Where will This Land Ltd's business plan cash come from?

 By Andrew Rowson

At the July meeting of Cambridgeshire County Council’s Shareholder Sub-Committee, the latest, long-awaited business plan of the authority’s wholly-owned housing development company This Land Ltd (TLL) was revealed and approved by members.  An earlier business plan shown to councillors in January in private session was rejected.

Not all the latest plan has been revealed to the public however.  The latest business plan available to the public does not show key details such as the number of projected house sales year by year, sales revenue or the annual costs of building those houses.  Instead it just shows annual cashflows. 

The table below is the simplified cashflow model available to the public.

The bottom two sections are easy enough to understand, but the site cashflows section at the top is lacking in detail, and problematic.  Over time, operating cashflows approximate to gross profit (sales less cost of sales).  The site cashflows therefore indicate that over the six financial years to March 2030, TLL aims to make gross profits of around £88 million that will be used to pay off the 59.9m loan balance as at March 2025, though not the £59.95m that was effectively written off in March this year (see the “Conversion to Capital” reference above).  Without that write-off, TLL's outstanding debt at 31 March 2025 would have been £119.75m

In the real world, those annual site cashflows do not occur simultaneously. The expenditure involved in buying building materials and paying for the outsourced labour to build the houses must precede the cash revenues from selling the houses - often by many months.  This Land’s historical record over the last five years shows it has achieved a total gross margin of just below zero per cent.

Given that track record, it would be unrealistic to expect TLL, in its tenth year of trading suddenly to leap to a healthy gross profit margin of 30% say, especially when it has pledged to build and sell 45% of  houses as affordable homes, which have lower margins.  In light of TLL’s minus 23% gross margin in 2024/25, it is a stretch to suggest even a 10% gross margin going forward, and no evidence is available to the public to suggest it is capabe of achieving even that. 

Nevertheless, with a gross profit margin of 10% in 2025/26 (year 2 from the business plan table at the top), in order to achieve positive site cashflows of £12.6m, This Land would need to spend around ten times that sum (£126m) some time before it could collect the sales proceeds of eleven times that sum (£138.6m) - resulting in the 10% gross margin of £12.6m.  Where will it find that cash?  According to figures from This Land's consolidation accounts schedule, It had £10.9m in the bank in March 2025, and inventory with a book value of £46.7m. 

Even if it depleted all of that in 2025/26, it would still be £68.4m short of the cash it would need to achieve those 2025/26 sales.  It cannot deplete all the cash and inventory anyway because it needs to replenish both for future years.  As with all of This Land’s previous business plans, the arithmetic just does not add up.  If its gross profit margin in 2025/26 were lower, at just 5%, it would need £252m of cash to make £264.6m worth of sales to produce the same projected £12.6m positive cashflows – an even more far-fetched scenario, and impossible without significant additional funding from Cambridgeshire taxpayers.  TLL claims it will require no more funding from the council until 2030.  It has made the same claim several times before.

Moving to year 4 in Table 2 above (FY28), at a 10% gross profit margin TLL would need cash resources of £454m to achieve site cashflows of £45.4m, or £908.6m cash up front to achieve the same site cashflows with a 5% gross profit margin.  Again, where will that money come from?