On 19 March 2020, Inland Homes provided the market with an interim trading update. The Covid-19 situation has since evolved rapidly, with further Government advice that has severely impacted the UK housing market.
As ever, the Group’s priority is to ensure the health and wellbeing of its employees, sub-contractors and customers. Having considered the Government guidance, a range of measures have been put in place. All office-based staff are now working from home and we have closed all our sales centres. The Group has also decided to close and suspend construction works on most of its sites.
For the time being, the Group is still constructing on a small number of sites, including a number of its key partnership housing developments, where the stage of construction allows for safe operation through strict implementation of social distancing in line with Government guidance. These sites continue to produce monthly cash flow, although as the current crisis evolves and supply chains deteriorate, it is difficult to predict for how much longer these will remain operational.
As at 19 March 2020, Inland had five significant land sales at an advanced stage of documentation with solicitors, three of which were to major national housebuilders. The changes in the UK housing market last week have resulted in decisions by many housebuilders to temporarily cease land purchases and these five land sales have now been aborted. Despite this short-term hiatus, these sites are well-located and highly attractive assets in areas of high housing demand. The Group has achieved legal completions over 52 homes during the month so far, and we are expecting further sales of homes to be completed this month in line with our previous announcement.
As a consequence, the extent of the overall disruption will now inevitably have a material impact on the Group’s results for the half year ending 31 March 2020. In light of the ongoing uncertainty, the Group is currently unable to quantify the impact of COVID-19 on its financial and trading performance and accordingly is suspending all existing financial guidance until such time as clarity returns.
The Group is pursuing a range of measures to proactively conserve cash, including cutting its overheads and investigating all Government assistance schemes. Accordingly, a significant proportion of employees are planned to be furloughed under the Coronavirus Job Retention Scheme. Furthermore, the Executive Directors and the wider management team will take a substantial reduction in basic salary from 1 April 2020.
The Group estimates it will have approximately £12m cash at the half year end and will adopt stringent cash management procedures to conserve its resources until conditions improve. Our housebuilding revolving credit facility with HSBC has a current headroom of £6.3 million plus an accordion facility of £10 million. As the significant land sales referred to above are not progressing, the Group’s net debt level at 31 March 2020 will be similar to that at 30 September 2019 and the planned reduction in debt will resume once the market returns to some normality.
Given the uncertainties caused by the impact of COVID-19 and the need for prudent cash management, the Board has also resolved to cancel the second interim dividend of 2.25p per share due to be paid on 12 June 2020, which now provides a cash saving of £4.6 million.
Stephen Wicks CEO commented:
“These are unprecedented times, with the effect of the pandemic causing a rapid deterioration in the housing market. Our immediate focus is to conserve cash, with the actions detailed above giving the Group the flexibility to manage the business and its high quality assets until normality returns to the market.”