TIDMINL
RNS Number : 2317O
Inland Homes PLC
08 February 2021
8 February 2021
Inland Homes plc
(the 'Company' or the 'Group')
Audited results for the year ended 30 September 2020
A CREDIBLE PERFORMANCE IN A CHALLENGING YEAR
Inland Homes plc (AIM: INL), a housebuilder, partnership housing
developer and regeneration specialist, today announces its audited
results for the year ended 30 September 2020 (prior period was
fifteen months ended 30 September 2019).
Stephen Wicks, Chief Executive at Inland Homes, commented:
"The Group has weathered the global pandemic well. The
flexibility in our diversified business model allowed us to adapt
quickly during the year despite challenging conditions. The
consolidation to land-focused activity, supported by the Group's
other income streams and the new equity raised during the year, has
benefited our balance sheet. A steady reduction in net debt is a
strategic priority for the Group.
"We are seeing increasing demand for our experience and skills
in successfully navigating the complex planning system. A primary
focus in the year ahead will, therefore, be growing our asset
management division. As a 'capital light' activity - where our
skills and expertise are the service - this has lower risk and
delivers attractive returns.
"There are plenty of opportunities ahead for Inland with growing
demand in the affordable and build to rent spaces. We have proven
capability in delivering such schemes and are actively seeking
these opportunities, which provide regular cash flow and land
sales.
"Above all else, there is a significant shortage of new homes
being built in the UK and we will play our part in building
sustainable communities for the future. We end the year with a
record land bank and sustained demand from customers, partners and
investors for our quality land assets and build expertise, leaving
us well positioned for future growth."
Financial performance*
-- Raised GBP9.4m (net of expenses) in May 2020, to provide additional liquidity
-- EPRA NAV[1] sustained at GBP235.7m (30 September 2019: GBP233.1m)
-- ERPA NAV per share 103.97p per share (30 September 2019:
113.69p), 8.5% lower due to placing of 20.75m new ordinary shares
during the year
-- Revenue at GBP124.0m (30 September 2019: GBP147.9m),
different from that guided to in the Trading Update due to change
in accounting policy for contract income
-- Gross profit reduced to GBP22.0m (30 September 2019:
GBP32.5m) as a result of a lower number of homes sold by the Group
and increased costs due to COVID-19
-- Profit before tax at GBP3.7m (30 September 2019: GBP25.0m)
-- Net debt reduced to GBP148.2m (30 September 2019: GBP152.3m)
-- Cash balances increased to GBP15.7m (30 September 2019:
GBP10.9m) of which GBP4.7m was restricted (30 September 2019:
GBP1.3m)
Operational performance*
-- Activity disrupted by COVID-19 pandemic
-- Robust health and safety procedures ensured operations
continued throughout the first lockdown on all but three sites,
which reopened in August 2020
-- Strategy refined to focus on four key pillars: increase the
size of our land bank; secure capital light opportunities; use the
flexibility within our model to maximise the value of land; deliver
homes that meet market need in a cost-efficient way
-- Two major land sales achieved at Wilton Park, Beaconsfield and Cheshunt Lakeside, Cheshunt
-- Resolution to grant planning consent achieved at Hillingdon
Gardens (former Master Brewer site) subject to signing of a Section
106 agreement to deliver 514 homes including 182 affordable
homes
-- Secured our first two sales to 'Build to Rent' (BTR) funds for GBP52.8m
-- Building a high-quality land bank to support expected growth
in demand from affordable housing providers and BTR operators.
Total land holdings at a record 11,045 plots (7,796 plots) with an
anticipated gross development value (GDV) of GBP3.1bn
-- Private Housing: 226 completions (30 September 2019: 201)
including joint ventures. Continued strong demand with a forward
order book of GBP50.8m (2019: GBP39.3m)
-- Partnership Housing: Revenues of GBP51.8m (30 September 2019:
GBP62.6m). Will continue to increase our partnership housing
activity as it achieves both land sales and a forward income stream
for the Group that provides a good balance to our business
model
-- Asset Management : Grown to six live projects in Greater
London with the potential to deliver more than 3,100 homes. During
the year, the Group earned management fees of GBP24.4m (30
September 2019: GBP18.6m) from these sites
-- Land sales: 107 land plots sold (30 September 2019: 532).
Five significant land sales were aborted as an immediate result of
the COVID-19 pandemic. Subsequently the Group has secured new
purchasers for these sites.
-- Hugg Homes: Winner of the 'Innovator of the Year: Housing
Delivery' at the UK Housing Awards. Our temporary modular housing
business continues to grow and once additional units at Cheshunt
and Southampton have been constructed, the total number of Hugg
tenanted homes will be 118 ( 30 September 2019: 54).
-- Rosewood Housing: Our affordable housing provider continues
to see high demand and made good progress, adding four Shared
Ownership and eight affordable rent homes to its property
portfolio
*2019 data is for the 15-month period to 30 September 2019
Enquiries:
Inland Homes plc: Tel: +44 (0) 1494 762450
Stephen Wicks, Chief Executive
Nishith Malde, Finance Director
Gary Skinner, Managing Director
Panmure Gordon (UK) Limited Tel: +44 (0) 20 7886 2500
Dominic Morley
Erik Anderson
Instinctif Partners Tel: +44 (0) 20 7457 2020
Mark Garraway
Rosie Driscoll
Galyna Kulachek
The information contained within this Announcement is deemed by
the Company to constitute inside information as stipulated under
Market Abuse Regulation (Regulation 596/2014), as it forms part of
domestic law by virtue of the European Union (Withdrawal) Act 2018
("MAR").
Notes to Editors:
Incorporated in the UK in 2005, Inland Homes plc is an AIM
listed specialist housebuilder and brownfield developer, dedicated
to achieving excellence in sustainability and design.
Inland Homes acquires brownfield land in the South and
South-East of England principally for residentially led development
schemes. The business then enhances the land value by obtaining
planning permission, before building open market and affordable
homes or selling surplus consented land to other developers to
generate cash.
The Company is committed to extensive public and community
consultation in order to ensure that, where possible, local
community needs and objectives are met.
Inland's aim is to create sustainable communities and homes
which set a benchmark for all future developments in the South and
South East of England. The Company is always looking for brownfield
sites without planning permission for future development.
For further information, please visit the Inland Homes website
at: www.inlandhomes.co.uk
Hugg Homes - www.hugghomes.co.uk
Rosewood Housing - www.rosewoodhousing.co.uk
Chairman's statement
This has been a challenging year but we are a resilient business
and have adapted well to weather the headwinds in our market place
and the continued uncertainty caused by the global COVID-19
pandemic.
As a result of the prudent action outlined below, we start the
new financial year with cautious optimism. We have used the
flexibility in our diversified business model to adapt to the
changing conditions, swiftly and decisively implementing a strategy
of land focused activity to reduce costs, conserve cash and create
opportunities for future growth.
Unlike others in the industry, Inland generates income from
multiple sources - primarily land sales, asset management, private
and partnership housing, supported by revenue generated from
investment and rental properties. This diversity enabled us to
respond quickly to the challenges presented by COVID-19, enabling
the Group to adapt to changing market conditions and maintain cash
flow.
This change of emphasis to land-focused activity, supported by
the Group's other income streams and the new equity raised during
the year, has improved our balance sheet. I continue to be
impressed by the sustained demand from customers, partners and
investors for our quality land assets and build expertise.
The health and safety of our colleagues and suppliers has been,
and remains, our priority. Inland is an agile and adaptable
business and its people are too. I am extremely pleased with how
the Inland team has responded to the COVID-19 crisis and continues
to do so. I would like to acknowledge and thank them for their
continued support.
Land-focused activity
The Group had been trading in line with expectations up to March
2020. COVID-19 changed the market backdrop significantly and its
ramifications were immediate. The extent of the overall disruption
inevitably impacted on the Group's final results for the year ended
30 September 2020, with five significant land sales, which were at
an advanced stage of documentation with solicitors, aborted in its
immediate wake.
Despite this backdrop, the Group maintained continued
operational delivery across all but three sites and has been quick
to adapt to the new trading environment. In parallel, the housing
market has responded positively to the Stamp Duty Land Tax holiday
until March 2021 and it is reassuring to see good demand for our
high-quality homes and land assets.
Subsequently, the Group has completed the five aborted land
sales with new buyers, with the proceeds providing additional cash
flow. These include the sale of 94 plots at Inland's flagship site
Wilton Park, Beaconsfield and 195 plots at Cheshunt Lakeside,
Cheshunt. The sale at Cheshunt Lakeside to a local housing
association via the Group's joint venture Cheshunt Lakeside
Developments Limited, also secured a GBP34.5m contract for Inland
Partnerships to construct the homes. The sale of a further 53 units
at Wilton Park in January 2021 will deliver further cash flow and
debt reduction benefit.
The scale of our operations now allows us to seek to maximise
returns in the short and medium term through these phased sales
whilst maintaining overall control of the scheme masterplan and the
subsequent long-term returns.
The Group's asset management arm has grown rapidly this year and
it is now managing six projects with the potential for more than
3,100 homes. The Group secures sites on behalf of investors and
uses its extensive land and planning expertise to secure planning
approval on their behalf. The fees generated from this 'capital
light' activity, generate attractive returns for the Group, whilst
preserving its working capital. During the financial year, the
Group earned management fees of GBP24.4m (fifteen-month period to
30 September 2019: GBP18.6m). We are seeking to grow this part of
the business in the year ahead.
Using our agility, we secured our first forward sales to two
'Build to Rent' (BTR) funds within our Centre Square joint venture
and wholly owned Buckingham House developments in High Wycombe in
September 2020. The total forward sale consideration is GBP52.8m,
comprising GBP31.5m for 123 units and amenity space at Centre
Square and GBP21.3m for 85 units at Buckingham House. These are the
first of what we hope will be many BTR opportunities secured by the
Group, with Inland's land bank and build capability making it
well-placed to access this attractive market. We listed securing
such opportunities as one of our priorities in last year's
accounts, recognising that our high-quality assets and expertise
would be in demand in this rapidly growing market.
Our partnership housing (contract income) activity has supported
our land-focused activity this year. Growing the partnership
housing arm of the Group has also been a focus for the past few
years and its benefits in terms of market resilience compared to
self-delivery has been beneficial in these uncertain times. At the
year end, our partnership housing forward order book stood at
GBP105.8m, with 1,302 homes under construction. Margins on some of
our older legacy sites have not been as good as they should have
been and with the experience gained from the significant volume of
homes now under construction, we will look to increase these gross
margins in the future.
Similarly, we will seek to improve margins in private
housebuilding. We have further tightened our internal controls to
achieve this. While COVID-19 restrictions have resulted in overall
lower completions than targeted (2020: 226 private house
completions, including via joint ventures but excluding bulk sales
to BTR operators, fifteen-month period ended 30 September 2019:
201), the sales rate in the final quarter of the year exceeded
expectations. The Group has 415 private homes under construction
and with an average selling price of GBP287,000 (fifteen-month
period ended 30 September 2019: GBP250,000), homes continue to be
attractive to, and within reach of, first-time buyers.
Our equity fundraise earlier in the year and increased bank
facilities have provided additional liquidity. We welcomed several
new shareholders to our share register through an oversubscribed
placing in April 2020. In addition, we triggered the accordion part
of the revolving credit facility (RCF) with HSBC of GBP20.0m,
taking the facility available from GBP45.0m to a new maximum of
GBP65.0m. As at the year end, we had drawn down GBP42.8m of this
facility leaving headroom of GBP22.2m. The facility expires in
March 2023.
Results and dividend
Revenue and profit before tax are lower than originally expected
at GBP124.0m and GBP3.7m respectively (fifteen-month period ended
30 September 2019: GBP147.9 and GBP25.0m). The EPRA net asset value
of the Group has been sustained at GBP235.7m (2019: GBP233.9m) and
cash balances have increased to GBP15.7m (30 September 2019:
GBP10.9m).
Reducing net debt and gearing remains a key priority for the
Board; however, the impact of COVID-19 has limited our progress.
Net borrowings have reduced by only GBP4.1m, from GBP152.3m to
GBP148.2m at 30 September 2020, representing net gearing of 85.5%
(2019: 93.9%). Net gearing based on EPRA net assets of GBP235.7m
was lower than last year at 62.9% (2019: 65.1%). The Group is
focused on and committed to making significant reductions to its
net debt and gearing in the year ahead.
Given the uncertainties caused by the impact of COVID-19 and the
need for prudent cash management, in March 2020 the Board resolved
to cancel the second interim dividend of 2.25p per share due to be
paid on 12 June 2020, which conserved GBP4.6m cash. The Board
intends to resume the payment of dividends in the current financial
year, provided there is no deterioration in the land and housing
market caused by the COVID-19 pandemic or otherwise.
Market environment
The roll-out of the UK's COVID-19 vaccination programme is
clearly positive and the new trade agreement between the UK and the
EU significantly reduces previous concerns over a 'no deal' exit.
However, we remain cautious around what the broader impact of the
new trade agreement will be. Added to this, the third lockdown for
England and subsequent tighter restrictions mean the uncertainties
surrounding the potential impact of the pandemic remain.
We have revisited and updated our risk register to reflect this
environment.
However, even in these difficult times there are plenty of
opportunities for Inland. The Government maintains its commitment
to building 300,000 new homes per annum by the mid-2020s, the Prime
Minister has implored the country to 'Build, Build, Build' and the
Government's 'Planning for the Future' White Paper on planning
reform seeks to support this; a welcome and much needed move. The
cumbersome planning process continues to cause the Group
frustration. A faster, less bureaucratic system would benefit all.
It is fair to say that we have not witnessed much improvement in
the planning system for brownfield sites to be built at a faster
pace, which is disappointing. We are keen to contribute to the
ongoing discussions around planning reform and work with the
Government to improve the process.
Governance
After fourteen years as Chairman of the Company, I have decided
not to seek re-election at the forthcoming Annual General Meeting.
Inland today is a very different business to the one I joined in
2007 and I am proud to have played a part in its exciting growth
journey. I wish the Company well for the future as it enters the
next phase in its development.
Having served as a Board member for two years, Laure Duhot
resigned from the Board in July 2020. We thank Laure for her
service and valued contribution. We are pleased to welcome Carol
Duncumb to the Board from early February 2021. Carol is an
experienced Non-executive Director with considerable experience in
Executive and Non-executive roles. Her wealth of experience,
especially in brand building and consumer-related businesses, will
bring an added dimension to the Board.
The Board is committed to upholding the principles of good
governance as set out in its chosen governance code, the Quoted
Companies Alliances (QCA) Corporate Governance Code. In line with
changes to our reporting requirements, this year we detail how key
stakeholders' interests have been considered in Board discussions
and decision-making. We also report our carbon emissions across
sites.
Outlook
The Board and the Executive team have demonstrated clear
leadership this year, acting decisively in response to the
unprecedented challenges of COVID-19. Predictions about COVID-19
cannot be made with any certainty but having taken measures to
ensure the health and safety of our workforce, improve our
financial security and deliver a more efficient business, we are
much better placed to manage this challenging environment.
Whilst the short-term economic outlook remains unclear, the
sustained levels of developer, investor, partner and private
interest in Inland's land assets and homes reflect the fundamental
shortage of high-quality, affordably-priced housing across the UK
as well as the Group's positioning in its markets.
The Group remains focused on maximising the value in its land
bank in the year ahead, via planning, private and partnership
housebuilding activities and using the flexibility within the
business model to adapt to changing market conditions. This
flexibility is proving to be Inland's greatest strength in this
rapidly changing market.
Terry Roydon
Chairman
Chief Executive's review
COVID-19 has brought unprecedented challenges but there has been
sustained demand for our high-quality land and we have achieved
some significant sales of sites during the year.
We are focused on and committed to delivering a clear strategy
of land-focused activity geared to positive cash generation and net
debt reduction. Whilst our final results have inevitably been
impacted by the pandemic, the actions we have taken have put us in
a better position to manage the ongoing market uncertainty.
We start the new financial year with a record land bank of
11,045 plots, a forward order book of GBP105.8m for partnership
housing and GBP50.8m for private homes and commercial units. Whilst
we have achieved a GBP4.1m reduction in net debt (30 September
2020: GBP148.2m, 30 September 2019: GBP152.3m) and increased cash
balances to GBP15.7m (30 September 2019: GBP10.9m), reducing the
Group's net debt further is the key focus for the year ahead.
These results would not have been possible without the support
of our staff and supply chain. They have embodied our values of
both making no compromises on safety and working to be 'stronger
together'. I would like to express my sincere thanks to all for
their immense efforts during these unprecedented times and their
continued support.
Land portfolio
In line with our strategy, our land bank continues to reach new
heights - a record 11,045 plots (2019: 7,796) with an estimated
GBP3.1bn gross development value. We have achieved planning
permission on 2,470 of these plots, submitted planning applications
on 1,819 and have a further 3,961 plots at pre-application planning
stage. The land bank includes 2,795 plots on strategic sites, the
majority of which are held by way of discount to market value
options. In aggregate, 107 plots were sold this year.
These sales include the 94 plots within the first phase at
Wilton Park, Beaconsfield to a private developer and 195 plots
within our joint venture Cheshunt Lakeside, Cheshunt to a local
housing association. The sale of Phase 2 at Wilton Park, comprising
53 plots, in January 2021 and a GBP34.5m partnership housing
contract at Cheshunt Lakeside will further enhance our
position.
We submitted the reserved matters application for the first two
phases at Wilton Park, comprising 147 plots, in June 2020 and this
application was approved in December 2020. Detailed planning
consent for the first phase at Cheshunt Lakeside was achieved in
February 2020 and construction started in November 2020.
With our ability to move nimbly, as explained in the Chairman's
Statement, we were able to secure our first Build to Rent (BTR)
opportunities this year.
Asset management
Our 100% success rate in achieving planning consent on
brownfield sites is driving this rapidly growing arm of the
business which offers attractive returns with significantly reduced
capital investment.
This year, we secured the 4.4-acre former Homebase site in
Walthamstow, North East London and the 36.7-acre Cavalry Barracks
site in Hounslow, West London on behalf of third-party investors,
bringing the total number of schemes in our asset management
division to six, which combined have the potential for more than
3,100 homes. We submitted a planning application for 583 units at
Walthamstow in August 2020 and will submit an application for 1,650
homes at the Cavalry Barracks site in the first quarter of
2021.
We were delighted in January 2021 to receive notification that
our planning application for the delivery of 514 new homes on the
former Master Brewer site in Hillingdon, West London can be
determined at a local level by the Greater London Authority. The
site had been the subject of third-party requests to call in for
determination by the Secretary of State who recently decided that
the application could be approved at a local level. Following
approval by the Mayor of London in September 2020, we will shortly
finalise the Section 106 agreement. We look forward to progressing
delivery of the scheme, which is supportive of the Government's
housebuilding agenda, delivering much needed affordable homes and
regenerating a dilapidated site.
Private and partnership housing build performance
In line with our strategy, we are now constructing more homes on
behalf of partners than ever before. As at 30 September 2020, there
were 1,302 partnership homes and 415 private homes under
construction (30 September 2019: 921 partnership homes, 892 private
homes). The forward order book for partnership housing contract
income stands at GBP105.8m (30 September 2019: GBP123.7m) and
includes GBP40.3m of future contract income secured during the last
two months of the financial year.
While we anticipate the highest demand in the year ahead for our
partnership housing offer, the rate of reservation of private homes
in the fourth quarter exceeded expectations, driven in part by the
summer relaxation of COVID-19 restrictions and the temporary
relaxation in Stamp Duty Land Tax. Our weekly net reservation rate
per active sales outlet was 0.69 for the year (fifteen-month period
to 30 September 2019: 0.73) and this increased to 1.12 homes per
active sales outlet during the fourth quarter.
The number of private home completions also increased this year,
from 201 in the fifteen-month period to 30 September 2019 to 226 in
the year to 30 September 2020 (excluding bulk sales to BTR
operators). Of these sales, 130 were across sites held in joint
ventures (fifteen-month period to 30 September 2019: 71).
To protect ourselves from any softening of the private housing
market, we are focused on building homes which meet market need.
This means building houses rather than apartments and continuing to
target the first-time buyer market. Our average selling price of
GBP287,000 (fifteen-month period to 30 September 2019: GBP250,000)
continues to make our homes attractive to this market. We have
experienced significant cost increases on some of our projects due
to COVID-19 and other inefficiencies which have impacted our
margins. However, we now have several years of housebuilding
experience under our belt and we will seek to grow the profit
margins this activity delivers, increasing efficiencies through
design and fit-out and improved internal controls.
Strategic focus
This year has been one of refocus and consolidation. We have
taken the opportunity to review and refine the areas of our
strategic focus in light of the COVID-19 pandemic. The refined
strategy ensures a focus on maximising the value of our land bank
and reducing net debt and gearing.
01 Increase the size of our land bank
Land is at the heart of what we do. We will continue to focus on
increasing our land bank of brownfield and strategic sites where we
expect residentially led development in the South and South
East.
02 Seek to secure capital light opportunities
We will grow the asset management division of the Group,
managing the acquisition and securing planning permission on behalf
of third parties. This activity is capital light and offers
attractive returns.
03 Use the flexibility within our business model to maximise the
value of land that has planning consent
We will continue to make the decision to sell, build or partner
with others based on an assessment of what will deliver the highest
returns and the Group's cash requirements. In the short term, we
will continue to increase our partnership housing activity as this
achieves land sales for the Group and also secures a forward income
stream, thus protecting the business against any potential decline
in the private housing market.
04 Deliver homes which meet market need in the most
cost-efficient way
We will continue to target the first-time buyer market, building
homes of outstanding quality and value. Now that we have achieved
critical mass of homes under construction, we are standardising our
product offering, both in design and fit-out to drive efficiencies.
Our focus will be on building houses rather than apartments for the
private sale market as this is where there is greatest customer
demand.
Chairman of the Board
Chairman of the Board Terry Roydon has announced he will not
stand for re-election at the Annual General Meeting in March 2021.
Terry has played an integral role over the past fourteen years in
the Group's success, setting clear strategic direction and
delivering strong leadership. I sincerely thank Terry for his
longstanding dedication to the interests of Inland and the very
considerable contribution that he has made to the Company during
his time on the Board.
The position of the Chairman will be assumed by Simon Bennett
who has also considerable experience with the Group, having been
with the Company since it joined the AIM market in April 2007.
Outlook
The Group was trading in line with expectations until March
2020, with momentum returning to the market; the general election
in late 2019 and progress in Brexit negotiations had returned
confidence to both the house-buyer market and the wider economy.
However, COVID-19 changed the marketplace significantly and the
long-term economic ramifications are still to be felt.
Despite these headwinds, there are plenty of opportunities for
Inland. The market has been buoyed by news of effective COVID-19
vaccines, long-awaited planning reform is on the horizon and there
is growing demand in the affordable and build-to-rent space. Above
all else, there is a shortage of new homes being built in the UK,
reflected in the sustained demand for our private sale homes.
Growing our asset management division will be a primary focus.
We are seeing increasing demand for our experience and skills in
successfully navigating the planning system and will continue to
seek new opportunities within this sector. As a 'capital light'
activity - where our skills and expertise are the service - this
activity has lower risk and delivers attractive returns.
We will continue to grow our land bank and build houses that
meet market need. The shortfall in the number of new homes being
delivered across the UK and particularly in the South and South
East of England will continue to drive demand for our land assets
and build capability.
We anticipate increased activity in the year ahead from
affordable housing providers as demand for temporary accommodation
increases due to COVID-19. We have proven capability in delivering
these schemes and are actively seeking these opportunities which
provide regular cash flow and land sales.
The BTR market is growing rapidly and we have a substantial
number of sites suitable for rental housing within our portfolio.
Being able to offer the build capability as well as the land makes
us an attractive proposition to investors and we look forward to
making more progress into this market.
We have a clear strategy for dealing with the short-term future:
maximising the value within our land bank with reduced borrowings
and risk. Our business model allows us to adapt our activity - land
sales, private or partnership housebuilding activity - to the
changing market conditions and this flexibility is standing us in
good stead.
With multiple income streams, we have a balanced business model
to progress through the current uncertain times.
Stephen Wicks
Chief Executive Officer
Group Finance Director's review
The results for the year ended 30 September 2020 are presented
against the backdrop of two very distinct trading periods where the
underlying conditions were radically different caused by the
emergence and then subsequent worldwide impact of the COVID-19
pandemic.
On 6 June 2019, the Group changed its accounting reference date
from 30 June to 30 September. Consequently, the current period is a
year to 30 September 2020 and comparative information is for the
fifteen-month period to 30 September 2019.
The global uncertainty caused by the COVID-19 pandemic and the
consequential measures taken by the Group have significantly
impacted the results for the financial year ended 30 September
2020.
As we approached our half-year end, five planned and
well-advanced land disposals to major housebuilders worth GBP46.2m
were aborted by the purchasers in late March following the
introduction of national restrictions by the UK Government. The
Group responded swiftly to this changing environment, taking
various measures, with the principal objectives being: the safety
of our workforce, conserving cash and raising new equity.
As a result, the Group has weathered the storm of the global
pandemic. We have extended existing facilities which were due for
repayment before 31 December 2021 and grown the asset management
segment of the business.
Share placing
The Group raised GBP9.4m (net of expenses) in April 2020 from a
placing and subscription of 20,750,000 new ordinary shares at 47.5p
per share, the proceeds of which have improved the balance sheet
and provided additional liquidity. We were delighted with the
response from investors and welcome several new institutional
shareholders to our register, as well as many new retail
shareholders via PrimaryBid.
Operational performance
Although the severe impact of COVID-19 reduced the Group's
revenue for the year to 30 September 2020 to GBP124.0m
(fifteen-month period to 30 September 2019: GBP147.9m), the run
rate was better than the previous period.
The Group achieved housebuilding revenue of GBP23.8m
(fifteen-month period to 30 September 2019: GBP34.5m) from the
completion of 96 private home sales (fifteen-month period to 30
September 2019: 130), excluding those via joint venture and bulk
sales to Build to Rent (BTR) operators. The average selling price
decreased to GBP240,000 (fifteen-month period to 30 September 2019:
GBP250,000) due to a change of sales mix between houses and
apartments sold, as well as price differences in different
geographic locations. 130 homes were completed by our joint
ventures at an average price of GBP322,000 (2019: 71 homes;
GBP300,000). In addition, our joint venture at Lily's Walk, High
Wycombe completed the sale of 123 homes to a BTR fund on a
forward-funding basis with completion due in March 2021. Contracts
were also exchanged to sell 85 homes to a BTR operator for delivery
in March 2022.
Our weekly net reservation rate per active sales outlet was 0.69
for the year (fifteen-month period to 30 September 2019: 0.73);
however, this increased to 1.12 homes per active sales outlet
during the last quarter of the financial year, demonstrating the
strength of the market in the areas we operate, which is supported
by the relaxation of Stamp Duty Land Tax. Purchasers of 60%
(fifteen-month period to 30 September 2019: 65%) of our homes used
the Government's Help to Buy scheme. Our forward order book of
homes and commercial buildings reserved and exchanged as at the
year-end amounted to GBP50.8m (2019: GBP39.3m).
The total number of plots within our land bank increased to
11,045. The Group sold 107 residential plots (fifteen-month period
to 30 September 2019: 532 plots) for GBP21.7m (fifteen-month period
to 30 September 2019: GBP29.2m).
The revenue from our partnership housing activity was GBP51.8m
(fifteen-month period to 30 September 2019: GBP62.6m) from
contracts across five sites. All but one partnership housing site
remained operational during the period from 23 March 2020 to 31
July 2020 albeit at lower operational capacity due to the stringent
measures put in place for the safety of those working on the sites.
As at 30 September 2020, the forward order book of partnership
housing contract income was GBP105.8m (2019: GBP123.7m) with two
new partnership and external build contracts secured in the last
two months of the financial year for total revenue of GBP40.3m. The
Group will continue to target partnership housing activity as it
generally secures a land sale and a forward income stream that
provides a good balance to our business model.
The Group's asset management division, which acts on behalf of
property investors to procure sites and provide planning and
management services, has grown this year to six live projects in
Greater London with the potential to deliver more than 3,100 homes.
The Group generally enters into a planning and management services
agreement with investors. The agreements set out certain programme
obligations and associated fees that the Group would be entitled
to. The fees would be received by the Group once the property
assets are sold. During the financial year, the Group earned
management fees of GBP24.4m (fifteen-month period to 30 September
2019: GBP18.6m) from six sites. The transactions are structured so
that they require significantly reduced investment and working
capital from Inland Homes and are also generally non-recourse to
the Group. These sites are sold on receipt of planning consent and
the sale may also lead to a partnership housing contract for the
Group.
Other revenue of GBP2.3m (fifteen-month period to 30 September
2019: GBP3.0m) includes letting income from investment properties
and short-term rents from brownfield sites being processed through
the planning system.
Gross profit reduced from GBP32.5m to GBP22.0m as a result of a
shorter accounting period compared to the previous period and lower
revenues. It is also due to lower margins in housebuilding, losses
incurred in contract income and increased costs due to COVID-19,
together with reduced output leading to an inefficient rate of
absorption of site overheads and sales costs. Production cost
increases also impacted on contracts. These increases were due to
changes in building regulations which necessitated changes to
design and materials used.
The Group also wrote off GBP2.1m of work-in-progress relating to
aborted land transactions and provided for a GBP2.8m expected
credit loss. These relate to legacy sites and controls have now
been put in place to ensure improvements on future projects. At 30
September 2020, the project teams hold project contingencies within
their budgets totalling GBP4.0m (30 September 2019: GBP5.2m) and a
clear focus for the forthcoming year is a significant improvement
in both operational efficiency and commercial delivery to drive up
gross margin in the Contract Income and Housebuilding segments.
Increased site costs along with extended construction periods are
expected to continue on the legacy sites and will therefore affect
the margins for the financial year ending 30 September 2021.
Consequently, gross margin reduced from 22.0% to 17.7% and
operating margin fell from 22.1% to 9.5%. During the year the Group
sold 50% of its interest in High Wycombe Developments Limited
(HWDL) at a loss of GBP2.0m. It is noteworthy that the previous
period's operating margin included profit of GBP12.6m from the sale
of our 50% beneficial interest in Cheshunt Lakeside Developments
Limited.
Administrative expenses are in line with the prior period run
rate at GBP12.6m (fifteen-month period to 30 September 2019:
GBP15.7m) as the Group's staff base had grown to 161 employees at
the start of the financial year. Due to the economic uncertainties
that lie ahead as a result of COVID-19, 25 staff were made
redundant, resulting in additional redundancy costs. The Group
ended the financial year with 128 employees.
Profit before tax was down to GBP3.7m (fifteen-month period to
30 September 2019: GBP25.0m). A detailed analysis by operating
segment is shown in Note 10 to the Financial Statements.
Net finance costs
Finance costs of GBP9.2m (fifteen-month period to 30 September
2019: GBP9.4m) comprised principally bank and other loan interest,
amortisation of arrangement fees and exit fees, non-utilisation
fees and interest rolled up on the Zero Dividend Preference shares
(ZDPs). Finance income of GBP1.1m (fifteen-month period to 30
September 2019: GBP1.7m) includes interest from joint ventures and
associates, other interest receivable and notional interest income
on long-term receivables. Interest on development funding is
capitalised where required by IAS 23.
The increased net finance costs are a reflection of the level of
gross borrowings during the year. Interest on bank and non-bank
borrowings amounted to GBP6.2m (15-month period to 30 September
2019: GBP7.5m), amortised loan arrangement and other fees were
GBP2.3m (15-month period to 30 September 2019: GBP1.7m) and the
finance cost relating to the ZDPs was GBP1.5m (15-month period to
30 September 2019: GBP1.5m). The funding costs capitalised into
work-in-progress were GBP0.8m (15-month period to 30 September
2019: GBP1.3m).
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 GBP1.4m combines a current taxation
charge of GBP0.9m and a deferred tax charge of GBP0.5m and
represents an effective rate of 37.8% of the profit before tax. The
current corporation tax rate is 19% and the difference between the
expected tax charge and the actual tax charge is mainly due to the
loss on the disposal of controlling interest in subsidiary and the
interest accrued on the ZDPs which are disallowed for tax
purposes.
Earnings per share and dividends
Basic earnings per share fell from 11.79p to 0.79p, reflecting a
combination of the lower profit after tax and the dilution
resulting from the issue of 20.75 million new ordinary shares in
May 2020.
Given the uncertainties caused by the impact of COVID-19 and the
need for prudent cash management, the Board cancelled the second
interim dividend of 2.25p per share that was due to be paid on 12
June 2020, resulting in a cash saving of GBP4.6m. The Board is
presently minded to resume the payment of dividends in the current
financial year, provided there is no further deterioration in the
land and housing market caused by the COVID-19 pandemic or
otherwise.
Undiluted
GBPm (p) Diluted (p)
----------------------------------------------- ------ --------- -----------
At 30 September 2020
Net assets attributable to equity shareholders 173.3 76.45 74.70
Adjustment for:
Revaluation of projects 59.8
Deferred tax on investment property
revaluation (see note 27) 2.6
----------------------------------------------- ------ --------- -----------
EPRA net asset value 235.7 103.97 101.59
----------------------------------------------- ------ --------- -----------
Adjustment for:
Deferred tax on investment property
revaluation (see note 27) (2.6)
Deferred tax on project revaluation (11.4)
----------------------------------------------- ------ --------- -----------
EPRA triple net asset value 221.7 97.79 95.56
----------------------------------------------- ------ --------- -----------
At 30 September 2019
Net assets attributable to equity shareholders 162.2 78.84 76.67
Adjustment for:
Revaluation of projects 69.7
Deferred tax on investment property
revaluation 2.0
----------------------------------------------- ------ --------- -----------
EPRA net asset value 233.9 113.69 110.55
----------------------------------------------- ------ --------- -----------
Adjustment for:
Deferred tax on investment property
revaluation (2)
Deferred tax on project revaluation (11.8)
----------------------------------------------- ------ --------- -----------
EPRA triple net asset value 220.1 106.98 104.03
----------------------------------------------- ------ --------- -----------
At 30 At 30
September September
2020 2019
---------------------------- ----------- -----------
Shares in issue 228,341,045 207,366,045
Less shares held in:
- EBT (1,627,500) (1,627,500)
---------------------------- ----------- -----------
For use in basic measures 226,713,545 205,738,545
---------------------------- ----------- -----------
Dilutive effect of
- share options 1,323,000 2,018,000
- deferred bonus shares 1,694,000 1,527,000
- growth shares 2,285,000 2,285,000
---------------------------- ----------- -----------
For use in diluted measures 232,015,545 211,568,545
---------------------------- ----------- -----------
Balance sheet
The Group's net assets have increased from GBP162.2m to
GBP173.3m at 30 September 2020 predominantly due to the profit
after tax and a placing of 20.75m new ordinary shares in May 2020
at 47.5p per share. The EPRA net asset value at 30 September 2020
was GBP235.7m (30 September 2019: GBP233.9m). Net asset value per
share fell from 78.8p to 76.5p and the EPRA net asset value per
share reduced to 104.0p per share (30 September 2019: 113.7p) due
to the ordinary shares issued in the fund raising during the
year.
The Board is required to assess the fair value of its sites held
in current assets when determining EPRA NAV. For undeveloped sites
(both owned and controlled by way of options), a residual land
valuation is carried out to determine the expected value of the
site with planning consent. The valuation is then discounted by a
factor of between 0% to 90% to reflect the probability of achieving
planning permission.
There is not a ready market for sites where construction has
commenced. The Directors have therefore assumed that fair value
equates to the carrying value for such sites unless the site is
forecast to make a gross margin in excess of 16%, in which case a
fair value adjustment is made to reflect the residual land value
uplift.
The Group transferred a further eight residential investment
properties and one commercial property to Assets held for Sale. The
commercial property was sold in January 2021 and the residential
properties are intended to be sold during the current financial
year.
The balance of investment properties amounting to GBP43.5m
(2019: GBP49.3m) comprise principally of existing residential
properties at Wilton Park and some development land in Poole.
In accordance with IFRS 16 (Leases), the lease on our head
office in Beaconsfield has been capitalised and classified as a
'right-of-use' asset at GBP1.2m with a corresponding lease
liability of GBP1.2m at the year end.
Investment in joint ventures consists of five joint ventures
with the most significant being our investment in Cheshunt Lakeside
Developments Limited at GBP6.0m with amounts due from the joint
venture within current assets being GBP28.6m. Similarly, Other
Receivables due after more than one year of GBP22.3m represents the
amount due from our joint venture partner in Cheshunt Lakeside
Developments Limited which is secured by way of a charge over their
share of profits from the development of GBP20.7m and GBP1.6m of
retentions owed on contract income.
Inventories have reduced from GBP192.4m to GBP173.6m due to land
and unit disposals. In addition, the Group sold a 50% interest in
High Wycombe Developments Limited, thereby de-consolidating
GBP36.2m of land and work-in-progress and GBP23.6m of external
borrowing at the date of disposal. Most new site acquisitions were
procured for investors to whom the Group provides planning and
management services.
Trade and Other Receivables due within one year have increased
from GBP45.4m to GBP60.9m principally due to a significant increase
in accrued management fees from our planning and management
services activity which comprised GBP28.6m (30 September 2019:
GBP21.4m) of the total balance. Included in prepayments and accrued
income due in less than one year is GBP10.6m treated as short term
as it represents the normal operating cycle of business but is not
expected to be received until greater than one year. These amounts
will be received upon disposal of the underlying land by the third
party.
Net debt and borrowings
The Board's strategic objective is to reduce the Group's net
debt and gearing position. Net debt has reduced by GBP4.1m from
GBP152.3m to GBP148.2m at 30 September 2020 representing net
gearing of 85.5% (2019: 93.9%). Net gearing based on EPRA net
assets of GBP235.7m was 62.9% (2019: 65.1%).
In November 2019, Inland ZDP PLC issued a further 1,671,067 zero
dividend preference shares for gross proceeds of GBP2.7m. As at the
year end, the accrued liability to holders of ZDP shares was
GBP30.2m (2019: GBP25.9m).
In May 2020, we increased our revolving facility from Homes
England to GBP15.3m which continues to finance our development of
520 homes and 64,000sqft of commercial space at Chapel Riverside in
Southampton. Phase 3 of this development is at an advance stage
with many homes sold and occupied. As at 30 September 2020, we had
drawn down GBP13.2m of this facility.
In September 2020, we triggered the accordion part of our
revolving credit facility with HSBC of GBP20.0m, taking the
facility from GBP45.0m to GBP65.0m. As at the year end, we had
drawn down GBP42.8m of this facility leaving headroom of GBP22.2m.
The facility expires in March 2023.
The Group had a secured revolving credit facility of GBP17.2m
from a Fund of which GBP14.3m was drawn down at the year end. In
January 2021, the facility was extended at a lower amount of
GBP15.4m to 31 December 2021.
The Group has negotiated a new facility for GBP15.4m with the
Fund for a period of five years with an option in favour of the
Group to break the facility at the end of three years. The new
facility is intended to be in place by the end of April 2021 and
will replace the existing facility.
The Group has three bank facilities for a total sum of GBP41.3m
which have been extended to 30 April 2022.
The Group has also extended two loan facilities for the sum of
GBP11.0m to 31 December 2021.
The Board is targeting further significant reductions in net
debt by 30 September 2021, to be achieved through considered land
disposals and recovery of management fees.
Going Concern
In preparing the forecasts the Directors have considered the
continued adoption of stringent cash management procedures, market
disruptions already brought about by COVID-19, the possibility of
future disruption in the Going Concern period which could
potentially be caused by COVID-19 and other risks and
uncertainties, including credit risk and liquidity risk, the
present and possible future economic climate, the current and
possible future demand for land with planning consent and the state
of the housing market in the geographic areas where the Group
operates. The Directors have performed detailed sensitivity
analyses to test the Group's future liquidity and banking covenant
compliance based on several scenarios. The Group has forecast land
sales in the next twelve months in the normal course of its
business.
The Directors have a reasonable expectation that the Group and
parent Company 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. Further details can be found in Note 2.
Outlook
The Group is focused on making further progress in net debt
reduction and improving operational and commercial margins. We will
also continue to grow the asset management and partnership housing
segments in line with our refined strategy. Whilst the unsettled
short-term economic outlook persists, the various business
activities within our business model provide the flexibility to
adapt to changing market conditions and meet these strategic
objectives in the year ahead.
Nishith Malde
Group Finance Director
Group statement of comprehensive income
for the year ended 30 September 2020
Fifteen-month
Year ended period to
30 September 30 September
2020 2019
Continuing operations Note GBPm GBPm
--------------------------------------------------- ------ ------------- -------------
Revenue 10 124.0 147.9
Cost of sales 10 (99.2) (115.4)
Expected credit loss 29 (2.8) -
Gross profit 22.0 32.5
--------------------------------------------------- ------ ------------- -------------
Administrative expenses 10, 11 (12.6) (15.7)
Gain on sale of joint venture interest 25 - 12.6
Share of profit of joint ventures 25 2.0 2.0
Share of (loss)/profit of associate 26 (0.2) 0.2
Revaluation of assets held for sale 30 2.0 -
Loss on sale of controlling interest in subsidiary 25 (2.0) -
Revaluation of investment property 19 0.6 1.1
--------------------------------------------------- ------ ------------- -------------
Operating profit 11.8 32.7
--------------------------------------------------- ------ ------------- -------------
Finance costs - interest expense 14 (9.2) (9.4)
Finance income - interest receivable and similar
income 15 1.1 1.7
--------------------------------------------------- ------ ------------- -------------
Profit before tax 3.7 25.0
--------------------------------------------------- ------ ------------- -------------
Current tax charge 16 (0.9) (1.1)
Deferred tax (charge)/credit 16 (0.5) 0.7
--------------------------------------------------- ------ ------------- -------------
Total profit for the period 2.3 24.6
Revaluation of quoted investments 23 (0.6) (0.4)
--------------------------------------------------- ------ ------------- -------------
Total profit and comprehensive income for the
period 1.7 24.2
--------------------------------------------------- ------ ------------- -------------
Earnings per share for profit attributable
to the equity holders of the Company during
the year/period
- basic 17 0.79p 11.79p
- diluted 17 0.77p 11.47p
--------------------------------------------------- ------ ------------- -------------
The accompanying notes form an integral part of these financial
statements.
Statements of financial position
at 30 September 2020
Group Company
--------------------------------
30 September 30 September 30 September 30 September
2020 2019 2020 2019
Note GBPm GBPm GBPm GBPm
-------------------------------- ---- ------------ ------------ ------------ ------------
ASSETS
Non-current assets
Investment properties 19 43.5 49.3 - -
Property, plant and equipment 20 5.6 6.3 - -
Right-of-use assets 21 1.2 - - -
Intangible assets 22 0.2 0.3 - -
Investments in quoted companies 23 0.5 1.1 - -
Investment in subsidiaries 24 - - 12.5 12.5
Investment in joint ventures 25 8.8 8.0 - -
Amounts due from joint ventures 25 - 1.0 - -
Investment in associate 26 1.1 1.3 - -
Other receivables 29 22.3 21.8 - -
Deferred tax 27 - - 0.7 0.8
-------------------------------- ---- ------------ ------------ ------------ ------------
Total non-current assets 83.2 89.1 13.2 13.3
-------------------------------- ---- ------------ ------------ ------------ ------------
Current assets
Inventories 28 173.6 192.4 - -
Trade and other receivables 29 60.9 45.4 60.0 40.2
Assets held for sale 30 12.5 4.7 - -
Amounts due from associate 26 3.1 3.3 - -
Amounts due from joint ventures 25 42.2 34.8 - -
Cash and cash equivalents 31 15.7 10.9 8.2 7.1
-------------------------------- ---- ------------ ------------ ------------ ------------
Total current assets 308.0 291.5 68.2 47.3
-------------------------------- ---- ------------ ------------ ------------ ------------
Total assets 391.2 380.6 81.4 60.6
-------------------------------- ---- ------------ ------------ ------------ ------------
LIABILITIES
Current liabilities
Bank loans and overdrafts 32 (41.5) (48.0) - -
Other loans 32 (25.3) - (7.0) -
Trade and other payables 33 (32.8) (47.7) (0.8) (0.6)
Deferred income 37 (10.0) - - -
Amounts due to joint ventures 25 (6.2) - - -
Lease liabilities 34 (0.3) - - -
Corporation tax (3.1) (2.2) - -
Other financial liabilities 36 - (4.1) - -
-------------------------------- ---- ------------ ------------ ------------ ------------
Total current liabilities (119.2) (102.0) (7.8) (0.6)
-------------------------------- ---- ------------ ------------ ------------ ------------
Non-current liabilities
Bank loans 32 (43.9) (82.1) - -
Other loans 32 (13.1) (7.2) - -
Deferred income 37 (2.1) - - -
Lease liabilities 34 (0.9) - - -
Other financial liabilities 36 (6.8) - - -
Zero Dividend Preference shares 32 (30.2) (25.9) - -
Deferred tax 27 (1.7) (1.2) - -
-------------------------------- ---- ------------ ------------ ------------ ------------
Total non-current liabilities (98.7) (116.4) - -
-------------------------------- ---- ------------ ------------ ------------ ------------
Total liabilities (217.9) (218.4) (7.8) (0.6)
-------------------------------- ---- ------------ ------------ ------------ ------------
Net current assets 188.8 189.5 60.4 46.7
-------------------------------- ---- ------------ ------------ ------------ ------------
Net assets 173.3 162.2 73.6 60.0
-------------------------------- ---- ------------ ------------ ------------ ------------
EQUITY
Share capital 39 22.8 20.7 22.8 20.7
Share premium account 39 43.7 36.4 43.7 36.4
Employee benefit trust 39 (1.1) (1.1) (1.1) (1.1)
Special reserve 39 1.1 1.1 1.1 1.1
Retained earnings 39 106.8 105.1 7.1 2.9
-------------------------------- ---- ------------ ------------ ------------ ------------
Total equity 173.3 162.2 73.6 60.0
-------------------------------- ---- ------------ ------------ ------------ ------------
Retained earnings for the Company includes a profit after tax
for the period of GBP4.2m (fifteen-month period ended 30 September
2019: loss after tax of GBP3.4m).
The Company has taken advantage of the exemption allowed under
Section 408 of the Companies Act 2006 and has not presented its own
statement of comprehensive income in these financial
statements.
The accompanying notes form an integral part of these financial
statements.
Statements of changes in equity
for the year ended 30 September 2020
Employee
Share Share Benefit Special Treasury Retained
capital premium Trust reserve reserve earnings Total
Group Note GBPm GBPm GBPm GBPm GBPm GBPm GBPm
-------------------------- ---- -------- -------- -------- -------- -------- --------- -----
At 30 June 2018 20.5 34.8 (1.1) 6.1 (0.5) 82.8 142.6
Total profit for the
period - - - - - 24.6 24.6
Other comprehensive
income 23 - - - - - (0.4) (0.4)
Transactions with owners:
Share-based payments 13 - - - - - 0.3 0.3
Issue of ordinary shares 39 0.2 1.6 - - - (1.8) -
Purchase of own shares 39 - - - - (0.1) - (0.1)
Exercise of share options 39 - - - - 0.6 (0.4) 0.2
Dividend payment 18 - - - (5.0) - - (5.0)
-------------------------- ---- -------- -------- -------- -------- -------- --------- -----
At 30 September 2019 20.7 36.4 (1.1) 1.1 - 105.1 162.2
-------------------------- ---- -------- -------- -------- -------- -------- --------- -----
Total profit for the
year - - - - - 2.3 2.3
Other comprehensive
income 23 - - - - - (0.6) (0.6)
Transactions with owners:
Issue of ordinary shares 39 2.1 7.3 - - - - 9.4
-------------------------- ---- -------- -------- -------- -------- -------- --------- -----
At 30 September 2020 22.8 43.7 (1.1) 1.1 - 106.8 173.3
-------------------------- ---- -------- -------- -------- -------- -------- --------- -----
Company
-------------------------- ---- -------- -------- -------- -------- -------- --------- -----
At 30 June 2018 20.5 34.8 (1.1) 6.1 (0.5) 8.2 68.0
Total profit for the
period - - - - - (3.4) (3.4)
Transactions with owners:
Share-based payments 13 - - - - - 0.3 0.3
Issue of ordinary shares 39 0.2 1.6 - - - (1.8) -
Purchase of own shares 39 - - - - (0.1) - (0.1)
Exercise of share options 39 - - - - 0.6 (0.4) 0.2
Dividend payment 18 - - - (5.0) - - (5.0)
-------------------------- ---- -------- -------- -------- -------- -------- --------- -----
At 30 September 2019 20.7 36.4 (1.1) 1.1 - 2.9 60.0
-------------------------- ---- -------- -------- -------- -------- -------- --------- -----
Total profit for the
year - - - - - 4.2 4.2
Transactions with owners:
Issue of ordinary shares 39 2.1 7.3 - - - - 9.4
-------------------------- ---- -------- -------- -------- -------- -------- --------- -----
At 30 September 2020 22.8 43.7 (1.1) 1.1 - 7.1 73.6
-------------------------- ---- -------- -------- -------- -------- -------- --------- -----
The accompanying notes form an integral part of these financial
statements.
Group statement of cash flows
for the year ended 30 September 2020
Fifteen-month
period
Year ended to
30 September 30 September
2020 2019
Note GBPm GBPm
----------------------------------------------------- ---- ------------- -------------
Cash flow from operating activities
Profit for the year/period before tax 3.7 25.0
Adjustments for:
- depreciation - property, plant and equipment 20 1.0 0.7
- depreciation - right-of-use asset 21 0.3 -
- amortisation 22 0.1 -
- share-based payments 13 - 0.3
- revaluation of investment property 19 (0.6) (1.1)
- revaluation of assets held for sale 30 (2.0) -
- interest expense 14 9.2 9.4
- interest receivable and similar income 15 (1.1) (1.7)
- gain on sale of joint venture interest 26 - (12.6)
- loss on sale of controlling interest in subsidiary
undertaking 25 2.0 -
- IFRS 15 opening adjustment - 0.2
- share of profit of joint ventures 25 (2.0) (2.0)
- share of loss/(profit) of associate 26 0.2 (0.2)
Corporation tax payments - (5.6)
Change in working capital:
- increase in inventories (45.4) (50.8)
- increase in trade and other receivables (11.8) (3.7)
- increase in trade and other payables 22.1 7.9
- increase in deferred income 12.1 -
- (decrease)/increase in other financial liabilities (4.1) 0.4
- (decrease)/increase in trading balance due
to/from joint ventures (0.1) 4.1
----------------------------------------------------- ---- ------------- -------------
Net cash outflow from operating activities (16.4) (29.7)
----------------------------------------------------- ---- ------------- -------------
Cashflow from investing activities
Interest received 0.2 1.0
Purchase of property, plant and equipment (0.3) (5.4)
Purchase of intangible assets - (0.3)
Purchase of investment property (1.7) (1.5)
Proceeds from sale of investment property 1.4 -
Loans provided under management fee contracts (3.4) (4.2)
Loans provided to joint ventures (13.6) (19.9)
Amounts repaid by joint ventures 9.2 -
Distribution of profit from joint venture 2.4 1.0
Amounts repaid by associate - 2.6
----------------------------------------------------- ---- ------------- -------------
Net cash outflow from investing activities (5.8) (26.7)
----------------------------------------------------- ---- ------------- -------------
Cashflow from financing activities
Interest paid (5.8) (7.0)
Repayment of borrowings (33.4) (20.0)
Repayment of lease liabilities (0.3) -
New loans 44.7 52.6
Proceeds from loan from joint ventures 3.1 -
Proceeds from other financing arrangements 6.6 -
Proceeds from issue of shares 9.4 -
Issue of zero dividend preference shares 2.7 6.2
Equity dividends paid to ordinary shareholders - (5.0)
Exercise of share options - 0.1
----------------------------------------------------- ---- ------------- -------------
Net cash inflow from financing activities 27.0 26.9
----------------------------------------------------- ---- ------------- -------------
Net increase/(decrease) in cash and cash equivalents 4.8 (29.5)
Net cash and cash equivalents at beginning of
year/period 10.9 40.4
----------------------------------------------------- ---- ------------- -------------
Net cash and cash equivalents at end of year/period 31 15.7 10.9
----------------------------------------------------- ---- ------------- -------------
The accompanying notes form an integral part of these financial
statements.
Notes to the financial statements
for the year ended 30 September 2020
1. Nature of operations and general information:
Inland Homes PLC ("Inland Homes", "The Group" or "Company")
registered number 05482990, the ultimate parent company, is a
public limited company incorporated and domiciled in England and
Wales. The Company's shares are quoted on AIM, a market operated by
the London Stock Exchange. The Group's registered office is located
at Burnham Yard, London End, Beaconsfield, HP9 2JH.
The principal activities of Inland Homes are to acquire
brownfield, mixed-use or residential land and to then seek
achievement of planning consent for development. The Group also
develops a number of plots for private sale and constructs
partnership housing for registered providers. These activities are
grouped into the following business segments:
-- Land sales : The Group sells its own land assets to third parties which
have the benefit of planning permission.
-- Asset management fees : The Group engages as an asset manager to third
party landowners to provide land management and planning services.
-- Contract income : The Group constructs private or affordable housing
projects for a third party landowner.
-- House building : The Group constructs private or affordable housing
units for sale to individuals or private investors.
-- Rental income : The Group holds property assets for rental income purposes
as cost mitigation in the short and medium term of site development.
-- Investment properties : The Group holds property assets for rental
income purposes for the long term.
-- Central services : The Group's central support functions supporting
all other segments
At 30 September 2020, the Group, directly or indirectly, held
interests in equity via holdings of ordinary shares of the
following:
Company
As at As at
30 September 30 September
2020 2019
GBPm GBPm
--------------- ------------- -------------
Cost 12.5 12.5
--------------- ------------- -------------
Net book value 12.5 12.5
--------------- ------------- -------------
Holding
and
voting
rights
Company name Principal activity (1)
---------------------------------------- ------------------------- -------
Subsidiary undertakings
Basildon Developments Limited Real estate development 100%
Basildon United Football, Sports &
Leisure Limited Real estate development 100%
Brooklands Helix Developments Limited Real estate development 100%
Bucks Developments Limited Real estate development 100%
Bulwark Properties Limited Real estate development 100%
Chapel Riverside Developments Limited Real estate development 100%
Letting or operating of
Chapel Riverside Lifestyle Limited real estate 100%
Dormant Company 06764423 Limited Dormant company 100%
Dormant Company 08944533 Limited Dormant company 100%
Dormant Company 10651624 Limited Dormant company 100%
Drayton Developments Limited Real estate development 100%
Drayton Garden Village Limited Real estate development 100%
Exeter Road (Bournemouth) Limited Real estate development 100%
High Wycombe Developments No. 2 Limited Real estate development 100%
Letting or operating of
Hugg Homes Limited real estate 100%
Inland Bourne Ruislip Limited Real estate development 100%
Inland Developments Limited Real estate development 100%
Inland Commercial Limited Real estate development 100%
Inland Commercial Property Limited Real estate development 100%
Inland Corporate Limited Holding company 100%
Inland Developments Limited Real estate development 100%
Inland Finance Limited Real estate development 100%
Inland Helix Limited Real estate development 100%
Inland Homes (Essex) Limited Real estate development 100%
Inland Homes 2013 Limited Holding company 100%
Inland Homes Developments Limited Real estate development 100%
Inland Homes Land Development Limited Real estate development 100%
Inland Limited Real estate development 100%
Construction of domestic
Inland Partnerships Limited buildings 100%
Inland Property Finance Limited Provision of finance 100%
Inland Property Limited Real estate development 100%
Inland (Star Road) Limited Real estate development 100%
Inland (STB) Limited Provision of finance 100%
Inland Strategic Land Limited Real estate development 100%
Inland ZDP plc Provision of finance 100%
Merrielands Crescent Dagenham LLP Real estate development 100%
Poole Investments Limited Real estate development 100%
Rosewood Housing Limited Real estate development 100%
Wessex Hotel Developments Limited Real estate development 100%
Wilton Park Developments Limited Real estate development 100%
Interests in joint ventures
10 Ant South Limited Real estate development 50%
Bucknalls Developments Limited Real estate development 50%
Letting or operating of
Centre Square Commercial Limited real estate 50%
Letting or operating of
Centre Square Lifestyle Limited real estate 50%
Cheshunt Lakeside Developments Limited Real estate development 50%
Delamare Estate (Cheshunt) Limited Real estate development 50%
Europa Park LLP Real estate development 50%
Gardiners Park LLP Real estate development 50%
High Wycombe Developments Limited Real estate development 50%
Project Helix Holdco Limited Holding company 20%
West Drayton Developments Limited Real estate development 25%
Interest in associate
Troy Homes Limited Real estate development 25%
---------------------------------------- ------------------------- -------
Inland Homes 2013 Limited is the only direct subsidiary of the
Company and all others are indirect holdings.
All of the above entities are incorporated and domiciled in
England and Wales, and are registered at the same registered office
of the Company, with the exception of:
-- Europa Park LLP and Gardiners Park LLP which are registered at Springfield
Lodge, Colchester Road, Chelmsford, Essex, CM2 5PW
-- Inland Helix Limited and Project Helix Holdco Limited which are registered
at 2nd Floor, Regis House, 45 King William Street, London, EC4R 9AN
-- Troy Homes Limited which is registered at 5 Technology Park, Colindeep
Lane, Colindale, London, NW9 6BX
The joint ventures and associate listed above are accounted for
using the equity method.
There are no restrictions on the ability of the Company or its
subsidiaries to transfer cash or other assets to or from other
entities in the Group.
Additions of subsidiaries
During the year, the Group incorporated the following
subsidiaries:
-- Basildon Developments Limited
-- Bulwark Properties Limited
-- Chapel Riverside Lifestyle Limited
-- Inland (Cressing) Limited (subsequently renamed Appletree Farm Cressing
Limited)
-- Inland Corporate Limited
-- Inland Developments 01 Limited (subsequently renamed Inland Developments
Limited)
-- Inland Homes Land Development Limited
Disposal of subsidiaries
During the year ended 30 September 2020, the Group disposed
of:
-- Appletree Farm Cressing Limited (formerly Inland (Cressing) Limited).
No profit or loss arose on this disposal.
-- Gallions Developments Limited (formerly Inland Barking Limited). No
profit of loss arose on this disposal.
-- High Wycombe Developments Limited. A controlling interest was disposed
of realising a loss of GBP2.0m. The entity is now operated in joint
venture.
-- Hounslow Property Development Limited (formerly Inland Developments
Limited). No profit or loss arose on this disposal.
-- Inland (Southern) Limited. No profit or loss arose from this disposal.
During the period ended 30 September 2019, the Group
incorporated and disposed of Hillingdon Properties Limited
(formerly Inland Developments Limited). No profit or loss arose on
this disposal.
2. 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 international accounting standards in
conformity with the requirements of the Companies Act 2006 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 is a year in comparison to the
prior period which is fifteen 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.
On 1 October 2019, the Group adopted the new accounting standard
for the recognition of leases (see note 3). The new Standard has
been applied using the modified retrospective approach.
Accordingly, the Group is not required to present a third statement
of financial position as at that date.
The consolidated financial statements are presented in GBP,
which is also the Group and parent company's functional
currency.
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 Directors have reviewed the performance of the Group and
parent Company for the current year and forecasts for the period to
28 February 2022.
The Directors are required to assess the Group's and parent
Company's abilities to continue as a Going Concern for a period of
at least the next twelve months. Given the significant adverse
impact of the COVID-19 crisis on the economy and the activities of
the Group, a thorough review of the Going Concern assumption has
been undertaken in preparing the Group and parent Company financial
statements.
The Group's and parent Company's Going Concern assessment
considers the Group's and parent Company's principal risks and is
dependent on several factors, including its financial performance,
continued access to borrowing facilities and the ability to operate
within their respective financial covenants.
In response to the global COVID-19 pandemic, which quickly
emerged in March 2020, the Group adopted stringent cash management
procedures to conserve resources, a range of other measures
undertaken to reduce the cost base and raised new equity of
GBP9.4m, net of expenses, to strengthen the balance sheet and
provide additional liquidity during this uncertain period.
In preparing the forecasts the Directors have considered the
continued adoption of stringent cash management procedures, market
disruptions already brought about by COVID-19, the possibility of
future disruption in the Going Concern period which could
potentially be caused by COVID-19 and other risks and
uncertainties, including credit risk and liquidity risk, the
present and possible future economic climate, the current and
possible future demand for land with planning consent and the state
of the housing market in the geographic areas where the Group
operates.
The key risks faced by the Group are set out below. At the date
of signing of the Group's and parent Company's accounts, the
continued and prolonged impact of COVID-19 may result in further
uncertainties that are not apparent at present.
There are contractual and anticipated cash inflows expected
which ensure that the Group and parent Company have sufficient
working capital for its requirements.
At the date of signing of this report, the Group has a total
forward order book of GBP53.5m for private homes reserved or
contracted, including two contracted block sales of 109 units and a
contracted sale of a hotel and GBP73.9m for partnership housing
contract income. In addition, the Group has contracted to sell a
parcel of land for GBP14.0m (including payments for infrastructure
works) subject to certain conditions being fulfilled.
The Group also has contracted annualised residential and
commercial rental income of GBP2.3m.
As also disclosed in Note 42, the Group extended the following
facilities during January 2021:
-- A revolving credit facility for GBP15.4m to 31 December 2021.
-- Two loan facilities amounting to GBP11.0m to 31 December 2021.
-- Three bank loan facilities amounting to GBP41.3m to 30 April 2022.
The Group has three facilities totalling GBP26.4m falling due
for repayment on 31 December 2021. The Directors are in advanced
discussions with the provider of the revolving credit facility to
renew the facility for a further five-year period. The Directors
have positive relationships and have had constructive discussions
with all their existing lenders and a number of other potential
lenders; however, they do not as yet have a binding commitment to
extend or refinance these facilities beyond 31 December 2021.
The Group has also negotiated a relaxation to the interest cover
covenant test under the revolving credit facility with HSBC in
respect of the December 2020 and March 2021 periods as proactive
defence against any possible severe but plausible downside
scenarios.
The Directors have performed detailed sensitivity analyses to
test the Group's future liquidity and banking covenant compliance
based on several scenarios. The Group has forecast land sales in
the next twelve months in the normal course of its business. As
part of their Going Concern review, the Directors have considered
the impact of a delay of six months on each of these sales in
isolation. They have also considered, again in isolation, a price
reduction of 10% on all residential unit sales that have not been
contracted and are forecast to complete after 31 March 2021.
Finally, the Group considered a delay in residential unit sales by
three months. None of these scenarios leads to an issue with either
the Group's debt covenants or its liquidity.
The Directors have also considered the following severe, but
plausible downside scenario:
-- Only residential sales that have exchanged or reserved complete between
now and 31 March
-- After 31 March through to 28 February 2022 legal completions of residential
units continue, but at a 50% reduction in volume and a 10% reduction
in sales prices
-- No land sales until the end of May 2021, other than a small scheduled
sale where negotiations with the purchaser are in progress at the date
of this report.
Additionally, the Directors considered an even more severe
scenario which mirrors the above but assumes no residential unit
sales for a period of three months from 1 April 2021 before
returning to the assumptions in the Group's base case.
The Board's modelling choice of cessation of activity period for
the severe, but plausible downside scenario is based on the market
experiences of 2020, when the national housebuilders stopped
purchasing land for a short period during national lockdown.
In making their assessment of the sensitivity tested above the
Directors have considered the Stamp Duty Land Tax holiday which
expires on 31 March 2021. The Directors are therefore confident
that residential unit sales reserved or exchanged for completions
due in the months of February 2021 and March 2021 are secure. The
Directors have assumed that the current Stamp Duty Land Tax holiday
window is not extended by the UK Government after 31 March 2021 in
preparing their projections.
Under both severe, but plausible scenarios, the Directors would
need to make strategic choices in the near term to delay both
planning application activity, construction activity and identified
but non-contractual purchases however there is no need for any
further liquidity to be introduced into the Group or any need for
any relaxation of the Group's financial covenants with its
lenders.
Should the cessation of the land and planning activity and
housebuilding activity discussed above, extend beyond the periods
referred to above, then the Group may have to rely on the sale of
property assets at lower than open market values to generate
liquidity for the Group and parent Company to meet their
obligations as they fall contractually due. Again, there would be
no need for any relaxation of the Group's financial covenants with
its lenders under such circumstances. Additionally, the Directors
also have the option to access the capital and debt markets to
raise further liquidity as may be needed.
The Strategy outlined above details our approach to the current
situation but, the Directors are mindful that no one can forecast
exactly how the global COVID-19 pandemic will play out and how this
may affect the Group, industry and the wider economy for the
foreseeable future. A significant worsening of the situation and a
return to a strict national lockdown for a prolonged period longer
than the severe, but plausible downside scenarios would have
implications for the Group as it would for many other businesses.
Such a situation would then require the Directors to re-examine the
Group's financial position at the time and if necessary, report any
significant adverse changes.
At the time of approving these financial statements and after
making appropriate enquiries, the Directors have a reasonable
expectation that the Group and parent Company 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.
3. Changes in accounting policies
The principal accounting policies are described in note 5 and
are consistent with those applied in the Group's financial
statements for the year ended 30 September 2020 and the
fifteen-month period to 30 September 2019, as amended to reflect
the adoption of new standards, amendments and interpretations which
became effective in the year as shown below.
New standards adopted during the year
The following standards, amendments and interpretations endorsed
by the EU were effective for the first time for the Group's year
ended 30 September 2020 and had no material impact on the financial
statements.
-- IFRIC 23 Uncertainty over Income Tax Treatments;
-- IFRS 9 Prepayment Features with Negative Compensation (Amendments to
IFRS 9);
-- IAS 28 Long-term Interests in Associates and Joint Ventures (Amendments
to IAS 28);
-- Annual Improvements to IFRS 2015-2017 Cycle; and
-- Plan Amendment, Curtailment or Settlement (Amendments to IAS 19)
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, however, the impact of standards
in issue but not yet effective is currently being assessed by the
Group.
-- Amendments to References to the Conceptual Framework in IFRS Standards;
-- IFRS 3 Definition of a Business (Amendments to IFRS 3)
-- IAS 1 and IAS 8 Definition of Material (Amendments to IAS 1 and IAS
8);
-- IFRS 9, IAS 38 and IFRS 7 Interest Rate Benchmark Reform (Amendments
to IFRS 9, IAS 38 and IFRS 7); and
-- IFRS 16 Leases Covid-19 Related Rent Concessions (Amendments to IFRS
16);
-- IAS 1 Classification of Liabilities as Current or Non-current (Amendments
to IAS 1);
-- Amendments to IFRS 3 Business Combinations*;
-- Amendments to IAS 16 Property, Plant and Equipment*;
-- Amendments to IAS 37 Provisions, Contingent Liabilities and Contingent
Assets*;
-- Annual Improvements (2018-2020 Cycle) IFRS 1, IFRS 9, IAS 41 and Illustrative
Examples accompanying IFRS 16*; and
-- IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16 Interest Rate Benchmark Return
Reform - Phase 2 (Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS
16)*
*Standards and amendments not yet endorsed by the EU.
4. Adoption of new accounting standards
In the year ended 30 September 2020, the Group has adopted IFRS
16 'Leases', which has resulted in the Group recognising a
right-of-use asset and liability on the Statement of financial
position at the present value of all future lease payments for any
leases for which it is the lessee.
The impact on the Group's Statement of financial position at 1
October 2019 was to recognise a right-of-use asset and lease
liability of GBP1.5m. The right-of-use asset relates to the Group's
occupation of Burnham Yard, Beaconsfield, as a Head Office
facility.
IFRS 16 - Leases
IFRS 16, 'Leases' replaces IAS 17, 'Leases' along with three
Interpretations (IFRIC 3 'Determining whether an Arrangement
contains a Lease', SIC 15 'Operating Leases - Incentives' and SIC
27 'Evaluating the Substance of Transactions Involving the Legal
Form of a Lease').
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. The adoption of this
new Standard has resulted in the Group recognising a right-of-use
asset and a related lease liability in connection with all former
operating leases except for those identified as low-value or having
a remaining lease term of less than twelve months from the date of
initial application.
The new Standard has been applied using the modified
retrospective approach, with the cumulative effect of adopting IFRS
16 being recognised in equity as an adjustment to the opening
balance of retained earnings for the current period. The adjustment
to equity is immaterial and therefore, no adjustment has been made.
Prior periods have not been restated.
For contracts in place at the date of initial application, the
Group has elected to apply the definition of a lease from IAS 17
and IFRIC 4 and has not applied IFRS 16 to arrangements that were
previously not identified as lease under IAS 17 and IFRIC 14.
The Group has elected not to include initial direct costs in the
measurement of the right-of-use asset for operating leases in
existence at the date of initial application of IFRS 16, being 1
October 2019. At this date, the Group has also elected to measure
the right-of-use assets at an amount equal to the lease liability
adjusted for any prepaid or accrued lease payments that existed at
the date of transition.
Instead of performing an impairment review on the right-of-use
assets at the date of initial application, the Group has relied on
its historic assessment as to whether leases were onerous
immediately before the date of initial application of IFRS 16.
On transition, for leases previously accounted for as operating
leases with a remaining lease term of less than twelve months and
for leases of low-value assets, the Group has applied the optional
exemptions to not recognise right-of-use assets but to account for
the lease expense on a straight-line basis over the remaining lease
term.
For those leases previously classified as finance leases, the
right-of-use asset and lease liability are measured at the date of
initial application at the same amounts as under IAS 17 immediately
before the date of initial application.
On transition to IFRS 16 the weighted average incremental
borrowing rate applied to lease liabilities recognised under IFRS
16 was 4.75%.
The treatment of leases where the Group is acting as a lessor is
substantially unchanged from that currently applied under IAS
17.
Other than as described above, the same accounting policies,
presentation and method of computation are followed in these
financial statements as were applied in the previous audited
financial statements.
IFRS 15 - Revenue from contracts with customers
As described below, during the year the Group changed the method
of accounting for contract income from the output method to the
input method.
5. 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 2020. 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. Further
information can be found in notes 1 and 24.
Unrealised gains on transactions between the Group and its
subsidiaries are eliminated. Unrealised losses are also eliminated
unless the transaction provides evidence of an impairment of the
asset transferred. Amounts reported in the financial statements of
subsidiaries have been adjusted where necessary to ensure
consistency with the accounting policies adopted by the Group.
Acquisitions of subsidiaries are dealt with by the acquisition
method. The method involves the recognition at fair value of all
identifiable assets and liabilities, including contingent
liabilities and non-controlling interests of the subsidiary, at the
acquisition date, regardless of whether or not they were recorded
in the financial statements of the subsidiary prior to acquisition.
On initial recognition, the assets and liabilities of the
subsidiary are included in the Group Statement of Financial
Position at their fair values, which are also used as the basis for
subsequent measurement in accordance with the Group accounting
policies. Goodwill is stated after separating out identifiable
intangible assets. Goodwill represents the excess of the fair value
of the consideration transferred over the fair value of the Group's
share of the identifiable net assets and non-controlling interests
of the acquired subsidiary at the date of acquisition.
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 previous fifteen-month period to 30 September 2019, 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 IFRS 16 'Leases'.
To determine whether to recognise revenue, the Group follows a
5-step process:
1. Identifying the contract with a customer
2. Identifying the performance obligations
3. Determining the transaction price
4. Allocating the transaction price to the performance obligations
5. Recognising revenue when/as performance obligations are satisfied.
The Group often enters into transactions with multiple
performance obligations. In these cases, the total transaction
price for a contract is allocated amongst the various performance
obligations based on their relative stand-alone selling prices. The
transaction price for a contract excludes any amounts collected on
behalf of third parties.
Revenue is recognised either at a point in time or over time,
when (or as) the Group satisfies performance obligations by
transferring the promised goods or services to its customers.
The Group recognises contract liabilities for consideration
received in respect of unsatisfied performance obligations and
reports these amounts as other payables in the Statement of
financial position (note 33). Similarly, if the Group satisfies a
performance obligation before it receives the consideration, the
Group recognises either a contract asset or receivable in the
Statement of financial position, depending on whether something
other than the passage of time is required before the consideration
is due.
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.
Sales of land and sales of freehold
Revenue from the sale of land and reversionary freeholds is
recognised at a point in time on legal completion. In some
instances, payment terms are deferred, such balances are discounted
if deferred terms are more than one year.
Sales of residential units
Revenue from the sale of residential units is recognised at a
point in time on legal completion.
Contract income
On reviewing the accounting policy for contract income adopted
by the Group for the fifteen-month period ended 30 September 2019,
the Board have concluded that the policy is not appropriate and
that adopting the input method faithfully depicts the transfer of
goods and services. Additionally, the Directors made an accrual for
costs of sales associated with contract income that were yet to be
incurred. The impact of these errors is not material. Further
details of the accounting policy for contract income are set out
below.
Contract income relates to where the Group is providing
construction services to third parties, resulting in a completed
developed property, on land that is not controlled by the Group
during the development phase.
Revenue is recognised over time, with reference to the stage of
completion of the contract. The stage of completion is determined
using an input method that reflects the development cost incurred
as a proportion of the total expected development cost as it is
considered proportionate to the satisfaction of the underlying
performance obligation. These contracts are typically for a fixed
cash consideration received on a monthly cycle over the course of
the construction services contract.
Management planning and land management services
For each planning and land management services contract there
are a number of milestones, which vary from contract to contract,
but in all cases include a planning and a disposal obligation. The
Directors must exercise judgement over whether each milestone
constitutes a distinct performance obligation. In doing so 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 agreed by the
customer. 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 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 9.
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.
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.
Administrative expenses
Operating expenses are recognised in the Group Statement of
Comprehensive Income upon utilisation of the service as it is
incurred.
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 share-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.
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.
Taxation
Tax expense recognised in the Group Statement of Comprehensive
Income comprises the sum of current tax and deferred tax not
recognised in other comprehensive income or directly in equity.
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.
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 is derecognised on disposal. When the
Directors consider that the status of the property has changed to
being a development property it is transferred to inventories. A
property is transferred to inventories when management changes its
intentions and there is evidence of the change in use, such as the
cessation of future rental income. When a partial disposal or
transfer is made, the proportion relating to the disposal or
transfer is derecognised.
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 applicable are:
Fixtures and
fittings - 20% to 25%
Office equipment - 25%
Motor vehicles - 25%
Modular housing - Over useful economic life estimated at 40 years
Material residual value estimates are reviewed as required, but
at least annually.
Leased assets
As described in note 3, the Group has applied IFRS 16 using the
modified retrospective approach and therefore comparative
information has not been restated. This means comparative
information is still reported under IAS 17 and IFRIC 14.
The Group as a lessee
For any new contracts entered into on or after 1 October 2019,
the Group considers whether a contract is, or contains a lease. A
lease is defined as 'a contract, or part of a contract, that
conveys the right to use an asset (the underlying asset) for a
period of time in exchange for consideration'. To apply this
definition, the Group assesses whether the contract meets three key
evaluations which are whether:
-- The contract contains an identified asset, which is either explicitly
identified in the contract or implicitly specified by being identified
at the time the asset is made available to the Group
-- The Group has the right to obtain substantially all of the economic
benefits from use of the identified asset throughout the period of use,
considering its rights within the defined scope of the contract
-- The Group has the right to direct the use of the identified asset throughout
the period of use. The Group assesses whether it has the right to direct
'how and for what purpose' the asset is used throughout the period of
use.
At lease commencement date, the Group recognises a right-of-use
asset and a lease liability on the balance sheet date. The
right-of-use asset is measured at cost, which is made up of the
initial measurement of the lease liability, any initial direct
costs incurred by the Group, an estimate of any costs to dismantle
and remove the asset at the end of the lease, and any lease
payments made in advance of the lease commencement date (net of any
incentives received).
The Group depreciates the right-of-use assets on a straight-line
basis from the lease commencement date to the earlier of the end of
the useful life of the right-of-use asset or the end of the lease
term. The Group also assesses the right-of-use asset for impairment
when such indicators exist.
At the commencement date, the Group measures the lease liability
at the present value of the lease payments unpaid at that date,
discounted using the interest rate implicit in the lease if that
rate is readily available or the Group's incremental borrowing
rate.
Lease payments included in the measurement of the lease
liability are made up of fixed payments (including in substance
fixed), variable payments based on an index or rate, amounts
expected to be payable under a residual value guaranteed and
payments arising from options reasonably certain to be
exercised.
Subsequent to initial measurement, the liability will be reduced
for payments made and increased for interest. It is remeasured to
reflect any reassessment or modification, or if there are changes
in in-substance fixed payments.
When the lease liability is remeasured, the corresponding
adjustment is reflected in the right-of-use asset, or profit and
loss if the right-of-use asset is already reduced to zero.
The Group has elected to account for short-term leases and
leases of low-value assets using the practical expedients. Instead
of recognising a right-of-use asset and lease liability, the
payments in relation to these are recognised as an expense in the
statement of comprehensive income on a straight-line basis over the
lease term. Right-of-use assets have been recognised as a
non-current asset and lease liabilities have been included as a
liability.
The Group as a lessor
The Group's accounting policy under IFRS 16 has not changed from
the comparative period.
As a lessor the Group classifies its leases as either operating
or finance leases.
A lease is classified as a finance lease if it transfers
substantially all the risks and rewards incidental to ownership of
the underlying asset, and is classified as an operating lease if it
does not.
The Group earns rental income from operating leases of its
investment properties. Rental income is recognised on a
straight-line basis over the lease term.
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 relating 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%
Development costs - 25%
Website costs - 25%
Other computer software - 25%
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's investments in joint ventures are held at
cost.
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.
Deferred income
Deferred income is recognised where the Group receives cash from
customers in advance of achieving the performance obligation under
IFRS 15 'Revenue'. Deferred income arise in the contract income and
housebuilding segments.
Shared ownership sales
Shared ownership is where initially a long lease on a property
is granted through a sale to the occupier, in return for an initial
payment (the First Tranche).
First Tranche sales are included within revenue and the related
proportion of the cost of the asset recognised as cost of
sales.
Shared ownership properties are split proportionately between
Inventories and Investment Properties based on the current element
relating to First Tranche sales. The split is made at the point of
completion of the sale to the third party. The assumptions on which
the First Tranche proportion has been based include, but are not
limited to, matters such as the affordability of the shared
ownership properties, local demand for shared ownership properties,
and general experience of First Tranche shared ownership sales
within the wider social housing sector. As at 30 September 2020,
the average First Tranche sales percentage assumed for vacant
shared ownership properties is 40%. If there is a change in
percentage used, this will affect the proportion of inventory and
investment property recognised with a higher assumed First Tranche
sales percentage resulting in a higher inventory value and a lower
investment property value.
Shared Owners have the right to acquire further tranches and any
surplus or deficit on such subsequent sales are recognised in the
Group income statement as a part disposal of investment
properties.
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 assets disposed during the year are included in
the consolidated statement of comprehensive income in the
appropriate segment, up to the date of disposal.
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 25) 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 are recognised. 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.
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.
Borrowing costs
The Group capitalises borrowing costs directly attributable to
the acquisition, construction or production of a qualifying asset
as part of the cost of that asset where developments are considered
to fall under the requirements of IAS 23 Borrowing Costs (Revised).
Qualifying assets are those which are being constructed over a
significant period of time, which the Group interprets to be over
twelve months. The majority of the Group's sites involve the
development of large volumes of properties in a repetitive manner.
The Group therefore expenses borrowing costs relating to such
developments in the period to which they relate through the income
statement using the effective interest method which calculates the
amortised cost of a financial asset and allocates the interest
income over the relevant period. The effective interest rate is the
rate that exactly discounts estimated future cash receipts through
the expected life of the financial asset to the net carrying amount
of the financial asset. Currently, the Group capitalises borrowing
costs only in relation to the site at Wilton Park. Additionally,
the Group's joint venture, Cheshunt Lakeside Developments Limited,
also capitalises borrowing costs. These are the only sites where
borrowing costs are directly attributable to the production of
qualifying asset and where construction occurs over a significant
period of time.
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.
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 which are deducted from total equity until they are
issued to employees under the Deferred Bonus 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.
Treasury Reserve represents the purchase of the Company's own
shares which are deducted from total equity until they are issued
to employees under the share option plan.
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.
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 and Company 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.
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.
Segmental reporting
The Group has a number of operating segments. In identifying
these operating segments, management generally follows the Group's
service lines representing its main activities. Each of these
operating segments is managed separately.
In addition, corporate assets which are not directly
attributable to the business activities of any operating segment
are not allocated to a segment. This primarily relates to the
Group's headquarters.
Government grants furlough
Grants for revenue expenditure are netted against the cost
incurred by the Group. Where retention of a government grant is
dependent on the Group satisfying certain criteria, it is initially
recognised as deferred income. When the criteria for retention have
been satisfied, the deferred income balance is released to the
consolidated statement of comprehensive income.
Land options
The Group holds a number of land options that were bought for
the potential to exercise the option and either develop the land or
sell with planning permission. The land options are initially
capitalised at cost and considered for any impairment indication
annually. The impairment review includes consideration of the
resale value of the option, likelihood of achieving planning
consent and current recoverable value as determined by the
Directors.
Investment in subsidiaries (Company only)
Subsidiaries are entities in which the company has control.
Investments in subsidiaries are held in the Company's Statement of
Financial Position at cost less impairment.
6. 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 5. Not
all of these accounting policies require management to make
difficult, subjective or complex judgements or estimates. Estimates
and judgements are continually evaluated and are based on
historical experience and other factors, including expectations of
future events that are believed to be reasonable under the
circumstances. Although these estimates are based on management's
best knowledge of the amount, event or actions, actual results may
differ from those estimates. The following is intended to provide
an understanding of the policies that management consider critical
because of the level of complexity, judgement or estimation
involved in their application and their impact on the financial
statements.
Key sources of estimation uncertainty
Cost of and net realisable value of inventories (note 28)
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 19)
The fair value of materially completed investment property is
determined by independent valuation experts using the highest and
best 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 19 for information about valuation methodology and
assumptions made.
Deferred consideration on transfer of beneficial interest in
Cheshunt Lakeside Developments Limited (notes 25 and 36)
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 during the
fifteen-month period ended 30 September 2019 and estimated a
discount to present value calculated from the date of disposal. At
30 September 2020, this is shown as an other receivable of GBP20.7m
(2019: GBP19.9m) disclosed in note 29. Further details of Cheshunt
Lakeside Developments Limited are provided in note 25.
The impact of a change in the discount rates by one percent up
on the receipt would be a reduction in the receivable of GBP0.8m
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
GBP1.6m.
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 GBP0.7m.
Significant judgements
Timing and recoverability of repayment - amounts due from joint
ventures and associate (notes 25 and 26)
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 and
development sales. The judgements involved are the same as outlined
above for inventories.
Likelihood of achieving planning - inventories (note 28)
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. GBP3.3m (fifteen-month period ended 30
September 2019: GBP0.4m) of inventories are held at net realisable
value. A provision of GBP2.1m (fifteen-month period ended 30
September 2019: GBP0.2m) was recognised during the year.
Capitalisation of borrowing costs (note 32)
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 they necessarily take a substantial
period of time to be developed or become ready for sale. This has
resulted in borrowing costs related to such sites to be capitalised
in the current and prior periods. During the year, the Group
capitalised GBP0.9m (fifteen-month period ended 30 September 2019:
GBP1.3m) 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 9)
The Group recognises revenue in respect of management services
equal to the amounts entitled. The management fee formula in the
contract reflects progress at any given time of the satisfaction of
the contract's underlying performance obligations, which involves
judgement.
There were a number of material management service contracts
that were either ongoing or commenced in the period. For each
management service 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;
-- whether the revenue is recognised at a point in time or over time;
-- whether the achievement of a successful planning outcome is highly probable
in the context of the scheme; and
-- whether it is highly probable the third party asset with planning produces
a suitable economic return for the Group to recover its management fee
in full.
The Directors have a number of judgements to consider in
recognising revenue from management service contracts which are if
revenue:
-- should be recognised over time or at a point in time. The Directors recognise
management fee income when the customer benefits only once the obligation
is met.
-- meets all of the criteria to be recognised under IFRS 15.
-- is highly probable that a significant reversal will not occur. In making
that decision the Directors have to consider whether there is sufficient
certainty that they will get planning permission and whether that permission
will be for a scheme that generates sufficient value to ensure the Group
recovers management services fees due.
The Directors were required to exercise judgement in respect of
revenue recognition for the following contracts as set out below.
For all of the following management contracts a key judgement is an
assessment of the collectability of management fees on achieved
planning and the eventual sale price of the site which is based on
the assessment of value of the land once planning is achieved.
The significant judgements made were in relation to the
following contracts:
Hillingdon Gardens:
For the contract at Hillingdon Gardens, it was determined that
there were a number of distinct performance obligations of which no
further performance obligations were satisfied in the year to 30
September 2020. The contract was entered into in the prior period
where five performance obligations were satisfied in the
fifteen-month period to 30 September 2019. It was concluded that
these were distinct on the basis the customer benefited from each
of the milestones and that these milestones were considered
separable in the context of the contract. Planning obligations are
considered to be one milestone achieved when the grant of planning
is awarded. The performance obligations recognised were considered
satisfied in the period as control of the relating service was
transferred to the customer before the year 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 they all meet the criteria to be recognised at
a point in time.
Walthamstow:
For the contract at Walthamstow, it was determined that there
were a number of distinct performance obligations of which three
were satisfied in the year to 30 September 2020. The contract was
entered into in January 2020. It was concluded that these were
distinct on the basis that the customer benefits from each of the
milestones as they are actioned. Planning obligations are
considered to be one milestone achieved when the grant of planning
is awarded. The performance obligations recognised were considered
satisfied in the period as control of the related service was
transferred to the customer before the year 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 they all meet the criteria to be recognised at
a point in time.
Hounslow:
For the contract at Hounslow, it was determined that there were
a number of distinct performance obligations of which one was
satisfied in the year to 30 September 2020. The contract was
entered into in August 2020. It was concluded that these were
distinct on the basis that the customer benefits from each of the
milestones as they are achieved. Planning obligations are
considered to be one milestone achieved when the grant of planning
is awarded. The performance obligations recognised were considered
satisfied in the period as control of the related service was
transferred to the customer before the year 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 they all meet the criteria to be recognised at
a point in time.
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.
Accounting for the investment in Cheshunt Lakeside Developments
Limited and the associated put and call option arrangement (note
25)
In addition to a direct holding in Cheshunt Lakeside
Developments Limited (CLDL) (see note 25), 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.
Assets held for sale (note 30)
At 30 September 2020, the Directors' intention was to sell some
investment properties over the year ending 30 September 2021. 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 the next twelve 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 and which have been
determined based on the type, specification and location of the
property. The financial outturn in both the current year and prior
period relating to land and house building sales margins is
disclosed in note 10.
Other financial liabilities (Note 36)
During the year, the Group transferred legal title of land to a
third party with a contract that contains a put and call option and
did not recognise any revenue. At 30 September 2020, the Group had
a put and call option over the land with a third party which can be
triggered in certain circumstances where planning is achieved or
after a certain elapsed time period by either party.
There is significant judgement involved as to whether or not
this transaction should be accounted for as revenue or as a
financing arrangement on the initial transfer of legal title of the
land and in determining whether the put and call option could be
exercised, on what grounds and at what time. The Directors consider
that it is highly probable either they or the third party will
trigger the option in greater than one year and therefore under
IFRS 15, have accounted for the options as an other financial
liability and this relates to a financing agreement and not a land
sale.
7. 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
notes 24, 25, 26 and 29. 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:
As at As at
30 September 30 September
2020 2019
GBPm GBPm
------------------------------------------------------ ------------- -------------
Classes of financial assets - carrying amounts
Investment in quoted companies 0.5 1.1
Cash and cash equivalents 15.7 10.9
Amounts due from joint ventures in less than one year 42.2 34.8
Amounts due from joint ventures in more than one year - 1.0
Amounts due from associates in less than one year 3.1 3.3
Receivables due in more than one year 22.3 21.8
Trade and other receivables 63.8 44.4
------------------------------------------------------ ------------- -------------
147.6 117.3
------------------------------------------------------ ------------- -------------
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 into 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 endeavours to seek and secure a legal charge over
underlying property assets held until such time that all elements
of the deferred consideration have 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 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.
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 year ended 30 September 2020 or the prior fifteen-month
period ending 30 September 2019.
A majority of current trade and other receivables will be paid
within 30-59 days of the balance sheet date. 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.
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 and 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 29.
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.
Credit ratings of the financial institutions holding the Group's
cash deposits as at 30 September 2020 are shown below:
Long-term Long-term
credit credit Cash at
rating rating bank
Financial institution - Fitch - Moody's GBPm
---------------------- ---------- ----------- -------
HSBC AA- A1 11.0
Lloyds Bank A+ A1 4.7
Barclays A+ A1 -
Aldermore Bank Unquoted Unquoted -
Metro Bank B+ Unquoted -
---------------------- ---------- ----------- -------
Aldermore Bank is privately owned so no credit rating is
provided.
Credit ratings of the financial institutions holding the Group's
cash deposits as at 30 September 2019 are shown below:
Long-term Long-term
credit credit Cash at
rating rating bank
Financial institution - Fitch - Moody's GBPm
---------------------- ---------- ----------- -------
HSBC AA- A1 -
Barclays A+ A1 9.7
Lloyds Bank A+ A1 1.2
---------------------- ---------- ----------- -------
(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.
See note 32 for the maturity analysis of borrowings and details
of the undrawn committed borrowing facilities at the year-end.
(c) Interest rate risk
Interest rate risk is the risk that future cash flows of a
financial instrument will fluctuate due to changes in interest
rate.
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 32. 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.
As at As at
30 September 30 September
2020 2019
GBPm GBPm
------------------------------------------------- ------------- -------------
0.5 per cent increase in interest rates
Interest on borrowings (0.8) (0.6)
Interest on cash deposits 0.1 0.1
------------------------------------------------- ------------- -------------
Total impact on pre-tax profit and equity - loss (0.7) (0.5)
------------------------------------------------- ------------- -------------
0.5 per cent decrease in interest rates
Interest on borrowings 0.8 0.6
Interest on cash deposits (0.1) (0.1)
------------------------------------------------- ------------- -------------
Total impact on pre-tax profit and equity - gain 0.7 0.5
------------------------------------------------- ------------- -------------
The interest rate risk profile of financial assets and
liabilities of the Group at 30 September 2020 was as follows:
Financial
assets
Floating Fixed on which
rate financial rate financial no interest
assets assets is earned Total
GBPm GBPm GBPm GBPm
----------------------- --------------- --------------- ------------ -----
Total financial assets 15.7 45.3 86.6 147.6
----------------------- --------------- --------------- ------------ -----
Financial
liabilities
Floating Fixed on which
rate financial rate financial no interest
liabilities liabilities is earned Total
GBPm GBPm GBPm GBPm
---------------------------- --------------- --------------- ------------ ------
Total financial liabilities 85.0 70.2 45.3 200.5
---------------------------- --------------- --------------- ------------ ------
The interest rate risk profile of financial assets and
liabilities of the Group at 30 September 2019 was as follows:
Financial
assets
Floating Fixed on which
rate financial rate financial no interest
assets assets is earned Total
GBPm GBPm GBPm GBPm
----------------------- --------------- --------------- ------------ -----
Total financial assets 10.9 39.1 67.3 117.3
----------------------- --------------- --------------- ------------ -----
Financial
liabilities
Floating Fixed on which
rate financial rate financial no interest
liabilities liabilities is earned Total
GBPm GBPm GBPm GBPm
---------------------------- --------------- --------------- ------------ -----
Total financial liabilities 116.1 47.1 51.3 214.5
---------------------------- --------------- --------------- ------------ -----
(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.
Financial assets and liabilities
The carrying amounts presented in the Statement of Financial
Position relate to the following categories:
As at As at
30 September 30 September
2020 2019
GBPm GBPm
-------------------------------------------------- ------------- -------------
Amortised cost
Other assets - non-current 22.3 22.8
Other assets - current 109.1 78.5
Cash and cash equivalents 15.7 10.9
-------------------------------------------------- ------------- -------------
Fair value through other comprehensive income
Other assets - non-current 0.5 1.1
-------------------------------------------------- ------------- -------------
Fair value through profit and loss
Other assets - current - 4.0
-------------------------------------------------- ------------- -------------
147.6 117.3
-------------------------------------------------- ------------- -------------
Financial liabilities
Financial liabilities measured at amortised cost:
- borrowings 123.8 137.3
- Zero Dividend Preference shares 30.2 25.9
- other liabilities - current 38.8 51.3
- other liabilities - non-current 7.7 -
-------------------------------------------------- ------------- -------------
200.5 214.5
-------------------------------------------------- ------------- -------------
Other assets - non current includes investments, amounts due
from associate in note 26 and joint ventures shown in note 25 and
amounts shown as trade and other receivables in note 29 due in more
than one year.
Other assets - current includes amounts due from joint ventures
and associate shown in notes 25 and 26 and all amounts shown as
trade and other receivables due in less than one year in note 29
except prepayments of GBP0.3m (30 September 2019: GBP1.0m). Amounts
due from Bucknalls Developments Limited is split between amortised
cost and fair value through profit and loss.
Other liabilities - current includes purchase consideration of
GBPnil (30 September 2019: GBP4.1m) shown in note 36 and all
amounts shown as trade and other payables in note 33 except sales
and social security taxes of GBP0.5m (30 September 2019: GBP0.5m).
All amounts are non-interest bearing and are due within one
year.
Other liabilities - non-current contains another financial
arrangement of GBP6.8m (30 September 2019: GBPnil) at an implied
rate of interest tied to the triggering of the put and call options
in place.
Borrowings consist of loans which attract interest at varying
rates and there is a variety of fixed and variable rates (see table
in note 32). The ZDP shares are carried at their accrued value of
167.83p per share (30 September 2019: 159.12p). Their closing price
on the main market of the London Stock Exchange on 30 September
2020 was 156.00p (30 September 2019: 161.50p). 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.
8. Capital management policies and procedures
The Group's objectives when managing capital are:
-- to safeguard its ability to continue as a going concern;
-- to ensure sufficient liquid resources are available to meet the funding
requirement of its projects and to fund new projects where identified;
and
-- to provide returns for shareholders and benefits for other stakeholders.
This is achieved through ensuring sufficient bank and other
facilities are in place; further details are given in notes 31 and
32 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 Board at 40% and an outturn metric scoring higher than this
amount is 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 Group
Finance Director's review.
As at As at
30 September 30 September
2020 2019
GBPm GBPm
-------------------------------------------- ------------- -------------
Equity 173.3 162.2
Less: cash and cash equivalents (15.7) (10.9)
-------------------------------------------- ------------- -------------
Capital 157.6 151.3
-------------------------------------------- ------------- -------------
Equity 173.3 162.2
Bank loans 85.4 130.1
Other loans 38.4 7.2
Zero Dividend Preference shares 30.2 25.9
Loans from joint ventures 3.1 -
Other financial liabilities 6.8 -
-------------------------------------------- ------------- -------------
Borrowings 163.9 163.2
-------------------------------------------- ------------- -------------
Overall financing (Capital plus Borrowings) 337.2 325.4
-------------------------------------------- ------------- -------------
Capital to overall financing 46.7% 46.5%
-------------------------------------------- ------------- -------------
The Group manages the capital structure and makes adjustments in
light of changes in economic conditions and the risk
characteristics of the underlying assets. In order to maintain or
adjust the capital structure, the Group may adjust the level of
dividends paid to shareholders, return capital to shareholders,
issue new shares or sell assets to reduce debt.
Every quarter the Group must report to the ZDP shareholders that
the covenants attached to the ZDP shares have not been breached.
The most significant covenant is the 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 .
9. Revenue from contracts with customers
The Group has disaggregated revenue into various categories in
the following tables 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 10.
Land Management Contract House
sales fees income building Total
Year ended 30 September 2020 GBPm GBPm GBPm GBPm GBPm
----------------------------- ------ ---------- -------- --------- -----
Point in time 21.7 21.4 - 23.8 66.9
Over time - 3.0 51.8 - 54.8
----------------------------- ------ ---------- -------- --------- -----
Total 21.7 24.4 51.8 23.8 121.7
----------------------------- ------ ---------- -------- --------- -----
Land Management Contract House
Fifteen-month period ended 30 September sales fees income building Total
2019 GBPm GBPm GBPm GBPm GBPm
---------------------------------------- ------ ---------- -------- --------- -----
Point in time 29.2 16.7 - 34.5 80.4
Over time - 1.9 62.6 - 64.5
---------------------------------------- ------ ---------- -------- --------- -----
Total 29.2 18.6 62.6 34.5 144.9
---------------------------------------- ------ ---------- -------- --------- -----
All revenue is earned in the United Kingdom.
Included within 'Land sales' are land sales to housing
associations which include construction works to 'Golden Brick'.
Subsequent construction works to completion are included within
'Contract income'.
Included within 'House building' are the sales of reversionary
freehold reversions and customers' extras that arise as a
by-product of house building activity.
Rental income and investment properties income is not disclosed
in the table above as these revenue sources do not fall under the
IFRS 15 accounting standard.
During the year, transactions with three customers each
accounted for more than 10% of revenue from contracts with
customers (fifteen-month period to 30 September 2019: no
transactions). One customer was in the 'Land sales' segment
(revenue of GBP20.2m) and two customers were in the 'Contract
income' segment (revenue of GBP23.9m and GBP23.7m).
Contract assets and contract liabilities are included within the
Group Statement of Financial Position. The timing of work performed
and revenue recognised, billing profiles and cash collection
results in trade receivables (amounts billed to date and unpaid),
contract assets (unbilled amounts where revenue has been
recognised) and contract liabilities (amounts relating to contracts
where work is yet to be performed and the performance obligation
achieved) being recognised on the Group Statement of Financial
Position.
The reconciliation of the opening to closing contract balances
is shown below:
Contract Contract
assets liabilities
GBPm GBPm
------------------------------------------- -------- ------------
At 30 September 2019 5.0 -
Transfer to trade receivables (5.0) -
Excess of revenue recognised over invoiced 2.1 -
Invoiced in advance of performance - (12.1)
------------------------------------------- -------- ------------
At 30 September 2020 2.1 (12.1)
------------------------------------------- -------- ------------
Contract assets are recognised in prepayments and accrued income
(note 29). Contract liabilities are recognised in accruals (note
33).
10. Segmental information
In accordance with IFRS 8, information is disclosed to enable
users of financial statements to evaluate the nature and financial
effects of the business activities in which the Group engages.
In identifying its operating segments, management differentiates
between land sales, housebuilding, contract income, rental income,
hotel income, investments, investment properties, management fees
and other income. These segments are based on the information
reported to the chief operating decision maker (which in the
Group's case is the Operating Board comprising the three Executive
Directors and four senior managers) and represent the activities
which generate significant revenues, profits and use of resources
within the Group. These operating segments are monitored and
strategic decisions are made on the basis of segment operating
results. Note 1 provides further information relating to each
segment.
Segmental analysis by activity
Land Management Contract House Rental Investment Central
Year ended sales fees income building income properties support Total
30 September 2020 GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------------------------------- ------ ----------- -------- --------- ------- ------------ -------- ------
Revenue from contracts
with customers 21.7 24.4 51.8 23.8 - - - 121.7
Other revenue - - - - 1.4 0.9 - 2.3
Cost of sales (19.7) (3.0) (52.9) (22.7) (0.4) (0.5) - (99.2)
Expected credit loss (2.8) - - - - - - (2.8)
------------------------------- ------ ----------- -------- --------- ------- ------------ -------- ------
Gross profit/(loss) (0.8) 21.4 (1.1) 1.1 1.0 0.4 - 22.0
------------------------------- ------ ----------- -------- --------- ------- ------------ -------- ------
Administrative expenses - - - - - - (12.6) (12.6)
Share of profit of
joint ventures - - - 2.0 - - - 2.0
Share of loss of associate - - - (0.2) - - - (0.2)
Revaluation of assets
held for sale - - - - - 2.0 - 2.0
Loss on sale of controlling
interest
in subsidiary - - - (2.0) - - - (2.0)
Revaluation of investment
property - - - - - 0.6 - 0.6
------------------------------- ------ ----------- -------- --------- ------- ------------ -------- ------
Operating profit/(loss) (0.8) 21.4 (1.1) 0.9 1.0 3.0 (12.6) 11.8
------------------------------- ------ ----------- -------- --------- ------- ------------ -------- ------
Finance cost (4.5) (0.3) (0.1) (2.0) - (0.5) (1.8) (9.2)
Finance income 0.8 0.1 - 0.2 - - - 1.1
------------------------------- ------ ----------- -------- --------- ------- ------------ -------- ------
Profit/(loss) before
tax (4.5) 21.2 (1.2) (0.9) 1.0 2.5 (14.4) 3.7
------------------------------- ------ ----------- -------- --------- ------- ------------ -------- ------
Net tax charge 0.1 (0.8) - (0.6) (0.1) (0.1) 0.1 (1.4)
------------------------------- ------ ----------- -------- --------- ------- ------------ -------- ------
Total profit/(loss) (4.4) 20.4 (1.2) (1.5) 0.9 2.4 (14.3) 2.3
Other comprehensive
income - - - - - - (0.6) (0.6)
------------------------------- ------ ----------- -------- --------- ------- ------------ -------- ------
Total profit and comprehensive
income/(loss) (4.4) 20.4 (1.2) (1.5) 0.9 2.4 (14.9) 1.7
------------------------------- ------ ----------- -------- --------- ------- ------------ -------- ------
Fifteen-month period Land Management Contract House Rental Investment Central
to sales fees income building income properties support Total
30 September 2019 GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------------------------------- ------ ----------- -------- --------- ------- ------------ -------- -------
Revenue from contracts
with customers 29.2 18.6 62.6 34.5 - - - 144.9
Other revenue - - - - 1.5 1.5 - 3.0
Cost of sales (24.3) (2.5) (57.1) (30.6) (0.9) - - (115.4)
------------------------------- ------ ----------- -------- --------- ------- ------------ -------- -------
Gross profit 4.9 16.1 5.5 3.9 0.6 1.5 - 32.5
------------------------------- ------ ----------- -------- --------- ------- ------------ -------- -------
Administrative expenses - - - - - - (15.7) (15.7)
Gain on sale of joint
venture interest - - 12.6 - - - 12.6
Share of profit of
joint ventures - - - 2.0 - - - 2.0
Share of profit of
associate - - - 0.2 - - - 0.2
Revaluation of investment
property - - - - - 1.1 - 1.1
------------------------------- ------ ----------- -------- --------- ------- ------------ -------- -------
Operating profit/(loss) 4.9 16.1 5.5 18.7 0.6 2.6 (15.7) 32.7
------------------------------- ------ ----------- -------- --------- ------- ------------ -------- -------
Net finance (cost)/income (1.5) 0.7 - (4.8) - (1.8) (0.3) (7.7)
------------------------------- ------ ----------- -------- --------- ------- ------------ -------- -------
Profit/(loss) before
tax 3.4 16.8 5.5 13.9 0.6 0.8 (16.0) 25.0
------------------------------- ------ ----------- -------- --------- ------- ------------ -------- -------
Tax (charge)/credit (0.1) (0.3) (0.1) (0.2) - - 0.3 (0.4)
------------------------------- ------ ----------- -------- --------- ------- ------------ -------- -------
Total profit/(loss) 3.3 16.5 5.4 13.7 0.6 0.8 (15.7) 24.6
Other comprehensive
income - - - - - - (0.4) (0.4)
------------------------------- ------ ----------- -------- --------- ------- ------------ -------- -------
Total profit and comprehensive
income/(loss) 3.3 16.5 5.4 13.7 0.6 0.8 (16.1) 24.2
------------------------------- ------ ----------- -------- --------- ------- ------------ -------- -------
Land Management Contract House Rental Investment Central
Year ended sales fees income building income properties support Total
30 September 2020 GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------------------------------ ------ ----------- -------- --------- ------- ------------ -------- -------
ASSETS
Non-current assets
Investment properties - - - - - 43.5 - 43.5
Property, plant and
equipment - - - - 4.7 - 0.9 5.6
Right-of-use asset - - - - - - 1.2 1.2
Intangible assets - - - - 0.2 - - 0.2
Investments in quoted
companies - - - - - - 0.5 0.5
Investment in joint
ventures - - - 8.8 - - - 8.8
Investment in associate - - - 1.1 - - - 1.1
Other receivables - - 1.6 20.7 - - - 22.3
------------------------------ ------ ----------- -------- --------- ------- ------------ -------- -------
Total non-current assets - - 1.6 30.6 4.9 43.5 2.6 83.2
------------------------------ ------ ----------- -------- --------- ------- ------------ -------- -------
Current assets
Inventories 72.1 4.0 - 97.5 - - - 173.6
Trade and other receivables 15.8 36.8 8.0 - - - 0.3 60.9
Assets held for sale - - - - - 12.5 - 12.5
Amounts due from associate - - - 3.1 - - - 3.1
Amounts due from joint
ventures - - - 42.2 - - - 42.2
Cash and cash equivalents - - - - - - 15.7 15.7
------------------------------ ------ ----------- -------- --------- ------- ------------ -------- -------
Total current assets 87.9 40.8 8.0 142.8 - 12.5 16.0 308.0
------------------------------ ------ ----------- -------- --------- ------- ------------ -------- -------
Total assets 87.9 40.8 9.6 173.4 4.9 56.0 18.6 391.2
------------------------------ ------ ----------- -------- --------- ------- ------------ -------- -------
LIABILITIES
Current liabilities
Bank loans (14.2) - - - (0.3) (27.0) - (41.5)
Other loans (25.3) - - - - - - (25.3)
Trade and other payables (15.8) - (11.4) (4.2) (0.1) (1.3) - (32.8)
Deferred income - - (10.0) - - - - (10.0)
Amounts owed to joint
ventures - - - (6.2) - - - (6.2)
Lease liabilities - - - - - - (0.3) (0.3)
Corporation tax - - - - - - (3.1) (3.1)
------------------------------ ------ ----------- -------- --------- ------- ------------ -------- -------
Total current liabilities (55.3) - (21.4) (10.4) (0.4) (28.3) (3.4) (119.2)
------------------------------ ------ ----------- -------- --------- ------- ------------ -------- -------
Non-current liabilities
Bank loans - - - (42.4) (0.3) (1.2) - (43.9)
Other loans - - - (13.1) - - - (13.1)
Deferred income - - - (2.1) - - - (2.1)
Lease liabilities - - - - - - (0.9) (0.9)
Other financial liabilities (6.8) - - - - - - (6.8)
Zero Dividend Preference
shares - - - (30.2) - - - (30.2)
Deferred tax - - - - - (2.4) 0.7 (1.7)
------------------------------ ------ ----------- -------- --------- ------- ------------ -------- -------
Total non-current liabilities (6.8) - - (87.8) (0.3) (3.6) (0.2) (98.7)
------------------------------ ------ ----------- -------- --------- ------- ------------ -------- -------
Total liabilities (62.1) - (21.4) (98.2) (0.7) (31.9) (3.6) (217.9)
------------------------------ ------ ----------- -------- --------- ------- ------------ -------- -------
Net assets/(liabilities) 25.8 40.8 (11.8) 75.2 4.2 24.1 15.0 173.3
------------------------------ ------ ----------- -------- --------- ------- ------------ -------- -------
Land Management Contract House Rental Investment Central
sales Fees income building income properties support Total
30 September 2019 GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------------------------------ ------- ---------- -------- --------- ------- ------------ -------- -------
ASSETS
Non-current assets
Investment properties - - - - - 49.3 - 49.3
Property, plant and equipment - - - - 5.2 - 1.1 6.3
Intangible assets - - - - 0.3 - - 0.3
Investments - - - - - - 1.1 1.1
Investment in joint ventures - - - 8.0 - - - 8.0
Amounts due from joint
ventures - - - 1.0 - - - 1.0
Investment in associate - - - 1.3 - - - 1.3
Other receivables 1.7 - 0.2 19.9 - - - 21.8
------------------------------ ------- ---------- -------- --------- ------- ------------ -------- -------
Total non-current assets 1.7 - 0.2 30.2 5.5 49.3 2.2 89.1
------------------------------ ------- ---------- -------- --------- ------- ------------ -------- -------
Current assets
Inventories 77.2 - - 115.2 - - - 192.4
Trade and other receivables 11.8 15.7 14.9 1.0 - - 2.0 45.4
Assets held for sale - - - - - 4.7 - 4.7
Amounts due from associate - - - 3.3 - - - 3.3
Amounts due from joint
ventures - - - 34.8 - - - 34.8
Cash and cash equivalents - - - - - - 10.9 10.9
------------------------------ ------- ---------- -------- --------- ------- ------------ -------- -------
Total current assets 89.0 15.7 14.9 154.3 - 4.7 12.9 291.5
------------------------------ ------- ---------- -------- --------- ------- ------------ -------- -------
Total assets 90.7 15.7 15.1 184.5 5.5 54.0 15.1 380.6
------------------------------ ------- ---------- -------- --------- ------- ------------ -------- -------
LIABILITIES
Current liabilities
Bank loans and overdrafts (48.0) - - - - - - (48.0)
Trade and other payables (16.8) - (14.3) (13.1) - (1.2) (2.3) (47.7)
Corporation tax - - - - - - (2.2) (2.2)
Other financial liabilities (4.1) - - - - - - (4.1)
------------------------------ ------- ---------- -------- --------- ------- ------------ -------- -------
Total current liabilities (68.9) - (14.3) (13.1) - (1.2) (4.5) (102.0)
------------------------------ ------- ---------- -------- --------- ------- ------------ -------- -------
Non-current liabilities
Bank loans (1.1) - - (53.0) - (28.0) - (82.1)
Other loans - - - (7.2) - - - (7.2)
Zero Dividend Preference
shares - - - (25.9) - - - (25.9)
Deferred tax - - - - - (1.2) - (1.2)
------------------------------ ------- ---------- -------- --------- ------- ------------ -------- -------
Total non-current liabilities (1.1) - - (86.1) - (29.2) - (116.4)
------------------------------ ------- ---------- -------- --------- ------- ------------ -------- -------
Total liabilities (70.0) - (14.3) (99.2) - (30.4) (4.5) (218.4)
------------------------------ ------- ---------- -------- --------- ------- ------------ -------- -------
Net assets 20.7 15.7 0.8 85.3 5.5 23.6 10.6 162.2
------------------------------ ------- ---------- -------- --------- ------- ------------ -------- -------
11. Expenses by nature
Fifteen-month
period
Year ended to
30 September 30 September
2020 2019
GBPm GBPm
------------------------------------------------- ------------- --------------
Depreciation - property, plant and equipment 1.0 0.7
Depreciation - right-of-use asset 0.3 -
Amortisation 0.1 -
Operating lease rentals - properties - 0.4
Fees paid to BDO LLP in respect of:
- audit of the company and consolidated accounts
- current year/period 0.2 0.3
- prior year/period - 0.1
Advertising expenses 0.2 0.6
------------------------------------------------- ------------- --------------
Non-audit services fees, relating to review of the interim
report, for the year were GBPnil (fifteen-month period to 30
September 2019: GBP18,000).
12. Employee costs
The Directors of the Company who served during the period are
considered to be key management personnel in both the current year
and prior fifteen-month period.
The Remuneration Report is produced for information purposes, in
order to give shareholders and other users of financial statements
greater transparency about the way in which the Directors are
remunerated.
Total employee costs (including Directors) during the year were
as follows:
Fifteen-month
period
Year ended to
30 September 30 September
2020 2019
GBPm GBPm
-------------------------------------------- ------------- --------------
Wages and salaries 12.3 15.0
Social security costs 1.6 1.7
Pension costs - defined contribution plans 0.5 0.4
Share-based payments - 0.3
-------------------------------------------- ------------- --------------
14.4 17.4
-------------------------------------------- ------------- --------------
Amount capitalised to inventories (note 28) (5.7) (8.1)
-------------------------------------------- ------------- --------------
Total employee cost 8.7 9.3
-------------------------------------------- ------------- --------------
During the year, the Group received reimbursement of payroll
costs of GBP0.6m (fifteen-month period to 30 September 2019:
GBPnil) in respect of the UK Government's Coronavirus Job Retention
Scheme. This is shown as a credit to gross wages and salary costs
of GBP12.9m, to give wages and salaries costs of GBP12.3m.
The average number of employees during the period was as
follows:
Fifteen-month
period
Year ended to
30 September 30 September
2020 2019
Number Number
------------------------- ------------- --------------
Key management personnel 3 3
Administration 156 135
------------------------- ------------- --------------
Total 159 138
------------------------- ------------- --------------
There were no employee or employee benefit expenses in the
Company in the current year or prior fifteen-month period.
13. 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 members of staff
awarded the options are still employed by the Company at the time
of the options being exercised. Good leavers can exercise options
for a period of up to six months from the date of leaving. 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.
A summary of the outstanding options under this equity-settled
option scheme is as follows:
Outstanding Outstanding
Exercise Date from at at
Year of Price which Expiry 1 October 30 September
grant p exercisable date 2019 Issued Exercised Lapsed 2020 Exercisable
-------- -------- ------------ ---------- ----------- ------ --------- -------- ------------- -----------
For the year ended 30 September 2020
------------------------------------------------------------------------------------------------------------------
2009 16.50 17/12/2012 16/12/2019 180,000 - (180,000) - - -
2010 18.25 22/11/2013 22/11/2020 1,500,000 - - - 1,500,000 1,500,000
2012 17.50 25/06/2015 24/06/2022 170,000 - (10,000) - 160,000 160,000
2013 32.50 18/06/2016 17/06/2023 390,000 - (10,000) - 380,000 380,000
2015 70.25 22/06/2018 21/06/2025 290,000 - (25,000) (25,000) 240,000 240,000
2018 67.00 17/07/2021 16/07/2028 1,420,000 - - (35,000) 1,385,000 -
2019 61.30 18/03/2022 17/03/2029 500,000 - - - 500,000 -
-------- -------- ------------ ---------- ----------- ------ --------- -------- ------------- -----------
4,450,000 - (225,000) (60,000) 4,165,000 2,280,000
-------- -------- ------------ ---------- ----------- ------ --------- -------- ------------- -----------
The weighted average exercise price of share options exercised
and lapsed was 75.50p (2019: 16.50p) and 68.35p (2019: 67.88p)
respectively. The exercise price of options outstanding at 30
September 2020 ranged between 17.50p and 70.25p (2019: 16.50p and
70.25p) and their weighted average contractual life was 6.7 years
(2019: 6.7 years).
The weighted average share price (at the date of exercise) of
options exercised during the year was 75.50p (2019: 51.20p).
The weighted average fair value of each option granted during
the year was nil p (2019: 61.30p).
The fair value of the options granted is calculated using the
Black-Scholes option pricing model. The following information is
relevant in the determination of the fair value:
30 September 2019
------------------------------------ ------------- -------------------
30 September Grant Grant
Grant date 2020 2 1
------------------------------------ ------------- --------- --------
Share price at date of grant - 61.0p 67.0p
Volatility - 21% 32%
Option life - 4 years 4 years
Dividend yield - 3.30% 4.00%
Risk-free investment rate - 0.40% 0.90%
Fair value per option at grant date - 3.0p 5.0p
Exercisable price at date of grant - 61.0p 67.0p
------------------------------------ ------------- --------- --------
On 4 November 2020, Nishith Malde, an executive director of the
Company, exercised options over ordinary shares of 10 pence each
under the unapproved share option scheme. Nishith Malde exercised a
total of 1,500,000 options and sold 1,000,000 ordinary shares to
cover the exercise price and the tax liability arising from the
exercise of these options. Following the above transactions,
Nishith Malde holds an interest in 11,496,792 Ordinary Shares
representing approximately 5.0% of the Company's issued share
capital Following issue of these shares, the Company had a total of
229,841,045 Ordinary Shares in issue.
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.
The share-based payment charged to the Group statement of
comprehensive income for the year ended 30 September 2020 is GBPnil
(fifteen-month period ended 30 September 2019: GBP0.3m) with a
corresponding deferred tax asset at that date of GBPnil
(fifteen-month period ended 30 September 2019: GBP0.1m). GBPnil of
this charge (fifteen-month period ended 30 September 2019: GBP0.3m)
relates to the Directors.
No Growth Shares were issued in the current year or prior
period. At 30 September 2020, there were 2,285,076 (30 September
2019: 2,285,076) 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.
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 vested to the Directors three years
after the award date. The amount of the bonus awarded each year is
explained in the Remuneration Committee report.
14. Finance costs
Fifteen-month
period
Year ended to
30 September 30 September
2020 2019
GBPm GBPm
-------------------------------------------------- ------------- -------------
Interest expense:
- bank loan borrowings 4.1 3.9
- other loan borrowings 2.1 3.6
- amortisation of loan arrangement and other fees 2.3 1.7
- Zero Dividend Preference shares 1.5 1.5
-------------------------------------------------- ------------- -------------
Gross finance costs 10.0 10.7
Finance costs capitalised (see note 28) (0.8) (1.3)
-------------------------------------------------- ------------- -------------
Finance costs 9.2 9.4
-------------------------------------------------- ------------- -------------
Finance costs of GBP0.8m (fifteen-month period to 30 September
2019: GBP1.3m) have been capitalised on inventories in the period
in accordance with IAS23 Borrowing Costs (see note 28), using the
Group's cost of borrowing for that loan specific to the development
in question.
In the year ended 30 September 2020, the average capitalisation
interest rate for interest expense in the cost of inventories was
5.25% (fifteen-month period to 30 September 2019: 5.25%).
15. Finance income
Fifteen-month
period
Year ended to
30 September 30 September
2020 2019
GBPm GBPm
---------------------------------------------------- ------------- -------------
Interest from loans to joint ventures and associate 0.2 0.7
Other interest receivable 0.1 0.3
Notional interest income 0.8 0.7
---------------------------------------------------- ------------- -------------
Finance income 1.1 1.7
---------------------------------------------------- ------------- -------------
16. Tax charge
An analysis of the tax charge in the year is as follows:
Fifteen-month
period
Year ended to
30 September 30 September
2020 2019
GBPm GBPm
-------------------------------------------------- ------------- -------------
Current tax charge
Current tax on profits for the year/period 1.0 2.1
Adjustment for under provision in prior periods (0.1) (1.0)
-------------------------------------------------- ------------- -------------
Total current tax charge 0.9 1.1
-------------------------------------------------- ------------- -------------
Deferred tax charge/(credit)
Origination and reversal of temporary differences 0.4 (0.7)
Effect of tax rate change on opening balances 0.1 -
-------------------------------------------------- ------------- -------------
Total deferred tax charge/(credit) 0.5 (0.7)
-------------------------------------------------- ------------- -------------
Total tax expense 1.4 0.4
-------------------------------------------------- ------------- -------------
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:
Year ended Fifteen-month
30 September period
2020 to
30 September
2019
GBPm GBPm
-------------------------------------------------------------- ------------- -------------
Profit before tax 3.7 25.0
-------------------------------------------------------------- ------------- -------------
Expected tax charge based on the standard rate of corporation
tax in the UK of 19% (2019: 19.0%) 0.7 4.8
Expenses not deductible for tax purposes 0.7 0.1
Zero Dividend Preference share interest not deductible
for tax purposes 0.3 0.3
Capital losses 0.2 (0.2)
Adjustments to tax charge in respect of previous periods (0.1) (0.5)
Income not deductible for tax purposes - (2.4)
Prior year capital losses now recognised - (1.6)
Other items (0.4) (0.1)
-------------------------------------------------------------- ------------- -------------
Tax expense 1.4 0.4
-------------------------------------------------------------- ------------- -------------
The tax credit relating to revaluation of quoted investments
within other comprehensive income in the year ended 30 September
2020 is GBP0.1m (fifteen-month period ending 30 September 2019:
GBP0.1m).
The Group's share of tax expense in its joint ventures and
associate is GBP0.1m (2019: GBPnil).
17. Earnings per share
Number of shares
Both the basic and diluted earnings per share have been
calculated using the profit attributable to shareholders of the
parent company, i.e. no adjustments to profit were necessary in
2020 or 2019.
The reconciliation of the weighted average number of shares for
the purposes of diluted earnings per share to the weighted average
number of ordinary shares used in the calculation of basic earnings
per share is as follows:
Earnings per share
---------------------------- ----------------------------
Weighted average
Fifteen-month
period
Year ended to
30 September 30 September
2020 2019
'000 '000
---------------------------- ------------- -------------
For use in basic measures 214,361 205,285
Dilutive effect of:
- share options 1,323 1,500
- deferred bonus shares 1,694 1,823
- growth shares 2,285 2,397
---------------------------- ------------- -------------
For use in diluted measures 219,663 211,005
---------------------------- ------------- -------------
The Group's Employee Benefit Trust (EBT) purchased 650,000
shares on 29 October 2014, 377,500 shares on 20 December 2015 and a
further 600,000 shares on 16 December 2016 in Inland Homes plc
under the terms of the Long Term Incentive Plan. These total
1,627,500 shares and have been deducted from the weighted average
number of ordinary shares in issue and also from the shares in
issue at the year end.
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 fifteen-month 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 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.
Basic and diluted EPS
Fifteen-month
period
Year ended to
30 September 30 September
2020 2019
-------------------------------------------------- ------------- -------------
Profit attributable to equity shareholders (GBPm) 1.7 24.2
-------------------------------------------------- ------------- -------------
Earnings per share 0.79p 11.79p
-------------------------------------------------- ------------- -------------
Diluted earnings per share 0.77p 11.47p
-------------------------------------------------- ------------- -------------
18. Dividends
Dividends are not paid to the shares owned by the Employee
Benefit Trust.
On 30 March 2020, in response to the global COVID-19 pandemic,
the Board cancelled the second interim dividend of 2.25p per share
that was due to be paid on 12 June 2020. There were no dividends
declared in relation to the year ended 30 September 2020.
Details of dividends in the prior fifteen-month period to 30
September 2019 are as follows:
Fifteen-month
period
to
Dividend 30 September
Payment per share 2019
date p GBPm
-------------------------------------------------- ------------- ---------- --------------
25 January
2018 final dividend 2019 1.55 3.2
2019 interim dividend 03 July 2019 0.85 1.8
-------------------------------------------------- ------------- ---------- --------------
Distribution of prior period profit and dividends
as reported in the
Group Statement of Changes in Equity 5.0
----------------------------------------------------------------- ---------- --------------
During the year, dividends of GBP7.5m were received by the
Company from its subsidiaries (fifteen-month period to 30 September
2019: GBPnil).
19. Investment properties
Commercial Residential Development Assets
properties properties land under construction Total
GBPm GBPm GBPm GBPm GBPm
--------------------------------- ----------- ----------- ----------- ------------------- -----
Fair value
At 30 June 2018 - 47.5 5.3 - 52.8
Additions 2.5 0.2 0.5 1.2 4.4
Fair value adjustment 0.1 0.3 0.7 - 1.1
Transfer (to)/from inventories - (6.3) 2.0 - (4.3)
Transfer to assets held for sale - (4.7) - - (4.7)
--------------------------------- ----------- ----------- ----------- ------------------- -----
At 30 September 2019 2.6 37.0 8.5 1.2 49.3
Additions - 1.6 - 0.1 1.7
Disposals (1.4) - - - (1.4)
Fair value adjustment (0.3) 0.9 - - 0.6
Transfer between classes - 1.3 - (1.3) -
Transfer (to)/from inventories - (0.9) - - (0.9)
Transfer to assets held for sale (0.9) (4.9) - - (5.8)
--------------------------------- ----------- ----------- ----------- ------------------- -----
At 30 September 2020 - 35.0 8.5 - 43.5
--------------------------------- ----------- ----------- ----------- ------------------- -----
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.
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 in the local area. 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 GBP8.5m (2019: GBP8.5m). 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 transactions following
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 year ended 30 September 2020 (fifteen-month period to 30
September 2019: None).
There has been no change in valuation techniques of Level 3 fair
value measurements in the year. The fair value is based on the
above items' highest and best use, which does not differ from their
actual use.
The key inputs to the strategic property valuations valued for
EPRA purposes include house prices, rental values and development
costs.
The impact of sensitising these inputs on the financial
statements are as follows:
Increase/(decrease)
-----------------------
2020 2019
Sensitivity analysis Variable Variation GBPm GBPm
----------------------- -------------- --------- ---------- ---------
Commercial properties Rental values +5% - 0.1
-5% - (0.1)
Residential properties House prices +5% 1.8 1.9
-5% (1.8) (1.9)
Development land House prices +5% 2.2 1.6
-5% (2.2) (1.3)
Development
costs +5% (1.1) (1.1)
-5% 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 year ended 30 September 2020, GBP0.9m (fifteen-month
period ended 30 September 2019: GBP1.5m) rental and ancillary
income from investment properties was recognised in the Group
statement of comprehensive income. Direct operating expenses,
including repairs and maintenance, arising from investment property
that generated rental income amounted to GBP0.5m (fifteen-month
period ended 30 September 2019: GBP0.3m). The Group did not incur
any direct operating expenses arising from investment properties
that did not generate rental income (year ended 30 September 2019:
GBPnil).
Restrictions and obligations
At 30 September 2020 there were no restrictions on the
realisability of investment property or the remittance of income
and proceeds of disposal (fifteen-month period ended 30 September
2019: None). There are no obligations (fifteen-month period ended
30 September 2019: None) to construct or develop the Group's
residential or development land investment property. At 30
September 2020 contracted obligations to purchase investment
properties amounted to GBPnil (fifteen-month period ended 30
September 2019: GBPnil).
At 30 September 2020, the historical cost of the Group's
investment properties was GBP11.9m (fifteen-month period ended 30
September 2019: GBP18.3m). Certain of the investment properties
have been pledged as security against the Group's borrowings. For
details see note 32.
The modular housing, which forms part of property, plant and
equipment (see note 20), has been pledged as security against a
borrowing of the Group. For details see note 32.
20. Property, plant and equipment
Modular Office Fixtures Motor
housing equipment and fittings vehicles Total
Group GBPm GBPm GBPm GBPm GBPm
--------------------- -------- ---------- ------------- --------- -----
Cost
At 30 June 2018 0.8 0.6 0.6 0.4 2.4
Additions 4.7 0.7 0.3 - 5.7
Disposals - - - (0.1) (0.1)
--------------------- -------- ---------- ------------- --------- -----
At 30 September 2019 5.5 1.3 0.9 0.3 8.0
Additions - 0.3 - - 0.3
Disposals - (0.5) (0.4) (0.2) (1.1)
--------------------- -------- ---------- ------------- --------- -----
At 30 September 2020 5.5 1.1 0.5 0.1 7.2
--------------------- -------- ---------- ------------- --------- -----
Depreciation
At 30 June 2018 - 0.4 0.4 0.3 1.1
Depreciation charge 0.3 0.2 0.1 0.1 0.7
Disposals - - - (0.1) (0.1)
--------------------- -------- ---------- ------------- --------- -----
At 30 September 2019 0.3 0.6 0.5 0.3 1.7
Depreciation charge 0.5 0.3 0.2 - 1.0
Disposals - (0.5) (0.4) (0.2) (1.1)
--------------------- -------- ---------- ------------- --------- -----
At 30 September 2020 0.8 0.4 0.3 0.1 1.6
--------------------- -------- ---------- ------------- --------- -----
Net book value
--------------------- -------- ---------- ------------- --------- -----
At 30 September 2020 4.7 0.7 0.2 - 5.6
--------------------- -------- ---------- ------------- --------- -----
At 30 September 2019 5.2 0.7 0.4 - 6.3
--------------------- -------- ---------- ------------- --------- -----
At 30 June 2018 0.8 0.2 0.2 0.1 1.3
--------------------- -------- ---------- ------------- --------- -----
21. Right-of-use asset
On adoption of IFRS 16 on 1 October 2019, the Group has
recognised a right-of use asset. This has been presented in the
Statement of Financial Position as follows:
Leasehold
property
Group GBPm
---------------------- ---------
Cost
At 1 October 2019 -
Transition to IFRS 16 1.6
---------------------- ---------
At 30 September 2020 1.6
---------------------- ---------
Depreciation
At 1 October 2019 -
Transition to IFRS 16 0.1
Depreciation charge 0.3
---------------------- ---------
At 30 September 2020 0.4
---------------------- ---------
Net book value
---------------------- ---------
At 30 September 2020 1.2
---------------------- ---------
At 30 September 2019 -
---------------------- ---------
The right-of-use asset relates to the Group's occupation of
Burnham Yard, Beaconsfield as a Head Office facility. Right-of-use
assets are depreciated on a straight-line basis over the remaining
term of the lease or over the remaining economic life of the asset,
if this is judged to be shorter. See note 34 for further
details.
22. Intangible assets
Development
costs
Group GBPm
---------------------------------------- -----------
Cost
At 1 October 2019 and 30 September 2020 0.3
---------------------------------------- -----------
Amortisation
At 1 October 2019 -
Charge for the year 0.1
---------------------------------------- -----------
At 30 September 2020 0.1
---------------------------------------- -----------
Net book value
---------------------------------------- -----------
At 30 September 2020 0.2
---------------------------------------- -----------
At 30 September 2019 0.3
---------------------------------------- -----------
Intangible assets relate to development costs of the Hugg Homes
brand capitalised under IAS 38 'Intangible assets'.
23. Investments in quoted companies
Quoted
investments
Group GBPm
------------------------ ------------
Cost and carrying value
At 30 September 2019 1.1
Revaluation (0.6)
------------------------ ------------
At 30 September 2020 0.5
------------------------ ------------
Investments of quoted securities is measured at fair value
through other comprehensive income. The fair value is based on
published market prices.
24. Investments in subsidiaries
At 30 September 2020, the Group, directly or indirectly, held
interests in equity in various subsidiary undertakings. Details of
these have been included in note 1.
25. Investments in joint ventures
At 30 September 2020, the Group held interests in equity in
various joint ventures. A summary of the investments in joint
ventures is as follows:
Cheshunt
Bucknalls Lakeside Europa High Wycombe Gardiners
Developments Developments Park Developments Park Total
GBPm GBPm GBPm GBPm GBPm GBPm
----------------------------- ------------- ------------- ------ -------------- --------- ------
Cost
At 1 July 2018 - 0.4 - - - 0.4
Share of profit after
tax 0.7 0.3 1.0 - - 2.0
Receipts from joint ventures - - (1.0) - - (1.0)
Exercise of call option* - 13.8 - - - 13.8
Disposal of 50% beneficial
interest* - (7.2) - - - (7.2)
----------------------------- ------------- ------------- ------ -------------- --------- ------
Movement during the period 0.7 6.9 - - - 7.6
----------------------------- ------------- ------------- ------ -------------- --------- ------
At 30 September 2019 0.7 7.3 - - - 8.0
----------------------------- ------------- ------------- ------ -------------- --------- ------
Share of profit after
tax 1.6 (1.0) 1.0 - 0.4 2.0
Receipts from joint ventures - - (0.8) (0.4) (1.2)
----------------------------- ------------- ------------- ------ -------------- --------- ------
Movement during the period 1.6 (1.0) 0.2 - - 0.8
----------------------------- ------------- ------------- ------ -------------- --------- ------
At 30 September 2020 2.3 6.3 0.2 - - 8.8
----------------------------- ------------- ------------- ------ -------------- --------- ------
* See further details later in this note under Cheshunt Lakeside
Developments Limited.
Amounts due from/(to) joint ventures
As at As at
30 September 30 September
2020 2019
GBPm GBPm
------------------------------- ---------------------------------- ------------- -------------
Amounts owed by joint ventures, due within one year
Bucknalls Developments
Limited held at carrying value - (2.0)
held at fair value through profit
and loss - 4.0
------------------------------------------------------------------ ------------- -------------
- 2.0
Cheshunt Lakeside Developments
Limited held at carrying value 28.6 32.8
High Wycombe Developments
Limited held at carrying value 13.6 -
------------------------------- ---------------------------------- ------------- -------------
42.2 34.8
Amounts owed by joint ventures, due in greater than one
year
Gardiners Park LLP held at carrying value - 1.0
------------------------------- ---------------------------------- ------------- -------------
- 1.0
Amounts due from joint
ventures 42.2 35.8
------------------------------------------------------------------- ------------- -------------
Amounts owed to joint ventures, due in within one year
Bucknalls Developments
Limited held at carrying value (6.2) -
------------------------------- ---------------------------------- ------------- -------------
Amounts owed to joint
ventures (6.2) -
------------------------------------------------------------------- ------------- -------------
Amounts due from/(to)
joint ventures 36.0 35.8
------------------------------------------------------------------- ------------- -------------
The Directors considered and concluded in the prior year that
the classification of the amounts due from Bucknalls Developments
Limited at 30 September 2019 was GBP4.0m classified as amounts due
from joint ventures as assets held at fair value through profit and
loss due to the Perpetual Annuity Bond interest. All other amounts
above are held at carrying value. During the year ended 30
September 2020, the Perpetual Annuity Bond was repaid in full.
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 year ended 30
September 2020 or fifteen-month period ended 30 September 2019.
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.
The Group applies a forward looking expected credit loss model
to measure any credit loss provision for amounts due from joint
ventures. Both the expected credit loss provision and the incurred
loss provision in the current period and prior year are
immaterial.
Summarised financial information has been included for material
joint ventures and follows.
Bucknalls Developments Limited
In December 2015, the Group entered into a joint venture with
two private 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.
Summarised statement of total comprehensive income
Fifteen-month
period
Year ended to
30 September 30 September
2020 2019
GBPm GBPm
------------------------------------- ------------- -------------
Revenue 17.3 16.6
Cost of sales and operating expenses (14.1) (13.3)
Interest receivable/(payable) 0.6 (0.9)
Tax payable (0.7) (0.4)
------------------------------------- ------------- -------------
Total comprehensive income 3.1 2.0
------------------------------------- ------------- -------------
Summarised statement of financial position
As at As at
30 September 30 September
2020 2019
GBPm GBPm
---------------------------------------------------- ------------- -------------
Current assets
Cash and cash equivalents - 0.3
Other current assets 6.3 12.3
---------------------------------------------------- ------------- -------------
Total current assets 6.3 12.6
---------------------------------------------------- ------------- -------------
Current liabilities
Financial liabilities (excluding trade payables and
provisions) (0.4) (10.0)
Other current liabilities (1.4) (1.2)
---------------------------------------------------- ------------- -------------
Total current liabilities (1.8) (11.2)
---------------------------------------------------- ------------- -------------
Net assets 4.5 1.4
---------------------------------------------------- ------------- -------------
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 fifteen-month 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 in the prior fifteen-month period
At the start of the prior fifteen-month period, Inland Limited
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 together represented the cost of net assets
acquired.
On 22 September 2019, 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 was included
within other payables at the balance sheet date of the prior
fifteen-month period (see note 33).
At the same time, the Group entered into a contract with a third
party to sell its existing 50% beneficial interest in 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.
The disposal proceeds are payable by the new joint venture
partner once the joint venture has sold the developed asset. The
proceeds payable are GBP28.5m, and on a discounted basis are
estimated to be GBP20.7m as included within other receivables due
in more than one year (see note 29) (30 September 2019:
GBP19.9m).
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 in the prior
fifteen-month period resulted in a gain recognised in the Income
Statement of GBP12.6m, being the fair value of the disposal
proceeds (GBP20m) less 50% of the previous carrying amount
(GBP7.4m).
Summarised statement of total comprehensive income
Period from
Period from 6 June
Year ended 1 July 2018 2019 to
30 September to 5 June 30 September
2020 2019 2019
Accounted Accounted Accounted
as a joint as a joint as a subsidiary
venture venture
under IAS under IAS GBPm
28 28
GBPm GBPm
------------------------------------- ------------- ------------ ----------------
Revenue 15.9 1.9 0.5
Cost of sales and operating expenses (16.5) (1.2) (0.4)
Interest payable (1.9) - -
Tax receivable 0.5 - -
------------------------------------- ------------- ------------ ----------------
Total comprehensive (expense)/income (2.0) 0.7 0.1
------------------------------------- ------------- ------------ ----------------
Summarised statement of financial position
As at As at
30 September 30 September
2020 2019
GBPm GBPm
---------------------------------------------------- ------------- -------------
Non-current assets
Property, plant and equipment 0.3 -
---------------------------------------------------- ------------- -------------
Total non-current assets 0.3 -
---------------------------------------------------- ------------- -------------
Current assets
Other current assets 66.9 74.6
---------------------------------------------------- ------------- -------------
Total current assets 66.9 74.6
---------------------------------------------------- ------------- -------------
Total assets 67.2 74.6
---------------------------------------------------- ------------- -------------
Current liabilities
Financial liabilities (excluding trade payables and
provisions) (68.0) (69.5)
Other current liabilities (0.3) (0.9)
---------------------------------------------------- ------------- -------------
Total current liabilities (68.3) (70.4)
---------------------------------------------------- ------------- -------------
Non-current liabilities
Financial liabilities (excluding trade payables and
provisions) - (3.1)
---------------------------------------------------- ------------- -------------
Total non-current liabilities - (3.1)
---------------------------------------------------- ------------- -------------
Total liabilities (68.3) (73.5)
---------------------------------------------------- ------------- -------------
Net (liabilities)/assets (1.1) 1.1
---------------------------------------------------- ------------- -------------
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 year ended 30 September 2020, the site is
under construction and the company has sold the bulk of all the
residential units constructed.
Summarised statement of total comprehensive income
Fifteen-month
period
Year ended to
30 September 30 September
2020 2019
GBPm GBPm
------------------------------------- ------------- -------------
Revenue 9.2 10.1
Cost of sales and operating expenses (7.0) (8.0)
Interest payable (0.1) (0.2)
------------------------------------- ------------- -------------
Total comprehensive income 2.1 1.9
------------------------------------- ------------- -------------
Summarised statement of financial position
As at As at
30 September 30 September
2020 2019
GBPm GBPm
---------------------------------------------------- ------------- -------------
Current assets
Cash and cash equivalents 0.4 -
Other current assets 0.6 3.2
---------------------------------------------------- ------------- -------------
Total current assets 1.0 3.2
---------------------------------------------------- ------------- -------------
Current liabilities
Other current liabilities (0.5) (0.7)
---------------------------------------------------- ------------- -------------
Total current liabilities (0.5) (0.7)
---------------------------------------------------- ------------- -------------
Non-current liabilities
Financial liabilities (excluding trade payables and
provisions) - (2.5)
---------------------------------------------------- ------------- -------------
Total non-current liabilities - (2.5)
---------------------------------------------------- ------------- -------------
Total liabilities (0.5) (3.2)
---------------------------------------------------- ------------- -------------
Net assets 0.5 -
---------------------------------------------------- ------------- -------------
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 year ended 30 September 2020, construction
completed and the company has exchanged and completed on a number
of residential units.
Summarised statement of total comprehensive income
Fifteen-month
period
Year ended to
30 September 30 September
2020 2019
GBPm GBPm
------------------------------------- ------------- -------------
Revenue 9.8 2.0
Cost of sales and operating expenses (8.7) (1.8)
Interest payable (0.1) (0.1)
------------------------------------- ------------- -------------
Total comprehensive income 1.0 0.1
------------------------------------- ------------- -------------
During the fifteen-month period to 30 September 2019, the Group
provided an additional amount of GBP1m 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.
Summarised statement of financial position
As at As at
30 September 30 September
2020 2019
GBPm GBPm
---------------------------------------------------- ------------- -------------
Current assets
Cash and cash equivalents 0.2 0.5
Other current assets - 5.2
---------------------------------------------------- ------------- -------------
Total current assets 0.2 5.7
---------------------------------------------------- ------------- -------------
Current liabilities
Other current liabilities (0.1) (0.9)
---------------------------------------------------- ------------- -------------
Total current liabilities (0.1) (0.9)
---------------------------------------------------- ------------- -------------
Non-current liabilities
Financial liabilities (excluding trade payables and
provisions) - (2.8)
---------------------------------------------------- ------------- -------------
Total non-current liabilities - (2.8)
---------------------------------------------------- ------------- -------------
Total liabilities (0.1) (3.7)
---------------------------------------------------- ------------- -------------
Net assets 0.1 2.0
---------------------------------------------------- ------------- -------------
High Wycombe Developments Limited
In December 2019, the Group disposed of a 50% controlling
interest in High Wycombe Developments Limited for consideration of
GBP5,000.
Summarised statement of total comprehensive income
Period Period
from 27 from 1 Fifteen-month
December October period
2019 to 2019 to to 30
30 September 26 December September
2020 2019 2019
GBPm GBPm GBPm
------------------------------------- ------------- ---------------- -------------
Accounted
as a joint
venture
under Accounted
IAS 28 as a subsidiary
------------------------------------- ------------- ---------------- -------------
Revenue 29.4 6.9 -
Cost of sales and operating expenses (28.5) (6.2) -
Interest payable (1.1) (0.3) -
Tax payable (0.1) - -
------------------------------------- ------------- ---------------- -------------
Total comprehensive (expense)/income (0.3) 0.4 -
------------------------------------- ------------- ---------------- -------------
Summarised statement of financial position
As at As at
30 September 30 September
2020 2019
GBPm GBPm
---------------------------------------------------- ------------- -------------
Non-current assets
Property, plant and equipment 4.3 -
---------------------------------------------------- ------------- -------------
Total non-current assets 4.3 -
---------------------------------------------------- ------------- -------------
Current assets
Cash and cash equivalents 0.1 -
Other current assets 20.8 -
---------------------------------------------------- ------------- -------------
Total current assets 20.9 -
---------------------------------------------------- ------------- -------------
Total assets 25.2 -
---------------------------------------------------- ------------- -------------
Current liabilities
Financial liabilities (excluding trade payables and
provisions) (24.4) -
Other current liabilities (2.1) -
---------------------------------------------------- ------------- -------------
Total current liabilities (26.5) -
---------------------------------------------------- ------------- -------------
Total liabilities (26.5) -
---------------------------------------------------- ------------- -------------
Net (liabilities)/assets (1.3) -
---------------------------------------------------- ------------- -------------
26. Investment in associate
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.
At 30 September 2020, the Company continued to hold equity in
its associate. A summary of the investment in the associate is as
follows:
Total
GBPm
--------------------------- -----
Cost
At 1 July 2018 1.1
Share of profit after tax 0.2
--------------------------- -----
Movement during the period 0.2
--------------------------- -----
At 30 September 2019 1.3
Share of loss after tax (0.2)
--------------------------- -----
Movement during the period (0.2)
--------------------------- -----
At 30 September 2020 1.1
--------------------------- -----
Amounts due from associate
As at As at
30 September 30 September
2020 2019
GBPm GBPm
--------------------------------- ------------- -------------
Current
Other receivables - 0.2
Loans 3.1 3.1
--------------------------------- ------------- -------------
Total amounts due from associate 3.1 3.3
--------------------------------- ------------- -------------
The above loans are repayable on demand. Interest is charged on
the loan amounts.
Summarised financial information has been included for the
associate, as follows.
Troy Homes Limited
For the year ended 30 September 2020, Troy Homes made a loss
before tax of GBP0.4m (fifteen-month period ended 30 September
2019: profit of GBP0.5m).
Summarised statement of total comprehensive income
Fifteen-month
period
Year ended ended
30 September 30 September
2020 2019
GBPm GBPm
------------------------------------- ------------- -------------
Revenue 16.0 29.0
Cost of sales and operating expenses (15.0) (26.2)
Interest payable (1.5) (2.1)
Income tax payable 0.1 (0.2)
------------------------------------- ------------- -------------
Total comprehensive (expense)/income (0.4) 0.5
------------------------------------- ------------- -------------
Summarised statement of financial position
As at As at
30 September 30 September
2020 2019
GBPm GBPm
---------------------------------------------------- ------------- -------------
Non-current assets
Investments 0.1 -
---------------------------------------------------- ------------- -------------
Total non-current assets 0.1 -
---------------------------------------------------- ------------- -------------
Current assets
Cash and cash equivalents 0.7 3.0
Other current assets 34.0 32.3
---------------------------------------------------- ------------- -------------
Total current assets 34.7 35.3
---------------------------------------------------- ------------- -------------
Total assets 34.8 35.3
---------------------------------------------------- ------------- -------------
Current liabilities
Financial liabilities (excluding trade payables and
provisions) (21.3) (18.1)
Other non-current liabilities (0.9) (3.8)
---------------------------------------------------- ------------- -------------
Total current liabilities (22.2) (21.9)
---------------------------------------------------- ------------- -------------
Non-current liabilities
Financial liabilities (excluding trade payables and
provisions) (9.0) (9.4)
Other non-current liabilities - -
---------------------------------------------------- ------------- -------------
Total non-current liabilities (9.0) (9.4)
---------------------------------------------------- ------------- -------------
Total liabilities (31.2) (31.3)
---------------------------------------------------- ------------- -------------
Net assets 3.6 4.0
---------------------------------------------------- ------------- -------------
27. Deferred tax
Capital
losses
recognised
on
Revaluation revaluation Share-based
gain gain payments Total
Group GBPm GBPm GBPm GBPm
--------------------------------------- ----------- ------------ ----------- ------
At 1 October 2019 6.3 (4.3) (0.8) 1.2
Charged/(credited) to income statement 0.4 0.2 (0.1) 0.5
--------------------------------------- ----------- ------------ ----------- ------
At 30 September 2020 6.7 (4.1) (0.9) 1.7
--------------------------------------- ----------- ------------ ----------- ------
Company
--------------------------------------- ----------- ------------ ----------- ------
At 1 October 2019 - - (0.8) (0.8)
Credited to income statement - - 0.1 0.1
--------------------------------------- ----------- ------------ ----------- ------
At 30 September 2020 - - (0.7) (0.7)
--------------------------------------- ----------- ------------ ----------- ------
Deferred income tax assets are recognised for tax losses carried
forward to the extent that the realisation of the related tax
benefit through future taxable profits is probable.
No deferred tax asset is recognised in respect of realised or
unrealised capital losses if there is uncertainty over future
recoverability.
In the Spring Budget 2020, the Government announced that from 1
April 2020 the corporate tax rate would remain at 19% (rather than
reducing to 17%, as previously enacted). This new law was
substantively enacted on 17 March 2020, and so this new rate has
been applied to deferred tax balances (2019: 19%).
28. Inventories
As at As at
30 September 30 September
2020 2019
GBPm GBPm
------------------------------------------------------- ------------- -------------
At 1 October/At 1 July 192.4 136.2
Additions 111.7 154.6
Disposal on sale of controlling interest in subsidiary
undertakings (36.2) -
Capitalisation of finance costs (Note 14) 0.8 1.3
Capitalisation of employee costs (Note 12) 5.7 8.1
Charged to income statement (99.6) (111.9)
Transferred from investment property (Note 19) 0.9 4.3
Impairment (2.1) (0.2)
------------------------------------------------------- ------------- -------------
At 30 September 173.6 192.4
------------------------------------------------------- ------------- -------------
Analysis of inventories
As at As at
30 September 30 September
2020 2019
GBPm GBPm
----------------- ------------- -------------
Work in Progress 101.5 115.2
Land 72.1 77.2
----------------- ------------- -------------
173.6 192.4
----------------- ------------- -------------
Certain of the inventories are secured against the Group's
borrowings. For details see note 32.
29. Trade and other receivables
Group Company
----------------------------
As at As at As at As at
30 September 30 September 30 September 30 September
2020 2019 2020 2019
GBPm GBPm GBPm GBPm
---------------------------------------- ------------- ------------- ------------- -------------
Trade receivables from contract revenue
with customers 18.9 14.7 - -
Prepayments and accrued income 30.8 18.9 - -
Other receivables 11.2 11.8 0.1 1.6
Amounts owed by Group undertakings - - 59.9 38.6
---------------------------------------- ------------- ------------- ------------- -------------
Trade and other receivables due in less
than one year 60.9 45.4 60.0 40.2
Other receivables due in more than one
year 22.3 21.8 - -
---------------------------------------- ------------- ------------- ------------- -------------
83.2 67.2 60.0 40.2
---------------------------------------- ------------- ------------- ------------- -------------
Materially, all of the trade receivables are receivables from
contract revenue with customers.
The carrying value of trade and other receivables classified at
amortised cost is considered a reasonable approximation of fair
value.
Within prepayments and accrued income is GBP2.1m (30 September
2019: GBP5.0m) relating to income accrued on a construction
contract.
Included within other receivables due in greater than one year
is GBP20.7m (30 September 2019: GBP19.9m) in relation to the sale
of the Group's beneficial interest of 50% in Cheshunt Lakeside
Developments Limited. See note 25 for further details.
Included in prepayments and accrued income due in less than one
year is GBP10.6m treated as short term as it represents the normal
operating cycle of business but is not expected to be retained
until greater than one year.
The Group does not hold any collateral as security.
As is outlined in note 5, 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. The expected credit loss provision in the current year
and prior period are immaterial. The incurred loss provision in the
current year was GBP2.8m (fifteen-month period ending 30 September
2019: nil).
Other receivables
Group
----------------------------------
As at As at
30 September 30 September
2020 2019
GBPm GBPm
---------------------------------- ------------- -------------
Due in less than one year
Sale of subsidiary - 2.9
Sale of interest in joint venture - 2.1
Loan facility 7.9 4.2
Other 3.3 2.6
---------------------------------- ------------- -------------
11.2 11.8
---------------------------------- ------------- -------------
Due in more than one year
Sale of interest in joint venture 20.7 19.9
Other 1.6 1.9
---------------------------------- ------------- -------------
22.3 21.8
---------------------------------- ------------- -------------
Within other receivables due in more than one year is GBP1.6m
(30 September 2019: GBP1.7m) relating to retentions receivable from
construction contracting clients.
Loan facility includes amounts as follows.
As at As at
30 September 30 September
2020 2019
GBPm GBPm Repayment status Interest status
-------------------------------- ------------- ------------- ---------------- ---------------
Repayable on Non-interest
Hillingdon Properties Limited 4.1 4.1 demand bearing
Repayable on Interest rate
Inland (Southern) Limited 2.8 0.1 demand of 4%
Repayable on Non-interest
Gallions Developments Limited 0.7 - demand bearing
Repayable on Interest rate
Brook Street Properties Limited 0.3 - demand of 4%
-------------------------------- ------------- ------------- ---------------- ---------------
7.9 4.2
-------------------------------- ------------- ------------- ---------------- ---------------
30. Assets held for sale
The assets held for sale relate to surplus existing investment
properties at Wilton Park which will not be developed and one
commercial property. The assets were transferred based on a
Directors' valuation as shown in the table below. Management expect
disposal of these assets to occur within 12 months of the balance
sheet date and post balance sheet disposals are disclosed in Note
42. The properties held as assets held for sale in the prior year
were unsold during the year due to the impact of Covid-19 which
disrupted the housing market temporarily.
Fifteen-month
period
Year ended ended
30 September 30 September
2020 2019
GBPm GBPm
------------------------------------ ------------- -------------
At 1 October/1 July 4.7 -
Transfer from investment properties 5.8 4.7
Fair value adjustment 2.0 -
------------------------------------ ------------- -------------
Total 12.5 4.7
------------------------------------ ------------- -------------
31. Cash and cash equivalents
Group Company
----------------------------
As at As at As at As at
30 September 30 September 30 September 30 September
2020 2019 2020 2019
GBPm GBPm GBPm GBPm
------------- ------------- ------------- ------------- -------------
Cash at bank 15.7 10.9 8.2 7.1
------------- ------------- ------------- ------------- -------------
Included in cash at bank is a restricted amount of GBP4.7m
(2019: GBP1.3m) held on behalf of Homes England.
32. Borrowings
1 to 2 2 to 3 3 to 4 4 to 5
< 1 year years years years years > 5 years Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
----------------------------- -------- ------ ------ ------ ------ --------- ------
At 30 September 2020
Secured bank loans 41.5 0.8 42.4 - - 0.7 85.4
Secured other loans 25.3 - - 13.1 - - 38.4
----------------------------- -------- ------ ------ ------ ------ --------- ------
Borrowings 66.8 0.8 42.4 13.1 - 0.7 123.8
Zero Dividend Preference
shares - - - 30.2 - - 30.2
Loans from joint ventures 3.1 - - - - - 3.1
Other financing arrangements - 6.8 - - - - 6.8
----------------------------- -------- ------ ------ ------ ------ --------- ------
Gross debt 69.9 7.6 42.4 43.3 - 0.7 163.9
----------------------------- -------- ------ ------ ------ ------ --------- ------
Cash and cash equivalents (15.7) - - - - - (15.7)
----------------------------- -------- ------ ------ ------ ------ --------- ------
Net debt 54.2 7.6 42.4 43.3 - 0.7 148.2
----------------------------- -------- ------ ------ ------ ------ --------- ------
At 30 September 2019
Secured bank loans 26.8 51.3 1.2 29.6 - - 108.9
Secured other loans 21.2 - - - 7.2 - 28.4
----------------------------- -------- ------ ------ ------ ------ --------- ------
Borrowings 48.0 51.3 1.2 29.6 7.2 - 137.3
Zero Dividend Preference
shares - - - - 25.9 - 25.9
----------------------------- -------- ------ ------ ------ ------ --------- ------
Gross debt 48.0 51.3 1.2 29.6 33.1 - 163.2
----------------------------- -------- ------ ------ ------ ------ --------- ------
Cash and cash equivalents (10.9) - - - - - (10.9)
----------------------------- -------- ------ ------ ------ ------ --------- ------
Net debt 37.1 51.3 1.2 29.6 33.1 - 152.3
----------------------------- -------- ------ ------ ------ ------ --------- ------
Undrawn committed
bank facilities
Secured bank loans - - 22.6 - - - 22.6
Secured other loans 20.0 - - 3.2 - - 23.2
----------------------------- -------- ------ ------ ------ ------ --------- ------
At 30 September 2020 20.0 - 22.6 3.2 - - 45.8
----------------------------- -------- ------ ------ ------ ------ --------- ------
At 30 September 2019 - 0.4 0.1 14.8 5.3 - 20.6
----------------------------- -------- ------ ------ ------ ------ --------- ------
At 30 September 2020, the bank loans were secured over GBP34.9m
(30 September 2019: GBP47.9m) of investment property and assets
held for sale and GBP105.5m (30 September 2019: GBP147.3m) of
inventories. The other loans were secured over GBP8.5m (30
September 2019: GBP7.0m) of investment property, GBP4.7m (30
September 2019: GBPnil) of property, plant and equipment and
GBP35.9m (30 September 2019: GBP38.1m) of inventories. The Zero
Dividend Preference shares were secured against loans to joint
ventures and associates of GBP32.9m (30 September 2019: GBP38.7m)
and GBP7.7m of unrestricted cash (30 September 2019: GBP7.0m).
Zero Dividend Preference shares
The Zero Dividend Preference shares carry no entitlement to any
dividends or other distributions or to participate in the revenue
or any other profits of the Company. The Zero Dividend Preference
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 Zero Dividend Preference plc's
Articles of Association, which would be likely to affect their
rights or general interests. At 30 September 2020, there were
18,101,857 Zero Dividend Preference shares in issue (30 September
2019: 16,430,790). An explanation of the fair value of the Zero
Dividend Preference shares is included in note 7. In August 2018,
the Zero Dividend Preference 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.
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 to 2 2 to 3 3 to 4 4 to 5
< 1 year years years years years > 5 years Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------------------------- -------- ------ ------ ------ ------ --------- -----
At 30 September 2020
Variable rate borrowings 41.2 7.3 - 43.3 - - 91.8
Fixed rate borrowings 28.7 0.3 42.4 - - 0.7 72.1
------------------------- -------- ------ ------ ------ ------ --------- -----
Gross debt 69.9 7.6 42.4 43.3 - 0.7 163.9
Interest on gross
debt 3.3 2.6 1.5 1.4 0.6 0.1 9.5
------------------------- -------- ------ ------ ------ ------ --------- -----
Gross loan commitments 73.2 10.2 43.9 44.7 0.6 0.8 173.4
------------------------- -------- ------ ------ ------ ------ --------- -----
At 30 September 2019
Variable rate borrowings 26.8 51.3 1.2 29.6 7.2 - 116.1
Fixed rate borrowings 47.1 - - - - - 47.1
------------------------- -------- ------ ------ ------ ------ --------- -----
Gross debt 73.9 51.3 1.2 29.6 7.2 - 163.2
Interest on gross
debt 5.9 3.6 1.4 0.8 0.2 - 11.9
------------------------- -------- ------ ------ ------ ------ --------- -----
Gross loan commitments 79.8 54.9 2.6 30.4 7.4 - 175.1
------------------------- -------- ------ ------ ------ ------ --------- -----
33. Trade and other payables
Group Company
----------------------------
As at As at As at As at
30 September 30 September 30 September 30 September
2020 2019 2020 2019
GBPm GBPm GBPm GBPm
-------------------------------- ------------- ------------- ------------- -------------
Trade payables 17.0 19.5 0.2 0.1
Other payables 3.9 14.8 - 0.1
Sales and social security taxes 0.5 0.5 - -
Provisions 0.2 0.2 - -
Accruals 11.2 12.7 0.6 0.4
-------------------------------- ------------- ------------- ------------- -------------
Total 32.8 47.7 0.8 0.6
-------------------------------- ------------- ------------- ------------- -------------
The carrying value of trade and other payables is considered to
be a reasonable approximation of fair value.
Included within trade payables is GBP9.1m (30 September 2019:
GBP7.1m) relating to amounts payable in relation to construction
contracts in the contract income segment and GBP4.3m (30 September
2019:GBP7.2m) in relation to construction contracts in the
housebuilding segment.
Included within other payables is GBPnil (30 September 2019:
GBP13.7m) in relation to the option liability payment for the
purchase of 50% of Cheshunt Lakeside Developments Limited.
34. Lease liabilities
IFRS 16 'Leases' was adopted on 1 October 2019 without
restatement of comparative figures. On adoption, lease liabilities
were measured at the present value of the contractual payments due
to the lessor over the lease term, with the discount rate
determined by reference to the rate inherent in the lease which in
the Group's case was the Group's incremental borrowing rate on
commencement of the lease.
The Group has a lease for the Head Office facility at Burnham
Yard, Beaconsfield. This has been presented on the Statement of
Financial Position as a right-of-use asset and a lease liability.
Short-term leases and leases of low-value underlying assets have
been excluded, as is permitted by IFRS 16.
The lease imposes a restriction that the right-of-use asset can
only be used by the Group and is non-cancellable for six years from
the commencement of the lease. Further, the Group is prohibited
from selling or pledging the underlying leased asset as security
and the Group must keep the property in a good state of repair and
return the property in its original condition at the end of the
lease. The lease is secured by the related underlying asset.
The Group has elected not to recognise a lease liability for
short term leases (leases with an expected term of 12 months or
less) or for leases of low value assets. Payments made under such
leases are expensed on a straight-line basis.
Year ended
30 September
2020
GBPm
------------------------------- -------------
At 1 October 2019 -
On adoption of IFRS16 'Leases' 1.4
Interest 0.1
Lease payments (0.3)
------------------------------- -------------
At 30 September 2020 1.2
------------------------------- -------------
Leases are presented in the Statement of Financial Position as
follows:
As at As at
30 September 30 September
2020 2019
GBPm GBPm
------------ ------------- -------------
Current 0.3 -
Non-current 0.9 -
------------ ------------- -------------
Total 1.2 -
------------ ------------- -------------
Future minimum lease payments at 30 September 2020 were as
follows:
<1 year 1-2 years 2-3 years 3-4 years Total
GBPm GBPm GBPm GBPm GBPm
---------------------------------- ------- --------- --------- --------- -----
Lease liabilities secured against
right-of-use asset 0.3 0.3 0.3 0.3 1.2
---------------------------------- ------- --------- --------- --------- -----
Total 0.3 0.3 0.3 0.3 1.2
---------------------------------- ------- --------- --------- --------- -----
The expense relating to payments not included in the measurement
of the lease liability is immaterial.
35. Commitments and leases
Operating lease commitments where the Group is the lessor
The Group leases 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:
As at As at
30 September 30 September
2020 2019
GBPm GBPm
------------------------------------------------------ ------------- -------------
Due in less than one year 1.1 1.5
Due later than one year and not later than five years 0.6 1.8
Due later than five years 0.4 0.9
------------------------------------------------------ ------------- -------------
Total 2.1 4.2
------------------------------------------------------ ------------- -------------
There were no other significant leasing arrangements where the
Group is lessor at either 30 September 2020 or 30 September
2019.
36. Other financial liabilities
Other financial liabilities, falling due within one year, of
GBPnil (30 September 2019: GBP4.1m) relate to purchase
consideration on inventories falling due within one year. Other
financial liabilities, falling due greater than one year, of
GBP6.8m (30 September 2019: GBPnil) relate to the recognition of
another financial liability.
37. Deferred income
As at As at
30 September 30 September
2020 2019
GBPm GBPm
---------------------------------------------- ------------- -------------
Deferred income, due in less than one year 10.0 -
Deferred income, due in greater than one year 2.1 -
---------------------------------------------- ------------- -------------
The deferred income greater than one year, has arisen on receipt
of a deposit relating to the sale of completed units. These are
currently under construction.
The deferred income due within one year arises due to the
differences between customer certification of contract income
recognised under the input method of IFRS 15 and amounts billed to
customers.
38. Contingencies
Subsidiary guarantees of bank loans and other loans
The Company has guaranteed the obligations of certain
subsidiaries with regards to bank loans and other loans as
follows:
As at As at
30 September 30 September
2020 2019
GBPm GBPm
-------------------------------------- ------------- -------------
Chapel Riverside Developments Limited 8.6 7.2
High Wycombe Developments Limited - 2.2
Hugg Homes Limited 0.7 -
Inland Commercial Property Limited 0.5 1.3
Inland Homes Developments Limited 42.8 30.3
Inland Limited 4.0 4.0
Inland Property Finance Limited 14.3 17.2
Inland (STB) Limited 17.2 8.8
Rosewood Housing Limited 0.7 -
-------------------------------------- ------------- -------------
Total 88.8 71.0
-------------------------------------- ------------- -------------
All of the above subsidiaries are going concerns.
Subsidiary guarantees of payment of subcontractors
The Group has guaranteed the obligations of certain subsidiaries
with regards to the payments of subcontractors. No guarantees were
considered significant at either 30 September 2020 or 30 September
2019.
Subsidiaries guarantees of build performance obligations
Inland Homes plc has guaranteed the build performance
obligations of Inland Partnerships Limited on its contracts with
housing associations. The Directors do not consider that these
guarantees would be called up.
Associate guarantee to Troy Homes Limited
Inland Homes plc has guaranteed the obligations of Poole
Investments Limited on its commitments to its associate company,
Troy Homes Limited. Further information regarding the associate can
be found in note 26.
No provisions have been made in these financial statements in
respect of any of these contingent liabilities.
Joint ventures and associate
Unless otherwise noted, the Group has no commitments to its
joint ventures or 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 High Wycombe Developments Limited, the Group is committed to
contributing all assets not funded by external borrowings together
with its joint venture partner.
For Troy Homes Limited, the Group acquired 25% of Troy Homes
Limited and is entitled to 25% of the net returns.
39. Share capital and reserves
Group and Company
The Group and Company has two classes of share capital and five
types of reserves organised as follows:
Ordinary shares
Except for the shares held in the Employee Benefit Trust and the
Treasury reserve, 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 42. On 30 April 2020, the Group announced the
successful Placing and Subscription for New Ordinary Shares to
raise a total of approximately GBP9.9 million (before expenses) by
the issue of 20,750,000 ordinary shares at an Issue Price of 47.5
pence per share.
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 GBP10,000,000 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.
The movement in the number of shares in issue is shown in the
table below.
Authorised, issued and fully
paid
--------------------------------------------
10p ordinary shares 10p deferred shares
--------------------- ---------------------
Number GBPm Number GBPm
---------------------------------------- -------------- ----- ------------ -------
At 30 June 2018 204,551,121 20.5 9,980 -
Issued on exercise of LTIP 2,814,924 0.2 - -
---------------------------------------- -------------- ----- ------------ -------
At 30 September 2019 207,366,045 20.7 9,980 -
Issued on exercise of LTIP 225,000 - - -
Issued on placing and subscriptions for
new ordinary shares 20,750,000 2.1 - -
---------------------------------------- -------------- ----- ------------ -------
At 30 September 2020 228,341,045 22.8 9,980 -
---------------------------------------- -------------- ----- ------------ -------
10p ordinary
shares
Number
------------------------ ------------
Total voting shares (1)
At 30 June 2018 202,098,621
------------------------ ------------
At 30 September 2019 205,738,545
------------------------ ------------
At 30 September 2020 226,713,545
------------------------ ------------
1 Ordinary shares in issue less shares held in the Employee
Benefit Trust and the Treasury reserve.
Reserves
The following describes the nature and purpose of each reserve
within shareholders' equity:
Reserve Description and purpose
----------------- ------------------------------------------------------------------
Share premium Amount subscribed for share capital in excess of nominal
value less directly attributable issue costs.
----------------- ------------------------------------------------------------------
Employee benefit This represents the purchase of the Company's own shares
trust and are deducted from total equity until they are issued
to employees under the Deferred Bonus Plan. At 30 September
2020 this reserve holds 1,627,500 shares (30 September
2019: 1,627,500 shares).
----------------- ------------------------------------------------------------------
Special reserve A resolution was passed at the AGM in November 2011 for
the capitalisation of the Parent Company's reserves to
allow for the possibility of distributions in the future
and this was put in the Special Reserve, which is a distributable
reserve. A copy of this resolution is available from
Companies House.
----------------- ------------------------------------------------------------------
Treasury reserve This represents the purchase of the Company's own shares
which deducted from total equity until they are issued
to employees under the share option plan. At 30 September
2020, this reserve holds nil shares (30 September 2019:
nil).
----------------- ------------------------------------------------------------------
Retained earnings Cumulative net gains and losses recognised in the Group
income statement together with other items such as dividends
and share-based payments.
----------------- ------------------------------------------------------------------
10p ordinary shares
---------------------
Number GBPm
------------------------------------------------------- -------------- -----
Employee Benefit Trust
------------------------------------------------------- -------------- -----
At 30 June 2018, 30 September 2019 & 30 September 2020 1,627,500 (1.1)
------------------------------------------------------- -------------- -----
Treasury reserve
At 30 June 2018 825,000 (0.5)
Purchase of own shares 200,000 (0.1)
Exercise of share options (1,025,000) 0.6
------------------------------------------------------- -------------- -----
At 30 September 2019 and 30 September 2020 - -
------------------------------------------------------- -------------- -----
40. Cash flow information
Net debt reconciliation
Cash flows Non-cash movements
------------- ------ -------------------- ---------------------------- -------------
Amounts
derecognised
on disposal
of controlling
As at interest Movement As at
30 September Cash in subsidiary in accrued 30 September
2019 flows Proceeds Repayments undertaking liability 2020
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
---------------------------- ------------- ------ -------- ---------- --------------- ----------- -------------
Secured bank loans 108.9 - 31.6 (30.4) (23.6) (1.1) 85.4
Other secured loans 28.4 - 13.1 (3.0) - (0.1) 38.4
---------------------------- ------------- ------ -------- ---------- --------------- ----------- -------------
Borrowings 137.3 - 44.7 (33.4) (23.6) (1.2) 123.8
Zero Dividend Preference
shares 25.9 - 2.7 - - 1.6 30.2
Loans from joint ventures - - 3.1 - - - 3.1
Other financing arrangements - - 6.6 - - 0.2 6.8
---------------------------- ------------- ------ -------- ---------- --------------- ----------- -------------
Gross debt 163.2 - 57.1 (33.4) (23.6) 0.6 163.9
---------------------------- ------------- ------ -------- ---------- --------------- ----------- -------------
Cash and cash equivalents (10.9) (4.8) - - - - (15.7)
---------------------------- ------------- ------ -------- ---------- --------------- ----------- -------------
Net debt 152.3 (4.8) 57.1 (33.4) (23.6) 0.6 148.2
---------------------------- ------------- ------ -------- ---------- --------------- ----------- -------------
Net assets
IFRS 162.2 173.3
---------------------------- ------------- ------ -------- ---------- --------------- ----------- -------------
Net gearing
IFRS 93.9% 85.5%
---------------------------- ------------- ------ -------- ---------- --------------- ----------- -------------
Non-cash movements
-------- ------ -------------------------------------- -------------
Amortisation
As at of loan Non-cash Movement As at
30 June Cash arrangement receivable in accrued 30 September
2018 flows fees settlement liability 2019
GBPm GBPm GBPm GBPm GBPm GBPm
-------------------------------- -------- ------ ------------ ----------- ----------- -------------
Secured bank loans 67.4 38.5 1.7 1.3 - 108.9
Other secured loans 34.3 (5.9) - - - 28.4
-------------------------------- -------- ------ ------------ ----------- ----------- -------------
Borrowings 101.7 32.6 1.7 1.3 - 137.3
Zero Dividend Preference shares 18.4 6.2 - - 1.3 25.9
-------------------------------- -------- ------ ------------ ----------- ----------- -------------
Gross debt 120.1 38.8 1.7 1.3 1.3 163.2
-------------------------------- -------- ------ ------------ ----------- ----------- -------------
Cash and cash equivalents (40.4) 29.5 - - - (10.9)
-------------------------------- -------- ------ ------------ ----------- ----------- -------------
Net debt 79.7 68.3 1.7 1.3 1.3 152.3
-------------------------------- -------- ------ ------------ ----------- ----------- -------------
Net assets
IFRS 142.4 162.2
-------------------------------- -------- ------ ------------ ----------- ----------- -------------
Net gearing
IFRS 56.0% 93.9%
-------------------------------- -------- ------ ------------ ----------- ----------- -------------
41. Related party transactions
Nishith Malde is a non-executive Director of Troy Homes Limited,
an associate of the Group. Please see note 26 for balances
outstanding from the associate and contractual terms of the debtors
at 30 September 2020 and as at 30 September 2019.
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 25.
For details of compensation paid to the Directors and key
management please see the Remuneration Committee report in the
Annual Report.
42. Post balance sheet events
On 1 October 2020, Terry Roydon, non-executive Chairman,
purchased 150,000 ordinary shares. On the same day, the R&H
Trust Co Limited as a Trustee of The Leon Roydon Foundation sold
150,000 ordinary shares. Terry Roydon is a beneficiary of the Leon
Roydon Foundation and therefore interested in those shares.
Following the transfer, Terry Roydon continues to hold an interest
in 357,500 ordinary shares.
On 28 October 2020, the Group's joint venture, Cheshunt Lakeside
Developments Limited, renewed its bond with Beaufort Ventures II
(Jersey) Limited for a period of one further year to 28 October
2021.
On 4 November 2020, Nishith Malde, an executive director of the
Company, exercised options over ordinary shares of 10 pence each
under the unapproved share option scheme. Nishith Malde exercised a
total of 1,500,000 options and sold 1,000,000 ordinary shares to
cover the exercise price and the tax liability arising from the
exercise of these options. Following the above transactions,
Nishith Malde holds an interest in 11,496,792 Ordinary Shares
representing approximately 5.0% of the Company's issued share
capital Following issue of these shares, the Company will have a
total of 229,841,045 Ordinary Shares in issue.
On 9 October 2020, the Group reacquired all of the ordinary
share capital of Appletree Farm Cressing Limited. The acquired
entity holds land with planning permission for housebuilding in
Cressing, Essex which the Group plans to develop out.
On 8 January 2021, the Group extended its revolving credit
facility of GBP15.4m from a fund to 31 December 2021.
On 9 January 2021, the Group disposed of Inland Commercial
Property Limited to a third party. The legal entity contained a
commercial property asset that was accounted for as an asset held
for sale at 30 September 2020 and the sale achieved the value of
the asset.
On 13 January 2021, it was confirmed that the planning
application for Hillingdon Gardens at the former Master Brewer site
will not be called in by the Secretary of State for Housing,
Communities and Local Government. The site has been the subject of
third-party requests to call in for determination by the Secretary
of State but it has been decided that the application for 514 homes
can be determined at a local level by the Greater London Authority.
The site was approved by the Mayor of London in September 2020 and
will now be subject to signing of a Section 106 agreement which is
expected to be signed during 2021.
On 15 January 2021, the Group exchanged conditional contracts
with Bewley Homes PLC for the sale of 53 units at Wilton Park,
Beaconsfield.
On 15 January 2021, the Group also extended bank facilities
amounting to GBP41.3m to 30 April 2022 on existing terms.
On 18 January 2021, the Group extended two facilities amounting
to GBP11.0m from a lender to 31 December 2021 on existing
terms.
43. Disclosure of non-statutory information
The financial information for the year ended 30 September 2020
and the fifteen -month period ended 30 September 2019 in this
announcement does not constitute the company's statutory accounts
for those years.
Statutory accounts for the fifteen-month period ended 30
September 2019 have been delivered to the Registrar of Companies.
The statutory accounts for the year ended 30 September 2020 will be
delivered to the registrar of companies in due course.
The auditors' reports on the accounts for 30 September 2020 and
30 September 2019 were unqualified, did not draw attention to any
matters by way of emphasis, and did not contain a statement under
498(2) or 498(3) of the Companies Act 2006.
[1] Represents net assets attributable to equity shareholders
after adjustments for revaluation of projects and deferred tax on
investment property revaluation
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END
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