• Guides and directs the corporate governance process
• Serves as the Board’s principal point of contact with the CEO
• Works with the Chairperson of the various committees to align their objectives
Board
Key Responsibilities
• Setting the overall Group strategy
• Dealing with all significant operational matters
• Regularly monitors the Group’s risks
• Ensures that there is an adequate system of internal controls in place
• Makes certain that the management information systems are in place to allow the Board to make timely and informed decisions
• Monitors the Group’s Health & Safety procedures
• Works with the Chairperson of the various committees to align their objectives
Chief Executive Officer
Key Responsibilities
Group Finance Director
Key Responsibilities
• Implementing the short and longer term strategy of the
Group and other key issues determined by the Board
• Plays a key role in developing, monitoring and evaluating
overall corporate strategy
• Presiding over the day to day management of the Group’s
• Works closely with the CEO and has overall responsibility
activities
for all financial related activities of the Group
• Making all key decisions regarding the Group’s activities
• Is accountable for the financial and administrative
• Delivering shareholder value
• Managing the financial implications and risks associated
with any major decisions
• Is accountable for risk management operations for the
Group
• In conjunction with the Group Finance Director is
responsible for communication with the Group’s
stakeholders
operations of the Group with particular emphasis on
profitability, working capital management and enhancing
shareholder value
• Provides key financial insight to allow the Board to make
better decisions
• Communicates the financial implications of business
decisions to the CEO
• To establish an internal control system required to
effectively manage the business and control risk
• In conjunction with the CEO is responsible for
communication with the Group’s stakeholders
Audit Committee
Key Responsibilities
Remuneration Committee
Key Responsibilities
• Monitors the effectiveness and integrity of the Group’s
• Establishing and updating the remuneration policy for each
financial reporting systems
of the Executive Directors
• Reviews the financial statements provided to shareholders
• Plays a key role in planning and working with the Group’s
auditors to ensure that they provide a cost effective service
which is objective and independent
• Meets separately with the auditors four times a year
• Considering, discussing and approving the annual bonuses
for the Executive Directors and agreeing any awards to be
made under the 2013 LTIP, approved by shareholders in
December, 2013
• Further details of the remuneration policy and package
for each of the Executive Directors are set out in the 2016
Directors’ Remuneration Report on pages 56 to 59
54
25010 24 October 2016 10:23 AM Proof One
2016ANNUAL REPORT AND ACCOUNTS Internal controls
The Board is responsible for maintaining
a sound system of internal control to
safeguard shareholders’ investment and
the Group’s assets and for reviewing its
effectiveness. Such a system is designed
to manage, but not eliminate, the risk
of failure to achieve business objectives.
There are inherent limitations in any
control system and accordingly even the
most effective system can provide only
reasonable, not absolute, assurance
against material misstatement or loss.
The Board reviews the effectiveness of
the Group’s system of internal control
on an ongoing basis. Annual budgets
are prepared and detailed management
reports are presented to the Board and
used to monitor financial performance
and compliance with the Group’s policies
and procedures. All controls are covered
including financial and operational
controls to manage risk. The Board
meetings are also used to consider the
Group’s major risks.
Relations with shareholders
The Company has institutional
shareholders and is, where practicable,
willing to enter into a dialogue with
them. The Chief Executive and Group
Finance Director meet with institutional
investors within the confines of relevant
legislation and guidance.
The Board invites communication from
its private investors and encourages
participation by them at the AGM. All
Board members are present at the AGM
and are available to answer questions
from shareholders.
Internal audit
The Board reviews from time to time
the need for an internal audit function
and remains of the opinion that the
systems of internal financial control
are appropriate to the Group’s present
activities and that such a function is
unnecessary.
Remuneration Committee
The Remuneration Committee comprises
Simon Bennett (Chairman) and Terry
Roydon. The principal functions of
the committee are to determine the
Group’s policy on the remuneration of
Executive Directors and to determine
the remuneration package of each
Executive Director. The committee
also determines long term incentive
plans and the allocation of share
options to the Executive Directors and
other employees. The Remuneration
Committee meetings are also attended
by invitation by the Chief Executive and
the Group Finance Director. During
the year the committee met four times
to review the Executive Directors’
remuneration package.
The Directors comply with Rule 21 of the
AIM Rules relating to Directors’ dealings
and take all reasonable steps to ensure
compliance by the Company’s applicable
employees. The Company has adopted
and operates a share dealing code for
Directors and employees in accordance
with the AIM Rules.
Employee involvement
The Group places considerable value
on the involvement of its employees
and keeps them informed of all relevant
matters on a regular basis. The Group
is an equal opportunities employer and
all applications for employment are
considered fully on the basis of suitability
for the job.
Corporate governance
Whilst the Company does not comply with
the 2014 Corporate Governance Code for
periods beginning after 1 October 2014,
the Directors recognise the importance
of sound corporate governance and have
reported on our Corporate Governance
arrangements by drawing upon best
practice available, including those
aspects of the UK Corporate Governance
Code 2012 we consider to be relevant to
the Company and best practice.
Audit Committee
The Audit Committee comprises Terry
Roydon (Chairman) and Simon Bennett.
The Audit Committee meets at least
four times a year and is responsible for
ensuring that the financial performance
of the Group is properly reported and
monitored and for meeting the auditor
and reviewing their reports in relation
to the financial statements and internal
control systems. The Group’s auditor
provides some non-audit services, but
these are not considered to threaten
their independence. The committee
reviews the level of non-audit fees on
an annual basis. The Audit Committee
meetings are also attended by invitation
by representatives of the Group’s auditor,
the Group Finance Director and the
Chief Executive.
Since 30 June 2015 the Audit Committee
has met four times to consider the
planning of the statutory audit and to
review the Group’s draft half and full year
results prior to Board approval and to
consider the external auditor’s detailed
reports thereon.
25010 24 October 2016 10:23 AM Proof One
55
Inland Homes plc Annual Report and Accounts for the year ended 30 June 2016 www.inlandhomes.co.ukGOVERNANCE Directors’ Remuneration Report (unaudited)
• 50% of salary for “on target”
performance; and
• a further 50% of salary for “out-
performance”.
For example, for achieving 90% of on
target performance there will be a
discretionary bonus of up to 25% of
salary (and pro-rata between 90% and
100% of on target performance) and
there will be no bonus for less than 90%
of on target performance.
The target is measured by reference
to two equally weighted performance
measures, namely:
i. profit before taxation as compared
with brokers’ market forecasts
following the announcement of the
preliminary results of the previous
accounting period; and
ii. net debt levels.
Once the quantum of the Executive
Directors’ bonuses has been calculated,
these will be settled as to 50% in cash
and as to 50% by the issue of ordinary
shares of the Company. The issue of
any ordinary shares awarded under the
Deferred Bonus Plan will be deferred
for three years and will be subject to
forfeiture in the event that an Executive
leaves the Company as a “bad leaver”,
but would not be subject to further
performance conditions.
Long Term Incentive Plans
The Company operates both an
unapproved share option scheme, which
is open to all employees of Inland Homes
and the recently introduced 2013 LTIP for
the Executive Directors.
Awards under the unapproved share
option scheme are made on a periodic
basis to the Company’s Executive
Directors and employees. The share
options in this scheme vest three years
after the date of grant and have an
exercise period of seven years. The
schemes are equity-settled.
There is no requirement for
companies quoted on AIM to produce
a formal Remuneration Report. As a
consequence, this Remuneration Report
is produced for information purposes
in order to give shareholders and other
users of the financial statements greater
transparency about the way in which
the Directors of Inland Homes are
remunerated.
This report sets out the remuneration
paid to the Directors for the year
ended 30 June 2016 and sets out the
remuneration policy for the forthcoming
financial year and beyond.
Composition and role of the
Remuneration Committee
The Board have established a
Remuneration Committee which
currently consists of Simon Bennett,
independent Non-Executive Director,
who is Chairman of the committee
and Terry Roydon, the Company’s
Non-Executive Chairman. The role of
the Remuneration Committee is to
determine the specific remuneration
package for each of the Executive
Directors and no Director is involved
in any decisions that will affect his
own remuneration. The Remuneration
Committee has access to information
provided by the three Executive Directors
of Inland Homes, namely Stephen Wicks,
Chief Executive, Nishith Malde, Finance
Director and Paul Brett, Land Director
and independent advice from external
consultants, where it considers this to be
appropriate.
The Remuneration Committee meets
formally three times a year and on such
other occasions as may be required.
Policy for Executive Directors’
remuneration
The policy for Executive Directors’
remuneration is designed to attract,
motivate and retain high calibre
individuals with a competitive
remuneration package. The
remuneration policy takes into account
the overall performance of the Company
and the individual Executive Directors
and the prevailing pay structures in
the markets in which Inland Homes
operates.
The Executive Directors’ remuneration is
designed to provide a balance between
fixed and variable rewards, although it
is recognised that it is common industry
practice for total remuneration to
be significantly influenced by annual
bonuses and long term incentive plans.
Consequently, remuneration packages
for individual Executive Directors
comprise a basic salary, deferred
bonus plan, a long term incentive plan
and benefits in kind. In agreeing the
basic salary and annual bonuses, in
addition to the factors outlined above,
the Remuneration Committee takes into
account the aggregate remuneration to
be received by the individual Executive.
In 2013, in line with best corporate
governance and market practice, the
Remuneration Committee introduced
a new deferred bonus plan and a long
term incentive plan for the Company’s
Executive Directors, which have been
designed to incentivise the Executive
Directors to grow the business and
maximise returns to shareholders. The
latter is known as The Inland Homes plc
2013 Growth Plan (“2013 LTIP”), which
will operate for a period of six years and
which was approved by shareholders in
general meeting in December 2013. The
key elements of the scheme are set out
below.
Basic salary
The basic salaries of the Executive
Directors are reviewed on an annual
basis. The Remuneration Committee
seeks to establish a basic salary for
each position commensurate with
the individual’s responsibilities and
performance, taking into account
comparable salaries for similar
companies of a similar size in the
same market.
Deferred Bonus Plan
The Deferred Bonus Plan came
into effect on 1 July 2013. Executive
Directors can earn up to 100% of basic
annual salary as an annual bonus. The
plan provides for 50% of an Executive
Director’s bonus to be mandatorily
deferred into ordinary shares in the
Company. Under these arrangements,
bonuses would be based on a percentage
of the individual Executive Director’s
base salary as follows:
56
25010 24 October 2016 10:23 AM Proof One
2016ANNUAL REPORT AND ACCOUNTS The following is a summary of the
principal features and terms of the 2013
LTIP:
1. Creation of Growth Shares
The plan operates by reference to rights
attached to a special class of share in a
newly established intermediate holding
company (Inland Homes 2013 Limited)
between the Company and the Group’s
trading subsidiaries. The special class
of shares are called “Growth Shares”.
The Growth Shares are qualifying
shares for the purposes of the Employee
Shareholder Status scheme, a recently
introduced proposal by the Government,
the aim of which is to provide tax benefits
to employees and Directors who achieve
growth for their employing companies.
The awards in relation to the Growth
Shares will be subject to performance
targets (“Performance Targets”) and
when such Performance Targets are
achieved, a relevant proportion of the
Growth Shares will be awarded.
2. Vesting and Exchange of Growth
Shares
Subject to the Performance Targets
being met, the awards in relation to the
Growth Shares will vest in accordance
with the Articles of Association of Inland
Homes 2013 Limited if and when each
Performance Target is met. After vesting,
the Growth Shares may be realised by
being exchanged for a fixed number of
the Company’s ordinary shares.
The Growth Shares will not carry any
entitlement to dividends, capital or
voting unless and until they vest and are
exchanged for shares in the Company.
3. Performance Targets
Vesting will only occur if specific
Performance Targets (which are linked to
the share price of Inland Homes plc over
six consecutive performance periods) are
met or exceeded for 15 working days in
the relevant performance period. Each
annual performance period ends 20
working days after the announcement of
preliminary results for each year, usually
therefore in October of each year.
The target share prices for the 2013
LTIP are based on compounded growth
being achieved and accordingly, if the
Performance Target is missed in one
period, the participants’ awards can
still vest if the required compound
percentage of growth is achieved in
subsequent periods. For instance, if in
the first period the Performance Target
for that period is not met, then the
related number of Growth Shares which
could have vested may still vest in the
following period or periods, provided
that the Performance Target for those
periods is achieved, as the target gets
increasingly more stretching.
The first Performance Target has been
set at a price of 60.5 pence per ordinary
share (the “First Target Performance
Price”), which has been set at a 30%
premium to the share price of 46.5 pence
per ordinary share (the “Initial Base
Price”), being the mid price at the close
of business on 20 December 2013, the
date 2013 LTIP was adopted.
The table below shows the accounting periods and the total number of ordinary shares in the Company that would be issuable on
exchange for vested Growth Shares assuming the Performance Target for each year of the respective years is achieved:
Start date of accounting period
1 July 2013
1 July 2014
1 July 2015
1 July 2016
1 July 2017
1 July 2018
Performance target (Inland
Homes plc share price)
30% above Initial Base Price
15% compounded
10% compounded
10% compounded
10% compounded
10% compounded
Total number of
Inland Homes plc
shares
2,000,000
2,000,000
2,000,000
2,000,000
2,000,000
1,350,504
11,350,504
25010 24 October 2016 10:23 AM Proof One
57
Inland Homes plc Annual Report and Accounts for the year ended 30 June 2016 www.inlandhomes.co.ukGOVERNANCE Directors’ Remuneration Report continued
4. Dilution
The total number of shares in the
Company which may become issuable on
the exchange of Growth Shares (assuming
vesting in full) is 11,350,504, equivalent to
5.6% of the current issued share capital of
the Company. In order for the maximum of
11,350,504 ordinary shares in the Company
to become issuable under the 2013 LTIP,
the price for each Inland Homes ordinary
share, in the absence of a takeover, will
have had to have more than doubled
before the end of the final performance
period (being 20 working days after the
announcement of the preliminary results
for the year ending 30 June 2019), when
compared with the Initial Base Price
of 46.5 pence per ordinary share. This
increase is approximately equivalent to a
14% annual compound rise in the ordinary
share price.
5. Change of Control
The 2013 LTIP will allow realisation from
three years after the award, provided
the Performance Targets have been
met. As is customary, the 2013 LTIP
does provide for early vesting of Growth
Shares in the event of a takeover of
Inland Homes before the expiry of the
plan, such that all the Growth Shares
will vest, provided that the offer price is
greater than the share price required to
achieve the Performance Target for the
relevant performance period in which the
takeover occurs.
6. Participants
The Executive Directors who will
participate in the 2013 LTIP and
their allocations of Growth Shares,
is as follows: Stephen Wicks 47%,
Nishith Malde 38% and Paul Brett
15%. In addition, any awards to the
Executive Directors under the 2013
LTIP are subject to good and bad leaver
provisions.
Other benefits
Depending on the exact terms of each
individual Executive Director’s service
contract with the Company, they are
entitled to a range of benefits including
either a car allowance or a fully
expensed company car, contributions to
pension schemes, private fuel, private
health care insurance, permanent
health insurance and death in service
insurance.
Service contracts and notice
periods
Each of the Executive Directors are
employed on rolling contracts subject
to one year’s notice from either Inland
Homes or the Executive Director in
relation to Stephen Wicks and Nishith
Malde, and three months’ notice in
relation to Paul Brett, and contain
confidentiality provisions and restrictive
covenants for the Company’s protection.
The Executive Directors’ service
contracts do not provide specifically for
any termination payments, although
the Company might make payments in
lieu of notice. For this purpose, such
payments would consist of basic salary
and other benefits for the relevant period
and depending on the circumstances,
any awards due under the 2013 LTIP.
Non-executive Directors
Inland Homes has two independent
Non-executive Directors, namely Terry
Roydon, the Chairman and Head of the
Audit Committee and Simon Bennett,
Head of the Remuneration Committee.
Both Non-executive Directors have
letters of appointment, initially for a
three year period and thereafter on
six months’ notice from either Inland
Homes or the individual and contain
confidentiality provisions for the
Company’s benefit.
The Non-executive Directors’ letters of
appointment do not provide specifically
for any termination payments, although
the Company might make payments in
lieu of notice.
Non-executive fees are determined
by the Executive Directors, having
regard to the requirement to attract
high calibre individuals with the right
experience, the time requirements and
the responsibilities incumbent on an
individual acting as a Non-executive
Director for a company, such as Inland
Homes, listed on AIM. The Non-executive
Directors are not eligible for annual
discretionary bonuses and do not
participate in the Company’s long term
incentive plans.
The current service contracts of the
Executive Directors, the letters of
appointment of the Non-executive
Directors and the Rules of the 2013
LTIP are available for inspection
at the Company’s registered office
during normal office hours and at the
Company’s Annual General Meeting
(“AGM”) until the conclusion of the AGM.
Directors’ emoluments for the
year ended 30 June 2016
A review of the financial results for the
year ended 30 June 2016, as more fully
set out in the Chairman’s Statement, the
Chief Executive’s Review and the Finance
Director’s Review, demonstrates that
Inland Homes has had another good
year with turnover for the year at £101.9
million (2015: £114.2 million) and profit
before tax at £32.9 million (2015: £34.0
million), including a revaluation surplus
on the Group’s investment properties of
£18.0 million (2015: £14.5 million). This
contributed to a 30% increase in net asset
value to £116.0 million (2015: £88.8 million)
and an EPRA net asset value for the Group
at 30 June 2016 of 91.54p per ordinary
share (31 December 2015: 84.38p).
In light of the results recorded by the
Group, the following bonuses have been
awarded by the Remuneration Committee
to the Executive Directors, as follows:
Stephen Wicks
Nishith Malde
Paul Brett
£234,000
£234,000
£153,000
In accordance with the rules of the
Deferred Bonus Plan, further details of
which are set out above, these bonuses
will be settled as to 50% in cash and as to
50% in ordinary shares of the Company.
The ordinary shares awarded in respect
of these bonuses will be deferred
for three years and will be subject to
forfeiture in the event that an Executive
Director leaves the Company as a “bad
leaver”, but are not subject to any further
performance conditions. The award of
ordinary shares of the Company will be
granted on terms that, when they vest, the
number of ordinary shares subject to the
award shall be increased by deeming the
net dividends paid on the ordinary shares
from the date of the award until the date
of vesting to have been cumulatively
reinvested in additional ordinary
shares. As per the requirements of the
Companies Act 2006, the ordinary shares
are not shown in the below Directors’
Remuneration table until they vest.
58
25010 24 October 2016 10:23 AM Proof One
2016ANNUAL REPORT AND ACCOUNTS Directors’ remuneration table (audited)
The remuneration of each of the Directors during the year ended 30 June 2016 is set out in detail below:
Executive Directors
S D Wicks*
N Malde*
P Brett
Non-executive Directors
T Roydon
S Bennett
Salary/
fees
£000
348
348
197
55
45
2016
Bonus
£000
Benefits
£000
Pension
£000
Total
remuneration
£000
Social
security
costs
£000
Total
remuneration
& social
security
£000
117
117
77
—
—
29
25
12
—
—
—
—
20
—
—
494
490
306
55
45
66
66
38
—
—
560
556
344
55
45
2015
Total
£000
560
556
342
50
40
* S Wicks and N Malde have taken their pension entitlement as part of their salaries. No share options were exercised during the year and no LTIPs vested.
Directors’ interests in shares and the unapproved share option scheme and the 2013 LTIP
(audited)
Directors’ interests in the Company’s ordinary shares are disclosed in the Directors’ Report. The share options held by the
Directors in the unapproved share option scheme are set out below:
Options exercisable 28 March 2010 to 27 March 2017 at 50.0p
Options exercisable 17 December 2012 to 16 December 2019 at 16.5p
Options exercisable 22 November 2013 to 21 November 2020 at 18.25p
Total options outstanding at 30 June 2015
Exercised during the year
Total options outstanding at 30 June 2016
Nishith
Stephen
Malde
Wicks
—
—
—
—
1,500,000
—
1,500,000
—
—
—
— 1,500,000
Paul
Brett
700,000
400,000
—
1,100,000
—
1,100,000
2013 LTIP
The initial price for determination of awards under the 2013 LTIP was 46.5 pence per ordinary share. The Inland Homes share
price has in general terms performed well over the last two years, having increased by 24% over this period. The Company’s
share price has been above 76.5 pence per share for more than 15 working days since 26 November 2015, the start of the
performance period for the 2016 LTIP awards. As a result, performance targets relating to a further 2,000,000 shares have now
been met and will vest in October 2017. In aggregate therefore, the conditions for the issue of 6,000,000 of the 11,350,504 new
ordinary shares that can be issued in exchange for vested Growth Shares have been met in accordance with the rules of the
2013 LTIP.
Stephen Wicks
Nishith Malde
Paul Brett
Ordinary
shares of
10p each
2,820,000
2,280,000
900,000
The next performance target under the 2013 LTIP, to earn the equivalent of a further 2,000,000 ordinary shares, will be achieved
once the Inland Homes share price has reached 84.1 pence per ordinary share for the qualifying period and the target after that,
also to earn the equivalent of a further 2,000,000 ordinary shares will be achieved once the Inland Homes share price has reached
92.5 pence per ordinary share for the qualifying period.
25010 24 October 2016 10:23 AM Proof One
59
Inland Homes plc Annual Report and Accounts for the year ended 30 June 2016 www.inlandhomes.co.ukGOVERNANCE Directors’ Report
The Directors present their report and
the financial statements of the Group
and the Company for the year ended
30 June 2016.
Results and dividends
The trading results for the year are set
out in the Group Income Statement
on page 65 and the Group’s financial
position at the end of the year is set
out in the Group Statement of Financial
Position on page 66. Further details of
the performance during the financial
year and expected future developments
are contained in the Chairman’s
Statement, Chief Executive’s Review and
the Finance Director’s Review which
form part of the Strategic Report.
The Directors have proposed a final
dividend of 0.9p per share (2015: 0.7p)
payable on 27 January 2017, subject to
Shareholders’ approval, to Shareholders
at the close of business
on 30 December 2016.
Business review
A review of the development and
performance of the business during the
year and the future outlook of the Group
is set out in the Chairman’s Statement
on page 06 and the Chief Executive’s
Review on page 32. The Group’s key
performance indicators are monitored
closely by the Board and the details of
performance against these are on
page 28.
Financial risk management
objectives and policies
All potential areas of financial risk are
regularly monitored and reviewed by
the Directors and management. Any
preventative or corrective measures
are taken as necessary.
The Group uses various financial
instruments. These include loans, cash
and trade receivables that arise directly
from its operations. The main purpose
of these financial instruments is to raise
finance for the Group’s operations.
The existence of these financial
instruments exposes the Group to a
number of financial risks, which are
described in more detail in note 26 to
the Group financial statements.
Capital risk management
The Group’s objectives when managing
capital are to safeguard the Group’s
ability to continue as a going concern in
order to provide returns for shareholders
and benefits for other stakeholders and
to maintain an optimal capital structure
to reduce the cost of capital.
In order to maintain or adjust the
capital structure, the Group may
adjust the amount of dividends paid
to shareholders, return capital to
shareholders, issue new shares or sell
assets to reduce debt.
Consistent with others in the industry,
the Group monitors capital in relation to
overall financing. Further information
can be found in note 25 to the Group
financial statements.
Directors and their interests
Each of the Directors listed on pages
50 and 51 held office as at 30 June 2016.
The Directors of the Company and their
respective beneficial interests in the
shares of the Company as at 30 June
2016 were as follows:
As at 30 June 2016
As at 30 June 2015
S D Wicks
N Malde
P Brett
T Roydon
S Bennett
Number of
ordinary
shares
13,737,332
11,270,029
3,504,214
325,000
110,000
Number of
Growth
Shares
470
380
150
—
—
Number of
share
options
1,500,000
1,100,000
—
—
Number of
ordinary
shares
— 16,237,332
11,270,029
3,504,214
325,000
110,000
Number of
Growth
Shares
470
380
150
—
—
Number of
share
options
—
1,500,000
1,100,000
—
—
T Roydon and S Bennett are retiring by rotation in accordance with the Company’s Articles of Association and have offered
themselves for re-election.
Further information on the 2013 LTIP can be found in the Directors’ Remuneration Report on page 56.
Qualifying third party indemnity provision
During the financial year, a qualifying third party indemnity provision for the benefit of all the Directors was in force.
Substantial shareholding
As at 13 October 2016, the Company was aware of the following holdings, in addition to those of the Directors discussed above,
of 3% or more of the nominal value of the Company’s shares:
Name
M H Dixon
Henderson Global Investors
Downing LLP
60
Shareholding
20,000,000
10,403,000
6,099,432
%
9.86
5.13
3.02
25010 24 October 2016 10:23 AM Proof One
2016ANNUAL REPORT AND ACCOUNTS Directors’ responsibility also extends
to the ongoing integrity of the financial
statements contained therein.
Post balance sheet events
On 23 September 2016 Inland ZDP plc,
a wholly owned subsidiary of the Group,
issued 1,131,000 new zero dividend
preference shares of 10 pence each at
a price of 139 pence each. They were
admitted to trading on the London
Stock Exchange plc’s main market on
28 September 2016. Net proceeds of this
issue were approximately £1.52m.
On 24 August 2016 the Group entered
into a new five-year, £27 million facility
with Secure Trust Bank plc secured on
some of the Group’s properties. This
repaid a loan of £18.9m from another
UK bank.
On 23 August 2016 the Group entered
into a new five-year, revolving credit
facility of up to £25 million with a fund
to be secured on sites without planning
permission. Part of this facility has been
used to repay individual loans previously
provided by this fund.
Annual General Meeting
The Notice covering the AGM together
with the proposed resolutions
is contained in the document
accompanying this report. The AGM will
be held on 1 December 2016.
Auditor
A resolution to reappoint BDO LLP as
auditor for the ensuing year will be
proposed at the AGM in accordance with
Section 489 of the Companies Act 2006.
By order of the Board
Nishith Malde
Company Secretary
13 October 2016
Employee Benefit Trust
On 20 December 2015 the Group’s
Employee Benefit Trust purchased
377,500 shares of 10p each in Inland
Homes plc under the terms of the
Long Term Incentive Plan. The total
consideration paid was £331,000.
Going concern
The Board has reviewed the performance
for the current year and forecasts for the
future period. It has also considered the
risks and uncertainties, including credit
risk and liquidity risk. The Directors
have considered the present economic
climate, the state of the housing market
and the current demand for land with
planning consent. The Group has
continued to see a demand for consented
land in the areas in which it operates.
The Group has significant forward sales
of residential units and is in discussions
for the sale of some of the land within its
projects and expects to make sufficient
disposals in the foreseeable future to
ensure it has adequate working capital
for its requirements. The Directors are
satisfied that the Group will generate
sufficient cash to meet its liabilities as
and when they fall due for a period of
12 months from signing these financial
statements. The Directors therefore
consider it appropriate to prepare
the financial statements on the going
concern basis.
Directors’ responsibilities
The Directors are responsible for
preparing the annual report and the
financial statements in accordance with
applicable laws and regulations.
Company law requires the Directors
to prepare financial statements for
each financial year. Under that law
the Directors have elected to prepare
the Group financial statements in
accordance with International Financial
Reporting Standards (IFRSs) as adopted
by the European Union and have elected
to prepare the Parent Company financial
statements in accordance with United
Kingdom Generally Accepted Accounting
Practice (United Kingdom Accounting
Standards and applicable laws). Under
company law the Directors must not
approve the financial statements unless
they are satisfied that they give a true
and fair view of the state of affairs of the
Group and Company and of the profit or
loss of the Group and Company for that
period. The Directors are also required
to prepare financial statements in
accordance with the rules of the London
Stock Exchange for companies trading
securities on the Alternative Investment
Market.
In preparing these financial statements,
the Directors are required to:
• select suitable accounting policies
and then apply them consistently;
• make judgements and accounting
estimates that are reasonable and
prudent;
• state whether they have been
prepared in accordance with IFRSs as
adopted by the European Union for the
Group and UK Accounting standards
for the Parent Company, subject to
any material departures disclosed and
explained in the financial statements;
and
• prepare the financial statements on
the going concern basis unless it is
inappropriate to presume that the
Company will continue in business.
The Directors are responsible for
keeping adequate accounting records
that are sufficient to show and explain
the Company’s transactions and disclose
with reasonable accuracy at any time
the financial position of the Company
and enable them to ensure that the
financial statements comply with the
requirements of the Companies Act
2006. They are also responsible for
safeguarding the assets of the Company
and hence for taking reasonable steps
for the prevention and detection of fraud
and other irregularities.
Website publication
The Directors are responsible for
ensuring the annual report and the
financial statements are made available
on a website. Financial statements are
published on the Company’s website in
accordance with legislation in the United
Kingdom governing the preparation and
dissemination of financial statements,
which may vary from legislation in other
jurisdictions. The maintenance and
integrity of the Company’s website is
the responsibility of the Directors. The
25010 24 October 2016 10:23 AM Proof One
61
Inland Homes plc Annual Report and Accounts for the year ended 30 June 2016 www.inlandhomes.co.ukGOVERNANCE 62Artist’s impression of proposed mixed use development
at the Wessex Hotel in Bournemouth, Dorset
25010 21 October 2016 5:10 PM Proof One
2016ANNUAL REPORT AND ACCOUNTS FINANCIALS
Independent Auditor’s Report to the
Members of Inland Homes plc
Group Income Statement
Group and Company Statement of
Financial Position
Group Statement of Changes in Equity
Group Statement of Cash Flows
Notes to the Group Financial Statements
Advisers and Company Information
64
65
66
68
69
70
105
25010 21 October 2016 5:10 PM Proof One
63
Inland Homes plc Annual Report and Accounts for the year ended 30 June 2016 www.inlandhomes.co.uk Independent Auditor’s Report to the Members
of Inland Homes plc
We have audited the financial statements of Inland Homes plc for the year ended 30 June 2016 which comprise the Group Income
Statement, the Group and Company Statement of Financial Position, the Group Statement of Cash Flows, the Group and Company
Statement of Changes in Equity and the related notes. The financial reporting framework that has been applied in the preparation
of the Group financial statements is applicable law and International Financial Reporting Standards (IFRSs) as adopted by
the European Union. The financial reporting framework that has been applied in preparation of the Parent Company financial
statements is applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting
Practice).
This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act
2006. Our audit work has been undertaken so that we might state to the company’s members those matters we are required to
state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the company and the company’s members as a body, for our audit work, for this report, or for
the opinions we have formed.
Respective responsibilities of directors and auditors
As explained more fully in the statement of directors’ responsibilities, the directors are responsible for the preparation of the
financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion
on the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those
standards require us to comply with the Financial Reporting Council’s (FRC’s) Ethical Standards for Auditors.
Scope of the audit of the financial statements
A description of the scope of an audit of financial statements is provided on the FRC’s website at www.frc.org.uk/
auditscopeukprivate.
Opinion on financial statements
In our opinion:
• the financial statements give a true and fair view of the state of the group’s and the parent company’s affairs as at 30 June
2016 and of the group’s profit for the year then ended;
• the group financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union;
• the parent company’s financial statements have been properly prepared in accordance with United Kingdom Generally
Accepted Accounting Practice; and
• the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.
Opinion on other matters prescribed by the Companies Act 2006
In our opinion the information given in the strategic report and directors’ report for the financial year for which the financial
statements are prepared is consistent with the financial statements.
Matters on which we are required to report by exception
We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our
opinion:
• adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been
received from branches not visited by us; or
• the parent company financial statements are not in agreement with the accounting records and returns; or
• certain disclosures of directors’ remuneration specified by law are not made; or
• we have not received all the information and explanations we require for our audit.
Thomas Edward Goodworth (senior statutory auditor)
For and on behalf of BDO LLP, statutory auditor
London
13 October 2016
64
25010 21 October 2016 5:10 PM Proof One
2016ANNUAL REPORT AND ACCOUNTS Group Income Statement
for the year ended 30 June 2016
Continuing operations
Revenue
Cost of sales
Gross profit
Administrative expenses
Profit on sale of PPE
Provision for doubtful debt
Fair value adjustments on DGVL option
Revaluation of investment properties
Operating profit
Finance cost — interest expense
Finance income — interest receivable and similar income
Profit before tax and share of profits from joint ventures and associates
Share of loss of associates
Share of loss of joint ventures
Profit before tax
Income tax
Total profit and comprehensive income for the year
Attributable to:
— Shareholders of the Company
— Non-controlling interests
Earnings per share for profit attributable to the equity holders of the Company
during the year
— basic
— diluted
The accompanying accounting policies and notes form part of these financial statements.
* prior year comparatives have been restated. Further details can be found in note 10.
Note
4
4
5
16
13
11
7
8
13
13
9
20
10
10
2016
£000
101,910
(72,329)
29,581
(6,297)
9
(1,106)
—
18,015
40,202
(7,425)
477
33,254
(138)
(232)
32,884
(3,543)
29,341
2015
£000
114,219
(79,841)
34,378
(6,021)
—
—
(541)
14,519
42,335
(8,373)
201
34,163
—
(135)
34,028
(5,078)
28,950
28,742
599
29,680
(730)
14.23p
13.47p
14.67p*
14.20p*
25010 21 October 2016 5:10 PM Proof One
65
Inland Homes plc Annual Report and Accounts for the year ended 30 June 2016 www.inlandhomes.co.ukFINANCIALS Group and Company Statement of Financial Position
at 30 June 2016
Group
Company
Note
2016
£000
2015
£000
2016
£000
2015
£000
ASSETS
Non-current assets
Investment properties
Property, plant and equipment
Investment in subsidiaries
Investment in associates
Loans to associates due in more than one year
Investment in joint ventures
Loans to joint ventures due in more than one year
Receivables due in more than one year
Deferred tax due in more than one year
Total non-current assets
Current assets
Inventories
Trade and other receivables
Amounts due from associates
Amounts due from joint ventures
Listed investments carried at fair value through profit and loss
Cash and cash equivalents
Total current assets
Total assets
EQUITY
Capital and reserves attributable to the Company's equity holders
Share capital
Share premium account
Employee benefit trust
Special reserve
Retained earnings
Total equity attributable to shareholders of the Company
Non-controlling interests
Total equity
LIABILITIES
Current liabilities
Bank loans and overdrafts
Other loans
Trade and other payables
Corporation tax
Other financial liabilities
Total current liabilities
Non-current liabilities
Zero Dividend Preference shares
Other financial liabilities
Bank loans due in more than one year
Payables due in more than one year
Total non-current liabilities
Total equity and liabilities
11
12
13
13
16
13
16
16
14
15
16
16
16
17
18
19
20
26
26
21
21
22
22
22
26
21
51,705
480
—
113
894
1,216
—
55
338
54,801
146,825
6,816
3,372
10,103
1
16,723
183,840
238,641
20,281
34,033
(713)
6,059
56,372
116,032
—
116,032
19,010
21,135
18,656
7,618
22,369
88,788
14,607
—
16,535
2,679
33,821
238,641
34,000
332
—
—
—
1,488
3,246
55
548
39,669
121,031
7,998
—
—
1
21,377
150,407
190,076
20,281
34,033
(382)
6,059
28,806
88,797
272
89,069
25,192
18,724
14,862
6,347
10,881
76,006
12,372
12,629
—
—
25,001
190,076
—
5
12,472
—
—
—
—
—
539
13,016
—
40,307
—
—
1
10,826
51,134
64,150
20,281
34,033
(713)
6,059
3,930
63,590
—
63,590
—
—
560
—
—
560
—
—
—
—
—
64,150
—
7
12,472
—
—
—
—
—
406
12,885
—
35,488
—
—
1
21,020
56,509
69,394
20,281
34,033
(382)
6,059
9,027
69,018
—
69,018
—
—
376
—
—
376
—
—
—
—
—
69,394
The financial statements were approved and authorised for issue by the Board of Directors on 13 October 2016.
Stephen Wicks
Director
Nishith Malde
Director
Company number 5482990
The accompanying accounting policies and notes form part of these financial statements.
66
25010 21 October 2016 5:10 PM Proof One
2016ANNUAL REPORT AND ACCOUNTS Group Statement of Changes In Equity
for the year ended 30 June 2016
At 30 June 2014
Share-based payments
Dividend payment
Reinstatement of deferred shares
Purchase of own shares for deferred
bonus plan
Transactions with owners
Total comprehensive income for the year
Total changes in equity
At 30 June 2015
Share-based payments
Dividend payment
Purchase of own shares for deferred
bonus plan
Transactions with owners
Non-controlling interest acquired during
the year
Surplus arising on acquisition of non-
controlling interests
Total comprehensive income for the year
Total changes in equity
At 30 June 2016
Share
capital
£000
20,280
—
—
1
—
1
—
1
20,281
—
—
—
—
—
Share
premium
£000
34,033
—
—
—
—
—
—
—
34,033
—
—
—
—
—
—
—
—
20,281
—
—
—
34,033
Employee
Benefit
Trust
£000
—
—
—
—
(382)
(382)
—
(382)
(382)
—
—
(331)
(331)
—
—
—
(331)
(713)
Special
reserve
£000
6,059
—
—
—
—
—
—
—
6,059
—
—
—
—
—
Retained
earnings
£000
(281)
625
(1,217)
(1)
—
(593)
29,680
29,087
28,806
665
(2,832)
Non-
controlling
interests
£000
1,002
—
—
—
—
—
(730)
(730)
272
—
—
Total
£000
60,091
625
(1,217)
—
(382)
(974)
29,680
28,706
88,797
665
(2,832)
Total
equity
£000
61,093
625
(1,217)
—
(382)
(974)
28,950
27,976
89,069
665
(2,832)
—
(2,167)
(331)
(2,498)
—
—
(331)
(2,498)
871
871
(871)
—
—
—
—
6,059
120
28,742
27,566
56,372
120
28,742
27,235
116,032
—
599
(272)
—
120
29,341
26,963
116,032
During the year the Company paid dividends of 1.4p per share (2015: 0.6p).
25010 21 October 2016 5:10 PM Proof One
67
Inland Homes plc Annual Report and Accounts for the year ended 30 June 2016 www.inlandhomes.co.ukFINANCIALS Company Statement of Changes in Equity
for the year ended 30 June 2016
At 30 June 2014
Share-based payments
Dividend payment
Reinstatement of deferred shares
Purchase of own shares for deferred
bonus plan
Transactions with owners
Total comprehensive income for the year
Total changes in equity
At 30 June 2015
Share-based payments
Dividend payment
Purchase of own shares for deferred
bonus plan
Transactions with owners
Total comprehensive income for the year
Total changes in equity
At 30 June 2016
Share
capital
£000
20,280
—
—
1
—
1
—
1
20,281
—
—
—
—
—
—
20,281
Share
premium
£000
34,033
—
—
—
—
—
—
—
34,033
—
—
—
—
—
—
34,033
Employee
Benefit
Trust
£000
—
—
—
—
(382)
(382)
—
(382)
(382)
—
—
(331)
(331)
—
(331)
(713)
Special
reserve
£000
6,059
—
—
—
—
—
—
—
6,059
—
—
—
—
—
—
6,059
Retained
earnings
£000
92
625
(1,217)
(1)
—
(593)
9,528
8,935
9,027
665
(2,832)
—
(2,167)
(2,930)
(5,097)
3,930
Total
£000
60,464
625
(1,217)
—
(382)
(974)
9,528
8,554
69,018
665
(2,832)
(331)
(2,498)
(2,930)
(5,428)
63,590
Non-
controlling
interests
£000
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
Total
equity
£000
60,464
625
(1,217)
—
(382)
(974)
9,528
8,554
69,018
665
(2,832)
(331)
(2,498)
(2,930)
(5,428)
63,590
During the year the Company paid dividends of 1.4p per share (2015: 0.6p).
A resolution was passed at the AGM in November 2011 for the capitalisation of the Parent Company’s reserves to allow for the
possibility of distributions in the future and this was put in the Special Reserve, which is a distributable reserve. A copy of this
resolution is available from Companies House.
The accompanying accounting policies and notes form part of these financial statements.
68
25010 21 October 2016 5:10 PM Proof One
2016ANNUAL REPORT AND ACCOUNTS Group Statement of Cash Flows
for the year ended 30 June 2016
Cash flow from operating activities
Profit for the year before tax
Adjustments for:
— depreciation
— profit on disposal of property, plant and equipment
— share-based payments
— fair value adjustment for the value of the DGVL option
— revaluation of investment properties
— interest expense
— interest and similar income
— share of loss of joint ventures
— share of loss of associates
Corporation tax payments
Change in working capital:
— (increase)/decrease in inventories
— decrease in trade and other receivables
— decrease in trade and other payables
Net cash inflow from operating activities
Cash flow from investing activities
Interest received
Purchases of property, plant and equipment
Purchases of investment property
Sale of property, plant and equipment
Acquisition of subsidiaries
Loans provided to joint ventures
Investment in joint ventures
Loans provided to associates
Investment in associates
Net cash outflow from investing activities
Cash flow from financing activities
Interest paid
Repayment of borrowings
New loans
Equity dividends paid to ordinary shareholders
Purchase of own shares for Long Term Incentive Plan
Net cash inflow/(outflow) from financing activities
Net (decrease)/increase in cash and cash equivalents
Net cash and cash equivalents at beginning of year
Net cash and cash equivalents at end of year
The accompanying accounting policies and notes form part of these financial statements.
25010 21 October 2016 5:10 PM Proof One
Note
2016
£000
2015
£000
32,884
34,028
12
13
12
11
179
(9)
665
—
(18,015)
7,425
(477)
232
138
(2,158)
(16,797)
669
(2,781)
1,955
—
(329)
(1,021)
12
(804)
(5,810)
(202)
(4,266)
(251)
(12,671)
(5,203)
(28,417)
42,845
(2,832)
(331)
6,062
(4,654)
21,377
16,723
120
—
625
541
(14,519)
8,373
(201)
135
—
(678)
13,819
2,434
(7,870)
36,807
199
(299)
(11,481)
—
(250)
(3,246)
(1,622)
—
—
(16,699)
(7,172)
(36,568)
35,544
(1,217)
(382)
(9,795)
10,313
11,064
21,377
69
Inland Homes plc Annual Report and Accounts for the year ended 30 June 2016 www.inlandhomes.co.ukFINANCIALS Notes to the Group Financial Statements
for the year ended 30 June 2016
1. Accounting Policies
The principal accounting policies adopted in the preparation of the Group financial statements are set out below.
Basis of preparation
The Group financial statements have been prepared under the historical cost convention, except for certain financial instruments
and investment properties which are measured at fair value, and in accordance with applicable International Financial Reporting
Standards (IFRS) as adopted by the EU and as issued by the International Accounting Standards Board. These financial
statements have also been prepared in accordance with those parts of the Companies Act 2006 that are relevant to companies
that prepare their financial statements in accordance with IFRS.
The accounting policies that have been applied in the opening Statement of Financial Position have also been applied throughout
all periods presented in these financial statements. The introduction of FRS 101 for the Parent Company financial statements has
not required the restatement of any prior year results. Other than this, the accounting policies have been applied on a consistent
basis. These accounting policies comply with each IFRS that is mandatory for accounting periods ended on 30 June 2016.
Disclosure exemptions adopted
In preparing the financial statements of the Parent Company, advantage has been taken of all disclosure exemptions conferred by
FRS 101. Therefore, the Parent Company financial statements do not include:
• certain comparative information as otherwise required by EU endorsed IFRS;
• a statement of cash flows;
• the effect of future accounting standards not yet adopted;
• disclosure of related party transactions with other wholly owned members of the group headed by Inland Homes plc.
In addition, and in accordance with FRS 101 further disclosure exemptions have been adopted because equivalent disclosures
are included in the consolidated financial statements of Inland Homes plc. The parent financial statements do not include certain
disclosures in respect of:
• Financial Instruments (other than certain disclosures required as a result of recording financial instruments at fair value); and
• Fair value measurement (other than certain disclosures required as a result of recording financial instruments at fair value).
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 Group.
Management anticipates that all of the relevant pronouncements will be adopted in the Group’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 Group’s financial statements is provided below.
Standards in issue but not yet effective
New standards and interpretations currently in issue but not effective, based on EU mandatory effective dates, for accounting
periods commencing on 1 July 2015 are:
• IFRS 15 Revenue from Contracts with Customers (EU effective date 1 January 2018)
• IFRS 9 Financial Instruments (EU effective date 1 January 2018)
• IFRS 16 Leases (EU effective date 1 January 2019)
• Amendments to IFRS 11 Accounting for Acquisition of Interests in Joint Operations (EU effective date 1 January 2016)
• Amendments to IAS 16 & IAS 38 Clarification of Acceptable Methods of Depreciation and Amortisation (EU effective date
1 January 2016)
• Amendments to IAS 27 Equity Method in Separate Financial Statements (EU effective date 1 January 2016)
• Annual Improvements to IFRSs (2012-2014 cycle) (EU effective date 1 January 2016)
• Amendments to IAS 1 Disclosure Initiative (EU effective date 1 January 2016)
• Amendments to IFRS 10 and IAS 28 Sale or Contribution of Assets Between an Investor and its Associate or Joint Venture
(postponed indefinitely)
The Group is in the process of assessing the impact of these new standards and interpretations on its financial reporting.
70
25010 21 October 2016 5:10 PM Proof One
2016ANNUAL REPORT AND ACCOUNTS 1. Accounting Policies continued
Going concern
The board has reviewed the performance for the current year and forecasts for the future period. It has also considered the risks
and uncertainties, including credit risk and liquidity risk. The Directors have considered the present economic climate, the state
of the housing market and the current demand for land with planning consent. The Group has continued to see an increase in
demand for consented land in the areas in which it operates. The Group has significant forward sales of residential units and is in
discussions for the sale of some of the land within its projects and expects to make sufficient disposals in the foreseeable future
to ensure it has adequate working capital for its requirements. The Directors are satisfied that the Group will generate sufficient
cash to meet its liabilities as and when they fall due for a period of at least 12 months from signing these financial statements.
The Directors therefore consider it appropriate to prepare the financial statements on the going concern basis.
Basis of consolidation
The Group’s financial statements consolidate the financial statements of the Company and all of its subsidiary undertakings
drawn up to 30 June 2016. Where the Company has control over an investee, it is classified as a subsidiary. The Company controls
an investee if all three of the following elements are present: power over the subsidiary; exposure, or rights to, the variable
returns from its involvement with the subsidiary; and the ability to affect those returns through its power over the subsidiary. The
Group obtains and exercises control through voting rights, development agreements and option agreements. Further information
can be found in note 3.
Unrealised gains on transactions between the Group and its subsidiaries are eliminated. Unrealised losses are also eliminated
unless the transaction provides evidence of an impairment of the asset transferred. Amounts reported in the financial statements
of subsidiaries have been adjusted where necessary to ensure consistency with the accounting policies adopted by the Group.
Acquisitions of subsidiaries are dealt with by the acquisition method. The method involves the recognition at fair value of all
identifiable assets and liabilities, including contingent liabilities and non-controlling interests of the subsidiary, at the acquisition
date, regardless of whether or not they were recorded in the financial statements of the subsidiary prior to acquisition. On initial
recognition, the assets and liabilities of the subsidiary are included in the Group Statement of Financial Position at their fair
values, which are also used as the basis for subsequent measurement in accordance with the Group accounting policies. Goodwill
is stated after separating out identifiable intangible assets. Goodwill represents the excess of the fair value of the consideration
transferred over the fair value of the Group’s share of the identifiable net assets and non-controlling interests of the acquired
subsidiary at the date of acquisition.
At the time of acquisition, the Group considers whether each acquisition represents the acquisition of a business or the
acquisition of an asset. The Group accounts for an acquisition as a business combination where an integrated set of activities
is acquired in addition to the property. Where such acquisitions are not judged to be the acquisition of a business, they are not
treated as business combinations. Rather, the cost to acquire the corporate entity is allocated between the identifiable assets and
liabilities of the entity based upon their relative fair values at the acquisition date. Accordingly, no goodwill or additional deferred
tax arises.
Joint ventures
Joint ventures are entities in which the Group has shared control with another entity, established by contractual agreement.
Jointly controlled entities are accounted for using the equity method from the date that joint control is obtained to the date
that the joint control of the entity ceases. All subsequent changes to the share of interest in the equity of the joint venture are
recognised in the Group’s carrying amount of the investment. Changes resulting from the profit or loss generated by the joint
venture are recognised in the Group’s carrying amount of the investment. Changes resulting from the profit or loss generated
by the joint venture are reported in ‘share of profits of joint venture’ in the Group Income Statement and therefore affect the net
results of the Group. These changes include subsequent depreciation, amortisation or impairment of the fair value adjustments
of assets and liabilities. If the share of losses equals its investment, the Group does not recognise further losses, except to the
extent that there are amounts receivable that may not be recovered or there are further commitments to provide funding. Both
realised and unrealised gains on transactions between the Group and its joint ventures are eliminated to the extent of the Group’s
investment in joint ventures. Realised and unrealised losses are also eliminated unless the transaction provides evidence of an
impairment of the asset transferred. The accounting policies of the joint ventures are consistent with those of the Group.
25010 21 October 2016 5:10 PM Proof One
71
Inland Homes plc Annual Report and Accounts for the year ended 30 June 2016 www.inlandhomes.co.ukFINANCIALS Notes to the Group Financial Statements
for the year ended 30 June 2016
1. Accounting Policies continued
Associates
Where the Group has significant influence but not control or joint control over the financial and operating policy decisions of
another entity, it is classified as an associate. Associates are initially recorded in the Group Balance Sheet at cost. Changes
resulting from the Group’s share of post-acquisition profits and losses are recognised in the Group’s carrying amount of the
investment. Changes resulting from the profit or loss generated by the associate are reported in ‘share of profits of associate’ in
the Group Income Statement and therefore affect the net results of the Group. These changes include subsequent depreciation,
amortisation or impairment of the fair value adjustments of assets and liabilities. If the share of losses equals its investment, the
Group does not recognise further losses, except to the extent that there are amounts receivable that may not be recovered or there
are further commitments to provide funding. The accounting policies of the associate are consistent with those of the Group.
Business combinations
At the time of acquisition, the Group considers whether each acquisition represents the acquisition of a business or the
acquisition of an asset. The Group accounts for an acquisition as a business combination where an integrated set of activities
is acquired in addition to the property. Where such acquisitions are not judged to be the acquisition of a business, they are not
treated as business combinations. Rather, the cost to acquire the corporate entity is allocated between the identifiable assets and
liabilities of the entity based upon their relative fair values at the acquisition date. Accordingly, no goodwill or additional deferred
tax arises.
Revenue
Revenue is measured by reference to the fair value of consideration received or receivable by the Group for goods supplied,
excluding VAT and trade discounts.
Sale of land and residential units
Revenue from the sale of land is recognised on legal completion when all the following conditions have been satisfied:
• the Group has transferred to the buyer the significant risks and rewards of ownership of the goods which is when contracts
have been completed, which is when title passes;
• the Group retains neither continuing managerial involvement to the degree usually associated with ownership nor effective
control over the land sold which is when the contract has been completed;
• the amount of revenue can be measured reliably;
• it is probable that the economic benefits associated with the transaction will flow to the Group; and
• the costs incurred or to be incurred in respect of the transaction can be measured reliably.
Contract income
The Group acts as a main contractor on certain building projects, primarily on behalf of housing associations where the Group
must provide social housing units as part of its S106 obligations under the planning consent. Once the Group considers that the
outcome of the contract can be reliably estimated, revenue and profit is recognised on the basis of the proportion of the contract
that is completed. The stage of completion is determined by reference to the valuation certificate provided by a third party
surveyor engaged to certify the value of works completed at various intervals in respect of the contract sum.
Interest
Interest is recognised using the effective interest method which calculates the amortised cost of a financial asset and allocates
the interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash
receipts through the expected life of the financial asset to the net carrying amount of the financial asset.
Rental Income
Rental income derived from operating leases is recognised on a straight line basis over the lease term.
Property, plant and equipment
Property, plant and equipment is stated at cost, net of depreciation and any provision for impairment.
Disposal of assets
The gain or loss arising on the disposal of an asset is determined as the difference between the disposal proceeds and the
carrying amount of the asset and is recognised in the Group Income Statement.
72
25010 21 October 2016 5:10 PM Proof One
2016ANNUAL REPORT AND ACCOUNTS 1. Accounting Policies continued
Depreciation
Depreciation is calculated to write down the cost less estimated residual value of all property, plant and equipment by the straight
line method where it reflects the basis of consumption of the asset. The rates generally applicable are:
Fixtures and fittings
Office equipment
Motor Vehicles
Leasehold property
— 25%
— 25%
— 25%
— Over shorter of lease term and useful economic life
Material residual value estimates are reviewed as required, but at least annually.
Investment property
Investment properties are those properties which are not occupied by the Group and which are held for long-term rental yields,
capital appreciation or both. Investment property also includes property that will be developed for future use as investment
property.
Investment properties are initially measured at cost, including related transaction costs. At each subsequent reporting date they
are remeasured to their fair value. Movements in fair value are included in the Group Income Statement.
Subsequent expenditure is capitalised to the asset’s carrying value only where it is probable that the future economic benefits
associated with the expenditure will flow to the Group.
Any gain or loss resulting from the sale of an investment property is immediately recognised in the Group Income Statement. An
investment property shall be derecognised on disposal. When the Directors consider that the status of the property has changed
to being a development property it is transferred to inventories. A property is transferred to inventories when it has been decided
that the units being constructed will be sold and no future rental income is expected. When a partial disposal or transfer is made,
the proportion relating to the disposal or transfer is derecognised.
Where the Group employs professional valuers the valuations provided are subject to a comprehensive review to ensure they
are based on accurate and up-to-date tenancy and market information. Discussions are also held with the valuers to test the
valuation assumptions applied and comparable evidence utilised to ensure they are appropriate in the circumstances.
Inventories
Inventories consist of land and work in progress and are valued at the lower of cost and net realisable value. Cost includes the
purchase of sites, the cost of infrastructure and construction works, and legal and professional fees incurred during development
prior to sale. Net realisable value is estimated based upon the future expected selling price, less estimated costs to sell.
Taxation
Current tax is the tax currently payable based on taxable profit for the period calculated using tax rates and laws substantively
enacted at the reporting date.
Deferred income taxes are calculated using the liability method on temporary differences. Deferred tax is generally provided on
the difference between the carrying amounts of assets and liabilities and their tax bases. However, deferred tax is not provided on
the initial recognition of goodwill, nor on the initial recognition of an asset or liability unless the related transaction is a business
combination or affects tax or accounting profit. Temporary differences include those associated with shares in subsidiaries and
joint ventures unless reversal of these temporary differences can be controlled by the Group and it is probable that reversal will
not occur in the foreseeable future. In addition, tax losses available to be carried forward as well as other income tax credits to
the Group are assessed for recognition as deferred tax assets.
Deferred tax liabilities are provided in full, with no discounting. Deferred tax assets are recognised to the extent that it is probable
that the underlying deductible temporary differences will be able to be offset against future taxable income. Current and deferred
tax assets and liabilities are calculated at tax rates and laws that are expected to apply to their respective period of realisation,
provided they are enacted or substantively enacted at the year end date.
Changes in deferred tax assets or liabilities are recognised as a component of tax expense in the Group Income Statement except
where they relate to items that are recognised in other comprehensive income or directly in equity in which case the related
deferred tax is also recognised in other comprehensive income or equity respectively.
25010 21 October 2016 5:10 PM Proof One
73
Inland Homes plc Annual Report and Accounts for the year ended 30 June 2016 www.inlandhomes.co.ukFINANCIALS Notes to the Group Financial Statements
for the year ended 30 June 2016
1. Accounting Policies continued
Leased assets
Lease payments (excluding costs for services such as insurance and maintenance) applicable to operating leases where
substantially all the benefits and risks of ownership remain with the lessor are recognised as an expense on a straight line basis
over the lease term.
Employee benefits
Defined contribution retirement benefit scheme
The pension costs charged against operating profits are the contributions payable to the scheme in respect of the accounting
period.
Equity-settled share-based payment
All shared-based payment arrangements are recognised in the Group financial statements. All goods and services received in
exchange for the grant of any share-based payment are measured at their fair values using the Black–Scholes options pricing
model for share options and the Monte Carlo simulation technique for LTIPs. Where employees are rewarded using share-based
payments, the fair values of employees’ services are determined indirectly by reference to the fair value of the instrument granted
to the employee. This fair value is appraised at the grant date and excludes the impact of any non-market vesting conditions.
The Black–Scholes model is used to value the share options because it relies on fixed inputs and the options do not have non-
standard features. The Monte Carlo simulation is more suitable to value LTIPs as they depend on the share price changing over
time and therefore have more complex vesting conditions than the share options.
Share options are awarded to all eligible members of staff on a discretionary basis and there are no service or performance
conditions attached to them, other than that the member of staff awarded the options are still employed by the Company at the
time of the options being exercised. LTIPs are awarded to the three Executive Directors based on share price performance as
explained in the Remuneration Report.
All equity-settled share-based payments are ultimately recognised as an expense in the Group Income Statement with a
corresponding credit to retained earnings.
If vesting periods or other non-market vesting conditions apply, the expense is allocated over the vesting period, based on the
best available estimate of the number of share options/LTIPs expected to vest. Estimates are subsequently revised if there is any
indication that the number of share options/LTIPs expected to vest differs from previous estimates. Any cumulative adjustment
prior to vesting is recognised in the current period. No adjustment is made to any expense recognised in prior periods if share
options/LTIPs ultimately exercised are different to that estimated on vesting.
Upon exercise of share options/LTIPs the proceeds received net of attributed transaction costs are credited to share capital and,
where appropriate, share premium.
The Executive Directors receive 50% of bonuses in shares which are purchased by the Employee Benefit Trust and the remaining
50% in cash. The number of shares purchased correspond to the number of shares which would have been able to be purchased
at the closing price on 30 June for the relevant year. The shares will be transferred to the Directors three years after the period to
which they relate. The amount of the bonus awarded each year is explained in the Remuneration Report.
Employee benefit trust
The Directors consider that the Employee Benefit Trust (EBT) is under the de facto control of the Company as the trustees look
to the Directors to determine how to dispense the assets. Therefore the assets and liabilities of the EBT have been consolidated
into the Group accounts. The EBT’s investment in the Company’s shares is eliminated on consolidation and shown as a deduction
against equity. Any assets in the EBT will cease to be recognised in the Group Statement of Financial Position when those assets
vest unconditionally in identified beneficiaries.
Financial assets
Financial assets are divided into the following categories: loans and receivables and financial assets at fair value through profit
or loss. Financial assets are assigned to the different categories by management on initial recognition, depending on the purpose
for which they were acquired.
All financial assets are recognised when the Group becomes a party to the contractual provisions of the instrument. Financial
assets other than those categorised as at fair value through profit or loss are initially recognised at fair value plus transaction
costs. Financial assets categorised at fair value through profit or loss are recognised initially at fair value with transaction costs
expensed through the Group Income Statement.
74
25010 21 October 2016 5:10 PM Proof One
2016ANNUAL REPORT AND ACCOUNTS 1. Accounting Policies continued
Financial assets at fair value through profit or loss include financial assets that are designated by the entity as at fair value
through profit or loss upon initial recognition. Subsequent to initial recognition, the financial assets included in this category
are measured at fair value with changes in fair value recognised in the Group Income Statement. Financial assets originally
designated as financial assets at fair value through profit or loss may not be reclassified subsequently.
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an
active market. Trade receivables and loans to associates and joint ventures are classified as loans and receivables. Loans and
receivables are measured subsequent to initial recognition at amortised cost using the effective interest method, less provision
for impairment. Any change in their value through impairment or reversal of impairment is recognised in the Group Income
Statement.
Provision against trade receivables is made when there is objective evidence that the Group will not be able to collect all amounts
due to it in accordance with the original terms of those receivables. The amount of the write-down is determined as the difference
between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the original effective
interest rate.
Interest and other income resulting from holding financial assets are recognised in the Group Income Statement.
A financial asset is derecognised only where the contractual rights to the cash flows from the asset expire, or the financial asset
is transferred and that transfer qualifies for derecognition. A financial asset is transferred if the contractual rights to receive the
cash flows of the asset have been transferred or the Group retains the contractual rights to receive the cash flow of the asset, but
assumes a contractual obligation to pay the cash flows to one or more recipients. A financial asset that is transferred qualifies
for derecognition if the Group transfers substantially all the risks and rewards of ownership of the asset, or if the Group neither
retains nor transfers substantially all the risks and rewards of ownership but does transfer control of that asset.
Borrowing costs
The Group capitalises borrowing costs directly attributable to the acquisition, construction or production of a qualifying asset
as part of the cost of that asset where developments are considered to fall under the requirements of IAS 23 Borrowing Costs
(Revised). Qualifying assets are those which are being constructed over a significant period of time. The Directors consider a
significant period of time to be over 12 months. Otherwise the Group expenses borrowing costs in the period to which they relate
through the income statement using the effective interest method which calculates the amortised cost of a financial asset and
allocates the interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated
future cash receipts through the expected life of the financial asset to the net carrying amount of the financial asset.
Financial liabilities
Financial liabilities are obligations to pay cash or other financial assets and are recognised when the Group becomes a party to
the contractual provisions of the instrument.
All financial liabilities are recorded at amortised cost using the effective interest method, with interest-related charges
recognised as an expense in finance cost in the Group Income Statement. Finance charges, including premiums payable on
settlement or redemption and direct issue costs, are charged to the Group Income Statement on an accruals basis using the
effective interest method and are added to the carrying amount of the instrument to the extent that they are not settled in the
period in which they arise.
A financial liability is derecognised only when the obligation is extinguished, that is, when the obligation is discharged or
cancelled or expires.
Cash and cash equivalents
Cash and cash equivalents comprise cash in hand and demand deposits, together with other short term, highly liquid investments
that are readily convertible into known amounts of cash and which are subject to an insignificant risk of changes in value .
Dividends
Dividend distributions payable to equity shareholders are included in other short term financial liabilities when the dividends are
approved in a general meeting prior to the year end date. Interim dividends are recognised when paid.
25010 21 October 2016 5:10 PM Proof One
75
Inland Homes plc Annual Report and Accounts for the year ended 30 June 2016 www.inlandhomes.co.ukFINANCIALS Notes to the Group Financial Statements
for the year ended 30 June 2016
1. Accounting Policies continued
Equity
An equity instrument is a contract which evidences a residual interest in the assets after deducting all liabilities. Equity
comprises the following:
• ‘Share capital’ represents the nominal value of equity shares;
• ‘Share premium’ represents the excess over nominal value of the fair value of consideration received for equity shares, net of
expenses of the share issue;
• ‘Employee benefit trust’ represents the purchase of the Company’s own shares and are deducted from total equity until they
are issued to employees under the Long Term Incentive Plan;
• ‘Special reserve’ represents the distributable surplus created by the transfer of an amount from the share premium to rectify
the deficit which existed on the retained earnings reserve; and
• ‘Retained earnings reserve’ represents retained profits
2. Segment Information
In accordance with IFRS 8, information is disclosed to enable users of financial statements to evaluate the nature and financial
effects of the business activities in which the Group engages.
In identifying its operating segments, management differentiates between land sales, housebuilding, contract income, rental
income, hotel income and other income. These segments are based on the information reported to the chief operating decision
maker and represent the activities which generate significant revenues, profits and use of resources within the Group. An analysis
of the Group’s results by segment is disclosed in note 4.
3. Critical Accounting Estimates and Judgements
Estimates and judgements are continually evaluated and are based on historic experience and other factors , including
expectations of future events that are believed to be reasonable under the circumstances.
Critical accounting estimates
The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, rarely
equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to
the carrying amounts of assets and liabilities within the next financial year are outlined below.
(a) Valuation of inventories
In applying the Group’s accounting policy for the valuation of inventories the Directors are required to assess the expected selling
price and costs to sell each of the plots or units that constitute the Group’s land bank and work in progress. Cost includes the
cost of acquisition of sites, the cost of infrastructure and construction works, and legal and professional fees incurred during
development prior to sale. Estimation of the selling price is subject to significant inherent uncertainties, in particular the
prediction of future trends in the market value of land.
Whilst the Directors exercise due care and attention to make reasonable estimates, taking into account all available information
in estimating the future selling price, the estimates will, in all likelihood, differ from the actual selling prices achieved in future
periods and these differences may, in certain circumstances, be very significant. The critical judgement in respect of receipt of
planning consent (see below) further increases the level of estimation uncertainty in this area.
(b) Income taxes
The Group recognises tax/deferred tax assets and liabilities for anticipated tax based on estimates of when the tax/deferred
tax will be paid or recovered. When the final outcome of these matters is different from the amounts initially recorded, such
differences impact the period in which the determination is made. Critical accounting estimates relate to the profit forecasts used
to determine the extent to which deferred tax assets are recognised from available losses and the period over which they are
estimated.
(c) Fair value of derivatives and other financial instruments
The fair value of instruments that are not traded in an active market is determined by using valuation techniques. The Group uses
its judgement to select a variety of methods and makes assumptions that are mainly based on market conditions existing.
76
25010 21 October 2016 5:10 PM Proof One
2016ANNUAL REPORT AND ACCOUNTS 3. Critical Accounting Estimates and Judgements continued
(d) Fair value of investment properties
The fair value of materially completed investment property is determined by independent valuation experts using the open
market value of existing use method, subject to current leases and restrictions, as this has been assessed currently as the best
use of these assets. Investment properties awaiting construction are valued by the Directors using an appraisal system; critical
accounting estimates relate to the forecasts prepared in order to assess the carrying value.
(e) Fair value of assets and liabilities acquired with business combinations
The fair value of assets and liabilities is determined by the Directors at the date of acquisition using the residual valuation model
for property assets,the recoverable amount for debtors and the discounted cash flow method for deferred consideration of
inventories in accordance with IAS 39. Critical accounting estimates relate to the experience of the Directors in reaching their
valuations and the cost of debt capital used as an appropriate discount rate.
(f) Discounting on deferred consideration of inventories and acquisition of shares
The Group discounts deferred consideration using the discounted cash flow method; the Group considers that the cost of debt
capital is the most appropriate discount rate and this is a significant estimate.
Critical judgements in applying the entity’s accounting policies
Inventories
The Group values inventories at the lower of cost and net realisable value. The net realisable value is based on the judgement of
the probability that planning consent will be granted for each site. The Group believes that, based on the Directors’ experience,
planning consent will be given. If planning consent was not achieved then a provision may be required against inventories.
Consolidation of Drayton Garden Village Limited (DGVL)
In December 2008 the Group entered into an Option and Development Services Agreement (the Agreement) with DGVL. This
company was consolidated in prior years as the Directors had considered the requirements of IFRS 10 and believed the Group
had control over DGVL from the date it entered into this agreement even though it did not own the share capital. During the year
ended 30 June 2016, the Group acquired the share capital of DGVL. Further information can be found in note 13.
Consolidation of Bucks Developments Ltd (BDL) and Wilton Park Developments Ltd (WPDL)
In December 2014, the Group entered into an Option with WPDL. These companies were consolidated in the prior year as the
Directors had considered the requirements of IFRS 10 and believed the Group had control over BDL & WPDL from the date it
entered into this agreement even though it did not own the share capital. During the year ended 30 June 2016, the Group acquired
the share capital of BDL. BDL wholly owns the share capital of WPDL. Further information can be found in note 13.
Investment in joint ventures
The Group’s joint venture investments in Aston Clinton S.A.R.L and Project Helix Holdco Limited (Project Helix) are not in equal
share (the Group owns 10% of the share capital of Aston Clinton S.A.R.L. and 20% of the share capital of Project Helix) however
the Group has joint control over the activities of the companies with the other parties due to its entitlement to veto any decisions.
In addition the Group and the other parties to the agreements only have rights to the net assets of these companies through the
terms of the contractual arrangements. Within Aston Clinton S.A.R.L the Group is entitled to 50% of the net assets and within
Project Helix there is a ratchet mechanism which depends on the amount of profit each development contributes to the joint
venture. Therefore these entities are classified as joint ventures and are accounted for using the equity method.
The Group’s joint venture investments in Bucknalls Developments Limited (Bucknalls) and Inland (Stonegate) Limited are 50/50
joint ventures and the Group has joint control over the activities of the companies with the other parties and has an entitlement
to veto any decisions. The Group and the other parties to the agreements only have rights to the net assets of these companies
through the terms of the contractual arrangements. Within both joint ventures the Group is entitled to 50% of the net assets.
Therefore these entities are classified as joint ventures and are accounted for using the equity method.
Investment in associates
The Group has a 25% investment in Troy Homes Limited. It has significant influence over that entity but does not have joint
control. Therefore the investment is classified as an associate and is accounted for using the equity method.
25010 21 October 2016 5:10 PM Proof One
77
Inland Homes plc Annual Report and Accounts for the year ended 30 June 2016 www.inlandhomes.co.ukFINANCIALS
Notes to the Group Financial Statements
for the year ended 30 June 2016
4. Group Income and Segmental Analysis
The Group generates income by way of land sales. It also generates income from housebuilding, contracting, rental income, hotel
income, investments and investment properties. These operating segments are monitored and strategic decisions are made on
the basis of segment operating results. The segmental analysis of operations is as follows:
Segmental analysis by activity
2015
Revenue
Cost of sales
Gross profit
Administrative expenses
Loss on investments
Revaluation of investment
properties
Operating profit/(loss)
Finance (cost)/income
Profit/(loss) before tax and share
of profits from joint ventures and
associates
Share of loss of joint ventures
Profit/(loss) before tax
Income tax
Total profit/(loss) for the year
2016
Revenue
Cost of sales
Gross profit/(loss)
Administrative expenses
Profit on sale of fixed assets
Provision for doubtful debt
Revaluation of investment
properties
Operating profit/(loss)
Finance (cost)/income
Profit/(loss) before tax and share
of profits from joint ventures and
associates
Share of loss of associates
Share of loss of joint ventures
Profit/(loss) before tax
Income tax
Total profit/(loss) for the year
Land
sales
£000
39,560
(22,553)
17,007
—
—
House
building
£000
66,119
(52,317)
13,802
—
—
Contract
income
£000
7,592
(4,943)
2,649
—
—
—
17,007
(4,816)
—
13,802
(2,567)
—
2,649
—
12,191
—
12,191
(2,530)
9,661
11,235
—
11,235
(2,331)
8,904
2,649
—
2,649
(550)
2,099
Land
sales
£000
House
building
£000
Contract
income
£000
43,311
(26,229)
17,082
—
—
—
51,458
(40,203)
11,255
—
—
—
2,936
(3,665)
(729)
—
—
—
—
17,082
(4,256)
—
11,255
(1,246)
12,826
—
—
12,826
(2,565)
10,261
10,009
—
—
10,009
(2,002)
8,007
—
(729)
—
(729)
—
—
(729)
146
(583)
Rental
income
£000
787
(28)
759
—
—
—
759
—
759
—
759
(157)
602
Rental
income
£000
2,089
(408)
1,681
—
—
—
—
1,681
—
1,681
—
—
1,681
(336)
1,345
Hotel
income
£000
—
—
—
—
—
Investments
£000
—
—
—
—
(541)
Investment
properties
£000
—
—
—
—
—
Other
£000
161
—
161
(6,021)
—
Total
£000
114,219
(79,841)
34,378
(6,021)
(541)
—
—
—
—
—
—
—
—
—
(541)
(990)
14,519
14,519
—
—
(5,860)
201
14,519
42,335
(8,172)
(1,531)
(135)
(1,666)
233
(1,433)
14,519
—
14,519
—
14,519
(5,659)
—
(5,659)
257
(5,402)
34,163
(135)
34,028
(5,078)
28,950
Hotel
income
£000
1,704
(1,696)
8
—
—
—
Investments
£000
—
—
—
—
—
—
Investment
properties
£000
—
—
—
—
—
—
Other
Total
£000
£000
412 101,910
(128) (72,329)
29,581
284
(6,297)
(6,297)
9
9
(1,106)
(1,106)
—
8
—
8
—
—
8
(2)
6
—
—
392
18,015
18,015
(997)
—
(7,110)
(841)
18,015
40,202
(6,948)
392
(138)
(232)
22
(4)
18
17,018
—
—
17,018
(787)
16,231
(7,951)
—
—
(7,951)
2,007
(5,944)
33,254
(138)
(232)
32,884
(3,543)
29,341
Included within the ‘Land sales’ segment is land sales to housing associations which include construction works to ‘Golden
Brick’. The construction works to completion are included in the ‘Contracting income’ segment.
Included with the ‘House building’ segment are the sales of freehold reversions and customer’s extras that arise as a by-product
of house building activity.
Items included within ‘Other’ above do not produce significant income streams and are therefore not monitored separately by the
Board, but as a group.
78
25010 21 October 2016 5:10 PM Proof One
2016ANNUAL REPORT AND ACCOUNTS 4. Income and Segmental Analysis continued
Transactions with customers making up 10% or more of revenue
Land sales customer 1
Land sales customer 2
Housebuilding bulk sale customer 3
Contracting customer 4
All assets and revenue arose solely in the United Kingdom.
2016
£000
15,077
—
—
14,000
29,077
2015
£000
19,000
12,000
11,420
—
42,420
2015
ASSETS
Non-current assets
Investment properties
Property, plant and equipment
Investment in joint ventures
Loans to joint ventures due in more than one
year
Receivables due in more than one year
Deferred tax due in more than one year
Total non-current assets
Current assets
Inventories
Trade and other receivables
Listed investments carried at fair value
through profit and loss
Cash and cash equivalents
Total current assets
Total assets
EQUITY
Capital and reserves attributable to the
Company's equity holders
Share capital
Share premium account
Employee benefit trust
Special reserve
Retained earnings
Total equity attributable to shareholders of
the Company
Non-controlling interests
Total equity
LIABILITIES
Current liabilities
Bank loans and overdrafts
Other loans
Trade and other payables
Corporation tax
Other financial liabilities
Total current liabilities
Non-current liabilities
Zero Dividend Preference shares
Other financial liabilities
Total non-current liabilities
Total equity and liabilities
Land
£000
House
building
£000
Contracting
£000
Hotel
£000
Investments
£000
Investment
property
£000
Other
£000
Total
£000
—
—
—
—
—
58
58
—
—
—
—
55
57
112
90,530
2,845
29,709
430
—
—
93,375
93,433
—
—
30,139
30,251
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
792
—
—
—
792
792
—
—
—
—
—
—
—
—
5,000
14,010
6,998
—
10,881
36,889
4,692
4,714
3,299
—
—
12,705
—
12,629
12,629
49,518
—
—
—
12,705
—
—
1,506
—
—
1,506
—
—
—
1,506
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
1,488
3,246
—
28
4,762
—
2,110
1
—
2,111
6,873
—
—
—
—
—
—
—
—
—
—
330
—
—
330
—
—
—
330
34,000
—
—
—
—
—
34,000
—
332
—
—
—
405
737
34,000
332
1,488
3,246
55
548
39,669
—
158
—
2,455
121,031
7,998
—
—
158
34,158
—
21,377
23,832
24,569
1
21,377
150,407
190,076
—
—
—
—
—
—
—
—
20,281
34,033
(382)
6,059
28,806
20,281
34,033
(382)
6,059
28,806
88,797
272
89,069
88,797
272
89,069
15,500
—
—
—
—
15,500
—
—
2,729
6,347
—
9,076
25,192
18,724
14,862
6,347
10,881
76,006
—
—
—
15,500
12,372
—
12,372
110,517
12,372
12,629
25,001
190,076
79
25010 21 October 2016 5:10 PM Proof One
Inland Homes plc Annual Report and Accounts for the year ended 30 June 2016 www.inlandhomes.co.ukFINANCIALS Notes to the Group Financial Statements
for the year ended 30 June 2016
4. Income and Segmental Analysis continued
2016
ASSETS
Non-current assets
Investment properties
Property, plant and equipment
Investment in associates
Loans to associates due in more than one
year
Investment in joint ventures
Loans to joint ventures due in more than
one year
Receivables due in more than one year
Deferred tax due in more than one year
Total non-current assets
Current assets
Inventories
Trade and other receivables
Amounts due from associates
Amounts due from joint ventures
Listed investments carried at fair value
through profit and loss
Cash and cash equivalents
Total current assets
Total assets
EQUITY
Capital and reserves attributable to the
Company's equity holders
Share capital
Share premium account
Employee benefit trust
Special reserve
Retained earnings
Total equity attributable to shareholders of
the Company
LIABILITIES
Current liabilities
Bank loans and overdrafts
Other loans
Trade and other payables
Corporation tax
Other financial liabilities
Total current liabilities
Non-current liabilities
Zero Dividend Preference shares
Bank loans due in more than one year
Payables due in more than one year
Total non-current liabilities
Total equity and liabilities
Land
£000
House
building
£000
Contracting
£000
Hotel
£000
Investments
£000
Investment
property
£000
Other
£000
Total
£000
—
—
—
—
—
—
—
463
463
—
—
—
—
—
—
55
21
76
99,073
3,420
—
—
47,661
162
—
—
—
—
102,493
102,956
—
—
47,823
47,899
—
—
—
—
—
—
—
—
—
—
—
—
105
21,135
11,824
—
22,369
55,433
—
859
2,679
3,538
58,971
—
—
3,412
—
—
3,412
—
15,676
—
15,676
19,088
—
—
—
—
—
—
—
—
—
75
440
—
—
—
—
515
515
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
16
172
—
—
—
—
188
188
—
—
—
—
—
—
—
—
508
—
—
508
—
—
—
—
508
—
—
113
51,705
—
—
—
480
—
51,705
480
113
894
1,216
—
—
102
2,325
—
402
3,372
10,103
1
—
13,878
16,203
—
—
—
—
894
1,216
—
—
(787)
50,918
—
—
539
1,019
—
55
338
54,801
—
3
—
—
— 146,825
6,816
3,372
10,103
2,217
—
—
—
—
3
50,921
1
—
16,723
16,723
18,940 183,840
19,959 238,641
—
—
—
—
—
—
—
—
215
—
—
215
—
—
—
—
215
—
—
—
—
—
20,281
34,033
(713)
6,059
56,372
20,281
34,033
(713)
6,059
56,372
—
116,032 116,032
18,905
—
446
—
—
19,351
—
—
2,251
7,618
—
9,869
19,010
21,135
18,656
7,618
22,369
88,788
—
—
—
—
19,351
14,607
—
—
14,607
14,607
16,535
2,679
33,821
140,508 238,641
Included within land inventories above is £5.5 million relating to the hotel.
80
25010 21 October 2016 5:10 PM Proof One
2016ANNUAL REPORT AND ACCOUNTS
5. Expenses by Nature
Depreciation
Operating lease rentals
Employee costs
Share based payment expense
Fees paid to BDO LLP in respect of:
— audit of the company
Other services:
— audit of subsidiaries and associates
— audit related assurance services
— taxation compliance services
The prior year audit fees were payable to the previous auditors, Grant Thornton.
6. Employee Benefit Expenses
The employee benefit expense (including Directors) during the year was as follows:
Wages and salaries
Social security costs
Pension costs — defined contribution plans
Amount capitalised to inventories
The average number of employees during the year was as follows:
Management
Administration
2016
£000
179
134
4,027
665
6
71
15
25
2016
£000
3,760
531
57
4,348
(321)
4,027
2016
No.
7
26
33
2015
£000
120
134
4,146
625
6
84
26
25
2015
£000
3,680
416
50
4,146
—
4,146
2015
No.
4
25
29
Please see the Directors’ Remuneration Report on pages 56-59 for details of the employees benefits expense of the Directors.
Short and long term employee benefits and share-based payments in respect of key personnel (excluding Directors) were as
follows:
Wages and salaries
Bonuses
Social security costs
Pension
Share-based payment
2016
£000
441
318
101
17
13
890
2015
£000
166
40
27
8
6
247
Other long term benefits in respect of key personnel and the Directors were as follows:
Key personnel and Directors
As at 30 June 2016
As at 30 June 2015
Number
of Growth
Shares
Number
of share
options
1,000
3,195,000
Number
of Growth
Shares
1,000
Number
of share
options
2,900,000
A long term incentive plan is in place for the benefit of the Executive Directors. Further details can be found in the Directors’
Remuneration Report on pages 56-59.
25010 21 October 2016 5:10 PM Proof One
81
Inland Homes plc Annual Report and Accounts for the year ended 30 June 2016 www.inlandhomes.co.ukFINANCIALS
Notes to the Group Financial Statements
for the year ended 30 June 2016
7. Finance Cost
Interest expense:
— bank borrowings
— other loan interest
— notional interest on deferred consideration
— amortisation of loan arrangement fees and other finance related costs
8. Finance Income
Other interest receivable
Interest from loans to joint ventures and associates
Bank interest receivable
9. Income Tax
Current tax charge
Deferred tax charge
2016
£000
1,038
4,129
1,488
770
7,425
2016
£000
280
197
—
477
2016
£000
3,333
210
3,543
2015
£000
2,023
2,813
1,215
2,322
8,373
2015
£000
198
—
3
201
2015
£000
4,150
928
5,078
The tax on the Group’s profit before tax differs from the theoretical amount that would arise using the tax rate applicable to profit
on the Group companies as follows:
Profit before tax
Profit on ordinary activities multiplied by the standard rate of corporation tax in the UK of 20.00%
(2015: 20.75%)
Expenses not deductible for tax purposes
ZDP interest not deductible for tax purposes
Adjustments to tax charge in respect of previous periods
Timing differences
Joint venture and associate tax losses not recognised
Prior year capital losses now recognised
Tax charge
2016
£000
32,884
6,577
14
177
167
(576)
—
(2,816)
3,543
2015
£000
34,028
7,061
70
129
—
166
(28)
(2,320)
5,078
82
25010 21 October 2016 5:10 PM Proof One
2016ANNUAL REPORT AND ACCOUNTS
10. Earnings and Net Asset Value Per Share
Basic and diluted EPS
Basic and diluted earnings per share is calculated by dividing the earnings attributable to equity holders of the Company by the
weighted average number of ordinary shares in issue during the period.
Profit attributable to equity holders of the Company (£000)
Net assets attributable to equity holders of the Company (£000)
Weighted average number of ordinary shares in issue (000)
Dilutive effect of share options (000)
Dilutive effect of shares held in EBT (000)
Dilutive effect of growth shares (000)
Weighted average number of ordinary shares used in determining diluted EPS (000)
Basic earnings per share in pence
Diluted earnings per share in pence
Shares in issue (000)
Net asset value per share in pence
Diluted net asset value per share in pence
2016
28,742
116,032
201,957
2,413
1,027
8,000
213,397
14.23p
13.47p
201,779
57.50p
54.42p
2015
29,680
88,797
202,368
1,985
643
4,000
208,996
14.67p
14.20p
202,156
43.92p
42.53p
The Group’s Employee Benefit Trust purchased 643,216 shares on 29 October 2014 and a further 383,850 shares on 20 December
2015 in Inland Homes plc under the terms of the Long Term Incentive Plan. These have been deducted from the weighted average
number of ordinary shares in issue and also from the shares in issue at the year end.
The diluted EPS and net asset value per share for the prior year has been restated due to a change in the assumptions with
regards to the contingently issuable shares. This has resulted in an increase of 0.44p per share for the diluted EPS and 1.35p per
share for the diluted net asset value.
11. Investment Properties
Fair value
At 30 June 2014
Additions
Fair value adjustment
Transfer to inventories
At 30 June 2015
Additions
Fair value adjustment
Transfer from/(to) inventories
At 30 June 2016
At 30 June 2015
At 30 June 2014
Commercial
properties
Level 3
£000
£000
—
—
—
—
—
854
111
—
965
—
—
Residential
properties
Level 3
£000
Development
land Level 3
£000
—
11,481
14,519
—
26,000
167
17,904
1,319
45,390
26,000
—
11,800
—
—
(3,800)
8,000
—
—
(2,650)
5,350
8,000
11,800
Total
£000
11,800
11,481
14,519
(3,800)
34,000
1,021
18,015
(1,331)
51,705
34,000
11,800
The different valuation method levels are defined below.
Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities;
Level 2: inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (i.e. as
prices) or indirectly (i.e. derived from prices); and
Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).
These levels are specified in accordance with IFRS 13 Fair Value Measurement. Our property valuation approach and process is
set out within the ‘Valuation and sensitivity’ section of this note below. Property valuations are inherently subjective as they are
made on the basis of assumptions made by the valuer which may not prove to be accurate. For these reasons we have classified
the investment property valuations as Level 3 as defined by IFRS 13.
25010 21 October 2016 5:10 PM Proof One
83
Inland Homes plc Annual Report and Accounts for the year ended 30 June 2016 www.inlandhomes.co.ukFINANCIALS Notes to the Group Financial Statements
for the year ended 30 June 2016
11. Investment Properties continued
The Group’s policy is to recognise transfers between fair value hierarchy levels as of the date of the event or change in
circumstances that caused the transfer. There have been no transfers during the period.
At 30 June 2016, the Group’s investment properties were valued at £51.7m (2015: £34.0m) and the historical costs were £13.0m
(2015: £12.3m).
During the year a decision was made to build 68 homes at Poole for sale to the public. Therefore, a transfer at a fair value of
£2.65m was made to inventories to reflect this decision.
Both the Poole and Wilton Park investment properties are pledged as security on borrowings.
Income and expense
During the year ended 30 June 2016 £642,000 (2015: £nil) rental and ancillary income from investment properties was recognised
in the Group Income Statement. Direct operating expenses, including repairs and maintenance, arising from investment property
that generated rental income amounted to £203,000 (2015: nil). The Group did not incur any direct operating expenses arising
from investment properties that did not generate rental income (2015: £nil).
Restrictions and obligations
At 30 June 2016 there were no restrictions on the realisability of investment property or the remittance of income and proceeds of
disposal (2015: £nil).
There are no obligations to construct or develop the Group’s residential or development land investment property. The Group has
an obligation to complete the construction of its commercial investment property that had commenced at the balance sheet date.
At 30 June 2016 contractual obligations to develop investment property amounted to £234,000 (2015: £nil).
Valuation and sensitivity
The Group’s residential investment properties were valued by an independent external valuer, Savills, on the basis of ‘open
market value’. The valuer used the comparable method of valuation involving analysing data obtained from local selling prices
for the entire portfolio, by property type. The valuation report included the following statement from the valuer highlighting the
potential future impact on property values of the result of the EU referendum: “The outcome of the Referendum on 23 June
2016 is now known - the United Kingdom will leave the European Union on terms and at a date which, as yet, are unknown. The
uncertainty around the outcome and the resulting decision to leave the Economic Union had led to general political and financial
uncertainty, the effect of which on the UK property market is as yet unclear. In view of this, we have less confidence than usual in
the probability of our valuation coinciding exactly with the price achieved were there a sale and recommend that our valuation is
kept under constant review. We also recommend that specific marketing advice is obtained should you wish to effect a disposal.”
If house prices fell by 5% this would result in a reduction in fair value of £2.3m.
The Group’s development property is carried at fair value which has been established by the Directors using an internal appraisal
model based on the ‘residual method’. The inputs for this model are the market value of units to be constructed in accordance
with the planning permission, the costs of any housebuilding, infrastructure, local authority fees and professional fees. The
market value of the units has been assumed to be at a similar level to the prices obtained by the Group on earlier phases of the
same development for similar property types. Housebuilding and infrastructure costs have been forecast using costs incurred
by the Group on this or other similar developments with an allowance for cost increases. Local authority fees were agreed at the
time of the signing of the planning permission and are therefore known costs. Professional fees are input using costs incurred on
similar projects and finance holding costs are the Group’s cost of debt capital. Using a profit margin of 20% this generated a land
value for the remaining site of £5.35m. The Directors are of the opinion that developing the site reflects the highest and best use
of this asset.
As a residual valuation model is used, if house prices were to fall by 5% this would result in a reduction in fair value of £1.3m in
order to maintain a profit margin of 20% on the development. If costs should increase by 5% this would result in a reduction in fair
value of £1.1m in order to maintain the required 20% profit margin.
The Group’s commercial property at Leighton Buzzard is carried at fair value which has been established by the Directors using a
rental yield of 6%. The annual rent used in this calculation is the subject of a lease with the Co-op. Costs to complete have been
deducted from the fair value along with a suitable developer’s margin.
If rental values dropped by 5% the value of this property would decrease by £58,000.
84
25010 21 October 2016 5:10 PM Proof One
2016ANNUAL REPORT AND ACCOUNTS 12. Property, Plant and Equipment
Group
Cost
At 30 June 2014
Additions
At 30 June 2015
Additions
Disposals
At 30 June 2016
Depreciation
At 30 June 2014
Depreciation charge
At 30 June 2015
Depreciation charge
Disposals
At 30 June 2016
Net book value
At 30 June 2016
At 30 June 2015
At 30 June 2014
No property, plant or equipment are pledged as security.
Company
Leasehold
property
£000
Motor
vehicles
£000
Office
equipment
£000
Fixtures and
fittings
£000
5
8
13
—
—
13
5
2
7
2
—
9
4
6
—
115
—
115
217
(25)
307
45
29
74
65
(23)
116
191
41
70
183
126
309
89
—
398
109
54
163
64
—
227
171
146
74
94
165
259
23
—
282
85
35
120
48
—
168
114
139
9
Cost
At 30 June 2014
Additions
At 30 June 2015
Additions
Disposals
At 30 June 2016
Depreciation
At 30 June 2014
Depreciation charge
At 30 June 2015
Depreciation charge
Disposals
At 30 June 2016
Net book value
At 30 June 2016
At 30 June 2015
At 30 June 2014
No property, plant or equipment are pledged as security.
25010 21 October 2016 5:10 PM Proof One
Total
£000
397
299
696
329
(25)
1,000
244
120
364
179
(23)
520
480
332
153
Leasehold
property
£000
—
8
8
—
—
8
—
1
1
2
—
3
5
7
—
85
Inland Homes plc Annual Report and Accounts for the year ended 30 June 2016 www.inlandhomes.co.ukFINANCIALS Notes to the Group Financial Statements
for the year ended 30 June 2016
13. Investments
Group
Cost or fair value
At 30 June 2014
Additions
Share of loss after tax
Fair value adjustment
Movement during the year to 30 June 2015
At 30 June 2015
Additions
Transfer to loans to joint ventures
Share of loss after tax
Movement during the year to 30 June 2016
Net book value
At 30 June 2016
At 30 June 2015
Company
Cost or fair value
At 30 June 2014
At 30 June 2015
Net book value
At 30 June 2016
At 30 June 2015
Option
£000
Investment in
associates
£000
Investment in
joint ventures
£000
541
—
—
(541)
(541)
—
—
—
—
—
—
—
—
—
—
—
—
—
251
—
(138)
113
113
—
—
1,623
(135)
—
1,488
1,488
202
(242)
(232)
(272)
1,216
1,488
Investment
in Group
undertakings
£000
12,472
12,472
12,472
12,472
Total
£000
541
1,623
(135)
(541)
947
1,488
453
(242)
(370)
(159)
1,329
1,488
Total
£000
12,472
12,472
12,472
12,472
On 18 December 2008, Inland entered into an Option and Development Services Agreement with DGVL which granted Inland
Limited an option for a consideration of £250,000 to purchase the share capital of DGVL at an exercise price of £1. The initial
period of the option was for one year from the date of the agreement and this could be extended on up to four occasions to a
maximum period of ten years by making further payments. During the years ended 30 June 2010, 2011, 2012, 2013 and 2014, the
option period was extended to expire on 15 January 2019 for a total consideration of £1,200,000. In accordance with the Group’s
accounting policy for financial assets, the option was measured at fair value at 30 June 2015, which resulted in a fair value loss
of £541,000. During the year ended 30 June 2016 the Group exercised the option. After the accumulated NCI (non-controlling
interests) was eliminated the Group recognised a surplus in the Statement of Changes in Equity of £120,000 on exercising the
option.
86
25010 21 October 2016 5:10 PM Proof One
2016ANNUAL REPORT AND ACCOUNTS 13. Investments continued
At 30 June 2016, the Company, directly or indirectly, held equity of the following:
Company name
Country of
registration
Principal activity
Holding and
voting rights
Class
of shares
Subsidiary undertakings
England & Wales
Inland Homes 2013 Limited
England & Wales
Inland Limited
England & Wales
Poole Investments Limited
England & Wales
Inland Housing Limited
England & Wales
Inland Finance Limited
England & Wales
Inland (Southern) Limited
England & Wales
Inland Homes (Essex) Limited
England & Wales
Inland Homes Developments Limited
England & Wales
Inland New Homes Limited
England & Wales
Exeter Road (Bournemouth) Limited
England & Wales
Inland ZDP plc
England & Wales
Inland Helix Limited
England & Wales
Inland Property Limited
England & Wales
Inland Commercial Limited
England & Wales
Drayton Developments Limited
England & Wales
Leighton Developments Limited
England & Wales
Chapel Riverside Developments Limited
England & Wales
Bucks Developments Limited
England & Wales
Wilton Park Developments Limited
Drayton Garden Village Limited
England & Wales
Basildon United Football, Sports & Leisure Limited England & Wales
Interests in joint ventures
10 Ant South Limited
Aston Clinton S.A.R.L.
Bucknalls Developments Limited
Inland (Stonegate) Limited
Project Helix Holdco Limited
Interests in associates
Troy Homes Limited
England & Wales
Luxembourg
England & Wales
England & Wales
England & Wales
England & Wales
Holding company
Real estate development
Real estate investment
Real estate development
Real estate development
Real estate development
Real estate development
Real estate development
Real estate development
Real estate development
Provision of finance
Real estate development
Real estate investment
Real estate investment
Real estate development
Real estate development
Real estate development
Real estate development
Real estate development
Real estate development
Sports club
Real estate investment
Real estate development
Real estate development
Real estate development
Holding company
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
50%
10%
50%
50%
20%
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Real estate development
25%
Ordinary
The joint ventures and associates listed above are accounted for using the equity method. Further details can be found in Critical
Judgements in note 3 and below.
There are no restrictions on the ability of the Parent Company or its subsidiaries to transfer cash or other assets to or from other
entities in the Group.
25010 21 October 2016 5:10 PM Proof One
87
Inland Homes plc Annual Report and Accounts for the year ended 30 June 2016 www.inlandhomes.co.ukFINANCIALS Notes to the Group Financial Statements
for the year ended 30 June 2016
13. Investments continued
Interests in subsidiary undertakings with significant non-controlling interests (NCI)
Drayton Garden Village Ltd
The Group has consolidated DGVL, a property development company based in the UK. In prior years the Group neither directly
nor indirectly owned any of the equity of that entity or had any voting rights. Further details of the relationship with DGVL can be
found in note 3. All the risks associated with DGVL were non-recourse to the Group. During the year ended 30 June 2016, the
Group acquired the share capital of DGVL for a consideration of £804,000 and, after the elimination of NCI, this resulted in a gain
of £120,000 recognised in the Statement of Changes in Equity. Set out below is the summarised financial information for DGVL,
as this subsidiary had non-controlling interests that were material to the Group in the prior year. Amounts disclosed are before
intercompany eliminations and therefore contain adjustments to recognise the Group’s profit share, lowering the profits within
the individual company to that of the non-controlling interest’s share only:
DGVL — Summarised statement of financial position
Current assets
Current liabilities
Current net assets
Non-current assets
Non-current liabilities
Non-current net liabilities
Net assets
Accumulated NCI
DGVL — Summarised statement of total comprehensive income
Revenue
Profit for the period
Total comprehensive income
Profit allocated to NCI
Dividends paid to NCI
DVGL — Summarised cash flow statement
Cash flows from operating activities
Cash flows from financing activities
Net increase in cash and cash equivalents
2016
£000
4,458
(1,239)
3,219
—
—
—
3,219
—
2016
£000
13,665
4,389
4,389
175
—
2016
£000
5,073
(5,054)
19
2015
£000
21,463
(11,884)
9,579
—
(1,973)
(1,973)
7,606
1,196
2015
£000
27,148
2,303
2,303
194
—
2015
£000
8,786
(8,685)
101
88
25010 21 October 2016 5:10 PM Proof One
2016ANNUAL REPORT AND ACCOUNTS 13. Investments continued
Bucks Developments Group
The Group has consolidated Bucks Developments Ltd (BDL) and its wholly owned subsidiary Wilton Park Developments Limited
(WPDL), a real estate investment group based in the UK. In prior years the Group neither directly nor indirectly owned any of the
equity of that group or had any voting rights. The Group had an option to purchase the site owned by WPDL and the rights to all
profits and cash flows generated by sales to the Group resided with the shareholder of that company. All the risks associated
with BDL and WPDL were non-recourse to the Group. During the year ended 30 June 2016 the Group acquired the share capital
of BDL. Set out below is the summarised financial information for BDL and WPDL, as these subsidiaries had non-controlling
interests that were material to the Group. Amounts disclosed are before intercompany eliminations:
Bucks Developments Group — Summarised statement of financial position
Current assets
Current liabilities
Current net assets
Non-current assets
Non-current liabilities
Non-current net assets
Net assets
Accumulated NCI
Bucks Developments Group — Summarised statement of total comprehensive income
Revenue
Profit for the period
Total comprehensive income
Profit/(loss) allocated to NCI
Dividends paid to NCI
Bucks Developments Group — Summarised cash flow statement
Cash flows from operating activities
Cash flows from financing activities
Net increase in cash and cash equivalents
2016
£000
19,711
(18,150)
1,561
5,254
(787)
4,467
6,028
—
2016
£000
619
3,572
3,572
424
—
2016
£000
588
(588)
—
2015
£000
21,958
(4,853)
17,105
—
(15,000)
(15,000)
2,105
(924)
2015
£000
18,010
2,105
2,105
(924)
—
2015
£000
514
(514)
—
25010 21 October 2016 5:10 PM Proof One
89
Inland Homes plc Annual Report and Accounts for the year ended 30 June 2016 www.inlandhomes.co.ukFINANCIALS Notes to the Group Financial Statements
for the year ended 30 June 2016
13. Investments continued
Interests in joint ventures
Aston Clinton S.A.R.L.
In November 2014, the Group acquired a 10% interest in Aston Clinton S.A.R.L (Lux) whose purpose is to acquire a site near
Aylesbury, Buckinghamshire, and obtain planning permission. The site has the potential for 400 residential plots. Under the
terms of the joint venture agreement, the Group has an obligation to fund 50% of the costs of the site and is entitled to receive
50% of the net returns. The Group has made a capital investment of £1,196,000, which is accounted for as an Investment in Joint
Ventures. The Group has also provided loans of £2,504,000 as at the balance sheet date, and this is accounted for as Amounts
due from Joint Ventures within Current Assets in the Group Statement of Financial Position. This investment is accounted for
using the equity method and further details of this can be found in Critical Judgements in note 3. Aston Clinton S.A.R.L. is based
in Luxembourg and their accounts are prepared under Luxembourg GAAP (Lux GAAP). £432,000 (to date: £578,000) recognised
as an operating expense under Lux GAAP in the Statement of Comprehensive Income has been reclassifed as inventories in
current assets in order to bring the accounts into line with IFRSs. Similarly £6.8m held as fixed assets under Lux GAAP has been
reclassified as inventories in current assets.
Aston Clinton S.A.R.L. — Summarised statement of financial position
Current assets
Cash and cash equivalents
Other current assets
Total current assets
Current liabilities
Financial liabilities (excluding trade payables and provisions)
Other current liabilities
Total current liabilities
Net assets
Reporting entity's share in %
Reporting entity's share in £000
Goodwill £000
Carrying amount at year end £000
Aston Clinton S.A.R.L. — Summarised statement of total comprehensive income
Revenue
Interest income
Interest charge
Income tax expense
Total comprehensive income
As at
30 June 2016
£000
As at
30 June 2015
£000
36
7,348
7,384
4,938
77
5,015
2,369
50%
1,185
12
1,197
8
7,084
7,092
4,428
52
4,480
2,612
50%
1,306
(65)
1,241
12 months to
30 June 2016
£000
8 months to
30 June 2015
£000
—
—
(272)
(1)
(273)
54
1
(191)
(5)
(141)
90
25010 21 October 2016 5:10 PM Proof One
2016ANNUAL REPORT AND ACCOUNTS 13. Investments continued
Project Helix Group
In December 2014, the Group entered into a joint venture with CPC Group Ltd (CPC) to purchase land, obtain planning permission
and ultimately sell the land. Under the terms of the joint venture, the Group owns 20% of the share capital and is obliged to fund
20% of the costs of the sites acquired by the joint venture. A ‘waterfall’ calculation determines the amount of profit to be received
by the Group, using performance hurdles. Along with the Group’s capital investment of £600, £3,902,000 of loans have been
provided, which is accounted for as Amounts due from Joint Ventures within Current Assets in the Group Statement of Financial
Position. This investment is accounted for using the equity method and further details of this can be found in Critical Judgements
in note 3. Project Helix is based at the Company’s registered office. Project Helix purchased land in Ashford, Middlesex for
£12.9m, £3.3m of which was deferred and outstanding at 30 June 2016. Under the terms of the joint venture agreement the Group
must fund £660,000 of this amount. The results below are for both Project Helix Holdco Ltd and its subsidiary undertakings: High
Wycombe Developments Ltd; High Wycombe Developments No. 2 Ltd; and Brooklands Helix Developments Ltd.
Project Helix Group — Summarised statement of financial position
Current assets
Cash and cash equivalents
Other current assets
Total current assets
Current liabilities
Financial liabilities (excluding trade payables and provisions)
Other current liabilities
Total current liabilities
Net liabilities
Reporting entity's share in %
Reporting entity's share in £000
Goodwill in £000
Carrying amount at year end in £000
Project Helix Group — Summarised statement of total comprehensive income
Revenue
Operating expenses
Shareholder interest
Total comprehensive income
As at
30 June 2016
£000
As at
30 June 2015
£000
148
22,659
22,807
3,325
19,819
23,144
(337)
20%
(67)
68
1
105
5,605
5,710
5,648
62
5,710
—
20%
—
247
247
12 months to
30 June 2016
£000
8 months to
30 June 2015
£000
84
(33)
—
51
—
(4)
(173)
(177)
25010 21 October 2016 5:10 PM Proof One
91
Inland Homes plc Annual Report and Accounts for the year ended 30 June 2016 www.inlandhomes.co.ukFINANCIALS Notes to the Group Financial Statements
for the year ended 30 June 2016
13. Investments continued
Bucknalls Developments Ltd
In December 2015, the Group entered into a joint venture with two individuals to purchase land, obtain planning permission and
develop approximately 100 homes in Garston, Hertfordshire. Under the terms of the joint venture, the Group owns 50% of the
share capital, is obliged to fund 50% of the costs of the site and is entitled to receive a management fee and 50% of the returns.
Along with the Group’s capital investment of £19,000, loans of £2,680,000 have been provided which are accounted for as Amounts
due from Joint Ventures within Current Assets in the Group Statement of Financial Position. This investment is accounted for
using the equity method and further details of this can be found in Critical Judgements in note 3. Bucknalls Developments Ltd is
based at the Company’s registered office.
Bucknalls Developments Ltd — Summarised statement of financial position
Current assets
Cash and cash equivalents
Other current assets
Total current assets
Current liabilities
Financial liabilities (excluding trade payables and provisions)
Other current liabilities
Total current liabilities
Net liabilities
Reporting entity's share in %
Reporting entity's share in £000
Goodwill in £000
Carrying amount at year end in £000
Bucknalls Developments Ltd — Summarised statement of total comprehensive income
Revenue
Operating expenses
Interest
Income tax expense
Total comprehensive income
As at
30 June 2016
£000
—
8,318
8,318
8,258
72
8,330
(12)
50%
(6)
25
19
7 months to
30 June 2016
£000
—
(1)
(11)
—
(12)
92
25010 21 October 2016 5:10 PM Proof One
2016ANNUAL REPORT AND ACCOUNTS 13. Investments continued
Inland (Stonegate) Ltd
In June 2016, the Group entered into a joint venture whose purpose is to acquire a site in Cheshunt, Hertfordshire, obtain planning
permission and ultimately sell the land. The site has the potential for 750 residential plots. Under the terms of the joint venture
agreement, the Group has an obligation to fund 50% of the costs of the site and is entitled to receive 50% of the net returns. The
Group has made a capital investment of £1 as at 30 June 2016, which is accounted for as an Investment in Joint Ventures. Funds
of £1,017,000 have also been forwarded and are accounted for as Amounts due from Joint Ventures on the Group Statement
of Financial Position. At 30 June 2016 Inland (Stonegate) Ltd had exchanged contracts to purchase the site in Cheshunt. After
procuring a loan secured on the site to partially fund the completion, under the terms of the joint venture agreement the Group
was liable to provide a further loan of £5m. As at the date of the signing of these financial statements this amount had been paid.
This investment is accounted for using the equity method and further details of this can be found in Critical Judgements in note 3.
Inland (Stonegate) Ltd — Summarised statement of financial position
Current assets
Cash and cash equivalents
Other current assets
Total current assets
Current liabilities
Financial liabilities (excluding trade payables and provisions)
Other current liabilities
Total current liabilities
Net liabilities
Reporting entity's share in %
Reporting entity's share in £000
Goodwill in £000
Carrying amount at year end in £000
Inland (Stonegate) Ltd — Summarised statement of total comprehensive income
Revenue
Operating expenses
Interest
Income tax expense
Total comprehensive income
25010 21 October 2016 5:10 PM Proof One
As at
30 June 2016
£000
—
31,642
31,642
30,017
1,625
31,642
—
50%
—
—
—
1 month to
30 June 2016
£000
—
—
—
—
—
93
Inland Homes plc Annual Report and Accounts for the year ended 30 June 2016 www.inlandhomes.co.ukFINANCIALS Notes to the Group Financial Statements
for the year ended 30 June 2016
13. Investments continued
Interests in Associates
Troy Homes Ltd
In October 2015 the Group acquired 25% of Troy Homes Ltd (Troy), a new premium housebuilder, and is entitled to 25% of the
net returns. At 30 June 2016 the Group had made a capital investment of £74,000 and had provided loans of £894,000 which
are accounted for as Loans to Associates within Non-Current Assets in the Group Statement of Financial Position. The Group
has subscribed to a further £2.1m of loan notes and £1.25m of share capital which are payable when called for by the board of
Troy. The Group has also sold 2 sites amounting to £2.8m on deferred terms to Troy during the year. There is a debtor of £3.4m
(including VAT) in relation to these transactions in Amounts due from Associates within Current Assets. This investment is
accounted for using the equity method, further details of which can be found in the accounting policies.
Troy Homes Ltd — Summarised statement of financial position
Non-current assets
Tangible assets
Total non- current assets
Current assets
Cash and cash equivalents
Other current assets
Total current assets
Total assets
Current liabilities
Financial liabilities (excluding trade payables and provisions)
Other current liabilities
Total current liabilities
Net assets
Reporting entity's share in %
Reporting entity's share in £000
Negative goodwill in £000
Carrying amount at year end in £000
Troy Homes — Summarised statement of total comprehensive income
Revenue
Operating expenses
Interest
Income tax
Total comprehensive income
As at
31 March 2016
£000
37
37
111
10,367
10,478
10,515
9,475
637
10,112
403
25%
101
(27)
74
5 months to
30 June 2016
£000
—
(539)
(152)
138
(553)
94
25010 21 October 2016 5:10 PM Proof One
2016ANNUAL REPORT AND ACCOUNTS 14. Deferred Tax
Group
The net movement on the deferred tax account is as follows:
At 1 July 2015
Income statement charge
At 30 June 2016
The movement in deferred tax assets is as follows:
At 1 July 2015
(Charged)/credited to income statement
At 30 June 2016
Capital losses
recognised on
revaluation
gain
£000
2,797
2,320
5,117
Revaluation
gain
£000
(2,797)
(3,107)
(5,904)
Other
£000
(148)
250
102
Share-based
compensation
£000
406
133
539
Notional
interest on
deferred
consideration
£000
290
194
484
£000
548
(210)
338
Total
£000
548
(210)
338
Deferred income tax assets are recognised for tax losses carried forward to the extent that the realisation of the related tax
benefit through future taxable profits is probable. The Group has capital losses amounting to £10,702,000 (2015: £24,783,000) that
have not been recognised as the Directors consider the realisation of the losses is not expected to crystallise in the future.
Company
The net movement on the deferred tax account is as follows:
At 1 July 2015
Income statement credit on share based charge
At 30 June 2016
15. Inventories
Stock and work in progress
£000
406
133
539
2016
£000
146,825
2015
£000
121,031
During the year, a total of £72,329,000 (2015: £79,841,000) of inventories was included in the Group Income Statement as an expense.
The Group conducted a review of the net realisable value of its land bank in view of current market conditions. Where the estimated
future net realisable value of the site is less than the carrying value within the Group Statement of Financial Position, the Group has
impaired the land value. This has resulted in an impairment of £95,000 (2015: £300,000). The amount of loans and ZDP borrowings
secured against inventory is £85.4 million (2015: £64.3 million).
25010 21 October 2016 5:10 PM Proof One
95
Inland Homes plc Annual Report and Accounts for the year ended 30 June 2016 www.inlandhomes.co.ukFINANCIALS Notes to the Group Financial Statements
for the year ended 30 June 2016
16. Trade and Other Receivables
Trade receivables
Prepayments and accrued income
Amounts due from associates
Amounts due from joint ventures
Other receivables
Amounts owed by Group undertakings
VAT debtor
Corporation tax debtor
Loans to associates due in more than one year
Loans to joint ventures due in more than one year
Other receivables due in more than one year
2016
£000
3,506
895
3,372
10,103
2,415
—
—
—
894
—
55
21,240
Group
Company
2015
£000
167
656
—
—
7,175
—
—
—
—
3,246
55
11,299
2016
£000
—
37
—
—
1,149
38,783
—
338
—
—
—
40,307
2015
£000
—
57
—
—
302
34,947
30
152
—
—
—
35,488
The carrying value of trade and other receivables is considered a reasonable approximation of fair value. The Directors have made
a provision of £1.1m against a debtor relating to a contractor who has been placed into Administration as shown in the Group
Income Statement. Further details can be found in note 23. No other trade receivables are considered to be impaired. There were
no unimpaired trade receivables past due at the reporting date.
Within other receivables is £309,000 (2015: £383,000) relating to retentions receivable from construction contracting clients.
Within prepayments and accrued income is £10,000 (2015: £nil) relating to income accrued on a construction contract.
At the balance sheet date, the Group has provided loans of £2,504,000 to Aston Clinton S.A.R.L. as shown in note 13.
At the balance sheet date, the Group has provided loans of £3,902,000 to Project Helix as shown in note 13.
At the balance sheet date, the Group has provided loans of £2,680,000 to Bucknalls Developments Ltd as shown in note 13.
At the balance sheet date, the Group has provided loans of £1,017,000 to Inland (Stonegate) Ltd as shown in note 13.
At the balance sheet date, the Group has provided loans of £894,000 to Troy Homes Ltd and was due £3,372,000 for the sale of 2
sites as shown in note 13.
17. Listed Investments Held at Fair Value Through Profit and Loss
Group & Company
At 1 July 2015
Movements during the year
At 30 June 2016
18. Cash and Cash Equivalents
Cash at bank and in hand
£000
1
—
1
Group
Company
2016
£000
2015
£000
2016
£000
2015
£000
16,723
21,377
10,826
21,020
96
25010 21 October 2016 5:10 PM Proof One
2016ANNUAL REPORT AND ACCOUNTS 2016
£000
2015
£000
23,999
1
—
1,200
25,200
2016
£000
20,280
1
—
20,281
23,999
1
—
1,200
25,200
2015
£000
20,280
1
—
20,281
2015
£000
1,029
—
1,029
19. Share Capital Group & Company
Authorised
239,990,000 (2015: 239,990,000) ordinary shares of 10p each
9,800 (2015: 9,800) redeemable shares of 10p each
180 (2015: 180) deferred shares of 10p each
12,000,000 (2015: 12,000,000) ZDP shares of 10p each
Allotted, issued and fully paid — ordinary, redeemable and deferred shares
202,799,432 (2015: 202,799,432) ordinary shares of 10p each
9,800 (2015: 9,800) redeemable shares of 10p each
180 (2015: 180) deferred shares of 10p each
Allotted, issued and fully paid — ZDP shares
At 1 July
Issued for cash during the year
At 30 June
2016
Number
10,285
1,028
11,313
2016
£000
2015
Number
1,029
103
1,132
10,285
—
10,285
Ordinary shares
Each share has the right to one vote and is entitled to participate in any distribution made by the Company, including the right to
receive a dividend.
Deferred shares
Deferred shares shall not confer the right to be paid a dividend or to receive notice of or attend or vote at a general meeting. On a
winding-up, after the distribution of the first £10,000,000 of the assets of the Company, the holders of the deferred shares (if any)
shall be entitled to receive an amount equal to the nominal value of such deferred shares pro rata to their respective holdings.
ZDP shares
The ZDP shares carry no entitlement to any dividends or other distributions or to participate in the revenue or any other profits of the
company. The ZDP shareholders have no right to receive notice of, or to attend or vote at, any general meeting of the company except
in those circumstances set out in the Inland ZDP plc’s Articles of Association, which would be likely to affect their rights or general
interests.
The Group’s Employee Benefit Trust purchased 643,216 shares on 29 October 2014 and a further 383,850 shares on 20 December
2015 in Inland Homes plc under the terms of the Long Term Incentive Plan. This is a separate entity which is consolidated in the
Group’s financial statements.
The Company operates an unapproved share option scheme. Awards under each scheme are made periodically to employees. Share
options vest three years after the date of grant and have an exercise period of seven years from the date of vesting. The schemes
are all equity-settled. The Company has used the Black-Scholes formula to calculate the fair value of outstanding share options and
deferred shares. The assumptions applied to the Black-Scholes formula for share options issued and the fair value per option are
detailed in the table below for options issued in the current and prior year.
25010 21 October 2016 5:10 PM Proof One
97
Inland Homes plc Annual Report and Accounts for the year ended 30 June 2016 www.inlandhomes.co.ukFINANCIALS Notes to the Group Financial Statements
for the year ended 30 June 2016
19. Share Capital continued
The Company also operates a long term incentive plan (2013 LTIP) for the Executive Directors. Further details of this can be
found in the Directors’ Remuneration Report. The Company has used the Monte Carlo simulation technique to determine the fair
value of the grant of the awards as the outcome of the performance targets depends on the Parent Company’s share price. The
assumptions applied to the Monte Carlo simulation and the fair value per Growth Share are detailed in the table below for any
Growth Shares issued in the current or prior year.
Expected life of options based on options exercised to date
Volatility of share price
Dividend yield
Risk free interest rate
Share price at date of grant
Exercise price
Fair value per option
Unapproved
share options
2014/15 grant
3 years
30%
2%
2.25%
70.25p
70.25p
£0.07
Volatility was calculated using historical share price information. No share options or Growth Shares were issued in the current
year. No Growth Shares were issued in the prior year.
The charge calculated for the year ended 30 June 2016 is £665,000 (2015: £625,000) with a corresponding deferred tax asset at
that date of £133,000 (2015: £126,000).
Volatility was assessed using the closing prices on the first business day of each month over the period since the shares have
been listed.
A reconciliation of option movements over the year ended 30 June 2016 is shown below:
Outstanding at 30 June 2014
Granted during the year
Outstanding at 30 June 2015
Granted during the year
Outstanding at 30 June 2016
Exercisable at 30 June 2016
Exercisable at 30 June 2015
Weighted
average
exercise price
pence
26.18p
70.25p
30.61p
—
30.61p
20.57p
16.74p
Number
000s
3,670
410
4,080
—
4,080
3,670
3,120
In addition to the share options in the above table, there were 11,350,504 ordinary shares exchangeable for the Growth Shares
outstanding, issued in December 2013, that do not have an exercise price but are subject to vesting conditions. Further details
can be found in the remuneration report on pages 56-59.
At 30 June 2016, outstanding share options granted over 10p ordinary shares were as follows:
Share option scheme
Company unapproved
Company unapproved
Company unapproved
Company unapproved
Company unapproved
Company unapproved
Option price
pence
50.0p
16.5p
18.25p
17.5p
32.5p
70.25p
Number
Dates exercisable
710,000
28 March 2010 to 27 March 2017
605,000 17 December 2012 to 16 December 2019
1,500,000 22 November 2013 to 21 November 2020
25 June 2015 to 24 June 2022
18 June 2016 to 17 June 2023
22 June 2018 to 21 June 2025
305,000
550,000
410,000
The weighted average remaining life of share options outstanding at 30 June 2016 is four and a half years.
Further details of the share options can be found in the remuneration report on pages 56-59.
98
25010 21 October 2016 5:10 PM Proof One
2016ANNUAL REPORT AND ACCOUNTS 20. Non-Controlling Interests (minority interests)
The movement in the non-controlling interests is presented below.
Balance at 1 July 2015
Non-controlling interests in the net result for the year
Purchase of non-controlling interests' share of subsidiaries
Balance as at 30 June 2016
WPDL
£000
924
(424)
(500)
—
DGVL
£000
(1,196)
(175)
1,371
—
Further information on the arrangements with these companies can be found in notes 3 and 13.
21. Trade and Other Payables
Trade payables
Other creditors
Social security, other taxes and VAT
Corporation tax
Provisions
Accruals and deferred income
Other creditors falling due in more than one year
Group
Company
2016
£000
3,871
4,687
3,770
7,618
943
5,385
2,679
28,953
2015
£000
4,425
3,675
3,802
6,347
—
2,960
—
21,209
2016
£000
—
58
312
—
—
190
—
560
Total
£000
(272)
(599)
871
—
2015
£000
70
60
—
—
—
246
—
376
The carrying value of trade and other payables is considered to be a reasonable approximation of fair value.
22. Other Financial Liabilities
Purchase consideration on inventories falling due within one year
Purchase consideration on inventories falling due in more than one year
Zero Dividend Preference shares
2016
£000
22,369
—
14,607
36,976
2015
£000
10,881
12,629
12,372
35,882
The ZDP shares will be repaid on or before 10 April 2019. An explanation of the fair value of the ZDP shares is included in note 26.
23. Contingencies
During the year ended 30 June 2016, one of the Group’s principal contractors (“the contractor”) experienced significant financial
difficulties and was put into Administration. The Group has made a claim to the contractor’s Administrators for £7.2m in relation
to amounts it believes it is owed by the contractor. A counter proposal for £11.6m has been received from the Administrators
for various unexplained reasons, based on discussions with the contractor. The Administrators have not provided any evidence
to support the contractor’s claims and the Group will be vigorously defending any claims from the contractor as it believes that
contractually they have no merit.
Inland Homes plc has guaranteed the obligations of certain borrowings of its subsidiaries.
Inland Homes plc has guaranteed the build performance obligations of Inland Limited on a contract with a housing association. In
the Directors’ opinion there is unlikely to be any cash outflow in relation to this.
Inland Homes plc has guaranteed the obligations of one of its joint venture companies on a payment of deferred land
consideration. A counter indemnity was obtained from the Group’s joint venture partner.
Inland Homes plc has guaranteed the obligations of Poole Investments Limited on its commitments to its associate company,
Troy Homes Limited.
No provisions have been made in these financial statements in respect of these contingent liabilities.
25010 21 October 2016 5:10 PM Proof One
99
Inland Homes plc Annual Report and Accounts for the year ended 30 June 2016 www.inlandhomes.co.ukFINANCIALS Notes to the Group Financial Statements
for the year ended 30 June 2016
24. Commitments & Leases
Operating lease commitments where the Group is the lessor
The Group lets houses, commercial properties and land under non-cancellable operating lease agreements to third parties. The
leases have varying terms, escalation clauses and renewal rights.
The future aggregate minimum lease receipts under non-cancellable operating leases for the Company’s properties are as
follows:
Due in less than one year
Due later than one year and not later than five years
Due later than five years
2016
£000
1,158
1,843
1,543
4,544
2015
£000
398
1,319
1,167
2,884
Operating lease commitments where the Group is the lessee
The Group leases an office and some plant and machinery under non-cancellable operating lease agreements. The leases have
varying terms, escalation clauses and renewal rights.
The future aggregate minimum lease payments under non-cancellable operating leases for the Company’s premises and plant
and machinery are as follows:
Due in less than one year
Due later than one year and not later than five years
2016
£000
134
260
394
2015
£000
134
395
529
The Company has a rental contract for the registered office at Decimal Place, Chiltern Avenue, Amersham, Buckinghamshire,
HP6 5FG dated 10 July 2014. This contract has a non-cancellable term of five years, with an annual rent of £127,000.
Joint ventures & associates
Aston Clinton S.A.R.L. — the Group is committed to contributing 50% of all costs. From the date of signing of the financial
statement, the Group expects further contributions to be minimal.
Project Helix — the Group is committed to contributing 20% of all costs. The initial agreement has a limit of £41.25m and Inland
would be liable for £8.25m, including what has already been paid.
Bucknalls Developments Ltd — the Group is committed to contributing 50% of all costs. The agreement allowed for the land
purchase to be funded equally by each side and a contribution of £75,000 from the Group’s join venture partners towards planning
costs. The Group is committed to fund anything over this amount, until the site becomes income generating. From the date
of the signing of the financial statements, the Group expects to contribute a further £200,000 towards planning costs before
construction begins. It is anticipated that construction will be funded by a bank loan.
Inland (Stonegate) Ltd — the Group is committed to contributing 50% of all costs. Since 30 June 2016 the Group has contributed a
further £5.6m and expects to fund a further £1.6m before receipt of a planning permission.
Troy Homes Ltd — the Group has subscribed to a further £2.1m of loan notes and £1.0m of share capital which are payable when
called for by the board of Troy.
100
25010 21 October 2016 5:10 PM Proof One
2016ANNUAL REPORT AND ACCOUNTS 25. Capital Management Policies and Procedures
The Group’s objectives when managing capital are:
• to safeguard its ability to continue as a going concern, so that it can continue to provide returns for shareholders and benefits
for other stakeholders; and
• to ensure sufficient liquid resources are available to meet the funding requirement of its projects and to fund new projects
where identified.
This is achieved through ensuring sufficient bank and other facilities are in place; further details are given in note 26 to the
Group accounts. The Group monitors capital on the basis of the carrying amount of the equity less cash and cash equivalents as
presented on the face of the Group Statement of Financial Position.
The movement in the capital to overall financing ratio is shown below. The target capital to overall financing ratio has been set by
the Directors at 40% and results over this amount are considered to be a good performance against the target.
Equity
Less: cash and cash equivalents
Equity
Borrowings
Overall financing
Capital to overall financing
2016
£000
116,032
(16,723)
99,309
2016
£000
116,032
71,287
187,319
53.0%
2015
£000
88,797
(21,377)
67,420
2015
£000
88,797
56,288
145,085
46.5%
The Group manages the capital structure and makes adjustments in light of changes in economic conditions and the risk
characteristics of the underlying assets. In order to maintain or adjust the capital structure, the Group may adjust the level of
dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt.
Every quarter the Group must report to the ZDP shareholders that the covenants attached to the ZDP shares have not been
breached. The most significant covenant is the gearing ratio which is calculated as adjusted gross assets:financial indebtedness.
This covenant is monitored on a bi-monthly basis by the Board and has not been breached at any time. Further details can be
found in the Inland ZDP Prospectus on the Company’s website at www.inlandhomes.co.uk/inland-zdp-plc.
26. Financial Instruments
Financial risk management
The Group’s activities expose it to a variety of financial risks: credit risk; liquidity risk; and interest rate risk. The Group’s overall
risk management programmes focus on the unpredictability of financial markets and seek to minimise potential adverse effects
on the Group’s financial performance.
Risk management is carried out centrally under policies approved by the Board of Directors.
(a) Credit risk
The Group has no significant concentrations of credit risk other than its loans to joint ventures which are adequately covered by
the underlying values of the assets within the joint ventures. Further information can be found in notes 13 and 16. It has policies
in place to ensure that sales of products and services are made to customers with an appropriate credit history.
25010 21 October 2016 5:10 PM Proof One
101
Inland Homes plc Annual Report and Accounts for the year ended 30 June 2016 www.inlandhomes.co.ukFINANCIALS Notes to the Group Financial Statements
for the year ended 30 June 2016
26. Financial Instruments continued
The Group’s exposure to credit risk is limited to the carrying amount of financial assets recognised at the year end date, as
summarised below:
Classes of financial assets — carrying amounts
Cash and cash equivalents
Loans to joint ventures due in more than one year
Loans to associates due in more than one year
Amounts due from joint ventures in less than one year
Amounts due from associates in less than one year
Receivables due in more than one year
Trade and other receivables
2016
£000
2015
£000
16,723
—
894
10,103
3,372
55
5,921
37,068
21,377
3,246
—
—
—
55
7,342
32,020
The Group’s policy is to deal with creditworthy counterparties.
The Group’s management considers that all the above financial assets for each of the reporting dates under review are of
good credit quality. The Directors consider that none of the receivables are past due or impaired. Further information on the
concentration of credit risk can be found in note 16 on page 96.
The credit risk for liquid funds and other short term financial assets is considered negligible, since the counterparties are
reputable banks with high quality credit ratings.
(b) Liquidity risk
Prudent liquidity risk management implies maintaining sufficient cash balances and ensuring availability of funding through an
adequate amount of credit facilities. The Group aims to maintain flexibility in funding by keeping credit lines available. The Group
also purchases property under deferred consideration arrangements.
(c) Interest rate risk
The Group’s interest rate risk arises from long term borrowings. Borrowings issued at variable rates expose the Group to risk.
Most of the Group’s borrowings are at variable rates.
Market rate sensitivity analysis
The analysis below shows the sensitivity of the Group Income Statement and net assets to a 0.5 per cent change in interest rate
on the Group’s financial instruments that are affected by market risk. These financial instruments consist solely of borrowings.
Total impact on pre-tax profit and equity of 0.5 per cent increase in interest rates — loss
Total impact on pre-tax profit and equity of 0.5 per cent decrease in interest rates — gain
2016
£000
(35)
35
2015
£000
(16)
16
Financial assets & liabilities
The carrying amounts presented in the Statement of Financial Position relate to the following categories of assets and liabilities:
Financial assets
Listed investments held for trading
Loans and receivables
Trade and other receivables
Cash and cash equivalents
Financial liabilities
Financial liabilities measured at amortised cost:
— current borrowings
— trade and other payables
— Zero Dividend Preference shares
— other financial liabilities
102
25010 21 October 2016 5:10 PM Proof One
Note
17
16
18
21
22
22
2016
£000
1
20,345
16,723
37,068
56,680
15,007
14,607
22,369
108,663
2015
£000
1
10,643
21,377
32,020
43,916
11,902
12,372
23,510
91,700
2016ANNUAL REPORT AND ACCOUNTS 26. Financial Instruments continued
The fair values are presented in the related notes.
Current borrowings consist of housebuilding loan facilities of £25.5m, of which £15.7m (2015: £9.4m) is drawn down, and further
loans of £22.1m (2015: £19.0m) secured against land and £18.9m (2015: £15.5m) against investment properties. The loans attract
interest at varying rates and there is a variety of fixed and variable rates. The table below analyses current borrowings into maturity
groupings based on the remaining period at the Statement of Financial Position date to the loan redemption date, also split between
variable and fixed rates of interest:
Less than one year
More than one year and less than two
More than two years and less than five
2016
2015
Variable rate
borrowings
£000
105
105
14,029
14,239
Fixed rate
borrowings
£000
40,040
2,401
—
42,441
Variable rate
borrowings
£000
1,850
—
—
1,850
Fixed rate
borrowings
£000
42,066
—
—
42,066
The table below analyses the Group’s financial contractual liabilities into relevant maturity groupings based on the remaining
period at the Statement of Financial Position date to the contractual maturity date. The amounts disclosed are the contractual
undiscounted cash flows.
Less than one year
More than one year and less than five
Trade, other
payables &
borrowings
£000
52,679
19,535
72,214
2016
Zero Dividend
Preference
shares
£000
—
17,637
17,637
Purchase
consideration
£000
23,799
—
23,799
Trade, other
payables &
borrowings
£000
71,687
—
71,687
2015
Zero Dividend
Preference
shares
£000
—
16,034
16,034
Purchase
consideration
£000
11,428
15,000
26,428
The ZDP shares are carried at their accrued value of 129.12p per share (2015: 120.20p) however their closing price on the main
market of the London Stock Exchange on 30 June 2016 was 139.00p (2014: 132.75p). The ZDP shares attract an interest rate of
7.3%.
Financial assets and liabilities are measured at fair value in the Group Statement of Financial Position in accordance with the fair
value hierarchy. This hierarchy groups financial assets and liabilities into three levels, based on the significance of inputs used in
measuring the fair value of the financial assets and liabilities. The fair value hierarchy has the following levels:
Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities;
Level 2: inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (i.e. as
prices) or indirectly (i.e. derived from prices); and
Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).
The level within which the financial asset or liability is classified is determined based on the lowest level of significant input to the
fair value measurement.
The financial assets and liabilities measured at fair value in the Group Statement of Financial Position are grouped into the fair
value hierarchy as follows:
Assets
Net fair value at 30 June 2015
Fair value adjustments during the year
Net fair value at 30 June 2016
The financial assets carried at fair value consist of listed investments.
Level 1
£000
1
—
1
Level 2
£000
—
—
—
Level 3
£000
—
—
—
Total
£000
1
—
1
25010 21 October 2016 5:10 PM Proof One
103
Inland Homes plc Annual Report and Accounts for the year ended 30 June 2016 www.inlandhomes.co.ukFINANCIALS Notes to the Group Financial Statements
for the year ended 30 June 2016
27. Related Party Transactions
During the year the Group entered into three new joint ventures, all of which are considered to be material. The Group’s share of
the net assets and net results of these joint ventures can be found in note 13. Further information on loans to joint ventures can
be found in note 16.
During the year the beneficial interests of the Directors in the ordinary share capital of the Company received dividends as
follows:
Stephen Wicks
Nishith Malde
Paul Brett
Terry Roydon
Simon Bennett
2016
£000
200
158
49
5
2
2015
£000
97
68
21
2
1
For details of compensation paid to the Directors and key management please see the Remuneration Report and note 6.
• Mr A K Brett, the former shareholder of DGVL, had previously provided a loan to DGVL of £250,000 (2015: £250,000) which
attracts interest at a rate of 4.5%. This has been repaid during the year.
• DGVL had previously provided a loan of £461,000 to Mr S D Wicks (2015: £461,000). This has been repaid during the year.
• DGVL had previously provided a loan of £848,000 (2015: £848,000) to First Place Nurseries Limited, a company in which Mr N
Malde and Mr S D Wicks are shareholders. This has been repaid during the year.
• DGVL had previously provided a loan of £1,442,000 (2015: £1,442,000) to a subsidiary of Energiser Investments plc, a company
in which Mr N Malde and Mr S D Wicks are shareholders and directors. This loan attracted interest of 10% per annum and as
at 30 June 2016 £357,000 (2015: £229,000) remains outstanding which relates to accrued interest. This loan was for a specific
project and the Directors consider the interest rate to be market rate for this type of project.
• DGVL has provided a loan of £647,000 (2015: £723,000) to a subsidiary of Energiser Investments plc, a company in which Mr N
Malde and Mr S D Wicks are shareholders and directors. This loan attracts interest of 4.5% per annum and as at 30 June 2016
£174,000 (2015: £114,000) has been accrued and remains unpaid. The Directors consider the interest rate to be market rate.
28. Events after the Balance Sheet Date
On 23 September 2016 Inland ZDP plc, a wholly owned subsidiary of the Group, issued 1,131,000 new zero dividend preference
shares of 10 pence each at a price of 139 pence each. They were admitted to trading on the London Stock Exchange plc’s main
market on 28 September 2016. Net proceeds of this issue were approximately £1.52m.
On 24 August 2016 the Group entered into a new five year, £27m facility with Secure Trust Bank plc secured against some the
Group’s properties. This repaid a loan of £18.9m from another UK bank.
On 23 August 2016 the Group entered into a new five-year, revolving credit facility of up to £25 million with a fund to be secured on
sites without planning permission. Part of this facility has been used to repay individual loans previously provided by this fund.
29. Company Information
The Company is a public limited company registered in England and Wales. The registered office and principal place of business
is Decimal Place, Chiltern Avenue, Amersham, Buckinghamshire HP6 5FG.
The principal activity of the Group is to acquire residential and mixed use sites and seek planning consent for development. The
Group develops a number of the plots for private sale and sells consented plots to housebuilders.
104
25010 21 October 2016 5:10 PM Proof One
2016ANNUAL REPORT AND ACCOUNTS Advisers and Company Information
Financial PR Consultants
FTI Consulting
200 Aldersgate
Aldersgate Street
London
EC1A 4HD
Registrar
Capita Registrars
The Registry
34 Beckenham Road
Beckenham
Kent, BR3 4TU
Inland Homes plc
Registered office and website
Decimal Place
Chiltern Avenue
Amersham
Buckinghamshire, HP6 5FG
Tel: 01494 762450
Fax: 01494 765897
Email: info@inlandplc.com
Company registration number
5482990
Company Secretary
Nishith Malde FCA
Nominated adviser and broker
Stifel Nicolaus Europe Ltd
7th Floor
One Broadgate
London, EC2M 2QS
Solicitor
Dorsey & Whitney LLP
199 Bishopsgate
London, EC2M 3UT
Auditor
BDO LLP
Chartered Accountants
Statutory Auditor
55 Baker Street
London
W1U 7EU
Banker
Barclays Bank plc
Fourth Floor
Apex Plaza
Forbury Road
Reading
Berkshire, RG1 1AX
25010 24 October 2016 10:23 AM Proof One
105
SHAREHOLDER INFORMATIONInland Homes plc Annual Report and Accounts for the year ended 30 June 2016 www.inlandhomes.co.uk I
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Inland Homes plc
Decimal Place
Chiltern Avenue
Amersham
Buckinghamshire
HP6 5FG
T: 01494 762450
F: 01494 765897
E: info@inlandplc.com
www.inlandhomes.co.uk
25010 24 October 2016 8:58 AM Proof One