Preliminary Results

RNS Number : 3682P

Inland PLC

03 October 2011

 



For immediate release                                                                                                       3 October 2011

Inland PLC

("Inland" or the "Company" or the "Group")

Unaudited preliminary results for the year ended 30 June 2011

Inland (AIM: INL) which specialises in the acquisition of brownfield sites and seeks to enhance their value by obtaining planning permission today announces preliminary results for the year ended 30 June 2011.

Financial highlights

·      Revenue increased by 29.2% to £21.37m (2010: £16.54m)

·      Operating profit increased by 72.06% to £3.51m (2010: £2.04m)

·      Pre-tax profit increased by 237.14% to £3.54m (2010: £1.05m)

·      Earnings per share: 2.10p (2010: 0.68p)

·      Stocks and investment property: £32.91m (2010: £43.95m)

·      Net assets: £48.48m (2010: £44.46m)

·      Net asset value per share: 26.49p (2010: 24.30p)

Operational highlights

·      Sale of 256 building plots during the year, an increase of 62% on prior year

·      Drayton Garden Village site

o  Significant progress made at West Drayton

o  Sale of 89 plots to a substantial private housebuilder for £9.5m plus £0.63m towards Section 106 payments

o  Gross receipts from land sales at Drayton Garden Village now at £15.2m

o  Conditional sale of a plot for an 80 bed nursing home for £1.8m

o  Share of profits to 30 June 2011: £4m

o  Share of future gross profit from DGV expected to be approximately £18m

o  Land bank comprises 625 consented residential plots (2010: 773) and 55,000 sq ft consented commercial space (2010: 53,000 sq ft)

o  Won the Land Award by Sustain Magazine in recognition of achievements in energy conservation and a sustainable development

·      Queensgate, Farnborough site

o  Sale of a further 31 homes

·      Poole, Dorset site

o  Planning application submitted for the development of approximately 270 homes and 100,000 sq ft of commercial space

·      Initiatives implemented to increase the scale of house building activity to harness greater development upside

·      Land bank controlled comprises 965 residential plots (2010: 1,177) and 205,000 sq ft commercial space (2010: 210,000 sq ft) of which:

o  484 (2010: 584) are consented residential plots

o  97,000 sq ft (2010: 108,000) is consented commercial space

Stephen Wicks, Chief Executive of Inland commented:

"I am delighted with the strong performance of Inland over the last twelve months.  Despite the ongoing difficulties of the planning system, we are able to secure favourable consents, but, more importantly, generate profitable outcomes which will continue to underpin the prospects for Inland.

Our development pipeline has never been stronger and we continue to see further opportunities across the South East.  Despite the broader market uncertainty we remain upbeat and believe the next twelve months will deliver another period of growth for Inland."

Enquiries:

Inland PLC

Stephen Wicks, Chief Executive                                            Tel: [phone]

Nishith Malde, Finance Director                                             Tel: [phone]

FinnCap Nominated Adviser & Broker

Matthew Robinson / Charlotte Stranner (Corporate Finance)     Tel: [phone]

Buchanan

Jeremy Garcia / Christian Goodbody                                      Tel: [phone]

The annual accounts will shortly be sent to shareholders and made available on the Company's website www.inlandplc.com

 Chairman's Statement

Introduction

I am pleased to report that the year ended 30 June 2011 has seen an excellent performance by Inland.

This has produced a substantial increase in both revenue and profitability over the previous period as well as significantly lower levels of debt. 

Results

Total turnover resulting from land and property sales, rental income and project management fees was £21.4m (2010: £16.5m), operating profit was £3.5m (2010:  £2.0m) and profit before tax was £3.5m (2010: £1.1m). Earnings per share have increased by 208.8% from 0.68p to 2.10p. Net asset value per share was 26.49p, an increase of 9.0% over the previous period (2010: 24.30p). As I stated in the Interim Report, this figure excludes any future value from Drayton Garden Village, where Inland has the potential of realising up to 90% of the profit from this development. The Directors believe that our potential share of the future profits from this project could be approximately £18m and is equivalent to 7p per share net of tax. 

Operational Review

Inland achieved the sale of 256 building plots during the year, an increase of 62% compared to the corresponding period. This strong performance demonstrates the ongoing demand for development land in the South East of England, a trend that we believe looks set to continue irrespective of the general weakness in the house building industry elsewhere in the UK. Of particular note in the year was the sale of 65 plots for affordable homes in Minet Drive, Hayes, Middlesex to a major housing association. We succeeded in securing planning permission for this site 7 weeks from submission of the planning application after initially having lost a planning appeal. This has enabled the Directors to maintain their unbroken track record of obtaining consents on their projects; an outstanding performance in today's very hostile planning environment!

Drayton Garden Village, a 'flagship' development, that we have significant involvement in, of 773 plots with commercial space in West London, continues to make considerable progress. Key milestones in this project were the sale of 89 plots to a substantial private housebuilder for £9.5m plus, a contribution of £630,000 towards 'Section 106' payments and a further sale (conditional on detailed planning consent) of a plot for an 80 bed nursing home for £1.8m which is expected to complete in the second half of the current financial period. Gross receipts to date from land sales at Drayton Garden Village are £15.2m. Inland's share of the profits of DGVL to 30 June 2011 is £4m. At the year end, the total amount of deferred consideration payments due on this site amounted to £14m of which £7m falls due after more than one year.

Having completed demolition and land remediation, the focus is now on installing the infrastructure at Drayton Garden Village and I am pleased to report that roads, drainage and the first of the village greens are nearing completion. The combined heat and power network and energy centre are now also well underway.

During the course of the year Drayton Garden Village won the coveted Land Award by Sustain Magazine, recognising our achievements in energy conservation and sustainable development.

I am pleased to report that we completed the sale of 31 homes at our Queensgate, Farnborough development achieving a development contribution of £576,000. We will shortly commence building the next phase of 19 homes on this development, which are mainly two bedroom houses, with construction finance provided by Close Property Finance. A revised planning application for the balance of the site (approximately 290 plots) with an improved layout and mix has now been submitted.

We also intend to start the construction of our Redhill, Surrey development in early 2012.  This residential development of 28 units is in an attractive location which we believe will be popular with homebuyers.

In light of the changes in the marketplace, our strategy continues to evolve and we have made a conscious decision to increase the scale of our house building activities on specific sites under our control, following the successful conclusion of the planning process. On our larger projects, this strategy will not only improve the value of the remaining land but will also allow Inland to retain the development profit, thereby further enhancing shareholder value. This approach will be carefully balanced to ensure the Group's cash flows are sufficient to enable us to take this longer term view. The Board is also proposing a resolution at the next annual general meeting to change the Company's name to Inland Homes PLC.

The first phase of work on the £2m link road for the new Twin Sails Bridge in Poole, Dorset has now been completed. The planning application for our development has now been submitted for approximately 270 homes and 100,000 sq ft of commercial space. This is a momentous achievement for our planning team as the site in Poole will be a significant redevelopment project for the region.

I am also pleased to report that since the year end, we have contracted to purchase part of St John's Hospital in Chelmsford, Essex. This 6.5 acre brownfield site should gain a consent for approximately 125 homes.

The current land bank under the Group's control consists of approximately 965 residential plots and 205,000 sq ft of commercial space of which 484 plots and 97,000 sq ft of commercial space is consented. In addition Drayton Garden Village has 625 residential plots and 55,000 sq ft of commercial space with planning permission.

It gives me great pleasure to also report that Paul Brett has been appointed as Land Director to the Board of Inland PLC. Paul joined the Inland Group in August 2005 and has extensive experience in identifying brownfield land and in the complex processes of the planning system.

Financial Summary

The net profit for the year ended 30 June 2011 was £3.8m (2010: £1.2m) which represents earnings per share of 2.10p (2010: 0.68p).

As reported previously to shareholders, despite a track record with Royal Bank of Scotland stretching back over many years, the bank behaved in a precipitous manner with regard to our banking facilities, reducing the amounts available to Inland and introducing penal terms that were unpalatable. As a consequence the Board decided to make a full repayment at the earliest possible opportunity to avoid these exhorbitant fees and enable Inland to exit the 'relationship'. I am pleased to report that the bank was repaid in full in December 2010.

Whilst the Group is seeking a new senior banking relationship and some positive discussions are taking place, interim funding is being achieved from sales and loans from private investors. However, bank finance for housebuilding is more readily available.

By the year end all deferred consideration on land purchases by the Group were paid (2010: £6m outstanding); net debt at the year end stood at £0.42m (2010: £6.7m) translating in net gearing (including deferred consideration) of 0.9% (2010: 34.2%).

In view of the progress achieved by the Group, the Board has resolved to eliminate the deficit in reserves and a resolution will be proposed at the next annual general meeting for the capitalisation of the parent company's reserves to pave the way for distributions to be made in the future.

Investments

Our associate company Howarth Homes plc made considerable progress in the year, increasing both turnover and profitability. Howarth secured £14m of contracts to build affordable housing on sites where the Housing Associations purchased the land from Inland.

Howarth are project managing a complex infrastructure package for Inland at Drayton Garden Village as well as working in partnership with us on the Croxley Green joint venture of 51 houses.

Outlook

Inland's strong performance over the last 12 months is in stark contrast to the broader economic outlook in the UK. Our strategy of pursuing complex, large scale projects where our expertise can create substantially increased value is now starting to show tangible results.

With Inland's development focus in the South East and our portfolio and pipeline now generating exciting new opportunities, we remain confident about our strategy and prospects for the future.

Terry Roydon

Chairman

Group income statement

For the year ended 30 June 2011

		2011	2010
		(unaudited)	(audited)
Continuing operations	Note	£000	£000
Revenue	2	21,372	16,542
Cost of sales		(15,699)	(12,875)
Gross profit		5,673	3,667
Administrative expenses		(2,207)	(1,945)
Profit on investments		46	321
Operating profit		3,512	2,043
Finance cost - interest expense		(577)	(807)
Finance income - notional interest		207	(324)
Finance income - interest receivable and similar income		131	139
		3,273	1,051
Share of profit of associate		132	-
Share of profit of joint venture		138	-
Profit before tax		3,543	1,051
Income tax	3	303	141
Profit for the year		3,846	1,192
Attributable to:
Equity holders of the Company		3,846	1,192
Earnings per share for profit attributable to the equity holders of the Company during the year
- basic	4	2.10p	0.68p
- diluted	4	2.07p	0.68p

Group statement of comprehensive income

For the year ended 30 June 2011

		2011	2010
		(unaudited)	(audited)
	Note	£000	£000
Profit for the year		3,846	1,192
Other comprehensive income		-	-
Total comprehensive income for the year		3,846	1,192

Group statement of financial position

At 30 June 2011

		2011	2010
		(unaudited)	(audited)
	Note	£000	£000
ASSETS
Non-current assets
Investment property		8,801	8,801
Property, plant and equipment		76	58
Investments		1,009	729
Joint ventures		2,401	2,269
Investment in associate		96	-
Receivables due in more than one year		70	-
Deferred tax	5	4,976	4,597
Total non-current assets		17,429	16,454
Current assets
Inventories		24,105	35,151
Trade and other receivables		10,299	5,691
Loan to associate		1,895	1,895
Listed investments held for trading (carried
at fair value through profit and loss)		1	131
Cash and cash equivalents		2,239	2,519
Total current assets		38,539	45,387
Total assets		55,968	61,841
EQUITY
Capital and reserves attributable to the Company's equity holders
Share capital		18,301	18,301
Share premium account		45,794	45,806
Treasury shares		(366)	(366)
Retained earnings		(15,248)	(19,280)
Total equity		48,481	44,461
LIABILITIES
Current liabilities
Bank loans and overdrafts		663	9,242
Other loans		2,000	-
Trade and other payables		4,824	2,173
Other financial liabilities	6	-	5,965
Total liabilities		7,487	17,380
Total equity and liabilities		55,968	61,841

Group statement of changes in equity

For the year ended 30 June 2011

	Share	Share	Treasury	Retained	Other
	capital	premium	shares	earnings	reserves	Total
	£000	£000	£000	£000	£000	£000
At 30 June 2009 (audited)	16,216	45,184	(366)	(15,848)	(4,806)	40,380
Share-based payment	-	-	-	182	-	182
Issue of equity	2,085	622	-	-	-	2,707
Transactions with owners	2,085	622	-	182	-	2,889
Total comprehensive income for the year	-	-	-	1,192	-	1,192
Available-for-sale financial asset: - reclassification to profit or loss	-	-	-	(4,806)	4,806	-
Total changes in equity	-	-	-	(3,614)	4,806	1,192
At 30 June 2010 (audited)	18,301	45,806	(366)	(19,280)	-	44,461
Share-based payment	-	-	-	186	-	186
Issue of equity	-	(12)	-	-	-	(12)
Transactions with owners	-	(12)	-	186	-	174
Total comprehensive income for the year	-	-	-	3,846	-	3,846
Total changes in equity	-	(12)	-	4,032	-	4,020
At 30 June 2011 (unaudited)	18,301	45,794	(366)	(15,248)	-	48,481

Group statement of cash flows

For the year ended 30 June 2011

		2011	2010
		(unaudited)	audited
	Note	£000	£000
Cash flow from operating activities
Profit for the year before tax		3,543	1,051
Adjustments for:
- depreciation		38	34
- share-based compensation		186	182
- fair value adjustment for listed investments		(30)	(31)
- profit on disposal of listed investments		(16)	(60)
- interest expense		577	1,131
- interest and similar income		(338)	(139)
- share of profit of associate		(132)	-
- share of profit in joint venture		(138)	-
Changes in working capital (excluding the effects of acquisition):
- decrease in inventories		11,046	6,505
- increase in trade and other receivables		(4,400)	(2,094)
- decrease in receivables due in more than one year		(70)	-
- decrease in trade and other payables		(3,365)	(6,788)
Net cash inflow/(outflow) from operating activities		6,901	(209)
Cash flow from investing activities
Interest received		131	120
Purchases of property, plant and equipment		(56)	(11)
Purchase of investments		(283)	(2,717)
Sale of investments		146	628
Net cash outflow from investing activities		(62)	(1,980)
Cash flow from financing activities
Interest paid		(527)	(748)
Repayment of borrowings		(2,410)	-
New loans		2,000	2,657
Costs on issue of ordinary shares during prior year		(12)	-
Net proceeds on issue of ordinary shares		-	2,707
Net cash (outflow)/inflow from financing activities		(949)	4,616
Net increase in cash and cash equivalents		5,890	2,427
Net cash and cash equivalents at beginning of year		(3,651)	(6,078)
Net cash and cash equivalents at the end of year		2,239	(3,651)
Cash and cash equivalents		2,239	2,519
Bank overdraft		-	(6,170)
		2,239	(3,651)

Notes to the preliminary announcement

For the year ended 30 June 2011

1.   CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS

Estimates and judgements are continually evaluated and are based on historic experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

Critical accounting estimates

The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, rarely equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are outlined below.

(a) Valuation of inventories

In applying the Group's accounting policy for the valuation of inventories the Directors are required to assess the expected selling price and costs to sell each of the plots or units that constitute the Group's landbank and work in progress. Estimation of the selling price is subject to significant inherent uncertainties, in particular the prediction of future trends in the market value of land.

Whilst the Directors exercise due care and attention to make reasonable estimates taking into account all available information in estimating the future selling price, the estimates will, in all likelihood, differ from the actual selling prices achieved in future periods and these differences may, in certain circumstances, be very significant. The critical judgement in respect of planning consent (see below) further increases the level of estimation uncertainty in this area.

(b) Income taxes

The Group recognises tax/deferred tax assets and liabilities for anticipated tax based on estimates of when the tax/deferred tax will be paid or recovered. When the final outcome of these matters is different from the amounts initially recorded, such differences impact the period in which the determination is made.

(c) Fair value of derivatives and other financial instruments

The fair value of instruments that are not traded in an active market is determined by using valuation techniques. The Group uses its judgement to select a variety of methods and make assumptions that are mainly based on market conditions existing.

(d) Investment properties

Properties are classified as investment properties if there are significant rentals and the intention is to hold those properties for a significantly longer time than inventory property, ie not for sale in the ordinary course of business.

(e) Discounting on deferred consideration of inventories

The Group discounts deferred consideration of inventories by discounted cash flow method, using the cost of debt capital as the discount rate.

Critical judgements in applying the entity's accounting policies

Inventories

The Group values inventories at the lower of cost and net realisable value. The net realisable value is based on the judgement of the probability that planning consent will be given for each site. The Group believes that, based on the Directors' experience, planning consent will be given. If planning consent was not achieved then a provision may be required against inventories.

Investments

The Group has entered into a Development Services Agreement with Drayton Garden Village Limited ("DGVL"). The Directors have considered the requirements of IAS 27 'Consolidated and separate financial statements' (revised 2008) and 'SIC 12 Consolidation - special purpose entities' and do not believe that the Group has the power to control DGVL.  DGVL makes its own decisions even though the director of DGVL receives property advice and property services from the Group. The Directors also consider that the Group does not have the decision making powers to obtain the majority of the benefits and the risks of the activities of DGVL as the shareholder of DGVL maintains control as to whether he finances the deferred land consideration payments, and hence improve his profit share, or whether he allows Inland to arrange the funding.  Therefore the Directors do not believe that DGVL should be consolidated within the Group's financial statements.

Critical judgements in applying the entity's accounting policies (continued)

The Group is entitled to receive a fee for the provision of planning application services, assistance in obtaining statutory and third party consents, assistance in entering into development and construction agreements, assistance in achieving sales, assistance in engaging professional advisors, seeking opportunities to generate interim revenues and the potential provision of finance to DGVL in respect of the site known as Drayton Garden Village. Under the agreement the Group has the potential to earn up to 90% of the profits realised from the sale of the property over the life of the project.

At 30 June 2011 this fee amounted to 58.19% of the total profits of £23.6m expected to be realised from the sale of the property over the life of the project. In accordance with the Option and Development Services Agreement with DGVL ("The Agreement"), 51.23% of the profits would be due to the Group for the provision of planning application and property management services and this has to be accounted for under IAS 18. 6.96% of the profits would be due to the Group for the provision of finance to DGVL and would be accounted for under IAS 39 as notional interest income.

In calculating the fee for the provision of planning application and property services to DGVL, under IAS 18 the Group has estimated the following:

•     Total profits (total expected sales less total estimated development costs to completion) to be realised from the sale of the property;

•    Profits would be realised over 6 years from 1 July 2010; and

•    Percentage of planning application and property services provided to DGVL as at the period end with the balance to be provided over the remaining life of the project.

During the year ended 30 June 2011 the Group has recognised £3.77m (2010: £0.8m) in revenue within the Group Income Statement for such services to DGVL.

In calculating the fee for the provision of finance to DGVL, under IAS 39 the Group has estimated the following:

•    Total profits (total expected sales less total estimated development costs to completion) to be realised from the sale of the property; and

•    Profits would be realised over 6 years from 1 July 2010.

During the year ended 30 June 2011 the Group has recognised £0.24m (2010: £nil) within notional interest income in the Group Income Statement in respect of such fees.

The table below shows the revenue and notional interest recognised by Inland under IAS 18 and IAS 39 in comparison to the results recognised by DGVL on its sales:

	2011	2010
	£000	£000
Total revenue and notional interest recognised under IAS 18 and 39	4,017	-

Land sales in DGVL - year to 30 June 2011 (unaudited)
Plots sold		148
Revenue (£000)		15,186
Gross profit (£000) as per DGVL's draft accounts		5,378
Inland's share of fees at 58.19% as per The Agreement (£000)		3,130

2.  SEGMENTAL ANALYSIS OF TURNOVER

	2011	2010
	(unaudited)	(audited)
	£000	£000
Land sales	9,399	12,837
Housebuilding	7,324	2,142
Fee income	3,975	893
Rental income	374	670
Other property sale	300	-
	21,372	16,542

3.   INCOME TAX

	2011	2010
	(unaudited)	(audited)
	£000	£000
Corporation tax charge	-	-
Tax charge on associate and joint venture profits	76	-
Deferred tax credit	(379)	(141)
	(303)	(141)

The tax on the Group's profit before tax differs from the theoretical amount that would arise using the tax rate applicable to profits of the consolidated companies as follows:

	2011	2010
	(unaudited)	(audited)
	£000	£000
Profit before tax	3,543	1,051
Profit on ordinary activities multiplied by the standard rate of corporation tax in the UK of 28% (2010: 28%)	992	294
Expenses not deductible for tax purposes	35	28
Other timing differences	109	-
Utilisation of tax losses	(1,439)	(465)
Losses not recognised	-	2
Tax credit	(303)	(141)

4.  EARNINGS PER SHARE

Basic and diluted earnings per share is calculated by dividing the earnings attributable to equity holders of the Company by the weighted average number of ordinary shares in issue during the period.

	2011	2010
	(unaudited)	(audited)
Profit attributable to equity holders of the Company (£000)	3,846	1,192
Weighted average number of ordinary shares in issue (000)	182,999	174,965
Dilutive effect of options (000)	2,575	-
Weighted average number of ordinary shares used in determining                 diluted EPS (000)	185,574	174,965
Basic  earnings per share in pence	2.10p	0.68p
Diluted earnings per share in pence	2.07p	0.68p

5.  DEFERRED TAX

The net movement on the deferred tax account is as follows:

	£000
At 1 July 2010 (audited)	4,597
Income statement credit	693
Adjustment in respect of corporation tax to 26%	(314)
At 30 June 2011 (unaudited)	4,976

The movement in deferred tax assets is as follows:

	Accelerated
	tax
	depreciation	Losses	Other	Total
	£000	£000	£000	£000
At 1 July 2010 (audited)	(7)	3,612	992	4,597
Credited/(charged) to income statement	5	483	(109)	379
At 30 June 2011 (unaudited)	(2)	4,095	883	4,976

The deferred tax asset is recoverable as follows:       

	2011	2010
	(unaudited)	(audited)
	£000	£000
Deferred tax asset to be recovered after twelve months	3,225	4,597

Deferred income tax assets are recognised for tax losses carried forward to the extent that the realisation of the related tax benefit through future taxable profits is probable. The Group did not recognise deferred tax assets on losses of £nil (2010: £5,800,000) that can be carried forward against future taxable income. The Group has capital losses amounting to £20,449,000 (2010: £19,983,000) that have not been recognised as the Directors consider the realisation of the losses is not expected to crystalise in the future.

6.  OTHER FINANCIAL LIABILITIES

	2011	2010
	£000	£000
Deferred purchase consideration on inventories falling due within one year	-	5,965

The Group seeks to manage financial risk by ensuring sufficient liquidity is available to meet foreseeable needs. The lack of availability of bank funding has resulted in the Group seeking finance from alternative lending sources to improve liquidity.

7.  CONTINGENCIES

The Group has the following contingent liabilities:

a)     upon the sale of an investment property, a payment of £550,000 is due to two parties;

b)     a subsidiary undertaking, Poole Investments plc ("Poole") ceased to participate in its operating subsidiary's pension scheme when it disposed of former subsidiaries in May 2004.  The Scheme's principal employer, Pilkington's Tiles Limited went into administration on 14 June 2010 and as a result Poole may be liable for a share of the cost of securing the liabilities of the Scheme pertaining to its two former employees should there be a deficit on the Scheme's fund. The Directors consider that, as at the balance sheet date, material uncertainty exists over the basis and calculation of any obligation that may fall due to Poole Investments PLC.  Advice is being sort to clarify the Company's position.  A provision has therefore not been made in the financial statements as the basis of any provision cannot be reliably established; and

c)     Inland PLC has guaranteed the obligations of Howarth Homes plc to Investec Bank plc in respect of cost and interest overruns in relation to the borrowings of the joint venture with Howarth for the site at Croxley Green, Hertfordshire. The potential exposure is limited to £1m.

No provisions have been made in these financial statements in respect of these contingent liabilities.

8.  PUBLICATION OF NON STATUTORY ACCOUNTS

The financial information set out in this preliminary announcement does not constitute statutory accounts as defined in section 435 of the Companies Act 2006.

The Group Income Statement, the Group Statement of Comprehensive Income, the Group Statement of Financial Position at 30 June 2011, the Group Statement of Changes in Equity and the Group Statement of Cash Flows and associated notes for the year then ended have been extracted from the Group's financial statements. Those financial statements have not yet been delivered to the Registrar, nor have the auditors reported on them.

 

END

 

 

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