INTERIM RESULTS PRESENTATION Six months to 31 December 2016 MARCH - - PowerPoint PPT Presentation

DELIVERING VALUE THROUGH HOUSEBUILDING AND BROWNFIELD DEVELOPMENT

MARCH 2017 INTERIM RESULTS PRESENTATION

Six months to 31 December 2016

Our business 01 Who we are Strategy Business focus

• AIM listed with market cap of £129m
• Housebuilding and brownfield regeneration business in Southern

England

• 100% track record in obtaining planning consents
• Identify and acquire brownfield land opportunities with strategic

angles

• Secure options over strategic greenfield land
• Add value by navigating through complex planning system
• Develop homes for private sale; sell consented plots; control

substantial land bank; generate rental income

• Grow in-house construction capabilities to increase

housebuilding output

• Increase size of land bank
• Increase proportion of consented plots within land bank

01

Meridian Waterside, Southampton St Johns, Chelmsford The Wessex Hotel, Bournemouth

Clear business model 02

Beaumont Works, St Albans

Brownfield land acquisition process Navigation

• f complex

planning system Land bank Sale of consented plots House building programme Investment portfolio

Creating value through planning expertise

St Johns, Chelmsford

Group highlights 03

Financial

▪ EPRA net asset value of 87.05p (2015: 80.64p) per share and adjusted EPRA net asset value of 92.03p (2015: 84.38p) per share ▪ Profit before tax of £4.4m (2015: £21.5m including revaluation surplus of £14.0m) ▪ Housebuilding revenue of £27.5m (2015 : £30.3m) ▪ Gross margin on housebuilding 20.0% (2015 : 24.1%) – reduction due to increased costs related to failed contractor ▪ Profit from plot sales of £6.3m (including £6.0m gain on the sale

• f a subsidiary) (2015 : 6.3m)

▪ 36% increase in gross rental income to £1.2m (2015: £0.9m) ▪ Net current asset position transformed with 98% of total borrowings non-current (2015: 20%) with cheaper funding costs ▪ 10% increase in net asset value to £118m (2015: £107m) ▪ 25% increase in interim dividend to 0.5p (2015 : 0.4p) per share ▪ Strengthened balance sheet with cash balances of £17.6m (2015: £16.6m)

Operational

▪ 87 units (2015: 93) sold, of which 85 private units sold at average price of £319,000 (2015: £325,000) ▪ Forward sales of £31.8m ▪ 389 units currently under construction ▪ 866 plots awaiting planning decisions and 1,344 plots the subject of pre-application discussions with local authorities ▪ Land bank increased to 7,151 plots (2015: 5,672 plots) of which 2,440 have planning consent; strategic land with 2,094 plots across 21 sites and over 390 acres ▪ New joint venture with Anderson Group to develop 43 homes at Gardiners Park, Basildon – first phase of potentially much larger project ▪ Minimal impact seen from referendum decision

H1 2017 H1 2016 Change Comments Revenue £32.6m £55.1m

• 40.8%

Land sale shown as disposal of subsidiary in H1 2017 Gross margin 21.1% 26.5% Profit before tax (including valuation gain) £4.4m £21.5m

• 79.5%

Revaluation uplift of £14m in H1 2016 Profit before tax (excluding revaluation gain) £4.4m £7.5m

• 41.3%

Major part of profits expected in H2 2017 Earnings per share 1.71p 10.04p

• 83.0%

No revaluation uplift Interim dividend per share 0.5p 0.4p +25% Payable in June 2017

Income statement 04

Revenue & gross profit analysis 05 ▪ 101 units sold (2015: 105) ▪ 45% (2015: 32%) of private sales with Help to Buy ▪ Average private unit selling price of £319,000 (2015: £325,000) ▪ Gross margin of 20.0% (2015: 24.1%) on housebuilding ▪ Forward sales of £31.8m made up of 78 private units and 36 Housing Association contract equivalent units ▪ Gross profit of £6.3m on sale of 177 plots including a corporate land sale (2015: £6.3m on 244 plots) ▪ Significant increase in rental income with current annualised amount of £2.3m

2% 84% 5% 4% 5%

Revenue by segment H1 2017

Land sales Housebuilding Contract Rental and other Hotel 39% 55% 4% 2%

Revenue by segment H1 2016

Land sales Housebuilding Contract Rental and

• ther

3% 76%

• 3%

15% 3%

Gross profit by segment H1 2017

Land sales Housebuilding Contract Rental and

• ther

Hotel 43% 50% 1% 6%

Gross profit by segment H1 2016

Land sales Housebuilding Contract Rental and

• ther

Balance sheet highlights 06

H1 2017 H1 2016 Comments EPRA NAV 87.05p 80.64p Reflection of increase in unrealised value within projects Adjusted EPRA NAV 92.03p 84.38p Investment Properties £52.1m £48.1m Joint Ventures £20.0m £7.3m New JVs in Cheshunt and Basildon Associate £2.0m £0.8m 25% interest in Troy Homes Ltd Inventories £146.0m £129.7m Increase in housebuilding WIP Cash & cash equivalents £17.6m £16.6m Borrowings <1 year £(1.8)m £(57.0)m Debt profile transformed Net current assets £155.6m £77.5m Borrowings > 1 year £(94.1)m £(14.2)m Land creditors £(22.1)m £(17.2)m Deferred consideration on three sites Equity attributable to shareholders £118.0m £107.1m NAV 58.42p 53.06p

2% 98%

Debt profile H1 2017

Due <1 year Due >1 year 80% 20%

Debt profile H1 2016

Due <1 year Due >1 year

Land bank

07 Land Portfolio ▪ Operations focused on sustainable Southern locations ▪ Strong and visible pipeline of new opportunities ▪ Delivery of first time buyer and mid-tier price range homes into high-demand areas in Southern England

08 Visible and growing pipeline of future opportunities

Significant brownfield and strategic land bank with visible pipeline of opportunities

942 1,811 1,303 1,805 2,294 1,329 2,589 1,575 307 605 1,344 1,124 842 114 49 1,057 1,318 1,086 1,048 1,175 66 1,265 2,306 3,734 5,176 6,681 7,151

• 1,000

2,000 3,000 4,000 5,000 6,000 7,000 8,000 FY 2013 FY 2014 FY 2015 FY 2016 H1 2017

Land Bank

Managed or held within joint ventures with consent (contracted or terms agreed) Owned or contracted with planning consent or resolution to grant planning consent Plots controlled or terms agreed with consent or resolution to grant planning consent Owned or contracted without planning consent Managed or held within joint ventures without consent (contracted or terms agreed) Plots controlled or terms agreed without consent (including strategic options) 1249 2,416 3,976 5,518 4,711 1,057 1,318 1,200 1,163 2,440 2,306 3,734 5,176 6,681 7,151 500 1000 1500 2000 2500 3000 3500 4000 4500 5000 5500 6000 6500 7000 7500 8000 FY 2013 FY 2014 FY 2015 FY 2016 H1 2017

Plots owned / managed (number)

Plots With Planning Permission Plots Without Planning Permission total

Strategic: 2094 To be progressed: 407 Pre-application discussions: 1,344 Planning applications submitted: 866

Land progressing through planning system

Planning status of residential plots Planning status of commercial space

100% record of obtaining planning permission

9

Visible pipeline of assets moving through the planning cycle

Strategic To be progressed Pre-application discussions Planning applications submitted

Target plots for consent by 30 June 2017 Ownership status

• No. of plots
• No. of sites
• No. of plots
• No. of sites
• No. of plots
• No. of sites
• No. of plots
• No. of sites

Managed or held in joint ventures (contracted or terms agreed)

• 250

1 900 1 425 3 59 Owned or contracted 335 2 46 1 444 4 352 4 352 Plots controlled or terms agreed 1,759 19 111 1

• 89

1

• Grand Total

2,094 21 407 3 1,344 5 866 8 411

To be progressed Pre-application discussions Planning applications submitted

Ownership status

• No. of sites

Sq ft

• No. of sites

Sq ft

• No. of sites

Sq ft Managed or held in joint ventures (contracted or terms agreed)

• 1

30,000 2 14,982 Owned or contracted

• 3

81,628 2 57,209 Plots controlled or terms agreed

• 1

53,820 Grand Total

• 4

111,628 5 126,011

10

Wilton Park, Beaconsfield, Buckinghamshire

▪ 114 acres ▪ Estimated GDV £300m ▪ Development Brief adopted

in 2015 for 350 homes

▪ Access road from Pyebush

roundabout now opened

▪ Short term rental income in

excess of £1.5m p.a.

▪ Existing residential

properties valued at £45.5m

▪ Financial viability

assessment to be finalised with LA followed by planning application expected in May 2017

▪ Site included in Local

Authority’s Preferred Option list for Green Belt release which could result in further residential and commercial space

▪ Former headquarters of

Tesco plc

▪ Acquired in a 50:50 joint

venture for £30 million

▪ Framework for a

Masterplan being developed in collaboration with Broxbourne Borough Council

▪ Plan expected to be

adopted mid 2018

▪ Expect approximately 1,900

residential units and 200,000 sq ft of commercial space on 25 acres of which the JV owns 13 acres

▪ Further land assembly

agreed to bring total JV land up to 16 acres

▪ Half an hour to Liverpool

Street Station by train. Site identified as part of Crossrail 2 proposals

Cheshunt, Hertfordshire

11

▪ Major greenfield release of

approximately 75 acres, of which 40 are developable

▪ Site had existing planning

permission for 125 residential units and 250,000 sq ft of commercial space

▪ Resolution to grant

planning consent received for 400 residential units and 100,000 sq ft of commercial space

▪ Site encompasses

Scheduled Ancient Monument

▪ Estimated GDV in excess of

£100m

▪ Held in a joint venture with

Europa Capital

Aylesbury, Buckinghamshire

12

▪ Site located on the River

Itchen close to Ocean Village and St Mary’s Stadium

▪ Inland Homes has a

development agreement with Southampton City Council

▪ Resolution to grant

consent received for 457 residential units and 64,000 sq ft of commercial space

▪ Detailed planning consent

for first phase of 72 units (outlined pink) and sea wall

▪ Development expected to

commence in June 2017

▪ Archeological

investigations well advanced

Chapel Riverside, Southampton

13

Homes under construction

14

▪ 389 homes under

construction across nine sites

▪ 226 of these being ‘self-

delivered’

▪ 145 houses and 244

apartments

▪ 391 additional units

across three sites expected to commence by the year end

▪ 31 people directly and in

excess of 450 people indirectly employed in our construction operations

▪ Objective is to drive costs

down and take control of delivery

▪ Investigating off-site

manufacturing process to mitigate labour shortages

Supportive market environment

Compelling market opportunity 16

UK mainstream house price increases (5 year)

Source: Savills

Economic forecasts

Source: Bank of England

South East statistics

2017 2018 2019

GDP growth 2.0% 1.6% 1.7% Inflation 2.0% 2.7% 2.6% UK base rate 0.25% Expected to increase to 1.0%

London South East Population 8,670,000 8,950,000 Annual population growth rate (2015) 1.6% 0.8% Average weekly earnings £832 £669 Age of first time buyers 32 32 Average house price (Dec 2016) £491,000 £319,000 Annual house price inflation 7.3% 8.7% Average unemployment (Jan 2017) 5.6% 3.5%

Further demand for home ownership is being driven by an economy getting stronger – wages are rising, unemployment is falling and growth is robust

Sources: ONS, Wales.gov.uk, Halifax

2 3 4 1

Help to Buy (HTB)

▪ Facilitates deposit as low as only 5%, through Equity Loan scheme ▪ Represents 45% of Inland’s unit sales

Supportive political environment 17

Help to Buy ISA & Lifetime ISA

▪ Help to Buy ISA – government contribution of up to 25% of monthly cash savings (up to £50 per month) ▪ Lifetime ISA – 25% government contribution of savings up to £4,000

Restrictions on pension savings by higher earners

▪ Lifetime allowance cut from £1.25 million to £1 million – buy- to-let provides an alternative investment option despite increase in buy-to-let levies e.g. increase in SDLT

Starter Homes

▪ Imposed 20% discount for first time home buyers in exchange for reduced requirement for affordable housing ▪ Inland secured consent for one of the first starter home schemes in the country

Driving demand Assisting supply

2 3 4 1

Permitted conversion

▪ Permanent extension of permitted development rights for

• ffice-to-residential conversions from April 2016

▪ Government reviewing how to allow demolition of offices and replacing with new build residential

Government’s Housing White Paper

▪ Range of initiatives and funding to speed up the planning and construction process and to assist SMEs and new entrants into the market ▪ Summary of the benefits for Inland included on next slide

Planning reform

▪ Focus on reducing the time planning applications spend with decision makers ▪ “Delivery test” introduced to ensure delivery of local homes within a reasonable timeframe

Government to provide £5 billion to stimulate housebuilding projects

▪ £2 billion to accelerate construction for homes on publicly

• wned land

▪ £1 billion of short term loans to small housebuilders ▪ £2 billion of long term funding for infrastructure and large projects to deliver up to 200,000 homes

4 3 2 1

Planning for the right homes in the right places

▪ Government and Local Authorities to release land with potential for 320k homes in this parliament with presumption that brownfield land is suitable for housing ▪ Higher densities in urban locations with good public transport ▪ Better local plans with repercussions if targets not met ▪ £45m land release fund to assist public sector land owners with remediation and infrastructure costs ▪ Support and assistance to set up brand new settlements using garden village/town model

Supportive political environment – Housing White Paper February 2017 18

Building homes faster

▪ Increase capacity and capability of Local Authority planning teams by raising planning fees by 20% plus a further 20% for high housing need areas ▪ £2.3bn infrastructure fund to provide infrastructure at the right time in the right places and speed up utility connections ▪ Removing unnecessary planning conditions and introducing more sensible approach to protected species ▪ Address skills shortage ▪ Housing delivery tests for Local Authorities ▪ Review of developer contributions to infrastructure – S106 and CIL – as agreements take too long

Diversifying the market

▪ Home Building Fund for SME housebuilders - £1bn short term and £2bn long term/larger projects and infrastructure ▪ Accelerated Construction Programme – £2bn fund for partnerships with developers to build out government land; government to provide itself with outline planning permission for ACP land and undertake remediation works to de-risk ▪ Encourage institutional investors for PRS – pooling Local Authority pension funds, £3.5bn fund for acquisition of new build PRS units ▪ Support Housing Associations and Local Authorities to build more ▪ Encourage modern construction methods to mitigate skills shortage, reduce costs and assist SMEs into the market

Helping people now

▪ Help to Buy to continue until at least 2021 ▪ Starter Homes Scheme – vacant and unviable employment land to have limited grounds for refusal and on brownfield land in the greenbelt ▪ £1.2bn Starter Home Land Fund to support preparation of brownfield sites for development ▪ Help to Buy ISA and Lifetime ISA ▪ £7bn Affordable Homes Programme to build 225k affordable homes in this parliament – now includes Rent to Buy and Shared Ownership

Structural supply / demand imbalance in Inland’s favour 19

▪ Significant structural undersupply of housing nationally and particularly in the South East ▪ Estimated requirement of 300,000 homes per annum nationally ▪ Government policies may help stabilise house price growth and increase supply, but it remains to be seen if the 100,000 annual shortfall will be significantly reduced

Source: Office for National Statistics

House prices to 28 February 2017 Seasonally adjusted trends in quarterly housing starts and completions, England 10,250 15,900 38,390 4,190 9,550 22,380 8,120 10,770 11,100 East Midlands East of England London North East North West South East South West West Midlands Yorkshire and The Humber Net additional dwellings

Source: Halifax House Price Index

UK housing demand gap

Source: House of Commons Library, Housing needs and demand Source: Office for National Statistics

Large and growing land bank in South and South East England

▪ 7,151 plots of which 2,440 have planning consent ▪ Continued strong demand for land with planning consent in the South and South East of England from housebuilders and Registered Providers

Strong fundamentals underpin an attractive investment case 20

Clear and agile business model Diversified revenue streams with visibility on future earnings

▪ 389 private residential units under construction ▪ Annualised rental income of £2.3 million provides contribution towards overheads

Highly experienced management and specialist development teams

▪ Highly experienced team having worked together for 27 years successfully identifying and securing suitable land and property and maximising each project's potential ▪ 100% track record in securing planning permissions across all our sites by planning team with over 50 years combined experience

Strengthened balance sheet

▪ Transformed borrowing profile with 98% due after more than one year and cheaper funding costs ▪ Net debt of £78.4 million representing 42.2% of Adjusted EPRA net asset value

Supportive market environment

▪ Sustainable owner / occupier demand particularly at the Inland pricing level ▪ Supportive government policies are increasing demand and mitigating supply barriers ▪ Flexibility to realise value in land bank through a number of channels including:

• Housebuilding;
• Consented plot sales;
• Sales to housing associations; or
• Investment property

Note: All figures as at or for the period ending 31 December 2016 unless stated otherwise

Decimal Place, Chiltern Avenue Amersham, Buckinghamshire HP6 5FG Telephone: 01494 762450 Email: info@inlandplc.com www.inlandhomes.co.uk