Final Results

RNS Number : 7719E

Inland PLC

01 October 2008

 



For Immediate Release

1 October 2008

Inland PLC

('Inland' or the 'Company')

Preliminary results for the year ended 30 June 2008

Inland, which specialises in buying brownfield sites and enhancing their value by obtaining planning permission, today announces preliminary results for the year ended 30 June 2008.

Financial Highlights

• Turnover £11.01m (2007: £5.47m)

• Operating profit before exceptional costs £0.71m (2007: £1.36m)

• Exceptional costs £4.78m (2007: £Nil)

• Pre tax loss £4.19m (2007: Profit £1.12m)

• Cash £4.6m (2007: £42.84m)

• Stocks £47.68m (2007: £38.79m)

• Net asset value per share 32.9p (2007: 38.1p)

Operational highlights

• Portfolio of 20 development sites

• Potential for development of 1,360 plots and 253,000 sq ft of commercial space

• Secured residential and commercial letting income of £636,000 p.a 

• Examining alternative uses for development land driven by the hotel and nursing home sectors

Stephen Wicks, Chief Executive of Inland commented: 

'Over the last six months we have witnessed a rapid decline in the UK housing market with both consumer and investor confidence now very low.  

In these challenging trading conditions the demand for development land remains weak. In the long term however planning constraints and the underlying demand for new homes will ensure that when market conditions return to normal our attractive well located landbank will be a valuable commodity.

We have an excellent and capable team in place and are therefore confident of achieving good returns for our shareholders in the longer term.'

For further information please contact:

Inland Plc Stephen Wicks, Chief Executive Nishith Malde, Finance Director	Tel: [phone]
Buchanan Communications Jeremy Garcia / Mark Edwards	Tel: [phone]
KBC Peel Hunt Ltd Julian Blunt / Nicholas Marren	Tel: [phone]

  CHAIRMAN'S STATEMENT

Introduction

The results for the year ended 30 June 2008 show an operating profit on operations before exceptional costs of £0.708m (2007: £1.357m ) and a loss before tax of £4.189m (2007: profit £1.123m).

Since floating in March 2007 the Company is operating with a strong balance sheet and has now completed the purchase of 20 development sites which have the potential for 1,360 plots and 253,000 sq ft of commercial space.  During the year, we have secured planning consents on four sites for 468 residential units and 105,000 sq ft of commercial space.

Since the last annual report and accounts there has been an unprecedented fall in confidence in the housing market with house prices having declined significantly. As a result there has been a serious reduction in demand for land from both volume and other house builders.

There appears to be little prospect of any material improvement in the housing market until mortgage finance and consumer confidence returns and with financial markets being increasingly volatile and dysfunctional, any recovery may be some considerable time away.

We are therefore examining alternative uses on a number of our sites and are in discussions with a number of potential purchasers with particular interest coming from the housing associations and the hotel and nursing home sectors. 

Financial summary

Revenue for the year ended 30 June 2008 was £11.0m (2007: £5.5m).  This was principally achieved by the sale of 98 development plots across 3 sites which had been successfully taken through the planning process, together with a listed building suitable for conversion into residential units and a commercial building that was let.

Market conditions have seriously declined over the last few weeks and as a result the Board decided to carry out a further review of the carrying value of its land holding.  Whilst a number of our sites are still showing potential profitability we believe it is appropriate to write down the value of part of our portfolio by £4.783m to reflect the values at the lower of cost and net realisable value in the current market place.

The Group continued to increase its activity in the course of the year with inventories standing at £47.68m (2007: £38.79m). We had cash of £4.60m (2007: £42.84m) as at the balance sheet date and net assets were £53.32m (2007: £61.77m) being 32.9p (2007: 38.1p) per share.  Further to the announcement dated 4 August 2008 we confirm that we are in ongoing discussions with our bank to agree the level of security required to put in place a bank facility of £15m.  In the meantime, our existing overdraft facility stands at £7m secured by way of a debenture and is available until 31 July 2009.  The extension to £15m requires credit committee approval though the directors are confident based on the Group's substantial assets that this will take place once a suitable level of collateral is agreed.

The current portfolio generates residential and commercial letting income of £636,000 per annum.

Land

The Group's main focus at the moment is on securing planning consents on the existing portfolio.  The current market conditions are now presenting some potentially attractive propositions which are being examined, however due to the extremely difficult trading environment we are taking a very cautious approach.

On 4 August 2008, we announced that heads of terms had been agreed for the sale of our site at Ashford Hospital near Heathrow subject to consent being obtained for a hotel. Unfortunately the potential purchaser has now withdrawn, but we are in discussions with other potential hotel operators regarding the site.

We continue to believe that the fundamentals of our business model remain sound because of the overall constraints in the supply of development land in the United Kingdom and the underlying demand for housing.  In addition major housebuilders who are not in the land market at present and who are currently using up their existing land stocks will need to replenish their landbanks in due course.  The current downturn is also resulting in less planning applications being submitted thereby further restricting the supply of land with planning consent.

Planning constraints

Unfortunately the planning system has continued to deteriorate since we reported our interim results.

With a few exceptions, most planning departments seem to go out of their way to frustrate development opportunities and rarely encourage the initiative, enthusiasm and professionalism that Inland puts into its projects.

The difficulties that the sector continues to experience and the resulting delays caused, impairs our ability to realise attractive opportunities. This impediment is compounded when the rapid decline in the housing market has prevented a number of sales being achieved at good margins, had consents been received earlier.

We continue to take a robust and tenacious approach to the planning problems we are experiencing but the process is nevertheless time consuming and frustrating.

Investments

Howarth Homes PLC where we hold 15% of the equity and a further 20% by way of convertible loan stock is experiencing challenging conditions in line with others in the house building industry.

Howarth had taken a decision to preߛsell over £24m of their stock last year and most of those completions have now taken place.  The focus is on cash generation and sales are still being achieved albeit at reduced margins.  Howarth are currently operating on six sites totalling 51 homes.  The company has a land and development facility of £20m from Royal Bank of Scotland and are currently operating well within this.

Inland are working closely with Howarth on new initiatives where land can be sold for social housing by Inland with Howarth securing the building contract.

At 30 June 2008 the Group held a stake in M J Gleeson PLC representing 3.74% of its issued share capital with a carrying value of £3.06m. The carrying value of other listed investments amounted to £0.84m.

Outlook

Despite the current turbulent market conditions we believe that the long term fundamentals of the land market and Inland's business model remain sound.  

Terry Roydon

Chairman

  INLAND PLC

CONSOLIDATED INCOME STATEMENT

FOR THE YEAR ENDED 30 JUNE 2008

		2008 Before Exceptional Costs (Unaudited)	2008 Exceptional costs (note 1) (Unaudited)	2008 (Unaudited)	2007 (Audited)
	Note	£000	£000	£000	£000
Revenue		11,006	-	11,006	5,466
Cost of sales		(6,565)	(4,783)	(11,348)	(2,603)
Gross profit/(loss)		4,441	(4,783)	(342)	2,863
Administrative expenses		(2,208)	-	(2,208)	(1,506)
Loss on investments		(1,525)	-	(1,525)	-
Operating profit/(loss)		708	(4,783)	(4,075)	1,357
Interest expense		(103)	-	(103)	(107)
Notional interest		(1,455)	-	(1,455)	(1,265)
Interest and similar income		1,427	-	1,427	963
		577	(4,783)	(4,206)	948
Share of profit of associate		17	-	17	175
Profit/(loss) before tax		594	(4,783)	(4,189)	1,123
Income tax	2			317	(328)
Loss/(profit) for the year				(3,872)	795
Attributable to:
Equity holders of the Company				(3,872)	795
(Loss)/earnings per share for (loss)/profit attributable to the equity holders of the Company during the year
- basic	3			(2.39)p	0.98p
- diluted	3			(2.39)p	0.98p

  INLAND PLC 

CONSOLIDATED BALANCE SHEET

FOR THE YEAR ENDED 30 JUNE 2008

		2008 (Unaudited)	2007 (Audited)
	Note	£000	£000
ASSETS
Non-current assets
Investment property		8,801	-
Plant and equipment		87	65
Investments		825	815
Investment in associate		756	385
Available-for-sale financial assets	5	3,064	3,341
Deferred tax	6	6,741	393
		20,274	4,999
Current assets
Inventories		47,683	38,791
Trade and other receivables		4,752	2,674
Loan to associate		475	2,000
Listed investments held for trading (carried at fair value through profit and loss)		842	-
Cash and cash equivalents		4,600	42,838
		58,352	86,303
Total assets		78,626	91,302
EQUITY
Capital and reserves attributable to the Company's equity holders
Share capital		16,216	16,216
Share premium account		45,184	45,184
Treasury shares		(366)	-
Retained earnings		(3,317)	373
Other reserves		(4,397)	-
Total equity		53,320	61,773
LIABILITIES
Current liabilities
Trade and other payables		2,697	740
Current tax liabilities		-	454
Other financial liabilities	7	14,040	9,202
Total current liabilities		16,737	10,396
Non-current liabilities
Other financial liabilities	7	8,569	19,133
Total non-current liabilities		8,569	19,133
Total liabilities		25,306	29,529
Total equity and liabilities		78,626	91,302

  INLAND PLC 

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 30 JUNE 2008

	Share	Share	Treasury	Retained	Other
	capital	premium	shares	earnings	Reserves	Total
	£000	£000	£000	£000	£000	£000
At 30 June 2006	3,279	699	-	(466)	-	3,512
Profit attributable to shareholders	-	-	-	795	-	795
Total recognised income and expense	-	-	-	795		795
Share based compensation	-	-	-	44	-	44
Issue of equity	12,937	47,343	-	-	-	60,280
Issue expenses	-	(2,858)	-	-	-	(2,858)
At 30 June 2007	16,216	45,184	-	373	-	61,773

Fair value adjustment in respect of available for sale financial assets	-	-	-	-	(4,397)	(4,397)
Loss attributable to shareholders	-	-	-	(3,872)	-	(3,872)
Total recognised income and expense	-	-	-	(3,872)	(4,397)	(8,269)
Share based payment	-	-	-	182	-	182
Purchase of own shares	-	-	(366)	-	-	(366)
At 30 June 2008	16,216	45,184	(366)	(3,317)	(4,397)	53,320

  INLAND PLC 

CONSOLIDATED CASH FLOW STATEMENT

FOR THE YEAR ENDED 30 JUNE 2008

	Note	2008 (Unaudited)	2007 (Audited)
		£000	£000
Cash flows from operating activities
(Loss)/profit for the period before tax		(4,189)	1,123
Adjustments for:
- depreciation		25	16
- share based compensation		182	44
- fair value adjustment for listed investments		1,863	-
- profit on disposal of listed investments		(338)	-
- interest expense		1,558	1,372
- interest and similar income		(1,427)	(963)
- Share of profit of associate		(17)	(175)
- Tax paid		(454)	-
Changes in working capital (excluding the effects of acquisition):
- increase in inventories		(8,892)	(39,064)
- increase in trade and other receivables		(202)	(4,212)
- increase in trade and other payables		(5,807)	29,522
Net cash outflow from operating activities		(17,698)	(12,337)
Cash flow from investing activities
Interest received		1,115	946
Dividends received		302	11
Purchases of property, plant and equipment		(133)	(45)
Equity investment in associate		(359)	-
Purchase of listed investments		(15,396)	(3,342)
Purchase of own shares		(366)	-
Sale of listed investments		8,859	-
Acquisition of subsidiary, net of cash acquired	4	(11,267)	-
Net cash used in investing activities		(17,245)	(2,430)
Cash flow from financing activities
Interest paid		(91)	(107)
New bank loans raised		-	1,175
Bank loans repaid		(3,204)	(1,700)
Issue of shares		-	57,422
Net cash from financing activities		(3,295)	56,790
Net increase in cash and cash equivalents		(38,238)	42,023
Cash and cash equivalents at beginning of period		42,838	815
Cash and cash equivalents at the end of the period		4,600	42,838

  INLAND PLC 

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2008

The financial information set out in this preliminary announcement does not constitute statutory accounts as defined in section 240 of the Companies Act 1985.

The summarised balance sheet at 30 June 2008 and the summarised profit and loss account, summarised cash flow statement 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.

1.   EXCEPTIONAL COSTS

The Group conducted a review of the net realisable value of its land bank in view of the deterioration in the UK housing market. Where the estimated future net realisable value of the site is less than its carrying value within the balance sheet, the Group has impaired the land value. This has resulted in an impairment of £4.783m. The key judgement in estimating the net realisable value is the evaluation of the expected selling prices of residential units and the cost of construction.

2.   INCOME TAX 

	Year ended 30 June 2008 (Unaudited)	Year ended 30 June 2007 (Audited)
	£000	£000
Corporation tax charge	5	(507)
Adjustments in respect of prior year	(206)	-
Deferred tax credit	(571)	179
Deferred tax asset written off after initial recognition in respect of Poole Investments PLC	400	-
Change in tax rate	55	-
	(317)	(328)

3. EARNINGS PER SHARE

Basic and diluted

Basic and diluted (loss)/earnings per share is calculated by dividing the profit attributable to equity holders of the Company by the weighted average number of ordinary shares in issue during the year.

	Year ended 30 June 2008 (Unaudited)	Year ended 30 June 2007 (Audited)
(Loss)/profit attributable to equity holders of the Company (£'000)	(3,872)	795
Weighted average number of ordinary shares in issue ('000)	162,150	80,944
Dilutive effect of options treated as exercisable at the year end ('000)	-	(96)
	162,150	80,848
Basic (loss)/earnings per share in pence	(2.39)p	0.98p
Diluted (loss)/earnings per share in pence	(2.39)p	0.98p

4. ACQUISITION OF SUBSIDIARY

During the year, the Group acquired the share capital of Poole Investments PLC.
							£000
Purchase consideration:
- Shares purchased							11,097
- direct costs relating to the acquisition							239
							11,336
The assets and liabilities arising from the acquisition are as follows:
					Acquiree's		Provisional
					book value		fair value
					£000		£000
Investment property					6,524		8,718
Debtors					144		144
Cash and cash equivalents					18		18
Creditors & other payables					(572)		(572)
Loans					(3,205)		(3,205)
					2,909		5,103
Deferred tax (tax losses in subsidiary)					-		6,233
Net identifiable assets acquired					2,909		11,336
							£000
Outflow of cash to acquire business, net of cash acquired:
Cash consideration							11,336
Cash paid in previous period							(51)
							11,285
Cash and cash equivalents in subsidiary acquired							(18)
Cash outflow on acquisition							11,267

The acquisition of Poole Investments PLC is not an acquisition in terms of a business combination as defined by IFRS 3 but was accounted for as a purchase of assets. Poole Investments PLC was accounted for by allocating the cost of the company between the individual identifiable assets and liabilities in the company based on their relative fair values at the acquisition date. The fair value of the consideration was allocated to the assets (property and tax losses ) in the appropriate category. The property met the requirements of an investment property and was accounted for in accordance with IAS 40 - Investment Property.

5. AVAILABLE-FOR-SALE FINANCIAL ASSETS

		£'000
At 1 July 2007		3,341
Transferred to investment in Group undertakings		(51)
Additions		4,171
Provision		(4,397)
		3,064

All the listed investments have been issued by publicly traded companies in the Euro zone. Fair values for these securities have been determined by reference to their quoted mid prices at the balance sheet date.

6. DEFERRED TAX

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

	£000
At 1 July 2007	393
Acquisition of Poole Investments PLC	6,232
Income statement credit	116
At 30 June 2008	6,741

The movement in deferred tax assets is as follows:

	Accelerated tax
	depreciation £000	Losses £000	Other £000	Total £000
At 1 July 2007	-	-	393	393
Acquisition of Poole Investments PLC	-	6,232	-	6,,232
Deferred tax asset written off after initial recognition in respect of Poole Investments PLC	-	(400)	-	(400)
Change in tax rate	-	(4)	(51)	(55)
Credited to income statement	(3)	108	466	571
At 30 June 2008	(3)	5,936	808	6,741

The deferred tax asset is recoverable as follows:

	2008 (Unaudited) £000	2007 (Audited) £000
Deferred tax asset to be recovered after 12 months	6,741	393
	6,741	393

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 income tax assets of £2,527,000 that can be carried forward against future taxable income.

7. OTHER FINANCIAL LIABILITIES

	2008 (Unaudited) £000	2007 (Audited) £000
Deferred purchase consideration on inventories falling due within one year	14,040	9,202

Deferred purchase consideration on inventories falling due
between one and two years	4,179	10,661
between two and three years	4,390	4,370
between three and four years	-	4,102
	8,569	19,133

The Group seeks to manage financial risk by ensuring sufficient liquidity is available to meet foreseeable needs. Flexibility is achieved by bank loans and overdraft facilities.

A first charge on property included within inventories has been granted to some of the vendors.

 

END

 

 

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