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Belvoir Group PLC

Belvoir Lettings PLC - Preliminary Results

RNS Number : 0113U
Belvoir Lettings PLC
04 April 2016
 

For Immediate Release                                                                                                                                                            4 April 2016

BELVOIR!
             

BELVOIR LETTINGS PLC

(the "Company", the "Group" or "Belvoir")

 

Preliminary Results for the year ended 31 December 2015

 

Belvoir Lettings plc (AIM: BLV), one of the UK's largest property franchises, is pleased to announce its preliminary results for the year ended 31 December 2015.

 

Financial highlights

·      Group revenue up 19% to £6.9m (2014: £5.9m)

·      Growth in Management Service Fees (MSF) was 25% to £4.0m (2014: £3.2m), consisting of 12.5% (2014: 11%) from the organic growth of the Belvoir network and 12.5% from the mid-year network acquisitions

·      Revenue from property sales up 60% to £1.4m (2014: £0.8m), primarily reflecting the increased service offering from the acquired businesses

·      The Group remains predominantly lettings-based with a ratio of lettings to sales revenue of 77:23 (2014: 84:16)

·      Administrative expenses of £5.0m (2014: £4.9m) included exceptional costs of £0.2m relating to legal and professional fees on the acquisitions of the Newton Fallowell and Goodchilds networks

·      Operating profit at £1.9m (2014: £1.0m)

·      Profit before taxation was £2.2m (2014: £1.8m), an increase of 25% over the prior year

·      Strong year-end cash position of £2.7m (2014: £1.5m) and bank debt of £1.0m (2014: £1.5m)

·      Basic earnings per share of 6.5p (2014: 5.6p); adjusted of 7.3p (2014: 5.6p)

·      Final dividend of 3.4p (2014: 3.4p) giving a total dividend for the year of 6.8p (2014: 6.8p)

 

Operational highlights

·      Belvoir is now a multi-brand Group following the acquisition of the Newton Fallowell and Goodchilds franchised networks

·      UK coverage increased by 50 outlets (31%) to 212 (2014: 162) with the addition of new networks

·      Recruitment restored in H2 following the General Election uncertainty in H1, resulting in eleven (2014: 15) new Belvoir franchisees for the year, seven into new and four into existing territories

·      Record growth performance by two franchised offices whose turnover each exceeded £1.0m

·      Property sales being offered by 111 (2014: 30) outlets

·      Networks account for around 37,000 (2014: 30,000)  managed properties

·      Secured "Gold Lettings Franchise of the Year Award" for the fifth time in six years

 

2016 update

·      Newton Fallowell exceed their 2017 EBITDA target of £1m

·      Given their performance to date, the earn out due to the Newton Fallowell vendors in 2017 of £0.9 will be settled in 2016 so as the operational management of Newton Fallowell and Goodchilds can be consolidated

·      Board strengthened with appointment of Mark Newton

·      Current trading in line with management expectations

 

Mike Goddard, Chief Executive Officer of Belvoir Lettings, commenting on the results, said:
"2015 was a pivotal year for Belvoir.  The Company commenced its strategic vision of a multi-brand operation with the acquisitions of Newton Fallowell and Goodchilds, substantially increasing our presence across the East and West Midlands respectively.  As a result of these new networks and seven new Belvoir territories, our UK coverage has increased by 31% to 212 outlets, MSF is up 25% to £4.0m and adjusted profit before tax is up 36% to £2.4m. The Board appreciated the support of our shareholders in funding the mid-year acquisitions and I am confident that the coming year will see the full impact of our successful multi-brand strategy as the new brands become further incorporated into the Group.

 

Looking to the future I expect Belvoir to be at the forefront of further consolidation within the property franchising industry as the benefits of centralised franchising expertise and economies of scale become more attractive."

 

 

 

For further details:

 

Belvoir Lettings PLC

Mike Goddard, Chairman and CEO

Louise George, Chief Financial Officer

 

 

01476 584900

investorrelations@belvoirlettings.com

Cantor Fitzgerald Europe

Rick Thompson, Phil Davies, Michael Reynolds
Corporate Finance

020 7894 7000

 

 

 

Buchanan

Charles Ryland, Victoria Watkins, Madeleine Seacombe

 

0207 466 5000

 

 

The preliminary results will be available on the Company's website: www.belvoirlettingsplc.com

About Belvoir Lettings PLC

Founded in 1995, Belvoir is one of the UK's largest specialist lettings agency franchises, with 212 outlets nationwide.

 

Since listing on AIM in February 2012 (BLV.L), Belvoir has continued to diversify its core business offer in lettings (representing 77% of revenue) 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 Ltd, a network of 30 franchised and one corporate estate and lettings agencies in July 2015. Furthermore, in October 2015 the Group acquired Goodchilds Estate Agents and Lettings Limited, a network of 14 property sales and lettings branches located across the West Midlands.

 

Belvoir continues to grow organically by delivering award winning service, prioritising franchisee recruitment and supporting franchisee acquisitions. In recognition, the Group was awarded the "Best Lettings Agency Franchise Award" at the 2015 Agency of the Year Awards for the fifth time since the awards started six years ago.

 

The Company remains committed to diversifying its brand portfolio, utilising Belvoir's strong franchising expertise and infrastructure, in order to capitalise on a rapidly increasing target market.

 

 

Chairman's statement

 

Introduction

2015 was a pivotal year for Belvoir.  The Company commenced its strategic vision of a multi-brand operation, so as to further expand the network reach across the UK, whilst continuing to support and develop the strong organic growth of our existing Belvoir network.  The Board appreciated the support of our shareholders in funding the mid-year acquisitions and I am confident that the coming year will see the full impact of our successful multi-brand strategy as the new brands become further incorporated into the Group.

 

Multi-brand franchising strategy

The Company purchased the Newton Fallowell network of 31 outlets in July and the Goodchilds network of 14 outlets in October. As a result of these two major acquisitions a number of key indicators have risen significantly compared to last year. Profits before tax have increased by 25% to £2.2m, while MSF increased by 25% to £4.0m.  The total size of the network increased by 31% to 212 outlets reflecting the acquisitions and the recruitment of eleven new Belvoir franchises, seven of which were new territories and four were resales of existing Belvoir outlets.

Growth strategy

The Group's estate agency business which was introduced in 2014, continues to accelerate, with 111 (2014: 30) franchise owners trained to offer a property sales service by the end of 2015.  Growth has been achieved due to both organic growth within the pre-existing Belvoir network and the acquisitions of the Newton Fallowell and Goodchilds networks already offering this service. We expect this number to increase by a further 41 offices in 2016. Revenue from property sales grew by 60% to £1.4m (2014: £0.8m), primarily reflecting the increased service offering from the acquired businesses. The ratio of revenue from lettings to sales now stands at 77:23 (2014: 84:16). It is, however, our intention to remain a lettings dominant business so as to ensure that we have greater certainty of recurring revenues from this market.  We will continue to look at ways to increase our market share from our current portfolio of some 37,000 (2014: 30,000) managed properties.

 

Growth at individual franchisee level is an important strategic focus and we are continuing to invest in a comprehensive marketing strategy, consisting of both traditional measures and through social media, as well as providing acquisition opportunities for our franchise owners.  Our strategy has proved successful, with revenue growth for the Belvoir network continuing to accelerate in 2015 exceeding 12% growth during the period.

 

The team

Following his recent appointment, I am delighted to welcome Mark Newton to the Board. As Managing Director of Newton Fallowell, Mark will be taking Board level responsibility for management of both the Newton Fallowell and Goodchilds networks.  Mark has a deep understanding of estate agency and franchising, which will both strengthen and complement the expertise of the Belvoir Board in delivering on its multi brand strategy and value creation for shareholders.

 

The Board greatly appreciates the considerable efforts made by our staff to meet the challenges of the past year, so I would like to take this opportunity to personally thank everyone for their continued commitment to the Company.

 

The future            

Looking to the future I anticipate further consolidation within the property franchising industry as the benefits of centralised franchising expertise and economies of scale become more attractive. I expect the Belvoir Group to be at the forefront of this exciting opportunity. 

 

Michael Goddard

Chairman and Chief Executive

 

 

Operating review

 

MSF growth

MSF for the Group increased by 25% to £4.0m. These fees are collected by Belvoir 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 acquisition of two chains of lettings and sales agencies by the franchisor.

Lettings

Lettings represents over three quarters of our MSF and corporate revenue reflecting that Belvoir continues to operate predominantly as a lettings franchise model with lettings activity providing a predictable and stable core income. With the additional burden of regulation across the private rented sector more landlords are utilising the services of a letting agent and this is reflected in our underlying growth in MSF. Rents continue to rise, broadly in line with growth in wages, and according to the Office for National Statistics private rental prices paid by tenants in the UK rose by 2.5% in the year to December 2015 with rents increasing by 2.7% in England, 0.7% in Wales and 0.9% in Scotland. Rents increased in London by 3.9% in the same period.  By comparison, Belvoir like-for-like growth was 4.2% when comparing outlets in existence for both full year periods and eliminating the impact of acquisitions.

Property sales

Following the introduction of estate agency in 2014, primarily to offer a full property service to our landlord clients, and the acquisition of the Newton Fallowell and Goodchilds networks in 2015, over half of our franchise owners are now able to offer a property sales service. Typically, over 90% of the 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 over 37,000 (2014: 30,000) properties currently under management, and new relationships with local and national housebuilders, property sales remains a significant area of future growth.

Acquisitions

Our strategy of providing financial support to our franchisees who want to accelerate growth through acquisition resulted in the successful completion on franchisee-led acquisitions in Bury, Brighton, Southampton and Aldershot. There are over 10,000 potential acquisition targets comprising small to medium-sized independent lettings and sales agencies in the UK and in late 2015 we invested in an in-house acquisition sourcing service with two full-time members of staff. This investment resulted in a stronger pipeline of acquisitions in progress at the end of 2015.

Corporate outlets

During the year we operated from company-owned outlets in Pimlico, Lichfield, Burton upon Trent, Cumbria, Basingstoke, Tadley, Grantham and Devizes, the latter two having been bought back during the year due to exceptional personal circumstances of the respective franchisees. It is the Company's strategic objective to re-franchise these outlets when the opportunity arises so as to bring them in line with our core franchising expertise. 

Compliance

Belvoir has consistently been recognised for its high standards of service and professionalism.  Much of this can be attributed our rigorous training programme, ongoing support of our network and most importantly our compliance procedures.  Every office 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 is introduced into the private rented sector.

A growing business

In 2015 our network increased in size by almost a third to a total of 212 (2014: 162) outlets. Eleven new franchisees were recruited to the Belvoir network, seven of which opened in new territories, and the acquisitions of Newton Fallowell and Goodchilds extended our national reach by 44 franchised outlets and one corporate outlet.

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.  Two outlets achieved record performance in the year generating more than £1.0m of fee income for their respective franchise owners and one franchisee sold his business to an incoming Belvoir franchisee for close to £1.0m.

Our successful strategy of growing our network organically with single office operators, multi-unit operators and by acquisition continues.

Market conditions

In recent years there has been a rapid growth in the residential lettings market and the outlook is set to continue. In 2014/15, among the total housing stock in the UK, there were 14.3 million owner occupiers, 4.3 million (19%) privately rented, and 3.9 million (17%) rented in the social housing sector. Of the four million households in the private rented sector, around 50% of private landlords use the services of a letting agent. Over 37,000 residential properties across the UK are managed by our three brands; this represents less than 1% of a rapidly increasing target market.  The percentage of landlords who use a letting agent to provide specialist advice and expertise is set to increase, as is the number of dwellings within the private rented sector.

An increased supply of properties for homeownership, and within the rented sector, is needed to satisfy current housing needs in the UK. The Government has reacted to this demand by announcing a number of new initiatives in 2015. These include doubling the current housing budget to £2bn to fund the building of new houses, 400,000 more new homes by 2020 and extending the Right to Buy scheme to housing associations. In addition to increasing supply of new builds, changes to stamp duty for landlords and second-home buyers was announced along with changes to mortgage interest tax relief, both of which will result in higher acquisition costs and operating costs for landlords.  According to the Treasury, the changes to tax relief will impact one in five landlords. Apart from a rush to beat changes in stamp duty, these changes do not appear to have had any negative impact on the housing market.  Demand for rented properties remains high, landlords are continuing to acquire new properties and it is clear that privately renting remains the tenure of choice for a mobile and flexible workforce, and for those who do not wish to be tied to homeownership.  Housing in the UK is moving more towards its European counterparts where in Germany, for example, over half of the population chooses to rent rather than own a property.

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 £15.1bn 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 £5bn 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.

Current trading and outlook

Early signs for 2016 are positive, with a strong 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

Managing Director Belvoir

 

 

Financial review

 

Revenue

Group revenue for the financial year ended 31 December 2015 increased by 19% to £6.9m (2014: £5.9m).  This was underpinned by strong growth of 25% in management service fees (MSF) to £4.0m (2014: £3.2m), reflecting organic growth of 12.5% from the Belvoir network and a further 12.5% growth from the two franchised networks acquired in the second half of the year.

Initial franchise fees and resales commissions were down 17% after a challenging first half for franchise recruitment caused by the uncertainty surrounding the General Election. In total these contributed revenue of £0.36m (2014: £0.43m) with four new franchise owners joining in the first half of the year compared to seven in the second half when confidence was restored. 

Corporate owned outlets contributed £1.9m (2014: £2.0m) reflecting a changing mix during the period.  At the year end the Group owned eight Belvoir and one Newton Fallowell outlet. 

The Directors have decided to restate the 2014 statement of comprehensive income by £0.7m to account for the sale of two corporate outlets in 2014 as a profit on disposal rather than revenue, as this better represents the underlying trading of the Group but has no impact on the profit for the prior year.

The two network acquisitions during the year introduced a greater proportion of revenue from estate agency into the Group with MSF from property sales contributing £0.4m (2014: £0.02m) and corporate revenue of £1.0m (2014: £0.8m). 

Operating profit before exceptional items

Operating profit before exceptional costs was £2.1m (2014: £0.97m) for the year ended 31 December 2015.

Non-exceptional administrative expenses for the year were down 2% to £4.8m (2014: £4.9m) with the reduction of £0.4m in the costs of operating the corporate outlets during 2015 and the one-off costs of £0.3m in 2014 being offset by the £0.5m associated with the increased overheads of the two mid-year acquisitions.

Within administrative expenses there is a charge of £18,000 (2014: £33,000) associated with the share options issued to Directors and certain staff in 2014 and 2015. 

Exceptional items

The exceptional costs of £0.2m (2014: £nil) all related to legal and professional fees on the acquisitions of the Newton Fallowell and Goodchilds networks.

Finance income

Interest receivable on franchisee loans of £0.3m (2014: £0.3m) is regarded by the Group as part of its ongoing operations to extend the network reach.

Profit before taxation

Profit before taxation was £2.2m (2014: £1.8m), an increase of 25% over the prior year.

Taxation

The effective rate of corporate tax for the year was 22.9% (2014: 24.4%) due to the exceptional costs of the acquisitions not being an allowable deduction from profits for tax purposes.

Earnings per share

Basic earnings per share was 6.5p (2014: 5.6p) based on an average number of shares in issue in the period of 26,197,089 (2014: 24,010,417), an increase of 2,186,672 arising from the share issue in July and October 2015.  This compared to adjusted earnings per share of 7.3p (2014: 5.6p). The profit attributable to owners was £1.7m (2014: £1.3m).

 

Dividends

The Board is proposing a final dividend for 2015 of 3.4p per share (2014: 3.4p). Together with the interim dividend of 3.4p paid to shareholders on 15 October 2015, this equates to a total dividend for the year of 6.8p per share (2014: 6.8p).

Subject to shareholders' approval at the AGM on 26 May 2016, the dividend will be paid on 31 May 2016 based upon the register on 22 April 2016.  The ex-dividend date will be 21 April 2016.  

Cash flow

The net cash inflow from operations was £2.4m (2014: £0.05m) with good cash inflows from the enlarged Group.

The net cash used in investing activities was £5.7m (2014: 0.6m):

·      On 29 July 2015 the Group acquired the entire share capital of Newton Fallowell Ltd, a network of 30 franchised and one corporate office, for initial consideration of £4.0m.

·      On 6 October 2015 the Group acquired the entire share capital of Goodchilds Estate Agents and Lettings Ltd, a network of 14 franchised offices for initial consideration of £2.4m.

·      The Group bought back two franchised outlets at a cost of £0.5m and these form part of the portfolio of corporate outlets.

·      During the year the net inflow from the franchise loan book was £0.7m (2014: net outflow £2.4m).

Two significant share issues net of share placing costs accounted for £7.4m cash inflow from financing activities out of which the corporate acquisitions were funded. Loans repaid to the bank in the year were £0.5m (2014: £0.8m) and dividend payments totalled £1.7m (2014: £1.6m).  As a result, net cash generated from financing activities totalled £5.1m (2014: net cash used £2.5m). 

Liquidity and capital resources

At the year end the Group had cash balances of £2.7m (2014: £1.5m) and a term loan of £1.0m (2014: 1.5m) repayable in quarterly instalments by December 2017.

Financial position

The Group continues to operate from a sound financial platform and is strongly cash generative.  This, together with the £2.7m opening cash balance, will enable the Company to settle in cash the anticipated £1.5m year one earn-out under the Newton Fallowell acquisition and the £0.8m deferred payment under the Goodchilds acquisition both due to be paid within the current year.  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 rate 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 fees;

·      operating profit; and

·      earnings per share.

The key non-financial indicators are as follows:

·      number of outlets;

·      recruitment of new franchise owners;

·      compliance of franchised outlets;

·      level of Belvoir-assisted franchisee acquisitions;

·      take-up of property sales;

·      no. of managed properties with the group; and

·      lettings awards.

Louise George
Chief Financial Officer

 

 

Group statement of comprehensive income

For the financial year ended 31 December 2015

 

 

 

Notes

2015

£'000

Restated

2014

£'000

Continuing operations

 

 

 

 

Revenue

 

 

6,947

5,856

Administrative expenses

 

 

 

 

   Non exceptional

 

 

(4,799)

(4,887)

   Exceptional - acquisition costs

 

7

(201)

-

 

 

 

(5,000)

(4,887)

Operating profit

 

 

1,947

969

Profit on disposal of corporate outlets

 

3

-

651

Finance costs

 

 

(61)

(111)

Finance income

 

 

338

269

Profit before taxation

 

 

2,224

1,778

Taxation

 

 

(510)

(434)

Profit and total comprehensive income for the financial year

 

 

1,714

1,344

Profit for the year attributable to the equity holders of the parent company

 

 

1,714

1,344

 

 

 

 

 

Basic earnings per share from continuing operations

 

9

6.5p

5.6p

Adjusted basic earnings per share from continuing operations

 

9

7.3p

5.6p

Diluted earnings per share from continuing operations

 

9

6.4p

5.6p

The Group's results shown above are derived entirely from continuing operations.

 

 

 

Statements of financial position

As at 31 December 2015

 

 

 

 

Group

 

Company

 

 

Notes

2015

£'000

2014

£'000

 

2015

£'000

2014

£'000

 

Assets

 

 

 

 

 

 

 

Non-current assets

 

 

 

 

 

 

 

Intangible assets

 

11,854

1,477

 

-

-

 

Investments in subsidiaries

 

-

-

 

22,039

12,483

 

Property, plant and equipment

 

649

648

 

-

-

 

Trade and other receivables

 

3,656

4,288

 

-

-

 

 

 

16,159

6,413

 

22,039

12,483

 

Current assets

 

 

 

 

 

 

 

Trade and other receivables

 

2,090

1,638

 

8,990

7,297

 

Cash and cash equivalents

 

2,679

1,486

 

130

1,029

 

 

 

4,769

3,124

 

9,120

8,326

 

Total assets

 

20,928

9,537

 

31,159

20,809

 

Liabilities

 

 

 

 

 

 

 

Non-current liabilities

 

 

 

 

 

 

 

Interest-bearing loans and borrowings

10

500

1,500

 

-

-

 

Deferred tax

 

1,001

141

 

-

-

 

 

 

1,501

1,641

 

-

-

 

Current liabilities

 

 

 

 

 

 

 

Trade and other payables

 

4,149

725

 

3,329

37

 

Interest-bearing loans and borrowings

10

500

21

 

-

-

 

Tax payable

 

357

156

 

-

-

 

 

 

5,006

902

 

3,329

37

 

Total liabilities

 

6,507

2,543

 

3,329

37

 

Total net assets

 

14,421

6,994

 

27,830

20,772

 

Equity

 

 

 

 

 

 

 

Shareholders' equity

 

 

 

 

 

 

 

Share capital

11

305

240

 

305

240

 

Share premium

 

7,379

-

 

7,379

-

 

Share-based payments reserve

 

51

33

 

51

33

 

Revaluation reserve

 

162

162

 

(50)

(50)

 

Merger reserve

 

(5,774)

(5,774)

 

8,101

8,101

 

Retained earnings

 

12,298

12,333

 

12,044

12,448

 

Total equity

 

14,421

6,994

 

27,830

20,772

The financial statements were approved and authorised for issue by the Board on 1 April 2016 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 2015

 

Group

 

Share

capital

£'000

Share

premium

£'000

Share-based

payments

reserve

£'000

Revaluation reserve

£'000

Merger

reserve

£'000

Retained

earnings

£'000

Total

equity

£'000

Balance at 1 January 2014

240

11,742

-

162

(5,774)

880

7,250

Changes in equity

 

 

 

 

 

 

 

Cancellation of share premium

-

(11,742)

-

-

-

11,742

-

Share-based payments

-

-

33

-

-

-

33

Dividends

-

-

-

-

-

(1,633)

(1,633)

Transactions with owners

-

(11,742)

33

-

-

10,109

(1,600)

Profit and total comprehensive income for the financial year

-

-

-

-

-

1,344

1,344

Balance at 31 December 2014

240

-

33

162

(5,774)

12,333

6,994

Issue of equity share capital

65

7,379

-

-

-

-

7,444

Share-based payments

-

-

18

-

-

-

18

Dividends

-

-

-

-

-

(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

 

Company

 

Share

capital

£'000

Share

premium

£'000

Share-based

payments

reserve

£'000

Revaluation reserve

£'000

Merger

reserve

£'000

Retained

earnings

£'000

Total

equity

£'000

Balance at 1 January 2014

240

11,742

-

(50)

8,101

860

20,893

Changes in equity

 

 

 

 

 

 

 

Cancellation of share premium

-

(11,742)

-

-

-

11,742

-

Share-based payments

-

-

33

-

-

-

33

Dividends

-

-

-

-

-

(1,633)

(1,633)

Transactions with owners

-

(11,742)

33

-

-

10,109

(1,600)

Profit and total comprehensive income for the financial year

-

-

-

-

-

1,479

1,479

Balance at 31 December 2014

240

-

33

(50)

8,101

12,448

20,772

Issue of equity share capital

65

7,379

-

-

-

-

7,444

Share-based payments

-

-

18

-

-

-

18

Dividends

-

-

-

-

-

(1,749)

(1,749)

Transactions with owners

65

7,379

18

-

-

(1,749)

5,713

Profit and total comprehensive income for the financial year

-

-

-

-

-

1,345

1,345

Balance at 31 December 2015

305

7,379

51

(50)

8,101

12,044

27,830

 

 

 

Statements of cash flows

For the financial year ended 31 December 2015

 

 

 

 

 

Company

 

 

Notes

2015

£'000

2014

£'000

 

2015

£'000

2014

£'000

 

Operating activities

 

 

 

 

 

 

 

Cash generated from/(used in) operating activities

12

2,364

50

 

(1,901)

(3,245)

 

Tax paid

 

(572)

(454)

 

-

-

 

Net cash flows generated from/(used in) operating activities

 

1,792

(404)

 

(1,901)

(3,245)

 

Investing activities

 

 

 

 

 

 

 

Dividends received

 

-

-

 

1,700

1,800

 

Acquisitions

 

(6,892)

-

 

(6,395)

-

 

Working capital and cash introduced by companies acquired

 

241

-

 

-

-

 

Capital expenditure on property, plant and equipment

 

(102)

(92)

 

-

-

 

Disposal of assets

 

14

-

 

-

-

 

Capital expenditure on intangibles

 

-

(20)

 

-

-

 

Disposal of corporate outlets

 

-

1,798

 

-

-

 

Deferred consideration

 

-

(206)

 

-

-

 

Franchisee loans granted

 

(449)

(3,110)

 

-

-

 

Loans repaid by franchisees

 

1,138

 738

 

-

-

 

Finance income

 

338

269

 

2

12

 

Net cash flows (used in)/generated from investing activities

 

(5,712)

(623)

 

(4,693)

1,812

 

Financing activities

 

 

 

 

 

 

 

Finance costs

 

(61)

(111)

 

-

-

 

Loan repayments in the year

 

(521)

(790)

 

-

-

 

Proceeds from share issue

 

7,890

-

 

7,890

-

 

Share placing costs

 

(446)

-

 

(446)

-

 

Equity dividends paid

 

(1,749)

(1,633)

 

(1,749)

(1,633)

 

Net cash generated from/(used in) financing activities

 

5,113

(2,534)

 

5,695

(1,633)

 

Net change in cash and cash equivalents

 

1,193

(3,561)

 

(899)

(3,066)

 

Cash and cash equivalents at the beginning of the financial year

 

1,486

5,047

 

1,029

4,095

 

Cash and cash equivalents at the end of the financial year

 

2,679

1,486

 

130

1,029

 

 

 

 

 

 

 

 

 

 

 

Notes to the preliminary statement

 

1 Approval

This announcement was approved by the Board of Directors on 1 April 2016.

2 Basis of preparation

The financial information set out above does not constitute the Company's statutory accounts for the years ended 31 December 2015 or 2014, but is derived from those accounts.  Statutory accounts for 2014 have been delivered to the Registrar of Companies and those for 2015 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 2015 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 Change of prior year presentation

The Directors have decided to restate the 2014 statement of comprehensive income by £0.7m to account for the sale of two corporate outlets in 2014 as a profit on disposal rather than revenue, as this better represents the underlying trading of the Group.  Whilst this reduces the operating profit by £0.7m in the prior year, it has no impact on the profit before taxation for that year.

4 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 2015 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 split as follows:

 

Lettings

Property sales

 

Total revenue

 

2015

£'000

2014

£'000

2015

£'000

2014

£'000

2015

£'000

2014

£'000

Management service fees

3,669

3,222

375

16

4,044

3,238

Corporate owned outlets

913

1,145

980

831

1,893

1,976

 

4,582

4,367

1,355

847

5,937

5,214

Initial franchise fees and resale commissions

 

 

 

 

356

432

Other income

 

 

 

 

654

210

 

 

 

 

 

6,947

5,856

 

5 Operating profit

Operating profit is stated after charging:

 

2015

£'000

2014

£'000

Depreciation - owned assets

136

74

Amortisation of customer relationships and brand

142

60

Impairment of goodwill

119

90

Auditors' remuneration

 

 

- Fees payable to the Company's auditors for the audit of Company's annual accounts

46

13

- Tax compliance services

19

14

- Statutory audit of subsidiaries

15

25

Operating lease expenditure

 

 

- Land and property

303

148

- Other

138

71

 

6 Share-based payments

Administrative expenses includes a charge of £18,000 (2014: £33,000) 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.

7 Exceptional Items

Transaction costs associated with the acquisitions of Newton Fallowell Ltd and Goodchilds Estate Agents and Lettings Ltd of £201,000 were incurred during the year.  This amount was paid during the year and was not allowable for tax purposes.

8 Dividends

 

2015

£'000

2014

£'000

Final dividend for 2014

 

 

3.4p per share paid 1 June 2015 (2013: 3.4p per share paid 24 April 2014)

816

816

Interim dividends for 2015

 

 

3.4p per share paid 15 October 2015 (2014: 3.4p per share paid 15 October 2014)

933

817

Total dividend paid

1,749

1,633

The Directors propose a final dividend of 3.4p per share totalling £1,039,000 payable on 31 May 2016. As this remains conditional on shareholders' approval, provision has not been made in these financial statements.

9 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. 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.

 

2015

2014

Profit for the financial year

£1,714,000

£1,344,000

Adjusted profit for the financial year

£1,955,000

£1,344,000

Weighted average number of ordinary shares - basic

26,197,089

24,010,417

Weighted average number of ordinary shares - diluted

26,914,453

24,084,623

Basic earnings per share

6.5p

5.6p

Diluted earnings per share

6.4p

5.6p

Adjusted basic earnings per share

7.3p

5.6p

Adjusted diluted earnings per share

7.1p

5.6p

 

10 Maturity of borrowings and net debt

31 December 2015

 

 

Term

loan

£'000

Group

 

 

 

Repayable in less than six months

 

 

273

Repayable in months seven to twelve months

 

 

267

Current portion of long-term borrowings

 

 

540

Repayable in years one to five

 

 

517

Total borrowings

 

 

1,057

Less: interest included

 

 

(57)

Total net debt

 

 

1,000

 

31 December 2014

Mortgage

loan

£'000

Revolving

credit

£'000

Total

 £'000

Group

 

 

 

Repayable in less than six months

21

-

21

Payable in seven to twelve months

-

-

-

Current portion of long-term borrowings

21

-

21

Repayable in years one to five

-

1,599

1,599

Total borrowings

21

1,599

1,620

Less: interest included

-

(99)

(99)

Total net debt

21

1,500

1,521

Bank loan is secured by a fixed and floating charge over the Group assets.

The mortgage loan was fully repaid during in May 2015.

The term loan balance of £1,000,000 is repayable in quarterly instalments to December 2017 and bears interest at 4.25% above base rate.

11 Called up share capital

 

2015

 

2014

 

Number

£'000

 

Number

£'000

Group and Company

 

 

 

 

 

Allotted, issued and fully paid

 

 

 

 

 

Ordinary shares of 1p each

30,546,763

305

 

24,010,417

240

 

 

 

 

 

 

 

 

Group Company

Number

Nominal

share capital

£

 

Share

premium

£

 

As at 1 January and 31 December 2014

 

24,010,417

240

33

Issue of shares during the year:

 

 

 

 

28 July 2015 - share price 125p

 

3,424,000

34

3,938

06 October 2015 - share price 116p

 

1,667,346

17

1,917

07 October 2015 - share price 116p

 

693,695

7

798

07 October 2015 - share price 116p

 

40,000

-

46

23 October 2015 - share price 116p

 

711,305

7

818

As at 31 December 2015

 

30,546,763

65

7,517

                   

 

12 Reconciliation of profit before taxation to cash generated from operations

Group

 

2015

£'000

2014

£'000

Profit before taxation

2,224

1,778

Depreciation and amortisation charges (including impairment)

397

224

Share-based payment charge

18

33

Profit on disposal of corporate outlets

-

(651)

Finance costs

61

111

Finance income

(338)

(269)

 

2,362

1,226

Decrease in trade and other receivables

(278)

151

Decrease in trade and other payables

280

(1,327)

Cash generated from operations

2,364

50

 

13 Acquisitions

During the year the Company acquired two franchised networks 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, as follows:

On 29 July 2015 the Company acquired 100% of the equity of Newton Fallowell, a company comprising a network of 30 franchised and one corporate owned estate and lettings agents, for £3,954,000 in cash on completion and deferred consideration through an earn-out. The earn-out is based on a multiple of 6.667 times EBITDA capped at £804,000 in the year to 29 February 2016 and £984,000 in the year to 28 February 2017 resulting in a maximum earn-out of £2,330,000. See note 28 regarding post balance sheet events.

On 6 October 2015 the Company acquired 100% of the equity of Goodchilds Estate Agents and Lettings Ltd, a company comprising a network of 14 franchised estate and lettings agents, for £2,441,000 in cash on completion and deferred consideration of £814,000 payable in equal tranches at the six month and twelve month anniversary of completion.

Both transactions met the definition of a business combination and are accounted for using the acquisition method under IFRS 3. The assets and liabilities below are shown at their fair values at acquisition. 

 

Belvoir
Devizes
£'000

Belvoir

Grantham

£'000

Newton Fallowell
£'000

Goodchilds

£'000

Total

£'000

Intangible assets

 

 

 

 

 

  Trade names

-

-

88

9

97

  Master franchise agreements

-

-

2,876

1,475

4,351

  Customer relationships

83

290

-

-

373

Tangible assets

-

-

50

-

50

Trade and other receivables

-

-

577

66

643

Cash and cash equivalents

-

-

(48)

54

6

Deferred tax liabilities

-

(53)

(539)

(264)

(856)

Trade and other payables

-

-

(355)

(90)

(445)

Identifiable net assets acquired

83

237

2,649

1,250

4,219

Goodwill on acquisition

28

149

3,635

2,005

5,817

Consideration

111

386

6,284

3,255

10,036

Consideration settled in cash

111

386

3,954

2,441

6,892

Contingent consideration

-

-

2,330

-

2,330

Deferred consideration

-

-

-

814

814

Total consideration

111

386

6,284

3,255

10,036

The goodwill represents the value attributable to the new businesses and the assembled and trained workforce. Deferred tax at 18% has been provided on the value of intangible assets defined as brand names and master franchise agreements. Acquisition costs of £201,000 were incurred and charged to exceptional items in the consolidated statement of comprehensive income.

 

 

Newton Fallowell

£'000

Goodchilds

£'000

Total

£'000

Revenue

952

114

1,066

Profit and loss

519

92

611

 

If the acquisitions had completed on the first day of the financial year, Group revenues would have been £8.2m and Group profit before tax would have been £3.0m.

 

14 Post Balance Sheet Event

Subsequent to the year end it was agreed that the Newton Fallowell earn out based on the financial performance for the year to 28 February 2017 would be cancelled and that the cap on the earn out based on the financial performance for the year to 29 February 2016 would be increased to the maximum payable under the original sale and purchase agreement.  The basis for the change stemmed from the fact that the Newton Fallowell group had already exceeded its target for both years under review and that, subsequent to the acquisition of the Goodchilds, management of this network was being undertaken by the Newton Fallowell management team.

15 Posting of accounts

It is intended that the financial statements for the year ended 31 December 2015 will be made available to shareholders on the company's website www.belvoirlettingsplc.com by 25 April 2016 and will also be available thereafter at the registered office, The Old Courthouse, 61a London Road, Grantham, NG31 6HR.

16 Annual General Meeting

The Annual General Meeting will be held at 10.00am on Thursday 26 May 2016 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
 
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