| One Heritage Group plc (OHG) 31 October 2023 ONE HERITAGE GROUP PLC (the “Company”) or (the “Group”) Full year results for the year ending 30 June 2023
One Heritage Group PLC (LSE: OHG), the UK-based residential developer, development manager and property manager focused on the North of England, is pleased to announce its audited results for the year ended 30 June 2023 (FY 2023).
Financial highlights
Operating highlights
Post Period Events
Prospects
Jason Upton, Chief Executive Officer, commented:
“It has been a milestone year for the Group as we delivered our first wave of practical completions. The Group has also seen strong revenues, with the majority of units sold, whilst sales channels are focused on the remaining unsold residences.
The Group is also poised to complete all self-delivered projects in the short term, which have been problematic with cost control, and has now commenced all new projects using fixed price contracts to remove this risk. Our focused strategy, coupled with significant investment in experienced property development skills and resources, gives us confidence that current and future development projects will be delivered on a timely and cost-effective basis.
The North of England continues to prove itself as an attractive region for property investors given the growing demand for quality, affordable housing, which we are delivering. We look forward to continuing delivery of our strategic objectives in this coming year.”
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 England, seeking out value and maximising opportunities for investors. In 2020 One Heritage Group PLC became one of the first publicly listed residential developers with a focus on Co-living.
The Company is listed on the Standard List of the Main Market of the London Stock Exchange, trading under the ticker OHG.
References to page numbers throughout this announcement relates to the page numbers within the Annual Report of the Company for the year ended 30 June 2023.
Chairman’s statement
An inflationary environment and supply chain difficulties, caused by number of macro-economic and geopolitical factors, have had a significant and adverse bearing on the property development industry and we have not proved immune to this. Equally, however, as became evident as time passed, our acquisition and delivery strategies, with notable exceptions, have not served us well, in mitigating the inherent risks associated with property development. And so, while the Board was pleased to see the completion during the year of three direct development projects at Lincoln House, Bolton, Bank Street, Sheffield and Oscar House, Manchester and one development management project at Oldham, it is clearly disappointing to all concerned that two of the development projects (Bank Street and Oscar House) have been further impaired, as has St Petersgate, Stockport which awaits completion this quarter.
Having said this, I am pleased to see the energy and clarity of purpose with which the Executive Team has responded to the challenges we faced. New senior appointments both on the acquisition and delivery sides of the business are very welcome and significant initiatives have been introduced to good effect - namely a widening of our net in terms of target acquisitions to include housing as well as apartments and local authority and social housing partnering; and, in terms of delivery, third party outsourcing on fixed priced construction contracts in lieu of an in-house model.
The sales side of the development process has gone well and is testament to the quality of our product, its desirability to the rental market and the exceptional sales network that our parent company has built up in Asia. There remains strong appetite from the overseas investor for the right product, accompanied by good professional management services, particularly in our chosen geographies.
It’s important to note that of the original batch of properties purchased pre-January 2022, only St Petersgate, Stockport awaits completion and that Churchgate, Leicester and Seaton House, Stockport, both consented sites, are to be sold and not developed out by the Group following a reassessment of profitability. Construction is going well at the most recent purchase i.e. the site for housing at Victoria Road, Eccleshill and there are a number of encouraging discussions ongoing on other potential projects.
Our other principal source of revenue comes from our development management activities and I am pleased with the way that One Victoria, Manchester is shaping up and we are putting every effort in to are making sure that this business line grows in significance going forward.
Despite setbacks, I am confident that our revised strategies are fit for purpose, that we have the leadership and technical expertise to deliver them and that with the continued support of our major shareholder, our bottom line performance will greatly improve.
David Izett Chairman 31 October 2023
Chief Executive’s statement
Reflecting on the past financial year, I wish to acknowledge the hard work and commitment of our team particularly in respect of the four development projects – three direct developments and one development management project - completed during the period. Overall, after adapting our strategies in response to market conditions, strengthening our team, and refining our internal processes and delivery, I believe that we are in a much stronger position to deliver value for our shareholders in the future.
In 2021, in difficult market conditions leading to a reduction in the number of appropriate 3rd party contractor options and much higher pricing from those willing to quote, and following a contractor insolvency at Bank Street Sheffield and North Church House, Sheffield, we took the decision, essentially out of necessity, to take construction in house. We recognise that the performance of self-delivery projects has not gone to plan as costs have continued to increase to our detriment. It is important to note that the outstanding projects of North Church House, Sheffield and St Petersgate, Stockport where we are providing in house construction are due to complete this quarter and our delivery strategy will be focused on obtaining a fixed price contract for future projects.
While there is no doubt that external factors such as cost increases and delays have impacted us severely across a number of our projects, we also recognised that changes were required to our acquisition and delivery strategies to mitigate attendant risks to the development process leading to strong future performance.
Our acquisitions strategy has become more cautious over the past year to avoid some of the particular problems encountered on more challenging projects such as Bank Street and St Petersgate. A highly experienced Investment Director was appointed earlier in the year to head the acquisition team in order to build a more risk averse pipeline. Similarly, as mentioned above, our delivery strategy has evolved to an outsourced model to mitigate the risk of unforeseen cost increases. To lead this team, we have hired a Head of Projects to provide us with greater oversight and control of how projects are delivered. These two senior appointments add to the Interim Development Director appointed earlier in the year and have enabled us to create three specialist teams i.e., Acquisition, Technical and Delivery for future projects. We are delighted to have recruited great people for these roles and to have restructured our development team during the period, acknowledging where we went wrong and what we can do better.
Now that we have settled on a revised project delivery strategy, and we believe that the picture on costs is clearer, we are focusing our efforts on finding and securing new opportunities for direct development. We have also increased our efforts to source profitable deals as development manager or in Joint Ventures, along with establishing what we hope will be long term partnerships with local authorities and registered housing providers.
In order to measure our success as a business, in last year’s statement I highlighted four strategic objectives for the Group to perform against:
As mentioned above, this year has been marked by four project completions – three direct developments and one development management project.
The first completion in FY 2023 was our direct development of Lincoln House, Nelson Street, Bolton, previously a part-build office building, which we repurposed for residential use to provide 88 apartments. The gross floor area of the building is c., 60,500 square feet.
In March 2023, we completed our first development management project, a conversion of Oldham County Court, New Radcliffe Street, Oldham, into 42 residential apartments comprising a gross floor area of c., 33,400 square feet. This also marked the completion of the Group’s first partnership with a housing association, and all 42 apartments were let at affordable rents, boosting the availability of affordable housing in Oldham Town Centre.
In May 2023, we delivered our second direct development of 2023 calendar year at Liberty House, Bank Street, Sheffield. This was the conversion of a former Grade II Listed office building into an apartment block of 23 units, with a gross floor area of c., 21,000 square feet.
In quick succession to Liberty House, in June 2023, we announced the practical completion of our third direct development at Oscar House, Chester Road, Manchester. This is a six-storey apartment block of c., 19,700 square feet and comprises 27 units on a formerly unoccupied brownfield site.
Post-period end, we updated the market that the completion of 57 St Petersgate, Stockport, a conversion of a former office building, comprising 18 apartments, 1 commercial unit and c., 12,000 square feet, was delayed until later this calendar year, due to further challenges in respect of sub-contractor labour shortages.
As mentioned above and as announced in our interim results, after careful internal evaluation, we took the decision to cease providing in-house construction services to both our direct development and development management projects in favour of the appointment of a fixed-price principal contractor. This will take effect later this year, tying in with the completion of our direct development of 57 St Petersgate, Stockport and our development management project at North Church House, Queen Street, Sheffield which comprises 58 apartments in a former office building totalling c., 41,400 square feet.
As previously announced, principally as a result of an increase in costs due to rising material prices, sub-contractor prices and cost of debt, the Group impaired the value of its developments at Bank Street, St Petersgate, and Oscar House.
The Group has previously confirmed its decision to sell the consented development at Churchgate, Leicester, following a viability review based around its design and costs and has accepted an offer that is progressing through the due diligence and legal processes. We have also recently decided to sell the consented project at Seaton House, Stockport following a viability review.
In April 2023, we were pleased to commence the construction, as developer, of 24 houses at Victoria Road, Eccleshill, West Yorkshire, our first new build housing project. A principal contractor has been appointed with a fixed price build contract and completion is expected in H2 2024.
*As at 23 October 2023
We have continued to see strong demand for well-designed and well-located homes with 71 units (out of 125 available for sale) sold and legally completed during the period which increased to 102 at 23 October 2023.
Post period, the Group has exchanged contracts for the bulk sale of twenty apartments at Lincoln House, Bolton. The sales were contracted to complete in August 2023, but following buyer delays, the remaining units completed in October 2023. This, along with two further sales increases the number of completions at Lincoln House to 76 out of 88. Bank Street reported two further sales completions post year end.
In June 2023, the Group announced that the buyer underwriting the purchase of 27 apartments at Oscar House had failed to perform on 22 apartments. The Group has since remarketed the units and following a revaluation, it is anticipated that the GDV will increase from £6.1m to £6.8m. Oscar House recorded its first sale completions, seven in total, post year end.
The marketing of the 24 houses at Victoria Road, Eccleshill will commence in Q1 2024 when construction has progressed further and we enter the final six months of the project.
We are investing considerable time and effort into seeking out new opportunities both for our direct development business and for larger development partners for whom we undertake the development management role. But we do so with caution. Since 2020 BCIS (Building Cost Information Service Construction Data) cite a 24% increase in build costs with an 8.7% increase in 2022. Similarly, interest rates have risen from 1% in May 2022 to 5.25% in August 2023. Markets and supply chains continue to recalibrate post the pandemic and the disruptions caused by the ongoing war in Ukraine and the unfolding events in Israel.
At the time of writing, we have several potential sites under review and have a number of encouraging conversations underway with possible joint venture partners such as local authorities and housing associations. We will be updating the market on this in due course.
Development management
The second of our two core business lines is development management and as mentioned above, in March 2023 we completed our first such project, a conversion of Oldham County Court, New Radcliffe Street, Oldham, into 42 residential apartments. We are also managing the development of North Church House, Queen Street, Sheffield which comprises 58 apartments. More recently, we announced our appointment as development manager to deliver One Victoria, Manchester. We have entered into a construction agreement with Torsion Construction Limited, who will construct the new-build development comprising c.,113,000 square feet across two buildings containing a total of 129 units and two ground-floor commercial units. One Victoria is a significant regeneration project in Manchester City Centre, and we are looking forward to managing its successful delivery.
Our other development management project of scale is One Heritage Tower which is still yet to commence construction. The project has been significantly impacted by increased construction costs resulting in the need for design changes to improve efficiency and reduce costs. Interest rate increases have also impacted the cost of debt. Despite these viability challenges, progress is being made on a fixed price construction contract, and options are being progressed which include both a sale of the project and a revised delivery strategy with funding partners.
Property services
Our property services team has worked hard this year to establish the infrastructure needed to accommodate the increase in properties under management. We have invested in a new Customer Relationship Management (CRM) system and have gained accreditations in industry-recognised Money Shield and Property Ombudsman schemes. The property management function of One Heritage is now well established as we continue to grow our properties under management to generate increased revenue for our stakeholders.
The Group continues to provide its tailored property sourcing service, which finds, analyses, and negotiates property deals for overseas investors. This area has seen steady growth over recent months, and its services are being marketed in Hong Kong under the brand ‘Red Brick’. Sixteen properties were secured for investors during the period under review which generated over £30,000 in revenue for the Group.
Services such as sourcing, property transactions and project management to investors in Co-living properties (typically single-dwelling suburban houses which are repurposed as shared accommodation for young professionals) continue to be provided. While we remain committed to advancing Co-living projects, rising house prices and construction costs have seen a reduction in activity levels since the beginning of the calendar year.
We have examined various ways to adapt our strategy to these more challenging market conditions including a recent trial providing Serviced Accommodation services. We will be providing a further update on this business segment in due course.
Our people
There has been a number of personnel changes at a senior level during the year. At the beginning of the period under review, Anthony Unsworth joined the Company as CFO and an Executive Director. Anthony has brought financial and listed company expertise to the Company and paired with his track record in property development, he has proved to be invaluable to us all here at One Heritage. In September 2023, Anthony informed the Board of his decision to resign, but will continue in these roles during his notice period ending in March 2024. The Board has commenced a search for a replacement.
With his wealth of experience and in-depth understanding of the property and regeneration marketplace, we were delighted to announce the arrival of Paul Westhead on an initial interim basis to oversee the delivery of our development projects, Paul has provided invaluable support to the Group in the restructuring of the development team and the project delivery element of our development process. It is intended that his role will be carried out on a permanent basis and we will provide an update on this in due course.
Post period end in July, we welcomed Geoff Willis into a new role of Investment Director, strengthening the senior team. With his experience and expertise complementing our existing team, Geoff will help us to source and deliver new development opportunities.
2024 FINANCIAL YEAR STRATEGIC OBJECTIVES
The Group continues to evolve and navigate through a very challenging market. We will continue to focus on the delivery of our development projects and growing our development pipeline, both as developer and as Development Manager, will be one of our primary objectives.
The following four objectives will remain in place for the forthcoming financial year.
INDUSTRY OVERVIEW
Over the 12 months leading up to June 2023, the UK economy experienced a 1% increase in economic output, 0.8% higher than it was in February 2020 before the pandemic struck. The economic outlook for the remainder of 2023 and into 2024 is uncertain with persistent inflationary pressures leading to increased prices. The decisions made by the government and the Bank of England regarding economic policies and interest rates will be crucial in curbing inflation, with a particular focus on the Autumn Statement. HM Treasury's August consensus economic forecasts indicated limited GDP growth of just 0.3% in 2023 and 0.6% in 2024.
The shortage of housing in the UK remains a significant issue, evident from the long-term trend of rising house prices relative to incomes and the considerable inflationary pressures in the rental market. The last reported figures for the year to March 2022 (reported by the HBF and Gov.uk annually in November) show c.,210,100 new housing additions in England, 9.5% higher than the previous year of c.,191,800, but 4% lower than the c.,219,100 homes from the pre pandemic data to March 2020 with supply chain limitations related to labour and building materials limiting growth. The building of new housing remains low in the current year due to the end of the Help to Buy programme, higher mortgage interest rates and subsequent affordability challenges.
Although house prices reached their peak in August 2022, affordability constraints have caused them to decline over the ten-month period ending in June 2023. According to the Nationwide Building Society, the average UK house price decreased by 3.5% during the 12 months up to June 2023.
The shortage of new homes available for sale has generated increased demand in the rental sector, resulting in a 10.4% average household rent increase over the year leading up to June 2023. This rent surge has affected every region of the UK, as reported by the HomeLet Rental Index, and a 22.0% increase over the past two years leading up to June 2023. Unless there is a significant reduction in mortgage interest rates, rental demand is expected to continue growing as potential homebuyers remain unable to purchase homes.
A consistent and reliable land supply within a predictable planning system plays a crucial role in the housebuilding industry. After the pandemic, planning consents reached their peak at c.,339,500 in the 12 months ending June 2021, aligning with the government's target of delivering 300,000 homes annually by the mid-2020s. However, this level has decreased by 20% to c.,270,600 in the year ending March 2023. A significant shift occurred following the December 2022 announcement that local housing targets were no longer mandatory and that local authorities were no longer obligated to maintain a rolling five-year land supply if they had a local plan in place.
There has been a significant change in mortgage interest rates, posing challenges for homebuyers seeking mortgage financing. Bank of England data reveals that mortgage borrowing costs for new mortgages steadily declined for over 12 years, reaching a low of 1.51% in November 2021. However, this trend reversed sharply in less than 18 months, with the average cost of new mortgages rising to 4.64% in June 2023, bringing mortgage interest rates to levels last observed in 2009. According to the Halifax Mortgage Affordability Index, purchasing a new home now consumes 40.8% of after-tax income. In the upcoming months, nominal wage growth may have a positive impact on this affordability measure, but it will ultimately depend on the future movements of both mortgage rates and house prices.
Throughout the year to June 2023, we encountered a notable surge in build cost inflation, impacted by supply limitations, inflationary pressures affecting labour costs and the delayed impact of a significant rise in energy costs, which began in the autumn of 2021 and was further compounded by the conflict in Ukraine. However, with headline inflation showing reductions we expect the rate of increase to continue to slow over the coming year.
The construction industry is poised to confront forthcoming regulatory changes over the next three years, notably related to biodiversity net gain and the Future Homes Standard. Starting in November 2023, new legislation will mandate that all our developments achieve a minimum biodiversity net gain of 10%. This requirement necessitates the development of plans to achieve a measurable improvement of at least 10% in the site's biodiversity relative to its state before development commenced. Commencing in 2025, the Future Homes Standard will necessitate that new homes produce between 75% and 80% fewer carbon emissions than the standards applicable up to June 2022. Detailed requirements and performance measurement criteria for this new standard are yet to be finalised. The timing, transition arrangements, and industry consultation processes for this standard are pending initiation.
ESG
In November 2021, we announced our ESG policy which outlined our commitments to conducting our business activities ethically and responsibly, and our commitment to embedding ESG initiatives both in our day-to-day operations and across our developments. An update on each commitment is outlined below.
We continue to have a long-term relationship with Mustard Tree in Manchester which is a homelessness charity. Our employees raised over £2,000 from initiatives including Tough Mudder, Hike for the Turkey and Syria Appeal and various collections.
Post year end, a new training provider and system has been implemented for regular e-learning across the Company. We continue to support our employees with funding for their professional development which includes AAT and ACCA qualifications.
The Group has subscribed to Stribe, an employee engagement tool which allows employees to provide confidential feedback and gives all a fair voice. A decisive factor in choosing Stribe was their community engagement. Each new Stribe membership provides a school with a pupil safeguarding app for free which gives hundreds of children a voice and a safe confidential way for them to speak up within their schools.
We were pleased to again support International Women’s Day earlier in the year with women making up 63% of our workforce. Furthermore, we are progressing our application to become a full member of the Greater Manchester Good Employment Charter (“GMGEC”). We are undergoing an assessment by GMGEC and expect to update on our application in due course. GMGEC are aligned with our values which include providing opportunities for our people to grow, develop and thrive.
We were delighted to work with Bolton NHS foundation in the period under review to provide 62 of our 88 apartments to house key workers at our Lincoln House, Bolton development.
Our Co-living offering, which has fixed weekly rents and includes all bills. continues to be an important accommodation class for us. This has protected our tenants from rising utility costs and cost of living.
Increases in material costs cause additional pressure which is affecting the whole industry so initiatives to improve the environmental performance of our developments are cost sensitive. Despite this we are looking at cost effective measures and have recently implemented initiatives working with contractors to track and monitor waste on our development projects. There have been various design changes across our developments, and we have reviewed our specification to include energy efficient lighting and energy efficient heating options where we can. Further assessments of specification are under review.
We continue to work with building managers on the strategy to engage with our tenants and occupiers relating to their environmental impact. This includes recycling measures and awareness in home user guides in our properties.
We believe in building a culture which has ESG at its core, and this has resulted in changes across all areas of the business and how decisions are made. Processes incorporate ESG which include budget allowances where appropriate, lessons learnt exercises, and regular audits of the advisors and consultants the Group uses to ensure they are aligned with our values and expectations.
The Group is reviewing ways to monitor and report effectively against the United Nation’s Sustainable Development Goals. A further update will be provided next year in relation to how the Group intends to do this.
Outlook
In our last Annual Report, I said that we continued to face the same challenges as before which showed little sign of immediate improvement. These have continued over the last twelve months. Rising costs of materials, interest rates and labour have all affected the industry. There are however signs of improvement with build cost inflation expected to ease which should support viability and reduce pressure on margins. This will help us to build our pipeline more effectively and profitably.
The diversity of our revenue sources has offered us a degree of insulation against the current market challenges with our development management revenue performing strongly. With some viability concerns surrounding Co-living, it is imperative the Group adapts and we have already taken steps to do so by identifying new opportunities such as Serviced Accommodation. We are giving due focus and attention on working with local authorities and registered housing providers to allow us to both deliver returns for our shareholders and tackle the lack of affordable housing.
We continue to be positive about the outlook for the sector of the UK housing market in which we operate. House prices have remained resilient for several years and with a lack of supply, especially in the North of England, in city centres that are seeing population growth, rental values continue to be strong due to the lack of supply. This supply shortage should support pricing and sustain strong returns for property investors which will benefit our sales.
We will proceed with cautious optimism and as a maturing business, we are now much better placed. Market dynamics in our view have started to stabilise which offer greater certainty around costs and values. We have demonstrated our agility, and we will continue to adapt strategies when necessary to safeguard our projects and stakeholders against similar disruptions in the future.
Task Force on Climate-Related Financial Disclosures (TCFD)
In light of the growing global concern over climate change and the increasing need for transparency and disclosure regarding climate-related financial risks and opportunities, our company has made the strategic decision to adopt the Task Force on Climate-related Financial Disclosures (TCFD) initiative. The following outlines our comprehensive plan for implementing the TCFD framework and enhancing our climate-related financial reporting.
The TCFD initiative was established to help organisations assess and disclose their climate-related financial risks and opportunities, enabling investors, stakeholders, and the public to make informed decisions. Adopting this framework demonstrates our commitment to addressing climate change and aligning our business strategies with a sustainable and resilient future.
The Group will allocate necessary resources, including personnel, technology, and financial resources, to support the successful implementation of the TCFD framework.
The implementation steps are planned on a phased approach over the year to June 2024:
By adopting the TCFD initiative, our company is taking proactive steps to address climate-related financial risks and opportunities. This comprehensive plan outlines our commitment to transparency, resilience, and sustainability, ensuring that we are well-prepared for the challenges and opportunities that a changing climate presents.
Jason Upton Chief Executive 31 October 2023
Group’s Financial Review
Trading For the twelve months ended 30 June 2023, revenue increased by £13.84m (+792%) to £15.59m (FY 2022: £1.75m). This primarily reflects significant growth in development sales along with construction services.
Developments sales revenue remained the largest contributor to Group revenue, accounting for 64% of total revenue. This significant growth was driven from Lincoln House, Bolton delivering £6.72m from 54 legal completions and Bank Street, Sheffield legally completing 17 sales equating to £3.27m.
Co-living property management relates to the works undertaken on Co-living properties where the Group receives a 5.0% cost plus margin on all works undertaken and generated revenue of £1.28m (FY 2022: £0.53m).
Further to the co-living property management fee, construction services delivered revenue of £3.17m in the period (FY 2022: £0.13m), reflecting building activity supplied to related party Queen Street, Sheffield, a refurbishment project where the Group is development manager.
There was an increase in development management fee income of £0.47m to £0.70m (FY 2022: £0.23m), due to the recognition of a full year of income from an agreement made in the period to develop manage One Victoria, Manchester. The other projects contributing to the period are North Church House, Sheffield, and the One Heritage Tower, Salford.
Property services delivered revenue of £0.33m in FY 2023. This was driven by management fees and transaction fees.
The gross profit improved by £1.30m to £0.59m (FY 2022: loss £0.71m) due mainly to the completions from Lincoln House. The impairment in the period was £1.09m (FY 2022: £1.30m) and this was broadly in line with impairment reported in the interim results of December 2022 across the three impaired developments: St Petersgate, Bank Street and Oscar House. The impairment was principally as a result of previously mentioned factors of increased costs due to rising material prices, sub-contractor prices, delays experienced and the cost of debt.
There has been a number of changes implemented in the year to reporting, risk management and operational delivery, to better protect the Group from similar challenges in the future, most notably the cessation of in-house construction services to both our direct development and development management projects in favour of the appointment of a fixed-price principal contractor on all new projects. The development at Victoria Road, Eccleshill which commenced in the period is with a fixed price principal contractor.
The gross margin was 3.79% (FY 2022: (40.4%)), which is predominantly due to the completions on Lincoln House offset by further impairment in the period.
Administrative expenses were £2.21m in the period (FY 2022: £1.48m). This represents an overall £0.73m increase in overheads arising from a number of factors: a higher salary cost of £0.40m driven by an increase in average headcount to 28 employees (FY 2022: 23) with more experienced individuals along with an £80k increase in recruitment costs; an increase of £22k in audit fees; and an increase of £176k in professional fees mainly due to higher consultants and software costs. The Group remains focused on a tight control of overheads, whilst introducing some planned investment in costs to drive the revenue streams. Administrative expenses as a proportion of revenue were 14% in FY 2023 whilst FY 2022 administrative expenses as a proportion of revenue were 85% of turnover on lower revenues.
The operating loss decreased by £0.49m to a loss of £1.62m (FY 2022: loss of £2.11m). Finance costs were £0.52m (FY 2022: £29k). The increase in finance cost is attributable to the Lincoln House, Oscar House and Bank Street developments reaching practical completion in the period, and all finance costs since then are expensed and not capitalised. The pre taxation loss amounts to £2.14m (FY 2022: £2.13m). The basic loss per share was 6.2 pence (FY 2022: loss 6.6 pence).
Balance Sheet The Balance Sheet structure reflects the strategy of funding development projects with a combination of debt and equity instruments. As the Group continues to progress, and with development projects reaching completion and realising sales, the Balance Sheet will in due course reflect the positive cash impact of such transactions allowing funds to be recycled into new projects through targeted acquisitions.
Net assets have decreased by £1.14m from £0.57m to negative equity of £0.57m due to an increase in borrowings funding future growth, but also recognising the prudent impairment of assets as described earlier. The completion of properties at Lincoln House, Bank Street and Oscar House, Manchester that have taken place in the period have commenced a shift in the Balance Sheet which will ultimately allow for funds to be directed into targeted acquisitions as the Group moves forward. As anticipated, no dividends have been declared in this year with losses being reported in the first three years of trading.
Development Inventory has increased by £1.40m from £15.13m to £16.57m. The key balances are at Oscar House £6.32m (FY 2022: £4.22m) and Lincoln House £3.50m (FY 2022: £7.41m) where the projects are completed and sale completions have taken place. The inventory balances have increased at St Petersgate £2.71m (FY 2022: £0.80m) which is a site due to practically complete in the quarter, along with Victoria Road, Eccleshill £1.80m, which was purchased on 8 July 2022 and where construction has now commenced.
Reported Net Assets per share decreased by 3.3p in the period to negative 1.5p (FY 2022: 1.8p).
Liquidity The capital structure of the Group continued to evolve with the issuance of new shares in the period. On 7 July 2022, the Group issued 6.25m new ordinary shares of 1.0 pence each at an issue price of 20.0 pence per share, raising gross proceeds of £1.25m. This additional source of finance enhanced funding in addition to the initial placing, a corporate bond, construction finance and shareholder loan support.
The Net Debt has increased by £1.99m from £14.95m to £16.94m. This increase is supporting the planned growth of the Group and includes:
Net Cash outflow used in operating activities was £0.57m, primarily due to the reported loss of £2.14m. In summary, we are beginning to realise the benefits from our development sales and development management agreements. This gives us incremental funding flexibility to pursue our Group strategy with renewed confidence.
Anthony Unsworth Chief Financial Officer 31 October 2023
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 Government 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.
Anthony Unsworth Chief Financial Officer 31 October 2023
Statement of Directors’ Responsibilities
DIRECTORS’ RESPONSIBILITIES The Directors are responsible for preparing the Annual Report and the Group and parent Company financial statements in accordance with applicable law and regulations.
Company law requires the Directors to prepare Group and parent Company financial statements for each financial year. Under that law they are required to prepare the Group financial statements in accordance with international accounting standards in conformity with the requirements of the Companies Act 2006 and applicable law and have elected to prepare the parent Company financial statements in accordance with UK accounting standards and applicable law (UK Generally Accepted Accounting Practice), including FRS 101 Reduced Disclosure Framework. In addition, the Group financial statements are required under the UK Disclosure Guidance and Transparency Rules to be prepared in accordance with International Financial Reporting Standards adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union.
Under company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Group and parent Company and of the Group’s profit or loss for that period. In preparing each of the Group and parent Company financial statements, the Directors are required to:
The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the parent Company’s transactions and disclose with reasonable accuracy at any time the financial position of the parent Company and enable them to ensure that its financial statements comply with the Companies Act 2006. They are responsible for such internal control as they determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error, and have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the Group and to prevent and detect fraud and other irregularities. Under applicable law and regulations, the Directors are also responsible for preparing a Strategic Report, Directors’ Report, Directors’ Remuneration Report and Corporate Governance Statement that complies with that law and those regulations.
The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company’s website. Legislation in the UK governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.
WEBSITE PUBLICATION The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company’s website. Legislation in the UK governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.
DIRECTORS’ RESPONSIBILITIES PURSUANT TO DTR4 The Directors confirm to the best of their knowledge:
By order of the Board Jason Upton Chief Executive Officer 31 October 2023
Independent Auditor’s Report to the Members of One Heritage Group PLC Our opinionWe have audited the consolidated financial statements and Company financial statements of One Heritage Group Plc (the “Company”) and its subsidiaries (together, the “Group”), which comprise the consolidated statement of financial position and the Company’s balance sheet as at 30 June 2023, the consolidated statements of comprehensive income, the consolidated and Company’s changes in equity and consolidated cash flows for the year then ended, and notes, comprising significant accounting policies and other explanatory information. In our opinion:
Basis for opinionWe conducted our audit in accordance with International Standards on Auditing (UK) (“ISAs (UK)”) and applicable law. Our responsibilities are described below. We have fulfilled our ethical responsibilities under, and are independent of the Company and Group in accordance with, UK ethical requirements including the FRC Ethical Standard as applied to public interest entities. We believe that the audit evidence we have obtained is a sufficient and appropriate basis for our opinion. Key audit matters: our assessment of the risks of material misstatementKey audit matters are those matters that, in our professional judgment, were of most significance in the audit of the consolidated financial statements and company financial statements and include the most significant assessed risks of material misstatement (whether or not due to fraud) identified by us, including those which had the greatest effect on: the overall audit strategy; the allocation of resources in the audit; and directing the efforts of the engagement team. These matters were addressed in the context of our audit of the consolidated financial statements and company financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. In arriving at our audit opinion above, the key audit matters were as follows (unchanged from 2022):
Our application of materiality and an overview of the scope of our auditMateriality for the consolidated financial statements as a whole was set at £147,000 (2022: £163,000), determined with reference to a benchmark of group total assets of £18,970,907 (2022: £18,440,109), of which it represents approximately 0.76% (2022: 0.88%). Materiality for the Company financial statements was set at £40,000 (2022: £42,000), determined with reference to a benchmark of Company total assets of £4,354,322 (2022: £5,067,679), of which it represents approximately 0.92% (2022: 0.83%). In line with our audit methodology, our procedures on individual account balances and disclosures were performed to a lower threshold, performance materiality, so as to reduce to an acceptable level the risk that individually immaterial misstatements in individual account balances add up to a material amount across theconsolidated financial statements as a whole. Performance materiality for Group was set at 65% (2022: 65%) of materiality for the consolidated financial statements as a whole, which equates to £95,500 (2022: £106,000), which is lower than the maximum of 75% per our methodology. This was to take into account the Group nature of the audit and resulting increased level of aggregation risk from consolidation of the subsidiaries. For the Company, performance materiality was set at 75% (2022: 75%), which equates to £30,000 (2022: £32,000). We applied this percentage in our determination of performance materiality because we did not identify any factors indicating an elevated level of risk. We reported to the Audit Committee any corrected or uncorrected identified misstatements exceeding £7,350 (2022: £8,000), for the consolidated financial statements and £2,000 (2022: £2,000) for the Company financial statements, in addition to other identified misstatements that warranted reporting on qualitative grounds. Our audit of the Group was undertaken to the materiality level specified above, which has informed our identification of significant risks of material misstatement and the associated audit procedures performed in those areas as detailed above. The group team performed the audit of the Group as if it was a single aggregated set of financial information. The audit was performed using the materiality level set out above and covered 100% of total group revenue, total group profit before tax, and total group assets and liabilities. Going concernThe directors have prepared the consolidated financial statements and company financial statements on the going concern basis as they do not intend to liquidate the Group or the Company or to cease their operations, and as they have concluded that the Group and the Company's financial position means that this is realistic. They have also concluded that there are no material uncertainties that could have cast significant doubt over their ability to continue as a going concern for at least a year from the date of approval of the consolidated financial statements and the company financial statements (the “going concern period"). An explanation of how we evaluated management’s assessment of going concern is set out in the related key audit matter in the key audit matters section of this report. Our conclusions based on this work:
However, as we cannot predict all future events or conditions and as subsequent events may result in outcomes that are inconsistent with judgements that were reasonable at the time they were made, the above conclusions are not a guarantee that the Group and the Company will continue in operation. Fraud and breaches of laws and regulations – ability to detectIdentifying and responding to risks of material misstatement due to fraudTo identify risks of material misstatement due to fraud (“fraud risks”) we assessed events or conditions that could indicate an incentive or pressure to commit fraud or provide an opportunity to commit fraud. Our risk assessment procedures included:
As required by auditing standards, we perform procedures to address the risk of management override of controls, in particular the risk that management may be in a position to make inappropriate accounting entries. On this audit we do not believe there is a fraud risk related to revenue recognition because the Group’s revenue streams are simple in nature with respect to accounting policy choice, and are easily verifiable to external data sources or agreements with little or no requirement for estimation from management. We did not identify any additional fraud risks. We performed procedures including
Identifying and responding to risks of material misstatement due to non-compliance with laws and regulationsWe identified areas of laws and regulations that could reasonably be expected to have a material effect on the consolidated financial statements from our sector experience and through discussion with management (as required by auditing standards), and from inspection of the Group’s regulatory and legal correspondence, if any, and discussed with management the policies and procedures regarding compliance with laws and regulations. As the Group is regulated, our assessment of risks involved gaining an understanding of the control environment including the entity’s procedures for complying with regulatory requirements. The Group is subject to laws and regulations that directly affect the consolidated financial statements including financial reporting legislation and taxation legislation and we assessed the extent of compliance with these laws and regulations as part of our procedures on the related financial statement items. The Group is subject to other laws and regulations where the consequences of non-compliance could have a material effect on amounts or disclosures in the consolidated financial statements, for instance through the imposition of fines or litigation or impacts on the Group and the Company’s ability to operate. We identified financial services regulation as being the area most likely to have such an effect, recognising the regulated nature of the Group’s activities and its legal form. Auditing standards limit the required audit procedures to identify non-compliance with these laws and regulations to enquiry of management and inspection of regulatory and legal correspondence, if any. Therefore if a breach of operational regulations is not disclosed to us or evident from relevant correspondence, an audit will not detect that breach. Context of the ability of the audit to detect fraud or breaches of law or regulationOwing to the inherent limitations of an audit, there is an unavoidable risk that we may not have detected some material misstatements in the consolidated financial statements, even though we have properly planned and performed our audit in accordance with auditing standards. For example, the further removed non-compliance with laws and regulations is from the events and transactions reflected in the consolidated financial statements, the less likely the inherently limited procedures required by auditing standards would identify it. In addition, as with any audit, there remains a higher risk of non-detection of fraud, as this may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal controls. Our audit procedures are designed to detect material misstatement. We are not responsible for preventing non-compliance or fraud and cannot be expected to detect non-compliance with all laws and regulations. The directors' report and strategic reportThe directors are responsible for the strategic report and the directors' report. Our opinion on the consolidated financial statements and company financial statements do not cover those reports and we do not express an audit opinion thereon. Our responsibility is to read the strategic report and the directors' report and, in doing so, consider whether, based on our consolidated financial statements and company financial statements audit work, the information therein is materially misstated or inconsistent with the consolidated financial statements and company financial statements or our audit knowledge. Based solely on that work:
Matters on which we are required to report by exceptionUnder the Companies Act 2006, we are required to report to you if, in our opinion:
We have nothing to report in these respects. Respective responsibilitiesDirectors' responsibilitiesAs explained more fully in their statement set out on page 36, the directors are responsible for: the preparation of the consolidated financial statements including being satisfied that they give a true and fair view; such internal control as they determine is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error; assessing the Group and Company’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 they either intend to liquidate the Group or the Company or to cease operations, or have no realistic alternative but to do so. Auditor's responsibilitiesOur objectives are to obtain reasonable assurance about whether the consolidated financial statements and company financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue our opinion in an auditor’s report. Reasonable assurance is a high level of assurance, but does not guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the consolidated financial statements and company financial statements.
The purpose of our audit work and to whom we owe our responsibilities
This report is made solely to the Company's members, as a body, in accordance with chapter 3 of part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the Company’s members those matters we are required to state to them in an auditor’s 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 and its members, as a body, for our audit work, for this report, or for the opinions we have formed.
Edward Houghton (Senior Statutory Auditor) For and on behalf of KPMG Audit LLC (Statutory Auditor) Chartered Accountants Isle of Man 31 October 2023
Consolidated statement of comprehensive income For the year ended 30 June 2023
The accompanying notes form an integral part of the financial statements.
Consolidated statement of financial position As at 30 June 2023
Jason David Upton Company registration number: 12757649
Consolidated statement of cash flows For the year ended 30 June 2023
*restated (note 1)
The accompanying notes form an integral part of the financial statements
Consolidated statement of changes in equity For the year ended 30 June 2023
For the year ended 30 June 2022
The accompanying notes form an integral part of the financial statements.
Notes to the consolidated financial statements For the year ended 30 June 2023
One Heritage Group PLC (the “Company”)(Company number: 12757649) 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 and subsidiaries is that of property development.
These consolidated financial statements (“Financial Statements”) as at the end of the financial year to 30 June 2023 comprise of the Company and its subsidiaries. A full list of companies consolidated in these Financial Statements can be found in Note 27.
The financial statements are prepared on the historical cost basis except for financial assets at fair value through profit or loss.
The Group’s financial statements have been prepared and approved by the Directors in accordance with international accounting standards in accordance with UK-adopted international accounting standards (“UK-adopted IFRS”). The Company has elected to prepare its parent company financial statements in accordance with FRS 101. These are presented on pages 76 to 83. The significant accounting policies are set out in note 5. The accounting policies have been applied consistently to all periods presented in these group Financial Statements.
They were authorised for issue by the Company’s Board of Director on 31 October 2023.
Restatement The prior year presentation of operating cashflows and financing cashflows have been reclassified in order to reflect financing and operating cashflows appropriately. The impact of this restatement reduced financing cash inflows by £546,772 from £9,836,108 to £9,289,336 (comprising an increase of £178,743 in third party loans repaid and reduction of £368,029 in related party borrowing) and increased operating cash flows by the same amount from £(9,028,074) to £(8,481,302) (comprising a reduced movement in receivables and prepayments of £737,676, an increased movement in inventory of £435,768 and an increased movement in payables of £244,864).
Segment reporting
During the previous financial year the Group has begun operating with distinct Segments, having previously managed the Group as one distinct entity. This has been driven by the Group incorporating entities to manage construction and property services, which were previously outsourced.
The Group operates in three operating segments, each managed by a senior manager who sits on the Group’s management team. In addition to these, there is a corporate segment which covers central operations. The following is a summary of the operations for each reportable segment.
Management has determined the Group’s operating segments based on the information reviewed by Senior Management to make strategic decisions. The chief operating decision maker is the Senior Management Team, comprising the Executive Directors and the Department Directors. The information presented to Senior Management Team includes reports from all functions of the business as well as strategy, financial planning, succession planning, organisational development and Group-wide policies.
There are various levels of integration between Development and Construction. This integration involves the services that Construction undertakes on the developments on behalf of the Development segment.
The Group’s primary measure of financial performance for segments is the operating profit or loss in the period.
Going concern
Notwithstanding net current liabilities of £5.8 million (excluding inventory balances totalling £16.6 million) as at 30 June 2023 (2022: £8.3 million (excluding inventory balances totalling £15.1 million), a loss for the year then ended of £2.4 million (2022: £2.1 million) and operating cash outflows for the year of £0.6 million (2022: £9 million), the financial statements have been prepared on a going concern basis which the directors consider to be appropriate for the following reasons.
The directors have prepared a cash flow forecast on a consolidated basis for the period to 31 December 2024 which indicates that, taking account of reasonably possible downsides, the Group will have sufficient funds to meet its liabilities including the Hampshire Trust Bank loan and Corporate Bond, as they fall due for that period using the proceeds from:
As with any company placing reliance on other group/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 and its subsidiaries will have sufficient funds to continue to meet their 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.
The board 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 directors 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:
Measurement of fair values A number of the Group’s accounting policies and disclosures require the measurement of fair values, for both financial and non-financial assets and liabilities.
The Group has an established control framework with respect to the measurement of fair values. The Chief Financial Officer has overall responsibilities for overseeing all significant fair value measurements.
The Chief Financial Officer regularly reviews significant unobservable inputs and valuation adjustments. If third party information, such as broker prices or pricing services, is used to measure fair values, then the Chief Financial Officer assesses the evidence obtained from the third parties to support the conclusion that these valuations meet the requirements of the Standards, including the level in the fair value hierarchy in which the valuations should be classified.
Significant valuation issues are reported to the Group’s audit committee. When measuring the fair value of an asset or a liability, the Group uses observable market data as far as possible. Fair values are categorised into different levels in fair value hierarchy based on the inputs used in the valuation techniques as follows:
If the inputs used to measure the fair value of an asset or liability fall into different levels of the fair value hierarchy, then the fair value measurement is categorised in its entirely in the same level of the fair value hierarchy as the lowest level input that is significant to the entire measurement.
The Group recognises transfer between levels of the fair value hierarchy at the end of the reporting period during which the change has occurred.
The significant judgements with regard to going concern are the forecast timing of development property inventory realisations and in the event it is needed the ability of the Group to be able to drawdown on the facility by its parent company, One Heritage Property Development Limited (“OHPD”). Management of the Company and its subsidiaries are not aware of any material uncertainties that may cast significant doubt on the Company and its subsidiaries ability to continue as going concerns. Therefore, the Group financial statements continue to be prepared on the going concern basis. For detail refer note 3 going concern.
Basis of consolidation
Subsidiaries
Subsidiaries are entities controlled by the Group. The Group ‘controls’ any entity when it is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. The financial statements of subsidiaries are included in the consolidated financial statements from the date on which control commences until the date on which control ceases.
Transactions eliminated on consolidation
Intra-group balances and transactions, and any unrealised income and expenses (except for foreign currency transaction gains or losses) arising from intra-group transactions, are eliminated. Unrealised gains arising from transactions with equity-accounted investees are eliminated against the investment to the extent of the Group’s interest in the investee. Unrealised losses are eliminated in the same way as unrealised gains, but only to the extent that there is no evidence of impairment.
Interests in equity-accounts investees
The Group’s interests in equity-accounted investees comprise interests in associates.
Associates are those entities in which the Group has significant influence, but not control or joint control, over the financial and operating policies.
Interests in associates are accounted for using the equity method. They are initially recognised at cost, which includes transaction costs. Subsequent to initial recognition, the consolidated financial statements include the Group’s share of the profit or loss and OCI of equity-accounted investees, until the date on which significant influence or joint control ceases.
Earnings per share and net asset value per share
Basic earnings per share amounts are calculated by dividing net profit or loss for the year attributable to the owners of the Group by the weighted average number of ordinary shares outstanding during the year.
Diluted earnings per share amounts are calculated by dividing the net profit or loss attributable to the owners of the Group (after adjusting for interest on the convertible notes) by the weighted average number of ordinary shares outstanding during the year plus the weighted average number of ordinary shares that would be issued on conversion of all the dilutive potential ordinary shares into ordinary shares.
Net asset value per share amounts is calculated by dividing net assets of the Group at the reporting date by the weighted average number of ordinary shares outstanding during the year.
Revenue is recognised when the performance obligation associated with the sale is completed or as the performance obligation is completed over time where appropriate. The transaction price comprises the fair value of the consideration received or receivable, net of value added tax, rebates and discounts and after eliminating sales within the Group. Revenue and gross profit are recognised as follows (note 7):
Revenue from housing sales is recognised in profit or loss when control is transferred to the customer. This is deemed to be when title of the property passes to the customer on legal completion and the performance obligation associated with the sale is completed.
Management fees are recognised as revenue in the period to which they relate when performance obligations are fulfilled based on agreed transaction prices. Variable performance fees are estimated based on the expected value and are only recognised over time as performance obligations are fulfilled when progress can be measured reliably and to the extent that a significant reversal of revenue in a subsequent period is unlikely.
The Group primarily operates under cost plus margin agreements and therefore revenue is recognised when the relevant cost has been incurred.
The Group generates a monthly co-living management fee for services provided relating to day-to-day administration and office space. These fees are recognised as revenue in the period to which they relate when performance obligations are fulfilled based on agreed transaction prices.
The Group generates rental income from Trading Properties. This has been recognised as other income rather than revenue as it is not expected to be a recurring source of income and is not a main trading activity of the Group.
Cost of sales
The Group determines the value of inventory charged to cost of sales based on the total budgeted cost of developing a site. Once the total expected costs of development are established, they are allocated to individual plots to achieve a standard build cost per plot. Cost of sales represent cost for purchase of land, construction costs, consultant costs, utilities cost and other related direct costs.
To the extent that additional costs or savings are identified as the site progresses, these are recognised over the remaining plots unless they are specific to a particular plot, in which case they are recognised in profit or loss at the point of sale.
Operating profit/(loss)
Operating profit/(loss) is the Group’s total earnings from its core business functions for a given period, excluding the deduction of interest and taxes, the gain/(loss) on sale of subsidiaries and gain/(loss) on sale of fixed assets.
Financial guarantees
A financial guarantee contract is initially recognised at fair value. At the end of each subsequent reporting period, financial guarantees are measured at the higher of:
The amount of the loss allowance at each subsequent reporting period equals the 12-month expected credit losses. However, where there has been a significant increase in the risk that the specified debtor will default on the contract, the calculation is for lifetime expected credit losses.
Finance income
Interest income on bank deposits is recognised on an accruals basis. Also included in interest receivable are interest and interest-related payments the Group receives on other receivables and external loans.
Finance costs
Borrowing costs are recognised on an accruals basis and are payable on the Group’s borrowings and lease liabilities. Also included are the amortisation of fees associated with the arrangement of the financing.
Specific or general borrowing costs are capitalised if they are directly attributable to the acquisition, construction or production of qualifying assets which are assets that necessarily take a substantial period to get ready for sale. The group considers that its inventories are qualifying assets.
Foreign currencies
These consolidated financial statements are presented in Pound sterling, which is the Company’s functional currency.
The individual financial statements of each Group company are presented in Pound Sterling, the currency of the primary economic environment in which it operates (its functional currency). Transactions in currencies other than the functional currency are recorded at the rates of exchange prevailing on the dates of the transactions. At each reporting date, monetary assets and liabilities that are denominated in foreign currencies other than the functional currency are retranslated at the rates prevailing at the reporting date.
Leases
The Group as a lessee
The Group assesses at inception whether a contract is, or contains, a lease. A lease exists if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration.
The Group assessment includes whether:
At the commencement of a lease, the Group recognises a right-of-use asset along with a corresponding lease liability.
The lease liability is initially measured at the present value of the remaining lease payments, discounted using the Group’s incremental borrowing rate. The lease term comprises the non-cancellable period of the contract, together with periods covered by an option to extend the lease where the Group is reasonably certain to exercise that option based on operational needs and contractual terms. Subsequently, the lease liability is measured at amortised cost by increasing the carrying amount to reflect interest on the lease liability and reducing it by the lease payments made. The lease liability is remeasured when the Group changes its assessment of whether it will exercise an extension or termination option.
Right-of-use assets are initially measured at cost, comprising the initial measurement of the lease liability adjusted for any lease payments made at or before the commencement date, estimated asset retirement obligations, lease incentives received and initial direct costs. Subsequently, right-of-use assets are measured at cost, less any accumulated depreciation and any accumulated impairment losses, and are adjusted for certain remeasurements of the lease liability. Depreciation is calculated on a straight-line basis over the length of the lease.
Right-of-use assets are presented within non-current assets in property, plant and equipment, and lease liabilities are included in current liabilities (borrowings) and non-current liabilities (borrowings) depending on the length of the lease term.
Property, plant and equipment
Property, plant and equipment are stated at cost less accumulated depreciation, and accumulated impairment losses.
Depreciation is recognised to write off the cost or valuation of assets less their residual values over their useful lives, using the straight-line method. The estimated useful lives, residual values and depreciation method are reviewed at each year end, with the effect of any changes in estimate accounted for on a prospective basis.
The gain or loss on the disposal or retirement of an item of property, plant and equipment is determined as the difference between the sales proceeds and the carrying amount of the asset as is recognised in the profit or loss.
Depreciation is provided at the following annual rates to write off each asset over its estimated useful life:
Fixtures and fittings 15% on cost Office equipment 15% on cost Motor vehicles 25% on cost
Impairment of tangible and intangible assets
At each reporting date, the Group reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated to determine the extent of the impairment loss (if any). Where the asset does not generate cash flows that are independent from other assets, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs.
The recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value, using a pre-tax discount rate that reflects current market assessments and the risks specific to the asset.
If the recoverable amount of an asset or cash-generating unit is estimated to be less than its carrying amount, the carrying amount of the asset or cash-generating unit is reduced to its recoverable amount. An impairment loss is recognised as an expense immediately in the profit or loss.
Where an impairment loss subsequently reverses, due to a change in circumstances or in the estimates used to determine the asset’s recoverable amount, the carrying amount of the asset or cash-generating unit is increased to the revised estimate of its recoverable amount, so long as it does not exceed the original carrying value prior to the impairment being recognised. A reversal of an impairment loss is recognised as income immediately in the statement of comprehensive income.
Financial instruments
Financial assets Financial assets are initially recognised at fair value and subsequently classified into one of the following measurement categories:
The classification of financial assets depends on the Group’s business model for managing the asset and the contractual terms of the cash flows. Assets that are held for the collection of contractual cash flows that represent solely payments of principal and interest are measured at amortised cost, with any interest income recognised in profit or loss using the effective interest method.
Financial assets that do not meet the criteria to be measured at amortised cost are classified by the Group as measured at FVTPL. Fair value gains and losses on financial assets measured at FVTPL are recognised in profit or loss and presented within net operating expenses.
The Group currently has no financial assets measured at FVOCI.
Impairment of financial assets
The Group assesses on a forward-looking basis the expected credit loss associated with its financial assets carried at amortised cost. The impairment methodology applied depends on whether there has been a significant increase in credit risk. For trade receivables, the Group applies the simplified approach permitted by IFRS 9, which requires expected lifetime losses to be recognised from initial recognition of the receivables.
Trade and other receivables Trade and other receivables are measured at amortised cost, less any loss allowance.
Cash and cash equivalents
Cash and cash equivalents comprise cash held by the Group and short-term bank deposits with an original maturity of three months or less from inception and are subject to insignificant risk of changes in value.
Financial liabilities
Financial liabilities are initially recognised at fair value and subsequently classified into one of the following measurement categories:
Non-derivative financial liabilities are measured at FVTPL when they are considered held for trading or designated as such on initial recognition.
The Group has no non-derivative financial liabilities measured at FVTPL.
Derecognition
Financial assets
The Group derecognises a financial asset when:
Financial liabilities
The Group derecognises a financial liability when its contractual obligations are discharged or cancelled, or expire. The Group also derecognises a financial liability when its terms are modified and the cash flows of the modified liability are substantially different, in which case a new financial liability based on the modified terms is recognised at fair value.
On derecognition of a financial liability, the difference between the carrying amount extinguished and the consideration paid (including any non-cash assets transferred or liabilities assumed) is recognised in profit or loss.
Borrowings
Borrowings are allocated to either specific or general borrowings and initially recognised at fair value, net of transaction costs incurred and subsequently measured at amortised cost. Specific or general borrowing costs are capitalised if they are directly attributable to the acquisition, construction or production of qualifying assets which are assets that necessarily take a substantial period of time to get ready for sale. These are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale.
All other borrowing costs are recognised in profit or loss in the period in which they are incurred.
Trade and other payables
Trade and other payables are measured at amortised cost. When the acquisition of land has deferred payment terms a land creditor is recognised. Payables are discounted to present value when repayment is due more than one year after initial recognition or the impact is material.
Customer deposits
Customer deposits are recorded as deferred income on receipt and released to profit or loss when the related revenue is recognised.
Equity instruments
An equity instrument is any contract that evidences a residual interest in the assets of the Group after deducting all of its liabilities. Equity instruments issued by the Company are recorded as the proceeds are received, net of direct issue costs.
Amortisation
Amortisation is charged to the income statement on a straight-line basis over the estimated useful lives of intangible assets unless such lives are indefinite. Intangible assets with an indefinite useful life and goodwill are systematically tested for impairment at each balance sheet date.
Inventory – developments
Inventories are initially stated at cost and held at the lower of this initial amount and net realisable value. Costs comprise direct materials and, where applicable, direct labour and those overheads that have been incurred in bringing the inventories to their present location and condition.
Net realisable value represents the estimated selling price based on intended use less all estimated costs of completion and costs to be incurred in marketing, selling and distribution. Land is recognised in inventory when the significant risks and rewards of ownership have been transferred to the Group.
Non-refundable land option payments are initially recognised in inventory. They are reviewed regularly and written off to profit or loss when it is probable that the option will not be exercised.
Taxation
The tax charge represents the sum of the tax currently payable and deferred tax.
Current tax
The tax currently payable is based on taxable profit for the period. Taxable profit differs from profit before tax as reported in the profit or loss because it excludes items of income or expense that are taxable or deductible in other years, and it further excludes items that are never taxable or deductible. The Group’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted at the reporting date.
Deferred tax
Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised.
Such assets and liabilities are not recognised if the temporary difference arises from goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit.
Deferred tax liabilities are also recognised for taxable temporary differences arising on investments in subsidiaries and interests in joint ventures, except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future.
Deferred tax is measured on a non-discounted basis using the tax rates and laws that have been enacted or substantively enacted by the reporting date.
The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Deferred tax is charged or credited to the profit or loss, except when it relates to items charged or credited directly to other comprehensive income or equity, in which case the deferred tax is also dealt with in other comprehensive income or equity.
Share capital
Ordinary shares are classified as equity. Any incremental costs directly attributable to the issue of new shares are shown in equity as a deduction, net of tax, from the proceeds.
The Group operates four segments: Developments, Construction, Property Services and Corporate.
The accounting policies of the reportable segments are the same as the Group’s accounting policies described in Note 5.
All the revenues generated by the group were generated within the United Kingdom.
In the developments segment, £9,766,522 revenue was generated from external parties through the sale of 71 units in completed developments (2022: £nil). In the Lincoln House development, 52 units were sold during the year generating revenue of £6,496,522. The Bank Street development sold 19 units generating £3,270,000 in revenue. The remainder of the revenue was earned from related parties in the form of rental income and development management fees.
The revenue generated from Robin Hood Property Development Limited, a related party, amounted to £1,280,006 (30 June 2022: £590,952) for the year. This amounted to 8% (30 June 2022: 34%) of the total revenue of the Group. This was derived from three segments of the Group, see note 7.
Segment information for these businesses is presented below. 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.
For the financial year to 30 June 2023
For the financial year to 30 June 2022
Developments consist of sales of properties owned and developed by the Group and four development management agreements with One Heritage Tower Limited, ACT Property Holding Limited, One Heritage Great Ducie Street Limited and One Heritage North Church Limited:
With the exception of ACT Property Holding Limited which completed in the year, the Group has not recognised any further revenue linked to the profit share element of these agreement 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.
During the year £9,766,522 revenue was generated from external parties through the sale of 71 units in completed developments (2022: £nil). In the Lincoln House development, 52 units were sold during the year generating revenue of £6,496,522. The Bank Street development sold 19 units generating £3,270,000 in revenue.
Construction generates revenue from two entities: Robin Hood Property Development Limited and One Heritage North Church Limited. During the previous financial year, it signed an agreement with Robin Hood Property Development Limited to undertake works on Co-living properties. The Group receives a cost plus 5.0% margin on all works undertaken, recognising £1,280,006 (30 June 2022: £534,619) of revenue in the year. The Group has undertaken work for One Heritage North Church Limited on a cost plus 5.0% margin basis, this generated revenue of £3,168,370 (30 June 2022: £130,605) in the year.
The development and construction revenues have been generated through related parties.
Property Services generated revenue from management fees that are based on a percentage of gross rental collected for clients and through transaction fees for each co-living property bought and sold for Robin Hood Property Development Limited, a related party £115,818 (30 June 2022: £55,057).
It also includes any rental income collected for properties owned by the Group.
The Corporate revenue is from contracts signed with Robin Hood Property Development Limited, generating revenue of £108,333 and One Heritage Portfolio Rental Limited, recognising revenue of £12,000 and is in consideration for a range of administration services and use of the Group’s office.
Revenue is measured based on the consideration specified in a contract with a customer. The Group recognises revenue when it transfers control over a good or service to a customer.
The following table provides information about the nature and timing of the satisfaction of performance obligations in contracts with customers, including significant payment terms, and related revenue recognition policies.
\* The rate of interest used to capitalise the general borrowings is 7%.
The Group has generated a loss in the year and the prior year.
Tax losses carried forward Tax losses for which no deferred tax asset was recognised expire as follows:
The carried forward losses do not expire as they relate to trading activity that is expected to continue.
Reconciliation of effective tax rate
As at 30 June 2023
As at 30 June 2022
Right of use asset
Break options
The lease for the office has an option to break the lease after 5 years. The right-of-use asset has been calculated on the assumption that the break clause is taken up.
As at 30 June 2022, the Group had 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 £1,297,560 as at 30 June 2022.
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 £2,392,136 as at 30 June 2023 and the charge for the year was £1,094,576.
The Group disposed of Nicholas Street Development Limited during the prior financial year. This entity held the Nicholas Street property. This property was valued at £650,000 by Management, with the net proceeds received adjusted to reflect the other assets and liabilities in Nicholas Street Development Limited at the date of disposal. Nicholas Street Development Limited was sold to One Heritage Property Rental Limited, a related party.
On 17 March 2019, the Group invested £258,512 to acquire a 47.0% stake in One Heritage Complete Limited. One Heritage Complete provides letting and facilities and property management for investors in Co-living properties. On 05 October 2021 two subsidiaries of One Heritage Complete Limited, namely One Heritage Maintenance Limited and One Heritage Design Limited were put into liquidation and the investment in associate was written down to nil in the 30 June 2022 annual financial statements.
Reconciliation of investment in associate
Following the insolvency of two subsidiaries of our associate, One Heritage Complete Limited, the Group made the decision to write down the full value of our investment in associate. On 6 July 2022, the Group agreed to sell our 47.0% stake in One Heritage Complete Limited for £50,000. Furthermore the Group has decided that the £24,368 provision against prior dividends were no longer required and was reversed in the prior financial year.
During the prior year, the profit participation loan with Robin Hood Property Development Limited was cancelled and the outstanding funds due were repaid.
These financial assets are considered due from related parties, further details can be found in note 24.
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.
The Group defines capital as the Group’s shareholder equity and borrowings. The Group’s policy is to maintain a strong capital base so as to maintain, investor, creditor and market confidence and to sustain future development of the business. Management monitors the return on capital, as well as the level of external debt in the business.
The Group monitors capital using a ratio of ‘net debt’ to shareholder equity. Net debt is calculated as total liabilities (as shown in the statement of financial position) less cash and cash equivalents. The Group’s policy is to keep the ratio below 3.0. In the current and prior year the ratio is significantly higher than the policy due to the negative equity and the impairment of three developments.
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 £3.5 million. This had a term of 20 months and is to be drawn down to fund costs incurred by the development in that subsidiary. In line with the agreement on the loan, when the Lincoln House development reached practical completion in August 2022, as units are sold, the proceeds of these will go toward repayment of the loan. The Group paid an arrangement fee of £35,000 and will pay an exit fee of £43,875 on final repayment. The loan was repaid in full on 27 January 2022. The loan had two covenants that are linked to the underlying development, the loan to development cost of 44% and a loan to value of 45%, which have both been complied with during the reporting period.
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 £4 million. This had a term of 18 months and is to be drawn down to fund costs incurred by the development in that subsidiary. On 18 November 2022 the Group entered into an agreement to extend the loan to 19 May 2023. The loan bears interest at 9.6% per year. The loan had two covenants that are linked to the underlying development, the loan to development cost of 69% and a loan to value of 89%, which have both been complied with during the reporting period.
As the One Heritage Oscar House Limited development incurred further delays and indicated a completion date post May 2023, the Group refinanced the project settling the previous debt of £3.9m on 09 June 2023. An agreement has been entered into with a new lender, Hampshire Trust Bank Limited, on improved terms for £4.2m for a period of 10 months to provide appropriate funding until all the remaining units are legally completed and handed over to customers. The new loan has a single covenant that are linked to the underlying development, the loan to gross development value of 57% which have been complied with during the reporting period.
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 £2 million. This had a term of 18 months and is to be drawn down to fund costs incurred by the development in that subsidiary. During November 2022 it was agreed with Together Financial Limited that the loan be renewed for a further 12 months. The loan bears interest at 0.85% monthly at a variable rate, based on the Bank of England base rate. In line with the agreement on the loan, when the Bank Street development reached practical completion in May 2023, as units are sold, the proceeds of these will go toward repayment of the loan. The loan was repaid in full on 31 May 2023. The loan had two covenants that are linked to the underlying development, the loan to development cost of 70% and a loan to value of 70%, which have both been complied with during the reporting period.
On 18 March 2022 the Group had a £1.5 million corporate bond admitted to the Standard List of the London Stock Exchange. This had a 2 year term and a 8.0% coupon which is paid on 30 June and 31 December each year. The Group incurred listing costs of £102,040 which were capitalised and released over the term of the Bond.
Related party borrowings
On 22 July 2020 and 11 August 2020 the Trading Group received loans worth £1,135,000 and £1,007,000 respectively from One Heritage SPC. The loan advanced on 22 July 2020 was repaid during the prior year with the accrued interest. On 11 April 2023 the remaining loan was repaid in full with the accrued interest.
The Group signed a £5.0 million loan facility with One Heritage Property Development Limited on 21 September 2020. The facility has an interest rate of 7.0%. On 18 February 2021 the facility was increased by £2.5 million to £7.5 million, this additional amount can only be drawn to fund property development activities where obtaining project financing is delayed or unavailable. During the 2023 financial year the facility was further increased by £4.8 million to £12.3 million. Refer to note 25 for a further extension post year end. The balance on this loan at 30 June 2023 was £11,328,152 (30 June 2022: £7,190,414).
The loan facility balance is due for repayment in December 2024. One Heritage Property Development Limited confirmed however, 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.
Terms and repayment schedule
The terms and conditions of outstanding loans are as follows:
Reconciliation of movements of liabilities to cash flows from financing activities
Trade payables and accruals relate to amounts payable at the reporting date for services received during the period.
The Group has received deposits and reservation fees in relation to its developments, these totalled £1,302,276 (30 June 2022: £1,012,222). These relate to units that were exchanged on and are repayable. The deposits will be repayable if significant property damage occurs, and reinstatement is not possible.
The company has financial risk management policies in place to ensure that all payables are paid within the credit timeframe.
Fair values
For all financial assets and financial liabilities not measured at fair value, the carrying amount is a reasonable approximation of fair value.
Financial risk management
The Group has exposure to the following risks arising from financial instruments:
Risk management framework
The Company’s Board of Directors has overall responsibility for the establishment and oversight of the Groups risk management framework. The Board of Directors has established the risk management committee, which is responsible for developing and monitoring the Groups risk management policies. The committee reports regularly to the Board of Directors on its activities.
The Group’s risk management policies are established to identify and analyse the risks faced by the Group, to set appropriate risk limits and controls to monitor risks. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and the Group’s activities. The Group, through its training and management standards and procedures, aims to maintain a disciplined and constructive control environment in which all employees understand their roles and obligations.
The Group audit committee oversees how management monitors compliance with the Group’s risk management policies and procedures and reviews the adequacy of the risk management framework in relation to the risks faced by the Group.
Credit risk
Credit risk is the risk of financial loss where counterparties are not able to meet their obligations. Group policy is that surplus cash, when not used to repay borrowings, is placed on deposit with the Group’s main relationship banks and with other banks or money market funds based on a minimum credit rating and maximum exposure.
The significant concentrations of credit risk are to related parties (refer note 24).
Management consider that the credit quality of the various receivables is good in respect of the amounts outstanding and therefore credit risk is considered to be low.
The carrying amount of financial assets represents the Group’s maximum exposure to credit risk at the reporting date assuming that any security held has no value.
Cash and cash equivalents
The Group held cash and cash equivalents of £303,816 at 30 June 2023 (30 June 2022: £974,201).
The Group also held petty cash of £241 as at 30 June 2023 (30 June 2022: £672).
Guarantees
The Group’s policy is to provide financial guarantees only for subsidiaries’ liabilities. At 30 June 2023, the Company has issued a guarantee to certain banks in respect of credit facilities granted to One Heritage Oscar House Limited £4,118,054 (30 June 2022: £2,185,772). Refer to note 5 and 10 of the Company financial statements.
Liquidity risk
Liquidity risk is the risk that the Group does not have sufficient financial resources available to meet its obligations as they fall due. The Group manages liquidity risk by continuously monitoring forecast and actual cash flows, matching the expected cash flow timings of financial assets and liabilities with the use of cash and cash equivalents, borrowings, overdrafts and committed revolving credit facilities with a minimum of 12 months to maturity.
Future borrowing requirements are forecast on a monthly basis and funding headroom is maintained above forecast peak requirements to meet unforeseen events. At 30 June 2023, the Group’s borrowings and facilities had a range of maturities with an average life of 26 months.
In addition to fixed term borrowings, the Group has access to a shareholder loan facility. At the reporting date, the total unused committed amount available for general purposes was £0.9million and cash and cash equivalents were £303,816.
The maturity profile of the anticipated future cash flows including interest, using the latest applicable relevant rate, based on the earliest date on which the Group can be required to pay financial liabilities on an undiscounted basis, is as follows:
As at 30 June 2023
As at 30 June 2022
The secured bank debt contains loan covenants, disclosed in note 19. A future breach of covenant may require the Group to repay the loan earlier than indicated in the above table.
Market risk
Market risk is the risk that changes in market prices will affect the Group’s income. The objective of market risk management is to manage and control risk exposures within acceptable exposures within acceptable parameters, while optimising the return. The Group does not hold any equity positions and trade in foreign currencies. It therefore considers the market risk to be low.
Interest rate risk management
The Group has a policy to have fixed interest rate borrowings where possible. Where this is not possible, the Group will look to hedge interest variability if cost effective.
Interest rate sensitivity
The Group currently has two variable interest rate arrangements and therefore returns are sensitive to movements in the interest rates in the next financial period on existing borrowing obligations.
If interest rates on the loans had been 1% per cent higher/lower and all other variables were held constant, the Group’s loss for the year ended 30 June 2023 would (increase)/decrease by (£423,130)/£340,769. This is mainly attributable to the Group’s exposure to interest rates on its variable rate borrowings.
The Directors did not receive any other benefits or post-employment remuneration.
All shares issued by the Company are ordinary shares and have equal voting and distribution rights.
On 07 July 2022 the Group issued 6,250,000 new ordinary shares of 1.0 pence each at an issue price of 20.0 pence per share, raising gross proceeds of £1,250,000.
The total shares in issue as at 30 June 2023 is 38,678,333 (30 June 2022: 32,428,333) and are fully paid up.
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 other shareholder holds more than 5.0% of the shares in the Company. One Heritage Holding Group Limited, incorporated in the British Virgin Island, is considered the ultimate controlling party through its 100% ownership of One Heritage Property Development Limited.
Transactions with key management
Key management personnel compensation comprised the following:
Compensation of the Group’s key management personnel is short term employee benefits.
Key management personnel transactions
The key management control 3% (30 June 2023: 31%) of the voting shares of the Company.
Other related party activity
Below is a table that sets out the entities that are related parties to the Group:
On 31 July 2023 the Group facility was increased by £1.7 million, to £14 million. This can be drawn down as required, has an interest rate of 7.0% and is repayable on 31 December 2024. This additional amount can only be drawn to fund property development activities where obtaining project financing is delayed or unavailable.
There are no new or amended standards that are expected to have a significant impact on the Group’s consolidated financial statements when adopted.
New standards and amendments issued but not effective for the current annual period
The following standards and interpretations had been issued but not yet mandatory for annual reporting periods ending June 30, 2023.
Description
The Group anticipates that these new standards, interpretations, and amendments will be adopted in the financial statements as and when they are applicable and adoption of these new standards, interpretations and amendments, may have no material impact on the financial statements in the period of initial application.
The Company’s subsidiaries and other related undertakings at 30 June 2023 are listed below. All Group entities are included in the consolidated financial results. All companies listed below undertake all of their activity in the United Kingdom.
The share capital of each of the companies, where applicable, comprises ordinary shares unless otherwise stated.
There are loans between these entities, which are all interest free and repayable on demand.
The following subsidiaries are exempt from the requirements of the Companies Act 2006 relating to the audit of individual accounts by virtue of Section 479A of that Act.
Company balance sheet As at 30 June 2023
*restated (note 1)
These financial statements were approved by the board of directors on 30 October 2023 and were signed on its behalf by:
Jason David Upton Company registration number: 12757649 The accompanying notes form an integral part of the financial statements
Company statement of changes in equity For the year ended 30 June 2023
For the year ended 30 June 2022
The accompanying notes form an integral part of the financial statements.
Notes to the Company financial statements
For the year ended to 30 June 2023
The following accounting policies have been applied consistently in dealing with items which are considered material in relation to the financial statements, except as noted below.
General information
One Heritage Group plc is a public limited company, limited by shares, incorporated in England and Wales under the Companies Act 2006 on 21 July 2020. The address of its registered office and principal place of trading is 80 Mosley Street, Manchester, M2 3FX. The principal activity of the Company is a property development holding company. The Company does not have any employees and is funded through the issuance of share capital to investors.
Basis of preparation
These financial statements were prepared in accordance with Financial Reporting Standard 101 Reduced Disclosure Framework (“FRS 101”).
In preparing these financial statements, the Company applies the recognition, measurement and disclosure requirements of international accounting standards in conformity with the requirements of the Companies Act 2006 (“Adopted IFRSs”) but makes amendments where necessary in order to comply with Companies Act 2006 and has set out below where advantage of the FRS 101 disclosure exemptions has been taken.
Under section s408 of the Companies Act 2006 the Company is exempt from the requirement to present its own profit and loss account.
Restatement The prior year presentation of the amount due from subsidiary of £2,183,153 has been reclassified from current asset to other non-current asset. This correction has been made in order to reflect that the amount was not expected to be settled in the ordinary course of business in the next 12 months. The impact of this restatement reduced current assets by £2,182,153 and increased other non-current assets by the same amount. In these financial statements, the Company has applied the exemptions available under FRS 101 in respect of the following disclosures:
As the consolidated financial statements include the equivalent disclosures, the Company has also taken the exemptions under FRS 101 available in respect of the following disclosures:
Going concern
Notwithstanding net current liabilities of £0.4 million as at 30 June 2023 (2022: net current assets £2.3 million) and a loss for the year then ended of £5.68 million (2022: £0.17 million), the financial statements have been prepared on a going concern basis which the directors consider to be appropriate for the following reasons.
The directors have prepared a cash flow forecast for the period to 31 December 2024 on a consolidated basis which indicates that, taking account of reasonably possible downsides, the Company will have sufficient funds through existing resources held by the company and subsidiaries (including funds drawn down on the parent company loan facility post year-end), the continued forecast realisations of development property inventory by its subsidiaries, and in the event of need continued financial support from its parent company, One Heritage Property Development Limited (“OHPD”), to meet its liabilities as they fall due for that period, including the Corporate Bond of £1.5 million due for repayment in March 2024.
As with any company placing reliance on other group/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.
The accounting policies set out below have, unless otherwise stated, been applied consistently to all periods presented in these financial statements.
Measuring convention
The financial statements are prepared on the historical cost.
Significant judgements
The significant judgements with regard to going concern are the forecast timing of development property inventory realisations and in the event it is needed the ability of the Group to be able to drawdown on the facility by its parent company, One Heritage Property Development Limited (“OHPD”). Management of the Company is not aware of any material uncertainties that may cast significant doubt on the Company’s ability to continue as a going concern. Therefore, the parent company financial statements continue to be prepared on the going concern basis. For detail refer note 1 going concern.
Financial guarantees
A financial guarantee contract is initially recognised at fair value. At the end of each subsequent reporting period, financial guarantees are measured at the higher of:
The amount of the loss allowance at each subsequent reporting period equals the 12-month expected credit losses. However, where there has been a significant increase in the risk that the specified debtor will default on the contract, the calculation is for lifetime expected credit losses.
Investment in subsidiary
Investment in and loans to subsidiaries are stated at cost less impairment.
Impairment
The carrying amounts of the Company’s non-financial assets are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, then the asset’s recoverable amount is estimated.
The recoverable amount of an asset or cash-generating unit is the greater of its value in use and its fair value less costs to sell. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. For the purpose of impairment testing, assets that cannot be tested individually are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or groups of assets (the “cash-generating unit”).
An impairment loss is recognised if the carrying amount of an asset or its CGU exceeds its estimated recoverable amount. Impairment losses are recognised in profit or loss. Impairment losses recognised in respect of CGUs are allocated first to reduce the carrying amount of any goodwill allocated to the units, and then to reduce the carrying amounts of the other assets in the unit (group of units) on a pro rata basis.
In respect of other assets, impairment losses recognised in prior periods are assessed at each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised.
The Company assesses the subsidiaries for any indicators of impairment by looking at the individual performance of the underlying entities, including their budgets, development progress and forecast profitability.
Due to losses in the underlying subsidiaries, the investment in subsidiaries were impaired in the current year by £1,742,368 (2022: £nil) in order to reflect the estimated recoverable amount based on the net asset value of the subsidiary entity and net realisable value of inventory. The impairment was recognised in the current year as a consequence of the losses and impairment to inventory recognised by Group entities. The carrying amount is considered to reflect the fair value less costs of disposal and is considered a level 3 asset in the fair value hierarchy.
The share capital of each of the companies, where applicable, comprises ordinary shares unless otherwise stated.
Below is a list of the key subsidiaries of One Heritage Property Development (UK) Limited.
The Intercompany loan payable by One Heritage Property Development (UK) Limited is interest free and payable on demand.
The Company assesses the intercompany loans for any indicators of impairment by looking at the individual performance of the underlying entities, including their budgets, development progress and forecast profitability. There are no indicators of impairment and therefore no expected credit losses.
On 18 March 2022 the Group had a £1.5 million corporate bond admitted to the Standard List of the London Stock Exchange. This had a 2 year term and a 8.0% coupon which is paid on 30 June and 31 December each year. The Group incurred listing costs of £102,040, which were capitalised and released over the term of the Bond. The bond is repayable in March 2024.
The holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at meetings of the Company. On 07 July 2022 the Company issued 6,250,000 new ordinary shares of 1.0 pence each at an issue price of 20.0 pence per share, raising gross proceeds of £1,250,000.
The following subsidiaries are exempt from the requirements of the Companies Act 2006 relating to the audit of individual accounts by virtue of Section 479A of that Act. Under the Act the Company has undertaken guarantees for all outstanding liabilities to which the subsidiary company is subject at the end of the financial year to which the guarantee relates, until they are satisfied in full.
On 31 July 2023 the Company facility was increased by £1.7 million, to £14 million. This can be drawn down as required, has an interest rate of 7.0% and is repayable on 31 December 2024. This additional amount can only be drawn to fund property development activities where obtaining project financing is delayed or unavailable.
The Directors of the Company were paid through One Heritage Property Development (UK) Limited, a subsidiary.
Guarantees The Company’s policy is to provide financial guarantees only for subsidiaries’ liabilities. At 30 June 2023, the Company has issued a guarantee to certain banks in respect of credit facilities granted to One Heritage Oscar House Limited £4,118,054 (30 June 2022: £2,185,772). Refer to note 5 for provisions recognised.
Refer to note 8 for additional guarantees undertaken by the Company and note 5 for provisions recognised.
Parent and ultimate controlling party At the reporting date 63.8% of the shares are held by One Heritage Property Development Limited, which is incorporated in Hong Kong. Keith Crews held 9.6% of the shares at the reporting date. No other shareholder holds more than 5.0% of the shares in the Company. One Heritage Holding Group Limited, incorporated in the British Virgin Island, is considered the ultimate controlling party through its 100% ownership of One Heritage Property Development Limited.
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| ISIN: | GB00BLF79495 |
| Category Code: | FR |
| TIDM: | OHG |
| LEI Code: | 2138008ZZUCCE4UZHY23 |
| OAM Categories: | 1.1. Annual financial and audit reports |
| Sequence No.: | 281777 |
| EQS News ID: | 1761773 |
| End of Announcement | EQS News Service |
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UK Regulatory announcement transmitted by EQS Group AG. The issuer is solely responsible for the content of this announcement.