Inland ZDP PLC

31 January 2023

INLAND ZDP PLC

AUDITED RESULTS FOR YEAR ENDED 30 SEPTEMBER 2022

KEY POINTS

The board of Inland ZDP PLC (the "Company") announces the results for the year ended 30 September 2023 and the publication of its annual report.

The Company is a specialist funding vehicle only and has no business, operations or employees of its own.  It has issued 18,101,857 zero dividend shares ("ZDP shares") at various prices between 20 December 2012 and 19 November 2019, raising £22.28m cash which has been lent to its holding company, Inland Homes plc ("Inland"). 

ZDP shares are Listed and traded on the Main Market of the London Stock Exchange and are due to be redeemed for 201.4p cash per ZDP share (£36.45m in total) on 10 April 2024, when the Company will be liquidated unless proposals to extend its life have been approved by holders of all its classes of shares.

The Inland Homes group (the "Group") has an extensive network of relationships which enable it to identify potentially attractive, primarily brownfield, residential and mixed-use property development opportunities and has an outstanding 100% track record in successfully achieving planning consents on its brownfield sites. 

Initially the Group sold most of its consented plots to major housebuilders, but in recent years, its business model has changed to include construction activity, selling completed homes or selling plots to BTR (Build to Rent) operators and housing associations with construction contracts. 

The Group has relationships with investors with whom it can develop sites through separately funded joint ventures or source or generate fees for managing developments funded by the investors.  During recent years, a higher proportion of its projects have been pursued on an asset management basis resulting in significant reductions in the Group's borrowing requirements as owned sites and completed homes are sold.

The Company is reliant on Inland's ability to finance the redemption of the ZDP shares on 10 April 2024.  Although the Group announced anticipated losses of approximately £91m for the year to 30 September 2022, it continues (with some short term fluctuations) to realise cash and reduce debt as a result of adopting a less cash intensive business model whereby developments are promoted and managed by the Group on behalf of others who fund them (asset management projects) or developed in joint ventures with their own financing arrangements.

On 25 January 2023, Inland Homes PLC announced that it is seeking waivers of covenant breaches from two lenders owed a combined £49.3m; stating that: Whilst the board believes that these waivers will be forthcoming, they consider that if required, these borrowings can be refinanced.  Positive discussions are progressing with the lenders to procure the waivers.   The financial statements do not include the adjustments that would result if the Company were unable to continue as a going concern. At the time of approving the financial statements and after making the appropriate enquiries, the Directors have a reasonable expectation that the Company has adequate resources to continue in operational existence for the foreseeable future.  

As the recoverability of the intercompany receivable in April 2024 and by association the Company's ability to meet its repayment obligations in April 2024 is dependent on the Group continuing in operation as a going concern these matters indicate the existence of a material uncertainty which may cast significant doubt on the Company's ability to continue as a going concern.  The Directors therefore consider it appropriate to prepare the financial statements on the going concern basis. The auditors' report on the accounts for the year ended 30 September 2022, which contains a statement of material uncertainty relating to the going concern basis of preparation, is unqualified. 

Additionally, the Group has budgeted and forecast completion of both planned land sales in the course of the next twelve months as part of its normal course of business alongside forecasting expected legal completions of house sales and commercial units which underpin it to continue trading as a going concern.  The payment of the Final Capital Entitlement to ZDP Shareholders is expected to be funded through a combination of surplus operating cash and refinancing.  If the former is available prior to 10 April 2024, it could be used to buy ZDP Shares in the market.

The Company's constitution and arrangements with Inland contain commitments to pledge Assets with a book value of at least 120% of the accrued amount due to ZDP Shareholders, less any Pledged Cash (which was satisfied at 30 September 2022); and to satisfy an Asset Cover covenant whereby Assets (broadly tangible assets less trade creditors) divided by Financial Indebtedness (including the Final Capital Entitlement of the ZDP Shares) exceed 1.8.  The Group's annual results for the year to 30 September 2022 are expected to be announced at the end of February 2023 following completion of the audit.  As the Asset Cover of the ZDP Shares is derived from the Group's consolidated financial statements, the following cover ratio is subject to adjustment.  If any such adjustment is material the updated cover ratio will be announced. As at 30 September 2022 the Cover Ratio was 2.44 (30 September 2021 2.54). 

Enquiries:

Inland ZDP PLC

Nishith Malde FCA       Tel: 01494 762450

INLAND ZDP PLC

AUDITED RESULTS FOR YEAR ENDED 30 SEPTEMBER 2022

Strategic report

The Company and the Group

The Company is a specialist funding vehicle only and has no business, operations or employees of its own.  It has issued 18,101,857 zero dividend shares ("ZDP shares") at various prices between 20 December 2012 and 19 November 2019, raising £22.28m cash which has been lent to its holding company, Inland Homes plc ("Inland"). 

ZDP shares are Listed and traded on the Main Market of the London Stock Exchange and are due to be redeemed for 201.4p cash per ZDP share (£36.45m in total) on 10 April 2024, when the Company will be liquidated unless proposals to extend its life have been approved by holders of all its classes of shares.

The Inland Homes group (the "Group") has an extensive network of relationships which enable it to identify potentially attractive, primarily brownfield, residential and mixed-use property development opportunities and has an outstanding 100% track record in successfully achieving planning consents on its brownfield sites. 

Initially the Group sold most of its consented plots to major housebuilders, but in recent years, its business model has changed to include construction activity, selling completed homes or selling plots to BTR (Build to Rent) operators and housing associations with construction contracts. 

The Group has relationships with investors with whom it can develop sites through separately funded joint ventures or source or generate fees for managing developments funded by the investors.  During recent years, a higher proportion of its projects have been pursued on an asset management basis resulting in significant reductions in the Group's borrowing requirements as owned sites and completed homes are sold.

The Company's participation in the Group's funding arrangements

The Group has a range of borrowing arrangements, including the loan from the Company, with the following aims:

·    spreading maturity dates over time, reducing the impact of refinancings falling due when fluctuating credit market conditions are difficult;

·    avoiding excessive dependence on any single lender;

·    achieving a balance between fixed and floating interest rates;

·    ensuring that the security arrangements and covenants applicable to individual loans are mutually compatible.

Inland Homes plc has entered into contractual commitments to the Company and is obliged to meet all the Company's costs and expenses, grant and maintain first charge security to the Company over tangible assets with a book value of 120% of the accrued value of the ZDP shares, less Pledged Cash; and abide by asset cover covenants which are tested quarterly.  Under the Contribution Agreement, Inland is obliged to ensure that the Company has sufficient cash to pay the Final Capital Entitlement (201.4p per ZDP share) on the redemption date.

Principal risks and uncertainty and risk management

The Board believes that the principal risk faced by the Company is the credit risk associated with the loan made to Inland. 

The specific risks faced by Inland, which may impact the credit risk the Company has with the loan made to Inland, are included within its financial statements. These principally comprise: adverse economic conditions affecting the housing market and the propensity of people to buy homes; adverse changes to government policy and planning regulations; failure to effectively manage major projects to industry standard margins; the inability to retain or source high calibre and experienced staff;  solvency and difficulty in procuring borrowing facilities at competitive rates and maintain sufficient cash headroom; access to site labour and materials; inability to source and develop suitable land at the appropriate cost and quantity; health and safety risks; cyber and business continuity risks; climate-related risk and the risk of a major incident impacting the UK (e.g. pandemic).

The Directors of the Company are also directors of other companies in the Inland Group and are therefore in a position to assess the recoverability of amounts due from Inland.

The Company is also exposed to risks in relation to its financial instruments.  Further details of these risks and the way in which they are managed are contained in note 9 of the financial statements.

The Company is reliant on Inland's ability to finance the redemption of the ZDP shares on 10 April 2024.  Although the Group announced significant expected losses for the year to 30 September 2022, it continues (with some short term fluctuations) to realise cash and reduce debt as a result of adopting a less cash intensive business model whereby developments are promoted and managed by the Group on behalf of others who fund them (asset management projects) or developed in joint ventures with their own financing arrangements.

On 25 January 2023, Inland Homes PLC announced that it is seeking waivers of covenant breaches from two lenders owed a combined £49.3m; stating that: Whilst the board believes that these waivers will be forthcoming, they consider that if required, these borrowings can be refinanced.  Positive discussions are progressing with the lenders to procure the waivers.  This material uncertainty is reflected in the basis of preparation of the financial statements and the audit report.  See the Chairman's statement for further comment about this risk.

Key performance indicators

The key performance indicators used by the Board to measure the Company's success are the asset cover (which is calculated on a Group basis, described in more detail in the chairman's statement, but broadly comprises tangible gross assets at book value less trade creditors and deferred consideration liabilities for land purchases up to 60 per cent. of the total consideration; divided by Financial Indebtedness, which includes the ZDP Final Redemption Liability, borrowings repayable prior to 10 October 2024 and deferred consideration in excess of 60% of the total consideration payable for land), the asset value per ZDP share, the accrued capital entitlement and the price of the ZDP shares.

The Group's annual results for the year to 30 September 2022 are expected to be announced at the end of February 2023 following completion of the audit.  As the Asset Cover of the ZDP Shares is derived from the Group's consolidated financial statements, the figures below are subject to adjustment.  If any such adjustment is material the updated cover ratio will be announced.

The asset value and the accrued capital entitlement will continue to increase as the repayment date approaches. The book value of ZDP shares in the financial statements is derived from the various issue prices using the effective interest method, whereas the accrued capital entitlement is based on the initial issue price (100p) and its accrual at 7.3% per annum from the initial issue date (12 December 2012) to 148.8p on 13 August 2013, when an extension of the redemption date was approved, subsequently accruing at 5.5% to 10 April 2024. The redemption price is not affected by the prices of subsequent issues. As at the repayment date, the book value and accrued capital entitlement will be equal to one another.

The ZDP share price increased by 4% to 181p during the first half of the financial year and remained at that level for the following five months. During September 2022 the ZDP share price dropped to a low point of 171.5p in the context of an announcement by Inland of poorer performance than the market had been expecting for the year to 30 September 2022 and a possible breach of a banking covenant.  Having recovered a little in the interim, the ZDP Share price dropped to a closing price of 121p when Inland announced losses and breaches of loan covenants on 25 January 2023. 

Chairman's statement

I am pleased to present the Company's annual report and financial statements for the year ended 30 September 2022.

The Company is a wholly owned subsidiary of Inland Homes 2013 Limited which is a wholly owned subsidiary of Inland Homes plc ("Inland") and was established solely for the purpose of issuing ZDP shares and lending the proceeds to Inland.

The financial statements have been produced on a going concern basis, on the assumption that the breaches by the Group of loan covenants can be remedied by agreeing the terms of waivers with the relevant lenders or refinancing their debt. If neither is achieved, the going concern basis would no longer be appropriate and many of the Group's asset values could be seriously impaired, including the value of the Pledged Assets, the most significant of which is a loan to a property joint venture the value of which could be significantly reduced if Inland became insolvent. 

Accordingly the ZDP Share price is likely to be influenced by Inland's announcements relating to the above, whether upwards on remedying the covenant breaches or downwards if that is not achieved. 

The original loan and contribution agreements between the Company and Inland contain certain protections for the Company which are intended to benefit its ZDP shareholders. These include first charges over pledged assets and pledged cash in a charged bank account. The pledged assets (currently primarily interests in a property development joint venture) must have a book value of at least 120% of the accrued value of the ZDP shares net of the pledged cash. As at 30 September 2022, the accrued amount due to ZDP shareholders was £33,601,021 (30 September 2021: £31,852,736), the pledged cash was £4,245,826 (30 September 2021: £7,327,479) and the pledged assets had a book value of £38,994,874 (30 September 2021: £36,962,175), thereby satisfying this requirement.

The loan agreement also contains a covenant relating to asset cover, which is shown below as at 30 September 2022. The definitions of Assets and Financial Indebtedness, which apply to the Group as a whole, are set out in the prospectus published in connection with the issue of the ZDP shares amended as shown in the Continuation Circular dated 19 July 2018 which is available at https://www.inlandhomesplc.com/media/2014/inland-zdp-plc-continuation-circular.pdf. The definition of Financial Indebtedness excludes indebtedness which falls due more than 6 months after the final ZDP Repayment Date of 10 April 2024.

Asset cover:

As explained in the Strategic Report above, the Asset cover ratio as at 30 September 2022 is subject to adjustment:

Assets / Financial Indebtedness plus ZDP Final Redemption Liability = 2.4 times cover (30 September 2021: 2.5 times cover).

The asset cover should be at least 1.8 times, so this covenant, which is tested quarterly, was satisfied at 30 September 2022.  It has been satisfied on all testing dates since the initial issue of ZDP Shares.

The return to maturity of a ZDP Share based on the mid market closing price as at 30 January 2023 (132p) was 42.5 per cent.

The Board believes that the use of book values for security and asset cover covenants is generally conservative on a going concern basis, because a proportion of the group's assets are properties for which planning consents are sought. The planning process takes time and any progress towards reaching the stage when building can commence is not reflected in an increase in the book values beyond the costs attributable to the relevant sites, whereas any diminution in value is reflected by way of impairment provisions, such that planning gains are not generally recognised in Inland's financial statements until sales are contracted. If the covenant ratios were to be calculated by reference to the market values of the assets, the cover would be higher. However, forced sale values could be significantly lower.

The Hurdle Rate by which the consolidated values of the Group's Assets would need to decrease before 10 April 2024, if Inland's Assets are to remain sufficient to cover the Final Capital Entitlement and its net debt (calculated from book values as at 30 September 2022, but excluding intangible assets) is -46.3%.

The Group has adopted a less capital intensive business model over recent years.  New developments are primarily funded by asset management clients (who buy the sites and pay fees to the Group for managing their planning and development) or by independently financed joint ventures.  This business model has resulted in significant repayment of debt as the Group's owned development sites and completed homes were sold. This process is ongoing and, notwithstanding the losses incurred by the Group in the year to 30 September 2022, the Group's plan is to continue to generate cash as the redemption date of the ZDP shares in April 2024 draws nearer.  The payment of the Final Capital Entitlement to ZDP Shareholders is expected to be funded through a combination of surplus operating cash and refinancing.  If the former is available prior to 10 April 2024, it could be used to buy ZDP Shares in the market.

Stephen Wicks and Gary Skinner resigned from the Company's Board when they left the Group and Desmond Wicks has been appointed as a director.  Stephen Wicks was a joint founder of Inland and had been chief executive of the Group since its inception.  He remains a consultant to the Group until 30 September 2023. Gary Skinner was managing director of the Group.  I thank them for their service to the Company and welcome Desmond Wicks to the Board.

Nishith Malde

Chairman

31 January 2023

Financial statements

STATEMENT OF COMPREHENSIVE INCOME

FOR THE YEAR ENDED 30 SEPTEMBER 2022

The accompanying accounting policies and notes form an integral part of these financial statements.

STATEMENT OF FINANCIAL POSITION

AS AT 30 SEPTEMBER 2022

The accompanying accounting policies and notes form an integral part of these financial statements.

STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 30 SEPTEMBER 2022

The accompanying accounting policies and notes form an integral part of these financial statements.

STATEMENT OF CASH FLOWS

FOR THE YEAR ENDED 30 SEPTEMBER 2022

The accompanying accounting policies and notes form an integral part of these financial statements.

NOTES TO THE FINANCIAL STATEMENTS

1        Accounting policies

          The principal accounting policies adopted in the preparation of the financial statements are set out below.

1.1     Basis of preparation

          The financial statements have been prepared in accordance with the Companies Act 2006 and UK adopted International Accounting Standards in conformity with the requirements of the Companies Act 2006.  The principal accounting policies adopted by the Company are set out below.

The financial statements are prepared in sterling, which is the functional currency of the Company. Monetary amounts in these financial statements are rounded to the nearest £'000.

These accounting policies comply with each accounting standard that is mandatory for accounting year ended 30 September 2022. 

At the date of approval of these financial statements, certain new standards, amendments and interpretations to existing standards have been published by the IASB but are not yet effective and have not been adopted early by the Company.

Management anticipates that all of the relevant pronouncements will be adopted in the Company's accounting policies for the first period beginning after the effective date of the pronouncement.  Information on new standards, amendments and interpretations that are expected to be relevant to the Company's financial statements is provided below.

Certain other new standards and interpretations have been issued but are not expected to have a material impact on the Company's financial statements.

The Company's business activities principal risks and uncertainty, and risk management are set out in the strategic report. The Company is reliant on the ability of Inland Homes plc to continue as a going concern as detailed in the strategic report.  Further disclosures regarding the Company's financial instruments and exposure to credit and liquidity risk are set out in note 9 of the Financial Statements.

Given the dependency on Inland Homes plc, details regarding their going concern assumptions are given below.

Going concern

The Directors are required to assess the Company's ability to continue as a going concern for a period of at least the next twelve months however, having regard to the fact that the Company has 18,101,857 ZDP shares in issue as at 30 September 2022 which are due for repayment on 10 April 2024, the assessment considers the ability of the Company to remain a going concern up to the date that the shares fall due for repayment.

The going concern assessment considers the Company's principal risks and the ability to operate within the financial covenants of the ZDP shares. The ZDP shares and associated loan documentation impose a number of covenants that must be complied with which are discussed within the Chairman's Statement. As at 30 September 2022 the Company is compliant with all covenants and there are no forecast covenant breaches in the going concern period.

In addition as Inland Homes plc ("the Group") is responsible for all the Company's liabilities including its obligations to ZDP Shareholders, pursuant to the Loan Note and Contribution Agreement, the Directors have due regard to the financial position of the Group as at the date of approving these accounts. The Group has recently announced anticipated losses of approximately £91m for the financial year ended 30 September 2022 and that it is in breach of certain borrowing covenants with two separate lenders. The Group's Board believes that these waivers will be forthcoming, and the Group has received written notification that one of the lenders' credit teams have approved the waivers. However, at the date of this report neither lender has contractually waived these covenant breaches. Should the waivers not be obtained, the Directors understand the Group would aim to refinance the £49.3m debt. As the recoverability of the intercompany receivable in April 2024 and by association the Company's ability to meet its repayment obligations in April 2024 is dependent on the Group continuing in operation as a going concern these matters indicate the existence of a material uncertainty which may cast significant doubt on the Company's ability to continue as a going concern.  The financial statements do not include the adjustments that would result if the Company were unable to continue as a going concern. At the time of approving these financial statements and after making the appropriate enquiries, the Directors have a reasonable expectation that the Company has adequate resources to continue in operational existence for the foreseeable future. The Directors therefore consider it appropriate to prepare the financial statements on the going concern basis.

1.2     Income

Finance income is calculated on the amount lent to Inland and represents the difference between the amounts advanced (which was equal to the proceeds on the issue of zero dividend preference shares) and the final amounts due (which is equal to the liability payable on redemption of the zero dividend preference shares). It is recognised as revenue as interest income over the term of the zero dividend preference shares using the effective interest method.

1.3     Expenses

All expenses are borne by the Company's parent company, Inland Homes 2013 Limited.

1.4     Zero dividend preference shares

Zero dividend preference shares are recognised as liabilities in the Statement of Financial Position in accordance with IFRS 9: Financial Instruments.  After initial recognition, these liabilities are measured at amortised cost, which represents the initial proceeds of the issuance plus the accrued interest based on the effective interest method to 30 September 2022.

1.5     Intercompany receivable

Intercompany receivables are recognised as assets in the Statement of Financial Position in accordance with IFRS 9: Financial Instruments.  After initial recognition they are measured at amortised cost which represents the initial loan plus the accrued interest receivable at the reporting date. Directors have assessed intercompany receivables to meet the requirements under the business model test and SPPI test. The objective of the business model is to hold financial assets to collect their contractual cash flows. The cash flows are solely payments of principal and interest on the principal amounts outstanding.

The Company applies the general approach to providing for expected credit losses prescribed by IFRS 9 for intercompany receivables. The expected credit loss provision in the current year and prior period have been assessed as £nil.

Pursuant to a loan agreement between the Company and Inland, the Company has lent Inland the gross proceeds of its placings. This loan is on terms requiring its repayment by Inland to the Company on the ZDP shares repayment date when the company must be wound up.

1.6     Finance costs

Finance costs are calculated as the difference between the proceeds on the issue of zero dividend preference shares and the final liability and are charged as finance costs over the term of the life of these shares using the effective interest method.

1.7     Taxation

The charge for taxation is based on the taxable profits for the year. Taxable profit differs from profit before tax as reported in the Statement of Comprehensive Income because it excludes items of income or expenses that are never taxable or deductible.  The Company's liability for tax is calculated using rates that have been enacted or substantively enacted by the reporting date.

1.8     Equity

An equity instrument is a contract which evidences a residual interest in the assets after deducting all liabilities.  Equity comprises 'Share capital', which represents the nominal value of equity shares.

1.9     Key assumptions

Judgements used in preparing the financial statements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed reasonable.

Judgement is required in assessing the recoverability of the intercompany receivable. Recoverability is underpinned by the profitability of Inland's development and strategic land sites, notwithstanding the losses incurred in relation to construction activity in addition to which the guarantee from Inland in the Contribution Agreement and the first charge security over Pledged Assets enhance the prospect of recovery in the event of Inland becoming insolvent.

1.10   Segment information

In accordance with IFRS 8, information is disclosed to enable the users of financial statements to evaluate the nature and financial effects of the business activities in which the Company engages.  The Board has identified that the sole operating segment is to lend the proceeds of share issues to Inland and provide the final capital entitlement of the Company's ZDP shares to the holders of the ZDP shares at the final repayment date of 10 April 2024.  Consequently, all information presented in these financial statements relate to that segment.

2        Interest income

3        Expenses

Administration expenses of £nil were suffered during the year (period ended 30 September 2021: £nil).  All administration expenses during the year, including auditors' remuneration of £30,000 (2021 £25,000), were borne by the ultimate parent Company, Inland Homes plc and have not been recharged to the Company. The directors received no remuneration for their services in relation to Inland ZDP PLC. Further disclosures with regards to the auditors' remuneration can be found in the group financial statements.

There were no employees other than directors in the current year or the prior year.

4      Finance costs

5      Taxation

6      Earnings per ordinary share

The calculation of earnings per share is based on a result after tax figure for the year of £nil (year ended 30 September 2021: £nil) and the weighted average number of 50,000 ordinary shares in issue during the year.  The basic and diluted earnings per share are the same.

7      Zero dividend preference shares

During the year ended 30 September 2021 certain ZDP Share issue costs included in the book value brought forward were charged to the intercompany account between the Company and Inland because they were borne by Inland under the Contribution Agreement.

8     Ordinary share capital

       Authorised/called up/allotted/fully paid

All ordinary shares are owned by the Company's parent Company, Inland Homes 2013 Limited.

Each ordinary share is entitled to one vote at a general meeting.

In addition to receiving any income distributed by way of dividend, the ordinary shareholders will be entitled to all surplus assets after payment of all debts, including the ZDP shares.

9      Financial instruments

The Company's financial instruments comprise fixed interest creditors classified as financial liabilities at amortised cost and financial assets classified as amortised cost.

The main risks arising from the Company's financial instruments are liquidity risk and funding risk and credit risk.

Liquidity and funding risk

This is the risk that the Company will encounter difficulty in meeting obligations associated with financial liabilities.

Liquidity risk is considered to be significant as the Company is reliant upon repayment from its ultimate parent Company. The parent Company manages liquidity risk by maintaining sufficient cash balances and ensuring availability of funding through an adequate amount of credit facilities. The parent Company aims to maintain flexibility in funding by keeping credit lines available.

Contractual maturity analysis for financial liabilities

Credit risk

This is the risk that a counterparty to a financial instrument will fail to discharge an obligation or commitment that it has entered with the Company. Credit risk is managed by way of a security over the loan. The security relates to pledged tangible assets (such as property and interests in property development joint ventures) and pledged cash in a charged bank account.

At the reporting date, the Company's financial assets exposed to credit risk amounted to the following:

Amortised Cost

The directors consider the carrying amounts to be a reasonable approximation of fair value.

The Company applies the general approach to providing for expected credit losses prescribed by IFRS 9 for amounts due from ultimate parent Company. There were no expected credit loss provisions in the current year and prior period. The security that is pledged is more than sufficient to cover the amounts due. The Directors have assessed a possible downturn in the value of the pledged assets by 10% (being a reduction of £4.21m) and following that assessment no credit loss, as defined by IFRS 9, would arise.

The following table presents the fair value of financial liabilities that are carried at amortised cost in the Statement of Financial Position in accordance with the fair value hierarchy. This hierarchy groups financial liabilities into three levels based on the significance of inputs used in measuring the fair value of the financial liabilities. The fair value hierarchy has the following levels:

●    Level 1: quoted prices (unadjusted) in active markets for identical liabilities;

●    Level 2: inputs other than quoted prices included within Level 1 that are observable for the liability, either directly (i.e., as prices) or indirectly (i.e. derived from prices); and

●    Level 3: inputs for the liability that are not based on observable market data (unobservable inputs).

The level within which the financial liability is classified is determined based on the lowest level of significant input to the fair value measurement.

If the financial liabilities were measured at fair value in the Group Statement of Financial Position, they would be grouped into the fair value hierarchy as follows:

The ZDP shares are carried at their accrued value using the effective interest method of 186.19p per share (30 September 2021: 176.86p) however their closing price on the main market of the London Stock Exchange on 30 September 2022 was 174.0p (30 September 2021: 168.5p). 

10    Capital management policies and procedures

The Company's objectives when managing capital are:

●    to safeguard its ability to continue as a going concern; and

●    to ensure sufficient liquid resources are available to meet the funding requirement of its ZDP shareholders.

The directors consider that the capital management policies and procedures of the ultimate parent company will enable the Company to meet its objectives.  Further details of the policies and procedures of Inland can be found within its financial statements and include a target capital to overall financing ratio of over 40%.

The capital of the Company comprises 1,860,186 (ordinary shares and ZDP preference shares) and the nominal value of these amounted to £50,000 and £1,810,186 respectively.

11    Related party transactions

The loan to Inland is repayable along with all accrued interest, together with a contribution for such amount that will result in the Company having sufficient cash funds to satisfy the then current, or as the case may be, final capital entitlement of the ZDP shares on the ZDP repayment date or immediately upon an event of default. At 30 September 2022, the total amount due from the ultimate parent Company was £33,754,000 (30 September 2021: £32,065,000).

12   Ultimate controlling party

       The directors regard Inland Homes plc as the ultimate parent and controlling party.

13   Holding company

The Company is a wholly owned subsidiary of Inland Homes 2013 Limited which is a wholly owned subsidiary of Inland Homes plc, a quoted company whose shares are traded on the AIM market of the London Stock Exchange.  Copies of its annual report for the year ended 30 September 2022 will be available to view on Inland's website (www.inlandhomesplc.com) following their publication at the end of February 2023.

Responsibility and audit

The Directors are the persons responsible for the full annual report and financial statements.

Each of the Directors confirms that to the best of his knowledge:

·    the financial statements, prepared in accordance with IFRS as adopted by the European Union, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company; and

·    the Strategic Report and the Report of the Directors includes a fair review of the development and performance of the business and the position of the Company together with a description of the principal risks and uncertainties it faces.

The statutory financial statements have been audited by PricewaterhouseCoopers LLP and their report was unqualified, containing a statement of material uncertainty relating to the going concern basis of preparation.

Publication of non-statutory accounts      

The financial information for the years ended 30 September 2021 and 2022 in this announcement does not constitute the company's statutory accounts for those years.

Statutory accounts for the year ended 30 September 2021 have been delivered to the Registrar of Companies. The statutory accounts for the year ended 30 September 2022 will be delivered to the registrar of companies in due course.

The auditors' reports on the accounts for 30 September 2022 and 30 September 2021 were unqualified, and did not contain a statement under 498(2) or 498(3) of the Companies Act 2006. The auditors' report on the accounts for the year ended 30 September 2022 contains a statement of material uncertainty relating to the going concern basis of preparation.  The auditors' report for the year ended 30 September 2021 did not draw attention to any matters by way of emphasis.

A copy of the annual report will shortly be submitted to the National Storage Mechanism and will be available for inspection at https://data.fca.org.uk/#/nsm/nationalstoragemechanism and at the Company's website: http://www.inlandhomesplc.com/investors/inland-zdp/zdp-documents-and-accounts/