Zentra Group plc: Full year results for the year ending 30 June 2024

30 October 2024

ZENTRA GROUP PLC

(the “Company”) or (the “Group”)

Full year results for the year ending 30 June 2024

Zentra Group PLC (LSE: ZNT), 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 2024 (FY 2024).

Financial highlights

• Reduction in revenue of £0.94m, 6% on the prior year, from £15.59m to £14.65m, driven by a reduction in sales completions from 71 to 52 during the period.
• Impairment £0.82m compared with £1.09m in the prior year, a reduction of £0.27m. 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, as remaining self delivery projects completed by year-end. The remaining project of Victoria Road Eccleshill, procured on a fixed price contract, is within budget.
• Gross profit of £0.18m, down by £0.41m or 69% on prior year mainly due to the reduction in sales completions (FY 2023: gross profit of £0.59m).
• Loss before tax of £3.56m (FY 2023: loss of £2.14m).
• Basic loss per share of 8.7 pence (FY 2023: loss of 6.2 pence).
• Net debt of £16.89m (FY2023: £16.94m). Repayment in the period of £1.0m of the £1.5m Corporate Bond which matured in March 2024, with the reminder £0.5m rolled into a new loan note facility on the same terms for a further 12 months to March 2025.
• A decrease in the One Heritage Property Development shareholder loan facility of £0.4m to £10.98m (FY 2023: £11.38m). During the year renegotiation took place of the facility termination date, which was extended to December 2025, with the ability to extend for a further 3 years

Operating highlights

• Practical completion of St Petersgate Stockport and North Church House Sheffield (as development manager), bringing to an end the policy of self-delivery development.
• A decision to move away from co-living activity due to uncertainties on returns.
• Advancement of construction on Victoria Road, Eccleshill within budget by utilising a fixed price contract procurement strategy, with practical completion occurring in October 2024.
• Completed a Company strategic review, resulting in a number of financial and operational changes after the financial year, including the alignment of overheads to current business position.
• Scott Nicol appointed as Group Head of Investment, adding substantial knowledge and experience and Ben Scandrett also came on board as Group Head of Development, overseeing all development activities, from pipeline management to project delivery.

Post Period Events

• Rebranding of One Heritage Group PLC to Zentra Group PLC reflecting a broader strategic realignment.
• Unconditional exchange of contracts for the sale of our inventory valued at £7.0m.
• The acquisition of a 30% stake in the One Victoria project in Manchester, where we also serve as Development Manager.
• Agreement of refinancing initiatives, including securing a new Related party £7.0m facility at a more favourable 6% interest rate (down from 7%) and a £2.0m debt write-off of existing Group facilities reducing our interest burden and increased financial flexibility.
• Completion of the sale of the building Seaton House, Stockport for £0.6m together with exchange of conditional contracts for the sale of the land to the rear for £0.4m.
• Practical completion in October 2024 of 24 houses at Victoria Road, Eccleshill.

Outlook

• The movement away from in-house delivery and Co-living are pivotal to allow the business to focus on the securing of new business opportunities linked with the promotion of our two main brands of Zentra Living for Apartments and Zentra Homes for single dwelling houses.
• The robust review of financial and operational structures and steps put in place give the Company greater operational and financial flexibility with the benefit of adding value for our shareholders.

Jason Upton, Chief Executive Officer, commented:

“Over the past year, the Company has faced economic and trading challenges, affecting both consumer confidence and our cost base. It has also been a time of reflection and transition, with key decisions made to move away from self-delivery, reduce our exposure to Co-living, and realign our cost base and staffing structure. These actions are vital for restoring profitability and increasing shareholder returns.

The recent financial restructuring and inventory disposal have laid a strong foundation as we enter a new era with a fresh identity and revised strategy under the Zentra brand. I look forward to leading the team through this exciting chapter in the months ahead.”

Contacts

Zentra Group PLC

Jason Upton

Chief Executive Officer

Email: jason.upton@zentragroup.co.uk

Robert Holbrook

Head of Finance

Email: robert.holbrook@zentragroup.co.uk

Hybridan LLP (Financial Adviser and Broker)

Claire Louise Noyce

Email : claire.noyce@hybridan.com

Tel: +44 (0)203 764 2341

About Zentra Group PLC

Zentra Group PLC (previously 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.

The Company is listed on the Standard List of the Main Market of the London Stock Exchange, trading under the ticker ZNT. 

For further information, please visit the Company’s website at www.zentragroup.co.uk The previous website www.oneheritageplc.com will automatically redirect to the new website.

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 2024.

Chairman’s statement

It is my pleasure to present this year’s annual report, which covers a period of significant transformation for the Group. The period under review has continued to be extremely challenging, with economic uncertainty and rising construction costs and reduced investor appetite combining to adversely affect our business. However, ‘out of adversity comes opportunity’ as the saying goes, and I am very pleased with the way that the executive team, post-period, has executed opportunities to recapitalise the business and acquire a significant stake in a prime Manchester high-rise apartment development.

During the year, we also made some difficult yet necessary decisions, including the reduction of our core cost base, and the streamlining of operations to ensure a leaner and more focused Group. Importantly, our strategic shift away from Co-Living and in-house construction has allowed us to concentrate on our core strength—residential development—enabling us to respond more effectively to market opportunities and deliver predictable outcomes.

Looking ahead, I am optimistic about the prospects for the Group. The adjustments we have made to our structure and the sharpening of our focus will better enable us to seize emerging opportunities in the residential development market. Our continued emphasis on urban residential projects and new-build housing in high-demand areas, particularly in the North West of England, aligns with our commitment to meeting the evolving needs of our customers while generating strong returns for our shareholders.

I would like to take this opportunity to express my gratitude to our shareholders, employees, and other stakeholders for their unwavering support throughout this period of transformation. As we embark on the next phase of our journey, we do so with confidence, knowing that we have the right strategy, the right team, and the right foundations to deliver long-term success for the Group.

David Izett

Chairman

29 October 2024

Chief Executive’s statement

As I reflect on the past few years, it is clear that our journey has been shaped by a rapidly evolving environment that has presented both opportunities and challenges. Since listing on the London Stock Exchange in December 2020, we have navigated significant changes in the property development landscape, from rising construction costs and fluctuating investor demand to broader macroeconomic uncertainties. These factors have affected the rate of sales and our operational costs, forcing us to rethink our strategy and reposition ourselves for the future.

The external environment has undoubtedly been challenging, with construction costs escalating and the financial climate becoming increasingly complex. Investor sentiment has also been tempered by economic volatility, further impacting the speed at which we have been able to secure sales. Despite these headwinds, we have remained steadfast in our commitment to delivering high-quality residential developments and managing our portfolio with discipline and foresight.

Recognising the need for decisive action, we initiated a strategic review earlier this year, which led to a restructuring of the Group. During this review, an opportunity presented itself to complete several significant transactions. Although the restructuring process presented challenges, it was crucial for securing the long-term success of the business. The process began with the strategic review and culminated after the year-end with the announcement of the exchange of contracts for the sale of our inventory valued at £7 million and our rebranding to Zentra Group PLC, marking a key milestone in our evolution.

The proposed restructuring will strengthen our financial position and better align our operations with current market opportunities. It also enabled us to refocus on our core strength - residential development - while stepping away from higher-risk areas like in-house construction and Co-Living services. By adopting a leaner, more efficient business model, centred on cost certainty through fixed-price contracts with third-party contractors, we have reduced financial exposure and mitigated the risks of rising construction costs, all while continuing to deliver the high-quality developments that define our company.

Our decision to rebrand as Zentra Group is more than just a change in name; it reflects a broader strategic realignment. Zentra embodies the values of balance, harmony, and focus-principles that resonate with our renewed commitment to providing high-quality residential developments. This new identity allows us to distance ourselves from potential reputational risks with the One Heritage brand which is synonymous with financial services in Asia, allowing us to have our own identity and forge a fresh path forward, particularly in the UK market where our presence and reputation continue to grow.

The restructuring also includes the acquisition of a 30% stake in the One Victoria project in Manchester, where we also serve as Development Manager. Scheduled for completion in H2 FY 2025, One Victoria will offer 129 apartments and 2 commercial units, further reinforcing our commitment to high-quality urban developments. This acquisition, along with our refinancing initiatives, including securing a new £7 million facility at a more favourable 6% interest rate (down from 7%) and a £2 million debt write-off, are major achievements that bring significant value to our shareholders. This refinancing arrangement is a significant milestone, allowing us to reduce our interest burden and increase financial flexibility. The new terms place the Group in a stronger position to navigate future market conditions while providing us with the resources to focus on key development projects.

Executing such a comprehensive restructuring within the necessary timeframes was a challenging task, especially considering the complexities of aligning it with our financial results and market conditions. There were moments of uncertainty and in particular with respect to the timing of transactions, but we remained focused on creating long-term value for our shareholders. I firmly believe that the steps we have taken lay the groundwork for a stronger, more resilient company going forward.

During the period under review, I am pleased we achieved several key milestones which included the construction on the One Victoria project in Manchester mentioned above. Additionally, we also commenced construction on our first new build housing project, consisting of 24 houses at Victoria Road in Eccleshill, West Yorkshire which reached practical completion post period in October. We also achieved practical completion of other significant projects, namely St. Petersgate Stockport and North Church House Queen Street Sheffield. Furthermore, we successfully repaid a £1.5 million corporate bond and secured a £0.5 million unsecured loan with an interest rate of 8%, maturing on March 15, 2025. These accomplishments reflect our ongoing commitment to delivering value and advancing our strategic objectives, positioning us for future growth.

KEY PROJET ACHIEVEMENTS

In detail:

1. St Petersgate, Stockport: 

In January, we achieved practical completion of this significant conversion project, which involved transforming a former office building into 18 high-quality residential apartments and a commercial unit. During the construction phase, the project encountered unexpected challenges, notably around the rooftop extension. Despite these hurdles, we successfully navigated the complexities to deliver the project on time. The residential units were all sold, showing strong demand for well-located housing in Stockport. Additionally, the commercial unit was fully let, contributing to a balanced mixed-use development that integrates residential and commercial space effectively, creating value for both residents and businesses.

2. Victoria Road, Eccleshill: 

In October 2024, we completed our first new-build housing development at Victoria Road. The development comprises 24 houses, marking a significant milestone in our story as we expand into the new-build sector. Sales efforts are currently underway, with a dual approach targeting both individual homebuyers and bulk sales to registered housing providers.

3. North Church House, Sheffield: 

In March, construction completed on the 58-unit development North Church House. As the development manager, we encountered several challenges in converting this former office building, particularly in installing a rooftop extension, which required careful planning and execution. Despite these obstacles, the project was executed successfully, resulting in a well-finished development that adds residential capacity in a prime urban location. This conversion showcases our expertise in adaptive re-use of commercial properties, contributing to sustainable urban regeneration.

4. One Victoria, Manchester:

As well as exchanging contracts to acquire a 30% shareholding in the SPV that owns One Victoria with completion of this contract expected in October, the Group has retained its role as Development Manager for the project. This ongoing development consists of 129 high-quality residential apartments and two commercial units, strategically located in Manchester city centre.

The project is progressing well, with construction expected to be completed in the second half of FY 2025. To ensure smooth financial progress, construction finance is being drawn down in stages to cover the ongoing construction costs. Torsion Construction Limited, a well-established contractor, is leading the construction efforts, leveraging their expertise to maintain progress on schedule.

This development is an important part of the Group’s broader growth strategy, further strengthening its presence in the Manchester property market. One Victoria is poised to provide valuable housing stock while also creating commercial opportunities that align with the city’s economic growth. The project demonstrates the Group’s capability in managing large-scale, mixed-use developments and its commitment to delivering projects that balance residential and commercial needs effectively.

STRATEGIC OBJECTIVES FOR 2025

As we look to the future, we remain focused on our core strategic objectives, which will drive our continued growth and success:

1. Successfully Delivering Existing Development Projects

Our development pipeline has been strengthened by the expected acquisition of a 30% equity stake in One Victoria, with our contract due to complete in October . This investment represents a significant addition to our portfolio. As Development Manager for One Victoria, we are committed to overseeing its successful completion, ensuring the delivery of 129 high-quality residential units and 2 commercial spaces. Completion of the development is on course for H2 FY 2025.

2. Securing Sales for our properties

*As at 03 October 2024

** Exchanged unconditional contracts for 30% of the share capital of the company that owns the project. 

We are pleased to announce post year end that in October, the completion of a £7 million bulk sale of our inventory took place, marking a significant achievement. This sale allows us to focus on new opportunities and further strengthens our financial position to execute our strategic objectives.

Sales at Victoria Road Eccleshill are now a priority following the project's practical completion. We have launched a targeted marketing campaign, partnering with local agents to promote the 24 units. In addition to individual buyer sales, we are in active negotiations with several registered housing providers and institutions for a bulk sale, offering another avenue to maximise value.

Our investment in One Victoria is also a key focus. So far, we have exchanged contracts on 38 units, and the newly completed showroom is expected to attract significant interest.

3. Expanding the Pipeline of New Development Opportunities 

We are actively exploring new development opportunities, both as a direct developer and through partnerships with local authorities and housing providers. Expanding our pipeline is crucial to maintaining our growth momentum, and we are currently evaluating a number of promising projects. The restructuring of our team earlier this year has positioned us to be more agile and resp