Inland
homes
Inland
homes
BREATHING LIFE INTO LAND
Annual Report and Accounts for the year ended 30 June 2018
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Welcome to Inland Homes plc
Strategic report
Year in summary
A focused portfolio
Chairman’s statement
Chief Executive’s review
Key aspects of our marketplace
Our agile business model
Our strategy
Our KPIs
Our principal risks
Portfolio review
Church Road, Ashford case study
Finance Director’s review
Corporate and Social Responsibility
Chapel Riverside, Southampton case study
Governance
Board of Directors
Corporate Governance statement
Remuneration Committee report
Audit Committee report
Directors’ report
Financial statements
Independent Auditor’s report
Group income statement
Statements of financial position
Statements of changes in equity
Group statement of cash flows
Notes to the financial statements
Five year summary
List of definitions
Advisers and company information
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Welcome to
Inland Homes plc
Who we are
Inland Homes is an established land regeneration business, focused on developing
sites in the South and South-East of 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
maximising the potential of the final development.
Our versatile structure, 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 and planning teams, means that we are able to
secure a valuable planning consent for the sites we own and manage.
We have a clear and agile business model giving us the flexibility to realise value in the
land bank through consented plot sales, private housebuilding, Partnership Housing
deals with Registered Providers and Private Rented Sector operators or rental income
from investment property. Our ambitious developments, combining style, comfort and
sustainability for a wide social demographic, deliver appropriate rewards for our business,
our shareholders and stakeholders, 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.
Our highly experienced management and specialist development teams successfully
identify and secure suitable land opportunities and thereafter maximise each project’s
potential. Our planning team, which has over 85 years combined experience, has a long
track record of securing planning permissions across all our sites.
Sustainability is at the heart of everything we do. Ensuring sustainable operations and
developments is of paramount importance, and our commitment to this helps to ensure
that we can continue as a successful business.
Why invest in Inland Homes?
• Strong management team
• Adding value throughout the planning process
• Well-located land portfolio in the South and South-East of England
• Unrealised value within the land bank
• Capturing further value through private and partnership housebuilding activities
Above: artist’s impression of
Carter’s Quay, Poole
Cover: Meridian Waterside,
Southampton
Read our online annual report at
www.inlandhomesplc.
annualreport2018.com
Read more online at
www.inlandhomesplc.com
and www.inlandhomes.co.uk
www.inlandhomesplc.com
INLAND HOMES
01
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Cheshunt Lakeside,
Hertfordshire
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STRATEGIC
REPORT
Year in summary
A focused portfolio
Chairman’s statement
Chief Executive’s review
Key aspects of our marketplace
Our agile business model
Our strategy
Our KPIs
Our principal risks
Portfolio review
Church Road, Ashford case study
Finance Director’s review
Corporate and Social Responsibility
Chapel Riverside, Southampton case study
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Stock code: INL04INLAND HOMESANNUAL REPORT AND ACCOUNTS 2018 // STRATEGIC REPORTANNUAL REPORT AND ACCOUNTS 2018 // STRATEGIC REPORTYear in summaryHousebuilding activities Highlights• EPRA NAV1 growth of 6.3%• Recurring profit before tax up 6.6%• Private housing forward order book of £19.7m and Partnership Housing construction order book of c£100m• 682 homes under constructionp.08 Chairman’s statementp.10 Chief Executive’s reviewp.36 Finance Director’s reviewOur market• Planning approvals 5% above 10-year average• 2.2% year-on-year increase in UK house pricesp.14 Key aspects of our marketplaceOur portfolio• Maintained healthy land bank at 6,870 plots with an anticipated gross development value of £2.1 billionp.06 A focused portfolioOur responsibility• One million hours with zero AFR• First supply chain conference in November 2017• Considerate Constructors Scheme score of 39 out of 50p.40 Corporate and Social Responsibilityp.46 Case study: Chapel Riverside, SouthamptonLargest ever planning application submitted for 1,853 homes and over 18,000m2 of commercial space at Cheshunt LakesideOur business modelConstruction activitiesLand activitiesp.16 Our agile business modelInland Homes has made strong operational and strategic progressp.10 Chief Executive’s reviewInland Homes Annual Report 2018.indd 410/9/2018 8:17:18 PM www.inlandhomesplc.com05INLAND HOMESSTRATEGIC REPORT // ANNUAL REPORT AND ACCOUNTS 2018 Our performancep.08 Chairman’s statementp.22 Our KPIsp.30 Portfolio reviewp.36 Finance Director’s reviewOur risk profilep.24 Our principal risksp.48 GovernanceOur main priorities for 2018/19• Procure planning consent at Wilton Park and Cheshunt Lakeside• Increase our Partnership Housing business• Build on our new modular housing initiatives p.10 Chief Executive’s reviewp.20 Our strategy£95m contract for sale and development of Church Road, AshfordRevenue£147.4m2017: £90.7m+62.5%Earnings per share7.64p2017: 7.82p-2.3%Dividend per share2.20p2017: 1.70p+29.4%Recurring profit before tax£19.3m2017: £18.1m+6.6%EPRA NAV per share1102.28p2017: 96.22p+6.3%Year end cash balance£40.4m2017: £26.5mPrivate housing units sold2752017: 188+46.3%Land plots sold8372017: 780+7.3%1 On an undiluted basis.Pre-let for £0.6m pa to Premier Inn for 46,000 sq ft, 105 room hotel in Bournemouthp.30 Portfolio reviewp.30 Portfolio reviewp.34 Case study: Church Road, AshfordInland Homes Annual Report 2018.indd 510/9/2018 8:17:21 PM ANNUAL REPORT AND ACCOUNTS 2018 // STRATEGIC REPORT
A focused portfolio
Land bank plots
6,870
2017: 6,776
8,000
7,000
6,000
5,000
4,000
3,000
2,000
1,000
0
8,000
7,000
6,000
5,000
4,000
3,000
2,000
1,000
0
1,163
2,105
1,708
5,518
4,671 5,162
1,200
3,976
1,318
2,416
2014 2015
2016
2017
2018
8,000
7,000
6,000
5,000
4,000
3,000
2,000
1,000
0
2,105
2,034
1,708
1,606
4,671
3,813
5,162
4,502
Total
Group share Total Group share
2017
2018
Plots without planning permission
Plots with planning permission
300
275
808
743
12
6,776
6,780
2017
Acquisitions
Density
increase
House
sales
Land
sales1
Other
2018
1 In addition to the 743 plots above, 94 plots were sold into a 50% joint venture
and therefore remain in the year end land bank figure.
p.30 Portfolio review
Our land portfolio currently
consists of 6,870 plots with
the vast majority in the
South and South-East of
England. The size of each
site ranges from under 50
plots to over 1,350 plots.
We are continuing to focus on acquiring a
mix of brownfield sites, as well as strategic
land, which is usually greenfield land,
acquired with the knowledge that it is
suitable for development at a later date. The
strategic sites in our land bank have the
potential for almost 3,000 residential plots
across 500 acres and typically have a two to
five year timeline for planning permission.
We are targeting large brownfield sites
that are appropriate for residentially led
mixed-use regeneration schemes. While
we have been involved in these projects for
some time now, we are looking to expand
this area to maximise the opportunities and
value available.
We are continuing to focus
on acquiring a mix
of brownfield sites, as well
as strategic land.
We are also pushing to enhance the
number of collaborative joint ventures with
institutional landowners. Institutions such
as the MOD, NHS and local authorities often
have surplus land but not the skill
set or commercial drivers that we have at
our disposal.
While our core focus has always been,
and will continue to be, acquiring and
developing brownfield sites, we are
establishing ourselves as a respected
housebuilder in our own right both for
ourselves and on behalf of others as part
of Partnership Housing deals. This allows
us to take more control of our sites and
ensures a higher build quality while
maximising value generated for the Group.
Abbey Wharf, Alperton
Berryfields, Tiptree
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INLAND HOMES
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STRATEGIC REPORT // ANNUAL REPORT AND ACCOUNTS 2018
Sites under
construction
Other Inland
sites
Strategic land
Ipswich
Cressing
Colchester
Braintree
Basildon
Billericay
Little Chalfont
Garston
Meppershall
Cheshunt
Holmer Green
Elstree
Alperton
Fulmer
Iver
Colnbrook
Staines
Southall
Ashford
Birmingham
Hazlemere
High Wycombe
Chesham
Hyde Heath
Amersham
Beaconsfield
Slough
Maidenhead
Datchet
Farnborough
Bournemouth
Poole
Southampton
Queensgate, Farnborough
St John’s, Chelmsford
Castle House, High Wycombe
www.inlandhomesplc.com
INLAND HOMES
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ANNUAL REPORT AND ACCOUNTS 2018 // STRATEGIC REPORT
Chairman’s statement
“Despite potential political and regulatory
headwinds, the overall health of the
sector is positive, particularly the part
of the market in which we operate and
where we believe there will continue to
be ongoing support for the products that
we are offering.”
Terry Roydon
Chairman
Overview
This has been another strong year for the
Group, both operationally, our activity
delivering healthy growth in revenues,
profit and net asset value, as well as
strategically as we continue to pivot
the business towards a more robust,
diversified and adaptable model. Revenues
are being generated from housebuilding,
brownfield site regeneration, land sales,
partnerships with Housing Associations,
whilst at the same time we are growing
our exposure to the Private Rented Sector
and social housing. Our priority is to build
on the strong financial performance
during the period and, with a significantly
enlarged, highly qualified team in place,
we believe we are now in a position to
effectively manage this increasingly broad
range of activity and to meet our growth
ambitions for Inland Homes.
Revenue increased to £147.4m (2017:
£90.7m) with the completion of 275
open market homes (2017: 188) and
79 partnership equivalents (2017: 37) as
well as the sale of a record number of
837 building plots (2017: 780). Despite
these sales and the use of plots for our
own developments, we were still able to
increase the size of the land bank to 6,870
plots (2017: 6,776) which demonstrates the
scale of the underlying activity levels.
Results and dividend
The Group achieved recurring profit of
£19.3m (2017: £18.1m), an increase of 6.6%.
The undiluted EPRA net asset value per
share has increased by 6.3%, from 96.22p
to 102.28p per share, while net asset
value per share has increased by 9.0% to
70.46p (2017: 64.62p). In August 2018, we
extended the maturity of the zero dividend
preference shares from 10 April 2019 to
10 April 2024. We are also in discussions
with a number of banks to increase our
revolving credit facility to support our
expanding housebuilding operations.
On the back of another strong set of
results and the continued progress
being made by the Group, the Board has
recommended an increase in the payment
of a final dividend by 29.2% from 1.20p to
1.55p per share subject to shareholder
approval at the Annual General Meeting
to be held on 27 November 2018. This
together with the interim dividend of 0.65p
(2017: 0.50p) per share equates to a total
dividend of 2.20p (2017: 1.70p) per share,
an increase of 29.4%.
Operations
Following a considerable and carefully
executed recruitment programme, we
now have a high-quality and scalable
construction business in place. At the
same time, the land team has also
been strengthened and is well placed to
manage the significant number of pipeline
opportunities ahead of us.
Our in-house construction team is
increasingly focused on the delivery
of Partnership Housing, where we can
provide turnkey developments for
Housing Associations, other public bodies
and operators in the Private Rented
Sector. Our order book currently stands
at circa £100m.
In March, we submitted our largest
planning application to date, for
1,853 homes at Cheshunt Lakeside, the
former Tesco headquarters. It is the major
brownfield site in Broxbourne Borough
and we are working very closely with the
Council to ensure early delivery. We are
anticipating a resolution to grant planning
permission before the end of the year.
The planning application at our flagship
scheme at Wilton Park, Beaconsfield
has now been submitted for over a year.
Although progress has been slower
than we would have anticipated we
remain in active dialogue with the local
authority on the 100-acre site, which it
has allocated for development. Whilst
we are confident that we will achieve
the necessary permissions, we are
considering the options open to us over
the coming months. In the meantime, the
site continues to produce rental income of
approximately £1.5m per annum.
08
INLAND HOMES
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STRATEGIC REPORT // ANNUAL REPORT AND ACCOUNTS 2018
Outlook
Despite wider market uncertainty, we
continue to see robust demand for our
products, whether it be consented land
or affordably priced homes. Whilst prices
have softened slightly in the Greater
London area and the industry awaits
further clarity on the long term future
of the Help to Buy scheme, we are well
positioned through our increasingly
diverse revenue streams to benefit from
the fundamental lack of suitable housing
in our target markets. We have delivered
significant progress this year and strong
financial metrics and now have a platform
in place that provides excellent visibility
over our future growth ambitions.
Terry Roydon
Chairman
19 September 2018
Corporate Governance
With effect from 28 September 2018, all
AIM companies are required to adopt
a recognised corporate governance
code and to make additional corporate
governance related disclosures on their
websites. I am pleased to announce
that the Company has adopted the
Quoted Companies Alliance’s Corporate
Governance Code (QCA Code).
Notwithstanding that the requirement
to adopt a recognised code came into
force after the date to which the Group’s
financial statements have been prepared,
we have prepared the relevant sections
of our accounts as if the requirement to
adopt that code had been in force during
the financial year ended 30 June 2018.
The Board
During the year we welcomed Laure Duhot
and Brian Johnson to the Board as new
Non-executive Directors. Laure brings
over 30 years of senior executive level
experience in the investment banking
and property sectors, specialising in
alternative real estate assets and Brian
brings a wealth of sector expertise having
held senior management and non-
executive positions within the housing,
social care and commercial sectors.
In another change to our Non-executive
Board, we are pleased to announce the
appointment of Simon Bennett as Senior
Independent Director effective from
13 September 2018. Simon has been an
independent Non-executive Director
since March 2007 and has chaired the
Remuneration Committee since that date.
We were also pleased to add Gary Skinner
to the Board as Managing Director in
May 2018. Gary was previously Director
of Operations at Willmott Dixon Housing,
a privately-owned contracting and interior
fit-out group, where he was responsible
for the delivery of up to 1,000 homes
per annum. Since joining the Group, in
February 2016, Gary has had a tremendous
impact and has been an integral part of
our growth, having led the formation and
expansion of our construction operations.
As announced in February 2018, Paul
Brett, our Land Director since 2011,
decided to leave the Group to pursue his
own interests and he stepped down from
Board with effect from 16 April 2018 but
will remain as a consultant to the Group,
supporting, in particular, the ongoing
planning application processes at its
significant development opportunities at
Wilton Park in Beaconsfield and
Cheshunt Lakeside in Hertfordshire.
On behalf of the Board, I should like to
thank Paul for his contribution to the
Group since its formation and wish him
well in his new endeavours.
www.inlandhomesplc.com
INLAND HOMES
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Chief Executive’s review
“This has been another strong year for
the Group, both operationally, with our
activity delivering healthy growth in
revenues, profit and net asset value, as
well as strategically as we continue to
pivot the business towards a more robust,
diversified and adaptable model.”
Stephen Wicks
Chief Executive
We have had yet another very good
year of further growth which has once
again generated solid financial results,
as management continues with the
implementation of our expansion strategy
and the diversification of the Group’s revenue
streams.
where they seldom existed before. We have
an outstanding track record over the last
decade of managing schemes through the
complex UK planning process and of tackling
challenging sites, where our expertise
can be deployed to the benefit of the wider
community.
In a changing environment it is important
that the strategy evolves to take account of
wider economic factors as well as specific
industry issues, including affordability and
efficient delivery, which are at the forefront of
our thinking. Against this backdrop, the key
components of our strategy include:
Over the last three years, we have built a
highly accomplished construction division,
now comprising 79 employees, which has
the ability and experience to take on the
most complex brownfield projects. Our core
skillset at Inland Homes has always been the
ability to source attractive land opportunities
and secure planning permissions from
challenging sites, for which key management
has a successful, 25-year unbroken track
record. By adding the building operations to
our existing land platform, we have created
a winning formula for the delivery of our
new homes and, importantly, the capability
to provide “turnkey” land and building
partnerships to Housing Associations, PRS
funds and local authorities. This element of
our business is gathering momentum and
we have circa £100m of Housing Association
contracts in place for the delivery of over
500 affordable homes over the next five
years. The total number of units under
construction, including both private and
partnership homes, at the year end was
over 680, a record for the Group.
Inland Homes has always taken an
entrepreneurial approach to the growth of
the business and we have a history of looking
at things differently, focusing our efforts on
finding and creating new opportunities
10
INLAND HOMES
Our strategy
With this in mind, my job as Chief Executive
of the Group is to execute the strategy
formulated by the Board and to deliver it
effectively, ultimately generating value for our
shareholders. This time last year, I stated that
our Group strategy continues to focus on the
following four strategic goals:
• Increasing the size of our strategic
land bank, including brownfield sites
where residential development is
expected; the tactical acquisition of sites
which unlock future potential; and locations
which will become key housebuilding
terrain in the future.
• Adding value to our land bank by navigating
what are often complex sites through
the planning system, requiring a unique
skillset, and selling them to other
developers, realising attractive short term
margins and generating cash to fund our
operations.
• Maximising the value from our land bank
through housing development and direct
sales, as well as providing housebuilding
services to other landowners.
• Ensuring a strong and flexible balance sheet
by maintaining borrowings at a manageable
level through a focus on cash management
and with a maturity profile appropriate to
our potential future cash flows.
New homes for sale
Maintain our focus on providing affordably
priced (average sales price of £293,000), high
quality homes, in those locations in the South
and South-East of England.
Plot sales
Continue our policy of selling consented
plots to third parties to generate cash and
profitability, with a bias towards sales
where our building division can secure the
construction contract.
Partnership housing
Delivery of homes for Housing Associations
where contract income will provide a regular
positive cash flow and a contribution towards
profit.
Land acquisition
Grow our land bank year-on-year through a
mix of unconditional brownfield purchases
and strategic land options.
Rental income
Improve the short term letting income
from our residential and commercial
assets whilst sites are going through the
planning process.
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STRATEGIC REPORT // ANNUAL REPORT AND ACCOUNTS 2018
The units will be let to local authorities for
a three to five-year period and the Company
has an agreement with an experienced
manufacturer that has the capacity to
service our requirements. The Hugg
units have an estimated 60-year lifespan
and at the end of each lease period are
transportable on a lorry to a new suitable
location.
We believe this new business will provide
an additional significant and reliable
income stream to our Group, whilst
providing good quality homes for people in
need at a significant saving to the taxpayer.
They will be particularly attractive to local
authorities where estate regeneration is
taking place and where residents can be
temporarily relocated within their own
communities while works are completed.
Strategy evolution in action
In line with our efforts to consistently
evolve our strategy against this changing
market backdrop, we have two new
embryonic businesses, established
this year following significant research
and viability assessments, that we
believe will support our ambitions for
sustainable growth.
Rosewood Housing
As announced on 22 August 2018, Rosewood
Housing, a wholly owned subsidiary of
Inland Homes, has been registered as a for
profit provider of social housing by Homes
England, the Regulator of Social Housing,
following a two-year qualification period.
This registration opens up the opportunity
for Rosewood to develop, hold and manage
certain section 106 homes, comprising a mix
of rented and shared ownership units that
need to remain within the regulated sector
whilst owned by a Registered Provider.
In particular, the company expects to
generate visible and attractive income from
the “staircasing” of shared ownership homes,
whereby residents can buy further shares in
their property once they have lived in it for a
certain period of time.
Once we have achieved critical mass in this
specialist sub-sector, it may be appropriate
for us to partner with an institutional investor
to help deliver further portfolio growth. This
activity will be highly complementary to our
develop-to-sell strategy and will leverage the
capabilities of our rapidly growing in-house
construction division.
Hugg Homes
Based on current trends more than
100,000 homeless families in England will
be living in temporary accommodation soon.
Since 2010, the number has grown by
61% and in 2016 alone local authority spend
on this form of housing - which is often
in unsuitable and cramped bed and
breakfast or hostel accommodation, with
no stability - was a cost to the taxpayer
of £845m, with many councils having to
subsidise the accommodation beyond
the local housing allowance.
Inland Homes has been working on a new
modular housing product for some time,
www.hugghomes.co.uk, based on a concept
that provides high quality modular homes,
offering a flexible and responsive solution
to the housing shortage through bespoke
temporary accommodation that is focused
on sustainability and a commitment to
design and manufacturing excellence.
Hugg Homes is based on a principle of
using land that would be otherwise inactive
during the planning process, enabling
“pop up” developments in key locations. It
will give local authorities the agility to react
quickly to emerging temporary local housing
requirements and ensure that vacant land is
efficiently utilised in support of social needs.
The first temporary consents have been
secured in Southampton, Hampshire and
Cheshunt, Hertfordshire for a total of
76 units with the first installation expected
to be complete and occupied by the end of
this calendar year.
First Rosewood Home;
The Pheasant, Amersham
www.inlandhomesplc.com
Hugg Home show unit
INLAND HOMES
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ANNUAL REPORT AND ACCOUNTS 2018 // STRATEGIC REPORT
Chief Executive’s review continued
Inland Homes is making every effort to
engage with the Council to resolve this
matter to everyone’s satisfaction and
discussions are continuing. Such delays
caused by arguments over the level of
affordable housing are one of the biggest
causes of delays in the delivery of new
homes in the UK; the battle continues!
Cheshunt Lakeside, Hertfordshire
This is the largest project in the Inland
portfolio where a planning application
has been submitted for a new community
of 1,853 homes and 200,000 sqft of
commercial space, comprising a significant
part of the former Tesco headquarters
in Cheshunt, Hertfordshire together with
other land we have assembled on this large
scale brownfield opportunity. The local
authority at Broxbourne are very supportive
of our proposals and we are anticipating an
early approval.
This development will provide some
significant project delivery opportunities to
work on, alongside major PRS funds and
Housing Associations as well as private
sales. This scheme is held in a joint venture
where there is an ability to buy out our
partners, which is the current intention.
Ongoing projects
The Portfolio review will provide a detailed
account of many of our projects, but I
would like to comment on two key projects
in particular:
Wilton Park, Beaconsfield,
Buckinghamshire
Despite our 100% record in securing
permissions, unfortunately the UK planning
system continues to present challenges to
us in certain instances.
The 100-acre site at Wilton Park, described
by Savills as “the best residential
development opportunity in Southern
England” has an allocation for 350 homes
and 2,100m2 of commercial space. We have
now owned the site for over five years,
guiding the project through to an adopted
planning brief and a subsequent planning
application, which has now been submitted
for over a year. Developers are required to
build Affordable Housing, as defined by local
authority policy - in this case 40% of all
homes built - unless it can be demonstrated
through a Financial Viability Assessment
(FVA) that it would not be viable to do so.
While our FVA, which demonstrated that
the delivery of the decreed 40% Affordable
Housing at Wilton Park would be unviable
due to heavy infrastructure costs, was
signed off by a source approved by the
Council, the Council has refused to accept
the findings. It subsequently commissioned
a further viability assessment which took
six months to prepare and came to a similar
conclusion, which, frustratingly, the Council
is again refusing to accept.
Outlook
Underpinning our overall strategy is the
ongoing chronic shortage of housing across
the UK, at various price points, and whilst
this situation remains, we are confident
that housebuilders like ourselves, as well
as other stakeholders who are committed
to solving this problem, will continue to be
supported in their activities. We anticipate
that any changes to the Help-to-Buy
scheme come 2021 will impact those who
are not first-time buyers and those looking
at properties towards the higher end of the
bracket and we’d expect the favourable
borrowing environment to persist for the
foreseeable future. Whilst the Greater
London property market continues to be
impacted by wider political uncertainty,
values and demand in the Home Counties
remains robust, supported by improving
infrastructure investment and evidence of
wage growth returning in the UK economy.
Conclusion
2018 has been another busy year for Inland
and we have made considerable strides
which, importantly, are reflected in our
full year results. I firmly believe that the
component parts of this business are well
balanced and provide a cohesive strategy
for continuing and sustainable growth in
the more uncertain environment over the
short to medium term. Whilst there are
challenges, we see great opportunities for
us at Inland going forward.
Finally, I would like to extend my heartfelt
thanks to the entire team at Inland Homes,
without which the building of such a
dynamic and successful business would not
have been remotely possible.
Stephen Wicks
Chief Executive
19 September 2018
Aerial view of Wilton Park site
Cheshunt Lakeside, Hertfordshire
12
INLAND HOMES
Stock code: INL
Inland Homes Annual Report 2018.indd 12
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Abbey Wharf, Alperton
www.inlandhomesplc.com
INLAND HOMES
13
Inland Homes Annual Report 2018.indd 13
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Stock code: INL14INLAND HOMESANNUAL REPORT AND ACCOUNTS 2018 // STRATEGIC REPORTKey aspects of our marketplace UK GDP 2018+1.4%ONS estimated figure for year ended 30 June 20182010/11Real and forecast GDP growth %01.01.52.02.53.02011/122012/132013/142014/152015/162016/172017/182018/192019/202020/212021/223.5Source: ONS/OBR%UK economyConsumer confidence and the health of the UK economy are fundamental to the UK housing market. The UK economy continued to grow in the 12 months to 30 June 2018, albeit more slowly than previously predicted. The EU referendum result in June 2016 led to some initial uncertainty for the UK economy but it has proven more resilient than forecast following the referendum. The latest estimates show that GDP has increased by 1.4% in the year to 2018, slightly below the 1.8% growth to June 2017. Unemployment rates and interest rates remain historically low, which support consumer sentiment. However, risks to demand remain within the UK economy as uncertainties resulting from the ongoing negotiations regarding the UK exit from the EU move forward.Government policy and planningPlanning approvals for the year were 5% above the 10-year average. However the process of securing implementable detailed planning consent remains challenging. While the planning system remains cumbersome and bureaucratic, there have been some improvements in recent years. However, further change is needed and the Government’s White Paper on planning has been broadly welcomed by the industry, as it seeks to address the problem of planning delays, including under-resourced planning authorities. The Government has announced planning reforms to improve land availability for new housing and to maximise the potential of underused land in towns and cities. This should support progress towards achieving the Government’s significant housebuilding targets in the future. Local planning authorities are required to put in place five-year plans to meet their housing needs, which in theory should ensure a consistent supply of consented land to enable the housebuilding industry to commit capital to long term projects. All political parties have recognised the need for additional housing, not just because of the chronic need for new homes but also because of the important role that housebuilding plays in the wider economy. Recent policy has focused on stimulating demand for home ownership through programmes such as Help to Buy. Commitment to the Help to Buy programme has been made to 2021 and the scheme was recently bolstered by an additional £10bn of funding, although we still await an update from the Government on the future of the Help to Buy scheme in the period after 2021. Additionally, the Government has committed a further £2bn of funding to deliver affordable homes and the National Planning Policy Framework is ensuring that all local authorities have a consistently calculated five-year supply of land for new homes.Following the tragic events at Grenfell Tower, a wide-ranging inquiry has commenced to establish the causes and examine the responses to this disaster. Whilst focused on high-rise residential, the Government has required all housebuilders and property owners to review the fire strategy for all buildings built or refurbished since 2005.p.40 Corporate and Social ResponsibilityPlanning approvals above 10-year average by+5%Source: Nationwide1 Buckinghamshire, Hampshire, Oxfordshire and Sussex2 Essex, Hertfordshire and SurreyUK House price index+2.2%1998200020022004200620082010201220142016201819941996101505(5)(10)252030Outer South East1Outer Metropolitan2UK(15)%Inland Homes Annual Report 2018.indd 1410/9/2018 8:17:34 PM STRATEGIC REPORT // ANNUAL REPORT AND ACCOUNTS 2018
Supply and demand imbalance
There continues to be a fundamental
demand and supply imbalance in new
build housing. The Government’s Housing
White Paper published early last year aims
to deliver increased numbers of homes
more quickly to meet the demands of local
communities, and in the 2017 Autumn
Budget the Government announced plans to
increase the annual volume of new homes
built to 300,000 per annum by 2022.
Demand for new build housing has
remained strong supported by healthy
employment trends, a competitive
mortgage market and the Government’s
Help to Buy scheme. Increased demand
has resulted in house prices rising at a
rate above that of retail price inflation.
The average UK house price was £215k
in June 2018, a growth of 2.2% on the
previous year. Our average selling price
was £283k (excluding joint ventures) and
£293k (including joint ventures) in the year
to 30 June 2018, as we have a focus on
affordability and the first-time buyer,
first-time mover market.
The most recent available data shows
a small decrease of 2.5% in new build
completions, with 153,000 new properties
completed in the UK, for the year to
30 June 2018. This remains well below the
level required to address the UK’s supply
and demand imbalance.
Mortgage affordability and availability
Mortgage availability and affordability in the
UK is a key dynamic for the housebuilding
sector and our customers. Despite the
recent modest increases in the Bank
of England base rate to 0.75%, the first
increases in the last decade, borrowing
costs remain at a historically low level.
Commentary from the Bank of England
after the November 2017 base rate increase
indicated its expectation of only modest
further increases in the coming years, so
we do not currently envisage any material
change in the overall conditions in the
mortgage market in the near term.
The number of new mortgages decreased
slightly in the year to 30 June 2018 to
780,000 new loans for home purchase
(2017: 796,000) primarily due to continued
weakness in buy-to-let completions. In
contrast, first-time buyer completions
have increased. The Help to Buy scheme
continues to be important for new
housebuilding and has supported almost
170,000 property completions since its
launch in April 2013 to the end of December
2017. The majority of these (81%) were to
first-time buyers.
Mortgage availability remains strong,
with mortgage lenders keen to increase
their market share and the mortgage
market remains competitive. However, the
mortgage market could be restricted by
changes in Government policy, particularly
changes to the Help to Buy scheme.
Construction costs
Construction costs in the UK have
increased by 3.9% in the year to March 2018
(2017: 5.0%) due to continued pressure
on resources to deliver the higher level of
homebuilding, the devaluation of Sterling
and labour costs rising due to an acute
skilled labour shortage.
Skilled labour
The shortage of skilled labour is, along
with the inadequate planning system and
financial constraints, the greatest limitation
to increasing the UK housing supply. The
housebuilding industry has a shortage of
skilled and experienced labour at all levels.
The skills gap has largely been filled by
overseas workers from the European Union
(“EU”) and beyond, who now make up a
significant proportion of the workforce.
Brexit negotiations have led to uncertainty
over the security of the EU workforce, not
just from potential future employment
restrictions but also from possible
economic migration caused by Sterling
devaluation.
p.40 Corporate and Social Responsibility
2018 New home completions
New mortgages in 2018
Construction costs increase
153,000
780,000
0
0
0
’
£
45
40
35
30
25
20
15
10
5
0
3
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1,500
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0
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‘
750
500
250
0
1993
/94
1997
/98
2002
/03
2007
/08
2012
/13
2017
/18
Source: NHBC
Source: Bank of England
www.inlandhomesplc.com
3.9%
140
135
130
125
120
115
110
105
100
95
x
e
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n
I
3
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All-in TPI
General Building Cost index
Private Housing Construction Price index
Source: BCIS (June 2013=100)
INLAND HOMES
15
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ANNUAL REPORT AND ACCOUNTS 2018 // STRATEGIC REPORT
Our agile business model
Relationships and resources
Our key activities
Strong portfolio
Experienced team
Knowledge of
planning system
Good relationships
throughout the supply chain
Trusted by
Housing Associations
Land
activities
Land activity is the
foundation of our business model.
Through identifying opportunities,
selecting acquisitions, securing
planning permission
and purchasing strategic sites
with future potential, Inland
is able to expand its land
portfolio
Housebuilding
activities
In response to a changing
marketplace, we have been creating
its own construction capabilities. By
investing in our own people, we can
ensure longer term, higher value
returns for our shareholders.
Construction
activities
We sell some of our sites to
Housing Associations and
institutional landlords, with a
construction contract for
Inland Homes to build the units.
16
INLAND HOMES
Stock code: INL
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STRATEGIC REPORT // ANNUAL REPORT AND ACCOUNTS 2018
Adding value
Delivering for our stakeholders
• Working with Local Authorities and communities
to maximise the potential value of each site by
securing a valuable planning permission.
• Allows us to capture the development margin
in addition to the land value uplift via planning.
• Developing the sites with our own team provides
us with additional control over quality, costs
and delivery.
Developers:
• Part or all of a site can be sold to developers; when
selling part of a site to developers, they generally
benefit from the relevant infrastructure which has
already been installed by Inland Homes.
• We generally ensure that potential barriers to
development are resolved and that the planning
permission is for the right housing mix and
development size to maximise the potential value
of the site.
Homeowners:
• Part or all of the site can be developed by Inland
Homes; we are proud of the developments we plan
and design, and are always looking to create an
environment that is attractive for future residents.
• Delivering on our commitment to quality and
comfort, developed sites feature open spaces, play
areas and attractive landscaping to suit the needs
of a variety of people.
• The construction contract accelerates revenue
and provides monthly cash flow which assists
the Group’s working capital and reduces our net
borrowings.
Housing Associations and Private Rented Sector:
• Delivering high quality, reliable and attractive
developments.
www.inlandhomesplc.com
INLAND HOMES
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ANNUAL REPORT AND ACCOUNTS 2018 // STRATEGIC REPORT
Our value chain
Our value chain outlines the various options available to the Group
for generating value in the short, medium and long term.
In the short term we can generate value quickly through ensuring land obtains planning permission before
being sold on, while medium and long term value can be made through the development of part, or all, of the site.
Long term
returns
Develop the whole site
Building a whole development takes longer but
maximises the revenue a site can deliver over the long term. We are now
self-delivering the majority of our sites.
Medium term
returns
Selling 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.
Sell land with planning
permission to developers
Once a planning consent is secured, we have the opportunity to sell the whole
site or part of the site with planning permission to developers or Housing
Associations for a short term return.
Achieve planning permission
Once a site is acquired, extensive research and stakeholder consultations
take place to prepare our applications for planning permission. Our record of
achieving planning permissions on brownfield sites is second to none.
Short term
returns
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.
activities
Land
Housebuilding
Construction
activities
activities
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.
18
INLAND HOMES
Stock code: INL
Inland Homes Annual Report 2018.indd 18
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St. John’s,
Chelmsford
www.inlandhomesplc.com
INLAND HOMES
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ANNUAL REPORT AND ACCOUNTS 2018 // STRATEGIC REPORT
Our strategy
Our 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 uniquely Inland.
Strategic goal
1
Acquire land and add value through
planning
2
Maximise the value from our land bank
by expanding our private housebuilding
and Partnership Housing programmes
3
Continue the core activity of plot sales
to generate cash to fund our operations
4
Maintain borrowings at a manageable level
through a strong focus on cash management
and vendor financing
Description
Progress over
past 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 equity released from
operations.
Having proved our credentials as a quality
housebuilder with award-winning developments
such as Meridian Waterside in Southampton
and Carter’s Quay in Poole, we continue to build
momentum and develop our quality portfolio.
Our housebuilding capabilities have bolstered
our reputation and attracted some substantial
transactions; for example the project in Chapel
Riverside, Southampton. It has also led to
significant Partnership Housing deals with
Housing Associations such as Church Road,
Ashford with A2 Dominion.
• The size of the land bank has still increased
since last year end despite the sale of 837
plots and 275 homes during the year. The
Board also made the decision not to purchase
any significant new sites due to the number of
plots being processed through the planning
system by the Group.
• Planning permission or resolution to grant
planning permission was obtained on 594
plots during the year.
• Further investment in staff to increase the
capacity and level of construction expertise
within the Group.
• We have 682 residential units under
construction across 13 sites including 117
within joint ventures.
• Residential sales increased by 46% in the year
to 275 homes.
• Partnership Housing equivalent units
increased by 114% in the year to 79 homes.
As our planning team adds value to land through securing
Our varied range of financing options gives us flexibility. Our
planning permissions, we are able to make attractive short
business plan includes the sale of consented land, which we
term returns through land sales to developers and Housing
can tailor to our cash flow requirements as well as forward
Associations. In this strong housebuilding climate there is high
sales of homes and construction contracts in hand that provide
demand for quality land, which means that we are well poised to
consistent cashflow. Additionally, we have a bank of properties,
take advantage of this and generate strong revenue streams and
which are providing a steady stream of rental income and cash
cash flow to fund our land buying and development programme.
that provides a contribution towards our overheads.
• 797 plots with planning permission and 40 plots without
• EPRA net gearing at 38.6%
planning permission were sold during the year generating
revenue of £59.3m.
• 1,708 plots with planning permission in land bank.
• Cash balances of £40.4m
• Gross borrowings of £120.1m
Focus for the future
Continue to secure more planning consents and
acquire sites with excellent potential to
add value.
Our Private and Partnership Housing
developments are expected to increase
in number.
Selective disposal of sites to other developers and Housing
The Group has set a target to maintain its EPRA net gearing
Associations.
below 40%.
Connected KPI
• Undiluted EPRA net asset value per share
• Revenue
• Net gearing
• Profit before tax
• Revenue
• Profit before tax
• Profit before tax
• Net gearing
• Number of plots with or without planning
• Total residential units sold
• Undiluted EPRA net asset value per share
consent
• Total residential plots sold
• Planning permissions gained during the year
• Planning permissions gained during the year
• Net gearing
• Number of plots with or without planning consent
• Total residential plots sold
• Planning permissions gained during the year
20
INLAND HOMES
Stock code: INL
Inland Homes Annual Report 2018.indd 20
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STRATEGIC REPORT // ANNUAL REPORT AND ACCOUNTS 2018
Strategic goal
Acquire land and add value through
Maximise the value from our land bank
1
planning
2
by expanding our private housebuilding
and Partnership Housing programmes
3
Continue the core activity of plot sales
to generate cash to fund our operations
4
Maintain borrowings at a manageable level
through a strong focus on cash management
and vendor financing
As our planning team adds value to land through securing
planning permissions, we are able to make attractive short
term returns through land sales to developers and Housing
Associations. In this strong housebuilding climate there is high
demand for quality land, which means that we are well poised to
take advantage of this and generate strong revenue streams and
cash flow to fund our land buying and development programme.
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 as well as forward
sales of homes and construction contracts in hand that provide
consistent cashflow. Additionally, we have a bank of properties,
which are providing a steady stream of rental income and cash
that provides a contribution towards our overheads.
Progress over
past year
• The size of the land bank has still increased
• Further investment in staff to increase the
• 797 plots with planning permission and 40 plots without
• EPRA net gearing at 38.6%
planning permission were sold during the year generating
revenue of £59.3m.
• 1,708 plots with planning permission in land bank.
• Cash balances of £40.4m
• Gross borrowings of £120.1m
Description
Purchases range from sites ready for
Having proved our credentials as a quality
immediate development, to tactical acquisitions
housebuilder with award-winning developments
of sites which open up the potential of
such as Meridian Waterside in Southampton
neighbouring land, to areas which will become
and Carter’s Quay in Poole, we continue to build
key housebuilding terrain in the future. All of
momentum and develop our quality portfolio.
these purchases are funded by our careful
Our housebuilding capabilities have bolstered
financial strategy, which balances loan finance,
our reputation and attracted some substantial
joint venture funding and equity released from
transactions; for example the project in Chapel
operations.
Riverside, Southampton. It has also led to
significant Partnership Housing deals with
Housing Associations such as Church Road,
Ashford with A2 Dominion.
since last year end despite the sale of 837
capacity and level of construction expertise
plots and 275 homes during the year. The
within the Group.
Board also made the decision not to purchase
any significant new sites due to the number of
• We have 682 residential units under
construction across 13 sites including 117
plots being processed through the planning
within joint ventures.
system by the Group.
• Planning permission or resolution to grant
planning permission was obtained on 594
plots during the year.
• Residential sales increased by 46% in the year
to 275 homes.
• Partnership Housing equivalent units
increased by 114% in the year to 79 homes.
Focus for the future
Continue to secure more planning consents and
Our Private and Partnership Housing
acquire sites with excellent potential to
developments are expected to increase
add value.
in number.
Selective disposal of sites to other developers and Housing
Associations.
The Group has set a target to maintain its EPRA net gearing
below 40%.
Connected KPI
• Undiluted EPRA net asset value per share
• Revenue
• Profit before tax
• Revenue
• Profit before tax
• Profit before tax
• Net gearing
• Number of plots with or without planning
• Total residential units sold
• Undiluted EPRA net asset value per share
• Planning permissions gained during the year
• Net gearing
• Number of plots with or without planning consent
• Total residential plots sold
• Planning permissions gained during the year
• Net gearing
consent
• Total residential plots sold
• Planning permissions gained during the year
www.inlandhomesplc.com
INLAND HOMES
21
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ANNUAL REPORT AND ACCOUNTS 2018 // STRATEGIC REPORT
Our KPIs
Financial KPIs
KPI
Revenue
Strategic
focus
Revenue from
housebuilding and
contracting activities is
expected to continue to
increase and this will be
supplemented by land
sales and rental income.
There was one disposal
of land in 2018 and two in
2017 which flow through
gain on sale of subsidiary
or joint venture rather
than revenue and gross
margin. If they had
been direct land sales
revenue would have been
£148.6m (2017: £117.7m),
representing a 26%
increase on the prior
year.
Performance
Chart
Recurring profit
before tax
EPRA net asset value
per share
Net gearing
The Group is keen to
maintain gearing at a
reasonable level, taking
into account the EPRA
net asset value.
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
Private and Partnership
Housing and contracting
activities together with
the sale of consented
building plots.
The value added to the
land bank by the planning
process will continue to
be one of the Group’s
key focuses. Further
value will be extracted
from the land bank
through Private and
Partnership Housing.
Demand for consented
land was once again
strong during the year
and this resulted in
several highly profitable
land sales.
EPRA net asset value1
increased again this year
by 6.3% from 96.22p
to 102.28p. The use of
the EPRA methodology
reveals how much
“hidden” value is held
within inventories.
Based on EPRA net
asset value, net gearing
has increased from
35.0% to 38.6% in line
with management’s
expectations. On a
non-EPRA basis, it has
increased to 56.0% from
52.1% in the prior year.
m
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8
2
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2
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2
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1
.
2
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%
0
.
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5
%
9
.
6
4
%
9
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3
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2
1 On an undiluted basis.
2 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.
22
INLAND HOMES
Stock code: INL
Inland Homes Annual Report 2018.indd 22
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STRATEGIC REPORT // ANNUAL REPORT AND ACCOUNTS 2018
Non-financial KPIs
KPI
Number of plots with or
without planning consent
Total residential
plots sold
Private residential
home sales
Planning permissions
gained during the year
Strategic
focus
The Group’s target is
to have a land bank of
approximately 10,000
residential plots in the
medium term.
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.
The sale of the number of
private residential units
is expected to fall in the
year to 30 June 2019 and
thereafter to increase
substantially to approach
our target of approximately
500 units pa.
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 the
date of purchase.
Performance
The land bank now
stands at 6,870 plots,
including 1,708 plots with
planning permission
or resolution to grant
planning permission.
There was a strong
demand for consented
plots from housebuilders
during the year, resulting
in the sale of 837 plots.
The Group sold 275
private residential units
during the year, which
was a 46% increase over
the previous year.
The Group gained
planning permission
or a resolution to grant
planning permission on
594 plots during the year
ended 30 June 2018.
Chart
6
7
1
,
5
0
0
2
,
1
6
7
9
,
3
4
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www.inlandhomesplc.com
INLAND HOMES
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ANNUAL REPORT AND ACCOUNTS 2018 // STRATEGIC REPORT
Our principal risks
As with any business, we face risks and uncertainties in the course of our
day-to-day activities and it is only by effectively identifying and managing
these risks that we can deliver our strategy.
Risk management framework
The Executive Directors are heavily involved in the day-to-day
running of the business and risks are discussed on a daily
basis as part of their decision-making processes. This regular
consideration of risks allows management to respond quickly
to changes in circumstances.
Senior management report regularly to the Executive Directors
in a number of areas:
• legal;
• sales and marketing;
• planning;
• environmental;
• construction; and
• financial.
This reporting frequently involves the use of external consultants.
For example, during the due diligence carried out before the
acquisition of each site, planning consultants are normally engaged
for their specialist knowledge and outside perspective to challenge
our assumptions and ensure that we have a full understanding of
the site and its market.
By assessing all the information in the reports from Senior
Management, Executive Directors can determine the risks present
in each area of the business.
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 supports the Board in ensuring that the
financial performance of the Group is properly reported and
monitored. The Audit Committee consider any control weaknesses
that are highlighted by the external Auditor during the course of
the external audit.
Board of Directors
Executive Directors
Senior Management
Audit Committee
External Consultants
24
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Change since
last year
Rating
HIGH
MEDIUM/
HIGH
Risk
1
UK’s exit from
the EU
2
Government
policy and
planning
regulations
Potential impact
Mitigation
We continue to closely monitor the impact
of the increased uncertainty on the UK
economy and the housing market through
the review of external information and
changes in the behaviour of our customer
base. The overall shortage of supply of
housing in the UK may provide a degree
of support to the housing market should
these circumstances arise. Action taken
by the Government to adjust policy to
support UK economic performance may
provide further mitigation, as might any
response with respect to interest rates by
the Bank of England.
We monitor Government policy in
relation to housebuilding very closely and
continually review changes to Building
Regulations and supporting guidance.
The Group undertakes extensive pre-
acquisition due diligence on planning and
technical issues.
The Group has considerable in-house
technical and planning expertise
focused on complying with regulations
and achieving implementable planning
consents that meet local requirements.
For more detail see the Corporate and
Social Responsibility section on page 40.
The Group is focused on acquiring housing
sites already identified in Councils’ Local
Plans.
In addition to actively engaging with
industry bodies on potential changes,
we regularly review and assess our land
portfolio to accurately forecast likelihood
of planning consent and associated
commencement dates.
Both major political parties in the UK
continue to support the Help to Buy
scheme which received additional funding
in 2017 and is scheduled to remain in
place until 2021. Recent changes in stamp
duty for first-time buyers should also
support activity levels in the market.
The UK continues to negotiate the terms
of its exit from the European Union and
there remains a degree of uncertainty on
the outlook for the UK economy. Ongoing
economic uncertainty may reduce
consumer confidence and impact on
demand and pricing for new homes and
affect revenues, profits, cash flows and
asset values. Potential legislative changes
on freedom of movement may also restrict
the availability of skilled construction
workers and impact on costs and delay
build activity. In addition, potential
further devaluation of the UK currency
as a result of Brexit could increase costs
of materials.
Government policy has the potential to
influence various aspects of our strategy,
operations and overall performance.
Potential changes in Government
policy, such as changes to the planning
system, changes in the tax regime, or the
amendment of the Help to Buy scheme
could have an adverse effect on revenues,
margins and asset values. Government
initiatives to encourage housebuilding
through social housing or the SME
sector could also increase the demand
for, and costs of, scarce material and
labour resources. As all elements of the
anticipated changes from the Housing
White Paper are clarified, and if the
terms of the Help to Buy scheme are
amended, this could have a disruptive
effect on the planning system, revenues
and customer behaviour.
The Hackitt Review, instigated following
the Grenfell fire tragedy in June 2017, is
expected to deliver its final report in the
near future. While focused on high-rise
buildings, the review is wide-ranging,
examining the regulatory system around
residential buildings.
Obtaining timely planning permissions and
achieving other regulatory requirements
and permits is key to starting on site
as soon as possible. There remains
a risk of delayed or refused planning
applications, increased timescales to
the discharge of planning conditions and
greater complexity around Section 106
since the introduction of the Community
Infrastructure Levy (CIL).
www.inlandhomesplc.com
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Our principal risks continued
Change since
last year
Rating
HIGH
HIGH
Risk
3
Adverse economic
outlook
4
Lack of mortgage
availability
Potential impact
Mitigation
The housing market is sensitive to
changes in unemployment, interest
rates and consumer confidence. Any
deterioration in economic conditions may
decrease demand and pricing for new
homes, which could have a material effect
on our revenues, margins and profits
and result in the impairment of land and
property values and an inability to realise
maximum value in a timely fashion.
The cost of servicing a mortgage
continues to be at historic lows. However,
a change in business confidence,
employment opportunities or significant
changes in the Bank of England base rate
that is not combined with wage growth
could impact the demand for housing,
which may also lead to lower selling
prices. The ability of first time buyers
to purchase homes is constrained by
changes in mortgage availability at higher
loan-to-value levels. Sustained growth in
interest rates and low wage inflation could
challenge mortgage affordability.
We carry out extensive due diligence prior
to our land investment decisions and
ensure that all sites are in locations
with healthy levels of demand. We
continually monitor key indicators on the
direction of the UK housing market so
as to manage our exposure to any future
market disruption.
We select our site locations that best
meet the needs of the local community
and customer demand now and in the
future. The Government-backed Help to
Buy supports customers to gain access
to the housing market with competitive
mortgage rates and funded home
deposits. £10 billion additional funding
was announced at the Conservative Party
Conference in 2017 to support the Help to
Buy scheme until its currently forecast
end in 2021. However, there is potential
for change to the scheme rules and
potentially its discontinuation.
We continue to promote this scheme
and our customers demonstrate strong
demand for it.
The Group continues to monitor
the lending criteria of the key
financial institutions.
The Group offers a high level of sales
support to customers and this includes
assistance with obtaining mortgages at a
suitable interest rate.
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Risk
5
Inability to source
suitable land
6
Inability to attract
and retain
high-calibre
employees
7
Inadequate
health, safety and
environmental
procedures
8
Rising cost and
availability of
materials
Rating
Change since
last year
LOW
Potential impact
Mitigation
Land is a valuable resource for the Group.
The purchase of land of poor quality, at
too high a price, or incorrect timing in
relation to the economic cycle could
impact future profitability.
Acquiring insufficient land would
reduce our ability to actively manage
our land portfolio and create value
for shareholders.
The Group has an experienced
management team with a strong track
record in the industry which ensures that
there is disciplined purchasing of land
of the appropriate quality, on attractive
terms and at the right time and scale in
the economic cycle.
Understanding the markets in which we
operate is central to our strategy and,
consequently, land acquisition is focused
on our core markets in the South and
South-East of England.
All potential land acquisitions are subject
to a formal appraisal process.
Having an appropriately skilled workforce
is a key requirement for the Group to
facilitate the growth of the business in
the highly competitive market in which
it operates.
The Group maintains good morale in
the workplace and sets remuneration
packages at attractive levels.
LOW
A deterioration in the Group’s health,
safety and environmental standards could
put the Group’s employees, contractors or
the general public at risk of injury or death
and could lead to litigation or penalties
or damage the Group’s reputation. A lack
of adequate procedures and systems
to reduce the dangers inherent in the
construction process increases the risk of
accidents or site-related catastrophes.
Overseen by our head of Health and
Safety, procedures, training and reporting
are all carefully monitored to ensure that
high standards are maintained.
The assessment of environmental risk is
an important element of the due diligence
undertaken prior to any purchase of land.
The Group uses reputable environmental
consultancy firms to assist in this area.
MEDIUM
MEDIUM
We closely monitor our build programmes
and our supply chain enabling us to
manage and react to any supply chain
issues. We build good relationships with
suppliers to ensure consistency of supply
and cost efficiency.
The expansion in UK housebuilding
has driven an increase in demand for
materials which may continue to cause
availability constraints and/or costs to
increase. Prices for key materials may
also be affected by currency movements
as the Brexit process continues.
Shortages or increased costs of materials
or the inability to secure supplies upon
appropriate credit terms could increase
costs and delay construction.
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INLAND HOMES
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Potential impact
Mitigation
Rating
Change since
last year
MEDIUM
ANNUAL REPORT AND ACCOUNTS 2018 // STRATEGIC REPORT
Our principal risks continued
Risk
9
Availability of
sub-contractors
and suppliers
10
Construction
costs not
adequately
controlled and
delays
A continued increase in housing
production may further strain the
already reduced availability of skilled
sub-contractors. In addition, leaving the
EU could impact on the availability of
skilled workers given the relatively large
proportion of the labour force, particularly
in the South-East, that is from Eastern
Europe. Together, this could result in
build programme and completion delays.
The majority of work performed on our
sites is sub-contracted to various trades,
providing flexibility. If the availability of
sub-contractors is insufficient to meet
demand, this could lead to longer build
times and increased costs, thereby
reducing profitability. Lack of skilled
sub-contractors could also result in
higher levels of waste being produced
from our sites and lower build quality.
Shortages of skilled labour or the failure
of a key supplier could increase costs and
delay construction.
A lack of project oversight can lead to
unforeseen cost increases and erode
margins, increasing pressure to contain
costs and potentially reduce quality.
When selecting our sub-contractors,
we consider competencies particularly
in relation to health and safety,
quality, previous performance and
financial stability.
We seek to establish and maintain
long term supplier and sub-contractor
partnerships.
Our build programmes are monitored
closely which enables us to manage
our labour requirements effectively. We
maintain regular contact with our sub-
contractors and provide high-level and
site-specific programme information to
them to aid with demand planning.
LOW
The Group has built strong relationships
with principal contractors which
increases communication and facilitates
early notification of issues. We provide
advance notice of our site plans and build
programmes to sub-contractors. This
helps them to plan and builds confidence
to expand the workforce to meet the
requirements of our projects.
We regularly review the progress and
cost forecasts for each of our projects to
ensure that any impact is minimised.
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Potential impact
Mitigation
Risk
11
Lack of financing
at appropriate
rates
The lack of sufficient borrowing facilities
could impact on the Group’s ability
to implement its current strategy. An
increase in interest rates would lead to
increased borrowing costs and thus have
a detrimental effect on profit.
12
Cyber and data
risk
The Group places significant reliance upon
the availability, accuracy and security of
all of its underlying operating systems
and the data contained therein. The
Group could suffer significant financial
and reputational damage because of
the corruption, loss or theft of data,
whether inadvertent or via a deliberate,
targeted cyber attack.
Rating
Change since
last year
MEDIUM
MEDIUM
At the year end, the Group has £72.5m
of cash and headroom on its existing
facilities. We have excellent relationships
with existing and other lenders and
continue to seek finance from alternative
lending sources to further improve the
Group’s liquidity.
The Group mitigates any adverse exposure
to interest rate changes by controlling
its gearing and, if necessary, by using
hedging instruments.
The Group has a fully-tested disaster
recovery system which is tested annually
as part of a third party supplier contract.
There is a boundary firewall at each of
our locations with a fixed internet line. All
emails are encrypted by Transport Layer
Security Protocols and every workstation
is protected by centrally managed
corporate Anti-Virus systems as well
as by a firewall.
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INLAND HOMES
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Portfolio review
“It has been another successful and very
active year for the Group with growth
across all areas of the business in line
with our strategic plan.”
Gary Skinner
Managing Director
the related build contract as part of the
transaction. Demand for consented and
unconsented land within the London
suburbs, home counties and the
South-East remains strong amongst
the major housebuilders particularly
given the decline of the London housing
market. The planning system continues
to be the single biggest factor prohibiting
housing delivery due to sustained lack of
investment in the public sector planning
departments. This has resulted in an
increase in both planning costs and
timetable to achieve planning consents.
During the current financial year Inland
will continue to focus on growing the land
bank through the acquisition of brownfield
sites and options over greenfield sites in
strategic locations throughout the South
East. In line with recent years, the pattern
of land sales is likely to result in the profits
for the year to 30 June 2019 being heavily
weighted to the second half.
It has been another successful and very
active year for the Group with growth
across all areas of the business in line
with our strategic plan. Revenue, homes
delivered and under construction, land plot
sales and our land bank have all increased.
Land bank
The Group operates across a diverse land
portfolio from town centre developments
to major regeneration projects as well
as some redevelopment of land located
in the greenbelt. This requires a highly
experienced and knowledgeable land and
planning team and the team we now have in
place ensures that we continue to be able
to negotiate the complex landscape and
deliver consented land both for sale and for
our own construction activity.
We sold 837 land plots in the year,
comprising 480 plots to private
housebuilders, and 357 plots to Housing
Associations. Despite these disposals
and the 275 house sales in the year, our
land bank still increased from 6,776 at
30 June 2017 to 6,870 plots at the year end.
We are continuing to see strong demand
on our land sales and where appropriate
we are targeting these sales to the major
Housing Associations and where our
Partnership Housing team can secure
Total land bank split by type (%)
Houses
Flats
53
47
Status of planning (%)
8
36
45
11
Strategic sites
Planning applications
submitted
Pre-application
discussions
To be progressed
30
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We believe we now have in place a
construction team that can help us deliver
on our stated target of building 1,000
homes a year, having added a number
of highly skilled people to the team from
across the industry. Our staff numbers
have increased to 105 at 30 June 2018 from
74 last year. Career progression, long
term incentivisation and a good working
environment, should ensure that we
maintain the quality and strengths of the
team going forward.
Validating our Partnership Housing
strategy, we secured our largest build
contract to date with A2 Dominion, one of
the UK’s biggest Housing Associations. We
sold our site at Church Road, Ashford in
Middlesex for £29.7m and simultaneously
signed a £65m construction contract for
delivery of 357 houses and apartments.
Together with our contracts at Alperton and
Witley Gardens, Southall our Partnership
Housing order book currently stands at
approximately £100m for the delivery of
over 500 affordable homes over five years.
We currently have 13 sites under
construction which are diverse in both
location and type of build. At the year end
there were 682 homes under construction
(including 220 Partnership Housing units)
compared to 427 last year with 82 reserved
or exchanged representing forward sales
of £19.7m. We anticipate a slight drop off
in the number of open market completions
next year due to the build cycle of our sites.
In line with the increasing demand from
Housing Associations who have been
tasked by the Government to increase
the number of homes within their
portfolios, we are targeting the delivery
of 200 Partnership Housing units during
the current year, resulting in an overall
increase in total completions.
Construction and sales
An increasingly core business activity is
our private housebuilding and partnership
homes activities. We completed on
275 open market completions (including
joint ventures), an increase of 46% from
188 last year and increased the Partnership
Housing equivalent units from 37 to 79,
an increase of 114%.
The average sales price of our residential
units was £293,000 (2017: £306,000), and
we continue to see significant demand
from first-time buyers. Help to Buy has
been a major influence, with 58% of our
sales utilising the Government scheme.
The abolition of SDLT for first-time
buyers on homes of up to £300,000 has
also benefited our sales, with 61% of our
buyers purchasing under this price point.
A combination of the two schemes and
tailored incentive packages from Inland
Homes has proven effective, with an
increase in visitors and reservations at
various sales events. Customer demand for
our good quality, affordably priced homes
remains strong and the average sales rate
per active site during the second half of the
year was 1.34 units.
As previously stated, we are committed to
improving our housebuilding margins which
we believe will come primarily through
scale. Already, the increase in the volume
of units we are constructing has enabled us
to negotiate group deals at discount rates,
including rebates, with national material
suppliers, driving down our build costs,
and alleviating the upward pressure on
construction costs.
Unit completion timescale (%)
17
28
55
<24 months
2-5 Years
>5 Years
275
open market completions
837
land plot disposals
682
homes under construction
www.inlandhomesplc.com
INLAND HOMES
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Portfolio review continued
Sites under construction
Chapel Riverside, Southampton
This riverside regeneration site is being
delivered by way of a Development
Agreement with Southampton City
Council. It comprises of 457, one, two and
three bedroom new build apartments
plus 64,000 sqft of commercial space.
In addition to the construction of the
dwellings, there is a high element of civil
infrastructure investment required. This
includes the construction of a 210 metre
long sea wall and the relocation of three
water settlement tanks. This project is
a lightweight steel frame construction,
the first phase will complete in October
2018 with 36 private sale and 27 PRS
completions achieved for the year to
30 June 2018. This is a six year development
which is expected to complete by 2024.
Chapel Riverside, Southampton has added
greatly to our accomplishments on the
South Coast, selling out the first phase in
just 17 weeks, with an average reservation
rate of 2.63 per week. There has been a
strong demand in the Southampton area.
We have achieved 160 legal completions
for the region this year and won the
“Regeneration Project of the Year” award
for Meridian Waterside, at the prestigious
South Coast Property Awards.
p.46
Case study: Chapel Riverside,
Southampton
Meridian Waterside, Southampton
This brownfield regeneration of the former
Meridian television studios is adjacent
to the River Itchen in Southampton. The
development comprises of 350, one, two and
three bedroom new build apartments plus
5,415 sqft of commercial space. Phases one
and two were of traditional construction and
comprised 96 homes. The final private sale
completions in phase two were achieved in
June 2018. The remaining 254 apartments
in phases three and four are concrete frame
construction up to 10 storeys high and piling
commenced in August 2018. Completion is
expected during 2021.
Wessex Hotel, Bournemouth
The Wessex Hotel site was previously
an operating hotel and is within walking
distance of Bournemouth town centre
on the south coast and will comprise 88
apartments (one and two bedroom) in two
blocks together with a new 105-bed hotel
where we have entered into a 25-year
pre-let with Whitbread for a Premier Inn.
This project is light weight steel frame
construction over a concrete basement
carpark. Construction commences in
September 2018 with completion expected
in the first quarter of 2021.
Lily’s Walk, High Wycombe
This brownfield regeneration site on a
former gas works in the heart of High
Wycombe with sloping terrain presented
a range of challenges to overcome. The
project comprises 239, one and two
bedroom new build apartments plus
15,800 sqft of commercial space and a
Town Centre relief road. This four-year
project is a concrete frame construction
with the first completions due in June 2019.
Abbey Wharf, Alperton
This is a brownfield regeneration of
a former light industrial site adjacent
to the Grand Union Canal in Alperton,
near Wembley in North West London. A
partnership contract was secured with
Clarion Housing Association for £30.0m
during the year for the construction of
135, one and two bedroom apartments.
This project is concrete frame construction
and is due to complete in September 2020.
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Gardiners Lane, Basildon
A designated for development site, this
is also a joint venture with the Anderson
Group on a site in Basildon with the
partners having the same responsibilities
as at Europa Way outlined above. Phase
one comprised of 43 two, three and
four bedroom houses and one and two
bedroom apartments. This phase is now
complete and the joint venture is in the
process of purchasing phase two where
planning has been procured for 33 homes.
Construction is expected to commence in
November 2018.
Strategic land
We continued to strengthen our land bank
during the year to ensure that our pipeline
of prospective projects extends well into the
future. We acquired options over 90 acres
of strategic land across eight different
locations which has the potential for 771
plots and we now have 24 options covering
approximately 380 acres of potential
development land secured at attractive
discounts to market value.
Church Road, Ashford
The former Brooklands College in the
town centre in Ashford, close to Heathrow
Airport, will be developed into 357 homes
(one and two bedroom apartments and
three bedroom houses) plus 6,700 sqft
of commercial space and 4,700 sqft
of educational space. After receiving
planning permission in December 2017,
we purchased our joint venture partner’s
80% interest in March 2018. In June 2018,
we sold the site to A2 Dominion for
£29.7m and simultaneously signed a
£65.1m construction contract for this
concrete frame build project. Construction
commenced in July 2018 and phased
completion is forecast for between
2020 and 2023.
p.34 Case study: Church Road, Ashford
Planning and future pipeline
During the year ended 30 June 2018 new
planning approvals and resolutions to grant
planning approval had been received for
594 residential units.
Detailed accounts of our key projects at
Wilton Park, Beaconsfield and Cheshunt
Lakeside, Hertfordshire are set out in the
Chief Executive’s review.
Europa Way, Ipswich
This is a former light industrial site in
Ipswich where we secured planning for
94 two, three and four bedroom houses
and one and two bedroom apartments.
The site was transferred into a 50:50
joint venture with the Anderson Group
who are constructing the development
and with Inland Homes undertaking the
sales and marketing function. The project
commenced in February 2018 with the show
home opening in October 2018 and first
completions due in January 2019.
Bucknalls Lane, Garston
This green belt release site between
Watford and Hemel Hempstead comprises
100 two, three and four bedroom houses
and one and two bedroom apartments. This
project is in a 50:50 joint venture with the
existing landowners and Inland Homes.
Construction commenced in May 2018 with
the show home opening in Autumn 2018 and
first completions expected in Spring 2019.
www.inlandhomesplc.com
INLAND HOMES
INLAND HOMES
33
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Church Road, Ashford
In June 2018, we sold the
10-acre site at Church Road,
Ashford to A2 Dominion for
£29.7m and simultaneously
signed a construction
contract for £65.1m
after receiving planning
permission for 357 homes
(including 32 affordable
units) and 6,700 sqft of
commercial space.
As part of the deal we also retain the
commercial space. In March 2018 we
bought our joint venture partner’s 80%
interest in the project.
The site was originally part of Brooklands
College and the archway from the original
building will be retained and will form part
of a 1,000m2 pocket park. The site will also
contain one hectare of open space including
park and play areas which along with the
pocket park will be open to the public.
34
INLAND HOMES
The archway from the
original building will be
retained and form part of
a 1,000 m2 pocket park.
The development will benefit from solar
lights throughout the site and the parking
will contain electric vehicle charging points.
Our SUDS strategy ensures that there is
zero rainwater run-off from the site.
We have already relocated a gym that
operated on the property and new premises
will be built on-site for the Hair and Beauty
Academy which also existed on the
site previously.
Our journey
July 2005:
Site purchased for
£12.8m in 20:80
joint venture with
CPC Group Limited
September 2017:
Planning application
submitted for
357 homes
December 2017:
Planning permission
granted
March 2018:
Purchased joint venture
partner’s 80% interest for
£16.3m
Stock code: INL
Inland Homes Annual Report 2018.indd 34
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STRATEGIC REPORT // ANNUAL REPORT AND ACCOUNTS 2018
Clockwise
from far left:
CGI artist’s
impression;
Archway
retained
in pocket
park; One-
hectare park
available for
public use.
Preparatory work on the site has been
completed and construction commenced in
July 2018. The build programme is split into
five phases which will complete between
2020 and 2023.
This transaction is our largest partnership
deal to date and demonstrates our
flexible and innovative approach to land
transactions as well as the skills of our
experienced team.
1. 73 units
2. 32 units
3. 145 units
4. 81 units
5. 26 units
1
3
4
5
2
July 2018:
Construction
commenced on site
September 2021:
Phase one expected
to complete
March 2023:
Phase four expected to
complete
June 2018:
Partnership deal with A2
Dominion. Land sale £29.7m and
£65.0m construction contract
February 2020:
Phase two expected to
complete
January 2022:
Phase three expected to
complete
October 2023:
Phase five expected to
complete
www.inlandhomesplc.com
INLAND HOMES
35
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Our journey
ANNUAL REPORT AND ACCOUNTS 2018 // STRATEGIC REPORT
Finance Director’s review
EPRA NAV per share up
6.3%
Recurring profit before tax up
6.6%
“Our priority is to build on the strong
financial performance during the year
and, with a significantly enlarged, highly
qualified team in place, we believe we are
now in a position to effectively manage
this increasingly broad range of activity
and to meet our growth ambitions for
Inland Homes.”
Nishith Malde
Group Finance Director
The Group generated record revenues
of £147.4m (2017: £90.7m) with recurring
profit before tax of £19.3m (2017: £18.1m),
being an increase of 6.6% over the previous
year. The Group’s revenues are derived
principally from the following activities:
• Trading parcels of land to other
housebuilders
• Disposal of parcels of land to Registered
Providers or PRS operators as part of our
Partnership Housing business
• Private homes built by the Group for open
market sale
Group income statement
The rise in revenues has resulted
predominantly from the increase in our
housebuilding activities and disposals
of land parcels to both developers and
Registered Providers. The Group sold 837
plots (2017: 780 plots) for £59.3m (2017:
£49.4m) as shown in the table below.
The Group’s revenues continue to grow with
substantial sales being generated from its
land trading activity. This is increasingly
being supported by Partnership Housing
that involves the sale of land followed by a
construction contract to build the homes.
Partnership Housing has led to a surge in
contract income by 287%, from £3.1m to
£12.0m. The Group recognises the revenue
on construction contracts based on the
proportion of the contract completed.
As a typical construction contract has a
build programme of more than 12 months,
this includes revenue from construction
contracts that were entered into in previous
years and continued during the financial
year ended 30 June 2018 as well as new
contracts exchanged during the year. A key
focus of the Group’s strategy is to grow its
Partnership Housing business and, as at
the year end, the construction order book
under this activity amounted to £98.0m
which will be delivered over the next five
years. This activity enables the Group to
recognise revenue and profitability much
earlier compared to the sale of homes on
the open market to private purchasers. It
also de-risks part of the Group’s operations
and reduces net borrowings.
We completed the sale of 275 private homes
during the financial year (2017: 188 homes)
at an average price of £293,000 (2017:
£306,000) producing revenues of £70.2m
(2017: £57.7m).
Land assets sold directly
Disposal of interest in joint venture
Land sold by corporate disposal
Total plot sale revenues
2018
2017
Plots
837
–
1
838
£m
59.3
–
1.2
60.5
Plots
207
400
173
780
£m
22.4
11.0
16.0
49.4
36
INLAND HOMES
Stock code: INL
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STRATEGIC REPORT // ANNUAL REPORT AND ACCOUNTS 2018
Gross profit was £31.8m (2017: £19.5m)
representing a total margin of 21.6% (2017:
21.5%). The gross profit from land sales
was £18.3m (2017: £19.2m) including the
disposal of our interest in a joint venture
and land sold via a corporate disposal)
representing a margin of 30.2% (2017:
38.9%). The gross profit from private
housebuilding was £7.7m (2017: £8.7m),
delivering an 11.0% margin (2017: 15.1%).
As stated in my previous year’s report,
the lower margin is due to an increase in
site-wide costs on certain large project
and continued additional remedial costs
on some historic projects. Our margins on
new developments for open market sale
are expected to increase as the expansion
in the Group’s in-house build capacity
results in additional buying power and
general efficiencies within the supply
chain. The gross profit from construction
contracts was £1.8m (2017: loss of £0.3m),
representing a margin of 15.0% (2017: loss
of 9.7%). We expect a minimum margin of
10% on Partnership Housing construction
contracts. This is in addition to the margin
made on the related land disposal which
varies from site to site.
Our average number of employees has
increased by 58% from 59 to 93 during
the year as the Group has expanded its
in-house construction capabilities to
self-deliver most of our sites and increase
its operational capacity for growth. This
investment into the Group’s growth and
expertise has inevitably led to a rise in our
administrative costs by 22.1% from £7.7m to
£9.4m, representing 6.4% of revenues.
www.inlandhomesplc.com
Revenue by segment (%)
4
8
40
48
Land sales
Housebuilding
Contract income
Management fees/
Other
Gross profit by segment (%)
13
6
24
Land sales
Housebuilding
Contract income
Management fees/
Other
57
Gross finance costs reduced by 23.5%
from £8.1m to £6.2m, partly due to notional
interest of £1.4m charged in the previous
year that has not been incurred this year.
It also reflected a general reduction in
some of our funding costs in spite of gross
borrowings, having increased from £94.5m
to £120.1m. Included within finance costs is
£1.1m (2017: £1.1m) in respect of the coupon
on zero dividend preference (“ZDP”) shares.
The Group capitalised £1.1m (2017: £1.1m)
of finance costs within the carrying value of
the Wilton Park site in accordance with
IAS 23 Borrowing Costs, as it is constructed
over a significant period of time and is
complex in nature.
Tax charge
The total tax charge of £3.9m represents
20.2% of the profit before tax. The current
corporation tax rate is 19% and the small
difference arises due to the disallowance
of the interest accrued on the zero dividend
preference shares together with other
expenditure disallowed for tax purposes.
INLAND HOMES
37
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ANNUAL REPORT AND ACCOUNTS 2018 // STRATEGIC REPORT
Finance Director’s review continued
Earnings per share and dividend
Basic earnings per share reduced by
2.3% to 7.64p (2017: 7.82p) per share while
the basic earnings per share excluding
revaluation gains has increased by 7.8%
from 7.09p to 7.64p.
The Company continues to maintain a
progressive dividend policy having already
increased the interim dividend by 30% to
0.65p (2017: 0.50p) per share, that was
paid on 29 June 2018. The Board has
recommended a final dividend of 1.55p
(2017: 1.20p) per share, giving a total
increase of 29.4% over the previous year
and delivering a yield of 3.3% based on
the share price at the financial year end of
67.5p. The proposed final dividend will be
paid on 25 January 2019 to shareholders
on the register at the close of business on
28 December 2018. The ex-dividend date is
27 December 2018.
Dividend growth (p)
2.5
2.0
1.5
1.0
0.5
0.0
2.2
1.7
1.3
1.0
0.6
2014
2015
2016
2017
2018
Dividend yield (%)
3.5
3.0
2.5
2.0
1.5
1.0
0.5
0.0
3.3
2.8
2.2
1.2
1.4
2014
2015
2016
2017
2018
EPRA NAV1 p
100
96.22
7.62
80
60
40
20
0
0.25
102.28
(1.83)
0.02
39%
1,708
discount
62.38
June
2017
Profit
Revaluation
Dividends
Other
June
2018
Share
price2
1 On an undiluted basis.
2 At 19 September 2018.
Group balance sheet
Net assets of the Group have increased to
£142.4m at 30 June 2018 from £130.6m,
principally due to retained earnings for
the financial year net of the dividends
paid in January and June 2018. This
translates to net assets of 70.46p per share
(2017: 64.62p). The undiluted EPRA net
asset value per share at the year end was
102.28p (2017: 96.22p).
Joint ventures
The investment period within the Project
Helix joint venture with CPC Group Limited
came to an end in December 2017. After
planning consent was received for the joint
venture’s land at the Church Road site in
Ashford, Middlesex the Group purchased
the remaining interest.
We are a 50% partner in Cheshunt Lakeside
Developments Limited where we injected
a further £5.3m by way of loans to fund the
acquisition of further parcels of land, work
in progress and finance costs.
The Group has a 50% interest in Bucknalls
Developments Limited which secured
detailed planning consent in March 2018
on the site at Bucknalls Lane, Garston.
We have increased our loans to the joint
venture by £1.2m to £5.6m to fund the initial
construction costs. Shortly after the year
end, we secured senior debt funding for the
development of 100 homes on the site.
We also have a 50% interest in two joint
ventures with Constable Homes Limited,
one of which was the development of
43 homes at Gardiners Park, Basildon
where 33 homes were sold by the year
ended 30 June 2018, generating a profit of
£1.6m. Our investment in this venture has
been fully repaid. The other is at Europa
Way, Ipswich, where construction is now
under way for 94 homes funded by a senior
debt facility.
Other assets
Inventories comprise largely of sites (with
and without planning), professional fees
incurred in the planning process and option
fees for strategic sites. The carrying value of
inventories have remained relatively static in
comparison to the previous year due to new
opportunities being focused on options over
strategic sites which are light on capital.
Trade and other receivables stand at
£41.4m (2017: £28.1m) with approximately
£24.9m being outstanding in relation to
land transactions of which £11.0m is due
after more than one year.
Assets by segment (%)
14
18
3
28
37
Land sales
Housebuilding
Contract income
Investment
property
Other
38
INLAND HOMES
Stock code: INL
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STRATEGIC REPORT // ANNUAL REPORT AND ACCOUNTS 2018
Net debt and borrowings
Our cash balances at the year end stood
at £40.4m (2017: £26.5m) with net debt at
£79.7m (2017: £68.0m). As expected net debt
has increased due to the expansion in the
Group’s housebuilding for open market
sale and represents net gearing of 56.0%
(2017: 52.1%) on net assets of £142.4m
(2017: £130.6m) or 38.6% (2017: 35.0%) on
EPRA net assets of £206.7m (2017: £194.4m).
We have undrawn committed bank facilities
at the year end of £32.1m (2017: £11.2m).
Although £44.4m of our borrowings fall due
within one year, in August 2018 we extended
the maturity date of £18.4m ZDP shares
by five years to 10 April 2024. In addition,
we issued a further 1,000,000 ZDP shares
at 150.8p per share raising a gross sum
of £1.5m. The gross redemption yield will
reduce from 7.3% per annum to 5.25% per
annum as from 10 April 2019.
Inland Homes has a revolving credit
facility of £20.0m from Barclays to
fund construction costs relating to the
development of private homes for open
market sale. As at the year end, the Group
had drawn £13.8m of this facility. The Group
also has a revolving credit facility of £17.2m
from a Fund to finance sites with and
without planning consent, that falls due for
repayment in August 2020. This facility was
fully drawn down at the year end.
During the year we secured a facility
for £11.5m from Homes England for
infrastructure and development costs
in respect of 450 homes at our site,
Chapel Riverside in Southampton. As
at 30 June 2018, a substantial part of
Phase 1, comprising 72 units had been
built and sold and consequently the full
facility was available to fund ongoing costs.
We have a revolving cashflow facility of
£24.0m to finance the construction of
239 homes at Lily’s Walk in High Wycombe.
The Group had drawn down £10.7m of this
facility at the year end.
The Group is also in advance negotiations
and has received strong indications that its
borrowing facilities of £26.0m expiring in
December 2018 will be extended by another
12 months.
Inland Homes is in a solid financial position
with a good spread of borrowing facilities to
fund both land purchases and construction
costs for the delivery of its strategic growth
plans. This will be complemented by the
expansion of its Partnership Housing
activity which obviates the need for equity
or debt and assists in reducing the Group’s
gearing levels.
Debt maturity (£m)
2024/25
2023/24
2022/23
2021/22
2020/21
2019/20
2018/19
0
10
20
30
40
50
Proforma1
June 2018
Cash and headroom
at 30 June 2018
£72.5m
2017: 37.7m
Borrowings
Net debt
Cash and headroom
Gearing – IFRS
– EPRA
Average maturity – facilities
– borrowings
Weighted average cost of debt2
– Housebuilding
– Land and investment property
1 Proforma figures include ZDP refinancing in August 2018.
2 Excludes ZDP.
Proforma June
20181
£m
120.1
79.7
74.0
56.0%
38.6%
2.3 yrs
2.6 yrs
n/a
n/a
June
2018
£m
120.1
79.7
72.5
56.0%
38.6%
1.7 yrs
1.9 yrs
3.1%
5.9%
June
2017
£m
94.5
68.0
37.7
52.1%
35.0%
2.7 yrs
2.7 yrs
3.5%
6.2%
www.inlandhomesplc.com
INLAND HOMES
39
Inland Homes Annual Report 2018.indd 39
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Stock code: INL40INLAND HOMESANNUAL REPORT AND ACCOUNTS 2018 // STRATEGIC REPORTCorporate and Social ResponsibilityThe Board is responsible for the governance of the Group’s corporate and social responsibilities. Our sustainability strategy is an inherent part of the Group’s overall business strategy. Our activities can be split into the following three areas: SocietyCustomersEnsuring customers have a positive experience throughout their interaction with us increases the likelihood of us securing project partnerships with developers and repeat custom or recommendations from homeowners. Our customer service procedures ensure that in the unlikely event a customer is dissatisfied, we are able to quickly respond and deal with the issue. We operate a dedicated Customer Service mailbox for each development. This enables our Customer Service team to log all reported issues and enquiries on dedicated trackers to monitor progress in addressing issues and to keep the customer informed. Our process means that whether the development is self-delivery or contractor- led, we can ensure that the issue or enquiry is forwarded directly to the correct personnel where it will be acknowledged and steps will be taken to resolve it. Our Customer Service Managers will attend face-to-face meetings with customers, where appropriate, to discuss, inspect and investigate reported issues first-hand and make immediate determinations as to how to resolve these issues. In the case of residential sales, our relationship with the homeowner also continues after the sale of a house, with close monitoring and support being provided, and customer feedback being sought with a view to improving our performance on future projects.During the year, we adopted a full suite of policies for the purposes of the General Data Protection Regulation (GDPR). These included our customer privacy policy which is on our website. We provided training in those policies to all our customer-facing staff who are also required to complete an e-learning data protection module. We also contacted all of our customers, giving them Society• Customers• Employees• Communities• CharitiesConstruction• Planning and regulation• Supply chain• Site management• Sustainability• Health & safetyEnvironment• Brownfield sites• Biodiversity• Waste managementInland Homes’ StakeholdersInland Homes Annual Report 2018.indd 4010/9/2018 8:17:55 PM STRATEGIC REPORT // ANNUAL REPORT AND ACCOUNTS 2018
the option to opt out of future mailings of
marketing information.
Affordability
The Government’s recent White Paper
on the reform of the housing market and
boosting of supply of new homes in England
highlighted that, in the current market
place, affordability is often a barrier to
people wanting to either take their first
step on the property ladder or to upsize as
their circumstances change. We recognise
that supporting the affordability of new
homes is vital to the continuing success of
our business and our wide range of houses
and apartments enables our customers
to select the right property for their needs
and budget. Our average selling price this
year was £293,000 (2017: £306,000). The
Government’s Help to Buy schemes have
been an important mechanism to support
home ownership and of the 275 homes sold
this year (2017: 188), 58% were purchased
using these schemes.
Employees
Our people are our greatest resource.
Without the knowledge, skills and
experience of our staff we would not be
able to deliver our strategy and value to
our shareholders. As our housebuilding
operations have expanded, our staff
levels have grown accordingly. Over the
past two years, we have grown from 33
to 105 employees at 30 June 2018. This
level of growth can create communication
challenges and to alleviate this potential
issue we have introduced an intranet portal
for all personnel during the last year. We
believe in treating all of our employees and
sub-contractors fairly and responsibly.
We offer competitive salary and benefit
packages, including pensions, life
assurance and an interest-free loan share
purchase scheme. We also support the
Government’s Cycle to Work scheme.
The bringing of new talent into the Company
is hugely important, especially as there
is a general shortage of labour across
all roles within the property industry. We
are passionate about developing the next
generation of workers, whether they be
in our offices or on-site, working with our
sub-contractors. We hire graduates and
www.inlandhomesplc.com
apprentices and we offer work experience
to students where there is a potential of a
permanent employment position at the end.
We employed four new apprentices during
the year.
The Group provides extensive training for
all our staff and achieved an average of
8.5 days of training per employee during
the year ended 30 June 2018. We support
all staff with training that is specific to
their role. All site-based staff undertake
mandatory training in site safety and first
aid at work and are expected to have the
relevant CSCS card. We also provide bi-
monthly management training workshops
to upskill our managers and during the year
we instigated e-learning programmes for
DSE and for the new GDPR policies referred
to above (see “Customers” section).
A full suite of human resources (HR)
policies has been formalised and
implemented during the year and in
January 2018, we introduced an HR
information system which has the benefit
of a self-service module, helping to
streamline our processes and procedures.
New and revised policies adopted during
the year include maternity/paternity leave,
adoption leave and whistleblowing.
Communities
Close collaboration with planning
authorities and engagement with local
communities enables us to refine our
developments so as to reflect local
demands within each locality that
we serve.
We understand that the process of
development and the consequences of
investment decisions have a lasting effect
upon local communities. The delivery of
new homes comes with the responsibility
of ensuring that the impact upon the lives
of new and existing residents is understood
and mitigated. We recognise that whilst
we aim to have a positive effect on the
communities in which we operate, existing
and future residents may have concerns
about perceived negative impacts of our
construction and the future life of our
developments. We appreciate that the local
community has a right to enjoy their homes
Board of Directors
86%
14%
Senior managers
80%
20%
Other employees
71%
29%
Total employees
72%
28%
INLAND HOMES
41
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ANNUAL REPORT AND ACCOUNTS 2018 // STRATEGIC REPORT
Corporate and Social Responsibility continued
“The children have not
stopped talking about
their visit to Lily’s Walk
and were so impressed
by the different skills
and machinery.”
and working environment without nuisance
caused by our works. Our sites have
stringent procedures in place to reduce
noise, dust and nuisance which may be
caused by additional vehicular traffic both
during and after the construction period.
Our partnership sites are registered for the
Considerate Constructors Scheme and in
the year to 30 June 2018 our average score
across the Group was 39 out of 50, well
above the national average of 36/50.
Charities
We support local and national charities,
as well as the communities in which we
operate. We continue to support The
British Institute of Brain Injured Children
(BIBIC), the National Autistic Society
and the London Taxi Drivers’ Fund for
Underprivileged Children as well as
sponsoring local football and cricket teams.
Environment
Biodiversity and ecology
We continue to carry out biodiversity and
ecology risk assessments as part of the
site planning process, ensuring that the
full impact of the development is fully
understood and associated mitigation
measures implemented if necessary.
Brownfield sites make up 60% of the owned
and controlled plots in our land bank and
this strategy will continue to be important
in our future plans.
Brownfield sites
The majority of our sites are “brownfield”
meaning they have been previously used
or built upon. These sites often present
environmental issues which, whilst
Lily’s Walk, High Wycombe
In May 2018, the Lily’s Walk
project team arranged for a
local primary school to visit
Lily’s Walk.
“I wanted to write to you to
personally thank you for all
the hard work and effort you
have put into organising such
a wonderful and memorable
trip for our Nursery children
today. The planning of the trip,
from the moment I met you
to start discussing it to the
moment our bus left the site
today has been so thorough
and thoughtful. Your team
has gone above and beyond
to accommodate the
children safely and ensure
such an educational and
beneficial visit.
Since arriving back to Nursery
the children have not stopped
talking about their visit to
Lily’s Walk and were so
impressed by the different
skills and machinery. The
digger that you had moved
into the safe zone for them
to be able to actually sit
on was a wonderful touch
and a real highlight for the
children. The packs and hats
you have also thoughtfully
given to the children were
very well received and the
children could not wait to
share them with their parents
at pick up time this morning.
Many parents asked me to
personally pass on their
thanks to you too. It has been
a real opportunity to build
a link in the community and
we do hope that in the future
we may be able to bring the
children back to see the
progress of the work. It was
already staggering to see
what had changed since we
last visited to do the risk
assessment.
Once again, I would like to
thank you for providing the
opportunity for our young
children to learn so much in
the real building world. The
set up you had provided meant
that the children could have
the best possible hands-on
learning experience with
ultimate safety too.”
Hannah Smart, Head of Nursery
Godstowe Preparatory School
42
INLAND HOMES
Stock code: INL
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STRATEGIC REPORT // ANNUAL REPORT AND ACCOUNTS 2018
generally of a relatively minor nature,
can on occasions be more complex and
challenging. The Group has experience and
expertise in dealing with these issues.
As an example, we are developing the
former gas holders’ site at Lily’s Walk
next to the town centre at High Wycombe.
The site was a gas works for over a century,
and inevitably the ground below the site
contains various levels of contamination.
To minimise the potential disturbance
to the ground, we are constructing the
buildings on sleeved concrete piles using
methodology agreed with the Environment
Agency and Thames Water to prevent any
contamination leaching into the aquifer
below the site. Additionally, Chapel
Riverside in Southampton provided
several environmental challenges and
these are discussed in more detail on
page 46. Projects such as these highlight
our technical skills and ability to resolve
issues using innovative solutions, enabling
us to pursue projects which would be
unattractive to developers who lack our
expertise and experience.
Waste management
The Group is committed to reducing waste,
arising from its construction activities and
to recycling waste wherever possible. Our
methodology can be summarised as “reuse,
recycle, recover”. Disposal at landfill is
regarded as a last resort, to be used only
when none of these options are possible.
Construction
Planning and regulation
As part of the planning process for
each development, our consultation
process involves engaging with a range
of stakeholders from the existing
communities, including local authorities,
property owners, businesses, schools and
residents’ associations. Where possible
we incorporate feedback received from our
engagement with stakeholders into our
project plans.
We contribute to local communities over
and above the employment opportunities
we offer and the new homes we create. We
invest in local communities in many forms,
such as parks and public open space;
education provision, community buildings
and roads and other infrastructure.
During the year we paid £2.4m via section
106, legal agreements and CIL payments
(2017: £1.5m).
Following the Government’s requirement
for housebuilders to review the fire strategy
of their buildings, all apartment buildings
constructed by the Group have been
independently surveyed by a third party fire
consultant and signed off as fully compliant
with all relevant fire regulations.
Supply chain
We strive to work with suppliers and sub-
contractors who share our values and who
can support our business in a manner that
is safe and efficient which reduces adverse
environmental impact from operations.
We intend that, so far as possible, our
relationships with our suppliers are more
in the nature of partnerships than one-
sided arrangements and we are keen to
support our supply chain, appreciating the
differences in the ways that people work
and offering flexibility where appropriate.
We are committed to paying our suppliers
and sub-contractors within agreed terms.
To improve the collaborative process
with our sub-contractors we hosted
our first Supply Chain Conference in
November 2017 which was attended by
over 50 sub-contractors. We used the
conference to set out our requirements
and expectations and to provide
sub-contractors with an opportunity
to outline their key aspirations in
relation to securing a contract and
working for their developer client. We
are holding our second conference in
November 2018 to continue our dialogue
and to further improve our relationships.
As mentioned previously, we actively
encourage apprenticeships within the
business. During the year we employed
three apprentices in construction
management.
39 out of 50
score from Considerate
Constructors Scheme
60%
of the owned and controlled plots
in our land bank are made up of
brownfield sites
November
2017
First supply chain conference
www.inlandhomesplc.com
INLAND HOMES
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Queensgate,
Farnborough
44
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Stock code: INL
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STRATEGIC REPORT // ANNUAL REPORT AND ACCOUNTS 2018
Corporate and Social Responsibility continued
Site management
As we now predominantly self-deliver our
homes, we have gained greater control
over developments. At all of our self-
delivery homes, 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 (see waste management section).
We are also 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 less
efficient generators.
Sustainability
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 the 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
sustainability projects, such as installing
energy centres, and all of our projects
use a range of environmentally friendly
materials and construction methods. All of
our timber suppliers and manufacturers
are registered with either the PEFC or FSC
(when every tree is cut down they plant
three and all trees cut are from regulated
forests in Scandinavia or Canada).
The principles of lifetime homes are
incorporated into all of our developments,
which means that our homes are designed
to be easily adaptable for use by most
occupants at all stages of life without the
necessity for substantial alterations.
Health and safety
Occupational health and safety is integral
to our culture. The Group appointed to a
new post a head of Health and Safety in
May 2017. The role of the appointee is to
advise and assist managers of self-delivery
projects on the effective implementation
of these projects in a manner which
minimises the role of injury or ill-health to
those engaged in their delivery.
A steering group comprising all project
managers and regional directors meets
quarterly to review recent performance
and to offer suggestions for further
improvement. The steering group also
reviews all proposed changes to the
management system prior to their
implementation.
We believe that our emphasis on
high standards of safety from the
commencement of each project filters down
through our supply chain and encourages
good performance from sub-contractors,
teams and individuals. The benefits of this
approach not only enable us to achieve low
accident rates but also contribute to the
success and profitability of the business.
As evidence of the benefits of our focus
on health and safety, the self-delivery
business has completed the last one million
man hours worked with no reportable
accidents – a zero Accident Frequency
Rate (AFR). Our minor injury rate has also
reduced significantly. This achievement
is due primarily to the commitment,
professionalism and competence of our
staff.
High levels of safety and quality sit side
by side and we will continue our focus on
the management of these complementary
areas in our future planning.
Zero AFR
for last one million
man hours
May 2018
Thames Valley Housebuilder
of the Year, Thames Valley
Property Awards
Sept 2017
Identified as one of
London Stock Exchange
Group’s 1,000 Companies
to Inspire Britain
www.inlandhomesplc.com
INLAND HOMES
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ANNUAL REPORT AND ACCOUNTS 2018 // STRATEGIC REPORT
Chapel Riverside, Southampton
In addition to the construction of the
dwellings, there is quite a high element of
civil infrastructure investment required
which is expected to cost approximately
£10m. This includes the construction of a
210 metre long sea wall and the relocation
of three existing water settlement tanks
as well as substantial archaeological
excavation.
Chapel Riverside represents
the first scheme where we
have partnered with a local
authority.
The site is located a stone’s throw from
the city’s Ocean Village but requires
considerable regeneration. While the
scheme is technically challenging, progress
is running to plan with the team on target to
deliver 457 homes over the next six years.
The Chapel Riverside scheme demonstrates
how we can deliver significant schemes in
collaboration with local authorities. The
regeneration site was secured through a
development agreement with Southampton
City Council, with the aim to provide
high-density housing to an area close to
the attractive Ocean Village development.
The Council continues to own the land and
grant us a phased 999-year lease. The
development agreement allows us to retain
a fixed mark-up on all costs from the profits
generated by the development. Any surplus
profits above an agreed threshold will be
shared between ourselves and the Council.
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. As a result of
this project, the waterfront will become
accessible to the general public through
the inclusion of a riverside walkway and
parks in our development. Additionally, the
development will contain a 3,600m2 plaza
which will be open to the public.
The scale of the project is considerable and
will take six years to complete. Construction
of phase one commenced in September
2017 and is due to complete in October
2018. This phase comprises 72 units, all of
which (except two show homes) were sold
or contracts exchanged at the year end.
The construction of the sea wall (phase
two) is well underway and should complete
in September 2018. Phase three has just
commenced and is expected to complete in
2020 with delivery of the remaining phases
through to 2024.
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Challenges
Archaelogical works
Archaeological works were undertaken for
a period of 13 weeks from January 2017.
A 12th century chapel was demolished
above ground level in 1964. We undertook
extensive excavation work to expose the
remains and recorded every aspect. Much
was learned about the way the building was
used; from when it changed as a chapel
to a tide mill and then one of the first
steam driven mills in the 18th century. The
site held strategic importance in piecing
together the final area of what was the
Saxon settlement of Hamwic. Our site is on
the line of the old Saxon shore and Hamwic.
Various finds of medieval pottery, waste
pits and other items were discovered.
Site contamination
Originally the site contained the Council’s
waste and recycling centre, highways
division premises for maintenance of refuse
vehicles and storage of salt and grit for
the roads and a Council double glazing
factory. All these activities have contributed
to the contamination of the site, including
hydrocarbon pluming and asbestos and
have to be dealt with as part of the project.
Additionally, during site investigation work
an old quay previously used for unloading
and storing lumber was found to have
been filled in together with two mill ponds
on other parts of the site. Both of these
required complex ground engineering
solutions. The reclaimed land build-up
does not offer bearing pressures to support
any foundation other than a piled solution.
The old quay wall will need to be
grubbed out to remove any obstructions
within the ground. Any hydrocarbon
contamination will be remediated on site
and the soil re-used.
Water settlement tanks
The pump house on site handles one-third
of Southampton’s waste water. In addition,
there are three large open air storm
water settlement tanks which have to be
relocated on the site as part of the project.
Lengthy negotiations have taken place with
Southern Water and the current proposal is
to build an 18-metre deep precase concrete
shaft which will use less area and therefore
release further land for development.
In order to retain control over time and
budget we are designing and building this
ourselves rather than having to rely on a
third party.
STRATEGIC REPORT // ANNUAL REPORT AND ACCOUNTS 2018
5
6
4
2
1
3
Phases of build
1. 72 plots1
2. Sea wall
3. 132 plots + commercial2
4. 38 plots + commercial
5. 132 plots
6. 83 plots + commercial
1 Construction commenced
September 2017 completing
October 2018.
2 Construction commenced
July 2018.
Sea wall
The project borders the River Itchen and
as can be seen from the site diagram
above, the sea wall covers almost half of
the boundary of the site and is an extensive
undertaking. It is 210 metres long with the
outer wall requiring the sinking of 16-metre
steel sheet pile walls with an inner wall of
nine metres connected by over 100 four-
metre steel tie rod bars.
In order to finalise the design of the wall,
negotiations were held with the Crown and
the Marine Management Organisation as
well as the local authority and will form
part of the Southampton Strategic Flood
Defence. Construction started in January
2018 and will be completed in September
2018 at a cost of over £2m.
Top left:
CGI of phase three.
Top right:
Construction of the
sea wall.
www.inlandhomesplc.com
INLAND HOMES
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Chapel Riverside,
Southampton
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26133
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Proof 7
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GOVERNANCE
Board of Directors
Corporate Governance statement
Remuneration Committee report
Audit Committee report
Directors’ report
50
52
58
64
65
26133
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26133
9 October 2018 8:15 PM
Proof 7
Stock code: INL50INLAND HOMESANNUAL REPORT AND ACCOUNTS 2018 // GOVERNANCEBoard of DirectorsTerry Roydon Non-executive ChairmanAppointed to the Board2007Skills and expertiseTerry has extensive managerial, practical and political experience of the property sector obtained over a 40-year career. He was Chief Executive of Prowting plc, Non-executive Director of Country & Metropolitan plc and Avant plc (formerly Gladedale Holdings plc) as well as president of the Home Builders Federation.Other current appointmentsConsultant and member of the Board of Dom Development S.A., a major quoted Polish residential developer, Non-executive Director of Kimberly Resources NV (until February 2018 when the company delisted from AIM), Larkfleet Holdings Limited and Chairman of Sigma Homes Limited. He was also president of the European Union of Housebuilders and Developers until the expiry of his term of office in May 2018.Time commitment1-2 days per monthStephen Wicks Chief ExecutiveNishith Malde Finance DirectorAppointed to the Board2005Skills and expertiseStephen 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. He was the founding shareholder and Chief Executive of Country & Metropolitan plc, which floated on the main market of the London Stock Exchange in 1999 with a market capitalisation of £6.9m until its disposal in 2005 to Gladedale Holdings plc for approximately £72m.Other current appointmentsNon-executive Chairman of Energiser Investments plc.Time commitmentFull-timeCommittee membership Audit RemunerationA RAppointed to the Board 2005Skills and expertiseNish is a chartered accountant and has over 25 years’ experience in the property sector with wide professional knowledge and understanding of both listed and unlisted companies. He was Finance Director and Company Secretary of Country & Metropolitan plc, which floated on the main market of the London Stock Exchange in 1999, until its disposal in 2005 to Gladedale Holdings plc.Other current appointmentsExecutive Director of Energiser Investments plc.Time commitmentFull-timeGary Skinner Managing DirectorAppointed to the Board2018Skills and expertiseGary brings considerable experience to the Board having worked in the housebuilding sector for over 30 years. He joined the Group in February 2016 and was appointed to the Board in May 2018. Previously, he was Director of operations at Willmott Dixon Housing and production director at George Wimpey (now part of Taylor Wimpey plc).Time commitmentFull-timeInland Homes Annual Report 2018.indd 5010/9/2018 8:18:09 PM www.inlandhomesplc.com51INLAND HOMESGOVERNANCE // ANNUAL REPORT AND ACCOUNTS 2018 Simon Bennett Senior Independent Director1Laure Duhot Non-executive DirectorA RAppointed to the Board2018Skills and expertiseLaure brings over 30 years of senior executive level experience in the investment banking and property sectors, specialising in alternative real estate assets. She has held senior roles at Lehman Brothers, Macquarie Capital Partners, Sunrise Senior Living Inc and Grainger plc., and has been Non-executive Director at a number of funds and property companies. Other current appointmentsManaging Director of Duhot-Consult Ltd which provides strategic and transaction support to investors and property firms and Non-executive Director at the Guinness Partnership and at healthcare REIT, MedicX Fund. Time commitment1-2 days per monthBrian Johnson Non-executive Director1 With effect from 13 September 2018.Appointed to the Board 2007Skills and expertiseSimon is a chartered accountant and has over 30 years of investment banking experience and of providing corporate finance and broking advice to growing companies. He was head of corporate finance and head of the Mid and Small Caps team at Credit Lyonnais Securities as well as head of Corporate Broking at Fairfax IS plc and Sanlam Securities.Other current appointmentsHe established Incremental Capital LLP in 2004 to provide corporate finance advice to mid and small cap companies. He is also Chairman of the Grown Up Chocolate Company, a Non-executive Director of the Live Company Group Plc, where he is Head of the Audit Committee and a member of the Remuneration Committee and a Partner at Glenmill Partners, which provides impartial advice to growing companies.Time commitment1-2 days per monthAppointed to the Board 2018Skills and expertiseBrian brings a wealth of sector expertise, having held senior management and Non-executive positions within the housing, social care and commercial sectors. He was Chief Executive at CityWest Homes, Moat Homes Limited and at Metropolitan Housing Trust. In addition, Brian was previously a Non-executive Director at North Essex Partnership NHS Foundation Trust.Other current appointmentsInterim Chief Operating Officer at Abzena PLC.Time commitment1-2 days per monthInland Homes Annual Report 2018.indd 5110/9/2018 8:18:12 PM ANNUAL REPORT AND ACCOUNTS 2018 // GOVERNANCE
Corporate Governance statement
The QCA Code is constructed around ten
broad principles and a set of disclosures.
The QCA has stated what it considers to
be appropriate arrangements for growing
companies and asks companies to provide
an explanation about how they are meeting
the principles through the prescribed
disclosures. Recommendations are made
within the QCA Code as to which particular
disclosures should be made in the annual
report and which should be made on the
website. These recommendations have been
followed in the preparation of this section.
In addition to the specific disclosures,
the Code recommends the inclusion of
a “Corporate Governance Statement”
prepared by the Chairman in the annual
report and on the website. The Company’s
Corporate Governance statement is set
out below.
Corporate Governance statement
The Board, under my Chairmanship, is
committed to sound corporate governance
and to the fundamentals of corporate
governance put forward by the QCA. Good
corporate governance is about (i) having
the right people in the right roles, working
together and doing the right things to
deliver shareholder value over the long
term; (ii) being mindful of the Group’s
responsibilities to all its stakeholders
including the workforce, local communities
and business counter-parties; and (iii)
seeking to mitigate the environmental
impact of the Group’s activities. The Board
recognises that good communication is
essential to good corporate governance and
to gaining and maintaining the trust of our
shareholders.
As Chairman, I lead discussions on the
corporate governance responsibilities of the
Board and am the ultimate reporting point
for all corporate governance-related issues.
High-level information as to how the QCA
Code is applied by the Group and how its
application supports the Company’s long
term success as well as explanations for
any areas in which the Group’s governance
structures and practices differ from the
expectations set by the QCA Code are set
out later in this report.
In furtherance of the Group’s commitment
to corporate governance, the Board was
strengthened during the year by the
appointment of two additional independent
non-executive directors, Laure Duhot and
Brian Johnson, both of whom bring relevant
and valuable experience to the Board as
well as balancing out the executive and
non-executive contingent. Biographical
details for Laure and Brian, summarising
the skills that they bring to the Board, are
set out on page 51.
Following the appointments of Laure and
Brian, the departure of Paul Brett in April of
this year and the appointment to the Board
of Gary Skinner, the Board comprises three
executive directors and four non-executive
directors, including the Chairman.
As part of the Board’s review of its
corporate governance arrangements it has
considered the ten principles of the QCA
Code and has considered how and to what
extent it is appropriate for the Company
to adopt practices for the purposes of
complying with those principles, having
regard to the nature and scale of the
Group’s operation and the resources
available to the Group. The following
summary makes appropriate compliance
disclosures against each principle.
The ten principles of the QCA Code are
as follows:
Establish a strategy and business model
which promote long term value for
shareholders
The Group’s strategy is set out and
discussed on page 20 and its business
model is summarised on page 16. The
business model is focused on maintaining
a strong portfolio of properties delivering
both short and medium to long term
value to shareholders. As in past years,
the Board’s four strategic goals are (i)
to acquire land and add value through
planning; (ii) to continue the core activity
of plot sales to generate cash to fund our
operations; (iii) to maximise value from the
land-bank by expanding the house-building
and Partnership Housing programmes; and
(iv) to maintain borrowings at a manageable
level through a strong focus on cash
management and vendor financing.
Stock code: INL
Terry Roydon
Chairman
Dear Shareholder
On behalf of the Board I am pleased
to present the Corporate Governance
statement for the year ended 30 June 2018.
Introduction
Following amendments made to the AIM
Rules, which take effect on 28 September
2018, all AIM companies are required to
apply a recognised corporate governance
code and to make additional website
disclosures relating to their compliance
with that code.
In compliance with the new requirement,
the Company has, since the year end,
adopted the Quoted Companies Alliance’s
(“QCA”) Corporate Governance Code (which
was revised in April 2018) (“QCA Code”)
and has updated its website to include the
additional disclosures required by the QCA
Code and the AIM Rules.
The information set out in this report
has been prepared as if the requirement
to adopt the QCA Code had been in
force during the financial year ended
30 June 2018.
The QCA Code takes key elements of good
governance and applies them in a manner
which is workable for the different needs
of growing companies. In determining the
extent and manner of application of the QCA
Code, the Board has had regard to the size,
risks, complexity and nature of operations
of the business.
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GOVERNANCE // ANNUAL REPORT AND ACCOUNTS 2018
section, the Board is in the process of
formulating an evaluation framework for
directors, including the Chairman and
committees of the Board.
Promote a corporate culture that is based
on ethical values and behaviours
The Group places great value on its culture
and promotes ethical values and behaviours
internally and amongst its stakeholders.
The culture and ethical values of the
Group are best demonstrated through its
commitment to corporate responsibility
and sustainability initiatives as described
on pages 40 to 45 under the heading
“Corporate and Social Responsibility”.
Maintain governance structures and
processes that are fit for purpose and
support good decision-making by the
board
Our corporate governance structures and
processes are summarised and discussed
at page 55 below under the heading
“Governance framework”.
Communicate how the company
is governed and is performing by
maintaining a dialogue with shareholders
and other relevant stakeholders
In addition to the activities summarised
under the QCA Code principle, “Seek to
understand and meet shareholder needs and
expectations” the Company undertakes the
investor relations activities described on
page 56 under the heading “Engaging with
our shareholders”. The Company’s Audit
Committee report is set out on page 64 and
the Remuneration Committee Report is set
out on pages 58 to 63.
Seek to understand and meet shareholder
needs and expectations
Primary responsibility for investor relations
rests with the Company’s Chief Executive,
Stephen Wicks supported by the Finance
Director, Nish Malde and the Managing
Director, Gary Skinner. In addition to
investor presentations and meetings,
the Board uses the Company’s Annual
General Meeting to make a presentation to
shareholders on the Group’s performance.
The Annual General Meeting also provides
an opportunity for the shareholders,
particularly private shareholders, to
question the Board and to share their
thoughts on the Group’s strategy and
business model. Further information
is set out on page 56 under the heading
“Engaging with our shareholders”.
Take into account wider stakeholder
and social responsibilities and their
implications for long term success
The Board is responsible for directing
the Group’s wider stakeholder and social
responsibilities and sustainability strategy.
These activities fall into three broad
categories: Society (customers, employees,
communities and charities); Environment
(brownfield sites, biodiversity and waste)
and Construction (planning, supply chain,
site management, sustainability and health
and safety). Further information is set
out on pages 40 to 45 under the heading
“Corporate and Social Responsibility”.
Embed effective risk management,
considering both opportunities and
threats, throughout the organisation
The principal risks which the Group faces
and the processes which it has put in place
to mitigate those risks are listed on pages
24 to 29. These risks are discussed between
the Board and senior management as a
matter of course and information relating
to them is communicated to all relevant
executives. An assessment of relevant risks
is an integral part of the decision-making
process at all levels of the Group.
Maintain the board as a well-functioning,
balanced team led by the chairman
The QCA Code requires that the boards
of AIM companies have an appropriate
balance between executive and non-
executive directors and that each board
should have at least two independent
directors. As mentioned above, during the
year the Board has been strengthened with
the appointment of Laure Duhot and Brian
Johnson as independent Non-executive
Directors. The Board considers that the
Company’s chairman, Terry Roydon, and
Simon Bennett, are also independent. A
summary of the key responsibilities of
the Board is set out on page 54 under the
heading “Effective leadership” and details
of the governance framework established
by the Board to support its operation in
line with the principles of the QCA Code,
including as to provision of information
to members of the Board, is set out on
page 55 under the heading “Governance
framework”.
Ensure that between them the directors
have the necessary up-to-date
experience, skills and capabilities.
All seven members of the Board have
significant relevant sector experience
and the majority of the Board also have
considerable prior experience of listed
companies. Biographical information on
each member of the Board is provided on
pages 50 and 51. The Board believes that
its blend of relevant experience, skills and
personal qualities and capabilities positions
it well to successfully execute its strategy.
The training and development activities
undertaken by members of the Board are
summarised at page 57 below.
Evaluate board performance based on
clear and relevant objectives, seeking
continuous improvement
The effectiveness of the Board is key to the
effective implementation and operation of
the Group’s strategy and business model
and the Board seeks to foster a culture of
continuous improvement to maximise the
effectiveness of board practices. Details
of the Board’s approach to evaluation
are set out on page 57 under the heading
“Evaluation”. As further described in that
www.inlandhomesplc.com
INLAND HOMES
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Corporate Governance statement continued
Effective leadership
Our Board
Led by our Chairman, Terry Roydon, the
Board is committed to promoting the
long term success of the Group for the
benefit of our shareholders and other
stakeholders. Our Directors bring a range
of skills, perspectives and corporate
experience to our Boardroom. The Board
is responsible for decisions relating to the
Group’s strategy, capital structure and
financing, any major property acquisition,
the risk appetite of the Group and the
authorisation of expenditure above the
delegated authority limits.
The Board considers the following to be its key
responsibilities:
• to set the vision and strategy for the Group;
• to determine and secure the execution of
that strategy by putting in place its business
model so as to deliver value to shareholders;
• to monitor management activity and
performance against targets;
• to provide constructive challenge to ensure
management remains focused on strategic
objectives;
• to define the Group’s corporate governance
arrangements; and
• to promote the long term success of the
Group for the benefit of all stakeholders.
When making decisions, the Board has regard
to the following fundamental considerations:
• the need to act with integrity and to
conduct itself and the business in an open
and honest manner;
• the interests and well-being of our
employees;
• the impact of the decision on local
communities, business counter-parties and
the environment;
• the wants and needs of current and future
customers; and
• the need to develop strong and sustainable
relationships with our key contractors and
suppliers.
Our Board has established the governance
framework illustrated in the chart on
page 55 to support its effective operation
in line with the principles of the QCA Code
and generally to maintain good governance
practices throughout the Group.
The Operating Board, which consists of the
three Executive Directors and the five senior
managers, is responsible for ensuring that
policies and behaviours set at Board level are
effectively communicated and implemented
across the Group’s business. Our intranet
is also used as a platform for employees to
access our policies and be kept fully informed
of the latest developments within the Group.
Attendance
The Board meets regularly throughout the
year and full attendance is encouraged
where possible. The following table sets
out the number of meetings held during the
year to 30 June 2018 and the attendance at
those meetings.
Independent
Yes
Yes
Yes
Yes
No
No
No
No
Name of Director
Terry Roydon
Simon Bennett
Laure Duhot
Brian Johnson
Stephen Wicks
Nish Malde
Paul Brett
Gary Skinner
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INLAND HOMES
No. of meetings attended
7
7
n/a
n/a
7
7
5
1
Attendance
100%
100%
n/a
n/a
100%
100%
100%
100%
Culture
From early 2017 the Group has seen
a significant growth in its workforce.
Throughout this period of rapid growth, the
Board has sought to maintain a ‘family feel’
within the business. We pride ourselves
on our open, supportive and caring culture
which encourages everyone to work together
as one team regardless of where they work
in the business. We believe that our culture
is a key strength of our business and we
see the benefits of our strong culture in the
level of employee engagement, retention and
productivity across the Group. Our managers
take responsibility for monitoring the culture
within their own areas and for feeding back
any issues, comments or concerns raised by
our employees to the Board.
The Group places considerable value on the
involvement of its employees and keeps them
informed of all relevant matters on a regular
basis. In July 2017, to explore the impact of
the increasing numbers of staff resulting
from the growth of the business, the Board
commissioned an external consultant to lead
a piece of work with a small group of staff.
The external consultant facilitated a one-day
workshop for 19 multi-disciplinary staff to
explore the past, present and future cultures
of the Group with a view to identifying actions
to build on the existing culture and for staff to
work more closely together as one business.
The staff who attended were fully engaged
in the workshop and as a result, were able to
identify the preferred culture for the Group
to work towards and the actions to help it
achieve that. Many of those actions have been
completed. These include the development
of an intranet to improve communication,
informal social events to engender a sense
of ‘one company’ and to celebrate success,
regular site visits for senior staff and back
office staff to understand the business better,
standard policies and procedures across
all disciplines, the development of a supply
chain forum and the establishment of central
training provision/administration so that staff
have the knowledge and skills needed to do
their job.
Within the Corporate and Social
Responsibility section, on pages 40 to 45,
there are further details on our employees.
Stock code: INL
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GOVERNANCE // ANNUAL REPORT AND ACCOUNTS 2018
Governance framework
We pride ourselves on conducting our business in an open and transparent manner. Our governance framework remains flexible due to
our culture and allows for fast decision making and effective oversight.
The Board
The Board is primarily responsible for setting the Group’s strategy for delivering long term value to our shareholders and other
stakeholders, providing effective challenge to management concerning the execution of the strategy and ensuring the Group maintains
an effective risk management and internal control system.
The Board delegates certain matters to its two principal committees:
Audit Committee
Remuneration Committee
Responsible for reviewing, and reporting to the Board on
the Group’s financial reporting, maintaining an appropriate
relationship with the Group’s Auditor and monitoring the internal
control systems.
Responsible for establishing the Group’s Remuneration Policy for
Executive Directors and ensuring there is a clear link between our
performance and the remuneration we pay.
Operating Board
The Board delegates the execution of the Group’s strategy and the day-to-day management of the business to the Operating Board.
Independence
The Board considers that our Non-
executive Directors remain independent.
All Directors have confirmed (as they are
required to do annually) that they have been
able to allocate sufficient time to discharge
their responsibilities effectively.
The independence of our Non-executive
Directors is considered on a regular basis
to confirm that they remain independent
from executive management and free from
any business or other relationship which
could materially interfere with the exercise
of their judgement.
As stated above, the Board was
strengthened during the year by the
appointment of two additional independent
Non-executive Directors, Laure Duhot and
Brian Johnson.
Terry Roydon and Simon Bennett have
served the Company as non-executive
Directors since its admission to AIM in 2007.
The QCA Code acknowledges that the fact
that a director has served for more than
nine years does not automatically affect
independence provided that the Board
is satisfied that the director continues to
exhibit independence of character and
judgment. In the Board’s opinion, both Terry
and Simon have continued to demonstrate
robust commitment to their roles and to
exercise their judgement in an effective
and independent manner, nor do they have
any association with management that
might compromise their independence.
Accordingly, the Board considers them to
be independent Non-executive Directors
of the Company. They will also stand for
re-election at all Annual General Meetings
of the Company.
Our Directors are required to notify the
Board of any changes to their external
commitments with an indication of the time
commitment involved. During the year,
Terry Roydon became Chairman of Sigma
Homes Limited. Terry notified the Board in
advance of his appointment and the Board
has confirmed that it does not believe
that this change in directorship will affect
Terry’s ability to fulfil his duties as the
Chairman of the Company nor will it give
rise to a potential conflict of interest.
Any Director who has concerns about the
running of the Group or a proposed course
of action is encouraged to express those
concerns which are then recorded. No such
concerns were raised during the year ended
30 June 2018 (2017: None). During the year,
the Chairman held a number of meetings
with the Non-executive Directors without
executive management being present.
These meetings are useful to safeguard
the independence of our Non-executive
Directors by providing them with time
to discuss their views in a more private
environment.
We have established an agreed procedure
by which Directors can, for the purposes of
discharging their duties, obtain independent
professional advice at the Company’s
expense. No Director had reason to use this
facility during the year ended 30 June 2018
(2017: None).
The Board has considered whether
the Company is of a size where the it
is appropriate to designate one of the
Non-executive Directors as the “Senior
Independent Director” to act as a sounding
board and intermediary for the Chairman
www.inlandhomesplc.com
INLAND HOMES
55
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ANNUAL REPORT AND ACCOUNTS 2018 // GOVERNANCE
Corporate Governance statement continued
or other members of the Board and to
provide an alternative route of access
to the Board for shareholders and other
directors where appropriate. The Board
has nominated Simon Bennett as the Senior
Independent Director.
Conflict of interests
As a Non-executive Director’s
independence could be impaired where a
Director has a conflict of interest, the Board
operates a policy that restricts a Director
from voting on any matter in which he or
she might have a personal interest unless
the Board unanimously decides otherwise.
Prior to all major Board decisions, the
Chairman requires the Directors to confirm
that they do not have a potential personal
conflict with the matter being discussed.
If a conflict does arise, the Director is
excluded from discussions and from voting.
Information sharing
The Board and its Committees are provided
with comprehensive papers in a timely
manner to ensure that the members are
fully briefed on the matters to be discussed
at their meetings. The Chairman of the
Board and the chairmen of the Committees,
being Terry Roydon in the case of the
Audit Committee and Simon Bennett in
the case of the Remuneration Committee,
set the agendas for upcoming meetings in
discussion with members of the Board and
Committees (as the case may be).
Papers to the Board are required to be
clear and concise with any background
material included as an appendix to
the papers.
Share dealing
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 and the Market Abuse
Directive (MAR).
56
INLAND HOMES
Roles and responsibilities
Our Board is composed of the Chairman,
three Executive Directors and three
independent Non-executive Directors.
The key responsibilities of each category of
directors are set out below:
Key responsibilities of the Chairman
• To lead the Board effectively and to
oversee the adoption, delivery and
communication of the Company’s
corporate governance model.
• To ensure that the Board has the right
balance of skills, experience and
independence.
• To promote teamwork across the Board.
• To engender a Boardroom culture
that is rooted in the principles of good
governance and enables challenge, debate
and transparency.
• To ensure that the Board as a whole
plays a full and constructive part in the
development of strategy and that there is
sufficient time for Boardroom discussion.
• To ensure effective engagement between
the Board and its shareholders and other
stakeholders.
Key responsibilities of the Chief
Executive (CEO)
• To execute the Group’s strategy and
commercial objectives and to implement
the decisions of the Board and its
Committees.
• To keep the Chairman and Board
appraised of important and strategic
issues facing the Group.
• To ensure that the Group’s business is
conducted with the highest standards of
integrity, in keeping with our culture.
• To manage the Group’s risk profile,
including the maintenance of appropriate
health, safety and environmental policies.
Key responsibilities of the Non-executive
Directors (NEDs)
• To provide constructive challenge to our
executives, to help to develop proposals
on strategy and to monitor performance
against our KPIs.
• To ensure that no individual or group
dominates the Board’s decision making.
• To promote the highest standards of
integrity and corporate governance
throughout the Company, including at
Board level.
• To determine appropriate levels of
remuneration for the Executive Directors
with the benefit of recommendations
made by the Remuneration Committee.
• To review the integrity of the Group’s
financial reporting processes, including
ensuring that financial controls and
systems of risk management are robust.
The roles of Chairman and Chief Executive
are separately held and the respective
duties and responsibilities attached to
those positions are clearly established.
Engaging with our shareholders
We recognise the importance of clear
communication and proactive engagement
with our shareholders.
The following is a summary of the different
actions taken by the Company to maximise
shareholder engagement.
Investor meetings
Following the full year and half year
announcements, as well as at various
times during the year as requested, the
Executive Directors present to a number
of institutional and significant private
investors to update them on the Group’s
results and strategy and answer any
questions they may have.
Institutional shareholders and fund
managers
Our Executive Directors also maintain
contact with institutional shareholders
and fund managers, through phone calls,
presentations and visits to our Group’s
property assets.
Annual General Meeting
Our 2017 Annual General Meeting (AGM)
was held on 28 November 2017 and we were
delighted to receive in excess of 91% votes
in favour for all of our resolutions. The 2018
AGM is to be held on 27 November 2018
at Decimal Place, Chiltern Avenue,
Amersham, Buckinghamshire, HP6 5FG
and we encourage our shareholders to
attend. The AGM provides an opportunity
for private shareholders in particular to
raise any queries with the Board.
Stock code: INL
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GOVERNANCE // ANNUAL REPORT AND ACCOUNTS 2018
Annual and half year reports
We communicate with shareholders
through our annual report and accounts
and interim report, full year and half year
announcements and trading updates.
Through our electronic communication
initiatives, we aim to make our annual
report as accessible as possible for our
shareholders, who can opt to receive a hard
copy in the post or PDF copies via email or
from our website.
Corporate website
The Group’s corporate website,
www.inlandhomesplc.com, has a dedicated
investor section which includes our
annual reports, results presentations
(which are made to analysts and investors
after the publication of the interim and
full year results) and our financial and
dividend calendar for the upcoming year.
Additionally, we have a commercial website
(www.inlandhomes.co.uk) which contains
details of all our current developments.
Debtholder engagement
Our CEO, Stephen Wicks and Group Finance
Director, Nish Malde, have meetings and
calls with the ZDP shareholders as and
when requested.
Key contacts for our shareholders
We have included contact details for
our financial PR consultants, Company
Secretary and our Registrars on page 116.
Evaluation
In view of the size of the Group and the
relatively small Board of the Company,
the Company has not historically
adopted a formal evaluation process for
individual members of the Board and the
Committees. Instead, the Chairman has
invited feed-back on the performance of
members of the Board on an informal
but confidential basis from time to time
and, if and when necessary, has addressed
any points arising directly with the
director concerned.
Following its adoption of the QCA Code, the
Board intends to adopt a formal evaluation
process in the current financial year which
will include the completion and return to
the Chairman of questionnaires relating to
the effectiveness of the Board and a self-
assessment by each director of his or her
contribution to the Board. The responses
to those questionnaires will then form
the basis for discussions between each
Director and the Chairman and, in the case
of the Chairman, a nominated independent
non-executive director.
In view of the size of the Group, the
Directors do not consider that an
external review process with the associated
costs is an appropriate or proportionate
use of resources at this point in the
Group’s development.
Training and development
With the dynamic environment in which
the Group operates, it is important for our
Executive and Non-executive Directors
to keep abreast of recent, and upcoming,
developments both in the industry and in
the regulation of companies whose shares
are traded on public markets.
Professional advisers to the Group
deliver industry and professional updates
to members of the Board; the Finance
Director provides regular updates to the
Board and its Committees on regulatory
and corporate governance matters and the
Managing Director provides updates on any
significant changes affecting the industry.
During the year the Board also received
an AIM rules refresher presentation from
the Company’s nominated adviser and all
Directors have access to the resources
provided by the Quoted Companies’ Alliance
by virtue of the Company’s membership of
that organisation.
Terry Roydon
Chairman
19 September 2018
www.inlandhomesplc.com
INLAND HOMES
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ANNUAL REPORT AND ACCOUNTS 2018 // GOVERNANCE
Remuneration Committee report
(unaudited)
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.
Role of the Committee
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,
Group Finance Director and Gary Skinner,
Managing Director and independent
advice from external consultants, where it
considers this to be appropriate.
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
considers the aggregate remuneration to
be received by the individual Executive.
Simon Bennett
Chair of the Remuneration Committee
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
2018 and the remuneration policy for the
forthcoming financial year
and beyond.
Membership and attendance
The Board has 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 Remuneration
Committee meets formally three times a
year and on such other occasions as may
be required.
Independent
No. of meetings
Attendance
Terry
Roydon
Simon
Bennett
Yes
3
Yes
3
100%
100%
58
INLAND HOMES
Stock code: INL
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GOVERNANCE // ANNUAL REPORT AND ACCOUNTS 2018
Long Term Incentive Plans
The Company operates both an unapproved
share option scheme, which is open to
all employees of Inland Homes, and the
2013 LTIP.
Awards under the unapproved share option
scheme are made on a periodic basis to
the Company’s 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.
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, 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. Participants
Originally, when the 2013 LTIP was
established, the Executive Directors
participating in the 2013 LTIP and their
allocations of Growth Shares were as
follows: Stephen Wicks 47%, Nishith Malde
38% and Paul Brett 15% (collectively the
“Participants”). Paul Brett, who remains
as a consultant to the Group, stepped
down from the Board with effect from 16
April 2018 prior to which he exchanged 79
Growth Shares for 896,689 ordinary shares.
Consequently, Mr Brett’s allocation of any
future Growth Shares has lapsed and the
aggregate number of ordinary shares now
issuable under the 2013 LTIP has been
reduced by 1,702,576 ordinary shares
to 9,647,928 ordinary shares (previously
11,350,504 ordinary shares).
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:
• 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 50% in cash and as
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 Director leaves the Company as
a “bad leaver”, but would not be subject to
any further performance conditions.
www.inlandhomesplc.com
INLAND HOMES
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Remuneration Committee report
(unaudited) continued
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 was set at a
price of 60.5 pence per ordinary share (the
“First Target Performance Price”), being
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 as at 30 June 2018 on exchange
for vested Growth Shares assuming the
Performance Target for each year of the
respective years is achieved.
3. Participants (continued)
Of these, 6,000,000 ordinary shares were
available to be issued to the Participants,
under the terms of the 2013 LTIP, as the
Performance Targets had been met. Of this
aggregate number, 896,689 ordinary shares
were issued to Paul Brett on 9 April 2018
with 3,311 ordinary shares having lapsed
as explained below. As a consequence,
at 30 June 2018 there were 9,647,928
ordinary shares available to be issued to
the Participants (5,100,000 ordinary shares
which have been earned and 4,547,928
available to be earned subject to the
performance criteria being met), equivalent
to 4.72% of the total issued ordinary
share capital at the year end. Following
the financial year end, a further 2,814,924
ordinary shares were issued to Stephen
Wicks on 19 July 2018 and consequently
there are now 6,833,004 ordinary shares
available to be issued to the remaining
Participants subject, where relevant, to
the performance criteria being met. Of this
number, 2,285,076 ordinary shares have
been earned and 4,547,928 ordinary shares
are available to be earned.
Due to an anomaly in the way in which
the 2013 LTIP was drafted, fractional
entitlement of a Growth Share can’t
be exchanged for ordinary shares and
therefore the actual number of ordinary
shares issued to Paul Brett was 896,689
(shown as 900,000 in last year’s financial
statements) and to Stephen Wicks was
2,814,924 (shown as 2,820,000 in last year’s
financial statements). It is the present
intention of the Remuneration Committee to
issue any earned but unallocated ordinary
shares created by this anomaly to the
existing Participants (which currently total
5,076 ordinary shares) when the 2013 LTIP
is closed in accordance with its terms.
Any awards to the Executive Directors
under the 2013 LTIP are subject to good
and bad leaver provisions and Paul Brett
was determined to have been a good leaver
and was, as a result, entitled to retain the
ordinary shares that he was entitled to in
accordance with the rules of the scheme.
Gary Skinner, who recently joined the Group
Board, will not be entitled to any awards
under the 2013 LTIP.
4. 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
Start date of accounting period
1 July 2013
1 July 2014
1 July 2015
1 July 2016
1 July 2017
1 July 2018
1 Previously 2,000,000 ordinary shares.
2 Previously 1,350,504 ordinary shares.
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
1,700,0001
1,700,0001
1,700,0001
1,700,0001
1,700,0001
1,147,9282
9,647,9283
3 The total number of ordinary shares issuable under the 2013 LTIP has now been reduced by 1,702,576 (previously 11,350,504), as one of the original
participants has left the Group as explained more fully in Note 3 “Participants”.
60
INLAND HOMES
Stock code: INL
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GOVERNANCE // ANNUAL REPORT AND ACCOUNTS 2018
5. Dilution
The total number of shares in the
Company which may become issuable on
the exchange of Growth Shares (assuming
vesting in full) at the year end is 9,647,928
ordinary shares (previously 11,350,504
ordinary shares) and in aggregate 2,814,924
ordinary shares have been issued to the
Participants after the year end, leaving a
further 6,833,004 ordinary shares to be
issued, equivalent to 3.38% of the
current issued ordinary share capital
of the Company.
6. 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.
In order for all the 9,647,928 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 when the 2013 LTIP was introduced.
This increase is approximately equivalent to
a 14% annual compound rise in the ordinary
share price.
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
Gary Skinner, 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 to Stephen Wicks or Nishith
Malde under the 2013 LTIP.
Non-executive Directors
Inland Homes now has four Non-
executive Directors, namely Terry Roydon,
the Chairman and Head of the Audit
Committee, Simon Bennett, Head of the
Remuneration Committee, and Laure Duhot
and Brian Johnson, who bring a wealth of
commercial property experience and who
both joined the Board on 27 June 2018.
The Non-executive Directors have letters
of appointment, which initially are for a
three-year period and thereafter on either
three or 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.
www.inlandhomesplc.com
INLAND HOMES
61
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ANNUAL REPORT AND ACCOUNTS 2018 // GOVERNANCE
Remuneration Committee report
(unaudited) continued
Directors’ emoluments for the
year ended 30 June 2018
A review of the financial results for the
year ended 30 June 2018 as more fully
set out in the Chairman’s Statement, the
Chief Executive’s Review and the Finance
Director’s Review indicate that this financial
year has been another good one for Inland
Homes, with revenue of £147.4m (2017:
£90.7m) up 62.5%, recurring profit before
tax of £19.3m (2017: £18.1m) up 6.6%,
undiluted EPRA NAV per share of 102.28p
(2017: 96.22p) up 6.3% and total dividends of
2.20p for the year (2017: 1.70p) up 29.4%. 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
Gary Skinner
£81,000
£81,000
£25,000
In accordance with the rules of the
Deferred Bonus Plan, further details of
which are set out above, the bonuses for
Stephen Wicks and Nishith Malde (and
Gary Skinner in future years) will be
settled as 50% in cash and as 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 bonus for Gary Skinner,
who joined the Board at the end of the
Group’s financial year in May 2018, has
been approved on a discretionary basis by
the Remuneration Committee and will be
settled in cash. In future years any bonuses
awarded to Gary Skinner will be treated in
the same way as for the other Executive
Directors, namely as being part of the
Deferred Bonus Plan as set out above.
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.
The basic salaries of Stephen Wicks and
Nishith Malde have remained unchanged
for the past five years. In recognition
of this, with effect from 1 July 2018 the
Remuneration Committee have awarded an
increase in their basic annual salaries from
£290,000 to £320,000 (excluding national
insurance contributions), equivalent to a
cost of living rise of approximately 2% per
annum over a five-year period.
Directors’ remuneration table (audited)
The remuneration of each of the Directors during the year ended 30 June 2018 is set out in detail below:
Salary/ fees
£000
Bonus
£000
Benefits
£000
Pension
£000
Total
remuneration
£000
Social
security
costs
£000
Total
remuneration
& social security
£000
2018
Executive Directors
S D Wicks1
N Malde1
G Skinner (appointed on
9 May 2018)
P Brett (resigned on
16 April 2018)
Non–executive Directors
T Roydon
S Bennett
L Duhot
B Johnson
348
348
42
156
55
45
–
–
40
40
35
–
–
–
–
–
29
26
2
9
–
–
–
–
–
–
1
16
–
–
–
–
417
414
80
181
55
45
–
–
55
55
11
25
–
–
–
–
1 S Wicks and N Malde have taken their pension entitlement as part of their salaries. During the period no LTIPs vested.
2017
Total
£000
591
589
–
472
469
91
206
371
55
45
–
–
55
45
–
–
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Stock code: INL
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GOVERNANCE // ANNUAL REPORT AND ACCOUNTS 2018
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 on page 66. The share options held
by the Directors in the unapproved share option scheme are set out below:
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 2017
Exercised during the year
Total options outstanding at 30 June 2018
Stephen
Wicks
–
–
–
–
–
Nishith
Malde
–
1,500,000
1,500,000
–
1,500,000
Paul
Brett
400,000
–
400,000
–
400,000
On 18 July 2018 Gary Skinner was granted options over 250,000 ordinary shares at a price of 67.0 p per share.
2013 LTIP
The initial price for determination of awards
under the 2013 LTIP was 46.5 pence per
ordinary share. In aggregate, to date, the
conditions for the issue of the following
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
are as follows:
Stephen Wicks
Nishith Malde
Paul Brett
Ordinary
shares of
10p each
2,820,000
2,280,000
900,000
As explained above, Stephen Wicks was
issued 2,814,924 ordinary shares on
19 July 2018 and Paul Brett was issued
896,689 ordinary shares on 9 April 2018.
The balance of 3,311 ordinary shares for
Paul Brett have lapsed. The balance of
5,076 ordinary shares which have been
earned by Stephen Wicks but not yet
allocated is intended to be issued to him in
the future as described more fully above.
The Performance Target under the 2013
LTIP for the financial year ended on
30 June 2017, which would have earned the
equivalent of a further 2,000,000 ordinary
shares, was not achieved as the Inland
Homes plc share price did not exceed the
necessary threshold price of 84.1 pence
per ordinary share for the qualifying
period. Under the terms of the 2013 LTIP,
the awards in this period can be earned in
future periods if the share price exceeds
the threshold price for the qualifying
period. The threshold price for the financial
year ended 30 June 2018, which would earn
a further 1,700,000 ordinary shares, is 92.5
pence per ordinary share. The threshold
price for the new financial year ending
30 June 2019, which would earn a further
1,147,928 ordinary shares, is 101.8 pence
per ordinary share.
There remain a total of 6,833,004 new
ordinary shares that can be issued in
exchange for vested Growth Shares
(2,285,076 ordinary shares) and Growth
Shares where the conditions have yet to
be met in accordance with the rules of the
2013 LTIP (4,547,928 ordinary shares).
Approval
This report was approved by the Board
on 19 September 2018 and signed on its
behalf by:
Simon Bennett
Chair of the Remuneration Committee
www.inlandhomesplc.com
INLAND HOMES
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ANNUAL REPORT AND ACCOUNTS 2018 // GOVERNANCE
Audit Committee report
Duties
The main duties of the Audit Committee
are described in the Corporate Governance
framework on page 55. It is intended
that these will be kept under continuous
review to ensure they remain appropriate
and reflect any changes in legislation,
regulation or best practice.
The main items of business considered
by the Audit Committee during the
year included:
• review of the 2018 financial statements
and annual report;
• consideration of the external audit report
and management representation letter;
• going concern review;
• review of the 2018 audit plan;
• review of suitability of the external
Auditor;
• review of the interim results; and
• assessment of the need for an internal
audit function.
Internal audit
The Committee 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.
Internal controls
On behalf of the Board we monitor the
Group’s system of internal controls
to ensure they remain robust and are
effectively implemented. 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.
These controls include those financial and
operational controls to manage risk. A
discussion of these risks can be found on
pages 24 to 29.
Role of the external Auditor
The Audit Committee monitors the
relationship with the external Auditor,
BDO LLP, to ensure that auditor
independence and objectivity are
maintained. As part of its review the
Committee monitors the provision of
non-audit services by the external auditor.
The breakdown of fees between audit and
non-audit services is provided in note 5 of
the Group’s financial statements.
BDO LLP no longer provides any tax
services to the Group but continues to
do so to the Group’s joint ventures. The
non-audit fees relate to tax compliance for
the Group’s joint ventures and a review of
the interim results. Having reviewed the
auditor’s independence and performance,
the Committee recommends that BDO LLP
be reappointed as the Group’s Auditor at
the next AGM.
External audit process
The external Auditor prepares an audit
plan for its review of the full year financial
statements. The audit plan sets out the
scope of the audit, areas to be targeted
and audit timetable. This plan is reviewed
and agreed in advance by the Committee.
Following the audit, the Auditor presented
their findings to the Audit Committee for
discussion. No major areas of concern
were highlighted by the Auditor during the
year, however, areas of significant risk
and other matters of audit relevance are
regularly communicated.
Whistleblowing
The Group has in place a whistleblowing
policy which sets out the formal process
by which an employee of the Group may,
in confidence, raise concerns about
possible improprieties in financial reporting
or other matters.
Approval
This report was approved by the Board
on 19 September 2018 and signed on its
behalf by:
Terry Roydon
Chair of the Audit Committee
Terry Roydon
Chair of the Audit Committee
I am pleased to present the Audit
Committee Report for 2018. This report
provides shareholders with an overview of
the activities carried out by the Committee
during the year. The Committee is
responsible for ensuring that the financial
performance of the Group is properly
measured and reported on. Its role includes
monitoring the integrity of the financial
statements (including annual and interim
accounts and results announcements),
reviewing any changes to accounting
policies, reviewing and monitoring the
extent of the non-audit services undertaken
by external auditors, advising on the
appointment of external auditors and
meeting with external auditors without
management present.
Membership and attendance
The Committee consists of two independent
Non-executive Directors: myself (as
Chairman) and Simon Bennett. It is expected
that either of the two new Non-executive
Directors; Laure Duhot and Brian Johnson,
will join the Committee during the current
financial year. Other members of the Board
or management may attend Committee
meetings by invitation if required.
Independent
No. of meetings
Attendance
Terry
Roydon
Simon
Bennett
Yes
3
Yes
3
100%
100%
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GOVERNANCE // ANNUAL REPORT AND ACCOUNTS 2018
Directors’ report
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 28 to the Group financial statements.
Results and dividends
The financial statements set out the results
of the Group for the financial year ended
30 June 2018 and are shown on pages 75
to 112. The Directors have proposed a final
dividend of 1.55p per share (2017: 1.20p)
payable on 25 January 2019, subject to
shareholders’ approval, to shareholders
at the close of business on 28 December
2018. 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 8,
the Chief Executive’s review on page 10, the
Finance Director’s review on page 36 and
the Portfolio review on page 30. The Group’s
key performance indicators are monitored
closely by the Board and the details of
performance against these are on pages 22
and 23.
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.
Nish Malde
Company Secretary
The Directors present their annual report and
the financial statements of the Group and the
Company for the year ended 30 June 2018.
This annual report contains certain forward-
looking statements. By their nature, any
statements about the future outlook involve
risk and uncertainty because they relate to
events and depend on circumstances that
may or may not occur in the future. Actual
results, performance or outcomes may differ
materially from any results, performance
or outcomes expressed or implied by
such forward-looking statements. Each
forward-looking statement speaks only
as of the date of that particular statement.
No representation or warranty is given in
relation to any forward-looking statements
made by Inland Homes, including as to their
completeness or accuracy. Nothing in this
report and accounts should be construed as
a profit forecast.
Both the Strategic report and the Directors’
report have been drawn up and presented
in accordance with and in reliance upon
applicable English Company law, and the
liabilities of the Directors in connection with
that report shall be subject to the limitations
and restrictions provided by such law.
www.inlandhomesplc.com
INLAND HOMES
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Directors’ report continued
Directors and their interests
S D Wicks
N Malde
P Brett (resigned 16/04/2018)
G Skinner (appointed 09/05/2018)
T Roydon
S Bennett
L Duhot (appointed 27/06/2018)
B Johnson (appointed 27/06/2018)
Number of
ordinary shares
13,987,332
11,360,029
n/a
40,000
325,000
110,000
–
–
As at 30 June 2018
Number of
Growth Shares
470
380
n/a
–
–
–
–
–
Number of
share options
–
1,500,000
n/a
–
–
–
–
–
Number of
ordinary shares
13,737,332
11,360,029
4,204,214
n/a
325,000
110,000
n/a
n/a
As at 30 June 2017
Number of
Growth Shares
470
380
150
n/a
–
–
n/a
n/a
Number of
share options
–
1,500,000
400,000
n/a
–
–
n/a
n/a
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 as well as
a substaintial order book for its Partnership
homes and is in discussions for the sale of
some 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 the date of signing these
financial statements.
Each of the Directors listed on pages 50 and
51 held office as at 30 June 2018. Details of
the Directors’ beneficial interests in shares
are shown in the table above.
Further information on the 2013 LTIP can
be found in the Remuneration Committee
report on pages 58 to 63.
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.
Employee Benefit Trust
On 16 December 2016 the Group’s Employee
Benefit Trust (“EBT”) purchased 600,000
shares of 10p each in Inland Homes plc
under the terms of the Deferred Bonus Plan
for total consideration of £365,000. This
brought the total number of shares owned
by the EBT to 1,627,500. No shares were
purchased by the EBT during the year ended
30 June 2018.
Substantial shareholding
As at 19 September 2018, 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
Premchand & Kanchangauri Shah
At 30 June 2018, the Group had £44.4m
of borrowing facilities expiring within one
year. Included within this figure was £18.4m
relating to the Group’s ZDP borrowings,
the maturity of which was extended to April
2024 shortly after the year end. The balance
of £26.0m relates to loans where we are in
advance negotiations with the bank and have
received strong indications that the facility
will be extended by a further 12 months to
expire in December 2019. The Directors
therefore consider it appropriate to prepare
the financial statements on the going
concern basis.
Shareholding
16,000,000
10,138,737
6,199,222
%
7.81
4.95
3.03
66
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Stock code: INL
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GOVERNANCE // ANNUAL REPORT AND ACCOUNTS 2018
Auditors
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.
The Directors who held office at the date of
approval of this Directors’ report confirm
that, so far as they are each aware, there is
no relevant audit information of which the
Company’s Auditor is unaware and that each
Director has taken all the steps that they
ought to have taken as a Director to make
themselves aware of any relevant audit
information and ensure that the Auditor is
aware of such information.
The Strategic report and Directors’ report
have been approved by the Board of
Directors and signed on its behalf by:
Nishith Malde
Company Secretary
19 September 2018
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 Directors’ responsibility also extends
to the ongoing integrity of the financial
statements contained therein.
Post balance sheet events
Details of post balance sheet events are
given in note 31 of the financial statements.
Annual General Meeting
The Notice covering the Annual General
Meeting (“AGM”) together with the proposed
resolutions is contained in the document
accompanying this report. The AGM will be
held on 27 November 2018.
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.
www.inlandhomesplc.com
INLAND HOMES
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Lily’s Walk,
High Wycombe
Inland Homes Annual Report 2018.indd 68
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26133
9 October 2018 8:15 PM
Proof 7
FINANCIAL
STATEMENTS
Independent Auditor’s report
Group income statement
Statements of financial position
Statements of changes in equity
Group statement of cash flows
Notes to the financial statements
Five year summary
70
75
76
77
78
79
113
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26133
9 October 2018 8:15 PM
Proof 7
ANNUAL REPORT AND ACCOUNTS 2018 // FINANCIALS
Independent Auditor’s report
to the members of Inland Homes plc
Opinion
We have audited the financial statements of Inland Homes plc (the ‘Parent Company’) and its subsidiaries (the ‘Group’) for the year
ended 30 June 2018 which comprise the Group Income Statement, the Group and Company Statement of Financial Position, the Group
and Company Statement of Changes in Equity, the Group Statement of Cash Flows and the notes to the financial statements, including a
summary of significant accounting policies.
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 the preparation of the Parent Company financial statements is applicable law and United Kingdom Accounting Standards,
including Financial Reporting Standard 101 Reduced Disclosure Framework (United Kingdom Generally Accepted Accounting Practice).
In our opinion:
• the financial statements give a true and fair view of the state of the Group’s and of the Parent Company’s affairs as at 30 June 2018 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 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.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities
under those standards are further described in the Auditor’s responsibilities for the audit of the financial statements section of our report.
We are independent of the Group and the Parent Company in accordance with the ethical requirements that are relevant to our audit of
the financial statements in the UK, including the FRC’s Ethical Standard as applied to listed entities, and we have fulfilled our other ethical
responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate
to provide a basis for our opinion.
Conclusions relating to going concern
We have nothing to report in respect of the following matters in relation to which the ISAs (UK) require us to report to you where:
• the Directors’ use of the going concern basis of accounting in the preparation of the financial statements is not appropriate; or
• the Directors have not disclosed in the financial statements any identified material uncertainties that may cast significant doubt about
the Group’s or the Parent Company’s ability to continue to adopt the going concern basis of accounting for a period of at least 12 months
from the date when the financial statements are authorised for issue.
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements
of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) we identified,
including those which had the greatest effect on: the overall audit strategy, the allocation of resources in the audit; and directing the
efforts of the engagement team. These matters were addressed in the context of our audit of the financial statements as a whole, and in
forming our opinion thereon, and we do not provide a separate opinion on these matters.
70
70
INLAND HOMES
INLAND HOMES
Stock code: INL
Stock code: INL
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FINANCIALS // ANNUAL REPORT AND ACCOUNTS 2018
Valuation of investment properties and carrying value of trading properties (Notes 13 and 17)
Key audit matter
How we addressed the key audit matter
The Group owns a portfolio of properties
which are held as either investment
properties or trading properties.
Investment properties, including those in
the course of development, are held at fair
value in the Group financial statements.
Trading properties are carried in the
Group Statement of Financial Position at
the lower of cost and net realisable value
and are remeasured to fair value for
the purposes of calculating EPRA NAV
(see note 11).
Determination of the fair value of
investment properties and the carrying
amount and fair value of trading
properties is considered a significant
audit risk due to the subjective nature of
certain assumptions and the potential
for management bias inherent in each
valuation.
Each valuation requires consideration of
the individual nature of the property, its
location, its cash flows and comparable
market transactions. The majority of
the Group’s property interests are in the
course of development. The valuation of
these properties requires estimation of
the expected sales value the completed
developments will achieve with deductions
for future build costs to completion,
which requires significant judgements.
Judgements in relation to future sales
values and build costs in particular are
impacted by the political and economic
uncertainty arising from the result of the
EU referendum.
The valuation of the Group’s income
generating investment properties requires
significant judgements to be made
in relation to the appropriate market
capitalisation yields and estimated
rental values.
Trading properties
Our audit work in relation to stock included, but was not restricted to, the following:
• We agreed a sample of data used by valuers, both internal and external, back to source
documentation, including title deed and tenancy agreements.
• We assessed the movement in the valuation of the property portfolio against our own
expectations and challenged the Directors or external valuers, as appropriate, for
those valuations which fell outside of our range of expectations.
• Where relevant we obtained any post year end sales agreements for whole sites to
support the carrying value at the year end.
• We obtained all copies of any planning permission documents received in the year to
support the uplift in land values.
• We obtained project appraisals prepared by the Directors for each development and:
• reviewed and assessed costs to complete and compared these to developments of a
similar nature;
• considered the historic accuracy of cost and sales forecasts;
• for a sample of properties that have been exchanged, reserved or sold post year
end we obtained supporting documentation and compared the prices achieved to
those in the development appraisals. Where no activity has occurred, we performed
a comparison of prices achieved on similar properties sold or comparable market
transactions; and
• we visited the Group’s development sites at Lily’s Walk, Castle House, Wilton Park
and The Pheasant and considered the stage of the development compared to the
costs to complete in the project appraisal.
Investment properties
Our audit work included, but was not restricted to, the following:
• We obtained the valuation schedules prepared by the Directors and;
• evaluated the competence and capability of the Director;
• confirmed that the basis of the valuation was in accordance with requirements of
accounting standards; and
• discussed the basis of the valuation, the assumptions used and the valuation
movements in the year with the Director;
• We considered whether movements in the valuations are consistent with our own
expectations based upon market comparable transactions and changes in industry
benchmarks and challenged those valuations which fell outside of our expectations.
• We compared the significant valuation inputs used by the Directors against our own
expectations, underlying supporting evidence and, where relevant, market data.
• We obtained external support used by the Directors in preparing their valuations.
We tested the inputs of this support and compared them to the inputs used in the
valuations prepared by the Directors.
• For a sample of investment properties we corroborated the rental income to
supporting leases.
www.inlandhomesplc.com
INLAND HOMES
INLAND HOMES
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ANNUAL REPORT AND ACCOUNTS 2018 // FINANCIALS
Independent Auditor’s report
to the members of Inland Homes plc continued
Revenue and profit recognition (Note 4)
Key audit matter
How we addressed the key audit matter
Our audit work included, but was not restricted to, the following:
Sale of land and buildings
• We agreed a sample of sales to completion statement and the proceeds to bank. To
address cut off, we tested a sample of sales that occurred in June 2018 and checked
that completion took place pre year end. For post year end receipts we obtained the
completion statement for the associated sale and checked that it was recognised in the
correct period.
• We reviewed the realised margin on the land and building sales in the year compared to
the expected margin obtained from the original development appraisal.
Contract income
For each development contract we obtained copies of the construction contract and
performed the following:
• We agreed the total value of the development to the signed contract.
• We discussed the forecast profitability with management.
• We verified the underlying stage of completion to the valuation certificate provided by
each external quantity surveyor engaged to certify the value of the work completed.
• We compared the key assumptions within each development appraisal against the
contract terms and agreed details to supporting documentation where relevant.
• We compared the stage of completion against the proportion of profit recognised
to date.
The Group has numerous sources of
revenue out of which we consider the
sale of land and contract income to pose
specific risks.
Proceeds from the sale of land and
buildings should only be recognised once
the risks and rewards of ownership have
passed to the buyer, which is considered
to be completion. There is a risk that
revenue and profits on house sales could
be recognised before completion and
also through management incorrectly
allocating costs on different phases on
multi-phase developments.
There were a significant number of
completions that occurred in June 2018
and we therefore also identified cut off as
a significant audit risk.
The accounting for the revenue from
contract income is inherently complex and
involves significant judgement, particularly
with regard to assessing the stage of
completion of the project. Revenue from
long term contracts is recognised based
upon management’s assessment of the
value of works carried out, with regard to
external quantity surveyor reports, having
considered the anticipated programme
of works and the costs incurred and to
complete. Profit is recognised once the
Directors are able to make an estimate of
the outcome with reasonable certainty.
Our application of materiality
We apply the concept of materiality both in planning and performing our audit, and in evaluating the effect of misstatement on the audit
and in forming our opinion. Materiality is assessed on both quantitative and qualitative grounds.
Materiality
Performance materiality
Clearly trivial threshold
Group – Financial Statement materiality
£3,000,000
£1,800,000
£60,000
Group – Specific materiality
£1,580,000
£948,000
£31,600
Materiality
We consider materiality to be the magnitude by which misstatements, individually or in aggregation, could reasonably be expected to
influence the economic decisions of the users of the financial statements.
We determined that Group total assets would be the most appropriate basis for setting overall financial statement materiality, as we
consider this to be one of the principal considerations for members of the Company in assessing the financial performance of the Group.
As such, the materiality for the Group financial statements as a whole was determined to be £3,000,000, which represents 1% of the
Group’s total assets.
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Stock code: INL
Stock code: INL
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FINANCIALS // ANNUAL REPORT AND ACCOUNTS 2018
We also determined that for other classes of transactions, balances or disclosures that impact adjusted earnings (being profit before
tax adjusted for investment property valuations), a misstatement of less than materiality for the financial statements as a whole could
influence the economic decisions of the users of the financial statements. As a result, we applied a specific materiality of £1,580,000 to
these areas which represents 8% of adjusted earnings.
In the prior year we applied a single financial statement materiality based on 7% of profit before tax. The prior year financial statement
materiality was £1,080,000.
We determined that a measure of financial statement materiality alone for the Parent Company was appropriate, given that its principal
activity is that of an investment company. The materiality applied was £1,160,000 which represents 2% of the Company’s total assets.
Whilst materiality for the financial statements as a whole was £3,000,000, each component of the Group was audited to a lower level of
materiality. Component materiality ranged from £1,000 to £2,180,000.
Performance materiality
The application of materiality at the individual account or balance level is set at an amount to reduce to an appropriately low level the
probability that the aggregate of uncorrected and undetected misstatements exceeds materiality.
On the basis of our risk assessment together with the Group’s overall control environment our judgement was that overall performance
materiality for the Group should be 60% of overall materiality. As such, performance financial statement materiality was set at £1,800,000
and specific performance materiality was set at £948,000.
We determined that the same measure as the Group was appropriate for the Parent Company, and the performance materiality applied
was £696,000.
Reporting threshold
An amount below which identified misstatements are considered as being clearly trivial.
We agreed with the Audit Committee that we would report to them all individual audit differences in excess of £60,000 for all items audited
to financial statement materiality, and £31,600 for items audited to specific materiality. We also agreed to report on any other differences
that, in our view, warranted reporting on qualitative grounds.
The reporting threshold applied for the Parent Company was set at £23,000.
We evaluate any uncorrected misstatements against both the qualitative measures of materiality discussed above and in the light of other
relevant qualitative considerations.
An overview of the scope of our audit
Our Group audit was scoped by obtaining an understanding of the Group and its environment, including the Group’s system of internal
control, and assessing the risks of material misstatement at the Group level. Audit work to respond to the assessed risks was performed
directly by the Group audit engagement team which performed full scope audit procedures on each of the Group’s component entities.
Our audit work at each of these components was executed at levels of materiality applicable to the relevant component, which in each
instance was lower than Group materiality. BDO LLP audited all significant components. All components are based in the UK.
Other information
The Directors are responsible for the other information. The other information comprises the information included in the annual
report, other than the financial statements and our Auditor’s report thereon. Our opinion on the financial statements does not cover
the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance
conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider
whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise
appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to
determine whether there is a material misstatement in the financial statements or a material misstatement of the other information. If,
based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to
report that fact. We have nothing to report in this regard.
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INLAND HOMES
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ANNUAL REPORT AND ACCOUNTS 2018 // FINANCIALS
Independent Auditor’s report
to the members of Inland Homes plc continued
Opinions on other matters prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of the audit:
• the information given in the strategic report and the Directors’ report for the financial year for which the financial statements are
prepared is consistent with the financial statements; and
• the strategic report and the Directors’ report have been prepared in accordance with applicable legal requirements.
Matters on which we are required to report by exception
In the light of the knowledge and understanding of the Group and the Parent Company and its environment obtained in the course of the
audit, we have not identified material misstatements in the strategic report or the Directors’ report.
We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report to you if,
in our opinion:
• adequate accounting records have not been kept, 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.
Responsibilities of Directors
As explained more fully in the Directors’ responsibilities statement set out on page 67, the Directors are responsible for the preparation of
the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the Directors determine
is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the Directors are responsible for assessing the Group’s and the Parent Company’s ability to
continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting
unless the Directors either intend to liquidate the Group or the Parent Company or to cease operations, or have no realistic alternative but
to do so.
Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high
level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement
when it exists.
Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be
expected to influence the economic decisions of users taken on the basis of these financial statements.
A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council’s
website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our Auditor’s report.
Use of our report
This report is made solely to the Parent 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 Parent 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 Parent Company and the Parent Company’s members as a body, for our audit work, for this report,
or for the opinions we have formed.
Thomas Edward Goodworth (Senior Statutory Auditor)
For and on behalf of BDO LLP, Statutory Auditor
London
19 September 2018
BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC305127).
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INLAND HOMES
Stock code: INL
Stock code: INL
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FINANCIALS // ANNUAL REPORT AND ACCOUNTS 2018
Group income statement
for the year ended 30 June 2018
Continuing operations
Revenue
Cost of sales
Gross profit
Administrative expenses
Gain on sale of subsidiary
Gain on sale of joint venture
Share of loss of associates
Share of profit of joint ventures
Revaluation of investment properties
Operating profit
Finance cost - interest expense
Finance income - interest receivable and similar income
Profit before tax
Tax charge
Total profit and comprehensive income for the year
Earnings per share for profit attributable to the equity holders of the Company during the
year
– basic
– diluted
The accompanying notes form part of these financial statements.
Note
4
4
5
15
15
15
15
13
8
9
10
11
11
2018
£m
147.4
(115.6)
31.8
(9.4)
0.1
–
–
1.0
–
23.5
(5.1)
0.9
19.3
(3.9)
15.4
2017
£m
90.7
(71.2)
19.5
(7.7)
6.0
7.0
(0.2)
–
1.5
26.1
(7.0)
0.5
19.6
(3.8)
15.8
7.64p
7.30p
7.82p
7.46p
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ANNUAL REPORT AND ACCOUNTS 2018 // FINANCIALS
Statements of financial position
at 30 June 2018
Company number 5482990
Group
2018
£m
Note
ASSETS
Non-current assets
Investment properties
Property, plant and equipment
Investments
Investment in subsidiaries
Investment in joint ventures
Amounts due from joint ventures
Investment in associate
Amounts due from associate
Other receivables
Deferred tax
Total non-current assets
Current assets
Inventories
Trade and other receivables
Corporation tax
Amounts due from associate
Amounts due from joint ventures
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
Treasury reserve
Special reserve
Retained earnings1
Total equity attributable to shareholders of the Company
LIABILITIES
Current liabilities
Bank loans and overdrafts
Zero Dividend Preference shares
Trade and other payables
Corporation tax
Other financial liabilities
Total current liabilities
Non-current liabilities
Zero Dividend Preference shares
Bank loans
Other loans
Deferred tax
Total non-current liabilities
Total equity and liabilities
13
14
15
15
15
15
15
18
16
17
18
15
15
19
20
21
21
21
21
21
23
23
22
25
23
23
23
16
52.8
1.3
0.2
–
0.4
1.0
1.1
3.0
11.0
–
70.8
136.2
30.4
–
2.8
19.0
40.4
228.8
299.6
20.5
34.8
(1.1)
(0.5)
6.1
82.6
142.4
26.0
18.4
24.9
6.6
3.7
79.6
–
41.4
34.3
1.9
77.6
299.6
2017
£m
53.6
0.7
–
–
0.2
–
1.1
5.8
5.7
–
67.1
139.9
22.4
–
–
18.3
26.5
207.1
274.2
20.4
34.3
(1.1)
–
6.1
70.9
130.6
–
–
20.5
6.5
20.1
47.1
17.3
63.2
14.0
2.0
96.5
274.2
Company
2018
£m
–
–
–
12.5
–
–
–
–
–
0.7
13.2
–
37.1
0.5
–
–
18.3
55.9
69.1
20.5
34.8
(1.1)
(0.5)
6.1
8.2
68.0
–
–
1.1
–
–
1.1
–
–
–
–
–
69.1
2017
£m
–
–
–
12.5
–
–
–
–
–
0.6
13.1
–
51.1
0.5
–
–
0.1
51.7
64.8
20.4
34.3
(1.1)
–
6.1
4.4
64.1
–
–
0.7
–
–
0.7
–
–
–
–
–
64.8
1 Retained earnings for the Company includes a profit for the year of £7.5m (2017: £2.9m).
The financial statements were approved and authorised for issue by the Board of Directors on 19 September 2018.
Stephen Wicks
Director
Nishith Malde
Director
The accompaning notes form part of these financial statements.
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INLAND HOMES
Stock code: INL
Stock code: INL
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FINANCIALS // ANNUAL REPORT AND ACCOUNTS 2018
Statements of changes in equity
for the year ended 30 June 2018
Group
At 30 June 2016
Total comprehensive
income for the year
Transactions with owners:
Share-based payments
Dividend payment
Issue of ordinary shares
Purchase of own shares
for deferred bonus plan
At 30 June 2017
Total comprehensive
income for the year
Transactions with owners:
Share-based payments
Dividend payment
Issue of ordinary shares
Purchase of own shares
Exercise of share options
At 30 June 2018
Company
At 30 June 2016
Total comprehensive
income for the year
Transactions with owners:
Share-based payments
Dividend payment
Issue of ordinary shares
Purchase of own shares
for deferred bonus plan
At 30 June 2017
Total comprehensive
income for the year
Transactions with owners:
Share-based payments
Dividend payment
Issue of ordinary shares
Purchase of own shares
Exercise of share options
At 30 June 2018
Share
capital
£m
20.3
Share
premium
£m
34.0
Employee
Benefit
Trust
£m
(0.7)
Note
Special
reserve
£m
6.1
Treasury
reserve
£m
–
Retained
earnings
£m
56.6
Total
£m
116.3
7
12
20
20
7
12
20
20
20
7
12
20
20
7
12
20
20
20
–
–
–
0.1
–
20.4
–
–
–
0.3
–
34.3
–
–
–
–
0.1
–
–
20.5
–
–
0.5
–
–
34.8
–
–
–
–
(0.4)
(1.1)
–
–
–
–
–
–
(1.1)
–
–
–
–
–
6.1
–
–
–
–
–
–
6.1
20.3
34.0
(0.7)
6.1
–
–
–
0.1
–
20.4
–
–
–
0.3
–
34.3
–
–
–
–
0.1
–
–
20.5
–
–
0.5
–
–
34.8
–
–
–
–
(0.4)
(1.1)
–
–
–
–
–
–
(1.1)
–
–
–
–
–
6.1
–
–
–
–
–
–
6.1
–
–
–
–
–
–
–
–
–
–
(0.6)
0.1
(0.5)
–
–
–
–
–
–
–
–
–
–
–
(0.6)
0.1
(0.5)
15.8
15.8
1.3
(2.8)
–
–
70.9
15.4
0.6
(3.7)
(0.6)
–
–
82.6
3.8
2.9
0.5
(2.8)
–
–
4.4
7.5
0.6
(3.7)
(0.6)
–
–
8.2
1.3
(2.8)
0.4
(0.4)
130.6
15.4
0.6
(3.7)
–
(0.6)
0.1
142.4
63.5
2.9
0.5
(2.8)
0.4
(0.4)
64.1
7.5
0.6
(3.7)
–
(0.6)
0.1
68.0
The accompanying notes form part of these financial statements.
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ANNUAL REPORT AND ACCOUNTS 2018 // FINANCIALS
Group statement of cash flows
for the year ended 30 June 2018
Cash flow from operating activities
Profit for the year before tax
Adjustments for:
– depreciation
– share-based payments
– revaluation of investment properties
– gain on disposal of subsidiary
– gain on disposal of joint venture
– interest expense
– interest and similar income
– share of profit of joint ventures
– share of loss of associate
Corporation tax payments
Change in working capital:
– decrease in inventories
– (increase)/decrease in trade and other receivables
– decrease in trade and other payables
Net cash (outflow)/inflow from operating activities
Cash flow from investing activities
Interest received
Purchases of property, plant and equipment
Purchases of investment property
Purchase of investment
Proceeds from sale of subsidiary
Loans provided to joint ventures
Amounts repaid by joint ventures
Distribution of profits from joint venture
Loans provided to associate
Amounts repaid by associate
Investment in associate
Net cash inflow/(outflow) from investing activities
Cash flow from financing activities
Interest paid
Repayment of borrowings
New loans
Net proceeds on issue of ordinary shares
Equity dividends paid to ordinary shareholders
Purchase of own shares
Net cash inflow from financing activities
Net 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 notes form part of these financial statements.
Note
14
14
13
12
19
2018
£m
19.3
0.3
0.8
–
(0.1)
–
5.1
(0.9)
(1.0)
–
(4.0)
(3.2)
(17.8)
(12.8)
(14.3)
0.8
(0.9)
(0.2)
(0.2)
13.4
(7.6)
5.9
0.8
–
–
–
12.0
(3.8)
(6.3)
30.6
–
(3.7)
(0.6)
16.2
13.9
26.5
40.4
2017
£m
19.6
0.3
1.3
(1.5)
(6.0)
(7.0)
7.0
(0.5)
–
0.2
(3.6)
(6.9)
6.1
(7.4)
1.6
0.3
(0.5)
(0.4)
–
5.8
(10.8)
–
–
(2.5)
1.1
(0.1)
(7.1)
(4.5)
(48.7)
71.3
0.4
(2.8)
(0.4)
15.3
9.8
16.7
26.5
78
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INLAND HOMES
Stock code: INL
Stock code: INL
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FINANCIALS // ANNUAL REPORT AND ACCOUNTS 2018
Notes to the financial statements
for the year ended 30 June 2018
1. 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 Parent Company financial statements have been prepared in accordance with FRS 101, Financial
Reporting Standards Reduced Disclosure Framework.
The consolidated financial statements present the results of the Group as if it formed a single entity. Intercompany transactions and
balances between Group companies are therefore eliminated in full.
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 Company 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).
The Company has taken advantage of the exemption allowed under section 408 of the Companies Act 2006 and has not presented its own
profit and loss account in these financial statements.
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 as well as a substantial order
book for its Partnership homes and is in discussions for the sale of some 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 the date of signing
these financial statements. At 30 June 2018, the Group had £44.4m of borrowing facilities expiring within one year. Included within this
figure was £18.4m relating to the Group’s ZDP borrowings, the maturity of which was extended to April 2024 shortly after the year end.
The balance of £26m relates to loans where we are in advance negotiations with the bank and have received strong indications that the
facility will be extended by a further 12 months to expire in December 2019. The Directors therefore consider it appropriate to prepare the
financial statements on the going concern basis.
2. CHANGES IN ACCOUNTING POLICIES
The principal accounting policies are described in note 32 and are consistent with those applied in the Group’s financial statements for the
year ended 30 June 2017, as amended to reflect the adoption of new standards, amendments and interpretations which became effective
in the year as shown below.
New standards adopted during the year
The following standards, amendments and interpretations endorsed by the EU were effective for the first time for the Group’s 30 June
2018 year end and had no material impact on the financial statements. The adoption of IAS 7 (amended) has resulted in an additional note
for the reconciliation of net debt and is note 25 in the financial statements.
IAS 7 (amended) - Statement of Cash Flows;
IAS 12 (amended) - Income Taxes; and
IFRS 12 - Disclosure of Interests in Other Entities.
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Notes to the financial statements
for the year ended 30 June 2018 continued
2. CHANGES IN ACCOUNTING POLICIES continued
Standards in issue but not yet effective
The following new standards, amendments and interpretations to existing standards were in issue at the date of approval of these
financial statements but are not yet effective for the current accounting year and have not been adopted early. Based on the Group’s
current circumstances the Directors do not anticipate that their adoption in future periods will have a material impact on the financial
statements of the Group.
IAS 40 (amended) - Transfers of Investment Property
IFRS 2 (amended) - Share Based Payments;
IFRS 4 (amended) - Insurance Contracts;
IFRS 17 - Insurance Contracts;
IFRIC 22 - Foreign Currency Transactions and Advance Consideration;
IFRIC 23 - Uncertainty over Income Tax Treatments;
Annual improvements to IFRSs (2014 - 2016 cycle);
Amendments to IAS 28: Long-term interests in Associates and Joint Ventures1;
Annual Improvements to IFRSs (2015-2017 Cycle)1;
Amendments to IAS 19: Plan Amendment, Curtailment or Settlement1; and
Amendments to References to the Conceptual Framework in IFRS Standards1.
1 Standards and amendments not yet endorsed by the EU.
In addition to the above, IFRS 9 Financial Instruments and IFRS 15 Revenue from Contracts with Customers have been endorsed by the
EU and will be effective for the first time for the Group’s year ending 30 June 2019. IFRS 16 Leases has also been endorsed and will be
effective for the Group’s year ending 30 June 2020.
IFRS 9 Financial Instruments
This standard applies to classification and measurement of financial assets and financial liabilities, impairment provisioning and hedge
accounting. Management’s assessment of IFRS 9 determined that the main area of potential impact was impairment provisioning on trade
receivables for the Group and balances due from subsidiaries for the Company. In both cases, this was due to the requirement to use a
forward-looking expected credit loss model. The Group does not presently hold any complex financial instruments. Given that inter group
balances are eliminated on consolidation and does not affect group results, no material impairment allowance adjustments are expected.
Having substantially completed our assessment, it is considered that the introduction of IFRS 9 is not expected to have a material impact
on the results or cash flows of either the Group or the Company. Presentation changes are expected given the additional disclosure
requirements under IFRS 9.
IFRS 15 Revenue from Contracts with Customers
IFRS 15 combines a number of previous standards, setting out a five-step model for the recognition of revenue and establishing principles
for reporting useful information to users of financial statements about the nature, amount, timing and uncertainty of revenue. The
standard is applicable to land sales, house sales, contract income, management fees and hotel income but excludes rental income, which
is within the scope of IFRS 16.
The Group has substantially completed its assessment of the impact of IFRS 15 on its financial statements and has identified no material
adjustments to date that will be required as a result of the implementation of IFRS 15. Currently the Group recognises revenue at the fair
value of the consideration received and receivable in respect of the sale of housing and land on legal completion. This standard is not
expected to effect the statement of cashflows nor does the Group expect the implementation of this standard to have a material impact
on profit.
IFRS 15 introduces a substantial change to presentations and disclosures. IFRS 15 requires separate presentation of contract assets and
contract liabilities. This will result in some reclassifications as of 1 July 2017 in relation to advance payments and deferred revenue which
are currently included in other balance sheet line items. Other presentation changes are limited to additional disclosure requirements
under IFRS 15 only.
IFRS 16 Leases
This standard does not substantially affect the accounting for rental income earned by the Group as lessor. The main impact of the
standard is the removal of the distinction between operating and finance leases for lessees, which will result in almost all leases being
recognised on the balance sheet. This will therefore have a presentational impact on the financial statements when the Group enters into
a new office lease next year, details of which are yet to be finalised. Please refer to note 27 (commitments and leases) for the financial
impact of the operating leases both as lessor and lessee.
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Stock code: INL
Stock code: INL
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FINANCIALS // ANNUAL REPORT AND ACCOUNTS 2018
3. SIGNIFICANT JUDGEMENTS, KEY ASSUMPTIONS AND ESTIMATES
The preparation of financial statements in accordance with IFRS requires the use of certain critical accounting estimates and judgements.
It also requires management to exercise judgement in the process of applying the Group’s accounting policies. The Group’s significant
accounting policies are stated in note 32. Not all of these accounting policies require management to make difficult, subjective or complex
judgements or estimates. Estimates and judgements are continually evaluated and are based on historical experience and other factors,
including expectations of future events that are believed to be reasonable under the circumstances. Although these estimates are based
on management’s best knowledge of the amount, event or actions, actual results may differ from those estimates. The following is
intended to provide an understanding of the policies that management consider critical because of the level of complexity, judgement or
estimation involved in their application and their impact on the financial statements.
Key sources of estimation uncertainty
Valuation of inventories (note 17)
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. The critical judgement in respect of receipt of planning consent (see below) further increases the level of estimation
uncertainty in this area.
Income taxes (notes 10 and 16)
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.
Fair value of investment properties (note 13)
The fair value of materially completed investment properties 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.
Discounting on deferred consideration of inventories, disposal of joint ventures and acquisition of shares
(notes 8, 15 and 17)
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.
Significant judgements
Timing of likely repayment - Amounts due from joint ventures and associate (note 15)
Each of the amounts due from the joint ventures are contractually repayable on demand and the amounts due from the associate are
repayable over the term of the underlying development. At each balance sheet date the Directors review the forecasts of the underlying
developments and make a judgement as to the likely timing of the recoverability of each loan which are then disclosed as either due in
less than one year or greater than one year accordingly.
Likelihood of achieving planning - Inventories (note 17)
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. The cost value is based
on actual costs incurred at the date of signing the financial statements with an estimation of costs to complete. The judgement of costs
to complete is based on the Directors’ experience and if actual plus projected costs are higher than net realisable value then a provision
would be required against inventories.
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Notes to the financial statements
for the year ended 30 June 2018 continued
3. SIGNIFICANT JUDGEMENTS, KEY ASSUMPTIONS AND ESTIMATES continued
Capitalisation of borrowing costs (note 17)
The Group capitalises borrowing costs where there is a qualifying asset. The Directors must assess each site held with inventories each
year in order to judge whether or not the site is a qualifying asset in line with the requirements of IAS 23 Borrowing Costs. In the opinion
of the Directors, sites are judged to be qualifying assets if due to the long term, complex nature of these developments which will take
several years before parts of it are sold or developed. This has resulted in borrowing costs related to such sites to be capitalised in the
current and prior years. For non-qualifying sites the Group expenses borrowing costs due to the quantity and repetitive nature of the
process adopted. In many cases such developments may take longer than 12 months. The Directors are therefore required to exercise
judgement as to whether or not a site represents a qualifying asset.
Investment in joint ventures (note 15)
The Group’s joint venture investment in Project Helix Holdco Limited (Project Helix) is not in equal share (the Group owns 20% of the
share capital of Project Helix). However, the Group has had joint control over the activities of the company with the other party due to its
entitlement to veto any decisions. In addition, the Group and the other party to the agreement only have rights to the net assets of these
companies through the terms of the contractual arrangements. Within Project Helix there is a ratchet mechanism which depends on
the amount of profit each development contributes to the joint venture. Therefore, this entity has been classified as a joint venture and is
accounted for using the equity method. The Group’s joint venture investments in Bucknalls Developments Limited (Bucknalls), Cheshunt
Lakeside Developments Limited (formerly Inland (Stonegate) Limited), Europa Park LLP and Gardiners Park LLP 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 these four 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 (note 15)
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.
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FINANCIALS // ANNUAL REPORT AND ACCOUNTS 2018
4. SEGMENTAL 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, investments, investment properties, management fees and other income. These segments are based on the information
reported to the chief operating decision maker (which in the Group’s case is the Operating Board comprising the three Executive Directors
and four senior managers) and represent the activities which generate significant revenues, profits and use of resources within the
Group. These operating segments are monitored and strategic decisions are made on the basis of segment operating results.
Segmental analysis by activity
2018
Revenue
Cost of sales
Gross profit
Administrative expenses
Gain on sale of subsidiary
Share of profit of joint ventures
Operating profit/(loss)
Net finance cost
Profit/(loss) before tax
Tax (charge)/credit
Total profit/(loss) for the year
2017
Revenue
Cost of sales
Gross profit/(loss)
Administrative expenses
Gain on sale of subsidiary
Gain on sale of joint venture
Share of loss of associate
Revaluation of investment
properties
Operating profit/(loss)
Net finance cost
Profit/(loss) before tax
Tax (charge)/credit
Total profit/(loss) for the year
Land
sales
£m
59.3
(41.0)
18.3
–
–
–
18.3
(1.6)
16.7
(3.1)
13.6
22.4
(16.2)
6.2
–
6.0
7.0
–
–
19.2
(3.5)
15.7
(3.0)
12.7
House
building
£m
70.2
(62.5)
7.7
–
–
0.8
8.5
(0.9)
7.6
(0.5)
7.1
Contract
income
£m
12.0
(10.2)
1.8
–
–
–
1.8
–
1.8
(0.1)
1.7
Rental
income
£m
0.7
(0.1)
0.6
–
–
0.2
0.8
–
0.8
–
0.8
Investment
properties
£m
1.3
(0.3)
1.0
–
0.1
–
1.1
(1.2)
(0.1)
(0.1)
(0.2)
Management
fees
£m
2.4
–
2.4
–
–
–
2.4
–
2.4
(0.2)
2.2
57.7
(49.0)
8.7
–
–
–
(0.2)
–
8.5
(0.8)
7.7
(1.5)
6.2
3.1
(3.4)
(0.3)
–
–
–
–
–
(0.3)
–
(0.3)
0.1
(0.2)
1.3
(0.1)
1.2
–
–
–
–
–
1.2
–
1.2
(0.2)
1.0
1.1
(0.2)
0.9
–
–
–
–
1.5
2.4
(0.9)
1.5
(1.3)
0.2
2.5
–
2.5
–
–
–
–
–
2.5
–
2.5
–
2.5
Other
£m
1.5
(1.5)
–
(9.4)
–
–
(9.4)
(0.5)
(9.9)
0.1
(9.8)
2.6
(2.3)
0.3
(7.7)
–
–
–
–
(7.4)
(1.3)
(8.7)
2.1
(6.6)
Total
£m
147.4
(115.6)
31.8
(9.4)
0.1
1.0
23.5
(4.2)
19.3
(3.9)
15.4
90.7
(71.2)
19.5
(7.7)
6.0
7.0
(0.2)
1.5
26.1
(6.5)
19.6
(3.8)
15.8
Included with the “Land sales” segment are land sales to Housing Associations which include construction works to “Golden Brick”.
The construction works to completion are included in the “Contract income” segment. Included with the “Housebuilding” segment are the
sales of freehold reversions and customers’ 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. During the year, one land sale transaction (2017: None) with a customer accounted for more than 10% of revenue and
amounted to £29.7m.
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Notes to the financial statements
for the year ended 30 June 2018 continued
4. SEGMENTAL INFORMATION continued
2018
ASSETS
Non-current assets
Investment properties
Property, plant and equipment
Investments
Investment in joint ventures
Amounts due from joint ventures
Investment in associate
Amounts due from associate
Other receivables
Total non-current assets
Current assets
Inventories
Trade and other receivables
Amounts due from associate
Amounts due from joint ventures
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
Treasury reserve
Special reserve
Retained earnings
Total equity
LIABILITIES
Current liabilities
Bank loans and overdrafts
Zero Dividend Preference shares
Trade and other payables
Corporation tax
Other financial liabilities
Total current liabilities
Non-current liabilities
Bank loans
Other loans
Deferred tax
Total non-current liabilities
Total equity and liabilities
Land1
£m
House
building
£m
Contract
income
£m
Investment
properties
£m
Other
£m
Total
£m
–
–
–
–
–
–
–
11.0
11.0
85.0
13.9
–
–
–
98.9
109.9
–
–
–
–
–
–
–
26.0
–
3.1
–
3.7
32.8
1.1
17.2
–
18.3
51.1
–
–
–
0.4
1.0
1.1
3.0
–
5.5
51.2
6.3
2.8
19.0
–
79.3
84.8
–
–
–
–
–
–
–
–
–
11.3
–
–
11.3
13.8
17.1
–
30.9
42.2
–
–
–
–
–
–
–
–
–
–
8.2
–
–
–
8.2
8.2
–
–
–
–
–
–
–
–
–
2.9
–
–
2.9
–
–
–
–
2.9
52.8
–
–
–
–
–
–
–
52.8
–
1.3
–
–
–
1.3
54.1
–
–
–
–
–
–
–
–
–
0.4
–
–
0.4
26.5
–
1.9
28.4
28.8
–
1.3
0.2
–
–
–
–
–
1.5
–
0.7
–
–
40.4
41.1
42.6
20.5
34.8
(1.1)
(0.5)
6.1
82.6
142.4
–
18.4
7.2
6.6
–
32.2
–
–
–
–
174.6
52.8
1.3
0.2
0.4
1.0
1.1
3.0
11.0
70.8
136.2
30.4
2.8
19.0
40.4
228.8
299.6
20.5
34.8
(1.1)
(0.5)
6.1
82.6
142.4
26.0
18.4
24.9
6.6
3.7
79.6
41.4
34.3
1.9
77.6
299.6
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Stock code: INL
Stock code: INL
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FINANCIALS // ANNUAL REPORT AND ACCOUNTS 2018
2017
ASSETS
Non-current assets
Investment properties
Property, plant and equipment
Investment in joint ventures
Investment in associate
Amounts due from associate
Other receivables
Total non-current assets
Current assets
Inventories
Trade and other receivables
Amounts due from joint ventures
Amounts due from associate
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
Trade and other payables
Corporation tax
Other financial liabilities
Total current liabilities
Non-current liabilities
Zero Dividend Preference shares
Bank loans
Other loans
Deferred tax
Total non-current liabilities
Total equity and liabilities
Land1
£m
House
building
£m
Contract
income
£m
Investment
properties
£m
Other
£m
Total
£m
–
–
–
–
–
5.7
5.7
85.1
18.9
–
–
–
104.0
109.7
–
–
–
–
–
–
7.9
–
20.1
28.0
–
17.0
14.0
(0.1)
30.9
58.9
–
–
0.2
1.1
5.8
–
7.1
51.9
1.3
18.3
–
–
71.5
78.6
–
–
–
–
–
–
7.5
–
–
7.5
–
19.9
–
(0.6)
19.3
26.8
–
–
–
–
–
–
–
2.9
1.5
–
–
–
4.4
4.4
–
–
–
–
–
–
1.5
–
–
1.5
–
–
–
–
–
1.5
53.6
–
–
–
–
–
53.6
–
–
–
–
–
–
53.6
–
–
–
–
–
–
0.3
–
–
0.3
–
26.3
–
3.3
29.6
29.9
–
0.7
–
–
–
–
0.7
–
0.7
–
–
26.5
27.2
27.9
20.4
34.3
(1.1)
6.1
70.9
53.6
0.7
0.2
1.1
5.8
5.7
67.1
139.9
22.4
18.3
–
26.5
207.1
274.2
20.4
34.3
(1.1)
6.1
70.9
130.6
130.6
3.3
6.5
–
9.8
17.3
–
–
(0.6)
16.7
157.1
20.5
6.5
20.1
47.1
17.3
63.2
14.0
2.0
96.5
274.2
1 Included within land inventories above is £6.8m (2017: £5.7m) relating to a hotel.
All assets and revenues arose solely in the United Kingdom.
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Notes to the financial statements
for the year ended 30 June 2018 continued
5. EXPENSES BY NATURE
Depreciation
Operating lease rentals
Fees paid to BDO LLP in respect of:
– audit of the company and consolidated accounts
– current year
– prior year
Other services:
– audit of subsidiaries and associates
– audit-related assurance services
– taxation compliance and advisory services1
1 BDO ceased to be the Group’s tax advisors during the current year.
6. EMPLOYEE COSTS
The employee costs (including Directors) during the year were as follows:
Wages and salaries
Social security costs
Pension costs - defined contribution plans
Share-based payments
Amount capitalised to inventories
The average number of employees during the year was as follows:
Management
Administration
2018
£000
274
140
75
40
50
18
–
2018
£m
8.1
0.9
0.2
0.5
9.7
(3.0)
6.7
2018
8
85
93
2017
£000
242
124
74
–
45
16
100
2017
£m
5.7
0.6
0.1
0.5
6.9
(1.4)
5.5
2017
8
51
59
Please see the table in the Remuneration Committee report on pages 58 to 63 for details of the employee costs of the Directors, including
details of the highest paid Director.
Employee costs in respect of key personnel (excluding Directors) were as follows:
Wages and salaries
Bonuses
Social security costs
Pension
2018
£m
1.0
0.2
0.2
0.1
1.5
2017
£m
0.8
0.2
0.1
–
1.1
Other long term benefits in respect of key personnel and the Directors were as follows:
Key personnel and Directors
As at 30 June 2018
As at 30 June 2017
Number
of Growth
Shares
1,000
Number
of share
options
2,070,000
Number
of Growth
Shares
1,000
Number
of share
options
2,495,000
There were no employees or employee benefit expenses in the Company in the current or prior year.
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Stock code: INL
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FINANCIALS // ANNUAL REPORT AND ACCOUNTS 2018
7. SHARE-BASED PAYMENTS
Group - equity-settled option scheme
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 is still employed by the Company at the time of the options
being exercised or are “good” leavers and the options are exercised within six months of leaving employment. This unapproved share
option scheme is separate to the long term incentive plan (LTIP) for the Executive Directors, further details of which can be found in the
Remuneration Committee report on pages 58 to 63.
Date from
which
exercisable
Expiry
date
Outstanding
at 1 July
Exercised
Lapsed
at 30 June Exercisable
Outstanding
Exercise
price
p
Year of grant
For the year ended 30 June 2018
16.50
2009
18.25
2010
17.50
2012
32.50
2013
70.25
2015
17/12/2012
22/11/2013
25/06/2015
18/06/2016
22/06/2018
16/12/2019
21/11/2020
24/06/2022
17/06/2023
21/06/2025
For the year ended 30 June 2017
50.00
2007
16.50
2009
18.25
2010
17.50
2012
32.50
2013
70.25
2015
28/03/2010
17/12/2012
22/11/2013
25/06/2015
18/06/2016
22/06/2018
27/03/2017
16/12/2019
21/11/2020
24/06/2022
17/06/2023
21/06/2025
Weighted average exercise price of share options:
Exercisable
Non-exercisable
Total
Weighted average remaining contracted life of share options:
Exercisable
Non-exercisable
Total
580,000
1,500,000
245,000
490,000
365,000
3,180,000
710,000
605,000
1,500,000
305,000
550,000
410,000
4,080,000
–
–
(75,000)
(100,000)
–
(175,000)
(710,000)
(25,000)
–
(60,000)
(60,000)
–
(855,000)
–
–
–
–
(25,000)
(25,000)
–
–
–
–
–
(45,000)
(45,000)
580,000
1,500,000
170,000
390,000
340,000
2,980,000
580,000
1,500,000
170,000
390,000
340,000
2,980,000
–
580,000
1,500,000
245,000
490,000
365,000
3,180,000
–
580,000
1,500,000
245,000
490,000
–
2,815,000
30 June 2018 30 June 2017
1 July 2016
25.66p
n/a
25.66p
20.30p
70.25p
27.60p
16.74p
70.25p
20.57p
3.17 years
n/a
3.17 years
3.79 years
7.98 years
4.27 years
4.05 years
8.98 years
4.55 years
The weighted average exercise price of share options exercised and lapsed was 26.07p (2017: 45.51p) and 70.25p (2017: 70.25p)
respectively. The weighted average share price at which share options were exercised during the year was 64.00p (2017: 58.67p).
Volatility was calculated with reference to historical share price information using the closing prices on the first business day of each
month over the period since the shares have been listed. No share options or Growth Shares were issued in the current year or prior year.
The share-based payment charged to the Income Statement for the year ended 30 June 2018 is £0.5m (2017: £0.5m) with a corresponding
deferred tax asset at that date of £0.1m (2017: £0.1m), and £0.5m (2017: £0.5m) of this charge relates to the Directors.
At 30 June 2018, there were 9,647,928 (2017: 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
Committee report on pages 58 to 63.
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 award date. The amount of the
bonus awarded each year is explained in the Remuneration Committee report on pages 58 to 63.
www.inlandhomesplc.com
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Notes to the financial statements
for the year ended 30 June 2018 continued
8. FINANCE COST
Interest expense:
– bank loans
– Zero Dividend Preference shares
– other loans
– notional interest on deferred consideration
– amortisation of loan arrangement fees and other finance related costs
Gross finance costs
Finance costs capitalised
2018
£m
2017
£m
3.1
1.1
1.3
–
0.7
6.2
(1.1)
5.1
3.1
1.1
1.7
1.4
0.8
8.1
(1.1)
7.0
Finance costs of £1.1m (2017: £1.1m) have been capitalised on inventories in accordance with IAS 23 Borrowing Costs (see note 17), using
the Group’s cost of borrowing for that loan specific to the development in question.
9. FINANCE INCOME
Other interest receivable
Interest from loans to joint ventures and associate
10. TAX CHARGE
Current tax charge
Deferred tax (credit)/charge
Total
2018
£m
0.1
0.8
0.9
2018
£m
4.0
(0.1)
3.9
2017
£m
0.1
0.4
0.5
2017
£m
2.7
1.1
3.8
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
Expected tax charge based on the standard rate of corporation tax in the UK of 19.0% (2017: 19.0%)
Expenses not deductible for tax purposes
ZDP interest not deductible for tax purposes
Capital losses
Adjustments to tax charge in respect of previous periods
Timing differences
Release deferred tax asset on disposal of joint venture
Deferred tax liability on investment properties
Tax losses utilised
Tax charge
2018
£m
19.3
3.7
0.1
0.2
(0.1)
–
–
–
–
–
3.9
2017
£m
19.6
3.7
–
0.2
–
0.1
(0.2)
0.1
1.3
(1.4)
3.8
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FINANCIALS // ANNUAL REPORT AND ACCOUNTS 2018
11. EARNINGS AND NET ASSET VALUE PER SHARE
Number of shares
Shares in issue
Less shares held in:
– EBT1
– Treasury2
For use in basic measures
Dilutive effect of:
– share options
– deferred bonus shares
– growth shares3
For use in diluted measures
Earnings per share
Weighted average
2018
‘000
2017
‘000
Net asset value per share
At 30 June
2018
‘000
204,551
2017
‘000
203,654
201,621
201,875
1,844
1,763
5,790
211,018
1,882
1,627
6,000
211,384
(1,627)
(825)
202,099
1,837
1,823
5,100
210,859
(1,627)
-
202,027
1,912
1,627
6,000
211,566
1 The Group’s Employee Benefit Trust (EBT) purchased 650,000 shares on 29 October 2014, 377,500 shares on 20 December 2015 and a further 600,000 shares on
16 December 2016 in Inland Homes plc under the terms of the Long Term Incentive Plan. These total 1,627,500 shares and have been deducted from the weighted
average number of ordinary shares in issue and also from the shares in issue at the year end.
2 In several transactions in October and November 2017, the Group purchased 1,000,000 of its own shares to be held in treasury. On 18 January 2018, 175,000 shares
were transferred from the treasury reserve to satisfy employee share options exercised within the terms of the Company’s share option scheme.
3 Amounts included for the growth shares are those where the performance conditions have been satisfied. On 6 April 2018, Paul Brett transferred 79 vested LTIP
shares to the Company in exchange for the issue of 896,689 shares in the Company as referred to in the Remuneration Committee report on pages 58 to 63.
Basic and diluted earnings per share
Profit attributable to equity shareholders (£m)
Earnings per share
Diluted earnings per share
Net asset value and net asset value per share
At 30 June 2018
Net assets attributable to equity shareholders
Adjustment for:
Revaluation of projects
Deferred tax on investment property revaluation
EPRA net asset value
Adjustment for:
Deferred tax on investment property revaluation
Deferred tax on project revaluation
EPRA triple net asset value
At 30 June 2017
Net assets attributable to equity shareholders
Adjustment for:
Revaluation of projects
Deferred tax on investment property revaluation
EPRA net asset value
Adjustment for:
Deferred tax on investment property revaluation
Deferred tax on project revaluation
EPRA triple net asset value
www.inlandhomesplc.com
2018
15.4
7.64p
7.30p
2017
15.8
7.82p
7.46p
£m
Undiluted
p
Diluted
p
142.4
70.46
67.53
61.0
3.3
206.7
(3.3)
(11.6)
191.8
102.28
98.03
94.91
90.97
130.6
64.62
61.72
60.5
3.3
194.4
(3.3)
(11.5)
179.6
96.22
91.88
88.90
84.89
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Notes to the financial statements
for the year ended 30 June 2018 continued
12. DIVIDENDS
Payment
date
Dividend per
share
p
2018
£m
2017
£m
Current year
2018 final dividend
2018 interim dividend
Distribution of current year profit
Prior year
2017 final dividend
2017 interim dividend
Distribution of prior year profit
25 January 2019
29 June 2018
26 January 2018
23 June 2017
2016 final dividend
Dividends as reported in the Group statement of changes in equity
27 January 2017
1.55
0.65
2.20
1.20
0.50
1.70
0.90
–
1.3
1.3
2.4
–
2.4
–
3.7
–
–
–
–
1.0
1.0
1.8
2.8
Dividends are not paid on the shares owned by the Employee Benefit Trust. During the year dividends of £11.0m were received by the
Company from its subsidiaries (2017: £5.0m).
13. INVESTMENT PROPERTIES
Fair value
At 30 June 2016
Additions
Fair value adjustment
At 30 June 2017
Additions
Transfer from inventories
Disposals
At 30 June 2018
Commercial
properties
£m
Residential
properties
£m
Development
land
£m
1.0
0.3
–
1.3
–
1.2
(2.5)
–
45.4
0.1
1.5
47.0
0.5
–
–
47.5
5.3
–
–
5.3
–
–
–
5.3
Total
£m
51.7
0.4
1.5
53.6
0.5
1.2
(2.5)
52.8
Valuation techniques
- Commercial properties
At 30 June 2017, the Group’s commercial property consisted of a property at Leighton Buzzard which was carried at fair value established
by the Directors using a rental yield of 5.5%. The annual rent used in this calculation was the subject of a lease with the Co-op. Costs to
complete were deducted from the fair value along with a suitable developer’s margin. The property was disposed of during the year to
30 June 2018.
- Residential properties
The Group’s residential investment properties were valued by the Directors on the basis of “open market value”. In arriving at their view
of open market value the Directors had regard to the following; the accommodation offered, the square footage and the condition of each
property. They then considered the above in light of the local market and prices achieved in recent transaction in consultation with a local
property agent.
- Development land
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 £5.3m (2017: £5.3m). The Directors are of
the opinion that developing the site reflects the highest and best use of this asset.
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These techniques use significant unobservable inputs such that the fair value measurement of investment properties has been classified
as Level 3 in the fair value hierarchy as set out by IFRS 13 Fair Value Measurement. There were no transfers between Levels 1 and 2 or
between 2 and 3 in the fair value heirarchy during the year ended 30 June 2018 (2017: None).
Sensitivity analysis
Commercial properties
Residential properties
Development land
Variable
House prices
Rental values
House prices
Development costs
Variation
+5%
-5%
+5%
-5%
+5%
-5%
+5%
-5%
Increase/(decrease)
2018
£m
n/a
n/a
2.4
(2.4)
1.6
(1.3)
(1.1)
0.9
2017
£m
0.1
(0.1)
2.4
(2.4)
1.6
(1.3)
(1.1)
0.9
Income and expense
During the year ended 30 June 2018 £1.3m (2017: £1.1m) rental and ancilliary 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 £0.3m (2017: £0.2m). The Group did not incur any direct operating expenses arising from investment
properties that did not generate rental income (2017: £nil).
Restrictions and obligations
At 30 June 2018 there were no restrictions on the realisability of investment property or the remittance of income and proceeds of
disposal (2017: None). There are no obligations (2017: None) to construct or develop the Group’s residential or development land
investment property.
At 30 June 2018, the historical cost of the Group’s investment properties was £14.7m (2017: £15.4m). Certain of the investment properties
are secured against the Group’s borrowings. For details see note 23.
14. PROPERTY, PLANT AND EQUIPMENT
Group
Cost
At 30 June 2016
Additions
At 30 June 2017
Additions
At 30 June 2018
Depreciation
At 30 June 2016
Depreciation charge
At 30 June 2017
Depreciation charge
At 30 June 2018
Net book value
At 30 June 2016
At 30 June 2017
At 30 June 2018
Modular
housing
£m
Motor
vehicles
£m
Office
equipment
£m
Fixtures and
fittings
£m
Total
£m
–
–
–
0.8
0.8
–
–
–
–
–
–
–
0.8
0.3
0.1
0.4
–
0.4
0.1
0.1
0.2
0.1
0.3
0.2
0.2
0.1
0.4
0.1
0.5
0.1
0.6
0.2
0.1
0.3
0.1
0.4
0.2
0.2
0.2
0.3
0.3
0.6
–
0.6
0.2
0.1
0.3
0.1
0.4
0.1
0.3
0.2
1.0
0.5
1.5
0.9
2.4
0.5
0.3
0.8
0.3
1.1
0.5
0.7
1.3
www.inlandhomesplc.com
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Notes to the financial statements
for the year ended 30 June 2018 continued
15. INVESTMENTS IN GROUP UNDERTAKINGS
At 30 June 2018, the Company, directly or indirectly, held equity of the following:
Company name
Subsidiary undertakings
Basildon United Football, Sports & Leisure Limited
Brooklands Helix Developments Limited
Bucks Developments Limited
Chapel Riverside Developments Limited
Drayton Developments Limited
Drayton Garden Village Limited
Exeter Road (Bournemouth) Limited
High Wycombe Developments Limited
High Wycombe Developments No. 2 Limited
Hugg Homes Limited
Hugg Housing Limited
Inland Limited
Inland (Southern) Limited
Inland (STB) Limited
Inland Finance Limited
Inland Helix Limited
Inland Homes (Essex) Limited
Inland Homes 2013 Limited
Inland Homes Developments Limited
Inland Housing Limited
Inland Partnerships Limited
Inland Property Finance Limited
Inland Property Limited
Inland ZDP plc
Leighton Developments Limited
Poole Investments Limited
Rosewood Housing Limited
Wessex Hotel Developments Limited
Wilton Park Developments Limited
Interests in joint ventures
10 Ant South Limited
Bucknalls Developments Limited
Cheshunt Lakeside Developments Limited
Europa Park LLP
Gardiners Park LLP
Project Helix Holdco Limited
Interests in associates
Troy Homes Limited
1 All holdings are of ordinary shares
Principal activity
Holding and
voting rights 1
Sports club
Real estate development
Real estate development
Real estate development
Real estate development
Real estate development
Real estate development
Real estate development
Real estate development
Letting or operating of real estate
Letting or operating of real estate
Real estate development
Real estate development
Provision of finance
Real estate development
Real estate development
Real estate development
Holding company
Real estate development
Real estate development
Construction
Provision of finance
Real estate investment
Provision of finance
Real estate development
Real estate investment
Real estate development
Real estate development
Real estate development
Real estate investment
Real estate development
Real estate development
Real estate development
Real estate development
Holding company
Real estate development
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
50%
50%
50%
50%
50%
20%
25%
Inland Homes 2013 Limited is the only direct subsidiary of the Company. All others are indirect holdings. All of the above entities are
incorporated and domiciled in England and Wales. In addition, all entities are registered at Decimal Place, Chiltern Avenue, Amersham,
Buckinghamshire, HP6 5FG, with the exception of:
- Europa Park LLP and Gardiners Park LLP which are registered at Springfield Lodge, Colchester Road, Chelmsford, Essex, CM2 5PW
- Troy Homes Limited which is registered at 10-14 Accommodation Road, London, NW11 8ED
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.
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FINANCIALS // ANNUAL REPORT AND ACCOUNTS 2018
Disposal of subsidiaries
During the year to 30 June 2018, the Group disposed of two of its subsidiaries Uxbridge; Homes Developments Limited and Inland
Commercial Limited. There was a gain of £0.1m on the sale of these companies. During the year to 30 June 2017, Inland Homes 2013
Limited disposed of its 100% owned subsidiary, Inland New Homes Limited. A management fee of £6.0 million was charged by Inland Ltd
to Inland New Homes Ltd prior to the sale for £1 resulting in a gain of £6.0 million which was recognised in the Group Income Statement.
Group
Aston
Clinton
S.A.R.L.
£m
Project
Helix
£m
1.0
0.3
(0.2)
(1.1)
–
(1.0)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Cost
At 30 June 2016
Additions
Transfer of loans to joint ventures
Disposal of interest in joint venture
Share of loss after tax
Movement during the year
At 30 June 2017
Share of profit after tax
Receipts from joint ventures
Movement during the year
At 30 June 2018
Amounts due from associate
Due in less than one year
Other receivables1
Due in more than one year
Loans
Other receivables1
Investment in joint ventures
Cheshunt
Lakeside
Develop-
ments
£m
Bucknalls
Develop-
ments
£m
Europa
Park
£m
Gardiners
Park
£m
Investment
in
associates
£m
Total
£m
Total
£m
–
–
–
–
–
–
–
–
–
–
–
0.2
–
–
–
–
–
0.2
0.2
–
0.2
0.4
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
0.8
(0.8)
–
–
1.2
0.3
(0.2)
(1.1)
–
(1.0)
0.2
1.0
(0.8)
0.2
0.4
0.1
1.2
–
–
(0.2)
1.0
1.1
–
–
–
1.1
2018
£m
2.8
3.0
–
3.0
5.8
1.3
1.5
(0.2)
(1.1)
(0.2)
–
1.3
1.0
(0.8)
0.2
1.5
2017
£m
–
3.0
2.8
5.8
5.8
1 Other receivables relates to amounts due from the sale of two sites during the year ended 30 June 2016.
The above loans are repayable in October 2020 and other receivables over the period of the underlying development. Interest is charged
on the loan amounts but not on other receivables.
Amounts due from joint ventures
Due in less than one year
Project Helix
Bucknalls Developments Limited
Cheshunt Lakeside Developments Limited
Gardiners Park LLP
Due in more than one year
Europa Park LLP
No interest is charged on any of the amounts due from joint ventures.
www.inlandhomesplc.com
2018
£m
–
5.6
13.4
–
19.0
1.0
20.0
2017
£m
4.9
4.4
8.1
0.9
18.3
–
18.3
INLAND HOMES
INLAND HOMES
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Notes to the financial statements
for the year ended 30 June 2018 continued
15. INVESTMENTS IN GROUP UNDERTAKINGS 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 was to acquire a site near Aylesbury,
Buckinghamshire, and obtain planning permission. During the year ended 30 June 2017, following the achievement of planning consent
for 400 residential units and commercial space, the Group sold its interest in Aston Clinton S.A.R.L. for £8.3m, generating a gain of £7.0m
which was recognised in the Group Income Statement. Aston Clinton S.A.R.L. is based in Luxembourg.
Summarised statement of total comprehensive income
Revenue
Interest charge
Total comprehensive expense
2018
£m
–
–
–
2017
£m
–
(0.3)
(0.3)
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. During the year, Project Helix Holdco Limited’s interests in its subsidiary undertakings, High Wycombe
Developments Ltd, High Wycombe Developments No. 2 Ltd and Brooklands Helix Developments Ltd were purchased by the Group. Project
Helix Group will be liquidated shortly.
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
Investment cost
Carrying amount at year end
Summarised statement of total comprehensive income
Revenue
Operating expenses
Total comprehensive income
2018
£m
–
–
–
–
–
–
–
–
–
–
2018
£m
–
–
–
2017
£m
–
24.3
24.3
0.6
24.0
24.6
(0.3)
(0.1)
0.1
–
2017
£m
0.2
(0.1)
0.1
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FINANCIALS // ANNUAL REPORT AND ACCOUNTS 2018
15. INVESTMENTS IN GROUP UNDERTAKINGS 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
the homes in Garston, Hertfordshire. During the year ended 30 June 2017 outline planning consent was obtained for 100 residential
units. Under the terms of the joint venture agreement, the Group is obliged to fund 50% of the costs of the site and is entitled to receive a
management fee and 50% of the returns.
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
Losses restricted to nil
Carrying amount at year end
Summarised statement of total comprehensive income
Interest
Total comprehensive expense
2018
£m
0.1
9.5
9.6
9.9
0.3
10.2
(0.6)
(0.3)
0.3
–
2018
£m
(0.3)
(0.3)
2017
£m
–
8.4
8.4
8.3
0.1
8.4
–
–
–
–
2017
£m
–
–
Cheshunt Lakeside Developments Ltd (formerly Inland (Stonegate) Ltd)
In June 2016, the Group entered into a joint venture whose purpose was to acquire a site in Cheshunt, Hertfordshire, obtain planning
permission and ultimately sell the land. The site has the potential for 1,500 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.
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
Investment cost
Carrying amount at year end
Summarised statement of total comprehensive income
Revenue
Operating expenses
Total comprehensive income
2018
£m
0.3
57.5
57.8
56.6
0.6
57.2
0.6
0.3
0.1
0.4
2018
£m
0.7
(0.3)
0.4
2017
£m
0.2
39.4
39.6
22.7
16.7
39.4
0.2
0.1
0.1
0.2
2017
£m
0.2
–
0.2
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INLAND HOMES
INLAND HOMES
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Notes to the financial statements
for the year ended 30 June 2018 continued
15. INVESTMENTS IN GROUP UNDERTAKINGS continued
Europa Park LLP
In December 2017, the Group entered into a joint venture which acquired a site in Ipswich, Suffolk from the Group which has planning
permission for 94 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.
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
Investment cost
Carrying amount at year end
Summarised statement of total comprehensive income
Total comprehensive income
2018
£m
2017
£m
0.1
2.7
2.8
1.9
0.9
2.8
–
–
–
–
2018
£m
–
–
–
–
–
–
–
–
–
–
–
2017
£m
–
Gardiners Park LLP
In November 2016, the Group entered into a joint venture with Constable Homes Limited to develop a site in Basildon, Essex with 30
private and 13 Housing Association units. 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.
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)
Partners’ loans
Other current liabilities
Total current liabilities
Net liabilities
Reporting entity’s share
Investment cost
Carrying amount at year end
Summarised statement of total comprehensive income
Revenue
Operating expenses
Interest
Total comprehensive income
2018
£m
2017
£m
0.4
0.9
1.3
–
–
1.3
1.3
–
–
–
–
2018
£m
11.0
(9.3)
(0.1)
1.6
0.3
5.9
6.2
3.4
1.8
1.1
6.3
(0.1)
–
–
–
2017
£m
0.9
(0.9)
(0.1)
(0.1)
96
96
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Stock code: INL
Stock code: INL
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FINANCIALS // ANNUAL REPORT AND ACCOUNTS 2018
15. INVESTMENTS IN GROUP UNDERTAKINGS continued
INTERESTS IN ASSOCIATE
Troy Homes Limited
In October 2015 the Group acquired 25% of Troy Homes Limited (Troy), a new premium housebuilder, and is entitled to 25% of the
net returns.
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
Non-current liabilities
Financial liabilities (excluding trade payables and provisions)
Total non-current liabilities
Total liabilities
Net assets
Reporting entity’s share
Investment cost
Carrying amount at year end
Summarised statement of total comprehensive income
Revenue
Operating expenses
Interest
Income tax
Total comprehensive income/(expense)
Company
Cost
Net book value
2018
£m
0.1
0.1
3.1
29.3
32.4
32.5
14.1
5.5
19.6
9.2
9.2
28.8
3.7
0.9
0.2
1.1
2018
£m
14.2
(12.9)
(1.4)
0.3
0.2
2018
£m
12.5
12.5
2017
£m
0.1
0.1
0.6
26.1
26.7
26.8
10.4
3.4
13.8
9.5
9.5
23.3
3.5
0.9
0.2
1.1
2017
£m
1.0
(1.9)
(0.8)
0.3
(1.4)
2017
£m
12.5
12.5
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INLAND HOMES
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ANNUAL REPORT AND ACCOUNTS 2018 // FINANCIALS
Notes to the financial statements
for the year ended 30 June 2018 continued
16. DEFERRED TAX
Group
At 1 July 2017
(Credited)/charged to income statement
At 30 June 2018
Company
At 30 June 2017
Credited to income statement
At 30 June 2018
Capital
losses
recognised
on
revaluation
gain
£m
(3.2)
0.5
(2.7)
Notional
interest on
deferred
consideration
£m
(0.7)
–
(0.7)
Share-based
payments
£m
(0.6)
(0.1)
(0.7)
Revaluation
gain
£m
6.5
(0.5)
6.0
–
–
–
–
–
–
–
–
–
(0.6)
(0.1)
(0.7)
Total
£m
2.0
(0.1)
1.9
(0.6)
(0.1)
(0.7)
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.
17. INVENTORIES
At 1 July
Additions
Capitalisation of finance costs
Capitalisation of employee costs
Charged to income statement
Transferred to investment property
Impairment
At 30 June
2018
£m
139.9
107.8
1.1
3.0
(113.7)
(1.2)
(0.7)
136.2
2017
£m
148.4
58.0
1.1
1.4
(68.6)
–
(0.4)
139.9
Certain of the inventories are secured against the Group’s borrowings. For details see note 23.
Included within inventories is £0.9m in relation to construction contracts and to 30 June 2018 £15.5m has been billed in relation to
these contracts.
98
98
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Stock code: INL
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FINANCIALS // ANNUAL REPORT AND ACCOUNTS 2018
18. TRADE AND OTHER RECEIVABLES
Trade receivables
Prepayments and accrued income
Other receivables
Amounts owed by Group undertakings
Trade and other receivables due in less than one year
Other receivables due in more than one year
Group
2018
£m
16.1
0.4
13.9
–
30.4
11.0
41.4
2017
£m
3.4
1.3
17.7
–
22.4
5.7
28.1
Company
2018
£m
–
–
0.2
36.9
37.1
–
37.1
2017
£m
–
0.1
1.0
50.0
51.1
–
51.1
The carrying value of trade and other receivables is considered a reasonable approximation of fair value. During the year an amount of
£0.5m (2017: £nil) was written off in relation to a contractor which went into administration in 2016 (for more details see note 22). No other
trade receivables are considered to be impaired and there were no unimpaired trade receivables past due at the reporting date.
Other receivables
Due in less than one year
Sale of subsidiary
Sale of interest in joint venture
Construction contract bond
Other
Due in more than one year
Sale of subsidiary
Sale of interest in joint venture
Other
Group
2018
£m
1.3
5.0
5.0
2.6
13.9
4.7
5.7
0.6
11.0
2017
£m
10.7
5.0
–
2.0
17.7
–
5.7
–
5.7
Within other receivables is £0.5m (2017: £0.4m) relating to retentions receivable from construction contracting clients and within trade
receivables is £2.9m (2017: £1.0m) relating to income accrued on a construction contract.
19. CASH AND CASH EQUIVALENTS
Cash at bank and at hand
Group
2018
£m
40.4
2017
£m
26.5
Company
2018
£m
18.3
2017
£m
0.1
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INLAND HOMES
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ANNUAL REPORT AND ACCOUNTS 2018 // FINANCIALS
Notes to the financial statements
for the year ended 30 June 2018 continued
20. SHARE CAPITAL
Group and Company
The movement in the number of shares in issue is shown in the table below.
At 30 June 2016
Issued on exercise of share options
At 30 June 2017
Issued on exercise of LTIP
At 30 June 2018
Employee Benefit Trust
At 30 June 2016
Purchase of own shares for deferred bonus plan
At 30 June 2017 and 30 June 2018
Treasury reserve
At 30 June 2016 and 30 June 2017
Purchase of own shares
Exercise of share options
At 30 June 2018
Total voting shares1
At 30 June 2016
At 30 June 2017
At 30 June 2018
Authorised, issued and fully paid
10p ordinary shares
Number
202,799,432
855,000
203,654,432
896,689
204,551,121
£m
20.3
0.1
20.4
0.1
20.5
10p deferred shares
Number
9,980
–
9,980
–
9,980
£m
–
–
–
–
–
(0.7)
(0.4)
(1.1)
–
(0.6)
0.1
(0.5)
1,027,500
600,000
1,627,500
–
1,000,000
(175,000)
825,000
201,771,932
202,026,932
202,098,621
1 Ordinary shares in issue less shares held in the Employee Benefit Trust and the Treasury reserve
Ordinary shares
Except for the shares held in the Employee Benefit Trust and the Treasury reserve (see note 21), 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.
100 INLAND HOMES
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Stock code: INL
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FINANCIALS // ANNUAL REPORT AND ACCOUNTS 2018
21. RESERVES
The following describes the nature and purpose of each reserve within shareholders’ equity
Reserve
Description and purpose
Share premium
Amount subscribed for share capital in excess of nominal value less directly attributable issue costs.
Employee Benefit
Trust
Special reserve
This represents the purchase of the Company’s own shares and are deducted from total equity until they are
issued to employees under the Deferred Bonus Plan. At 30 June 2018, this reserve holds 1,627,500 shares
(2017: 1,627,500 shares).
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.
Treasury reserve
This represents the purchase of the Company’s own shares and are deducted from total equity until they are
issued to employees under the share option plan. At 30 June 2018, this reserve holds 825,000 shares (2017: None).
Retained earnings
Cumulative net gains and losses recognised in the Group income statement together with other items such as
dividends and share-based payments.
22. TRADE AND OTHER PAYABLES
Trade payables
Other creditors
Sales and social security taxes
Accruals
Group
2018
£m
8.5
3.1
6.4
6.9
24.9
2017
£m
7.2
6.3
1.8
5.2
20.5
Company
2018
£m
–
0.4
0.5
0.2
1.1
2017
£m
–
0.1
0.4
0.2
0.7
The carrying value of trade and other payables is considered to be a reasonable approximation of fair value.
Within trade payables is £0.7m relating to amounts payable in relation to construction contracts.
The contingencies note of last year’s financial statements included disclosure relating to a claim and counter-claim with respect to one
of the Group’s contractors which went into Administration during the year ended 30 June 2016. Included within other creditors of £3.1m at
30 June 2018 is a provision for £275,000 for the final agreed settlement with the Administrators in relation to these claims.
www.inlandhomesplc.com
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ANNUAL REPORT AND ACCOUNTS 2018 // FINANCIALS
Notes to the financial statements
for the year ended 30 June 2018 continued
23. BORROWINGS
At 30 June 2018
Secured bank loans
Other secured loans
Borrowings
ZDP shares
Gross debt
Cash and cash equivalents
Net debt
At 30 June 2017
Secured bank loans
Other secured loans
Borrowings
ZDP shares
Gross debt
Cash and cash equivalents
Net debt
Undrawn committed bank facilities
At 30 June 2018
At 30 June 2017
< 1 year
£m
1 to 2 years
£m
2 to 3 years
£m
3 to 4 years
£m
4 to 5 years
£m
> 5 years
£m
26.0
–
26.0
18.4
44.4
–
–
–
–
–
–
–
13.8
17.2
31.0
–
31.0
16.0
–
16.0
17.3
33.3
–
10.5
10.5
–
10.5
19.9
14.0
33.9
–
33.9
13.9
–
13.3
11.2
27.6
–
27.6
–
27.6
–
–
–
–
–
–
–
–
–
–
–
–
27.3
–
27.3
–
27.3
–
6.6
6.6
–
6.6
–
–
–
–
–
–
–
4.9
–
Total
£m
67.4
34.3
101.7
18.4
120.1
(40.4)
79.7
63.2
14.0
77.2
17.3
94.5
(26.5)
68.0
32.1
11.2
At 30 June 2018, the bank loans were secured over £47.1m (2017: £53.6m) of investment property and £16.6m (2017: £18.5m) of inventories.
The other loans were secured over £5.3m (2017: £nil) of investment property and £50.9m (2017: £40.0m) of inventories. The ZDP shares
were secured against inventories of £4.1m (2017: £4.1m) and loans to joint ventures of £18.9m (2017: £12.5m). No property, plant or
equipment are pledged as security.
Zero Dividend Preference (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. At 30 June 2018, there were 12,444,200 ZDP shares in issue (2017: 11,313,200). An explanation of the fair value of the ZDP shares
is included in note 26. The maturity of the ZDP shares was extended in August 2018 and will now be repaid on or before 10 April 2024. In
addition, a further 1,000,000 ZDP shares were issued. More details on the continuation and extension are included in note 31.
102 INLAND HOMES
102 INLAND HOMES
Stock code: INL
Stock code: INL
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FINANCIALS // ANNUAL REPORT AND ACCOUNTS 2018
23. BORROWINGS continued
IFRS 7 Financial liabilities: Disclosure, requires disclosure of the maturity of the Group’s remaining contractual financial liabilities. The
table below shows the contractual undiscounted cash outflows arising from the Group’s gross debt which is split between fixed rate and
variable rate borrowings.
< 1 year
£m
1 to 2 years
£m
2 to 3 years
£m
3 to 4 years
£m
4 to 5 years
£m
> 5 years
£m
At 30 June 2018
Variable rate borrowings
Fixed rate borrowings
Gross debt
Interest on gross debt
Gross loan commitments
At 30 June 2017
Variable rate borrowings
Fixed rate borrowings
Gross debt
Interest on gross debt
Gross loan commitments
24. CASH FLOW INFORMATION
26.0
18.4
44.4
6.2
50.6
–
–
–
3.6
3.6
13.8
17.2
31.0
2.2
33.2
16.0
17.3
33.3
5.3
38.6
Net debt reconciliation
Secured bank loans
Other secured loans
Borrowings
ZDP shares
Gross debt
Cash and cash equivalents
Net debt
Net assets
IFRS
EPRA
Net gearing
IFRS
EPRA
27.6
–
27.6
0.4
28.0
–
–
–
1.2
1.2
–
–
–
0.3
0.3
27.3
–
27.3
0.1
27.4
6.6
–
6.6
0.3
6.9
–
–
–
–
–
Non-cash movements
Amortisation
of loan
arrangement
fees
£m
0.2
–
0.2
–
0.2
Cash flows
£m
4.0
20.3
24.3
–
24.3
Movement
in accrued
liability
£m
–
–
–
1.1
1.1
(13.9)
10.4
–
0.2
–
1.1
10.5
–
10.5
1.9
12.4
19.9
14.0
33.9
2.5
36.4
2017
£m
63.2
14.0
77.2
17.3
94.5
(26.5)
68.0
130.6
194.4
52.1%
35.0%
25. OTHER FINANCIAL LIABILITIES
Other financial liabilities of £3.7m (2017: £20.1m) relates to purchase consideration on inventories falling due within one year.
Total
£m
84.5
35.6
120.1
11.3
131.4
63.2
31.3
94.5
12.7
107.2
2018
£m
67.4
34.3
101.7
18.4
120.1
(40.4)
79.7
142.4
206.7
56.0%
38.6%
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ANNUAL REPORT AND ACCOUNTS 2018 // FINANCIALS
Notes to the financial statements
for the year ended 30 June 2018 continued
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’s significant concentrations of credit risk are its loans to joint ventures and deferred receipts on disposal of investment in
subsidiaries and joint ventures which are adequately covered by the underlying values of the assets within the joint ventures or legal
charges over the land within the vehicle disposed of. Further information can be found in note 15. It has policies in place to ensure that
sales of products and services are made to customers with an appropriate credit history.
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
Amounts due from joint ventures in less than one year
Amounts due from joint ventures in more than one year
Amounts due from associate in more than one year
Amounts due from associate in less than one year
Receivables due in more than one year
Trade and other receivables
The Group’s policy is to deal with creditworthy counterparties.
2018
£m
40.4
19.0
1.0
3.0
2.8
11.0
30.0
107.2
2017
£m
26.5
18.3
–
5.8
–
5.7
21.1
77.4
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 18.
Other forms of credit risk are for liquid funds and other short term financial assets but these are 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% 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% increase in interest rates - loss
Total impact on pre-tax profit and equity of 0.5% decrease in interest rates - gain
104 INLAND HOMES
104 INLAND HOMES
2018
£m
(0.3)
0.3
2017
£m
(0.2)
0.2
Stock code: INL
Stock code: INL
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FINANCIALS // ANNUAL REPORT AND ACCOUNTS 2018
26. FINANCIAL INSTRUMENTS continued
(d) Price risk
The Group’s price risk arises from the market value of land and house prices. These are affected by credit availability, employment
levels, interest rates, consumer confidence and the supply of land. Whilst it is not possible for the Group to fully mitigate such risks on a
macroeconomic basis, the Group does focus its operations in areas that have a favourable supply/demand ratio and ensures that planning
permissions gained are for units of the type and price point which are less easily affected by any downturns in the housing market.
The Group has also started entering into construction contracts with Housing Associations which involve the bulk, forward selling of
residential units and has less risk than speculative building.
Financial assets and liabilities
The carrying amounts presented in the Statement of Financial Position relate to the following categories:
Loans and receivables
Other assets - non-current1
Other assets - current2
Cash and cash equivalents
Financial liabilities
Financial liabilities measured at amortised cost:
- borrowings
- Zero Dividend Preference shares
- other liabilities - current3
2018
£m
15.2
51.8
40.4
107.4
101.7
18.4
22.2
142.3
2017
£m
11.5
39.4
26.5
77.4
77.2
17.3
38.8
133.3
1 Other assets - non-current includes investments, amounts due from associate and joint ventures shown in note 15 and amounts shown as trade and other
receivables in note 18 due in more than one year.
2 Other assets - current includes amounts due from associate and joint ventures shown in note 15 and all amounts shown as trade and other receivables
due in less than one year in note 18 except prepayments of £0.4m (2017: £1.3m).
3 Other liabilities - current includes purchase consideration of £3.7m (2017: £20.1m) shown in note 25 and all amounts shown as trade and other payables in
note 22 except sales and social security taxes of £6.4m (2017: £1.8m). All amounts are non-interest bearing and are due within one year.
Borrowings consist of loans which attract interest at varying rates and there is a variety of fixed and variable rates (see table in note 23).
The ZDP shares are carried at their accrued value of 147.59p per share (2017: 137.55p) however their closing price on the main market
of the London Stock Exchange on 30 June 2018 was 151.70p (2017: 143.75p). The ZDP shares attract an interest rate of between 4.64%
and 7.30%.
27. COMMITMENTS AND 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 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
2018
£m
0.7
0.1
–
0.8
2017
£m
1.0
0.6
1.3
2.9
At 30 June 2017, the Group had two leasing arrangements which it considered significant. At Drayton Garden Village in West Drayton,
Middlesex, the Group had a rental contract with a third party for a shop dated 31 October 2016. This contract had a non-cancellable term
of 15 years with an annual rent of £64,000. At RAF Stanbridge in Leighton Buzzard, Bedfordshire, the Group had a rental contract with a
third party for a shop, dated 5 August 2016. This contract had a non-cancellable term of 15 years with an annual rent of £69,750. Both of
these properites were sold during the year. There were no significant leasing arrangements at 30 June 2018.
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ANNUAL REPORT AND ACCOUNTS 2018 // FINANCIALS
Notes to the financial statements
for the year ended 30 June 2018 continued
27. COMMITMENTS AND LEASES continued
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 are as follows:
Due in less than one year
Due later than one year and not later than five years
2018
£m
0.1
0.1
0.2
2017
£m
0.1
0.2
0.3
The Company has a rental contract for the registered office at Decimal Place, Chiltern Avenue, Amersham, HP6 5FG dated 10 July 2014.
This contract has a non-cancellable term of five years, with an annual rent of £127,000. Other than this there were no significant leasing
arrangements in the current or prior year.
Joint ventures and associate
Bucknalls Developments Limited - the Group is committed to contributing 50% of all costs not funded by external borrowings and no
further costs are expected.
Cheshunt Lakeside Developments Limited - the Group is committed to contributing 50% of all costs. The Group expects to fund a further
£1.2m (2017: £0.8m) before receipt of a planning permission.
Europa Way LLP - the Group is committed to contributing 50% of all costs not funded by external borrowings and no further costs
are expected.
Gardiners Park LLP - the Group is committed to contributing 50% of all costs not funded by external borrowings and no further costs
are expected.
Troy Homes Limited - there is £0.3m of share capital subscribed to by the Group which remains uncalled as at 30 June 2018 and is payable
when called for by the board of Troy Homes.
28. 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 notes 23 and 26. 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
106 INLAND HOMES
106 INLAND HOMES
2018
£m
142.4
(40.4)
102.0
142.4
120.1
262.5
38.9%
2017
£m
130.6
(26.5)
104.1
130.6
94.5
225.1
46.2%
Stock code: INL
Stock code: INL
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28. CAPITAL MANAGEMENT POLICIES AND PROCEDURES continued
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.inlandhomesplc.com.
29. CONTINGENCIES
Inland Homes plc has guaranteed the obligations of certain borrowings of its subsidiaries:
Chapel Riverside Developments Limited
High Wycombe Developments Limited
Inland Homes Developments Limited
Inland (STB) Limited
Inland Property Finance Limited
2018
£m
11.5
2.2
20.0
54.1
25.0
112.8
2017
£m
–
–
20.0
29.2
14.0
63.2
All of these subsidiaries are going concerns.
Inland Homes plc has guaranteed the obligations of certain subsidiaries with regards to the payments of sub-contractors. No guarantees
were considered significant at 30 June 2018. At 30 June 2017 one guarantee was considered significant by the Group and was in relation to
Inland Finance Ltd for a maximum of £0.8m. This guarantee expired during the year.
Inland Homes plc has guaranteed the build performance obligations of Inland Limited and Inland Partnerships Ltd on their contracts with
Housing Associations. The Directors do not consider that these guarantees could be called up.
Inland Homes plc has guaranteed the obligations of Poole Investments Limited on its commitments to its associate company, Troy Homes
Limited. Further information on these commitments can be found in note 15.
No provisions have been made in these financial statements in respect of any of these contingent liabilities.
30. RELATED PARTY TRANSACTIONS
The Group has interests in several joint ventures, all of which are considered to be material. Further information, including the Group’s
share of the net assets and net results of these joint ventures as well as outstanding loan amounts, interest and distributions received,
can be found in note 15.
For details of compensation paid to the Directors and key management please see the Remuneration Committee report on pages 58 to 63
and note 6. For Directors’ shareholdings in the Company please see the Directors’ report on page 66.
Drayton Garden Village Limited had previously provided two loans of £1.4m and £0.6m at 10% pa and 4.5% pa respectively to a subsidiary
of Energiser Investments plc, a company in which Mr Malde and Mr Wicks are shareholders and directors. These were both repaid during
the year ended 30 June 2017.
Mr Malde is a Non-executive Director of Troy Homes Limited, an associate of the Group. Please see note 15 for balances outstanding from
the associate and contractual terms of the debtors as at 30 June 2018.
31. POST BALANCE SHEET EVENTS
ZDP refinancing
On 13 August 2018, the life of the Group’s existing ZDP shares was extended to 10 April 2024. Additionally, a further 1,000,000 ZDP shares
were issued for gross proceeds of £1.5m. Following this issue, the number of ZDP shares in issue was 13,444,200 shares.
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Notes to the financial statements
for the year ended 30 June 2018 continued
32. SIGNIFICANT ACCOUNTING POLICIES
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 2018. 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’s 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 and 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.
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 Statement of Financial Position 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 and in
‘share of profits of associates’ 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.
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32. SIGNIFICANT ACCOUNTING POLICIES continued
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 or has sold the land to the Housing Association
and entered into a construction contract to provide the completed units. 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.
Golden brick income
On sites where the Group acts as a main contractor the contract income is usually preceded by a land sale which takes place once
construction has reached one level of bricks above the damp proof course. This is authorised by an agent of the purchaser and at this
point title passes.
Interest receivable
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.
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.
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
Modular housing
Leasehold property
- 25%
- 25%
- 25%
- Over useful economic life estimated at 40 years
- Over shorter of lease term and useful economic life
Material residual value estimates are reviewed as required, but at least annually.
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Notes to the financial statements
for the year ended 30 June 2018 continued
32. SIGNIFICANT ACCOUNTING POLICIES continued
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 an 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. 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.
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.
Investments
Investments are classified as available-for-sale financial assets. They are carried at fair value with changes in the fair value recognised
in other comprehensive income. Where there is a significant or prolonged decline in the fair value of an available for sale financial asset
(which constitutes objective evidence of impairment), the full amount of the impairment, including any amount previously recognised in
other comprehensive income, is recognised in profit or loss. Investments in subsidiaries are included in the Company’s balance sheet at
the lower of cost and recoverable amount. Any impairment is recognised immediately in the income statement.
Inventories
Inventories consist of land, trading and work in progress and are valued at the lower of cost and net realisable value. Cost includes the
purchase price 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.
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.
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32. SIGNIFICANT ACCOUNTING POLICIES continued
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.
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 or LTIPs expected to vest. Estimates are subsequently revised if there is any indication
that the number of share options or 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 or LTIPs ultimately
exercised are different to that estimated on vesting.
Upon exercise of the share options or LTIPs the proceeds received net of attributed transaction costs are credited to share capital and,
where appropriate, share premium.
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.
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.
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.
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Notes to the financial statements
for the year ended 30 June 2018 continued
32. SIGNIFICANT ACCOUNTING POLICIES continued
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, which the Group interprets to be over 12 months, and are
complex in their nature. The majority of the Group’s sites involve the development of large volumes of properties in a repetitive manner.
The Group therefore expenses borrowing costs relating to such developments 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. Currently, the Group capitalises borrowing costs only in
relation to the site at Wilton Park and its joint venture site at Cheshunt as these are the only sites that are considered sufficiently complex
in nature and will take over 12 months to develop.
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, 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.
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Five year summary
Year ended 30 June
Revenue
Profit before tax
Inventories
Cash
Gross debt
Net debt
Net gearing (%)
IFRS
EPRA
Net assets
IFRS
EPRA
Earnings per share (p)
Basic
Diluted
Dividend per share (p)
IFRS
Distribution of year’s earnings
Net asset value per share (p)
IFRS
EPRA - diluted
EPRA - undiluted
Private housing units sold
Land plots sold
Costruction contract equivalent units
2018
£m
147.4
19.3
2017
£m
90.7
19.6
2016
£m
101.9
33.7
2015
£m
114.2
34.9
2014
£m
58.9
9.6
136.2
139.9
148.4
121.8
104.3
40.4
120.1
79.7
56.0
38.6
26.5
94.5
68.0
52.1
35.0
16.7
71.3
54.6
46.9
29.3
142.4
206.7
130.6
194.4
116.3
184.7
21.4
56.3
34.9
38.9
n/a
88.8
n/a
7.64
7.30
1.85
2.20
70.46
98.03
102.28
275
837
79
7.82
7.46
1.40
1.70
64.62
91.88
96.22
188
780
37
14.01
13.38
15.01
14.09
1.10
1.30
0.60
1.00
57.66
88.22
92.34
147
425
21
43.92
n/a
n/a
248
440
39
11.1
51.9
40.8
66.9
n/a
61.1
n/a
3.46
3.26
0.27
0.60
29.63
n/a
n/a
114
169
16
Land bank plots
6,870
6,776
6,681
5,176
3,734
Plots with planning permission and resolution
to grant planning consent
Plots without planning permission
1,708
5,162
2,105
4,671
1,163
5,518
1,200
3,976
1,318
2,416
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List of definitions
Accident Frequency Rate (AFR)
The Accident Frequency Rate is a way of measuring the accidents we have based on a category of accident which is reportable to the
Health and Safety Executive under RIDDOR.
Affordable Housing
Social rented and intermediate housing provided to specified eligible households whose needs are not met by the market, at a cost low
enough for them to afford, determined with regard to local incomes and local house prices.
Brownfield site
Land which has been previously used or built upon.
Community Infrastructure Levy (CIL)
The CIL is a levy payable by developers to local authorities in England and Wales to help deliver infrastructure to support the development
of the area.
Construction Skills Certification Scheme (CSCS)
CSCS is the leading skills certification scheme within the UK construction industry. CSCS cards provide proof that individuals working
on construction sites have the required training and qualifications for the type of work they carry out. The scheme keeps a database of
people working in construction who have achieved or are committed to achieving a recognised construction-related qualification.
Diluted figures
Reported results adjusted to include the effects of potential dilutive shares issuable under the Group’s share option plans, LTIPs and
deferred bonus schemes.
Display screen equipment (DSE) assessments
These assessments are not only a legal requirement but can help combat musculoskeletal disorders, reduced concentration levels and
other ill-health effects that are symptomatic of time spent at poorly-designed workstations.
Earnings/earnings per share (EPS)
Earnings represent the profit or loss for the year attributable to equity shareholders and are divided by the weighted average number of
ordinary shares in issue during the financial year to arrive at earnings per share.
European Public Real Estate Association (EPRA)
A not-for-profit association with a membership of Europe’s leading property companies, investors and consultants which strives to
establish best practices in accounting, reporting and corporate governance and to provide high-quality information to investors. EPRA
published its latest Best Practices Recommendations in November 2016. This includes guidelines for the calculation of the following
performance measures which the Group has adopted:
• EPRA net asset value per share
NAV adjusted to include land and properties and other investment interests at fair value and to exclude certain items not expected to
crystallise in a long term investment property business model.
• EPRA triple net asset value per share
EPRA NAV adjusted to include the fair values of (i) financial instruments, (ii) debt and (iii) deferred taxes on revaluations, where
applicable.
Forest Stewardship Council (FSC)
FSC runs a global forest certification system with two key components; forest management and chain of custody. This system allows
consumers to identify, purchase and use wood, paper and other forest products produced from well-managed forests and/or recycled
materials. FSC’s “tick tree” logo is used to indicate that products are certified under the FSC system.
General Data Protection Regulation (GDPR)
GDPR enforces rules that protect people against a wide variety of privacy issues and took effect on 25 May 2018. It enforces the right
for people to lawfully agree with companies to use their private information. It also enforces the right for people to have their private
information no longer accessible by a company and that users have the right to allow their private information to become public or not.
The regulation also makes sure that no personal data is processed unless the user has allowed the processor of personal data to do so.
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Golden brick
The ‘golden brick’ is the first brick laid above the foundation level. At this point, the house builder can zero rate the sale of land that will
form the site of a building provided a building is clearly under construction.
Headroom
This is the amount left to draw under the Group’s loan facilities (i.e. the total loan facilities less amounts already drawn).
Help to Buy
The Help to Buy equity loan scheme is a government scheme which provides equity loans to both first-time buyers and home movers
on newly constructed homes worth up to £600,000 in England. Buyers have to contribute at least 5% of the property price as a deposit
and obtain a mortgage of up to 75% and the government provides a loan for up to 20% of the price. The Help to Buy mortgage guarantee
scheme helps people to buy a home worth up to £600,000 in the UK with a 5% deposit to obtain a 95% mortgage. The government gives a
guarantee to the lender of up to 15% of the value of the property.
Key Performance Indicators (KPIs)
Activities and behaviours, aligned to both business objectives and individual goals, against which the performance of the Group is annually
assessed. Performance measured against them is referenced in the Annual Report.
Net asset value (NAV) per share
Equity shareholders’ funds divided by the number of ordinary shares in issue at the balance sheet date.
Net debt
Borrowings plus accrued ZDP liability less cash and cash equivalents.
Net gearing/EPRA net gearing
Loans and accrued ZDP liability less cash as a proportion of IFRS and EPRA net asset value respectively.
Programme for the Endorsement of Forest Certification (PEFC)
The Programme for the Endorsement of Forest Certification (PEFC) is an international non-profit, non-governmental organisation
dedicated to promoting sustainable forest management through independent third-party certification. It works throughout the entire
forest supply chain to promote good practice in the forest and to ensure that timber and non-timber forest products are produced with
respect for the highest ecological, social and ethical standards. Its eco-label means customers and consumers are able to identify
products from sustainably managed forests.
Planning permission
Usually granted by the local planning authority, this permission allows a plot of land to be built on, change its use or, for an existing
building, be redeveloped or altered. Permission is either ‘outline’ when detailed plans are still to be approved, or ‘detailed’ when detailed
plans have been approved.
Recurring profit before tax
Profit before tax after excluding any revaluation gains or losses.
Reporting of Injuries, Diseases and Dangerous Occurrences Regulations (RIDDOR)
RIDDOR refers to the Reporting of Injuries, Diseases and Dangerous Occurrences Regulations 2013. The regulations require an employer
to report any absence by an employee of seven days or more caused by an accident at work to the Health and Safety Executive.
Section 106 planning agreements (s106)
These are legally-binding agreements or planning obligations entered into between a landowner and a local planning authority, under
section 106 of the Town and Country Planning Act 1990. These agreements are a way of delivering or addressing matters that are
necessary to make a development acceptable in planning terms. They are increasingly used to support the provision of services and
infrastructure, such as highways, recreational facilities, education, health and affordable housing.
Site Management Safety Training Scheme (SMSTS)
This is a course for anyone who has responsibilities for ensuring the Health and Safety of construction site employees.
Social Housing
Housing that is let at low rents and on a secure basis to people with housing need. It is generally provided by councils and not-for-profit
organisations such as housing associations.
www.inlandhomesplc.com
INLAND HOMES 115
115
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ANNUAL REPORT AND ACCOUNTS 2018 // FINANCIALS
Advisers and company information
Company registration number
5482990
Company Secretary
Nishith Malde FCA
Nominated adviser and broker
Panmure Gordon (UK) Limited
One New Change
London
EC4M 9AF
Solicitor
Dorsey & Whitney (Europe) 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
Financial PR Consultants
FTI Consulting
200 Aldersgate
Aldersgate Street
London
EC1A 4HD
Registrar
Link Asset Services
6th floor
65 Gresham Street
London
EC2V 7NQ
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
Investor website:
www.inlandhomesplc.com
House sales website:
www.inlandhomes.co.uk
116 INLAND HOMES
116 INLAND HOMES
Stock code: INL
Stock code: INL
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Inland Homes plc
Decimal Place
Chiltern Avenue
Amersham
Buckinghamshire
HP6 5FG
01494 762450
info@inlandplc.com
House sales website:
www.inlandhomes.co.uk
Investor website:
www.inlandhomesplc.com
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