Chief Executive's Review

Stephen Wicks
Chief Executive Officer

Land bank status

  • Without planning
  • With planning
  • Without planning
  • With planning

Planning status of plots in land bank

  • Strategic
  • To be progressed
  • Pre-application discussions
  • Planning applications submitted
The ongoing strategy and underlying trend is to increase annually towards our interim target of 500 home completions per annum.

I am pleased to report on a year of considerable progress for Inland with the business achieving 31% growth in net assets per share to 57.50p (2015: 43.92p) and a profit before tax of £32.9 million (2015: £34.0 million). The underlying value of our inventories is significantly higher than the book values and this is demonstrated by the EPRA net asset value per share of 86.63p per share and the adjusted net asset value per share of 91.54p at 30 June 2016, further details of which can be found in the Chairman's Statement.

As reported in the Chairman's statement, the Group sold 425 building plots to other housebuilders and completed the sale of 147 (2015: 248) private homes in the year at an average price of £337,000 compared with £264,000 last year. In addition, the Group sold 21 equivalent affordable housing units (2015: 39).

Although the unit completions were lower than last year, due largely to the contractor issues outlined by our Chairman, the ongoing strategy and underlying trend is to increase annually towards our interim target of 500 home completions per annum. We currently have 321 homes under construction with a significant number being "self-delivered" by our in-house team. This part of the business was bolstered during the year with the appointment of Gary Skinner as Managing Director of Inland Limited, with specific responsibility to substantially increase our housebuilding activities.

The core value enhancing skill at Inland is in its land acquisition and planning strategy, supported by a team of people that has worked together for many years and which has a long track record of success in securing planning consents. The land team is led by Paul Brett, the Group Land Director, with whom I have worked for over 20 years, who is ably supported by Des Wicks, our Senior Land Manager, Mark Gilpin, our Planning Director, and a small group of support staff within the team. As a land man by background, I am also involved with a number of key transactions. This part of the business has successfully procured planning consents for 544 plots since the publication of our previous year's results and puts us in a strong position to achieve our future house building target.

The land bank currently stands at a record 6,681 plots (2015: 5,176), demonstrating the momentum behind this part of the business following substantial plot and house sales. The 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 construction321321
Owned or contracted1,1247271,851
Managed or held within joint ventures2,389262,415
Joint ventures terms agreed20040240
Plots controlled or terms agreed20049249
Strategic land controlled1,5631,563
Strategic land terms agreed4242
TOTAL PLOTS5,5181,1636,681

We are seeing increasing interest in our land bank from Registered Providers ("RPs") of affordable housing who are considerably increasing their production of homes, in light of the growing realisation that the private sector is unable to deliver the volume of new affordable homes required in the UK. We are also observing a high level of enquiries for land from Private Rented Sector Funds, another growth area that we hope to benefit from.

Operations – key projects

Wilton park, Beaconsfield, Buckinghamshire

I described this site last year as our "jewel in the crown" and this continues to be the case. The site sits in a parkland setting of over 100 acres close to Beaconsfield Old Town. Currently the site is allocated for 350 homes together with commercial space.

The first section of the access road from the Pyebush roundabout is nearly complete. Landscaping with mature tree planting is ongoing to create the gateway to this magnificent development opportunity.

We expect to make a formal planning application in this calendar year, with a view to starting work in mid-2017.

Carter's Quay, Poole, Dorset

Meridian Waterside, Southampton

This scheme is the regeneration of the former ITV Meridian Studios, a complex brownfield site in a rundown part of Southampton.

We have recently launched the sale of the first phase of 54 homes and a 4,250 sq ft retail unit and achieved 7 reservations over the opening weekend. The completed development will comprise over 350 homes. This is the first project we are self-delivering without using a main contractor.

The construction is on programme and within budget and we are expecting to commence the build out of Phase 2 for 42 units in November 2016. There is a very strong initial interest from potential buyers with prices starting from £140,000.

Brooklands College, Ashford, Middlesex

This is a 10 acre site in the centre of town where we expect to receive a resolution to grant planning permission for 366 units plus commercial space in the near future. The land is held in our joint venture with CPC Group Limited.

Lily's Walk, High Wycombe, Buckinghamshire

This former gas holder site is in the town centre and where a planning permission for 239 units and 16,000 sq ft of commercial space is expected imminently. This site is also held in our joint venture with CPC Group Limited, which has now also purchased the adjoining land which provides the scope for a further 85 residential units.

Lily's Walk, High Wycombe, Buckinghamshire

Chapel Riverside, Southampton

This project is our first major joint venture with a Local Authority (Southampton City Council).

In what is a challenging waterside brownfield regeneration, our planning team has come up with a creative approach that aims to secure consent for over 450 homes in addition to 59,000 sq ft of commercial space. We expect a gross development value of over £100 million from this project.

We hope this partnership will be the first of many with Local Authorities, many of whom do not have the expertise that we can offer, and we are directing our management team to make this an area of focus.

Strategic land portfolio

About 18 months ago, reflecting the intense pressure that Local Authorities are under to allocate more land for development, we made a decision to supplement our brownfield land portfolio with a number of strategic options over greenfield land that adjoins existing built up areas where there are distinct possibilities of that land being released in the future for housing.

This strategic decision has proved to be exceptionally successful with 17 option agreements now in place. These options give Inland the right to acquire the site at a discount to market value (typically 20%) once the site achieves planning permission. Most of the options run for at least 10 years and provide control over 330 acres of land (mainly in Buckinghamshire) with the scope for the delivery of circa 1,600 homes.

A number of these sites have already been identified for potential housing in Local Authority Plans.

Investment income

As part of our brownfield land and property acquisitions, we often "inherit" existing tenants and have the scope to generate short term rental income through lettings to operators for things such as short term car parking income, film production and storage. We have also retained 86 existing houses at our Wilton Park development, the bulk of which are let on assured shorthold tenancies.

Recently opened Co-op neighbourhood supermarket at former RAF Stanbridge in Leighton Buzzard. Built and retained as an investment property by Inland Homes.

The Group is also seeking new development opportunities within the mixed use schemes. We have two neighbourhood supermarkets which we have retained and are let to Sainsbury's and the Co-Op, with another under construction at our Meridian site in Southampton.

The intensification of our commercial rental activities has resulted in current rental income of over £2.6 million per annum. We expect this rental income to continue to rise and provide a good contribution to overheads and funding costs.

Brexit

Despite the hysteria leading up to the referendum, the housing market has emerged relatively unscathed from the turmoil that surrounded the UK's decision to leave the EU, although it is still early days.

However, the fact remains that there is a long term underlying demand for new homes particularly at the fairly low average price point that Inland operates at and on sites which are well located in Southern England.

Summary & outlook

Demand for residential land in our well located portfolio from third party housebuilders is steady, with a number of new land sales agreed post year end.

Inland Homes is continuing to extract maximum short term value from its land bank via income producing opportunities as well as the development of new commercial opportunities by virtue of its mixed use developments.

Focused investment is being made in new personnel so that the Group is well resourced to deliver on its growth plans. Our staff headcount is now 53 compared with 31 at the date of signing the last Annual Report.

We have a medium term target of achieving 500 home completions per annum and having repositioned the business to have less reliance on main contractors, are confident this will be achieved.

The underlying net asset value of the Group has increased substantially year on year. Our small skilled team of professionals are focused on creating maximum value from our excellent and well located portfolio.

Inland is on track to deliver further considerable growth for its shareholders. The fundamentals of the housing market particularly at our low cost end of the sector remain strong and are well supported by Government initiatives. We are very positive about our business model going forward.

Stephen Wicks
Chief Executive Officer
13 October 2016

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