With 2012 looking to be an important year for Inland Homes I was pleased to meet with Chief Executive, Stephen Wicks, recently.  From our conversation I gained a clear impression that he is pleased with the Company’s progress and particularly enthusiastic about some potential future developments.

AimZine first covered Inland in this February 2011 article and since that time the Company’s share price has declined from 19.25 to 16.75, despite positive results from the Company. The CEO is particularly unhappy about the performance of the shares and the board are considering a number of measures, including the paying of a dividend, which they believe will encourage a fairer valuation.

Building on the Core

Inland’s core business is trading in land, whereby the Company enhances the land’s value by obtaining planning permission. They concentrate on brown field sites in the South East of England. Stephen explained that Inland Homes always purchases land which is earmarked for building and he reflected that his team has consistently been successful in gaining planning approval, commenting that “the length of time to obtain the permission is the only variable”.

Once planning permission has been granted on a site, the Company will usually sell on the building land to house builders. However, recently Inland has increasingly managed the construction of more homes itself – both using its 33% owned partner, Howarth Homes and also other contractors. To reflect this change in model the Company recently changed its name from “Inland” to “Inland Homes”.

Stephen indicated that Inland Homes expects to build 50 homes in calendar year 2012 and are planning to double this figure in 2013, with further growth anticipated in 2014. As well as earning the Company extra margin, Inland is able to control the quality of the build on its sites by completing the building work itself. This is felt to be particularly important in the early stages of a site’s development. Another advantage in house building for Inland is that bank funding is now relatively easy to obtain for this activity.

Between 6 and 10 of Inland’s new build homes are targeted for sale before the end of the current financial year (30 June 2012). This will bring a small addition to profits in the current year and a more significant contribution is expected in the following years.

Stephen also explained that the Company is expecting to produce some additional earnings from consultancy in the current year. Inland has been providing asset management services to other companies and has recently obtained planning permission for 67 units for a client.  Inland is currently working on 2 other projects in this area and is bidding for larger projects.

Stephen Wicks                          

Carter's Quay Poole                           

Drayton Garden Village (DGV)

DGV with 537 plots is the largest site Inland is working on. As we explained in our February 2011 article this site is being developed by a joint venture company, Drayton Garden Village Ltd – see their website at www.draytongardenvillage.com. Two further instalments are due to be paid to Defence Estates for the purchase of the DGV land. These are £7 million by the end of March this year and £6.8 million in March 2013. Inland currently owns 58% of the DGV Joint Venture Company and this will increase to 90% if, as expected, both payments are made on schedule.

I asked Stephen about the funding arrangements for DGV. He indicated that some shareholders have expressed concern about the arrangements for funding DGV. In particular they did not like another

party taking some of the profits and also thought it made it difficult to value the listed company.  Stephen understands investors’ concerns but explains that the method provides access to a substantial level of funding when traditional funding options are either not available or very expensive. It has also allowed Inland to purchase a substantial site without having to risk a large part of its own capital.

As well as the Drayton Garden Village sites, Inland has major projects at Chelmsford, Poole, Farnborough and Croxley Green. The Company will be providing an update on progress with these sites in its Interim Results which are due to be released shortly. The Poole site is of particular interest at present following the recent opening of the town’s Twin Sails Bridge.

Drayton Garden Village                       

“Buckinghamshire”

Inland have been negotiating for some time for the purchase of a new site from the Ministry of Defence.  Stephen indicated that this is a prime site in Buckinghamshire with an excellent rail connection for commuters. He describes this site as a fantastic opportunity where he expects that Inland Homes will obtain permission for a minimum of 300 homes. 

Details of the Buckinghamshire site are still confidential but Stephen did say that Inland has already purchased several acres of land to provide road access to this new site. No decision has been made on funding for this new site.

Share Price

In their 2011 results Inland reported their Net Asset Value (NAV) per share as 26.49 pence excluding the future value from DGV.  The Directors also stated in these results that they believe that the potential share of profits from DGV would be approximately 7 pence per share.

Stephen expressed some frustration with the Company’s share price (16 pence at the time of writing) as it fails to recognise the value of the assets. (It also makes no allowance for future profits from current and future projects – MC).  The Board are considering a number of options to encourage new investors. One of these is to pay a modest annual dividend.

A major negative factor for Inland from the outset of the credit crunch has been the difficulty in obtaining bank funding and this has had a major detrimental impact on the shares - the company’s problems with previous banking arrangements are explained in the Company’s 2011 results.  Today the company is finding alternative routes for funding, including loans from private investors’ SIPPs and is no longer seriously constrained by lack of funds.

One thing which may have spooked some investors was Stephen’s sale of a proportion of his own shareholding in December. Stephen explained that he has recently purchased a new house and used the share sale to complete the funding of this project. Stephen retains over 16 Million shares in the Company which he declares he has no intention of selling at the current level.  At the time of Stephen’s share sale the other four directors purchased shares in the Company and the table below, issued with the December RNS, summarises the transactions:

AimZine Comment

Inland’s shares were badly impacted in the lead into the credit crunch. Indeed in 2008 the shares fell from 40 pence to 6.5 pence. Since that time the Company has adjusted its model to suit current conditions and has found alternative routes to funding.  The shares have recovered to around 16 pence but still trade well below their Net Asset Value. The shares of some House builders have performed particularly strongly in the first 2 months of 2012 but as yet Inland remains in the doldrums. Perhaps the newsflow from 2012 will remedy this situation.

Poole's Twin Sails Bridge              

St John's Hospital site Chelmsford              

Written by Michael Crockett

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