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: 01923 713 600


Buchanan Communications

Jeremy Garcia / Mark Edwards


Tel: 020 7466 5000

KBC Peel Hunt Ltd

Julian Blunt / Nicholas Marren

Tel: 020 7418 8900

  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 1,36plots 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 £53.32(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.


Wcontinue 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 experiencand 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.



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