1st Oct 2007 07:02
Inland PLC01 October 2007 For Immediate Release 1 October 2007 Inland PLC ("Inland" or the "Company") Maiden unaudited preliminary results for the year ended 30 June 2007 Inland, which specialises in buying brownfield sites and enhances their value byobtaining planning permission, today announces maiden unaudited preliminaryresults for the year ended 30 June 2007. Financial Highlights . Turnover £5.47m (2006: £Nil) . Operating profit £1.36m (2006: Operating loss £(0.73)m) . Pre tax profit £1.12m (2006: Pre tax loss £(0.68)m) . Cash £42.84m (2006: £0.82m) . Stocks £38.79m (2006: £3.53m) Operational highlights . Raised £61m by way of pre-IPO private placing and flotation on AIM . Development pipeline now over 1,200 plots with a gross development value of circa £340m . 3 sites sold in the period achieving an average annual return on capital employed of 119% . Substantial increase in profitability achieved at Howarth Homes . Acquired Poole Investments PLC after the year end Stephen Wicks, Chief Executive of Inland commented: "2007 has been a pivotal year for Inland. Having successfully secured thedesired funding through our IPO we have now begun to implement our strategy ofunlocking value in brownfield redevelopment. The acquisition of Poole Investments PLC after the year end, demonstrates ourcommitment to extracting significant returns for shareholders from sources thatmight not be considered routine for a property developer. We still seetremendous potential in the South of England which leads us to believe that thecontinued prospects for the land market and the Group remain strong. We believethat the next 12 months will represent a period of considerable growth forInland." For further information please contact: Inland Plc Tel: 01923 713 600Stephen Wicks, Chief ExecutiveNishith Malde, Finance Director Buchanan Communications Tel: 020 7466 5000Jeremy Garcia / Susanna Gale Dawnay, Day Corporate Finance Limited Tel: (020) 7509 4570David Floyd / Alex Stanbury Inland Plc Preliminary results Introduction I am pleased to report maiden unaudited preliminary results for the year ended30 June 2007 of Inland PLC which show a profit before tax of £1.123m (2006: lossof £0.680m). Following a pre IPO private placing and an IPO on AIM, the Group has raised£61m. This new equity now gives the Group the opportunity to target morebrownfield sites in the South of England. The Group's balance sheet has beenconsiderably strengthened as a consequence and we have noticed that our profilein the marketplace with vendors and their agents has been heightened. Financial summary Turnover for the year ended 30 June 2007 was £5.466m (2006: £Nil). This wasgenerated through the sale of three sites which were successfully taken throughthe planning process gaining consent for 38 plots and 2,000 sq ft of offices. Two of these sites were sold during the first half of the financial year,producing an average annual return on equity capital invested of 122% and anaverage annual return on capital employed of 96%. The third site in Northwoodwhich had consent for 14 plots achieved an annual return on the Group's averagecapital employed of approximately 160%. Operating profit for the year ended 30June 2007 amounted to £1.36m (2006: loss of £0.74m). The Group has increased its activity significantly over the previous year withstocks at £38.79m at the year end (2006: £3.53m). We retained £42.84m of cashas at the balance sheet date and net assets were £61.73m (2006: £3.51m). The Directors believe that the sites owned and where purchase contracts wereunconditionally exchanged at the year end represented a gross development valueof £205m with the benefit of planning consent. Gross development value is the sales revenue achieved on residential homes constructed on our sites acquired byhousebuilders. The current land portfolio includes commercial space which generates rentalincome of £630,000 per annum. Land Since the year end the Group has acquired or agreed terms to purchase 6 sitesrepresenting approximately 490 residential plots and 100,000 sq ft ofemployment space. A planning application for 399 residential units and 95,000 sq ft of commercialspace has now been submitted on the Group's flagship site in Farnborough,Hampshire after extensive pre-planning consultation. We anticipate planningpermission will be received on this site imminently. The Group has let anotherbuilding on this site comprising of approximately 10,000 sq ft on a 15 year termat £85,000 per annum with upward only annual rent reviews. Work on the detailed planning application for 173 apartments on a former NHSsite in Ashford, Middlesex, is now at an advanced stage with the applicationexpected to be submitted shortly. We contracted the purchase of this site for£7m on favourable deferred terms. Planning constraints The planning system in the UK continues to cause much frustration to thehousebuilding industry. With the current government committed to increasinghousebuilding from 200,000 to 240,000 new homes per annum by 2016, greateremphasis will be placed on brownfield development alongside pressure for therelease of greenfield sites. However, these targets seem a distant prospectunder existing planning regulations, which are over complicated and riddled withred tape. Inland has a management team which has considerable experience of the planningsystem, by taking a robust and tenacious approach to the negativity andbureaucracy that is commonplace within the local authorities. We believe Inlandobtains planning permissions more successfully and in a shorter period of timethan most of its competitors. It is obvious that the government does not have any clear understanding of theobstacles housebuilders have to overcome at local authority level to obtainconsents. Unless the planning system is subject to a radical overhaul, we see noimprovements in the foreseeable future and this will continue to exacerbate thesupply shortage for housebuilders. Corporate activity Any suitable brownfield opportunities that are in the open market are generallysubject to intense competition with resultant price inflation on the final saleprice. The Inland management team have therefore begun to evaluate a number ofcorporate opportunities not necessarily associated with property developers.Currently there are a number of companies that have significant land holdingswhich up to now have not maximised their development potential. One such opportunity has been secured through our recent acquisition of PooleInvestments PLC ("Poole"). The primary asset of Poole is a 9.5 acre site withwaterside frontage in Lower Hamworthy, Dorset, upon which is an investmentproperty that provides a rental income of £335,000 per annum. This land formspart of the area within the Poole "Full Sail Ahead" regeneration scheme. Thesite has significant development potential and we have already commenced initialdiscussions for what we believe will result in an exciting mixed use schemeultimately enhancing the value for our shareholders. Investments Howarth Homes PLC, where we hold a 10% equity stake and a further 20% by way ofthe convertible loan stock, has made substantial progress. Pre-tax profit forthe year ended 31 July 2007 is expected to be in the order of £1.9m on turnoverof £30.3m. Howarth's current trading is strong with 8 sites totalling 140 unitsunder construction. Howarth have forward sold approximately £23.9m of homes forthe current financial year. Inland has a strategy of identifying and acquiring strategic investments inquoted and unquoted companies, particularly those where the share price does notreflect the value of the underlying property assets or their developmentpotential. At 30 June 2007 the Group held quoted investments to the value of £3.3m. Thisincluded an accumulated stake in Poole, the offer for which was declaredunconditional in all respects on 6 September 2007. Outlook Inland continues to demonstrate its ability to identify opportunities and createvalue in a market where there is an acute shortage of land with planningpermission with a number of initial projects now coming to fruition. Inland'sskills to secure a steady pipeline of new sites continues and our current landbank that is owned, controlled or where offers have been agreed comprise of 19sites representing approximately 1,200 residential plots with a grossdevelopment value in the order of £340m. In addition we have commercial spacewithin several schemes totalling 215,000 sq ft. In response to changes in sentiment in the housebuilding industry, recentannouncements by some of the major housebuilders have indicated a greaterpreference towards acquiring sites that already have planning consent andaccordingly are less speculative. The Directors consider that Inland is wellplaced to capitalise on such a shift in sentiment further endorsing theCompany's existing product offering. The strength and skills of Inland's management team will enable the Group tocontinue to increase its underlying value and we believe the next 12 monthsshould represent a further period of considerable growth. INLAND PLC Period from 16CONSOLIDATED INCOME STATEMENT Year ended June 2005 toFOR THE YEAR ENDED 30 JUNE 2007 30 June 2007 30 June 2006 (Unaudited) (Audited) £000 £000 Revenue 5,466 -Cost of sales (2,603) (5) --------- --------Gross profit/(loss) 2,863 (5) Administrative expenses (1,506) (733) --------- --------Operating profit/(loss) 1,357 (738)Interest expense (107) (24)Notional interest (1,265) (29)Interest and similar income 963 49 --------- -------- 948 (742)Share of profit of associate 175 62 --------- --------Profit/(loss) before tax 1,123 (680)Income tax (328) 214 --------- --------Profit/(loss) for the period 795 (466) ========= ========Attributable to:Equity holders of the Company 795 (466) ========= ========Earnings/(loss) per share for profit attributableto the equity holders of the Company during theperiod- basic 0.98p (3.28)p ========= ========- diluted 0.98p (3.28)p ========= ======== INLAND PLC CONSOLIDATED BALANCE SHEETFOR THE YEAR ENDED 30 JUNE 2007 At 30 June At 30 June 2007 2006 (Unaudited) (Audited) £000 £000 ASSETSNon-current assetsProperty, plant and equipment 65 36Investments 4,156 808Investment in associate 385 262Deferred tax 393 214 ---------- ---------- 4,999 1,320 ---------- ---------- Current assetsInventories 38,791 3,533Trade and other receivables 2,674 82Loan to associate 2,000 380Cash and cash equivalents 42,838 815 ---------- ---------- 86,303 4,810 ---------- ----------Total assets 91,302 6,130 ========== ========== EQUITYCapital and reserves attributable to the Company'sequity holdersShare capital 16,216 3,279Share premium account 45,184 699Retained earnings 373 (466) ---------- ----------Total equity 61,773 3,512 ---------- ---------- LIABILITIES Current liabilitiesTrade and other payables 740 596Current tax liabilities 454 -Borrowings - 525Other financial liabilities 9,202 1,497 ---------- ----------Total current liabilities 10,396 2,618 ---------- ---------- Non-current liabilitiesDeferred purchase consideration 19,133 - ---------- ----------Total non-current liabilities 19,133 - ---------- ----------Total liabilities 29,529 2,618 ---------- ----------Total equity and liabilities 91,302 6,130 ========== ========== INLAND PLC CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 JUNE 2007 Share Share Retained capital premium earnings Total £000 £000 £000 £000Loss attributable to shareholders - - (466) (466) --------- --------- --------- ---------Total recognised income and expense - - (466) (466)Issue of equity 3,279 699 - 3,978 --------- --------- --------- ---------At 30 June 2006 (Audited) 3,279 699 (466) 3,512 ========= ========= ========= ========= Share based compensation - - 44 44 --------- --------- --------- ---------Net income recognised directly inequity - - 44 44Profit attributable to shareholders - - 795 795 --------- --------- --------- ---------Total recognised income and expense - - 839 839Issue of equity 12,937 47,343 - 60,280Issue expenses - (2,858) - (2,858) ========= ========= ========= =========At 30 June 2007 (Unaudited) 16,216 45,184 373 61,773 ========= ========= ========= ========= INLAND PLC Period from 16 CONSOLIDATED CASH FLOW STATEMENT Year ended June 2005 to FOR THE YEAR ENDED 30 JUNE 2007 30 June 2007 30 June 2006 (Unaudited) (Audited) £000 £000Profit/(loss) for the period before tax 1,123 (680) Adjustments for: - depreciation 16 6 - share based compensation 44 - - interest expense 1,372 53 - interest and similar income (963) (49) - Share of profit of associate (175) (62) Changes in working capital (excluding the effects of acquisition): - increase in inventories (39,064) (3,582) - increase in trade and other receivables (4,212) (462) - increase in trade and other payables 29,522 2,106 ---------- ----------Net cash outflow from operatingactivities (12,337) (2,670) ---------- ----------Cash flow from investing activitiesInterest received 946 40Dividends received 11 -Purchases of property, plant andequipment (45) (42)Equity investment in associate - (200)Convertible loan stock inassociate - (800)Listed investments (3,342) - ---------- ----------Net cash used in investingactivities (2,430) (1,002) ---------- ----------Cash flow from financing activitiesInterest paid (107) (16)New bank loans raised 1,175 525Bank loans repaid (1,700) -Issue of shares 57,422 3,978 ---------- ----------Net cash from financingactivities 56,790 4,487 ---------- ----------Net increase in cash and cashequivalents 42,023 815Cash and cash equivalents atbeginning of period 815 - ---------- ----------Cash and cash equivalents at theend of the period 42,838 815 ---------- ---------- INLAND PLCNOTES TO THE FINANCIAL INFORMATIONFOR THE YEAR ENDED 30 JUNE 2007 1. BASIS OF PREPARATION The Preliminary Report is unaudited and does not constitute statutory accountswithin the meaning of s240 of the Companies Act 1985. The statutory accounts forthe year ended 30 June 2006 have been delivered to the Registrar of Companiesand statutory accounts for the year ended 30 June 2007 will be delivered to theRegistrar after the Company's Annual General Meeting. The auditors' opinion onthe accounts for the period ended 30 June 2006 was unqualified and did notcontain a statement made under s237 (2) or (3) of the Companies Act 1985. The consolidated financial statements of Inland PLC have been prepared inaccordance with the EU Endorsed International Financial Reporting Standards(IFRS), IFRIC interpretations and the Companies Act 1985 applicable to companiesunder IFRS. The consolidated financial statements have been prepared under thehistorical cost convention, except in respect of certain financial instruments. The preparation of financial statements in conformity with IFRS requires the useof certain critical accounting estimates. It also requires management toexercise its judgment in the process of applying the Group's accountingpolicies. Although these estimates are based on management's best knowledge ofthe amount, event or actions, actual results ultimately may differ from thoseestimates. 2. ACCOUNTING POLICIES The principal accounting policies adopted in the preparation of the Group's IFRSfinancial statements are set out below. Basis of preparation The consolidated financial statements have been prepared in accordance withapplicable International Financial Reporting Standards ("IFRS") as adopted bythe EU and as issued by the International Accounting Standards Board. The financial statements have been prepared under the historical cost conventionexcept that they have been modified to include the revaluation of certainnon-current assets. The policies have changed from the previous year when thefinancial statements were prepared under applicable United Kingdom GenerallyAccepted Accounting Principles (UK GAAP). The comparative information has beenrestated in accordance with IFRS. The changes to accounting policies areexplained in note 6 together with the reconciliation of opening balances. Thedate of transition to IFRS was 16 June 2005. The accounting policies that have been applied in the opening balance sheet havealso been applied throughout all periods presented in these financialstatements. These accounting policies comply with each IFRS that is mandatoryfor accounting periods ending on 30 June 2007. Standards in issue but not yet effective • IAS 1 Presentation of Financial Statements (revised 2007) (effective 1 January 2009) • IAS 23 Borrowing Costs (revised 2007) (effective 1 January 2009) • IFRS 8 Operating Segments (effective 1 January 2009) • IFRIC 11 IFRS 2 - Group and Treasury Share Transactions (effective 1 March 2007) • IFRIC 12 Service Concession Arrangements (effective 1 January 2008) • IFRIC 13 Customer Loyalty Programmes (effective 1 July 2008) • IFRIC 14 IAS 19 - The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction (effective 1 January 2008) None of these standards will have an impact on the Group's financial statementsexcept IAS 23 the effect of which is currently being evaluated. Basis of consolidation The Group's financial statements consolidate those of the Company and all of itssubsidiary undertakings drawn up to 30 June 2007. Subsidiaries are entities overwhich the Group has the power to control the financial and operating policies soas to obtain benefits from its activities. The Group obtains and exercisescontrol through voting rights. Unrealised gains on transactions between the Group and its subsidiaries areeliminated. Unrealised losses are also eliminated unless the transactionprovides evidence of an impairment of the asset transferred. Amounts reported inthe financial statements of subsidiaries have been adjusted where necessary toensure consistency with the accounting policies adopted by the Group. Acquisitions of subsidiaries are dealt with by the purchase method. The purchasemethod involves the recognition at fair value of all identifiable assets andliabilities, including contingent liabilities of the subsidiary, at theacquisition date, regardless of whether or not they were recorded in thefinancial statements of the subsidiary prior to acquisition. On initialrecognition, the assets and liabilities of the subsidiary are included in theconsolidated balance sheet at their fair values, which are also used as thebases for subsequent measurement in accordance with the Group accountingpolicies. Goodwill is stated after separating out identifiable intangibleassets. Goodwill represents the excess of acquisition cost over the fair valueof the Group's share of the identifiable net assets of the acquired subsidiaryat the date of acquisition. Associates Associates are those entities over which the Group has significant influence butwhich are neither subsidiaries nor interests in joint ventures. Investments inassociates are recognised initially at cost and subsequently accounted for usingthe equity method. Acquired investments in associates are also subject topurchase method accounting. However, any goodwill or fair value adjustmentattributable to the share in the associate is included in the amount recognisedas investment in associates. All subsequent changes to the share of interest in the equity of the associateare recognised in the Group's carrying amount of the investment. Changesresulting from the profit or loss generated by the associate are reported in"share of profits of associates" in the consolidated income statement andtherefore affect net results of the Group. These changes include subsequentdepreciation, amortisation or impairment of the fair value adjustments of assetsand liabilities. Items that have been recognised directly in the associate's equity arerecognised in the consolidated equity of the Group. However, when the Group'sshare of losses in an associate equals or exceeds its interest in the associate,including any unsecured receivables, the Group does not recognise furtherlosses, unless it has incurred obligations or made payments on behalf of theassociate. If the associate subsequently reports profits, the investor resumesrecognising its share of those profits only after its share of the profitsequals the share of losses not recognised. Unrealised gains on transactions between the Group and its associates areeliminated to the extent of the Group's interest in the associates. Unrealisedlosses are also eliminated unless the transaction provides evidence of animpairment of the asset transferred. Amounts reported in the financialstatements of associates have been adjusted where necessary to ensureconsistency with the accounting policies adopted by the Group. Revenue Revenue is measured by reference to the fair value of consideration received orreceivable by the Group for goods supplied, excluding VAT and trade discounts.Revenue is recognised upon transfer of risk to the customer. Sale of land Revenue from the sale of land is recognised when all the following conditionshave been satisfied: •the Group has transferred to the buyer the significant risks and rewards of ownership of the goods which is generally when contracts have been completed •the Group retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the land sold which is generally when the contract has been completed •the amount of revenue can be measured reliably •it is probable that the economic benefits associated with the transaction will flow to the Group, and •the costs incurred or to be incurred in respect of the transaction can be measured reliably. Interest Interest is recognised using the effective interest method which calculates theamortised cost of a financial asset and allocates the interest income over therelevant period. The effective interest rate is the rate that exactly discountsestimated future cash receipts through the expected life of the financial assetto the net carrying amount of the financial asset. Rental income Rental income is recognised on a straight line basis over the lease term. Dividends Dividends are recognised when the shareholders right to receive payment isestablished. Property, plant and equipment Property, plant and equipment is stated at cost or valuation, net ofdepreciation and any provision for impairment. Disposal of assets The gain or loss arising on the disposal of an asset is determined as thedifference between the disposal proceeds and the carrying amount of the assetand is recognised in the income statement. The gain or loss arising from thesale or revaluation of held for sale assets is included in "other income" or"other expense" in the income statement. Any revaluation surplus remaining inequity on disposal of the asset is transferred to the profit and loss reserve. Depreciation Depreciation is calculated to write down the cost less estimated residual valueof all property, plant and equipment by the straight line method where itreflects the basis of consumption of the asset. The rates generally applicableare: Fixtures & fittings - 25% Office and computer equipment - 25% Material residual value estimates are updated as required, but at leastannually, whether or not the asset is revalued. Impairment testing of property, plant and equipment For the purposes of assessing impairment, assets are grouped at the lowestlevels for which there are separately identifiable cash flows (cash-generatingunits). As a result, some assets are tested individually for impairment and someare tested at cash-generating unit level. All individual assets or cash-generating units are tested for impairmentwhenever events or changes in circumstances indicate that the carrying amountmay not be recoverable. An impairment loss is recognised for the amount by which the asset's orcash-generating unit's carrying amount exceeds its recoverable amount. Therecoverable amount is the higher of fair value, reflecting market conditionsless costs to sell, and value in use based on an internal discounted cash flowevaluation. All assets are subsequently reassessed for indications that animpairment loss previously recognised may no longer exist. Inventories Inventories are stated at the lower of cost and net realisable value. Costs ofordinarily interchangeable items are assigned using the first in, first out costformula. Cost includes cost of land and associated costs in relation toacquisition and process of application for planning permission less discount fordeferred payment terms. Net realisable value is the anticipated sale value lesscosts to obtain planning permission. Taxation Current tax is the tax currently payable based on taxable profit for the period. Deferred income taxes are calculated using the liability method on temporarydifferences. Deferred tax is generally provided on the difference between thecarrying amounts of assets and liabilities and their tax bases. However,deferred tax is not provided on the initial recognition of goodwill, nor on theinitial recognition of an asset or liability unless the related transaction is abusiness combination or affects tax or accounting profit. Temporary differencesinclude those associated with shares in subsidiaries and joint ventures unlessreversal of these temporary differences can be controlled by the Group and it isprobable that reversal will not occur in the foreseeable future. In addition,tax losses available to be carried forward as well as other income tax creditsto the Group are assessed for recognition as deferred tax assets. Deferred tax liabilities are provided in full, with no discounting. Deferred taxassets are recognised to the extent that it is probable that the underlyingdeductible temporary differences will be able to be offset against futuretaxable income. Current and deferred tax assets and liabilities are calculatedat tax rates that are expected to apply to their respective period ofrealisation, provided they are enacted or substantively enacted at the balancesheet date. Changes in deferred tax assets or liabilities are recognised as a component oftax expense in the income statement, except where they relate to items that arecharged or credited directly to equity (such as the revaluation of land notincluded in inventories) in which case the related deferred tax is also chargedor credited directly to equity. Leased assets In accordance with IAS 17, the economic ownership of a leased asset istransferred to the lessee if the lessee bears substantially all the risks andrewards related to the ownership of the leased asset. The related asset isrecognised at the time of inception of the lease at the fair value of the leasedasset or, if lower, the present value of the minimum lease payments plusincidental payments, if any, to be borne by the lessee. A corresponding amountis recognised as a finance leasing liability. Leases of land and buildings aresplit into land and buildings elements according to the relative fair values ofthe leasehold interests at the date of entering into the lease agreement. The interest element of leasing payments represents a constant proportion of thecapital balance outstanding and is charged to the income statement over theperiod of the lease. All other leases are regarded as operating leases and the payments made underthem are charged to the income statement on a straight line basis over the leaseterm. Lease incentives are spread over the term of the lease. Employee benefits Defined Contribution Pension Scheme The pension costs charged against operating profits are the contributionspayable to the scheme in respect of the accounting period. Financial assets Financial assets, are divided into the following categories: loans andreceivables and financial assets at fair value through profit or loss. Financialassets are assigned to the different categories by management on initialrecognition, depending on the purpose for which they were acquired. Thedesignation of financial assets is re-evaluated at every reporting date at whicha choice of classification or accounting treatment is available. All financial assets are recognised when the Group becomes a party to thecontractual provisions of the instrument. Financial assets other than thosecategorised as at fair value through profit and loss are recognised at fairvalue plus finance costs. Financial assets categorised as at fair value throughprofit or loss are recognised initially at fair value with transaction costsexpensed through the income statement. Financial assets at fair value through profit or loss include financial assetsthat are either classified as held for trading or are designated by the entityas at fair value through profit or loss upon initial recognition. Subsequent toinitial recognition, the financial assets included in this category are measuredat fair value with changes in fair value recognised in the income statement.Financial assets originally designated as financial assets at fair value throughprofit or loss may not be re-classified subsequently. Financial assets are designated as at fair value through profit or loss wherethey eliminate or significantly reduce a measurement (or recognition) mismatch. Loans and receivables are non-derivative financial assets with fixed ordeterminable payments that are not quoted in an active market. Trade receivablesand loans to Associate are classified as loans and receivables. Loans andreceivables are measured subsequent to initial recognition at amortised costusing the effective interest method, less provision for impairment. Any changein their value through impairment or reversal of impairment is recognised in theincome statement. Provision against trade receivables is made when there is objective evidencethat the Group will not be able to collect all amounts due to it in accordancewith the original terms of those receivables. The amount of the write-down isdetermined as the difference between the asset's carrying amount and the presentvalue of estimated future cash flows. Regular way purchases and sales are accounted for on trade date. Interest and other cash flows resulting from holding financial assets arerecognised in the income statement when receivable, regardless of how therelated carrying amount of financial assets is measured. A financial asset is derecognised only where the contractual rights to the cashflows from the asset expire, or the financial asset is transferred and thattransfer qualifies for derecognition. A financial asset is transferred if thecontractual rights to receive the cash flows of the asset have been transferredor the Group retains the contractual rights to receive the cash flows of theasset, but assumes a contractual obligation to pay the cash flows to one or morerecipients. A financial asset that is transferred qualifies for derecognition ifthe Group transfers substantially all the risks and rewards of ownership of theasset, or if the Group neither retains nor transfers substantially all the risksand rewards of ownership but does transfer control of that asset. Financial liabilities Financial liabilities are obligations to pay cash or other financial assets andare recognised when the Group becomes a party to the contractual provisions ofthe instrument. Financial liabilities categorised as at fair value throughprofit or loss are recorded initially at fair value, all transaction costs arerecognised immediately in the income statement. All other financial liabilitiesare recorded initially at fair value, net of direct issue costs. Financial liabilities categorised as at fair value through profit or loss areremeasured at each reporting date at fair value, with changes in fair valuebeing recognised in the income statement. All other financial liabilities arerecorded at amortised cost using the effective interest method, withinterest-related charges recognised as an expense in finance cost in the incomestatement. Finance charges, including premiums payable on settlement orredemption and direct issue costs, are charged to the income statement on anaccruals basis using the effective interest method and are added to the carryingamount of the instrument to the extent that they are not settled in the periodin which they arise. Financial liabilities are categorised as at fair value through profit or losswhere they are classified as held-for-trading or designated as at fair valuethrough profit or loss on initial recognition. Financial liabilities aredesignated as at fair value through profit or loss where they eliminate orsignificantly reduce a measurement (or recognition) mismatch. A financial liability is derecognised only when the obligation is extinguished,that is, when the obligation is discharged or cancelled or expires. Cash and cash equivalents Cash and cash equivalents comprise cash on hand and demand deposits, togetherwith other short-term, highly liquid investments that are readily convertibleinto known amounts of cash and which are subject to an insignificant risk ofchanges in value. Dividends Dividend distributions payable to equity shareholders are included in "othershort term financial liabilities" when the dividends are approved in generalmeeting prior to the balance sheet date. Equity An equity instrument is a contract which evidences a residual interest in theassets after deducting all liabilities. Equity comprises the following: "Share capital" represents the nominal value of equity shares. "Share premium" represents the excess over nominal value of the fair value ofconsideration received for equity shares, net of expenses of the share issue. "Profit and loss reserve" represents retained profits. 3. INTEREST EXPENSE Period from 16 Year ended June 2005 to 30 June 2007 30 June 2006 (Unaudited) (Audited) £000 £000Interest expense: - bank borrowings 107 18- notional interest on deferredconsideration 1,265 35 ----------- ------------ 1,372 53 =========== ============ 4. EARNINGS/(LOSS) PER SHARE Basic and diluted Basic and diluted earnings/(loss) per share is calculated by dividing the profit/(loss) attributable to equity holders of the Company by the weighted averagenumber of ordinary shares in issue during the year. Period from 16 Year ended June 2005 to 30 June 2007 30 June 2006 (Unaudited) (Audited) Profit/(loss)attributable to equityholders of the Company(£'000) 795 (466) ------------ ------------- Weighted averagenumber of ordinaryshares in issue ('000) 80,944 14,195 Dilutive effect ofoptions treated asexercisable at theyear end ('000) (96) - ------------ ------------- 80,848 14,195 ------------ ------------- Basic earnings/(loss)per share in pence 0.98p (3.28)p ============ ============= Dilutedearnings/(loss) pershare in pence 0.98p (3.28)p ============ ============= 5. SHARE CAPITAL 2007 2006 (Unaudited) (Audited) £000 £000Authorised239,990,000 (2006: 100,000,000) ordinary shares of10p each 23,999 10,0001,000 (2006: NIL) deferred shares of £1 each 1 - ------------ ------------ 24,000 10,000 ============ ============ 2007 2006 (Unaudited) (Audited) £000 £000Allotted, issued and fully paid162,150,059 (2006: 32,792,866) 16,215 3,279ordinary shares of 10p each1,000 (2006: Nil) deferred shares of £1 each 1 - ------------ ------------ 16,216 3,279 ============ ============ All issued shares are fully paid. On 4 August 2006, 6,710,367 ordinary shares were issued at £0.35 per share. On 22 August 2006, 157,142 ordinary shares were issued at £0.35 per share. On 30th August 2006, 714,285 ordinary shares were issued at £0.35 per share. On 5 September 2006, 10,000 ordinary shares were issued at £0.35 per share. On 2 October 2006, 970,000 ordinary shares were issued at £0.35 per share. On 3 October 2006, 12,085,335 ordinary shares were issued at £0.35 per share. On 19 October 2006, 580,427 ordinary shares were issued at £0.35 per share. On 6 November 2006, 1,639,583 ordinary shares were issued at £0.35 per share. On 14 November 2006, 2,678,482 ordinary shares were issued at £0.35 per share. On 22 November 2006, 3,640,572 ordinary shares were issued at £0.35 per share. On 6 December 2006, 143,000 ordinary shares were issued at £0.35 per share. On 19 March 2007, 1,000 deferred shares were issued at £1 per share. On 26 March 2007, 28,000 ordinary shares were issued at £0.50 per share. On 3 April 2007, 100,000,000 ordinary shares were issued at £0.50 per share. The deferred shares are not entitled to receive any dividends and carry one voteper share in general meetings. On a return of capital, the holders of deferredshares will receive £1.00 per share unless the conditions described below aremet, in which event the entitlement of holders of deferred shares will beenhanced as described below. In the event that (i) the return to holders of Ordinary Shares (calculated asdividends received, together with the increase in share price over 50p exceeds10 per cent. per annum compounded annually); and (ii) the relevant holder ofdeferred shares has not voluntarily ceased to be employed by or engaged toprovide services to the Company or any Group company or been dismissed for causethen the following provisions will apply: (i) on a takeover (including a takeover effected by a scheme of arrangement)the holders of the deferred shares will become entitled to redeem their sharesat a price which is calculated so as to attribute to all the deferred shares thedifference between the takeover offer price per share and 35p (or such other sumas is agreed with HM Revenue & Customs) multiplied by 11,350,504; or (ii) on a winding up, the assets attributable to the deferred shares willlikewise be calculated to be such amount as would represent the differencebetween the amount attributable to each Ordinary Share and 35p (or such othersum as is agreed with HM Revenue & Customs) multiplied by 11,350,504. 6. TRANSITION TO IFRS Introduction Inland plc has previously produced and filed financial statements under UKGenerally Accepted Accounting Practice (UK GAAP). Reconciliations between IFRS and UK GAAP The following reconciliations provide a quantification of the effect of thetransition to IFRS, with notes to the reconciliations: - net income at 30 June 2006 - equity at 30 June 2006 The Company was incorporated on 16 June 2005 and these financial statementsunder IFRS are the first financial statements. The cash flow statement for theperiod ended 30 June 2006 under IFRS is also the same as under UK GAAP apartfrom presentational differences. Reconciliation of net income for period ended 30 June 2006 UK Associate's Notional Convertible GAAP profit interest loan stock IFRS £000 £000 £000 £000 £000 Revenue - - - - -Cost of sales (5) - - - (5) ------- -------- ------- --------- -------Gross loss (5) - - - (5)Administrativeexpenses (733) - - - (733) ------- -------- ------- --------- -------Operating loss (738) - - - (738)Finance costs - net 17 - (29) 8 (4) ------- -------- ------- --------- ------- (721) - (29) 8 (742)Share of profit ofassociate - 62 - - 62 ------- -------- ------- --------- -------Loss before tax (721) 62 (29) 8 (680)Taxation 214 - - - 214 ------- -------- ------- --------- -------Loss for the period (507) 62 (29) 8 (466) ======= ======== ======= ========= ======= Reconciliation of equity at 30 June 2006 UK Associate's Notional Convertible GAAP profit interest loan stock IFRS £000 £000 £000 £000 £000ASSETSNon-current assetsProperty,plant &equipment 36 - - - 36Investments 1,000 62 - 8 1,070Deferred tax 214 - - - 214 ------- -------- -------- --------- --------- 1,250 62 - 8 1,320Current assetsInventories 3,582 - (49) - 3,533Trade andotherreceivables 82 - - - 82Loan toassociate 380 - - - 380Cash and cashequivalents 815 - - - 815 ------- -------- -------- --------- --------- 4,859 - (49) - 4,810 ------- -------- -------- --------- --------- ------- -------- -------- --------- ---------Total assets 6,109 62 (49) 8 6,130 ======= ======== ======== ========= ========= EQUITYCapital and reserves attributable to the Company's equity holdersShare capital 3,279 - - - 3,279Share premiumaccount 699 - - - 699Retainedearnings (507) 62 (29) 8 (466) ------- -------- -------- --------- ---------Total equity 3,471 62 (29) 8 3,512 ======= ======== ======== ========= ========= LIABILITIESCurrent liabilitiesTrade andother payables 596 - - - 596Deferredpurchaseconsideration 1,517 - (20) - 1,497Borrowings 525 - - - 525 ------- -------- -------- --------- ---------Total currentliabilities 2,638 - (20) - 2,618 ------- -------- -------- --------- --------- ------- -------- -------- --------- ---------Totalliabilities 2,638 - (20) - 2,618 ------- -------- -------- --------- --------- ------- -------- -------- --------- ---------Total equityandliabilities 6,109 62 (49) 8 6,130 ======= ======== ======== ========= ========= Notes to the reconciliations a) The Group has applied IAS 28: Investments in Associates to its investment in Howarth Homes PLC at 30 June 2006. The Company owns 10% of the equity but is able to exert significant influence. The effect of equity accounting for Howarth Homes PLC as an associate is to take the Group's share of profit after tax of the associate which amounts to £62,000. b) In accordance with IAS 39, deferred payments arising from land creditors are to be held at discounted present value, hence recognising a financing element over the period of the deferred settlement terms. The land creditor is then increased to the settlement value over the period of financing, with the financing element charged as interest expense through the income statement. The value of land held on the balance sheet and the corresponding land creditor is reduced by the financing element. The reduction in land value in inventories will result in an eventual reduction in cost of sales as the land is traded out. For the period ended 30 June 2006, this has resulted in an inclusion of notional interest of £29,000, a reduction of inventories by £49,000 and a net reduction in land creditors of £20,000. c) The Group has applied IAS 39: Financial instruments: Recognition and Measurement to the Convertible Loan Stock in Howarth Homes PLC. The effect of this is to separate the equity element of the convertible loan stock from the loan by discounting the asset to its net present value. The loan is then increased to the settlement value over the period of the loan stock with the net interest credited to the income statement and a corresponding increase in the loan stock. The effect of applying this Standard is to increase interest received by £8,000 and account for the equity element of the convertible loan stock at £39,000 and reducing the loan stock by a net amount of £31,000. 7. POST BALANCE SHEET EVENT On 9 August 2007, the Company made an offer to acquire all of the issued sharecapital of Poole Investments PLC ("Poole") that it did not already own. Theoffer valued Poole at £11.1m. On 6 September 2007 the offer was declaredunconditional in all respects. Poole's primary asset is a 9.5 acre plot of landin Lower Hamworthy, Dorset with an investment property that generates a rentalincome. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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