PRELIMINARY RESULTS PRESENTATION Year ended 30 June 2016 DELIVERING - - PowerPoint PPT Presentation

DELIVERING VALUE THROUGH HOUSEBUILDING AND BROWNFIELD DEVELOPMENT

OCTOBER 2016 PRELIMINARY RESULTS PRESENTATION

Year ended 30 June 2016

Our business 01 Who we are Strategy Business

• bjectives
• AIM listed with market cap of £125m
• Land regeneration and residential development business in

Southern England

• 100% track record in obtaining planning consents
• Identify brownfield land opportunities with strategic angles
• Acquire brownfield sites unconditionally; secure options over

strategic greenfield or greenbelt land

• Add value by navigating through complex planning system
• Sell consented plots; develop lower cost homes; control

substantial land bank; generate rental income

• Increase net land bank and underlying NAV
• Expand housebuilding operations
• Increase rental income
• Joint ventures with major landowners and financial partners

01

Applewood, Boreham St Johns, Chelmsford Carter’s Quay, Poole

Operational

• Robust set of results
• Strengthened management team
• Land bank increased to 6,681 plots (2015: 5,176 plots) of which

1,163 have planning consent; Strategic land with over 1,600 plots across 17 sites and over 330 acres

• 147 private units (2015: 248) sold at average price of £337,000

(2015: £264,000)

• Forward sales of £22.5m
• Sold 425 residential plots (2015: 440)
• 321 units under construction
• Our marketplace unaffected to date by Brexit decision
• First major joint venture with a Local Authority (Southampton City

Council)

• Acquisition of substantial regeneration project in Cheshunt,

Hertfordshire in a joint venture

Group highlights 02

Financial

• EPRA net asset value of 86.63p per share and adjusted EPRA net

asset value of 91.54p per share

• Profit before tax of £32.9m (2015: £34.0m) including revaluation

surplus of £18.0m (2015: £14.5m)

• Housebuilding revenue of £51.5m (2015 : £66.1m)
• Revenue from plot sales of £43.3m (2015 : 39.6m)
• Gross margin on housebuilding increased to 21.9% (2015 : 20.9%)

after increased costs due to failed contractor

• 165% increase in rental income to £2.1m (2015: £0.8m)
• Revaluation gain of £18.0m, principally on investment properties

at Wilton Park, Beaconsfield

• 30% increase in net asset value to £116m
• 29% increase in proposed final dividend of 0.9p (2015 : 0.7p)
• Strong balance sheet with cash balances of £16.7m (2015:

£21.4m)

• Improved borrowing facilities

2016 £101.9m 2015 £114.2m Change

• 10.8%

Comments Revenue Lower number of private units sold Gross margin 29.0% 30.1% Profit before tax (including valuation gain) £32.9m £34.0m

• 3.4%

Profit before tax (excluding revaluation gain) £14.9m £19.6m

• 23.8%

Increased profit in previous year due to change in accounting policy Earnings per share 14.23p 14.67p

• 3.0%

Investment properties £51.7m £34.0m +52.1% Revaluation of residential properties at Wilton Park Investment & loans to JVs £11.3m £4.7m +136% Increase in number of JV projects Inventories £146.8m £121.0m +21.3% Other financial liabilities £22.4m £23.5m

• 3.4%

£15m deferred consideration outstanding on Wilton Park Net debt £54.6m £34.9m +56.4% Increased investment in sites and work in progress Net gearing 47.0% 39.2% +19.9% NAV per share 57.5p 43.9p +31.0% Impact of revaluation of investment properties and profits EPRA NAV per share 86.6p N/A N/A Reflection of unrealised value within projects Adjusted EPRA NAV per share 91.5p N/A N/A Reflection of unrealised value within projects

Financial highlights: strong results delivered across all operating metrics 03

Revenue & gross profit analysis 04

• 147 private units sold (2015: 248 units)
• 32% (2015: 31%) of private sales undertaken with Help to

Buy

• Average selling price of £337,000 (2015: £264,000)
• 80% of housebuilding revenue from sale of houses (2015:

42%)

• Overall gross margin 29.0% (2015: 30.1%)
• Gross margin of 21.9% (2015: 20.9%) on housebuilding
• Forward sales of £22.5m
• 425 building plots sold for £43.3m (2015: £39.6m)
• Significant increase in rental income with current

annualised amount of £2.6m

42% 51% 3% 2% 2%

Revenue by segment - 2016

Land sales Housebuilding Contract Rental and

• ther

Hotel 35% 58% 6% 1%

Revenue by segment - 2015

Land sales Housebuilding Contract Rental and

• ther

55% 37%

• 2% 6%

Gross profit by segment - 2016

Land sales Housebuilding Contract Rental and

• ther

49% 40% 8% 3%

Gross profit by segment - 2015

Land sales Housebuilding Contract Rental and

• ther

2016 (£m) 2015 (£m) Comments Investment Properties 51.7 34.0 Revaluation uplift on residential properties at Wilton Park Joint Ventures 11.3 4.7 Increased investment in JV projects Associate 1.0

• 25% interest in Troy Homes Ltd

Inventories 146.8 121.0 Cash & cash equivalents 16.7 21.4 Borrowings <1 year (40.1) (43.9) Borrowings > 1 year (31.1) (12.4) ZDPs and Barclays RCF Deferred consideration (22.4) (23.5) £15m due on Wilton Park, Beaconsfield Equity attributable to shareholders 116.0 88.8 NAV 57.5p 43.9p Adjusted EPRA NAV 91.5p N/A

Summarised balance sheet 05

43% 20% 0% 7% 21% 9% 0%

Assets by segment - 2016

Land Housebuilding Contracting Investments Investment properties Other Hotel 49% 16% 0% 4% 18% 13%

Assets by segment - 2015

Land Housebuilding Contracting Investments Investment properties Other Hotel 10% 88% 2%

Investment property - 2016

Development land Residential Commercial 24% 76%

Investment property - 2015

Development land Residential

Main drivers of EPRA NAV Growth 06

184.7

(0.8) (1.1) (6.3) (7.1) (3.5) (2.8) 89.1 17.1 11.3 1.7 18.0 1.2 67.9 0.0 20.0 40.0 60.0 80.0 100.0 120.0 140.0 160.0 180.0 200.0 Jun-15 Land sales Housebuilding Rental income Revaluation of investment properties Contracting Provision for doubtful debts Overheads Interest Tax Dividends Other movements Unrealised value in inventories Jun-16

EPRA net asset value

Land bank

07 Land Portfolio

• Strategic focus on South East commuter and high growth locations
• Strong and visible pipeline of opportunities, both within land bank and housing developments
• Delivery of first time buyer and mid-tier price range homes into high-demand areas in the South East and Outer London Boroughs

08 Visible and growing pipeline of future opportunities

“Significant brownfield and strategic land bank with visible pipeline of opportunities”

1,215 1,057 1,318 1,086 1,048 380 307 605 1,344 1,124 1,329 2,589 114 49 347 942 1,811 1,303 1,805 1,942 2,306 3,734 5,176 6,681 66

• 1,000

2,000 3,000 4,000 5,000 6,000 7,000 8,000 FY 2012 FY 2013 FY 2014 FY 2015 FY 2016

Land Bank

Plots controlled or terms agreed without consent (including strategic options) Plots controlled or terms agreed with consent or resolution to grant planning consent Managed or held within joint ventures without consent (contracted or terms agreed) Managed or held within joint ventures with consent (contracted or terms agreed) Owned or contracted without planning consent Owned or contracted with planning consent or resolution to grant planning consent Total

727 1249 2,416 3,976 5,518 1,215 1,057 1,318 1,200 1,163 1,942 2,306 3,734 5,176 6,681 500 1000 1500 2000 2500 3000 3500 4000 4500 5000 5500 6000 6500 7000 7500 FY 2012 FY 2013 FY 2014 FY 2015 FY 2016

Plots owned / managed (number)

Plots Without Planning Permission Plots With Planning Permission total

Strategic, 1349 To be progressed, 1014 Pre- application discussions, 1,709 Planning applications submitted, 1446

Planning status of plots in land bank

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)

• 968

2 616 3 1,005 3 1,171 Owned or contracted 35 2 46 1 982 8 96 3 714 Plots controlled or terms agreed 1,314 16

• 111

1 345 3 89 Grand Total 1,349 18 1,014 3 1,709 12 1,446 9 1,974

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 80,000 2 62,764 3 131,675 Owned or contracted

• 6

141,527

• Plots controlled or terms agreed
• 1

53,820 Grand Total 1 80,000 8 204,291 4 185,495

10

Wilton Park, Beaconsfield, Buckinghamshire

• 114 acres
• Estimated GDV in excess of

£250m

• Development Brief adopted

in 2015 for 350 homes

• Access road from Pyebush

roundabout to be opened soon

• Short term rental income in

excess of £1.4m p.a.

• Planning application

expected to be submitted by 31 December 2016

• Site included in Local

Authority’s Preferred Option list for Green Belt release

• Site is the former

headquaters 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 in early 2018

• Expect approximately

1,000 residential units on 20 acres of which the JV

• wns 13 acres
• Half an hour to Liverpool

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

Cheshunt, Hertfordshire

11

• Site located on the River

Itchen close to Ocean Village and St Mary’s Stadium

• Development agreement

with Southampton City Council

• Planning application for

approximately 450 residential units and 6,000 sq m to be made before December 2016

• Technical challenges

include provision of 200m

• f sea wall; major

archeological dig; relocation of 4,000 cubic metres of storage tanks

• Planning permission

expected in Spring 2017

Chapel Riverside, Southampton

12

Investment in in-house expertise to mitigate rising costs

13

Source: Housebuilder magazine

National skills shortages Building material costs

• Skilled labour shortage has been a significant factor in recent

housebuilding cost inflation

• Materials cost inflation has flattened following a period of

sustained increases from 2009, however these are expected to rise by 3.5% - 4.0% pa due to the weakness in sterling

• Inland is investing in housebuilding expertise as part of a

deliberate strategy aimed at addressing the well-publicised growth in construction costs and planned expansion

Supportive market environment

Compelling market opportunity 14

UK mainstream house price increases (5 year)

Source: Savills

Economic forecasts

Source: OBR, Halifax, Bank of England, BNP Paribas

South East statistics

2016 2017 2018

GDP growth 2.0% 0.8% 1.8% Inflation 0.8% 1.9% 2.4% UK base rate 0.25% Expected to increase to 1.0%

23.4% Outer commute 30 – 60 minute train journey from London 24.0% Inner commute Up to minute train journey from London 24.5% Suburban Wider M25 21.5% Central London

London South East Population 8,500,000 8,900,000 Annual population growth rate (2014) 1.4% 0.88% Average weekly earnings £660 £552 Age of first time buyers 52 45 Average house price (Feb 2016) £524,000 £368,000 House price inflation 6.8% 7.7% Average unemployment 6.1% 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

London by commute time (5 year)

2 3 4 1

Help to Buy (HTB)

• Facilitates deposit as low as only 5%, through Equity Loan

scheme

• Represents 32% of Inland’s unit sales

Supportive political environment 15

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

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 of offices to residential

• Permanent extension of permitted development rights for
• ffice-to-residential conversions from April 2016

Relaxation of building constraints on green belt and green field sites

• Permitted allocation of appropriate small-scale sites in the

Green Belt specifically for starter homes, designed for young families

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 to deliver up

to 200,000 homes

Structural supply / demand imbalance in Inland’s favour 16

• There exists a structural undersupply of housing nationally and particularly in the South East
• Estimated requirement of 250,000 homes per annum nationally
• Government policies may help stabilise house price growth but are unlikely to increase supply significantly, leaving an expected annual

shortfall of 100,000 homes

Source: Office for National Statistics

House prices to 30 September 2016 Seasonally adjusted trends in quarterly housing starts and completions, England

Sorce: Halifax House Price Index

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 RICS UK Housing Market Survey UK housing demand gap

Source: House of Commons Library, Housing needs and demand

Large and growing land bank in South East England

• 6,681 plots of which 1,163 have planning consent
• Continued strong demand for land with planning consent in the South East and Outer London Boroughs

from housebuilders and Registered Providers

Strong fundamentals forming an attractive investment case 17

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

• Consented plot sales represent 42.5% of total revenue (57.7% of gross margin)
• 321 private residential units under construction
• Annualised rental income of £2.6 million and growing provides contribution towards overheads

Highly experienced management and specialist development teams

• Highly experienced team having worked together for 26 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

Strong balance sheet with prudent capital structure

• Focused on maintaining borrowings at a manageable level through a strong focus on cash management

and vendor financing

• Net debt of £54.6 million representing 29.6% 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:
• consented plot sales;
• sales to housing associations;
• housebuilding; or
• investment property

Note: All figures as at or for the period ending 31 December 2015 unless stated otherwise

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