from One Heritage Group Plc (isin : GB00BLF79495)
Zentra Group plc: Interim Results for the six months ending 31 December 2024
Zentra Group plc (ZNT) 28 March 2025 ZENTRA GROUP PLC (“Zentra”, “the Company” or “the Group” or “ZNT”) Interim Results for the six months ending 31 December 2024 Zentra Group PLC, the Manchester based residential developer focused on the North of England, announces its half year results for the six months ended 31 December 2024. Financial highlights
Operational highlights
Post Period Events
Outlook
Commenting on the Group’s performance, Jason Upton, Chief Executive Officer said: “This has been a pivotal period for the Group, marked not only by significant operational and financial progress but also by our successful rebranding as Zentra and our transition to the Aquis Stock Exchange. These changes reflect our ambition to create a more focused, agile, and opportunity-driven business, positioning us for the next phase of growth. We have materially strengthened our balance sheet through asset disposals, debt reduction, and the waiver of shareholder loans, giving us a stronger foundation and greater financial flexibility. While the decision to actively market some inventory has impacted short-term margins, it has been the right step in aligning the Group for sustainable value creation. The expansion of our pipeline, including the investment into One Victoria in Manchester and New Islington, underlines our commitment to delivering high-quality developments in city centre and high-demand housing locations across the North. With a revitalised brand, an experienced team, and a clearer strategic direction, we are well-placed to capitalise on future opportunities and deliver long-term shareholder value.
Contacts
Zentra Group plc Jason Upton Chief Executive Officer Email: jason.upton@zentragroup.co.uk
Nick Courtney Finance Director Email: nick.courtney@zentragroup.co.uk
Hybridan LLP (AQSE Corporate Adviser and AQSE Broker) Claire Louise Noyce Email : claire.noyce@hybridan.com Tel: +44 (0)203 764 2341 About Zentra Group plc Zentra Group 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 currently listed on the Access Segment of the Aquis Stock Exchange Growth Market, trading under the ticker ZNT.
CHIEF EXECUTIVE’S REVIEW This update provides an overview of our activities for the six months ended 31 December 2024. During this period, our principal focus has been on positioning ourselves better to take advantages of opportunities in the property development sector and to deal with the accompanying challenges, while progressing with the direct development and development management projects currently on our books. Strategic Restructuring and Financial Position Improvement During the period, we implemented a strategic restructuring that significantly strengthened our financial position at the same time as undertaking a comprehensive review of our operations to enhance efficiency and focus solely on core activities and our listing status. Key outcomes of this restructuring include:
Delivering Our Existing Projects We have made notable progress on key developments:
Sales of Property and Land Generating cash flow through sales is a key priority. Our recent sales activity includes:
Strengthening the Leadership Team During the period under review, we made key senior hires to enhance our strategic capabilities:
Market Environment and Outlook Despite macroeconomic challenges such as rising interest rates and inflationary pressures, we remain confident in the long-term prospects of residential development, particularly in the northern cities where we operate. Demand for high-quality homes remains strong, and we believe our strategic focus on the right markets will yield positive results in the second half of FY25. Our key priorities moving forward include:
Conclusion We have made significant progress during the period under review, overcoming challenges with decisive action and a clear strategic direction. As we move forward, our focus remains on delivering value to shareholders, employees, and the communities we serve. With a strengthened leadership team and a streamlined business model, we are well positioned for continued success.
FINANCE REVIEW For the six months ended 31 December 2024, revenue decreased by £7.18m (-78%) to £1.97m (H1 FY24: £9.15m). This primarily reflects reduced activity in development sales and construction services.
* Construction revenues from the refurbishment of Co-Living properties are being phased out in line with the current strategic focus. Notwithstanding the reduction in activity compared to the prior period, developments sales revenue remained the largest contributor to Group revenue, accounting for 66% of total revenue. This revenue was driven mainly by the sale of the building at Seaton House, Stockport for £600,000, two completions at Oscar House and one completion at St Petersgate, Stockport. Construction services delivered revenue of £0.23m in the period (H1 FY24: £3.70m), reflecting building activity supplied to related parties (predominantly Robin Hood Property Development Ltd) on Co-Living properties. The reduction in revenue reflects the Group’s continued strategic move away from the provision of Co-Living and property management services. There was a small reduction in development management fee income of £0.02m to £0.27m (H1 FY24: £0.29m), and this was delivered from three projects: related party projects at One Victoria, Manchester, at One Heritage Tower, Salford, and Bee Kitchens, Salford. Property Services also saw a small decrease over the same period last year from £0.11m in H1 FY24 to £0.10m in H1 FY24. The £0.10m of revenue relates to property management fees. Gross profit reduced by £0.87m to a loss of £0.71m (H1 FY24: profit £0.16m) as a result of higher impairments in the current year. The impairment charge in the period of £1.05m (H1 FY24: £0.33m) predominantly relates to the plots at One Meadow, Eccleshill following a shift in strategy to market the majority of plots as a bulk sale rather than as individual sales, as well as an impairment to the value of the plot at Churchgate, Leicester. The gross margin was also lower than targeted due to a number of schemes within the Group having previously been impaired and therefore there is no margin to be recognised on these schemes as we complete on sales in the current period. Administrative expenses were £1.35m in the period (H1 FY24: £1.53m). This represents an overall £0.18 decrease in overheads arising from a decrease in staff costs and consultancy costs. The Group remains focused on a tight control of overheads, whilst introducing some investment in cost to benefit revenue streams. The Group recorded an operating profit of £0.50m (H1 FY24: loss of £1.37m). Whilst this was largely due to the profit of £2.56m (H1 FY24: Nil) on disposal of four entities from the Group shown in Note 8 to the financial statements, this was offset by the increased asset impairment charges in the period. Finance costs were flat compared to last year at £0.57m (H1 FY24: £0.57m). Basic loss per share was 0.2 pence (H1 FY24: loss 5.2 pence). There have been some significant changes to the Group balance sheet in the period to 31 December 2024. On 28 October 2024, One Heritage Bank Street Limited and One Heritage Lincoln House Limited and the related party OH UK Holdings 2 Limited entered into a 12 month loan facility agreement with Hilco Real Estate Finance UK Ltd of £2.33m secured against the completed properties held by those companies, of which £1.6m is attributable to Bank Street, Sheffield and Lincoln House, Bolton. On 22 November 2024, the Company completed on the acquisition of a 30% stake in the entity that owns the One Victoria project by purchasing debt and shares to the value of £3.0m from One Heritage Property Development Limited in Hong Kong (“OHPD”). The acquisition was funded by drawing down £3.0m from the then remaining shareholder loan facility (“Previous Facility”). The impact of this acquisition is shown in Note 10 to the financial statements. Simultaneous to the investment in One Victoria, Manchester, the Company completed the sale of a portfolio of completed residential and commercial properties, valued at approximately £7.0m, to OH UK Holdings Limited (“OHUK”), a company connected with OHPD. This portfolio included residential properties at Bank Street, Sheffield, Lincoln House, Bolton and Oscar House, Manchester, as well as the commercial unit at St Petersgate, Stockport. With approximately £2.0m of debt linked to Oscar House, the net proceeds of the portfolio sale were £5.0m and those proceeds were applied to reduce the Previous Facility from £13.8m million to £8.8m. As part of that restructuring, OHPD entered into a new loan agreement with OHUK at an interest rate of 6%. The loan has a repayment date of 31 December 2025, with an option to extend for up to 36 months. OHUK is a related party, sharing the same majority shareholders as the Company and OHPD. £6.7m of this new loan was drawn down on completion and used to partially repay the Previous Facility. The balance of £2.1m of the Previous Facility was then written off by OHPD as part of the restructuring, and the Previous Facility was settled in full at completion and terminated. At the same time, a new loan facility of £7.0m (the “New Facility”) was provided to the Group by OHUK at an interest rate of 6%, lower than the previous rate of 7%, such facility to become available from the date of completion of the property transactions outlined above. The loan has a repayment date of 31 December 2025, with an option for the Group to extend for a period of up to 36 months. OHUK also agreed to provide access to an additional £1.0m of funding (on the same terms as the New Facility) for a period up to 18 months to support the Group with short-term liquidity whilst development inventory is realised. As a result of the above transactions, net debt at 31 December 2024 was £11.24m (30 June 2024: £16.98m), a reduction of £5.74m or 34%. Inventory reduced in the period by £7.42m to £5.85m (30 June 2024: £13.27m) reflecting the bulk disposal to OHUK outlined above as well as the continued sell-down of inventory on a property-by-property basis. The surplus of proceeds over net assets (following the write-off of intercompany positions owed to the Group) from the disposals to OHUK described above of £2.56m has been recognised as an Exceptional Item in the Consolidated Statement of Comprehensive Income. The loan waiver of £2.1m has been recognised as a Capital Contribution Reserve in the Consolidated Statement of Financial Position. The latter is also shown in the Consolidated Statement of Changes in Equity.
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 & 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 the 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.
4. People & 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.
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.
STATEMENT OF DIRECTOR’S RESPONSIBILITIES in respect of the half-yearly financial report
We confirm that to the best of our knowledge:
The directors of Zentra Group PLC are listed on the company website, www.zentragroup.co.uk
By order of the Board Jason Upton Chief Executive Officer 27 March 2025 |