Inland Homes (INL) has been steadily transforming itself into what chief executive Stephen Wicks calls a more conventional housebuilder. And while it still acquires brownfield sites to bring through the planning procedure and sell on to hungry housebuilders, a lot of the land so acquired is being used to fuel its own explosive expansion into building homes.
- Housing output set to grow sharply
- Low gearing
- Land bank valued at cost
- Accelerating demand for land from housebuilders
- Modest yield
- Planning process still slow
The figures speak for themselves. In the first half of last year it sold 15 homes, but this grew to 47 in the six months to December 2013. And this is expected to grow further to 140 by the June year-end and to 270 in the next financial year. To help accommodate this level of growth along with selling to housebuilders, the land bank has been increased to a record 3,114 plots.
Further income is generated through the group's development called Drayton Garden Village (DGV). This 31-acre site was bought from the MoD in 2009 for £24.3m, but it came with a deferred consideration of £23.8m, and to protect the group the project was held in an off-balance sheet entity. This structure meant Inland initially shared in 35 per cent of the profits, but as deferred payments have been paid off, its share of the profits is now 90 per cent. More than half of the plots have been sold off, but at the half-way stage there were still a further plots 295 with consent. In fact, the company believes that future profits from DGV will be worth around £5.4m. In the latest half year, fee income derived from this operation jumped from £681,000 to £3.34m, while private home sales jumped from £3.12m to £7.93m.
| INLAND HOMES (INL) | ||||
|---|---|---|---|---|
| ORD PRICE: | 47p | MARKET VALUE: | £95m | |
| TOUCH: | 47-48p | 12-MONTH HIGH: | 51p | LOW: 26p |
| FORWARD DIVIDEND YIELD: | 1.5% | FORWARD PE RATIO: | 12 | |
| NET ASSET VALUE: | 30p | NET DEBT: | 30%* | |
| Year to 30 Jun | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p)** | Dividend per share (p) |
|---|---|---|---|---|
| 2011 | 21.4 | 3.5 | 2.1 | nil |
| 2012 | 6.1 | 1.6 | 0.4 | nil |
| 2013 | 31.1 | 5.1 | 2.0 | 0.27 |
| 2014** | 44.3 | 8.1 | 3.2 | 0.5 |
| 2015** | 65.0 | 10.0 | 3.9 | 0.7 |
| % change | +47 | +23 | +22 | +40 |
Normal market sized: 7,500 Market makers: 9 Beta:0.75 *Includes zero-dividend shares worth £10m **finnCap forecasts, adjusted EPS figures | ||||
Inland's land development business also remains important. Bringing land through the tortuous planning process can take years, but ideally the finished article attracts double the price that was paid for it. Revenue can be large and lumpy, depending on the timing of any particular sale, and in the first half no sales completed. Broker finnCap expects 250 plots to be sold in the second half, though, which could bring in £11m.
Current projects in the pipeline include the former Ashford Hospital, now known as West Plaza. Of the 152 apartments planned, 107 have already been contracted or reserved before any completions, and the scheme is expected to bring in revenue of £31m. Wilton Park at Beaconsfield is also expected to come through the planning procedure later this year, with room for around 300 homes and commercial space. Gearing remains modest and Inland recently raised a fresh £1.1m through the issue of zero dividend preference shares.
