Last checked at 25 Oct 2022 07:02
One Heritage Group plc (OHG) One Heritage Group plc: Full year results for the year ending 30 June 2022 25-Oct-2022 / 07:00 GMT/BST Dissemination of a Regulatory Announcement that contains inside information in accordance with the Market Abuse Regulation (MAR), transmitted by EQS Group. The issuer is solely responsible for the content of this announcement. 25 October 2022 ONE HERITAGE GROUP PLC Full year results for the year ending 30 June 2022 One Heritage Group PLC (LSE: OHG), the UK-based residential developer focused on the North of England, is pleased to announce its audited results for the year ended 30 June 2022.
Financial highlights 276% increase in revenue to £1.7 million from a combination of the disposal of a co-living property in Burnley, and revenues from development management, co-living, and property services. Generated a loss at gross profit level of £0.7 million, impacted by a delay in the completion of its Lincoln House, Bolton development and an impairment of £1.3 million across two of its development projects due to construction price increases. Operating loss of £2.1 million (FY21: £0.8 million loss) Inventory increased from £7.2 million to £15.1 million due to expenditure on four developments that are expected to be completed in the financial year to 30 June 2023. Raised £1.5 million via an unsecured corporate bond in March 2022. Drew down £5.5 million in debt via Construction Finance Facilities, which was used to pay for development expenditure. Utilisation of a further £5.4 million of the £7.5 million facility with One Heritage Property Development. At year end £7.2 million had been utilised leaving head room of £0.3million. Net Debt has increased by £9.57 million from £5.38 million to £14.95 million.Operating highlights Construction is ongoing on three of the Group’s development projects totalling 68 residential units. Signed a service agreement for co-living services and a further development management agreement which increases the Group’s development management projects to four. Latest development management agreement on the One Victoria, Manchester development, was signed in April 2022. Outstanding planning applications for St Petersgate, Stockport and Churchgate, Leicester were granted approval in February 2022 and August 2022, respectively. An outstanding application for Seaton House, Stockport expected to be determined by the end of 2022.Post Period Events Completed its first development, Lincoln House, Bolton post year-end in August 2022, which has made a positive change to its balance sheet. A subscription at a price of 20.0 pence per share, with existing and new investors, raised gross proceeds of approximately £1,250,000 on 6 July 2022. One Heritage Property Development Limited, the majority shareholder in the Company, acquired 4,500,000 of the Subscription Shares. A tenancy agreement, until August 2023 at the earliest, has been signed with Bolton NHS Foundation Trust for 62 of the 88 apartments at Lincoln House, Bolton.Outlook The Group is expecting to complete a further three of its developments in the financial year. Residential property services and co-living property services are both expected to expand in the coming period following completion of its developments and co-living properties under construction. The Group anticipates and is looking at ways to mitigate against the continuation of cost pressures throughout the forthcoming period.
Jason Upton, Chief Executive Officer said: “I am immensely proud of our people and the progress that the Group has made in what has been a challenging year for the industry. Our annual report provides a comprehensive view of the performance of the business and our strategy going forward with four strategic priorities outlined. Our environment is challenging, but there continues to be a lack of supply of quality residential accommodation in the UK, especially within areas of the North of England. We are particularly well-positioned to satisfy market demand in our chosen sectors, and confident in delivering upon our business strategy.”
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 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. For further information, please visit the Company’s website at https://www.oneheritageplc.com/. 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 2022. Chairman’s statement I am pleased to report good progress in our second full year of trading, this despite there being a number of industry challenges, which have combined to delay and, in two instances, impair our development projects, and some internal challenges which have caused us to change the way in which we deliver our developments and co-living projects. The agile, measured and decisive way in which we responded to these challenges puts us in a very good position to continue to evolve and grow into a market leading full service residential property developer in the North and the Midlands. It is a decisive moment in the life of a relatively young property development company when it completes its first major development. This moment has arrived for us with the practical completion of Lincoln House Bolton, a former part-built office building which we have transformed into residential use, providing 88 apartments. This development marks the first of such ‘developer as principal’ project completions with three more to follow during calendar year 2023. Moreover, we have taken opportunities to add to our development pipeline in Stockport and post year end in July 2022, Eccleshill in West Yorkshire. I was also pleased to see the signing of a further development management agreement, another core part of our business, on a 129 unit project in Manchester. We now have four of these management agreements in place namely One Victoria, One Heritage Tower, North Church House and the former Oldham County Court. Ours is a people business, and from time to time, people come and people go. During the period, at senior level, we were sorry to say goodbye to our Finance Director Luke Piggin and Independent Non-Executive Director Jeffrey Pym. In their places, without delay, we hired Anthony Unsworth (Chief Financial Officer) and Jeremy Earnshaw (Independent Non-Executive Director) and welcomed both to the board of directors. Their positive influence and contributions have been immediate and impressive. We also made further key hires with a Head of Lettings, Head of Projects and an Acquisitions Lead post year end June 2022. Our team overall has expanded and strengthened to take advantage of the opportunities that lie ahead. A creative and collaborative corporate culture is fast emerging. ESG is at the heart of our business and we are continuously seeking to move forward in this area. I was delighted to agree and publish our commitments to ESG during the period under review. We now have the right foundations in place to build on this policy and expect further improvements during the calendar year 2023. I would like to thank our shareholders and other stakeholders for their ongoing support. Additionally, I appreciate the efforts of our Directors and Employees who continue to adapt to and learn from the challenges they face. I am looking forward to the next chapter in the Group’s journey but recognise these are uncertain times with rising energy prices, interest rates and the cost of living. We are well positioned to continue to execute our strategy and remain committed to providing residential accommodation and property services to the highest standard possible.
David Izett Chairman 24 October 2022 Chief Executive’s statement The Group has made positive progress with our strategy over the period, despite the challenges caused by cost pressures and labour shortages that continue to impact the industry. We have demonstrated our resilience and agility to adapt to these challenges to date but remain cautious during these uncertain times. The headline results for the Group again reflect our infancy as a business and are partly a result of our first development, Lincoln House in Bolton, being delayed until August 2022 which is post year end. With the Group due to complete a further three development projects before year end 30 June 2023, and having added new development projects to our pipeline, along with new revenue streams, we have strong foundations in place which will contribute towards further growth over the forthcoming period. Our property services division has undergone a restructure which saw the Group dispose of its shares in One Heritage Complete in July 2022 for an initial payment of £42,500 after legal costs and a further £200,000 if certain performance milestones are achieved. One Heritage Complete was a subsidiary of the Group (shareholding 47%), which provided property management, lettings, refurbishment, design, fit out and furnishing services. Following a strategic review by the Group, we decided to bring these same services in-house and they are now provided by One Heritage Property Services Limited and One Heritage Construction Limited. The Group signed a service agreement with Robin Hood Property Development Limited in January 2022 for Co-Living services. Furthermore, the Group also signed an additional Development Management agreement for a 129-unit development called One Victoria in Manchester City Centre. Both agreements demonstrate further diversification of income for the Group. At the start of the period under review, I set out a number of key strategic priorities for the Group, which I touched on in our interim results earlier this year. These objectives and the current progress against each are set out below. SUCCESSFULLY DELIVER OUR DEVELOPMENT PROJECTS
Our first development reached practical completion in August 2022, Lincoln House, Bolton. Acquired in March 2020, this part-built office building had been left unfinished and vacant for nine years. Following our successful planning application in April 2021, we have transformed it into residential use providing 88 apartments with net revenue of £10 million. We are expecting our Liberty House (Bank Street), Sheffield development, a former courthouse with Grade II listed status being converted into 23 apartments, to finish within the first half of 2023. As announced in our interim results, the Group terminated its build contract with the principal contractor Emerald Construction (North West) Limited (“Emerald”), due to poor performance. They have since entered liquidation. It is important to add that the Group had no cash tied up in Emerald. The outstanding works are now being completed in-house by One Heritage Construction. However, inflationary increases and additional works being required due to the historic nature of the building, have meant a significant increase in development costs. This cost increase has regrettably resulted in an impairment of the asset. Our Oscar House, Manchester development (27 Apartments) and our St Petersgate, Stockport development (18 Apartments and one Commercial Unit) are also forecasted to finish behind schedule in the first half of 2023. Oscar House has experienced delays to date due to design changes and procurement challenges, but recent progress and the quality of work have been encouraging. Our St Petersgate development is being delivered in-house by One Heritage Construction due to the smaller size of the project (18 Apartments), however, along with Liberty House, has seen cost challenges arising from inflationary increases in materials and design changes which has also resulted in an impairment of the asset. The absence of a principal contractor and a fixed cost contract on both our Liberty House and St Petersgate projects has been the sole contributing factor in the impairment of these projects. Despite these setbacks, it is encouraging to see progress on all our construction sites and the way in which the team have overcome technical challenges. Our greatest test continues to be mitigating against industry-wide cost pressures in respect of building materials, which has consequently impacted two of our developments (Liberty House and St Petersgate). Cost increases, to some extent, have been offset by increases in values. For example, value appreciation influenced our decision to remarket 47 units at Lincoln House when a bulk purchaser failed to commit to the purchase. The increase in property prices in the area, and the reduced construction risk for buyers as the development is now completed, means we should be able to increase GDV by around £600,000. The Group had two outstanding planning applications awaiting determination at the start of the year. St Petersgate, Stockport was granted approval in February 2022 and Churchgate, Leicester was granted approval in August 2022 following several extensions of time requests by the planning authority. An application was also submitted in June 2022 for the Group’s Seaton House, Stockport development and a decision is expected later this year. In July 2022, the Group announced the acquisition of land on Victoria Road, Eccleshill, West Yorkshire. The land has planning approval for 24 homes and will be the Group’s first new build housing development. We are pleased to add some diversification to our development pipeline. The location of Eccleshill, between Bradford and Leeds, is well suited for new build housing and demand is already demonstrated with Barratt and Keepmoat having new build housing developments close by. Below is a current summary of our existing development projects as of 5 October 2022:
*Expected Net Revenue defined as expected Gross Sales less Selling Costs 1 As at RNS Announcement in a Trading Update on 15th July 2022 Overall we have experienced delays across all of our projects for a variety of reasons. Those projects within the construction phase have primarily seen delays due to design changes and procurement challenges, whereas projects pre-construction have been impacted by planning delays. Considering the current economic and market conditions, we are taking a cautious approach on our projects that are yet to start construction. As such, Churchgate, Seaton House and Victoria Road will commence construction later than hoped. It is expected that we will invest further time and resource in the design and procurement of these projects to mitigate against the risk of future cost challenges. Further to the above, we have made good progress with the developments where we are acting as Development Manager. In April 2022, the Group signed its fourth Development Management agreement for a 129-apartment development named One Victoria in central Manchester. Works are expected to commence in Q4 2022 with completion in Q3 2024. The project has a gross development value of £43.3 million. This development is in addition to development management projects at One Heritage Tower, Salford (542 apartments), Former Court House, Oldham (42 apartments) and Queen Street, Sheffield (58 apartments). We are delighted to continue to expand our development management services over the period and to secure additional sources of revenue. As a result, projects under our management have a Gross Development Value totalling £215 million. Secure sales for our properties under construction
We continue to experience positive demand for our properties but have adjusted our sales strategy over the period to delay some sales to achieve a better balance between reducing sales risk (by securing sales early) and selling later when values could be higher. On reflection, both our Liberty House, Sheffield and St Petersgate, Stockport developments were sold out too soon and, as a result, we failed to fully benefit from sales price increases offsetting rising development costs. In light of this, we have now implemented new internal processes and controls to improve how we launch a development for sales in the future. At Lincoln House, Bolton we agreed to sell 47 units to a fund in Q4 2021 but due to their failure to commit contractually, we decided to re market these units in June 2022. The increase in property values, along with the reduced construction risk for buyers with the development near completion, indicated that around £600,000 of additional revenue could be generated increasing Net Revenues from £9.4 million to £10 million. Our sales network also expanded and partnerships strengthened during the period. This has created a larger pool of buyers, from Hong Kong to the Middle East and Africa. Whilst we continue to experience the highest demand from Hong Kong due to the wider One Heritage network, we will continue to build our network and reputation overseas. In a time of rising interest rates, we benefit from the fact that the majority of our purchasers are cash buyers. Additionally, weak sterling has increased the purchasing power of our overseas investors. Continue to build our existing letting and property management businesses through our focus on Co-living and newly completed developments
It was hugely disappointing that One Heritage Maintenance and One Heritage Design, two subsidiaries of One Heritage Complete, became insolvent in September 2021. The Group owned a 47% stake in One Heritage Complete. We have subsequently taken steps to undertake a strategic review and decided to bring the same services in house and in so doing, incorporating One Heritage Property Services and One Heritage Construction. Additionally, further steps were taken to protect investors and landlords against further consequential issues, which our majority shareholder supported directly. Following a restructure, we agreed a sale of our 47% ownership of One Heritage Complete in July 2022 for an initial £42,500 after legal fees, which could generate a further £200,000 if certain performance milestones are achieved. We made some key hires within our property services division during the period under review appointing a Property Operations Director, and more recently in August 2022 a Head of Residential Lettings. Both will oversee growth of our property services activity. The Group already has in excess of 250 co-living rooms under management and we will recruit further to effectively manage the units from our completed developments. Our presence in Hong Kong and recent demand from Hong Kong nationals for UK residential property as a second residence, for future migration or as investment, means the Group is well positioned to support this demand. Operating under the brand ‘Red Brick’, the Group has been providing a property sourcing service to Hong Kong nationals and is seeing a steady month on month increase in requests. This sourcing service is tailored to an individual’s requirement and identifies property across the whole of the UK, with the Group receiving a fee for an initial search, and fee for any properties purchased. We are looking forward to further expansion of our property services offer over the forthcoming period with more properties under management and new opportunities being identified to generate and diversify sources of income. Our new property services website is due to be launched later in the year and further enhancements to our services continue to be made as we aim to provide a first-class service to both landlords and tenants. Recruit exceptional talent as we identify new opportunities in the market and take on new projects
We have added some exceptional talent during the period and have increased our headcount resulting in a move into larger office space in July 2021. Further hires are anticipated over the forthcoming period as we refine our delivery particularly in our development team as we bring in-house certain outsourced services such as project management and enhance our acquisition resource to enable us to grow our pipeline. Two key development hires have been made post year end namely a Head of Projects, as we place more emphasis on delivery and closer control in the face of rising cost pressures, and an Acquisitions Lead, to give greater emphasis on our long-term development pipeline. With the volume of workload and the number of financial transactions increasing as a result of bringing more services in-house, our finance function has also evolved. In June 2022 our Finance Director, Mr Luke Piggin tendered his resignation. The board were quick to react to identify and secure his replacement by appointing Mr Anthony Unsworth who we were delighted to see join us on 01 August 2022 as Chief Financial Officer. Anthony brings a wealth of finance and industry experience having been Divisional Finance Director, Partnerships North at Countryside Properties PLC for 3 and a half years, and Finance Director North West for Barratt Developments PLC for 11 years. Further appointments have been made to our Finance Team in an experienced Financial Controller and a Management Accountant. We know that our new recruits will add significant value to the company. However, at the same time, we continue to focus on our cost base to ensure that we are operating cost-effectively whilst sustaining performance levels.
Grow the pipeline of new development opportunities It has been pleasing to add two new developments to our pipeline with the acquisition of Seaton House, Stockport, and post year end in July 2022, Victoria Road, Eccleshill, West Yorkshire. The delays to our existing developments and industry challenges have meant that we have remained cautious as to not over commit or commit too early to acquisitions without the security of successfully completing our existing projects. As we are expecting to have completed four of our developments within the financial year end 30 June 2023, we have recently appointed an Acquisitions Lead as we look to secure new projects to build our pipeline.
2023 STRATEGIC OBJECTIVES The Group has evolved well over the period under review and objectives will remain broadly similar for the forthcoming period. We continue to focus on our developments including our pipeline, delivery and sales, along with growing additional revenue streams. With resource added and a solid infrastructure in place the Group’s objectives are focused on delivery to leverage the capacity now available. The following four objectives will be in place for the forthcoming period. Successfully deliver our development projects Secure sales for our properties under construction Grow the pipeline of new development opportunities Create diverse sources of revenue generated through the Group’s service provisions
Industry Overview
The outlook for the UK economy in the remainder of 2022 and 2023 is far from certain with a combination of inflationary pressures driven by cost increases across energy and food, limited labour availability and supply chain challenges. Key to the months ahead will be Government economic policies and the Bank of England’s decisions around interest rates to control inflation. Revised Office for National Statistics figures released in October showed that UK gross domestic product for the three months to June this year remained 0.2% below the level it achieved in the final quarter of 2019 and is the only G7 economy that remains smaller than it was before the pandemic. The ONS now says the economy grew 0.2 per cent between the first and second quarters of 2022. Some details in the data release revealed that households had been hurt by high inflation. Real household disposable income fell 1.2 per cent in the second quarter, the largest of the four successive drops as fast-rising prices diminished the value of wages. Since the recent mini budget, there has been significant turmoil in financial markets. Many experienced investors are struggling to see how the government would finance the £45bn in tax cuts and £72bn of new borrowing, in the absence of a financial forecast or fiscal strategy. The extreme volatility in the gilts market left some pension funds facing a liquidity crisis, the Bank of England launched a £65bn emergency intervention to stabilise markets. Lending markets have also seen a shift in recent times. Following a significant withdrawal of mortgage products whilst lenders digest the impact of the mini-budget, new products have now emerged and the interest rate on a typical five-year fixed rate has topped 6% for the first time in 12 years. A significant proportion of the tax cuts have since been reversed following a change in Chancellor with a financial forecast yet to be announced. The supply of land through the planning system is critical to the housebuilding sector. The latest provisional figures show that permission for 280,000 homes was given in the year to 30 June 2022, down 16.2% from the 334,000 homes granted permission in the year to 30 June 20211 [Gov.uk planning application statistics for England]. It should be noted that the latest figures are often revised upwards in later quarters. The latest figures for the year to March 2022 was for 307,000 homes, down 2.2% from the 314,000 homes granted permission in the year to March 2021. The temporary legislation allowing local authorities to hold virtual planning committee meetings was removed in May 2021 and could have impacted levels of approvals. Savills’ long term forecast to 2026 for the UK rental market is projecting an increase in the capital value of the second-hand market across the UK of 17.4%, and the two leading regions for growth are the North West and Yorkshire with forecasted increases of 24.3%. The rental value forecast is for an increase of 18.8% over the five year period for the UK excluding London. There was less Government support seen in the year to June 2022 for the housing market with the revised Help to Buy scheme not available for reservations after 31 October 2022, and the SDLT holiday, which was introduced in July 2020 began to taper in July 2021 before ending on 30 September 2021. The impacts of the SDLT holiday have impacted mortgage approval levels, but they remain ahead of those in the five-year period pre-pandemic. Of concern is housing affordability, reflecting house price inflation since the pandemic and the recent increase in interest rates. The Halifax Mortgage Affordability Index has the purchase of a new home at 35% of after-tax income, which is ahead of the long-term average at 32.7%. The full impact of the recent market turmoil is yet to be seen. Despite the mounting risks, one big positive for the sector remains the fact that housing is chronically undersupplied in the UK. Also, in the 12 months to 30 June 2022, the average UK house price increased by 13.0% according to the Halifax. In the same period, the average household rent has increased by 10.5%, affecting every region of the UK according to the Home Let Rental Index. New build housing additions were at 194,060 in the year to 31 March 2021 and this was lower than the pre pandemic levels of 219,120 (a decline of 11.4%) and below the Government target of 300,000 per year. Commentators are suggesting the levels in the year to 31 March 2022 will be closer to pre pandemic levels. The under supply of homes, has been a big driver of house price inflation over the last 30 years. There are changes impacting the housebuilding industry in the coming years, which we are mindful of in our planning, including: The Government Help to Buy scheme will close on 31 March 2023 with reservations under the scheme closing in October 2022. New building regulations with Parts L, F, O and S required on new developments from the 15 June 2022 and all developments from 14 June 2023 covering carbon emission reductions of 31% from previous standards. From mid-November legislation will require all national developments to deliver a biodiversity net gain of 10%. This means our developments will need to create a 10% measurable improvement in the biodiversity of the site developed relative to the site had development not occurred: and From 2025, the Future Homes Standard will require new homes to produce 75–80% less carbon emissions than standards applicable during FY22.
ENVIRONMENTAL, SOCIAL AND CORPORATE GOVERNANCE EVALUATION (ESG)
We announced in November 2021 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. Supporting local communities and charitable organisations, particularly in regions where our developments are located.We are pleased to have supported a number of local charities including homelessness charities in Manchester; Lifeshare, and Mustard Tree which our employees raised over £2,000 for and contributed to initiatives such as food collections. Further fundraising saw contributions made to charities which include Worldwide Radiology and RAF Benevolent Fund. We continue to offer all employees up to two days paid leave towards charitable commitments per year. Investing in the training and education of our workforce, as well as engaging with local schools and colleges to support students with their career pathways.Investment was made in training, with employees being funded towards AAT and CIMA qualifications, and external training provided throughout the year to all staff. A presentation was held for Manchester University by our Development Director to their students, discussing the business and providing career advice for property development. Additionally, a Development Surveyor attended a discussion at Trafford College which was focused on the United National Climate Change Conference (COP26) and careers, attendees were from six schools and sixth forms in the local area. Being an inclusive employer, committed to encouraging equality, diversity and inclusion.We were pleased to support International Women’s Day earlier in the year with Women making up over 60% of our workforce. Furthermore, we have become a supporter of the Greater Manchester Good Employment Charter and expect to become a full member in 2023 following an assessment. We value the importance placed on the value and quality of the workplace, along with providing opportunities for our people to grow, develop and thrive; the Greater Manchester Good Employment charter is aligned towards these values. Changes have been made to our recruitment process with external recruiters expected to remove personal details prior to interview shortlists to encourage fairness. Tackling the UK’s shortage of quality residential accommodation.In August 2022, we saw our first development complete in Bolton offering high quality accommodation in an area that lacks residential housing. We are delighted to have entered an agreement with Bolton NHS foundation who will house key workers in 62 of the 88 apartments for at least the next 12 months. Our Co-Living properties, which include bills within rental payments for tenants, are providing affordable accommodation which is significant considering the current cost of living crisis including rising energy costs. Co-Living room rates average around £420 a month inclusive of internet and bills. Running costs of a traditional property would likely exceed this amount which makes Co-Living affordable and an essential accommodation class we remain committed to provide. Considering its environmental impact, seeking ways to improve the environmental performance of our developments and reduce our carbon footprint.Increases to material costs have caused additional pressure which has impacted the whole industry, and decisions will have greater commercial emphasis when looking at initiatives to improve environmental performance. Despite these pressures, the Group has taken steps to establish an internal committee to review its environmental impact, and objectives placed which include actions to improve energy rating and energy saving in particular. Considering the energy price crisis at present, there is an even greater urgency for enhancements to improve energy efficiency, which will in turn reduce energy usage. Raising the awareness of our tenants and occupiers in respect of how they can reduce their environmental impact.We are working closely with our building managers on the strategy to engage our tenants and occupiers relating to environmental impact. To encourage the right behaviours, environmental impact is considered within our design at an early stage, which has resulted in changes such as a bio diverse (brown) roof on our Queen Street, Sheffield development, energy efficient lighting, and recycling areas. Engaging with its tenants, investors, and principal advisors to ensure awareness of their expectations and responding accordingly. We believe in building a culture which has ESG at its core, 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. Upholding the Quoted Companies Alliance Corporate Governance Code (QCA). Further details can be found on page 18. Reviewing One Heritage’s ESG strategy and initiatives against the United Nation’s Sustainable Development Goals, and monitoring and reporting on this. 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 provided an update on building material price increases and a year later we continue to face the same challenge which shows little sign of immediate improvement. This is further exacerbated by current economic pressures, including an energy price crisis. The Group is preparing for cost pressures to continue throughout the forthcoming period and is looking at ways to mitigate against this e.g. taking steps to diversify revenue sources for the Group. As development profits are impacted by cost increases and other changes in the market, consistent sources of additional revenue continue to be sought and generated from services the Group provides such as development management and Co-Living construction in particular. These revenue sources are important in that they help us maintain a resilient and sustainable business. As such, they constitute a clear strategic objective for the period.
With our first, and largest, development completed, along with a further three developments expected within our year end 30 June 2023, the Group will have strong cash reserves which we intend to deploy into new development opportunities. Our financial position was further supported in July 2022 where we raised £1.25m through a subscription which demonstrates the continued support for the company’s strategy.
The North of England continues to be our core market, but we are evaluating other areas of England such as towns and cities in the Midlands, that offer similar characteristic to the North in terms of values and expected economic growth. We remain positive on the outlook for the sector of the UK housing market in which we operate. We understand the challenges ahead and are agile enough to adapt where necessary. Moreover, the diversity of revenue sources that the Group now has offers us a further degree of insulation against the economic and industry challenges we may face.
Jason Upton Chief Executive 24 October 2022
Group’s Financial Review Trading Our development projects continue primarily to demonstrate the effectiveness of the business strategy. Many of the development units under construction have been sold off plan ahead of completion, and on the majority of projects, One Heritage Group PLC expects to generate very healthy profits. We have however experienced some setbacks on specific developments where, despite implementing mitigating strategies, originally anticipated costs have increased, and construction delays have impacted overall returns. Unit sales however have been maintained at very positive levels, evidencing the success of the geographical focus of the Group. As the business progresses in to its third full year of operation, we are confident that the development programme will continue to deliver the planned investment returns. The financial results for the year ended 30 June 2022 are the second full year of trading and continue to reflect the start of the journey for the Group following incorporation on 21 July 2020 and subsequent placing and full listing on 23 December 2020. More significant revenues are expected in the new financial year, starting with the completion of our first development, Lincoln House, Bolton which practically completed in August 2022 and had recorded 22 legal completions by 30 September 2022. Current year Revenue increased by £1,283k (276.3%) from £464k to £1,747k. The disposal of Nicholas Street Developments, a related party, generated £650k of revenue in the year. The remaining increase in Revenue is primarily due to the volume of refurbishment activity taking place within Co-Living, converting purchased houses to Houses of Multiple Occupancy (HMO) prior to making the property available for letting. The PLC generates a 5% profit on cost of this activity, and overall Construction activity accounted for £665k of total Revenue in the year. Gross Profit has decreased from £438k to a loss of £705k. The disposal of Nicholas Street delivered a profit of £189k in the year. An impairment to inventory has been recognised in the year at Bank Street £880k and St Petersgate £418k, a total impact of £1,298k. The Bank Street development has experienced significant delays and unforeseen costs, due to the non-performance and subsequent liquidation of the previous contractor. This, coupled with the increase in rising material costs, created a significant increase in total cost to complete for this development. The development has 23 units generating net revenue of approximately £3.9m, with one unit remaining to be sold. It is expected that the development will complete in H1 2023. The St Petersgate development has experienced the same setbacks as those of Bank Street on rising material cost. The development has 18 units, all of which have been sold, generating net revenue of £3.9 m. It is expected that this development will complete in H1 2023. The remaining impact was the insolvency in the year of One Heritage Maintenance and One Heritage Design, in which the Group owned a stake. Following a strategic review, the same services were brought in house to control the pipeline of Co-Living properties and an agreement was signed with Robin Hood Limited in December benefitting the Group with management fees and transaction fees. Unfortunately this liquidation and period of change resulted in activity delays and a reduction in fees. Operating Loss has increased by £1,328k, from £783k to £2,111k (169.5%), predominantly due to the Impairment of Inventory. Administration expenses increased in the year by £(479)k due to the increased headcount from 11 to 22 to ensure controlled growth of the business. The reversal of a write-down in investment in associate benefitting profit by £74k in the year (2021: a loss of £239k) Overall the Group generated a pre-tax loss of £2,135k (2021: a loss of £809k) impacted by the above factors but mitigated by a profit on the disposal of Nicholas Street. The weighted average number of shares in issue in the years to June 2021 and June 2021 was 26,204,555 and 32,428,333 respectively. Underlying basic earnings per share for the year was (6.6p), a 112.4% decrease compared to the prior period (2021:(3.1p)). As the Group commences the new financial year, there is a clear focus on the core operational areas of Developments, Co-Living, and Property Services. Roles and responsibilities across the business are aligned to the sources of revenues and profits. With a growing pipeline of developments and the strengthening of the teams to deliver, the Group is in a strong position to achieve controlled growth and shareholder returns
Balance Sheet The Balance Sheet structure reflects the anticipated impacts of forward funding development projects with a combination of increased debt and equity instruments. Ahead of completing significant developments in the financial year that commenced on 1 July 2022, the Group increased its borrowing levels in accordance with the strategy adopted by the group, supported by focused equity placements where appropriate. 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. Net assets have decreased by £2,135k from £2,709k to 574k due to an increase in borrowings funding future growth, but also recognising the prudent impairment of assets as described earlier. The completion of the properties at Lincoln House, Bolton that have taken place in September and October 2022 have commenced a significant shift in the balance sheet as the Group moves to returning profits. As anticipated, no dividends have been declared in this year or the previous year with losses being reported in the first two year’s trading. Developments Inventory has increased by £7,901k from £7,226k to £15,128k. This is predominantly due to expenditure on the 4 developments that are expected to complete in the financial year to 30 June 2023, being Lincoln House, Bank Street, St Petersgate and Oscar House. The other movements relate to the following acquisitions and disposals in the year: Acquisition of Seaton House, Stockport on 11 January 2022, where we paid an initial 10% deposit of £67,500. The remainder is to be paid in the current calendar year; Disposal of Nicholas Street, a trading property, on the 10 May 2022On 8 July 2022, post the current balance sheet date, Group also acquired land on Victoria Road Bradford. Reported Net Assets per closing shares in issue of 1.8p represents a 78.9% decrease from 8.4p at 30 June 2022.
Liquidity The capital structure of the Group continued to evolve with the issuance of a corporate bond and the signing of new construction debt facilities in the period. These additional sources of finance create further diversity in the Group’s financing options, reducing refinancing risk in the future, and also create a path to lower finance costs in the future. Net Debt has increased by £9,571k from £5,376k to £14,947k. This increase is supporting the planned growth of the Group and includes: Issuance and admission of a £1,500k unsecured Corporate Bond on the Standard List of the Main Market of the London Stock Exchange; Signing of a construction finance facility to cover the remaining construction costs of our Lincoln House, Bolton development. This development has seen the first tranche of units legally completing in September; Utilisation of a further £5,442k of the £7,500k facility with One Heritage Property Development. At year end £ 7,190k had been utilised leaving head room of £ 309k; The repayment of a loan of £ 1,135k; During the period the Group drew down a further £5.5 million in debt via Construction Finance Facilities which was used to pay for development expenditure and operating costs; The repayment of the profit participation loan with Robin Hood Property Development Limited and the signing of a new service agreement on 23 December 2021. This agreement covers a combination of management, transaction, sourcing and construction services and will provide regular income to the Group. The new agreement also allows the Group to provide services in-house in relation to its development projects and forms part of the restructure of services previously provided by One Heritage Complete Limited.In summary, Net Cash outflow used in operating activities was £9,028k, primarily due to the reported loss of £2,135k and the increase in inventories of £6,454k relating to developments being completed in the year to 30 June 2023. Anthony Unsworth Chief Financial Officer 24 October 2022 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: select suitable accounting policies and then apply them consistently; make judgements and estimates that are reasonable, relevant and reliable; for the Group financial statements, state whether they have been prepared in accordance with international accounting standards in conformity with the requirements of the Companies Act 2006 and, as regards the group financial statements, International Financial Reporting Standards adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union; for the parent Company financial statements, state whether applicable UK accounting standards have been followed, subject to any material departures disclosed and explained in the financial statements; assess the Group and parent Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern; and use the going concern basis of accounting unless they either intend to liquidate the Group or the parent Company or to cease operations, or have no realistic alternative but to do so.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: The financial statements have been prepared in accordance with the applicable set of accounting standards and Article 4 of the IAS Regulation and give a true and fair view of the assets, liabilities, financial position and loss of the Company. The Annual Report includes a fair review of the development and performance of the business and the financial position of the Company, together with a description of the principle risks and uncertainties that it faces.
By order of the Board Jason Upton Chief Executive Officer 24 October 2022
Independent Auditor’s Report to the Members of One Heritage Group PLC Our opinion We have audited the 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 2022, the consolidated statements of comprehensive income, changes in equity and cash flows and the Company’s statement of changes in equity for the year ended 30 June 2022, and notes, comprising significant accounting policies and other explanatory information. In our opinion: the financial statements give a true and fair view of the state of the Group's and of the Company's affairs as at 30 June 2022 and of the Group's loss for the year then ended; the Group financial statements have been properly prepared in accordance with UK-adopted international accounting standards; the parent Company financial statements have been properly prepared in accordance with UK accounting standards, including FRS 101 Reduced Disclosure Framework; and the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.Basis for opinion We conducted our audit in accordance with International Standards on Auditing (UK) (“ISAs (UK)”) and applicable law. Our responsibilities are described below. We believe that the audit evidence we have obtained is a sufficient and appropriate basis for our opinion. Our audit opinion is consistent with our report to the audit committee. We were first appointed as auditor by the directors on 25 January 2021. The period of total uninterrupted engagement is for the 2 financial years ended 30 June 2022. We have fulfilled our ethical responsibilities under, and we remain independent of the Group in accordance with, UK ethical requirements including the FRC Ethical Standard as applied to listed public interest entities. No non-audit services prohibited by that standard were provided. Key audit matters: our assessment of the risks of material misstatement Key audit matters are those matters that, in our professional judgment, were of most significance in the audit of the 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. We summarise below the key audit matters, in decreasing order of audit significance, in arriving at our audit opinion above, together with our key audit procedures to address those matters and, as required for public interest entities, our results from those procedures. These are unchanged from 2021. These matters were addressed, and our results are based on procedures undertaken, in the context of, and solely for the purpose of, our audit of the financial statements as a whole, and in forming our opinion thereon, and consequently are incidental to that opinion, and we do not provide a separate opinion on these matters.
Our application of materiality and an overview of the scope of our audit Materiality for the consolidated financial statements as a whole was set at £163,000 (2021: £65,000), determined with reference to a benchmark of Group total assets of £18,440,109 (2021: £8,938,904), of which it represents approximately 0.88% (2021: 0.73%). Materiality for the Company financial statements was set at £42,000 (2021: £33,000), determined with reference to a benchmark of Company total assets of £5,067,679 (2021: £3,865,852), of which it represents approximately 0.83% (2021: 0.85%). 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 the financial statements as a whole. Performance materiality for the Group was set at 65% of materiality for the financial statements as a whole, which equates to £106,000 (2021: £42,000). The level of performance materiality for the Group has been set at 65% (2021: £65%), 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% (2021: 75%), which equates to £32,000 (2021: £24,000). We reported to the Audit Committee any corrected or uncorrected identified misstatements exceeding £8,000 (2021: £3,000) for the consolidated financial statements and £2,000 (2021: £1,600) for the Company financial statements, in addition to other identified misstatements that warranted reporting on qualitative grounds. Our audit of the Group and Company 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 concern The directors have prepared the 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 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: - we consider that the Directors’ use of the going concern basis of accounting in the preparation of the financial statements is appropriate; and - we have not identified, and concur with the Directors’ assessment that there is not, a material uncertainty related to events or conditions that, individually or collectively, may cast significant doubt on the Group’s or Company's ability to continue as a going concern for the going concern period. See the Key Audit Matter with respect to going concern for additional detail. 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 detect Identifying and responding to risks of material misstatement due to fraud To 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: enquiring of management as to the Group’s policies and procedures to prevent and detect fraud as well as enquiring whether management have knowledge of any actual, suspected or alleged fraud; reading minutes of meetings of those charged with governance; and using analytical procedures to identify any unusual or unexpected relationships. 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 journal entries and other adjustments to test based on risk criteria and comparing any identified entries to supporting documentation; and incorporating an element of unpredictability in our audit procedures. Identifying and responding to risks of material misstatement due to non-compliance with laws and regulations We identified areas of laws and regulations that could reasonably be expected to have a material effect on the 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 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 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 regulation Owing to the inherent limitations of an audit, there is an unavoidable risk that we may not have detected some material misstatements in the 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 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. Other information The directors are responsible for the other information, which comprises the strategic report, the directors' report and the other information included in the annual report, but does not include the financial statements and our auditor’s report thereon. Our opinion on the financial statements does not cover the other information and, accordingly, we do not express an audit opinion or, except as explicitly stated below, any form of assurance conclusion thereon. Our responsibility is to read the other information and, in doing so, consider whether, based on our financial statements audit work, the information therein is materially misstated or inconsistent with the financial statements or our audit knowledge. Based solely on that work we have not identified material misstatements in the other information. Strategic report and directors’ report Based solely on our work on the other information: we have not identified material misstatements in the strategic report and the directors’ report; in our opinion the information given in those reports for the financial year is consistent with the financial statements; and in our opinion those reports have been prepared in accordance with the Companies Act 2006.Directors’ remuneration report In our opinion the part of the Directors’ Remuneration Report to be audited has been properly prepared in accordance with the Companies Act 2006. Matters on which we are required to report by exception Under the Companies Act 2006, we are required to report to you if, in our opinion: adequate accounting records have not been kept, or returns adequate for our audit have not been received from branches not visited by us; or the parent Company financial statements and the part of the Directors’ Remuneration Report to be audited are not in agreement with the accounting records and returns; or certain disclosures of directors’ remuneration specified by law are not made; or we have not received all the information and explanations we require for our audit.We have nothing to report in these respects. Respective responsibilities Directors' responsibilities As explained more fully in their statement set out on page 36, the directors are responsible for: the preparation of the 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 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 responsibilities Our objectives are to obtain reasonable assurance about whether the 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 financial statements. A fuller description of our responsibilities is provided on the FRC’s website at www.frc.org.uk/auditorsresponsibilities. 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 Heritage Court 41 Athol Street Douglas Isle of Man 24 October 2022
FINANCIAL STATEMENTS Consolidated statement of comprehensive income
For the year ended 30 June 2022
The accompanying notes on pages 51 to 76 form an integral part of the financial statements.
Consolidated statement of financial position
As at 30 June 2022
These financial statements were approved by the board of directors on 21 October 2022 and were signed on its behalf by: Jason David Upton Company registration number: 12757649 The accompanying notes on pages 51 to 76 form an integral part of the financial statements.
Consolidated statement of cash flows
For the year ended 30 June 2022
The accompanying notes on pages 51 to 76 form an integral part of the financial statements.
Consolidated statement of changes in equity
For the year ended 30 June 2022
For the year ended 30 June 2021
The accompanying notes on pages 51 to 76 form an integral part of the financial statements.
Notes to the consolidated financial statements
For the year ended 30 June 2022 Reporting entityOne 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 is that of property development. These consolidated financial statements (“Financial Statements”) as at the end of the financial year to 30 June 2022 comprise of the Company and its subsidiaries. A full list of companies consolidated in these Financial Statements can be found in Note 28. Measuring conventionThe financial statements are prepared on the historical cost basis except that the following assets and liabilities are stated at their fair value: financial assets at fair value through profit or loss. Basis of preparationThe 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 77 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 21 October 2022. Segment reporting During the 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. As a result, the Group is not reporting comparable information for the operating segments in the business. The Group operates in four operating segments, each managed by a Director 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 £8.3 million (excluding inventory balances totalling £15.1 million) as at 30 June 2022, a loss for the year then ended of £2.1 million and operating cash outflows for the year of £9.0million, 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 2023 which indicates that, taking account of reasonably possible downsides, the Group will have sufficient funds, through the proceeds from sale of four developments (net of repayment of related construction finance loans (note 19)), supplemented by continued financial support from its parent company, One Heritage Property Development Limited (“OHPD”), and a related party, One Heritage SPC Limited (“OHSPC”), to meet its liabilities as they fall due for that period. OHPD and OHSPC have confirmed that their respective loans due to mature in December 2022 and November 2022 will not be demanded for repayment until such a time that the Group can afford to repay them without impacting on its going concern. With respect to the two construction loans due to be repaid in November 2022 and December 2022 (note 19), the counterparties have indicated their intention to extend the maturity of the loans to match forecast completion dates of the related developments. As with any company placing reliance on other group/related entities for financial support or third-party loan counterparties extending the maturity dates in line with their indications, 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 Group 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. Use of judgements and estimation uncertaintyThe 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: The carrying value of inventory: Under IAS 2: Inventories the Group must hold developments at the lower of cost and net realisable value. The Group applies judgement to determine the net realisable value of developments at a point in time that the property is partly developed and compares that to the carrying value. The Group has undertaken an impairment review of all of the Inventory and determined that an impairment is appropriate on two of the developments.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 Finance Director has overall responsibilities for overseeing all significant fair value measurements, The Finance Director 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 Finance Director 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: Level 1: quotes prices (unadjusted) in active markets for identical assets and liabilities. Level 2: inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices). Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs)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. Significant accounting policiesBusiness Combinations The Group applies the acquisition method in accounting for business combinations. The consideration transferred by the Group to obtain control of a subsidiary is calculated as the sum of the acquisition-date fair values of assets transferred, liabilities incurred and the equity interests issued by the Group, which includes the fair value of any asset or liability arising from a contingent consideration arrangement. Assets acquired and liabilities assumed are generally measured at their acquisition-date fair values. Associates are all entities over which the Group has significant influence but not control or joint control. This is generally the case where the group holds between 20% and 50% of the voting rights. Investments in associates are accounted for using the equity method of accounting, after initially being recognised at cost. Revenue 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): DevelopmentsRevenue 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. Property services and developments
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. Construction services The Group primarily operates under cost plus margin agreements and therefore revenue is recognised when the relevant cost has been incurred. Corporate income
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 Other income 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. 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, and The amount initially recognised less cumulative amortisation, where appropriate.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. Finance charges, including premiums payable on settlement or redemption, and direct issue costs, are accounted for on an accruals basis in profit or loss using the effective interest method and are added to the carrying amount of the instrument to the extent that they are not settled in the period in which they arise. 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. 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 and presentational 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 statement of financial statement 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: the contract involves the use of an identified asset; the Group has the right to obtain substantially all of the economic benefits from the use of the asset throughout the contract period; and the Group has the right to direct the use of the asset.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, and lease liabilities are included in current liabilities and non-current liabilities 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 so as 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 and loss. Depreciation is provided at the following annual rates in order 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 and 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: Measured at amortised cost Measured subsequently at fair value through profit or loss (“FVTPL”) Measured subsequently at fair value through other comprehensive income (“FVOCI”)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 rate 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: Measured at amortised cost Measured subsequently at fair value through profit or lossNon-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: the contractual rights to the cash flows from the financial asset expire; or it transfers the rights to receive the contractual cash flows in a transaction in which either: substantially all of the risks and rewards of ownership of the financial asset are transferred; or the Group neither transfers nor retains substantially all of the risks and rewards of ownership and it does not retain control of the financial asset.The Group enters into transactions whereby it transfers assets recognised in its statement of financial position but retains either all or substantially all of the risks and rewards of the transferred assets. In these cases, the transferred assets are not derecognised. 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 as revenue upon legal completion. 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. Inventory - trading properties Trading property comprises those properties that in the Directors’ view are not held for long-term rental income or capital appreciation and are expected to be disposed of within one year of the reporting date or to be refurbished with the intention to sell. Trading property is carried at the lower of cost and net realisable value. Net realisable value is the estimated selling price based on intended use in the ordinary course of business, less the estimated costs of completion and selling costs. The amount of any write down of trading property to net realisable value is recognised as an expense in the period the write down occurs. Should a valuation uplift occur in a subsequent period, the amount of any reversal shall be recognised as a reduction in the previous write down in the period in which the uplift occurs. This may not exceed the property’s cost. The sale of trading property is recognised as revenue when the buyer obtains control of the property. Total costs incurred in respect of trading property are recognised simultaneously as a cost of sale. 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 and 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 and 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. Operating segmentsThe 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. The revenue generated from Robin Hood Property Development Limited, a related party, amounted to £590,952 for the year. This amounted to 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 are 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 2022
Revenue
Developments consist of three development management agreements with One Heritage Tower Limited, ACT Property Holding Limited and One Heritage North Church Limited. The Group earns a management fee of 0.75% £123,150 (2021: £101,467) of costs incurred to date per month and a 10% share of net profit generated by the development through the agreement with One Heritage Tower Limited. The Group is also entitled to 1% of any external debt or equity funding raised on behalf of the development. The ACT Property Holding Limited agreement has a 20% profit share of the net profit generated by the development. The One Heritage North Church Limited agreement splits the fees into three: 1. 2% of total development cost (£104,184: 2021: £7,732) , paid monthly over the period of the development; 15% of net profit, paid on completion; 1% on any debt finance raised. During the year the Group earned a 1.0% fee £nil (2021: £15,000) in relation to the signing of the One Heritage North Church Limited Investment Agreement, agreed by the parties. The Group has not recognised any 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. Also included in the developments is the sale of the Nicholas Street trading property for £650,000. See note 14. The cost of sale was £460,553. Construction generates revenue from two entities; Robin Hood Property Development Limited and One Heritage North Church Limited. During the 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 £534,619 of revenue in the year. The Group has undertaken work for One Heritage North Church Limited on a cost plus 7.0% margin basis, this generated revenue of £130,605 in the year. The development and construction revenues have been generated through related parties. Further details can be found in note 24. 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 (£55,057: 2021: £nil). Included in this is rent received from Nicholas Street Developments Limited, a related party (£56,333: 2021: £nil). The Group entered into a profit participation agreement with Robin Hood Property Development Limited and earned £26,163 for the year (2021: £nil). This agreement terminated in the year and was replaced by a management agreement. 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 and One Heritage Portfolio Rental Limited and is in consideration for a range of administration services and use of the Group’s office. This is clarified as related party. Further details can be found in note 24. 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.
*Representing impairment of inventory (see note 13) Administration expenses
Finance costs
The Group has generated a loss in the year and the prior year, and therefore has not recognised any taxation charge or credit. 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
Property, plant and equipment
As at 30 June 2022
As at 30 June 2021
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. Inventory - developments
The Group has a non-refundable right to purchase land at Churchgate, Leicester, which will result in the Group paying an additional £120,000 on the successful approval of planning on the property. The Group has recognised £246,523 (30 June 2021: £131,235) in inventory in relation to this in the period. During the year, the Group has taken the decision to impair the value of its Bank Street and St Petersgate developments, 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 in the year (2021: £nil). Inventory - trading properties
The Group disposed of Nicholas Street Development Limited during the 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. Investment in associateOn 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 2021 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 and make a provision against £24,368 of dividends received in the year to 30 June 2021. Following the end of the financial year end, 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 reversed this in the current financial year. Financial assets at FVTPL
During the 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. Trade and other receivables
Loan facility fees of £146,276 (30 June 2021: £178,743) were paid to cover the negotiation and arrangement of facilities which will be offset against the respective loans when drawn. Such fees are deferred if it is probable that a facility will be drawn down. Loan fees totalling £146,276 (2021: £178,743) were transferred to borrowing in the financial year. Trade receivables includes £50,980 (30 June 2021: £121,760) due from One Heritage Tower Limited, £154,089 (30 June 2021: £27,278) due from One Heritage North Church Limited, £3,221 (30 June 2021: £nil) due from One Heritage Great Ducie Street Limited, £565,880 (30 June 2021: £nil) due from Robin Hood Property Development Limited and £2,400 (30 June 2021: £nil) due from One Heritage Property Rental Limited, whom are all related parties. 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. Capital managementThe 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 year the ratio is significantly higher than the policy due to the delays in completion of three of the developments from the expected completion dates of June 2022 to August 2022 and March 2023 respectively, as well as the impairment of two developments. The Group’s net debt to equity at 26 (30 June 2021: 2.0) was as follows:
Loans and borrowings
On 23 November 2021, the Group repaid its loan of £770,000 to Wright (Holdings) Pension Scheme in advance of its maturity date. This was a requirement for the Group to be able to sign the facility with Shawbrook Bank Limited. 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. As at 30 June 2022, the balance of the loan was £2,436,564. The Group incurs an interest cost on drawdown funds of 6.25% plus three month SONIA. On signing of the agreement the Group paid an arrangement fee of £35,000 and will pay an exit fee of £43,875 on final repayment. The loan has 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. As at 30 June 2022, the balance of the loan was £2,166,706. The loan bears interest at 9.6% per year. The loan has two covenants that are linked to the underlying development, the loan to development cost of 71% and a loan to value of 65%, which have both 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. As at 30 June 2022, the balance of the loan was £1,126,056. The loan bears interest at 0.85% monthly at a variable rate, based on the Bank of England base rate. The loan has 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 an 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 year with the accrued interest. As at 30 June 2022, £227,776 of interest had been accrued against the remaining loan. The remaining loan is repayable in January 2023. The Group signed a £5.0 million loan facility with One Heritage Property Development Limited on 21 September 2020. This can be drawn down as required and is to be repaid on 31 December 2024. 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. The balance on this loan at 30 June 2022 was £5,000,000 (30 June 2021: £nil) and £2,190,414 (30 June 2021: £1,748,852) for the facilities that mature on 31 December 2024 and 31 December 2022 respectively. Terms and repayment schedule The terms and conditions of outstanding loans are as follows:
\* The Shawbrook bank is repayable on the earlier of completion or August 2023. As the development reached practical completion in August 2022, the loan is repayable before August 2023 and as such is classified as a current liability. Reconciliation of movements of liabilities to cash flows from financing activities
Trade and other payables
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 £1,012,222 (30 June 2021: £25,000). 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. During the prior year the Group made a provision against the dividends received from an associate. This was reversed in the current year. The company has financial risk management policies in place to ensure that all payables are paid within the credit timeframe. Financial instruments - fair value and risk managementFair 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: Credit risk Liquidity risk Market riskRisk 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 £974,201 at 30 June 2022 (30 June 2021: £204,147).
The Group also held petty cash of £672 as at 30 June 2022 (30 June 2021: £634). Guarantees The Group’s policy is to provide financial guarantees only for subsidiaries’ liabilities. At 30 June 2022, the Company has issued a guarantee to certain banks in respect of credit facilities granted to One Heritage Oscar House Limited £2,185,772 (30 June 2021: £122,447), see note 19. 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 2022, 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 £0.3million and cash and cash equivalents were £974,201. 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 2022
As at 30 June 2021
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, loans with variable interest rates 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 2022 would (increase)/decrease by (£309,618)/£238,365. This is mainly attributable to the Group’s exposure to interest rates on its variable rate borrowings. Directors’ remuneration
Apart from Jason Upton who received a pension of £1,321 for the year, the Directors did not receive any other benefits or post-employment remuneration. Share capital
All shares issued by the Company are ordinary shares and have equal voting and distribution rights. The total shares in issue as at 30 June 2022 is 32,428,333 (30 June 2021: 32,428,333) and are fully paid up. Related parties 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. 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. 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 31% (30 June 2021: 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:
Events after the reporting date 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. On 12 July 2022 the Group completed the acquisition of development land on Victoria Road, Eccleshill, West Yorkshire for £1,000,000. This was acquired through One Heritage Victoria Road Limited, a wholly owned subsidiary of the Group. On 14 October 2022 the Group facility was increased by £2 million. This can be drawn down as required, has an interest rate of 7.0% and is repayable on demand. This additional amount can only be drawn to fund property development activities where obtaining project financing is delayed or unavailable. New Standards and amendments to StandardsThere are no new or amended standards that are expected to have a significant impact on the Group’s consolidated financial statements when adopted. Disclosures relating to subsidiary undertakingsThe Company’s subsidiaries and other related undertakings at 30 June 2022 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. Audit exemption taken for subsidiariesThe 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 2022
These financial statements were approved by the board of directors on 21 October 2022 and were signed on its behalf by: Jason David Upton Company registration number: 12757649 The accompanying notes on pages 79 to 83 form an integral part of the financial statements. Company statement of changes in equity For the year ended 30 June 2022
For the year ended 30 June 2021
The accompanying notes on pages 79 to 83 form an integral part of the financial statements. Notes to the Company financial statements For the period ended to 30 June 2021 Accounting policiesThe 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. In these financial statements, the Company has applied the exemptions available under FRS 101 in respect of the following disclosures: Cash Flow Statement and related notes; Certain disclosures regarding revenue; Certain disclosures regarding leases; Disclosures in respect of transactions with wholly owned subsidiaries; Disclosures in respect of capital management; The effects of new but not yet effective IFRSs; Disclosures in respect of the compensation of Key Management Personnel; Disclosures of transactions with a management entity that provides key management personnel services to the Company.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: Certain disclosures required by IFRS 3 Business Combinations in respect of business combinations undertaken by the Company in the current and prior periods; and Certain disclosures required by IFRS 13 Fair Value Measurement and the disclosures required by IFRS 7 Financial Instrument Disclosures.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. 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, and The amount initially recognised less cumulative amortisation, where appropriate.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. Foreign currencies These financial statements are presented in Pound sterling, which is the Company’s functional and presentational 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 statement of financial statement date, monetary assets and liabilities that are denominated in foreign currencies other than the functional currency are retranslated at the rates prevailing at the statement of financial statement date. Non-monetary assets and liabilities carried at fair value that are denominated in foreign currencies are translated at the rates prevailing at the date when the fair value was determined. Gains and losses arising on retranslation are included in the net profit or loss for the period. 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. Investment in subsidiaries
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. There are no indicators of impairment.
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.
Debtors
The Intercompany loan payable by One Heritage Property Development (UK) Limited and 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. Creditors: amounts failing within one year
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 an 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. Called up share capital
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. The Company has not issued any share capital in the year to 30 June 2022. Audit exemption taken for subsidiariesThe 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.
Post balance sheet events 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 an 8.0% coupon which is paid on 30 June and 31 December each year. Related party disclosuresThe Directors of the Company were paid through One Heritage Property Development (UK) Limited, a subsidiary.
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.: | 196491 |
| EQS News ID: | 1470415 |
| End of Announcement | EQS News Service |
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