TIDMBLV
RNS Number : 4485B
Belvoir Lettings PLC
04 April 2017
FOR IMMEDIATE RELEASE 4 April 2017
BELVOIR!
BELVOIR LETTINGS PLC
(the "Company", the "Group" or "Belvoir")
Preliminary results for the year ended 31 December 2016
Another year of significant growth
Belvoir Lettings plc (AIM: BLV), the UK's largest property
franchise, is pleased to announce its preliminary results for the
year ended 31 December 2016.
Financial highlights
-- Group revenue up 43% to GBP9.9m (2015: GBP6.9m)
-- Growth in Management Service Fees (MSF) was 59% to GBP6.4m
(2015: GBP4.0m), consisting of 6% (2015: 12%) from the growth of
the Belvoir network and 53% (2015: 13%) from the acquired
networks
-- The Group remains predominantly lettings-based with a ratio
of lettings to sales revenue of 76:24 (2015: 77:23)
-- Administrative expenses of GBP7.4m (2015: GBP5.0m) included
exceptional costs of GBP0.5m relating mainly to legal and
professional fees on the acquisition of the Northwood GB Ltd
-- Profit before tax was GBP2.4m (2015: GBP2.2m) whilst adjusted
profit before tax showed an increase of 28% to GBP3.1m (2015:
GBP2.4m) reflecting the growth in the underlying business
-- Year-end cash position of GBP1.6m (2015: GBP2.7m) and bank
debt of GBP7.0m (2015: GBP1.0m) which was used to part-fund the
Northwood acquisition
-- Basic earnings per share (EPS) of 5.7p (2015: 6.5p); adjusted EPS of 7.7p (2015: 7.3p)
-- Final dividend of 3.4p (2015: 3.4p) giving a total dividend
for the year of 6.8p (2015: 6.8p)
Operational highlights
-- Acquisition in June 2016 and integration of Northwood, with
87 outlets, the largest remaining independent property franchise
network
-- UK coverage increased by 90 outlets (42%) to 302 (2015: 212)
-- Recruitment of twelve (2015: eleven) new franchise owners,
eight into new and six into existing territories
-- The Group now manages 55,756 (2015: 37,000) managed properties
-- Belvoir secured "Gold Lettings Franchise of the Year Award"
for the sixth time in seven years
Mike Goddard, Chief Executive Officer of Belvoir Lettings,
commenting on the results, said:
"2016 was another good year for Belvoir as we continued to
deliver on our promise to leverage our expertise as a property
franchisor through our multi-brand strategy with the acquisition of
Northwood. In addition, and against a background of uncertainty
within the sector due to Brexit and regulatory changes in the
buy-to-let market, we have seen further growth in our networks from
organic growth, local franchisee-led portfolio acquisitions and new
franchise owners. These have all contributed to broadening the base
from which the Group can continue to develop and grow underpinned
by highly professional franchisees and sound business ethics.
In 2017 the Board will be looking to take advantage of the
opportunities anticipated from uncertainty caused by the proposed
changes to tenant fees, further consolidating our recent
acquisitions to extract additional efficiencies and leveraging our
large managed property portfolio to further increase shareholder
value."
For further details:
Belvoir Lettings PLC 01476 584900
Mike Goddard, Chairman and investorrelations@belvoirlettings.com
CEO
Louise George, Chief Financial
Officer
Cantor Fitzgerald Europe
Rick Thompson, Phil Davies,
Michael Reynolds
(Corporate Finance) 0207 894 7000
Mark Westcott, David Banks
(Sales)
Buchanan
Charles Ryland, Vicky Hayns,
Madeleine Seacombe 0207 466 5000
The information communicated within this announcement is deemed
to constitute inside information as stipulated under the Market
Abuse Regulations (EU) No. 596/2014. Upon the publication of this
announcement, this inside information is now considered to be in
the public domain.
About Belvoir Lettings PLC
Founded in 1995, Belvoir is the UK's largest property franchise
group, with 302 outlets nationwide.
Since listing on AIM in February 2012 (BLV.L), Belvoir has
continued to diversify its core business offer in lettings by
broadening into property sales. Operating from its Central Office
in Grantham, Lincolnshire, the Group now offers a range of
specialist services in property rental, property management,
residential lettings, buy to let and property sales.
Belvoir's core revenue is derived from Management Service Fees
(MSF); a reliable recurring revenue model which allows the Group to
offer franchisees significant support and advice.
In 2015 Belvoir launched its multi-brand franchising strategy;
acquiring Newton Fallowell Limited, an East Midlands-based network
of 30 outlets in July 2015 and Goodchilds Estate Agents and
Lettings Limited, a West Midlands-based network of 14 outlets in
October 2015. In June 2016 Belvoir acquired Northwood GB Limited, a
network of 87 residential lettings and property sales agents
operating across the UK, making Belvoir the largest property
franchise group in the UK.
Belvoir continues to grow organically by delivering award
winning service, prioritising franchisee recruitment and supporting
franchisee acquisitions. In recognition, Belvoir was awarded the
"Best Lettings Agency Franchise Award" at the 2016 Lettings Agency
of the Year Awards for the sixth time since the awards started
seven years ago.
The Company remains committed to diversifying its brand
portfolio, utilising the Group's strong franchising expertise and
infrastructure, in order to capitalise on a consolidating
market.
Chairman's statement
I am pleased to report that 2016 has been another year of
significant growth for the Belvoir Group.
Introduction
Opportunities continue to arise at all levels for the Group to
increase its presence throughout the UK, despite the background of
uncertainty due to Brexit, the Government's intervention in the BTL
sector and continuing consolidation within our market. This has
enabled the Group to significantly improve on all its key
performance indicators and to meet market expectations.
Strategy
The Group continues to deliver growth through its multi-brand
strategy, the acquisition of individual businesses at franchise
owner level, organic growth through proactive marketing at local
and national level, and the franchising of a number of corporately
owned outlets.
In particular, the acquisition of Northwood GB Ltd, the largest
remaining independent property franchise network, brought another
strong and reputable brand to the Group and increased its high
street presence across the whole of the UK to 302 offices, and the
number of managed properties to 55,756 (2015: 37,000). The Group's
stable of brands now stands at four: Belvoir, Northwood, Newton
Fallowell and Goodchilds. The Board is continuing to look for
economies of scale across the back office operations of the Group
whilst maintaining investment in brand recognition and franchisee
support.
The Assisted Acquisition programme, providing growth
opportunities for our franchise owners, was extended to franchisees
across all four brands. A total of GBP1.5m of acquisitions were
completed under the programme in 2016, supported by group lending
of GBP551,000, and will increase MSF to the Group by GBP243,000p.a.
This strategy is particularly successful since it provides both the
franchise owner and the franchisor with an instant uplift in fee
income, with a relatively modest increase in overheads. Where the
Group provides partial funding, this facilitates the deal as well
as generating further interest income for the Group.
Organic growth, including the recruitment of new franchise
owners, is a key element of our growth strategy and is facilitated
through a strong Group marketing team as well as strong recruitment
teams at brand level. This area is challenging and the Board
continues to look for innovative and cost-effective ways to attract
new franchise owners into the network through cold starts, enhanced
starts where a new franchisee takes on a portfolio acquisition at
the outset, and resales of existing territories to new
franchisees.
Finally, the franchising out of certain under-performing
corporately-owned outlets, which commenced in 2016 and will
conclude in 2017, will allow the Central Office team to focus
entirely on its franchising operations.
Growth
The Group achieved growth across all financial metrics with
revenue up 43% to GBP9.9m (2015: GBP6.9m) underpinned by MSF growth
of 59% to GBP6.4m (2015: GBP4.0m), adjusted profit before tax up by
28% to GBP3.1m (2015: GBP2.4m) and adjusted EPS up by 3% to 7.7p
(2015: 7.3p).
The Belvoir Group has traditionally been a lettings-focused
business (indeed it only entered the sales arena in 2014) and it
continues to be so with a lettings to sales ratio of 76:24 in 2016.
However, the potential for further growth from property sales is
significant given the strong lettings background of most of our
franchise owners. By the end of 2016, over two-thirds of our
outlets were able to offer a sales service, and revenue from sales
had increased by 58% to GBP2.1m (2015: GBP1.4m).
Outlook
I continue to see business format franchising as a unique and
highly successful avenue to growth in the property service
industry, with franchisees benefitting from the marketing, business
support and cost-saving opportunities afforded by operating under
the umbrella of a large national brand, whilst also building a
business with a growing asset value. In 2016 our Peterborough and
Cambridge franchise was sold to a new franchise owner for a figure
in excess of GBP1.5 million. The franchise partnership thus created
a compelling incentive to do well for the franchisee, and for the
franchisor to deliver success for all stakeholders, franchise
owners and shareholders.
The Belvoir Group will look to take advantage of the many
further expansion opportunities that are apparent in 2017. As well
as consolidating the current acquisitions with a view to further
network efficiencies, the Group will look to leverage on its large
managed property portfolio, grow property sales volume and adapt to
the technology changes in our industry.
It is vital we have the right people to take the Belvoir Group
into 2017 and beyond and I am delighted to report we have a
dedicated and loyal team of directors, staff and franchise owners
across the whole Group, and that they are the very best in the
franchising and property industry. We are extremely lucky in this
respect and I am confident that we enter 2017 with a bright
future.
Michael Goddard
Chairman and Chief Executive Officer
Operating review
Franchising offers an unrivalled personal service and is ideally
suited to an exciting and dynamic housing sector where renting is
key to the future.
MSF growth
Growth in MSF of 59% to GBP6.4m (2015: GBP4.0m).
These fees are collected by each network as a royalty for
providing a brand, a system and the know-how for a franchisee to
operate a profitable business at local office level. The increase
in MSF reflected organic growth across our network of offices,
acquisitions of competing agencies by franchisees and the major
acquisition of Northwood.
Lettings
Lettings represents over three-quarters of our MSF income
providing a predictable and stable core income from a nationwide
portfolio of 55,576 rented properties.
Belvoir's rental index for the final quarter of 2016 confirms
that rents are broadly rising in line with earnings - with the
notable exception of London. Belvoir now has over 300 offices
nationwide and data for those offices that have traded consistently
over the last eight years in England, Wales and Scotland indicates
rental increases of just over 1.25%, year on year, from GBP734 in
Q4 2015 to GBP744 in Q4 2016 with average rents ranging from GBP598
per month in the North East, up to GBP717 in the South West, and
through to GBP975 in the South East and GBP1,478 in London. When
comparing the Q4 2016 average rent to the 2015 annual average of
GBP722, this shows a 3% increase, which was exactly in line with
our forecast at the end of 2015.
Property sales
Belvoir-branded offices doubled their MSF revenue from property
sales in 2016 to GBP184,000 (2015: GBP91,000) and this growth is
set to continue with over half of our franchise owners now able to
offer a property sales service.
Like Belvoir, Northwood launched property sales in earnest to
its network just a few years ago and saw growth of 30% from this
additional revenue stream in 2016. In the seven months since
joining the Group, property sales accounted for GBP158,000 (11%) of
the Northwood MSF revenue.
Within Newton Fallowell and Goodchilds, where property sales is
more established, MSF from property sales accounted for GBP579,000
(76%) and GBP104,000 (33%) of their respective total network
MSF.
Typically, over 90% of landlords who wish to sell their property
are being converted to a sales instruction for the franchise
office. This also provides an opportunity to introduce a new
landlord buyer rather than lose the ongoing management of a rented
property. With 55,576 (2015: 37,000) properties currently under
management, and new relationships with local and national
housebuilders, property sales remains a very significant area of
future growth.
Traditional estate agents, as opposed to exclusively online
estate agency businesses, handle over 90% of property transactions
in the UK. Vendors, especially landlords, continue to value the
local expertise and cost effectiveness available across our network
of offices.
Acquisitions
In 2016, nine independent agencies were acquired by Belvoir
franchisees, totalling a turnover of GBP1.5m and adding MSF of
GBP243,000p.a.
Our strategy of providing financial support to our franchisees
who want to accelerate growth through acquisition resulted in the
successful completion of franchisee-led acquisitions in Hatfield,
Bournemouth, Solihull, Rochester, Haydock, Portsmouth, Orkney,
Derby and Cardiff. There are over 10,000 potential acquisition
targets comprising small to medium-sized independent lettings and
sales agencies in the UK and with our dedicated in-house
acquisitions team there is an opportunity to significantly increase
the number of franchisee-led acquisitions with financial support
from the franchisor. This strategy is currently being rolled out
across our other franchise networks.
A growing business
In 2016 our network increased in size by 42% to a total of 302
(2015: 212) fully branded outlets. The acquisition of Northwood
extended our national reach by 87 franchised outlets. In addition,
twelve new franchise owners were recruited to the Group, eight of
which opened in new territories.
Our growth depends directly on the entrepreneurial drive of our
franchisees and, unlike many franchise offerings, our model offers
our franchisees both a revenue stream as they operate and grow
their business and a capital value on exit. One franchisee sold his
business to an incoming Belvoir franchisee for over GBP1.5m
demonstrating that our franchisees can not only develop their own
sizeable local businesses, but can also exit from their franchise
for a considerable sum. Our successful strategy of growing our
network organically with single and multi-unit operators and by
acquisition continues.
Corporate outlets
The move to operating a multi-brand franchised business over the
last two years reflects the focus of the Group on its franchising
operations. Accordingly, the Board has determined to implement a
franchise solution for most of its corporate-owned offices, to
enable the Group to further focus its resources on its franchise
business, resulting in the sale, during the year, of four of the
Group's ten corporate offices, out of the nationwide office network
of 302. Subsequent to the year end a further two have been sold.
Belvoir Lichfield and Belvoir Tadley have been sold to the
respective branch managers and Belvoir Devizes has been sold to a
new franchise owner, whilst Belvoir Basingstoke Sales and Belvoir
London Central have been sold to franchisees operating in adjacent
territories. This has been perceived by the Board as an opportunity
to bring fresh impetus to these offices which will now fall within
the remit of the Group's franchise support team and systems. Of the
remaining four corporate offices, we intend to retain the two
corporate Belvoir and Newton Fallowell offices in Grantham for
system development purposes.
Compliance
Belvoir has consistently been recognised for its high standards
of service and professionalism. Much of this can be attributed to
our rigorous training programme, ongoing support of our network and
most importantly our compliance procedures. Every office within the
Group is audited annually by our audit and compliance team to
ensure that our operational standards and current legislation are
being strictly adhered to. This will become increasingly important
as greater regulation and control are introduced into the PRS.
Market conditions
In 2015-16, the PRS accounted for 4.5 million or 20% of
households. The social rented sector accounted for 3.9 million
households or 17% of households.
According to official projections by the Office of National
Statistics ("ONS"), the UK's population will pass 70 million in
less than a decade, as demographers say the number of people living
in the country is increasing steadily due to a combination of
natural growth, ageing and the indirect impact of the expansion of
the European Union.
Pressure on UK housing stock, especially in the PRS, has driven
rents steadily upwards and increased the size of our market
significantly. With rising house prices making home ownership
increasingly unaffordable, it is predicted that by 2025 1.8 million
more households will be looking to rent, rather than buy, according
to a report by RICS in October 2016.
In 2015-16, the greatest number of household moves occurred
within, into or out of the PRS. In total, 787,000 households moved
within the tenure (i.e. from one privately rented home to another)
and 196,000 new households were created.
Some of these new rental properties are being provided by
private landlords, which is ideal for Belvoir's network of offices,
and some new homes will be provided by build-to-rent schemes which
are typically high density and high rise housing developments in
major town and city centres.
Whilst some potential private landlords will be affected by
recent changes in taxation, which include higher stamp duty and a
reduction in mortgage interest tax relief, landlords who do not
require a mortgage or who have incorporated remain broadly
unaffected by these changes apart from the increase in upfront
acquisition costs due to a rise in stamp duty. Buy to let remains
an attractive method for a landlord to increase their wealth and
confidence amongst new and existing landlords remains high.
From a tenant's perspective, renting from a private landlord
offers the most choice and flexibility of accommodation when
compared with other housing tenures. The Government's recent move
away from solely promoting the benefits of home ownership in
support of the PRS is a positive step with some economists
forecasting that the ratio of home ownership versus renting will
eventually move towards a more balanced 50:50 ratio.
Franchising in the UK
According to the most recent survey carried out by the British
Franchising Association and NatWest, the franchise industry in the
UK contributes over GBP15.1bn to the UK economy and employs 621,000
people. This has grown from an industry that 20 years ago had a
turnover of just over GBP5bn, had 379 different brands and
represented 18,300 franchised outlets. There are now 44,200
franchised units across 901 different brands. 97% of these units
are profitable. Franchising represents an attractive alternative to
employment with potential franchise owners being drawn by low
risks, a proven business model and a recognisable brand.
Brexit
The Belvoir Group has not suffered any negative effects as a
result of the EU referendum result. Housing is a necessity and
whilst a small minority of landlords, vendors, tenants and buyers
delay their transactions during periods of uncertainty, such as
immediately after the decision to leave the EU, the vast majority
have continued with their transactions in a normal way. We see no
reason for this not to continue.
At this stage in Brexit planning by the Government, it appears
the 3.3m EU nationals currently living in the UK will have the same
residency rights after Brexit, in return for the same benefits for
UK nationals living across the continent. As such there is no
foreseeable reduction in the current level of demand for
housing.
Current trading and outlook
Early signs for 2017 are positive with a reasonable pipeline of
potential franchise owners and an increased pipeline of potential
acquisitions. Franchisees are now beginning to reap the benefits of
utilising property sales to not only increase their turnover but,
more importantly, as a tool to fuel the underlying growth of their
managed lettings portfolios, which in turn translates into MSF
growth for the franchisor. With demand for rental properties
increasing, a nationwide drive to increase housebuilding and a
renewed interest in franchising, the key drivers behind our
successful business model remain unchanged.
Dorian Gonsalves
Chief Operating Officer
Financial review
Revenue
In 2016 Group revenue increased by 43% to GBP9.9m (2015:
GBP6.9m) reflecting the full year's impact of our 2015 acquisitions
of Newton Fallowell and Goodchilds and a contribution of GBP1.5m
from the seven-month ownership of Northwood. Similarly, the MSF
increase of 59% to GBP6.4m (2015: GBP4.0m) can be analysed as
follows:
The Belvoir brand MSF increased by 5.9%. Like-for-like growth
from lettings of 3.2% was impacted by the change in tax relief on
mortgage interest for many buy-to-let landlords reducing the number
of new private landlords coming into the sector and the trend
towards longer tenancies reducing the fee income from tenant
changeover. Belvoir mitigated this by continuing to drive property
sales within its network which accounted for 2.5% of MSF growth and
through its portfolio acquisition strategy which added a further
1.3%. Meanwhile the change in mix of corporate and franchise
outlets reduced the income from MSF by 1.1%.
The full year impact of the ownership of the Newton Fallowell
and Goodchilds networks compared to 2015 and the addition of the
Northwood network for the final seven months of the year
collectively added GBP2.2m to Group MSF income and represented the
remaining 53% of MSF growth.
Income from corporate-owned offices increased by 22% which, as
always, reflects a changing mix but in particular was affected by
the full year impact of the ownership of the Newton Fallowell
Grantham estate agency which contributed GBP580,000 (2015:
GBP407,000). Under the Belvoir brand, income from corporate outlets
increased by GBP209,000 reflecting the net impact of the
acquisitions of the Grantham and Devizes outlets mid-2015 and the
Spalding outlet in early 2016, and the disposal of the Belvoir
corporate outlets in Lichfield, Tadley, London Central and
Basingstoke Sales in the second half of 2016.
The uncertainty within the sector arising from the general
election in 2015 continued with the EU referendum and Brexit in
2016, and made the recruitment of new franchisees challenging in
both years.
However, with strong recognised brands, the Group attracted
twelve new franchise owners opening in four new Belvoir, three new
Newton Fallowell territories and one new Northwood territory, and
achieved six resales of existing territories. As a result, revenue
from franchise sales in 2016 was consistent at GBP0.4m (2015:
GBP0.4m).
Other income of GBP0.8m (2015: GBP0.7m) reflected additional
revenue arising from financial services with the Newton Fallowell
network, an area on which the Board intends to focus across all
networks in the coming year.
Operating profit before exceptional items
Non-exceptional administrative expenses for the year were up 46%
to GBP7.0m (2015: GBP4.8m) with GBP1.6m of the increase arising
from the full year impact of operating the acquired networks, an
incremental amortisation charge of GBP0.3m against those acquired
networks and GBP0.1m due to the changes in the mix of corporate
outlets.
Within administrative expenses there is a charge of GBP25,000
(2015: GBP18,000) associated with the share options issued to
Directors and certain staff in 2014 and 2015. Full disclosure is in
note [26] to the accounts.
Operating profit before exceptional items was GBP2.9m (2015:
GBP2.1m), an increase of 37% over the prior year.
Exceptional items
Exceptional items totalled GBP0.7m (2015: GBP0.2m), of which
GBP0.3m related to legal and professional fees on the acquisitions,
GBP0.3m related to the loss on sale of certain corporate offices
and the impairment against the remaining corporate offices and
GBP0.1m arose from the deemed interest associated with the deferred
contingent consideration estimated at GBP5.0m payable by May 2018
on the acquisition of Northwood GB Limited.
Profit before taxation
Profit before taxation of GBP2.4m (2015: GBP2.2m) is after
interest receivable on franchisee loans of GBP0.3m (2015: GBP0.3m),
which is regarded by the Group as part of its ongoing operations to
extend the network reach.
Taxation
The effective rate of corporate tax for the year was 23.9%
(2015: 22.5%) due to the GBP0.3m exceptional legal and professional
costs of the acquisition not being an allowable deduction from
profits for tax purposes.
Earnings per share
Basic earnings per share was 5.7p (2015: 6.5p) based on an
average number of shares in issue in the period of 32,375,694
(2015: 26,197,089), an increase arising from the issue of 818,754
shares in May against the Newton Fallowell earn out and 2,294,643
shares in June 2016 against the Northwood acquisition. When diluted
to incorporate 938,399 share options, the earnings per share was
5.5p (2015: 6.4p).
Adjusted basic earnings per share of 7.7p (2015: 7.3p) reflects
adjustments for exceptional administrative costs, loss on disposal
of corporate outlets and deemed interest on contingent
consideration totalling GBP0.7m. The adjusted diluted earnings per
share was 7.4p (2015: 7.1p).
The profit attributable to owners was GBP1.8m (2015:
GBP1.7m).
Dividends
The Board is proposing a final dividend for 2016 of 3.4p per
share (2015: 3.4p). Together with the interim dividend of 3.4p paid
to shareholders on 21 October 2016, this equates to a total
dividend for the year of 6.8p per share (2015: 6.8p).
Subject to shareholders' approval at the AGM on 25 May 2017, the
dividend will be paid on 31 May 2017 based upon the register on 18
April 2017. The ex-dividend date will be 13 April 2017.
Cash flow
The net cash inflow from operations was GBP2.9m (2015: GBP2.4m)
reflecting the enlarged Group.
The net cash used in investing activities was GBP9.4m (2015:
GBP5.7m):
-- On 7 June 2016 the Group acquired the entire share capital of
Northwood GB Ltd, a network of 87 franchised offices, for initial
consideration of GBP8.0m.
-- Part of the Newton Fallowell earn out in 2016 was settled in cash for GBP1.5m.
-- During the year the net inflow from the franchise loan book was GBP0.4m (2015: GBP0.7m).
The corporate acquisition of Northwood GB Ltd was part-funded by
increased bank lending of GBP6.0m and part-funded by an issue of
shares which raised GBP2.3m net of share placing costs. These
accounted for GBP8.3m cash inflow from financing activities out of
which the Northwood acquisition was funded. Loans repaid to the
bank in the year were GBP1.0m (2015: GBP0.5m) and dividend payments
totalled GBP2.2m (2015: GBP1.7m). As a result, net cash from
financing activities totalled GBP5.9m (2015: GBP5.1m).
Liquidity and capital resources
At the year end the Group had cash balances of GBP1.6m (2015:
GBP2.7m) and a term loan of GBP7.0m (2015: GBP1.0m) repayable in
quarterly instalments of GBP175,000 and a final repayment of
GBP4,025,000 in March 2021.
Financial position
The Group continues to operate from a sound financial platform
and is strongly cash generative. This, together with the GBP1.6m
opening cash balance, will enable the Company to meet the bank loan
repayment of GBP0.7m in 2017. Also, the capital repayments from the
existing franchisee loan book will enable the Group to give further
financial assistance to franchisees acquiring local managed
lettings portfolios, which delivers both network growth and
favourable rates of return for the Group.
Key performance indicators
The Group uses a number of key financial and non-financial
performance indicators to measure performance.
The key financial indicators are as follows:
-- management service fee;
-- adjusted net profit before tax; and
-- adjusted earnings per share.
These have been discussed in further detail above.
The key non-financial indicators are as follows:
-- number of outlets;
-- managed properties; and
-- outlets offering property sales
These have been discussed in further detail throughout the
Strategic report and are illustrated on page 08.
Louise George
Chief Financial Officer
Group statement of comprehensive income
For the financial year ended 31 December 2016
2016 2015
Notes GBP'000 GBP'000
------------------------------------------- ------ --------- ---------
Continuing operations
Revenue 3 9,940 6,947
------------------------------------------- ------ --------- ---------
Administrative expenses
Non exceptional 4 (6,948) (4,799)
Exceptional 6 (482) (201)
(7,430) (5,000)
------------------------------------------- ------ --------- ---------
Operating profit 2,510 1,947
Loss on disposal of corporate outlets 6 (160) -
Exceptional deemed interest on contingent
consideration 6 (93) -
Finance costs (139) (61)
Finance income 291 338
Profit before taxation 2,409 2,224
Taxation (576) (510)
------------------------------------------- ------ --------- ---------
Profit and total comprehensive income
for the financial year 1,833 1,714
------------------------------------------- ------ --------- ---------
Profit for the year attributable
to the equity holders of the parent
company 1,833 1,714
------------------------------------------- ------ --------- ---------
Basic earnings per share from continuing
operations 8 5.7p 6.5p
Adjusted basic earnings per share
from continuing operations 8 7.7p 7.3p
Adjusted diluted earnings per share
from continuing operations 8 7.4p 6.4p
------------------------------------------- ------ --------- ---------
The Group's results shown above are derived entirely from
continuing operations.
Statements of financial position
As at 31 December 2016
Group Company
------------------------------- ------ -------------------- --------------------
2016 2015 2016 2015
Notes GBP'000 GBP'000 GBP'000 GBP'000
------------------------------- ------ --------- --------- --------- ---------
Assets
Non-current assets
------------------------------- ------ --------- --------- --------- ---------
Intangible assets 24,772 11,854 - -
Investments in subsidiaries - - 35,314 22,039
Property, plant and equipment 657 649 - -
Trade and other receivables 4,024 3,656 - -
------------------------------- ------ --------- --------- --------- ---------
29,453 16,159 35,314 22,039
Current assets
------------------------------- ------ --------- --------- --------- ---------
Trade and other receivables 2,740 2,090 8,287 8,990
Cash and cash equivalents 1,591 2,679 16 130
------------------------------- ------ --------- --------- --------- ---------
4,331 4,769 8,303 9,120
------------------------------- ------ --------- --------- --------- ---------
Total assets 33,784 20,928 43,617 31,159
------------------------------- ------ --------- --------- --------- ---------
Liabilities
Non-current liabilities
------------------------------- ------ --------- --------- --------- ---------
Trade and other payables 4,281 - 4,281 -
Interest-bearing loans
and borrowings 9 6,270 500 6,270 -
Deferred tax 2,054 1,001 - -
------------------------------- ------ --------- --------- --------- ---------
12,605 1,501 10,551 -
Current liabilities
------------------------------- ------ --------- --------- --------- ---------
Trade and other payables 2,307 4,149 2,404 3,329
Interest-bearing loans
and borrowings 9 692 500 692 -
Tax payable 849 357 - -
------------------------------- ------ --------- --------- --------- ---------
3,848 5,006 3,096 3,329
------------------------------- ------ --------- --------- --------- ---------
Total liabilities 16,453 6,507 13,647 3,329
------------------------------- ------ --------- --------- --------- ---------
Total net assets 17,331 14,421 29,970 27,830
------------------------------- ------ --------- --------- --------- ---------
Equity
Shareholders' equity
------------------------------- ------ --------- --------- --------- ---------
Share capital 10 336 305 336 305
Share premium 10 10,583 7,379 10,583 7,379
Share-based payments
reserve 76 51 76 51
Revaluation reserve 162 162 (50) (50)
Merger reserve (5,774) (5,774) 8,101 8,101
Retained earnings 11,948 12,298 10,924 12,044
------------------------------- ------ --------- --------- --------- ---------
Total equity 17,331 14,421 29,970 27,830
------------------------------- ------ --------- --------- --------- ---------
The financial statements were approved and authorised for issue
by the Board on 4 April 2017 and signed on its behalf by:
Michael Goddard
Executive Chairman and Chief Executive Officer
Registered number 07848163
Statements of changes in shareholders' equity
For the financial year ended 31 December 2016
Group
Notes Share-based
Share Share payments Revaluation Merger Retained Total
capital premium reserve reserve reserve earnings equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------------- ------ --------- --------- ------------ ------------ --------- ---------- ---------
Balance at
1 January
2015 240 - 33 162 (5,774) 12,333 6,994
Changes in
equity
Issue of equity
share capital 10 65 7,379 - - - - 7,444
Share-based
payments 5 - - 18 - - - 18
Dividends 7 - - - - - (1,749) (1,749)
---------------------- ------ --------- --------- ------------ ------------ --------- ---------- ---------
Transactions
with owners 65 7,379 18 - - (1,749) 5,713
Profit and
total comprehensive
income for
the financial
year - - - - - 1,714 1,714
---------------------- ------ --------- --------- ------------ ------------ --------- ---------- ---------
Balance at
31 December
2015 305 7,379 51 162 (5,774) 12,298 14,421
Issue of equity
share capital 10 31 3,204 - - - - 3,235
Share-based
payments 5 - - 25 - - - 25
Dividends 7 - - - - - (2,183) (2,183)
---------------------- ------ --------- --------- ------------ ------------ --------- ---------- ---------
Transactions
with owners 31 3,204 25 - - (2,183) 1,077
Profit and
total comprehensive
income for
the financial
year - - - - - 1,833 1,833
---------------------- ------ --------- --------- ------------ ------------ --------- ---------- ---------
Balance at
31 December
2016 336 10,583 76 162 (5,774) 11,948 17,331
---------------------- ------ --------- --------- ------------ ------------ --------- ---------- ---------
Statements of cash flows
For the financial year ended 31 December 2016
Group Company
------------------------------------
2016 2015 2016 2015
Notes GBP'000 GBP'000 GBP'000 GBP'000
------------------------------------ ------ --------- --------- --------- ---------
Operating activities
------------------------------------ ------ --------- --------- --------- ---------
Cash generated from/(used
in) operating activities 11 2,946 2,364 1,331 (1,901)
Tax paid (597) (572) - -
------------------------------------ ------ --------- --------- --------- ---------
Net cash flows generated
from/(used in) operating
activities 2,349 1,792 1,331 (1,901)
Investing activities
------------------------------------ ------ --------- --------- --------- ---------
Dividends received - - 1,800 1,700
Acquisitions (8,005) (6,892) (8,000) (6,395)
Working capital and cash
introduced by companies acquired 243 241 - -
Capital expenditure on
property, plant and equipment (80) (102) - -
Disposal of assets 797 14 - -
Deferred contingent consideration (2,202) - (2,202) -
Franchisee loans granted (1,352) (449) - -
Loans repaid by franchisees 938 1,138 - -
Finance income 291 338 - 2
------------------------------------ ------ --------- --------- --------- ---------
Net cash flows used in from
investing activities (9,370) (5,712) (8,402) (4,693)
Financing activities
------------------------------------ ------ --------- --------- --------- ---------
Finance costs (185) (61) (161) -
Loan repayments in the
year (1,000) (521) - -
Proceeds from share issue 2,570 7,890 2,570 7,890
Bank loan advance 7,000 - 7,000 -
Share placing costs (269) (446) (269) (446)
Equity dividends paid (2,183) (1,749) (2,183) (1,749)
------------------------------------ ------ --------- --------- --------- ---------
Net cash generated from
financing activities 5,933 5,113 6,957 5,695
------------------------------------ ------ --------- --------- --------- ---------
Net change in cash and
cash equivalents (1,088) 1,193 (114) (899)
Cash and cash equivalents
at the beginning of the financial
year 2,679 1,486 130 1,029
------------------------------------ ------ --------- --------- --------- ---------
Cash and cash equivalents
at the end of the financial
year 1,591 2,679 16 130
------------------------------------ ------ --------- --------- --------- ---------
Notes to the preliminary statement
1 Approval
This announcement was approved by the Board of Directors on 4
April 2017.
2 Basis of preparation
The financial information set out above does not constitute the
Company's statutory accounts for the years ended 31 December 2016
or 2015, but is derived from those accounts. Statutory accounts for
2015 have been delivered to the Registrar of Companies and those
for 2016 will be delivered following the Company's Annual General
Meeting. The auditors have reported on those accounts: their
reports were unqualified, did not draw attention to any matters by
way of emphasis and did not contain a statement under Sections
498(2) or (3) of the Companies Act 2006.
For the year ended 31 December 2016 the Group has prepared its
annual report and accounts in accordance with accounting standards
adopted for use in the European Union (International Financial
Reporting Standards).
3 Segmental information
The Executive Committee of the Board, as the chief operating
decision maker, reviews financial information for and makes
decisions about the Group's overall franchising business. In the
year ended 31 December 2016 the Board identified a single operating
segment, that of property lettings, estate agency and
franchising.
The segmental information is, therefore, the same as that set
out in the consolidated statement of comprehensive income. The
Directors do not consider the presentation of gross profit within
the Group statement of comprehensive income to reflect a true
position of the Group's activities and core operations, which is
that of a property letting and sales franchisor. Therefore, the
Directors disclose operating profit as the key performance measure.
The reported segment is consistent with the Group's internal
reporting for performance measurement and resources allocation.
Management does not report on a geographical basis and no
customer represents greater than 10% of total revenue in either of
the periods reported. The Directors believe there to be three
material income streams, which are management service fees, revenue
from corporate-owned outlets and fees on the sale or resale of
franchise territory fees and are split as follows:
Lettings Property sales Total revenue
--------------------- -------------------- --------------------
2016 2015 2016 2015 2016 2015
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------------- --------- --------- --------- --------- --------- ---------
Management service
fees 5,405 3,669 1,026 375 6,431 4,044
Corporate-owned
outlets 1,205 913 1,110 980 2,315 1,893
--------------------- --------- --------- --------- --------- --------- ---------
6,610 4,582 2,136 1,355 8,746 5,937
--------------------- --------- --------- --------- --------- --------- ---------
Initial franchise
fees and other
resale commissions 368 356
--------------------- --------- --------- --------- --------- --------- ---------
Other income 826 654
--------------------- --------- --------- --------- --------- --------- ---------
9,940 6,947
--------------------- --------- --------- --------- --------- --------- ---------
4 Expenses
Administrative expenses (non-exceptional) by nature:
2016 2015
GBP'000 GBP'000
------------------------------------------------- --------- ---------
Staff costs 3,764 2,605
Depreciation and amortisation 592 397
Marketing 459 391
Auditors' remuneration
- Fees payable to the Company's auditors
for the audit of the Company's annual accounts 46 46
- Tax compliance services 37 19
- Statutory audit of subsidiaries 27 15
- Non-recurring financial due diligence 93 -
fees
Operating lease expenditure 444 441
Other administrative expenses 1,536 885
------------------------------------------------- --------- ---------
6,998 4,799
------------------------------------------------- --------- ---------
5 Share-based payments
Administrative expenses includes a charge of GBP25,000 (2015:
GBP18,000) after valuation of the Company's employee share options
schemes in accordance with IFRS 2 'Share-based payments'. Under
this standard, the fair value of the options at the grant date is
spread over the vesting period. These items have been added back in
the statement of changes in equity.
6 Exceptional items
A total charge of GBP735,000 (2015: GBP201,000) in relation to
exceptional items in the year arose from:
2016 2015
GBP'000 GBP'000
------------------------------------------------------ --------- ---------
Transaction costs on acquisitions 290 201
Impairment of goodwill 142 -
Write off of goodwill on disposal of corporate-owned 160 -
outlets
Deemed interest on deferred consideration 93 -
Tax provision from prior year 50 -
------------------------------------------------------ --------- ---------
735 201
------------------------------------------------------ --------- ---------
7 Dividends
2016 2015
GBP'000 GBP'000
-------------------------------------------- --------- ---------
Final dividend for 2015
3.4p per share paid 31 May 2016 (2014:
3.4p per share paid 1 June 2015) 1,039 816
Interim dividends for 2016
3.4p per share paid 21 October 2016 (2015:
3.4p per share paid 15 October 2015) 1,144 933
-------------------------------------------- --------- ---------
Total dividend paid 2,183 1,749
-------------------------------------------- --------- ---------
The Directors propose a final dividend of 3.4p per share
totalling GBP1,172,000 payable on 31 May 2017. As this remains
conditional on shareholders' approval, provision has not been made
in these financial statements.
8 Earnings per share
Basic earnings per share is calculated by dividing the profit
for the financial year by the weighted average number of ordinary
shares in issue during the year. Options over ordinary shares and
rights of conversion are described in note 26. The calculation of
diluted earnings per share is derived from the basic earnings per
share, adjusted to allow for the issue of shares under these
instruments.
2016 2015
Profit for the financial year GBP1,833,000 GBP1,714,000
Exceptional items 735,000 201,000
Tax on deductible exceptional items (89,000) -
-------------------------------------------- ------------- -------------
Adjusted profit for the financial year GBP2,479,000 GBP1,915,000
-------------------------------------------- ------------- -------------
Weighted average number of ordinary shares
- basic 32,375,694 26,197,089
Weighted average number of ordinary shares
- diluted 33,314,093 26,914,453
-------------------------------------------- ------------- -------------
Basic earnings per share 5.7p 6.5p
Diluted earnings per share 5.5p 6.4p
-------------------------------------------- ------------- -------------
Adjusted basic earnings per share 7.7p 7.3p
Adjusted diluted earnings per share 7.4p 7.1p
-------------------------------------------- ------------- -------------
9 Maturity of borrowings and net debt - term loan
2016 2015
GBP'000 GBP'000
----------------------------------------- --------- ---------
Group and Company
Repayable in less than six months 449 273
Repayable in seven to twelve months 444 267
----------------------------------------- --------- ---------
Current portion of long-term borrowings 893 540
Repayable in years one to five 6,811 517
----------------------------------------- --------- ---------
Total borrowings 7,704 1,057
Less: interest included (742) (57)
----------------------------------------- --------- ---------
Total net debt 6,962 1,000
----------------------------------------- --------- ---------
The bank loan is secured by a fixed and floating charge over the
Group assets.
The term loan balance of GBP7,000,000 (2015: GBP1,000,000) is
repayable in quarterly instalments of GBP175,000 to March 2021 plus
a final payment of GBP4,025,000 and bears interest at 2.5% over the
LIBOR rate.
10 Called up share capital
2016 2015
---------------------------- --------------------- ---------------------
Number GBP'000 Number GBP'000
---------------------------- ----------- -------- ----------- --------
Group and Company
Allotted, issued and fully
paid
Ordinary shares of 1p each 33,660,160 337 30,546,763 305
---------------------------- ----------- -------- ----------- --------
Group Nominal Share
and share premium
Company capital GBP
Number GBP
------------------------------------ ----------- --------- ---------
At 1 January 2015 24,010,417 240 -
------------------------------------ ----------- --------- ---------
Issue of shares during the year:
28 July 2015 - share price 125p 3,424,000 34 4,013
6 October 2015 - share price 116p 1,667,346 17 1,704
7 October 2015 - share price 116p 693,695 7 798
7 October 2015 - share price 116p 40,000 - 46
23 October 2015 - share price 116p 711,305 7 818
------------------------------------ ----------- --------- ---------
At 31 December 2015 30,546,763 305 7,379
------------------------------------ ----------- --------- ---------
Issue of shares during the year:
11 May 2016 - share price 114p 818,754 8 925
07 June 2016 - share price 112p 2,294,643 23 2,279
At 31 December 2016 33,660,160 336 10,583
------------------------------------ ----------- --------- ---------
11 Reconciliation of profit before taxation to cash generated
from operations
2016 2015
GBP'000 GBP'000
-------------------------------------------------- --------- ---------
Profit before taxation 2,409 2,224
Depreciation and amortisation charges (including
impairment) 602 397
Share-based payment charge 25 18
Loss on disposal of corporate outlets 302 -
Deemed interest charge 93 -
Adjustment to deferred consideration (2) -
Finance costs 139 61
Finance income (291) (338)
-------------------------------------------------- --------- ---------
3,277 2,362
Increase in trade and other receivables (604) (278)
Increase in trade and other payables 273 280
-------------------------------------------------- --------- ---------
Cash generated from/(used in) operations 2,946 2,364
-------------------------------------------------- --------- ---------
12 Acquisitions
On 7 June 2016 the Company acquired 100% of the equity of
Northwood GB Ltd, a company comprising a network of 87 franchised
estate and lettings agents, as part of the Group's multi-brand
franchising strategy with the aim of increasing the Group's
presence in the franchised property sector and opening up
additional growth opportunities. Initial consideration was
GBP8,000,000 in cash on completion and deferred contingent
consideration estimated at GBP5,500,000 through a two-year earn out
based on a multiple of 8 times annual EBITDA. The fair value of the
deferred contingent consideration at the time of acquisition was
deemed to be GBP5,218,000. The difference of GBP282,000 is being
accounted for as deemed interest and will be charged against the
profit and loss account in line with the expected timing of the
consideration payments.
The transaction met the definition of a business combination and
is accounted for using the acquisition method under IFRS 3. The
assets and liabilities below are shown at their book values which
were assessed as also being the fair values at acquisition.
In addition the Group acquired Belvoir Spalding from the
franchise owner due to exceptional personal circumstances. This
outlet will be operated as a corporate-owned outlet until a
suitable new franchise owner can be identified.
Belvoir
Spalding Northwood Total
GBP'000 GBP'000 GBP'000
--------------------------------- ----------- ---------- ---------
Intangible assets
Trade names - 454 454
Master franchise agreements - 5,481 5,481
Customer relationships 24 - 24
Tangible assets - 370 370
Trade and other receivables - 592 592
Cash and cash equivalents - 221 221
Deferred tax liabilities (4) (1,102) (1,106)
Trade and other payables - (1,171) (1,171)
----------------------------------- ----------- ---------- ---------
Identifiable net assets
acquired 20 4,845 4,865
----------------------------------- ----------- ---------- ---------
Goodwill on acquisition 12 8,373 8,385
----------------------------------- ----------- ---------- ---------
Consideration 32 13,218 13,250
----------------------------------- ----------- ---------- ---------
Consideration settled
in cash 32 8,000 8,032
Contingent consideration - 5,218 5,218
Total consideration 32 13,218 13,250
----------------------------------- ----------- ---------- ---------
The goodwill represents the value attributable to the new
businesses and the assembled and trained workforce. Deferred tax at
17% has been provided on the value of intangible assets defined as
brand names and master franchise agreements. Acquisition costs of
GBP290,000 were incurred and charged to exceptional items in the
consolidated statement of comprehensive income.
Northwood
GBP'000
----------------- ----------
Revenue 1,553
Profit and loss 542
------------------- ----------
If the acquisitions had completed on the first day of the
financial year, Group revenues would have been GBP11.1m and Group
profit before tax would have been GBP2.8m.
13 Posting of accounts
It is intended that the financial statements for the year ended
31 December 2016 will be made available to shareholders on the
company's website www.belvoirlettingsplc.com by 24 April 2016 and
will also be available thereafter at the registered office, The Old
Courthouse, 61a London Road, Grantham, NG31 6HR.
14 Annual General Meeting
The Annual General Meeting will be held at 10.00am on Thursday
25 May 2017 at the registered office, The Old Courthouse, 61a
London Road, Grantham, NG31 6HR
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR EANLDEFDXEFF
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April 04, 2017 02:00 ET (06:00 GMT)
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