Maiden Preliminary Results

Inland PLC 01 October 2007 For Immediate Release 1 October 2007 Inland PLC ('Inland' or the 'Company') Maiden unaudited preliminary results for the year ended 30 June 2007 Inland, which specialises in buying brownfield sites and enhances their value by obtaining planning permission, today announces maiden unaudited preliminary results for the year ended 30 June 2007. Financial Highlights . Turnover £5.47m (2006: £Nil) . Operating profit £1.36m (2006: Operating loss £(0.73)m) . Pre tax profit £1.12m (2006: Pre tax loss £(0.68)m) . Cash £42.84m (2006: £0.82m) . Stocks £38.79m (2006: £3.53m) Operational highlights . Raised £61m by way of pre-IPO private placing and flotation on AIM . Development pipeline now over 1,200 plots with a gross development value of circa £340m . 3 sites sold in the period achieving an average annual return on capital employed of 119% . Substantial increase in profitability achieved at Howarth Homes . Acquired Poole Investments PLC after the year end Stephen Wicks, Chief Executive of Inland commented: '2007 has been a pivotal year for Inland. Having successfully secured the desired funding through our IPO we have now begun to implement our strategy of unlocking value in brownfield redevelopment. The acquisition of Poole Investments PLC after the year end, demonstrates our commitment to extracting significant returns for shareholders from sources that might not be considered routine for a property developer. We still see tremendous potential in the South of England which leads us to believe that the continued prospects for the land market and the Group remain strong. We believe that the next 12 months will represent a period of considerable growth for Inland.' For further information please contact: Inland Plc Tel: 01923 713 600 Stephen Wicks, Chief Executive Nishith Malde, Finance Director Buchanan Communications Tel: 020 7466 5000 Jeremy Garcia / Susanna Gale Dawnay, Day Corporate Finance Limited Tel: (020) 7509 4570 David Floyd / Alex Stanbury Inland Plc Preliminary results Introduction I am pleased to report maiden unaudited preliminary results for the year ended 30 June 2007 of Inland PLC which show a profit before tax of £1.123m (2006: loss of £0.680m). Following a pre IPO private placing and an IPO on AIM, the Group has raised £61m. This new equity now gives the Group the opportunity to target more brownfield sites in the South of England. The Group's balance sheet has been considerably strengthened as a consequence and we have noticed that our profile in the marketplace with vendors and their agents has been heightened. Financial summary Turnover for the year ended 30 June 2007 was £5.466m (2006: £Nil). This was generated through the sale of three sites which were successfully taken through the planning process gaining consent for 38 plots and 2,000 sq ft of offices. Two of these sites were sold during the first half of the financial year, producing an average annual return on equity capital invested of 122% and an average annual return on capital employed of 96%. The third site in Northwood which had consent for 14 plots achieved an annual return on the Group's average capital employed of approximately 160%. Operating profit for the year ended 30 June 2007 amounted to £1.36m (2006: loss of £0.74m). The Group has increased its activity significantly over the previous year with stocks at £38.79m at the year end (2006: £3.53m). We retained £42.84m of cash as at the balance sheet date and net assets were £61.73m (2006: £3.51m). The Directors believe that the sites owned and where purchase contracts were unconditionally exchanged at the year end represented a gross development value of £205m with the benefit of planning consent. Gross development value is the sales revenue achieved on residential homes constructed on our sites acquired by housebuilders. The current land portfolio includes commercial space which generates rental income of £630,000 per annum. Land Since the year end the Group has acquired or agreed terms to purchase 6 sites representing approximately 490 residential plots and 100,000 sq ft of employment space. A planning application for 399 residential units and 95,000 sq ft of commercial space has now been submitted on the Group's flagship site in Farnborough, Hampshire after extensive pre-planning consultation. We anticipate planning permission will be received on this site imminently. The Group has let another building on this site comprising of approximately 10,000 sq ft on a 15 year term at £85,000 per annum with upward only annual rent reviews. Work on the detailed planning application for 173 apartments on a former NHS site in Ashford, Middlesex, is now at an advanced stage with the application expected to be submitted shortly. We contracted the purchase of this site for £7m on favourable deferred terms. Planning constraints The planning system in the UK continues to cause much frustration to the housebuilding industry. With the current government committed to increasing housebuilding from 200,000 to 240,000 new homes per annum by 2016, greater emphasis will be placed on brownfield development alongside pressure for the release of greenfield sites. However, these targets seem a distant prospect under existing planning regulations, which are over complicated and riddled with red tape. Inland has a management team which has considerable experience of the planning system, by taking a robust and tenacious approach to the negativity and bureaucracy that is commonplace within the local authorities. We believe Inland obtains planning permissions more successfully and in a shorter period of time than most of its competitors. It is obvious that the government does not have any clear understanding of the obstacles housebuilders have to overcome at local authority level to obtain consents. Unless the planning system is subject to a radical overhaul, we see no improvements in the foreseeable future and this will continue to exacerbate the supply shortage for housebuilders. Corporate activity Any suitable brownfield opportunities that are in the open market are generally subject to intense competition with resultant price inflation on the final sale price. The Inland management team have therefore begun to evaluate a number of corporate opportunities not necessarily associated with property developers. Currently there are a number of companies that have significant land holdings which up to now have not maximised their development potential. One such opportunity has been secured through our recent acquisition of Poole Investments PLC ('Poole'). The primary asset of Poole is a 9.5 acre site with waterside frontage in Lower Hamworthy, Dorset, upon which is an investment property that provides a rental income of £335,000 per annum. This land forms part of the area within the Poole 'Full Sail Ahead' regeneration scheme. The site has significant development potential and we have already commenced initial discussions for what we believe will result in an exciting mixed use scheme ultimately enhancing the value for our shareholders. Investments Howarth Homes PLC, where we hold a 10% equity stake and a further 20% by way of the convertible loan stock, has made substantial progress. Pre-tax profit for the year ended 31 July 2007 is expected to be in the order of £1.9m on turnover of £30.3m. Howarth's current trading is strong with 8 sites totalling 140 units under construction. Howarth have forward sold approximately £23.9m of homes for the current financial year. Inland has a strategy of identifying and acquiring strategic investments in quoted and unquoted companies, particularly those where the share price does not reflect the value of the underlying property assets or their development potential. At 30 June 2007 the Group held quoted investments to the value of £3.3m. This included an accumulated stake in Poole, the offer for which was declared unconditional in all respects on 6 September 2007. Outlook Inland continues to demonstrate its ability to identify opportunities and create value in a market where there is an acute shortage of land with planning permission with a number of initial projects now coming to fruition. Inland's skills to secure a steady pipeline of new sites continues and our current land bank that is owned, controlled or where offers have been agreed comprise of 19 sites representing approximately 1,200 residential plots with a gross development value in the order of £340m. In addition we have commercial space within several schemes totalling 215,000 sq ft. In response to changes in sentiment in the housebuilding industry, recent announcements by some of the major housebuilders have indicated a greater preference towards acquiring sites that already have planning consent and accordingly are less speculative. The Directors consider that Inland is well placed to capitalise on such a shift in sentiment further endorsing the Company's existing product offering. The strength and skills of Inland's management team will enable the Group to continue to increase its underlying value and we believe the next 12 months should represent a further period of considerable growth. INLAND PLC Period from 16 CONSOLIDATED INCOME STATEMENT Year ended June 2005 to FOR THE YEAR ENDED 30 JUNE 2007 30 June 2007 30 June 2006 (Unaudited) (Audited) £000 £000 Revenue 5,466 - Cost of sales (2,603) (5) --------- -------- Gross profit/(loss) 2,863 (5) Administrative expenses (1,506) (733) --------- -------- Operating profit/(loss) 1,357 (738) Interest expense (107) (24) Notional interest (1,265) (29) Interest and similar income 963 49 --------- -------- 948 (742) Share of profit of associate 175 62 --------- -------- Profit/(loss) before tax 1,123 (680) Income tax (328) 214 --------- -------- Profit/(loss) for the period 795 (466) ========= ======== Attributable to: Equity holders of the Company 795 (466) ========= ======== Earnings/(loss) per share for profit attributable to the equity holders of the Company during the period - basic 0.98p (3.28)p ========= ======== - diluted 0.98p (3.28)p ========= ======== INLAND PLC CONSOLIDATED BALANCE SHEET FOR THE YEAR ENDED 30 JUNE 2007 At 30 June At 30 June 2007 2006 (Unaudited) (Audited) £000 £000 ASSETS Non-current assets Property, plant and equipment 65 36 Investments 4,156 808 Investment in associate 385 262 Deferred tax 393 214 ---------- ---------- 4,999 1,320 ---------- ---------- Current assets Inventories 38,791 3,533 Trade and other receivables 2,674 82 Loan to associate 2,000 380 Cash and cash equivalents 42,838 815 ---------- ---------- 86,303 4,810 ---------- ---------- Total assets 91,302 6,130 ========== ========== EQUITY Capital and reserves attributable to the Company's equity holders Share capital 16,216 3,279 Share premium account 45,184 699 Retained earnings 373 (466) ---------- ---------- Total equity 61,773 3,512 ---------- ---------- LIABILITIES Current liabilities Trade and other payables 740 596 Current tax liabilities 454 - Borrowings - 525 Other financial liabilities 9,202 1,497 ---------- ---------- Total current liabilities 10,396 2,618 ---------- ---------- Non-current liabilities Deferred purchase consideration 19,133 - ---------- ---------- Total non-current liabilities 19,133 - ---------- ---------- Total liabilities 29,529 2,618 ---------- ---------- Total equity and liabilities 91,302 6,130 ========== ========== INLAND PLC CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 JUNE 2007 Share Share Retained capital premium earnings Total £000 £000 £000 £000 Loss attributable to shareholders - - (466) (466) --------- --------- --------- --------- Total recognised income and expense - - (466) (466) Issue of equity 3,279 699 - 3,978 --------- --------- --------- --------- At 30 June 2006 (Audited) 3,279 699 (466) 3,512 ========= ========= ========= ========= Share based compensation - - 44 44 --------- --------- --------- --------- Net income recognised directly in equity - - 44 44 Profit attributable to shareholders - - 795 795 --------- --------- --------- --------- Total recognised income and expense - - 839 839 Issue of equity 12,937 47,343 - 60,280 Issue expenses - (2,858) - (2,858) ========= ========= ========= ========= At 30 June 2007 (Unaudited) 16,216 45,184 373 61,773 ========= ========= ========= ========= INLAND PLC Period from 16 CONSOLIDATED CASH FLOW STATEMENT Year ended June 2005 to FOR THE YEAR ENDED 30 JUNE 2007 30 June 2007 30 June 2006 (Unaudited) (Audited) £000 £000 Profit/(loss) for the period before tax 1,123 (680) Adjustments for: - depreciation 16 6 - share based compensation 44 - - interest expense 1,372 53 - interest and similar income (963) (49) - Share of profit of associate (175) (62) Changes in working capital (excluding the effects of acquisition): - increase in inventories (39,064) (3,582) - increase in trade and other receivables (4,212) (462) - increase in trade and other payables 29,522 2,106 ---------- ---------- Net cash outflow from operating activities (12,337) (2,670) ---------- ---------- Cash flow from investing activities Interest received 946 40 Dividends received 11 - Purchases of property, plant and equipment (45) (42) Equity investment in associate - (200) Convertible loan stock in associate - (800) Listed investments (3,342) - ---------- ---------- Net cash used in investing activities (2,430) (1,002) ---------- ---------- Cash flow from financing activities Interest paid (107) (16) New bank loans raised 1,175 525 Bank loans repaid (1,700) - Issue of shares 57,422 3,978 ---------- ---------- Net cash from financing activities 56,790 4,487 ---------- ---------- Net increase in cash and cash equivalents 42,023 815 Cash and cash equivalents at beginning of period 815 - ---------- ---------- Cash and cash equivalents at the end of the period 42,838 815 ---------- ---------- INLAND PLC NOTES TO THE FINANCIAL INFORMATION FOR THE YEAR ENDED 30 JUNE 2007 1. BASIS OF PREPARATION The Preliminary Report is unaudited and does not constitute statutory accounts within the meaning of s240 of the Companies Act 1985. The statutory accounts for the year ended 30 June 2006 have been delivered to the Registrar of Companies and statutory accounts for the year ended 30 June 2007 will be delivered to the Registrar after the Company's Annual General Meeting. The auditors' opinion on the accounts for the period ended 30 June 2006 was unqualified and did not contain a statement made under s237 (2) or (3) of the Companies Act 1985. The consolidated financial statements of Inland PLC have been prepared in accordance with the EU Endorsed International Financial Reporting Standards (IFRS), IFRIC interpretations and the Companies Act 1985 applicable to companies under IFRS. The consolidated financial statements have been prepared under the historical cost convention, except in respect of certain financial instruments. The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgment in the process of applying the Group's accounting policies. Although these estimates are based on management's best knowledge of the amount, event or actions, actual results ultimately may differ from those estimates. 2. ACCOUNTING POLICIES The principal accounting policies adopted in the preparation of the Group's IFRS financial statements are set out below. Basis of preparation The consolidated financial statements have been prepared in accordance with applicable International Financial Reporting Standards ('IFRS') as adopted by the EU and as issued by the International Accounting Standards Board. The financial statements have been prepared under the historical cost convention except that they have been modified to include the revaluation of certain non-current assets. The policies have changed from the previous year when the financial statements were prepared under applicable United Kingdom Generally Accepted Accounting Principles (UK GAAP). The comparative information has been restated in accordance with IFRS. The changes to accounting policies are explained in note 6 together with the reconciliation of opening balances. The date of transition to IFRS was 16 June 2005. The accounting policies that have been applied in the opening balance sheet have also been applied throughout all periods presented in these financial statements. These accounting policies comply with each IFRS that is mandatory for accounting periods ending on 30 June 2007. Standards in issue but not yet effective • IAS 1 Presentation of Financial Statements (revised 2007) (effective 1 January 2009) • IAS 23 Borrowing Costs (revised 2007) (effective 1 January 2009) • IFRS 8 Operating Segments (effective 1 January 2009) • IFRIC 11 IFRS 2 - Group and Treasury Share Transactions (effective 1 March 2007) • IFRIC 12 Service Concession Arrangements (effective 1 January 2008) • IFRIC 13 Customer Loyalty Programmes (effective 1 July 2008) • IFRIC 14 IAS 19 - The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction (effective 1 January 2008) None of these standards will have an impact on the Group's financial statements except IAS 23 the effect of which is currently being evaluated. Basis of consolidation The Group's financial statements consolidate those of the Company and all of its subsidiary undertakings drawn up to 30 June 2007. Subsidiaries are entities over which the Group has the power to control the financial and operating policies so as to obtain benefits from its activities. The Group obtains and exercises control through voting rights. 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 purchase method. The purchase method involves the recognition at fair value of all identifiable assets and liabilities, including contingent liabilities 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 consolidated balance sheet at their fair values, which are also used as the bases for subsequent measurement in accordance with the Group accounting policies. Goodwill is stated after separating out identifiable intangible assets. Goodwill represents the excess of acquisition cost over the fair value of the Group's share of the identifiable net assets of the acquired subsidiary at the date of acquisition. Associates Associates are those entities over which the Group has significant influence but which are neither subsidiaries nor interests in joint ventures. Investments in associates are recognised initially at cost and subsequently accounted for using the equity method. Acquired investments in associates are also subject to purchase method accounting. However, any goodwill or fair value adjustment attributable to the share in the associate is included in the amount recognised as investment in associates. All subsequent changes to the share of interest in the equity of the associate are recognised in the Group's carrying amount of the investment. Changes resulting from the profit or loss generated by the associate are reported in 'share of profits of associates' in the consolidated income statement and therefore affect net results of the Group. These changes include subsequent depreciation, amortisation or impairment of the fair value adjustments of assets and liabilities. Items that have been recognised directly in the associate's equity are recognised in the consolidated equity of the Group. However, when the Group's share of losses in an associate equals or exceeds its interest in the associate, including any unsecured receivables, the Group does not recognise further losses, unless it has incurred obligations or made payments on behalf of the associate. If the associate subsequently reports profits, the investor resumes recognising its share of those profits only after its share of the profits equals the share of losses not recognised. Unrealised gains on transactions between the Group and its associates are eliminated to the extent of the Group's interest in the associates. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Amounts reported in the financial statements of associates have been adjusted where necessary to ensure consistency with the accounting policies adopted by the Group. Revenue Revenue is measured by reference to the fair value of consideration received or receivable by the Group for goods supplied, excluding VAT and trade discounts. Revenue is recognised upon transfer of risk to the customer. Sale of land Revenue from the sale of land is recognised when all the following conditions have been satisfied: •the Group has transferred to the buyer the significant risks and rewards of ownership of the goods which is generally when contracts have been completed •the Group retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the land sold which is generally when the contract has been completed •the amount of revenue can be measured reliably •it is probable that the economic benefits associated with the transaction will flow to the Group, and •the costs incurred or to be incurred in respect of the transaction can be measured reliably. Interest Interest is recognised using the effective interest method which calculates the amortised cost of a financial asset and allocates the interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to the net carrying amount of the financial asset. Rental income Rental income is recognised on a straight line basis over the lease term. Dividends Dividends are recognised when the shareholders right to receive payment is established. Property, plant and equipment Property, plant and equipment is stated at cost or valuation, 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 income statement. The gain or loss arising from the sale or revaluation of held for sale assets is included in 'other income' or 'other expense' in the income statement. Any revaluation surplus remaining in equity on disposal of the asset is transferred to the profit and loss reserve. Depreciation Depreciation is calculated to write down the cost less estimated residual value of all property, plant and equipment by the straight line method where it reflects the basis of consumption of the asset. The rates generally applicable are: Fixtures & fittings - 25% Office and computer equipment - 25% Material residual value estimates are updated as required, but at least annually, whether or not the asset is revalued. Impairment testing of property, plant and equipment For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units). As a result, some assets are tested individually for impairment and some are tested at cash-generating unit level. All individual assets or cash-generating units are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset's or cash-generating unit's carrying amount exceeds its recoverable amount. The recoverable amount is the higher of fair value, reflecting market conditions less costs to sell, and value in use based on an internal discounted cash flow evaluation. All assets are subsequently reassessed for indications that an impairment loss previously recognised may no longer exist. Inventories Inventories are stated at the lower of cost and net realisable value. Costs of ordinarily interchangeable items are assigned using the first in, first out cost formula. Cost includes cost of land and associated costs in relation to acquisition and process of application for planning permission less discount for deferred payment terms. Net realisable value is the anticipated sale value less costs to obtain planning permission. Taxation Current tax is the tax currently payable based on taxable profit for the period. 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 that are expected to apply to their respective period of realisation, provided they are enacted or substantively enacted at the balance sheet date. Changes in deferred tax assets or liabilities are recognised as a component of tax expense in the income statement, except where they relate to items that are charged or credited directly to equity (such as the revaluation of land not included in inventories) in which case the related deferred tax is also charged or credited directly to equity. Leased assets In accordance with IAS 17, the economic ownership of a leased asset is transferred to the lessee if the lessee bears substantially all the risks and rewards related to the ownership of the leased asset. The related asset is recognised at the time of inception of the lease at the fair value of the leased asset or, if lower, the present value of the minimum lease payments plus incidental payments, if any, to be borne by the lessee. A corresponding amount is recognised as a finance leasing liability. Leases of land and buildings are split into land and buildings elements according to the relative fair values of the leasehold interests at the date of entering into the lease agreement. The interest element of leasing payments represents a constant proportion of the capital balance outstanding and is charged to the income statement over the period of the lease. All other leases are regarded as operating leases and the payments made under them are charged to the income statement on a straight line basis over the lease term. Lease incentives are spread over the term of the lease. Employee benefits Defined Contribution Pension Scheme The pension costs charged against operating profits are the contributions payable to the scheme in respect of the accounting period. Financial assets Financial assets, are divided into the following categories: loans and receivables and financial assets at fair value through profit or loss. Financial assets are assigned to the different categories by management on initial recognition, depending on the purpose for which they were acquired. The designation of financial assets is re-evaluated at every reporting date at which a choice of classification or accounting treatment is available. All financial assets are recognised when the Group becomes a party to the contractual provisions of the instrument. Financial assets other than those categorised as at fair value through profit and loss are recognised at fair value plus finance costs. Financial assets categorised as at fair value through profit or loss are recognised initially at fair value with transaction costs expensed through the income statement. Financial assets at fair value through profit or loss include financial assets that are either classified as held for trading or are designated by the entity as at fair value through profit or loss upon initial recognition. Subsequent to initial recognition, the financial assets included in this category are measured at fair value with changes in fair value recognised in the income statement. Financial assets originally designated as financial assets at fair value through profit or loss may not be re-classified subsequently. Financial assets are designated as at fair value through profit or loss where they eliminate or significantly reduce a measurement (or recognition) mismatch. Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Trade receivables and loans to Associate are classified as loans and receivables. Loans and receivables are measured subsequent to initial recognition at amortised cost using the effective interest method, less provision for impairment. Any change in their value through impairment or reversal of impairment is recognised in the income statement. Provision against trade receivables is made when there is objective evidence that the Group will not be able to collect all amounts due to it in accordance with the original terms of those receivables. The amount of the write-down is determined as the difference between the asset's carrying amount and the present value of estimated future cash flows. Regular way purchases and sales are accounted for on trade date. Interest and other cash flows resulting from holding financial assets are recognised in the income statement when receivable, regardless of how the related carrying amount of financial assets is measured. A financial asset is derecognised only where the contractual rights to the cash flows from the asset expire, or the financial asset is transferred and that transfer qualifies for derecognition. A financial asset is transferred if the contractual rights to receive the cash flows of the asset have been transferred or the Group retains the contractual rights to receive the cash flows of the asset, but assumes a contractual obligation to pay the cash flows to one or more recipients. A financial asset that is transferred qualifies for derecognition if the Group transfers substantially all the risks and rewards of ownership of the asset, or if the Group neither retains nor transfers substantially all the risks and rewards of ownership but does transfer control of that asset. 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. Financial liabilities categorised as at fair value through profit or loss are recorded initially at fair value, all transaction costs are recognised immediately in the income statement. All other financial liabilities are recorded initially at fair value, net of direct issue costs. Financial liabilities categorised as at fair value through profit or loss are remeasured at each reporting date at fair value, with changes in fair value being recognised in the income statement. All other financial liabilities are recorded at amortised cost using the effective interest method, with interest-related charges recognised as an expense in finance cost in the income statement. Finance charges, including premiums payable on settlement or redemption and direct issue costs, are charged to the 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. Financial liabilities are categorised as at fair value through profit or loss where they are classified as held-for-trading or designated as at fair value through profit or loss on initial recognition. Financial liabilities are designated as at fair value through profit or loss where they eliminate or significantly reduce a measurement (or recognition) mismatch. A financial liability is derecognised only when the obligation is extinguished, that is, when the obligation is discharged or cancelled or expires. Cash and cash equivalents Cash and cash equivalents comprise cash on hand and demand deposits, together with other short-term, highly liquid investments that are readily convertible into known amounts of cash and which are subject to an insignificant risk of changes in value. Dividends Dividend distributions payable to equity shareholders are included in 'other short term financial liabilities' when the dividends are approved in general meeting prior to the balance sheet date. Equity An equity instrument is a contract which evidences a residual interest in the assets after deducting all liabilities. Equity comprises the following: 'Share capital' represents the nominal value of equity shares. 'Share premium' represents the excess over nominal value of the fair value of consideration received for equity shares, net of expenses of the share issue. 'Profit and loss reserve' represents retained profits. 3. INTEREST EXPENSE Period from 16 Year ended June 2005 to 30 June 2007 30 June 2006 (Unaudited) (Audited) £000 £000 Interest expense: - bank borrowings 107 18 - notional interest on deferred consideration 1,265 35 ----------- ------------ 1,372 53 =========== ============ 4. EARNINGS/(LOSS) PER SHARE Basic and diluted Basic and diluted earnings/(loss) per share is calculated by dividing the profit /(loss) attributable to equity holders of the Company by the weighted average number of ordinary shares in issue during the year. Period from 16 Year ended June 2005 to 30 June 2007 30 June 2006 (Unaudited) (Audited) Profit/(loss) attributable to equity holders of the Company (£'000) 795 (466) ------------ ------------- Weighted average number of ordinary shares in issue ('000) 80,944 14,195 Dilutive effect of options treated as exercisable at the year end ('000) (96) - ------------ ------------- 80,848 14,195 ------------ ------------- Basic earnings/(loss) per share in pence 0.98p (3.28)p ============ ============= Diluted earnings/(loss) per share in pence 0.98p (3.28)p ============ ============= 5. SHARE CAPITAL 2007 2006 (Unaudited) (Audited) £000 £000 Authorised 239,990,000 (2006: 100,000,000) ordinary shares of 10p each 23,999 10,000 1,000 (2006: NIL) deferred shares of £1 each 1 - ------------ ------------ 24,000 10,000 ============ ============ 2007 2006 (Unaudited) (Audited) £000 £000 Allotted, issued and fully paid 162,150,059 (2006: 32,792,866) 16,215 3,279 ordinary shares of 10p each 1,000 (2006: Nil) deferred shares of £1 each 1 - ------------ ------------ 16,216 3,279 ============ ============ All issued shares are fully paid. On 4 August 2006, 6,710,367 ordinary shares were issued at £0.35 per share. On 22 August 2006, 157,142 ordinary shares were issued at £0.35 per share. On 30th August 2006, 714,285 ordinary shares were issued at £0.35 per share. On 5 September 2006, 10,000 ordinary shares were issued at £0.35 per share. On 2 October 2006, 970,000 ordinary shares were issued at £0.35 per share. On 3 October 2006, 12,085,335 ordinary shares were issued at £0.35 per share. On 19 October 2006, 580,427 ordinary shares were issued at £0.35 per share. On 6 November 2006, 1,639,583 ordinary shares were issued at £0.35 per share. On 14 November 2006, 2,678,482 ordinary shares were issued at £0.35 per share. On 22 November 2006, 3,640,572 ordinary shares were issued at £0.35 per share. On 6 December 2006, 143,000 ordinary shares were issued at £0.35 per share. On 19 March 2007, 1,000 deferred shares were issued at £1 per share. On 26 March 2007, 28,000 ordinary shares were issued at £0.50 per share. On 3 April 2007, 100,000,000 ordinary shares were issued at £0.50 per share. The deferred shares are not entitled to receive any dividends and carry one vote per share in general meetings. On a return of capital, the holders of deferred shares will receive £1.00 per share unless the conditions described below are met, in which event the entitlement of holders of deferred shares will be enhanced as described below. In the event that (i) the return to holders of Ordinary Shares (calculated as dividends received, together with the increase in share price over 50p exceeds 10 per cent. per annum compounded annually); and (ii) the relevant holder of deferred shares has not voluntarily ceased to be employed by or engaged to provide services to the Company or any Group company or been dismissed for cause then the following provisions will apply: (i) on a takeover (including a takeover effected by a scheme of arrangement) the holders of the deferred shares will become entitled to redeem their shares at a price which is calculated so as to attribute to all the deferred shares the difference between the takeover offer price per share and 35p (or such other sum as is agreed with HM Revenue & Customs) multiplied by 11,350,504; or (ii) on a winding up, the assets attributable to the deferred shares will likewise be calculated to be such amount as would represent the difference between the amount attributable to each Ordinary Share and 35p (or such other sum as is agreed with HM Revenue & Customs) multiplied by 11,350,504. 6. TRANSITION TO IFRS Introduction Inland plc has previously produced and filed financial statements under UK Generally Accepted Accounting Practice (UK GAAP). Reconciliations between IFRS and UK GAAP The following reconciliations provide a quantification of the effect of the transition to IFRS, with notes to the reconciliations: - net income at 30 June 2006 - equity at 30 June 2006 The Company was incorporated on 16 June 2005 and these financial statements under IFRS are the first financial statements. The cash flow statement for the period ended 30 June 2006 under IFRS is also the same as under UK GAAP apart from presentational differences. Reconciliation of net income for period ended 30 June 2006 UK Associate's Notional Convertible GAAP profit interest loan stock IFRS £000 £000 £000 £000 £000 Revenue - - - - - Cost of sales (5) - - - (5) ------- -------- ------- --------- ------- Gross loss (5) - - - (5) Administrative expenses (733) - - - (733) ------- -------- ------- --------- ------- Operating loss (738) - - - (738) Finance costs - net 17 - (29) 8 (4) ------- -------- ------- --------- ------- (721) - (29) 8 (742) Share of profit of associate - 62 - - 62 ------- -------- ------- --------- ------- Loss before tax (721) 62 (29) 8 (680) Taxation 214 - - - 214 ------- -------- ------- --------- ------- Loss for the period (507) 62 (29) 8 (466) ======= ======== ======= ========= ======= Reconciliation of equity at 30 June 2006 UK Associate's Notional Convertible GAAP profit interest loan stock IFRS £000 £000 £000 £000 £000 ASSETS Non-current assets Property, plant & equipment 36 - - - 36 Investments 1,000 62 - 8 1,070 Deferred tax 214 - - - 214 ------- -------- -------- --------- --------- 1,250 62 - 8 1,320 Current assets Inventories 3,582 - (49) - 3,533 Trade and other receivables 82 - - - 82 Loan to associate 380 - - - 380 Cash and cash equivalents 815 - - - 815 ------- -------- -------- --------- --------- 4,859 - (49) - 4,810 ------- -------- -------- --------- --------- ------- -------- -------- --------- --------- Total assets 6,109 62 (49) 8 6,130 ======= ======== ======== ========= ========= EQUITY Capital and reserves attributable to the Company's equity holders Share capital 3,279 - - - 3,279 Share premium account 699 - - - 699 Retained earnings (507) 62 (29) 8 (466) ------- -------- -------- --------- --------- Total equity 3,471 62 (29) 8 3,512 ======= ======== ======== ========= ========= LIABILITIES Current liabilities Trade and other payables 596 - - - 596 Deferred purchase consideration 1,517 - (20) - 1,497 Borrowings 525 - - - 525 ------- -------- -------- --------- --------- Total current liabilities 2,638 - (20) - 2,618 ------- -------- -------- --------- --------- ------- -------- -------- --------- --------- Total liabilities 2,638 - (20) - 2,618 ------- -------- -------- --------- --------- ------- -------- -------- --------- --------- Total equity and liabilities 6,109 62 (49) 8 6,130 ======= ======== ======== ========= ========= Notes to the reconciliations a) The Group has applied IAS 28: Investments in Associates to its investment in Howarth Homes PLC at 30 June 2006. The Company owns 10% of the equity but is able to exert significant influence. The effect of equity accounting for Howarth Homes PLC as an associate is to take the Group's share of profit after tax of the associate which amounts to £62,000. b) In accordance with IAS 39, deferred payments arising from land creditors are to be held at discounted present value, hence recognising a financing element over the period of the deferred settlement terms. The land creditor is then increased to the settlement value over the period of financing, with the financing element charged as interest expense through the income statement. The value of land held on the balance sheet and the corresponding land creditor is reduced by the financing element. The reduction in land value in inventories will result in an eventual reduction in cost of sales as the land is traded out. For the period ended 30 June 2006, this has resulted in an inclusion of notional interest of £29,000, a reduction of inventories by £49,000 and a net reduction in land creditors of £20,000. c) The Group has applied IAS 39: Financial instruments: Recognition and Measurement to the Convertible Loan Stock in Howarth Homes PLC. The effect of this is to separate the equity element of the convertible loan stock from the loan by discounting the asset to its net present value. The loan is then increased to the settlement value over the period of the loan stock with the net interest credited to the income statement and a corresponding increase in the loan stock. The effect of applying this Standard is to increase interest received by £8,000 and account for the equity element of the convertible loan stock at £39,000 and reducing the loan stock by a net amount of £31,000. 7. POST BALANCE SHEET EVENT On 9 August 2007, the Company made an offer to acquire all of the issued share capital of Poole Investments PLC ('Poole') that it did not already own. The offer valued Poole at £11.1m. On 6 September 2007 the offer was declared unconditional in all respects. Poole's primary asset is a 9.5 acre plot of land in Lower Hamworthy, Dorset with an investment property that generates a rental income. This information is provided by RNS The company news service from the London Stock Exchange

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