Chief Executive's Review

Stephen Wicks Chief Executive Director

This has been a significant year for our Group, with record sales of 440 building plots, together with the sale of 248 private homes and 39 to housing associations

I am delighted to report on a record year for Inland with the business achieving 48% growth in net assets per share to 43.92p (2014 restated: 29.63p per share) and a profit before tax of £34.0m (2014 restated: £9.6m).

As set out in the Chairman's Statement, this has been a significant year for our Group, with record sales of 440 building plots, together with the sale of 248 private homes and 39 for housing associations. Our average selling price of £264,000 for our private units means that we are at the end of the market where our product is affordable and where demand from buyers is strongest.

This outstanding set of results has been helped by a revaluation surplus of £14.5m on the existing housing portfolio at Wilton Park, Beaconsfield, Buckinghamshire where 76 houses are being held as investment properties. This revaluation should help give shareholders an indication of some of the underlying value behind Inland's stated NAV per share. These properties are being rented out on assured shorthold tenancy agreements with 31 properties going under offer to tenants in the first few months. Once all the houses at Wilton Park are let, we expect gross residential rental income on this project to exceed £1m per annum.

Despite the utilisation of 727 plots through sale of land and construction of homes, our land bank has continued to rise and now stands at a record 5,176 plots. This is testament to our small land team led by Paul Brett, the Group Land Director.

The status of the land portfolio is as follows:

Plots
Owned or contracted with planning consent or resolution to grant planning consent1,086
Owned or contracted without consent1,344
Held within joint ventures without consent1,329
Plots controlled or terms agreed with consent or resolution to grant planning consent114
Plots controlled or terms agreed without consent1,303
Total5,176

Whilst our primary business is residentially led brownfield regeneration, wherever possible we ensure that our assets generate an income stream that contributes significantly towards the running costs of the business. Our short term target is to achieve a rental income in excess of £2m per annum.

The substantial increase in work in progress within our housebuilding operations and the continuing investment into good land opportunities, particularly into major projects such as Wilton Park, has led to an increase in our borrowings after the year end and the Board is comfortable with the position as the underlying asset value of the business has also grown substantially. The increased borrowings are also supported by a strong forward sales position and growing recurring rental income.

The Group has in the order of 50 projects at various stages of the development cycle and I set out below further details on a number of the more significant ones.

WILTON PARK, BEACONSFIELD, BUCKINGHAMSHIRE

We achieved adoption of the planning brief for the development of this site during the course of the year. This confirms the capacity for at least 300 new homes, together with commercial space and the retention of a substantial number of existing former MOD houses.

We now intend to apply for planning permission based on the principles set out in the brief and, in the meantime, expect to commence the construction of the first section of the new access road into the site from the Pyebush roundabout. This will also serve as the first section of the long awaited Beaconsfield relief road which will connect to Amersham Road (A355) in due course. In the short term, and until consent is granted, our focus will be on generating short term income and preparing the site for development.

This site is our 'jewel in the crown' and is geographically situated in one of the most affluent parts of the country outside Central London. We estimate the gross development value to be in the order of £250m. Shareholders can rest assured that we are managing and nurturing this asset very carefully.

Showhome at Drayton Garden Village, West Drayton in Middlesex

DRAYTON GARDEN VILLAGE, WEST DRAYTON, MIDDLESEX

We are very proud of what has been achieved on this project. We have turned what was a derelict wasteland of rundown buildings into a superb community of new homes in a highly landscaped environment with a number of beautifully laid out village greens and children's play areas.

A combined heat and power system was installed with a new energy centre that delivers hot water and heating to the development in an extremely efficient manner, with estimated carbon savings of 40% when compared to a more conventional system.

The sale of 205 building plots to a major housebuilder in June 2015 means that our work is now nearly finished. The development of 43 new homes by Inland, which are all pre-sold, will also conclude in this financial year.

The development has been extremely profitable and has demonstrated the ability of Inland to manage a large-scale complex development from inception through to completion, creating an excellent living environment in the process. The development is also experiencing additional value brought about by the new Cross Rail station at West Drayton which will be an easy walking distance away.

revenue

£114.2m

2014 (restated): £58.9m

profit before tax

£34.0m

2014 (restated): £9.6m

net asset value per share

43.92p

2014: 29.63p*

revenue segments (%)

* Due to the introduction of IFRS 10 the Group has consolidated the results of DGVL for the years ending 30 June 2015 and 2014. Prior years were accounted for under IAS 27 and SIC 12 and these standards did not require the consolidation of DGVL.

WEST PLAZA, ASHFORD, MIDDLESEX

The development of 152 apartments on a complex, brownfield former hospital site was completed during the year. The apartments proved to be very attractive to a substantial number of first time buyers and investors. A block of 59 units was sold to an investor prior to commencement of the development and this underpinned the financing for the project. The demand for the homes was very strong with all units sold well ahead of completion of the building works.

THE VALE, ACTON, LONDON

This site is a former builder's merchant yard, located in a prime location on a one acre plot. The property was acquired during the year and leased back to the former owner whilst it is being taken through the planning process.

We have now made a planning application for 95 apartments, including some affordable housing, and commercial space. We expect to receive planning consent during the current financial year for a scheme that is expected to generate a gross development value of approximately £35m.

MERIDIAN WATERSIDE, SOUTHAMPTON

This seven acre brownfield site is the former home of ITV Meridian Studios fronting the River Itchen. A resolution to grant planning consent for 351 units plus some commercial space was secured during the year, with no affordable housing provision. Site clearance has commenced and construction of the first phase of 54 homes will start in the current financial year. We expect the entire development to achieve a gross development value of £65m.

CARTER'S QUAY, POOLE, DORSET

Our development of a small part of the former Pilkington's Tiles factory, where we have consent for 268 homes, is now well under way with 41 homes now completed.

We are currently selling on average over four homes per month on this project, where 3 bedroom houses are achieving an average price of £320,000. This site has undergone a dramatic transformation from what was a derelict industrial estate.

CALLIS YARD, WOOLWICH

During the course of the year we obtained consent for 152 apartments on this derelict town centre site and subsequently completed a very profitable sale of the site to another housebuilder.

JOINT VENTURE WITH CPC GROUP

The following two sites have now been acquired by our joint venture with CPC Group Limited:

LILY'S WALK, HIGH WYCOMBE

This former gasworks site is in the town centre opposite the Eden Shopping Centre and is subject to significant remediation to prepare for development.

Detailed plans are due to be submitted shortly to the local authority for approximately 240 homes and circa 16,000 ft² of commercial space.

BROOKLANDS COLLEGE, CHURCH ROAD, ASHFORD, MIDDLESEX

This is a ten acre site in the town centre where a scheme is being prepared for approximately 300 residential units and some commercial space. A planning application is expected to be submitted in spring 2016.

During the nine months since the inception of the JV, a total of £13.3m has been committed on the above two projects, of which Inland's share is £2.6m.

We continue to maintain our success rate in securing planning permissions on our brownfield sites and are pleased to see a growing recognition of our regeneration skills by landowners, particularly local authorities where we are working in partnership with a number of councils to bring forward regeneration and much needed homes in Southern England. Of particular note on this front is our joint venture with Southampton City Council where we have signed heads of terms on a site, 'Chapel Riverside'. This opportunity is for approximately 350 homes and a new commercial centre and will regenerate ten acres of land owned by the Council. We expect the Development Agreement with the Council to be signed within the next few months.

MARKET

The UK housing market slowed down in the early part of 2015, in all likelihood due to the uncertainty caused by the May 2015 general election. Due to the continual undersupply of new housing and the expectation of low interest rates for the foreseeable future, it is more likely that house prices in Southern England will continue to rise. The market has recovered since the general election and the changes to stamp duty and the 'Help to Buy' scheme have been of significant assistance. The introduction of the National Planning Policy Framework has led to a much needed increase in residential consents; however, this increase is insufficient to meet the country's demand especially in areas of greatest need.

OUTLOOK

With purchasers' confidence high, supported by a removal of any political uncertainty and continuing strong demand for homes and building land, we have every confidence in delivering further significant progress in the current financial year.

Stephen Wicks

Chief Executive Officer

28 October 2015