One Heritage Group plc: Interim Results
Announcement provided by
Zentra Group Plc · ZNT28/03/2023 07:00
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One Heritage Group plc (OHG)
ONE HERITAGE GROUP PLC (the “Company” or “One Heritage”) Interim report for the six months ended 31 December 2022 28 March 2023 One Heritage Group PLC (LSE: OHG), the
Financial highlights For the six-month period to 31 December 2022. Comparatives are for the six month period to 31 December 2021 (H1 2022) unless otherwise stated. FY 2023 refers to the Group’s financial period 1 July 2022 to 30 June 2023.
Operational highlights
Post Period Events
Outlook
Commenting on the Group’s performance, Jason Upton, Chief Executive Officer said: “The Group has made further progress on our strategic objectives during the first half of our financial year. We have adapted our strategy to the current environment by implementing better internal processes and controls to improve efficiencies whilst also focusing our efforts as a residential Developer and Development Manager. Importantly, our development pipeline is now delivering revenue through sales, following the completion of Lincoln House, The second half of the financial year is looking strong, with the practical completions of Oscar House, Manchester and Bank Street, The overall outlook for the residential property sector within our core region of the North of
Contacts One Heritage Group plc
Jason Upton Chief Executive Officer Email: jason.upton@one-heritage.com
Anthony Unsworth Chief Financial Officer Email: anthony.unsworth@one-heritage.com
Hybridan LLP (Financial Adviser and Broker) Claire Louise Noyce Email: claire.noyce@hybridan.com Tel: +44 (0)203 764 2341
Yellow Jersey PR (Financial PR) Charles Goodwin/Annabelle Wills/Bessie Elliot Email: oneheritage@yellowjerseypr.com Tel: +44 (0)203 004 9512
About One Heritage Group One Heritage Group PLC is a property development and management company. It focuses on the residential sector primarily in the North of The Company is listed on the Standard List of the Main Market of the London Stock Exchange, trading under the ticker OHG. For further information, please visit the Company’s website at https://www.oneheritageplc.com/. CHIEF EXECUTIVE’S REVIEW We have made further progress on our strategic objectives during the first half of our financial year, including, most notably, the completion of our first major development project, Lincoln House, Our Construction Services Department has three principal revenue streams: in-house refurbishment of two group developments (St Petersgate, Stockport and Bank Street, The results for the period reflect only one development completion reached, and the legal completion of property sales has taken longer than expected due to several factors. We are expecting a strong second half to our financial year ending 30 June 2023, as we benefit from the revenue of our property sales across our completed development projects. Overall, I am pleased with how the team has adapted to the challenges faced and there are some important changes being planned upon which I look forward to providing updates in due course. We are in a far stronger position as we strengthen our internal processes and controls, adapt our strategy, and refine our delivery. This bodes well for the future, but we remain cautious concerning the economic challenges the country continues to face and how this impacts our industry. The following strategic objectives have been in place during the period under review and the progress of each is set out below. DELIVER OUR EXISTING DEVELOPMENT PROJECTS Below is a current summary of existing development projects:
Having completed Lincoln House, There are three other projects within the development pipeline and each is at a different stage. Churchgate, Following the signing of the Group’s fourth Development Management agreement in April 2022 for One Victoria, Changes have been made to improve the delivery of our development projects, in response to lessons learned from our projects to date and to adapt to challenging market conditions. Since the departure of the development director, our development team has been restructured and in January 2023 we brought in a highly experienced Interim Development Director. Further senior appointments have been made in the form of a Head of Projects and an Acquisitions Lead, with more hires expected over the coming months to further strengthen the team. SECURE PRE-SALES WHERE WE CAN THROUGH OUR SALES NETWORK At our completed development, Lincoln House, It is encouraging to report that sales on our projects under construction have been strong. There is an agreement for sale of all 27 apartments at Oscar House, INCREASE REVENUE GENERATED THROUGH THE GROUP’S SERVICES Our property services team continues to establish the infrastructure needed to accommodate the increase in volume of properties under management. Investment has been made in a new Customer Relationship Management system and accreditations have been gained for industry-recognised Money Shield and Property Ombudsman schemes. The property management function of the business has become well established and I expect the properties under management to continue to grow and generate increased revenue. Additional sources of revenue include property sourcing which has seen steady growth over recent months with marketing for our services commencing in Development Management revenue for the Group increased following our appointment to deliver One Victoria, The Group provides Co-Living services which generate revenue through sourcing, property transactions and project management. We have restructured how we deliver these services, which saw some delays for a few months towards the end of 2022 as we paused operations to renegotiate contracts with external suppliers. GROW THE DEVELOPMENT PIPELINE During the period under review, the Group acquired land at Victoria Road, Eccleshill, Work to grow the development pipeline is ongoing and the timing of future acquisitions will be important to deliver best value. OUTLOOK The outlook remains positive for the property market, with the North of Whilst we remain cautious of the challenging market conditions, the changes made to the business, including adding even greater property development experience and different skills to our team, put us in a stronger position as we look to the future. We remain on track to deliver strong revenue for the FY 2023, driven by our robust pipeline of property sales expected to start coming through in the second quarter of 2023. FINANCE REVIEW For the six months ended 31 December 2022, revenue increased by
* Construction revenue in in-house residential development projects to be discontinued from Q3 calendar year 2023. Construction revenues from the refurbishment of co-living properties will continue.
Developments sales revenue remained the largest contributor to Group revenue, accounting for 57% of total revenue. This significant growth was driven mainly by the contributions from Lincoln House, Construction Services delivered revenue of Property Services also saw an increase over the same period last year from Gross profit reduced by Administrative expenses were The operating loss increased by Net debt at 31 December 2022 was On 7 July 2022 the Group issued 6.25m new ordinary share of RISK MANAGEMENT AND PRINCIPAL RISKS The ability of the Group to operate effectively and achieve its strategic objectives is subject to a range of potential risks and uncertainties. The Board and the broader management team take a pro-active approach to identifying and assessing internal and external risks. The potential likelihood and impact of each risk is assessed and mitigation policies are set against them that are judged to be appropriate to the risk level. Management constantly updates plans and these are monitored by the Audit and Risk Committee and reported to the Board. The principal risks that the Board sees as impacting the Group in the coming period are divided into six categories, and these are set out below together with how the Group mitigates such risks. 1. Strategy: Government regulation, planning policy and land availability. 2. Delivery: Inadequate controls or failures in compliance will impact the Group’s operational and financial performance. 3. Operations: Availability and cost of raw materials, sub-contractors and suppliers. 4. People and culture: Attracting and retaining high-calibre employees. 5. Finance & Liquidity: Availability of finance and working capital. 6. External Factors: Economic environment, including housing demand and mortgage availability. 1. Strategy: Government regulation, planning policy and land availability A risk exists that changes in the regulatory environment may affect the conditions and time taken to obtain planning approval and technical requirements including changes to Building Regulations or Environmental Regulations, increasing the challenge of providing quality homes where they are most needed. Such changes may also impact our ability to meet our margin or site return on capital employed (ROCE) hurdle rates (this ratio can help to understand how well a company is generating profits from its capital as it is put to use). An inability to secure sufficient consented land and strategic land options at appropriate cost and quality in the right locations to enhance communities, could affect our ability to grow sales volumes and/or meet our margin and site ROCE hurdle rates. The Group mitigates against these risks by liaising regularly with experts and officials to understand where and when changes may occur. In addition, the Group monitors proposals by Westminster to ensure the achievement of implementable planning consents that meet local requirements and that exceed current and expected statutory requirements. The Group regularly reviews land currently owned, committed and pipeline prospects, underpinned with robust key business control where all land acquisitions are subject to formal appraisal and approved by the senior executive team. 2. Delivery: Inadequate controls or failures in compliance will impact the Group’s operational and financial performance A risk exists of failure to achieve excellence in construction, such as design and construction defects, deviation from environmental standards, or through an inability to develop and implement new and innovative construction methods. This could increase costs, expose the Group to future remediation liabilities, and result in poor product quality, reduced selling prices and sales volumes. To mitigate this the Group liaises with technical experts to ensure compliance with all regulations around design and materials, along with external engineers through approved panels. It also has detailed build programmes supported by a robust quality assurance. 3. Operations: Availability and cost of raw materials, sub-contractors and suppliers A risk exists that not adequately responding to shortages or increased costs of materials and skilled labour or the failure of a key supplier, may lead to increased costs and delays in construction. It may also impact our ability to achieve disciplined growth in the provision of high quality homes. Following a strategic review, the Group has taken the opportunity to cease our participation in in-house construction of residential development projects, and this will take effect upon the completion of our current projects under construction. We will continue to provide the development of co-living projects but have chosen a new approach to the delivery of our development projects by appointing a principal contractor after a period of due diligence, which we believe will deliver the best shareholder value. 4. People and culture: Attracting and retaining high-calibre employees A risk exists that increasing competition for skills may mean we are unable to recruit and/or retain the best people. Having sufficient skilled employees is critical to delivery of the Group’s strategy whilst maintaining excellence in all of our other strategic priorities. To mitigate this the Group has a number of People Strategy programmes which include development, training and succession planning, remuneration benchmarking against competitors, and monitoring of employee turnover, absence statistics and feedback from exit interviews. 5. Finance & Liquidity: Availability of finance and working capital A risk exists that lack of sufficient borrowing and surety facilities to settle liabilities and/or an ability to manage working capital, may mean that we are unable to respond to changes in the economic environment, and take advantage of appropriate land buying and operational opportunities to deliver strategic priorities. To minimise this risk the Group has a disciplined operating framework with an appropriate capital structure, and management have stress tested the Group’s resilience to ensure the funding available is sufficient. This process has regular management and Board attention to review the most appropriate funding strategy to drive the Group’s growth ambitions. We have regular monthly Treasury updates, and we gain market intelligence and availability of finance from experienced sector Treasury advisers. 6. External Factors: Economic environment, including housing demand and mortgage availability A risk exists that changes in the UK macroeconomic environment may lead to falling demand or tightened mortgage availability, upon which most of our customers are reliant, thus potentially reducing the affordability of our homes. This could result in reduced sales volumes and affect our ability to deliver profitable growth. To mitigate this risk the wider Group has a significant presence in Hong Kong, China and Singapore and the majority of overseas purchasers are cash buyers. The Group continually monitors the market at Board, Executive Committee and team levels, leading to amendments in the Group’s forecasts and planning, as necessary. In addition there are comprehensive sales policies, regular reviews of pricing in local markets and development of good relationships with mortgage lenders. This is underpinned by a disciplined operating framework with an appropriate capital structure and strong balance sheet.
STATEMENT OF DIRECTOR’S RESPONSIBILITIES in respect of the half-yearly financial report
We confirm that to the best of our knowledge:
The directors of One Heritage Group PLC are listed on the company website, www.oneheritageplc.com
By order of the Board Jason Upton Chief Executive Officer 27 March 2023
INDEPENDENT REVIEW REPORT TO ONE HERITAGE GROUP PLC Report on the interim financial statements Conclusion We have been engaged by the company to review the condensed set of financial statements in the interim report for the six months ended 31 December 2022 which comprises the consolidated statements of comprehensive income, financial position, changes in equity and cash flows and the related explanatory notes. Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the interim report for the six months ended 31 December 2022 is not prepared, in all material respects, in accordance with IAS 34 Interim Financial Reporting as adopted for use in the UK and the Disclosure Guidance and Transparency Rules (“the DTR”) of the UK’s Financial Conduct Authority (“the UK FCA”). Basis of conclusion We conducted our review in accordance with International Standard on Review Engagements (UK) 2410 Review of Interim Financial Information Performed by the Independent Auditor of the Entity (“ISRE (UK) 2410”) issued for use in the UK. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. We read the other information contained in the interim report and consider whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion. Conclusions relating to going concern Based on our review procedures, which are less extensive than those performed in an audit as described in the Basis of conclusion section of this report, nothing has come to our attention that causes us to believe that the directors have inappropriately adopted the going concern basis of accounting, or that the directors have identified material uncertainties relating to going concern that have not been appropriately disclosed. This conclusion is based on the review procedures performed in accordance with ISRE (UK) 2410. However, future events or conditions may cause the group to cease to continue as a going concern, and the above conclusions are not a guarantee that the group will continue in operation. Directors’ responsibilities The interim financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the interim report in accordance with the DTR of the UK FCA. As disclosed in note 2, the annual financial statements of the group are prepared in accordance with UK-adopted international accounting standards. The directors are responsible for preparing the condensed set of financial statements included in the interim report in accordance with IAS 34 as adopted for use in the UK. In preparing the condensed set of financial statements, the directors are responsible for assessing the group’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the group or to cease operations, or have no realistic alternative but to do so. Our responsibility
Our responsibility is to express to the company a conclusion on the condensed set of financial statements in the interim report based on our review. Our conclusion, including our conclusions relating to going concern, are based on procedures that are less extensive than audit procedures, as described in the Basis for conclusion section of this report.
The purpose of our review work and to whom we owe our responsibilities
This report is made solely to the company in accordance with the terms of our engagement to assist the company in meeting the requirements of the DTR of the UK FCA. Our review has been undertaken so that we might state to the company those matters we are required to state to it in this report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company for our review work, for this report, or for the conclusions we have reached.
Edward Houghton BA FCA for and on behalf of KPMG Audit LLC Chartered Accountants Heritage Court 41 Athol Street Douglas Isle of Man 27 March 2023
FINANCIAL STATEMENTS Consolidated statement of comprehensive income For the six months ended 31 December 2022
FINANCIAL STATEMENTS Consolidated statement of financial position As at 31 December 2022
FINANCIAL STATEMENTS Consolidated statement of cash flows For the six months ended 31 December 2022
FINANCIAL STATEMENTS Consolidated statement of changes in equity For the six months ended to 31 December 2022
For the six months ended 31 December 2021
For the year ended 30 June 2022
FINANCIAL STATEMENTS Notes to the interim financial statements For the six months ended to 31 December 2022
One Heritage Group PLC (the “Company”) is a public limited company, limited by shares, incorporated in England and Wales under the Companies Act 2006. The address of its registered office and its principal place of trading is 80 Mosley Street, Manchester, M2 3FX. The principal activity of the company is that of property development. These condensed consolidated interim financial statements (“interim financial statements”) as at the end of the six month period to 31 December 2022 comprise of the Company and its subsidiaries.
These interim financial statements for the six months ended 31 December 2022 have been prepared in accordance with IAS 34 Interim Financial Reporting as adopted for use in the UK, and should be read in conjunction with the Group’s last annual consolidated financial statements as at and for the year ended 30 June 2022 (‘last annual financial statements’). They do not include all of the information required for a complete set of financial statements prepared in accordance with IFRS Standards. However, selected explanatory notes are included to explain events and transactions that are significant to an understanding of the changes in the Group’s financial position and performance since the last annual financial statements. The annual financial statements of the group are prepared in accordance with UK-adopted international accounting standards. As required by the Disclosure Guidance and Transparency Rules of the Financial Conduct Authority, the condensed set of financial statements has been prepared applying the accounting policies and presentation that were applied in the preparation of the company’s published consolidated financial statements for the year ended 30 June 2022. These interim financial statements were authorised for issue by the Company’s board of directors on 27 March 2023. Going concern Notwithstanding net current liabilities of The directors have prepared cash flow forecasts for the period to 30 June 2024 which indicate that, taking account of reasonably possible downsides, the company will have sufficient funds, through the proceeds from sale of developments supplemented by continued financial support from its parent company, One Heritage Property Development Limited (“OHPD”), and a related party, One Heritage SPC Limited (“OHSPC”), to meet its liabilities as they fall due for at least that period. OHPD and OHSPC have confirmed that their respective loans due to mature in June 2023 and January 2023 will not be demanded for repayment until such a time that the Group can afford to repay them without impacting on its going concern. The loan facility from the parent company was As with any company placing reliance on other related entities for financial support, the directors acknowledge that there can be no certainty that this support will continue although, at the date of approval of these financial statements, they have no reason to believe that it will not do so. Consequently, the directors are confident that the company will have sufficient funds to continue to meet its liabilities as they fall due for at least 12 months from the date of approval of the financial statements and therefore have prepared the financial statements on a going concern basis.
In preparing these Interim Financial Statements, management has made judgements, estimates and assumptions that affect the application of the Group’s accounting policies and the reported amounts in the financial statements. The management continually evaluate these judgements and estimates in relation to assets, liabilities, contingent liabilities, revenue and expenses based upon historical experience and on other factors that they believe to be reasonable under the circumstances. Actual results may differ from the judgements, estimates and assumptions. The key areas of judgement and estimation are:
The accounting policies applied in these interim financial statements are the same as those applied in the Group’s consolidated financial statements as at and for the year ended 30 June 2022. The accounting policies will also be reflected in the Group’s consolidated financial statements as at and for the year ending 30 June 2023.
The Group operates four segments: Developments, Construction, Property Sevices and Corporate. All the revenues generated by the Group were generated within the United Kingdom. For the period ended 31 December 2022:
Segment operating profit or loss is used as a measure of performance as management believe this is the most relevant information when evaluating the performance of a segment.
The Group generates its revenue primarily from development management agreements, development sales and construction services.
Development sales is attributable to the sale of 27 units in the completed Lincoln House development. This development reached practical completion at the end of August 2022. Development management consist of three development management agreements with One Heritage Tower Limited, One Heritage Great Ducie Street Limited and One Heritage North Church Limited. The Group earns a management fee of 0.75% of costs incurred to date per month and a 10% share of net profit generated by the development through the agreement with One Heritage Tower Limited. The Group is also entitled to 1% of any external debt or equity funding raised on behalf of the development. This agreement generated The One Heritage North Church Limited agreement splits the fees into three: 1. 2% of total development cost, paid monthly over the period of the development; 2. 15% of net profit, paid on completion; 3. 1% on any debt finance raised. This agreement generated The Group signed a development management agreement on 1 April 2022 with One Heritage Great Ducie Street Limited that splits the fees as follows: 1. 2% of the total development cost, paid monthly over the period of the development 2. 15% of net profit, paid on completion; 3. 1% on any debt finance raised. This agreement generated The Group has not recognised any revenue linked to the profit share element of these agreements as the transaction price is variable and the amount cannot be reliably determined at this time. This is because the developments are in the early stages of construction and there is too much uncertainty to reliably estimate expected revenue. Construction generates revenue from two entities; Robin Hood Property Development Limited and One Heritage North Church Limited. The Group receives a cost plus 5.0% margin on all works undertaken, recognising The development management and construction revenues have been generated through related parties. The Corporate revenue is from contracts signed with Robin Hood Property Development Limited, generating revenue of
On 12 July 2022 the Group completed the acquisition of development land on Victoria Road, Eccleshill for As at 30 June 2022, the Group has taken the decision to impair the value of its Bank Street and St Petersgate development, which are owned by wholly owned subsidiaries, One Heritage Bank Street Limited and One Heritage St Petersgate Limited. This was a consequence of significant cost pressures and issues with the previous contractors. The impairment totalled Due to further expenditures, the Group has taken the decision to further impair the value of its Bank Street and St Petersgate developments and additionally, the Oscar House development. The impairment totalled
Loan facility fees of £nil (30 June 2022: Trade receivables includes The prepaid sales fees and commissions relate to the sales agents fees and commissions paid on units from developments that have been exchanged but not yet completed. These relate to units exchanged on the Lincoln House, St Petersgate, Bank Street and Oscar House developments. Management consider that the credit quality of the various receivables is good in respect of the amounts outstanding, there have been no increases in credit risk and therefore credit risk is considered to be low. Therefore, no expected credit loss provision has been recognised.
Trade payables and accruals relate to amounts payable at the reporting date for services received during the period.
The related party payable relates to amounts payable to various related parties outside of the Group, with
The Group has received deposits and reservation fees in relation to its developments. These relate to units that have been reserved for sale and exchanged contracts, but are yet to legally complete sale. The deposits will only be repayable if significant property damage occurs and reinstatement is not possible
On 16 December 2021 a subsidiary, One Heritage Lincoln House Limited, signed a loan agreement with Shawbrook Bank Limited. This was for a gross amount of construction finance totalling On 20 May 2021 a subsidiary, One Heritage Oscar House Limited, signed a loan agreement with Lyell Trading Limited. This was for a gross amount of construction finance totalling On 01 June 2021 a subsidiary, One Heritage Bank Street Limited, signed a loan agreement with Together Commercial Finance Limited. This was for a gross amount of construction finance totalling On 18 March 2022 the Group had a On 11 August 2020 the Group received a loan worth Related party borrowings The Group signed a The balance due consist of two tranches. A tranche of Terms and repayment schedule The terms and conditions of outstanding loans are as follows:
** One Heritage Property Development Limited confirmed that the loan will not be demanded for repayment until such a time that the Group can afford to repay them without impacting its going concern
On 7 July 2022 the Group issued 6,250,000 new ordinary share of
The following table shows the carrying amounts of financial assets and liabilities, including their levels in the fair value hierarchy: As at 31 December 2022
As at 30 June 2022
Parent and ultimate controlling party At the reporting date 65.15% of the shares are held by One Heritage Property Development Limited, which is incorporated in Hong Kong. One Heritage Holding Group Limited, incorporated in the British Virgin Islands, is considered the ultimate controlling party through its 100% ownership of One Heritage Property Development Limited. Included in prepayments is Compensation of the Group’s key management personnel is short term employee benefits. Transactions with key management Key management personnel compensation comprised the following:
On 17 January 2023 the facility with One Heritage Property Development Limited was increased with a further
On 18 January 2023, the Group purchased Seaton House, for
On 27 January 2023, the Group settled the Shawbrook loan in full. Dissemination of a Regulatory Announcement that contains inside information in accordance with the Market Abuse Regulation (MAR), transmitted by EQS Group. The issuer is solely responsible for the content of this announcement. |
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| ISIN: | GB00BLF79495 |
| Category Code: | IR |
| TIDM: | OHG |
| LEI Code: | 2138008ZZUCCE4UZHY23 |
| OAM Categories: | 1.2. Half yearly financial reports and audit reports/limited reviews |
| Sequence No.: | 232903 |
| EQS News ID: | 1593571 |
| End of Announcement | EQS News Service |
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