Inland Homes has breached a number of covenants on its debt with two lenders and forecast full-year losses will more than double from its September prediction of £37m to £91m when it publishes its figures at the end of next month.
The group said the economic outlook for the UK housebuilding industry had deteriorated since its initial update, with rising interest rates, high inflation and the cost of living crisis impacting the ability of first-time buyers to purchase new homes. It said this meant that “the future prospects for the industry have taken a turn for the worse” with sentiment in terms of market confidence and property valuations being adversely affected.
The business remains a going concern but the loss means it has breached gearing covenants with one lender and net asset and quick ration assets with another. Combined borrowings with these two lenders are £49.3m.
Inland Homes said: “These represent the only breaches of financial covenants on any of the group’s borrowings and Inland Homes has already had discussions with the lenders concerned to procure waivers for both the existing and any forecast expected future covenant breaches for the two lenders concerned. While the board believes that these waivers will be forthcoming, they consider that if required, these borrowings can be refinanced.”
The group ended its financial year with a land portfolio of 8,578 plots, including 3,680 plots that have planning consent or a resolution to grant planning consent. However, it said recent announcements by the government had led to a significant amount of uncertainty about the planning system, which will further slow the progress that could be made in converting credible land opportunities for development and the enhancement of many local communities.
It added that a number of local authorities had withdrawn or suspended their proposed local plans, thereby putting strategic planning in a state of paralysis.
To help shore up finances, Inland Homes has sold its strategic land portfolio of more than 2,822 plots in the South of England for £9.5m.
The group, which is undergoing a strategic review of the whole business, put the portfolio up for sale following increasing restrictions on building on the green belt. Some 81% of land in the portfolio is in the green belt.
Inland Homes said: “In light of recent government announcements strengthening green belt restrictions, against the backdrop of an already challenging planning system, a decision was made to dispose of Inland’s greenfield “strategic land” option portfolio consisting of 2,822 potential plots… the sale of the strategic options will enable Inland to focus on its roots of enhancing the value of brownfield land through the planning process.”
The sale has resulted in a £3.5m profit for the business.
The strategic review of the business comes after what chairman Simon Bennett described as an “extremely disappointing” year for the business. Results of the review, being conducted by Lazard, will be revealed in March.
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