DJ One Heritage Group plc: Full year results for the year ending 30 June 2023
One Heritage Group plc (OHG)
One Heritage Group plc: Full year results for the year ending 30 June 2023
31-Oct-2023 / 12:30 GMT/BST
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31 October 2023
ONE HERITAGE GROUP PLC
(the "Company") or (the "Group")
Full year results for the year ending 30 June 2023
One Heritage Group PLC (LSE: OHG), the UK-based residential developer, development manager and property manager focused
on the North of England, is pleased to announce its audited results for the year ended 30 June 2023 (FY 2023).
Financial highlights
-- Increase in revenue of GBP13.84m, +792% on the prior year, from GBP1.75m to GBP15.59m, driven by 71 sale
completions during the period.
-- Impairment was GBP1.09m in the period, a decrease of GBP0.01m on the impairment reported in the interim
announcement. The impairment loss is included in cost of sales.
- Previously reported factors have continued to impact developments, including increases in costs due
to rising material prices, sub-contractor prices, delays experienced and the cost of debt. The self-delivery of
projects leaves the business exposed to any inflationary pressures and construction delays, and this has been a
major contributor to the losses. All self-delivered projects will be completed by the end of the current
calendar year.
-- Gross profit of GBP0.59m improved by GBP1.30m or 184% on prior year mainly due to the sales growth (FY 2022:
gross loss of GBP0.71m).
-- Loss before tax of GBP2.14m (FY 2022: loss of GBP2.13m).
-- Basic loss per share of 6.2 pence (FY 2022: loss of 6.6 pence).
-- Net debt of GBP16.94m (FY2022: GBP14.95m). In the period a One Heritage SPC loan of GBP1.23m at a 12% interest
rate was repaid and the existing shareholder loan facility was increased by the same value at an interest rate of
7%. The total shareholder loan facility drawdown as at 30 June was GBP11.38m and the total facility is GBP14.30m, due
to be repaid on 31 December 2024.
Operating highlights
-- Practical completion of three major development projects, being Lincoln House, Bolton, Liberty House,
Sheffield and Oscar House, Manchester.
-- Practical completion of County House, Oldham, the Group's first project acting as development manager.
-- Construction commenced on our latest development project in May 2023 on Victoria Road, Eccleshill, West
Yorkshire, with target completion expected in H2 2024.
-- Completed a Company strategic review, with particular reference to our acquisition and delivery
strategies, focusing on our core discipline of residential Property Development in the North of England, acting
as developer and development manager using fixed-priced build contracts, commencing with Victoria Road, Eccleshill.
-- In May 2023, the Group received its Arla Propertymark accreditation, a nationally recognised code of
practice, for its Lettings operation.
-- Geoff Willis appointed as Investment Director, a new role overseeing the Group's development pipeline.
Post Period Events
-- The Group secured a bulk sale of 20 apartments in Lincoln House, Bolton. The sales were legally completed
in October 2023, and this now means that 76 out of the 88 units have been sold.
-- Construction commenced for One Victoria, Manchester, where 129 self-contained apartments across two
buildings are set to be developed acting as development manager.
-- Parent company and majority shareholder extended its support and increased its previous GBP12.30 million
debt facility by GBP1.70 million to GBP14.00 million, on the same terms with a repayment date of 31 December 2024.
-- The Group has decided to sell the developments at Churchgate, Leicester and Seaton House, Stockport
following a viability review of its design and costs, and sales of the projects are being progressed.
Prospects
-- On track to deliver Victoria Road, Eccleshill, a direct development, during the next calendar year and
the new project pipeline contains future opportunities which are being reviewed.
-- The Group is expecting to complete North Church House, Sheffield a development managed project in FY
2024.
-- The North continues to be validated as highly attractive for property investment, with leading adviser
Savills predicting house price growth in the North West specifically of 11.7% over the next five years - the
highest of any UK region.
Jason Upton, Chief Executive Officer, commented:
"It has been a milestone year for the Group as we delivered our first wave of practical completions. The Group has also
seen strong revenues, with the majority of units sold, whilst sales channels are focused on the remaining unsold
residences.
The Group is also poised to complete all self-delivered projects in the short term, which have been problematic with
cost control, and has now commenced all new projects using fixed price contracts to remove this risk. Our focused
strategy, coupled with significant investment in experienced property development skills and resources, gives us
confidence that current and future development projects will be delivered on a timely and cost-effective basis.
The North of England continues to prove itself as an attractive region for property investors given the growing demand
for quality, affordable housing, which we are delivering. We look forward to continuing delivery of our strategic
objectives in this coming year."
Contacts
One Heritage Group plc
Jason Upton
Chief Executive Officer
Email: jason.upton@one-heritage.com
Anthony Unsworth
Chief Financial Officer
Email: anthony.unsworth@one-heritage.com
Hybridan LLP (Financial Adviser and Broker)
Claire Louise Noyce
Email: claire.noyce@hybridan.com
Tel: +44 (0)203 764 2341
Yellow Jersey PR (Financial PR)
Charles Goodwin/Annabelle Wills/Bessie Elliot
Email: oneheritage@yellowjerseypr.com
Tel: +44 (0)203 004 9512
About One Heritage Group
One Heritage Group PLC is a Property Development and Management company. It focuses on the residential sector primarily
in the North of England, seeking out value and maximising opportunities for investors. In 2020 One Heritage Group PLC
became one of the first publicly listed residential developers with a focus on Co-living.
The Company is listed on the Standard List of the Main Market of the London Stock Exchange, trading under the ticker
OHG.
References to page numbers throughout this announcement relates to the page numbers within the Annual Report of the
Company for the year ended 30 June 2023.
Chairman's statement
An inflationary environment and supply chain difficulties, caused by number of macro-economic and geopolitical factors,
have had a significant and adverse bearing on the property development industry and we have not proved immune to this.
Equally, however, as became evident as time passed, our acquisition and delivery strategies, with notable exceptions,
have not served us well, in mitigating the inherent risks associated with property development. And so, while the
Board was pleased to see the completion during the year of three direct development projects at Lincoln House, Bolton,
Bank Street, Sheffield and Oscar House, Manchester and one development management project at Oldham, it is clearly
disappointing to all concerned that two of the development projects (Bank Street and Oscar House) have been further
impaired, as has St Petersgate, Stockport which awaits completion this quarter.
Having said this, I am pleased to see the energy and clarity of purpose with which the Executive Team has responded to
the challenges we faced. New senior appointments both on the acquisition and delivery sides of the business are very
welcome and significant initiatives have been introduced to good effect - namely a widening of our net in terms of
target acquisitions to include housing as well as apartments and local authority and social housing partnering; and, in
terms of delivery, third party outsourcing on fixed priced construction contracts in lieu of an in-house model.
The sales side of the development process has gone well and is testament to the quality of our product, its
desirability to the rental market and the exceptional sales network that our parent company has built up in Asia. There
remains strong appetite from the overseas investor for the right product, accompanied by good professional management
services, particularly in our chosen geographies.
It's important to note that of the original batch of properties purchased pre-January 2022, only St Petersgate,
Stockport awaits completion and that Churchgate, Leicester and Seaton House, Stockport, both consented sites, are to be
sold and not developed out by the Group following a reassessment of profitability. Construction is going well at the
most recent purchase i.e. the site for housing at Victoria Road, Eccleshill and there are a number of encouraging
discussions ongoing on other potential projects.
Our other principal source of revenue comes from our development management activities and I am pleased with the way
that One Victoria, Manchester is shaping up and we are putting every effort in to are making sure that this business
line grows in significance going forward.
Despite setbacks, I am confident that our revised strategies are fit for purpose, that we have the leadership and
technical expertise to deliver them and that with the continued support of our major shareholder, our bottom line
performance will greatly improve.
David Izett
Chairman
31 October 2023
Chief Executive's statement
Reflecting on the past financial year, I wish to acknowledge the hard work and commitment of our team particularly in
respect of the four development projects - three direct developments and one development management project - completed
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during the period. Overall, after adapting our strategies in response to market conditions, strengthening our team,
and refining our internal processes and delivery, I believe that we are in a much stronger position to deliver value
for our shareholders in the future.
In 2021, in difficult market conditions leading to a reduction in the number of appropriate 3rd party contractor
options and much higher pricing from those willing to quote, and following a contractor insolvency at Bank Street
Sheffield and North Church House, Sheffield, we took the decision, essentially out of necessity, to take construction
in house. We recognise that the performance of self-delivery projects has not gone to plan as costs have continued to
increase to our detriment. It is important to note that the outstanding projects of North Church House, Sheffield and
St Petersgate, Stockport where we are providing in house construction are due to complete this quarter and our delivery
strategy will be focused on obtaining a fixed price contract for future projects.
While there is no doubt that external factors such as cost increases and delays have impacted us severely across a
number of our projects, we also recognised that changes were required to our acquisition and delivery strategies to
mitigate attendant risks to the development process leading to strong future performance.
Our acquisitions strategy has become more cautious over the past year to avoid some of the particular problems
encountered on more challenging projects such as Bank Street and St Petersgate. A highly experienced Investment
Director was appointed earlier in the year to head the acquisition team in order to build a more risk averse pipeline.
Similarly, as mentioned above, our delivery strategy has evolved to an outsourced model to mitigate the risk of
unforeseen cost increases. To lead this team, we have hired a Head of Projects to provide us with greater oversight and
control of how projects are delivered. These two senior appointments add to the Interim Development Director appointed
earlier in the year and have enabled us to create three specialist teams i.e., Acquisition, Technical and Delivery for
future projects. We are delighted to have recruited great people for these roles and to have restructured our
development team during the period, acknowledging where we went wrong and what we can do better.
Now that we have settled on a revised project delivery strategy, and we believe that the picture on costs is clearer,
we are focusing our efforts on finding and securing new opportunities for direct development. We have also increased
our efforts to source profitable deals as development manager or in Joint Ventures, along with establishing what we
hope will be long term partnerships with local authorities and registered housing providers.
In order to measure our success as a business, in last year's statement I highlighted four strategic objectives for the
Group to perform against:
1. Successfully delivering our existing development projects
As mentioned above, this year has been marked by four project completions - three direct developments and one
development management project.
The first completion in FY 2023 was our direct development of Lincoln House, Nelson Street, Bolton, previously a
part-build office building, which we repurposed for residential use to provide 88 apartments. The gross floor area of
the building is c., 60,500 square feet.
In March 2023, we completed our first development management project, a conversion of Oldham County Court, New
Radcliffe Street, Oldham, into 42 residential apartments comprising a gross floor area of c., 33,400 square feet. This
also marked the completion of the Group's first partnership with a housing association, and all 42 apartments were let
at affordable rents, boosting the availability of affordable housing in Oldham Town Centre.
In May 2023, we delivered our second direct development of 2023 calendar year at Liberty House, Bank Street, Sheffield.
This was the conversion of a former Grade II Listed office building into an apartment block of 23 units, with a gross
floor area of c., 21,000 square feet.
In quick succession to Liberty House, in June 2023, we announced the practical completion of our third direct
development at Oscar House, Chester Road, Manchester. This is a six-storey apartment block of c., 19,700 square feet
and comprises 27 units on a formerly unoccupied brownfield site.
Post-period end, we updated the market that the completion of 57 St Petersgate, Stockport, a conversion of a former
office building, comprising 18 apartments, 1 commercial unit and c., 12,000 square feet, was delayed until later this
calendar year, due to further challenges in respect of sub-contractor labour shortages.
As mentioned above and as announced in our interim results, after careful internal evaluation, we took the decision to
cease providing in-house construction services to both our direct development and development management projects in
favour of the appointment of a fixed-price principal contractor. This will take effect later this year, tying in with
the completion of our direct development of 57 St Petersgate, Stockport and our development management project at North
Church House, Queen Street, Sheffield which comprises 58 apartments in a former office building totalling c., 41,400
square feet.
As previously announced, principally as a result of an increase in costs due to rising material prices, sub-contractor
prices and cost of debt, the Group impaired the value of its developments at Bank Street, St Petersgate, and Oscar
House.
The Group has previously confirmed its decision to sell the consented development at Churchgate, Leicester, following a
viability review based around its design and costs and has accepted an offer that is progressing through the due
diligence and legal processes. We have also recently decided to sell the consented project at Seaton House, Stockport
following a viability review.
In April 2023, we were pleased to commence the construction, as developer, of 24 houses at Victoria Road, Eccleshill,
West Yorkshire, our first new build housing project. A principal contractor has been appointed with a fixed price build
contract and completion is expected in H2 2024.
Direct Development Residential Commercial Gross Development Reservations* Exchanged Completed Expected
Projects Units Units Value (GBPm) * Sales * Completion
Lincoln House, 88 0 GBP10.1m 2 0 76 Completed
Bolton
Bank Street, 23 0 GBP3.9m 1 0 19 Completed
Sheffield
Oscar House, 27 0 GBP6.8m 1 1 7 Completed
Manchester
St Petersgate, 18 1 GBP2.9m 0 18 0 H2 2023
Stockport
Victoria Road, 24 0 GBP6.5m Not released H2 2024
Eccleshill
Seaton House, 35 0 GBP5.6m Not released To be sold
Stockport
Churchgate, 15 1 GBP3.1m Not released To be sold
Leicester
230 2 GBP38.9m 4 19 102
*As at 23 October 2023 2. Secure sales for our properties under construction
We have continued to see strong demand for well-designed and well-located homes with 71 units (out of 125 available for sale) sold and legally completed during the period which increased to 102 at 23 October 2023.
Post period, the Group has exchanged contracts for the bulk sale of twenty apartments at Lincoln House, Bolton. The sales were contracted to complete in August 2023, but following buyer delays, the remaining units completed in October 2023. This, along with two further sales increases the number of completions at Lincoln House to 76 out of 88. Bank Street reported two further sales completions post year end.
In June 2023, the Group announced that the buyer underwriting the purchase of 27 apartments at Oscar House had failed to perform on 22 apartments. The Group has since remarketed the units and following a revaluation, it is anticipated that the GDV will increase from GBP6.1m to GBP6.8m. Oscar House recorded its first sale completions, seven in total, post year end.
The marketing of the 24 houses at Victoria Road, Eccleshill will commence in Q1 2024 when construction has progressed further and we enter the final six months of the project. 3. Growing the pipeline of new development opportunities
We are investing considerable time and effort into seeking out new opportunities both for our direct development business and for larger development partners for whom we undertake the development management role. But we do so with caution. Since 2020 BCIS (Building Cost Information Service Construction Data) cite a 24% increase in build costs with an 8.7% increase in 2022. Similarly, interest rates have risen from 1% in May 2022 to 5.25% in August 2023. Markets and supply chains continue to recalibrate post the pandemic and the disruptions caused by the ongoing war in Ukraine and the unfolding events in Israel.
At the time of writing, we have several potential sites under review and have a number of encouraging conversations underway with possible joint venture partners such as local authorities and housing associations. We will be updating the market on this in due course. 4. Create diverse sources of revenue generated through the Group's service provisions
Development management
The second of our two core business lines is development management and as mentioned above,
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in March 2023 we completed our first such project, a conversion of Oldham County Court, New Radcliffe Street, Oldham, into 42 residential apartments. We are also managing the development of North Church House, Queen Street, Sheffield which comprises 58 apartments. More recently, we announced our appointment as development manager to deliver One Victoria, Manchester. We have entered into a construction agreement with Torsion Construction Limited, who will construct the new-build development comprising c.,113,000 square feet across two buildings containing a total of 129 units and two ground-floor commercial units. One Victoria is a significant regeneration project in Manchester City Centre, and we are looking forward to managing its successful delivery.
Our other development management project of scale is One Heritage Tower which is still yet to commence construction. The project has been significantly impacted by increased construction costs resulting in the need for design changes to improve efficiency and reduce costs. Interest rate increases have also impacted the cost of debt. Despite these viability challenges, progress is being made on a fixed price construction contract, and options are being progressed which include both a sale of the project and a revised delivery strategy with funding partners.
Property services
Our property services team has worked hard this year to establish the infrastructure needed to accommodate the increase in properties under management. We have invested in a new Customer Relationship Management (CRM) system and have gained accreditations in industry-recognised Money Shield and Property Ombudsman schemes. The property management function of One Heritage is now well established as we continue to grow our properties under management to generate increased revenue for our stakeholders.
The Group continues to provide its tailored property sourcing service, which finds, analyses, and negotiates property deals for overseas investors. This area has seen steady growth over recent months, and its services are being marketed in Hong Kong under the brand 'Red Brick'. Sixteen properties were secured for investors during the period under review which generated over GBP30,000 in revenue for the Group.
Services such as sourcing, property transactions and project management to investors in Co-living properties (typically single-dwelling suburban houses which are repurposed as shared accommodation for young professionals) continue to be provided. While we remain committed to advancing Co-living projects, rising house prices and construction costs have seen a reduction in activity levels since the beginning of the calendar year.
We have examined various ways to adapt our strategy to these more challenging market conditions including a recent trial providing Serviced Accommodation services. We will be providing a further update on this business segment in due course.
Our people
There has been a number of personnel changes at a senior level during the year. At the beginning of the period under review, Anthony Unsworth joined the Company as CFO and an Executive Director. Anthony has brought financial and listed company expertise to the Company and paired with his track record in property development, he has proved to be invaluable to us all here at One Heritage. In September 2023, Anthony informed the Board of his decision to resign, but will continue in these roles during his notice period ending in March 2024. The Board has commenced a search for a replacement.
With his wealth of experience and in-depth understanding of the property and regeneration marketplace, we were delighted to announce the arrival of Paul Westhead on an initial interim basis to oversee the delivery of our development projects, Paul has provided invaluable support to the Group in the restructuring of the development team and the project delivery element of our development process. It is intended that his role will be carried out on a permanent basis and we will provide an update on this in due course.
Post period end in July, we welcomed Geoff Willis into a new role of Investment Director, strengthening the senior team. With his experience and expertise complementing our existing team, Geoff will help us to source and deliver new development opportunities.
2024 FINANCIAL YEAR STRATEGIC OBJECTIVES
The Group continues to evolve and navigate through a very challenging market. We will continue to focus on the delivery of our development projects and growing our development pipeline, both as developer and as Development Manager, will be one of our primary objectives.
The following four objectives will remain in place for the forthcoming financial year. 1. Successfully deliver our development projects 2. Secure sales of our properties 3. Grow the pipeline of new development opportunities 4. Increase revenue generated through the Group's service provisions
INDUSTRY OVERVIEW
Over the 12 months leading up to June 2023, the UK economy experienced a 1% increase in economic output, 0.8% higher than it was in February 2020 before the pandemic struck. The economic outlook for the remainder of 2023 and into 2024 is uncertain with persistent inflationary pressures leading to increased prices. The decisions made by the government and the Bank of England regarding economic policies and interest rates will be crucial in curbing inflation, with a particular focus on the Autumn Statement. HM Treasury's August consensus economic forecasts indicated limited GDP growth of just 0.3% in 2023 and 0.6% in 2024.
The shortage of housing in the UK remains a significant issue, evident from the long-term trend of rising house prices relative to incomes and the considerable inflationary pressures in the rental market. The last reported figures for the year to March 2022 (reported by the HBF and Gov.uk annually in November) show c.,210,100 new housing additions in England, 9.5% higher than the previous year of c.,191,800, but 4% lower than the c.,219,100 homes from the pre pandemic data to March 2020 with supply chain limitations related to labour and building materials limiting growth. The building of new housing remains low in the current year due to the end of the Help to Buy programme, higher mortgage interest rates and subsequent affordability challenges.
Although house prices reached their peak in August 2022, affordability constraints have caused them to decline over the ten-month period ending in June 2023. According to the Nationwide Building Society, the average UK house price decreased by 3.5% during the 12 months up to June 2023.
The shortage of new homes available for sale has generated increased demand in the rental sector, resulting in a 10.4% average household rent increase over the year leading up to June 2023. This rent surge has affected every region of the UK, as reported by the HomeLet Rental Index, and a 22.0% increase over the past two years leading up to June 2023. Unless there is a significant reduction in mortgage interest rates, rental demand is expected to continue growing as potential homebuyers remain unable to purchase homes.
A consistent and reliable land supply within a predictable planning system plays a crucial role in the housebuilding industry. After the pandemic, planning consents reached their peak at c.,339,500 in the 12 months ending June 2021, aligning with the government's target of delivering 300,000 homes annually by the mid-2020s. However, this level has decreased by 20% to c.,270,600 in the year ending March 2023. A significant shift occurred following the December 2022 announcement that local housing targets were no longer mandatory and that local authorities were no longer obligated to maintain a rolling five-year land supply if they had a local plan in place.
There has been a significant change in mortgage interest rates, posing challenges for homebuyers seeking mortgage financing. Bank of England data reveals that mortgage borrowing costs for new mortgages steadily declined for over 12 years, reaching a low of 1.51% in November 2021. However, this trend reversed sharply in less than 18 months, with the average cost of new mortgages rising to 4.64% in June 2023, bringing mortgage interest rates to levels last observed in 2009. According to the Halifax Mortgage Affordability Index, purchasing a new home now consumes 40.8% of after-tax income. In the upcoming months, nominal wage growth may have a positive impact on this affordability measure, but it will ultimately depend on the future movements of both mortgage rates and house prices.
Throughout the year to June 2023, we encountered a notable surge in build cost inflation, impacted by supply limitations, inflationary pressures affecting labour costs and the delayed impact of a significant rise in energy costs, which began in the autumn of 2021 and was further compounded by the conflict in Ukraine. However, with headline inflation showing reductions we expect the rate of increase to continue to slow over the coming year.
The construction industry is poised to confront forthcoming regulatory changes over the next three years, notably related to biodiversity net gain and the Future Homes Standard. Starting in November 2023, new legislation will mandate that all our developments achieve a minimum biodiversity net gain of 10%. This requirement necessitates the development of plans to achieve a measurable improvement of at least 10% in the site's biodiversity relative to its state before development commenced. Commencing in 2025, the Future Homes Standard will necessitate that new homes produce between 75% and 80% fewer carbon emissions than the standards applicable up to June 2022. Detailed requirements and performance measurement criteria for this new standard are yet to be finalised. The timing, transition arrangements, and industry consultation processes for this standard are pending initiation.
ESG
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In November 2021, we announced our ESG policy which outlined our commitments to conducting our business activities ethically and responsibly, and our commitment to embedding ESG initiatives both in our day-to-day operations and across our developments. An update on each commitment is outlined below. 1. Supporting local communities and charitable organisations, particularly in regions where our developmentsare located.
We continue to have a long-term relationship with Mustard Tree in Manchester which is a homelessness charity. Our employees raised over GBP2,000 from initiatives including Tough Mudder, Hike for the Turkey and Syria Appeal and various collections. 2. Investing in the training and education of our workforce, as well as engaging with local schools andcolleges to support students with their career pathways.
Post year end, a new training provider and system has been implemented for regular e-learning across the Company. We continue to support our employees with funding for their professional development which includes AAT and ACCA qualifications.
The Group has subscribed to Stribe, an employee engagement tool which allows employees to provide confidential feedback and gives all a fair voice. A decisive factor in choosing Stribe was their community engagement. Each new Stribe membership provides a school with a pupil safeguarding app for free which gives hundreds of children a voice and a safe confidential way for them to speak up within their schools. 3. Being an inclusive employer, committed to encouraging equality, diversity, and inclusion.
We were pleased to again support International Women's Day earlier in the year with women making up 63% of our workforce. Furthermore, we are progressing our application to become a full member of the Greater Manchester Good Employment Charter ("GMGEC"). We are undergoing an assessment by GMGEC and expect to update on our application in due course. GMGEC are aligned with our values which include providing opportunities for our people to grow, develop and thrive. 4. Tackling the UK's shortage of quality residential accommodation.
We were delighted to work with Bolton NHS foundation in the period under review to provide 62 of our 88 apartments to house key workers at our Lincoln House, Bolton development.
Our Co-living offering, which has fixed weekly rents and includes all bills. continues to be an important accommodation class for us. This has protected our tenants from rising utility costs and cost of living. 5. Considering its environmental impact, seeking ways to improve the environmental performance of ourdevelopments and reduce our carbon footprint.
Increases in material costs cause additional pressure which is affecting the whole industry so initiatives to improve the environmental performance of our developments are cost sensitive. Despite this we are looking at cost effective measures and have recently implemented initiatives working with contractors to track and monitor waste on our development projects. There have been various design changes across our developments, and we have reviewed our specification to include energy efficient lighting and energy efficient heating options where we can. Further assessments of specification are under review. 6. Raising the awareness of our tenants and occupiers in respect of how they can reduce their environmentalimpact.
We continue to work with building managers on the strategy to engage with our tenants and occupiers relating to their environmental impact. This includes recycling measures and awareness in home user guides in our properties. 7. Engaging with our tenants, investors, and principal advisors to ensure awareness of their expectationsand responding accordingly.
We believe in building a culture which has ESG at its core, and this has resulted in changes across all areas of the business and how decisions are made. Processes incorporate ESG which include budget allowances where appropriate, lessons learnt exercises, and regular audits of the advisors and consultants the Group uses to ensure they are aligned with our values and expectations. 8. Upholding the Quoted Companies Alliance Corporate Governance Code (QCA). Further details can be found onour company website. 9. Reviewing One Heritage's ESG strategy and initiatives against the United Nation's Sustainable DevelopmentGoals, 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 said that we continued to face the same challenges as before which showed little sign of immediate improvement. These have continued over the last twelve months. Rising costs of materials, interest rates and labour have all affected the industry. There are however signs of improvement with build cost inflation expected to ease which should support viability and reduce pressure on margins. This will help us to build our pipeline more effectively and profitably.
The diversity of our revenue sources has offered us a degree of insulation against the current market challenges with our development management revenue performing strongly. With some viability concerns surrounding Co-living, it is imperative the Group adapts and we have already taken steps to do so by identifying new opportunities such as Serviced Accommodation. We are giving due focus and attention on working with local authorities and registered housing providers to allow us to both deliver returns for our shareholders and tackle the lack of affordable housing.
We continue to be positive about the outlook for the sector of the UK housing market in which we operate. House prices have remained resilient for several years and with a lack of supply, especially in the North of England, in city centres that are seeing population growth, rental values continue to be strong due to the lack of supply. This supply shortage should support pricing and sustain strong returns for property investors which will benefit our sales.
We will proceed with cautious optimism and as a maturing business, we are now much better placed. Market dynamics in our view have started to stabilise which offer greater certainty around costs and values. We have demonstrated our agility, and we will continue to adapt strategies when necessary to safeguard our projects and stakeholders against similar disruptions in the future.
Task Force on Climate-Related Financial Disclosures (TCFD)
In light of the growing global concern over climate change and the increasing need for transparency and disclosure regarding climate-related financial risks and opportunities, our company has made the strategic decision to adopt the Task Force on Climate-related Financial Disclosures (TCFD) initiative. The following outlines our comprehensive plan for implementing the TCFD framework and enhancing our climate-related financial reporting.
The TCFD initiative was established to help organisations assess and disclose their climate-related financial risks and opportunities, enabling investors, stakeholders, and the public to make informed decisions. Adopting this framework demonstrates our commitment to addressing climate change and aligning our business strategies with a sustainable and resilient future.
The Group will allocate necessary resources, including personnel, technology, and financial resources, to support the successful implementation of the TCFD framework.
The implementation steps are planned on a phased approach over the year to June 2024:
-- Awareness and Training: To ensure a smooth transition, we will begin by conducting awareness and trainingsessions for key personnel across various departments. These sessions will cover the TCFD framework, itsobjectives, and the role of each department in the implementation process.
-- Governance and Accountability: Establish a dedicated TCFD working group or committee responsible foroverseeing the implementation and reporting process. Assign clear roles and responsibilities within theorganisation for TCFD compliance. The Board will oversee climate risks through an agreed matrix of climate issuesbeing deployed by management and through quarterly measurement against the relevant KPI's. There will be acomprehensive review and analysis of the scheme delivery at practical completion. In terms of managementoversight, a clear Climate strategy is being finalised, and is already being used informally, that sets core KPI'sin terms of efficiency standards, fabric first process / renewables / embodied carbon impact / operational carbonoutputs / core material choices / main contractor stats / staff travel/carbon footprint. A separate emergencystrategy is to be put in place to consider impacts & requirements following acts of God. We already embrace methodsof modern construction (MMC), along with construction opportunities where climate and financial gain is achieved.We review suppliers embracing new technology - such as flood resilience - as well as using improved performancematerials that improves overall operational carbon outputs. Opportunities will be reviewed where a new projectoffers the chance to retain the embodied carbon.
-- Risk identification will be delivered by conducting a comprehensive assessment of climate-related risksand opportunities within our organisation. This will involve identifying potential impacts on our operations,supply chain, and financial performance. The identification of a risk follows other business processes to managerisk. We will work with our main contractor and supply chain partners to understand the collective impacts on theclimate. There will be clear guidance on specifications and materials, along with controls that ensure any materialsubstituted into the process is reviewed and approved as appropriate.
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-- Risk management: No material risks have been identified at present, however all material climate riskswould be managed in line with other risk management processes proportionate to the risk identified, with strongcontrols from management processes and a formal charge to the Employers Agent (EA) to monitor KPIs.
-- Climate risk assessments fit within a wider risk assessment framework, following the same businessprocess as other key risk areas. Through the review and analysis of all climate risks conducted by the managementteam with Board oversight, all existing and potential risks will be documented, and KPIs put in place to measurethe risk. All mitigations will be reviewed and appropriate actions agreed, where appropriate.
-- Scenario Analysis: Develop climate scenario analysis models to assess the potential financialimplications of different climate scenarios on our business. This will help us identify resilience measures andstrategic adjustments.
-- Data Collection and Disclosure: Enhance our data collection and management systems to ensure theavailability of accurate and reliable climate-related data. Prepare and publish TCFD-aligned disclosures, includinginformation on governance, strategy, risk management, and metrics and targets.
-- Integration with Strategy: Integrate climate-related considerations into our strategic planningprocesses, ensuring that climate risks and opportunities are factored into business decisions and investmentstrategies. Risks and opportunities identified over the short, medium & long term: There are none identified atpresent, but identification processes are being enhanced as the level of data, both internal and external, developsover time. Development KPIs are to be integrated through future schemes. Rationale will continue to be monitoredfor trips and travel where appropriate. There will be a periodic review of employee travel to work and the standardof office space will be reviewed. The impact of climate related risks & opportunities on the business is currentlyassessed to be limited.
-- Engagement with Stakeholders: Actively engage with our stakeholders, including investors, customers,suppliers, and employees, to communicate our TCFD-aligned reporting and gather feedback.
-- Continuous Improvement: Establish a process for regular review and improvement of our TCFD disclosuresand strategies, ensuring they remain aligned with evolving climate risks and best practices.
-- We intend to communicate our commitment to adopting the TCFD initiative through internal and externalchannels. Publish our TCFD-aligned disclosures in accordance with recommended reporting timelines.
By adopting the TCFD initiative, our company is taking proactive steps to address climate-related financial risks and opportunities. This comprehensive plan outlines our commitment to transparency, resilience, and sustainability, ensuring that we are well-prepared for the challenges and opportunities that a changing climate presents.
Jason Upton
Chief Executive
31 October 2023
Group's Financial Review
Trading
For the twelve months ended 30 June 2023, revenue increased by GBP13.84m (+792%) to GBP15.59m (FY 2022: GBP1.75m). This primarily reflects significant growth in development sales along with construction services.
FY 2023 FY 2022 Change Change
Revenue
GBPm GBPm GBPm %
Development management fee 0.70 0.23 0.47 207%
Development sales 9.99 - 9.99 -
Co-living property management fee 1.28 0.53 0.75 -
Trading property - 0.65 (0.65) (100)%
Construction * 3.17 0.13 3.04 2,326%
Property services 0.33 0.16 0.17 110%
Corporate 0.12 0.05 0.07 160%
TOTAL 15.59 1.75 13.84 +792%
-- Construction services revenue in in-house residential development projects to be discontinued from H2calendar year 2023.
Developments sales revenue remained the largest contributor to Group revenue, accounting for 64% of total revenue. This significant growth was driven from Lincoln House, Bolton delivering GBP6.72m from 54 legal completions and Bank Street, Sheffield legally completing 17 sales equating to GBP3.27m.
Co-living property management relates to the works undertaken on Co-living properties where the Group receives a 5.0% cost plus margin on all works undertaken and generated revenue of GBP1.28m (FY 2022: GBP0.53m).
Further to the co-living property management fee, construction services delivered revenue of GBP3.17m in the period (FY 2022: GBP0.13m), reflecting building activity supplied to related party Queen Street, Sheffield, a refurbishment project where the Group is development manager.
There was an increase in development management fee income of GBP0.47m to GBP0.70m (FY 2022: GBP0.23m), due to the recognition of a full year of income from an agreement made in the period to develop manage One Victoria, Manchester. The other projects contributing to the period are North Church House, Sheffield, and the One Heritage Tower, Salford.
Property services delivered revenue of GBP0.33m in FY 2023. This was driven by management fees and transaction fees.
FY23 FY22 Change Change
Statement of Comprehensive Income
GBPm GBPm GBPm %
Revenue 15.59 1.75 13.84 792%
Cost of sales (13.91) (1.16) (12.75)
Cost of sales - Impairment (1.09) (1.30) 0.20
Gross Profit / (Loss) 0.59 (0.71) 1.30 184%
Gross margin 3.79% (40.4)% 44.19%
Investment in associate and other income 0.00 0.08 (0.08)
Administration costs (2.21) (1.48) (0.73) (49)%
Operating Loss (1.62) (2.11) 0.49 23%
(Loss) before taxation (2.14) (2.13) - -%
(Loss) per share (pence) (6.2) (6.6) 0.4 6%
The gross profit improved by GBP1.30m to GBP0.59m (FY 2022: loss GBP0.71m) due mainly to the completions from Lincoln House. The impairment in the period was GBP1.09m (FY 2022: GBP1.30m) and this was broadly in line with impairment reported in the interim results of December 2022 across the three impaired developments: St Petersgate, Bank Street and Oscar House. The impairment was principally as a result of previously mentioned factors of increased costs due to rising material prices, sub-contractor prices, delays experienced and the cost of debt.
There has been a number of changes implemented in the year to reporting, risk management and operational delivery, to better protect the Group from similar challenges in the future, most notably the cessation of in-house construction services to both our direct development and development management projects in favour of the appointment of a fixed-price principal contractor on all new projects. The development at Victoria Road, Eccleshill which commenced in the period is with a fixed price principal contractor.
The gross margin was 3.79% (FY 2022: (40.4%)), which is predominantly due to the completions on Lincoln House offset by further impairment in the period.
Administrative expenses were GBP2.21m in the period (FY 2022: GBP1.48m). This represents an overall GBP0.73m increase in overheads arising from a number of factors: a higher salary cost of GBP0.40m driven by an increase in average headcount to 28 employees (FY 2022: 23) with more experienced individuals along with an GBP80k increase in recruitment costs; an increase of GBP22k in audit fees; and an increase of GBP176k in professional fees mainly due to higher consultants and software costs. The Group remains focused on a tight control of overheads, whilst introducing some planned investment in costs to drive the revenue streams. Administrative expenses as a proportion of revenue were 14% in FY 2023 whilst FY 2022 administrative expenses as a proportion of revenue were 85% of turnover on lower revenues.
The operating loss decreased by GBP0.49m to a loss of GBP1.62m (FY 2022: loss of GBP2.11m). Finance costs were GBP0.52m (FY 2022: GBP29k). The increase in finance cost is attributable to the Lincoln House, Oscar House and Bank Street developments reaching practical completion in the period, and all finance costs since then are expensed and not capitalised. The pre taxation loss amounts to GBP2.14m (FY 2022: GBP2.13m). The basic loss per share was 6.2 pence (FY 2022: loss 6.6 pence).
Balance Sheet
The Balance Sheet structure reflects the strategy of funding development projects with a combination of debt and equity instruments. As the Group continues to progress, and with development projects reaching completion and realising sales, the Balance Sheet will in due course reflect the positive cash impact of such transactions allowing funds to be recycled into new projects through targeted acquisitions.
Net assets have decreased by GBP1.14m from GBP0.57m to negative equity of GBP0.57m due to an increase in borrowings funding future growth, but also recognising the prudent impairment of assets as described earlier. The completion of properties at Lincoln House, Bank Street and Oscar House, Manchester that have taken place in the period have commenced a shift in the Balance Sheet which will ultimately allow for funds to be directed into targeted acquisitions as the Group moves forward. As anticipated, no dividends have been declared in this year with losses being reported in the first three years of trading.
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Development Inventory has increased by GBP1.40m from GBP15.13m to GBP16.57m. The key balances are at Oscar House GBP6.32m (FY 2022: GBP4.22m) and Lincoln House GBP3.50m (FY 2022: GBP7.41m) where the projects are completed and sale completions have taken place. The inventory balances have increased at St Petersgate GBP2.71m (FY 2022: GBP0.80m) which is a site due to practically complete in the quarter, along with Victoria Road, Eccleshill GBP1.80m, which was purchased on 8 July 2022 and where construction has now commenced.
Reported Net Assets per share decreased by 3.3p in the period to negative 1.5p (FY 2022: 1.8p).
Liquidity
The capital structure of the Group continued to evolve with the issuance of new shares in the period. On 7 July 2022, the Group issued 6.25m new ordinary shares of 1.0 pence each at an issue price of 20.0 pence per share, raising gross proceeds of GBP1.25m. This additional source of finance enhanced funding in addition to the initial placing, a corporate bond, construction finance and shareholder loan support.
The Net Debt has increased by GBP1.99m from GBP14.95m to GBP16.94m. This increase is supporting the planned growth of the Group and includes:
-- Interest payment GBP2.65m;
-- A refinance of Oscar House, Manchester in line with the revised sales strategy on improved terms to theprevious loan GBP4.12m;
-- An increase in the One Heritage Property Development shareholder loan facility of GBP4.19m to GBP11.38m (FY2022: GBP7.19m) which allowed the repayment of a higher interest loan with One Heritage SPC of GBP1.23m resulting inlower interest costs. The total available facility is GBP14.30m, and the drawdown recorded at 30 June 2023illustrates headroom of GBP2.92m;
-- The repayment of loan facilities at Lincoln House (GBP2.44m), Bank Street (GBP1.13m) and Oscar House(GBP2.17m);
Net Cash outflow used in operating activities was GBP0.57m, primarily due to the reported loss of GBP2.14m.
In summary, we are beginning to realise the benefits from our development sales and development management agreements. This gives us incremental funding flexibility to pursue our Group strategy with renewed confidence.
Anthony Unsworth
Chief Financial Officer
31 October 2023
RISK MANAGEMENT AND PRINCIPAL RISKS
The ability of the Group to operate effectively and achieve its strategic objectives is subject to a range of potential risks and uncertainties. The Board and the broader management team take a pro-active approach to identifying and assessing internal and external risks. The potential likelihood and impact of each risk is assessed and mitigation policies are set against them that are judged to be appropriate to the risk level. Management constantly updates plans and these are monitored by the Audit and Risk Committee and reported to the Board.
The principal risks that the Board sees as impacting the Group in the coming period are divided into six categories, and these are set out below together with how the Group mitigates such risks.
1. Strategy: Government regulation, planning policy and land availability.
2. Delivery: Inadequate controls or failures in compliance will impact the Group's operational and financial performance.
3. Operations: Availability and cost of raw materials, sub-contractors, and suppliers.
4. People and culture: Attracting and retaining high-calibre employees.
5. Finance & Liquidity: Availability of finance and working capital.
6. External Factors: Economic environment, including housing demand and mortgage availability.
1. Strategy: Government regulation, planning policy and land availability
A risk exists that changes in the regulatory environment may affect the conditions and time taken to obtain planning approval and technical requirements including changes to Building Regulations or Environmental Regulations, increasing the challenge of providing quality homes where they are most needed. Such changes may also impact our ability to meet our margin or site return on capital employed (ROCE) hurdle rates (this ratio can help to understand how well a company is generating profits from its capital as it is put to use). An inability to secure sufficient consented land and strategic land options at appropriate cost and quality in the right locations to enhance communities, could affect our ability to grow sales volumes and/or meet our margin and site ROCE hurdle rates. The Group mitigates against these risks by liaising regularly with experts and officials to understand where and when changes may occur. In addition, the Group monitors proposals by Government to ensure the achievement of implementable planning consents that meet local requirements and that exceed current and expected statutory requirements. The Group regularly reviews land currently owned, committed and pipeline prospects, underpinned with robust key business control where all land acquisitions are subject to formal appraisal and approved by the senior executive team.
2. Delivery: Inadequate controls or failures in compliance will impact the Group's operational and financial performance
A risk exists of failure to achieve excellence in construction, such as design and construction defects, deviation from environmental standards, or through an inability to develop and implement new and innovative construction methods. This could increase costs, expose the Group to future remediation liabilities, and result in poor product quality, reduced selling prices and sales volumes.
To mitigate this, the Group liaises with technical experts to ensure compliance with all regulations around design and materials, along with external engineers through approved panels. It also has detailed build programmes supported by a robust quality assurance.
3. Operations: Availability and cost of raw materials, sub-contractors, and suppliers
A risk exists that not adequately responding to shortages or increased costs of materials and skilled labour or the failure of a key supplier, may lead to increased costs and delays in construction. It may also impact our ability to achieve disciplined growth in the provision of high-quality homes.
Following a strategic review, the Group has taken the opportunity to cease our participation in in-house construction of residential development projects, and this will take effect upon the completion of our current projects under construction. We will continue to provide the development of Co-living projects but have chosen a new approach to the delivery of our development projects by appointing a principal contractor after a period of due diligence, which we believe will deliver the best shareholder value.
4. People and culture: Attracting and retaining high-calibre employees
A risk exists that increasing competition for skills may mean we are unable to recruit and/or retain the best people. Having sufficient skilled employees is critical to delivery of the Group's strategy, whilst maintaining excellence in all of our other strategic priorities.
To mitigate this the Group has a number of People Strategy programmes which include development, training and succession planning, remuneration benchmarking against competitors, and monitoring of employee turnover, absence statistics and feedback from exit interviews.
5. Finance & Liquidity: Availability of finance and working capital
A risk exists that lack of sufficient borrowing and surety facilities to settle liabilities and/or an ability to manage working capital, may mean that we are unable to respond to changes in the economic environment, and take advantage of appropriate land buying and operational opportunities to deliver strategic priorities.
To minimise this risk, the Group has a disciplined operating framework with an appropriate capital structure, and management have stress tested the Group's resilience to ensure the funding available is sufficient. This process has regular management and Board attention to review the most appropriate funding strategy to drive the Group's growth ambitions. We have regular monthly Treasury updates, and we gain market intelligence and availability of finance from experienced sector Treasury advisers.
6. External Factors: Economic environment, including housing demand and mortgage availability
A risk exists that changes in the UK macroeconomic environment may lead to falling demand or tightened mortgage availability, upon which most of our customers are reliant, thus potentially reducing the affordability of our homes. This could result in reduced sales volumes and affect our ability to deliver profitable growth.
To mitigate this risk, the wider Group has a significant presence in Hong Kong, China and Singapore and the majority of overseas purchasers are cash buyers. The Group continually monitors the market at Board, Executive Committee, and team levels, leading to amendments in the Group's forecasts and planning, as necessary. In addition, there are comprehensive sales policies, regular reviews of pricing in local markets and development of good relationships with mortgage lenders. This is underpinned by a disciplined operating framework with an appropriate capital structure and strong Balance Sheet.
Anthony Unsworth
Chief Financial Officer
31 October 2023
Statement of Directors' Responsibilities
DIRECTORS' RESPONSIBILITIES
The Directors are responsible for preparing the Annual Report and the Group and parent Company financial statements in accordance with applicable law and regulations.
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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 withinternational accounting standards in conformity with the requirements of the Companies Act 2006 and, as regardsthe Group financial statements, International Financial Reporting Standards adopted pursuant to Regulation (EC) No1606/2002 as it applies in the European Union; - for the parent Company financial statements, state whether applicable UK accounting standards have beenfollowed, 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 parentCompany 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 standardsand 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 thefinancial position of the Company, together with a description of the principle risks and uncertainties that itfaces.
By order of the Board
Jason Upton
Chief Executive Officer
31 October 2023
Independent Auditor's Report to the Members of One Heritage Group PLC Our opinion
We have audited the consolidated financial statements and Company financial statements of One Heritage Group Plc (the "Company") and its subsidiaries (together, the "Group"), which comprise the consolidated statement of financial position and the Company's balance sheet as at 30 June 2023, the consolidated statements of comprehensive income, the consolidated and Company's changes in equity and consolidated cash flows for the year then ended, and notes, comprising significant accounting policies and other explanatory information. In our opinion: 1. the financial statements give a true and fair view of the state of the Group's and of the Company'saffairs as at 30 June 2023 and of the Group's loss for the year then ended;
-- the Group financial statements are properly prepared in accordance with UK-adopted internationalaccounting standards;
-- the parent Company financial statements have been properly prepared in accordance with UK accountingstandards, including FRS 101 Reduced Disclosure Framework; and
-- 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 have fulfilled our ethical responsibilities under, and are independent of the Company and Group in accordance with, UK ethical requirements including the FRC Ethical Standard as applied to public interest entities. We believe that the audit evidence we have obtained is a sufficient and appropriate basis for our opinion. Key audit matters: our assessment of the risks of material misstatement
Key audit matters are those matters that, in our professional judgment, were of most significance in the audit of the consolidated financial statements and company financial statements and include the most significant assessed risks of material misstatement (whether or not due to fraud) identified by us, including those which had the greatest effect on: the overall audit strategy; the allocation of resources in the audit; and directing the efforts of the engagement team. These matters were addressed in the context of our audit of the consolidated financial statements and company financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. In arriving at our audit opinion above, the key audit matters were as follows (unchanged from 2022):
The risk Our response
Our audit procedures included:
Internal Controls:
Documenting and assessing the design and
implementation of the processes and controls
regarding impairment of inventory;
Challenging managements' assumptions and
inputs:
We critically assessed the appropriateness
of key assumptions and the commercial
Estimation uncertainty: viability of sites as determined by
management through comparison against
historic data and consideration of current
market conditions;
The carrying value of inventory is determined by
reference to a number of assumptions such as sales
values, costs to complete that are inherent in site
forecasts and the level of provisioning, if any, Assessing impairment model:
required for impairment. These assumptions are
inherently subjective and therefore may be open to
management bias.
Impairment of For incomplete development sites we compared
inventory - The effect of these matters is that, as part of our the actual costs incurred to date to the
developments risk assessment, we determined that the assumptions budgeted costs to complete where relevant
used in the impairment assessment have a high degree and agreed the budgeted costs to
of estimation uncertainty, with a potential range of construction contracts where they had been
reasonable outcomes greater than our materiality for signed or completion of works statements
2023: GBP16,566,922 the financial statements as a whole, and possibly from developers;
(2022 GBP15,127,758) many times that amount.
Refer to the Audit
Committee Report on Forecast sales for each development site
page 29, note 5 Risk: were vouched to pre-sales and bookings where
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accounting policy available and, where not available, to
and note 13 budgeted sales listings (and assessed for
disclosures. reasonableness based on market prices for
There is a risk that the carrying value of inventory similar developments);
is overstated. The carrying value of inventory is
assessed by management for impairment by reference to
current market information and assumptions. In
performing the assessment, management undertake For each incomplete development we
quarterly valuations to determine the expected recalculated the impairment charge by
outcome of each development and hence identify if any deducting the estimated costs to complete
impairment is required. from the estimated selling price and where
complete we compared actual costs incurred
to estimated selling prices;
Assessing disclosures:
Weconsidered the adequacy of the group's
disclosures about the economic and
operational circumstances impacting the
carrying value of inventory property.
Our results
We found the results of our testing and
related disclosures in respect of the
impairment to be satisfactory and the
carrying value of inventory recognised to be
acceptable.
The risk Our response
Our audit procedures included:
Consideration of whether these risks could
plausibly affect the liquidity of the Group and
Company in the going concern period by assessing
the directors' sensitivities over the level of
available financial resources indicated by the
Group's and Company's financial forecasts taking
account of severe, but plausible, adverse effects
that could arise from these risks individually and
collectively.
Our procedures also included:
Funding assessment:
. Agreeing the committed level of funding from the
Disclosure quality: Company's parent company (One Heritage Property
Development Limited, Hong Kong) to the facility
agreement and confirmed the balance drawn and
undrawn as at the year end;
The financial statements explain how the
Board has formed a judgement that it is
appropriate to adopt the going concern
basis of preparation for the Group and . Inspecting the financial support provided by the
parent Company. Company's parent company (confirming deferral of
repayment of the loan until the Group can afford to
repay them without impacting its going concern);
That judgement is based on an evaluation
of the inherent risks to the Group's and
Company's business model and how those . Assessing the ability of the Company's parent
risks might affect the Group's and company to meet the committed facility by examining
Company's financial resources or ability the latest unaudited management accounts of the
to continue operations over a period of at ultimate parent company and a letter of support
least a year from the date of approval of which had been provided by the ultimate parent
the financial statements. company to the Company's parent company;
Risk: . Assessing the appetite of the parent company to
meet any further funding requests by examining the
history of requests made and funding received in
the year and post year end;
The risks most likely to adversely affect
the Group's and Company's available . Agreeing post year-end receipts from sale of
financial resources over this period were: units in completed developments to bank statements
or repayment of the related construction finance
Going concern loans;
. Continued support from the parent . Assessing whether the forecast proceeds from the
company (in the nature of a confirmation sale of developments projected to complete in the
Refer to the Audit from the parent company that their loan, forecast period to 31 December 2024 (net of
Committee Report on page due to mature in December 2024, will not repayment of related construction finance loans),
29 and notes 3 and 1 be demanded for repayment until such a supplemented by continued financial support from
disclosures in the Group time that the Group can afford to repay the Company's parent company and related company
and Company financial them without impacting on its going (as detailed above) are sufficient to provide the
statements respectively. concern); Group and Company with sufficient liquidity to meet
committed expenditure in the forecast period up to
31 December 2024;
. The refinancing of a previous
construction loan on improved terms to
match forecast completion dates of the Sensitivity analysis:
related developments; and
. Considering sensitivities over the level of
. The timely completion and sale of available financial resources indicated by the
property developments. Group's and Company's financial forecasts taking
account of plausible (but not unrealistic) adverse
effects that could arise from these risks
individually and collectively. We did this by
There are also less predictable but stress testing the identified critical factors,
realistic second order impacts, such as namely delaying the timing of the planned sales of
the erosion of customer or supplier developments by 3 months;
confidence, which could result in a rapid
reduction of available financial
resources.
Evaluating directors' intent:
The risk for our audit was whether or not
those risks were such that they amounted . Evaluating the achievability of the actions the
to a material uncertainty that may have directors consider they would take to improve the
cast significant doubt about the ability position should the risks materialise, which
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of the Group and the Company to continue included delaying the planned development of
as a going concern. Had they been such, properties, taking into account the extent to which
then that fact would have been required to the directors can control the timing and outcome of
have been disclosed. these;
Assessing transparency:
. Considering whether the going concern disclosure
in notes 3 and 1 to the group and company financial
statements respectively give a full and accurate
description of the Directors' assessment of going
concern, including the identified risks and
dependencies.
Our results
We found the going concern basis of preparation
without any material uncertainty to be appropriate
and the related disclosure in notes 3 and 1 of the
Group and Company financial statements respectively
adequately describe the judgements, assumptions and
dependencies..
The risk Our response
Our audit procedures included:
Test of details:
Comparing the carrying amount of 100% of the
parent Company's loans to and investments in
Recoverability of subsidiaries with the relevant subsidiaries'
parent Company's balance sheet and budgets for the underlying
loans to and development and trading properties to
investment in Low risk, high value: identify whether their financial position
subsidiaries supported the carrying amount of the parent
Company's loans to and investments in those
subsidiaries and evaluating budgeted
The carrying value of the parent Company's loans to forecasts in line with our knowledge of the
Loans to subsidiaries and investment in subsidiaries represents 99% of entity. This procedure was also relevant for
GBP3,033,711 (2022 the parent Company's total assets. The assessment our assessment of going concern.
GBP2,183,153) and of carrying value is not at a high risk of
investment in significant misstatement or subject to significant
subsidiaries judgement as the carrying value is supported by the
GBP1,007,732 (2022 net asset value of the subsidiaries and the profits Assessing disclosures
GBPGBP2,750,100) forecast to be made on sale of the development and
trading properties owned by the subsidiaries (which
Refer to the Audit are stated at cost in the financial statements).
Committee Report on However, due to its materiality in the context of We have also considered the adequacy of the
page 14, note 1 the parent Company financial statements, this is Company's disclosure of the circumstances
accounting policy and considered to be the area that had the greatest identified by management in respect of the
notes 2 and 3 effect on our overall parent Company audit. carrying value of the investments and
disclosures in the intercompany loan receivable from the
Company financial subsidiary.
statements.
Our results:
The results of our testing were satisfactory
and we found the carrying value and
associated disclosure of the investment in
subsidiary, following the provision
recognised by management, and recoverability
of parent Company's loans to be acceptable. 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 GBP147,000 (2022: GBP163,000), determined with reference to a benchmark of group total assets of GBP18,970,907 (2022: GBP18,440,109), of which it represents approximately 0.76% (2022: 0.88%).
Materiality for the Company financial statements was set at GBP40,000 (2022: GBP42,000), determined with reference to a benchmark of Company total assets of GBP4,354,322 (2022: GBP5,067,679), of which it represents approximately 0.92% (2022: 0.83%).
In line with our audit methodology, our procedures on individual account balances and disclosures were performed to a lower threshold, performance materiality, so as to reduce to an acceptable level the risk that individually immaterial misstatements in individual account balances add up to a material amount across theconsolidated financial statements as a whole. Performance materiality for Group was set at 65% (2022: 65%) of materiality for the consolidated financial statements as a whole, which equates to GBP95,500 (2022: GBP106,000), which is lower than the maximum of 75% per our methodology. This was to take into account the Group nature of the audit and resulting increased level of aggregation risk from consolidation of the subsidiaries. For the Company, performance materiality was set at 75% (2022: 75%), which equates to GBP30,000 (2022: GBP32,000). We applied this percentage in our determination of performance materiality because we did not identify any factors indicating an elevated level of risk.
We reported to the Audit Committee any corrected or uncorrected identified misstatements exceeding GBP7,350 (2022: GBP8,000), for the consolidated financial statements and GBP2,000 (2022: GBP2,000) for the Company financial statements, in addition to other identified misstatements that warranted reporting on qualitative grounds.
Our audit of the Group was undertaken to the materiality level specified above, which has informed our identification of significant risks of material misstatement and the associated audit procedures performed in those areas as detailed above.
The group team performed the audit of the Group as if it was a single aggregated set of financial information. The audit was performed using the materiality level set out above and covered 100% of total group revenue, total group profit before tax, and total group assets and liabilities. Going concern
The directors have prepared the consolidated financial statements and company financial statements on the going concern basis as they do not intend to liquidate the Group or the Company or to cease their operations, and as they have concluded that the Group and the Company's financial position means that this is realistic. They have also concluded that there are no material uncertainties that could have cast significant doubt over their ability to continue as a going concern for at least a year from the date of approval of the consolidated financial statements and the company financial statements (the "going concern period").
An explanation of how we evaluated management's assessment of going concern is set out in the related key audit matter in the key audit matters section of this report.
Our conclusions based on this work: 2. we consider that the directors' use of the going concern basis of accounting in the preparation of theconsolidated financial statements and company financial statements is appropriate;
-- we have not identified, and concur with the directors' assessment that there is not, a materialuncertainty related to events or conditions that, individually or collectively, may cast significant doubt on thethe Group and the Company's ability to continue as a going concern for the going concern period; and
-- we have nothing material to add or draw attention to in relation to the directors' statement in the notesto the consolidated financial statements and company financial statements on the use of the going concern basis ofaccounting with no material uncertainties that may cast significant doubt over the Group and the Company's use ofthat basis for the going concern period, and that statement is materially consistent with the consolidatedfinancial statements and company financial statements and our audit knowledge. See the Key Audit Matter withrespect to going concern for additional detail.
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DJ One Heritage Group plc: Full year results for the -10-
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: 3. enquiring of management as to the Group's policies and procedures to prevent and detect fraud as well asenquiring 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 4. Identifying journal entries and other adjustments to test based on risk criteria and comparing anyidentified 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 consolidated financial statements from our sector experience and through discussion with management (as required by auditing standards), and from inspection of the Group's regulatory and legal correspondence, if any, and discussed with management the policies and procedures regarding compliance with laws and regulations. As the Group is regulated, our assessment of risks involved gaining an understanding of the control environment including the entity's procedures for complying with regulatory requirements.
The Group is subject to laws and regulations that directly affect the consolidated financial statements including financial reporting legislation and taxation legislation and we assessed the extent of compliance with these laws and regulations as part of our procedures on the related financial statement items.
The Group is subject to other laws and regulations where the consequences of non-compliance could have a material effect on amounts or disclosures in the consolidated financial statements, for instance through the imposition of fines or litigation or impacts on the Group and the Company's ability to operate. We identified financial services regulation as being the area most likely to have such an effect, recognising the regulated nature of the Group's activities and its legal form. Auditing standards limit the required audit procedures to identify non-compliance with these laws and regulations to enquiry of management and inspection of regulatory and legal correspondence, if any. Therefore if a breach of operational regulations is not disclosed to us or evident from relevant correspondence, an audit will not detect that breach. Context of the ability of the audit to detect fraud or breaches of law or 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 consolidated financial statements, even though we have properly planned and performed our audit in accordance with auditing standards. For example, the further removed non-compliance with laws and regulations is from the events and transactions reflected in the consolidated financial statements, the less likely the inherently limited procedures required by auditing standards would identify it.
In addition, as with any audit, there remains a higher risk of non-detection of fraud, as this may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal controls. Our audit procedures are designed to detect material misstatement. We are not responsible for preventing non-compliance or fraud and cannot be expected to detect non-compliance with all laws and regulations. The directors' report and strategic report
The directors are responsible for the strategic report and the directors' report. Our opinion on the consolidated financial statements and company financial statements do not cover those reports and we do not express an audit opinion thereon.
Our responsibility is to read the strategic report and the directors' report and, in doing so, consider whether, based on our consolidated financial statements and company financial statements audit work, the information therein is materially misstated or inconsistent with the consolidated financial statements and company financial statements or our audit knowledge. Based solely on that work: 5. 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 theconsolidated financial statements and company financial statements; and
-- in our opinion those reports have been 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: 1. adequate accounting records have not been kept, or returns adequate for our audit have not been receivedfrom branches not visited by us; or
-- the parent Company financial statements 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 consolidated financial statements including being satisfied that they give a true and fair view; such internal control as they determine is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error; assessing the Group and Company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern; and using the going concern basis of accounting unless they either intend to liquidate the Group or the Company or to cease operations, or have no realistic alternative but to do so. Auditor's responsibilities
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements and company financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue our opinion in an auditor's report. Reasonable assurance is a high level of assurance, but does not guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the consolidated financial statements and company financial statements. 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
Isle of Man
31 October 2023
Consolidated statement of comprehensive income
For the year ended 30 June 2023
Year to Year to
GBP unless stated Notes
30 June 2023 30 June 2022
Revenue 7 15,591,928 1,747,221
Revenue - developments 15,591,928 1,097,221
Revenue - trading property - 650,000
Cost of sales (15,000,835) (2,452,644)
Cost of sales - developments (13,906,259) (694,531)
Cost of sales - trading property - (460,553)
Cost of sales - write down of inventory 13 (1,094,576) (1,297,560)
Gross profit/(loss) 591,093 (705,423)
Reversal in investment in associate 15 - 74,368
Other income - 2,386
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DJ One Heritage Group plc: Full year results for the -11-
Administration expenses 8 (2,210,021) (1,481,896) Operating (loss) for the year (1,618,928) (2,110,565) Gain on disposal of fixed asset - 5,096 Finance expense 10 (520,851) (29,466) (Loss) before taxation for the year (2,139,779) (2,134,935) Taxation 11 (250,473) - (Loss) after tax and comprehensive income for the year (2,390,252) (2,134,935) Weighted average shares in issue over the period 38,657,785 32,428,333 (Loss) per share (GBp) (6.2) (6.6) Diluted (loss) per share (GBp) (6.2) (6.6)
The accompanying notes form an integral part of the financial statements.
Consolidated statement of financial position
As at 30 June 2023
30 June 2023
GBP unless stated Notes 30 June 2022
ASSETS
Non-current assets
Property, plant and equipment 12 278,628 374,475
Intangible assets 1,913 2,324
280,541 376,799
Current assets
Cash and cash equivalents 303,816 974,201
Inventory - developments 13 16,566,922 15,127,758
Investment in associate 15 - 50,000
Trade and other receivables 17 2,100,169 1,911,351
18,970,907 18,063,310
TOTAL ASSETS 19,251,448 18,440,109
LIABILITIES
Non-current liabilities
Borrowings 19 11,572,047 6,679,902
11,572,047 6,679,902
Current liabilities
Trade and other payables 20 2,579,644 1,944,632
Borrowings 19 5,668,473 9,241,139
8,248,117 11,185,771
TOTAL LIABILITIES 19,820,164 17,865,673
EQUITY
Share capital 23 386,783 324,283
Share premium 23 4,753,325 3,568,725
Retained earnings (5,708,824) (3,318,572)
TOTAL EQUITY (568,716) 574,436
TOTAL LIABILITIES AND EQUITY 19,251,448 18,440,109
Shares in issue 38,678,333 32,428,333
Net asset value per share (GBp) (1.5) 1.8 These financial statements were approved by the board of directors on 31 October 2023 and were signed on its behalf by:
Jason David Upton
Company registration number: 12757649 The accompanying notes form an integral part of the financial statements.
Consolidated statement of cash flows
For the year ended 30 June 2023
Year to
Year to
GBP unless stated Notes 30 June 2023
30 June 2022
Cash flows from operating activities
Loss for the year before tax (2,139,779) (2,134,935)
Adjustments for:
Reversal in equity accounted investee 15 - (74,368)
Finance expense 10 520,851 29,466
Profit on disposal of associate 15 50,000 -
Profit on disposal of fixed assets - (5,096)
Depreciation of property, plant and equipment 8, 12 103,984 108,983
Amortisation of intangible asset 8 411 -
Movement in working capital:
Increase in trade and other receivables* (188,818) (845,796
Decrease/(increase) in inventories* 700,068 (6,879,205)
Increase in trade and other payables* 384,539 (1,319,649)
Net cash used in operating activities (568,744) (8,481,302)
Cash flows from investing activities
Purchases of property, plant and equipment 12 (8,137) (56,313)
Disposal of property, plant and equipment 12 - 18,333
Net cash used in investing activities (8,137) (37,980)
Financing cash flows
Issue of share capital 19 1,247,100 -
Interest paid 19 (2,647,476) (1,044,771)
Proceeds from borrowings* 4,169,072 7,131,436
Proceeds of related party borrowing* 2,953,748 4,215,638
Borrowings repaid* (5,729,326) (948,743)
Payments made in relation to lease liabilities 11 (86,623) (64,224)
Net cash (used in)/generated from financing activities (93,504) 9,289,336
Net change in cash and cash equivalents (670,385) 770,054
Opening cash and cash equivalents 974,201 204,147
Closing cash and cash equivalents 303,816 974,201
*restated (note 1)
The accompanying notes form an integral part of the financial statements
Consolidated statement of changes in equity
For the year ended 30 June 2023
Share Share Retained Total
GBP unless stated
capital premium earnings Equity
Balance at 01 July 2022 324,283 3,568,725 (3,318,572) 574,436
Loss for the period - - (2,390,252) (2,390,252)
Total comprehensive income for the year 324,283 3,568,725 (5,708,824) (1,815,816)
Issue of share capital 62,500 1,187,500 - 1,250,000
Cost of share issue - (2,900) - (2,900)
Balance at 30 June 2023 386,783 4,753,325 (5,708,824) (568,716)
For the year ended 30 June 2022
Share Share Retained Total
GBP unless stated
capital premium earnings Equity
Balance at 01 July 2021 324,283 3,568,725 (1,183,637) 2,709,371
Loss for the period - - (2,134,935) (2,134,935)
Total comprehensive income for the year 324,283 3,568,725 (3,318,572) 574,436
Balance at 30 June 2022 324,283 3,568,725 (3,318,572) 574,436
The accompanying notes form an integral part of the financial statements.
Notes to the consolidated financial statements
For the year ended 30 June 2023 1. Reporting entity
One Heritage Group PLC (the "Company")(Company number: 12757649) is a public limited company, limited by shares, incorporated in England and Wales under the Companies Act 2006. The address of its registered office and its principal place of trading is 80 Mosley Street, Manchester, M2 3FX. The principal activity of the company and subsidiaries is that of property development.
These consolidated financial statements ("Financial Statements") as at the end of the financial year to 30 June 2023 comprise of the Company and its subsidiaries. A full list of companies consolidated in these Financial Statements can be found in Note 27. 2. Measuring convention
The financial statements are prepared on the historical cost basis except for financial assets at fair value through profit or loss. 3. Basis of preparation
The Group's financial statements have been prepared and approved by the Directors in accordance with international accounting standards in accordance with UK-adopted international accounting standards ("UK-adopted IFRS"). The Company has elected to prepare its parent company financial statements in accordance with FRS 101. These are presented on pages 76 to 83. The significant accounting policies are set out in note 5. The accounting policies have been applied consistently to all periods presented in these group Financial Statements.
They were authorised for issue by the Company's Board of Director on 31 October 2023.
Restatement
The prior year presentation of operating cashflows and financing cashflows have been reclassified in order to reflect financing and operating cashflows appropriately. The impact of this restatement reduced financing cash inflows by GBP546,772 from GBP9,836,108 to GBP9,289,336 (comprising an increase of GBP178,743 in third party loans repaid and reduction of GBP368,029 in related party borrowing) and increased operating cash flows by the same amount from GBP(9,028,074) to GBP (8,481,302) (comprising a reduced movement in receivables and prepayments of GBP737,676, an increased movement in inventory of GBP435,768 and an increased movement in payables of GBP244,864).
Segment reporting
During the previous financial year the Group has begun operating with distinct Segments, having previously managed the Group as one distinct entity. This has been driven by the Group incorporating entities to manage construction and property services, which were previously outsourced.
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DJ One Heritage Group plc: Full year results for the -12-
The Group operates in three operating segments, each managed by a senior manager who sits on the Group's management team. In addition to these, there is a corporate segment which covers central operations. The following is a summary of the operations for each reportable segment.
Reportable Operations
segments
Developments Internally managed development activities including the sales of completed developments and Co-living
property management fee
Construction Construction services provided to an internally owned and managed development
Property Property letting and management services
Services
Corporate Head office, fees to related parties and other costs
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 GBP5.8 million (excluding inventory balances totalling GBP16.6 million) as at 30 June 2023 (2022: GBP8.3 million (excluding inventory balances totalling GBP15.1 million), a loss for the year then ended of GBP2.4 million (2022: GBP2.1 million) and operating cash outflows for the year of GBP0.6 million (2022: GBP9 million), the financial statements have been prepared on a going concern basis which the directors consider to be appropriate for the following reasons.
The directors have prepared a cash flow forecast on a consolidated basis for the period to 31 December 2024 which indicates that, taking account of reasonably possible downsides, the Group will have sufficient funds to meet its liabilities including the Hampshire Trust Bank loan and Corporate Bond, as they fall due for that period using the proceeds from:
-- existing resources held by the Group (including funds drawn down on the parent company loan facility postyear-end)
-- the forecast continued sale of development property inventory (net of repayment of related constructionfinance loans (note 19)); and
-- in the event of need, the continued financial support from its parent company One Heritage PropertyDevelopment Limited ("OHPD") which includes the remaining facility of GBP5 million which can be drawn down asrequired combined with the confirmation from OHPD that the loans due to mature in December 2024 will not bedemanded for repayment until such a time that the Group can afford to repay them without impacting on its goingconcern.
As with any company placing reliance on other group/related entities for financial support, the directors acknowledge that there can be no certainty that this support will continue although, at the date of approval of these financial statements, they have no reason to believe that it will not do so.
Consequently, the directors are confident that the Company and its subsidiaries will have sufficient funds to continue to meet their liabilities as they fall due for at least 12 months from the date of approval of the financial statements and therefore have prepared the financial statements on a going concern basis. 4. Use of judgements and estimation uncertainty
The board has made judgements, estimates and assumptions that affect the application of the Group's accounting policies and the reported amounts in the financial statements. The directors continually evaluate these judgements and estimates in relation to assets, liabilities, contingent liabilities, revenue and expenses based upon historical experience and on other factors that they believe to be reasonable under the circumstances. Actual results may differ from the judgements, estimates and assumptions.
The key areas of judgement and estimation are: - The carrying value of inventory: Under IAS 2: Inventories the Group must hold developments at the lowerof cost and net realisable value. The Group applies judgement to determine the net realisable value of developmentsat a point in time that the property is partly developed and compares that to the carrying value. The Group hasundertaken an impairment review of all of the Inventory and determined that an impairment is appropriate on threeof 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 Chief Financial Officer has overall responsibilities for overseeing all significant fair value measurements.
The Chief Financial Officer regularly reviews significant unobservable inputs and valuation adjustments. If third party information, such as broker prices or pricing services, is used to measure fair values, then the Chief Financial Officer assesses the evidence obtained from the third parties to support the conclusion that these valuations meet the requirements of the Standards, including the level in the fair value hierarchy in which the valuations should be classified.
Significant valuation issues are reported to the Group's audit committee.
When measuring the fair value of an asset or a liability, the Group uses observable market data as far as possible. Fair values are categorised into different levels in fair value hierarchy based on the inputs used in the valuation techniques as follows:
-- 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 orliability, 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 (unobservableinputs)
--
If the inputs used to measure the fair value of an asset or liability fall into different levels of the fair value hierarchy, then the fair value measurement is categorised in its entirely in the same level of the fair value hierarchy as the lowest level input that is significant to the entire measurement.
The Group recognises transfer between levels of the fair value hierarchy at the end of the reporting period during which the change has occurred.
The significant judgements with regard to going concern are the forecast timing of development property inventory realisations and in the event it is needed the ability of the Group to be able to drawdown on the facility by its parent company, One Heritage Property Development Limited ("OHPD"). Management of the Company and its subsidiaries are not aware of any material uncertainties that may cast significant doubt on the Company and its subsidiaries ability to continue as going concerns. Therefore, the Group financial statements continue to be prepared on the going concern basis. For detail refer note 3 going concern. 5. Significant accounting policies
Basis of consolidation
Subsidiaries
Subsidiaries are entities controlled by the Group. The Group 'controls' any entity when it is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. The financial statements of subsidiaries are included in the consolidated financial statements from the date on which control commences until the date on which control ceases.
Transactions eliminated on consolidation
Intra-group balances and transactions, and any unrealised income and expenses (except for foreign currency transaction gains or losses) arising from intra-group transactions, are eliminated. Unrealised gains arising from transactions with equity-accounted investees are eliminated against the investment to the extent of the Group's interest in the investee. Unrealised losses are eliminated in the same way as unrealised gains, but only to the extent that there is no evidence of impairment.
Interests in equity-accounts investees
The Group's interests in equity-accounted investees comprise interests in associates.
Associates are those entities in which the Group has significant influence, but not control or joint control, over the financial and operating policies.
Interests in associates are accounted for using the equity method. They are initially recognised at cost, which includes transaction costs. Subsequent to initial recognition, the consolidated financial statements include the Group's share of the profit or loss and OCI of equity-accounted investees, until the date on which significant influence or joint control ceases.
Earnings per share and net asset value per share
Basic earnings per share amounts are calculated by dividing net profit or loss for the year attributable to the owners of the Group by the weighted average number of ordinary shares outstanding during the year.
Diluted earnings per share amounts are calculated by dividing the net profit or loss attributable to the owners of the Group (after adjusting for interest on the convertible notes) by the weighted average number of ordinary shares outstanding during the year plus the weighted average number of ordinary shares that would be issued on conversion of all the dilutive potential ordinary shares into ordinary shares.
Net asset value per share amounts is calculated by dividing net assets of the Group at the reporting date by the weighted average number of ordinary shares outstanding during the year. Revenue
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DJ One Heritage Group plc: Full year results for the -13-
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): a. Developments
Revenue from housing sales is recognised in profit or loss when control is transferred to the customer. This is deemed to be when title of the property passes to the customer on legal completion and the performance obligation associated with the sale is completed. b. 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. c. Construction services
The Group primarily operates under cost plus margin agreements and therefore revenue is recognised when the relevant cost has been incurred. d. 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. e. 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. Cost of sales represent cost for purchase of land, construction costs, consultant costs, utilities cost and other related direct costs.
To the extent that additional costs or savings are identified as the site progresses, these are recognised over the remaining plots unless they are specific to a particular plot, in which case they are recognised in profit or loss at the point of sale.
Operating profit/(loss)
Operating profit/(loss) is the Group's total earnings from its core business functions for a given period, excluding the deduction of interest and taxes, the gain/(loss) on sale of subsidiaries and gain/(loss) on sale of fixed assets.
Financial guarantees
A financial guarantee contract is initially recognised at fair value. At the end of each subsequent reporting period, financial guarantees are measured at the higher of: - The amount of the loss allowance, 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.
Specific or general borrowing costs are capitalised if they are directly attributable to the acquisition, construction or production of qualifying assets which are assets that necessarily take a substantial period to get ready for sale. The group considers that its inventories are qualifying assets.
Foreign currencies
These consolidated financial statements are presented in Pound sterling, which is the Company's functional currency.
The individual financial statements of each Group company are presented in Pound Sterling, the currency of the primary economic environment in which it operates (its functional currency). Transactions in currencies other than the functional currency are recorded at the rates of exchange prevailing on the dates of the transactions. At each reporting date, monetary assets and liabilities that are denominated in foreign currencies other than the functional currency are retranslated at the rates prevailing at the reporting date.
Leases
The Group as a lessee
The Group assesses at inception whether a contract is, or contains, a lease. A lease exists if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration.
The Group assessment includes whether: - 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 assetthroughout 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 in property, plant and equipment, and lease liabilities are included in current liabilities (borrowings) and non-current liabilities (borrowings) depending on the length of the lease term.
Property, plant and equipment
Property, plant and equipment are stated at cost less accumulated depreciation, and accumulated impairment losses.
Depreciation is recognised to write off the cost or valuation of assets less their residual values over their useful lives, using the straight-line method. The estimated useful lives, residual values and depreciation method are reviewed at each year end, with the effect of any changes in estimate accounted for on a prospective basis.
The gain or loss on the disposal or retirement of an item of property, plant and equipment is determined as the difference between the sales proceeds and the carrying amount of the asset as is recognised in the profit or loss.
Depreciation is provided at the following annual rates to write off each asset over its estimated useful life:
Fixtures and fittings 15% on cost
Office equipment 15% on cost
Motor vehicles 25% on cost
Impairment of tangible and intangible assets
At each reporting date, the Group reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated to determine the extent of the impairment loss (if any). Where the asset does not generate cash flows that are independent from other assets, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs.
The recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value, using a pre-tax discount rate that reflects current market assessments and the risks specific to the asset.
If the recoverable amount of an asset or cash-generating unit is estimated to be less than its carrying amount, the carrying amount of the asset or cash-generating unit is reduced to its recoverable amount. An impairment loss is recognised as an expense immediately in the profit or loss.
Where an impairment loss subsequently reverses, due to a change in circumstances or in the estimates used to determine the asset's recoverable amount, the carrying amount of the asset or cash-generating unit is increased to the revised estimate of its recoverable amount, so long as it does not exceed the original carrying value prior to the impairment being recognised. A reversal of an impairment loss is recognised as income immediately in the statement of comprehensive income.
Financial instruments
Financial assets
Financial assets are initially recognised at fair value and subsequently classified into one of the following measurement categories:
-- Measured at amortised cost
-- Measured subsequently at fair value through profit or loss ("FVTPL")
-- Measured subsequently at fair value through other comprehensive income ("FVOCI")
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The classification of financial assets depends on the Group's business model for managing the asset and the contractual terms of the cash flows. Assets that are held for the collection of contractual cash flows that represent solely payments of principal and interest are measured at amortised cost, with any interest income recognised in profit or loss using the effective interest method.
Financial assets that do not meet the criteria to be measured at amortised cost are classified by the Group as measured at FVTPL. Fair value gains and losses on financial assets measured at FVTPL are recognised in profit or loss and presented within net operating expenses.
The Group currently has no financial assets measured at FVOCI.
Impairment of financial assets
The Group assesses on a forward-looking basis the expected credit loss associated with its financial assets carried at amortised cost. The impairment methodology applied depends on whether there has been a significant increase in credit risk. For trade receivables, the Group applies the simplified approach permitted by IFRS 9, which requires expected lifetime losses to be recognised from initial recognition of the receivables.
Trade and other receivables
Trade and other receivables are measured at amortised cost, less any loss allowance.
Cash and cash equivalents
Cash and cash equivalents comprise cash held by the Group and short-term bank deposits with an original maturity of three months or less from inception and are subject to insignificant risk of changes in value.
Financial liabilities
Financial liabilities are initially recognised at fair value and subsequently classified into one of the following measurement categories:
-- Measured at amortised cost
-- Measured subsequently at fair value through profit or loss
Non-derivative financial liabilities are measured at FVTPL when they are considered held for trading or designated as such on initial recognition.
The Group has no non-derivative financial liabilities measured at FVTPL.
Derecognition
Financial assets
The Group derecognises a financial asset when: - 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 itdoes not retain control of the financial asset.
Financial liabilities
The Group derecognises a financial liability when its contractual obligations are discharged or cancelled, or expire. The Group also derecognises a financial liability when its terms are modified and the cash flows of the modified liability are substantially different, in which case a new financial liability based on the modified terms is recognised at fair value.
On derecognition of a financial liability, the difference between the carrying amount extinguished and the consideration paid (including any non-cash assets transferred or liabilities assumed) is recognised in profit or loss.
Borrowings
Borrowings are allocated to either specific or general borrowings and initially recognised at fair value, net of transaction costs incurred and subsequently measured at amortised cost. Specific or general borrowing costs are capitalised if they are directly attributable to the acquisition, construction or production of qualifying assets which are assets that necessarily take a substantial period of time to get ready for sale. These are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale.
All other borrowing costs are recognised in profit or loss in the period in which they are incurred.
Trade and other payables
Trade and other payables are measured at amortised cost. When the acquisition of land has deferred payment terms a land creditor is recognised. Payables are discounted to present value when repayment is due more than one year after initial recognition or the impact is material.
Customer deposits
Customer deposits are recorded as deferred income on receipt and released to profit or loss when the related revenue is recognised.
Equity instruments
An equity instrument is any contract that evidences a residual interest in the assets of the Group after deducting all of its liabilities. Equity instruments issued by the Company are recorded as the proceeds are received, net of direct issue costs.
Amortisation
Amortisation is charged to the income statement on a straight-line basis over the estimated useful lives of intangible assets unless such lives are indefinite. Intangible assets with an indefinite useful life and goodwill are systematically tested for impairment at each balance sheet date.
Inventory - developments
Inventories are initially stated at cost and held at the lower of this initial amount and net realisable value. Costs comprise direct materials and, where applicable, direct labour and those overheads that have been incurred in bringing the inventories to their present location and condition.
Net realisable value represents the estimated selling price based on intended use less all estimated costs of completion and costs to be incurred in marketing, selling and distribution. Land is recognised in inventory when the significant risks and rewards of ownership have been transferred to the Group.
Non-refundable land option payments are initially recognised in inventory. They are reviewed regularly and written off to profit or loss when it is probable that the option will not be exercised.
Taxation
The tax charge represents the sum of the tax currently payable and deferred tax.
Current tax
The tax currently payable is based on taxable profit for the period. Taxable profit differs from profit before tax as reported in the profit or loss because it excludes items of income or expense that are taxable or deductible in other years, and it further excludes items that are never taxable or deductible. The Group's liability for current tax is calculated using tax rates that have been enacted or substantively enacted at the reporting date.
Deferred tax
Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised.
Such assets and liabilities are not recognised if the temporary difference arises from goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit.
Deferred tax liabilities are also recognised for taxable temporary differences arising on investments in subsidiaries and interests in joint ventures, except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future.
Deferred tax is measured on a non-discounted basis using the tax rates and laws that have been enacted or substantively enacted by the reporting date.
The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Deferred tax is charged or credited to the profit or loss, except when it relates to items charged or credited directly to other comprehensive income or equity, in which case the deferred tax is also dealt with in other comprehensive income or equity.
Share capital
Ordinary shares are classified as equity. Any incremental costs directly attributable to the issue of new shares are shown in equity as a deduction, net of tax, from the proceeds. 6. Operating segments
The Group operates four segments: Developments, Construction, Property Services and Corporate.
The accounting policies of the reportable segments are the same as the Group's accounting policies described in Note 5.
All the revenues generated by the group were generated within the United Kingdom.
In the developments segment, GBP9,766,522 revenue was generated from external parties through the sale of 71 units in completed developments (2022: GBPnil). In the Lincoln House development, 52 units were sold during the year generating revenue of GBP6,496,522. The Bank Street development sold 19 units generating GBP3,270,000 in revenue. The remainder of the revenue was earned from related parties in the form of rental income and development management fees.
The revenue generated from Robin Hood Property Development Limited, a related party, amounted to GBP1,280,006 (30 June 2022: GBP590,952) for the year. This amounted to 8% (30 June 2022: 34%) of the total revenue of the Group. This was derived from three segments of the Group, see note 7.
Segment information for these businesses is presented below. Segment operating profit or loss is used as a measure of performance as management believe this is the most relevant information when evaluating the performance of a segment.
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DJ One Heritage Group plc: Full year results for the -15-
For the financial year to 30 June 2023
GBP unless stated Developments Construction Property services and Lettings Corporate Total Revenue - developments 10,689,920 4,448,376 333,299 120,333 15,591,928 Cost of sales - developments (9,580,942) (4,235,479) (89,839) - (13,906,259) Impairment of inventory (1,094,576) - - - (1,094,576) Gross profit/(loss) 14,402 212,897 243,460 120,333 591,093 Depreciation - - - (103,984) (103,984) Administration expenses (532,900) - (411,682) (1,161,455) (2,106,037) Other expenses - - - Operating (loss)/profit (518,498) 212,897 (168,222) (1,145,105) (1,618,928) Finance expense (455,331) - - (65,520) (520,851) Taxation (250,473) (250,473) (Loss)/Profit for the year (973,829) 212,897 (168,222) (1,461,098) (2,390,252)
For the financial year to 30 June 2022
GBP unless stated Developments Construction Property services and Lettings Corporate Total
Revenue - developments 227,334 665,224 158,449 46,214 1,097,221
Revenue - trading property 650,000 - - - 650,000
Cost of sales - developments - (618,496) (76,035) - (694,531)
Cost of sales - trading property (460,553) - - - (460,553)
Impairment of inventory (1,297,560) - - - (1,297,560)
Gross profit/(loss) (880,779) 46,728 82,414 46,214 (705,423)
Reversal in investment in associate - - - 74,368 74,368
Other income - - - 2,386 2,386
Administration expenses (320,868) (64,000) (210,250) (773,232) (1,368,350)
Other expenses - - - (113,546) (113,546)
Operating loss (1,201,647) (17,272) (127,836) (763,810) (2,110,565)
Gain on disposal of fixed asset - - - 5,096 5,096
Finance expense - - - (29,466) (29,466)
(Loss) for the year (1,201,647) (17,272) (127,836) (788,180) (2,134,935) 7. Revenue
GBP unless stated 30 June 2023 30 June 2022
Revenue
Trading property - 650,000
10,689,920 227,334
Developments
Development sales 9,991,574 -
Development management 698,346 227,334
Construction 4,448,376 665,224
Property Services and Lettings 333,299 158,449
Transaction services 81,500 50,163
Lettings services 251,799 108,286
Corporate 120,333 46,214
15,591,928 1,747,221
Cost of sales
Trading property - (460,553)
(10,675,518) (1,297,560)
Developments
Development sales (9,580,942) -
Impairment (note 13) (1,094,576) (1,297,560)
Construction (4,235,478) (618,496)
Lettings services (89,839) (76,035)
(15,000,835) (2,452,644)
Gross loss 591,093 (705,423)
Developments consist of sales of properties owned and developed by the Group and four development management agreements with One Heritage Tower Limited, ACT Property Holding Limited, One Heritage Great Ducie Street Limited and One Heritage North Church Limited:
-- One Heritage Tower Limited: The Group earns a management fee of 0.75% GBP134,599 (30 June 2022: GBP123,150)of costs incurred to date per month and a 10% share of net profit generated by the development through theagreement with One Heritage Tower Limited. The Group is also entitled to 1% of any external debt or equity fundingraised on behalf of the development.
-- ACT Property Holding Limited: The agreement has a 20% profit share of the net profit generated by thedevelopment. The development generated GBP58,783 of profit share for the Group.
-- One Heritage Great Ducie Street Limited: The Group earned a management fee of GBP206,160 (30 June 2022:GBPnil) through the agreement with One Heritage Great Ducie Street and GBP225,500 for external debt raised.
-- The One Heritage North Church Limited agreement splits the fees into three: 1. 2% of total developmentcost (GBP41,654 30 June 2022: GBP104,184), paid monthly over the period of the development; 15% of net profit, paid oncompletion; 1% on any debt finance raised (GBP31,650).
With the exception of ACT Property Holding Limited which completed in the year, the Group has not recognised any further revenue linked to the profit share element of these agreement as the transaction price is variable and the amount cannot be reliably determined at this time. This is because the developments are in the early stages of construction and there is too much uncertainty to reliably estimate expected revenue.
During the year GBP9,766,522 revenue was generated from external parties through the sale of 71 units in completed developments (2022: GBPnil). In the Lincoln House development, 52 units were sold during the year generating revenue of GBP6,496,522. The Bank Street development sold 19 units generating GBP3,270,000 in revenue.
Construction generates revenue from two entities: Robin Hood Property Development Limited and One Heritage North Church Limited. During the previous financial year, it signed an agreement with Robin Hood Property Development Limited to undertake works on Co-living properties. The Group receives a cost plus 5.0% margin on all works undertaken, recognising GBP1,280,006 (30 June 2022: GBP534,619) of revenue in the year. The Group has undertaken work for One Heritage North Church Limited on a cost plus 5.0% margin basis, this generated revenue of GBP3,168,370 (30 June 2022: GBP130,605) in the year.
The development and construction revenues have been generated through related parties.
Property Services generated revenue from management fees that are based on a percentage of gross rental collected for clients and through transaction fees for each co-living property bought and sold for Robin Hood Property Development Limited, a related party GBP115,818 (30 June 2022: GBP55,057).
It also includes any rental income collected for properties owned by the Group.
The Corporate revenue is from contracts signed with Robin Hood Property Development Limited, generating revenue of GBP108,333 and One Heritage Portfolio Rental Limited, recognising revenue of GBP12,000 and is in consideration for a range of administration services and use of the Group's office.
Revenue is measured based on the consideration specified in a contract with a customer. The Group recognises revenue when it transfers control over a good or service to a customer.
The following table provides information about the nature and timing of the satisfaction of performance obligations in contracts with customers, including significant payment terms, and related revenue recognition policies.
Type of Nature and timing of satisfaction of performance
product/ obligations, including significant payment terms Revenue recognition policies
service
Housing sales
Revenue from housing sales is recognised in profit
or loss when control is transferred to the customer.
Development management recognition is split into
three elements; management fee, arrangement fees and
a profit share on a final transaction.
Revenue from housing sales is recognised when title
of the property passes to the customer on legal
Management fee completion and the performance obligation associated
with the sale is completed.
The performance obligation is that the Group remains
the development manager on the site and undertakes
the scope of works in the agreement. Payment is due
on a monthly basis after the service has been Revenue for the management fee is recognised monthly
Development undertaken. as long as the group continues to be the development
management manager during the relevant calculation period.
Arrangement fee
Assuming that the Group continues to be the
The performance obligation is at the point that the development manager the group will look to recognise
service is completed. Payment is due after income from a profit share once the costs and
completion. proceeds of a particular site can be reliably
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DJ One Heritage Group plc: Full year results for the -16-
estimated and unlikely to be reversed.
Profit share
Assuming that the Group has performed the scope of
works effectively (its performance obligation), it
is entitled to a share of the profits at the end of
the project. The payment for this is made at the end
of the project.
No warranties are provided.
The Group operates contracts where it charges based
on a cost incurred plus margin basis. Revenue is
recognised at the point that the cost is incurred.
Construction Revenue is recognised when the associated cost is
revenue incurred.
Payment is generally made within 30 days of the
invoice being raised.
The Group offers property management services to
external landlords. These services are linked to a
percentage of the gross rental collected and any
additional services undertaken.
Property Management fee income is recognised at the point
Services - that the service is provided.
Revenue is recognised when service is provided for
Management management fees and at the point the service is
fees and completed for other services.
other Other income is recognised at the point that the
services service is completed.
Payments for these services are made within 90 days
of the service being undertaken.
The Group provides services, which include
Corporate administration, reporting, risk management, shared Revenue is recognised monthly as long as the Group
revenue office space and other services, to related parties. continues to provide the service during the relevant
Revenue is recognised for the period in which the calculation period.
service is undertaken. 8. Administration expenses
Year to Year to
GBP unless stated
30 June 2023 30 June 2022
Staff costs 1,306,577 908,946
Depreciation and amortisation 104,217 108,983
Auditors' remuneration 103,431 81,106
Other administration expenses 695,796 382,861
2,210,021 1,481,896
Year to Year to
GBP unless stated
30 June 2023 30 June 2022
Services provided by the auditor
- Interim audit of parent company and consolidated financial
29,011 20,441
statements
- Audit of parent company and consolidated financial statements 74,420 60,665
103,431 81,106 9. Staff costs and employees
Year to Year to
GBP unless stated
30 June 2023 30 June 2022
The aggregate remuneration comprised:
- Wages and salaries 1,159,761 816,982
- National insurance 129,537 78,414
- Pension costs 17,278 13,550
Average number of employees 28 23 10. Finance costs
Year to Year to
GBP unless stated
30 June 2023 30 June 2022
Interest charged on lease liabilities 12,607 15,263
Interest paid on borrowings 2,647,476 1,036,278
Amount capitalised* (2,139,232) (1,022,075)
520,851 29,466
*The rate of interest used to capitalise the general borrowings is 7%. 11. Income tax expense
The Group has generated a loss in the year and the prior year.
Tax losses carried forward
Tax losses for which no deferred tax asset was recognised expire as follows:
Year to Year to
GBP unless stated
30 June 2023 30 June 2022
Tax (losses) (2,390,252) (2,134,935)
Accumulated carried forward losses 5,412,010 3,021,758
The carried forward losses do not expire as they relate to trading activity that is expected to continue.
Year to Year to
GBP unless stated
30 June 2023 30 June 2022
Income tax expense recognised in the period (250,473) -
Reconciliation of effective tax rate
Year to Year to
GBP unless stated
30 June 2023 30 June 2022
Loss for the year/period (2,139,779) (2,134,935)
Tax using the blended UK corporate tax rate of 20.5% (GBP2022: 19%) (438,655) 405,633
Gross non-deductible expenses 555,748 -
Current year losses for which no deferred tax asset was recognised 133,380 (419,763)
Non-taxable income - 14,130
Total taxation expense 250,473 - 12. Property, plant and equipment
As at 30 June 2023
Right Office Motor
GBP unless stated Fixtures and fittings Plant and equipment Total
of use Equipment vehicles
Cost
At 30 June 2022 442,612 23,182 72,664 - 1,149 539,607
Additions - 6,280 930 - 927 8,137
At 30 June 2023 442,612 29,462 73,594 - 2,076 547,744
Accumulated depreciation
At 30 June 2022 147,612 5,019 12,472 - 29 165,132
Charge for the period 88,522 4,381 10,666 - 415 103,984
At 30 June 2023 236,134 9,400 23,138 - 444 269,116
Carrying amount
At 30 June 2022 295,000 18,163 60,192 - 1,120 374,475
At 30 June 2023 206,478 20,062 50,456 - 1,633 278,628
As at 30 June 2022
Right Office Motor
GBP unless stated Fixtures and fittings Plant and equipment Total
of use Equipment vehicles
Cost
At 30 June 2021 442,612 14,073 28,933 34,634 - 520,252
Additions - 9,109 43,731 - 1,149 53,989
Disposals - - - (34,634) (34,634)
At 30 June 2022 442,612 23,182 72,664 - 1,149 539,607
Accumulated depreciation
At 30 June 2021 59,090 1,678 2,543 14,235 - 77,546
Charge for the period 88,522 3,341 9,929 7,162 29 108,983
Disposal - - - (21,397) - (21,397)
At 30 June 2022 147,612 5,019 12,472 - 29 165,132
Carrying amount
At 30 June 2021 383,522 12,395 26,390 20,399 - 442,706
At 30 June 2022 295,000 18,163 60,192 - 1,120 374,475
Right of use asset
GBP unless stated 30 June 2023 30 June 2022
Amount recognised in the statement of financial position:
Right of use
Buildings 206,478 295,000
206,478 295,000
Lease liability
Non-current 193,109 267,125
Current 86,623 86,623
279,732 353,748
Year to Year to
GBP unless stated
30 June 2023 30 June 2022
Amount recognised in the profit and loss:
Depreciation on right of use building 88,522 88,522
Interest expense 12,607 15,263
Amount recognised in the statement of cash flow:
Lease payments made 86,623 64,224
Break options
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DJ One Heritage Group plc: Full year results for the -17-
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. 13. Inventory - developments
GBP unless stated 30 June 2023 30 June 2022
Residential developments
- Land 4,895,358 4,394,799
- Construction and development costs 9,547,628 9,322,221
- Capitalised interest 2,123,936 1,410,738
16,566,922 15,127,758 On 12 July 2022 the Group completed the acquisition of development land on Victoria Road, Eccleshill for GBP1,000,000, and on 19 December 2022, the Group purchased Churchgate for the value of GBP120,000.
As at 30 June 2022, the Group had taken the decision to impair the value of its Bank Street and St Petersgate development, which are owned by wholly owned subsidiaries, One Heritage Bank Street Limited and One Heritage St Petersgate Limited. This was a consequence of significant cost pressures and issues with the previous contractors. The impairment totalled GBP1,297,560 as at 30 June 2022.
Due to further expenditures, the Group has taken the decision to further impair the value of its Bank Street and St Petersgate developments and additionally, the Oscar House development. The impairment totalled GBP2,392,136 as at 30 June 2023 and the charge for the year was GBP1,094,576. 14. Inventory - trading properties
GBP unless stated 30 June 2023 30 June 2022 Opening - 435,820 Disposals - (444,331) Additions - 8,511 Closing - -
The Group disposed of Nicholas Street Development Limited during the prior financial year. This entity held the Nicholas Street property. This property was valued at GBP650,000 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. 15. Investment in associate
On 17 March 2019, the Group invested GBP258,512 to acquire a 47.0% stake in One Heritage Complete Limited. One Heritage Complete provides letting and facilities and property management for investors in Co-living properties. On 05 October 2021 two subsidiaries of One Heritage Complete Limited, namely One Heritage Maintenance Limited and One Heritage Design Limited were put into liquidation and the investment in associate was written down to nil in the 30 June 2022 annual financial statements.
Reconciliation of investment in associate
GBP unless stated 30 June 2023 30 June 2022 Opening 50,000 - Reversal of write down of investment in associate - 50,000 Sale of investment in associate (50,000) - Closing - 50,000
Following the insolvency of two subsidiaries of our associate, One Heritage Complete Limited, the Group made the decision to write down the full value of our investment in associate. On 6 July 2022, the Group agreed to sell our 47.0% stake in One Heritage Complete Limited for GBP50,000. Furthermore the Group has decided that the GBP24,368 provision against prior dividends were no longer required and was reversed in the prior financial year. 16. Financial assets at FVTPL
GBP unless stated 30 June 2023 30 June 2022
Opening - 397,796
Drawdown - -
Repayment - (423,959)
Profit recognised in the period - 26,163
- -
During the prior year, the profit participation loan with Robin Hood Property Development Limited was cancelled and the outstanding funds due were repaid. 17. Trade and other receivables
GBP unless stated 30 June 2023 30 June 2022
Trade receivables 339,097 776,570
Other debtors 1,132,525 140,544
Prepaid sales fees and commissions 568,688 843,835
VAT receivable 51,636 109,811
Related party receivable 8,223 40,591
2,100,169 1,911,351 Trade receivables includes GBP14,192 (30 June 2022: GBP50,980) due from One Heritage Tower Limited, GBP209,168 (30 June 2022: GBP154,089) due from One Heritage North Church Limited, GBPnil (30 June 2022: GBP3,221) due from One Heritage Great Ducie Street Limited, GBP30,061 (30 June 2022: GBP565,880) due from Robin Hood Property Development Limited and GBP1,200 (30 June 2022: GBP2,400) 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. 18. Capital management
The Group defines capital as the Group's shareholder equity and borrowings. The Group's policy is to maintain a strong capital base so as to maintain, investor, creditor and market confidence and to sustain future development of the business. Management monitors the return on capital, as well as the level of external debt in the business.
The Group monitors capital using a ratio of 'net debt' to shareholder equity. Net debt is calculated as total liabilities (as shown in the statement of financial position) less cash and cash equivalents. The Group's policy is to keep the ratio below 3.0. In the current and prior year the ratio is significantly higher than the policy due to the negative equity and the impairment of three developments.
GBP unless stated 30 June 2023 30 June 2022
Total borrowings 17,240,521 15,921,041
Less: cash and cash equivalents (303,816) (974,201)
Net debt 16,936,705 14,946,840
Total equity (568,716) 574,436
Net debt to equity ratio N/A 26.0 19. Loans and borrowings
GBP unless stated 30 June 2023 30 June 2022
Non-current
Lease liability (note 12) 193,109 267,125
Related party borrowings 11,378,938 5,000,000
Loan - 1,412,777
11,572,047 6,679,902
Current
Lease liability (note 12) 86,623 86,623
Related party borrowings - 3,425,190
Loan 5,581,850 5,729,326
5,668,473 9,241,139
17,240,521 15,921,041
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 GBP3.5 million. This had a term of 20 months and is to be drawn down to fund costs incurred by the development in that subsidiary. In line with the agreement on the loan, when the Lincoln House development reached practical completion in August 2022, as units are sold, the proceeds of these will go toward repayment of the loan. The Group paid an arrangement fee of GBP35,000 and will pay an exit fee of GBP43,875 on final repayment. The loan was repaid in full on 27 January 2022. The loan had two covenants that are linked to the underlying development, the loan to development cost of 44% and a loan to value of 45%, which have both been complied with during the reporting period.
On 20 May 2021 a subsidiary, One Heritage Oscar House Limited, signed a loan agreement with Lyell Trading Limited. This was for a gross amount of construction finance totalling GBP4 million. This had a term of 18 months and is to be drawn down to fund costs incurred by the development in that subsidiary. On 18 November 2022 the Group entered into an agreement to extend the loan to 19 May 2023. The loan bears interest at 9.6% per year. The loan had two covenants that are linked to the underlying development, the loan to development cost of 69% and a loan to value of 89%, which have both been complied with during the reporting period.
As the One Heritage Oscar House Limited development incurred further delays and indicated a completion date post May 2023, the Group refinanced the project settling the previous debt of GBP3.9m on 09 June 2023. An agreement has been entered into with a new lender, Hampshire Trust Bank Limited, on improved terms for GBP4.2m for a period of 10 months to provide appropriate funding until all the remaining units are legally completed and handed over to customers. The new loan has a single covenant that are linked to the underlying development, the loan to gross development value of 57% which have been complied with during the reporting period.
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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 GBP2 million. This had a term of 18 months and is to be drawn down to fund costs incurred by the development in that subsidiary. During November 2022 it was agreed with Together Financial Limited that the loan be renewed for a further 12 months. The loan bears interest at 0.85% monthly at a variable rate, based on the Bank of England base rate. In line with the agreement on the loan, when the Bank Street development reached practical completion in May 2023, as units are sold, the proceeds of these will go toward repayment of the loan. The loan was repaid in full on 31 May 2023. The loan had two covenants that are linked to the underlying development, the loan to development cost of 70% and a loan to value of 70%, which have both been complied with during the reporting period.
On 18 March 2022 the Group had a GBP1.5 million corporate bond admitted to the Standard List of the London Stock Exchange. This had a 2 year term and a 8.0% coupon which is paid on 30 June and 31 December each year. The Group incurred listing costs of GBP102,040 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 GBP1,135,000 and GBP1,007,000 respectively from One Heritage SPC. The loan advanced on 22 July 2020 was repaid during the prior year with the accrued interest. On 11 April 2023 the remaining loan was repaid in full with the accrued interest.
The Group signed a GBP5.0 million loan facility with One Heritage Property Development Limited on 21 September 2020. The facility has an interest rate of 7.0%. On 18 February 2021 the facility was increased by GBP2.5 million to GBP7.5 million, this additional amount can only be drawn to fund property development activities where obtaining project financing is delayed or unavailable. During the 2023 financial year the facility was further increased by GBP4.8 million to GBP12.3 million. Refer to note 25 for a further extension post year end. The balance on this loan at 30 June 2023 was GBP11,328,152 (30 June 2022: GBP7,190,414).
The loan facility balance is due for repayment in December 2024. One Heritage Property Development Limited confirmed however, that the loan will not be demanded for repayment until such a time that the Group can afford to repay them without impacting its going concern.
Terms and repayment schedule
The terms and conditions of outstanding loans are as follows:
30 June 2023 30 June 2022
Nominal interest Maturity Fair Carrying Fair Carrying
GBP unless stated Currency rate amount
Date value value Amount
One Heritage SPC GBB 12.0% Jan 23 - - 1,234,776 1,234,776
Lyell Trading Limited GBP 9.6% Nov 22 - - 2,166,706 2,166,706
Together Commercial Finance GBP 10.7% Dec 22 - - 1,126,056 1,126,056
Shawbrook Bank GBP 6.3% Aug 23 - - 2,436,564 2,436,564
Hampshire Trust Bank Limited GBP 9.3% Apr 24 4,118,054 4,118,054 - -
One Heritage Property GBP 7.0% Dec 24 11,378,938 11,378,938 7,190,414 7,190,414
Development
Corporate bond GBP 8.0% Mar 24 1,463,797 1,463,797 1,412,777 1,412,777
16,960,789 16,960,789 15,567,293 15,567,293
Reconciliation of movements of liabilities to cash flows from financing activities
Liabilities
Lease Share capital/
GBP unless stated Other loans and borrowings Total
liabilities Premium
Balance as at 01 July 2022 15,567,293 353,748 3,893,008 19,814,049
Changes from financing cash flows
Proceeds from issue of share capital - - 1,247,100 1,247,100
Proceeds from loans and borrowings 4,169,073 - - 4,169,073
Repayment of loans and borrowings (5,729,326) (5,729,326)
Proceeds from related party borrowings 2,953,748 - - 2,953,748
Interest paid (2,647,476) - - (2,647,746)
Payment of lease liabilities - (86,623) - (86,623)
Total changes from financing cash flows (1,253,980) (86,623) 1,247,100 (93,503)
Other changes
Liability related
Capitalised borrowing costs 2,139,232 - - 2,139,236
Interest expense 508,244 12,607 - 520,851
Total liability-related other changes 2,647,476 12,607 - 2,660,083
Total equity-related other changes - - - -
Balance as at 30 June 2023 16,960,789 279,732 5,140,108 22,380,628
Liabilities
Lease Share capital/
GBP unless stated Other loans and borrowings Total
liabilities Premium
Balance as at 01 July 2021 5,177,455 402,709 3,893,008 9,473,172
Changes from financing cash flows
Proceeds from loans and borrowings 7,131,436 - - 7,131,436
Proceeds from related party borrowings (948,743) (948,743)
Interest paid 4,215,638 - - 4,215,638
Payment of lease liabilities - (64,224) - (64,224)
Total changes from financing cash flows 9,353,560 (64,224) - 9,289,336
Other changes - - - -
Liability related
Capitalised borrowing costs 1,022,075 - - 1,022,075
Interest expense 14,203 15,263 - 29,466
Total liability-related other changes 1,036,278 15,263 - 1,051,541
Total equity-related other changes - - - -
Balance as at 30 June 2022 15,567,293 353,748 3,893,008 19,814,049
20. Trade and other payables
GBP unless stated 30 June 2023 30 June 2022
Trade payables 778,995 794,181
Accruals 192,439 115,392
Customer deposits 1,302,276 1,012,222
Related party payable 17,482 -
Tax payable 250,473 -
PAYE payable 37,979 22,837
2,579,644 1,944,632
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 GBP1,302,276 (30 June 2022: GBP1,012,222). These relate to units that were exchanged on and are repayable. The deposits will be repayable if significant property damage occurs, and reinstatement is not possible.
The company has financial risk management policies in place to ensure that all payables are paid within the credit timeframe. 21. Financial instruments - fair value and risk management
Fair values
For all financial assets and financial liabilities not measured at fair value, the carrying amount is a reasonable approximation of fair value.
Financial risk management
The Group has exposure to the following risks arising from financial instruments:
-- Credit risk
-- Liquidity risk
-- Market risk
Risk management framework
The Company's Board of Directors has overall responsibility for the establishment and oversight of the Groups risk management framework. The Board of Directors has established the risk management committee, which is responsible for developing and monitoring the Groups risk management policies. The committee reports regularly to the Board of Directors on its activities.
The Group's risk management policies are established to identify and analyse the risks faced by the Group, to set appropriate risk limits and controls to monitor risks. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and the Group's activities. The Group, through its training and management standards and procedures, aims to maintain a disciplined and constructive control environment in which all employees understand their roles and obligations.
The Group audit committee oversees how management monitors compliance with the Group's risk management policies and procedures and reviews the adequacy of the risk management framework in relation to the risks faced by the Group.
Credit risk
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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 GBP303,816 at 30 June 2023 (30 June 2022: GBP974,201).
Bank Amount held Standard and Poor's Moody's Fitch Barclays Bank UK Plc 131,806 A A1 A+ Revolut Bank 172,011 - - -
The Group also held petty cash of GBP241 as at 30 June 2023 (30 June 2022: GBP672).
Guarantees
The Group's policy is to provide financial guarantees only for subsidiaries' liabilities. At 30 June 2023, the Company has issued a guarantee to certain banks in respect of credit facilities granted to One Heritage Oscar House Limited GBP4,118,054 (30 June 2022: GBP2,185,772). Refer to note 5 and 10 of the Company financial statements.
Liquidity risk
Liquidity risk is the risk that the Group does not have sufficient financial resources available to meet its obligations as they fall due. The Group manages liquidity risk by continuously monitoring forecast and actual cash flows, matching the expected cash flow timings of financial assets and liabilities with the use of cash and cash equivalents, borrowings, overdrafts and committed revolving credit facilities with a minimum of 12 months to maturity.
Future borrowing requirements are forecast on a monthly basis and funding headroom is maintained above forecast peak requirements to meet unforeseen events. At 30 June 2023, the Group's borrowings and facilities had a range of maturities with an average life of 26 months.
In addition to fixed term borrowings, the Group has access to a shareholder loan facility. At the reporting date, the total unused committed amount available for general purposes was GBP0.9million and cash and cash equivalents were GBP303,816.
The maturity profile of the anticipated future cash flows including interest, using the latest applicable relevant rate, based on the earliest date on which the Group can be required to pay financial liabilities on an undiscounted basis, is as follows:
As at 30 June 2023
On 1-2 2-5 5+
GBP unless stated Carrying amount Total Within 1 year
demand years years Years
Non-derivative financial liabilities
Secured bank debt 5,581,850 5,581,850 - 5,581,580 - - -
Other borrowings 11,378,938 11,378,938 - - 11,378,938 - -
Lease payables 279,732 279,732 - 99,228 198,456 - -
Trade payables 2,579,644 2,579,644 - 2,579,644 - - -
19,820,164 19,820,164 - 8,260,452 11,577,394 - -
As at 30 June 2022
On 1-2 2-5 5+
GBP unless stated Carrying amount Total Within 1 year
demand years years Years
Non-derivative financial liabilities
Secured bank debt 7,142,103 7,677,341 - 5,887,687 1,789,563 - -
Other borrowings 8,425,190 9,113,289 - 3,588,289 5,525,000 - -
Lease payables 353,748 399,502 - 99,228 189,070 111,204 -
Trade payables 1,944,632 1,944,632 - 1,944,632 - - -
17,865,673 19,134,764 - 11,519,836 7,503,633 111,204 -
The secured bank debt contains loan covenants, disclosed in note 19. A future breach of covenant may require the Group to repay the loan earlier than indicated in the above table.
Market risk
Market risk is the risk that changes in market prices will affect the Group's income. The objective of market risk management is to manage and control risk exposures within acceptable exposures within acceptable parameters, while optimising the return. The Group does not hold any equity positions and trade in foreign currencies. It therefore considers the market risk to be low.
Interest rate risk management
The Group has a policy to have fixed interest rate borrowings where possible. Where this is not possible, the Group will look to hedge interest variability if cost effective.
Interest rate sensitivity
The Group currently has two variable interest rate arrangements and therefore returns are sensitive to movements in the interest rates in the next financial period on existing borrowing obligations.
If interest rates on the loans had been 1% per cent higher/lower and all other variables were held constant, the Group's loss for the year ended 30 June 2023 would (increase)/decrease by (GBP423,130)/GBP340,769. This is mainly attributable to the Group's exposure to interest rates on its variable rate borrowings. 22. Directors' remuneration
Year to Year to
GBP unless stated
30 June 2023 30 June 2022
During the period remuneration payable to directors was as follows:
Jason Upton 97,154 76,321
Yiu Tak Cheung 15,000 15,000
Jeffrey Pym - 19,172
Anthony Unsworth 115,794 -
David Izett 29,167 25,000
Jeremy Earnshaw 25,000 6,181
282,115 141,674
The Directors did not receive any other benefits or post-employment remuneration. 23. Share capital
GBP unless stated 30 June 2023 30 June 2022
Share capital (1p per share) 386,783 324,283
Share premium 4,753,325 3,568,725
5,140,108 3,893,008
All shares issued by the Company are ordinary shares and have equal voting and distribution rights.
On 07 July 2022 the Group issued 6,250,000 new ordinary shares of 1.0 pence each at an issue price of 20.0 pence per share, raising gross proceeds of GBP1,250,000.
The total shares in issue as at 30 June 2023 is 38,678,333 (30 June 2022: 32,428,333) and are fully paid up. 24. Related parties
Parent and ultimate controlling party
At the reporting date 65.15% of the shares are held by One Heritage Property Development Limited, which is incorporated in Hong Kong. One other shareholder holds more than 5.0% of the shares in the Company. One Heritage Holding Group Limited, incorporated in the British Virgin Island, is considered the ultimate controlling party through its 100% ownership of One Heritage Property Development Limited.
Transactions with key management
Key management personnel compensation comprised the following:
Year to Year to
GBP unless stated
30 June 2023 30 June 2022
Short term employee benefits 412,851 311,061
412,851 311,061
Compensation of the Group's key management personnel is short term employee benefits.
Key management personnel transactions
The key management control 3% (30 June 2023: 31%) of the voting shares of the Company.
Other related party activity
Below is a table that sets out the entities that are related parties to the Group:
Company Note Description
Harley Street Developments Limited Common directors, owned by the beneficial owners of the Group
Mosley Property Limited Common directors, owned by the beneficial owners of the Group
One Heritage Great Ducie Street Limited 7,17,19 Common directors, owned by the beneficial owners of the Group
One Heritage North Church Limited 7,17,19 Common directors, majority stake held by the beneficial owners of the
Group
One Heritage Property Development Common director, owned by the beneficial owners of the Group
Limited
One Heritage Property Management Common director, owned by the beneficial owners of the Group
Limited
One Heritage SPC Managed by the beneficial owners of the Group
One Heritage Tower Limited 7,17,19 Common directors, part owned by the beneficial owners of the Group
Robin Hood Property Development Limited 7,17,19 Common directors, owned by the beneficial owners of the Group 25. Events after the reporting date
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On 31 July 2023 the Group facility was increased by GBP1.7 million, to GBP14 million. This can be drawn down as required, has an interest rate of 7.0% and is repayable on 31 December 2024. This additional amount can only be drawn to fund property development activities where obtaining project financing is delayed or unavailable. 26. New Standards and amendments to Standards
There are no new or amended standards that are expected to have a significant impact on the Group's consolidated financial statements when adopted.
New standards and amendments issued but not effective for the current annual period
The following standards and interpretations had been issued but not yet mandatory for annual reporting periods ending June 30, 2023.
Description
-- Non-current liabilities with Covenants - Amendments to IAS 1 (effective for annual periods beginning onor after 1 January 2024)
-- Classification of Liabilities as Current or Noncurrent - Amendments to IAS 1 (effective for annualperiods beginning on or after 1 January 2024)
-- Lease liability in a Sale and Leaseback - Amendments to IFRS 16 (effective for annual periods beginningon or after 1 January 2024)
-- Sale or Contribution of Assets between an investor and its Associate or Joint Venture - IFRS 10 and IAS28 (effective date deferred indefinitely)
The Group anticipates that these new standards, interpretations, and amendments will be adopted in the financial statements as and when they are applicable and adoption of these new standards, interpretations and amendments, may have no material impact on the financial statements in the period of initial application. 27. Disclosures relating to subsidiary undertakings
The Company's subsidiaries and other related undertakings at 30 June 2023 are listed below. All Group entities are included in the consolidated financial results. All companies listed below undertake all of their activity in the United Kingdom.
The share capital of each of the companies, where applicable, comprises ordinary shares unless otherwise stated.
Company name Business activity Company number Ownership One Heritage Property Development (UK) Limited Property developer 11982934 100.0% One Heritage Churchgate Limited Development company 12114319 100.0% One Heritage Lincoln House Limited Development company 12434625 100.0% One Heritage Bank Street Limited Development company 12763845 100.0% One Heritage Oscar House Limited Development company 11331256 100.0% One Heritage St Petersgate Limited Development company 13154858 100.0% One Heritage Red Brick Limited Property services 13178461 100.0% One Heritage Property Services Limited Property services 13426415 100.0% One Heritage Seaton House Limited Development company 13520340 100.0% One Heritage Construction Limited Construction company 13761479 100.0% One Heritage Victoria Road Limited Development company 14172104 100.0% St Petersgate Building Management Limited Dormant 13979905 100.0% Oscar House Building Management Limited Dormant 13981057 100.0% Liberty House Building Management Limited Dormant 13986387 100.0% Lincoln House Building Management Limited Dormant 12710283 100.0% OH Oscar House Property Limited Dormant 14969230 100.0% OH Lincoln House Property Limited Dormant 14255279 100.0%
There are loans between these entities, which are all interest free and repayable on demand. 28. Audit exemption taken for subsidiaries
The following subsidiaries are exempt from the requirements of the Companies Act 2006 relating to the audit of individual accounts by virtue of Section 479A of that Act.
Company name Company number One Heritage Property Development (UK) Limited 11982934 One Heritage Churchgate Limited 12114319 One Heritage Lincoln House Limited 12434625 One Heritage Bank Street Limited 12763845 One Heritage Oscar House Limited 11331256 One Heritage St Petersgate Limited 13154858 One Heritage Red Brick Limited 13178461 One Heritage Property Services Limited 13426415 One Heritage Seaton House Limited 13520340 One Heritage Construction Limited 13761479 One Heritage Victoria Road Limited 14172104 St Petersgate Building Management Limited 13979905 Oscar House Building Management Limited 13981057 Liberty House Building Management Limited 13986387 Lincoln House Building Management Limited 12710283
Company balance sheet
As at 30 June 2023
As at 30 June As at 30 June
GBP unless stated Notes
2023 2022
INTANGIBLE ASSETS
Trademark 1,913 2,324
1,913 2,324
TANGIBLE ASSETS
Investments 2 1,007,732 2,750,100
1,007,732 2,750,100
OTHER NON-CURRENT ASSETS
Debtors* 3 3,033,711 2,183,153
3,033,711 2,183,153
CURRENT ASSETS
Debtors* 4 302,351 127,719
Cash at bank 8,615 4,383
310,966 132,102
Creditors: amounts falling within one year 5 (5,191,231) (55,975)
Net current (liabilities)/assets (4,880,265) 2,259,280
Total assets less current liabilities (836,909) 5,011,704
Creditors: amounts due after one year 6 - (1,412,777)
Net assets (836,909) 3,598,927
CAPITAL AND RESERVES
Called up share capital 7 386,783 324,283
Share premium account 4,753,325 3,568,725
Profit and loss account (5,977,017) (294,081)
Shareholders' funds (836,909) 3,598,927
*restated (note 1)
These financial statements were approved by the board of directors on 30 October 2023 and were signed on its behalf by:
Jason David Upton
Company registration number: 12757649
The accompanying notes form an integral part of the financial statements
Company statement of changes in equity
For the year ended 30 June 2023
Called up Share Shareholders
GBP unless stated Profit and loss account
share capital premium Funds
Balance at 1 July 2022 324,283 3,568,725 (294,081) 3,598,927
Loss for the period - - (5,682,936) (5,682,936)
Total comprehensive income for the period 324,283 3,568,725 (5,977,017) (2,084,009)
Issue of share capital 62,500 1,187,500 - 1,250,000
Cost of share issuance - (2,900) - (2,900)
Balance at 30 June 2023 386,783 4,753,325 (5,977,017) (836,9009)
For the year ended 30 June 2022
Called up Share Shareholders
GBP unless stated Profit and loss account
share capital premium Funds
Balance at incorporation 324,283 3,568,725 (123,154) 3,769,854
Loss for the period - - (170,927) (170,927)
Total comprehensive income for the period 324,283 3,568,725 (294,081) 3,598,927
Balance at 30 June 2022 324,283 3,568,725 (294,081) 3,598,927
The accompanying notes form an integral part of the financial statements.
Notes to the Company financial statements
For the year ended to 30 June 2023 1. Accounting policies
The following accounting policies have been applied consistently in dealing with items which are considered material in relation to the financial statements, except as noted below.
General information
One Heritage Group plc is a public limited company, limited by shares, incorporated in England and Wales under the Companies Act 2006 on 21 July 2020. The address of its registered office and principal place of trading is 80 Mosley Street, Manchester, M2 3FX. The principal activity of the Company is a property development holding company. The Company does not have any employees and is funded through the issuance of share capital to investors.
Basis of preparation
These financial statements were prepared in accordance with Financial Reporting Standard 101 Reduced Disclosure Framework ("FRS 101").
In preparing these financial statements, the Company applies the recognition, measurement and disclosure requirements of international accounting standards in conformity with the requirements of the Companies Act 2006 ("Adopted IFRSs") but makes amendments where necessary in order to comply with Companies Act 2006 and has set out below where advantage of the FRS 101 disclosure exemptions has been taken.
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Under section s408 of the Companies Act 2006 the Company is exempt from the requirement to present its own profit and loss account.
Restatement
The prior year presentation of the amount due from subsidiary of GBP2,183,153 has been reclassified from current asset to other non-current asset. This correction has been made in order to reflect that the amount was not expected to be settled in the ordinary course of business in the next 12 months. The impact of this restatement reduced current assets by GBP2,182,153 and increased other non-current assets by the same amount.
In these financial statements, the Company has applied the exemptions available under FRS 101 in respect of the following disclosures: - 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 tothe 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 combinationsundertaken 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 7Financial Instrument Disclosures. - Certain disclosures required by IAS 36 Impairment of Assets
Going concern
Notwithstanding net current liabilities of GBP0.4 million as at 30 June 2023 (2022: net current assets GBP2.3 million) and a loss for the year then ended of GBP5.68 million (2022: GBP0.17 million), the financial statements have been prepared on a going concern basis which the directors consider to be appropriate for the following reasons.
The directors have prepared a cash flow forecast for the period to 31 December 2024 on a consolidated basis which indicates that, taking account of reasonably possible downsides, the Company will have sufficient funds through existing resources held by the company and subsidiaries (including funds drawn down on the parent company loan facility post year-end), the continued forecast realisations of development property inventory by its subsidiaries, and in the event of need continued financial support from its parent company, One Heritage Property Development Limited ("OHPD"), to meet its liabilities as they fall due for that period, including the Corporate Bond of GBP1.5 million due for repayment in March 2024.
As with any company placing reliance on other group/related entities for financial support, the directors acknowledge that there can be no certainty that this support will continue although, at the date of approval of these financial statements, they have no reason to believe that it will not do so.
Consequently, the directors are confident that the Company will have sufficient funds to continue to meet its liabilities as they fall due for at least 12 months from the date of approval of the financial statements and therefore have prepared the financial statements on a going concern basis.
The accounting policies set out below have, unless otherwise stated, been applied consistently to all periods presented in these financial statements.
Measuring convention
The financial statements are prepared on the historical cost.
Significant judgements
The significant judgements with regard to going concern are the forecast timing of development property inventory realisations and in the event it is needed the ability of the Group to be able to drawdown on the facility by its parent company, One Heritage Property Development Limited ("OHPD"). Management of the Company is not aware of any material uncertainties that may cast significant doubt on the Company's ability to continue as a going concern. Therefore, the parent company financial statements continue to be prepared on the going concern basis. For detail refer note 1 going concern.
Financial guarantees
A financial guarantee contract is initially recognised at fair value. At the end of each subsequent reporting period, financial guarantees are measured at the higher of: - The amount of the loss allowance, 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.
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. 2. Investment in subsidiaries
GBP unless stated 30 June 2023 30 June 2022
One Heritage Property Development (UK) Limited 1,007,732 2,750,100
1,007,732 2,750,100
The Company assesses the subsidiaries for any indicators of impairment by looking at the individual performance of the underlying entities, including their budgets, development progress and forecast profitability.
Due to losses in the underlying subsidiaries, the investment in subsidiaries were impaired in the current year by GBP1,742,368 (2022: GBPnil) in order to reflect the estimated recoverable amount based on the net asset value of the subsidiary entity and net realisable value of inventory. The impairment was recognised in the current year as a consequence of the losses and impairment to inventory recognised by Group entities. The carrying amount is considered to reflect the fair value less costs of disposal and is considered a level 3 asset in the fair value hierarchy.
The share capital of each of the companies, where applicable, comprises ordinary shares unless otherwise stated.
Company name Jurisdiction Company number Ownership One Heritage Property Development (UK) Limited England and Wales 11982934 100.0%
Below is a list of the key subsidiaries of One Heritage Property Development (UK) Limited.
Company name Jurisdiction Company number Ownership
One Heritage Churchgate Limited England and Wales 12114319 100.0%
One Heritage Lincoln House Limited England and Wales 12434625 100.0%
One Heritage Bank Street Limited England and Wales 12763845 100.0%
One Heritage Oscar House Limited England and Wales 11331256 100.0%
One Heritage St Petersgate Limited England and Wales 13154858 100.0%
One Heritage Red Brick Limited England and Wales 13178461 100.0%
One Heritage Property Services Limited England and Wales 13426415 100.0%
One Heritage Seaton House Limited England and Wales 13520340 100.0%
One Heritage Construction Limited England and Wales 13761479 100.0%
One Heritage Victoria Road Limited England and Wales 14172104 100.0%
St Petersgate Building Management Limited England and Wales 13979905 100.0%
Oscar House Building Management Limited England and Wales 13981057 100.0%
Liberty House Building Management Limited England and Wales 13986387 100.0%
Lincoln House Building Management Limited England and Wales 12710283 100.0% 3. Debtors: amounts receivable within one year
30 June 2023 30 June 2022
GBP unless stated
Intercompany loan - 2,183,153
Trade and other receivables 270,000 90,000
Prepayments 32,351 37,719
302,351 2,310,872 4. Debtors: amounts receivable after one year
30 June 2023 30 June 2022
GBP unless stated
Intercompany loan 3,033,711 -
3,033,711 -
(MORE TO FOLLOW) Dow Jones Newswires
October 31, 2023 08:31 ET (12:31 GMT)
DJ One Heritage Group plc: Full year results for the -22-
The Intercompany loan payable by One Heritage Property Development (UK) Limited is interest free and payable on demand.
The Company assesses the intercompany loans for any indicators of impairment by looking at the individual performance of the underlying entities, including their budgets, development progress and forecast profitability. There are no indicators of impairment and therefore no expected credit losses. 5. Creditors: amounts falling within one year
GBP unless stated 30 June 2023 30 June 2022
Trade and other payables 15,000 16,393
Accruals 76,780 37,500
Corporate bond 1,463,797 -
Parental guarantee provision (refer to note 10) 3,635,109 -
Tax payable 545 2,082
5,191,231 55,975 6. Creditors: amounts due after one year
GBP unless stated 30 June 2023 30 June 2022
Corporate bond - 1,412,777
- 1,412,777
On 18 March 2022 the Group had a GBP1.5 million corporate bond admitted to the Standard List of the London Stock Exchange. This had a 2 year term and a 8.0% coupon which is paid on 30 June and 31 December each year. The Group incurred listing costs of GBP102,040, which were capitalised and released over the term of the Bond. The bond is repayable in March 2024. 7. Called up share capital
Ordinary
GBP unless stated
Shares
Issued share capital as at 30 June 2023 38,440,561
38,440,561
The holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at meetings of the Company.
On 07 July 2022 the Company issued 6,250,000 new ordinary shares of 1.0 pence each at an issue price of 20.0 pence per share, raising gross proceeds of GBP1,250,000. 8. Audit exemption taken for subsidiaries
The following subsidiaries are exempt from the requirements of the Companies Act 2006 relating to the audit of individual accounts by virtue of Section 479A of that Act. Under the Act the Company has undertaken guarantees for all outstanding liabilities to which the subsidiary company is subject at the end of the financial year to which the guarantee relates, until they are satisfied in full.
Company name Company number One Heritage Property Development (UK) Limited 11982934 One Heritage Churchgate Limited 12114319 One Heritage Lincoln House Limited 12434625 One Heritage Bank Street Limited 12763845 One Heritage Oscar House Limited 11331256 One Heritage St Petersgate Limited 13154858 One Heritage Red Brick Limited 13178461 One Heritage Property Services Limited 13426415 One Heritage Seaton House Limited 13520340 One Heritage Construction Limited 13761479 One Heritage Victoria Road Limited 14172104 St Petersgate Building Management Limited 13979905 Oscar House Building Management Limited 13981057 Liberty House Building Management Limited 13986387 Lincoln House Building Management Limited 12710283 9. Post balance sheet events
On 31 July 2023 the Company facility was increased by GBP1.7 million, to GBP14 million. This can be drawn down as required, has an interest rate of 7.0% and is repayable on 31 December 2024. This additional amount can only be drawn to fund property development activities where obtaining project financing is delayed or unavailable. 10. Related party disclosures
The Directors of the Company were paid through One Heritage Property Development (UK) Limited, a subsidiary.
Year to Year to
GBP unless stated
30 June 2023 30 June 2022
During the period remuneration payable to directors was as follows:
Jason Upton 97,154 76,321
Yiu Tak Cheung 15,000 15,000
Jeffrey Pym - 19,172
Anthony Unsworth 115,794 -
David Izett 29,167 25,000
Jeremy Earnshaw 25,000 6,181
282,115 141,674
Guarantees
The Company's policy is to provide financial guarantees only for subsidiaries' liabilities. At 30 June 2023, the Company has issued a guarantee to certain banks in respect of credit facilities granted to One Heritage Oscar House Limited GBP4,118,054 (30 June 2022: GBP2,185,772). Refer to note 5 for provisions recognised.
Refer to note 8 for additional guarantees undertaken by the Company and note 5 for provisions recognised.
Parent and ultimate controlling party
At the reporting date 63.8% of the shares are held by One Heritage Property Development Limited, which is incorporated in Hong Kong. Keith Crews held 9.6% of the shares at the reporting date.
No other shareholder holds more than 5.0% of the shares in the Company. One Heritage Holding Group Limited, incorporated in the British Virgin Island, is considered the ultimate controlling party through its 100% ownership of One Heritage Property Development Limited.
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ISIN: GB00BLF79495 Category Code: FR TIDM: OHG LEI Code: 2138008ZZUCCE4UZHY23 OAM Categories: 1.1. Annual financial and audit reports Sequence No.: 281777 EQS News ID: 1761773 End of Announcement EQS News Service =------------------------------------------------------------------------------------
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(END) Dow Jones Newswires
October 31, 2023 08:31 ET (12:31 GMT)
