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One Heritage Group plc: Interim Results

One Heritage Group plc (OHG)
One Heritage Group plc: Interim Results

28-March-2023 / 07:00 GMT/BST


ONE HERITAGE GROUP PLC

(the “Company” or “One Heritage”)

Interim report for

the six months ended

31 December 2022

28 March 2023

One Heritage Group PLC (LSE: OHG), the UK-based residential developer focused on the North of England, is pleased to announce its half-year results for the six months ended 31 December 2022.

 

Financial highlights  

For the six-month period to 31 December 2022. Comparatives are for the six month period to 31 December 2021 (H1 2022) unless otherwise stated. FY 2023 refers to the Group’s financial period 1 July 2022 to 30 June 2023.

  • Revenue of £5.75 million (H1 2022: £0.15million), driven mainly by the contributions from Lincoln House, Bolton, which practically completed and delivered 27 sales completions in the period.
  • Gross profit reduced by £0.42 million to a loss of £0.28 million (H1 2022: profit £0.14 million) due to an impairment in the period of £1.10 million.
  • Loss before tax of £1.57 million (H1 2022: loss £0.53 million).
  • Basic loss per share (pence) of 4.1 (H1 2022: 1.6). 
  • Net debt of £17.73 million (H2 2022: £14.95 million) an increase of £2.79 million facilitating the completion of developments prior to legal completions.
  • Subscription with existing and new investors raised £1.25 million, on 6 July 2022.

 

Operational highlights 

  • Completion of first major development project, Lincoln House, Bolton with 27 apartments sold at 31 December 2022.
  • Planning permission granted for 24 houses at Victoria Road, Eccleshill, West Yorkshire – pre-construction phase of development.
  • Planning application submitted and decision pending for Seaton House, Stockport.
  • Completed Company strategic review with focus now on our core discipline of residential property development in the North of England, acting as Developer and Development Manager utilising fixed priced build contracts.
  • Agreements for sale on all 27 apartments at Oscar House, Manchester.
  • Sold 20 of 23 apartments at Bank Street, Sheffield.

Post Period Events

  • Practical completion of County House, Oldham, our first project acting as Development Manager.

Outlook 

  • On track to deliver strong revenue for the FY 2023, driven by robust pipeline of property sales expected to start coming through in the second quarter of 2023.
  • 29 further sales at Lincoln House, Bolton expected in 2023 calendar year and 32 remain available for sale following the strategic decision to remarket the units.
  • Further practical completions on track to complete before 30 June 2023:
    • Oscar House, Manchester – 27 units.
    • Bank Street, Sheffield – 23 units.
    • St. Petersgate, Stockport – 18 units.

 

Commenting on the Group’s performance, Jason Upton, Chief Executive Officer said:

“The Group has made further progress on our strategic objectives during the first half of our financial year. We have adapted our strategy to the current environment by implementing better internal processes and controls to improve efficiencies whilst also focusing our efforts as a residential Developer and Development Manager. Importantly, our development pipeline is now delivering revenue through sales, following the completion of Lincoln House, Bolton, with 27 units legally completed,  a further 29 are sold and the remaining 32 unsold units are marketed for sale. 

The second half of the financial year is looking strong, with the practical completions of Oscar House, Manchester and Bank Street, Sheffield, imminent. Nearly all units relating to these projects have either been sold or sales have been agreed. St. Petersgate, Stockport, is also expected to complete prior to our financial year end, with all units pre-sold.

The overall outlook for the residential property sector within our core region of the North of England remains positive. There is still a shortage of quality, affordable homes and the focus of our strategy is to address this segment where demand is the highest and where our co-living proposition is growing in popularity. With momentum building, I look forward to updating the market on further progress in due course.” 

 

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. 

For further information, please visit the Company’s website at https://www.oneheritageplc.com/.

CHIEF EXECUTIVE’S REVIEW

We have made further progress on our strategic objectives during the first half of our financial year, including, most notably, the completion of our first major development project, Lincoln House, Bolton, as announced in August 2022. Post period, in March 2023, another milestone was achieved, with the practical completion of County House, Oldham, our first project acting as Development Manager. 

Our Full Year results statement, published in October 2022, noted that the Group had been affected by industry-wide challenges, including the higher cost of building materials and a shortage of sub-contractor labour. This consequently led to the impairment of two of our development projects in that period. In our January 2023 trading update, we confirmed that a further development, Oscar House in Manchester, was also likely to be impaired, with the higher cost of debt and construction-related cost increases being prominent factors.

Our Construction Services Department has three principal revenue streams: in-house refurbishment of two group developments (St Petersgate, Stockport and Bank Street, Sheffield); development of co-living properties; and the refurbishment of Queen Street, Sheffield, a project where the group is appointed as Development Manager. Following a strategic review, we have decided 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 in Q3 calendar year 2023. 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, which we believe will deliver the best shareholder value.

The results for the period reflect only one development completion reached, and the legal completion of property sales has taken longer than expected due to several factors. We are expecting a strong second half to our financial year ending 30 June 2023, as we benefit from the revenue of our property sales across our completed development projects. Overall, I am pleased with how the team has adapted to the challenges faced and there are some important changes being planned upon which I look forward to providing updates in due course. We are in a far stronger position as we strengthen our internal processes and controls, adapt our strategy, and refine our delivery. This bodes well for the future, but we remain cautious concerning the economic challenges the country continues to face and how this impacts our industry.

The following strategic objectives have been in place during the period under review and the progress of each is set out below.

DELIVER OUR EXISTING DEVELOPMENT PROJECTS

Below is a current summary of existing development projects:

Project

Location

Residential units

Commercial units

Gross Development

Value (£m)

Expected

 Completion

Reservations

Lincoln House

Bolton

88

0

10.0

Complete

56

Churchgate

Leicester

15

1

3.1

under assessment

Not released

Oscar House

Manchester

27

0

6.2

H1 2023

27

Bank Street

Sheffield

23

0

3.9

H1 2023

20

St Petersgate

Stockport

18

1

3.0

H1 2023

18

Seaton House

Stockport

30

0

5.6

H2 2024

Not released

Victoria Road

Eccleshill

24

0

6.5

H2 2024

Not released

 

 

225

2

38.3

 

 

 

Having completed Lincoln House, Bolton in September 2022, three more of the Group’s own developments are expected to complete within the calendar year ending 31 December 2023. These are Bank Street, Sheffield and Oscar House, Manchester, which are expected to complete in April 2023 and St Petersgate, Stockport, where completion is anticipated in June 2023.

There are three other projects within the development pipeline and each is at a different stage. Churchgate, Leicester, had planning permission granted in August 2022, but considering the impact of higher construction costs and the size of the development i.e. 15 units, the Board has decided to reassess whether the delivery of the project is in the best interests of the business. Victoria Road, Eccleshill, West Yorkshire, the Group’s first venture into new build housing, has the benefit of planning permission for 24 houses and is in the pre-construction phase of development. Seaton House, Stockport, has a  planning application pending with a decision expected imminently. Construction is now expected to start in the second half of 2023.

Following the signing of the Group’s fourth Development Management agreement in April 2022 for One Victoria, Manchester, construction of 129 apartments is expected to commence in April 2023.

Changes have been made to improve the delivery of our development projects, in response to lessons learned from our projects to date and to adapt to challenging market conditions. Since the departure of the development director, our development team has been restructured and in January 2023 we brought in a highly experienced Interim Development Director. Further senior appointments have been made in the form of a Head of Projects and an Acquisitions Lead, with more hires expected over the coming months to further strengthen the team.

SECURE PRE-SALES WHERE WE CAN THROUGH OUR SALES NETWORK

At our completed development, Lincoln House, Bolton, there were 27 completed sales by the end of December 2022. A further 29 completions are expected in the first half of 2023 and 32 remain available for sale. These available units are fully let and generating rental income for the Group whilst we consider offers. Importantly, the completed unit sales have enabled us to reduce the Lincoln House construction finance debt to £0.28m at H1 FY23 (June FY22: £2.44m). This residual debt of £0.28m has been fully repaid post half year end. 

It is encouraging to report that sales on our projects under construction have been strong. There is an agreement for sale of all 27 apartments at Oscar House, Manchester. Bank Street, Sheffield, has 20 of 23 apartments sold and at St Petersgate, Stockport, all 18 units are pre-sold.

INCREASE REVENUE GENERATED THROUGH THE GROUP’S SERVICES

Our property services team continues to establish the infrastructure needed to accommodate the increase in volume of properties under management. Investment has been made in a new Customer Relationship Management system and accreditations have been gained for industry-recognised Money Shield and Property Ombudsman schemes. The property management function of the business has become well established and I expect the properties under management to continue to grow and generate increased revenue. 

Additional sources of revenue include property sourcing which has seen steady growth over recent months with marketing for our services commencing in Hong Kong. This sourcing service is specific to overseas investors and tailored to their particular needs.

Development Management revenue for the Group increased following our appointment to deliver One Victoria, Manchester, which is a new build development of 129 units. Development Management continues to offer a strong source of revenue for the Group, and also includes construction finance arrangement fees and a profit share on the conclusion of each project. The first development management project completed post half year end, was a conversion of Oldham County Court into 42 residential apartments.

The Group provides Co-Living services which generate revenue through sourcing, property transactions and project management. We have restructured how we deliver these services, which saw some delays for a few months towards the end of 2022 as we paused operations to renegotiate contracts with external suppliers.

GROW THE DEVELOPMENT PIPELINE

During the period under review, the Group acquired land at Victoria Road, Eccleshill, West Yorkshire with planning consent for 24 houses comprising a mixture of 2, 3 and 4 bedrooms. The project is the first new build housing development for the Group and adds diversification to the portfolio.

Work to grow the development pipeline is ongoing and the timing of future acquisitions will be important to deliver best value.

OUTLOOK

The outlook remains positive for the property market, with the North of England continuing to perform well. Savills’ long term forecast to 2027 for the UK rental market projects a 6.2% increase in the capital value of the UK second-hand market. The North West and Yorkshire are in the top three leading regions for growth each with forecasted increases of 11.7%. Over the five-year period, the rental value for the UK excluding London is forecast to grow by 18.3%.  There also continues to be demand emanating from a long-term lack of supply of new housing throughout the country. With inflation continuing to increase construction prices over the last year, and with land prices remaining stable, there is pressure on the industry, but we are seeing signs of improvement that give us confidence moving into the second half of 2023.

Whilst we remain cautious of the challenging market conditions, the changes made to the business, including adding even greater property development experience and different skills to our team, put us in a stronger position as we look to the future. We remain on track to deliver strong revenue for the FY 2023, driven by our robust pipeline of property sales expected to start coming through in the second quarter of 2023.

FINANCE REVIEW

For the six months ended 31 December 2022, revenue increased by £5.60m (+3,760%) to £5.75m (H1 2022: £0.15m). This primarily reflects significant growth in sales along with construction services.

Revenue

H1 FY23

£m

H1 FY22

£m

Change

£m

Change

%

Development management fee

0.23

0.12

0.11

+94%

Development sales

3.29

0.00

3.29

-

Construction *

1.89

0.00

1.89

-

Property Services

0.28

0.03

0.25

+784%

Corporate

0.06

0.00

0.06

-

TOTAL

5.75

0.15

5.60

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