Half-year Report

28 March 2017

Inland Homes Plc

(the 'Company' or the 'Group')

Interim results for the six months ended 31 December 2016

Positive momentum and strategic repositioning ahead of key completions in second half

Inland Homes Plc (AIM: INL), the leading brownfield regeneration specialist and housebuilder with a focus on the South and South East of England, today announces its results for the six months to 31 December 2016.

Highlights

Delivery of NAV growth and dividend rise reflecting confidence

· 10.3% increase in net asset value to £118 million (2015: £107 million)

· Group revenue for the period of £32.6 million (2015: £55.1 million) and PBT £4.4 million (2015: £21.4 million), with the majority of profits due to be realised in the second half of the financial year due to the timing of the construction of Inland's sites and of planned land sales

· Annualised rental income of £2.3 million

· Transformed net current asset position with 98% (2015: 20%) of debt falling due after more than one year and at substantially lower rates of interest

· 25% rise in interim dividend to 0.5 pence (2015: 0.4 pence) per share, reflecting the Board's confidence in the expected performance in the second half of the current financial year

Operational and strategic momentum positioning the business for future growth

· Expansion of land bank to a record 7,151 plots (2015: 5,672), including 2,440 plots with planning consent (2015: 1,146)

· Development milestones achieved across multiple schemes, setting clear path for the future profit generation:

o Phase one of Meridian Waterside, Southampton, 32 of 54 homes exchanged or reserved, reflecting sales rate of 1.4 units per week at values ahead of budget

o Full planning permission received for 239 homes at Lily's Walk, the major regeneration scheme in High Wycombe town centre with a GDV of £75 million

o Resolution to grant consent on 457 residential units and 64,000 sq ft of commercial space at Chapel Riverside in a joint venture with Southampton City Council

· Sales of homes steady at 101 homes (2015: 105) with forward sales remaining robust with a current forward order book of £31.8 million (2015: £20.9 million)

· Sale of 177 residential plots generating a profit of £6.3 million (including £6.0 million disclosed as a gain on the sale of a subsidiary company in the Group Income Statement) (2015: £6.3 million)

· Gross margin from the sale of private homes at 20.0% (2015: 24.1%), with the previously reported contractor failure and the resulting final cost of homes accounting for the reduction from the same period last year

· Investment in Group's in-house building operations responsible for delivery of 226 units of the 389 units currently under construction

Housing market remains strong in the areas that the Company operates

· Demand remains strong from buyers for our homes in South and South East England with sales rates being sustained at good levels

· Appetite for land with planning consent remains buoyant

· Government initiatives, including the recent Housing White Paper, are contributing to strengthening confidence among funders and housebuilders to take on higher density projects, and demonstrate the ongoing relevance of Inland's expertise at navigating challenging plots of land through the planning system

Stephen Wicks, Chief Executive at Inland Homes commented:

"These results reflect another period of strategic growth for the business which has seen us meet a number of important operational and development milestones. Our business is in robust shape with demand remaining high for our homes, with forward sales growing substantially on a like for like basis, and for the expertise that the Company offers to joint venture parties, as proven by the recently received resolution to grant planning permission for 457 units at Chapel Riverside in Southampton, our first jv with a local authority. The investment in our in-house building operations is starting to show good results and will ensure certainty of delivery as well improved margins on home sales. This repositioning, combined with key completions due in the second half of the financial year means that we remain positive on the outcome for the full year."

Enquiries:

Notes to Editors:

Incorporated in the UK in 2005, Inland Homes plc is an AIM listed specialist housebuilder and brownfield developer, dedicated to achieving excellence in sustainability and design.

Inland Homes acquires brownfield land in the South and South-East of England principally for residentially led development schemes. The business then enhances the land value by obtaining planning permission, before building open market and affordable homes or selling surplus consented land to other developers to generate cash.

The Company is committed to extensive public and community consultation in order to ensure that, where possible, local community needs and objectives are met.

Inland's aim is to create sustainable communities and homes which set a benchmark for all future developments in the South of England. The Company is always looking for brownfield sites without planning permission for future development.

For further information, please visit the Inland Homes website at www.inlandhomes.co.uk.

Chairman's statement

I am pleased to provide an overview of the results for the half year ended 31 December 2016 and also to outline how we are well-positioned to continue delivering value for our shareholders.

The residential property market during the second half of 2016 and the start of 2017 has remained buoyant in the lower cost but good quality end of the sector where we have positioned ourselves. The focus for Inland Homes during the half year has been:

· To grow our in-house construction capabilities as our ambition to increase our housebuilding output continues to take shape

· To increase the size of our land bank

· To increase the proportion of consented plots within our land bank.

As stated at the time of the full year results, we expect to realise the majority of our profits and revenue in the second half of the year, due to the timing on a number of our construction sites coupled with the completion of planned land sales. Demand for both completed units and consented land has remained robust throughout the period and into the start of 2017 and this, coupled with a strengthened balance sheet, means we remain positive on the outcome for the full year.

The Group's balance sheet has also been strengthened with net current assets having increased substantially due to the majority of our borrowings now falling due after more than one year.

OPERATIONAL HIGHLIGHTS

During the period, sales of new homes remained strong. The Group sold 101 homes (2015: 105) (including 14 for Housing Association equivalent units (2015: 12)) at an average sales price of £319,000 per private unit (2015: £325,000). Forward sales remain robust, with a current forward order book of £31.8 million (2015: £20.9 million). The Group also sold 177 residential plots generating a profit of £6.3 million (including £6.0 million disclosed as a gain on the sale of a subsidiary company in the Group Income Statement) (2015: £6.3 million).

A key highlight was the launch of the first phase of Meridian Waterside, one of our major regeneration schemes in Southampton which will deliver a total of 351 homes over the next few years. To date, we have either exchanged or reserved 32 of the 54 units in the first phase, reflecting a healthy sales rate of 1.4 units per week and at values ahead of budget.

As previously announced, Lily's Walk, the major regeneration scheme in High Wycombe town centre with a gross development value of approximately £75 million, now has full planning consent for the construction of 239 homes. I am pleased to report that we have reached terms with our partners to enable us to commence the development of this site as part of our housebuilding programme. Construction will commence shortly, with an "off plan" sales launch for the first phase anticipated in July 2017.

A resolution to grant planning consent has also been received for 457 homes together with 64,000 sq ft of commercial space at Chapel Riverside, Southampton, in our joint venture with Southampton City Council.

At Wilton Park, our flagship development of over 100 acres in Beaconsfield, Buckinghamshire, we have completed the first section of the new estate road. Negotiations continue with the local authority on the final details of our planning application, which we expect to submit shortly, for the development of more than 300 homes.

In order to further increase levels of certainty on delivery, whilst simultaneously reducing construction costs, we have invested heavily in our in-house building operations and, of the 389 units across nine sites that the Group currently has under construction, 226 will be delivered by our in-house construction team rather than by using main contractors.

FINANCIAL HIGHLIGHTS

Revenue for the Group was £32.6 million (2015: £55.1 million) including £27.5 million (2015: £30.3 million) from the sale of 87 residential units (2015: 93).

The gross margin from the sale of residential units reduced to 20.0% (2015: 24.1%), reflecting the final cost of homes that had to be completed after a contractor failure. Going forward, the Board is confident that improved margins will be achieved as our in-house building operations continue to gather momentum and produce tangible results.

The EPRA net asset value and the adjusted EPRA net asset value of the Group at 31 December 2016 were 87.05p (2015: 80.64p) and 92.03p (2015: 84.38p) per ordinary share respectively and have been determined as follows:

*EPRA NAV adjusted to exclude the dilutive effect of the options, deferred bonus shares and Growth Shares.

Reflecting our confidence in the performance expected in the second half of the current financial year, the Board has increased the interim dividend by 25% to 0.5p (2015: 0.4p) per share. The dividend will be paid on 23 June 2017 to shareholders on the register at the close of business on 2 June 2017. The ex-dividend date is 1 June 2017.

Our investment in skilled and experienced staff continues to grow and remains a priority as we further invest in the Group's housebuilding activities. This has resulted in an increase in overheads to £4 million for the six months ended 31 December 2016 (2015: £3.6 million). As noted above, we expect that this will enable us to benefit from a higher margin on our housebuilding activities going forward.

The gross rental income from commercial and residential assets increased to £1.2 million (2015: £0.9 million), of which £509,000 was derived from the existing residential portfolio at Wilton Park in Beaconsfield. The Group's rental income is anticipated to increase further, with annualised income currently running at the rate of £2.3 million.

The Group's net current assets have been significantly improved with 98% (2015: 20%) of our debt falling due after more than one year. In achieving this transformation, the Group has managed to secure debt at substantially lower rates of interest than previously. During the period we refinanced the Wilton Park site with a five year facility at a significantly lower interest rate.

LAND AND PLANNING

There has been a strong focus on securing further strategic land options during the period. A considerable amount of success has been achieved in this area with a total of 19 sites under option where the potential exists for approximately 2,100 plots. The current land bank remains at an all-time high and is set out below:

We currently have planning applications submitted for 866 plots across eight sites, with positive decisions expected on 411 of those by the end of June 2017. We are in pre-application discussions with planning authorities on a further 1,344 plots across five sites where applications for 424 plots will be submitted shortly.

JOINT VENTURES

During the period we entered into a 50/50 joint venture with The Anderson Group to develop 43 homes at Gardiners Park, Basildon, Essex. This is the first phase of potentially a much larger project where Inland already has some freehold and leasehold interests.

On 23 March 2017, the joint venture with land owners on our Garston, Hertfordshire project gained a resolution to grant consent for 100 homes and construction is expected to commence in the new financial year.

As recently announced, a resolution to grant consent has also been achieved for 457 homes together with 64,000 sq ft of commercial space at Chapel Riverside, Southampton, in our joint venture with Southampton City Council, with pre-construction archaeological works already underway. Collaborating with local authorities is a strategic priority for us, enabling the regeneration of brownfield land owned by local authorities to meet the shortage in housing needs.

A masterplan is being prepared for approximately 1,900 homes on 25 acres of which we own 13 acres in our major joint venture with a financial partner on the former Tesco headquarters at Cheshunt, Hertfordshire. Further land is being assembled at this location and our masterplan is being prepared in collaboration with the local authority.

INVESTMENT IN TROY HOMES

At 31 December 2016, our investment in and loans to our associate company, Troy Homes Limited (Troy), amounted to £2.0 million (2015: £0.8 million) after deducting the Group's share of losses. The Group increased its commitment to invest in the share capital of Troy to £1.5 million, of which £250,000 has been called up. The Group has also increased its commitment to provide loan notes to £3.0 million of which £2.0 million was drawn down at 31 December 2016. There was a debtor of £2.6 million (2015: £nil) outstanding at 31 December 2016 in relation to two sites which were sold to Troy during the year ended 30 June 2016. Troy currently has 28 units under construction across three sites and a further 82 plots across seven sites in its land bank.

OUTLOOK

Against a backdrop of a slowing prime residential market in London, demand remains strong for our lower cost homes in outer London and Home Counties locations, with sales rates being sustained at good levels. The recent housing White Paper demonstrated the Government's commitment to meeting the demand for new homes and Inland is well positioned to be a beneficiary of the proposed new measures, from expedited planning consents through to the commitment for more building on brownfield land and the boost from modular construction.

Furthermore, the difficulty of getting onto the housing ladder remains acute and with around 45% of our private sales during the period utilising the "Help to Buy" scheme, we continue to benefit from the market for homes in our price point.

The demand for land with planning consent in our areas of operation continues to be strong, with an increasing level of activity being seen from Housing Associations in particular.

Our record land bank at the period end of 7,151 plots is a healthy combination of owned and joint ventured consented and unconsented land and we are confident that our specialist and proven planning capabilities will deliver a record number of consented plots during 2017.

The business has both a strong pipeline of land and a growing development programme, which will only accelerate as our in-house capabilities mature and, as such, we believe we are well placed to deliver shareholder value.

Terry Roydon

Chairman

Group income statement

for the six months ended 31 December 2016

Group statement of financial position

at 31 December 2016

Group statement of changes in equity

for the six months ended 31 December 2016

Group statement of cash flows 

for the six months ended 31 December 2016

Notes to the half-yearly financial report

for the six months ended 31 December 2016

1. Nature of operations and general information

The principal activity of the Company and its subsidiaries (together called the Group) is to acquire residential and mixed use sites and seek planning consent for development. The Group also develops a number of plots for private sale.

Inland Homes plc is the Group's ultimate parent company. It is incorporated and domiciled in Great Britain. The address of Inland Homes plc's registered office, which is also its principal place of business, is Decimal Place, Chiltern Avenue, Amersham, Buckinghamshire HP6 5FG.

Inland Homes plc's shares are quoted on AIM, a market operated by the London Stock Exchange. This consolidated half-yearly financial report has been approved for issue by the Board of Directors on 27 March 2017.

The financial information set out in this half-yearly financial report does not constitute statutory accounts as defined in Sections 434(3) and 435(3) of the Companies Act 2006. The Group's statutory financial statements for the year ended 30 June 2016 have been filed with the Registrar of Companies and are available at www.inlandhomes.co.uk. The auditor's report on those financial statements was unqualified and did not contain any statement under Section 498(2) or Section 498(3) of the Companies Act 2006.

2. Basis of preparation

This consolidated half-yearly financial report has been prepared in accordance with International Accounting Standard (IAS) 34 Interim Financial Reporting.

The consolidated half-yearly financial report should be read in conjunction with the annual financial statements for the year ended 30 June 2016, which have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union.

3. Accounting policies

The accounting policies applied are consistent with those of the annual financial statements for the year ended 30 June 2016.

4. Going concern

The Board has reviewed the performance for the current period and forecasts for the future period together with the available financial resources. It has also considered the risks and uncertainties, including credit risk and liquidity. The Directors have considered the present economic climate, the state of the housing market and the current demand for land with planning consent. The Group has continued to see demand for consented land in the areas in which it operates. The Group has significant forward sales of residential units and is in discussions for the sale of some of the land within its projects and expects to make sufficient disposals in the foreseeable future to ensure it has adequate working capital for its requirements. The Directors are satisfied that the Group will generate sufficient cash to meet its liabilities as and when they fall due for a period of 12 months from signing this half-yearly financial report. The Directors therefore consider it appropriate to prepare the financial statements on the going concern basis.

5. 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 land bank and work in progress. Cost includes the cost of acquisition of sites, the cost of infrastructure and construction works, and legal and professional fees incurred during development prior to sale. 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 receipt 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. Critical accounting estimates relate to the profit forecasts used to determine the extent to which deferred tax assets are recognised from available losses and the period over which they are estimated.

(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 makes assumptions that are mainly based on market conditions existing.

(d) Fair value of investment properties

The fair value of materially completed investment property is determined by the Directors using the open market value of existing use method, subject to current leases and restrictions, as this has been assessed currently as the best use of these assets. Investment properties awaiting construction are valued by the Directors using an appraisal system; critical accounting estimates relate to the forecasts prepared in order to assess the carrying value.

(e) Discounting on deferred consideration of inventories and acquisition of shares

The Group discounts deferred consideration using the discounted cash flow method; the Group considers that the cost of debt capital is the most appropriate discount rate and this is a significant estimate.

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 granted 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.

Consolidation of Drayton Garden Village Limited (DGVL)

In December 2008, the Group entered into an Option and Development Services Agreement (the Agreement) with DGVL. This company was consolidated in prior years as the Directors had considered the requirements of IFRS 10 and believed the Group had control over DGVL from the date it entered into this agreement even though it did not own the share capital. During the year ended 30 June 2016, the Group acquired the share capital of DGVL.

Consolidation of Bucks Developments Ltd (BDL) and Wilton Park Developments Ltd (WPDL)

In December 2014, the Group entered into an Option with WPDL. These companies were consolidated in the prior year as the Directors had considered the requirements of IFRS 10 and believed the Group had control over BDL & WPDL from the date it entered into this agreement even though it did not own the share capital. During the year ended 30 June 2016, the Group acquired the share capital of BDL. BDL wholly owns the share capital of WPDL.

Investment in joint ventures

The Group's joint venture investments in Aston Clinton S.A.R.L and Project Helix Holdco Limited (Project Helix) are not in equal share (the Group owns 10% of the share capital of Aston Clinton S.A.R.L. and 20% of the share capital of Project Helix) however the Group has joint control over the activities of the companies with the other parties due to its entitlement to veto any decisions. In addition, the Group and the other parties to the agreements only have rights to the net assets of these companies through the terms of the contractual arrangements. Within Aston Clinton S.A.R.L the Group is entitled to 50% of the net assets and within Project Helix there is a ratchet mechanism which depends on the amount of profit each development contributes to the joint venture. Therefore, these entities are classified as joint ventures and are accounted for using the equity method.

The Group's joint venture investments in Bucknalls Developments Limited (Bucknalls), Gardiners Park LLP (Gardiners Park) and Cheshunt Lakeside Developments Limited (Cheshunt) are 50/50 joint ventures and the Group has joint control over the activities of the companies with the other parties and has an entitlement to veto any decisions. The Group and the other parties to the agreements only have rights to the net assets of these companies through the terms of the contractual arrangements. Within these joint ventures the Group is entitled to 50% of the net assets. Therefore, these entities are classified as joint ventures and are accounted for using the equity method.

Investment in associates

The Group has a 25% investment in Troy Homes Limited. The investment is classified as an associate and is accounted for using the equity method.

6. Income and segmental analysis

The Group generates income by way of land sales. It also generates income from housebuilding, contracting, rental income, hotel income, investments and investment properties. These operating segments are monitored and strategic decisions are made on the basis of segment operating results. The segmental analysis of operations is as follows:

Segmental analysis by activity