This last financial year was an exceptional period that demonstrated the full capabilities of the business to deliver planning approvals on a considerable number of sites and across a wide range of diverse projects."
Stephen Wicks, Chief Executive
Planning status of plots in land bank
To be progressed
Planning applications submitted
Land bank status
Our Group strategy continues to be focused on the following four strategic goals:
- Increasing the size of our strategic land bank, including brownfield sites where residential development is expected; the tactical acquisition of sites which unlock future potential; and locations which will become key housebuilding terrain in the future.
- Adding value to our land bank by navigating what are often complex sites through the planning system, requiring a unique skillset, and selling them to other developers, realising attractive short-term margins and generating cash to fund our operations.
- Maximising the value from our land bank through housing development and direct sales, as well as providing housebuilding services to other landowners.
- Ensuring a strong and flexible balance sheet by maintaining borrowings at a manageable level through a focus on cash management and with a maturity profile appropriate to our potential future cash flows.
With these in mind, it gives me great pleasure to report on another set of robust results for Inland Homes, demonstrating strong profitability during the year ended 30 June 2017 and a further improvement in both stated and EPRA net asset value at the year end.
Results and operations
Profit before tax and before revaluation of investment properties has increased by 15.3% to £18.1 million (2016 restated*: £15.7 million) with the majority of realisations taking place in the second half of the financial year, as expected and previously guided. Including revaluation of investment properties, profit before tax was £19.6 million (2016 restated*: £33.7 million) reflecting the majority of the valuation uplift having taken place in the previous year on the portfolio of existing residential properties at our site in Wilton Park, Beaconsfield. The EPRA net asset value at 30 June 2017 was £194.4 million (2016 restated*: £186.3 million) and this translated to 96.22p per share (2016 restated*: 92.34p).
We operate at the more affordable point in the market, where homes are typically priced between £200,000 to £450,000 and the average selling price of our homes during the financial year was £306,000 (2016: £337,000). Our forward sales at 30 June 2017 stood at £19.9 million and currently stand at £33.0 million. In addition, we have three major construction contracts amounting to £41.5 million on our Partnership Housing activity, comprising permissioned land that has been sold to Housing Associations with Inland Homes subsequently securing construction contracts to build the planned residential units. The Group intends to increase this activity and expects this to be a growing revenue stream in the future.
The current annualised rental income from our commercial and residential investment activities, as we continually seek to maximise the potential of our assets, amounts to £2.6 million (2016: £2.6 million) and we will selectively sell some of these assets in order to reduce our net gearing.
Our development sites are principally around the M25 and M11 corridor, as well as on the South Coast around Poole in Dorset and Southampton in Hampshire. We believe these areas of the market, both in terms of pricing and location, will continue to remain relatively stable over the medium term, largely underpinned by the structural imbalance in the housing market which is continuing to witness excess demand over supply.
* Further information can be found in note 29 to the accounts
The Group's land bank currently stands at 6,936 plots (2016: 6,681 plots) with 30.8% (2016: 17.4%) of the portfolio having planning permission or a resolution to grant planning consent. During the year ended 30 June 2017 new planning approvals and resolutions to grant planning approval had been received for 1,856 residential units. The current status of the land portfolio is as follows:
|Plots without planning consent||Plots with planning consent or resolution to grant planning consent||Total plots|
|Owned under construction||–||294||294|
|Owned or contracted||493||1,700||2,193|
|Managed or held within joint ventures under construction||–||43||43|
|Managed or held within joint ventures||1,266||100||1,366|
|Joint ventures terms agreed||570||–||570|
|Strategic land terms agreed||2,270||–||2,270|
This last financial year was an exceptional period that demonstrated the full capabilities of the business to deliver planning approvals on a considerable number of sites and across a wide range of diverse projects types with varying levels of complexity associated with them. To achieve this, Inland Homes has drawn on its extensive experience within the senior management team to manage the challenges of site delivery, to meet programme timetables and enable approvals that the Group can either take forward as future constructions sites, or as land available for sale.
The Group operates across a diverse land portfolio from town centre developments to major regeneration projects as well as some redevelopment of land located in the greenbelt. This requires land and planning teams with a unique skillset and expertise that sets us apart from our peers. Set out below some are of the projects that we have been working on during the last year.
Regeneration and Greenbelt / Greenfield Developments
Wilton Park, Beaconsfield
An outline planning application for up to 350 homes as well as commercial and community development on this major developed site in the greenbelt was submitted in September 2017. The design proposals have taken longer to come to fruition than originally anticipated as we needed to ensure that the scheme met the requirements of this premium location as well as those expected by the Local Authority. We are already generating an annual rental stream of £1.0 million from 86 existing residential properties on this site valued at £46.9 million and which are included in the accompanying financial statements under investment properties. In addition, the site generates approximately £0.5 million per annum from letting other space for storage and film production. We expect this 100 acre site to generate a gross development value of approximately £350 million.
Wilton Park also sits within the proposed East of Beaconsfield Strategic Land release as proposed by South Bucks District Council and the current application ensures that it can accommodate further development on the site.
Cheshunt Lakeside, Cheshunt
This is currently Inland Homes' largest regeneration project comprising an emerging masterplan for a new mixed use Urban Village of up to 2,000 new homes on 30 acres of land of which 18 acres are either owned or controlled by our joint venture company. The site sits immediately adjacent to Cheshunt Station (27 minutes to London Liverpool Street) and the proposed new Crossrail 2 route. The setting is regarded by Broxbourne Borough Council as a key delivery location for much needed new homes and employment space in the Borough. Over the last year our land and planning team have assisted the Local Authority in increasing the development allocation from 1,000 residential units to approximately 2,000 units across the wider masterplan. The Group has a 50% interest in this development site and a planning application is expected to be submitted in December 2017, once we have successfully incorporated the requirements of key stakeholders and have a masterplan that can support the Borough through their Local Plan process. The resultant masterplan will include new community facilities, a new two form entry primary school and employment space comprising uses such as offices, healthcare, business, leisure, restaurant and retail.
Chapel Riverside, Southampton
This regeneration site was secured by way of a Development Agreement with Southampton City Council whereby Inland Homes has obtained outline planning approval for 457 apartments plus 64,000 sq ft of commercial space with a detailed approval for the first phase of 72 units, which is now under construction. The gross development value of this site is expected to be in excess of £120 million and we anticipate the project will take approximately seven years to complete.
Abbey Wharf, Alperton, London
A resolution to grant planning consent was received for a first phase of 135 apartments in what is a new London Housing Zone. This site will kick start the regeneration and deliver some of the key requirements of the Housing Zone masterplan. The site was sold by the Group during the financial year generating a profit of £6.0 million. The Group has also secured a £29.5 million construction contract and construction is expected to commence in December 2017.
Aston Clinton Road, Aylesbury
Significant technical and planning challenges, including noise, transport and drainage, had to be overcome by the Inland Homes team in order to secure planning consent for 400 homes and 105,000 sq ft of commercial space on this site, which was owned by our joint venture company with Europa Capital. The joint venture company was sold in June 2017 resulting in a gain for the Group of £7.0 million.
Town Centre Developments
Sherbourne Wharf, Birmingham
Located 500 metres from Brindleyplace in Birmingham, this well-located City Centre site has received planning approval for the first two phases, which will deliver a total of 167 canalside apartments. We submitted a planning application for the third and final phase of 87 apartments in September 2017. This is a dense urban site which provides an exciting opportunity to create a new vibrant waterfront destination that links in with the Canal and Rivers Trust plans for the area. It has an expected gross development value of £50 million.
Beaumont Works, St Albans
When Inland Homes acquired this Grade II Listed Building it was severely run down and in need of refurbishment. Sensitive negotiations with conservation officers enabled a bespoke design to be incorporated alongside a new contemporary residential building with a total of 58 residential units. The site was sold with planning consent in June 2017 for £7.5 million and a profit of £1.8 million.
Randalls Department Store, Uxbridge
The Group's expertise in the development of brownfield urban sites was put to the test on this former Grade II Listed Department store, a local landmark, which became the centrepiece of a new mixed use restaurant and residential proposal. Detailed negotiations with Historic England ensured that the final designs allowed for a practical design that retained the key aspects of the department store. Integration of affordable housing, technical aspects of structure and highways, plus the extra complication of the retention and conversion of the former fire station added to the complexities. Planning permission for 58 apartments and 8,000 sq ft of commercial space was received with some accolade from the local Council. The Group expects the gross development value to be approximately £25 million and plans to sell the site in the current financial year.
Lily's Walk, High Wycombe
Inland Homes secured planning permission for 239 new private tenure apartments and 15,800 sq ft of commercial space on this site in the heart of High Wycombe. As a former gas works with a significant sloping terrain, the site presented a range of challenges to be overcome. An integral part of this site is the delivery of a major piece of public infrastructure known as the Town Centre Relief Road that forms part of the new road system in the town. The Group will shortly commence construction of this development having purchased the site post year end from its joint venture with CPC Group Limited. The gross development value of the site is approximately £75 million and contracts have already been exchanged with end purchasers of apartments for £5.5 million.
Wessex Hotel, Bournemouth
This planning approval has been one of the hardest negotiated schemes the Group has procured. The location is on one of the major routes into Bournemouth and forms a key gateway within the West Cliff conservation Area. The scheme replaces an existing 100 bed, run down hotel, with a new 100 bed hotel, basement parking plus two apartment buildings totaling 88 private apartments.
Following the strategic decision to bring the majority of our housebuilding activity in-house, the past year has also focused on investing in the expansion of our construction team. This process has resulted in recruitment at both head office and site level and, as expected, this investment has brought about a planned increase in overheads, with staff numbers having increased from 39 on 1 July 2016 to 74 at the year end. This facet of the business will deliver improved processes and structures that will accommodate an expansion in our production. Moreover, by managing this construction activity ourselves, we can deliver cost savings over the long term and enable greater control and certainty over the delivery and timing of projects.
We currently have 427 units under construction (including 43 included within a joint venture) across 12 sites of which 316 units (74%) are being delivered in-house. In order to control our working capital requirements, our policy has always been to forward sell our homes. This has been further bolstered by engaging in land disposals to potential landlords with forward funded construction contracts which will have a positive and growing impact on revenue, profits and net borrowings.
We are continuing to see strong demand for sites within our land portfolio especially from Housing Associations who have been tasked by the government to increase the number of homes within their portfolios. The Group's strategy is to use more of its land bank for its own housebuilding activities and procure planning permissions in order to deliver sites that could be either sold outright or with the benefit of a construction contract, or be developed to extract the development contribution.
We believe that this provides Inland Homes with significant flexibility and balance to the business through diversified revenue streams and therefore, against the current market backdrop, feel very positive about our ability to create and crystallise further value for our shareholders.
Chief Executive Officer
27 September 2017