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Inland
homes
Report and Accounts
for the period ended 30 September 2019
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Welcome to the
2019 Report
and Accounts
We are skilled in maximising the
value of land. We have a proven
track record in identifying land
opportunities where we can
optimise planning and then sell,
self-build or partner with others
to unlock the potential at each
site and realise its full value.
Who we are
Inland Homes are established land professionals
and housebuilders with a successful track record
in the industry. We focus on building residential
and mixed-use communities for sale, or for partner
organisations, across the south and south-east
of England. Since we began in 2005, we have built
our business on our ability to identify opportunities
for brownfield regeneration on sites where we add
value by using our expertise to navigate the complex
planning system to secure approvals.
Over time, we have evolved our strategy, business
model and expertise to grasp the opportunities
presented by a changing market. This meant growing
our strategic land portfolio, and expanding into
housebuilding and developing sites, both for direct
sale and on behalf of affordable housing providers.
We consistently maximise the value of each project, with
a decision to sell, build or work in partnership based on
an assessment of each site’s potential and the Group’s
cash requirements. This approach seeks to maximise
year-on-year growth and strong shareholder returns.
Uniquely Inland – our principles
Safety first
Lasting legacy
Our biggest asset
Stronger together
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↙
Jasmine Park,
Ipswich, Suffolk
CONTENTS
OVERVIEW
02 Key highlights
04 Investment case
06 Chairman’s statement
STRATEGIC REPORT
10 Q&A with Stephen Wicks
14 Case study: Cheshunt Lakeside
16 Key aspects of our marketplace
18 Our agile business model
20 Case study: Chapel Riverside
22 Our strategy
24 Group Finance Director’s review
28 Our KPIs
30 Our principal risks
34 Operations review
36 Case study: Abbey Wharf
42 Social and environmental review
46 Case study: Hugg Homes
48 Case study: Bucks University
Technical College
GOVERNANCE
52 Board of Directors
54 Corporate Governance statement
59 Remuneration Committee report
64 Audit Committee report
66 Directors’ report
FINANCIAL STATEMENTS
70 Independent Auditor’s report
77 Group income statement
78 Statements of financial position
79 Statements of changes in equity
80 Group statement of cash flows
81 Notes to the financial statements
OTHER INFORMATION
122 Five year summary
123 List of definitions
125 Advisers and Company information
Read our online annual report at
www.inlandhomesplc.com
Read more about our developments at
www.inlandhomes.co.uk
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02
Our diversified
and adaptable
business model is
reaping rewards
Highlights
113.69p
EPRA NAV per share*
Year ended 30 June 2018: 102.28p
+11.2%
£147.9m
Revenue
Year ended 30 June 2018: £147.4m
+0.3%
£25.0m
Profit before tax
Year ended 30 June 2018: £19.3m
+29.5%
11.79p
Earnings per share
Year ended 30 June 2018: 7.64p
+54.3%
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Chapel Riverside case study page 20
Our main priorities for 2019/20
01
02
03
Continue to increase the
size of our land bank
Continue to increase the
number of partnership
schemes
Secure build-to-rent
opportunities in the new
financial year
* A reconciliation of EPRA NAV per share from IFRS NAV per share is outlined on page 26
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Stock code: INLInland Homes Report and Accounts 2019OVERVIEW
3.10p
Dividend per share
Year ended 30 June 2018: 2.20p
+40.9%
£2.4bn
Gross development value
Year ended 30 June 2018: £2.1bn
+14.3%
90.7%
Employee retention
Chairman’s statement page 6
Q&A with Stephen Wicks CEO page 10
Group Finance Director’s review page 24
03
Our performance
Land
Build
• Record 7,796 plots in land bank
• Planning consent received for 1,557
residential plots at Cheshunt Lakeside
and Wilton Park
• Sold 577 consented land plots
• Increased strategic land bank of non-
brownfield sites to 45% of total land
bank
• Increased number of plots with planning
permission: 2,956 (2018: 1,708)
Land bank
• Increased number private homes
under construction to 892 (2018: 682)
• Continued to deliver high-quality,
affordably priced homes, with an
average selling price of £250,000
• £39.3m forward order book for
private and commercial units
7,796
Partner
6,681
6,776
6,870
5,176
s
t
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l
P
8,000
7,000
6,000
5,000
4,000
3,000
2,000
1,000
0
June
2015
June
2016
June
2017
June
2018
September
2019
• 319% increase in partnership housing
homes under construction to 921
(2018: 220) across five sites
• £5.4m development agreement signed
with Watford Community Housing
Trust for 45 homes at Farrier’s Wood,
Garston
Our people
• 161 people employed by the Group as
at 30 September 2019
• 200 people hosted at second
subcontractor conference
Social and environmental review
page 42
Our responsibility
• £5.1m community contributions via
Section 106, legal agreements and
CIL payments
• Accident Frequency Rate (AFR) 0.12
• Considerate Constructors Scheme
score 42.5/50
Social and environmental review page 42
Our risk profile
As with any business, we face risks and
uncertainties in the course of day-to-
day activities; it is only by effectively
identifying and managing these risks
that we can deliver our strategy.
Our principal risks page 30
Governance page 52
Our strategy page 22
Our KPIs page 28
Operations review page 34
Portfolio review page 38
Abbey Wharf case study page 36
Hugg Homes case study page 46
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www.inlandhomesplc.comReport and Accounts 2019 Inland HomesOVERVIEW
04
Investment case
↘
Farrier’s Wood,
Garston,
Hertfordshire
01
Strong and
balanced portfolio
Our land portfolio is in the
south and south-east of
England, where there is ongoing
and sustained demand for
additional housing. This land
bank is principally brownfield
sites both with and without
planning permission, plus
strategic sites which are light
on capital resource. The gross
development value of our entire
land bank is £2.4bn. It comprises
a record 7,796 plots, of which we
have planning consent for 2,956.
02
A balanced
and flexible
business model
The number of options in our
business model enables us to
realise the value in our land
bank and maximise returns.
It includes the strategic
disposal of consented land to
suit our investment priorities,
as well as the construction
and forward sales of private
homes and partnership
housing contracts which
provide consistent cash
flow. Additionally, we have
a portfolio of properties
providing a steady stream
of rental income and cash
that contributes towards our
overheads.
03
Land-planning
experts
We employ highly experienced
management and specialist
development teams. Our
versatile structure, local insight
and opportunistic approach
gives us a competitive edge
in identifying and securing
suitable land opportunities.
We maximise each project’s
potential to ensure healthy
returns, based on a sustained
record of securing planning
permission for complex
brownfield sites. We have
a 100% success rate in
achieving planning consent on
brownfield sites.
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Stock code: INLInland Homes Report and Accounts 2019OVERVIEW 04
Proven self-build
and partnership-
building capability
We have built the majority of
our homes since 2016, providing
greater control over quality
and costs. Our ambitious,
high-quality and affordably
priced developments are in
high demand. They generate
appropriate rewards for our
business, our shareholders,
the local community and
other stakeholders. There is
strong demand from housing
associations for projects where
we provide both the land and the
construction. With our proven
credentials for this work, we
are well positioned to maximise
further market opportunities.
05
Our value chain
1. Identify land
Our local insight and established relationships with
vendors and public sector bodies mean we are aware of
opportunities to increase our land bank.
ACHIEVE
2. Acquire land
Short-term returns
Our financing resources and strong reputation as being
trustworthy and reliable mean we can act quickly to
secure promising sites. Sites acquired can often deliver
short-term returns. Emphasis is on ensuring 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. Most recently
we are promoting ‘meanwhile’ use, generating revenue
through our pop-up residential product, Hugg Homes.
3. Achieve planning permission
Once a site is acquired, stakeholder consultations and
extensive research continue as we prepare our bids for
planning permission. We have a 100% success rate in
achieving planning permissions on brownfield sites.
MONEY IS
Money is
reinvested
SELL LAND
ACHIEVE
SELL LAND
4. Sell land
Short-term returns
Once planning consent is achieved, we have the opportunity to
sell the whole or part of a site to other housebuilders or housing
associations for a short-term return.
(or)
5. Partial sale and partnership contracts
Medium-term returns
We can sell a portion of a site while carrying out infrastructure
works and housebuilding on other parts. Together
with partnership deals on a turnkey basis with housing
associations, we deliver revenue in the medium term.
DEVELOP
(or)
6. Develop the whole site
Long-term returns
Building a whole development takes more time but maximises
the revenue a site can deliver over the long term. With a
predominantly self-delivered housebuilding programme
through our in-house construction team, we can protect
revenue returns through the benefit of design and build
efficiencies, alongside confidence and control of cost,
programme and overall scheme quality.
Our agile business model page 18
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’
Inland Homes has all the components in place to
deliver even more success and shareholder value in
the year ahead."
Terry Roydon
Chairman
Inland Homes has adopted a diversified and
adaptable business model that is reaping
rewards for our stakeholders. The Group
is progressing on its growth trajectory and
building momentum. We have developed a
reputation as experts in identifying the right
land opportunities and in having the skills
to secure planning permission on what are
primarily complex brownfield sites.
While this entrepreneurial outlook remains
a key part of our culture, our evolving
strategy and diversification now provide
us with the flexibility to realise more value
from the land bank. Our business plan
includes the provision of planning and
management services, the sale of land
where we have achieved planning consent,
as well as forward sales of homes and
construction contracts.
Operations
We have continued to grow while investing
in high-quality staff and systems, at the
same time as improving the quality of
our building work and increasing the
satisfaction of our customers and partners.
Revenue for the period was £147.9m (year
ended 30 June 2018: £147.4m), in line
with the Directors’ expectations, and the
land bank sits at a record 7,796 plots, of
which 2,956 have planning permission.
Achieving planning consent for our
100-acre flagship scheme, Wilton
Park, Buckinghamshire, and
for our largest-ever scheme,
at Cheshunt Lakeside,
Hertfordshire, are significant
milestones and achievements
for the Group, together adding
consent for more than 1,500
homes. These two consents have
led to a respectable increase in
the EPRA value of the Group's
assets and provide a significantly
improved pipeline for our business
activities.
The Group’s flexible model enables it
to maximise market opportunities. A
growing part of the Group’s business
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is now providing planning and management
services to investors in the property
sector. During the period, management
fees increased by 675% to £18.6m (year
ended 30 June 2018: £2.4m). This activity
is an attractive proposition to the Group,
with significantly reduced equity and debt
exposure and strong operating margins.
Results and dividend
The Group achieved profit before tax of
£25.0m for the period (year ended 30 June
2018: £19.3m). The EPRA net asset value
per share has increased, from 102.28p to
113.69p per share, while net asset value per
share has increased from 70.46p to 78.84p.
Net gearing increased to 93.9% in the period
(30 June 2018: 56.0%) due to the increase in
the Group’s land bank and work in progress.
Net debt is expected to fall in the year
ahead due to sales receipts from large-
scale apartment developments, securing
land by way of discount to market value
options, acquiring sites within our land asset
management activity and expanding the
Group’s partnership housing activity.
With a substantial number of highly
sustainable sites suitable for rental
housing, we expect to secure build-to-rent
opportunities in the new financial year. As
we evaluate this opportunity and consider
the best way to develop the sites at Wilton
Park and Cheshunt Lakeside, we continue
to consider actively all our funding options,
including equity and further joint ventures,
with a view to maximising returns for
shareholders.
In recognition of the Group's continued
growth and its planning consent
achievements, the Board has declared the
payment of a second interim dividend of
2.25p per share. This, together with the
first interim dividend of 0.85p (2018: 0.65p)
per share already paid, will make total
dividends of 3.10p (2018: 2.20p) per share.
As a result, there will be no proposed final
dividend for the 15-month period ended 30
September 2019.
Stock code: INL
Stock code: INLOVERVIEW
07
Governance
A key function of the Board is to ensure
good corporate governance at all times. The
Board is fully committed to upholding the
principles of good governance as set out
in its chosen governance code, the Quoted
Companies Alliances (QCA) Corporate
Governance Code, and you will see further
details on how we achieve this in the pages
that follow.
We were pleased to announce the
appointment of Kat Worth (ACG) as Group
Company Secretary, effective from 5 March
2019. Kat has held a number of roles
within the public and private sectors and
before joining Inland Homes was Group
Company Secretary to a large housing
association based in London. There, her
remit included acting as the Lead Officer
for the Remuneration and Nominations
committees, ensuring compliance with the
provisions of the UK Corporate Governance
Code and the Financial Reporting Council’s
(FRC) guidance on board effectiveness. With
Inland Homes adopting the QCA Code in 2018,
Kat is playing a valuable role in ensuring the
Group’s ongoing compliance with the Code’s
requirements. There were no changes to the
Non-executive Board members during this
period.
Market trends
The lack of suitable housing in our target
markets continues to result in sustained
demand for the houses and apartments
we build. However, we need focused and
positive dialogue between the Government
and industry in the face of ongoing political
and regulatory uncertainty.
↑
Meridian Waterside,
Southampton, Hampshire
£25.0m
Profit before tax
3.10p
Total dividend
If the Government is to achieve its goal
of building 300,000 new homes a year
by the mid-2020s, the planning process
needs further attention. Housebuilders
spend an enormous amount of time and
money obtaining consents and on clearing
reserved matters within an outline planning
consent. An extension or alternative to the
existing Help to Buy scheme, due to end
in 2023, will also be essential to keep the
market moving.
Outlook
Having secured planning consent at Wilton
Park and Cheshunt Lakeside, with a record
number of homes under construction (both
for private sale and on behalf of partners)
and increased market confidence following
the general election, Inland Homes has all
the components in place to deliver even
more success and shareholder value in the
year ahead.
We have some very lucrative land
opportunities in the pipeline which we
are seeking to acquire with a capital light
structure in which the bulk of the capital is
provided by investors. This will increasingly
be a strategic focus for the Group.
Terry Roydon
Chairman
30 January 2020
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www.inlandhomesplc.comReport and Accounts 2019 Inland HomesOVERVIEW ↘
Centre Square,
High Wycombe,
Buckinghamshire
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Q&A with
Stephen Wicks
Our agile
business model
10
18
24
34
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Group Finance
Director's review
Operations review
46
Case study:
Hugg Homes
14
16
Case study:
Cheshunt Lakeside
Key aspects of our
marketplace
20
Case study:
Chapel Riverside
28
Our KPIs
36
22
Our strategy
30
Our principal risks
42
Case study:
Abbey Wharf
Social and
environmental review
48
Case study:
Bucks University
Technical College
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10
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In line with our strategic priorities, we now have
our largest-ever land bank; we own more plots with
planning permission than at any time before; and have
continued our increase in the number of homes and
partnership homes we are building.”
Stephen Wicks
Chief Executive Officer
What were this period's
highlights?
This year, Inland Homes has reached
new heights for our land acquisition,
construction and partnership activities. In
line with our strategic priorities, we now
have our largest-ever land bank; we own
more plots with planning permission than
at any time before; and have continued
our increase in the number of homes and
partnership homes we are building.
Within that, the highlights have been
achieving two significant planning consent
milestones, with permission granted for
both our flagship 100-acre site at Wilton
Park in Beaconsfield, Buckinghamshire
and for our largest-ever development,
at Cheshunt Lakeside in Cheshunt,
Hertfordshire. Achieving these consents
follows several years of extensive
consultation. We have an unbroken track
record in obtaining planning approvals on
complex brownfield sites, which is why I
rate these two consents as the significant
features of the reporting period.
Together, these two sites have
planning consent for more than
1,500 homes.
The number of plots in our land
bank now stands at a record
7,796 and, of these, 2,956 have
planning consent. With the
self-build and partnership
arms of our Group growing
in scale and reputation, we
have key pieces in place
to fully maximise the
value of this land across
the short, medium and
long term.
Is land acquisition still
important to the business
strategy?
The clue is in our name! Everything we
do stems from securing the right land
opportunities. Our ability to identify, purchase
and secure planning approvals on complex
sites enables us to maximise each site’s
potential, whether that is by selling, building
for private sale or partnership activities.
Identifying the right land opportunities is still
the key to our success.
Will construction and
partnership activities continue
to play a growing role in your
business model?
Yes. At the end of the reporting period we
had 1,813 homes under construction across
12 schemes (including five partnership
schemes) and we want to maintain this
momentum and increase year-on-year
the proportion of these that we build for
partners.
Having an in-house construction capability
gives greater control over a project and
should reduce our costs. We can buy
materials and employ subcontractors
directly, build higher-quality homes more
efficiently and offer customers a first-class
service. Since appointing Gary Skinner
as Group Managing Director in 2016, we
have invested extensively in systems and
personnel, and this is now starting to pay off.
With the Government’s target to build
300,000 homes per annum by the mid-2020s,
we expect significant and sustained growth
in the demand from housing associations,
where the developer is expected to provide
the land and construction. We have already
more than quadrupled the number of homes
being built on behalf of partners since the
previous reporting period, with more than
half of the homes under construction being
built on behalf of our partners (921 of the
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Stock code: INLSTRATEGIC REPORT
11
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Wilton Park,
Beaconsfield,
Buckinghamshire
↖
Inland Homes
head office
1,813 under construction). With our track
record of creating high-quality homes
on time and budget, we are in a strong
position to make the most of this anticipated
increased demand.
Brexit continues to dominate
the political landscape.
How is Inland Homes faring,
and what have you done to
mitigate any ongoing impact?
The uncertainty over Brexit has caused
considerable caution with first-time buyers
(who are our target market), and there has
been lower demand in Central London
(where we continue our policy of having no
activity). However, there remains a shortage
of housing across the UK, and property
values and demand in the south and south-
east, where we operate, remain healthy.
While this housing demand underpins our
strategy, we have refined our priorities
to ensure we maximise current market
opportunities and reduce risk. Our strategic
land bank of non-brownfield sites now
makes up 3,523 of our 7,796 plots. We hold
these sites on 'discount to market value'
options, which we are only required to
exercise after we obtain planning consent,
providing medium-term opportunities
without tying up significant amount of
capital.
We are experiencing exceptionally high
demand from housing associations, where
we provide the land and construction of
the scheme, and increasing the number of
homes build through partnership schemes
is a clear strategic priority. These schemes
reduce our exposure to any softening of
the market. We realise an immediate cash
injection from the land sale and recognise
revenue and cash through monthly
payments of certified work done for our
customers. We see partnerships with
housing associations and local authorities
as our biggest growth opportunity.
What planning reforms would
you like to see implemented?
The planning process needs further reform,
as housebuilders continue to spend an
enormous amount of time and money
obtaining consents. Much time is spent
on achieving an outline planning consent
which is then prolonged by time spent
in obtaining detailed planning consent.
This causes delays in building homes. For
example, we spent three years and more
than £3.2m securing an outline planning
consent at one of our major sites.
The biggest single reform to improve the
planning system would be to ‘ring fence’
and increase planning fees so that local
authorities can invest in sufficient and
experienced personnel.
In recent years, Help to Buy has been
responsible for a significant chunk of
transactions, particularly in the new-
build market, with 65% of our completions
this period supported by the scheme.
Government needs to look seriously at what
will replace the scheme when it is due to
come to an end in 2023. An extension or
alternative scheme is essential.
Scrapping all stamp duty for properties
under £500,000 would be a big win for
buyers. However, the Government should
also consider reducing the burden of this
tax on properties above £500,000 as the tax
loss is unlikely to be material, yet would
help increase the number of transactions.
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www.inlandhomesplc.comSTRATEGIC REPORTReport and Accounts 2019 Inland Homes 12
Q&A with Stephen Wicks
CONTINUED
Inland Homes has invested
heavily in its workforce. Why
has this been important?
Attracting new talent and retaining
experience gives us a competitive edge. As
the building arm of the business grows, so do
employee numbers. We had 161 employees
at the end of the reporting period, compared
to 105 last year. Most of these roles are
site based but support staff roles have also
increased. We will continue to focus on
maintaining the quality and strengths of
our team.
What is the outlook for the year
ahead?
Our agile business model enables us to
respond to the opportunities the market
presents.
With the requirement for affordable homes
being a priority for Government and local
authorities, there is exceptionally strong
demand from housing associations for
projects where we can provide both the land
and construction service.
We have some very lucrative land acquisition
opportunities which we are seeking to
engage in a ‘capital light’ structure, while
our net borrowings reduce to improve
our balance sheet. Specifically, we are
now targeting pro-development London
Boroughs, such as Barking and Dagenham,
Waltham Forest and Hounslow.
With our track record of creating high-
quality homes on time and budget, we are
in a strong position to make the most of
this increased demand. We are aiming to
increase our share of this growing market
and have created a land bank to achieve this
objective.
In recent months and in the year ahead, our
focus will be on acquiring land where we act
as asset managers on behalf of third parties.
We have a 100% success rate in securing
planning consent on brownfield sites and
have established a reputation for delivering
on behalf of these stakeholders. This activity
is light on our capital and at reduced risk
while still providing enhanced financial
contributions to Inland Homes. This reflects
the expertise added by the Group in the
management process.
With a substantial number of highly
sustainable sites suitable for rental housing,
we also expect to secure build-to-rent
operators in the current financial year. As
we evaluate this opportunity and consider
the best way to develop our sites at Wilton
Park and Cheshunt Lakeside, we are actively
exploring funding options.
7,796
Land bank plots
1,813
Homes under
construction
How does Inland Homes’
subsidiary, Hugg Homes,
fit with your strategy?
Hugg Homes helps us realise additional
value from land while it is going through
the planning process. The modular units
support local authorities and others in
meeting short-term housing needs with
a quality that ranks favourably against
other options. With local authorities
spending nearly £1bn a year on temporary
accommodation in 2017-18, there is huge
potential for growth.
What has happened with
Rosewood Housing this period?
We registered Rosewood Housing, a wholly
owned subsidiary of Inland Homes, as
a for-profit provider of social housing in
August 2018. During this reporting period,
we finalised its second affordable housing
transaction for a new housing development
in Tring.
Rosewood provides the opportunity to
develop, hold and manage certain Section
106 affordable homes. It comprises a mix
of rented and shared-ownership units that
need to remain within the regulated sector,
while owned by a registered provider. In
particular, we expect to generate revenue
from the ‘staircasing’ of shared-ownership
homes, where residents can buy further
shares in their property once they have lived
in it for a period of time. We will continue to
grow our affordable housing portfolio in the
coming year.
What is your approach
to health and safety?
It’s a no-compromise approach. The
safety of our staff, contractors and the
communities we operate in is our utmost
priority. In August, the Group reached
its target of having worked 2.5 million
man-hours with no reportable incidents
and as at 30 September 2019 our Accident
Frequency Rate (AFR) stands at 0.12.
We are acutely aware of the fact that as the
construction arm of the business grows,
so do the number of high-risk activities.
With this in mind, we are reaffirming
our commitment to safety throughout
the business and all employees will attend
a health and safety day conference in the
year ahead.
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www.inlandhomesplc.comSTRATEGIC REPORTReport and Accounts 2019 Inland Homes £429m
Estimated gross
development value
1,253
Residential plots
Commercial space
I
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£16m
Boost to the local economy
per year through increased
business activity
1,430
Jobs generated
£429m
£14m
Community
contributions
15
Planning permission secured
at Cheshunt Lakeside
Demonstrating our expertise in securing
planning approvals on complex brownfield
sites, in August 2019 we were delighted
to secure planning consent at Cheshunt
Lakeside in Cheshunt, Hertfordshire. Part of
the 30-acre brownfield site used to be Tesco’s
headquarters and it is our largest ever mixed-
use development.
We are the lead developer on the broader
masterplan, which will create a new ‘urban
village’, with 1,725 homes, 204,514sqft of
commercial space and provision for a new
primary school. Of these, we own and control
1,253 residential plots and 52,797sqft of
commercial and educational space. The
estimated gross development value of the
30-acre site is £620m, with £429m of this
representing the plots we control within
our joint venture.
Cheshunt Lakeside will sit in eight acres of
landscaped grounds and will include a public
square, shops, cafés and improved transport
links. We estimate the completed site will
create 1,000 new jobs. In addition, 250 jobs
and 30 apprenticeships will be created during
construction.
Planning permission took three years of
close consultation with the local councils and
community. We were able to agree promptly
the terms of the Section 106 agreement, a clear
indicator of our success in working with local
councils on complex sites.
We are eager to start construction and
transform this former industrial site into a
thriving residential and business community.
In October 2019, we made the first reserved
matters application to build 195 homes.
Project timeline
June
2019
Resolution to grant
planning permission
August
2019
Planning permission and Section
106 agreement signed securing
£14 million in public investment
October
2019
Demolition of Tesco
buildings on site
October
2019
Reserved matters application
for first phase submitted
Summer
2020
Construction of first phase
of homes to begin
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Key aspects of our marketplace
UK GDP 2019
3.5
3.0
2.5
%
2.0
1.5
1.0
0
Real and forecast GDP growth %
+1.2%
(ONS estimated figure for
2019 calendar year)
1
1
/
0
1
0
2
2
1
/
1
1
0
2
3
1
/
2
1
0
2
4
1
/
3
1
0
2
5
1
/
4
1
0
2
6
1
/
5
1
0
2
7
1
/
6
1
0
2
8
1
/
7
1
0
2
9
1
/
8
1
0
2
0
2
/
9
1
0
2
1
2
/
0
2
0
2
Source: ONS/OBR
UK House price index
30
25
20
15
10
5
0
(5)
(10)
(15)
%
Outer Metropolitan
Source: Nationwide
UK
+0.6%
(to 30 June 2019)
New home registrations 2019
175,000
100,000
25,000
0
156,019
151,437
157,298
153,059
164,768
2014/15 2015/16
Source: NHBC
2016/17
2017/18
2018/19
+7.7%
(to 30 June 2019)
New mortgages 2019
900,000
800,000
700,000
500,000
400,000
300,000
200,000
10,000
0
843,816
861,871
760,218
782,124
785,550
2014/15 2015/16
Source: Bank of England
2016/17
2017/18
2018/19
785,550
(to 30 June 2019)
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Market trend
There were 443,600 planning applications submitted
and 355,000 decisions granted in England during the
12 months ended 30 June 2019. This is a 5% decrease
in the number of decisions granted compared to the
previous year.
Context
Government has reiterated its commitment to
speeding up planning approval and housing delivery.
Updates to the National Planning Policy Framework
give greater powers to local authorities who are
required to put in place five-year plans to meet their
housing needs.
Opportunity
Our expertise and perseverance mean that we have
a good success rate in getting sites allocated for
development in local plans. However, we call on
Government to further reform the planning process
to speed up the application process. The planning
system remains cumbersome and bureaucratic,
with local government planning teams under-
resourced and a 'one size fits all' approach taken to
the process.
Source: Planning Applications in England:
April to June 2019: Ministry of Housing, Communities and
Local Government
Market trend
There were 84,740 households reported as being
in temporary accommodation (March 2019), a 77%
increase since December 2010, where the use of
temporary accommodation hit its lowest point
since 2004.
Councils across England are spending nearly £1bn
a year on temporary accommodation housing
these families.
Context
The shortage of affordable housing in the UK is forcing
local authorities to meet immediate housing needs
using bed and breakfast and hostel accommodation, at
significant expense to the taxpayer.
Opportunity
Our subsidiary, Hugg Homes Limited, offers a high-
quality, cost-effective solution that is available in 12
weeks. The bespoke, modular units are located on
inactive land and are let in line with local authority
housing allowance rates, offering a cost-effective
alternative.
Source: Households in temporary accommodation (England)
briefing paper, Number 02110, 15 October 2019
Source: Spend on temporary accommodation: Inside Housing
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Market trend
The Government's target to build 300,000 new
homes a year by the mid-2020s is at risk of not
being met.
Context
A National Audit Office report shows that hitting the
target requires a huge increase in housebuilding
after 2020.
Opportunity
We anticipate even greater demand from housing
associations for the delivery of turnkey projects,
where we deliver the land and the build on their
behalf. We are in an excellent position to grow this
partnership housing business significantly with the
consented land bank we are creating.
Source: National Audit Office ‘Planning for New Homes’
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Market trend
There were 164,768 new home registrations
between 1 July 2018 and 30 June 2019 in the UK,
an increase of 7.7% on the same period in the
previous year.
Context
Despite political uncertainty and a softening of the
market in London, demand for new build housing
remains strong in our own operating area.
Opportunity
We continue to increase our build portfolio to meet
this demand, with 892 private and 921 partnership
homes under construction.
We remain focused on the first-time buyer, first-
time mover market in the south and south-east of
England where demand remains strong.
Source: New home completions: NHBC
Market trend
The Bank of England base rate remains at 0.75%.
Mortgage approvals increased from 780,000 in the
twelve months to 30 June 2018 to 785,550 in the
year to 30 June 2019.
Context
Borrowing costs remain at a historically low level
and mortgage approvals have increased. Mortgage
affordability remains strong.
Opportunity
The continuing supply and demand imbalance,
combined with the ongoing availability of Help
to Buy, and low interest rates creates a healthy
market. We anticipate continued demand for our
high-quality, affordable homes which have an
average selling price of £250,000.
Source: Base rate and mortgage approvals: Bank of England
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Our agile business model
Our agile business model enables us to secure land opportunities both for the
Group as principal and for investors to whom we provide our planning expertise and
management services in return for a significant share of the development profit.
We make a decision to sell, build or work with a partner following receipt of planning
consent, based on a detailed assessment of each site’s potential. This approach
creates short, medium and long-term returns for investors and supports the
maintenance of a strong balance sheet.
Identify and acquire land
Secure planning approval
Land
Full or partial sale
to developers
Build
Full or partial self-build
and sale
Partner (contract income)
A construction contract for
Inland Homes to build, with
full or partial sale to housing
associations, investors and
institutional landlords
Adding value
• Generates cash flow to fund
our activities
• Captures the land-value uplift achieved
• Captures the development margin,
plus the land-value uplift achieved
from securing planning
• Accelerates revenue and provides
positive working capital
• Reduces net borrowing
by securing planning approvals
• Provides direct control of build costs
Achievement for our stakeholders
Developer benefit:
Homeowner benefit:
Partner benefit:
• Barriers to development resolved
before sale
• Land sold with planning permission
for the right housing mix and
development size, to maximise the
value of the site
• Range of affordably priced,
high-quality and attractive
homes available
• Each development designed to suit
modern lifestyles and individually
tailored to the location
• Proven credentials and positive
reputation as a partner gives
housing associations confidence in
our ability to complete projects
• Range of affordably priced,
high-quality and attractive
homes available
Investment case page 4
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A focused portfolio
As our name indicates, land is the
foundation of our business model. The
size of our land bank increases annually,
with our activity focused on identifying the
right opportunity, acquiring the land, and
securing planning approvals. The majority
of our sites are in the south and south-east
of England.
While brownfield land activity remains our
main focus, we are growing our strategic
bank of non-brownfield land. The addition
of this strategic land to the portfolio opens
up medium-term opportunities which are
significantly less capital intensive and
provides us with opportunities that would
not be available solely from dealing with
brownfield land.
In 2018-19, our land bank increased from
6,870 to 7,796 plots and our strategic
land bank grew significantly. Strategic
land now totals 595 acres, with the
potential for approximately 3,523 plots,
comprising approximately 3,018 houses and
505 apartments.
In a major milestone for the business,
this year we achieved planning consent
for our flagship project, Wilton Park in
Beaconsfield, Buckinghamshire and our
largest-ever scheme, Cheshunt Lakeside
in Cheshunt, Hertfordshire. Together these
two sites provide consent for more than
1,500 homes.
Land and planning
sites
Private housebuilding
sites
Partnership
sites
Ipswich
Braintree
Basildon
Billericay
Weston Turville
Little Chalfont
Meppershall
Cressing
Holmer Green
High Wycombe
Hyde Heath
Chesham
Amersham
Hazlemere
Beaconsfield
Uxbridge
Maidenhead
Datchet
Bournemouth
Southampton
Garston
West Hyde
Cheshunt
Chelmsford
Fulmer
Elstree
Alperton
Hillingdon
Ashford
Upminster
Dagenham
Ockley
Framfield
Poole
Fernhurst
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Winner
2018/19 International
Property Awards
UK - Mixed Use
Development UK
457
One, two and three-
bedroom homes
£100m
Estimated gross
development value
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Completion
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Chapel Riverside in
Southampton demonstrates
our experience and expertise
in securing planning
approvals and building homes
on complex brownfield sites.
With a local authority in favour of development,
and an established local supply and delivery
team, we have been able to maximise the value
of the development and play an important role in
regenerating the area.
Developed as a successful venture with
Southampton City Council, this major nine-
acre regeneration project will create 457
new one, two and three-bedroom homes,
many with waterside views, and 64,000sqft of
commercial space.
Phase one at Chapel Riverside, consisting of 72
units, completed in October 2018. The sale of
phase three, with 132 one, two and three-bedroom
apartments, was launched in June 2019.
Chapel Riverside is a prime example of our
expertise in brownfield site regeneration and
the additional value our in-house construction
team can bring. It is not just about creating
homes. We have laid strong foundations for a
new community to grow, and before construction
commenced, conducted vital remediation
and improvement works that will benefit
Southampton for many years.
Our investment includes raising the site level
and building a critical first section of a 210m
sea wall to protect the city at a cost of £2.5m.
This area of Southampton had been identified
as having a medium-to-high risk of flooding,
and with Chapel Riverside sitting at the lowest
point, defences on the site boundary with the
river are significant for the city. We completed
construction of the sea wall in September 2018.
We are now carrying out extensive remedial
works as part of phase three. The former
Town Depot left a legacy of disused buildings,
contaminated ground, and large surface-
water tanks that need careful demolition,
decontamination and relocation underground
at a cost of around £5m. This major piece of
civil engineering work involves sinking a 20m
water tank to a depth of 17m from ground level.
It will reduce the risk of water contamination
and greatly improve the look of the area, while
releasing more land at ground level to form
part of a public plaza with access to the new
waterside promenade.
Our ability to manage major civil engineering
works in-house, gives greater cost and
schedule control, creating additional value for
Southampton City Council.
Chapel Riverside is a six-year development, on
schedule for completion by 2024.
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Our strategy
Our business plan includes the provision of planning and asset management
services.
Identifying the right
land opportunities,
and securing planning
permission on these
sites, remains the
essence of what
makes us uniquely
Inland Homes.
In parallel, we
continue to grow
our partnership and
private housebuilding
activities; areas where
we are demonstrating
a successful track
record, and positioning
ourselves for growth.
Our varied range of financing options
gives us flexibility. Our business plan
includes selling consented land,
which we can tailor to our cash flow
requirements, as well as forward
sales of homes and partnership
housing contracts in hand that provide
consistent cash flow. Additionally, we
have a bank of properties providing a
steady stream of rental income that
contributes to our overheads.
Continue key activity of
identifying the right sites and
securing planning
Maintain
borrowings
Increase the size of our strategic
land bank where residential
development is expected
Description
The acquisition of strategic land to
the portfolio opens up medium-term
opportunities. These are significantly
less capital intensive and provide us with
opportunities which would not be available
dealing solely with brownfield land.
Financial driver
• Strategic land bank delivers long-term
returns which maximises shareholder
value
• Reduced risk
• Low initial investment of capital
Performance
• Strategic land plots: 3,523 plots, totalling
595 acres
• Potential for approximately 3,018 houses
and 505 apartments
2020 priorities
Continue to secure more planning consents
and secure options over sites with excellent
potential to add value. We have a target to
reduce EPRA net gearing below 40%.
KPIs
• Number of plots with or without
planning consent
• EPRA net asset value per share
• Planning permissions gained during the
period
Description
This is the foundation of our business.
Sites we buy range from those ready
for immediate development, strategic
acquisitions that open up the potential
of neighbouring land and areas that will
become key housebuilding terrain in the
future. The Group’s focus is to have a land
bank of approximately 10,000 residential
plots in the medium term.
Financial driver
• Balanced land bank delivers short,
medium and long-term returns
• Delivers above market returns for
investors
Performance
• Land bank: gross development value
£2.4bn
• Total land bank plots: 7,796 (year ended
30 June 2018: 6,870)
• Land plots sold: 577 (year ended 30 June
2018: 837)
• Number of plots with planning
permission: 2,956 (year ended 30 June
2018: 1,708)
2020 priorities
Continue to secure more planning consents
and acquire sites with excellent potential to
add value.
KPIs
• EPRA net asset value per share
• Net gearing
• Number of plots with or without
planning consent
• Residential home sales
• Planning permissions gained during
the period
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DEVELOP
Continue policy of selling
appropriate plots when we have
secured planning permission
Increase the number of homes
built through partnership
schemes on behalf of registered
affordable housing providers
Focus on building private sale
homes which meet the needs of
the market
Description
Our policy of selling consented plots to
third parties generates cash and profit.
Sales will be focused towards those
where our building division can secure the
construction contract.
Description
Delivery of affordable homes is high priority
for Government and local authorities.
There is strong demand from housing
associations for projects where we can
provide the land and the construction.
Description
Having proved our credentials as a high-
quality housebuilder with award-winning
developments, we continue to build
momentum and develop our portfolio,
building homes which meet market need.
Financial driver
• Short-term returns
• Cash inflow funds other activities
Performance
• Land plots sold: 577 (year ended 30 June
2018: 837)
• Number of plots with planning
permission: 2,956 (year ended 30 June
2018: 1,708)
2020 priorities
Selective disposal of sites to housing
associations and other developers.
KPIs
• Revenue
• Net gearing
• Number of plots with or without
planning consent
• Planning permissions gained during the
period
With a number of schemes in development,
and the land bank we are creating, we are
focused on increasing our share of this
growing market.
Financial driver
• Immediate cash inflow from land sale
• Recognition of revenue and cash flow
through monthly valuations reduces
equity capital requirement and
additional borrowings, and de-risks the
development from any sales risks
Performance
• 319% increase in partnership housing,
homes under construction to 921
(2018: 220)
2020 priorities
Continue to increase the number of homes
being constructed for partnership schemes.
KPIs
• Revenue
• Gross margin
There is continued demand for affordably
priced, high-quality homes in the south and
south-east of England.
We are focused on developing a pipeline
of 1,000 homes per annum for private sale
and are now the constructor at the majority
of our sites.
Financial driver
• Greater cost and quality control
• Site revenue maximised over the long
term
Performance
• Open market completions: 202
(2018: 275)
• Forward sales: £26.0m (year ended
30 June 2018: £20m)
• Average selling price £250,000 (year
ended 30 June 2018: £293,000)
• Average sales rate per active site over
the past 15 months of 0.73 homes a
week (year ended 30 June 2018: 1.34)
2020 priorities
Focus on houses rather than apartments,
as there is greater demand, and reduced
lock-up in work-in-progress.
KPIs
• Revenue
• Average weekly sales rate
• Gross margin
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The Group has made significant and tangible progress
across its key performance segments which include
its land activities, the provision of planning and
management services to investors and its private
housebuilding and partnership housing activities.”
Nishith Malde
Group Finance Director
Key financial highlights:
• EPRA net assets: £233.9m as at
30 September 2019, a 13.2% increase
from £206.7 million at 30 June 2018
• EPRA net assets per share as at
30 September 2019: 113.69p (30 June
2018: 102.28p)
• Revenue for the 15-month period ended
30 September 2019: £147.9m (year to 30
June 2018: £147.4m)
• Profit before tax for the 15-month period
to 30 September 2019: £25.0m (year to 30
June 2018: £19.3m)
• Net gearing as at 30 September 2019:
93.9% (30 June 2018: 56.0%)
• Net gearing on EPRA NAV basis as at
30 September 2019: 65.1% (30 June 2018:
38.6%)
• Second interim dividend for the 15-month
period to 30 September 2019: 2.25p per
share (year to 30 June 2018: 1.55p per
share)
Introduction
On 6 June 2019, the Group changed its
accounting reference date from 30 June
to 30 September so that its reporting
timetable was more closely aligned to value
recognition and the operational cycles of
the business. Consequently, the current
period presented is 15 months and
the comparative information is for 12
months throughout this report.
Over the past 15 months, the Group
has made significant and tangible
progress across its key performance
segments which include its land
activities, the provision of planning
and management services
to investors, and its private
housebuilding and partnership
activities.
During the 15-month period to 30
September 2019, the Group has
continued to create substantial
shareholder value from increasing
its land portfolio and adding value through
planning, as well as expanding both its private
housebuilding and partnership housing
programmes.
Operational performance
Revenue for the period to 30 September
2019 was £147.9m (year ended 30 June 2018:
£147.4m). The small increase is due to lower
revenues being generated from the sale
of residential plots and a reduced number
of private homes being completed during
the period. This is due to the nature of our
construction programme on a number of our
large-scale apartment developments, where
legal completions can only be achieved on
handover of completed blocks.
The Group sold 532 plots excluding joint
ventures (year ended 30 June 2018: 837
plots) for £29.2m (year ended 30 June 2018:
£59.3m) and 130 private homes, excluding
joint ventures and sale of reversionary
freeholds (year ended 30 June 2018: 242
private homes) for £32.5m (year ended 30
June 2018: £70.2m). The average selling price
of our homes was £250,000 (year ended 30
June 2018: £293,000). The reduction is due to
a change of mix of houses and apartments
sold as well as the locations of the homes
sold. Our net reservation rate per active outlet
during the period was 0.73 (year ended 30
June 2018: 1.34).
The housing market has seen a marked
improvement since the decisive outcome of
the general election. Despite the nature of
the eventual Brexit deal, the sales expectation
indicators point towards a more upbeat trend
in the housing market.
The Government’s Help to Buy initiative
continues to be a significant factor in the
market with 65% (year ended 30 June 2018:
58%) of our homes sold (including joint
ventures) using this scheme. Our forward
sales of homes reserved and exchanged
at 30 September 2019 amounted £26.0m.
In addition, we have forward sold a hotel
under construction at our development in
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Bournemouth for £13.3m.
Revenue from our partnership housing
programme increased to £62.6m (year
ended 30 June 2018: £12.0m). The Group
has created a platform to use its land
bank to grow this part of the business
quite significantly as it balances exposure
to market risk and provides regular cash
flow, requires no debt and deploys a limited
amount of equity.
A growing part of the Group’s business
is procuring sites and providing planning
and management services to investors in
the property sector. The Group typically
enters into a planning and management
services agreement with the investors which
includes procuring the opportunity to acquire
brownfield land, adding value by managing
the planning process and proposing a
disposal plan for the consented site. This
activity enables Inland Homes to earn
substantial fees with a significantly reduced
injection of equity and debt exposure. This
part of the business will generate significant
operating margins for the Group as a result
of the minimal direct costs attributable to
this activity. It also assists in the expansion
of our partnership housing activity as the
land can be sold to housing associations with
a construction contract for Inland Homes.
Management fees increased to £18.6m
(year ended 30 June 2018: £2.4m) during the
period.
The Group’s gross margin improved to 22.0%
(year ended 30 June 2018: 21.6%) and its
operating margin increased substantially to
22.1% from 15.9%, predominantly due to the
sale of our beneficial interest in Cheshunt
Lakeside Developments Limited (CLDL)
explained further below. Profit before tax was
£25.0m (year ended 30 June 2018: £19.3m).
Administrative expenses have increased from
£9.4m to £15.7m and this predominantly
reflects investment made in our staff, with
the average number of employees increasing
from 93 to 138, and total employee numbers
increasing from 105 as at 30 June 2018 to 161
on 30 September 2019. As stated above, the
expansion in our overhead base has set us up
to meet our strategic growth objectives.
The Group had a put and call option
arrangement to purchase its 50% joint
venture partner’s share in CLDL, a company
that owns the former Tesco’s headquarters
site in Cheshunt, Hertfordshire. Certain
conditions were attached to the options
which needed to be met in order for either
side of the option to be exercised. Taking
into account the Group’s present ability to
exercise the option, the Group considered
that together the 50% direct holding and the
put and call option gave the Group control
over the company from 6 June 2019, and
consequently consolidated 100% of CLDL
from this date. On 22 September 2019, the
Group exercised its option and the related
liability of £13.7m is included within other
creditors as at the period end date and was
settled on 25 October 2019. On 30 September
2019 the Group also entered into a contract
with a third party to transfer its existing 50%
beneficial interest in the company. The gain
recognised on disposal was £12.6m.
Finance costs
The Group’s finance costs comprise mainly
of interest on land and development finance,
non-utilisation fees, interest rolled up on the
Zero Dividend Preference shares (ZDPs) and
amortisation of arrangement fees. Interest
on development funding is capitalised where
required by IAS 23.
Total finance costs increased from £6.2m to
£10.7m; a reflection of increased borrowings
to fund the rise in work in progress from
£136.2m to £192.4m and financing CLDL to
repay our £15m of the loan of £16.8m from
our former joint venture partner. Interest on
bank and non-bank borrowings amounted
to £7.5m (year ended 30 June 2018: £4.4m),
amortised loan arrangement and other fees
was £1.7m (year ended 30 June 2018: £0.7m)
and the finance cost relating to the ZDPs was
£1.5m (year ended 30 June 2018: £1.1m).
The funding costs capitalised into work in
progress was £1.3m (year ended 30 June
2018: £1.1m).
Taxation
The Group is domiciled in the United
Kingdom and does not make use of any
tax structure that is not domiciled in the
United Kingdom.
The total tax charge of £0.4m combines
a current taxation charge of £1.1m and a
deferred tax credit of £0.7m and represents
an effective rate of 1.6% of the profit before
tax. The current corporation tax rate is 19%
and the principal difference arises due to
the gain on disposal of our 50% beneficial
interest in CLDL being exempt from
corporation tax, as an over provision in prior
periods and a deferred tax credit arising due
to capital losses brought forward. Refer to
note 12 in the Financial Statements for more
information.
Earnings per share and
dividends
Basic earnings per share increased to 11.79p
(year ended 30 June 2018: 7.64p) signifying
the increase in operating profit during the
period. The weighted average number of
shares in issue during the period was 205.3m
(year ended 30 June 2018: 201.6m).
Based on the strong results for the period
ended 30 September 2019, the Board has
declared a second interim dividend of 2.25p
per ordinary share. Together with the first
interim dividend of 0.85p paid on 3 July
2019, this makes a total dividend of 3.10p
for the period (year ended 30 June 2018:
2.20p). A final dividend for the period ended
30 September 2019 will not be proposed. The
second interim dividend is expected to be
paid on 12 June 2020 to those shareholders
on the register at the close of business on
21 February 2020. The ex-dividend date is
20 February 2020.
Total shareholder return
Inland Homes plc’s share price has increased
31.1% over the past 27 months (from 60.25p
per share at 30 June 2017 to 79.00p per
share at 30 September 2019) and 17.0%
over the 15 months to 30 September 2019
(from 67.50p per share at 30 June 2018 to
79.00p per share at 30 September 2019).
Combined with dividends paid during the
period of 2.4p per share, the share price
movement has resulted in a total shareholder
return of 20.6% for the 15-month period
to 30 September 2019. This compares to a
19.4% fall in the FTSE AIM All Share index.
Balance sheet
Net assets at 30 September 2019 were
£162.2m (30 June 2018: £142.4m), an
increase of 13.9%, mainly due to retained
earnings. This equates to net assets per
share of 78.8p (30 June 2018: 75.3p). The
EPRA net asset value per share at 30
September 2019 was 113.69p (30 June
2018: 102.28p). The EPRA NAV per share
increased during the period due to the profit
after tax for the period and the planning
consents received for the Group’s two major
projects at Wilton Park in Beaconsfield,
Buckinghamshire and Cheshunt Lakeside
in Cheshunt, Hertfordshire. Details of these
projects are set out in the Operations Review
on pages 34 to 41.
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Finance Director’s review
CONTINUED
Dividend growth (p)
3.1
2.2
1.7
3.5
3.0
2.5
2.0
1.5
1.0
0.5
0.0
1.3
1.0
2015
2016
2017
2018
2019
Dividend yield (%)
4.0
3.5
3.0
2.5
2.0
1.5
1.0
0.5
0.0
3.9
3.3
2.8
2.2
1.4
2015
2016
2017
2018
2019
Revenue by segment (%)
13
20
43
24
Land sales
Housebuilding
Contract income
Management fees/
Other
Gross profit by segment (%)
16
13
18
Land sales
Housebuilding
Contract income
Management fees/
Other
53
Net asset value and net asset value per share (unaudited)
The calculation of EPRA net asset value is set out below:
Net asset value per share
At
30 September
2019
’000
At
30 June
2018
’000
207,366
204,551
(1,627)
–
205,739
2,018
1,527
2,285
211,569
(1,627)
(825)
202,099
1,837
1,823
5,100
210,859
£m
Undiluted
p
Diluted
p
162.2
78.84
76.67
69.7
2.0
233.9
(2.0)
(11.8)
220.1
113.69
110.55
106.98
104.03
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
unless the site is forecast to make a margin
in excess of 16% in which case a fair value
adjustment is made to demonstrate the
residual land value uplift.
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.
Shares in issue
Less shares held in:
– EBT
– Treasury
For use in basic measures
Dilutive effect of:
– share options
– deferred bonus shares
– growth shares
For use in diluted measures
At 30 September 2019
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 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
The Directors are required to make an
assessment of the fair value of its trading
properties when determining EPRA NAV. For
undeveloped sites (both owned and options) a
residual valuation is carried out to determine
the anticipated value of the site with planning.
This is then subject to a discount ranging
between 0% and 80% to reflect the planning
prognosis of the relevant site.
There is not a ready market for sites where
construction has commenced. The Directors
have therefore assumed that fair value
equates to carrying value for such sites
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27
43.9%
discount
79.0
80
60
40
20
0
During the period ended 30 September
2019, the Group purchased 200,000 shares.
On 24 October 2018, 849,241 shares were
transferred from the treasury reserve to
satisfy employee share options exercised
within the terms of the Company’s share
option scheme. In several transactions
during August and September 2019, the
Group sold 175,759 shares. At 30 September
2019, no shares were held in treasury.
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. On 19 July 2018,
Stephen Wicks transferred 248 vested LTIP
shares to the Company in exchange for the
issue of 2,814,924 shares in the Company as
referred to in the Remuneration Committee
report on pages 59 to 63.
As at 30 September 2019, the Group’s
investment properties comprised principally
of 86 existing residential properties at Wilton
Park. The Board intends to sell some these
properties in the open market. Hence, £4.7m
has been transferred to Assets Held for
Sale within current assets and land valued
at £6.3m has been transferred to work in
progress.
Investment in joint ventures has increased
from £0.4m to £8.0m, primarily due to the
net effect of the deemed exercise of our call
option to acquire our former joint venture
partner’s share in CLDL and the transfer of
our 50% beneficial interest in the company as
explained above. Similarly, other receivables
due after more than one year of £21.8m have
increased from £11.0m, predominantly as a
result of the transfer of our 50% beneficial
interest in CLDL on deferred terms.
Inventories are the most significant part of
the Group’s net assets, and increased from
£136.2m to £192.4m. This has been driven
by the growth in the land bank from 6,870
plots to 7,796 plots as well as an increase in
work in progress on large-scale apartment
developments under construction.
The Group is owed £32.8m from CLDL which
represents the major part of amounts due
from joint ventures. The site at Cheshunt
Lakeside secured planning consent for
1,253 residential plots and 52,797sqft of
commercial and educational space during the
period and the joint venture has commenced
pre-construction works in preparation of the
development of the site.
EPRA NAV1 (p)
120
11.76
102.28
100
0.04
2.04
113.69
(2.43)
June
2018
Profit
Revaluation
Dividends
Other
September
2019
Share
price2
1 On an undiluted basis.
2 At 30 September 2019.
Net debt and borrowings
The Group funds its activities through a
combination of equity and debt. Due to the
increase in our land bank, work in progress
and financing CLDL to repay £15.0m of our
former joint venture partner’s loan, net debt
has risen to £152.3m, (year ended 30 June
2018: £79.7m) representing net gearing of
93.9% (year ended 30 June 2018: 56.0%).
Net gearing based on EPRA net assets of
£233.9m (year ended 30 June 2018: £206.7m)
equates to 65.1% (year ended 30 June 2018:
38.6%). Our cash balances at 30 September
2019 stood at £10.9m (year ended 30 June
2018: £40.4m).
In March 2019, we agreed a revolving credit
facility of £65.0m (including an accordion of
£20.0m) for a term of four years, secured
against some of our developments under
construction. As at the end of the period,
we had drawn down £30.2m of this facility
leaving potential headroom of £34.8m. In
August 2018, we extended the maturity
date of £18.4m ZDP shares by five years to
10 April 2024 and during the period ended
30 September 2019 we issued a further
3,987,000 ZDP shares raising a gross sum
of £6.2m. The Group also has a secured
revolving credit facility of £17.2m from a Fund
to finance sites with and without planning
consent. This facility, which was fully drawn
at 30 September 2019, expires in August 2020
and having had discussions with the Fund it
is the Board’s intention to renew the facility.
A revolving facility of £11.5m from Homes
England is funding our development of 457
homes and 64,000sqft of commercial space
at Chapel Riverside in Southampton. Phases
one and two of this development have been
completed with construction on phase three
well underway. As at 30 September 2019, we
had drawn down £7.3m of this facility.
A £24.0m revolving cash flow facility was in
place to fund the construction of 239 homes
at Lily’s Walk in High Wycombe. During
the period ended 30 September 2019, we
completed the sale of 18 homes with forward
sales of £6.7m at the development. £23.6m
of the facility had been drawn down at the
period end.
Of the Group’s total borrowing facilities of
£183.8m, 26% expire within one year from the
balance sheet date.
In December 2019, the Group renewed a land
facility of £26.75m secured against its site at
Wilton Park in Beaconsfield for a period of 12
months with stepped reductions to suit our
plans.
On 30 January 2020, the Group arranged
a new debt facility to be available from
May 2020 with a term of 12 months from
drawdown. This gives the Group increased
flexibility if required and safeguards the
Group against any delays in land sales.
The Group remains within the development
and corporate covenants stated within its
borrowing facilities and maintains excellent
relationships with its lenders.
The sale of the large-scale apartment
developments as well as engaging in new
land opportunities with partners; securing
discount to market value options on strategic
sites and expanding the partnership housing
activity will lead to a reduction in the Group’s
net borrowings over the next 12 months.
This will enable Inland Homes to grow with
a reduced level of risk and less of its own
equity being utilised.
Nishith Malde
Group Finance Director
30 January 2020
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28
Our KPIs
Financial KPIs
1.
113.69p
p
2
9
.
3
4
p
4
3
.
2
9
p
2
2
.
6
9
p
8
2
.
2
0
1
p
9
6
.
3
1
1
5
1
6
1
7
1
8
1
9
1
Revenue
3.
£147.9m
m
2
.
4
1
1
£
m
9
.
1
0
1
£
m
7
.
0
9
£
m
7
.
7
4
1
£
m
9
.
7
4
1
£
5
1
6
1
7
1
8
1
9
1
Net gearing
2.
93.9%
%
9
.
8
3
%
9
.
6
4
%
1
.
1
5
%
0
.
6
5
%
9
.
3
9
5
1
6
1
7
1
8
1
9
1
Profit before tax
4.
£25.0m
m
9
.
4
3
£
m
7
.
3
3
£
m
6
.
9
1
£
m
3
.
9
1
£
m
0
.
5
2
£
5
1
6
1
7
1
8
1
9
1
Definition
Net debt is calculated as a proportion
of borrowings less cash to total equity
attributable to shareholders. Gearing
measures our exposure to debt risk and
indicates the efficiency of the Group’s
capital structure.
Performance
In preparation for future growth, the
Group’s overhead base has expanded.
This, alongside an increase in the
land bank and work in progress has
resulted in a rise in the net debt
position for the reporting period. We
have a clear strategy to reduce the
Group’s borrowings which includes
the sale of large-scale apartment
developments, securing new land
opportunities with partners and
expanding the partnership housing
activity.
Link to strategy
Continue to secure more planning
consents and acquire sites with
excellent potential to add value.
Definition
Profit before tax gives us an indication
of the underlying performance of the
Group across all our activities.
Performance
The profit mix has changed during the
15-month reporting period. The Group
has seen a significant increase in
management fee income.
The Group exercised a put and call
option to acquire the remaining 50% of
its joint venture partner of Cheshunt
Lakeside Developments Limited. The
sale of 50% of its beneficial interest in
the Company resulted in a recognition
of £12.6m profit.
Link to strategy
In the coming year, we will continue
to move towards our target of building
more homes, finding the right land
opportunities and securing planning
permission on these sites.
Definition
EPRA Net Asset Value per share
is EPRA NAV divided by number of
shares at the period end. The use
of EPRA methodology reveals how
much ‘hidden’ value is held within
inventories. A reconciliation to
IFRS NAV per share is outlined on
page 26.
Performance
EPRA Net Asset Value increased
from 102.28p to 113.69p principally
as a result of profits after tax for the
period and a rise in the underlying
asset values of Wilton Park in
Beaconsfield and Cheshunt Lakeside
in Cheshunt.
Link to strategy
Continue the key activity of
identifying the right sites and
securing planning.
Definition
Revenue combines the major income
streams of the Group; including land
sales; sale of residential homes;
contract income; rental income; and
management fees.
Performance
Revenue increased from £147.7m
for the year ended 30 June 2018 to
£147.9m for the 15-month period to
30 September 2019. The revenue mix
has changed as we have seen land
sales, management fee income and
contract income form a larger part of
the Group’s revenue.
We have seen a reduced number
of private homes being completed
during the period due to the nature
of our construction programme on
a number of large-scale apartment
developments, where legal
completions can only be achieved on
handover of completed blocks.
Link to strategy
Revenue is a key measure of the
growth the Group has delivered.
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Non-financial KPIs
Number of plots with or without planning consent
Planning permissions gained during the period
Definition
Plots gained with planning
permission or a resolution to grant
planning permission.
Performance
The Group gained planning
permission or a resolution to grant
planning permission on 1,939 plots
during the 15-month period.
Link to strategy
Continue policy of selling
appropriate plots when we have
secured planning permission.
6.
1,939
5
8
8
4
4
5
6
5
8
,
1
4
9
5
9
3
9
,
1
5
1
6
1
7
1
8
1
9
1
↘
Farrier’s Wood,
Garston,
Hertfordshire
5.
7,796
6
9
7
,
7
6
5
9
,
2
0
4
8
,
4
5
7
1
,
5
1
8
6
,
6
6
7
7
,
6
0
7
8
,
6
5
0
1
,
2
1
7
6
,
4
8
0
7
,
1
2
6
1
,
5
3
6
1
,
1
8
1
5
,
5
6
1
7
1
8
1
9
1
0
0
2
,
1
6
7
9
,
3
5
1
Private home sales
7.
202
8
4
2
7
4
1
8
8
1
5
7
2
2
0
2
5
1
6
1
7
1
8
1
9
1
Definition
The number of plots owned or
controlled by the Group with the
potential for homes to be built.
Performance
Our land bank now stands at 7,796
plots, including 2,956 with planning
permission or resolution to grant
planning permission. The choices
within our business model enable us
to realise the value in our land bank
and maximise returns.
Link to strategy
In line with our strategic priorities,
we now have a land bank with a
record number of plots and we own
more plots with planning than at any
time before. Identifying the right land
opportunities is still the key to our
success.
Definition
The sale of the number of homes
where contracts have been legally
completed in the financial year,
including those within our joint
ventures.
Performance
During the period ended
30 September 2019, the Group sold
130 private homes and a further 72
within our joint ventures.
Link to strategy
Focus on building private sale
homes which meet the needs of the
market.
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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 Board is ultimately accountable for effective risk management
within the Group. Our chosen governance code, the QCA
Corporate Governance Code, requires us to embed an effective
risk management framework which considers both opportunities
and threats throughout the organisation. In order to better meet
these requirements, the Board has reviewed its approach to risk
management and as a result, implemented a revised framework.
The Group’s approach to risk management and assurance is to
maintain a balance between risk and reward that achieves our
strategic objectives without exposing the Group to unacceptable
levels of risk. Our risk and assurance objectives are to:
• reduce the level of uncertainty associated with achieving
Inland Homes’ strategic objectives;
• ensure significant risks are identified, measure, managed,
monitored and reported in a consistent and effective manner
across the Group using appropriate risk management
methodologies; and
• embed a culture of risk awareness and control consciousness in
all business activities.
We define risk as the effect of uncertainty on our business and its
objectives; the consequences of which might be positive, negative
or a deviation from the expected. Our three-tier approach to risk
management assesses:
• strategic risks – those which may impact the achievement of the
Group’s strategic objectives;
• operational risks – those which relate to the Group’s day-to-day
operational activities; and
• project risks – those which will impact the success of a specific
project or development.
Our risk appetite is defined by the level of risk we are willing to
take in order to execute a strategy or deliver on a project. This is
determined at a macro level by the impact in terms of cost and
reputational damage a project may have on the Group. At this level,
we expect controls to be clearly set out and implemented and kept
under review. At an operational or micro level, our risk appetite is
determined by staff and managers weighing the costs of various
acts of mitigation against the likely impact of risks crystallising.
Controls may be formal or informal depending on need and
appropriateness.
Our aim is to reduce negative uncertainty, so far as reasonably
possible, while giving the Group the ability to explore new
opportunities.
Our risk appetite at any time is also influenced by the external
environment (legal, economic, political), the Group’s perceived internal
strengths and weaknesses and the Group’s financial capacity.
Risk identification and management is built into every aspect of
the Group’s day-to-day operational activities, ranging from the
appraisal of new sites, assessment of the prospects of planning
success, building safely, and selling effectively to achieve long-term
success through the property market cycle.
Our three-tier approach to risk management ensures that we
record and map all risks across the Group. We keep strategic and
operational risk registers which are reviewed regularly. These maps
act as tools for improving risk mitigation and can give assurance
that risks are being managed effectively.
Board of Directors
Executive Directors
Senior Management
Audit Committee
External Consultants
Risk is identified at a strategic, operational or project level. The
identified risks are scored on the basis of the effectiveness of
existing mitigation controls and also on any additional improvement
controls which may be implemented to reduce the impact and
probability of the risk crystallising. As part of the risk evaluation,
consideration is given on whether to treat, tolerate, transfer or
terminate the risk.
Treat – manage the risk through control measures that influence
the impact and/or probability to an acceptable level
Tolerate – accept the risk as inherent to the activity/project being
delivered and that no further controls can be implemented
Transfer – move to another organisation through a contractual
agreement, i.e. insurance cover
Terminate – acknowledge the risk cannot be managed to an
acceptable level and either cease the whole or part of the activity,
development of project
Once evaluated, all key risks are included on the relevant risk
register together with a clear note of any existing mitigation.
We accept that some risk is inevitable, and that perfect risk
avoidance is neither possible, nor necessarily desirable. Equally,
we believe that risks which relate to health and safety, our financial
viability and our reputation must always be actively managed and
mitigated to minimise the probability of them crystallising.
Our approach to managing risk can be summed up as pragmatic
and measured. The outcomes that we seek are personal safety,
financial security and an efficient professional business.
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Change since
last year
Rating
HIGH
Potential impact
Mitigation
• Pressure on sales volumes and
prices resulting from consumer
confidence and affordability due
to:
− higher unemployment or fear
of unemployment;
− ongoing economic uncertainty;
and
− weak real wage growth and
reduced disposable income.
• Inflation due to foreign exchange
• Business uncertainty due to policy
changes
• Portfolio valuation
• Monitoring impact of Brexit
discussions and potential
outcomes
• Economic environment considered
before committing to significant
transactions or events such
as land purchases and sales
launches
• Refined strategic priorities to
maximise market opportunities
• Forward sales secured through
partnership contracts giving
greater certainty over cash flows
• Risk of delay or refused planning
• Considerable in-house technical
applications
and planning expertise
MEDIUM/
HIGH
• Uncertainty around design
solutions, delays in obtaining
consents
• Programmes and commencement
on sites disrupted
• Increased environmental and
other taxes due to excessive
planning conditions (CIL and
Section 106)
• Strong relationships maintained
with local authorities, planning
officers and local communities
to better understand underlying
policy and planning prospects
• Regularly review prospects of
the strategic land portfolio, with
processes and appraisals in place
to minimise disruption
• Focus on acquiring development
sites already identified through
local authority Local Plans
• Portfolio depletion
• Highly experienced Land and
LOW
• Impact to in-house construction
arm/self-build function
• Operational start dates delayed
on site leading to over capacity in
resources
• Fewer longer-term sites to
replenish the portfolio at good
margins
Planning teams employed with
strong track record of securing
sites and planning consents
• Targeted approach to land
acquisitions
• Local insight and established
relationships with vendors give us
a competitive edge
• All potential land acquisitions
are subject to formal appraisal
process to ensure viability
Risk
01
Economic uncertainty
Changing market conditions
(not just a downturn), whether
nationally influenced by Brexit
negotiations or local changes
in sentiment and investment
decisions, impact our ability
to implement our strategic
objectives and the resultant
value of our portfolio
02
Government policy and
planning regulation
Potential changes in
Government policy such as
changes to the planning
system, changes in tax regime,
or amendment of the Help to
Buy scheme could have an
adverse effect on revenues,
margins and asset values
03
Inability to source suitable
land
An inadequate supply of
suitable land or the inability
to convert strategic land into
viable planning permissions
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Our principal risks
CONTINUED
Risk
04
Availability of subcontractors
and suppliers
Continued increase in housing
production and the UK’s
departure from the EU may
further strain availability of
skilled subcontractors
05
Rising cost and availability of
materials
Rising production levels across
the industry puts pressure
on material supply chain.
Currency movements as the
Brexit process continues may
increase cost of key materials
06
Failure to effectively manage
major projects
Lack of project oversight could
lead to mismanagement of a
major project
07
Health and safety
A significant health and safety
event resulting in a fatality,
serious injury or a dangerous
situation
Potential impact
Mitigation
• Build programme and completion
delays leading to build cost
inflation
• Ineffective and stretched labour
force could impact business
performance, build quality and
shareholder confidence
• Shortage or increase cost of
materials could delay construction
• Quality of product impacted due to
shortage of material or increased
cost
• In-house construction arm means
we can employ subcontractors
directly
• Actively seek to establish and
maintain long-term supplier and
subcontractor partnerships
• Close monitoring of build
programmes to ensure labour
requirements managed effectively
• Maintain regular contact with
sub-contractors and provide high-
level and site-specific programme
information to aid with demand
planning
• Strong relationships with supply
chain to ensure consistency of
supply and cost efficiency
• Engaging in ongoing dialogue
with key suppliers to understand
critical supply chain risks
• Close monitoring of build
programme to ensure we react
quickly to any supply chain
issues
Change since
last year
Rating
MEDIUM
HIGH
Due to cost
inflation on
materials
• Construction costs not adequately
• Experienced Executive-level
MEDIUM
NEW RISK
controlled
leadership
• Reduced quality of product
• Health and safety issues
• Reputational damage
• Immediate personal injury or
damage to property
• Reputational damage
• Prosecution /imprisonment/
significant fines
• Remediation or legal costs
• Programme delays and inability
to meet forecast figures/market
expectation
• Extensive investment in systems
and personnel to ensure tight
controls and project oversight on
developments
• Regular management and project
team meetings
• Strong safety culture driven by
Directors and senior staff
• Experienced Health and Safety
team reinforces safety culture
• Annual health and safety
workshops for all staff
• Safety focus at subcontractor
forums
MEDIUM
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Change since
last year
Rating
LOW
Risk
08
People
Inability to attract and retain
high-calibre employees
Potential impact
Mitigation
• Inability to meet strategic
objectives
• Pressured workloads where
teams are under resourced
• Over reliance on consultants and
agency staff
• Inefficiencies and delays to
operations resulting in increased
costs
• Providing quality training and
professional development
opportunities, including through
our graduate and apprenticeship
programmes
• Dedicated HR team that monitors
pay structure and market trends
to ensure we remain competitive
• Annual employee engagement
survey to be implemented in 2020
to identify areas for improvement
• Development of preferred supplier
list of specialist recruitment firms
09
Solvency and liquidity
Cash generation for the Group
is central to our strategy;
insufficient cash headroom
limits our ability to be agile
in response to changes in
the economic environment
and to future development
opportunities
10
Cyber and business continuity
Cyber security risks such
as data breaches, hacking
and failure of the Group’s IT
security systems leading to
the loss of financial, market
sensitive, competitive or other
critical data
• Liquidity
• Covenant compliance
• Availability of development funding
• Regular review at board level of
HIGH
Due to
increase in
gearing
detailed cash flow forecasts which
are subject to sensitivity analysis
• Strong relationships with financial
institutions through regular
engagement
• Sufficient facilities in place to
allow us to take advantage of land
opportunities
• Asset disposals to reduce net
borrowings
• Financial penalties and sanctions
• Reputational damage
• Loss of personal and/or business
information
• Group has a fully tested disaster
recovery system which is tested
annually by a third-party supplier
• Boundary firewall at each location
MEDIUM
• Outage of IT systems leading to
operational disruption
• Phishing attacks and ransom
demands
• Encryption and two-factor
authentication in place
• Anti-virus software on all devices
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W
E
I
V
E
R
S
N
O
I
T
A
R
E
P
O
With the investment in staffing and systems already
made, we are now well set to increase the scale
and breadth of our activity in the year ahead."
Gary Skinner
Group Managing Director
The business is performing well on all
levels. We have managed to continue to
grow the business at the same time as
making significant investment in staffing
and systems. We have also improved
the quality of our building, and raised
satisfaction levels with our customers
and our partners. In this way, we have
created a platform for future growth. With
this momentum and our new planning
permissions, we are now well set to
increase the scale and breadth of our
activity in the year ahead.
Land activity
The gross development value of our entire
land bank is now £2.4bn, and its size has
grown from 6,870 plots to a record 7,796
plots; 2,956 with planning consent. The
Group has recently commenced to procure
land opportunities on behalf of third-party
investors and engage in planning and
management contracts which enables it
to extract a significant part of the added
value through management fees. This
activity is light on the Group’s capital and
hence, proving to be very lucrative. Our
strategic land portfolio, where most of the
plots are controlled by discount-to-market-
value options, has increased significantly
and now comprises 3,523 plots. We are
maintaining a good success rate in getting
sites allocated for development in
local plans.
Our strategic land bank now
totals 595 acres, with the
potential for approximately
3,018 houses and 505
apartments. We will either
sell these sites to other
developers or feed them
into our own growing
housebuilding operations.
Demand for consented
housebuilding land
remains strong, with 577
plots sold in the period.
Of these, we sold 207 to
other housebuilders and 370 to housing
associations. The proceeds from these plot
sales provides cash to fund our operations.
In a major milestone for the business,
following five years of intense work, we
received planning consent for both our
flagship 100-acre site, Wilton Park in
Beaconsfield, Buckinghamshire, and our
largest-ever scheme, Cheshunt Lakeside in
Cheshunt, Hertfordshire.
Wilton Park has an estimated gross
development value of £288m. We have
secured an initial consent for 304 new
homes plus 46 retained Service Family
Accommodation dwellings and 18,622sqft
of commercial space. There is also a draft
allocation for further development on
the site which, if adopted, could provide
a further 250 homes and 199,132sqft of
commercial space.
The Cheshunt Lakeside masterplan for
1,725 homes and 204,514sqft of commercial
space will be one of the largest brownfield
developments in the south-east. The Group
owns and controls 1,253 plots on this site,
with as estimated gross development value
of £429m.
Together these two sites will provide
more than 1,500 homes, leading to a
respectable increase in the EPRA value of
the Group’s assets.
In September 2019, we submitted a
detailed planning application as part of
our management agreement with the
landowner for more than 500 homes
at Hillingdon Gardens, a six-acre site
formerly known as the Master Brewer
Hotel in Hillingdon. The detailed plans will
help transform the former commercial
site to create a residentially-led, mixed-
use neighbourhood, with a network of
pedestrianised areas, landscaped public
squares and extensive green spaces to
create a diverse garden quarter.
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Build
The construction arm of the Group has
grown rapidly since 2016, in line with our
strategic priorities and we are in a good
position for the coming years. We now
have 12 development schemes under
construction, with 892 for private sale and
921 on behalf of partners. This compares
to 682 homes at the end of the previous
reporting period.
The growth is a result of having established
an experienced and skilled in-house
construction and customer care team. This
gives us greater control over each project,
through purchasing materials and directly
recruiting subcontractors, to create high-
quality, affordable homes. The growth of
our construction capability has enabled
us to identify further improvements in our
systems and processes, and to provide
first-class customer service.
Partner
We are aiming to increase our share of
this growing market and our partnership
housing equivalent units have more than
quadrupled this reporting period. Recently,
we have secured a partnership housing
contract worth £5.4m, for 45 homes with
Watford Community Housing Trust and
we expect to secure further significant
contracts during the new financial year.
Rosewood Housing
Our affordable housing subsidiary,
Rosewood Housing, finalised its second
deal in September 2019, agreeing to
acquire the affordable housing at a new-
homes development in Tring.
The scheme is the redevelopment of the
former St Francis School site and offers 34
new homes, 12 of which are affordable homes
under a Section 106 agreement. We will
offer these 12 homes as a mix of affordable
rent and shared ownership. The homes are
already under construction, with residents
expected to move in from March 2020.
Sales
Our homes continue to sell well, with an
average selling price of £250,000 over the
15-month reporting period. We experienced
an average sales rate per active site over
the past 15 months of 0.73 homes a week.
This demand is underpinned by a shortage
of new homes, the ongoing availability of
Help to Buy and low interest rates.
The forward order book, at the period
end, for private sale stands at £26.0m. In
addition, we have forward-sold the hotel
under construction as part of the Wessex
development in Bournemouth for £13.3m.
As expected, private housing completions
(including joint ventures) fell to 202 over
the 15-month reporting period (year
ended 30 June 2018: 275). This is due
to the significant number of large-scale
apartment developments we have under
construction, where legal completions can
only be achieved on handover of completed
blocks.
Customer demand for our product will
continue to drive the type of homes we
deliver. This period we have seen buyer
demand for houses outstripping demand
for apartments. As a result, where it is
financially and operationally viable to do
so, we will focus on the delivery of housing
sites in the year ahead.
Gary Skinner
Group Managing Director
30 January 2020
Total land bank split by type (%)
Houses
Flats
53
47
Status of planning (%)
25
8
10
Strategic
Pre-application
discussions
Planning application
submitted
To be progressed
57
Schemes under construction
completion timescale (%)
8
59
<24 months
2-3 Years
>3 Years
33
Planning permission
Plots with planning
permission
Plots without planning
permission
5,162
75%
1,708
25%
Total
2018
4,840
62%
2,956
38%
Total
2019
Lorem ipsum
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F
R
A
H
W
Y
E
B
B
A
2018/19
National Housing
Awards – Best
Partnership
£30m
Build contract 136
Homes including
111 shared
ownership
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37
We are working with Clarion Housing
Group to complete Abbey Wharf, an
affordable homes development that
is helping transform Alperton in
north-west London.
The development is transforming a disused industrial site
into 136 new homes, of which 111 will be offered as shared
ownership and the remainder available as affordable rent.
We acquired the site in 2015 and entered into a £30m
partnership construction contract with Clarion in June
2017. This is the first scheme within a broader partnership
agreement between the two groups. Our land assembly and
acquisition skills, and the groups’ combined planning expertise,
is ensuring the scheme meets local needs and the borough’s
aspirations, and that it is commercially viable. The partnership
has been open and effective from the outset and the project is
ahead of schedule, with an estimated completion date of spring
2020, having been scheduled for September 2020.
As a previous light-industrial site occupied by multiple
businesses, the development faced numerous complex
challenges in dealing with the remediation of the land,
including the removal of asbestos, rubbish and disused cars.
Eighteen tenants were on an ‘excluded lease’ which took one-
on-one discussions to resolve. As experts in brownfield site
regeneration, we have been able to resolve these challenges
efficiently and cost-effectively.
In its April 2019 Risk Engineering Construction Insurance
Survey Report, Zurich rated risk management on site as
‘excellent’ stating the risk approach on site was the 'best
in class management control of all present hazards'. The
site was subsequently rated 44/50 in the June Considerate
Constructors report.
We make exceptional efforts to ensure we keep those
affected by the works informed, and show courtesy to all in
what is an extremely congested location. We support initial
client consultation meetings with contractor newsletters,
there is no weekend work and we have created a specified
route for deliveries. We have secured a predominantly local
subcontractor workforce and the site has recruited local labour,
exceeding local authority targets by nearly double.
Richard Cook, Group Director of Development for Clarion
Housing Group commented:
“Inland Homes shares Clarion’s commitment to placemaking
and delivering quality, well-designed homes for our residents.
During our Abbey Wharf project, Inland has continually
demonstrated its ability to successfully navigate a way through
the often complex development process. Working closely
together we have been able to successfully resolve challenges
as they have arisen, to ensure that the project stays firmly
on track.”
We have since completed our second partnership deal
with Clarion Housing Group, in the borough of Barking and
Dagenham, and additional sites are in the pipeline.
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Operations review
CONTINUED
Centre Square,
High Wycombe
Chapel Riverside,
Southampton
Meridian Waterside,
Southampton
We continue to transform 1.43 hectares of
brownfield land and disused offices into an
exciting new development that integrates
residential, commercial, retail and leisure
space.
The first phase included converting and
extending Castle House, an existing office
building, to create 40 studio, one and two-
bedroom apartments, as well as Lily’s Walk,
a concrete-frame new-build construction of
239 one and two-bedroom apartments.
All units at Castle House have been
reserved and there has been good demand
for available apartments at Centre Square
with 7 reservations, 18 exchanges and 18
completions as at 30 September 2019.
A town centre relief road, built by Inland
Homes, opened in November 2019.
Centre Square completion is due in
summer 2020.
Developed as a successful joint venture
between Inland Homes and Southampton
City Council, this major nine-acre
regeneration project will create 457 new
one, two and three-bedroom homes, many
with waterside views, and 64,000sqft of
commercial space.
With the initial two phases now complete,
the latest phase of the waterfront
development is taking shape. The sale of
phase three, with 132 one, two and three-
bedroom apartments, was launched in June
2019, with prices starting from £190,000.
Chapel Riverside is a prime example of our
brownfield site expertise and the additional
value our in-house construction team can
bring. We are raising the site level and
constructing a new £2.5m 210m sea wall, to
protect the city. The former Town Depot left
a legacy of disused buildings, contaminated
ground and large surface-water tanks that
need careful demolition, decontamination
and relocation underground at a cost of
around £5m. Our ability to manage major
civil engineering works such as these, in
house, gives greater cost and programme
control, creating additional value for
Southampton City Council.
Chapel Riverside is a six-year development,
scheduled to complete by 2024. Phase
three is scheduled for completion in July
2020.
Chapel Riverside case study page 20
On the site of the former Meridian
Television Studios, Meridian Waterside is
a modern waterfront neighbourhood in a
prime position on the banks of the River
Itchen, just minutes from Southampton city
centre. The development comprises 352
one, two and three-bedroom apartments,
plus 5,359sqft of commercial space.
With the flooding effects of climate change
already evident along the River Itchen, the
Meridian Waterside design needed careful
planning and extensive consultation with
Southampton City Council. It included
infrastructure works that contribute to part
of a new flood-defence system along the
entire waterfront.
The development has been designed to
integrate coherently with the existing local
two-storey housing, with taller buildings
positioned closer to the water, to act as
a gateway to the city and make the most
of the spectacular river views. We chose
design and materials to complement the
waterfront environment, with red facade,
lap weatherboarding, timber doors and
painted metal Juliet balconies.
Phases one and two, comprising 96 homes,
completed in June 2018 and attention is
now focused on phases three and four.
Phase three, consisting of 152 one, two and
three-bedroom units, was launched to the
market in May 2019, with prices starting at
£169,000.
We will complete the construction of phase
three by the end of 2021 and the final phase
in 2023.
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The Wessex,
Bournemouth
Abbey Wharf,
Alperton
Church Road,
Ashford
We are working with Clarion Housing
Group to transform this disused industrial
site into 136 new homes overlooking the
Grand Union Canal. Abbey Wharf will offer
111 shared-ownership homes (with the
remainder available as affordable rent),
aimed at buyers currently struggling to
enter the housing market.
We acquired the site in 2015 and entered
into a construction contract with Clarion for
£30m in the 2017-18 reporting period. Initial
plans were approved for 135 units and we
have secured an additional residential unit
during this period.
Completion of this concrete frame
construction project is expected in spring
2020, ahead of the autumn 2020 schedule.
Abbey Wharf case study page 36
With a prominent location on the popular
West Cliff Road, this development benefits
from its close proximity to Bournemouth’s
iconic cliff top.
Following demolition of the former Wessex
Hotel in early 2018, construction of the
concrete basement car park started in
September 2018 and was completed in
September 2019.
Construction is now well underway on
phase one, with the steel frame complete
on the first building which will create a 105-
room Premier Inn hotel, designed to meet
the high demand for tourist accommodation
in the resort.
The steel frame of phase two has also
commenced, with these buildings creating
94 premium one, two and three-bedroom
apartments for private sale. Finished to a
high specification with designer interiors,
these homes will also have secure
underground parking, allowing for a large
expanse of landscaped lawns and gardens.
Completion is due in spring 2021.
We are working with A2Dominion on Church
Road, an affordable homes development in
Ashford, West London.
We sold the site to A2Dominion in June
2018 for £29.7m, with a construction
contract signed for £65.1m simultaneously.
The development is transforming a disused
college into 357 one and two-bedroom
apartments and three-bedroom houses,
plus 6,700sqft of commercial space and
4,700sqft of educational space.
The development is named after the
high street. The town itself is primarily
residential, forming part of the London
commuter belt, with a minor station on the
Waterloo to Reading line. It also benefits
from being just 2.5 miles from London
Heathrow Airport, and a portion of its
economy relates to this.
This project is split into five blocks: three
built using concrete-frame construction
and two of traditional construction.
Work started in July 2018. We are on track
to complete the build in summer 2022,
more than a year ahead of the contract
date.
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Operations review
CONTINUED
Farrier’s Wood,
Garston
Randalls,
Uxbridge
Merrielands,
Dagenham
The second partnership scheme with
Clarion Housing Group will see the creation
of 325 apartments, commercial units and
associated landscape works.
The land was previously used by Ford for
car manufacturing and the whole area is
undergoing something of an overhaul, with
many other projects under construction.
The building is of concrete frame
construction with metsec infills and brick
cladding.
Clarion is responsible for managing the
rented accommodation, and sales of the
shared ownership apartments.
This green belt release site between
Watford and Hemel Hempstead comprises
99 two, three and four-bedroom houses
and one and two-bedroom apartments.
Of these, 45 are offered as affordable
homes. It is a 50:50 joint venture with the
landowners.
We conducted thorough and meaningful
consultation with the community and other
stakeholders, to overcome concerns about
green belt development and increased
traffic. This happened at both outline and
reserve matters stages and we made
contributions of £60,000 to upgrade traffic
lights at the top of Bucknalls Lane and the
subsequent recommissioning of the other
traffic lights in the area.
Construction started in May 2018, and
the first phase is now fully occupied,
with 80 visitors on the launch weekend.
Phases two, three and four are now under
construction, with completion expected in
spring 2020.
We signed agreements totalling £7.68m
with Watford Community Housing Trust
in September 2019 for the 45 affordable
homes on the development. We have
created these homes as ‘blind tenure’,
meaning they are designed to blend in with
rest of the development.
We are developing 58 one and two-bedroom
apartments in Uxbridge town centre on the
site of the former Randalls department store.
We are converting the Grade II listed
building into eight apartments and adding
an additional storey for a further six
apartments, as well as creating commercial
space on the ground floor. We will also
convert the adjacent redundant fire station
into three duplex apartments.
The new-build elements of this project are
reinforced concrete frames, complemented
by cladding in keeping with the existing
Grade II listed aspects of the building.
As a listed building, the site brings
numerous challenges in dealing with the
existing facades and structure. The store
has had a complete refurbishment of its
existing façade, with the glazed ceramics,
windows and clock tower all being restored
to their former glory.
The old fire station is undergoing a
transformation reminiscent of its original
purpose, with new faux fire station doors
and a new sign and street lamp installed.
The three new-build blocks will create
complementary additions to the site
footprint, with contrasting geometry, and
materials of brick and ceramic cladding
being sympathetic to the existing building.
Completion is scheduled for mid-2020.
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Gardiners Park Village,
Basildon
Venue (formerly Exclusive
House), Maidenhead
Jasmine Park,
Ipswich
The first phase of this major residential
project was a joint venture with the
Anderson Group and is set to transform the
area to the east of Basildon town centre.
Exclusive House, popularly referred to as
the Showboat, was a nightclub in the 1930s
and is famed locally for the swimming and
cabaret it used to offer.
These beautiful and stylish houses
are positioned not only within a short
commuting distance of the City of London
and Docklands, but have the added benefit
of ready access to a multitude of schools,
shopping and leisure facilities in the
immediate vicinity.
The Anderson Group is constructing phase
two of the development and Inland Homes
is undertaking the sales and marketing of
the completed units. Phase one comprised
43 two, three and four-bedroom houses and
one and two-bedroom apartments.
The construction of a further 33 two and
three-bedroom homes as part of phase two
works commenced in November 2018 and
is expected to complete by the end of March
2020.
Also referred to as the ‘Palm Beach of
Maidenhead’, the original building was
claimed to have been used by American
servicemen in 1942 and then as a factory to
make Spitfire wings.
The site remained in light industrial use
until August 2016. Renamed Venue in a
nod to its history, the development is a
collection of 39 high specification one and
two-bedroom apartments. The build is of
timber frame over a concrete podium, with
completion expected in May 2020.
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 open in October 2018.
The first completions were achieved in
January 2019 and by the end of the reporting
period, completions had been achieved
on more than 50% of homes within the
development.
The marketing suite is targeted for an
opening summer 2020.
Overall build completion is scheduled for
March 2020.
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Social and environmental review
Our principles inform every aspect of our business operations
and decision making.
Safety first
We do not
compromise on
safety
Lasting legacy
Our ambitious
developments
combine quality,
value and
sustainability to
create a lasting
legacy
Our biggest asset
We attract talented
people, give them
responsibility,
and successfully
retain experienced
employees, all of
which provide us
with a competitive
edge
Stronger together
We value our supply
chain partners,
recognising we are
stronger together
This year, we have
maintained a significant
growth trajectory while
investing heavily in high-
quality staff and systems,
at the same time as
improving the quality of
our building work and
increasing customer and
partner satisfaction.”
Stakeholder engagement
Stakeholder
Why we engage?
Ways we engage
Customers
Ensuring customers have a positive experience
increases the likelihood of repeat custom, third-party
endorsement and project partnerships
• Regional Sales and Marketing Managers provide
assistance and support through the buying process
• Dedicated customer service mailbox and complaints
Colleagues
Our employees are our greatest asset and we attract
and retain talent to give us a competitive edge
Investors
Engaged investors will help us deliver on our strategy
and are more likely to invest more in the future
resolution process in place
• Extensive training opportunities
• Internal communications activities, including social
events, site visits, business updates
• Annual satisfaction survey
• Annual Report
• Annual General Meeting
• Market announcements
Communities
We engage in meaningful two-way dialogue throughout
the development process to ensure we understand the
needs of the communities in which we operate
• Community forums and information sessions
• Project newsletters
• Website and social media updates
Housing
associations
Effective engagement helps ensure continued demand
from housing associations for our turnkey product
• One-on-one engagement
• Proven track record of turnkey project delivery
Supply chain
Developers
The supply chain supports our business and we engage
with efficiency and transparency to build effective
relationships
• Subcontractor Conference
• One-on-one engagement
We sell land with planning permission to other
developers having resolved approval barriers
before sale
Local government We build constructive relationships with local
government to support our business activities
• One-on-one engagement
• Liaison via agents
• One-on-one engagement
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Safety
Making no compromises on safety is one
of our key principles. The safety of our
staff, contractors and the communities we
operate in is our utmost priority.
This year the Group achieved 2.5 million
hours worked with no reportable incidents
and currently has an Accident Frequency
Rate (AFR) of 0.12.
The safety culture is driven by strong
leadership from the Directors and senior
staff. Project Managers and members of
the Operations team all provide input to
developing and improving standards on site,
and everyone is empowered to intervene to
reduce risk and prevent injury or harm.
The Group has recruited a highly
experienced Health and Safety team that
reinforces the safety culture throughout
the business. Engagement with the supply
chain is a priority to ensure the highest
standards of safety performance across all
projects and sites.
We recognise that as our construction arm
grows, so does the volume of high-risk
activities. Therefore we have introduced
annual health and safety workshops, with
the first held in January 2019 and our
second in January 2020. These workshops
provide the opportunity to refocus minds for
the year ahead.
Our emphasis on high safety standards
from the start of each project filters
through to our supply chain and encourages
good safety habits from subcontractors.
Employees
As the building arm of the business
grows, so do employee numbers, with 161
employees at the end of the year, compared
to 105 in 2018. Most of the roles are
technical and site-based although support
staff roles have also increased. We continue
to focus on maintaining the quality and
strengths of the team.
Attracting new talent and retaining
experience gives us a competitive
edge. We offer competitive salary and
benefit packages, and extensive training
opportunities, providing an average of
4.45 days training per employee over the
reporting period. We invest in employee
health and wellbeing as a priority and
recently launched a new no-cost benefit
plan. This enables our staff to claim back
the cost of everyday health and wellbeing
needs, including dental, optical and
physiotherapy expenses. It also provides
access to round-the-clock confidential
support, either by phone or face-to-face.
To accommodate the increase in staff
numbers, in May 2019 we moved to a new
head office, in Beaconsfield. Working with
appropriate specialists, we have created an
environment that supports the responsive
nature of the Company and showcases our
ability to create high-quality, sustainable
spaces. Importantly, we have designed the
office to accommodate our growth. Staff
feedback has been extremely positive and
we look forward to working in our new
home for many years.
161
Staff at 30 September 2019
(30 June 2018: 105)
Gender diversity
Male
Female
30
70
Location
On sites
At head office
37%
63%
↓
St Michael’s C of E
Primary School visit
The Wessex
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Social and environmental review
CONTINUED
Fantastic ethos which is
visible through every site
I’ve had the pleasure to
work with them at!”
Delegate
Subcontractor conference delegate
This year we also opened a regional office
in Cheshunt, in one of the existing buildings
on our Cheshunt Lakeside development. We
use the office primarily for members of the
project team, but can also accommodate
additional staff, in line with our flexible
working ethos.
We work hard to maintain a family
style environment, as we feel this is
what has helped us grow the business
and is what makes us uniquely Inland.
Staff communication continues to be a
priority and we have introduced several
engagement measures to build on the
introduction of our employee intranet last
year.
This includes ‘Meet the Executive’
breakfasts for all new starters, project
updates, site visits for head-office-based
staff and regular staff updates from the
Chief Executive. Staff also enjoy a number
of social activities including ‘Bring Your
Dog to Work’ days, summer and Christmas
parties and charity fundraising events,
which boost engagement and foster
inclusion.
In the coming year, we will run a survey to
help understand how employees feel about
our culture and we will use the feedback to
make further improvements.
Skills shortage
According to the Chief Executive of The
Federation of Master Builders, the UK
industry is experiencing a serious shortage
of key skills. As part of our commitment
to adding lasting value through our
business activities, we continue to invest in
programmes that will alleviate the issues
caused by this continuing labour shortage.
We recruited four new apprentices during
the year, bringing the total number of
apprentices in employment to eight.
Most apprentices undertake a Level-4
apprenticeship training in Construction
Management, taking approximately two
years. The apprenticeship includes a
rotation of different parts of the business,
to offer an understanding of the various
professions and how they link with their
role. The work placements are combined
with one day a week at college.
Additionally, we have entered into a
formal partnership with Bucks University
Technical College to give students first-
hand experience of the career opportunities
available in the industry. The programme
involves facilitating classroom and site-
based visits for students in Years 10-12.
You can find more information about the
partnership on page 48.
↓
Bucks University
Technical College
students visit
Abbey Wharf
↓
Bucks Skills Show
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0.12
Accident Frequency
Rate
42.5/50
Considerate
Constructors score
Communities
We work closely with planning authorities
and manage comprehensive community
engagement strategies to ensure our
developments add lasting value to each
locality. Our consultation process involves
talking to a range of people from each
community, including local authorities,
property owners, businesses, schools and
residents’ associations. Where possible, we
incorporate the feedback received into our
project plans.
We contribute to local communities through
more than just providing employment
opportunities and new homes. We invest in
parks and public open spaces, education and
community buildings, and roads and other
infrastructure. During the 15-month reporting
period we paid £5.1m via Section 106, legal
agreements and CIL payments (2018: £2.4m).
We recognise that construction works can
disrupt and inconvenience communities,
and we work hard to lessen our impact.
Operating in what are often congested areas,
we develop and implement comprehensive
traffic management plans across our sites to
manage activities effectively. All our sites are
registered with Considerate Constructors,
and we are proud to have achieved an
average Considerate Constructors score of
42.5/50.
↓
Subcontractor
conference
We continue to support community
initiatives that open up students’ eyes to
the career paths available. In October 2019
we exhibited at the Bucks Skills Show,
talking to students about the rewarding and
diverse career opportunities available in
our industry. We have also hosted a number
of school visits to our development sites,
as well as work experience placements
throughout the period.
For the year ahead, we have recruited
an Early Talent and Skills Manager who
will identify and coordinate these work
experience, apprenticeship and career
opportunities, working closely with
education providers and other stakeholders
in the communities where we operate.
Supply chain: stronger together
We know that we are ‘stronger together’
and we invest in our supply chain contacts.
We continue to build strong relationships
with principal contractors, to improve
communication and make early notification
of issues easier. We provide subcontractors
with advance notice of our site plans and
building programmes. This helps them
plan and feel confident in expanding
their workforce in anticipation of our
requirements. For each of our projects,
we review progress and cost forecasts
regularly, to ensure we minimise any
impact on suppliers.
In June 2019, we held our second
subcontractor conference, with more
than 200 people from 120 contractors in
attendance. The conference provides us
with a platform to set out our requirements
and expectations and, in return, for
subcontractors to outline their aspirations
when working with us. Feedback from those
attending was exceptional.
Our procurement policy has succeeded
in securing a predominantly local
subcontractor workforce.
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brilliant for what I
need. The interior is
high quality, the design
is great and it all feels
very well put together.
The people I’ve met
here are friendly and
it feels like a real
community.”
Lauren Harrison-Short
Resident
46
S
E
M
O
H
G
G
U
H
Maximising dormant
land to meet immediate
housing need.
Since launching last year, we have grown
our temporary modular housing business,
Hugg Homes, with 22 units tenanted in
Southampton (six to Southampton Council)
and 32 to Broxbourne Council. These 54
tenanted homes produce a gross rental
income of about £500,000 a year.
Hugg Homes provides local authorities
and other partners with a high-quality
alternative to bed and breakfast or
hostel accommodation, at a considerable
saving to the taxpayer, while putting to
good use brownfield land waiting for
planning permission and construction to
commence. Councils across England spent
nearly £1bn in 2017-18 on temporary
accommodation, indicating significant
market for Hugg Homes which are leased
in line with local housing allowance rates.
Every Hugg Home is constructed and
designed to a consistently high standard
and is compliant with building regulations
(BBA certified minimum 60 years).
There are fitted kitchens with integrated
appliances, a fully tiled contemporary
shower room, electric heating, private
lockable storage, private access and
parking. The homes are well insulated
which ensures high energy efficiency (EPC
rating C) and good acoustic performance,
with minimal noise transfer.
Six months after moving into their
Southampton homes, we surveyed tenants
to learn more about their experience of
living in a Hugg Home. The results were
exceptional, with 100% stating they would
recommend Hugg Homes to a friend, 100%
rating the design and quality of fixtures
and fittings at 3/5 or higher and 100%
rating value for money at 3/5 or higher
(with an average score of 4.2/5).
Resident Lauren Harrison-Short
commented:
“My Hugg Home is brilliant for what I
need. The interior is high quality, the
design is great and it all feels very well
put together. The people I’ve met here are
friendly and it feels like a real community.”
Resident Alan Chorley added:
“I have stayed in lots of rented
accommodation over the years and Hugg
is very good quality. The rented houses
we had in the past were expensive and
landlords were putting the prices up every
six months. Our Hugg is ideal for us and
has everything we need. "
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Social and environmental review
CONTINUED
100%
Hugg Home resident
recommendation
↓
Sea wall and archaeological
works Chapel Riverside,
Southampton, Hampshire
During the period to 30 September 2019, we
implemented a Sustainable Procurement
Strategy. The strategy enables us to meet
our needs for goods, services, works
and utilities in a way that achieves value
for money while generating social and
environmental benefit at the same time.
Planning sustainable developments begins
at the earliest stages of a project, when
we assess potential sites, for example,
considering what materials are present
on the site and if we could reuse these in
the construction. We make decisions that
make both financial and ecological sense
throughout the project.
On larger projects, we have the scope
to undertake ambitious environmental
projects, such as installing blue roof water
systems to recycle rain water on site and
electric vehicle charging points. In line with
legislation, all of our timber suppliers and
manufacturers are registered with either
the PEFC or FSC.
We aim to reduce or recycle waste
wherever possible. Our methodology can
be summarised as 'reuse, recycle, recover'.
We regard disposal at landfill as a last
resort. At our Lily's Walk development, for
example, we recycled 97% of materials on
site between January and September 2019.
Not only does this reduce the amount of
waste going to landfill, it also reduces the
number of vehicles (and emissions) needed
to transport it.
Customers
Our strategy of building high-quality
affordable homes in the south and south-
east of England continues to be successful.
While many of our competitors face a
tougher market in the face of political
uncertainty, we have continued to sell
reasonably well, with an average selling
price of £250,000 over the 15-month
reporting period and an average sales rate
per active site of 0.73 homes per week.
With self-build providing more control
of our developments, we can ensure our
finished products offer an exceptional
standard of living, with a quality
specification included as standard.
Recognising that many of our buyers are
entering the property market for the first
time, we have targeted offers to support
them, with furniture packages and stamp-
duty-paid offers proving very popular. Hard
Hat and First Homebuyer events have
also supported customers, with potential
homebuyers benefitting from professional
expert advice.
In the unlikely event a customer is
dissatisfied, we are able to respond quickly.
We operate a customer service mailbox
for each development. Our database
enables our Customer Service team to log
all reported issues and enquiries, monitor
progress and keep the customer informed.
Our process means that regardless of
whether the development is managed by
us or by contractors, we can ensure the
issue or enquiry is forwarded to the correct
person to be resolved.
Environment
In line with our strategy of adding lasting
value, we focus on limiting our impact
on the environment. With our legacy of
brownfield site regeneration, we have
the experience and expertise to deal
with the challenges these sites present,
including where sites have been heavily
contaminated by the previous land use.
Year on year, we build on this experience,
implementing policies and measures to
improve our environmental performance.
We continue to carry out biodiversity
and ecology risk assessments as part of
our site-planning process, ensuring we
understand the full impact of development,
and can apply appropriate mitigation
measures where necessary.
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Opportunities like these
make it real. They open
up their eyes to what it
actually means working in
construction.”
Kevin Fraud
Lecturer, Bucks UTC
Y
T
I
S
R
E
V
I
N
U
S
K
C
U
B
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49
49
As part of our commitment to
creating lasting value for the
communities we operate in, we have
entered into a formal partnership
with Bucks University Technical
College.
This is designed to make students aware of the range
of careers available in the industry, through a mix of
classroom and site-based sessions.
Representatives from across Inland Homes first met the
students in June 2019, when they spoke to students at
the college about their roles and the career opportunities
available. The classroom presentations were followed by
visits to Abbey Wharf in Alperton, Centre Square in High
Wycombe and Farrier’s Wood in Garston, with more than
40 students attending.
Sebastian Czajka, Project Manager at our Abbey Wharf
development, hosted three visits to his site.
“Construction is a great industry to work in, with lots of
change happening, and by showing them a best-practice
site in action - a live construction site - we hope we have
been able to build a picture of life in the industry and help
them decide whether this is something they want to do in
their lives,” he said. “There is a shortage of construction
workers, but there are also so many other opportunities,
not necessarily on site in trades but also technical and
commercial roles and it is rewarding for us that we are
able to demonstrate this.”
Kevin Fraud, Lecturer at Bucks UTC, added: “Opportunities
like these make it real. They open up their eyes to what it
actually means working in construction, to the planning,
the procedures, the project management – understanding
the logistics of it all."
For students Oliver Jones, Kinga Karasz and Robert
Gomez Gomez the visits were more than just a break from
the classroom – as welcome as that was. “I’m not entirely
sure what I want to do when I leave. I’m keeping my
options open, but visits like these are useful in helping me
decide,” said Oliver.
For Kinga, who is aiming to be a civil engineer, architect
or quantity surveyor, the visit provided an opportunity to
find out more about these career options: “I really enjoyed
today, having the opportunity to walk around and ask
questions. I’ve learnt too much to even start,” she said.
Robert, who has his sights set on being an architect
added: “It’s been really useful, definitely, and 100% a good
break from the classroom!”
We are developing an ongoing education programme with
the College, which we will implement in the year ahead.
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Jasmine Park,
Ipswich,
Suffolk
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54
59
Corporate Governance
statement
Remuneration
Committee report
66
Directors’ report
52
Board of
Directors
64
Audit Committee
report
E
C
N
A
N
R
E
V
O
G
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52
Board of Directors
Committee membership
A Audit committee
R Remuneration committee I Independent
Terry Roydon
Non-executive Chairman
Stephen Wicks
Chief Executive Officer
Laure Duhot
Non-executive Director
Nishith Malde
Group Finance Director
A
R I
A
I
Appointment to the Board
2007
Appointment to the Board
2005
Appointment to the Board
2018
Appointment to the Board
2005
Key strengths and experience
• Experienced non-executive
director and Chairman
• Long-term track record
of leading large listed
and unlisted property and
development companies
Terry has extensive managerial
and political experience of
the property sector obtained
over a 40-year career. He was
CEO of Prowling plc, Non-
executive Director of Country
& Metropolitan plc and Avant
plc as well as president of the
House Builders Federation.
Other current appointments
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.
Key strengths and experience
• Very extensive in-
Key strengths and experience
• Significant experience
depth knowledge and
understanding of the
housebuilding and
construction sectors
• Considerable knowledge of
running large commercial,
property and land
businesses
Stephen 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
and 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 appointments
Non-executive Chairman of
Energiser Investments plc.
gained in private equity,
investment banking and
property markets
• Solid experience as non-
executive director and
member of audit and risk
committees
Laure brings over 30 years of
senior executive level experience
in the investment banking and
property sectors, with a focus
on alternative real estate assets,
particularly the ‘living’ sector.
Her last senior executive position
was Head of Investment and
Capital Markets – Europe, at
Lendlease. Prior to that, she
held senior roles at Grainger,
Pradera, Sunrise Senior Living,
Macquarie Capital Partners
(now M3), Lehman Brothers and
the EIB and has been a Non-
executive Director at a number of
Registered Providers, funds and
property companies.
Other current appointments
Non-executive Director at
healthcare REIT, Primary Health
Properties plc and at MIC
Limited.
Key strengths and experience
• Strong financial background
with extensive property
experience
• Considerable knowledge of
running large commercial,
property and land
businesses
Nishith 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 appointments
Executive Director of Energiser
Investments plc.
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A Audit committee
R Remuneration committee I Independent
53
Board balance
Tenure
3
4
n 0-10 years n 10+ years
Simon Bennett
Senior Independent Director
Gary Skinner
Group Managing Director
Brian Johnson
Non-executive Director
Independence
A R
I
R
I
Appointment to the Board
2007
Appointment to the Board
2018
Appointment to the Board
2018
3
Key strengths and experience
• Extensive career in finance
gained in the investment
banking and capital markets
• Considerable knowledge of
remuneration polices and
executive reward schemes
Simon is a chartered
accountant with over 30 years of
investment banking experience
and providing corporate finance
and broking advice to growing
companies.
He was Head of Corporate
Finance and Head of Mid and
Small Caps team at Credit
Lyonnais Securities (now Credit
Agricole) as well as Head of
Corporate Broking at Fairfax IS
plc and Sanlam Securities.
Other current appointments
Simon established Incremental
Capital LLP in 2004 to provide
corporate finance advice to mid
and small cap companies. He
is also a partner at Glenmill
Partners which provides
impartial advice to entrepreneurs
and growing companies.
Key strengths and experience
• Extensive knowledge of the
Key strengths and experience
• Solid knowledge of the
4
housing sector
• Strategic leader with a track
record of managing and
supervising multidisciplinary
executive teams
Gary brings considerable
experience to the Board having
worked in the housing 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).
Other current appointments
None.
sector and an experienced
non-executive director
• Extensive experience of
leading and working in large
organisations
Brian 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 appointments
Chief Executive Officer of
the Maritime & Coastguards
Agency since October 2018.
n Independent n Non-independent
Skills matrix
3
Investment management
Leadership and values
Strategy
3
Construction
Property
5
7
7
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Corporate Governance statement
Dear shareholder,
On behalf of the
Board, I am pleased to
present the Corporate
Governance statement
for the period ended
30 September 2019.
The Board, under my chairmanship, is
fully committed to ensuring we apply
high standards of governance, values and
behaviour consistently throughout the
Group. This will help ensure the integrity of
our business, the successful application of
our strategy and the long-term success of
the Group. The Board has chosen to base
our governance on complying with the UK’s
Quoted Companies Alliance Corporate
Governance Code (the QCA Code).
The statement, together with the
committee reports that follow, explains how
our governance framework functions and
how the Group as a whole has applied the
ten principles of the QCA Code during this
period.
Effective leadership
Our Board
The Board is collectively responsible for the
long-term success of the Group. It provides
entrepreneurial leadership, sets Group
strategy, upholds the Group’s culture and
values, reviews management performance,
and ensures the Group understands and
meets its obligations to shareholders.
Size and composition
The Board comprises seven Directors -
a Non-executive Chairman, three further
Non-executive Directors and three
Executive Directors. The Chairman is
responsible for leading the Board, setting
its agenda and monitoring its effectiveness.
There is a clear division of responsibility
between the Chairman and the Chief
Executive Officer. Our Board brings a range
of skills and experience to the boardroom.
We provide further information on pages 52
and 53.
Meetings
The Board met seven times in the reporting
period, with additional meetings held by
conference calls to consider, update or
approve key transactions on major projects
as required.
In conjunction with the Chairman, the
Company Secretary maintains a schedule
of regular governance, business, financial
and operational matters for the Board to
consider throughout the period’s meeting
cycle. The schedule incorporates site visits
and strategy sessions and ensures the
Company’s AIM obligations are reviewed
with its Nominated Advisor annually. The
Company Secretary also ensures that
the Group Board, and the Boards of its
subsidiaries, are kept up to date on all
governance and regulatory matters.
The Chairman, aided by the Company
Secretary, is responsible for ensuring
the Directors receive accurate and timely
information. The Board receives reports
from the Executive Directors and the
Operating Board, so it is informed of and
can supervise, the matters within its remit.
The Company Secretary provides minutes of
each meeting and every Director is aware of
the right to have any concerns minuted and
to seek independent advice at the Group’s
expense where appropriate.
Attendance
Directors are expected to attend all Board
meetings and meetings of the committees
they sit on, and to devote enough time to
the Group’s affairs to enable them to fulfil
their duties as Directors. If Directors cannot
attend a meeting, they will discuss in
advance with the Chairman their comments
on papers, so their contribution can be
included in the wider Board discussion.
The following table shows Directors’ attendance at scheduled Board and committee
meetings during the period:
Name of
Director
Terry Roydon
Simon Bennett
Laure Duhot
Brian Johnson
Stephen Wicks
Nishith Malde
Gary Skinner
Independent
Yes
Yes
Yes
Yes
No
No
No
No. of
Board
meetings
attended
7/7
7/7
7/7
7/7
6/7
7/7
7/7
No. of
Remuneration
Committee
meetings
attended
4/4
4/4
n/a
4/4
n/a
n/a
n/a
No. of
Audit
Committee
meetings
attended
3/3
3/3
3/3
n/a
n/a
n/a
n/a
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Independence
The Board considers that our Non-
executive Directors remain independent.
The independence of our Non-executive
Directors is reviewed to confirm they
remain independent from executive
management and free from any business
or other relationship which could materially
interfere with the exercise of their
judgement.
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
if a director has served for more than
nine years, this does not automatically
affect independence provided the board
is satisfied that the director continues
to exhibit independence of character
and judgement. In the Board’s opinion,
both Terry and Simon have continued to
demonstrate strong 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.
The Board has nominated Simon Bennett
as the Senior Independent Director. The
Senior Independent Director's role is to
act as a sounding board and intermediary
for the Chairman or other members of the
Board and to provide an alternative route of
access to the Board for shareholders and
other Directors where appropriate.
We pride ourselves on conducting our business in an open and transparent manner. Our governance framework remains flexible and
allows for fast decision-making and effective oversight.
Governance framework
The Board
The Board is primarily responsible for setting the Group’s strategy for creating long-term value for 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.
Committees
The Board has delegated specific
responsibilities to the Audit and
Remuneration Committees, details of which
are set out over the following pages.
Each committee has written terms of
reference setting out its duties, authority
and reporting responsibilities. We keep
these terms of reference under review to
ensure they remain appropriate and reflect
any changes in legislation, regulation or
best practice. Each committee is made up
of Non-executive Directors of the Group.
Skills and experience
We recognise the importance of having
a board with the necessary mix of skills,
experience and personal qualities to
deliver the strategy of the Company for the
benefit of the shareholders and the wider
stakeholder community. Appointments to
the Board are therefore based on merit and
judged against objective criteria. Our Board
members have high ethical values and
demonstrate strong leadership qualities.
We have a strong mix of knowledge and
experience relevant to our business,
including finance sector, public markets,
investor relations and property. Further
details about our Directors can be found on
pages 52 and 53.
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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 by email or
from our website.
Corporate website
The Group’s corporate website, www.
inlandhomesplc.com, has an investor
section which includes our annual reports,
results presentations (which we make 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.
Debt-holder engagement
Our CEO, Stephen Wicks, and Group
Finance Director, Nishith 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 in Advisers
and Company information. The Senior
Independent Non-executive Director is
available to shareholders if they have
concerns that cannot be resolved through
the normal channels of Chairman, Chief
Executive or Company Secretary or for
which such contact is inappropriate.
56
Corporate Governance statement
CONTINUED
Effectiveness and evaluation
The Board has historically adopted an
informal approach to evaluating the Board
as a whole, its committees and individual
members. This was in view of the size of the
Group and the relatively small Board at the
time. In complying with the QCA Code and
recognising that an effective, well-balanced
Board is central to good governance, the
Board will undertake a formal evaluation
process in early 2020. The review will
focus on:
• the composition of the Board, including
the balance of skills, knowledge and
experience;
• the strategy of the business and the
Board’s role in setting it;
• Board dynamics and culture (of the
Board and wider business);
• the management of the Board and
committee meetings;
• the Board’s oversight of risk
management; and
• leadership and succession planning.
Conflicts of interest
On appointment, each Director must
notify the Company of their external
board appointments, other significant
commitments and any actual or potential
conflicts of interest. Each Director has an
opportunity to disclose actual or potential
conflicts of interests to the Board, either by
way of general notice, or at the beginning
of each Board or Committee meeting.
Where actual or potential conflicts of
interest arise, the relevant Director does
not receive Board papers and is excluded
from discussions and voting on the subject
matter that gives rise to the conflict.
Internal controls and risk
management
The Board has ultimate responsibility for
the Group’s system of internal control.
Responsibility for monitoring and
ensuring the ongoing effectiveness of
this framework, is delegated to the Audit
Committee. The Board recognises that
any system of internal control can provide
reasonable, but not absolute, assurance
against material misstatement or loss.
However, the Board considers that the
internal controls in place are appropriate
for the size, complexity and risk profile of
the Group. The Group continually reviews its
controls framework to ensure adherence to
best practice, while also having regard to its
size and the resources available.
The principal risks faced by the business
are set out on pages 30 to 33. You can
find details of the Group’s internal control
framework on pages 57 and 58.
Business culture, values and
behaviour
Our principles inform every aspect of our
business operations and decision-making.
We have worked hard to maintain a family
feel as the business has grown, because
we believe this is what makes us uniquely
Inland. We don’t compromise on safety
and we know we are ‘stronger together’.
Whether that relates to our employees, our
partners or our supply chain - we invest in
those relationships. We use staff events,
staff surveys and supply chain forums to
promote our values and behaviours. The
results and feedback we receive allow the
Board to monitor how the Group embodies
our guiding principles. You can find
more about what we do in our Social and
Environmental Review on page 42.
Engaging with shareholders
We recognise the importance of clear and
proactive communication and engagement
with our shareholders.
The following is a summary of the ways in
which we do this.
Investor meetings
Following the full-year and half-year
announcements, as well as at various
other times as requested, the Executive
Directors meet 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
We held our 2018 Annual General Meeting
(AGM) on 27 November 2018. The 2019
Annual General Meeting will be held
on 4 March 2020 and we encourage our
shareholders to attend. The AGM provides
an opportunity for private shareholders in
particular to raise a queries with the Board.
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Governance principle
Compliant Explanation
Further reading
01
Establish a strategy and
business model which
promote long-term value
for shareholders
02
Seek to understand and
meet shareholder needs
and expectations
03
Take into account wider
stakeholder and social
responsibilities and their
implications for long-
term success
04
Embed effective
risk management,
considering both
opportunities and
threats, throughout the
organisation
05
Maintain the Board
as a well-functioning,
balanced team led by the
Chair
The strategy and business model are set by
the Board and reviewed regularly to ensure
both remain appropriate.
See pages 22 and 18 for further reading on
our strategy and business model.
We engage with our shareholders in a number
of ways, including through Investor Roadshows
and site and development tours with our
CEO, Group Finance Director and Managing
Director.
Further information on shareholder
engagement can be found on page 42.
The Board has identified the main
stakeholders in the business. Business
decisions and developments are taken with
the impact of our stakeholders in mind. We
take our social responsibilities seriously and
constantly strive to enhance our environmental
and social credentials.
The Board is ultimately responsible for setting
the risk appetite for the Company; however,
our culture seeks to empower all colleagues
to manage risk effectively.
See the Social and Environmental Review to
understand more about how we work closely
with our stakeholder groups.
We have summarised the main risks faced
by the business and how they are being
managed on pages 30 to 33. Further details
about our approach to risk management
and internal controls are provided in the
Corporate Governance statement on page 54
and the Audit Committee report on page 64.
The Board has an appropriate mix of Executive
and Non-executive Directors. The Chairman
facilitates open and productive debate between
Directors, ensuing constructive challenge
when necessary.
Our Directors and details of their key skills
and experience are set out on pages 52 and 53.
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58
Corporate Governance statement
CONTINUED
Governance principle
Compliant Explanation
Further reading
Our Board appointments are made on merit
and against objective criteria, including
personal characteristics. The balance of skills
and experience will be assessed as part of the
planned Board evaluation. Directors’ individual
development needs will also be discussed as
part of this process.
Further information about the balance of skills
and experience of the Board can be found on
pages 52 to 53.
An evaluation of the Board and individual
Directors will be undertaken in early 2020.
This will be an internal review and the outputs
will be considered by the Board as a whole.
Details of the criteria against which the Board
and individual Directors will be assessed are
included on page 56.
Our principles are embodied across the Group
and inform every aspect of our business
operations and decision-making.
You can read more about our corporate culture
in the employee section on page 43.
Under the leadership of the Chairman, the
Board has a collective responsibility for the
governance structure of the Group to ensure
the Company’s strategy is delivered effectively.
It important to us that the framework we
have in place is appropriate for our business
model and this is something we keep under
continuous review.
The Board recognises the importance of
communication with all stakeholder groups
to ensure that who we are as a Company
is understood and that our strategy and
performance are clearly articulated.
Our Corporate Governance statement on
pages 54 to 58 provides further reading on our
governance structure.
Find out more about how we do this on
page 42.
06
Ensure that between
them the Directors have
the necessary up-to-date
experience, skills and
capabilities
07
Evaluate Board
performance based
on clear and relevant
objectives, seeking
continuous improvement
08
Promote a corporate
culture that is based
on ethical values and
behaviours
09
Maintain governance
structures and processes
that are fit for purpose
and support good
decision-making by
the Board
10
Communicate how the
Company is governed
and is performing by
maintaining a dialogue
with shareholders
and other relevant
stakeholders
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59
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.
In 2013, in line with best corporate
governance and market practice at that
time, the Remuneration Committee
introduced a new deferred bonus plan and a
long-term incentive plan for the Company’s
Executive Directors, which were 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 operated for a period
of six years and which was approved
by shareholders in general meeting in
December 2013.
This scheme has now run its course and
the Remuneration Committee has been
working with the Group’s remuneration
consultants MM&K Limited, to formulate
a new long-term incentive plan to replace
the 2013 LTIP. Further details of these
proposals are set out below.
The key elements of the 2013 LTIP are given
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.
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 15-month
period ended 30 September 2019 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, Senior Non-executive
Director, who is Chairman of the
Committee, Terry Roydon, the Company’s
Non-executive Chairman and Brian
Johnson, Non-executive Director. The
Remuneration Committee meets formally
three times a year and on such other
occasions as may be required.
No. of meetings
Attendance
Simon
Bennett
4
Terry
Roydon
4
Brian*
Johnson
4
100% 100% 100%
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,
Group Managing Director, and independent
advice from external consultants, where it
considers this to be appropriate.
* Brian Johnson joined the committee on his
appointment to the Board, in July 2018.
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 Group and
the individual Executive Directors and the
prevailing pay structures in the markets in
which Inland Homes operates.
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Remuneration Committee report (unaudited)
CONTINUED
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 provided for
50% of an Executive Director’s bonus to be
mandatorily deferred into ordinary shares in
the Company. Under these arrangements,
bonuses will 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.
Long Term Incentive Plans
The Company currently operates both an
unapproved share option scheme, which
is open to all employees of Inland Homes,
and the 2013 LTIP, which is open to the
Executive Directors.
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, which
has now run its course:
1. Creation of Growth Shares
The plan operated 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 were called ‘Growth Shares’. The
Growth Shares were qualifying shares for
the purposes of the Employee Shareholder
Status scheme, the aim of which was to
provide tax benefits to employees and
Directors who achieved growth for their
employing companies.
The awards in relation to the Growth Shares
were subject to performance targets
(Performance Targets) and when such
Performance Targets were achieved, a
relevant proportion of the Growth Shares
were awarded.
2. Vesting and exchange of Growth
Shares
Subject to the Performance Targets
being met, the awards in relation to the
Growth Shares would vest in accordance
with the Articles of Association of Inland
Homes 2013 Limited if and when each
Performance Target was met. After vesting,
the Growth Shares could be realised by
being exchanged for a fixed number of the
Company’s ordinary shares.
The Growth Shares did not carry any
entitlement to dividends, capital or voting
unless and until they vested and were
exchanged for ordinary 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’). Originally 11,350,504
ordinary shares were available to be earned
under the 2013 LTIP, equivalent at the time
to 5.68% of the issued share capital.
One of the Participants, Paul Brett, stepped
down from the Board in April 2018 and 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.
His possible share of any future Growth
Shares lapsed at that time.
The aggregate number of ordinary shares
issuable under the 2013 LTIP was therefore
then reduced by 1,702,576 ordinary
shares to 9,647,928 ordinary shares (from
11,350,504 ordinary shares). On 19 July
2018, the Company issued 2,814,924 new
ordinary shares of 10p each to Stephen
Wicks in exchange for 248 of his vested
Growth Shares under the 2013 LTIP. The
total number of ordinary shares issuable
under the 2013 LTIP was therefore reduced
to 6,833,004 ordinary shares.
Of this total, as at 30 September 2019, in
aggregate a further 2,285,076 ordinary
shares (equivalent to 1.10% of the total
issued ordinary share capital) were
available to be issued to the Participants,
under the terms of the 2013 LTIP, as the
Performance Targets had been met. The
remaining, a total of 4,547,928 ordinary
shares (equivalent to 2.19% of the total
issued ordinary share capital at the period
end), have now lapsed as the Performance
Targets have not been met.
Due to an anomaly in the way in which
the 2013 LTIP was drafted, fractional
entitlements of a Growth Share cannot be
exchanged for ordinary shares. As a result
of the 2,285,076 ordinary shares earned by
the Participants but not yet issued, 14,975
ordinary shares would otherwise lapse. The
Remuneration Committee has agreed to
issue any earned but unallocated ordinary
shares created by this anomaly to the
existing Participants, 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 in accordance with
the rules of the scheme.
Gary Skinner, who joined the Group Board
in May 2018, was not entitled to any awards
under the 2013 LTIP, but will be able to
participate in any future LTIP approved by
shareholders at a general meeting.
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4. Performance Targets
Vesting only occurred as and when specific
Performance Targets (which were linked to
the share price of Inland Homes plc over six
consecutive annual performance periods)
were met or exceeded for 15 working days
in the relevant performance period. Each
annual performance period ended 20
working days after the announcement of
preliminary results for each year, usually
therefore in October of each year.
However, the Group’s accounting period
was changed during the year from 30 June
to 30 September 2019. For the purposes
of the 2013 LTIP only, the final period
for Performance Targets to be met was
deemed to be the year ended 30 June 2019.
The target share prices for the 2013
LTIP was based on compounded growth
being achieved and, accordingly, if the
Performance Target was missed in one
period, the Participants’ awards could still
vest, if the required compound percentage
of growth was achieved in subsequent
periods. For instance, if in the first period
the Performance Target for that period was
not met, then the related number of Growth
Shares which could have vested may
still vest in the following period or future
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 60.5p per ordinary share (the First
Target Performance Price), being a 30%
premium to the share price of 46.5p per
ordinary share (the Initial Base Price), being
the mid-price at the close of business on 20
December 2013, the date the 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
2019 in exchange for vested Growth Shares assuming the Performance Target for each year of the respective years is achieved.
Start date of accounting period
1 July 2013
1 July 2014
1 July 2015
1 July 2016
1 July 2017
1 July 2018
Performance target
(Inland Homes plc share price)
30% above Initial Base Price
15% compounded
10% compounded
10% compounded
10% compounded
10% compounded
Total number of
Inland Homes plc shares
1,700,0001
1,700,0001
1,700,0001
1,700,0001
1,700,0001
1,147,9282
9,647,9283
1 Previously 2,000,000 ordinary shares.
2 Previously 1,350,504 ordinary shares.
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’.
5. Dilution
Originally, 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, would have
had to have more than doubled before
the end of the final performance period,
when compared with the Initial Base Price
of 46.5 pence per ordinary share. This
increase would have been equivalent to an
approximate 14% annual compound rise in
the ordinary share price over the life of the
2013 LTIP.
As at 30 September 2019 a total of
2,285,076 ordinary shares (equivalent to
1.10% of the total issued ordinary share
capital) have been earned but not been
issued yet to the remaining Participants.
6. Change of Control
The 2013 LTIP allowed realisation from
three years after the award, provided the
Performance Targets had been met. As is
customary, the 2013 LTIP provided 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.
2019 Long Term Incentive Plan
As set out in more detail above, the 2013
LTIP scheme has now run its course and
the Remuneration Committee has been
working with the Group’s remuneration
consultants, MM&K Limited, to formulate
the terms of a new long-term incentive
plan, in accordance with current best
practice.
The new 2019 Long Term Incentive Plan (2019
LTIP) will take the form of a performance
share plan under which selected participants
will, each year, be awarded an interest in
a number of ordinary shares which will
vest three years later in whole or in part,
depending on whether and the extent to
which the chosen performance criteria
attaching to those awards have been met.
The normal maximum value of an award
that may be made to a participant each
year will be 100% of their salary although
the Remuneration Committee will be able
to make awards up to 200% of salary to
a selected participant, if it believes that
there are exceptional circumstances that
necessitate this level of award.
The Remuneration Committee will have the
discretion to override the formulaic vesting
outturn of the LTIP at the end of the three
year performance period to determine
the appropriate level of vesting where it
believes the outcome is not truly reflective
of underlying performance during the
performance period and to ensure fairness
to both shareholders and participants.
Vested awards will be subject to a holding
period following the end of the performance
period, and shares will not normally be
released until the end of the holding period.
This holding period will be 18 months for
50% of vested awards and 30 months for
the other 50%.
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Remuneration Committee report (unaudited)
CONTINUED
Non-executive Directors
Inland Home has four Non-executive
Directors, 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 three
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 Directors’ 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.
Additional amounts equivalent to any
dividends or shareholder distributions
will be made in respect of vested awards
at the time those shares are released to
the participants at the end of the holding
period. Such amounts will normally be paid
in shares.
Further details relating to the new
proposed LTIP will be sent to shareholders,
together with the full details of a new
remuneration policy, in a Circular
relating to a shareholder meeting later
in the year at which shareholders will be
asked to approve the new 2019 LTIP and
remuneration policy.
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.
Directors’ emoluments for the
period ended 30 September
2019
A review of the financial results for the
15-month period ended 30 September 2019
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 period has been another
successful one for the Group with profit
before tax of £25.0m (year ended 30 June
2018:£19.3m), and show undiluted EPRA
NAV per share increased to 113.69p (year
ended 30 June 2018: 102.3p).
In light of these results recorded by the
Group, the following bonuses have been
awarded by the Remuneration Committee
to the Executive Directors:
Stephen Wicks
Nishith Malde
Gary Skinner
£82,000
£82,000
£50,000
In accordance with the rules of the Deferred
Bonus Plan, further details of which are
set out above, the bonuses for Stephen
Wicks, Nishith Malde and Gary Skinner will
be settled as 50% in cash, £107,000, and
as 50% in ordinary shares of the Company,
£107,000. The ordinary shares awarded in
respect of these bonuses will be deferred for
three years and will be subject to forfeiture
in the event that an Executive Director
leaves the Company as a ‘bad leaver’, but
are not subject to any further performance
conditions.
The award of ordinary shares of the
Company will be granted on terms that,
when they vest, the number of ordinary
shares subject to the award shall be
increased by deeming the net dividends
paid on the ordinary shares from the date of
the award until the date of vesting to have
been cumulatively reinvested in additional
ordinary shares.
During the period there was no change to
the basic salaries of Stephen Wicks and
Nishith Malde. Gary Skinner was awarded
an increase in salary to £280,000 (from
£250,000), effective from 1 July 2018, to bring
his remuneration in line with the market.
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Directors’ remuneration table (audited)
The remuneration of each of the Directors during the 15-month period ended 30 September 2019 is set out in detail below:
2019
Salary/ fees
£000
Bonus
£000
Benefits
£000
Pension
£000
Total
remuneration
£000
Social
security
costs
£000
Total
remuneration
and social
security
£000
Year ended
30 June 2018
Total
remuneration
and social
security
£000
505
505
325
75
63
48
48
41
41
25
–
–
–
–
10
6
3
–
–
–
–
–
–
12
–
–
–
–
556
552
365
75
63
48
48
74
74
47
–
–
–
–
630
626
412
75
63
48
48
472
469
91
55
45
–
–
Executive Directors
S D Wicks1
N Malde1
G Skinner
Non-executive Directors
T Roydon
S Bennett
L Duhot
B Johnson
1 S Wicks and N Malde have taken their pension entitlement as part of their salaries. During the period no LTIPs vested.
Directors’ interests in shares and the unapproved share option scheme and the 2013 LTIP (audited)
Directors’ interests in the Company’s ordinary shares are disclosed in the Directors’ report on page 67. 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 2018
Options issued during the period:
Options exercisable 17 July 2021 to 16 July 2028 at 67.00p
Options exercisable 18 March 2022 to 17 March 2029 at 61.30p
Exercised during the period
Total options outstanding at 30 September 2019
Gary
Skinner
–
–
–
250,000
500,000
–
750,000
Stephen
Wicks
–
–
–
–
–
–
–
Nishith
Malde
–
1,500,000
1,500,000
–
–
–
1,500,000
Paul
Brett1
400,000
–
400,000
–
–
(400,000)
–
Approval
This report was approved by the Board on
30 January 2020 and signed on its behalf by:
Simon Bennett
Chair of the Remuneration Committee
30 January 2020
1 Paul Brett resigned on 16 April 2018.
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 6,000,000 ordinary shares
(in aggregate, including those issued to
Participants who have left the Group) have
been met, of the 11,350,504 new ordinary
shares that could have been issued in
accordance with the rules of the 2013
LTIP. The awards vested to date to current
Directors of the Group are as follows:
Under the 2013 LTIP, the threshold price for
the year ending 30 June 2019, which would
have earned a further 1,147,928 ordinary
shares, was 101.8 pence per ordinary share.
The Inland Homes share price did not attain
this level during the requisite period and as
a result no further awards will be made to
the Participants under the 2013 LTIP.
As at 30 September 2019 2,285,076 ordinary
shares (equivalent to 1.10% of the total
issued ordinary share capital) have been
earned but not been yet issued to the
remaining Participants.
S D Wicks2
N Malde
Ordinary
shares of
10p each
2,820,000
2,280,000
2 S D Wicks exercised 2,814,924 ordinary shares on
19 July 2018.
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64
Audit Committee report
I am pleased to present the Audit
Committee report for the period ended 30
September 2019. It provides shareholders
with an overview of the activities carried
out by the Committee during the period.
The Audit Committee is responsible for
ensuring 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 the Executive Directors and
management present.
Membership
The Committee consists of three
independent Non-executive Directors:
myself (as Chairman), Laure Duhot
and Simon Bennett. Other members of
the Board or management may attend
Committee meetings by invitation if
required. We ensure Committee members
have the skills and knowledge relevant
to the remit of the Committee, and the
personal attributes to enable us to work
with management and external auditors,
and to challenge matters if needed.
Duties
The main items of business considered
by the Audit Committee during the period
included:
• reviewing the 2019 Report and Accounts;
• considering the external audit report
and management representation letter;
• the going-concern review;
• reviewing the 2019 audit plan;
• reviewing the suitability of the
external auditor;
• reviewing the interim results;
and
• reviewing significant estimates
and judgements.
Role of the external auditor
The Audit Committee monitors the
relationship with the external auditor,
BDO LLP, to ensure we maintain auditor
independence and objectivity. 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 7 of the Financial
Statements. Having reviewed the auditor’s
independence and performance, the
Committee recommends BDO LLP be
reappointed as the Group’s auditor at the
next AGM.
Internal controls and risk
The Group continually reviews its controls
framework to ensure adherence to best
practice, while also having regard to its size
and the resources available.
The principal elements of the Group’s
internal control system include:
• close management of the day-to-day
activities of the Group by the Executive
Directors;
• an organisational structure with defined
levels of responsibility and approvals,
which promotes entrepreneurial
decision-making and implementation,
while mitigating risks;
• segregation of duties so no individual
can have undue influence or control over
an activity, process or transaction;
• central control over key areas such as
authorising capital expenditure and
banking facilities; and
• the formal risk framework agreed by the
Board, details of which you can find on
page 30.
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. The Audit Committee maintains
the policy on whistleblowing and monitors
its effectiveness and compliance.
Terry Roydon
Chair of the Audit Committee
30 January 2020
Stock code: INL
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Directors’ report
Principal activity
Inland Homes plc is a Company
incorporated in England and Wales under
company registration number 5482990.
The principal subsidiaries and associated
undertakings are shown in note 20 to the
Financial Statements.
Results and dividend
On 6 June 2019, the Group and the Company
changed its accounting reference date from
30 June to 30 September. Consequently,
the current period presented is 15 months
and the comparative information is for 12
months throughout this report. The Group’s
consolidated income statement set out on
page 77 shows Group profit before taxation
of £25.0m (2018: £19.3m). The Group’s
EPRA NAV per share was 113.69p as at 30
September 2019. The results for the Group
are reviewed in the Chairman’s statement on
page 6, the Chief Executive’s Q&A on page
10, the Group Finance Director's review on
page 24 and the Portfolio review on page
38. The detailed results are set out in the
Financial Statements on pages 77 to 121
which accompany this report. Likely future
developments for the Group are discussed in
the Chief Executive’s Q&A on page 10.
The Board discussed and resolved to pay
an interim dividend of 0.85p per share
which would represent an increase of
approximately 30% on the previous interim
dividend of 0.65p per share. The Board has
declared the payment of a further interim
dividend of 2.25p per share which, together
with the interim dividend already paid, will
make total dividends paid of 3.10p (2018:
2.20p) per share.
Going concern
In adopting the going concern basis for
preparing the Financial Statements, the
Directors have considered the business
activities as set out on page 22 as well as
the Group’s principal risks and uncertainties
as set out on pages 30 to 33. Based on the
Group’s cash flow forecasts and projections,
the Board is satisfied that the Group will
be able to operate within the level of its
facilities for the foreseeable future. For this
reason, the Board considers it appropriate
for the Group to adopt the going concern
basis in preparing its Financial Statements.
See note 28 for more information on our
facilities.
Post balance sheet events
Details of post balance sheet events are
given in note 36 of the Financial Statements.
Substantial shareholding
Substantial shareholding of 3% or more of the nominal value of the Company’s shares. This
table excludes Directors’ shareholdings, which are detailed on the next page.
Major shareholders
Mr Mark H Dixon
Janus Henderson Investors
Mr Premchand Shah and Mrs Kanchangauri Shah
Shareholding
16,000,000
10,138,737
6,199,222
Directors’ and Officers’ liability
insurance and independent
advice
The Company maintains an appropriate
level of Directors’ and Officers’ liability
insurance in respect of legal actions
against the Directors. The Board has
established a procedure by which any
Director, for the purpose of furthering
his or her duties, may take independent
professional advice at the Company’s
expense. No Director had reason to use
this facility during the reporting period.
Share capital
The Company’s issued share capital as at 30
September 2019 was 207,366,045 Ordinary
Shares of 10 pence each. 1,627,500 ordinary
shares are held by the Company’s Employee
Benefit Trust. Details of movements
in the Company’s issued share capital
can be found in note 25 to the Financial
Statements.
Share option schemes
Details of employee share schemes are set
out in note 26 to the Financial Statements.
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Directors and Directors’ interests
S D Wicks
N Malde
G Skinner
T Roydon
S Bennett
L Duhot
B Johnson
As at 30 September 2019
As at 30 June 2018
Number of
ordinary shares
Number of
Growth Shares
Number of
share options
Number of
ordinary shares
Number of
Growth Shares
Number of
share options
17,237,256
10,891,529
40,000
325,000
110,000
–
–
222
380
–
–
–
–
–
–
1,500,000
750,000
–
–
–
–
13,987,332
11,360,029
40,000
325,000
110,000
–
–
470
380
–
–
–
–
–
–
1,500,000
–
–
–
–
–
More information about the Directors can be found on page 52 and 53.
Purchase of own shares
The Company purchased 200,000 of its
own shares pursuant to the share buyback
programme. This is detailed in note 25 of
the Financial Statements.
Political donations
The Company did not make any
political donations or incur any political
expenditure during the reporting period to
30 September 2019, or in the prior year.
Auditor
A resolution to reappoint BDO LLP as
auditor of the Company and to authorise
the Audit Committee to determine its
remuneration will be proposed at the
forthcoming AGM.
As far as the Directors are aware, there
is no relevant audit information (that is,
information needed by the Group’s auditor
in connection with preparing their report) of
which the Group’s auditor is unaware. Each
Director has taken all reasonable steps that
he or she ought to have taken as a Director
in order to make himself or herself aware
of any relevant audit information and to
establish that the Group’s auditor is aware
of that information.
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 4 March 2020.
Statement of Directors’
responsibilities
The Directors are responsible for preparing
the strategic report, the annual report and
the financial statements in accordance with
applicable law and regulations.
Company law requires the Directors to
prepare financial statements for each
financial period. Under that law the
Directors have elected to prepare the
Group’s consolidated financial statements
in accordance with International Financial
Reporting Standards (IFRS) as adopted
by the European Union, and the Company
Financial Statements in accordance with
FRS 102: The Financial Reporting Standard
applicable in the UK and Republic of Ireland.
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 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 or United Kingdom
Generally Accepted Accounting Practice,
subject to any material departures
disclosed and explained in the financial
statements; and
• prepare the financial statements on
a going concern basis unless it is
inappropriate to presume that the Group
will continue in business.
The Directors are responsible for keeping
adequate accounting records that are
sufficient to show and explain the Group
and Company’s transactions and disclose
with reasonable accuracy at any time
the financial position of the Group and
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 Group and Company and
hence for taking reasonable steps for the
prevention and detection of fraud and other
irregularities.
Financial risk management
objectives and policies
These are detailed in note 31 of the
Financial Statements.
Website publication
The Directors are responsible for ensuring
the report and accounts are made available
on a website. Financial statements are
published on the Group’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 Group’s website is the responsibility
of the Directors. The Directors’
responsibility also extends to the ongoing
integrity of the financial statements
contained therein.
Kat Worth
Company Secretary
30 January 2020
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Independent
Auditor’s report
79
Statements of
changes in equity
77
78
Group income
statement
Statements of
financial position
80
81
Group statement of
cash flows
Notes to the financial
statements
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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 15 month
period ended 30 September 2019 which comprise the Group income statement, the Group and Parent Company statement of financial
position, the Group and Parent Company statement of changes in equity, the Group statement of cash flows and 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 September 2019
and of the Group’s profit for the period 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 twelve
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 judgment, 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.
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Key audit matter
How we addressed the key audit matter in audit
Valuation of investment
properties and carrying value of
trading properties (Notes 3, 15
and 22)
The Group owns a portfolio of
properties which are held as either
investment properties or trading
properties.
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
and for this reason, we considered
this as a key audit matter.
Trading properties
Our audit work in relation to trading properties 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;
− Reviewed the level of costs to complete that were fixed by way of procurement;
− 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, Buckingham House, Castle House
and Wilton Park 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 Directors;
− 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 Directors;
• 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 did this by holding
discussions with the Directors and obtaining an explanation for the reasons why these valuations
were outside of our expectations. We obtained supporting evidence to corroborate explanations
received from the Directors.
• 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. We performed a recalculation of the valuation based on the inputs tested.
• For a sample of investment properties we corroborated the rental income to supporting leases.
• For those properties re-classified as Held for Sale we considered the classification in light of the
evidence provided by management and the criteria under IFRS 5.
Key observations
We did not identify any indicators to suggest that the valuation of the Group’s investment properties
and the carrying value of the Group’s trading properties is inappropriate.
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Independent Auditor’s report
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Key audit matter
How we addressed the key audit matter in audit
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 September 2019 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.
Construction 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;
• 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;
• Compared the key assumptions within each development appraisal against the contract terms
and agreed details to supporting documentation where relevant; and
• Compared the stage of completion against the proportion of profit recognised to date.
Management fee income
For each contract we obtained copies of the management fee contract and performed the following:
• We obtained a copy of management’s paper regarding the revenue recognition policy for the
contract. We challenged the judgements made in relation to the performance obligations
identified with management and considered these in light of our review of the contract and
knowledge of IFRS 15.
• We obtained management’s assessment of the Group’s performance against the performance
obligations identified in each contract. We challenged management regarding the assumptions
made and corroborated their responses to external sources where necessary.
Key observations
We did not identify any indicators to suggest that the revenue and profit recognition from the sale of
land and buildings, from construction contract income or from management fee income has been
recognised inappropriately.
Revenue and profit recognition
(Note 6)
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.
The accounting for the revenue
from construction 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.
The group is involved in the provision
of certain development and
planning application management
fee services to third parties. The
accounting for revenue from such
contracts is inherently complex
and involves significant judgement
in terms of the identification of
performance obligations under
IFRS 15 and where appropriate the
stage of performance against those
obligations and the measurement
and recognition of any deferred
consideration where relevant.
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Key audit matter
How we addressed the key audit matter in audit
We evaluated the Directors’ going concern assessment and performed the following procedures:
• We assessed the appropriateness of the Group’s cash flow forecasts in the context of the Group’s
2019 financial position, the expected land and house sales and other contractual revenue and
evaluated the Directors’ downside sensitivities against these forecasts.
• We evaluated the key assumptions in these forecasts and considered whether these appear
reasonable, for example by comparing sales revenue to contractually secured future revenue and
expected sales prices to forward sales, historic sales data in the area and expected completion
of sites.
• We obtained the Directors’ views on their ability to obtain alternatives sources of finance to
replace existing facilities, the Directors’ views on and evidence of the continued support of their
lenders and the ability to obtain finance on unencumbered assets.
• We obtained and re-performed the Directors’ forecast covenant compliance to 30 September
2021.
• We considered the Group’s overhead and the level of discretionary spend in the Group and the
Directors’ ability to flex this in base case scenarios.
• We also reviewed the disclosures provided relating to the going concern basis of preparation and
considered whether these were consistent with the evidence that we found.
Our conclusions on going concern are set out in the going concern section above.
Key Observations
We did not identify any indicators to suggest that it is inappropriate to prepare the annual report on
a going concern basis.
Our audit procedures were in line with those set out in the valuation of investment properties and
carrying value of trading properties key audit matter outlined earlier in this report.
Key Observation
We did not identify any indicators to suggest that the receivables from Joint Ventures and the
Associate, and other significant receivables have been recognised inappropriately.
Going concern (Note 1)
Refer to page 66 (Directors Report)
and page 81 (accounting policies).
The Directors have prepared cash
flow forecasts for the period to 30
September 2021. These forecasts
include assumptions over the
revenue, profitability and cash
generation of the business. These
forecasts have been stress tested
for down turn scenarios that could
impact the business.
The Group has three facilities that
fall due for repayment during 2020.
Given the existence of facilities that
fall due for payment in the next 12
months we consider there to have
been an increase in going concern
risk.
Recoverability of receivables
from Joint Ventures and the
Associate (Note 20) and other
significant receivables (Note 23)
There Group has made a number of
loans to Joint Venture and Associate
entities. The recoverability of these
receivables is often underpinned
by the net realisable value of the
underlying development held within
the Special Purpose Vehicle.
There are also a number of other
significant receivables due from
management fee contracts. The
recoverability of these receivables
is often dependent on the value
of the land over which the Group
holds security and for this reason,
we considered this as a key audit
matter.
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Independent Auditor’s report
to the members of Inland Homes plc
CONTINUED
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.
Group – Financial Statement materiality
Group – Specific materiality
Materiality
Performance materiality
Clearly trivial threshold
£3,750,000
£2,250,000
£75,000
£1,000,000
£600,000
£20,000
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 in assessing the financial performance of the Group. As such, the
materiality for the Group financial statements as a whole was determined to be £3,750,000, which represents 1% of the Group’s total
assets.
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 £1,000,000 to these areas
which represents 5% of the three year average adjusted earnings. The three year average was taken to better reflect a consistent basis in a
business where there are inconsistent operational cycles and trading activity.
In the prior year to 30 June 2018 we applied a financial statement materiality based 1% of total assets of £3,000,000 and a specific
materiality of £1,580,000 which represented 8% of profit before tax. As explained above, we considered it appropriate for the current year to
change the basis and use a three year average of adjusted earnings for specific materiality. We also reduced the percentage used from 8%
to 5% to reflect the increased trading activity as the business matures.
We determined that a measure of financial statement materiality for the Parent Company, was £900,000 which was set based on 2% of the
Parent Company’s total assets, but capped at 90% of Group specific materiality (year ended 30 June 2018: £1,160,000).
Each component of the Group was audited to a lower level of materiality. Component materiality ranged from £4,000 to £900,000 (year
ended 30 June 2018: 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 £2,250,000
and specific performance materiality was set at £600,000 (year ended 30 June 2018: financial statement performance materiality was
£1,800,000 and specific performance materiality was £948,000).
For the Parent Company we considered it appropriate to set the level of performance materiality at 75%, and the performance materiality
applied was £675,000 (year ended 30 June 2018: £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 £75,000 for all items audited
to financial statement materiality, and £20,000 for items audited to specific materiality (year ended 30 June 2018: £60,000 for 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 £45,000 (year ended 30 June 2018: £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.
26868
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Proof 21
Stock code: INLInland Homes Report and Accounts 2019FINANCIAL STATEMENTS 75
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. For all subsidiary components in the Group, audit work was
performed to respond to the assess risks and was performed directly by the Group audit engagement team which consisted of performing
full audit procedures on each subsidiary. Our audit work at each of these subsidiary components was executed at levels of materiality
applicable to the relevant component, which in each instance was lower than Group materiality. 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 and
accounts, 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.
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 by the Parent Company, or returns adequate for our audit have not been received from
branches not visited by us; or
• the Parent Company financial statements are not in agreement with the accounting records and returns; or
• certain disclosures of Directors’ remuneration specified by law are not made; or
• we have not received all the information and explanations we require for our audit.
Responsibilities of Directors
As explained more fully in the Statement of Director’s responsibilities 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:
www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.
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www.inlandhomesplc.comReport and Accounts 2019 Inland HomesFINANCIAL STATEMENTS 76
Independent Auditor’s report
to the members of Inland Homes plc
CONTINUED
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, UK
30 January 2020
BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC305127).
26868
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Proof 21
Stock code: INLInland Homes Report and Accounts 2019FINANCIAL STATEMENTS Group income statement
for the 15-month period ended 30 September 2019
Continuing operations
Revenue
Cost of sales
Gross profit
Administrative expenses
Gain on sale of subsidiary
Gain on sale of joint venture interest
Share of profit of joint ventures
Share of profit of associate
Revaluation of investment property
Operating profit
Finance cost – interest expense
Finance income – interest receivable and similar income
Profit before tax
Tax charge
Total profit for the period/ year
Other comprehensive income:
Revaluation of quoted investments
Total profit and comprehensive income for the period/ year
Earnings per share for profit attributable to the equity holders of the Company during the
period/year
– basic
– diluted
The accompanying notes form part of these financial statements.
77
Fifteen
months to
30 September
2019
£m
Note
Year ended
30 June
2018
£m
6
6
6
20
20
20
20
15
10
11
12
17
13
13
147.9
(115.4)
32.5
(15.7)
–
12.6
2.0
0.2
1.1
32.7
(9.4)
1.7
25.0
(0.4)
24.6
(0.4)
24.2
147.4
(115.6)
31.8
(9.4)
0.1
–
1.0
–
–
23.5
(5.1)
0.9
19.3
(3.9)
15.4
–
15.4
11.79p
11.47p
7.64p
7.30p
26868
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Proof 21
www.inlandhomesplc.comReport and Accounts 2019 Inland HomesFINANCIAL STATEMENTS 78
Statements of financial position
at 30 September 2019
Company number 5482990
ASSETS
Non-current assets
Investment properties
Property, plant and equipment
Intangible assets
Investments in quoted companies
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
Assets held for sale
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 earnings
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
Bank loans
Other loans
Zero Dividend Preference shares
Deferred tax
Total non-current liabilities
Total equity and liabilities
Group
Company
30 September
2019
£m
Note
30 June
2018
£m
30 September
2019
£m
30 June
2018
£m
15
16
19
17
20
20
20
20
20
23
21
22
23
18
20
20
24
25
26
26
26
26
26
28
28
27
30
28
28
28
21
49.3
6.3
0.3
1.1
–
8.0
1.0
1.3
–
21.8
–
89.1
192.4
45.4
4.7
–
3.3
34.8
10.9
291.5
380.6
20.7
36.4
(1.1)
–
1.1
105.1
162.2
48.0
–
47.7
2.2
4.1
102.0
82.1
7.2
25.9
1.2
116.4
380.6
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
–
–
–
12.5
–
–
–
–
–
0.8
13.3
–
40.2
–
–
–
–
7.1
47.3
60.6
20.7
36.4
(1.1)
–
1.1
2.9
60.0
–
–
0.6
–
–
0.6
–
–
–
–
–
60.6
–
–
–
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
Retained earnings for the Company includes a loss after tax for the period of £3.4m (year ended 30 June 2018: profit after tax of £7.5m).
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.
The financial statements were approved and authorised for issue by the Board of Directors on 30 January 2020.
Stephen Wicks
Director
Nishith Malde
Director
The accompanying notes form part of these financial statements.
26868
5 February 2020 1:53 pm
Proof 21
Stock code: INLInland Homes Report and Accounts 2019FINANCIAL STATEMENTS Statements of changes in equity
for the 15-month period ended 30 September 2019
Group
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
Transitional IFRS 15 adjustment
At 30 June 2018 – restated
Total profit for the period
Other comprehensive income
Transactions with owners:
Share-based payments
Dividend payment
Issue of ordinary shares
Purchase of own shares
Exercise of share options
At 30 September 2019
Company
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
Total comprehensive loss for the period
Transactions with owners:
Share-based payments
Dividend payment
Issue of ordinary shares
Purchase of own shares
Exercise of share options
At 30 September 2019
Note
Share
capital
£m
20.4
–
Share
premium
£m
34.3
–
Employee
Benefit
Trust
£m
(1.1)
–
Special
reserve
£m
6.1
–
Treasury
reserve
£m
–
–
Retained
earnings
£m
70.9
15.4
9
14
25
25
25
5
17
9
14
25
25
25
9
14
25
25
25
9
14
25
25
25
–
–
0.1
–
–
20.5
–
20.5
–
–
–
–
0.2
–
–
20.7
20.4
–
–
–
0.1
–
–
20.5
–
–
–
0.2
–
–
20.7
–
–
0.5
–
–
34.8
–
34.8
–
–
–
–
1.6
–
–
36.4
34.3
–
–
–
0.5
–
–
34.8
–
–
–
1.6
–
–
36.4
–
–
–
–
–
(1.1)
–
(1.1)
–
–
–
–
–
–
–
(1.1)
(1.1)
–
–
–
–
–
–
(1.1)
–
–
–
–
–
–
(1.1)
–
–
–
–
–
6.1
–
6.1
–
–
–
(5.0)
–
–
–
1.1
6.1
–
–
–
–
–
–
6.1
–
–
(5.0)
–
–
–
1.1
–
–
–
(0.6)
0.1
(0.5)
–
(0.5)
–
–
–
–
–
(0.1)
0.6
–
–
–
–
–
–
(0.6)
0.1
(0.5)
–
–
–
–
(0.1)
0.6
–
0.6
(3.7)
(0.6)
–
–
82.6
0.2
82.8
24.6
(0.4)
0.3
–
(1.8)
–
(0.4)
105.1
4.4
7.5
0.6
(3.7)
(0.6)
–
–
8.2
(3.4)
0.3
–
(1.8)
–
(0.4)
2.9
The accompanying notes form part of these financial statements.
79
Total
£m
130.6
15.4
0.6
(3.7)
–
(0.6)
0.1
142.4
0.2
142.6
24.6
(0.4)
0.3
(5.0)
–
(0.1)
0.2
162.2
64.1
7.5
0.6
(3.7)
–
(0.6)
0.1
68.0
(3.4)
0.3
(5.0)
–
(0.1)
0.2
60.0
26868
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www.inlandhomesplc.comReport and Accounts 2019 Inland HomesFINANCIAL STATEMENTS
80
Group statement of cash flows
for the 15-month period ended 30 September 2019
Cash flow from operating activities
Profit for the period/ year before tax
Adjustments for:
– depreciation
– share–based payments
– revaluation of investment property
– gain on disposal of subsidiary
– interest expense
– interest receivable and similar income
– gain on sale of joint venture interest
– IFRS 15 opening adjustment
– share of profit of joint ventures
– share of profits of associates
Corporation tax payments
Change in working capital:
– increase in inventories
– increase in trade and other receivables
– increase/(decrease) in trade and other payables
– increase in other financial liabilities
– increase in trading balance due to joint ventures
Net cash outflow from operating activities
Cash flow from investing activities
Interest received
Purchases of property, plant and equipment
Purchases of intangible assets
Purchases of investment property
Purchases of quoted investments
Proceeds from sale of subsidiary
Loans provided to joint ventures
Amounts repaid by joint ventures
Distribution of profits from joint venture
Amounts repaid by associate
Net cash (outflow)/inflow from investing activities
Cash flow from financing activities
Interest paid
Repayment of borrowings
New loans
Issue of zero dividend preference shares
Equity dividends paid to ordinary shareholders
Exercise of share options
Purchase of own shares
Net cash inflow from financing activities
Net (decrease)/increase in cash and cash equivalents
Net cash and cash equivalents at beginning of period/year
Net cash and cash equivalents at end of period/year
The accompanying notes form part of these financial statements.
26868
5 February 2020 1:53 pm
Proof 21
Fifteen
months to
30 September
2019
Note
Year ended
30 June
2018
25.0
19.3
16
8
15
10
11
20
20
20
20
11
16
19
17
20
20
20
14
24
0.7
0.3
(1.1)
–
9.4
(1.7)
(12.6)
0.2
(2.0)
(0.2)
(5.6)
(50.8)
(7.9)
7.9
0.4
4.1
(33.9)
1.0
(5.4)
(0.3)
(1.5)
–
–
(19.9)
–
1.0
2.6
(22.5)
(7.0)
(20.0)
52.6
6.2
(5.0)
0.1
–
26.9
(29.5)
40.4
10.9
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
Stock code: INLInland Homes Report and Accounts 2019FINANCIAL STATEMENTS 81
Notes to the financial statements
for the 15-month period ended 30 September 2019
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.
On 6 June 2019, the Group and Company
changed its accounting reference date
from 30 June to 30 September so that
the reporting timetable was more closely
aligned to value recognition and the
operational cycles of the business.
As a result of the change in the Group and
Company’s accounting reference date, the
current period presented is 15 months in
comparison to the comparative information
which is for 12 months. The current period
is therefore not entirely comparable with the
prior year.
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 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. 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; and
• 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 does not present
its own profit and loss account in these
financial statements.
Going concern
The Group’s business activities, together
with factors likely to affect its future
development and performance, are set
out in the Strategic Report on pages 10
to 49. In particular, the management of
the risks and uncertainties affecting the
Group are set out on pages 30 to 34. The
financial position of the Group, its borrowing
facilities and headroom at 30 September
2019 are described in the Group Finance
Director’s review on pages 24 to 28. Further
disclosures regarding the Group’s financial
instruments and exposure to credit and
liquidity risk are set out in note 29 of the
Financial Statements.
The Board has reviewed the Group’s
projected business activities, corresponding
cash flow forecasts to 30 September 2021,
available borrowing facilities and related
covenant compliance. The Group currently
has facilities totalling £48.0m that fall due
for repayment in the 12 months from the
date of signing these financial statements. It
has also assessed sensitivity analysis based
on the following downside scenarios:
• possible delay in significant land disposal
by two or three months; and
• and a fall in house prices by 10% from
the Group’s budget prices.
As part of the Group’s normal operations,
it has secured a loan facility which could
be drawn down in May 2020, should
management conclude this is in the best
interests of the business. This facility
mitigates all downside scenarios referred
to above.
The forecasts assume significant
management fees receivable which are
dependent on the sales of certain parcels
of land. These receipts will be used to repay
a revolving credit facility which expires in
August 2020. The lender has confirmed that
they expect this facility to be renewed upon
expiry in any event.
Where the Group proposes to provide
deferred consideration terms to potential
purchasers of land, it would consider the
credit worthiness of the counter-party and
where ever possible procure security or a
promissory note which could be discounted
with a lender.
The Directors have considered the present
economic climate, the current demand for
land with planning consent and the state of
the housing market in the geographic areas
where the Group operates. The Group has
significant forward sales of its residential
homes under construction as well as a
substantial order book for its partnership
housing activity. It is also in negotiations
for the sale of certain land assets within its
land bank and expects to make sufficient
disposals in the foreseeable future to
ensure it has sufficient working capital for
its requirements.
After making appropriate enquiries, the
Directors have a reasonable expectation that
the Company and the Group have adequate
resources to continue in operational
existence for the foreseeable future. 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 4 and are consistent
with those applied in the Group’s financial
statements for the 15 month period to
30 September 2019 and year ended 30 June
2018, as amended to reflect the adoption
of new standards, amendments and
interpretations which became effective in
the year as shown below.
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www.inlandhomesplc.comReport and Accounts 2019 Inland HomesFINANCIAL STATEMENTS 82
Notes to the financial statements CONTINUED
for the 15-month period ended 30 September 2019
2. Changes in accounting
policies continued
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 September 2019 period end and had no
material impact on the financial statements.
• IAS 40 (amended) – Transfers of
Investment Property;
• IFRS 2 (amended) – Share Based
Payments; and
• Annual Improvements to IFRSs (2014-
2016 Cycle)
IFRS 9 – Financial Instruments
IFRS 9, ‘Financial instruments’ (‘IFRS 9’),
replaces the provisions of IAS 39, ‘Financial
Instruments’ that relate to the recognition,
classification and measurement of financial
assets and financial liabilities; derecognition
of financial instruments; impairment of
financial assets and hedge accounting. IFRS
9 also significantly amends other standards
dealing with financial instruments such as
IFRS 7, ‘Financial Instruments: Disclosures’.
IFRS 15 – Revenue from
Contracts with Customers
IFRS 15, ‘Revenue from contracts with
customers’ (‘IFRS 15’), establishes a
principles based approach for revenue
recognition and is based on the concept of
recognising revenue for obligations only
when they are satisfied and the control of
goods or services is transferred. It applies
to all contracts with customers, except
those in the scope of other standards.
Information on the initial application of IFRS
9 and IFRS 15, including the impact on the
financial position and performance of the
Group, can be found in note 5.
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, with the
exception of IFRS 16 where the expected
impact is outlined below.
• Amendments to IFRS 9: Financial
Instruments;
• Amendments to IAS 28: Long-term
interests in Associates and Joint
Ventures;
• Amendments to IAS 19: Plan
Amendment, Curtailment or Settlement;
• Annual Improvements to IFRSs (2015-
2017 Cycle);
• Amendments to IFRS 3 Business
Combinations*;
• Amendments to IFRS 17: Insurance
Contracts*;
• Amendments to References to the
Conceptual Framework in IFRS
Standards*; and
• IFRIC 23 Uncertainty over Income Tax
Treatments.
* Standards and amendments not yet endorsed by
the EU.
IFRS 16 Leases has also been endorsed and
will be effective for the Group for the year
ending on 30 September 2020.
IFRS 16 – Leases
IFRS 16 ‘Leases’ was issued in January 2016
to replace IAS 17 ‘Leases’ and is effective
for accounting periods beginning on or after
1 January 2019.
IFRS 16 eliminates the classification of
leases for lessees as either operating
leases or finance leases as per IAS 17,
and introduces a single lessee accounting
model. For lessees, lease agreements
will give rise to the recognition of an asset
representing the right to use the leased
item and a corresponding loan obligation
for future lease payables. Lease costs will
be recognised in the form of depreciation
of the right to use asset and interest on the
lease liability. Consequently, there will be
a reduction in operating expenses and an
increase in finance costs. The accounting
for leases that are currently designated as
finance leases will be largely unchanged
under IFRS 16. The accounting for leases
that are currently designated as operating
leases will be fundamentally different to
the current treatment of expensing the
rental charges on a straight line basis.
For lessors, IFRS 16 does not contain
substantial changes compared to IAS 17, a
lessor still has to classify leases as either
finance or operating, depending on whether
substantially all of the risk and rewards
incidental to ownership of the underlying
asset have been transferred. For a finance
lease, the lessor recognises a receivable at
an amount equal to the net investment in
the lease which is the present value of the
aggregate of lease payments receivable by
the lessor and any unguaranteed residual
value. If the contract is classified as an
operating lease, the lessor continues to
present the underlying assets.
The Group will apply the standard from its
mandatory adoption date of accounting
periods commencing on or after 1 January
2019 and intends to apply the modified
retrospective approach.
As at the reporting date, the Group has non-
cancellable operating lease commitments of
£1.7m, see note 32. Of these commitments,
approximately £0.1m relates to short-term
leases which will both be recognised on
a straight-line basis as expense in the
income statement. For the remaining
lease commitments, the Group expects to
recognise lease liabilities of approximately
£1.6m, and an increase to property, plant
and equipment of approximately £1.6m, both
of which will be discounted at the Group’s
incremental borrowing rate, which is
currently being determined by the Directors,
for the purposes of the adoption of the
accounting standard.
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 4. 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
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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
Cost of and net realisable value of
inventories (note 22)
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. The uncertainty
relates to both land and work in progress.
Cost which requires estimation includes
the cost of acquisition of sites, the cost
of infrastructure and construction works,
allocation of site wide costs 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.
Fair value of investment properties
(note 15)
The fair value of materially completed
investment property is determined by
independent valuation experts using the
open market value of existing use method,
subject to current leases and restrictions,
as this has been assessed currently as
the best use of these assets. Investment
properties awaiting construction are
valued by the Directors using an appraisal
system; critical accounting estimates
relate to the forecasts prepared in order to
assess the carrying value. See note 15 for
information about valuation methodology
and assumptions made.
Deferred consideration on transfer of
beneficial interest in Cheshunt Lakeside
Developments Limited (notes 20 and 23)
The Group discounts deferred consideration
payable or receivable using the discounted
cash flow method; the Group considers the
expected timing of payments and receipts
and uses the third party cost of debt capital
as the most appropriate discount rate
and these are considered to be significant
estimates.
The Group sold its beneficial interest of
50% of Cheshunt Lakeside Developments
Limited on deferred terms and estimate a
discount to present value calculated from
disposal. At the period end this resulted
in an other receivable of £19.9m disclosed
in note 23. Further details of Cheshunt
Lakeside Developments Limited are
provided in note 20.
The impact of a change in the discount rates
by one percent up on the receipt would be a
reduction in the receivable of £0.8m and the
impact of a change in the discount rates by
one percent down on the receipt would be
an increase in the receivable of £1.6m.
Management do not envisage a timing
opportunity where the receipt of the
receivable could be brought forward.
The impact of a delay in receipt of twelve
months, at the current discount rate, would
be a reduction in the receivable of £0.7m.
Significant judgements
Timing and recoverability of repayment
– amounts due from joint ventures and
associate (note 20)
Certain 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
and whether they will be recovered within
the normal operating cycle of the business.
Amounts are then disclosed as either
due in less than one year or greater than
one year accordingly. The recoverability of
receivables are dependent on the future
profitability of land are development sales.
The judgements involved are the same as
outlined above for inventories.
Likelihood of achieving planning –
inventories (note 22)
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
Directors believe that, based on the Group’s
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 taking account
of 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. £0.4m (year
ended 30 June 2018: £1.4m) of inventories
is held at net realisable value. A provision of
£0.2m (year ended 30 June 2018: £0.7m) was
recognised during the period.
Capitalisation of borrowing costs
(note 22)
The Group capitalises borrowing costs where
there is a qualifying asset. The Directors
must assess each site held within 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 periods.
During the period, the Group capitalised
£1.3m (year ended 30 June 2018: £1.1m) of
borrowing costs. 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.
Management fee income (note 6)
The Group recognises revenue in respect
of management services equal to the
amounts entitled, invoiced or accrued. Each
management fee formula in the contract
reflects progress at any given time to the
satisfaction of the contracts performance
obligations which involves judgement.
There were a number of material
management fee contracts that were either
ongoing or commenced in the period. For
each management contract there are a
number of milestones and obligations. The
Directors had to make significant judgements
for each contract based on:
• whether each milestone constituted a
distinct performance obligation;
• whether the obligations have been
satisfied; and
• whether the revenue is recognised at a
point in time or over time.
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Notes to the financial statements CONTINUED
for the 15-month period ended 30 September 2019
3. Significant judgements,
key assumptions and
estimates continued
The significant judgements made were in
relation to the following contracts:
Bucknalls
For the contract at Farrier’s Wood, the
Directors concluded the milestones in
the scheme were not distinct from one
another in the context of the contract. It
was therefore concluded that there was a
single performance obligation, to manage
the scheme on behalf of their joint venture.
Management considered that there was a
significant level of integration between the
various stages and the overall objective of
the contract was to sell the development
for maximum value. They further concluded
that the income in relation to this contract
should be recognised over time, given that
the management of the project is over an
agreed period, and the customer is receiving
and consuming the benefits to their asset
over the length of the contract.
Hillingdon Gardens
For the contract at Hillingdon Gardens, it
was determined that there were a number
of distinct performance obligations of
which five were satisfied in the period
to 30 September 2019. It was concluded
that these were distinct on the basis the
customer benefitted from each of the
milestones and that these milestones were
considered separable in the context of the
contract. The performance obligations
recognised were considered satisfied in
the period as control of the relating service
was transferred to customer before the
period end. For the remaining performance
obligations still to be satisfied, it was
determined by the Directors that they will
be recognised in future periods at a point in
time, given that they fail to meet the criteria
to be recognised over time.
Accounting for the investment in
Cheshunt Lakeside Developments
Limited and the associated put and call
option arrangement (note 20)
In addition to a direct holding in Cheshunt
Lakeside Developments Limited (CLDL)
(see note 20), the Group held a put and call
option over the other joint venture partner’s
50% share. Certain conditions were
attached to the options which needed to be
met in order for either side of the option to
be exercised. The Directors determined that
the acquisition date of CLDL was 6 June
2019 given that this was considered to be
the date where there were no conditions
outside of Inland’s control and therefore
Inland had full control to exercise their
option. It was therefore considered that
from this date the Group had the ability to
control CLDL and it should be consolidated
as a subsidiary from this date.
Further judgement was exercised by the
Directors as to whether CLDL constituted
a business in determining the correct
treatment for the acquisition. The Directors
considered whether CLDL meets the
definition of a business and therefore
whether it should be accounted for as a
business combination. It was determined
that CLDL did not meet the definition of
a business as the entity did not include
significant inputs, outputs and processes
that were capable of being managed
together for providing a return to investors.
The transaction was therefore treated as an
asset acquisition.
Asset held for sale (note 18)
At 30 September 2019, the Directors’
intention was to sell some investment
properties over 12 months to 30 September
2020. These assets have been reclassified to
assets held for sale at the expected disposal
value after allowing for costs of disposal.
The Directors have made a judgement that
the properties will sell within 12 months.
Overages
Estimates are involved when determining
how much revenue to recognise in relation
to variable consideration where Inland
Homes is entitled to an overage in relation
to future sales at a site sold by Inland
Homes to a customer. When determining
how much of the variable revenue to
recognise at the point of sale, the Directors
estimate the amount that they would expect
to receive based on market evidence for
current house prices. They then consider
the risk of a significant reversal of this
revenue in future periods and constrain it
accordingly.
Land and house building sales margins
There are significant estimates involved
in determining the appropriate profit
margin to recognise on land and residential
sales. Assumptions are required to be
made as to future costs to complete and
future sales prices to be achieved on the
remaining units. The Directors use detailed
project appraisals for each development
to determine the appropriate profit margin
to recognise which forecasts the costs to
complete on such developments and the
anticipated sales prices, which has been
determined based on the type, specification
and location of the property. The financial
outturn in both the current period and prior
year relating to land and house building
sales margins is disclosed in note 6.
Contract income revenue and
profit recognition
The revenue and profit recognition on
contract income involve significant
judgement and estimates with regards
to assessing the stage of completion
of the development and the anticipated
margin. Assumptions are required to be
made as to the future costs to complete
to determine the appropriate margin and
this is determined through detailed project
appraisals. The stage of the development
is determined through monthly valuation
surveys conducted by Inland Homes and
the customer who then agree the value of
the work completed. The financial outturn
in both the current period and prior year
relating to contract income and revenue and
profit recognition is disclosed in note 6.
4. 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 September
2019. 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 and development agreements.
Further information can be found in note 20.
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
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been adjusted where necessary to ensure
consistency with the accounting policies
adopted by the Group.
Acquisitions of subsidiaries are dealt with
by the acquisition method. The method
involves the recognition at fair value of all
identifiable assets and liabilities, including
contingent liabilities and non-controlling
interests of the subsidiary, at the acquisition
date, regardless of whether or not they
were recorded in the financial statements
of the subsidiary prior to acquisition. On
initial recognition, the assets and liabilities
of the subsidiary are included in the Group
Statement of Financial Position at their fair
values, which are also used as the basis for
subsequent measurement in accordance
with the Group accounting policies. Goodwill
is stated after separating out identifiable
intangible assets. Goodwill represents the
excess of the fair value of the consideration
transferred over the fair value of the Group’s
share of the identifiable net assets and
non-controlling interests of the acquired
subsidiary at the date of acquisition.
At the time of acquisition, the Group
considers whether each acquisition
represents the acquisition of a business
or the acquisition of an asset. The Group
accounts for an acquisition as a business
combination where an integrated set
of activities is acquired in addition to
the property. Where such acquisitions
are not judged to be the acquisition of a
business, they are not treated as business
combinations. Rather, the cost to acquire
the corporate entity is allocated between the
identifiable assets and liabilities of the entity
based upon their relative fair values at the
acquisition date. Accordingly, no goodwill or
additional deferred tax arises.
Joint ventures and associate
Joint ventures are entities in which the
Group has shared control with another
entity, established by contractual
agreement. 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. Joint ventures and
associates are initially recorded in the Group
Statement of Financial Position at cost and
are accounted for using the equity method.
All subsequent changes to the share of
interest in the equity of joint ventures and
associates are recognised in the Group’s
carrying amount of the investment. Changes
resulting from the profit or loss generated
are recognised in the Group’s carrying
amount of the investment and in ‘share of
profit of joint ventures’ for joint ventures and
‘share of profit of associate’ for 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. Both realised and unrealised gains
on transactions between the Group and its
joint ventures and associates are eliminated
to the extent of the Group’s investment in
joint ventures and associates. 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 and
associates are consistent with those of the
Group.
The Company investments in joint ventures
are held at cost.
Business combinations
At the time of acquisition, the Group
considers whether each acquisition
represents the acquisition of a business
or the acquisition of an asset. The Group
accounts for an acquisition as a business
combination where an integrated set
of activities is acquired in addition to
the property. Where such acquisitions
are not judged to be the acquisition of a
business, they are not treated as business
combinations. Rather, the cost to acquire
the corporate entity is allocated between the
identifiable assets and liabilities of the entity
based upon their relative fair values at the
acquisition date. Accordingly, no goodwill or
additional deferred tax arises.
Revenue
In the current year, the Group adopted
IFRS 15 ‘Revenue from Contracts with
Customers’. This establishes a principles
based approach for revenue recognition
and is based on the concept of recognising
revenue for obligations only when they
are satisfied and the control of goods or
services is transferred.
The standard is applicable to sales of
land and sales of reversionary freehold,
sales of residential units, property
construction services and management
fees from management of sites owned by
third parties but excludes rental income
which is accounted for within the scope
of IAS 17 ‘Leases’. The adoption of IFRS
15 has not had a significant impact on the
revenue recognition policies of the Group
or treatment of revenue undertaken in the
prior year period to 30 June 2018.
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.
Overages
Any variable consideration on overages is
estimated at the point of sale taking into
consideration the time to recover overage
amounts as well as other factors which may
give rise to variability. It is only recognised
to the extent that it is highly probable that
there will not be a significant reversal in the
future and is reassessed throughout the
duration of the sales contracts.
Sale of land and sales of
freehold
Revenue from the sale of land and
reversionary freeholds are recognised at a
point in time on legal completion when all
the following conditions have been satisfied:
• the Group has transferred to the buyer
the control 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.
In respect of land sales, a contract is
established through a formal purchase
process that involves the formal exchange of
contracts facilitated by legal advisors.
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Notes to the financial statements CONTINUED
for the 15-month period ended 30 September 2019
By nature of property transactions, all offers
to purchase are subject to the customer
successfully securing the required funds.
At the point when contracts are exchanged
payment terms are agreed and funding to
pay the purchase consideration must be
secured and verified. This ensures that
collectability is probable i.e. more likely than
not, prior to commencement of the contract.
Sale of residential units
In respect of sales of residential units, a
contract is established through a formal
purchase process that involves the formal
exchange of contracts facilitated by
legal advisors. Revenue from the sale of
residential units is recognised at a point in
time on legal completion at the point where
the Group has transferred to the buyer the
control of the units.
By nature of property transactions, all offers
to purchase are subject to the customer
successfully securing the required funds.
At the point when contracts are exchanged
payment terms are agreed and funding to
pay the purchase consideration must be
secured and verified. This ensures that
collectability is probable i.e. more likely than
not, prior to commencement of the contract.
Contract income
The Group acts as a main contractor on
certain building projects, primarily on behalf
of the 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.
Revenue on construction contracts is
recognised over time as the performance
obligations are satisfied. The output
method is used to measure the progress of
Inland’s performance over the duration of
the contract. This is done monthly through
valuation surveys conducted by Inland and
by the customer respectively who then
agree the value of work completed. The
agreed valuation is used to determine the
revenue to be recognised for the period.
Where the outcome of a contract on which
revenue is recognised over time cannot be
estimated reliably, revenue is recognised to
the extent of contract costs incurred.
Management fee income
For each management contract there are a
number of milestones, which varies contract
to contract, but in all cases includes a
planning and a disposal obligation. The
Directors must exercise judgement over
whether each milestone constitutes a
distinct performance obligation. In doing do
they consider whether each milestone has
a single commercial objective, whether any
of the milestones are interdependent on any
other milestone, and whether the service
or goods being provided represents a single
performance obligation. In determining
the number of performance obligations,
the Directors also consider the level of
integration between the milestones.
Once the number of performance
obligations has been determined, the
Directors will exercise further judgement
to allocate the consideration to each
obligation, which is based on the stand-
alone selling price of each performance
obligation. Once the Group considers
that the outcome of the contract can be
reliably estimated then revenue and profit
is recognised based on the proportion of
the contract that is completed. There is
also judgement in considering whether
the obligations have been satisfied, and
whether the revenue is recognised at a point
in time or over time. This is assessed on
a performance obligation by performance
obligation basis. In general, the Directors
have assessed that any construction or
management of construction obligations
are satisfied over time, given that Inland
Homes’ work enhances an asset controlled
by the customer. The planning and disposal
obligations have been assessed to be
recognised at a point in time. Refer to
note 6.
Golden brick income
Sales of land where title transfers prior to
construction beginning (or at ‘golden brick’)
are considered to be a distinct performance
obligation.
Revenue from land sales is recognised
at a point in time, being the completion
of contracts usually achieved at ‘golden
brick’. The separate construction element
of the contract is recognised over time in
accordance with the Group’s policy above for
construction contracts.
Rental income
Rental income derived from operating
leases is recognised on a straight line basis
over the lease term.
Property, plant and equipment
Property, plant and equipment is stated at
cost, net of depreciation and any provision
for impairment.
Disposal of assets
The gain or loss arising on the disposal of
an asset is determined as the difference
between the disposal proceeds and the
carrying amount of the asset and is
recognised in the Group Income Statement.
Depreciation
Depreciation is calculated to write down
the cost less estimated residual value of
all property, plant and equipment by the
straight line method where it reflects the
basis of consumption of the asset. The rates
generally applicable are:
Fixtures and fittings – 25%
– 25%
Office equipment
– 25%
Motor vehicles
– Over useful
Modular housing
economic life
estimated at 40 years
Material residual value estimates are
reviewed as required, but at least annually.
Investment property
Investment properties are those properties
which are not occupied by the Group and
which are held for long-term rental yields,
capital appreciation or both.
Investment property also includes
investment property under construction
that will be developed for future use as
investment property.
Investment properties are initially measured
at cost, including related transaction costs.
At each subsequent reporting date they are
remeasured to their fair value. Movements
in fair value are included in the Group
Income Statement. Investment properties
are valued by the Directors based on up to
date market information.
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
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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.
Intangible assets
Intangible assets, comprising costs
incurred in the development phase of new
business models and associated set-up
costs, are stated at cost less provisions
for both amortisation and impairments.
Development phase costs relate to
new business models either separately
acquired or acquired as part of a business
combination are amortised over their
estimated useful lives, generally not
exceeding 20 years, using the straight-line
basis, from the time they are available
for use. The estimated useful lives for
determining the amortisation charge
considers the expected business model
life. Asset lives are reviewed, and where
appropriate adjusted, annually.
Research costs are recognised in the
Income Statement as incurred.
The rates generally applicable are:
Enterprise Resource Planning system – 10%
– 25%
Development costs
– 25%
Website costs
– 25%
Other computer software
Inventories
Inventories consist of land and work in
progress and are valued at the lower
of cost and net realisable value. Cost
includes the purchase of sites, the cost of
infrastructure and construction works, and
legal and professional fees incurred during
development prior to sale. Net realisable
value is estimated based upon the future
expected selling price, less estimated costs
of completion and estimated costs to sell.
Assets held for sale
Non-current assets are classified as held
for sale when:
• they are available for immediate sale;
• management is committed to a plan to
sell;
•
it is unlikely that significant changes to
the plan will be made or that the plan
will be withdrawn;
• an active programme to locate a buyer
has been initiated;
• the asset or disposal group is being
marketed at a reasonable price in
relation to its fair value; and
• a sale is expected to complete within 12
months from the date of classification.
Non-current assets classified as held for
sale are measured at the lower of:
• their carrying amount immediately prior
to being classified as held for sale in
accordance with the Group’s accounting
policy; and
• fair value less costs of disposal.
Following their classification as held
for sale, non-current assets are not
depreciated.
The results of operations disposed during
the year are included in the consolidated
statement of comprehensive income up to
the date of disposal.
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.
Employee benefits
Defined contribution retirement benefit
scheme
The Group operates a defined contribution
retirement benefit scheme pension and
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 and Company
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.
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Notes to the financial statements CONTINUED
for the 15-month period ended 30 September 2019
4. Significant accounting
policies continued
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
The Group classifies its financial assets
into one of the categories discussed below,
depending on the purpose for which the
asset was acquired. The Group’s accounting
policy for each category is as follows:
Fair value through profit or loss
This category comprises amounts due
from joint ventures (refer to note 20) where
the terms of the loan are inconsistent
with a basic lending agreement and are
therefore not solely payments of principal
and interest. This balance is carried in the
statement of financial position at fair value
with changes in fair value recognised in the
consolidated statement of comprehensive
income in the finance income or expense
line. Other than amounts due from
joint ventures, the Group does not have
any assets held for trading nor does it
voluntarily classify any financial assets as
being at fair value through profit or loss.
Amortised cost
These assets arise principally from
the provision of goods and services to
customers (e.g. trade receivables), but
also incorporate other types of financial
assets where the objective is to hold these
assets in order to collect contractual cash
flows and the contractual cash flows are
solely payments of principal and interest.
They are initially recognised at fair value
plus transaction costs that are directly
attributable to their acquisition or issue, and
are subsequently carried at amortised cost
using the effective interest rate method,
less provision for impairment.
Impairment provisions for current and non-
current trade receivables are recognised
based on the simplified approach within
IFRS 9 using a provision matrix in the
determination of the lifetime expected credit
losses. During this process the probability
of the non-payment of the trade receivables
is assessed. This probability is then
multiplied by the amount of the expected
loss arising from default to determine the
lifetime expected credit loss for the trade
receivables. On confirmation that the trade
receivable will not be collectable, the gross
carrying value of the asset is written off
against the associated provision.
Impairment provisions for all other
receivables are recognised based on a
forward looking expected credit loss model.
The methodology used to determine the
amount of the provision is based on whether
there has been a significant increase in
credit risk since initial recognition of the
financial asset. For those where the credit
risk has not increased significantly since
initial recognition of the financial asset,
twelve month expected credit losses. For
those for which credit risk has increased
significantly, lifetime expected credit
losses are recognised. For those that are
determined to be credit impaired, lifetime
expected credit losses along with interest
income on a net basis are recognised.
The Group’s financial assets measured at
amortised cost comprise trade and other
receivables, cash and cash equivalents and
amounts due from joint ventures (other than
those held at fair value through profit and
loss) and associates in the consolidated
statement of financial position.
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.
Fair value through other comprehensive
income
The Group has investments which are not
accounted for as subsidiaries, associates
or joint ventures. For those investments,
the Group has made an irrevocable election
to classify the investments at fair value
through other comprehensive income
rather than through profit or loss as the
Group considers this measurement to be
the most representative of the business
model for these assets. They are carried
at fair value with changes in fair value
recognised in other comprehensive income
and accumulated in the fair value through
other comprehensive income reserve.
Upon disposal any balance within fair value
through other comprehensive income
reserve is reclassified directly to retained
earnings and is not reclassified to profit
or loss.
Dividends are recognised in profit or loss,
unless the dividend clearly represents
a recovery of part of the cost of the
investment, in which case the full or partial
amount of the dividend is recorded against
the associated investments carrying
amount.
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 Inland interpret 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
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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.
Retained earnings represents cumulative
net gains and losses recognised in the
Group income statement together with
other items such as dividends and share-
based payments.
at Fair Value Through Profit and Loss
(FVPL). Financial assets are assigned to
the different categories by management
on initial recognition, depending on the
purpose for which they were acquired.
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 initially recognised
at fair value net of any transaction costs.
Subsequently they 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.
Share capital and other equity
reserves
Ordinary shares are classified as equity.
Incremental costs directly attributable to the
issue of new shares or options are shown
in equity as a deduction, net of tax, from the
proceeds.
Share premium represents amounts
subscribed for share capital in excess of
nominal value less directly attributable
issue costs.
Employee benefit trust represents the
purchase of the Company’s own shares and
are deducted from total equity until they are
issued to employees under the Long Term
Incentive Plan.
Special Reserve represents the capitalisation
of the Parent Company’s reserves to allow for
the possibility of distributions in the future.
A copy of this resolution is available from
Companies House.
Guarantees
All guarantees are deemed to be insurance
contracts. A financial guarantee is
recognised where a contract requires
the issuer to make specified payments to
reimburse the holder for a loss it incurs
because a specified debtor fails to make
payment when due.
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.
5. Adoption of new
accounting standards
In the current period, the Group has adopted
the following accounting standards:
• IFRS 9 ‘Financial Instruments’, and
• IFRS 15 ‘Revenue from Contracts with
Customers’.
IFRS 9
IFRS 9, ‘Financial instruments’ replaces
the provisions of IAS 39 which relates to the
recognition, classification and measurement
of financial assets and financial liabilities;
derecognition of financial instruments;
impairment of financial assets and hedge
accounting. IFRS 9 also significantly
amends other standards such as IFRS 7,
‘Financial Instruments: Disclosures’.
Management have applied the fully
retrospective application of IFRS 9 and
have therefore carried out an assessment
of the implication on the Group’s financial
position for the comparatives at 30 June
2017 and 30 June 2018. In accordance with
the Management’s assessment below,
comparative figures have not been restated.
The transition to IFRS 9 did not have an
impact on the Group’s opening retained
earnings, as a result a reconciliation of
retained earnings is not required.
Treasury Reserve 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.
Financial assets
All financial assets within the scope of IFRS
9 are divided into the following categories:
Amortised Cost and Financial Assets
The Directors have reviewed and assessed
the Group’s financial assets and concluded
that the application of IFRS 9 has had no
impact on the measurement of the Group’s
financial assets. Financial assets have been
reclassified from Loans and Receivables
to Amortised Cost upon adoption of IFRS
9. Equity investments that were previously
classified as Available for Sale have been
reclassified to Fair Value through other
comprehensive income and amounts due
from joint ventures that were measured at
fair value through profit or loss continue to
be measured as such.
Financial liabilities
All the Group’s financial liabilities are
held at amortised cost. The IFRS 9
requirements regarding the classification
and measurement of financial liabilities
are broadly consistent with the previous
standard, IAS 39. Accordingly, the adoption
of IFRS 9 has had no impact on the
classification and measurement of the
Group’s financial liabilities.
Impairment of financial assets
IFRS 9 requires an expected credit loss
approach to impairment rather than the
incurred credit loss model under IAS
39. This requires the assessment of the
expected credit loss on each class of
financial asset at the reporting date. This
assessment should take into consideration
any changes in credit risk since the initial
recognition of the financial asset.
Management’s assessment of IFRS 9
determined that the main area of potential
impact was impairment provisioning on
trade receivables, and balances due from
joint ventures and associates 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. No adjustments
were considered necessary in respect of
trade receivables, balances due from joint
ventures and associates for the Group and
balances due from subsidiaries for the
Company. See note 31 for further analysis of
conclusions reached.
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Notes to the financial statements CONTINUED
for the 15-month period ended 30 September 2019
5. Adoption of new
accounting standards
continued
Impairment provisions for current and non-
current trade receivables are recognised
based on the simplified approach within
IFRS 9 using a provision matrix in the
determination of the lifetime expected credit
losses. During this process the probability
of the non-payment of the trade receivables
is assessed. This probability is then
multiplied by the amount of the expected
loss arising from default to determine the
lifetime expected credit loss for the trade
receivables. For trade receivables, which are
reported net, such provisions are recorded
in a separate provision account with the loss
being recognised within cost of sales in the
consolidated statement of comprehensive
income. On confirmation that the trade
receivable will not be collectable, the
gross carrying value of the asset is written
off against the associated provision. No
adjustments were considered necessary for
trade receivables following the assessment
using the simplified approach which requires
expected lifetime losses to be recognised
from initial recognition of the receivables.
Impairment provisions for other receivables
are recognised based on a forward-looking
expected credit loss model. The methodology
used to determine the amount of the
provision is based on whether there has been
a significant increase in credit risk since
initial recognition of the financial asset. For
those where the credit risk has not increased
significantly since initial recognition of the
financial asset, twelve month expected credit
losses along with gross interest income are
recognised. For those for which credit risk
has increased significantly, lifetime expected
credit losses along with the gross interest
income are recognised. For those that are
determined to be credit impaired, lifetime
expected credit losses along with interest
income on a net basis are recognised. No
adjustments were considered necessary for
other receivables.
IFRS 15
IFRS 15, ‘Revenue from contracts with
customers’ (‘IFRS 15’), establishes a
principles based approach for revenue
recognition and is based on the concept of
recognising revenue for obligations only
when they are satisfied and the control
of goods or services is transferred. 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 IAS 17
at the reporting date.
Management have applied the modified
retrospective application of IFRS 15 and
have therefore carried out an assessment
of the implication on the Group’s financial
position for the comparatives at 30 June
2017 and 30 June 2018.
The implementation of IFRS 15 resulted
in some refinement in the timing of
recognition of commissions paid on contract
costs that exceeded 12 months for the year
ended 30 June 2018. Management’s review
of contracts and commissions paid thereon
revealed one contract that exceeded 12
months where commission was paid. The
amount of £0.3m was paid during the fifteen
month period ended 30 September 2019
and the majority component of the revenue
was already recognised, which would result
in recognition during 2018. A prior year
adjustment has not been recognised on the
grounds of immateriality.
The transition to IFRS 15 did not have a
material impact on the Group’s opening
retained earnings. Contract income has
been recognised on the output method with
adjustment required to the opening reserves
of £0.2m in respect of one contract.
The Group implements contracts in place
for its commercial activities and in each
case there is a link between the timing of
the satisfaction of a performance obligation
or performance obligations. As part of a
property and real estate activity, there is
usually a small delay between exchange of
contracts and completion of contracts and
then subsequent completion of performance
obligations. The timing between those
points depends on the commercial terms in
each case but is usually immediate on the
completion of the performance obligation
mainly less than one year from completion
of the performance obligation. Where
the payment occurs more than one year
after the completion of the performance
obligation the contract asset is disclosed
separately and discounted appropriately.
In determining the judgements, and
changes in the judgements, made in
applying IFRS 15 that have significantly
affected the determination of the amount
and timing of revenue from contracts
with customers the Group considers
the judgements, and changes in the
judgements, used in determining the
following:
• The timing of satisfaction of performance
obligations;
• The transaction price and the amounts
allocated to performance obligations
(including any adjustments to the
consideration and whether any of
that consideration is or could become
constrained);
• Allocating the transaction price,
including estimating stand-alone selling
prices of promised goods or services
and allocating discounts and variable
consideration to a specific part of the
contract; and
• Measuring obligations for returns,
refunds and other similar obligations.
There have been additional balance sheet
reclassifications upon transition to IFRS
15. £16.1m previously disclosed as trade
receivables is now classified as trade
receivables from contract revenue with
customers, as outlined in note 23.
When performance obligations are satisfied
over time, the Group uses the output
method since measurement of works on
an application and certification basis with
the respective customer depiction of the
transfer of goods and services under such
contracts. Contract income and certain
performance obligations of management
fee contracts are the Group’s income
stream recognised over time. The remaining
revenue streams are recognised at a point
in time. A customer gains control of goods
and services at such time their contractual
liability to the Group has been extinguished.
Specific disclosure of contracts and their
associated performance obligations
and payment terms is not made as it is
commercially sensitive.
The Group has applied a practical expedient
whereby the Group does not need to
disclose performance obligations not yet
satisfied where either the performance
obligation is part of a contract that originally
was expected to have a duration of one
year or less or the entity has a right to
consideration from a customer in an
amount that corresponds directly with
the value to the customer of the entity’s
performance completed to date.
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6. 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. This is also deemed to be the appropriate analysis of the disaggregation of revenues
required by IFRS 15.
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
Land
sales
£m
Management
fees
£m
Contract
income
£m
House
building
£m
Rental
income
£m
Investment
properties
£m
15-month period to
30 September 2019
Revenue from contracts with
customers
Other Revenue
Cost of sales
Gross profit
Administrative expenses
Gain on sale of joint venture
interest
Share of profit of joint ventures
Share of profit of associate
Revaluation of investment
property
Operating profit/(loss)
Net finance cost
Profit/(loss) before tax
Tax charge
Total profit/(loss) for the
period
Other comprehensive income
Total profit and comprehensive
income/(loss) for the period
Other
£m
–
–
–
–
(15.7)
–
–
–
–
(15.7)
(0.3)
(16.0)
0.3
(15.7)
(0.4)
Total
£m
144.9
3.0
(115.4)
32.5
(15.7)
12.6
2.0
0.2
1.1
32.7
(7.7)
25.0
(0.4)
24.6
(0.4)
(16.1)
24.2
29.2
–
(24.3)
4.9
–
–
–
–
4.9
(1.5)
3.4
(0.1)
3.3
–
3.3
18.6
–
(2.5)
16.1
–
–
–
–
–
16.1
0.7
16.8
(0.3)
16.5
–
16.5
62.6
–
(57.1)
5.5
–
–
–
–
–
5.5
–
5.5
(0.1)
5.4
–
5.4
34.5
–
(30.6)
3.9
–
12.6
2.0
0.2
–
18.7
(4.8)
13.9
(0.2)
13.7
–
13.7
–
1.5
(0.9)
0.6
–
–
–
–
–
0.6
–
0.6
–
0.6
–
0.6
–
1.5
–
1.5
–
–
–
–
1.1
2.6
(1.8)
0.8
–
0.8
–
0.8
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Notes to the financial statements CONTINUED
for the 15-month period ended 30 September 2019
6. Segmental information continued
Year ended 30 June 2018
Revenue from contracts with
customers
Other 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
Total profit/(loss) for the year
Land
sales
£m
Management
fees
£m
Contract
income
£m
House
building
£m
Rental
income
£m
Investment
properties
£m
Other
£m
Total
£m
59.3
–
(41.0)
18.3
–
–
–
18.3
(1.6)
16.7
(3.1)
13.6
2.4
–
–
2.4
–
–
–
2.4
–
2.4
(0.2)
2.2
12.0
–
(10.2)
1.8
–
–
–
1.8
–
1.8
(0.1)
1.7
70.2
–
(62.5)
7.7
–
–
0.8
8.5
(0.9)
7.6
(0.5)
7.1
–
0.7
(0.1)
0.6
–
–
0.2
0.8
–
0.8
–
0.8
1.3
–
(0.3)
1.0
–
0.1
–
1.1
(1.2)
(0.1)
(0.1)
(0.2)
–
1.5
(1.5)
–
(9.4)
–
–
(9.4)
(0.5)
(9.9)
0.1
(9.8)
145.2
2.2
(115.6)
31.8
(9.4)
0.1
1.0
23.5
(4.2)
19.3
(3.9)
15.4
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 reversionary 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 period, no sales transaction (year ended 30 June 2018: one land sale) with a customer accounted for more than 10% of revenue.
Disaggregation of revenue
The Group has disaggregated revenue into point in time and over time in the following table which is intended to:
• depict how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic date; and
• enable users to understand the relationship with revenue segment information provided in note 6.
Rental income and investment properties income is not disclosed in the table below as these revenue sources do not fall under the IFRS 15
accounting standard.
Fifteen month period to
30 September 2019
Point in time
Over time
Total Revenue
Land
sales
£m
Management
fees
£m
Contract
income
£m
29.2
–
29.2
16.7
1.9
18.6
–
62.6
62.6
House
building
£m
34.5
–
34.5
Total
£m
80.4
64.5
144.9
26868
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Proof 21
Stock code: INLInland Homes Report and Accounts 2019FINANCIAL STATEMENTS 93
30 September 2019
ASSETS
Non-current assets
Investment properties
Property, plant and
equipment
Intangible assets
Investments
Investment in joint ventures
Amounts due from joint
ventures
Investment in associate
Other receivables
Total non-current assets
Current assets
Inventories
Trade and other receivables
Asset held for sale
Amounts due from associate
Amounts due from joint
ventures
Cash and cash equivalents
Total current assets
Total assets
LIABILITIES
Current liabilities
Bank loans and overdrafts
Trade and other payables
Corporation tax
Other financial liabilities
Total current liabilities
Non-current liabilities
Bank loans
Other loans
Zero Dividend Preference
shares
Deferred tax
Total non-current liabilities
Total liabilities
Net assets
Land
£m
House
building
£m
Contract
income
£m
Rental
income
£m
Investment
properties
£m
Management
Fees
£m
Other
£m
Total
£m
–
–
–
–
–
–
–
1.7
1.7
77.2
11.8
–
–
–
–
89.0
90.7
48.0
16.8
–
4.1
68.9
1.1
–
–
–
1.1
70.0
20.7
–
–
–
8.0
1.0
1.3
19.9
30.2
115.2
1.0
3.3
34.8
–
154.3
184.5
–
13.1
–
–
13.1
53.0
7.2
–
–
60.2
73.3
111.2
–
–
–
–
–
–
–
0.2
0.2
–
14.9
–
–
–
–
14.9
15.1
–
14.3
–
–
14.3
–
–
–
–
–
14.3
0.8
–
49.3
5.2
0.3
–
–
–
–
–
–
–
–
–
–
–
–
5.5
49.3
–
–
–
–
–
–
–
5.5
–
–
–
–
–
–
–
–
–
–
–
5.5
–
–
4.7
–
–
–
4.7
54.0
–
1.2
–
–
1.2
28.0
–
–
1.2
29.2
30.4
23.6
–
–
–
–
–
–
–
–
–
–
15.7
–
–
–
–
15.7
15.7
–
–
–
–
–
–
–
–
–
–
–
15.7
–
49.3
1.1
–
1.1
–
–
–
–
2.2
–
2.0
–
–
–
10.9
12.9
15.1
–
2.3
2.2
–
4.5
–
–
25.9
–
25.9
30.4
(15.3)
6.3
0.3
1.1
8.0
1.0
1.3
21.8
89.1
192.4
45.4
4.7
3.3
34.8
10.9
291.5
380.6
48.0
47.7
2.2
4.1
102.0
82.1
7.2
25.9
1.2
116.4
218.4
162.2
26868
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Proof 21
www.inlandhomesplc.comReport and Accounts 2019 Inland HomesFINANCIAL STATEMENTS 94
Notes to the financial statements CONTINUED
for the 15-month period ended 30 September 2019
6. Segmental information continued
30 June 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 joint ventures
Amounts due from associates
Cash and cash equivalents
Total current assets
Total assets
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 liabilities
Net assets
Land1
£m
House
building
£m
Contract
income
£m
Rental
income
£m
Investment
properties
£m
Management
Fees
£m
Other
£m
Total
£m
–
–
–
–
–
–
–
11.0
11.0
85.0
11.5
–
–
–
96.5
107.5
26.0
–
3.1
–
3.7
32.8
1.1
17.2
–
18.3
51.1
56.4
–
–
–
0.4
1.0
1.1
3.0
–
5.5
51.2
6.3
19.0
2.8
–
79.3
84.8
–
–
11.3
–
–
11.3
13.8
17.1
–
30.9
42.2
42.6
–
–
–
–
–
–
–
–
–
–
8.2
–
–
–
8.2
8.2
–
–
2.9
–
–
2.9
–
–
–
–
2.9
5.3
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
52.8
–
–
–
–
–
–
–
52.8
–
1.3
–
–
–
1.3
54.1
–
–
0.4
–
–
0.4
26.5
–
1.9
28.4
28.8
25.3
–
–
–
–
–
–
–
–
–
–
2.4
–
–
–
2.4
2.4
–
–
–
–
–
–
–
–
–
–
–
2.4
–
1.3
0.2
–
–
–
–
–
1.5
–
0.7
–
–
40.4
41.1
42.6
–
18.4
7.2
6.6
–
32.2
–
–
–
–
32.2
10.4
52.8
1.3
0.2
0.4
1.0
1.1
3.0
11.0
70.8
136.2
30.4
19.0
2.8
40.4
228.8
299.6
26.0
18.4
24.9
6.6
3.7
79.6
41.4
34.3
1.9
77.6
157.2
142.4
1 Included within land inventories above is £15.3m (2018: £6.8m) relating to a hotel.
All assets and revenues arose solely in the United Kingdom.
26868
5 February 2020 1:53 pm
Proof 21
Stock code: INLInland Homes Report and Accounts 2019FINANCIAL STATEMENTS 95
Fifteen
months to
30 September
2019
£m
Year ended
30 June
2018
£m
0.7
0.4
0.3
0.1
0.3
0.1
0.1
0.1
7. 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
Non-audit services fees for the period were £18,000 in relation to the interim review (year to 30 June 2018: £18,000).
8. Employee costs
Details of the Directors remuneration are given in the Remuneration Committee report on pages 59 to 63.
The Directors of the Company who served during the period are considered to be key management personnel (year ended 30 June 2018: 8).
Having considered the key decision makers within the Group and in line with its peer group within the industry, the Directors reassessed those
considered to be key management personnel. The combined emoluments for the key management personnel (relating to the period they were
a Director) based upon amounts included in the Group Financial Statements, are set out in the Remuneration Committee report on page 63.
Comparatives with the previous twelve-month reporting period are also provided below.
The employee costs (including Directors) during the period were as follows:
Wages and salaries
Social security costs
Pension costs - defined contribution plans
Share-based payments
Amount capitalised to inventories (note 22)
The average number of employees during the period was as follows:
Key management personnel
Administration
Fifteen
months to
30 September
2019
£m
Year ended
30 June
2018
£m
15.0
1.7
0.4
0.3
17.4
(8.1)
9.3
8.1
0.9
0.2
0.6
9.8
(3.0)
6.8
Fifteen
months to
30 September
2019
Year ended
30 June
2018
3
135
138
8
85
93
Employee costs in respect of key personnel (excluding Directors) during the year ended 30 June 2018 were as follows:
Wages and salaries
Bonuses
Social security costs
Pension
Please see the table in the Remuneration Committee report on page 63 for details of the employee costs of the Directors.
There were no employee or employee benefit expenses in the Company in the current period or prior year.
Year ended
30 June
2018
£m
1.0
0.2
0.2
0.1
1.5
26868
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Proof 21
www.inlandhomesplc.comReport and Accounts 2019 Inland HomesFINANCIAL STATEMENTS 96
Notes to the financial statements CONTINUED
for the 15-month period ended 30 September 2019
9. 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 are still employed by the Company at the time of the options
being exercised. 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 59 to 63.
Exercise
Price
p
Date from
which
Year of grant
exercisable
For the period ended 30 September 2019
2009
2010
2012
2013
2015
2018
2019
16.50 17/12/2012 16/12/2019
18.25 22/11/2013 21/11/2020
17.50 25/06/2015 24/06/2022
32.50 18/06/2016 17/06/2023
70.25 22/06/2018 21/06/2025
67.00 17/07/2021 16/07/2028
61.30 18/03/2022 17/03/2029
Expiry
date
Outstanding
at
1 July 2018
Issued
Exercised
Lapsed
580,000
1,500,000
170,000
390,000
340,000
2,980,000
–
–
–
–
–
1,555,000
500,000
2,055,000
(400,000)
–
–
–
–
–
–
(400,000)
–
–
–
–
(50,000)
(135,000)
–
(185,000)
Exercise
Price
p
Date from
which
exercisable
Expiry
date
Outstanding
at
1 July 2017
Issued
Exercised
Lapsed
Year of grant
For the year ended 30 June 2018
2009
2010
2012
2013
2015
16.50 17/12/2012
18.25 22/11/2013
17.50 25/06/2015
32.50 18/06/2016
70.25 22/06/2018
16/12/2019
21/11/2020
24/06/2022
17/06/2023
21/06/2025
580,000
1,500,000
245,000
490,000
365,000
3,180,000
–
–
–
–
–
–
–
–
(75,000)
(100,000)
–
(175,000)
–
–
–
–
(25,000)
(25,000)
580,000
1,500,000
170,000
390,000
340,000
2,980,000
Outstanding
at
30 September
2019
180,000
1,500,000
170,000
390,000
290,000
1,420,000
500,000
4,450,000
Outstanding
at
30 June 2018
Exercisable
180,000
1,500,000
170,000
390,000
290,000
–
–
2,530,000
Exercisable
580,000
1,500,000
170,000
390,000
340,000
2,980,000
Weighted average exercise price of share options:
Exercisable
Non-exercisable
Total
Weighted average remaining contracted life of share options:
Exercisable
Non-exercisable
Total
30 September
2019
30 June
2018
30 June
2017
26.23p
65.52p
43.18p
25.66p
n/a
25.66p
20.30p
70.25p
27.60p
2.11 years
8.97 years
5.07 years
3.17 years
n/a
3.17 years
3.79 years
7.98 years
4.27 years
The weighted average exercise price of share options exercised and lapsed was 16.50p (2018: 26.07p) and 67.88p (2018: 70.25p) respectively.
The weighted average share price at which share options were exercised during the period was 51.20p (2018: 64.00p).
Volatility was calculated with reference to historical share price information using the closing prices on each business day over the period
since the shares have been listed. No Growth Shares were issued in the current period or prior year.
The share-based payment charged to the Income Statement for the period ended 30 September 2019 is £0.3m (year ended 30 June
2018: £0.6m) with a corresponding deferred tax asset at that date of £0.1m (2018: £0.1m) and £0.3m (2018: £0.6m) of this charge relates to
the Directors.
At 30 September 2019, there were 6,833,004 (2018: 9,647,928) 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 59 to 63.
26868
5 February 2020 1:53 pm
Proof 21
Stock code: INLInland Homes Report and Accounts 2019FINANCIAL STATEMENTS 97
The Executive Directors receive 50% of bonuses in shares which are purchased by the Employee Benefit Trust and the remaining 50%
in cash. 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 59 to 63.
10. Finance cost
Interest expense:
– bank borrowings
– non bank borrowings
– amortisation of loan arrangement fees and other fees
– zero dividend preference shares
Gross finance costs
Finance costs capitalised (note 22)
Fifteen
months to
30 September
2019
£m
Year ended
30 June
2018
£m
3.9
3.6
1.7
1.5
10.7
(1.3)
9.4
3.1
1.3
0.7
1.1
6.2
(1.1)
5.1
Finance costs of £1.3m (year to 30 June 2018: £1.1m) have been capitalised on inventories in the period in accordance with IAS23 Borrowing
Costs (see note 22), using the Group’s cost of borrowing for that loan specific to the development in question.
11. Finance income
Interest from loans to joint ventures and associates
Other interest receivable
Notional interest income
12. Tax charge
Current tax charge
Deferred tax credit (note 21)
Total
Fifteen
months to
30 September
2019
£m
Year ended
30 June
2018
£m
0.7
0.3
0.7
1.7
0.8
0.1
–
0.9
Fifteen
months to
30 September
2019
£m
1.1
(0.7)
0.4
Year ended
30 June
2018
£m
4.0
(0.1)
3.9
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% (2018: 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
Income not deductible for tax purposes
Prior year capital losses now recognised
Other items
Tax charge
Fifteen
months to
30 September
2019
£m
25.0
4.8
0.1
0.3
(0.2)
(0.5)
(2.4)
(1.6)
(0.1)
0.4
Year ended
30 June
2018
£m
19.3
3.7
0.1
0.2
(0.1)
–
–
–
–
3.9
26868
5 February 2020 1:53 pm
Proof 21
www.inlandhomesplc.comReport and Accounts 2019 Inland HomesFINANCIAL STATEMENTS 98
Notes to the financial statements CONTINUED
for the 15-month period ended 30 September 2019
13. Earnings per share
Number of shares
For use in basic measures
Dilutive effect of:
– share options
– deferred bonus shares
– growth shares
For use in diluted measures
Earnings per share
Weighted average
Fifteen
months to
30 September
2019
’000
Year ended
30 June
2018
’000
205,285
201,621
1,500
1,823
2,397
211,005
1,844
1,763
5,790
211,018
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
period end.
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.
During the period ended 30 September 2019, the Group purchased 200,000 shares. On 24 October 2018, 849,241 shares were transferred
from the treasury reserve to satisfy employee share options exercised within the terms of the Company’s share option scheme. In several
transactions during August and September 2019, the Group sold 175,779 shares. At 30 September 2019, no shares were held in treasury.
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. On 19 July 2018, Stephen
Wicks transferred 248 vested LTIP shares to the Company in exchange for the issue of 2,814,924 shares in the Company as referred to in the
Remuneration Committee report on pages 59 to 63.
Basic and diluted EPS
Profit attributable to equity shareholders (£m)
Earnings per share
Diluted earnings per share
Fifteen
months to
30 September
2019
24.2
11.79p
11.47p
Year ended
30 June
2018
15.4
7.64p
7.30p
26868
5 February 2020 1:53 pm
Proof 21
Stock code: INLInland Homes Report and Accounts 2019FINANCIAL STATEMENTS 14. Dividends
15-month period to 30 September 2019
2018 final dividend
2019 interim dividend
2019 interim dividend
Distribution of current year profit
Year to 30 June 2018
2018 interim dividend
2017 final dividend
Distribution of prior year profit
Dividends as reported in the Group statement of changes in equity
Payment
date
Dividend per
share
p
25 January 2019
03 July 2019
12 June 2020
29 June 2018
26 January 2018
1.55
0.85
2.25
0.65
1.20
2019
£m
3.2
1.8
–
5.0
–
–
–
5.0
99
2018
£m
–
–
–
–
1.3
2.4
3.7
3.7
Dividends are not paid on the shares owned by the Employee Benefit Trust. During the period no dividends were received by the Company
from its subsidiaries (2018: £11.0m).
15. Investment properties
Fair value
At 30 June 2017
Additions
Transfer from inventories
Disposals
At 30 June 2018
Additions
Fair value adjustment
Transfer (to)/from inventories
Transfer to assets held for sale
At 30 September 2019
Commercial
properties
£m
Residential
properties
£m
Development
land
£m
Assets under
construction
£m
1.3
–
1.2
(2.5)
–
2.5
0.1
–
–
2.6
47.0
0.5
–
–
47.5
0.2
0.3
(6.3)
(4.7)
37.0
5.3
–
–
–
5.3
0.5
0.7
2.0
–
8.5
–
–
–
–
–
1.2
–
–
–
1.2
Total
£m
53.6
0.5
1.2
(2.5)
52.8
4.4
1.1
(4.3)
(4.7)
49.3
Valuation techniques
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 transactions in consultation with a local
property agent.
26868
5 February 2020 1:53 pm
Proof 21
www.inlandhomesplc.comReport and Accounts 2019 Inland HomesFINANCIAL STATEMENTS 100
Notes to the financial statements CONTINUED
for the 15-month period ended 30 September 2019
15. Investment properties continued
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 £8.5m (2018: £5.3m). The Directors are of
the opinion that developing the site reflects the highest and best use of this asset.
Commercial properties
The Group’s commercial 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 yields achieved in recent transaction in consultation with a local property agent.
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 hierarchy during the period ended 30 September 2019 (year to 30 June 2018: None).
Sensitivity analysis
Commercial properties
Residential properties
Development land
Variable
Variation
House prices
Rental values
House prices
Development costs
+5%
–5%
+5%
–5%
+5%
–5%
+5%
–5%
Increase/(decrease)
2019
£m
0.1
(0.1)
1.9
(1.9)
1.6
(1.3)
(1.1)
0.9
2018
£m
n/a
n/a
2.4
(2.4)
1.6
(1.3)
(1.1)
0.9
Where investment properties are valued on a yield basis the impact of sensitising of the yield would be immaterial.
Income and expense
During the period ended 30 September 2019, £1.5m (year ended 30 June 2018: £1.3m) rental and ancillary income from investment
properties was recognised in the Group Income Statement. Direct operating expenses, including repairs and maintenance, arising from
investment property that generated rental income amounted to £0.3m (year ended 30 June 2018: £0.3m). The Group did not incur any direct
operating expenses arising from investment properties that did not generate rental income (year ended 30 June 2018: £nil).
Restrictions and obligations
At 30 September 2019 there were no restrictions on the realisability of investment property or the remittance of income and proceeds of
disposal (year ended 30 June 2018: None). There are no obligations (year ended 30 June 2018: None) to construct or develop the Group’s
residential or development land investment property.
At 30 September 2019, the historical cost of the Group’s investment properties was £18.3m (at 30 June 2018: £14.7m). Certain of the
investment properties are secured against the Group’s borrowings. For details see note 28.
26868
5 February 2020 1:53 pm
Proof 21
Stock code: INLInland Homes Report and Accounts 2019FINANCIAL STATEMENTS Modular
housing
£m
Motor
vehicles
£m
Office
equipment
£m
Fixtures and
fittings
£m
–
0.8
0.8
4.7
–
5.5
–
–
–
0.3
–
0.3
5.2
0.8
–
0.4
–
0.4
–
(0.1)
0.3
0.2
0.1
0.3
0.1
(0.1)
0.3
–
0.1
0.2
0.5
0.1
0.6
0.7
–
1.3
0.3
0.1
0.4
0.2
–
0.6
0.7
0.2
0.2
0.6
–
0.6
0.3
–
0.9
0.3
0.1
0.4
0.1
–
0.5
0.4
0.2
0.3
16. Property, plant and equipment
Group
Cost
At 30 June 2017
Additions
At 30 June 2018
Additions
Disposals
At 30 September 2019
Depreciation
At 30 June 2017
Depreciation charge
At 30 June 2018
Depreciation charge
Disposals
At 30 September 2019
Net book value
At 30 September 2019
At 30 June 2018
At 30 June 2017
17. Investments in quoted companies
Group
Cost
At 30 June 2018
Additions
Revaluation
At 30 September 2019
101
Total
£m
1.5
0.9
2.4
5.7
(0.1)
8.0
0.8
0.3
1.1
0.7
(0.1)
1.7
6.3
1.3
0.7
Quoted
investments
£m
0.2
1.3
(0.4)
1.1
At the balance sheet date, the carrying value of investments was £1.1m.
18. Assets held for sale
The assets held for sale relate to surplus existing investment properties at Wilton Park which will not be developed. The assets were
transferred based on a Directors’ valuation of £4.7m. A loss of £0.2m was recognised on transfer as a result of selling costs. These assets
were being marketed in September 2019 and management expect disposal to occur within 12 months of the balance sheet date.
19. Intangible assets
Group
Cost
At 30 June 2018
Additions
At 30 September 2019
Intangible assets relate to development costs of the Hugg Homes brand capitalised under IAS 38 ‘Intangible assets’.
Quoted
investments
£m
–
0.3
0.3
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www.inlandhomesplc.comReport and Accounts 2019 Inland HomesFINANCIAL STATEMENTS 102
Notes to the financial statements CONTINUED
for the 15-month period ended 30 September 2019
20. Investments in Group undertakings
At 30 September 2019, 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 Bermondsey Limited
Inland Limited
Inland Commercial Limited
Inland (Southern) Limited
Inland (STB) Limited
Inland Finance Limited
Inland Helix Limited
Inland Homes (Essex) Limited
Inland Commercial Property Limited
Inland Homes 2013 Limited
Inland Homes Developments Limited
Merrielands Crescent Dagenham LLP
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
Delamare Estate (Cheshunt) Limited
Europa Park LLP
Gardiners Park LLP
Project Helix Holdco Limited
West Drayton Developments Limited
Interest in associate
Troy Homes Limited
1 All holdings are of ordinary shares.
Principal activity
Holding and
voting rights1
Real estate development
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
Real estate development
Provision of finance
Real estate development
Real estate development
Real estate development
Real estate development
Holding company
Real estate development
Real estate development
Real estate development
Construction of domestic buildings
Provision of finance
Real estate development
Provision of finance
Real estate development
Real estate development
Real estate development
Real estate development
Real estate development
Real estate development
Real estate development
Real estate development
Real estate development
Real estate development
Real estate development
Holding company
Real estate development
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%
100%
100%
100%
100%
50%
50%
50%
50%
50%
50%
20%
25%
25%
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Stock code: INLInland Homes Report and Accounts 2019FINANCIAL STATEMENTS 103
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 Burnham Yard, London End, Beaconsfield,
Buckinghamshire, HP9 2JH, 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 associate listed above are accounted for using the equity method.
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.
Disposal of subsidiaries
During the period ended 30 September 2019, the Group incorporated and disposed of Hillingdon Properties Limited (formerly Inland
Developments). No profit or loss arose on this disposal. During the year ended 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.
Group
Investment in joint ventures and associate
Investment in joint ventures
Investment in
associate
Bucknalls
Developments
£m
Cheshunt
Lakeside
Developments
£m
Europa
Park
£m
Gardiners Park
£m
Subtotal
£m
Troy Homes
£m
–
–
–
–
–
0.7
–
–
–
0.7
0.7
0.2
0.2
–
0.2
0.4
0.3
–
13.8
(7.2)
6.9
7.3
–
–
–
–
–
1.0
(1.0)
–
–
–
–
–
0.8
(0.8)
–
–
–
–
–
–
–
–
0.2
1.0
(0.8)
0.2
0.4
2.0
(1.0)
13.8
(7.2)
7.6
8.0
1.1
–
–
–
1.1
0.2
–
–
–
0.2
1.3
Total
£m
1.3
1.0
(0.8)
0.2
1.5
2.2
(1.0)
13.8
(7.2)
7.8
9.3
Cost
At 30 June 2017
Share of profit after tax
Receipts from joint ventures
Movement during the year
At 30 June 2018
Share of profit after tax
Receipts from joint ventures
Exercise of call option*
Disposal of 50% beneficial*
interest
Movement during the period
At 30 September 2019
* See further details later in this note under Cheshunt Lakeside Developments Limited.
Amounts due from associate
Current
Other receivables
Loans
Non-current
Loans
Total amounts due from associate
As at
30 September
2019
£m
As at
30 June
2018
£m
0.2
3.1
–
3.3
2.8
–
3.0
5.8
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.
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Notes to the financial statements CONTINUED
for the 15-month period ended 30 September 2019
20. Investments in Group undertakings continued
Amounts due from/(to) joint ventures
Current
Bucknalls Developments Limited
held at carrying value
held at fair value through profit and loss
Cheshunt Lakeside Developments Limited held at carrying value
Non-current
Europa Park LLP
Gardiners Park LLP
held at carrying value
held at carrying value
Total amounts due from joint ventures
As at
30 September
2019
£m
As at
30 June
2018
£m
(2.0)
4.0
2.0
32.8
34.8
–
1.0
1.0
35.8
1.6
4.0
5.6
13.4
19.0
1.0
–
1.0
20.0
The Directors have considered the classification of the amounts due from Bucknalls Developments Limited and believe that £4.0m
previously classified as amounts due from joint ventures at the year ended 30 June 2018 at carrying value should be classified as assets
held at fair value through profit and loss due to the Perpetual Annuity Bond interest. There is no impact on the measurement for the year
ended 30 June 2018. All other amounts above are held at carrying value.
The measurement uses significant unobservable inputs to measure fair value and is based on Directors valuation given there is no readily
available market information. These amounts have been classified as Level 3 in the fair value hierarchy as set out by IFRS 13 Fair Value
Measurement. There have been no transfers between levels in the fair value hierarchy during the period ended 30 September 2019 (year to
30 June 2018: none).
Apart from interest, which is charged on amounts due from Bucknalls Developments Limited held at fair value through profit and loss, all
other amounts are interest free and repayable on demand.
As outlined in note 5, the Group applies a forward looking expected credit loss model to measure any credit loss provision for amounts due
from joint ventures and associates. Both the expected credit loss provision and the incurred loss provision in the current period and prior
year are immaterial.
Summarised financial information for material joint ventures
Bucknalls Developments Limited
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, the Group is obliged to fund 50% of the costs of the site and is entitled to receive 50% of the returns.
Inland Limited also entered into a management fee agreement with Bucknalls Developments Limited in the period, for which revenue and
profit of £1.8m and £1.1m respectively were recognised in the Group.
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Stock code: INLInland Homes Report and Accounts 2019FINANCIAL STATEMENTS 105
As at
30 September
2019
£m
As at
30 June
2018
£m
0.3
12.3
12.6
10.0
1.2
11.2
1.4
0.7
–
0.7
0.1
9.5
9.6
9.9
0.3
10.2
(0.6)
(0.3)
0.3
–
Fifteen
months to
30 September
2019
£m
Year ended
30 June
2018
£m
16.6
(13.3)
(0.9)
(0.4)
2.0
–
–
(0.3)
–
(0.3)
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/(liabilities)
Reporting entity's share
Losses restricted to nil
Carrying amount at period/year end
Summarised statement of total comprehensive income
Revenue
Cost of Sales and Operating expenses
Interest payable
Tax payable
Total comprehensive income/(expense)
Cheshunt Lakeside Developments Limited
In June 2016, the Group entered into a joint venture whose purpose was to acquire a site in Cheshunt, obtain planning permission and
ultimately sell the land.
During the period ended 30 September 2019, planning consent was granted for 1,253 residential plots and 4,905sqm of retail space.
Additionally, the joint venture acquired a wholly owned subsidiary, Delamare Estate (Cheshunt) Limited, during the period. Delamare Estate
(Cheshunt) Limited and CLDL have entered into short-term leases with various tenants to maximise revenue in the short term.
Acquisition and subsequent disposal of interests in joint venture
At the start of the period, Inland Homes held a 50% interest in the joint venture. In addition to the direct holding, the Group held a put and
call option over the other joint venture partner’s 50% share. Certain conditions were attached to the options which needed to be met for
either side of the option to be exercised.
By taking into account the Group’s ability to exercise its option, the Group considered that together the 50% direct holding and put and call
option gave the Group control over the company from 6 June 2019. As a consequence, the Group ceased to equity account for its interest in
the company from this date and instead consolidated 100% of the company.
The nature of the company led the Group to conclude that the step acquisition would be most appropriately accounted for as an asset
acquisition. Therefore, the carrying value of the equity accounted investment at 6 June 2019 in addition to the fair value of the option price
(£13.7m) together represented the cost of net assets acquired.
On 22 September, the Group exercised its option to acquire the 50% share capital of the company under the option agreement. The option
price was payable in October 2019 and is included within other payables at the balance sheet date (see note 27).
At the same time (30 September 2019), the Group entered into a contract with a third party to sell its existing 50% share of the company.
As a result, the Group lost full control of the company and as at the balance sheet date has joint control under the new joint venture
agreement.
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www.inlandhomesplc.comReport and Accounts 2019 Inland HomesFINANCIAL STATEMENTS 106
Notes to the financial statements CONTINUED
for the 15-month period ended 30 September 2019
20. Investments in Group undertakings continued
The disposal proceeds are payable by the new joint venture partner once the joint venture has sold the developed asset. The proceeds
payable are £28.5m, and on a discounted basis are estimated to be £20m as included within other receivables due in more than one year
(see note 23).
The Group has accounted for its loss of control as if it were a disposal of an asset, given that the company’s activities are not considered to
constitute a business. The Group has therefore de-recognised the net assets of the company and 50% of the previous carrying value has
been attributed to the Group’s continuing investment in the joint venture, which is now once again equity accounted.
The profit on sale of the Group’s 50% holding resulted in a gain recognised in the Income Statement of £12.6m, being the fair value of the
disposal proceeds (£20m) less 50% of the previous carrying amount (£7.4m).
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
Non-current liabilities
Financial liabilities (excluding trade payables and provisions)
Total non-current liabilities
Total liabilities
Net assets
Reporting entity's share of profit
Investment cost
Exercise of call option
Disposal of 50% beneficial interest
Carrying amount at period / year end
As at
30 September
2019
£m
As at
30 June
2018
£m
–
74.6
74.6
69.5
0.9
70.4
3.1
3.1
73.5
1.1
0.3
0.4
13.8
(7.2)
7.3
0.3
57.5
57.8
56.6
0.6
57.2
–
–
–
0.6
0.3
0.1
–
–
0.4
Summarised statement of total comprehensive income
Time period:
Accounting treatment:
Revenue
Cost of sales and operating expenses
Total comprehensive income
Period from
1 July 2018 to
5 June 2019
Period from
6 June 2019 to
29 September 2019
Accounted as a
joint venture
under IAS28
£m
Accounted as a
subsidiary
£m
At
30 September
2019
Accounted as a
joint venture
under IAS28
£m
1.9
(1.2)
0.7
0.5
(0.4)
0.1
–
–
–
Year ended
30 June 2018
Accounted as a
joint venture
under IAS28
£m
0.7
(0.3)
0.4
26868
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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. During the period ended 30 September 2019, the site is under construction and the
company has sold half of the residential units.
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
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 period/year end
Summarised statement of total comprehensive income
Revenue
Cost of sales and operating expenses
Interest payable
Total comprehensive income
As at
30 September
2019
£m
As at
30 June
2018
£m
–
3.2
3.2
–
0.7
0.7
2.5
2.5
3.2
–
–
–
–
0.1
2.7
2.8
1.9
0.9
2.8
–
–
2.8
–
–
–
–
Fifteen
months to
30 September
2019
£m
Year ended
30 June
2018
£m
10.1
(8.0)
(0.2)
1.9
–
–
–
–
Gardiners Park LLP
In November 2016, the Group entered a joint venture with Constable Homes 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. During the period ended 30 September 2019, the site is under construction and the
company has exchanged on a number of residential units.
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Notes to the financial statements CONTINUED
for the 15-month period ended 30 September 2019
20. Investments in Group undertakings continued
Summarised statement of financial position
Current assets
Cash and cash equivalents
Other current assets
Total current assets
Current liabilities
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 period / year end
Summarised statement of total comprehensive income
Revenue
Cost of sales and operating expenses
Interest payable
Total comprehensive income
As at
30 September
2019
£m
As at
30 June
2018
£m
0.5
5.2
5.7
0.9
0.9
2.8
2.8
3.7
2.0
1.0
–
1.0
0.4
0.9
1.3
1.3
1.3
–
–
1.3
–
–
–
–
Fifteen
months to
30 September
2019
£m
Year ended
30 June
2018
£m
2.0
(1.8)
(0.1)
0.1
11.0
(9.3)
(0.1)
1.6
During the period, the Group provided an additional amount of £1m to Gardiners Park LLP which has been classified as a long-term
receivable in the annual accounts of Inland Homes plc but has been treated as equity in the financial statements of Gardiners Park LLP.
26868
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Stock code: INLInland Homes Report and Accounts 2019FINANCIAL STATEMENTS 109
Interest in associate
Summarised financial information for material associate
Troy Homes Limited
For the 15-month period ended 30 September 2019, Troy Homes made a profit before tax of £0.5m (year ended 30 June 2018: £0.2m).
In October 2015, the Group acquired 25% of Troy Homes Limited (Troy Homes), a premium housebuilder, and is entitled to 25% of the net
returns.
Summarised statement of financial position
As at
30 September
2019
£m
As at
30 June
2018
£m
–
–
3.0
32.3
35.3
35.3
18.1
3.8
21.9
9.4
9.4
31.3
4.0
1.0
1.1
2.1
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
Fifteen
months to
30 September
2019
£m
Year ended
30 June
2018
£m
29.0
(26.2)
(2.1)
(0.2)
0.5
30 September
2019
£m
12.5
12.5
14.2
(12.9)
(1.4)
0.3
0.2
30 June
2018
£m
12.5
12.5
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 period/year end
Summarised statement of total comprehensive income
Revenue
Cost of sales and operating expenses
Interest payable
Income tax (payable)/receivable
Total comprehensive income
Company
Cost
Net book value
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www.inlandhomesplc.comReport and Accounts 2019 Inland HomesFINANCIAL STATEMENTS 110
Notes to the financial statements CONTINUED
for the 15-month period ended 30 September 2019
21. Deferred tax
Group
At 1 July 2018
(Charged)/credited to income statement
At 30 September 2019
Company
At 1 July 2018
Credited to income statement
At 30 September 2019
Capital losses
recognised on
revaluation
gain
£m
Notional
interest on
deferred
consideration
£m
Revaluation
gain
£m
Share-based
payments
£m
6.0
0.3
6.3
–
–
–
(2.7)
(1.6)
(4.3)
–
–
–
(0.7)
0.7
–
–
–
–
(0.7)
(0.1)
(0.8)
(0.7)
(0.1)
(0.8)
Total
£m
1.9
(0.7)
1.2
(0.7)
(0.1)
(0.8)
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.
22. Inventories
At 1 July
Additions
Capitalisation of finance costs
Capitalisation of employee costs
Charged to income statement
Transferred from/(to) investment property
Impairment
At 30 September 2019/30 June 2018
Split of inventories
Work in Progress
Land
As at
30 September
2019
£m
136.2
154.6
1.3
8.1
(111.9)
4.3
(0.2)
192.4
As at
30 September
2019
£m
115.2
77.2
192.4
As at
30 June
2018
£m
139.9
107.8
1.1
3.0
(113.7)
(1.2)
(0.7)
136.2
As at
30 June
2018
£m
74.5
61.7
136.2
Certain of the inventories are secured against the Group’s borrowings. For details see note 28.
Included within inventories is £nil (30 June 2018: £0.9m) in relation to construction contracts and to 30 September 2019 £66.7m (30 June
2018: £15.5m) has been billed in relation to these contracts.
26868
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Proof 21
Stock code: INLInland Homes Report and Accounts 2019FINANCIAL STATEMENTS 111
23. Trade and other receivables
Trade receivables from contract revenue with customers
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
Company
As at
30 September
2019
£m
As at
30 June
2018
£m
As at
30 September
2019
£m
14.7
18.9
11.8
–
45.4
21.8
67.2
16.1
0.4
13.9
–
30.4
11.0
41.4
–
–
1.6
38.6
40.2
–
40.2
As at
30 June
2018
£m
–
–
0.2
36.9
37.1
–
37.1
Materially, all of the trade receivables are receivables from contract revenue with customers.
The carrying value of trade and other receivables is considered a reasonable approximation of fair value. During the year to 30 June 2018,
£0.5m was written off in relation to a contractor which went into administration in 2016 (for more details see note 27).
Included within other receivables due in greater than one year is £19.9m (30 June 2018: nil) in relation to the sale of the Group’s beneficial
interest of 50% in Cheshunt Lakeside Developments Limited. See note 20 for further details.
The Group applies the simplified approach to providing for expected credit losses prescribed by IFRS 9 for trade receivables. The Group
applies the general approach to providing for expected credit losses prescribed by IFRS 9 for other receivables. Both the expected credit
loss provision and the incurred loss provision in the current period and prior year are immaterial. Refer to note 5 for further details.
Other receivables
Due in less than one year
Sale of subsidiary
Sale of interest in joint venture
Construction contract bond
Loan facility
Other
Due in more than one year
Sale of subsidiary
Sale of interest in joint venture
Other
Group
As at
30 September
2019
£m
As at
30 June
2018
£m
2.9
2.1
–
4.2
2.6
11.8
–
19.9
1.9
21.8
1.3
5.0
5.0
–
2.6
13.9
4.7
5.7
0.6
11.0
Within other receivables due in less than one year is £nil (30 June 2018: £0.5m) relating to retentions receivable from construction
contracting clients and within trade receivables is £5.0m (30 June 2018: £2.9m) relating to income accrued on a construction contract.
Within other receivables due in more than one year is £1.7m (30 June 2018: £nil) relating to retentions receivable from construction
contracting clients.
Loan facility includes £3m (30 June 2018: £nil) receivable from Hillingdon Properties Limited. The loan facility bears no interest and is
repayable on demand.
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Notes to the financial statements CONTINUED
for the 15-month period ended 30 September 2019
24. Cash and cash equivalents
Cash at bank and at hand
25. Share capital
Group and Company
The movement in the number of shares in issue is shown in the table below.
Group
Company
As at
30 September
2019
£m
As at
30 June
2018
£m
As at
30 September
2019
£m
10.9
40.4
7.1
As at
30 June
2018
£m
18.3
Authorised, issued and fully paid
10p ordinary shares
10p deferred shares
At 30 June 2017
Issued on exercise of LTIP
At 30 June 2018
Issued on exercise of LTIP
At 30 September 2019
Employee Benefit Trust
At 30 June 2017 and 30 June 2018
Purchase of own shares for deferred bonus plan
At 30 September 2019
Treasury reserve
At 30 June 2017
Purchase of own shares
Exercise of share options
At 30 June 2018
Purchase of own shares
Exercise of share options
At 30 September 2019
Total voting shares1
At 30 June 2017
At 30 June 2018
At 30 September 2019
Number
9,980
–
9,980
–
9,980
£m
–
–
–
–
–
£m
20.4
0.1
20.5
0.2
20.7
(1.1)
–
(1.1)
–
(0.6)
0.1
(0.5)
(0.1)
0.6
–
Number
203,654,432
896,689
204,551,121
2,814,924
207,366,045
1,627,500
–
1,627,500
–
1,000,000
(175,000)
825,000
200,000
(1,025,000)
–
202,026,932
202,098,621
205,738,545
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 26), 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. Ordinary shares issued after the
balance sheet date but prior to the date of this report are disclosed in note 36.
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.
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26. Reserves
The following describes the nature and purpose of each reserve within shareholders' equity
Reserve
Share premium
Employee benefit trust
Special reserve
Treasury reserve
Retained earnings
Description and purpose
Amount subscribed for share capital in excess of nominal value less directly attributable issue costs.
This represents the purchase of the Company's own shares and are deducted from total equity until they are
issued to employees under the Long Term Incentive Plan. At 30 September 2019 this reserve holds 1,627,500
shares (30 June 2018: 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.
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 September 2019, this reserve holds no shares (30 June
2018: 825,000).
Cumulative net gains and losses recognised in the Group income statement together with other items such as
dividends and share–based payments.
27. Trade and other payables
Trade payables
Other payables
Sales and social security taxes
Provisions
Accruals
Group
Company
As at
30 September
2019
£m
As at
30 June
2018
£m
As at
30 September
2019
£m
As at
30 June
2018
£m
19.5
14.8
0.5
0.2
12.7
47.7
8.5
3.1
6.4
–
6.9
24.9
0.1
0.1
–
–
0.4
0.6
–
0.4
0.5
–
0.2
1.1
The carrying value of trade and other payables is considered to be a reasonable approximation of fair value.
Within trade payables is £7.1m (30 June 2018: £0.7m) relating to amounts payable in relation to construction contracts.
Included within other payables is £13.7m (30 June 2018: £nil) in relation to the option liability payment for the purchase of 50% of Cheshunt
Lakeside Developments Limited. See note 20 for further details.
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 £0.3m for the final agreed settlement with the Administrators in relation to these claims.
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Notes to the financial statements CONTINUED
for the 15-month period ended 30 September 2019
28. Borrowings
At 30 September 2019
Secured bank loans
Other secured loans
Borrowings
ZDP shares
Gross debt
Cash and cash equivalents
Net debt
At 30 June 2018
Secured bank loans
Other secured loans
Borrowings
ZDP shares
Gross debt
Cash and cash equivalents
Net debt
Undrawn committed bank facilities
At 30 September 2019
At 30 June 2018
< 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
26.8
21.2
48.0
–
48.0
26.0
–
26.0
18.4
44.4
51.3
–
51.3
–
51.3
13.8
17.2
31.0
–
31.0
1.2
–
1.2
–
1.2
–
10.5
10.5
–
10.5
29.6
–
29.6
–
29.6
27.6
–
27.6
–
27.6
–
7.2
7.2
25.9
33.1
–
–
–
–
–
–
–
–
–
–
–
6.6
6.6
–
6.6
Total
£m
108.9
28.4
137.3
25.9
163.2
(10.9)
152.3
67.4
34.3
101.7
18.4
120.1
(40.4)
79.7
–
0.4
13.9
0.1
13.3
14.8
–
5.3
–
–
4.9
20.6
32.1
At 30 September 2019, the bank loans were secured over £47.9m (30 June 2018: £47.1m) of investment property and assets held for sale
and £147.3m (30 June 2018: £16.6m) of inventories. The other loans were secured over £7.0m (30 June 2018: £5.3m) of investment property
and £38.1m (30 June 2018: £50.9m) of inventories. The ZDP shares were secured against inventories of £nil (30 June 2018: £4.1m) and loans
to joint ventures and associates of £38.7m (30 June 2018: £18.9m). 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 September 2019, there were 16,430,790 ZDP shares in issue (30 June 2018: 12,444,200). An explanation of the fair value of the ZDP
shares is included in note 31. In August 2018, the ZDP shareholders agreed to rollover and extend the facility and will now be repaid on
or before 10 April 2024. This was accounted for as a substantial modification due to the significant extension to the term of the debt,
the change to the covenants and the substantial change in interest rate. This resulted in no gain or loss being recognised in the Income
Statement. Further ZDP shares were issued after the period end; refer to note 36 for further information.
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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 September 2019
Variable rate borrowings
Fixed rate borrowings
Gross debt
Interest on gross debt
Gross loan commitments
At 30 June 2018
Variable rate borrowings
Fixed rate borrowings
Gross debt
Interest on gross debt
Gross loan commitments
29. Cash flow information
Net debt reconciliation
26.8
47.1
73.9
5.9
79.8
26.0
18.4
44.4
6.2
50.6
Secured bank loans
Other secured loans
Borrowings
ZDP shares
Gross debt
Cash and cash equivalents
Net debt
Net assets
IFRS
Net gearing
IFRS
1.2
–
1.2
1.4
2.6
10.5
–
10.5
1.9
12.4
Cash
flows
£m
38.5
(5.9)
32.6
6.2
38.8
29.5
71.6
51.3
–
51.3
3.6
54.9
13.8
17.2
31.0
2.2
33.2
As at
30 June
2018
£m
67.4
34.3
101.7
18.4
120.1
(40.4)
79.7
142.4
56.0%
29.6
–
29.6
0.8
30.4
27.6
–
27.6
0.4
28.0
7.2
–
7.2
0.2
7.4
–
–
–
0.3
0.3
–
–
–
–
–
6.6
–
6.6
0.3
6.9
Total
£m
116.1
47.1
163.2
11.9
175.1
84.5
35.6
120.1
11.3
131.4
Non-cash movements
Amortisation
of loan
arrangement
fees
£m
Non-cash
receivable
settlement
£m
Movement
in accrued
liability
£m
As at
30 September
2019
£m
1.3
–
1.3
–
1.3
1.7
–
1.7
–
1.7
–
(0.3)
–
–
–
1.3
1.3
–
1.3
108.9
28.4
137.3
25.9
163.2
(10.9)
152.3
162.2
93.9%
30. Other financial liabilities
Other financial liabilities of £4.1m (30 June 2018: £3.7m) relates to purchase consideration on inventories falling due within one year.
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Notes to the financial statements CONTINUED
for the 15-month period ended 30 September 2019
31. Financial instruments
Financial risk management
The Group’s activities expose it to a variety of financial risks: credit risk; liquidity risk; interest rate risk and price 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 the associate and deferred receipts on disposal of
investment in subsidiaries and joint ventures and management fees which are adequately covered by the underlying values of the assets within
the joint ventures and associate or legal charges over the land within the vehicle disposed of or from where management fees are due. Further
information can be found in note 20 and 23. 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 due in more than one year
Amounts due from associates in less than one year
Receivables due in more than one year
Trade and other receivables
As at
30 September
2019
£m
10.9
34.8
1.0
–
3.3
21.8
44.4
116.2
As at
30 June
2018
£m
40.4
19.0
1.0
3.0
2.8
11.0
30.0
107.2
The Group’s policy is to only deal with creditworthy counterparties. A creditworthy counterparty is defined by the Group as a counterparty
that carries a minimal risk that the counterparty in a transaction cannot honour its obligation to the Group.
Counterparties are assessed on contract inception through externally available information where legal charges are not available over the
underlying asset and are reviewed periodically to determine if there are any changes in creditworthiness or other circumstances that may
bring the financial viability of the counterparty in some doubt.
All new contracting and management service contracts entered into are with reputable parties and are subject to acceptance procedures
which include detailed creditworthiness checks. This procedure ensures that collectability is probable i.e. more likely than not, prior
to commencement of the contract. In this regard no instances have been identified in the past where the collectability of the sales
consideration has been considered improbable at the time of contract commencement.
In any instance where part of all the consideration is deferred, the Group additionally seeks and secures a legal charge over underlying
property assets held until such time that all elements of the deferred consideration has been fully received at which point that legal charge
is released.
The Group has assessed loans and advances due from joint ventures and associate and have concluded there is a minimal risk of default.
Default is defined and assessed as a risk of missed payment of interest and/or principal or a failure to honour the financial terms in place
between the Group and the joint ventures and associate in question.
The assessment of credit risk for amounts due from joint ventures are based on a consideration of known future cash flows which have
been sensitised, based on the most likely, the worst case and a mid-case scenarios. These cash flows are reviewed against what is due
and expected to be paid and analysis made of whether this is sufficient to repay monies based on the financial terms in place between the
Group and the joint ventures in question.
The assessment of credit risk for amount due from the associate are based on net valuations. The valuation of properties has been
sensitised based on the most likely, the worst case and a mid-case scenario downturn in valuations. These valuations are reviewed against
what is due and expected to be paid and analysis made of whether this is sufficient to repay monies based on the financial terms in place
between the Group and associate in question.
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Loans to joint ventures and associates are secured via charge over either the underlying asset, the future dividends of or the future profits
generated by the relevant entity based on the agreement between the joint venture or associate in question. The Group does not rely on this
collateral in taking its position of reviewing and/ or recognising an expected credit loss.
At the balance sheet date there are no financial assets that are credit impaired.
Management has determined there has not been a significant increase in credit risk on loans to subsidiaries from the parent company and
loans to joint ventures and associates for the Group during the 15-month period ended 30 September 2019 or the prior year ending 30 June
2018.
A majority of current trade and other receivables will be paid within 30-59 days. Due to the short term nature, the Group does not anticipate
any material default and the Directors do not consider the macro economic environment conditions (inflation, exchange rates and property
prices) to substantially change in the short term. There has been one immaterial write off in the past five years.
The vast majority of trade and other receivable balances relate to property transactions and are short term in nature. As a housing
developer, the risk of not receiving settlement on sales or services are low as such no trade and other receivables are deemed credit
impaired.
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 financial assets have expected credit losses. Further information on the concentration of
credit risk can be found in note 23.
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 as outlined in the table in note 28. The Group does not use hedging arrangements to limit the
interest rate risk.
Market rate sensitivity analysis
The analysis below shows the sensitivity of the Group Income Statement and net assets to a 0.5 per cent change in interest rate on the
Group’s financial instruments that are affected by market risk. These financial instruments consist solely of borrowings.
Total impact on pre-tax profit and equity of 0.5 per cent increase in interest rates – loss
Total impact on pre-tax profit and equity of 0.5 per cent decrease in interest rates – gain
As at
30 September
2019
£m
(0.5)
0.5
As at
30 June
2018
£m
(0.3)
0.3
(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 enters into construction contracts with housing associations which involve the bulk, forward selling of residential units and has less
risk than private house building.
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Notes to the financial statements CONTINUED
for the 15-month period ended 30 September 2019
31. Financial instruments continued
Financial assets and liabilities
The carrying amounts presented in the Statement of Financial Position relate to the following categories:
Amortised cost
Other assets – non-current
Other assets – current
Cash and cash equivalents
Fair value through other comprehensive income
Other assets – non-current
Fair value through profit and loss
Other assets – current
Financial liabilities
Financial liabilities measured at amortised cost:
– borrowings
– Zero Dividend Preference shares
– other liabilities – current
As at
30 September
2019
£m
1.2
80.5
10.9
As at
30 June
2018
£m
15.2
47.8
40.4
1.1
0.2
4.0
97.7
4.0
107.6
137.3
25.9
51.3
214.5
101.7
18.4
22.2
142.3
Other assets – non current includes investments, amounts due from associate and joint ventures shown in note 20 and amounts shown as
trade and other receivables in note 23 due in more than one year.
Other assets – current includes amounts due from associate and joint ventures shown in note 20 and all amounts shown as trade and
other receivables due in less than one year in note 23 except prepayments of £1.0m (30 June 2018: £0.4m). Amounts due from Bucknalls
Developments Limited is split between Amortised Cost and Fair Value Through Profit and Loss.
Other liabilities includes purchase consideration of £4.1m (30 June 2018: £3.7m) shown in note 30 and all amounts shown as trade and
other payables in note 27 except sales and social security taxes of £0.5m (30 June 2018: £6.4m). 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 28).
The ZDP shares are carried at their accrued value of 159.12p per share (30 June 2018: 147.59p) however their closing price on the main
market of the London Stock Exchange on 30 September 2019 was 161.50p (30 June 2018: 151.70p). The ZDP shares attract an interest rate
of between 4.96% and 5.49%. The interest rates disclosed for the ZDP preference shares were the rates disclosed before the changes in
August 2018.
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32. Commitments and leases
Operating lease commitments where the Group is the lessor
The Group lets houses, commercial properties, modular homes 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
As at
30 September
2019
£m
1.5
1.8
0.9
4.2
As at
30 June
2018
£m
0.7
0.1
–
0.8
There were no significant leasing arrangements at 30 September 2019 and 30 June 2018.
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
As at
30 September
2019
£m
0.3
1.4
1.7
As at
30 June
2018
£m
0.1
0.1
0.2
The Company has a rental contract for the registered office at Burnham Yard, London End, Beaconsfield, HP9 2JH dated 30 January 2019.
This contract has a non-cancellable term of six years, with an annual rent of £318,000. Other than this there were no significant leasing
arrangements in the current or prior year.
Joint ventures and associate
For Bucknalls Developments Limited, the Group is committed to contributing 50% of all costs not funded by external borrowings and no
further costs are expected.
For Cheshunt Lakeside Developments Limited, the Group is committed to contributing all costs not funded by external borrowings together
with its joint venture partner.
For Europa Park LLP, the Group is committed to contributing 50% of all costs not funded by external borrowings and no further costs are
expected.
For Gardiners Park LLP, the Group is committed to contributing 50% of all costs not funded by external borrowings and no further costs are
expected.
For Troy Homes Limited, the Group acquired 25% of Troy Homes Limited and is entitled to 25% of the net returns. There are no
commitments to note.
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Notes to the financial statements CONTINUED
for the 15-month period ended 30 September 2019
33. 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 28 and 31 to the Group
accounts. The Group monitors capital on the basis of the carrying amount of the equity less cash and cash equivalents as presented on the
face of the Group Statement of Financial Position.
The movement in the capital to overall financing ratio is shown below. The target capital to overall financing ratio has been set by the
Directors at 40% and results under this amount are considered to be a good performance against the target. Further commentary on the
level of borrowing, overall financing strategy and expected future direction is contained in the Finance Director’s report.
Equity
Less: cash and cash equivalents
Equity
Borrowings
Overall financing
Capital to overall financing
As at
30 September
2019
£m
162.2
(10.9)
151.3
162.2
163.2
325.4
46.5%
As at
30 June
2018
£m
142.4
(40.4)
102.0
142.4
120.1
262.5
38.9%
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 asset cover 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.
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As at
30 September
2019
£m
7.2
2.2
30.3
8.8
17.2
1.3
4.0
71.0
As at
30 June
2018
£m
11.5
2.2
20.0
54.1
25.0
–
–
112.8
34. Contingencies
Inland Homes plc has guaranteed the obligations of certain borrowings of its subsidiaries:
Chapel Riverside Limited
High Wycombe Developments Limited
Inland Homes Developments Limited
Inland (STB) Limited
Inland Property Finance Limited
Inland Commercial Property Limited
Inland Limited
All of these subsidiaries are going concerns.
Inland Homes plc has guaranteed the obligations of certain subsidiaries with regards to the payments of subcontractors. No guarantees
were considered significant at 30 September 2019.
Inland Homes plc has guaranteed the build performance obligations of Inland Limited and Inland Partnerships Limited 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 20.
No provisions have been made in these financial statements in respect of any of these contingent liabilities.
35. 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 20.
For details of compensation paid to the Directors and key management please see the Remuneration Committee report on page 63 and
note 8. For Directors’ shareholdings in the Company, please see the Directors’ report on page 66.
Mr Malde is a non-executive Director of Troy Homes Limited, an associate of the Group. Please see note 20 for balances outstanding from
the associate and contractual terms of the debtors at 30 September 2019 and as at 30 June 2018.
36. Post balance sheet events
On 7 November 2019, a further 1,671,067 ZDP shares were issued for gross proceeds of £2.7m. Following this issue, the number of ZDP
shares in issue was 18,101,857 shares.
On 14 November 2019, the Group issued 180,000 new ordinary shares of 10 pence each pursuant to an exercise of options over ordinary
shares by an employee of the company.
On 18 December 2019, the Group obtained a loan of £7.0m from W.E. Black Ltd with a term of 12 months.
On 19 December 2019, the Group issued 25,000 new ordinary shares of 10 pence each pursuant to an exercise of options over ordinary
shares by an employee of the Company.
On 20 December 2019, the Group renewed its loan facility from Secure Trust of £26.75m to a revised expiry date of 18 December 2020.
On 27 December 2019, the Group disposed of a 50% interest in High Wycombe Developments Limited to Qbay Limited and entered into a
joint venture agreement.
On 30 January 2020, the Group arranged a new debt facility of £20.0m to be available from May 2020 with a term of 12 months from
drawdown.
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www.inlandhomesplc.comReport and Accounts 2019 Inland HomesFINANCIAL STATEMENTS 122
Five year summary (unaudited)
15 month period ended 30 September
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
Land bank plots
Plots with planning permission and resolution
to grant planning consent
Plots without planning permission
1 Twelve-month reporting period ended 30 June.
2019
£m
147.9
25.0
20181
£m
147.4
19.3
20171
£m
90.7
19.6
20161
£m
101.9
33.7
20151
£m
114.2
34.9
192.4
136.2
139.9
148.4
121.8
10.9
163.2
152.3
93.9
65.1
162.2
233.9
11.79
11.47
3.10
2.40
78.84
110.55
113.69
Number
202
577
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
Number
275
837
7.82
7.46
1.40
1.70
64.62
91.88
96.22
Number
188
780
14.01
13.38
15.01
14.09
1.10
1.30
0.60
1.00
57.66
88.22
92.34
Number
147
425
43.92
n/a
n/a
Number
248
440
7,796
6,870
6,776
6,681
5,176
2,956
4,840
1,708
5,162
2,105
4,671
1,163
5,518
1,200
3,976
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Proof 21
Stock code: INLInland Homes Report and Accounts 2019OTHER INFORMATION
123
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.
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.
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.
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).
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www.inlandhomesplc.comReport and Accounts 2019 Inland HomesOTHER INFORMATION 124
List of definitions CONTINUED
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.
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.
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 organisations
such as housing associations.
26868
5 February 2020 1:53 pm
Proof 21
Stock code: INLInland Homes Report and Accounts 2019OTHER INFORMATION Advisers and Company information
Company registration number
5482990
Company Secretary
Kathryn Worth (ACG)
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
HSBC UK Bank plc
London Commercial Banking Centre
Level 6
71 Queen Victoria Street
London
EC4V 4AY
Financial PR Consultants
Instinct Partners
65 Gresham Street
London
EC2V 7NQ
Registrar
Link Asset Services
6th Floor
65 Gresham Street
London
EC2V 7NQ
Inland Homes plc
Registered office and website
Burnham Yard
London End
Beconsfield
Bucks
HP2 2JH
Tel: 01494 762450
Fax: 01494 765897
Email: info@inlandplc.com
Investor website:
www.inlandhomesplc.com
House sales website:
www.inlandhomes.co.uk
26868
5 February 2020 1:53 pm
Proof 21
www.inlandhomesplc.comReport and Accounts 2019 Inland Homes Inland Homes plc
Burnham Yard
London End
Beaconsfield
Buckinghamshire
HP9 2JH
01494 762450
info@inlandplc.com
House sales website:
www.inlandhomes.co.uk
Investor website:
www.inlandhomesplc.com
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5 February 2020 1:53 pm
Proof 21